Bill update

Our bill has been reported out of the  and sent to the Joint Committee on Financial Services. No hearing date scheduled yet! If your representative or senator sits on the committee, please contact them in support of the bill. We are also happy to come out to speak to local organizations about our bill and how a public bank could benefit Massachusetts.

Transportation problems? Why not try a public bank?

Massachusetts suffered an embarrassing drop in the US News and World Report best state ranking last week, especially so because we blew it so badly in just one thing: transportation. We are a dismal 45th out of 50, and to make it worse, it’s a score not just determined by resident surveys, but also backed up by another recent poll.

The MassINC Polling Group, working for the Barr Foundation found that improving Massachusetts highways, roads, and bridges was the top priority for respondents, ahead of improving education or lowering taxes. Since 80% of respondents drive alone as their primary means of transportation, with about 20% commuting between 30 minutes and an hour each day, addressing transportation issues would have some substantial economic and social benefits.

The poll found voters want more funding for both public transportation and roads but didn’t broadly back any one mechanism for generating the revenue needed. A change in state law to permit cities and towns to put funding measures for transportation on the ballot had strong support. Support was also high for adding electronic tolling to more state highways, but only if tolls were used to reduce congestion in the regions where they were collected.

A public infrastructure bank, such as our bill would institute, doesn’t yet have a high enough profile to make it on to polls as a possible solution to state transportation funding problems. (North Dakota, the only state with its own bank, topped the US News rankings for quality of life, and came in second for both fiscal stability and infrastructure.)

We think a public infrastructure bank could make a big difference in increasing the availability of funds for roads, schools, public buildings, recreational and emergency service facilities, and even climate change mitigation methods, and these polls clearly indicate that our state can use all the help it can get. But the MassINC poll also shows that state residents support addressing problems regionally, meaning that we don’t just need to sell the idea of a state bank, we need to ensure that it operates transparently, takes local preferences for solving transportation problems into account, and works for all regions of Massachusetts.

Seattle issues a RFP for a public bank feasibility study

On Monday, Seattle made their effort to create a public bank official by issuing a request for proposals for a Seattle Public Bank feasibility study. The city is seeking “a skilled consultant available for immediate work to evaluate the legal, financial and administrative feasibility” of a public bank, as well as the potential community benefits. The consultant will be expected to deliver a final report by August 1, 2018. The city has budgeted $100,000 for the study. You can read the RFP here.

The RFP follows the Seattle City Council’s passage of Ordinance 125257 in February 2017, which cut back on the city’s dealings with Wells Fargo due to the bank’s involvement in the Dakota Access pipeline and predatory lending practices. Seattle opted not to renew their contract with Wells Fargo for bank depository services, and put a three-year ban on new investments in bank securities, while seeking a more socially-responsible banking service provider. At the time, some city council members also indicated interest in a city or state owned bank.

How a Massachusetts Infrastructure Bank could fund disaster relief and preparedness

A little over a month ago, a nor’easter flooded coastal neighborhoods in Boston and both the north and south shores. Today, the Boston area will likely set a new record high for February 21. Municipalities are only just beginning to plan for floods, droughts, severe storms, and record heat in the face of collapsing weather patterns; here’s how a public bank can help increase community resiliency.  This article was part of the presentation at a legislative briefing on H3543, An Act Establishing the Massachusetts Infrastructure Bank.

by Steve Snyder

As a chartered bank owned by the State and People of Massachusetts, the Massachusetts Infrastructure Bank is mandated to serve the needs of its citizens through its loan program. Disaster relief and public health emergencies are now occurring with increased frequency and they must be responded to quickly in order to save lives, preserve communities and businesses, and maintain our vital infrastructure. Institutions, strategies, IT infrastructure, and personnel plans are in place, but the bottleneck is in funding that is responsive, adequate, and sustained.

A state-owned bank can also respond rapidly and flexibly because its profits do not have to be maximized in the short-term to serve absentee shareholders. As a public institution, it can effectively coordinate with the local public safety, media, hospital, business, finance and insurance sectors as well as other State and Federal Agencies

The consequences of a rapid response are clear in the following example. During the Grand Forks flood in the spring of 1997, the state-owned bank of North Dakota quickly established nearly $70 million in credit lines for the state Division of Emergency Management, the state National Guard, the City of Grand Forks and its state university, and the rebuilding of a key dike. The Bank of North Dakota also worked with local financial institutions and foundations to raise and coordinate relief funds both for Grand Forks and other areas affected by spring floods. Further, BND negotiated forbearance on student loans and housing loans backed by the federal government. It also reduced interest costs for farmers.

The flood inundated 75% of homes, impacted five thousand businesses, and necessitated the evacuation of 50,000 people. Throughout the months of recovery the Bank of North Dakota tirelessly supported its citizens. As a result, Grand Forks lost 3% of its population between 1997 and 2000. By contrast East Grand Forks across the river in Minnesota lost 17% of its population during the same period. Having ready credit for saving lives and rebuilding meant that the community of Grand Forks and its tax base were largely preserved.

