ECONOMY: THEY CAN FIX IT IF THEY WANT PLUS: STATE BANKS

OLDOGS COMMENTS

Some year’s back I stumbled onto one of Marilyn’s articles and out of ignorance disagreed with her. That inspired me to confront her with an email that I thought was sufficient to correct her. To my surprise she interpreted my letter more harshly than intended, and put me in my place in no uncertain terms, which caused me to conclude I was up against a brick wall, and any further communication would be fruitless. After more thought I offered an apology which she graciously accepted, and that was the smartest thing I have done in my lifetime. Since that day, I have been the beneficiary of a relationship that I have never before had, and I would not trade her friendship for any amount of gain. She, and my wife, are the only two people on earth I completely trust. We still have different opinions on some things, but there is no animosity between us. The same can be said for my wife. Even though we are very close in age, If I could have chosen who would be my Mother, it would be her. She is one of the few authors who have the ability to blend fact with fiction, and has proven it with her two books on banking, how it has been controlled in America, and what to do about it. (When the Swan’s neck Breaks) and (Flight of the Black Swan) The reader is advised to read them both, As it is seldom that you can learn something valuable while still being entertained. Both were impossible for me to put down, and concentrate on something else. For those with a discerning mind, there is a lot to learn in these two books. Since I could write reams on how much I trust her intelligence and knowledge, I will conclude with this statement. I have never voted in my life, and for damn good reason, but if she would run for any office, I would break that habit and vote for her. I cannot think of anyone in America or anywhere else who could be trusted to make a difference in America, if she were given the power to do so. She knows how to fix America, and you can bet the Bank on that. Marilyn for President in 2012!

 

ECONOMY: THEY CAN FIX IT IF THEY WANT
PART 1 & 2 + STATE BANKS

http://www.newswithviews.com/Barnewall/marilyn169.htm

By Marilyn M. Barnewall
July 31, 2011
NewsWithViews.com

Watching Congress create a fear-based crisis over the debt ceiling limit this past week has been anything but entertaining. It’s like watching someone with one foot nailed to the floor run in circles, thinking because he/she is moving, it represents progress.

It’s interesting that whenever “they” want to achieve something major… whether it’s the Patriot Act or war in the Middle East or an enemy called “terrorists” that will unify the nation… they use fear as the primary motivator. Fear is one of the strongest. The only thing stronger is faith.

The entire process reminds me of an end-around run. The President, as quarterback, hands the ball off to John Boehner (wide receiver) who passes – but the ball is intercepted by Harry Reid (pass defender) – who changes the direction of the play. When anyone gets close to a touchdown, the President moves the goal posts and the game remains scoreless… but the cheering squads on the sidelines keep chanting the message of one team or the other. Barry and Harry’s team shout “Look out you senior wrecks, come August there will be no checks!” The Boehner team’s cheerleaders tell the people “Listen not to Barack’s demagoguery, your check will come because of our choreography!”

And that’s how political football is played… with your money and mine, of course. It is shameful that the security of the elderly was a playing card in this disgusting deck.

There is a core problem causing our economic woes and everyone ignores it either out of insufficient insight into what is required to get us out of this mess, or because someone thinks it’s a good idea for the American economy to fail. It reminds me a bit of taking your car to a poor mechanic to make it run properly. He can fix the tires, the windshield wipers, change the oil, check the water and cooling fluids, and a myriad of other things – but he doesn’t know a damned thing about the engine. How much help will that mechanic be when your car has serious problems?

Washington is filled with economists and lawyers… they understand our problems from a theoretical perspective. If you move “Piece A,” it will impact “Pieces B and C” this way. They look at the economy like a chess board and understand investment banking in its relationship to the game. They know little or nothing about commercial banking – which is the engine of a capitalist economy. We can thus say the mechanics of our economy tinker, they don’t repair. They are the poor mechanics who got us into the mess – and it requires greater minds than those that caused the problems to solve them.

There are things that can be done to turn the economy around and none of them are even under consideration. For example:

The hardest hit middle class Americans have taken during the past four years is in primary residential real estate. Whether you realize it or not, the lost value of real estate impacts everything else. It is the way our economy is structured – and is largely responsible for credit drying up (which is largely responsible for no business growth – which is largely responsible for no job creation).

