• State bank deserves further consideration
    December 17,2012

    The Nov. 26 article, “State bank idea stays alive” mentions numerous long-term benefits and growing public support for a state bank in Vermont. Despite Vermont’s image of being local, and supporting the 99 percent, Vermont’s taxes and revenues go straight to Wall Street. Vermont’s funds should be reinvested in the state instead of supporting big banks and big companies.

    In 2008 the country was plunged into crisis because of banks that were, and still are, “too big to fail.” To avoid the next crisis, 19 states have introduced bills to study or form a state-owned bank. North Dakota, also a rural agricultural state with a little over half a million people, has fared better than any other state at weathering the economic crisis and has a large budget surplus.

    Census data shows North Dakota has the lowest unemployment rate in the country. What makes North Dakota different? Unlike the other 49 states, North Dakota has a public state-owned bank. While the vast majority of Vermont’s taxes and revenue goes to TD Bank, North Dakota’s funds are put in a public bank and re-invested in the community.

    Instead of maximizing shareholder value, the public bank’s mission is: “To deliver quality, sound financial services that promote agriculture, commerce and industry in North Dakota.” The bank has many programs to promote economic development and make loans that offer societal benefit.

    Because the bank serves the public instead of shareholders, it accepts lower returns on loans for job creation, starting a business, disaster relief and student loans. As a result, money is funneled toward those who need it and not into unsustainable speculative bubbles like those that caused the global financial crisis. Despite foregone profit from expanding credit and lowering the cost of loans, the bank’s return on equity has been well above the country’s median. The bank also returned $30 million of its profit to the state in 2009.

    Some believe a state bank would compete with other banks, yet North Dakota has three times the national average of community bank lending per capita. By creating partnerships through sharing and insuring loans, the state bank functions synergistically with other banks in the state.

    Despite the fact that part of North Dakota’s success is due to oil and gas revenues, it still had the lowest unemployment rate in the country in 2001 before its oil production skyrocketed. Alaska, with similar resources, has unemployment at 8 percent. The state bank provided nearly as much revenue to the state as oil and gas did. These numbers suggest there is more behind North Dakota’s success than resource wealth.

    As to whether a state bank would work in Vermont, Cairn Cross, a former banker and founder of venture capital firm Fresh Tracks, believed so in his testimony to the Vermont Legislature. He found that consolidating existing lending programs into a state bank could “create an entity that operates far less expensively and at a profit and therefore is able to pay a dividend to the state each year, rather than the reverse whereby the state needs to appropriate funds for these organizations on a regular ongoing basis.”

    If there is an option for a more independent, prosperous Vermont, it should be embraced and not feared. Our tax money should support our children’s education and local economies, not bankers with only their own interests in mind.

    Anders Christiansen attends the University of Vermont.

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