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California Banking System - Start a State-Owned Bank!

This article makes the case for the state starting its own bank. What a novel idea. Cities (LA DWP) own utility companies. And hospitals. Why not a bank? Why haven't we thought of this before? Heck...it could even be a green, sustainable, ethical bank!

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I'm not comfortable in the world of finance...and yet, my survival depends on what's happening around me. How do we understand the California budget crisis, the Wall Street bailout, the car company buyout...and now, health care and insurance usuary-level finances. It reminds me of the "99 Theses" posted by Martin Luther when he objected to the church selling indulgences -- those nasty, guilt- and fear-based saviors of the common people.

I hadn't heard a good analysis or solution to California's budget woes until today.  In an article by Ellen Brown, you get a very different picture than I've seen in the media about the banking system. 

The Banking System

Here's an excerpt that summarizes the infrastructure of the problem:


Among the banks in the banking system rejecting California's IOUs are six of particular interest: Citibank, Union Bank, Bank of America, Wells Fargo, U.S. Bank, and Westamerica Bank. These banks are interesting because they are six of the seven depository banks in which the state of California currently deposits its money. (The seventh is Bank of the West, which loyally said it would accept the IOUs indefinitely.)

...according to the California Treasurer's report, as of May 2009 the state had aggregate deposits and investments (in these banks) exceeding $55 billion.

And to add insult to injury, three of these six banks actually received federal bailout money from the taxpayers, something that was supposedly done to keep credit flowing to the states and their citizens. Citibank got $45 billion in bailout money, Wells Fargo got $25 billion, and Bank of America got $45 billion, not to mention guarantees of $300 billion for Citibank and $118 billion for Bank of America. When Governor Schwarzenegger asked for a loan guarantee from the banking system for a mere $6 billion to bolster California's credit rating, on the other hand, he was turned down. Californians compose one-eighth of the nation's population.

When the state's appeal for aid was rejected by the banks, California State Treasurer Bill Lockyer said he was "disappointed."


He and other state leaders should show their disappointment with their feet. California could pull its deposits out of those banking system depository banks refusing its IOUs and put them instead in its own state-owned bank, following the lead of North Dakota, which now has the only state-owned bank in the country.


Set up in 1919 to escape Wall Street predators, the Bank of North Dakota has been generating low-interest credit for the state and its residents for nearly a century with their own banking system. North Dakota is one of only two states (along with Montana) currently able to meet their budgets.

A banking system that depends on a state-owned bank could be fast-tracked into operation in a matter of weeks. With over $17 billion available to deposit in its own banking system, California could create $170 billion or more in credit--enough not only to meet its budget shortfall but to fund many other much-needed projects; and rather than feeding an ungrateful Wall Street or private banking system, the bank's profits would return to the state and its people.


Read the full article at YesMagazine.org -- an excellent online magazine!

Ellen Brown is an attorney and the author of eleven books, including Web of Debt: the Shocking Truth About Our Money System and How We Can Break Free. She can be reached through her website at www.webofdebt.com.

Edited by Carolyn Allen
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