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WHAT LOS ANGELES CAN LEARN ABOUT BANKING FROM FARGO (PART II)

February 11, 2014

WHAT LOS ANGELES CAN LEARN ABOUT BANKING FROM FARGO (PART II)
There are those who would say I have painted an “Alice in Wonderland” review in Part I, that the big Wall Street banks have a big majority of America’s money in their coffers, that such a monopoly gives public officials no choice in financing, that the world of money is brutal and unforgiving, that talking about starting such a bank and seeing the finished product come to fruition are two different things. This is not so for a very good reason: The “public officials” at the state level are themselves in charge of chartering of state banks. Such banks would not need FDIC insurance coverage because they would not take in deposits from the general public, and as noted earlier, they would not compete with commercial banks. Theirs would be a state-chartered bank taking in government deposits for use in infrastructure projects. (If there are those reading this who are from Los Angeles or California and wish to reduce their taxes and take the felons out of their current banking experience, check with the North Dakota banking regulators in Bismarck, who have had nearly a century of success in keeping their money at home. I have had the grand total of organizing one financial institution and am not an authority on the topic, hence my suggestion that putative public bank organizers go to the horse’s mouth in North Dakota.)
Such banks’ deposits would probably begin with a statutory grant followed by public deposits of state and/or city taxes and fees as well as such other specific income streams as that from school taxes, irrigation districts and other such political subdivisions. These sources of public deposits would quickly swell the coffers of any such bank (say, of California) overnight by the billions. Gone would be the day when the state or other jurisdiction would be parking their assets in some Goldman Sachs account in New York or some regional bank operating out of Wall Street. It’s the peoples’ money; they can keep it at home in their own bank and do their own leveraging. Why should they have to give such valuable ways of making money on their own money to the masters of leverage on Wall Street?
So how much (per Ellen Brown) would cities and/or states save on public projects if, for instance, Los Angeles had it own public bank? The answer is 35% or more! So if you build a new school house or public auditorium that cost a base of 50 million, that would be the final cost to taxpayers, not 67.5 million, a savings of 17.5 million savings on tax bills. That is a conservative estimate. She later points out that the San Francisco-Oakland Bay Bridge earthquake retrofit was slated to cost about 6 billion dollars, but when Wall Street banks’ fees and interest were added, the total cost of the bridge redo was another 6 billion dollars! In other words, Wall Street walked away with as much money to finance the project as the project itself cost! Funding through a public bank would have saved taxpayers 6 billion dollars. There is another lesson in this dreary exercise and it is this: Don’t pay any attention to the “sticker price” politicians put on projects; ask them what the Final Price will be after Wall Street collects its interest and “fees.” In this case, 6 billion dollars in taxes could have been saved. How many other projects are there scheduled or to be scheduled in California (and all over America, since only North Dakota has a public bank) that have been or are going to be financed by Wall Street banks when the people could have financed it themselves and in time saved themselves hundreds of billions if not trillions in taxes? Why should we pay taxes which are directly pipelined into Wall Street’s coffers when we could have our own banks finance such projects interest-free while such home-owned banks are even making a profit? We hear that the big banks are “too big to fail” and “too big to regulate” and “too big this and that,” but we have not heard that they are “too big to abandon.” I will expand on this in Part III. Stay tuned. GERALD E

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