Bucks County Courier Times
February 24, 2011
I smell a rat. It's the same rat that panicked the American people and Congress into the Wall Street bailout.
You will remember, way back in 2008, night after night, day after day, really worried talking heads in the national media explained that, without the bailout, credit would dry up and the world would come to an end.
So Congress and the Federal Reserve bailed out the barons, saved their failed banks and personal fortunes - and credit dried up. Millions of Americans have been plunged into a slow-motion, long-term catastrophe, while the rich few get richer and everybody else gets poorer.
Now the rat is spreading a new alarm, the total collapse of state finances. But the rat's solution, like the bailout, is unrelated to the real problem.
Across the United States, state and municipal governments are struggling with large budget shortfalls and even larger pension liabilities.
The budget shortfalls were created by collapsing revenue, which in turn was created when the money center banks of the Federal Reserve failed under the weight of fraud, mismanagement, a lack of accountability and reckless risk taking, which the bailout sidestepped.
State budget shortfalls are short term and will be resolved through a combination of cuts in spending, increased taxes and increased revenue from an improving economy.
But the rat is screaming that's not enough and long-term pension obligations are plunging the states into bankruptcy. A figure of $3 trillion is thrown around.
But the more sober analysis of the non-partisan Center for Budget and Policy Priorities points out that the $3 trillion number is created by an accounting rule that states do not normally employ and puts the number at $700 billion.
This is still a big number. But as the center observes, whatever the estimate of unfunded liabilities, it does not mean that states and localities have to contribute that amount to their pension funds, "since the funds very likely will earn higher rates of return over time than the Treasury bond rate, which will result in pension fund balances adequate to meet future obligations without adding the full $3 trillion to the funds."
But the rat continues to spread fear, conflating the short-term and long-term problems, which are quite different. Once again, the rat says the sky is falling.
What's the rat's game? For the answer, you must take a close look at the legislation in the current battleground, Wisconsin.
Not only does the legislation call for wage and benefit concessions from state workers - which under the short- term circumstances may be fair - but it also takes away from those workers the right to negotiate for their future, which has nothing to do with the actual problem.
This is an assault on labor - union busting - the cherished dream of predatory Darwinian fat cats since the New Deal.
But the rat wants more than that.
An article in the London-based Financial Times explains what the rat is up to. The Times quotes Orin Kramer, a member of the council that oversees New Jersey pension funds: "One consequence (of the crisis) is that asset sales and privatization will pick up."
In other words, the cash wealth of America having been concentrated in the hands of the few, now they will go after what's left: public assets.
The Huffington Post and others now report that the legislation in Wisconsin to "save the state" contains a provision to allow the sell-off of state energy assets, such as power plants, to private corporations, "with or without solicitation of bids, for any amount (state officials) determine to be in the best interest of the state."
As the Post reports, "One of the companies that could stand to benefit significantly is Koch Industries. Koch already has several companies in the state, including a coal subsidiary, timber plants and a large network of pipelines. The Koch-funded group Americans for Prosperity has been standing with (Wisconsin Gov.) Walker throughout his budget battles, busing in tea party activists and launching the site, Stand With Walker."
Now can you smell the rat?
Building infrastructure like power plants is expensive. Let the people pay for that. The profits are in the operation. Especially if, like Koch Industries, you can supply your new coal power plant from your own coal mines. But you want to get those assets at fire sale, no bid prices, after driving down the wages of the workers whose contracts you will pick up.
Panic helps.
From Wall Street to Washington to Wisconsin, fear mongering fats cats are once again stampeding the American people, and cashing in.
Thursday, February 24, 2011
Public Banking and A Strong Banking Industry
By: Ellen H Brown and Mike Krauss
Ellen H Brown is chairman of the Public Banking Institute, author of Web of Debt and a California corporate lawyer. Mike Krauss is a PBI board member, international logistics expert and former officer of PA county and state government.
It may be two years away, or six months. It could happen tomorrow. The next failure of the Too Big To Fail banks is only a matter if time.