The economy is not going to turn around until a firm floor is put under the residential real estate market. It can be done – but elected officials and bureaucrats must understand how commercial banks work. And, they do not.

Most secured loans utilize as collateral a second trust deed on the borrower’s residence. I’m not just talking about mortgage loans; I’m talking about home improvement loans or vacation loans or college (non-federal student) loans, etc. In the early 1990s and while Alan Greenspan was Federal Reserve Chairman, the Fed kept lowering the cost of funds. It encouraged people to re-finance their mortgages. The first time you ever heard of a personal line of credit called a residential credit line was in the early 1990s. People were encouraged to take out a residential credit line, which placed a second trust deed on their primary residence as collateral. In fact, the only way to get this personal line of credit was by putting a lien on the property – usually a second mortgage behind the first lien holder.

Until recently – just before the Lehman Brothers bankruptcy, coincidentally – when you bought a home, you had to put 20 percent down. Lehman was keeping its head above water by using liar loans from mortgage companies it owned – lenders that specialized in making them. It did that so it could create mortgage-backed derivatives. It – along with Goldman Sachs, J.P. Morgan Chase, Morgan Stanley and others – almost bankrupted the world. In fact, the jury is still out on whether they succeeded.

Get ready, because here comes some banker lingo… it can’t be said any other way. When we used to buy a home and made a 20 percent down payment, it resulted in an 80 percent collateral margin on the loan. In other words, the collateral value of the home plus the down payment gave the bank a 100 percent collateral position. Here are some numbers that may help:

Home purchase price: $200,000
Down payment, 20%: 40,000
Balance/Mortgage: 160,000 — 80% of home value, 1996

Bank regulations used to require an 80 percent margin be maintained on home loans – whether it is evaluated against a first or second trust deed. Today, that regulation is used selectively.

In 2007, the housing market began its steady decline. By 2010, the above home was re-appraised at $150,000. OMG! You are out of margin! When the FDIC or Comptroller of the Currency auditors come to your bank, your loan will be graded, even though you haven’t missed or been late with a single payment! Regardless of your faithfulness in making payments, the collateral is out of margin. It is an unsafe loan. This is a legitimate claim, by the way.

Chances are, your bank has a large number of such loans because using a borrower’s home has always been the preferred form of loan collateral in the commercial banking industry. Residential real estate has increased in value annually for generations so the risk was minimized… until 2007. Suddenly your bank finds itself on the regulatory watch list because it has too many loans that are out of margin. An otherwise healthy bank is threatened with closure. Some more numbers:

Loan balance:
$150,000 (after ten years of mortgage payments)
2010 Home value:
150,000 (after the real estate market drop)

There is no margin. To be in margin, an additional $30,000 must be added to the bank’s collateral position.

For the bank to have enough personal collateral from you, $30,000 of good assets must be added to bank’s collateral basket. Most people don’t have that amount sitting around to give the bank as collateral. The bank will soon tell the borrower to bring $30,000 more in assets to put the loan back in margin or the bank will be forced to call the loan and foreclose on your property. The auditors are screaming at the bank because of the margin lapse. They have to do something.

“But I’m not behind in a single payment!” you say, certain the bank won’t foreclose on your home loan just because of some bank regulation. If you’ve been thinking that all of the home foreclosures in process are caused by people who bought a house that was too expensive for them, think again. If you think they’re all people who aren’t making their house payments, think again. If you think the banks aren’t lending money because they don’t have money to lend, thing again. What they don’t have is access to a reliable form of collateral… like your house. Since the residential real estate market is still in a downward spin (and no one in Washington is doing anything intelligent to stop it), what asset does the middle class have available to provide the bank for collateral? Answer: None. No collateral, no loan access.

That explains why your local bank may be in trouble even though most of its loans are not (and thus it is a great takeover target for banksters). This also explains why banks aren’t lending: Without a healthy real estate market, they don’t have a solid collateral base. Too, their personnel’s time is spent dealing with loan margin problems or foreclosures. Only so much can be done in a single day by the same number of people.

Real estate is impacting jobs? Remember, 70 percent of all jobs in America come from independent business… middle class people who own homes and often use them as collateral for business loans are independent business owners.

And now you know why there are no new jobs: There are no homes with reliable dollar value available as loan collateral. Independent business owners can’t hire people. The economy, of course, has some impact on independent business growth because fewer people have money to spend on goods and services. And, there are banks that loaned too much money to contractors who were building new homes and got caught in the housing crunch… and bankers are notoriously bad at handling work-out loans in a way that benefits everyone.