Massachusetts needs a state-owned infrastructure bank that can provide credit to rebuild our communities in the event of a disaster and support shared economic prosperity. For this reason, in addition to the improved safety and profitability of our State’s deposits, we urge you to support H3543.


The cannabis industry’s banking problem, plus Congressional fixes and who supports them

The disconnect between state-level legalization and federal prohibition has left the cannabis industry pretty much “unbanked,” and there are potentially billions of dollars in play, from small business loans to retail banking services to tax payments. In California, the question of what to do with this money is one of the drivers behind a growing interest in public banks, especially at the municipal level.

But federal prohibition also represents a little windfall for the US Treasury, as Ellen Brown points out in this post on the Web of Debt blog. Businesses that are legal at all levels of government are allowed to deduct costs when filing taxes. The bar owner who buys $2000 worth of little fake Tiffany table lamps can claim a business expense; the grower who buys $2000 worth of grow lights cannot. As a result, writes Ellen, “The government makes a massive profit off the deal, snatching up to 70 percent of the proceeds of the reporting businesses, as opposed to the more typical rate of 30 percent.”

Banks that take cannabis industry money can currently be accused of money laundering, which became a crime only in 1986, and probably shouldn’t be a crime in the first place, since, as Brown writes, it hasn’t been a deterrent, and its prevention leads to “reporting requirements [that] are so burdensome and expensive that they have caused many smaller banks to sell out to larger banks or close their doors.” A decriminalization bill in Congress, H.R. 1227, the Ending Federal Marijuana Prohibition Act, sponsored by Virginia Republican Thomas Garrett and 32 cosponsors, is one fix (so far the only Massachusetts cosponsor is Rep. Michael Capuano) Another is the Secure and Fair Enforcement (SAFE) Banking Act (HR 2215 in the House, with our Reps McGovern, Capuano and Moulton co-sponsoring, S1152 in the Senate with both our Senators signed on) to “provide a safe harbor” for banks that provide financial products or services to state-legal marijuana businesses.

Maine Public Banking group recognizes legislative supporters

The Maine Fiddlehead Focus reports that Maine Public Banking recently presented its Profiles in Courage Awards to two state senators who supported a State Green Bank proposal despite what organizer Randall Parr characterized as “substantial misrepresentation” of the concept of public banking by members of the state’s financial establishment.

The Maine green bank bill was voted “ought not to pass” by the state legislature’s Join Insurance and Financial Services committee.

Other state legislators involved with the bill were also recognized by Maine Public Banking.

You can read the proposed legislation here.

STAB is the law of the land (plus ponies)

Politicians like to explain budgets as if governments are housewives checking the cookie jar and deciding whether Sunday dinner is going to be roast beef or Hamburger Helper. Aside from the obvious anachronisms—housewife? Sunday dinner?—governments aren’t households. We may get paid and then go grocery shopping, but governments don’t raise taxes and then call Raytheon to order a missile defense system. As economist Stephanie Kelton points out in this LA Times op-ed, they STAB—Spend, Tax, and then if spending outpaces tax revenue, swap the difference for government Bonds.

Consider the recent $700 billion defense authorization. Did we have $700 billion? Nope. “Without raising a dime from the rest of us, the Senate quietly approved an $80-billion annual increase, or more than enough money to make 4-year public colleges and universities tuition-free. And just where did the government get the money to do that? It authorized it into existence.”

Kelton was an economic adviser to the Bernie Sanders campaign. Sanders’ critics tried to boil his appeal down to “free stuff”—free health care, free college, and, in Hillary Clinton’s new book…

BERNIE: I think America should get a pony.

HILLARY: How will you pay for the pony?

The common sense approach is that goodies cost money that we don’t have. But the reality is that once we account for the internal limits of our economy “Congress can always afford the pony because it can always create the money to pay for it.”

The article is lively and fun and a good corrective to that housewife metaphor. But it’s only half right: when government spends more it has to borrow more or tax more, and if taxes stay flat, borrowing, mostly in the form of treasuries, takes money out of the economy just like taxes do. Eventually it comes back, and then some, in interest, but that takes time.

Increased spending can boost the economy and depending on what the money is spent on, can be a way of ensuring that more individuals and families share the wealth. That $700 billion that went to defense could have been much more of a prosperity multiplier if it went to education, infrastructure or human services—and in fact, a benefit of a Massachusetts public infrastructure bank is not just that it will make projects more affordable but that in building and repairing infrastructure we also create decent-paying jobs. In fact, military spending goes mostly to the already rich, where it sits in CD’s, treasuries, or brokerage accounts that don’t mix that much with the real economy, if it doesn’t leave the country altogether. Not to mention all the collateral damage the end product does. Come to think of it, that pony idea isn’t so bad…