Maine Treasury sink hole
Maine's savings are in a sink hole. Its Federal Agency Securities lost $1,328,799 in September, 20171, after 10 prior months of unrealized losses. Managers of Fannie Mae and Freddie Mac, U. S. instrumentalities in Maine's portfolio were fined and fired for wrongdoing involving their 2008 collapses. Because FNMA and FHLMC failures would have shattered the national economy, they were bailed out by U.S. taxpayers.
None in Maine's September, 2017, Corporate Note, portfolio, which had over $56K unrealized loss, ventured any significant assets in this state. One investee, Exxon-Mobil, suppressed and misrepresented climate change data, spilled over 10 million of gallons of crude into Prince William Sound, Alaska and substantially raised fossil fuel combustion emissions that are intensifying damaging storms. ExxonMobil is among the highest-emitting investor-owned fuel production companies since 1988. Even if investments had been profitable for Maine taxpayers, helping companies whose business mission warms oceans, and climate, and strengthens destructive hurricanes is morally reprehensible.
The sole state-owned bank recently announced that its $136 Million Net Income for 2016 2 was the highest-ever. As 1.3 million Maine people and millions in other states without state-owned banks watched their economies implode after 2008, this 757,952 person state averted recession by investing all of its cash in its $7 Billion bank.
“As the only state-owned bank in America, Bank of North Dakota is a unique financial institution and is the envy of many other states. North Dakota Bankers Association (NDBA) is a champion of Bank of North Dakota. We applaud the agility, stability and opportunity Bank of North Dakota provides state government, local communities, and citizens. North Dakota’s banks work closely with BND. Our members look at Bank of North Dakota as a partner, not a competitor. BND is agile when it comes to providing assistance and creating programs to meet the changing needs of our state. Whether it be adapting to fluctuations in major economic sectors like agriculture and energy, responding to catastrophic flooding, or helping first-time homeowners and startup businesses, BND can mobilize assets and partner with North Dakota banks to provide opportunities for communities and customers. BND programs help banks help their customers.” - Rick Clayburgh, Executive Director, North Dakota Bankers Association 3
Maine could have earned a profit investing locally in 2016 by creating a state-owned bank like 99-year- old Bank of North Dakota, but instead ventured two-thirds of its cash outside Maine, amassing over $15 Million in unrealized U. S. Treasury, Corporate, and Federal Agency losses in 11 months. Maine's cash was placed in out-of-state institutions in France, Netherlands, Japan, Canada, U. S., and other countries.4
Five banks where Maine kept its cash lent money to build the Dakota Access Oil Pipeline, which used eminent domain against landowners' wishes across Standing Rock Sioux reservation in North Dakota: Toronto Dominion, JPMorgan Chase, Citizens, Credit Agricole, and U. S. Bank. Before the pipeline environmental impact study was complete our recently-elected Commander-in-Chief expedited it by Executive Order jeopardizing drinking water for millions, accelerating climate change and violating the Clean Water Act, while Bank of North Dakota avoided financing this facility located in its own state. A Judge ruled the oil pipeline Executive Order was illegal.
Bank of North Dakota's respectable 15% annual return on investment greatly exceeds Maine 1.1% for August and 0.7% in prior months. Depositing Maine cash in a BND-modeled state-owned bank lessens, doesn't increase, Maine's saving risks, which are now being depleted. Maine funds invested in its own state bank should generate from $170M to $930M in additional income, between 2,900 and 24,000 jobs, and $10M to $59M of tax revenue, due to money formation with between 30% -70% lending assumptions.
Funds need not be appropriated to “capitalize” a state-owned bank. Maine instrumentalities could simply deposit money in the state bank instead of out-of-state, where it is stashed now, then write checks on public funds as they do in private banks, eliminating need for tax increases or budget cutting to pay for it.