I’m not an economist; just a commercial banker with God-given common sense. My common sense tells me the best way to put a floor under the falling real estate market has nothing to do with the $600 billion the Federal Reserve System plans to inject into the economy this fall. It will do about as much good as the TARP and TALF funds did (read: little to none – it’s the engine that needs help, not the windshield wipers or oil filter – and a limited number of people will have remarkable investment opportunities). If TARP funds had been used to stabilize the housing market rather than bailing out investment bankers who perpetrated fraud on the public, we would be in serious economic recovery by now. Our economy wouldn’t continue to waver between recession and depression.

Ben, rather than throw that $600 billion into greedy hands that do nothing to solve the nation’s economic problems, create a real estate stabilization fund. When a bank’s mortgage loan (either first or second trust deed) gets out of margin, guarantee that portion of the loan that is out of margin… in the example given above, $30,000. This gets the Comptroller of the Currency (or FDIC) auditors off of the banks’ back (which you could do anyway, if you so chose), and it gets the bank off of the backs of consumers who have sacrificed in many ways to repay their mortgage loans and who have a good repayment track record.

This would not apply to new loans… it’s not a something for nothing vote-getting kid of deal – which will automatically kill it before it gets started. It’s a program designed to put a floor under the housing market to prevent it from falling any further and to stabilize it. It’s not a loan. It’s a guarantee. Thus, the $600 billion you plan to throw into the greedy hands of the already rich will result in few loan losses. If you really want to save the economy, stabilize the real estate market.

To top that information off, here’s a press release from the Bureau of Economic Analysis, held for release until Friday morning, July 29, 2011:

“Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 0.4 percent.”

In other words, the President of the United States has lied to us about recovery. He has been telling us that though the economy is slow to recover, it is recovering. How can an economy “recover” when 99.6 percent of the economy did not grow? It cannot!

Now, if a little old lady who lives at the base of a big mountain in the countryside can figure that out, why can’t all of those economists in Washington, D.C.?

Below are pictures – each red dot in each picture represents broken hearts, shattered dreams, broken homes, and Americans who have had their false sense of security ripped from their formerly unrealistic view of life. They used to think things like “This is America; we’ll recover.” Or, “Everything is in God’s hands; I just have to trust Him.” They have learned the lesson that taking no action to stop fraud when it occurs is accepting fraud as the standard. They now know that everything is in God’s hands, but we are expected to protect and defend what His hands have so graciously given us.

I apologize for ending an article with such an emotional display of heartbreak as those exhibited below in pictures from Google Mapping.


1. Boise, Idaho — 1 in 21 homes in foreclosure

 
2. Sarasota, FL — 1 in 21 homes in foreclosure


3. Tampa, FL — 1 in 20 homes in foreclosure


4. Sacramento, Calif. — 1 in 19 homes in foreclosure


5. Bakersfield, Calif. — 1 in 17 homes in foreclosure


6. Reno, Nevada — 1 in 16 homes in foreclosure (Home of Senator Harry Reid)


7. Miami, FL — 1 in 14 homes in foreclosure


8. Phoenix, AZ — 1 in 14 homes in foreclosure


9. Cape Coral, FL — 1 in 12 homes in foreclosure


10. Las Vegas — 1 in 9 homes in foreclosure

Tell them all – the President, the Vice President, the Chairman of the Federal Reserve System, the Secretary of the Treasury, your U.S. Senators and Representatives – tell them all to stop lying to the American people!

ECONOMY: THEY CAN FIX IT IF THEY WANT
PART 2 + STATE BANKS

 There are many ways to improve the economy. Our Congress – people we elected – moan and groan saying they can’t do anything about national monetary policy or make the marketplace user friendly for job creation. That is untrue. They have control… what they don’t have is the cojones to exercise it. For example, many experts believe the Federal Reserve Act of 1913 is illegal.

On what is this argument about the legitimacy of the Federal Reserve System based?

Article I, Section 8 of the United States Constitution says that “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” And here’s where it gets interesting. The Constitution says the Congress has the power “To borrow Money on the credit of the United States.” Oops. How did a private corporation called the Federal Reserve inherit that responsibility? Section 8 also says the Congress “shall have Power… to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.” Since the Federal Reserve, a private corporation, does these things… isn’t it unconstitutional?

