Marilyn M. Barnewall
March 20, 2011
"It is time to declare economic sovereignty from the multinational banks that are responsible for much of our current economic crisis. Every year we ship over a billion dollars in Oregon taxpayer dollars to out-of-state and multinational banks in the form of deposits, only to see that money invested elsewhere. It's time to put our money to work for Oregonians." --Bill Bradbury, former Oregon Senate President and Secretary of State, quoted in The Nation
One of the hottest topics in the world of banking is State Banks. Oregon, Washington and Maryland have recently joined Illinois, Virginia, Massachusetts, California, Florida and Hawaii in evaluating the wisdom of implementing a “State Bank.” Governors of these States need to be careful because there is a great deal of disinformation on the subject suddenly appearing in a variety of places… it almost looks like a George Soros stealth attack.
States that have passed legislation involving sovereignty and the right for their State to coin its own currency, or are making trade in gold and silver lawful (as Utah just did), will have problems implementing such legislative promises until a system like the one that has been in existence for 92 years in North Dakota is created. North Dakota owns its own State Bank. Maybe that’s why, according to a recent Gallup poll, unemployment there is 3.8 percent and the job market is the best in the country (and the state’s population growth is up 5 percent). The jobless rate around the rest of the country has sky-rocketed and high-taxes in union-dominated States like New York, New Jersey, Wisconsin, Michigan, and Ohio cause lost population.
“State Banks” is a tricky topic for even experienced bankers because the response often is: “We’ve had state-chartered banks in our state for a hundred years.” And, they have.
A State Bank and a state-chartered bank are quite different. The only State in this country that has a State-owned bank is North Dakota – and it has 92 years of successful experience. In the middle of one of the worst economic downturns in American history, the Bank of North Dakota in 2009 helped the State of North Dakota generate the largest budget surplus in that State’s history.
Because North Dakota owns its own banking system, it has been able to target-market its loan programs to fit the needs of local borrowers rather than being forced to abide by the “one size fits all” views of the Federal Deposit Insurance Corporation (FDIC) and other federal regulators. It has also been able to maintain control over its real estate markets and escape much of the foreclosure treachery that seems so prevalent in the rest of America. Indeed, Bank of North Dakota (BND) doesn’t need the services of the FDIC because the State insures the funds of North Dakota depositors. Thus, when too big to jail banksters make stupid loans, the people of North Dakota don’t feel the pinch that results. They have their own State Deposit Insurance Corporation (SDIC). They have no need for the FDIC. Any independent bank that has been audited by the FDIC in the past two years understands the mischief these folks can create in an otherwise good, sound bank.
One of the primary advantages of a State Bank is that profits go to State Treasurers, not the federal government. The concept keeps taxpayers' money working within the State in which it is generated. Property taxes, state income taxes, sales taxes and all fees for services go to the State Bank. Right now, tax revenues from other States go into an account' held by the Bank of America which makes money off of our taxes. And I wouldn’t suggest that the Bank of America is the safest place for your money or mine.
Bank of North Dakota keeps the money inside that State and the profits – the Bank paid 30 percent of its income to the ND State Treasurer – help reduce tax burdens. The profits from the bank are returned to its shareholders: the people of the State of North Dakota.
How does a State Bank function?
Perhaps the simplest way to describe State Banks is to say they are a mini-Federal Reserve and a mini-FDIC. A State Bank can perform all of the same functions the Fed does: check clearing, monetary policy (for the State rather than the Nation), etc. At the moment, the Bank of North Dakota uses the Fed’s check clearing and other services. The point is, it doesn’t have to; it has alternatives.
Just as the Captains and the Kings of the federal financial world approve or deny bank charters across the nation, a State Bank approves or denies State Bank Charters. A State-owned bank doesn’t mean the State is running the banking system in lieu of independent banks. Quite the contrary is true. The State approves Bank Charters for the independent businessmen and women who run local banks in their communities. The State, not the federal government, audits the banks. The individual banks remain independent… they must comply with State laws just as banks in the other 49 states must comply with federal laws, but they are individually-owned, independent banks.
What happens to the big banks that are currently chartered to do business in States other than North Dakota?
The big banks keep doing business. They are merely chartered by the federal authorities, not the State authorities. A bank may not be chartered by both. A bank that carries the name “First National Bank” is, generally, going to be chartered by the feds. A bank that carries the name “First Colorado Bank” will likely be chartered by the State of Colorado.
And therein is a point of confusion. The State of Colorado currently charters independent state banks… as do most of the other 49 states. But, since the State of Colorado does not have a banking system owned by the State, the state-chartered banks must go to the federal government for check clearing, monetary policy, deposit insurance, etc. In other words, they are tied to the federal government because the feds are the only ones that make needed services available.