Blood to the body is like money is to the economy. Putting two-thirds of state cash outside the state affected Maine's economy like catheterizing your arm and removing 2/3rds of your blood. Maine's historically anemic economic activity indicates liquidity shortages caused by exporting its savings, while North Dakota reinvested in itself, strengthened its own economy and earned much higher returns.
Exporting our money is like draining a fish tank. Imagine the impact on the fish if 2/3ds of the water were removed from the New England Aquarium, Marineland, or SeaWorld.
Despite North Dakota Bankers' strong state bank support, Maine Bankers Association spokesmen and other witnesses ignored BND successes and misrepresented public banking, alleging it risks funds and competes with private banks at state bank hearings. Yet North Dakota's banking industry has consistently exceeded Maine's banking industry in return on assets, bankruptcy rate, past due loans, assets per capita, banks per capita, and other metrics. Maine bankers' objections to a state- bank are against their own interests. Prevaricating that it would “put Maine funds at risk” in the words of Senator Dana Dow of Lincoln County, the legislature's Joint Insurance and Financial Service Committee recommended the North Dakota-style State-owned bank bill “ought not to pass.” Risk is defined as the: “probability or threat of damage, injury, liability, or loss. “ Maine's U. S. Treasury Notes experienced aggregate "unrealized losses” of $1.6M over 11 months from November, 2016, to September, 2017. Maine's U S Treasury Note “unrealized losses” for September, 2017 exceeded $290K.5 If money Maine invested in U S Treasury Notes had been deposited in a state-owned bank, it would have strengthened Maine's economy and earned better returns instead of being lost. Our tax money is now in jeopardy and a state bank would reduce risk, not increase it.
Creating a false impression that state banking lacked support, the committee didn't publish all letters supporting it on its web page, although it did opposing testimony. Media didn't report the proposal, even though press releases were given to their State House bureaus An economic development initiative, it should have gone to Joint Commerce, Labor, Economic Development Committee, not Insurance and Financial Services, where it went.
When it got to the Senate floor, success required a “no” vote on the “not to pass” recommendation. Although nine enlightened Senators supported6 it, the majority backed the Insurance committee's irresponsible determination. The sponsor, Senator David Miramant of Knox County, along with Senators from the most northern and southern counties, and three largest population centers voted for a state bank, despite financial chieftains' fallacious criticism and an “ought not pass” Insurance committee vote.
Offsetting spending cuts, tax increases, asset selling, and bond-issuing pressures, a state-owned bank would raise local incomes, business activity, employment, and revenues, lessening recession impacts by providing capital to augment low cost credit to build and expand enterprises. Renewable energy facilities, infrastructure, and homes could be financed with a state bank when disaster hits and during periodic business contractions, when revenues fall and private banks cut lending.
Maine shouldn't put taxpayers money in foreign, or out-of-state U. S. banks, speculate on volatile out- of-state corporate securities, U.S. Treasury Notes, U. S. Agency securities, nor indirectly fund environmentally damaging projects. Financial leaders should admit that a state-owned bank would brighten their own and the public's fortunes. Media ignored it and the dismal Economics educations of many obscured it. The establishment's deceit maintains a bleak, depressed economy, especially in rural areas. Maine should stop contributing to projects jeopardizing human survival or violating laws. Mankind's survival requires abolition of fossil fuel extraction and combustion not expansion. Moving money now out-of-state into a state-owned bank would strengthen Maine's economy, obtain higher returns, and reduce environment and climate deterioration.
Some legislators responded to critics by offering greater state finance authority appropriations requiring spending cuts or tax increases, but increasing FAME7 doesn't replace a state bank, because it can't create new money when it lends, so it can't expand economic activity like a bank. Agency spokesmen who misrepresented the initiative should be reprimanded or dismissed from state jobs because public officials must be truthful when testifying to the legislature.
Contrary to witness's statements, no agencies must be eliminated to create a state bank. Maine Treasury deposits in local banks could be replaced by state bank deposits. This and other details could be sorted out by establishing a Joint Legislative Public Bank Standing Committee as was done by the Maine Legislature with Marijuana.
