Carl Person, who is seeking the Presidential Nomination of the Libertarian Party in 2012, has come out in favor of every State, City & Town in the United States to set up a North Dakota Type State Bank.
His full statement on the issue is as follows:
By saving the nation’s major banks from failing because these banks are viewed as “too big to fail”, Presidents Bush and Obama created even bigger banks, which can be considered as having greater protection under the “too big to fail” doctrine.
What we need in the U.S. (and perhaps the rest of the world), is competition for the commercial banking system, so that the banking activities can continue even if one or more of the largest banks is/are required to go through bankruptcy.
This can and should be done by encouraging every state, every major city, and many towns, villages and municipalities to create “North Dakota type state banks” for themselves, to be owned by the government (directly or indirectly) or in the case of city and local “state banks” by the local government or by local shareholders.
You may not remember but the federal statute (other than the 1913 Federal Reserve Act) that started this country on its banking decline was the elimination of laws which prohibited multi-state branch banking in the United States. States during the 1970’s and 1980’s passed statutes permitting the acquisition of local banks by out of-state banks or bank holding companies. Then, in the 1980’s, the Federal Bank Holding Company Act was enacted (called the “Douglas Amendment”) which permitted acquisition of local banks by out-of-state banks if state law governing the local bank permitted such acquisition. The Douglas Amendment was repealed in 1994 (effective 9/29/95) by the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, and acquisitions were permitted under federal law regardless of state law. The major banks then expanded with branches into every state and wiped out the local commercial banks.
With the nose of the camel already under the nation’s banking tent, the camel and its owners then spent enough money to encourage a money-hungry Congress in 1999 to rescind the Glass-Steagall Act of 1933, which thereafter allowed the camel to poke its nose into the more profitable (but risky business) of creating all sorts of esoteric investments, which has put the U.S. and world into its present financial crisis.
The North Dakota State Bank, for those of you who have not been paying attention, is owned by North Dakota and has the same banking privileges as any other commercial bank, which essentially is to create money out of thin air (at no interest cost) to lend to borrowers. North Dakota has disciplined itself to lend money at about 3% interest to local farmers, manufacturers, green-type companies and others under appropriate banking conditions, which has enabled North Dakota to be the only state of the 50 which doesn’t have an economic crisis.
North Dakota requires that all money paid to North Dakota be deposited in its state bank, which creates an amount that can be lent by the bank of almost 10 times the amount of average deposits in the bank.
Businesses can borrow money without having to pay usurious rates of interest, and small business is better able to expand and create jobs.
There is no reason that a “state bank” can’t be created at the city, county, town, village or municipality level, provided there is compliance with laws that may prohibit the activities if done directly, such as in New York State where the state and local governments are not allowed to lend money to anyone. In cases such as this, the bank should be set up to avoid any such laws, probably through a non-profit organization under state or local control.
These state banks should not be allowed to merge with out-of-state banks or to set up out-of-state branches (to stop at the outset any effort to have the state banks get involved in multi-state bank branching followed by bank mergers and “too big to fail” status).
The current complaint that businesses are not able to obtain bank loans would be addressed through the development of a state banking system. Usury would be eliminated. Small business would be enhanced and millions of new jobs would be created as a result. Also, there would be competition for the banks that are too big to fail.