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Washington State Proposal Would Make Taxpayer Money Work for the 99%
Ben Secord on February 2, 2012 - 3:36pm
A proposal to create a state-owned bank is gaining momentum in Washington State, where a bill modeled after the successful Bank of North Dakota was introduced in January with 44 co-sponsors in the House. In a speech at the outset of the legislative session, Speaker of the House Frank Chopp called it one of the caucuses’ key priorities this year.
The proposal would allow Washington to begin to administer certain loans and services that are currently operated by large multinational banks like Bank of America and Chase. Long-term, it could help increase lending to small businesses and farms, while also generating significant revenue for the state.
The Bank of North Dakota, an almost 100 year-old institution which partners with local banks to expand their lending capacity, is credited with helping the state support the most diverse banking sector in the country. North Dakota has four times more local banks than the U.S. average and local banks account for 60% of all deposits in the state, compared to only 16% nationally.
This is important because local community banks are much more likely to lend to small businesses and farms – the kind of employers that have been hit hardest during the Great Recession and its aftermath. In fact, smaller community banks lend three times as much to small businesses than four mega banks (Bank of America, Wells Fargo, Chase and Citi Bank), despite having only a quarter of the total assets of their much larger counterparts. The reluctance on the part of big banks to make loans available to small businesses has been a significant barrier to job creation, as many business owners say that the lack of access to credit has prohibited them from growing.
The Bank of North Dakota has also generated more than $300 million in revenue over the past decade, a significant boost to the general fund for a small state. By comparison, the equivalent sum in Illinois would have been $6 billion over the same period of time.
Washington has made more than $10 billion in cuts to core education and health systems since the onset of the recession, and this proposal could provide the state with more long-term stability and flexibility, especially during tough times. Instead of allowing the interest gained from the state’s reserves to funnel back to Wall Street, the money could potentially go toward funding infrastructure improvements, education, or replenishing the state’s Rainy Day Fund. It’s an idea that is resonating with lawmakers and the public alike who are angry over the role big banks have played in sinking the country into the Great Recession and saddling the state with four consecutive years of severe budget troubles.
The bill introduced in the state House to create the Washington Investment Trust, sponsored by Rep. Bob Hasegawa, has a companion bill in the Senate that has already garnered 11 sponsors. A number of other states are considering similar legislation, including Oregon, Maine, Michigan, Illinois, Massachusetts, Vermont, Hawaii, Montana and California.
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