A Bill That You Can Bank On

By Frank Irigon

“Imagine controlling our money and investing to stimulate the economy. Imagine financing student aid, infrastructure, industry and community development. Imagine providing access to capital for small businesses, or otherwise leveraging our resources instead of having to do it with tax incentives,” said state Rep. Bob Hasegawa (D-Seattle) about his bill to create a state-owned bank. “Imagine keeping our resources local instead of exporting them as profits, never to be seen again—that’s what this bank could do.”

On January 24 there were hearings before Senate and House committees on companion bills, SB5238 and HB1320, that would create the Washington Investment Trust -- a trust whose purpose is similar to the state-owned bank proposed by Hasegawa.

A year ago only a handful of legislators supported the state-owned bank. This session’s bill has bi-partisan support and twenty-six sponsors. What a year a difference makes!

There is a populist anger and mistrust of Wall Street, and rightfully so. Our country is in a financial mess because of deregulation that permitted financial institutions to invest in shaky derivatives or buy even shakier sub-prime loans. Feeling this anger, many Washington legislators are ready to address it with the creation of the Washington Investment Trust. Passing this bill is in the “best interest of the people and uses the people’s monies in a smart way,” Hasegawa said at the hearing.

A contingent of PSARA members attended both committee hearings. Gene Lux, a former State Senator and a PSARA Executive Board member, testified for the bill on behalf of PSARA. Lux said at both hearings that he learned about the need for a state-owned bank from the efforts of his father, who was a state chairman of the Nebraska/North Dakota Non-Partisan League in the early 1900’s. “It’s not about socialism or capitalism, but what works best for the people,” Lux said.

When North Dakota created the Bank of North Dakota, policy makers in that state used as an example the creation of the Port of Seattle and its publicly-owned grain elevator in the early part of the twentieth century. The Port of Seattle demonstrated the public good that can come from using public resources for the general welfare. Now, we in Washington can learn from North Dakota.

The Bank of North Dakota, created in 1919, is the only state-owned bank in the nation. Interestingly, North Dakota is the only state that has weathered this Great Recession with a billion dollar surplus. Many believe the bank played a significant role in helping North Dakota to ride out this terrible economic storm.
Testifying in favor of the bill were representatives from the Main Street Alliance, an organization of small business owners. These small business people gave compelling evidence about the difficulty of getting bank loans to expand their successful small businesses.

The owner of one small business, a long-time Republican from Oak Harbor, voiced his frustration in being denied a loan by several banks despite excellent credit ratings and assets to cover the loan. All he wanted was a loan to expand his business and rehire the employees he laid off during the recession. He said that if this bill passed, small business owners wouldn’t have to go through the hoops he and others had to go through to expand their business or start new ones.

Many at the hearings expressed disappointment that State Treasurer Jim McIntire, a longtime Democrat, testified against the bill, citing his belief that it violates the state constitution and that it is not a safe and reliable way to handle the revenue that comes to the state from taxpayers.

It was surreal seeing McIntire testifying alongside the banking association lobbyists. In a four-page statement, McIntire decried the bill as “placing both public funds and the state as a whole at significant risk.” Evidently, our state treasurer has somehow missed the role the Bank of North Dakota has played in the economy of North Dakota.

Legislation to create a state bank is being considered in at least ten other states. A bill has been introduced in Oregon by a long time Republican legislator. Similar legislation is expected to be introduced in Hawaii.

(Frank Irigon is a member of the PSARA Executive Board.)