money moves the world and banking moves money welcome to the public bank solution conversations about an emerging new american institution a publicly owned partnership banks able to rebalance the scales of monetary control in service of the public interest and our common wealth brought to you by the public banking institute and its national association of partners and we're going to see a low and welcome to the public welcome you back i hope to our series of discussions about creating a public bank almost anywhere in the country but most pacifically we're talking about the state bank of new jersey which we're delighted to be able to refer to now here we are in early two thousand and eighteen there's a new administration in trenton and as you know of the murphy campaign ran in part on creating a state owned bank this is a breakthrough candidacies now are considering including public banking as part of their campaign certainly he ran on this and won on it and now in the first week of his administration we have the issuance of a state bank bill  issued by senators gill and senators cody of essex county new jersey and so we are just thrilled about that we're going to be talking about that today and its implications and some of its specifics with our guest happy to say a  recurring guest ellen brown ellen is the chair and one of the founding directors and founders of the public banking institute and with which i work and have worked for years of course to create public exciting days for all of us in the public banking quote some good business nonprofit business yeah i think what are your reflections on the of the murphy initiative here you know here in new jersey well it's great that he is gone through with it so many times we get politicians who make promises and then they come into office and then nothing really happens bad and furphy is just shown right after bad that he's serious about these things and his bill looks good  tree for the last one fad like at least thirty i think bells that have been filed in states all across the country and cities and but they're largely pushed by public bank supporters not necessarily by the legislators so what they lack is the political will and therefore you get a lot of resistance among the politicians but bill murphy has the political will and one reason that he has a political well i think is that he was a banker at goldman sachs for many years and so he understands banking and he understands why the state should have its own bank thing you often hear legislators say well we've already got revolving fines you know we are we make loans to those areas or we've got plenty of banks why do we need banks etc so they if they don't really understand that the value of a state owned bank and field is evidently so and i would say the value is that we now know that banks actually create our money supply and most people think up by the government but it's not the bank of england acknowledged this in two thousand and fourteen in their quarterly report they said contrary to popular belief banks are not merely intermediaries taking in money and lending it out again they actually create money when they make loans so they just write it into your account and that in fact the bank of england ninety seven percent of the u k money supply is created in that way and in the u s it's about ninety five percent of the money supply so virtually all of our money all the accounting all the digital money and everything that papered paper bills and coins is created by beings so if we want to actually spanned the credit available in our community we need to have we need to control the banks and we need to own the banks so we can direct credit where it needs to go and we need to keep it in the community and we need to spend it when the profits come back to the bank they have to be spent again into the community because that's the nature of a banking system or a money system that it's based on debt in other words if the money is all debt created by a bank it has to come back and more has to come back than was even put out there and the only way that that's even possible is that when you pay this debt when you pay your monthly payment on your lo that money has to come back into the communities community somehow so it's available to pay the whole balance of principal plus interest which could be twice the value of the loan by that or the value of their principal by the time the things paid off or to kill a home loans or infrastructure or any of these long term loans so that is why that that's what a public bank does that the money goes back into the pot and that's back into th as opposed to what we have to do now and i think this is what governor murphy recognizes that we're spending billions of dollars in new jersey last year spent three billion dollars in interest which is money paid to to buy bonds for bonds and for borrowing from the banks and so forth and all of that money is leaving the state or at least leaving the control of the people in the state who want to do things with it so this bank becomes a whole new tool for us to finance our needs and we can do it so much more effectively and more more efficiently and i think maybe it's on that level that he knows that that because money is the lifeblood of the economy that when we can generate credit we can keep things moving and of course the returns are not just the kind of returns that the the larger commercial banks take which is basically four to maximize the the profits the returns that we would we're looking to get with this bank would be in the form of public  equities public growth of the of our infrastructure and improvement of our schools and servicing and supporting new industries small businesses to enable lower lending more cost effective lending for students those are all targets that the murphy administration wants to wants to approach and i was just looking we're looking at this bill to earlier and i just wanted to say that at the start of this of this bill it says the legislature finds and declares that access to capital is vitally important for health security wellbeing of all individuals and businesses they're the economic drivers that help new jersey's congress run smoothly but the lack of accessible capital and that's really what you what you find at the markets constrict and they get more expensive and consequently we don't have enough money to make these improvements but when we have a public bank there's a new access so we're not competing with the big banks in that regard on the layers of infrastructure that are are not funded for example in massachusetts where there's another bill there's a desire a need to fund infrastructure that they can't get from the markets anymore are limitations on what cities and counties and states can borrow from the public from the commercial arms so the public bank provides an additional source there and more cost effectively and with the yeah