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PBI Newsletter, Issue: # 011
February 28th, 2012
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Welcome to the PBI Newsletter, February Edition


With the addition of new bills introduced in the legislatures of Vermont, New Hampshire, and Idaho, the total number of states that have considered, or are considering, a state bank or a study for such since    Map 2-22-12  
2010 now numbers 17, over 1/3 of these United States, not including North Dakota, which has successfully operated a publicly owned bank for 93 years.

Granted, no state has actually implemented a state bank, but the conditions that engendered the current crisis are, as Paul Krugman recently noted, not getting any better. We would like to believe that, despite the unlimited resources of the opposition, it’s only a matter of time before a state, county, or municipality joins North Dakota in leveraging its tax revenues in the public interest. 

Perhaps such a leap will be taken during this leap year? In this issue, you’ll find an overview of the current status of public banking in the U.S. by our President, Ellen Brown.

Also, as a run up to our inaugural national conference in Philadelphia, April 27-28, we’ll be featuring articles by some of the compelling thought leaders that will be presenting at the event. In this issue, Tom Greco examines effective alternatives to Federal Reserve Notes for creating economic activity in times, such as ours, when the money supply is being suppressed.

We hope you’ll join us—your friends, and colleagues—for what promises to be a memorable get together in the city that engendered the first American revolution.

Robert Bows
PBI Newsletter Editor
Public Banking Institute

Move Our Money:  New State Bank Bills Address Credit and Housing Crises

Ellen Brownback cover photo 4th ed 2010
Chairman and President

Public Banking Institute

Eighteen states have now introduced bills for state-owned banks, and others are in the works.  Hawaii’s innovative state bank bill addresses the foreclosure mess.  County-owned banks are being proposed that would tackle the housing crisis by exercising the right of eminent domain on abandoned and foreclosed properties.  Arizona has a bill that would do this for homeowners who are current in their payments but underwater, allowing them to refinance at fair market value.      

The long-awaited settlement between 49 state Attorneys General and the big five robo-signing banks is proving to be a monumental disappointment before it has even been signed, sealed and court approved.  It appears that the bankers who took your home and your job will again be buying their way out of jail, and the curtain will again drop on the scene of the crime.
We may not be able to beat the banks, but we don’t have to play their game.  We can take our marbles and go home.  The Move Your Money campaign has already prompted more than 600,000 consumers to move their funds out of Wall Street banks into local banks, and there are much larger pools that could be pulled out in the form of state revenues.  States generally deposit their revenues and invest their capital with large Wall Street banks, which use those hefty sums to speculate, invest abroad, and buy up the local banks that service our communities and local economies.  The states receive a modest interest, and Wall Street lends the money back at much higher interest.
Rhode Island is a case in point.  In an article titled “Where Are R.I. Revenues Being Invested? Not Locally,” Kyle Hence wrote in ecoRI News on January 26th:
According to a December Treasury report, only 10 percent of Rhode Island’s short-term investments reside in truly local in-state banks, namely Washington Trust and BankRI. Meanwhile, 40 percent of these investments were placed with foreign-owned banks, including a British-government owned bank under investigation by the European Union.
Further, millions have been invested by Rhode Island in a fund created by a global buyout firm . . . . From 2008 to mid-2010, the fund lost 10 percent of its value — more than $2 million. . . . Three of four of Rhode Island’s representatives in Washington, D.C., count [this fund] amongst their top 25 political campaign donors . . . .

Hence asks:

Are Rhode Islanders and the state economy being served well here? Is it not time for the state to more fully invest directly in Rhode Island, either through local banks more deeply rooted in the community or through the creation of a new state-owned bank?
Hence observes that state-owned banks are “[o]ne emerging solution being widely considered nationwide  . . . . Since the onset of the economic collapse about five years ago, 16 states have studied or explored creating state-owned banks, according to a recent Associated Press report.”

2012 Additions to the Public Bank Movement
Make that 17 states, including three joining the list of states introducing state bank bills in 2012: Idaho (a bill for a feasibility study), New Hampshire (a bill for a bank), and Vermont (introducing THREE bills—one for a state bank study, one for a state currency, and one for a state voucher/warrant system).  With North Dakota, which has had its own bank for nearly a century, that makes 18 states that have introduced bills in one form or another—36% of U.S. states.  For states and text of bills, see here.

