Public Banking Institute’s Santa Fe Conference
September 27, 2014
Summary from Dennis Ortblad
City Councilmember Nick Licata joined John Repp and me at the conference. Licata obtained separate meetings with Santa Fe Mayor Gonzales and Councilmember Joe Maestas on the conference margins as well as discussions with several of the panelists.
Our goal was to find strategies for organizing support for a Seattle Public Bank and the substantive arguments needed for founding and funding it . An estimated 400-500 participants attended the presentations – a significant turn out for a city of Santa Fe’s size (about 80,000 residents).
I summarize only those points made by each of the following speakers that seemed helpful to our project of gaining public awareness of and support for a public bank in Seattle:
Ellen Brown, Writer, The Public Bank Solution:
--Public banks are common in many countries (40% of banks worldwide). Only in the U.S. are they relatively unknown.
--Need for a Public Bank: Public funds of Seattle are at risk because Wall Street banks face the risk of another crash. Their exposure to derivatives is already huge –over $300 Trillion!
--The Dodd-Frank law’s requirements for the resolution of a failing Wall Street bank and its ban on a second taxpayer bail out will result in major losses for ordinary depositors. Creditors (which includes Seattle’s deposits) will be required to take major losses as part of a so-called bail in.
--A recent decision by the Federal Reserve makes more compelling our case for a public bank. The Fed ruled that municipal bonds no longer qualify as the “highly qualified liquid assets” that Wall Street banks are required to hold as core capital. This Fed move means that cities will find their interest costs on bonds will rise.
-- A Seattle public bank can initially operate with minimal risk of its capital by conservatively investing only in its own municipal bonds. At later stage, it can open up supports for local lending.
Dr. Thomas Keidel, Board of the German Savings Bank Association
-- The over 200 year successful record of Germany’s public banks serves simply to refute any allegation that such a bank is a hare-brained scheme.
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Germany’s city public banks arose as a social movement – a movement to give the unbanked access to banking services. Similarly, a Seattle public bank could enact policies that encourage and enable our community banks to offer better services to the 25% of residents who are unbanked or under-banked.
--In Germany, home buyers can obtain mortgages at a public bank at 2-3% interest. A Seattle public bank could give the financial backing to allow a local bank to offer lower cost credit to home buyers or builders of affordable housing.
--A public banking system offers an effective model to compete with the giant banks like Deutsche Bank. The public bank is chartered to serve its community and can help small business with both better access to credit and its knowledge of the local business scene.
-- Over time, a public bank’s assets can grow to the point that it can return significant amounts to the community to support education, the arts, and school sports programs. In Germany, public banks donated last year $650 million to local communites for these purposes. In addition, they returned to cities as taxes over $3.5 billion.
Gwen Hallsmith, executive director, PBI, Vermont advocate
--Public city banks earnings are meant to serve the entire public in their respective cities. In contrast, a private banks’ goal is to serve its shareholders with its earnings; a credit union serves its members.
--A city like Seattle may have several lending authorities already in operation. These existing agencies can be consolidated in the form of a bank, which would add to their lending power. This process would reduce the amount of new money a city would need to appropriate as the bank’s equity capital.
-- Proponents of a Seattle public bank must be ready to respond to following issues as preparation for a bank:
What will be the equity capital base? How will the city get it?
What are the city’s cash flow needs if the city’s tax moneys flow through the bank? This will determine the bank’s reserve needs.
What are the legal requirements it must meet on the city, state and federal level?
What regulatory authorities will it be under?
What are annual costs of operation?
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-Javier Gonzalez, Mayor of Santa Fe
--the city needs revenue and investment capital to meet the pressing needs of promoting business and increasing jobs. A Santa Fe public bank will ensure more local money goes into the local economy rather than to the needs of the Wall Street banks. A public bank is a matter of building community. He backs the proposed bank and has gotten an appropriation to fund a study of how to implement one.
-- Mike Krauss, Chair of the Pennsylvania Public Bank Project, former state and county official, business leader
--In each city, advocates must define what purpose a public bank will serve. In other words, what needs do local citizens feel that would motivate them to support founding a public bank?
-- A city like Seattle might charter its proposed public bank to focus on giving credit for sustainable energy. It could offer terms for residential solar panels and weatherizing homes, which would attract support from climate change activists. It could offer refinancing for student loans, which would draw support among younger voters.
Craig Barnes, writer, civil rights lawyer, radio commentator
--The advocates for public banking in Seattle serve a larger purpose. The concentration of wealth in Wall Street banks and its abuse creates a harmful climate for democracy. Average citizens lose their political voice as they struggle with shrinking incomes and reduced public services. Thus, the effort to counter Wall Street dominance with the lending and services of a public bank helps to strengthen democracy in Seattle.
--Luncheon Meeting with Conference Organizers
-- An essential step for organizing support Santa Fe public banking was engagement of a professional ‘convener’, a prominent local leader who brought other influential figures into a series of coffees and informational events. The organizers contracted with the convener for a set number of such events and paid him for the service.
-- The Santa Fe organizers had financial angels who helped pay for the conference costs. Financing became available because they had compiled a target list of donors and enlisted one of their number to approach them all. In addition, the core group of organizers reached in their own pockets for significant amounts at certain points. Each conference participant paid $40 to attend, which defrayed costs.
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