That, in turn, explains why the Federal Reserve System – which is a private corporation (a cartel, like OPEC), not a federal agency – holds so much power over how business and finance are conducted in this country. It also explains why, when State Sovereignty and State Currency legislation passes, these things cannot really be achieved – if the States passing such laws do not have a State Bank before they start printing or minting their new currency, or before they declare Sovereignty.
To have a successful new currency, regardless of whether it is gold and silver or paper printed by the State and backed by resources within the State, a distribution system must be in place. What do you carry with you when you go shopping? A one-ounce gold coin worth $1,400+ these days (and the cost of gold will increase as inflation does)? How does the local grocery store make change? How does a national bank suddenly begin dealing with payments that come to it in both federal government currency (the dollar) and State currency? The questions involving everyday financial behavior are an article in their own right.
The same is true of Sovereignty. Some States have passed legislation declaring their right to declare Sovereignty from the federal government. How can they become Sovereign when they don’t have a monetary distribution system in place that is independent of the federal government? Answer: They cannot.
This is an article about State Banks and not Sovereignty, but a few things need to be made clear. To declare Sovereignty, a State must declare they are Sovereign, AND be recognized by other nations and/or states as having sufficient power and wealth to be Sovereign. Without its own system of banking, how can your State be recognized by others as Sovereign? It cannot. It is impossible.
Legislators, it seems, think their State can declare Sovereignty and continue with day-to-day business as usual. The government (which they have rejected and seceded from) will continue to let that State use its currency? I don’t think so. The government will continue to provide banking services… to clear checks and insure bank deposits? I don’t think so.
What a State-owned bank does is provide alternatives. It provides profits to the taxpayers of the State. It controls inflation because it doesn’t have to tolerate New York’s or New Jersey’s or California’s – or Wisconsin’s – irresponsible over-spending (all of which become a part of national monetary policy via the national banking system).
Probably the best way to end America’s economic crisis is to have each State implement its own State Bank. It’s the only way to provide a distribution system that benefits citizens of individual States and not money center banks in New York City (or Charlotte, NC). It’s the best way to remove the authority of the Federal Reserve System – a private corporation that makes a profit from every dollar it “lends” the U.S. Treasury (and the ‘loans’ are usually the result of faulty economic decisions of the Federal Reserve System). It’s a non-violent, civil way of getting rid of the Fed… and those elected to office at the national level don’t seem to have the stomach for it.
The Federal Reserve is nothing but a wholesaler of American money – and I don’t mean wealth, I mean money. The people hurt most by Federal Reserve decisions are the middle class and the poor. We sure haven’t seen the Wall Street banksters suffering much, have we?
is a State Bank funded? There is a way… the money is available via
existing funds identified by experts in Certified Annual Financial Reports
(CAFRs) published by every state… but that’s another article
for another day. It would require no loans and definitely no dollars from
I do offer a word of caution.
The State Bank concept has already been identified by groups of socialists around the country as a means of giving the State the same power to commit fraudulent over-spending the federal government has enjoyed for so many years. These groups want to utilize State Banks to make “free loans” to cities and counties to build any project the cities, towns and counties want. They want to create a fiat currency like the one that has ruined our national economy. Quite simply, a “fiat currency” is one that has nothing backing it to give it value other than the federal or the State’s legal right to force taxpayers to pay for whatever amount they want to spend.
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State Bank Charters must be carefully written to prevent such actions. If a State creates a paper currency, citizens must demand that the currency be backed by a commodity in which the State is rich – in Colorado, for example, uranium, oil shale, natural gas, etc.
And that, too, is another rather long article yet to be written on this subject. It’s complicated, but simple once understood. In my opinion, it is the strongest leverage Americans have to save their capitalist system and reject the slavery of socialism.
© 2011 Marilyn M. Barnewall - All Rights Reserved
Marilyn MacGruder Barnewall began her career in 1956 as a journalist with the Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and bank consultant, she wrote extensively for The American Banker, Bank Marketing Magazine, Trust Marketing Magazine, was U.S. Consulting Editor for Private Banker International (London/Dublin), and other major banking industry publications. She has written seven non-fiction books about banking and taught private banking at Colorado University for the American Bankers Association. She has authored seven banking books, one dog book, and one work of fiction (about banking, of course). She has served on numerous Boards in her community.
Barnewall is the former editor of The National Peace Officer Magazine and as a journalist has written guest editorials for the Denver Post, Rocky Mountain News and Newsweek, among others. On the Internet, she has written for News With Views, World Net Daily, Canada Free Press, Christian Business Daily, Business Reform, and others. She has been quoted in Time, Forbes, Wall Street Journal and other national and international publications. She can be found in Who's Who in America (2005-10), Who's Who of American Women (2006-10), Who's Who in Finance and Business (2006-10), and Who's Who in the World (2008).
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