Well, politicians and lawyers will argue and tell you that the Federal Reserve Act of 1913 makes it legal for the Congress to turn its monetary responsibilities as described in the Constitution over to the Federal Reserve.

Here’s an easier question for you to answer: In 1970, how old did an American citizen have to be to vote? Answer: 21. How did they lower the constitutional requirement that you had to be 21 to vote… how did 18 year olds get the vote? On June 22, 1970, then-President Richard Nixon signed a law making the voting age 18 in all federal, state and local elections. The States of Oregon and Texas challenged the law. The Supreme Court declared unconstitutional those parts of the law requiring states to register 18-year olds for state and local elections. Justice Hugo Black said: “I would hold that Congress has exceeded its power in attempting to lower the voting age in state and local elections.”

That Supreme Court ruling, then, meant states had to provide separate voting rolls for people between ages 18 and 21. It basically determined the Congress had the right to tell 18 year olds they could vote in federal elections, but states had the right to determine how old someone must be to vote in state elections.Special ballots created for those between the ages of 18 – 21 would create an election nightmare; so, on March 10, 1971, the Senate voted 94-0 in favor of passing a Constitutional amendment to guarantee the voting age would be no higher than 18 in all elections. On March 23, 1971, the House voted 401-19 in favor of the proposed amendment. The amendment was sent to each of the states and the minimum number of states ratified the proposed legislation – and the Constitution of the United States added Amendment XXVI, allowing 18 year olds to vote. Since I don’t know anyone (other than bankers who profit from the policies of the Federal Reserve System) who wouldn’t vote to do away with the Federal Reserve System, this alternative is available to the Congress. All they need is for a state legislature or two to challenge the Federal Reserve Act of 1913 and get the challenge to the Supreme Court. It would be interesting to see what today’s “living document” Supreme Court would do when faced with a 1970’s Court decision that comes down on the side of states’ rights.

A Supreme Court decision exists that says the Congress overstepped its bounds – or, as Justice Black said, “has exceeded its power” – by passing a law that applied to state and local elections. Many people suggest (myself included) the Congress “exceeded its power” by passing the Federal Reserve Act of 1913 because that law extends beyond the federal to the state level. How does it extend beyond the states to the federal level? Just one example: To be a “national bank” in Oregon or Texas (or in any state), a bank is required to be a member of the Federal Reserve System. Any state, at any time, can challenge the power base of the Federal Reserve System as it is exercised at the state level. So state legislators could change things too – if they wanted – just as Oregon and Texas successfully challenged the 1970 law signed by President Nixon giving 18 year olds the right to vote. Just because a President signs a Congressional Act doesn’t make it lawful. If it violates the Constitution of this country, it is not lawful and becomes what is called “fruit of the poisoned tree.”

As I have said in my columns many times, the Federal Reserve System is not part of the federal government. It is a private corporation (a cartel – like OPEC)… the only one in America that is exempt from both federal and state taxes. Well, General Electric (GE) doesn’t pay much in taxes, but that’s not because of an exemption. That’s because of loopholes – and that makes one scratch one’s head when one thinks about Obama’s key economic advisor, Jeffrey Imelt, Chairman and CEO of GE. When one rewards bad behavior (by honoring one guilty of it with a Presidential appointment), one should expect more bad behavior.

The point is, if the Congress or State Legislatures want to get rid of the Federal Reserve, they can… just like Texas and Oregon got rid of the 18 year old voting rights bill that was imposed on them by the United States Congress. I don’t know anyone who would vote to support keeping the Federal Reserve System… maybe Alan Greenspan and Ben Bernanke. The states forced the issue with Congress, they won, and an Amendment to the U.S. Constitution was required to legalize the 18-year old vote at state and local elections. The same charge of Congress exceeding its power when it transferred constitutional authority to the Federal Reserve System can be made by any state legislature… and a Supreme Court precedent exists.