Other recent state bank developments were in Virginia, Hawaii, Washington State, and California, all of which have upgraded from bills to study the feasibility of a state-owned bank to bills to actually establish a bank.  The most recent, California’s new bill, was introduced on Friday, February 24th.
All of these bills point to the Bank of North Dakota as their model.  Kyle Hence notes that North Dakota has maintained a thriving economy throughout the current recession:
One of the reasons, some say, is the Bank of North Dakota, which was formed in 1919 and is the only state-owned or public bank in the United States. All state revenues flow into the Bank of North Dakota and back out into the state in the form of loans.
Since 2008, while servicing student, agricultural and energy— including wind — sector loans within North Dakota, every dollar of profit by the bank, which has added up to tens of millions, flows back into state coffers and directly supports the needs of the state in ways private banks do not.
Publicly-owned Banks and the Housing Crisis
A novel approach is taken in the new Hawaii bill:  it proposes a program to deal with the housing crisis and the widespread problem of breaks in the chain of title due to robo-signing, faulty assignments, and MERS.  (For more on this problem, see here.)  According to a February 10th report on the bill from the Hawaii House Committees on Economic Revitalization and Business & Housing:
The purpose of this measure is to establish the bank of the State of Hawaii in order to develop a program to acquire residential property in situations where the mortgagor is an owner-occupant who has defaulted on a mortgage or been denied a mortgage loan modification and the mortgagee is a securitized trust that cannot adequately demonstrate that it is a holder in due course.
The bill provides that in cases of foreclosure in which the mortgagee cannot prove its right to foreclose or to collect on the mortgage, foreclosure shall be stayed and the bank of the State of Hawaii may offer to buy the property from the owner-occupant for a sum not exceeding 75% of the principal balance due on the mortgage loan.  The bank of the State of Hawaii can then rent or sell the property back to the owner-occupant at a fair price on reasonable terms. 
Arizona Senate Bill 1451, which just passed the Senate Banking Committee 6 to 0, would do something similar for homeowners who are current on their payments but whose mortgages are underwater (exceeding the property’s current fair market value).  Martin Andelman calls the bill a “revolutionary approach to revitalizing the state’s increasingly water-logged housing market, which has left over 500,000 of Arizona’s homeowners in a hopelessly immobile state.” 
The bill would establish an Arizona Housing Finance Reform Authority to refinance the mortgages of Arizona homeowners who owe more than their homes are currently worth.  The existing mortgage would be replaced with a new mortgage from AHFRA in an amount up to 125% of the home's current fair market value. The existing lender would get paid 101% of the home's fair market value, and would get a non-interest-bearing note called a “loss recapture certificate” covering a portion of any underwater amounts, to be paid over time.  The capital to refinance the mortgages would come from floating revenue bonds, and payment on the bonds would come solely from monies paid by the homeowner-borrowers. An Arizona Home Insurance Fund would create a cash reserve of up to 20 percent of the bond and would be used to insure against losses. The bill would thus cost the state nothing.  
Critics of the Arizona bill maintain that it shifts losses from collapsed property values onto banks and investors, violating the law of contracts; and critics of the Hawai bill maintain that the state bank could wind up having paid more than market value for a slew of underwater homes.  An option that would avoid both of these objections is one suggested by Michael Sauvante of the Commonwealth Group, discussed earlier here: the state or county could exercise its right of eminent domain on blighted, foreclosed and abandoned properties.  It could offer to pay fair market value to anyone who could prove title (something that with today’s defective title records normally can’t be done), then dispose of the property through a publicly-owned land bank as equity and fairness dictates.  If a bank or trust could prove title, the claimant would get fair market value, which would be no less than it would have gotten at an auction; and if it could not prove title, it legally would have no claim to the property.  Investors who could prove actual monetary damages would still have an unsecured claim in equity against the mortgagors for any sums owed.
Rhode Island Next?
As the housing crisis lingers on with little sign of relief from the Feds, innovative state and local solutions like these are gaining adherents in other states; and one of them is Rhode Island, which is in serious need of relief.  According to The Pew Center on the States, “The country’s smallest state . . . was one of the first states to fall into the recession because of the housing crisis and may be one of the last to emerge.” 
Rhode Islanders are proud of having been first in a number of more positive achievements, including being the first of the 13 original colonies to declare independence from British rule.  A state bank presentation was made to the president of the Rhode Island Senate and other key leaders earlier this month that was reportedly well received.  Proponents have ambitions of making Rhode Island the first state in this century to move its money out of Wall Street into its own state bank, one owned and operated by the people for the people.

Ellen Brown is an attorney and president of the Public Banking Institute,  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are and


Featured Article:  Stop Chasing the Buck and Change Your Luck

thom greco
Thomas H. Greco, Jr.
Author of "The End of Money, The Future of Civilization" and will be one of the speakers at the Public Banking in America Conference on April 27th and 28th.

