Letter: Treasurer wrong about public banking

Re “Is a Public Bank Right for Washington? Treasurer Says No” (BBJ Today, Dec. 20th): the article cites a report released by the Treasurer’s office compiling data from 12 other states, territories and cities on a publicly-run bank, of which the article concludes, “All except one — American Samoa — ultimately decided against the idea.” The linked report contains no footnotes or citations, but the summaries of the reports cited do not lead to that conclusion. Most state only that questions remained, and answering those questions is what Sen. Bob Hasegawa’s Washington State Bank Caucus is doing.

The only report actually addressing Washington State was the 2010 study by the Center for State Innovation. It concluded, “a state bank would have a positive effect on state revenue and could effectively strengthen the banking industry and create and sustain jobs through a revenue positive investment in a state bank.” The $100 million the CSI recommended in capitalization was not stated as a reason not to do it. Capitalizing a bank is not an expenditure; it is an investment repaid over time with profits. The CSI study said the funds could be acquired through a bond issue repaid with bank dividends. Assuming a 10 percent capitalization requirement, the result would be a bank with a potential $1 billion portfolio, which could make below-market loans for those state and local infrastructure needs sorely lacking funding today.

As for risk, Hasegawa’s Senate Caucus proposes to avoid it by excluding individual depositors and including only state and municipal governments as members and customers. One low risk alternative would be to merely refinance existing debts at lower interest.

I live in Los Angeles and am familiar with the Los Angeles city-owned bank proposal that is first up on the Treasurer’s list. Again no citation is given for the alleged finding that a bank is not feasible. As Treasurer Davidson’s own report observes, the Los Angeles City Council put the measure on the November ballot, indicating that it understood the bank’s potential. Davidson’s contention that the measure lost by a “wide margin” is untrue. It got 44 percent of the vote, a very good result for a first effort with only 3 months to promote it by a grassroots support group without funding. Next time around, with more funding and time to make the case, Los Angeles City Council President Herb Wesson has said he expects the measure to win.

Ellen Brown
Chair, Public Banking Institute
Los Angeles, California

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