State-run banks: a movement driven by unusual politics

Marshall Swearingen • http://www.hcn.org • November 26, 2012

During Tea Party champion Joe Read’s first session in the Montana Legislature, in 2011, he drew widespread ridicule for introducing a bill that declared global warming “beneficial to the welfare and business climate of Montana.” With another anti-science bill, Rep. Read called for Montana’s government to overrule federal regulations on greenhouse gases. He also passed out 170 DVDs of The Secret of Oz, a low-budget video charging that the Federal Reserve system has been corrupted by corporate bankers, symbolized by the “Wicked Witches” in the original Wizard of Oz.

The DVDs were part of Read’s attempt to create the “Last Chance State Bank,” named for a gulch where gold was mined in the 1800s. The colorful name also cut to the urgency of Read’s banking concerns: Desperate to fix a broken fiscal system, he envisioned that the Last Chance State Bank would be run by Montana’s government.

None of those bills became law, but the bank measure attracted a surprising supporter — Rep. Sue Malek, a Democrat who represents Missoula, a college town. Malek herself sponsored a bill supporting the state-bank idea (which also went nowhere), and Read wholeheartedly supported it…

“You hear that giant sucking sound?” read a flier circulated by the Service Employees International Union in Oregon in 2011. “That’s Wall Street’s big banks sucking up all the public dollars out of Oregon. (The state) does billions of dollars of business with big banks like Bank of America, JPMorgan Chase, and Wells Fargo … And what do we have to show for it? 28,000 homes in foreclosure, 10.6% unemployment, and devastating cuts to vital services.”

Read the article here.

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A Reappraisal of State-Owned Banks

Eduardo Levy Yeyati, Alejandro Micco, & Ugo Panizza • http://www.brookings.edu • Spring 2007

A reappraisal of state-owned banks
Authors: Eduardo Levy Yeyati; Alejandro Micco; Ugo Panizza
Year: 2007
Published in: Economia : Journal of the Latin American and Caribbean Economic Association. – Washington, DC : Brookings Institution Press, ISSN 1529-7470, ZDB-ID 20698392. – Vol. 7.2006/07, 2, p. 209-247.

Abstract
We revisit the public banks debate, survey the theoretical arguments and test the robustness (and expand) the existing empirical evidence. While we find some support for the view that public banks do not allocate credit optimally, we also report indicative evidence that they exert a positive influence on private bank efficiency, and may contribute to reduce credit procyclicality. Ultimately, we find that the recent criticism to public banks has generally been based on inconclusive cross-country evidence. More specific bank-level research is still needed to substantiate a case for or against public banks in developing economies.

This paper is divided into three parts. The first part describes the evolution of state ownership of banks in Latin America and the rest of the world. The second part discusses the theoretical justification for the existence of public banks. The third part surveys the existing empirical evidence and presents some new results.

Read the entire paper here.
A .pdf version of the paper is here.

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The 10 Major Brazilian banks — 3 of 10 Major Banks in Brazil are Publicly Owned

Andréa Novais • http://thebrazilbusiness.com • April 10, 2012

1 – Banco Bradesco Financiamentos. Founded in 1943, in the city of Marília, São Paulo, Banco Bradesco is the second largest private bank in Brazil. It is currently headquartered in Osasco, SP, at Companhia Cidade de Deus. Over its almost 70 years of existence, Bradesco has acquired several financial institutions in Brazil, such as Banco do Estado do Maranhão, Banco Morada, Banco de Crédito Nacional (BCN), Banco do Estado do Ceará and Banco Boavista. In 2006, Bradesco took over the American Express credit card operations in Brazil. Official website: http://www.bradesco.com.br

2 – Caixa Econômica Federal. Founded in 1861, Caixa Econômica Federal is a public bank owned by the federal government and is the only working with FGTS, PIS and the payment of unemployment insurance. It is also where all benefits offered by the federal government, such as Bolsa Família, are paid. Its expertise is banking services, FGTS, PIS, unemployment insurance and other initiatives made by the federal government, such as Programa Minha Casa, Minha Vida. Official website: http://www.caixa.gov.br

3 – HSBC. HSBC is a commercial and an investment bank organized within four business groups: commercial banking; global banking and markets; personal financial services and global private banking. Present in 87 countries, HSBC is present in Brazil since 1997 and is headquarted in Curitiba, PR. Official website: http://www.hsbc.com.br

4 – Banco J Safra S/A. Banco Safra is one of the 10 major Brazilian banks, operating in all banking divisions, focusing on companies and upper-class customers. Established in 1955, it is headquartered in São Paulo. Official website: http://www.safra.com.br