Most small and medium sized businesses (SMEs) these days are having a hard time financially--sales are down, costs are up, and bank credit is unavailable, all of which is symptomatic of the stagflation that besets the American economy.

Our present predicament is no accident of nature, nor is it a temporary condition; it is the expected result of a flawed system of money, banking and finance. We have allowed the banks to control our credit and charge us interest for the “privilege” of accessing some of it as bank “loans.” The fact is that the dollar regime, like every other political currency, collectivizes credit. It is the people’s collective credit that supports each national currency, but the allocation of that credit is determined by forces beyond popular control, and an inordinate proportion of it is used to fund the war machine and to enrich corporate fat cats, all to the detriment of peace, equity, and the common good.
But we need not be victims of a system that is so obviously failing us. We can learn to play a different game. It is possible to organize an entirely new structure of money, banking, and finance, one that is interest-free, decentralized, and controlled, not by banks or central governments, but by businesses and individuals that associate and organize themselves into moneyless trading networks. This is a way to reclaim “the credit commons” from monopoly control and create healthy community economies that can enhance the quality of life for all.
In brief, any group of traders can organize to allocate their own collective credit amongst themselves, interest-free. This is merely an extension of the common business practice of selling on open account—“I’ll ship you the goods now and you can pay me later,” except it is organized, not on a bilateral basis, but within a community of many buyers and sellers. Done on a large enough scale that includes a sufficiently broad range of goods and services, such systems can avoid the dysfunctions inherent in conventional money and banking and open the way to more harmonious and mutually beneficial trading relationships that enable the emergence of sustainable economies and promote the common good—a true economic democracy.
This approach is no pie-in-the-sky pipedream, it is proven and well established. Known as mutual credit clearing, it is a process that is used by scores of commercial “barter” companies around the world to provide moneyless trading for their business members. In this process, the things you sell pay for the things you buy without using money as an intermediate exchange medium. Instead of chasing dollars, you use what you have to pay for what you need. It’s as simple as that. Unlike traditional barter, which depends upon a coincidence of wants and needs between two traders who each have something the other wants, mutual credit clearing provides an accounting for trade credits, a sort of internal currency, that allows traders to sell to some members and buy from others. According to the International Reciprocal Trade Association (IRTA), a major trade association for the industry, “IRTA Member companies using the ‘Modern Trade and Barter’ process, made it possible for over 400,000 companies World Wide to utilize their excess business capacities and underperforming assets, to earn an estimated $12 billion dollars in previously lost and wasted revenues.”
Perhaps the best example of a credit clearing exchange that has been successful over a long period of time is the WIR Economic Circle Cooperative. Founded in Switzerland as a self-help organization in the midst of the Great Depression (1934), WIR provided a means for its members to continue to buy and sell to one another despite a shortage of Swiss francs in circulation. Over the past three quarters of a century, in good times and bad, WIR (now known as the WIR Bank) has continued to thrive. Its more than 60,000 members throughout Switzerland trade about $2 billion worth of goods and services annually without the use of Swiss francs.
The challenge for any network, of course, is to achieve sufficient scale to make it useful. The bigger the network, the more opportunities it provides for moneyless trades to be made. In the early stages, it may require some help to find those opportunities, but as the members discover each other and become aware of what each has to offer, the value proposition becomes ever more evident and more businesses are attracted to it. Like Facebook, Twitter, My Space and other networks that are purely social, moneyless trading networks will eventually grow exponentially –and that will mark a revolutionary shift in political as well as economic empowerment. It will be a quiet and peaceful revolution brought on, not by street demonstrations or by petitioning politicians who serve different masters, but by working together to use the power that is already ours—to apply the resources we have to support each other’s productivity and to give credit where credit is due.
Through participation in an exchange network that is open, transparent and democratic members enjoy the benefits of:
  • A reliable and friendly source of credit that is interest-free and community controlled.
  • Less need for scarce political money (dollars, euros, yen, etc.).
  • Increased sales.
  • A loyal customer base.
  • Reliable suppliers.
What the world needs now is a means of payment that people can trust, one that is locally controlled but globally useful. A system of small locally controlled credit clearing exchanges can provide it.
#     #     #
Thomas H. Greco, Jr. is a writer, networker, and consultant, specializing in cashless exchange systems and community economic development. A former engineer, entrepreneur, and tenured college professor, he is widely regarded as a leading authority on free-market approaches to monetary and financial innovation, and is a sought-after advisor and speaker at conferences internationally. He is the author of many articles and books, including The End of Money and the Future of Civilization (Chelsea Green, 2009) and Money: Understanding and Creating Alternatives to Legal Tender (Chelsea Green, 2001). His blog,, and website,, are valuable resources that provide detailed explanations and prescriptions for communities, businesses, and governments.