yeah and it's a very important point because the community banks are one of the benefactor beneficiaries of having a public bank but we've seen at least in north dakota the only state that has a public bank in the us anyway community banks there thrive like nowhere else because they have a partner with support with the public bank in cherry risk and expanding the lending capability but really most importantly and i think this also might be in the administration's thinking is that we need to reinforce the local economies of new jersey by supporting smaller business as much as small business start ups but by keeping our capital here and keeping the market business of the local community banks in new jersey as opposed to having doing business with the global banks and sending all of that money out and that's really i think a very cool thing about to decode a story even though people say well new jersey's not or north dakota yes thankfully in some regards the but but it is but banking works in both places pretty much the same way and the insulation the safety the stability they found is world wide that public banks tend to solidify and stabilize local economies because that money does not leave town and the community banking interests which have been diminishing in market scale over the recent years are now are in north dakota are you know control over eighty percent of the market that's about one hundred eighty degrees from how it is in forty nine other states and another part of this survey that we've mentioned this before but it's worth repeating is that in two thousand and eight  the collapse of the global economy with which anybody was doing business with the big banks like the forty nine other states went into the red north dakota was fine because the community bankers will say we're still there able to partner and lend into the community so it's an exciting new day and i think this this bill is undoubtedly the first you know it's just it's just out of the out of the gun so to speak says you know and if they get it to work  every we expect that it would be a domino effect because there are all these legislators waiting to do it or bills that have been filed or people that want to file bills they're just waiting to see how this is going to work out i'm from california and we have several cities that are that have resolutions two former city own bank and would add to the three leading candidates for governor support a publicly owned bank i don't the third my two i don't know but two of them have come out formally saying that they support this idea we have and various models that are possible models for a bank one possibility would be where you actually take individual deposit that the goal here really is to service the cannabis money which is a big issue in california right now because they just legalized cannabis for everyone not just medical marijuana so then the question is what do you do with these bags of said yeah there we heard one banker complain they come in here with these bags are cash it smells like you know but that the treasurer is running for president or sorry for governor john chiang and he's interested in a state owned bank to deal with the cannabis money because that's his problem right now is the treasure is what do you do with that these taxes they're expecting a billion dollars in taxes and it all comes in in dollar bills that you have to count think the governor wants to legalize marijuana and certainly expand access but again a revenue stream that can come out of having a bank potentially we realize that right now there are some restrictions on that that are likely to change but it will but regardless of what happens with the federal law the opportunity to have a public bank that could incentivize put it to the deposits into the public bank will again build new jersey's financial capabilities by bringing in that money and keeping it in the state of it instead of giving it over to the global banks which is you know which is the big the big threat there yeah we were just comparing the massachusetts  new jersey battling wind distinction is in the massachusetts bay they specifically say that they won't take individual deposits that i thought public money but it doesn't say that in the massachusetts bill i may be i mean sorry they need to sit back and maybe because he's thinking about the candidates the line in success with this obviously it's one thing to introduce a bill to the legislature and you've got a couple of committed senators and several committed representatives at this point we also know that the new treasure who was going to community development in mercer county is is attuned to this the new director of banking career a day i believe is also talk to her enthusiasm support this initiative in new jersey could well become really the national leader in this what's it going to take to get this over through the legislature and how do you read the prospects there because this  you can anticipate pushback but you get pushed back a lot we've had a number of bills and we really have a pretty good idea of what kind of arguments will come up but i hopefully we can maybe we can help with some of these arguments because we we know it's what they're going to say and we know we know how we would respond when probably we have is that the states will typically commission i feasibility study and then they'll want again they're an independent group to do the study they don't want the interested parties were doing i mean we're on the interesting because we think it's a good idea it's not like we're making any money off this we just think it's a good idea because we understand right the idea but they don't necessarily want us on their committees so they appoint bankers who actually have an interest in not seeing these bills pass and  whatever economists etc that that type of specialist and because they don't have a grounding in why this is a good idea they haven't really studied the bank and i think kodak or the whole model publicly on banks they tend to find reasons that that we actually would have good arguments against except that we're not in they're allowed to make the arguments so what we're hoping to do with for our next wave of bills is to be able to approach legislators ahead of time and that might benefit or the agency is that that could benefit but also the people the various public stakeholders like education for example the affordable housing interests and environmental interests to be able to  stimulate new industries here in new jersey i know that the governor has a strong commitment to renewable energy to moving new jersey into the forefront of some technology growth being able to afford some infrastructure  that you know we're going to set in in sore need of funding for that the whole host of needs there so but the citizens i think are going to have to show up around this and they can't do it of in a vacuum yeah that's