Gotta say. . .
The new presidential administration is crammed with alumni from one particular firm: Goldman Sachs. There’s Steve Bannon, Steve Mnuchin, and Gary Cohn. For starters.
"The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." —Matt Taibbi, Rolling Stone, April 2010.
Yet as Wall Street celebrates this swift return to glory days, let’s remember that a taxpayer-owned “public option” is outperforming Goldman Sachs and, more generally, Wall Street.
"It is more profitable than Goldman Sachs Group Inc., has a better credit rating than J.P. Morgan Chase & Co. and hasn’t seen profit growth drop since 2003." —Wall Street Journal, 11/16/14
"It" refers not to some colossus of crony capitalism but the state-owned Bank of North Dakota, America's only public bank. North Dakota launched this taxpayer-owned “public option” on a wave of populist anger against big banks, whose unrestrained greed devastated ordinary folks.
Sounds like this morning’s news, but the North Dakota government launched this do-it-yourself banking solution nearly a hundred years ago, in 1919. Today the socialistic Bank of North Dakota (BND) thrives in what is now one of America's reddest states. Proof, perhaps, that life has a keen sense of humor — but this time the joke's on Wall Street.
The 2014 financial results WSJ reported were not a flash in the pan. Third-quarter 2016 financials show BND again outperforming Goldman Sachs’ return on equity, a key measure of bank profitability, by more than 60 percent.
Eye-opening, for sure. But what exactly is BND? It does not operate like your neighborhood bank: it's a wholesale "banker's bank" with one office and no branches. By state law, tax revenues are deposited in BND and not in Wall Street banks, the default choice almost everywhere else.
Thanks to BND's strong support of independent local banking, North Dakota has six times more community banks and credit unions per capita than other states. On average, these local financial institutions do four times more small-business lending than their counterparts elsewhere — a substantial, ongoing boost to North Dakota's economy.
That's not all. State-owned BND lends cheaply to cities, counties and other public entities, like school systems. They borrow from BND at typical interest rates of about 2 percent and without the exorbitant fees charged by Wall Street. The result: huge cost savings on infrastructure projects and other public financings, a boon to taxpayers.
Earnings from lending help grow BND’s capital base, enabling the bank to further expand lending. The rest of its earnings go back to the State of North Dakota. Over the years BND has returned hundreds of millions of dollars to the state treasury, easing pressure to raise taxes while helping to pay for public services.
BND’s dazzling performance is managed by bankers who are state government employees. Civil servants. No sky-high salaries, no stock options, no golden parachutes.
This terrifies Wall Street.
After all, what if other states — and cities and counties — got uppity like North Dakota? What if they started their own banks, public banks operating strictly in the public interest instead of enriching top executives and wealthy shareholders?
What if state and local governments, with their trillions in deposits and debt, declared independence from Wall Street? Turned their backs on the financial elite whose behavior continues to devastate families, communities and economies?
What if these public entities declared, like Bernie Sanders, “Enough is enough!”
It’s already starting to happen. Millionaire and Wall Street renegade Phil Murphy, the leading candidate for New Jersey governor, is running on a public banking platform after news emerged that NJ squandered more than a billion dollars on Wall Street fees alone.
The Oakland, California city council looks ready to invest in a public banking feasibility study. Dozens of other public banking initiatives are underway from Phoenix to Philadelphia.
This revolt won’t happen overnight, but it’s gradually gathering steam — no matter how many crony capitalists are crammed into the White House.
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