“Effectively and efficiently manage investments, debt, and cash to protect and enhance Washington State’s strong financial standing, build economic vitality, and ensure the highest possible value for every tax dollar in a rapidly changing financial and regulatory environment.”
This is the mission of the Office of the Treasurer of the State of Washington. If a measure of the diligence with which our current state treasurer, Republican Duane Davidson, carries out his mission is the accuracy of information he imparts to the citizens, then there is a problem. This problem is exemplified by a recent piece on the site of the Bellingham Business Journal (BBJ) Today entitled “Is a public bank right for Washington? Treasurer says no.” of December 20, 2018 and written by Emily Hamann. The BBJ entry, in essence a record of an interview, so surprised former Chair of the Public Banking Institute Board (2015 - 2017), Walt McRee, that he immediately responded in a comment:
“Flabbergasted. That’s my reaction to Mr. Davidson’s numerous specious and deceptive claims both about public banks and some of the related public bank feasibility studies that have been issued in recent years. As an expert in the field, I know virtually all of them well enough to say that his lack of understanding of how these banks integrate into State management, public policy, and even the banking industry itself is egregious. His erroneous claims about Bank of North Dakota profits, claims of anti-competitiveness against private banks, fear-mongering about public risk—the list of errors and deceptions is long. He appears to hold an ideological barrier to the concept that public control of public assets can be far more efficient and productive than surrendering our common interests and assets to Wall Street gamblers, as in fact proven by the Bank of North Dakota itself. “What’s the problem?” he asks. If he doesn’t see that the growing and urgent financial challenges ahead need a better solution than raising more taxes, paying higher costs from the private capital markets and the associated risk of dealing with the same folks who brought the whole house down in 2008, he must be very friendly with the big banks that definitely don’t want the people to finance themselves.”
But I get ahead of myself. What did the Washington State Treasurer proffer to the residents of Washington during this interview? To borrow from Elizabeth Barrett Browning, “How does he mis-inform us, let me count the ways.”
The interview with Mr. Davidson, conducted by Ms Hamann, is based on a “report” by his office on the state of public banking in the U.S. This “report” is no more than an apparent Power Point presentation with accompanying notes for an erstwhile presenter. It is billed as “STUDY OF THE STUDIES - A REPORT FROM WASHINGTON STATE TREASURER DUANE A. DAVIDSON A comprehensive review of state, municipal, city, and public banking” But, as pointed out in a later letter to the BBJ by Ellen Brown, current Chair of the Public Banking Institute, “The linked report contains no footnotes or citations, but the summaries of the reports cited do not lead to that conclusion. Most state only that questions remained…” One would have to pour through the dozen or more source reports to verify all the points made in the presentation to ensure there was no mis-representation or mis-interpretation. The raison-d’etre of such a risibly billed “study” on the part of the office of the treasurer then becomes clear and that is one of obfuscation and purposeful incompleteness.
Of course, Mr. Davidson could not ignore the well-being of North Dakota’s public bank, but attributed its success to oil and coal revenues which Mr. McRee above correctly observes is a gross error. The bank was set up by North Dakota farmers in 1919 with a two million dollar investment that had nothing to do will coal and oil.
“BND has been the major factor in the creation of North Dakota’s strong, resilient economy over the past forty plus years (long before the recent oil and gas boom). Because North Dakota’s public funds were deposited in BND and invested locally, the people of North Dakota sailed through the great 2008 recession unscathed.” [This quote from the site of Banking on New Mexico which is exploring public banking in that state.]
Mr. Davidson can hardly claim that the state of Washington “sailed through” the 2008 recession. I have been a resident of Washington since 2002 and can attest that our state suffered along with the rest of the nation as the big banks were bailed out at the expense of the American people, especially those who lost their homes. But our state treasurer thinks that all is hunky-dory. “I think our current system of banking is working just fine. I think what we ought to do is not find more effective ways to issue debt, but maybe issue less debt.” I agree about debt. More effective and low cost ways are needed, like those that go along with public banking: lower interest rates for businesses (possibly working through credit unions), and interest income that is returned mostly to the people (i.e. to the public bank) not to share or bondholders. Seattle has been trying for years to get out of the grip of Wells Fargo, another one of those great, private banks that just paid another whopping fine of $575 million (on top of fines of $1.2 billion) for opening fake customer bank accounts and other such “dubious practices.” But Mr. Davidson tells us without embarrassment, a shred of evidence, or details:
“Take a look around the country — there’s been a lot of fraud and misappropriation and debacles done at the public level, and public agencies also. I think a large state bank could be subject to those same type of things.”
All of the top banking institutions in the U.S. that are so cherished by Mr. Davidson - Citigroup, JPMorgan Chase, Goldman Sachs Group, Bank of America, Wells Fargo and Morgan Stanley - are in demonstrably bad shape with bad debt and reckless management. These are the banks in which governments across the country place receipts since there are no public banks to speak of. [You can find more information on these wonderfully managed banks in my prior articles here and here] Consider this too from Wall St. On Parade: Citigroup closed out 2018 with a share price decline of 30 percent. Goldman Sachs closed out 2018 with a decline of 35 percent. Morgan Stanley’s share price was down 24 percent; Bank of America/Merrill Lynch, lost 18 percent, while JPMorgan Chase lost 10 percent. Fraud and corruption are part and parcel of the operations of these banks. People died as a result of this during the aftermath of the 2007/2008 financial crisis, a crisis that continues to this day in spite of risible notions that we have “recovered”. There were suicides. Black and other minority lives were destroyed and families left destitute.
Mr. Davidson’s professed knowledge of the efforts of the city of Seattle is also either lacking or terribly distorted for reasons of obfuscation. Seattle has robust efforts underway to move the city toward public banking, but they are slowed by inaction at the state level in the legislature, demonstrably the the real “hurdle” mentioned by Davidson. For almost a decade, Sen. Bob Hasegawa has been pushing for legislation in Olympia to allow for and promote public banking. Our treasurer is among those effectively blocking, confusing or discouraging these efforts by giving this kind of interview to the press. Mr. Davidson, meet the “hurdle.” And it is you.
My contention is that our state treasurer is afraid that the efforts of Sen. Hasegawa and Seattle are close to being successful. There is a powerful bank lobby in Washington state and certainly across the country that controls the coffers and has deep pockets to defend the banksters. Interviews with local press, such as we see here in the BBJ Today, are for the purposes of sowing FUD (fear, uncertainty and doubt). Be you a resident of this state or a business owner, you have a lot to gain from public banking. Visit the sites of the Public Banking Institute and the Seattle Public Bank Coalition and read for yourself about the efforts to keep the citizens’ money in the hands of the citizens, to assist cities, states and municipalities in low-cost funding public projects, and to provide low-cost financing elsewhere through partnerships with local banks and credit unions.