Twenty eight months after the collapse of the money center banks plunged the American people into a well of economic despair, neither the effects nor the causes of that collapse have been remedied. It's business as usual.
The meaningful changes in federal law that could have corrected the failure and abuse of the TBTF banks died in the last Congress, beaten back by an army of industry lobbyists and buried under a mountain of political IOUs.
The regulatory agencies charged to safeguard the market and investors are staffed by too many finance industry allies and face severe budget cuts that will cripple the efforts of conscientious regulators.
This is a time bomb waiting to explode.
As courts reject the standing and claims of the money center banks in the foreclosure mill, and analysts question the integrity of their balance sheets, citing accounting devices used to understate, or not state at all their liabilities and exposure, the fuse may already be lighted.
Then what? Another rescue? America needs banks and banking.
America has banks, more than 7,000 local banks and an even larger number of credit unions, the vast majority of which are sound and productive. Action must be taken now to decouple American banking from the endemic failures of the money center banks of the Federal Reserve and support what works.
Public banking – banking in the public interest – can help provide a viable, sustainable banking industry that remedies the reckless risk taking, inside dealing, and lack of transparency, accountability and sound corporate governance that are at the heart of the failure of the TBTF banks.
Efforts are underway to establish such banks. Six states currently have bills pending, three to establish a state-wide publicly owned bank (Washington State, Oregon, Illinois) and three for feasibility studies to explore the possibilities (Virginia, Massachusetts, Hawaii).
Public banking can provide a new supply of the affordable credit urgently needed to underwrite sustained economic activity and job creation. And public banking can generate a sustained and significant revenue source for cash strapped states, municipalities and battered taxpayers.
A public bank is capitalized by public money, for example state tax revenue and fees, and is managed by salaried civil service professionals who have no incentive for risk taking. The managers report to elected officials directly accountable to the people.
A public bank returns a portion of its profits to the chartering governing authority and plows the rest back into increased lending activity – to homebuyers, students, farmers, small businesses, start-ups, economic development and jobs creation.
Public banks partner with and support local banks and credit unions in a variety of ways. One is “participatory lending,” in which the public bank increases total loan size, provides guarantees or “buys down” the interest rates of the loans the private banks originate.
Public banks provide wholesale, “banker’s bank” services such as check clearing, bond account safekeeping, and Fed Funds lines to capitalize on excess liquidity within the banking system at very low interest. Public banks further strengthen the local banking industry by providing capital to local banks via direct bank stock lending or buying portions of a local bank’s loan portfolio.
Public banks offer a secondary market for mortgages and make a market at lower interest for municipal bonds, with huge savings to taxpayers in debt service.
Finally, a public bank has only one shareholder to whom it pays dividends – the people of the state or municipality that created it.
The public Bank of North Dakota (BND) has been doing all these things and more for the people of that state for almost a century, and helping to sustain a strong and healthy banking industry.
In 2009, while the U.S. economy was melting down, the BND backed $68 million in FHA and VA mortgages originated by local banks, funded or renewed $472 million in commercial loans of partner banks and institutions in a more than $1 billion commercial loan portfolio, and financed 268 business and industrial projects.
In the devastating 1997 Grand Forks flood and fire, the BND provided the state with immediate cash for relief until federal disaster funds arrived, underwrote the suspension of mortgage loan payments of those wiped out, and provided more than $100 million in loans to help businesses rebuild.
Over the last ten years the BND has returned more than a third of a billion dollars to the state’s general fund.
The people of the state are getting solid returns on their money. North Dakota has a population of only about 620,000. States with larger populations and tax revenues can anticipate larger returns.
As important, North Dakota has a thriving and healthy banking industry. A recent study by the Center for State Innovation (University of Wisconsin, Madison) analyses the role of the BND and concludes that this public bank “has been effective in strengthening the banking market, leading to robust competition.”
