Among other advantages to a state of owning its own bank are the substantial sums it could save in interest. As Fleetham notes of his own ailing state of Michigan:
"According to recent financial reports (available online), the State of Michigan, the City of Detroit, the Detroit Water and Sewerage Department, the Wayne County Airport, the Detroit Public Schools, the University of Michigan, and Michigan State University pay over $800 million a year in interest on long term debt. If you add interest paid by Michigan cities, school districts, and public utilities, the cost to our taxpayers easily tops a billion a year. What does Wall Street do with our billion plus dollars? They decorate their offices like kings."
Interestingly, the projected state budget deficit for 2009 is also $1 billion. If Michigan did not have to pay over a billion dollars in interest to Wall Street, the budget could be balanced and the state could be restored to solvency. A state-owned bank could not only provide interest-free credit for the state but could actually generate revenues for it. Fleetham notes that in 2007, the Bank of North Dakota earned a net profit of $51 million on a loan volume of $2 billion. He comments:
"Last year, Michigan citizens paid over $5 billion dollars in personal income tax. With a state bank like North Dakota's we could reduce this burden, fund new businesses, and restore our crumbling water and sewer systems. And we don't have to feel sorry about Wall Street losing our business. They didn't 'earn' the money they lent us. They created it in computers and charged us interest to boot. Let's follow North Dakota's lead and get free from Wall Street's web."
Taking the Initiative in California
California could do this as well. Robert Ellis is a Tucson talk show host who once worked on Wall Street and has been involved in setting up several banks and financial institutions. In January of this year, he proposed in a letter to Governor Schwarzenegger that California could resolve its financial woes by setting up a bank on the model of the Bank of North Dakota. Ellis wrote to the governor:
"I admire your tenacity in dealing with California's financial problems. Your idea of using IOU's was ingenious but there is a better way. The State of California can charter its own bank and issue its own checks to all state employees . . . . It can also pay all its vendors, contracts and contractors through the bank . . . . Additionally, once the bank is operational, you can fund your own state projects and you determine the interest rate paid as opposed to being at the mercy of the banks you currently deal with or the interest rates the investment bankers make you pay to issue bonds. By doing this, you will put the state in control of its own destiny and make it the benefactor of its own money.
". . . What I am proposing is not new. It has been done by one other state in the nation [North Dakota]. Why should you continue to pay the banks for services and interest on loans when you can receive that interest for the benefit of the state of California? Wouldn't it be better if you could fund your own infrastructure projects without having to get the approval of independent banks or investment bankers? Additionally, you set the interest rate on your own projects. You can even set it at zero if you deem the project worthy enough."
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