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In This Issue

•  Move Our Money: New State Bank Bills Address Credit and Housing Crisis
•  Featured Article:  Stop Chasing the Buck and Change Your Luck
• Public Banking in the News (sidebar)
• CANARD ALERT (sidebar)
Putting Vermont Money Back to Work in Vermont:  Introducing the Vermont Partnership Bank (sidebar)

Swami's Corner

swami2 4If you have a burning question - or even just a smoldering one - the great Swami promises to answer or evade it in the upcoming radio feature, Karma Talk. Watch this space to find out when and where you can ask Swami an answerable question, and receive Swami's questionable answer.  Listen to Karma Talk on Transitions Radio Magazine starting in April!

  — Swami Beyondananda

Public Banking in the News

OpEdNews, “Occupy Movement Discussion: Bringing About an Economy That Benefits Society,” John Iacovelli, February 28, 2012

Asia Times Online, “
Greek Knife to Wall Street,” Ellen Brown, February 23, 2012

Hawaii Reporter, “
Hawaii Needs a Public Bank,” Marc Armstrong, February 23, 2012, “
The Time of Big Government is Coming to an End,” Richard Heinberg, February 19, 2012

Demos, “
Putting Vermont Money Back to Work for Vermont:  Introducing the Vermont Partnership Bank,” Heather C. McGhee, Jason Judd, February 20, 2012
(see below) 

Right Side News, “Central Bank ‘Debt Capitalism’ and the Promise of US-Style State Banking,” Anthony Wile interview of Marilyn MacGruder Barnewall, February 20, 2012

Asia Times Online, “
A Real Guarantor is Needed,” Ellen Brown, February 9, 2012

Union Label & Service Trades Dept., “
Americans Are Bailing Out on Banks Too Big to Care; Credit Unions, Partnership and State-Run Banks Offer Alternatives,” December 22, 2011

Good Business, “
To Save Post Offices, Turn Them Into Public Banks,” December 21, 2011

Huffington Post, “
Why Aren’t Small Businesses Getting Loans From Big Banks?,” Janean Chun, December 16, 2011

Wall Street Journal online, "
Occupy Shocker: A Realistic, Actionable Idea," David Weidner, December 1, 2011

Euroasia Review, "
Reforming The US Financial And Tax System – OpEd," Michael Hudson, November 23, 2011

CityBeat, “
Banking on a Big Change,” Eli Johnson, November 16, 2011

Huffington Post, “
The Lost Profession of Banking,” John Fullerton, September 29, 2011





Because “banker’s banks” have been established in various regions, state banks are not needed.

ca·nard. noun. A deliberately misleading fabrication.

One of the most malignant skills in contemporary politics is the ability of a small group of wealthy financiers to convince a large number of struggling citizens to vote, in a fit of ignorance, against their own interests.

A case in point are the captured small business owners and independent bankers who insist that publicly owned banks are unnecessary, because they get what they need from regional “banker’s banks.”

Even if it were actually true that independent banks outside of North Dakota had the same low failure rate that is found in North Dakota—where the Bank of North Dakota (BND) helps local independent banks from drowning in insidious regulatory paper work designed to drive them out of business, and shields them from account stealing by the Wall Street banks—or, even it were actually true that independent businesses in the other 49 states had the same access to credit as those in North Dakota, none of the profits from the regional banker’s banks would be returned to the general funds of the states, to provide much needed services and to keep taxes low.

What these independent business owners and independent bankers aren’t seeing is that, in the absence of a state-owned bank, the citizenry is unnecessarily burdened with taxes and deprived of services. “Banker’s banks” are just another means of removing taxpayer’s dollars from the local economy.


Putting Vermont Money Back to Work for Vermont:  Introducing the Vermont Partnership Bank
Heather C. McGhee, Director, Dēmos
Jason Judd, Consultant to Dēmos, and President of Cashbox Partners

Vermont can put deposits of state tax revenue to use in ways that tilt the economic playing field back toward Main Street businesses, our community banks, and long-term job growth. The proposed state bank study (S. 204, H. 542) will help Vermont design an institution—like the successful Bank of North Dakota—that generates new revenue for Vermont, saves local governments money, and makes our small businesses, farms and consumers less vulnerable to cutbacks in lending in our state.