But state legislators and municipal leaders need to move quickly, before the next failure sends the TBTF banks running back to Congress and the Fed for another rescue that further cripples an already limping U.S. economy.
Ellen H Brown is chairman of the Public Banking Institute, author of Web of Debt and a California corporate lawyer. Mike Krauss is a PBI board member, international logistics expert and former officer of PA county and state government.
It may be two years away, or six months. It could happen tomorrow. The next failure of the Too Big To Fail banks is only a matter if time.
Twenty eight months after the collapse of the money center banks plunged the American people into a well of economic despair, neither the effects nor the causes of that collapse have been remedied. It's business as usual.
The meaningful changes in federal law that could have corrected the failure and abuse of the TBTF banks died in the last Congress, beaten back by an army of industry lobbyists and buried under a mountain of political IOUs.
The regulatory agencies charged to safeguard the market and investors are staffed by too many finance industry allies and face severe budget cuts that will cripple the efforts of conscientious regulators.
This is a time bomb waiting to explode.
As courts reject the standing and claims of the money center banks in the foreclosure mill, and analysts question the integrity of their balance sheets, citing accounting devices used to understate, or not state at all their liabilities and exposure, the fuse may already be lighted.
Then what? Another rescue? America needs banks and banking.
America has banks, more than 7,000 local banks and an even larger number of credit unions, the vast majority of which are sound and productive. Action must be taken now to decouple American banking from the endemic failures of the money center banks of the Federal Reserve and support what works.
Public banking – banking in the public interest – can help provide a viable, sustainable banking industry that remedies the reckless risk taking, inside dealing, and lack of transparency, accountability and sound corporate governance that are at the heart of the failure of the TBTF banks.
Efforts are underway to establish such banks. Six states currently have bills pending, three to establish a state-wide publicly owned bank (Washington State, Oregon, Illinois) and three for feasibility studies to explore the possibilities (Virginia, Massachusetts, Hawaii).
Public banking can provide a new supply of the affordable credit urgently needed to underwrite sustained economic activity and job creation. And public banking can generate a sustained and significant revenue source for cash strapped states, municipalities and battered taxpayers.
A public bank is capitalized by public money, for example state tax revenue and fees, and is managed by salaried civil service professionals who have no incentive for risk taking. The managers report to elected officials directly accountable to the people.
A public bank returns a portion of its profits to the chartering governing authority and plows the rest back into increased lending activity – to homebuyers, students, farmers, small businesses, start-ups, economic development and jobs creation.
Public banks partner with and support local banks and credit unions in a variety of ways. One is “participatory lending,” in which the public bank increases total loan size, provides guarantees or “buys down” the interest rates of the loans the private banks originate.
Public banks provide wholesale, “banker’s bank” services such as check clearing, bond account safekeeping, and Fed Funds lines to capitalize on excess liquidity within the banking system at very low interest. Public banks further strengthen the local banking industry by providing capital to local banks via direct bank stock lending or buying portions of a local bank’s loan portfolio.
Public banks offer a secondary market for mortgages and make a market at lower interest for municipal bonds, with huge savings to taxpayers in debt service.
Finally, a public bank has only one shareholder to whom it pays dividends – the people of the state or municipality that created it.
The public Bank of North Dakota (BND) has been doing all these things and more for the people of that state for almost a century, and helping to sustain a strong and healthy banking industry.
In 2009, while the U.S. economy was melting down, the BND backed $68 million in FHA and VA mortgages originated by local banks, funded or renewed $472 million in commercial loans of partner banks and institutions in a more than $1 billion commercial loan portfolio, and financed 268 business and industrial projects.
In the devastating 1997 Grand Forks flood and fire, the BND provided the state with immediate cash for relief until federal disaster funds arrived, underwrote the suspension of mortgage loan payments of those wiped out, and provided more than $100 million in loans to help businesses rebuild.
Over the last ten years the BND has returned more than a third of a billion dollars to the state’s general fund.
The people of the state are getting solid returns on their money. North Dakota has a population of only about 620,000. States with larger populations and tax revenues can anticipate larger returns.
