State-owned banks is the idea lawmakers love to kill

Feb 28, 2017, 5:01 AM | Updated: 8:53 am
state-owned banks...
Sen. Bob Hasegawa (center) continues to fight for state-owned banks. (AP)

In Sen. Bob Hasegawa’s personal Groundhog Day movie, the endlessly repeating event goes something like this:

The Seattle Democrat introduces a populist bill to establish a state-run bank similar to the one in North Dakota. He gets a phalanx of Democratic lawmakers to sign on. A finance committee discusses the bill. Supporters show up in droves and praise the North Dakota model as profit-making, Wall-Street-avoiding, and taxpayer-friendly. Little public opposition is heard.

Then the bill dies.

“It is like Groundhog Day,” Hasegawa said laughing. “Every iteration, I’m learning more and more.”

And once again in 2017, the state-bank idea has died in Washington for the fifth session in a row. This year it was in the form of SB 5464 which remains mortally stalled in the finance committee.

The bill would have established a state-run bank (called a trust) for the $40 billion in annual taxpayer money. The bank also would open to additional deposits of private funds. Its backers say rather than pay a major bank for big project financing – Washington pays $2 in debt service for every $1 it borrows through bonds — the state could finance projects through its own trust, issue its own bonds and earn interest itself in the process.

While the idea hasn’t enjoyed much fidelity in Olympia, it has become an object of desire at the populist, grass-roots level among both liberals and conservatives. Activists wonder why not carve out the same financial industry that torpedoed the economy in 2008-9? Why not divest from banks with unpopular investment strategies?

“Is it safer than Wall Street?” Hasegawa asked the committee. “I would say yes.”

More than a dozen people testified in favor of the bill. The sole public opposition in the finance committee hearing came from Denny Eliason, a lobbyist for the Washington Bankers’ Association. In remarks that lasted a mere 85 seconds, Eliason wondered if state-sponsored financial institutions should be created to compete against private banks.

“If the (state-owned bank) were allowed to compete with the private sector, it would do so with significant competitive advantages and on an un-level playing field,” he said in a February hearing in Olympia. “We would respectively submit this counter to public policy.”

Eliason’s firm, Alliances Northwest, represents the banking industry and was one of the biggest spending lobbying organizations in Olympia in 2016, 2015, 2014 and 2013, state records show.

SB 5464 never left the committee.

Currently, there is only one state-owned bank in the U.S. Established in 1919, the Bank of North Dakota, was, in part, charged with protecting farmland again bank foreclosure in the Great Depression. Today, the state not only uses the taxpayer-funded bank for infrastructure projects and loans to farmers and students, it has earned a profit for the state for the past dozen years.

But even though it appears to be working in North Dakota, some experts remain dubious about the idea. Economist and retired University of Washington professor Lewis Mandell, said he’s always skeptical about claims that a state can perform private industry functions — such as finance — better than private industry.

First, he said, state banks might be subject to shifting political pressure. But more importantly, he added, it creates a market of one for taxpayer money. Under the current system, the state takes bids for the best deals on its banking.

“In a competitive environment, we would have to ask ourselves, ‘Why do we wish to do this?’ “Mandell wondered. He said he suspects the underlying assumption here is that banks — and by extension Wall Street — are all out to cheat the state. “Are there no honest banks?” he asked. “If the answers to those questions are yes (then) I could certainly justify having a state bank.”

But even if it makes sense economically – it has in North Dakota but it remains untested elsewhere — politics that surround it are another matter.

Since 2010, more than 17 states have pushed bills to set up similar state-owned banks. All have failed. In Washington, legislation to establish a state-owned bank has never made it to the floor for a vote. The banking industry isn’t the only opposition; Municipal bond brokers hate it as well, given the commissions from $4 trillion national market for municipal and state bonds.

Senate majority leader Mark Schoesler (R-Spokane) predicted that the legislation will die every time it gets introduced. Hasegawa’s own party is supportive but mysteriously distant when the issue comes up, Schoesler points out, adding that Democratic House Speaker Frank Chopp has signed on as a co-sponsor in the past, but in fact has done very little to move the idea forward.

“Even a strongly held Democrat House would not pass a state bank,” he said. “If the House doesn’t do it with strong Democrat majorities, I doubt that the future is very bright.”

