Marilyn Writes

Marilyn MacGruder Barnewall began her career as a journalist with the Wyoming Eagle in Cheyenne. During her 20 year banking career, she wrote extensively for The American Banker, Bank Marketing Magazine, Trust Marketing Magazine, and other major industry publications. The American Bankers Association (ABA) published Barnewall’s Profitable Private Banking: the Complete Blueprint, in 1987. She taught private banking at Colorado University for the ABA and trained private bankers in Singapore.

Sunday, August 28, 2011

STATE BANKS: Our Most Important Survival Tool

By Marilyn M. Barnewall
August 28, 2011

In a speech I give about state banks, I begin by showing 20 slides. Each displays an overhead view of a city. Each city is covered with little red dots. Each dot represents a home in foreclosure… a broken dream for an American brother and/or sister.

Some of those slides were used in a recent article I did about home foreclosures and why so many people who have never missed a house payment are being told to either cough up more collateral for their mortgage loan or the bank will “call the loan” (require payment in full).

In my speech, I use the slides to emphasize the incompetence of the Federal Reserve System and as evidence of why the monetary policies of this private corporation (owned by and for bankers) has failed and why responsibility for monetary policy needs to be returned to the Congress of the United States of America where the Constitution firmly placed it.

Do I trust the Congress more than I trust Ben Bernanke? No. But I do trust the Constitution and respect the structure it put in place for our monetary policies and currency… for our Republic.

My slide presentation begins with Boise, Idaho. One in every 21 homes is in foreclosure in Boise. Several slides of cities in Florida are shown – Tampa, Port St. Lucie, Deltona, Naples – and some California cities like Sacramento, Bakersfield, Riverside and others. All of these cities have more homes in foreclosure than Boise does. There are two slides from Senator Harry Reid’s home state of Nevada – Reno (1 out of every 16 homes is in foreclosure) and Las Vegas (one out of every 9 homes is in foreclosure). Nevadans just re-elected Reid to his Senate seat. As the old saying goes, we get the government we deserve.

The Constitution (Article I, Section 8) quite clearly gives the right to borrow money on the credit of the United States to the Congress, not to a private corporation called the Federal Reserve. It gives to the Congress, not a cartel of bankers called the Federal Reserve, the right to coin money, regulate its value and that of foreign coins, and fix the standard of weights and measures.

The Federal Reserve Act was passed by the Congress in 1913. Thus, it took that private corporation (which, in reality, is nothing more than a middleman… a wholesaler of taxpayer currency) – 98 years to cause all of those little red dots, each representing a foreclosed home in an American city. The Fed has, unlawfully in my view, been in charge of our monetary policy for almost 100 years.

I suggest that this is one hundred year birthday we should not celebrate. It is a celebration we should abort… and I mean that in the worst kind of way.

The United States is $15 trillion in debt. We are spending $1.50 for every $1 in revenue we take in. That is unsustainable. Since every dollar that is printed is 46 cents in debt, it should be called a half-dollar, not a dollar. Printing a dollar bill that is almost 50 percent in debt before the ink dries may provide a new definition of counterfeiting.

The Federal Reserve recently underwent a partial audit that shows it made $16 trillion zero interest secret loans to American and foreign banks and businesses. You’d recognize the usual Wall Street bankster names… e.g., Goldman Sachs, J.P. Morgan Chase, Citigroup, etc. The foreign banks included some of the biggest in the world… Deutsche Bank, Royal Bank of Scotland, and others. While the Fed was making these zero interest loans (for which U.S. taxpayers are on the line), 6.5 million American homeowners were suffering through delinquent and foreclosed mortgages mostly caused by lost jobs resulting from a rotten economy – created by Federal Reserve policies.

The disastrous policies that have caused these personal nightmares give the American people all the necessary reasons required to demand we take back control of our banking system. We must tell this wholesaler of debt and money that whatever services it provides (other than screwing the people) are no longer needed.

Give authority over our banking system to individual states so the people have more control over their financial futures. When state banks are properly run, both the people and the government prosper… which is the way it’s supposed to be.

If a state implements a new, state-owned financial system, do we need to pay attention and make sure the state doesn’t turn state banks into political toys… follow in the Fed’s footsteps? You’re darned right we do! Had citizens been doing their job this past 98 years, the Federal Reserve wouldn’t have become the biggest financial abuser in world history! We need to watch anything that’s political to keep it from servings its own interests rather than those of the people!

What is a state bank?

There is only one state-owned system of banking in the country and it’s in North Dakota. That state has owned and operated its own system of banking for the past 93 years. So, when I write and talk of the benefits we can expect from implementing a state bank, it’s based on the experience of North Dakota’s bank, not on guess work or estimates.

As of July 2011, the unemployment rate in North Dakota is 3.3 percent. With a population of between 650,000 and 700,000, the North Dakota State Bank has, during the past ten years, paid the State Treasurer more than $325 million from bank profits. These funds keep the tax burden low which, in turn, encourages… what? Business and job growth! That’s one reason unemployment is so low in North Dakota. Think what states with larger populations and very high rates of unemployment – like Michigan – could do!

