Finally, Some of Us are Catching On

By a more than three-to-one margin on Tuesday, communities voting on whether to support the creation of a public bank in Vermont approved the idea, calling for the state legislature to establish such a bank and urging passage of legislation designed to begin its implementation.

In a show of direct democracy that also exposed the citizenry’s desire for a more localized and responsible banking system, fifteen of nineteen towns passed the resolution during ‘Town Meeting Day’— an annual event in which voters choose local officials, approve municipal budgets, and make their voices heard on a number of measures put before local residents for approval.

The specific proposal under consideration, Senate Bill 204, would turn an existing agency, the Vermont Economic Development Authority, into a public bank that would accept deposits and issue loans for in-state projects. Currently, the only state in the U.S. to maintain a public state bank is North Dakota. However, since the financial downturn of 2008, other states have looked into replicating the North Dakota model as a way to buck Wall Street while taking more control of state and local finances.

Voicing his support of the measure ahead of Tuesday’s vote, Gary Murphy, a resident of South Ryegate, one of the towns that subsequently approved the measure, explained the thinking behind the plan this way in a letter to the local Times-Argus:

Senate bill 204 would expand the Vermont Economic Development Authority to become a state bank and would start out by depositing 10 percent of Vermont’s unrestricted money into the state bank. The bank would be able to leverage this money by means available only to banks to bolster the economy of the state and cut down on the interest payments and fees that are presently paid to out-of-state financial institutions and other entities. The bank would not engage in retail banking and would not compete with community banks; it would work with community banks to maintain their viability and expand their ability to help create better economic outcomes for Vermonters by partnering with them in projects they would not be able to engage in on their own.

Presently, large public projects are, to a large extent, funded by bonding and other private investment which requires the state to pay interest and fees that often do not get recycled into the local economy. Bond sales are managed by Wall Street firms, which seem to rig everything they can to further enrich themselves. In addition to the fees that they charge for this service, it is possible that they are rigging the process to divert funds that would otherwise be available to the state into their own pockets. While the cost of bonding is relatively cheap now, it will likely increase in the next few years if not sooner and the bond market could dry up. Creating a state bank now and growing it could put us in a position where we can substantially lessen the need to float bonds to fund large public projects.

According to Vermont Public Radio, unofficial results on Wednesday showed the following towns had approved the resolution: Bakersfield, Craftsbury, Enosburg, Marshfield, Montgomery, Montpelier Plainfield, Putney, Randolph, Rochester, Royalton, Ryegate, Tunbridge, Warren, and Waitsfield. The four towns that voted down the measure were: Marlboro, Barnet and Fayston and Greensboro.

North Dakota has had a state bank since 1919. Eric Hardmeyer, chief executive officer of the Bank of North Dakota, said he’s heard from 30 to 40 states asking the same thing: How does the only state-owned bank in the U.S. work? The financial institution, which opened in 1919 to help North Dakota farmers, has $5 billion in assets and contributed about $340 million in earnings to state coffers in the 12 years through mid-2009.

BND lending

Lawmakers in other states are modeling proposals on the Bismarck bank as activists protest bailouts for JPMorgan Chase & Co. (JPM) and other financial giants while their customers struggle with foreclosures and unemployment. Supporters say state-run banks, whose deposit base would include tax revenue and other government funds, would have greater control to develop socially minded lending programs favoring average Americans.

“Because of the Occupy Wall Street movement, there is much more of an interest to put in place state-owned banks to serve the public interest,” Marc Armstrong, the executive director of the Sonoma, California-based Public Banking Institute, said in a telephone interview.

“The benefit to commercial businesses is they receive affordable low-cost loans, including some as low as 1 percent per year,” Armstrong said. “The benefit to the state’s public is a more affordable and competitive rate for student loans and home mortgages.”

The Bank of North Dakota offers below-market lending rates as part of a program for beginning farmers. The DEAL loan, which supports students in college, is one of the most competitive alternative loans in the nation. North Dakota students or those who attend school in ND pay zero fees, have the option of a fixed interest rate of 5.72% APR or a variable interest rate of 1.74% APR effective January 1, 2014 and can count on quality local customer service. Variable rates can change quarterly and may increase. Rate will never exceed 10%.