another thing we need a constituency that that's pushing these legislators that their whole good idea make me do it thing like resurrect that you know good idea make me do it that's another thing we're working on is building these constituencies that would support this idea and there are many as you point out there are many interesting groups groups that would be served by a publicly owned bank but they may not know it yet right that we want to educate them and that's one thing yeah that we're working and yeah and to that point by the way i'd like to just point out that there is an organization in new jersey called banking on new jersey which is one of the sponsors of this program a can check out what is being discussed and also access and participate which i think would be a really appropriate thing for your interest now by going to banking on new jersey dot o r g and you'll find out about what is going on specifically and in new jersey what about the notion that the we would be this bank would be putting government money at risk or that we would be at some sort of risk and that  but we're not talking about handing your money over to politicians to gamble with we're talking about putting your money in a bank which has been chartered which has complied with all the regulations for for a bank so it's the same as putting your money in in a wall street bank which it's only the wall street banks that even want public deposit these days because they b m they have to collateralize these deposits and that i don't know what the percentage is here but in california i think it's one hundred ten percent so they have to put up so much collateral to keep these deposits that they can't really use the deposit it's only there they're wall street banks that are set up to take these deposits and the reason they can do it is they make their money back in fees so they're charging huge fees to states and municipalities that are largely hidden so we've seen different people have done studies where they really have to dig to find out  you remember some of the figures that with well under me and the various fees and penalties i know that here in the delaware valley the city of philadelphia spent about five hundred million dollars in just in fees  d swap penalties for the school city and for the city itself and there were other commissions that had gone into the global financial market to to speculate and or to secure in some cases like these derivatives you swaps were to secure some of their money just in the case something happens in this in this corner of this house of cards which is the fed is the finance world of the global capital so yeah so there are lots of lots of different ways in which these expenses are relationship  dependence on these private capital arms have not been serving us so you're putting your deposits into a bank which is a separate entity from the government and it it's capitalized as all happen in two thousand and eight and now that thing is the government won't even bail them out they will bail in our deposits before they will bail out the big banks that's under died frank and we're seeing that in europe it's actually happening and hasn't worked out too well but it's actually happening yeah yeah so it's less in other words and your money is actually less safe in a wall street bank than in a state owned bank that has the same protections but doesn't have the same risk because they're not doing the same line of gambling yeah and of course the returns i mentioned before the different types of denominators of return looking not just for big paper dollars but looking for the sort of investment where if you put a dollar into infrastructure you're creating a buck and a half worth of value the multipliers but investing locally helps to build the real fabric of the local economy and i think too that governor murphy has has a real clear understanding that that's that's what we want to do here in new jersey is kind of bring our money home and start to really put it to to into resources and things that we can really do something with well around that in some of the places that are was formed by the nonpartisan league which with a name that because it was neither it was a partisan it was neither left nor right it wasn't it wasn't a democrat or republican or socialist thing it ways to serve the people of the state so it was great for everyone in the state and yeah and in that kind of puts us we're running a little bit low on time but i want to just say that that puts us into a into an a new awareness that people are seeing is that we're pretty much on our own in a lot of respects will subside the institutions that are able to support our economy the private interests of capital have have ruled the roost and they rule politics and public policy by and large all over the world so when you have your own bank you have your own financial engine your appeal to determine how things are going to be secured and what's going to be prioritized and having having a bank will be a breakthrough for for new jersey and i think hope of course will that will set the stage for a lot of these other dominoes to states and cities and counties to all jump in so we'll see what happens with that yeah i know that you're here i know you're doing some international travel but you're the public banking system half of that commercial banking in germany is done through these forecasts and banks which are not actually owned by the government they're nonprofit so they're not owned by anybody which is a good thing because so that so they're basing it on that model they don't really have a local bank i mean they can't really do the bank and i kind of my so that would actually work better for them and then in wales they have a strong public banking movement which i am now and then in the u k they also have i mean they don't actually have bills signed as far as i know but in all three of those places they have strong movements that have a plan so new jersey is part of a global movement toward public control of over resources and i thank you again for being here with us today on the public bank solution and of course we'll all be watching this very closely and hopefully you'll come back ok so we have we have a kind of a new day here in new jersey and we certainly invite your participation i want to give you the name of that website again that you that we'd like you to visit and check out this is a really a burgeoning citizens move citizens based movement to support our elected governor governor and elected representatives in in making this bank reflect the interest in the priorities of the people to securing its integrity its transparency accountability and its potency and we want to make sure this bank is designed  and to to achieve what we really could possibly do if we had the resources so thank you good for joining us come to public who have banking on new jersey dot au argy and you'll find out more