In 2009-2010, the worst American economy in recent history, North Dakota’s government had it largest surplus in history. The payroll growth in the private sector (not the public sector) during that time frame was 5.2 percent. The payroll growth of Texas placed it second at 2.6 percent. Maybe Governor Dalrymple should be running for President instead of Rick Perry?

When I speak publicly on this subject, people suggest that the North Dakota economy is so successful because of the Bakken oil project where an oil formation lies underground in a shale rock across western North Dakota, northeast Montana, and into Canada’s Saskatchewan Province. The barrels per day went from 3,000 in 2005 to 225,000 in 2010.

There’s no doubt Bakken has enhanced the North Dakota economy, but it’s not what causes the positive economic results. There are almost as many people in Alaska as North Dakota – and Alaska pumps about twice as much oil – unemployment in Alaska is 7.7 percent. Montana and Wyoming extracted far more gas than North Dakota, but neither maintained a continuous budget surplus since our economic crisis began in 2008. North Dakota has.

States with a lot of minerals weren’t initially hurt as badly as other states when the economy turned south. But other states haven’t reduced taxes. North Dakota has. It reduced income and property taxes by $400 million. Thinking of all of those little red dots on my speech slides… North Dakota also has the lowest foreclosure rate and lowest credit card default in the nation.

North Dakota has had no bank failures during the banking crisis, either. It has only one thing not available in other mineral rich states: a state bank.

From 2007 to 2009, the Bank of North Dakota added to the state’s coffers almost as much money as oil and gas tax revenues did.

So, that’s what you can expect from a state bank. Why does having a state bank make such a huge difference? Because the state’s money and banking reserves are maintained within the state and those funds are invested in local communities. And, in addition to a state bank providing needed administrative functions, it serves as a correspondent bank for the independent banks on North Dakota street corners.

There are two or three questions I get asked when I speak publicly about this subject. The most frequently asked question is “Does having a state bank mean that the state runs the banks people do business with?” No. It doesn’t. That would be a socialist system – and state banks are anything but that! The state runs the state bank; individual investors run the commercial banks on Main Street… just like they do now.

A state bank is an administrator which charters the banks that do business in the state (and by doing so, largely controls credit quality). It acts as a correspondent bank for the banks it charters. A “correspondent bank” provides credit services to small, independent banks which places them in a more competitive position with large banks. When a small bank gets a loan request too large for it to make, such a loan is referred to a correspondent bank and becomes a “shared” loan. Without a state bank, independent banks must refer their loans to the big banks – which is one reason they got too big to jail.

I mentioned earlier that North Dakota keeps all state revenues in the state. In other states, a large percentage of those funds are sent to the Federal Reserve – which places them in money center banks in New York. State banks keep those funds in the state and use them to benefit the people.

Some economists estimate that this one difference can turn a state’s economy around within one year.

I started writing about the issue of state banks about two years ago. Since then, numerous states are legislatively investigating how to implement one: Washington, Oregon, California, Montana, Illinois, Florida, Hawaii, Virginia, Maryland and Massachusetts are among them.

Another question audiences ask is: If we own a state bank, will we need to create our own state currency? The answer is no. However, a state bank does provide a needed distribution system for a state currency should a state decide it needs to create one. Why would a state need to create its own currency? If the federal system fails, so too will America’s currency (and with it, the national banking system). To distribute any currency, an organized system of banking is required. There are many questions about state currencies, but that is another article.

The other question asked regards state sovereignty.

Several states have legislatively declared their right to be sovereign states. They include: Alabama, Nebraska, Rhode Island, Wyoming, Washington, Indiana, Kentucky, Georgia, Kansas, Missouri, Mississippi and Maryland.

Remember this about sovereignty. It is impossible to have a sovereign state without having control of your state’s monetary system. To achieve that, you need a state bank. As to the arguments about the legality of sovereignty declarations, I leave that to the lawyers. I’m a banker and what I know is this: If a state declares sovereignty without first having a state bank in place, there will be economic chaos. The bank comes first; sovereignty, second.

We face difficult times ahead. I believe state banks are a key that makes it possible for Americans to maintain every possible lawful alternative to solve the problems headed our way.

© 2011 Marilyn M. Barnewall - All Rights Reserved


Marilyn MacGruder Barnewall began her career in 1956 as a journalist with the Wyoming Eagle in Cheyenne. During her 20 years (plus) as a banker and bank consultant, she wrote extensively for The American Banker, Bank Marketing Magazine, Trust Marketing Magazine, was U.S. Consulting Editor for Private Banker International (London/Dublin), and other major banking industry publications. She has written seven non-fiction books about banking and taught private banking at Colorado University for the American Bankers Association. She has authored seven banking books, one dog book, and two works of fiction (about banking, of course). She has served on numerous Boards in her community.

Barnewall is the former editor of The National Peace Officer Magazine and as a journalist has written guest editorials for the Denver Post, Rocky Mountain News and Newsweek, among others. On the Internet, she has written for News With Views, World Net Daily, Canada Free Press, Christian Business Daily, Business Reform, and others. She has been quoted in Time, Forbes, Wall Street Journal and other national and international publications. She can be found in Who's Who in America, Who's Who of American Women, Who's Who in Finance and Business, and Who's Who in the World.

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