Imagine a publicly owned state bank that generates new revenue for the state without raising taxes. Is it too good to be true?
Washington 11th District Sen. Bob Hasegawa says it can be done, and he calls the idea a no-brainer.
Hasegawa pushed his plan for a publicly owned Washington state bank at the Leschi Community Council monthly meeting on Thursday, Oct. 4.
As a potential alternative to raising taxes, Hasegawa contends a state-owned bank would keep taxpayer dollars within the state and would invest funds in infrastructure, student loans, absorb debt capacity and benefit small businesses.
“A concept about a state bank really isn’t rocket science, but people still have trouble kind of conceptualizing what it would be for the public to actually own a bank,” Hasegawa said.
A model for a state bank exists, Hasegawa often referring to the state-owned Bank of North Dakota. Established in 1919, the Bank of North Dakota this year reported its 14th consecutive year of record profits. That window spans the Great Recession of 2008 and the oil crash of 2014.
Hasegawa said he’s been working on promoting a state bank for a majority his 14 years serving in the state Legislature.
“I see a public bank as actually inevitable,” he said. “At some point, we’re gonna have to do it, because if you understand public financing right now, we have to sell bonds to finance our infrastructure. We have a capital budget, we also have a transportation budget. In our capital budget, our debt service [from] the most recent capital budget was right around $2.5 billion. That’s money that we’re paying to Wall Street to repay our bonds. In the transportation budget, the most recent one was about $1.5 billion. So $ billion repaying debt to Wall Street [in the state of Washington].”
Instead of sending state tax dollars to the U.S. Federal Reserve, Hasegawa argued keeping those tax dollars within the state would work toward reducing the debt service, as the state could take back control of how those dollars are invested.
“It would generate new revenue for the state of Washington without raising taxes. That’s a beautiful thing,” he said. “We understand that our revenue system is broken, you always hear about how it’s the most regressive revenue system in the United States. Out of all of the 50 states, we have the most regressive tax system … so when we’re talking about tax reform, I think that a public bank should actually come before you even talk about tax reform. It’s a cornerstone of building our economic future.”
Hasegawa called public banking “an anomaly in the United States,” and said “the whole rest of the world uses public banking as their economic development strategy,” citing France, Germany, Russia and China as examples. He said his goal is to have something 25 to 50 years down the road, so “our children will have this great resource to build infrastructure.”
“If we want to leave our children something for the future, we have to look at a different way of financing these projects, and that’s what the public bank is,” Hasegawa said.
In a model resolution for a state bank, Hasegawa wrote that the bank would be governed by an independent public commission that is “accountable and transparent to the people.” When asked if the bank would be under the same federal scrutiny as other banks, he said the bank would be monitored by the state’s Department of Financial Institutions, the state auditor’s office and the attorney general.
Hasegawa said a state banking caucus has been formed in the state Senate, and 21 members of the Senate have agreed to lend their name to the caucus. Another two members have indicated they’d vote for it if it makes it to the Senate floor. They would need 25 votes for it to pass.
“So we’re very close. Maybe after this election, we’ll get a state bank,” he said.
The idea of a state bank is not without pushback. Hasegawa said he’s had the idea dismissed as a socialist practice by some of his legislative colleagues. He said the biggest pushback he hears from people regarding a public bank is skepticism around the government running it. And, of course, there has been resistance from other banks. But Hasegawa argues there shouldn’t be resistance coming from local banks.
“The community banks should actually be supporting this,” he said. “I can understand why the Wall Street banks would not. In North Dakota, the community banks love their bank. Because they have this great resource the community banks can access to support them, they’ve been able to keep the big monolithic Wall Street banks out of the state. That’s more business for the community banks, and the economic development that’s stimulated with all the jobs created by the projects they’re doing helps grow the market for the community banks as well … but they don’t necessarily get that part of it yet, so they’re in sort of class solidarity with the Wall Street banks.”