Still, Hasegawa isn’t giving up. He has plans for a Seattle Town Hall to promote the issue. Seattle City Councilman Mike O’Brien recently received an ovation in a council hearing when he said a state bank would be a perfect alternative to Wells Fargo for city money. The new state treasurer, Duane Davidson, has not opposed the idea – yet.

“Every year I try to narrow the bill to make it more palatable,” Hasegawa offered, “for some of the legislators who are, um, skeptical about the concept. But it doesn’t really matter how narrow it gets. They are not going to support it.”

But maybe, Hasegawa said, they don’t have to. He’s heard talk of a statewide ballot initiative that would bypass the legislature. And backers of a state bank have said that cannabis industry is a possible proponent – and financial backer — given its critical need for non-federally linked banking and financing.

North Dakota has been successful with its bank through the recent national mortgage crisis and oil industry booms and busts, Hasegawa noted.

“This is one of those issues where we don’t even have to raise taxes to raise revenue,” he said. “We can start making a profit with our own money. The Bank of North Dakota has just posted its 12th consecutive year of record profits. It’s a solid investment of the people in themselves.

“We absolutely should do this. I’m not quitting.”

Local News

nick rolovich...
Frank Sumrall

Former WSU coach Rolovich moves forward with lawsuit against Washington state for wrongful termination

Rolovich is currently seeking $25 million on the grounds he was terminated as a result of religious discrimination by the university.
8 hours ago
Nicole Jennings

Wildfires in Central WA looking better, but thunderstorm possibility on way

Progress is being made on wildfires burning in Central Washington. But officials are worried that thunderstorms on the horizon could start new fires.
8 hours ago
gas-powered leaf blower...
Frank Sumrall

Gas-powered leaf blowers facing ban in Seattle, pending council decision

Seattle is also weighing incentives for people and businesses to switch to electric leaf-blowers instead, such as a rebate program.
1 day ago
ezells chicken harassment...
Logan Gilbert

Worker sues Ezell’s Famous Chicken over sexual harassment claims

A worker has filed a lawsuit against Ezell's Famous Chicken for sexual harassment, and she claims that they company didn't do enough to stop the harassment.
1 day ago
MyNorthwest Staff

Joe Kent surpasses Jaime Herrera Beutler in WA 3rd Congressional District’s tightly contested race

A Trump-backed candidate for Congress, Joe Kent, has overtaken the incumbent in Washington's Third Congressional District.
1 day ago
(Photo by Nicolas Economou/NurPhoto via Getty Images)...
KIRO Newsradio Newsdesk

KIRO Newsradio Headlines: Sexual assault prevention now a part of sex-ed, Boeing’s Dreamliner returns

KIRO Newsradio Headlines brings you a selection of quick stories to catch up on your news in the morning of Aug. 8
1 day ago

Sponsored Articles

Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
Swedish Cyberknife 900x506...

June is Men’s Health Month: Here’s Why It’s Important To Speak About Your Health

According to the Centers for Disease Control and Prevention, men in the United States, on average, die five years earlier than women.

Anacortes – A Must Visit Summertime Destination

While Anacortes is certainly on the way to the San Juan Islands (SJI), it is not just a destination to get to the ferry… Anacortes is a destination in and of itself!

Ready for your 2022 Alaskan Adventure with Celebrity Cruises?

Celebrity Cruises SPONSORED — A round-trip Alaska cruise from Seattle is an amazing treat for you and a loved one. Not only are you able to see and explore some of the most incredible and visually appealing natural sights on the planet, but you’re also able to relax and re-energize while aboard a luxury cruise […]

Compassion International Is Determined to ‘Fill’ a Unique Type of Football ‘Stadium’

Compassion International SPONSORED — During this fall’s football season—and as the pandemic continues to impact the entire globe—one organization has been urging caring individuals to help it “fill” a unique type of “stadium” in order to make a lasting difference in the lives of many. Compassion International’s distinctive Fill the Stadium (FtS, fillthestadium.com) initiative provides […]

What are the Strongest, Greenest, Best Windows?

Lake Washington Windows & Doors SPONSORED — Fiberglass windows are an excellent choice for window replacement due to their fundamental strength and durability. There is no other type of window that lasts as long as fiberglass; so why go with anything else? Fiberglass windows are 8x stronger than vinyl, lower maintenance than wood, more thermally […]
State-owned banks is the idea lawmakers love to kill