A lot of people think the Congress is being dominated by the banksters… especially the investment banks on Wall Street. If that’s true, the Congress can regain control. Do away with the Riegel-Neal Interstate Banking and Branching Efficiency Act of 1994. Bring back the old McFadden Act which prohibited interstate branch banking. Give the too big to jail guys time to divest themselves of the interstate branches and decentralize all of that misbegotten banking power. McFadden protected us for many years from banks becoming too big to jail. The point is there are things that can be done to eliminate the power abuses of the Federal Reserve System —if the Congress wants to do them. There are things that can be done to put the Congress back in control of our banking system and our monetary policy. States can implement a state-owned system of banking… the best possible example I can think of to decentralize the power of the Federal Reserve.

Until 1980 when the Monetary Control Act was passed, the Glass Steagall Act protected Americans by preventing commercial banks from giving investment advice or selling stocks and bonds. Glass Steagall prevented investment banks – Wall Street brokers, not commercial bankers – from making loans or taking deposits. These two key financial transactions credit and investments (especially relative to new product development on the investment side), like oil and water, do not mix. When they are mixed, it creates a moral hazard that can result in economic meltdown. We had a perfect example of that in 2007-08 and are still trying to find our way out of the economic abyss that was created – some say intentionally (me among them) – for us. There are too many potential conflicts of interest for a compatible marriage bed between these two functions.

In a NWV article April 25, 2010, titled Moral Hazard Ahead: Beware, I defined “moral hazard” as the mingling of commercial and investment banking. I stand by what I said in that article – and in over a year since its publication, those words have proven themselves true.

If Washington really wanted to force the too big to jail banks to return to serving the people rather than servicing them, they would eliminate the Monetary Control Act of 1980 and re-implement Glass Steagall. It would repeal Gramm, Leach Bliley, a/k/a the Financial Services Modernization Act of 1999 which was the death thrust to Glass Steagall. Congress has the power to change things… if it wants.

Congress likes to play like it’s not in control… it absolves them from the problems they create (they think). But Congress holds the reins of power. There are only two possible reasons why the Congress has passed such utterly stupid regulations and allowed such weak regulatory oversight of the investment banking industry – the industry which caused most of America’s economic trauma: 1) They want to bring the economy of the United States to its knees and move forward with George Herbert Walker Bush’s “New World Order;” or, 2) Those who were stupid enough to get us into this mess aren’t smart enough to understand their complicity in causing this mess and have no idea how to get us out of it.

We can only assume that if the Congress isn’t taking action, it’s for one of three reasons: 1) They don’t understand America’s monetary system and how financial institutions function sufficiently to cast votes that impact or change the system; 2) They are more focused on their political careers than on the economic health of the nation they have taken an Oath to serve; or, 3) They want the system to fail. The number three choice would certainly explain the ongoing over-spending that has brought the United States very, very close to total economic collapse.

The tribal wisdom of the Dakota Indians, passed on from generation to generation, says that, “When you discover that you are riding a dead horse, the best strategy is to dismount.”

Instead of listening to the wisdom of that voice from the past, we have a political administration that prefers appointing a committee to study the horse. It wants to provide more funding to help increase the dead horse’s performance.

We need to clean the House (and the Senate) in 2012. For part one click below.

© 2011 Marilyn M. Barnewall – All Rights Reserved

 STATE BANKS

In a speech I give about state banks, I begin by showing 20 slides. Each displays an overhead view of a city. Each city is covered with little red dots. Each dot represents a home in foreclosure… a broken dream for an American brother and/or sister.

Some of those slides were used in a recent article I did about home foreclosures and why so many people who have never missed a house payment are being told to either cough up more collateral for their mortgage loan or the bank will “call the loan” (require payment in full).

In my speech, I use the slides to emphasize the incompetence of the Federal Reserve System and as evidence of why the monetary policies of this private corporation (owned by and for bankers) has failed and why responsibility for monetary policy needs to be returned to the Congress of the United States of America where the Constitution firmly placed it.

Do I trust the Congress more than I trust Ben Bernanke? No. But I do trust the Constitution and respect the structure it put in place for our monetary policies and currency… for our Republic.

My slide presentation begins with Boise, Idaho. One in every 21 homes is in foreclosure in Boise. Several slides of cities in Florida are shown – Tampa, Port St. Lucie, Deltona, Naples – and some California cities like Sacramento, Bakersfield, Riverside and others. All of these cities have more homes in foreclosure than Boise does. There are two slides from Senator Harry Reid’s home state of Nevada – Reno (1 out of every 16 homes is in foreclosure) and Las Vegas (one out of every 9 homes is in foreclosure). Nevadans just re-elected Reid to his Senate seat. As the old saying goes, we get the government we deserve.

