While reviewing the various candidate responses to the Whatcom County Democrats’ election questionnaire for mayoral and city council hopefuls, I ran across the following among the approximately two dozen questions:
“Do you support? ...Transferring government accounts out of national banks and into local banks and credit unions, thereby keeping vital funds in the local community for economic development and job creation.”
I do give the Dems credit for recognizing that we ought to be pulling out of national banks, but the question goes much farther than the Dems seem willing to go, if the question itself is any indication. Is this out of ignorance that there is another option, or at least a complimentary option, that combines public banking with local community banks and credit unions? Or is this out of some other purpose of which I am ignorant? I prefer the former to the latter, however, the question must be answered. Perhaps someone from the Dems themselves might shed some light but until then, my two cents.
By all means YES. Flee! Flee immediately! Get out of those casino banks as soon as possible. The likes of CitiBank, Chase, Bank of Amerika, Wells Fargo, USBank and their ilk are poisonous and voracious institutions run by sociopathic poltroons, poseurs and mountebanks. Check out my articles on these grotesque “Rosemary’s Babies” of the financial world before they collapse again and we are greeted not by bail-outs but by bail-ins of cosmic proportions. This quote then from “Why Bank Bail-Ins Will Be the New Bailouts”:
“With a bank bail-in, the bank uses the money of its unsecured creditors, including depositors and bondholders, to restructure their capital so it can stay afloat. In effect, the bank is allowed to convert its debt into equity for the purpose of increasing its capital requirements. A bank can undergo a bail-in quickly through a resolution proceeding, which provides immediate relief to the bank. The obvious risk to bank depositors is the possibility of losing a portion of their deposits. However, depositors have the protection of the Federal Deposit Insurance Corporation (FDIC), which insures each bank account for up to $250,000. Banks are required to use only those deposits in excess of the $250,000 protection.”
The kicker is that the FDIC has a relatively minuscule amount of funds with respect to the exposure of depositors were there to be another bank failure scenario. In 2008 it went $8 BILLION in the hole. Since the FDIC is funded through its member banks, we have the situation of a snake eating its tail. In short, the FDIC has the ability to cover but a small percentage of its obligations. Bail-ins already happened in Italy and in Cyprus and it can happen here - legally.
Most people are not even dimly aware that once money is placed in a bank account (community banks and credit unions included) it is, for all intents and purposes, the bank’s. The depositor become an unsecured creditor. That means depositors stand in line behind just about everyone else to get their money, so when a bank fails, depositors get bupkis. (Lehman Brothers depositors got 8 cents on the dollar when the bank collapsed a decade ago.) Depositors stand at the front door of the bank with their tin cups while the limos arrive at the back door and haul away the cash.
Now consider that government entities generally operate at a level well above $250,000 per account. By placing their money in commercial casino banks, they are exposed to “taking a haircut” - the alternative term for bail-ins. This is the point at which public banks enter the picture. The city of Bellingham and Whatcom County, along with Democrats statewide, should be swarming over the Washington State Senate, begging for a public bank… but they are not. Why? Follow the money.
The Dems ought to be behind public banking 100%. If not, why not?
NOTA BENE: State Senator Bob Hasegawa, who spoke before the Bellingham City Club last month, will appear before the Whatcom County Council on September 24th at 11 a.m. to talk about public banking and seek support for his public banking bill in the form of a resolution from the council.