Over $7 billion of California’s annual budget goes to pay interest on the state’s debt to Wall Street. Some say establishing a public bank would keep that money on Main Street where it belongs.
Financial difficulties in the Fed mean financial crises for state governments. California has an outstanding debt of $158 billion, largely incurred for building infrastructure, and the state is having trouble making its payments.
As daunting as this debt may seem for a struggling state, it is exceeded by California’s assets, which are enough to capitalize a bank rivaling any in the world, according to Ellie Brown of Yes! Magazine.
Brown’s article highlights California’s recent consideration of the establishment of a California Investment Trust, a state-owned bank that would receive deposits of state funds, and allow the state to enjoy the benefits of lending its capital–instead of giving it to Wall Street.
The idea was broached by Assemblyman Ben Hueso of San Diego as Assembly Bill 750, and has already been approved by the Banking and Finance Committee with only one nay vote. It will now move on to the Appropriations Committee with the support of three major state unions—the California Nurses Association, the California Firefighters, and the California Labor Council.
By doing so, California joins eleven other states that have introduced bills to form state-owned banks or to study their feasibility–all of which are patterned after the very profitable Bank of North Dakota, currently the nation’s only state-owned bank.
But Could It Really Work For California?
If you examine this idea from a hyper-local scale, you can begin to see that it’s not as outlandish (or socialist) as it sounds.
According to the Move Your Money Project, a non-profit effort created in response to the gross negligence that triggered the current recession, it makes a huge difference where your your liquid assets sleep at night:
When you keep your money in a local financial institution, that money in turn is reinvested in local businesses, which is important for building a stable economy and encouraging local growth. Put your money in the big Wall Street banks however, and they will use your deposits to make risky investments, gambling at the expense of the economy as a whole.
Even more powerful than moving your checking account away from commercial banks is moving your debt, because that’s how banks make billions of dollars off their customers (a large percentage of which is used to support questionable political causes and environmentally damaging industries like mountaintop removal mining).
If this makes sense for individual consumers, how much MORE sense does it make for an entire state that’s struggling to make its minimum payments? Think about it.
Image Credit: Flickr – alancleaver_2000