The Constitution (Article I, Section 8) quite clearly gives the right to borrow money on the credit of the United States to the Congress, not to a private corporation called the Federal Reserve. It gives to the Congress, not a cartel of bankers called the Federal Reserve, the right to coin money, regulate its value and that of foreign coins, and fix the standard of weights and measures.

The Federal Reserve Act was passed by the Congress in 1913. Thus, it took that private corporation (which, in reality, is nothing more than a middleman… a wholesaler of taxpayer currency) – 98 years to cause all of those little red dots, each representing a foreclosed home in an American city. The Fed has, unlawfully in my view, been in charge of our monetary policy for almost 100 years.

I suggest that this is one hundred year birthday we should not celebrate. It is a celebration we should abort… and I mean that in the worst kind of way.

The United States is $15 trillion in debt. We are spending $1.50 for every $1 in revenue we take in. That is unsustainable. Since every dollar that is printed is 46 cents in debt, it should be called a half-dollar, not a dollar. Printing a dollar bill that is almost 50 percent in debt before the ink dries may provide a new definition of counterfeiting.

The Federal Reserve recently underwent a partial audit that shows it made $16 trillion zero interest secret loans to American and foreign banks and businesses. You’d recognize the usual Wall Street bankster names… e.g., Goldman Sachs, J.P. Morgan Chase, Citigroup, etc. The foreign banks included some of the biggest in the world… Deutsche Bank, Royal Bank of Scotland, and others. While the Fed was making these zero interest loans (for which U.S. taxpayers are on the line), 6.5 million American homeowners were suffering through delinquent and foreclosed mortgages mostly caused by lost jobs resulting from a rotten economy – created by Federal Reserve policies.

The disastrous policies that have caused these personal nightmares give the American people all the necessary reasons required to demand we take back control of our banking system. We must tell this wholesaler of debt and money that whatever services it provides (other than screwing the people) are no longer needed.

Give authority over our banking system to individual states so the people have more control over their financial futures. When state banks are properly run, both the people and the government prosper… which is the way it’s supposed to be.

If a state implements a new, state-owned financial system, do we need to pay attention and make sure the state doesn’t turn state banks into political toys… follow in the Fed’s footsteps? You’re darned right we do! Had citizens been doing their job this past 98 years, the Federal Reserve wouldn’t have become the biggest financial abuser in world history! We need to watch anything that’s political to keep it from servings its own interests rather than those of the people!

What is a state bank?

There is only one state-owned system of banking in the country and it’s in North Dakota. That state has owned and operated its own system of banking for the past 93 years. So, when I write and talk of the benefits we can expect from implementing a state bank, it’s based on the experience of North Dakota’s bank, not on guess work or estimates.

As of July 2011, the unemployment rate in North Dakota is 3.3 percent. With a population of between 650,000 and 700,000, the North Dakota State Bank has, during the past ten years, paid the State Treasurer more than $325 million from bank profits. These funds keep the tax burden low which, in turn, encourages… what? Business and job growth! That’s one reason unemployment is so low in North Dakota. Think what states with larger populations and very high rates of unemployment – like Michigan – could do!

In 2009-2010, the worst American economy in recent history, North Dakota’s government had it largest surplus in history. The payroll growth in the private sector (not the public sector) during that time frame was 5.2 percent. The payroll growth of Texas placed it second at 2.6 percent. Maybe Governor Dalrymple should be running for President instead of Rick Perry?

When I speak publicly on this subject, people suggest that the North Dakota economy is so successful because of the Bakken oil project where an oil formation lies underground in a shale rock across western North Dakota, northeast Montana, and into Canada’s Saskatchewan Province. The barrels per day went from 3,000 in 2005 to 225,000 in 2010.

There’s no doubt Bakken has enhanced the North Dakota economy, but it’s not what causes the positive economic results. There are almost as many people in Alaska as North Dakota – and Alaska pumps about twice as much oil – unemployment in Alaska is 7.7 percent. Montana and Wyoming extracted far more gas than North Dakota, but neither maintained a continuous budget surplus since our economic crisis began in 2008. North Dakota has.

