I investigated a little more the idea of state-run banks and apparently, I'm not the only one interested in the idea. In fact, North Dakota beat me to it by about 90 years. From The Cap Times:
The nation’s only state-owned bank avoided subprime lending and the derivatives markets during the recent real estate bubble and now has $4 billion under management. In the words of bank President Eric Hardmeyer, it continues to “plow those deposits back into the state of North Dakota in the form of loans. We invest back into the state in economic development type of activities.” What that means, according to Ellen Brown, author of the book “Web of Debt,” is that North Dakota has avoided the credit freeze “by creating its own credit (and) leading the nation in establishing state economic sovereignty.”
That sounds good to Massachusetts Senate President Therese Murray, who wants her state to look into creating its own bank. Washington House Finance Committee Vice Chair Bob Hasegawa, D-Seattle, has formally proposed a State Bank of Washington.
The movement to create state-run banks is part of a broader push to put public money to work for the people. In Los Angeles, the City Council voted unanimously on March 5 to ensure that taxpayer money is invested only in banks that have established track records of helping families stay in their homes, lending to small businesses that create jobs, and eschewing toxic interest-rate “swaps” that saddle communities with excessive fees and interest rates.
Urging these initiatives on is the Service Employees International Union, which is waging a national campaign to stop investing in unaccountable banks. “It’s time for Wall Street banks to stop focusing on their profits and start doing their part to help our cities and families recover,” says SEIU Secretary-Treasurer Anna Burger.
The prospect of what might be done with all the money that has flowed from the federal Treasury to private banks has some players talking of taking the North Dakota model national. A year ago, Stiglitz suggested, “If we had used the $700 billion to create a new financial institution, allowed it to lever 10-to-1, which is very modest compared to the 30-to-1 that we were doing — 10-to-1 would have generated $7 trillion of new lending capacity, far in excess of what our country needs. So the issue here is not about lending. It’s really about saving the bankers. And what we confused was saving the banks versus saving the bankers and their shareholders.”
Yet as Washington struggles with the task of imposing basic regulation on big banks, the action will be in the states. How likely is it? Hardmeyer used to doubt that the North Dakota model would ever be adopted elsewhere. Now, he says, “When I look around the country, it’s not quite as far a leap as I once thought it was.”