As important, North Dakota has a thriving and healthy banking industry. A recent study by the Center for State Innovation (University of Wisconsin, Madison) analyses the role of the BND and concludes that this public bank “has been effective in strengthening the banking market, leading to robust competition.”
But state legislators and municipal leaders need to move quickly, before the next failure sends the TBTF banks running back to Congress and the Fed for another rescue that further cripples an already limping U.S. economy.
Sunday, February 20, 2011
The federal center can't hold
States must bypass rotten Washington
The republic bequeathed to the American people by the Founders and Framers in the Constitution is being tested. The federal center is rotten and it cannot hold. If the American democracy is to endure, it must be rescued by the states and the people.
The Wall Street barons ran their banks into the ground in an orgy of profit mad excess and fraud. They lied to everybody - investors, regulators, the public and each other. When it all came undone and they had destroyed their banks' balance sheets and their personal fortunes, they siphoned trillions of dollars from the American people, with the help of a compliant national media and equally pliable presidents, Congresses and Federal Reserve.
It was a close call for the barons, some of whom might have been down to their last $20 million, squirreled away in some Swiss bank account or other off-shore, non dollar denominated piggy bank.
And no one has gone to jail. No one has been indicted, while the American people bleed the prosperity built up over decades of toil and sacrifice.
A few fines have been imposed. To ordinary Americas, fines of $500,000 or even $1 million sound like a lot. But it is not to someone whose annual income is more than a hundred million dollars.
And they have gone right back to the same rapacious behavior, while the American people are told it is their patriotic duty to tighten their belts and embrace the "shared sacrifice" that Wall Street and Washington will not be asked to share.
Oh, government employees will take a hit. One of the triumphs of the fat cats is to turn attention away from their failure and, in too many cases crimes, and set Americans one against the other.
What fun it must be, to watch from their mansions, penthouses and yachts as all the little people they bilked, now frightened to lose what little they have left, turn on each other.
Led on by politicians who are at best unimaginative; at worst, bought.
"There's just no money," is their battle cry, made to seem heroic by the corporate media that conceals the truth: there is plenty of money. It's just a matter of putting it to good use.
How might that happen? Let's start with how it won't happen.
The Congress will not impose a one time, $1 trillion "ill gotten gains" tax on Wall Street. Nor will the Congress shut down the war which Americans are asked to forget. Nor will the corporations that buy elections and surround the Congress with an army of lobbyists be asked to settle for lower profits.
Washington is going the other way. Seems we Americans have been mean to our corporations. Record profits and mountains of cash are just not what they need.
They want more.
And as a sign of contrition (and a conduit for 2012 campaign contributions), the president is "making nice" to suffering American corporations, and has brought in a Wall Street minder as his new chief of staff, and another as chief economic advisor.
While the children of the president will one day dine on oysters, with the children of members of Congress, the Wall Street barons, governors of the Fed and the entire national establishment, the one-third of American children who do not graduate high school, and the other third who graduate with no useful skills, will be lucky to get a job shucking oysters in the swell restaurants of the fortunate few.
The fortunate few of the new America will not be made to fess up, pay up or share the wealth they have accumulated. They don't want to, and no one in Washington has the courage to make them.
But there is an alternative course to restore - if not justice - at least some measure of prosperity to the American people.
Most Americans have little accumulated wealth. If they are to have any hope of wealth, build prosperity for their families, they must have access to affordable credit.
"Public banking" takes the public resources of a state or municipality - tax revenue, for example - and uses them to capitalize a bank. Then, like any bank, it leverages this capital to create credit for the community.
Affordable credit, low-cost credit for student loans, business expansion, start-ups, mortgages, economic development and a wide range of jobs creating economic activity.
Public banks do this not in competition with community banks, but in partnership, providing not retail banking, but what are called "banker's bank" services.