States with a lot of minerals weren’t initially hurt as badly as other states when the economy turned south. But other states haven’t reduced taxes. North Dakota has. It reduced income and property taxes by $400 million. Thinking of all of those little red dots on my speech slides… North Dakota also has the lowest foreclosure rate and lowest credit card default in the nation.

North Dakota has had no bank failures during the banking crisis, either. It has only one thing not available in other mineral rich states: a state bank.

From 2007 to 2009, the Bank of North Dakota added to the state’s coffers almost as much money as oil and gas tax revenues did.

So, that’s what you can expect from a state bank. Why does having a state bank make such a huge difference? Because the state’s money and banking reserves are maintained within the state and those funds are invested in local communities. And, in addition to a state bank providing needed administrative functions, it serves as a correspondent bank for the independent banks on North Dakota street corners.

There are two or three questions I get asked when I speak publicly about this subject. The most frequently asked question is “Does having a state bank mean that the state runs the banks people do business with?” No. It doesn’t. That would be a socialist system – and state banks are anything but that! The state runs the state bank; individual investors run the commercial banks on Main Street… just like they do now.

A state bank is an administrator which charters the banks that do business in the state (and by doing so, largely controls credit quality). It acts as a correspondent bank for the banks it charters. A “correspondent bank” provides credit services to small, independent banks which places them in a more competitive position with large banks. When a small bank gets a loan request too large for it to make, such a loan is referred to a correspondent bank and becomes a “shared” loan. Without a state bank, independent banks must refer their loans to the big banks – which is one reason they got too big to jail.

I mentioned earlier that North Dakota keeps all state revenues in the state. In other states, a large percentage of those funds are sent to the Federal Reserve – which places them in money center banks in New York. State banks keep those funds in the state and use them to benefit the people.

Some economists estimate that this one difference can turn a state’s economy around within one year.

I started writing about the issue of state banks about two years ago. Since then, numerous states are legislatively investigating how to implement one: Washington, Oregon, California, Montana, Illinois, Florida, Hawaii, Virginia, Maryland and Massachusetts are among them.

Another question audiences ask is: If we own a state bank, will we need to create our own state currency? The answer is no. However, a state bank does provide a needed distribution system for a state currency should a state decide it needs to create one. Why would a state need to create its own currency? If the federal system fails, so too will America’s currency (and with it, the national banking system). To distribute any currency, an organized system of banking is required. There are many questions about state currencies, but that is another article.

The other question asked regards state sovereignty.

Several states have legislatively declared their right to be sovereign states. They include: Alabama, Nebraska, Rhode Island, Wyoming, Washington, Indiana, Kentucky, Georgia, Kansas, Missouri, Mississippi and Maryland.

Remember this about sovereignty. It is impossible to have a sovereign state without having control of your state’s monetary system. To achieve that, you need a state bank. As to the arguments about the legality of sovereignty declarations, I leave that to the lawyers. I’m a banker and what I know is this: If a state declares sovereignty without first having a state bank in place, there will be economic chaos. The bank comes first; sovereignty, second.

We face difficult times ahead. I believe state banks are a key that makes it possible for Americans to maintain every possible lawful alternative to solve the problems headed our way.

© 2011 Marilyn M. Barnewall – All Rights Reserved  READ MARILYN’S ARCHIVES AT NEWS WITH VIEWS

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Marilyn MacGruder Barnewall began her career in 1956 as a journalist with the Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and bank consultant, she wrote extensively for The American Banker, Bank Marketing Magazine, Trust Marketing Magazine, was U.S. Consulting Editor for Private Banker International (London/Dublin), and other major banking industry publications. She has written seven non-fiction books about banking and taught private banking at Colorado University for the American Bankers Association. She has authored seven banking books, one dog book, and two works of fiction (about banking, of course). She has served on numerous Boards in her community.

Barnewall is the former editor of The National Peace Officer Magazine and as a journalist has written guest editorials for the Denver Post, Rocky Mountain News and Newsweek, among others. On the Internet, she has written for News With Views, World Net Daily, Canada Free Press, Christian Business Daily, Business Reform, and others. She has been quoted in Time, Forbes, Wall Street Journal and other national and international publications. She can be found in Who’s Who in America, Who’s Who of American Women, Who’s Who in Finance and Business, and Who’s Who in the World. AND, WHO’S WHO AT A NATION BEGUILED

Web site: http://marilynwrites.blogspot.com

E-Mail: marilynmacg@juno.com

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