BND by statute can do anything any other bank can do, unless restricted by statute. Mostly by practice BND does not make direct loans. However, legislative action has given express lending authority to BND for:

  • The purchase or acquisition of bank stock or the formation of a bank holding company.
  • The acquisition or refinancing of farm real estate by qualified individuals.
  • Assistance with post-secondary educational costs (i.e., student loans).
  • Originate home loans where loans are not readily available

All other lending by BND is through participation with a lead financial institution. This lead lender can be any qualified financial institution – most notably a bank, savings and loan, credit union or Farm Credit Services.



‘Bottom-Line Driven’

“We have a specific mission that we’re trying to achieve that’s not necessarily bottom-line driven,” Hardmeyer said.  Another difference is that deposits in most conventional commercial banks are guaranteed by the Federal Deposit Insurance Corp., while the North Dakota bank’s deposits are backed by the state.

Lawmakers in 13 states, including Massachusetts and California, introduced legislation this year that would create a state-run bank or study the notion, according to the Public Banking Institute, a non-partisan group backing the idea.

Financial Crisis

“As the financial crisis deepened and there are liquidity issues around the country, our model was looked at a little bit deeper than it ever had been before,” said Hardmeyer, who may be the only bank president in the U.S. who’s also a state employee. “It has been overwhelming at times in terms of the response.”

The U.S. banking industry opposes the idea and is lobbying against it, saying a state-run bank would compete with commercial banks for business and politicize a state’s lending decisions.  “A state-owned bank? Why don’t we just re-label the state capitols the Kremlin?” Camden Fine, president of the Independent Community Bankers of America, a Washington-based trade group that represents more than 5,000 community banks, said in a telephone interview.  “It’s a socialistic idea,” Fine said. “If you get a state-owned bank that is allocating credit, it can slide very quickly into a situation where those in favor get credit and those not in favor don’t get credit.”

Increase Jobs

Arizona Representative John Fillmore, a Republican from Apache Junction who has introduced legislation to create the Bank of Arizona, said he views it as a way his state could increase jobs while bolstering its treasury.

“We would have a bank, just like a regular bank that you see out there, it would have savings accounts and checking accounts,” Fillmore said in a telephone interview. “But its main function would be to give support to the state and to other banks within the state.”

Efforts to pursue the idea have gotten off to a rocky start in Massachusetts and California. In the Bay State, where legislation was introduced to create a Bank of Massachusetts, a commission said the bank would cost $3.6 billion to start and may expose public funds to “unacceptably high risk.”

In California, lawmakers in September agreed to set up a task force to study the idea of a “California Investment Trust” to boost economic development by easing access to credit for California-based businesses, according to the legislative text. Governor Jerry Brown, a 73-year-old Democrat, vetoed the bill. Brown said he didn’t want to create another “blue ribbon” taskforce and suggested the Legislature’s banking committees look at the idea.

Commercial Banks

The California Bankers Association, a Sacramento-based trade group, lobbied against the proposal, saying a state-owned bank would crowd out commercial banks.

“A state bank has the ability to use the enormous resources of the state to nearly monopolize the market and as a result, create an unfair advantage over commercial banks,” Alex Alanis, the association’s vice president of state government relations, said in a May letter to Assembly member Ben Hueso, who offered the bill.  Hueso, a Democrat from San Diego, said the proposal is aimed at creating a wholesale bank that would lend through commercial banks to businesses and consumers.

Economic Recovery

State-run banks are more likely to be more flexible in their lending relationships with consumers and less likely to engage in proprietary trading and other risky activities by large commercial banks.

North Dakota Economy was ranked No. #1 in economic development in 2010-2012. North Dakota has weathered the Great Recession with a boom in natural resources, particularly a boom in oil extraction from the Bakken formation, which lies beneath the western part of the state. The development has driven strong job and population growth, and low unemployment. It was largely supported by the state bank.