Large Out-of-State Banks are Failing Vermont Small Businesses

The future of Vermont’s middle class depends on the health of our small businesses. Yet the engine of a thriving small business economy—affordable credit—has stalled in our state since the financial industry set off the Great Recession in 2008. While the number of unemployed in Vermont has leapt 32 percent over the last four years[1], the largest banks have returned to profitability after taxpayer bailouts. Many of these same giant banks have refused to restore lending to small businesses and consumers to pre-crisis levels.[2]

These large banks have grown more powerful in Vermont’s economy as a result of consolidation—People’s purchase of Vermont’s largest bank, Chittenden Bank—and the financial crisis. Vermont’s dependence on Wall Street and large out-of-state banks is growing.[3]

TD Bank—home to more than 22 percent of all Vermont deposits, and more than half of state government’s short-term deposits[4]—made just $416,800 in Small Business Association loans to Vermont small businesses under the agency’s flagship 7(a) in 2010.[5] That was a 90% decline from the bank’s $4.29 million in 7(a) loans in 2008, a drop that has pushed Vermont small businesses to forgo expansion and new jobs, forced them out of business, or driven them to credit cards.[6] The average business card interest rate is 16 percent, but quality SBA 7(a) loans average seven to nine percent.      
Ah, business lending, then, is back! Well, not so fast. Yes, top-line commercial lending is up, but a closer look shows one segment of loans that did not increase: those to small businesses. According to the F.D.I.C., while the nation’s total commercial and industrial loan portfolio grew by $34 billion, or almost 3 percent, total outstanding loans to small businesses actually fell by $2.5 billion.” -- New York Times, August 2011[7]

This story continues here. with footnotes.

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1st Debate -- Petaluma, CA on February 12th.  2nd Debate -- Philadelphia, PA on April 28th.


2012 is the year that the Public Banking Institute brings public banking into the public discussion. What better way to do it than to have a public debate - old style?

The first debate will be held in Petaluma, CA and will be a debate on the question "Should Sonoma County have it's Own Bank?" Ellen Brown, founder of the Public Banking Institute, will debate members of the public. A featured guest -- the Monopoly Banker -- is rumoured to be getting his outfit ready.

This debate will be just the first of many debates throughout the USA. Does your county need a public bank? Should your state start its own bank? Debate it -- in the open, with your friends and colleagues. It's past time to get this question out in the open. We could very well be on the brink of another credit crisis, brought to us by Wall Street and the Federal Government. Debating this topic will give us an idea of what sort of alternative we could construct for ourselves.


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Public Banking Institute

PO Box 2195

Sonoma, California  95476

More about the Public Banking Institute

The Public Banking Institute (PBI) was formed in January 2011 as an educational non-profit organization.  Its mission is to further the understanding, explore the possibilities, and facilitate the implementation of public banking at all levels -- local, regional, state, and national.  

PBI’s vision is to establish a distributed network of state and local publicly-owned banks that create affordable credit, while providing a sustainable alternative to the current high-risk centralized private banking system. This network will act in the public interest, using its counter-cyclical credit-generating capacity to stabilize potential credit crises, maintain the floor against threats of asset devaluations, build infrastructure, and fund expansion of critical industrial productive capacity.  Most important, public banking will create jobs, by partnering with local banks to fund local business, advancing credit for public infrastructure, and augmenting government revenues.

PBI’s mission includes analyzing U.S. and global financial events to facilitate public banking, sharing best practices and lessons learned from research and initiatives in the U.S. and globally, using PBI’s online resources, website, webinars, blog, and in-person conferences.  PBI’s activities include:

•Publication of research involving the U.S. private banking system, past and current;

•Evaluation of existing and historical public banking models, in the U.S. and abroad;

•Publication of research regarding the legal requirements, structure, and daily operations of existing and proposed public banking and financing systems;

•Publication of a semi-annual legislative guide and presentations to aide local public banking initiatives; and

•Organization of public forums that enable state and local public banking efforts.

For more information on how BND operates, and how it partners with community banks instead of competing with them:

•  “Public Banking in America” Legislative Guide, Spring 2011, pp. 17-23. Ed Sather and bankers from several states explore the North Dakota model. 

• Bank of North Dakota,

• Public Banking Institute,


March, 2011 Newsletter
April, 2011 Newsletter
May "Read the Bills (1 of 2)"
May "Read the Bills (2 of 2)"
May "The Fed Speaks" Special Edition
June, 2011 Newsletter
July, 2011 Newsletter
August, 2011 Newsletter
September, 2011, Newsletter
October, 2011, Newsletter
November, 2011, Newsletter
February, 2012, Special Edition
PO Box 2195 • Sonoma, CA  95476


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