5 – Banco Itaú. Since the acquisition of Unibanco, in 2008, Itaú saw its market value increase 120%, becoming one of the 10 major banks in the world and the largest financial conglomerate in Latin America. Headquartered in São Paulo, Itaú is a branch of Itaú Unibanco Holding SA. It has operations in Argentina, Chile, Paraguay, Uruguay, England, Luxembourg, Portugal, USA, Japan, China and United Arab Emirates. Its major focus is financial services, such as commercial and corporate banking, besides insurance, assets management and capitalization plans. Official website: http://www.itau.com.br

6 – Banco do Estado do Rio Grande do Sul S/A. Banco do Estado do Rio Grande do Sul (or simply Banrisul), is a state-owned bank focused on business in Southern Brazil. Present in 364 cities, most of them concentrated in Rio Grande do Sul state, Banrisul is headquartered in the city of Porto Alegre and its major focus are banking services. Official website: http://www.banrisul.com.br

7 – Banco PanAmericano S/A. Founded by Grupo Silvio Santos in 1969, PanAmericano has operated as a multi-service bank since 1991, having started its credit card operations in 1994. PanAmericano Seguros was incorporated to the bank in 1999. In 2009 Caixa Econômica Federal bought part of the bank’s shares and became the second largest shareholder of the institution. Official website: http://www.panamericano.com.br

8 – Banco Santander. Santander fisrt came to Brazil in 1982, but it was only in 1991 that Santander Investment operations have begun. The Brazilian operation is considered to be the most important one, being responsible for 25% of the bank profit. In 1997 Grupo Santander acquired Banco Geral do Comércio and in 1998 and the control of Banco Banespa. In 2008 it acquired the Latin American operation of ABN Amro Bank and became the third major bank in Brazil in terms of assets. Official website: http://www.santander.com.br

9 – Banco do Brasil. Banco do Brasil is the largest Brazilian and Latin American bank in terms of assets and third by market value. Headquartered in Brasília, Banco do Brasil was founded in 1808 and is the oldest active bank in Brazil. The bank is controlled by the Brazilian government and since 2000 it is one of the four most-profitable Brazilian banks, holding a strong leadership position in retail banking. Its major services are the issuance of boletos, ATM loans, automatic payments, and the account holder may apply for international Mastercard and Visa debit cards. Also, the bank has got offices I several locations throughout the world, such as Amsterdan, Buenos Aires, Dubai, La Paz, Miami, New York City, Santiago and others. Official website: http://www.bb.com.br

10 – Citibank. Citibank Brasil is headquartered in São Paulo and is a branch of Citigroup FNC, the largest multi-bank in the world. The bank came to Brazil in 1915 and is present in 21 of the 26 Brazilian states. Official website: http://www.citibank.com.br

Read the article here.

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Public Banks in Latin America

Alejandro Micco & Ugo Panizza • http://www.iadb.org • February 25, 2005

Public Banks in Latin America
Background paper prepared for the conference on Public Banks in Latin America: Myth and Reality Inter-American Development Bank (February 25, 2005)

Government ownership of banks is a major phenomenon worldwide. In 1995 the average percentage of state ownership in the banking industry around the world was about 41.6 percent (Figure 1). This share was even larger during the 1970s, when more than 50 percent of worldwide bank assets were controlled by the public sector. Ideological changes regarding the state’s role in the economy, as well as financial crises, led governments to privatize financial institutions. Megginson (2004) documents that worldwide, from 1987 to 2003 more than 250 banks were privatized, raising US$143 billion.

Read the entire report here.
The 2005 Conference details are here.

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The Association of German Public Banks (Bundesverband Öffentlicher Banken Deutschlands, VÖB)

http://www.voeb.de • November 26, 2012

The Association of German Public Banks – Bundesverband Öffentlicher Banken Deutschlands, VÖB – is a leading industry association in the German banking industry. It was founded in 1916 and represents nowadays 62 member institutions including the regional banks (Landesbanken) as well as the development banks owned by the federal and state governments. The VÖB together with the four other top-level associations of the German banking industry comprise the German Banking Industry Committee, GBIC (Die Deutsche Kreditwirtschaft, DK).

Mission. The VÖB represents the joint business and general interests of its members in all matters relating to banking policy promotes cooperation between member banks and supports them in the fulfillment of their missions. The association represents and promotes the interests of its members through communication with lawmakers on the national and state level, national and international regulatory authorities, the media and the public. It is accredited with the German Bundestag, the European Parliament and the European Commission. The VÖB has maintained an office in Brussels since 1987. The association is also a member of the European Association of Public Banks (EAPB), which is located in Brussels.

Members. German financial institutes held directly or indirectly by the public sector either in whole or in part, or which perform special missions in or arising out of the public interest, can become regular members of the VÖB. Banks that already belong to another banking-industry association can apply for special membership.

Employer association. The VÖB is also an employer association. It represents the members of the collective-bargaining association of public banks in collective-bargaining negotiations for public banks and the private banking sector.