It is not surprising that commercial banking lobbyist would oppose the “state bank idea”. If you have watched how these commercial banks and lending institutions have dealt their hands in places like Detroit or Cleveland and watched as they have extracted huge amounts of public wealth out of the system, it is clear they have no interest in having State Banks pop up.  Why it’s Un-American right?


Reality is it is about as Un-American as the Boston Tea Party, the real Boston Tea Party. If you live in a state seriously considering starting a state bank, get yourself educated to what that means. We think the more you understand the more you will understand the freedom from banksters it represents.

Student Loans-An Engineered Social Trap?

When we started to do this article, we were just going to report on the fact that students, our youth, our future, are in debt over a trillion dollars out of the gate. However, as we started putting together all of the facts it became apparent that there was something far more sinister afoot. Slowly the realization began to form that this situation was something that was engineered to assure that the labor of our youth would be mostly for the benefit of banksters. Harsh words? Another wacko conspiracy theory? We will let you the reader decide, but we think not and here are the facts as they are.

According to recent figures from the National Bureau of Statistics, there is only one job vacancy for every five college graduate applicants in America today. In the last 15 years, college tuition in the US has risen a staggering 900%, while wages have risen an impressive average of 10%. And with most jobs in the US being off-shored to the Far East and Latin America, it’s a safe bet that stat is not changing anytime soon, at least for the next 10 years, unless of course you are going for a position under the Golden Arches.

college umemployment 3

Regardless of how bleak the outlook is, America has always been the land of positive thinking and no wonder, as there is no shortage in the queue of 17 year old youth dying to (literally) sign their life away to JP Morgan, Citi Bank and Wells Fargo in exchange for in many cases, around $80,000 in student loans.

Before we rush to judgment, let’s be fair and breakdown what the kids are getting for their 80K. First and foremost, they get that golden fleece, the sheep skin also known as The Degree. The overall average starting salary for Class of 2013 new college graduates currently stands at $45,327, an increase of 2.4 percent over the reported average of $44,259 for Class of 2012 graduates, according to the September 2013 Salary Survey. Here’s the irony of this, according to the Social Security Administration the national average wage index for 2012 is 44,321.67. So according to these numbers, a college degree does not mean better wages.

college unemployment

But here is the really bad news. Unemployment for students with new Bachelor’s degrees is an unacceptable 8.9 percent, but it’s a catastrophic 22.9 percent for job seekers with a recent high school diploma—and an almost unthinkable 31.5 percent for recent high school dropouts.

college unemployment2

So if this is truly a market driven economy, how can tuitions be rising by 900%? This is where the whole engineering part starts to take shape. Step by step, this was how it was deliberately engineered by the banksters.

Step One- Get the government to back student loans. By making the government the co-signer and the capital being used is government supplied money, the banksters simple rake in the profits for churning debt.

Step Two- Get the government to pass a law that student debt cannot be discharged in bankruptcy. This insures the banksters a never ending source of compound interest and penalties infinitely.

Step Three – do not allow low interest rates to prevail. Get the government to pass a law tying student loan interest rates to the 10 Treasury Index.

Step Four- Since student loans were made available to everyone because of government backing, colleges and universities could raise tuition and fees without regulation. This, the banksters also encouraged because the higher the tuition, the higher the individual debt load which translates to high interest and fees.

As of July 1, 2013, Stafford loan interest rates will be variable, but unlike other loans with variable rates, these Stafford loans will have a locked in rate for the life of the loan.  On July 1 of each year, undergraduate subsidized and unsubsidized Stafford loans will have an interest rate of the 10-year Treasury index rate plus 2.05%.  Graduate unsubsidized Stafford loans will have an interest rate of the 10-year Treasury index rate plus 3.6%.  The ten year treasury index currently floats around 3.5%. This means rates of 5 to 7% will be typical. However, again here is a trap. If students consolidate those loans, the interest rates are capped at 8.5%.

So given a typical debt load of $80,000 per student and a typical 20 year repayment schedule, and $1 Trillion in the float, banksters are ripping out $5.5 Trillion in interest! Here is the irony, it is all done without risking any private banking dollars.

