One promising response to the economic meltdown has been a focus on severing ties to the Wall Street banks that caused the crisis. Several states have proposed publicly owned state banks, the consummate underpinning of a truly local economy. In Oregon, this has involved not just legislation but a broad-based grassroots campaign to ensure that the legislation is not hijacked by the financial lobby, which has made every effort to derail it.
Like almost all states, Oregon continues to face budget gaps measured in billions of dollars, as tax revenues shrink and demand for social services skyrockets. We are still experiencing an official unemployment rate of nearly 10 percent. Six community banks have failed, and a number of others remain on the FDIC watch list. Local businesses and family farmers are capitalizing themselves on their personal credit cards.
Whether Oregonians are rural or urban, red, blue, conservative, anarchist, liberal or libertarian, we all agree on one thing: we care a lot about our state and take pride in our independence and self-sufficiency. We very self-consciously eat local, shop local and—at least since the debacle on Wall Street—bank local.
In January 2009, at an “economic crisis town hall” meeting attended by more than 800 people, we began a conversation not only about the origins of this recession but also about how to distance ourselves from its fallout and strengthen our local economy. From that meeting came a campaign for a state bank.
The coalition we built, Oregonians for a State Bank, is anchored by the Working Families Party and includes activists and organizations representing small businesses, family farmers, rural and urban communities and labor unions. At forums across the state, we have explained that keeping Oregon’s public money here will increase the availability of credit to local businesses, farmers, homeowners and possibly even college students. A year ago, we hosted a video conference with the president of the Bank of North Dakota (the country’s only state-owned bank), several North Dakota community bankers and several Oregon bankers. We made very clear that we are not proposing a retail bank that would compete with local banks and credit unions; to the contrary, we are proposing a bankers’ bank that would partner with local financial institutions to shore up their lending capabilities through participation loans.
A major part of our effort was electoral. During the 2010 election season, the first in which cross-nominations were allowed, the Oregon Working Families Party asked all candidates who sought our nomination whether they would support a state bank. Some thirty-two candidates said they were open to the idea, often after extensive conversations explaining the proposal; twenty-five of those were elected, including the state treasurer and the three state legislators who have introduced state bank bills.
The legislation has morphed considerably, but with the full support of the treasurer, we now have a “virtual state bank” proposal that has a very good chance of passing in this session. This institution, known as the Finance and Credit Authority, will consolidate pre-existing state economic development and investment funds under a new authority to partner with community banks and credit unions to increase credit options for businesses and farms. It will not, however, serve as a depository for the state’s short-term funds, as the Bank of North Dakota does. The managing board will consist of the governor, the treasurer and a third appointee, and there will be an advisory council (made up of bankers, credit union officers, and representatives of small businesses and family farms) that can recommend changes in future legislative sessions.
While it is true that the establishment of a state bank, virtual or otherwise, is clearly an exercise in the FDR tradition of saving capitalism from itself, what it would save is small-c capitalism in the face of a frightening prospect of a big-C Corporate State. And it would give the people of Oregon a sense that they actually have some control over their economy, that their money can be put to work on their own behalf. That, in itself, would make the campaign worthwhile, and could be a critical first step in a much-needed political realignment in this country.
Read the next proposal in the “Reimagining Capitalism” series, “Reforming Limited Liability Law,” by Kent Greenfield.