Ombudsman. The VÖB has been operating a customer complaint system since 1992; in May, 2001, the system was expanded to include an extrajudicial arbitration body and an ombudsman. On the European level, the VÖB ombudsman is a member of the Financial Complaint Service Network (FIN-NET), to which over 40 national arbitration bodies belong.

Deposit guarantee. The VÖB compensation scheme (statutory deposit guarantee) secures customer deposits as well as liabilities from securities transactions. The association’s Voluntary Guarantee Fund provides additional security for deposits.

Total assets. As of the end of 2011, the total assets of all VÖB member banks amounted to 1,991 billion euros. The market share of the VÖB member banks was thus 24 percent, as measured by the total assets of the entire German banking industry. The VÖB banks employ roundabout 80,000 persons.

Read more about the VÖB here.

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European Association of Public Banks (EAPB)

http://www.eapb.eu • November 25, 2012

The European Association of Public Banks (EAPB) was founded on 4 May 2000. Members of the EAPB are financial institutions, funding agencies, public banks, associations of public banks and banks with similar interests and have to be domiciled in a Member State of the European Union (EU), in Switzerland, in a signatory state of the European Economic Area (EEA-Treaty) or in a state whose application for Membership of the European Union has been officially accepted.

The EAPB has members from various European countries and represents about 100 financial institutions. As a whole, they have a European market share of approximately 15%, a balance sheet total of about € 3.500 billion and they represent about 190.000 employees.

The EAPB is a member of the European Banking Industry Committee (EBIC) through which the seven main European banking associations represent their interests collectively towards the European institutions.

The EAPB covers topics such as

Banking and banking supervision law
Capital markets and securities law
Accounting and company law
Consumer affairs
Taxation
Payment systems
Money laundering and financial crime
Civil law
EU regional policy and structural funds
State aid and competition
EU enterprise policy
Services of general interest
Local finance

Read more about the EAPB here.
List of member banks of the EAPB here.
Description of member banks of the EAPB in 2011-2012 Annual Report here.

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From Scotland News: Cashing in on state-owned banking

Alf Young • http://www.scotsman.com • November 24, 2012

AS THE debate over reform continues, one answer is to keep financial institutions in the public sector, writes Alf Young

Disturbing splits are emerging at the top of the Bank of England over how to reform our battered, post-crash banking system to ensure it doesn’t blow up again. In testimony this week to the parliamentary commission on banking standards, the Bank’s departing governor, Sir Mervyn King, called yet again for a more radical division of retail and investment banking actitivies than that envisaged by the Vickers Commission…

…A Los Angeles-based attorney, Ms Brown is the author of Web of Debt and president of the Public Banking Institute (PBI). Banking, she argues, is not a market good or service. It’s a vital part of societal infrastructure which properly belongs in the public sector. And by taking it back where it belongs, states could regain control of that very large slice (up to 40 per cent) of every public budget that currently goes on interest charged to finance investment programmes through the private sector. Deficit reduction could get an enormous boost, by cutting out the profit-driven middle man.

Read the complete article here.

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From the Christian Science Monitor: Public banks could help after a disaster such as superstorm Sandy

Kelly McCartney • http://www.csmonitor.com • November 22, 2012

In April 1997, a public bank was able to respond to a massive flood in Grand Forks, N.D., in ways that privately owned banks could not or, perhaps, would not. Could public banks help in other disasters, such as superstorm Sandy?

The Public Banking Institute blog cites a powerful example of how a public bank can help a city bounce back from a devastating natural disaster. As Hurricane Sandy recovery efforts unfold, there’s a lesson from history about the role of strong local financial institutions in increasing urban resilience.

In April of 1997, Grand Forks, North Dakota, was hit by record flooding and major fires that put the city’s future in jeopardy. One of the first economic responders was the Bank of North Dakota (BND), currently the only public bank in the United States.

What’s a public bank, you ask? Public banks are owned by citizens through their government. They have a public interest mission, are dedicated to funding local development, and plow profits back into the state treasury to fund social programs and cover deficits. Rather than competing with private banks, BND partners with them to meet the needs of North Dakotans. BND is one reason North Dakota has low unemployment and runs budget surpluses while most states are deeply in the red.

Read the complete article here.

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Public Banks: Removing Job Growth From the Corrupt Jackboot of Wall Street

Pam Martens • http://www.wallstreetonparade.com • November 15, 2012

…There’s one other positive to support the creation of public banks – competition to Wall Street. Reforming Wall Street cannot happen under the current compromised Congress; under the current campaign financing system; under the corrupt revolving door between Washington and Wall Street; under a system that rewarded the supervisory failures of the New York Fed by giving it greater oversight of Wall Street while continuing to allow Wall Street execs and their cronies to sit on its Board of Directors. The entire system is malignant and an insurmountable obstacle to the Nation’s economic recovery. We have watched for four years as Congress failed to reform Wall Street. The one thing that might actually stand a chance of reforming it is honest competition that provides an honest alternative.