So now you decide. Are our children doomed to economic slavery? While you are deciding this, think about what the alternatives could be. We could have state and locally owned banks, backed by our government that could offer student loans at 1% interest. We could have government regulations that capped tuition increases at state and private schools that were tied to the CPI. We could have a minimum wage at $10.50 per hour to create a livable wage. We could have $5.5 trillion more being pumped into our economy creating job opportunities for our college graduates.

When is enough-enough?

CONgress Acts in a Bipartisan Way!..Or Did They?

The House is expected to vote and possibly pass a student loan bill that passed the Senate last week by a vote of 81 to 18. The new bill would tie the student interest rate to market rates instead of the current 6.8 percent on federal loans taken out for the 2013-2014 school year. Rates on the subsidized Stafford federal loans doubled to 6.8 percent on July 1 because the bipartisan CONgress could not agree on a way to keep them at 3.4 percent.

Is this a victory for students and taxpayers as Rep. John Kline, Republican chairman of the House Committee on Education and the Workforce, has said?

It’s a victory to a manufactured problem, and a small one at that. You know, the actual financial ramifications of the interest rate having doubled was only about somewhere between $1,000 and $3,000 over the life of the loan for affected undergraduates to begin with. So it was really not that big of a deal to start out with. This whole fiasco has been essentially a distraction to the fact that there are structural problems with the student lending system that CONgress has yet to deal with and absolutely needs to in a very critical way.

Do you know why anybody or everybody can get a student loan? Well, when it comes to student loans, the lending system has turned functionally and structurally predatory because of the fact that the most standard consumer protections that American citizens have every reason to expect and exist for every type of loan don’t exist for student loans. They’ve been removed by CONgress. This includes bankruptcy protections, statutes of limitations, and truth in lending requirements. This, in turn, has created a very serious and unprecedented collection industry that has been given power that no collection industry has ever enjoyed. This has created a debt system where it’s quite frankly more profitable for the lending side when loans default rather than remain in good stead.

This is very dangerous, and it has enabled the inflation that we’ve seen. It has enabled a cavalcade of corruptions across the system. While it has greatly enriched the universities and allowed them to raise their prices willy-nilly and also enabled horrible inexcusable absent government oversight, it has not helped the students.  As we have reported here in previous articles, it’s the sticker price, and until CONgress deals with the structural problem, the price of college will only continue to rise.

How massive is this problem? Currently students across the country are over $1 trillion in debt, which is more than credit card debt. In 2005 we owed less than $400 billion as a nation in student loan debt, and that was a huge amount at the time. Here we are eight years later, and we currently owe about $1.2 trillion in student loan debt. The availability of student loans has raised the price of college faster than health-care costs, faster than even home prices before the bubble and bust in 2008.

CONgress manufactured this crisis by removing, number one, bankruptcy protections, but also statutes of limitations, state usury laws, and other fundamental consumer protections that enabled the debt spiral to begin. Similarly, Congress can very quickly solve this situation by returning at a minimum the standard bankruptcy protections that should have never been taken away. By doing this, they will force the lending side to have skin in the game on the side of the borrowers rather than on the side of the banks. In that environment, we could expect the Department of Education to begin cracking the whip on the schools to get serious about lowering their prices, improving their quality, and so forth. This is how a free-market system works. Even the most ardent conservative economists would agree with that approach.

We can only hope that the affected citizens will take this very seriously, because it is a guarantee that if the citizens do nothing and expect the PTB in Washington, D.C., to do their work for them, it will not get done. This is incumbent upon the citizens to fight this battle for themselves, unfortunately, because we are on our own.

This is one issue that I think does involve all of us, every single family with kids in school. We need to organize a giant lobby, since that seems to be the only thing that matters to the gangsters on the Hill. Only this lobby wouldn’t deal in campaign cash, it deals in votes. They still do count votes in Washington. This is an issue that isn’t left or right, liberal or conservative. Parents and students, this is one project you could work on together. Moms and Dads could the write the petitions and present to CONgress and kids can organize the whole movement through social media and texting? DO IT!