A Public Bank For California?

  • metta

    Posts: 39089

    May 17, 2011 9:18 PM GMT
    What a Public Bank Could Mean for California

    http://www.yesmagazine.org/new-economy/what-a-public-bank-could-mean-for-california
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    May 18, 2011 6:12 PM GMT
    They are about two decades behind Alberta. We created the Alberta treasury branch in the late 70's (or so.) It is a fine idea so long as it acts like a bank and not just another way for a state to get loans and accumulate debt.

    The model has worked very well here, but the article makes it sound like they are considering it mainly because they would be able to leverage cash reserves into debt. If the loans go to businesses (which most did in Alberta) and get the economy rolling while making money off of the interest it is fine. If the idea becomes to have a new way to lend themselves money (and the article makes it sound as though that is likely the reason for the banks creation) then it is just a way for California to dig themselves a larger hole.

    Passages such as "Under existing regulations, $8 in capital reserves can be leveraged into $100 in loans, drawing on the liquidity provided by the deposits to clear the outgoing checks. Assuming a 10 percent reserve requirement (the amount in deposits normally held in reserve), $8 in capital and $100 in deposits are sufficient to create $90 in loans ($100 less $10 held back for reserves)."

    Coupled with "Instead of relying on Wall Street banks for credit—or allowing a Wall Street bank to enjoy the benefits of lending its capital—California may decide to create its own, publicly owned bank."

    Make me think it is just another shell game that California wants to employ in order to kick the can of debt down the road another few years. Almost as if they are saying "look at all the free money we can spend!"
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    May 18, 2011 6:27 PM GMT
    I can still understand their motivation if it is to divert finance profits from Wall Street to California. Think of all the wealth that was transferred to New York when real estate markets crashed in California and New York firms got the bail outs.
  • roadbikeRob

    Posts: 14303

    May 18, 2011 9:39 PM GMT
    California would not be the first state with a publicly owned bank, North Dakota has one already.
  • TrentGrad

    Posts: 1541

    May 18, 2011 9:46 PM GMT
    It's kind of interesting...both Alberta and North Dakota are jurisdictions that tend to be more fiscally conservative!

    The idea of a public bank seems like a very...ahem...SOCIALIST...idea. ;) LOL
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    May 19, 2011 6:47 AM GMT
    TrentGrad saidIt's kind of interesting...both Alberta and North Dakota are jurisdictions that tend to be more fiscally conservative!

    The idea of a public bank seems like a very...ahem...SOCIALIST...idea. ;) LOL

    First off, I have to admit that I was wrong- and off by decades. Apparently, the ATB was founded in 1938 (meaning that California is lagging by over 7 decades.) It was created by the Social Credit government in power at the time.

    You have to remember that the West has always felt like it has gotten the shaft from the East; both governments and private corporations such as banks. The bank of Canada is run out of Ottawa and the big banks who refused to lend at the time were based in the east as well. The ATB was originally established to act outside of the federal bank act.

    The stated goal of the ATB was to “provide the people with alternative facilities for gaining access to their credit resources.” The other goals, when the ATB were founded were to "increase public purchasing power, create a demand for Alberta made products, assist in establishing Alberta based industries and advance the welfare of Albertans.

    I thought they started in the late 70's when we were getting screwed by the NEP and houses were selling for $1 because the economy went to pot and credit was hard to obtain. The ATB really did help in that atmosphere as well.

    Wow, I learned quite a lot looking into the history of that bank... Thanks.