Read the complete article here.

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Ellen Brown Interview with Populist Dialogues: Escaping the Great Recession With Public Banking

Populist Dialogues of Alliance for Democracy • PopulistDialogues at youtube.com • November 5, 2012

Guest Ellen Hodgson Brown, author of The Web of Debt and founder of the Public Banking Institute, discusses the advantages of public banking in the United States and around the world. She reviews how money is created, how the Federal Reserve was created, various types of public banks and how their are structured, why some nations have escaped the Great Recession, how America could save its postal service, how public banking institution could be used as a land bank to address the under-water property and foreclosure problems.

Watch the video of the interview here.

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WashPost article by Craig Shirley: “We should find a way to create 50 Wall Streets so that money can stay in the states…”

Craig Shirley • http://www.washingtonpost.com • November 9, 2012

From the article:
“…Wall Street is too fearsome and corrupt for anyone’s good. We should find a way to create 50 Wall Streets so that money can stay in the states, and corruption can be kept to a minimum and law enforcement to a maximum. In the era of the Internet — which empowers the individual — can there be any doubt that scrutiny of local Wall Streets would keep bankers and brokers on their toes?”

How about 50 state-owned banks…so that money can stay in the states? We already have a good start with one — the Bank of North Dakota!

Read Craig’s complete article here.

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It’s the Interest, Stupid! Why Bankers Rule the World

Ellen Brown • http://www.truth-out.org • November 8, 2012

Interest charges are a strongly regressive tax that the poor pay to the rich. A public banking system could realize savings up to 40 percent – allowing taxes to be cut, services increased and market stability created – with banks feeding the economy rather than feeding off it.

In the 2012 edition of Occupy Money released last week, Professor Margrit Kennedy writes that a stunning 35 percent to 40 percent of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35 percent to 40 percent cut of our GDP. That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed,” but because of the inexorable mathematics of our private banking system…

Read the complete article here.

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HURRICANE SANDY & THE GREAT RED RIVER FLOOD: How the Public Bank of North Dakota saved Grand Forks

Jim Morrow & Ira Dember • http://www.skyvalleychronicle.com • November 3, 2012

(GRAND FORKS, N.D.) — As the nation watches the aftermath of the destructive Hurricane Sandy in New York and New Jersey, it may be instructive to compare another cleanup 15 years ago in North Dakota after another natural disaster – the massive flooding of the Red River and the fire in downtown Grand Forks.

Folks in Grand Forks, North Dakota will never forget April 1997, when record flooding of the Red River and major fires devastated the city.

They also won’t forget that it was Bank of North Dakota — the nation’s only bank owned by a state — that put people above profits.

The BND rushed to the rescue with financial flexibility and generosity of spirit in the public interest that no privately owned bank could match…

Read the complete article here.

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PBI News Alert: Public Banking Rescues — WA Treasurer Resists

PBI News Alert • PublicBankingInstitute.org • Nov 3, 2012

As we watch developments in New York and New Jersey on the heels of Hurricane Sandy, it is instructive to compare another cleanup 15 years ago in North Dakota after another natural disaster, the flooding of the Red River and the fire in downtown Grand Forks. Meanwhile in Washington State, the Treasurer resists a public bank because of the “risk” involved, as if the Wall Street banks are trustworthy partners! “Funding is different for BND from that of other commercial banks,” says Standard & Poors (see below). Because it is different, it’s past time to put public money into public banks — for the public good, as the Bank of North Dakota so clearly demonstrates during times of prosperity — and times of natural disasters.

Read the entire PBI News Alert here.

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The HEALTHY MONEY Summit: A FREE Global Telesummit | November 7-9, 2012

healthymoneysummit.com • November 1, 2012

During these three potent days at the Healthy Money Summit, you will learn about some of the most powerful transformations happening in our financial systems – from the personal to the global.

By participating in the no-cost, 3-day Healthy Money Summit, you can come away with:

  • A healthier, more empowering relationship with money
  • Greater knowledge on our financial systems-and how we can change them for the better
  • Increased understanding of new and emerging economic models
  • Practical tools to improve your personal finances
  • Inspiring insights you can use to begin transforming your own community

More about the Telesummit and free registration here.

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PBI Newsletter, October 2012: Public Banking is Counter-cyclical, Chile, Toronto, and Philly updates!

PBI Newsletter, October 2012 • PublicBankingInstitute.org • October 31, 2012

The PBI (Public Banking Institute) October Newsletter is here!
Sign up for the Newsletter here.

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