The Way to Occupy a Bank is to Own One

Critics worry about the profligate risk-taking of politicians, but the trusty civil servants at the Bank of North Dakota insist that they are not politicians; they are bankers.   Unlike the Wall Street banks that had to be bailed out by the taxpayers, the Bank of North Dakota invests conservatively.   It avoided the derivatives and toxic mortgage-backed securities that precipitated the credit crisis, and it helped the state avoid the crisis by partnering with local banks, helping them with capital and liquidity requirements.   As a result, the state has had no bank failures in at least a decade.    

With intelligent use of the ever-evolving Internet, truly effective public oversight can minimize any cronyism.   California's pension funds might have avoided losing $100 billion if, instead of gambling in the Wall Street casino, they had invested in infrastructure through the state's own state bank.  

The Constitutional Challenge

In Weidner's Wall Street Journal article, he raises another argument of opponents--that California law forbids using taxpayer money to make private loans.   That, he said, would have to be changed.

The U.S. Supreme Court, however, has held otherwise.   In 1920, the constitutional objection was raised in conjunction with the Bank of North Dakota and was rejected both by the Supreme Court of North Dakota and the U.S. Supreme Court.   See Green v. Frazier, 253 U. S. 233 (1920) , and fuller discussion here.      

A municipal bank would be doing with the public's funds only what Bank of America does now: it would be lending "bank credit" backed by the bank's capital and deposits.   The difference would be that the local community, not Florida or Europe, would get the loans; and the city of San Francisco, not Bank of America, would get the profits.  

California and many other states already own infrastructure banks that use the states' funds to back loans.   If that use of public monies is legal, and if public funds can be deposited in Bank of America and used as the basis for loans to multi-national corporations, they can be deposited in the Bank of San Francisco and used as the basis for loans to the local community.  

Better yet, they can be used to buy municipal bonds.   Investing in municipal bonds would avoid the constitutional issue with "private loans" altogether, since the loans would be to local government.

Sending a Message to Wall Street

The campaign to "move your money" has gotten a groundswell of support, but move your money into what?   Weidner repeats the complaint of critics that private credit unions have gotten too big and threaten commercial banking.   Having greater impact would be to "move our money"--move our local government revenues out of Wall Street banks into our own publicly-owned banks, which could then generate credit for the local economy and public works.