http://www.illinoispublicbanking.org info@illinoispublicbanking.org

“We don’t have the money!”

An all too familiar refrain.

Options have been limited to: • Cut spending • Raise taxes • Sell off public assets

This argument is getting old!

Federal Option is off the table

Wall Street Journal, January 8, 2011:

“We have no expectation or intention to get involved in state and local

finance,” Mr. Bernanke said in testimony before the Senate Budget

Committee. The states, he said later, “should not expect loans from the

Fed.“

In January 2009, President Obama said the Fed might bail out hard-hit state and municipal governments. But the Fed says they are on their own.

Federal Option is off the table

NO RESCUE FOR YOU!

$191B would rescue all states…$12T for banks

“We don’t have the money!”

Solutions have been limited to: • Cut spending • Raise taxes • Sell off public assets

No federal rescue.

But now, there’s a new option:• Invest in our own citizens

The public can own its own bank!

New option: Create a state-owned bank

North Dakota owns its own bank – and therefore it creates its own credit.

As a result, North Dakota’s options are to: • Expand public services • Lower taxes • Increase their bank’s capital, to make even more credit available to the people of North Dakota

No need for a federal rescue.

The North Dakota experience:• State-owned bank established 1919• State budget surpluses 2008-2009* • Lowest unemployment in U.S. • Lowest foreclosure rate• The most local banks per capita• No bank failures in over 10 years** • Bank funds economic growth, from Main Street to high tech to oil production

* Most recent data available

** In 2009 - 2010 alone, 297 banks failed elsewhere in U.S. Source: FDIC

Profit the People

• The Bank of North Dakota (BND) earns 20+% return on equity by investing within the state.

• BND’s profits ($300M over 10 years) go to the state treasury, reducing tax burdens while supporting public services.

Why are our tax dollars supporting Wall Street?

Why not invest in-state? For education? Higher education? Renewable energy? Tech startups?

Invest in Our Own Citizens

Meanwhile, public pension funds in most states have lost hundreds of millions of dollars.

What if these funds were used to own a state bank?

And invested in their own citizens, as North Dakota does?

Free up Funds

• Banks have unlimited low-interest credit lines with the Fed and federal government

• States and municipal governments have no credit line with the Fed. . .

So they must create large “rainy day funds”—public money that sits, earning little interest.

Level the Playing Field

Federal law and the banking system give banks huge advantages and place states at a financial disadvantage.

• Banks borrow at rates as low as 0.2% (over-night Fed funds rate) to 1.27% (6-month CD)

• States borrow at much higher rates

Our state is paying too much for credit.

Control Rising Credit Costs

• States are now hit with lower credit ratings, making borrowing even more expensive

• A year ago, California was rated BBB, barely higher than bankrupt Greece

What is OUR state’s credit rating?

Urgent Need: Affordable Credit

What about municipal governments? Don’t they borrow by issuing bonds?

Yes, at “market rates”—but these rates are being driven up, increasing the cost of money.

The issue is not just available credit, but affordable credit.

Today, state and local governments are: • investing their capital (pension funds), and • depositing their tax revenues (our money!) on Wall Street

Translation: They are handing over their huge credit generating power to the same big banks that got us into this mess in the first place.

They are investing in Wall Street, not Main Street.

Does this make sense to you?

Banking in the Public Interest

Deposits begin the creation of credit in a bank. This credit is an asset of the bank.

If a state deposits funds in a Wall Street bank, it is giving away its power to create credit credit. This credit rightfully belongs to the public, not to private banks.

Our state and cities should be managing that credit in a public bank—serving the public interest by investing in our own Main Street.

Invest in Main Street Through a Public Bank

• Keeps our tax money working within the state

• Keeps our credit from leaving the state

• Strengthens our community banks

• Demonstrates that our elected officials are working for us and not for Wall Street

• Helps our communities return to prosperity in a nonpartisan way

Recap: Solution Choices

• Raise taxes • Cut services • Sell assets • Invest in our own citizens by creating a public bank

There are no other choices.

Will we continue having our tax payments sent to Wall Street banks?

Next Steps

Refine and pass a resolution: “Return to prosperity by forming a state-owned bank.”

Tell your state representative that keeping tax revenues in our state is vital—an urgent need.

Find “natural allies” to speak with one voice for public banking in the public interest.

Natural Allies

• Community leaders whose budgets are being gutted by the state, enlightened legislators

• Public employees and unions faced with

state and city budget cuts: teachers, firefighters,

etc.

• Community bankers wanting to originate

loans

• Unemployed and under-employed people

• Small business owners burdened by high

credit card APRs to pay for inventory