Such a bank has been in operation in North Dakota for almost 100 years. It has provided a river of credit to the people of that state, and a river of state revenue that does not come from taxes. The bank splits its profits between re-investment in creating more credit, and payments to the state's general fund.
It is time for the people of the states and municipalities to decouple from the failure of Washington and Wall Street, create public banks and take the future.
The republic bequeathed to the American people by the Founders and Framers in the Constitution is being tested. The federal center is rotten and it cannot hold. If the American democracy is to endure, it must be rescued by the states and the people.
The Wall Street barons ran their banks into the ground in an orgy of profit mad excess and fraud. They lied to everybody - investors, regulators, the public and each other. When it all came undone and they had destroyed their banks' balance sheets and their personal fortunes, they siphoned trillions of dollars from the American people, with the help of a compliant national media and equally pliable presidents, Congresses and Federal Reserve.
It was a close call for the barons, some of whom might have been down to their last $20 million, squirreled away in some Swiss bank account or other off-shore, non dollar denominated piggy bank.
And no one has gone to jail. No one has been indicted, while the American people bleed the prosperity built up over decades of toil and sacrifice.
A few fines have been imposed. To ordinary Americas, fines of $500,000 or even $1 million sound like a lot. But it is not to someone whose annual income is more than a hundred million dollars.
And they have gone right back to the same rapacious behavior, while the American people are told it is their patriotic duty to tighten their belts and embrace the "shared sacrifice" that Wall Street and Washington will not be asked to share.
Oh, government employees will take a hit. One of the triumphs of the fat cats is to turn attention away from their failure and, in too many cases crimes, and set Americans one against the other.
What fun it must be, to watch from their mansions, penthouses and yachts as all the little people they bilked, now frightened to lose what little they have left, turn on each other.
Led on by politicians who are at best unimaginative; at worst, bought.
"There's just no money," is their battle cry, made to seem heroic by the corporate media that conceals the truth: there is plenty of money. It's just a matter of putting it to good use.
How might that happen? Let's start with how it won't happen.
The Congress will not impose a one time, $1 trillion "ill gotten gains" tax on Wall Street. Nor will the Congress shut down the war which Americans are asked to forget. Nor will the corporations that buy elections and surround the Congress with an army of lobbyists be asked to settle for lower profits.
Washington is going the other way. Seems we Americans have been mean to our corporations. Record profits and mountains of cash are just not what they need.
They want more.
And as a sign of contrition (and a conduit for 2012 campaign contributions), the president is "making nice" to suffering American corporations, and has brought in a Wall Street minder as his new chief of staff, and another as chief economic advisor.
While the children of the president will one day dine on oysters, with the children of members of Congress, the Wall Street barons, governors of the Fed and the entire national establishment, the one-third of American children who do not graduate high school, and the other third who graduate with no useful skills, will be lucky to get a job shucking oysters in the swell restaurants of the fortunate few.
The fortunate few of the new America will not be made to fess up, pay up or share the wealth they have accumulated. They don't want to, and no one in Washington has the courage to make them.
But there is an alternative course to restore - if not justice - at least some measure of prosperity to the American people.
Most Americans have little accumulated wealth. If they are to have any hope of wealth, build prosperity for their families, they must have access to affordable credit.
"Public banking" takes the public resources of a state or municipality - tax revenue, for example - and uses them to capitalize a bank. Then, like any bank, it leverages this capital to create credit for the community.
Affordable credit, low-cost credit for student loans, business expansion, start-ups, mortgages, economic development and a wide range of jobs creating economic activity.
Public banks do this not in competition with community banks, but in partnership, providing not retail banking, but what are called "banker's bank" services.
Such a bank has been in operation in North Dakota for almost 100 years. It has provided a river of credit to the people of that state, and a river of state revenue that does not come from taxes. The bank splits its profits between re-investment in creating more credit, and payments to the state's general fund.
It is time for the people of the states and municipalities to decouple from the failure of Washington and Wall Street, create public banks and take the future.
Subscribe to:
Posts (Atom)