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Proposal for Maine State Bank Back on Legislative Agenda
12/10/2012   Reported By: Tom Porter

Two lawmakers are re-introducing a bill this session to establish a Maine state bank. Rep. Diane Russell, of Portland, and fellow Democrat Bobbi Beavers, of South Berwick, are gathering support for their proposal - which envisages, not so much a retail bank where you or I can open an account, but more of a mini-central bank where state dollars are invested, rather being invested in Wall Street. This, they say, would make more credit available to small businesses.

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Proposal for Maine State Bank Back on Legislative Listen
 Duration:
4:9

Two lawmakers are re-introducing a bill this session to establish a Maine state bank. Rep. Diane Russell, of Portland, and fellow Democrat Bobbi Beavers, of South Berwick, are gathering support for their proposal - which envisages, not so much a retail bank where you or I can open an account, but more of a mini-central bank where state dollars are invested, rather being invested in Wall Street. This, they say, would make more credit available to small businesses.

Ellen Brown, president of the Public Banking Institute, says Maine is among 20 states that have made efforts to set up a state bank. They're all inspired, she says, by the success of America's only state bank, which was set up in North Dakota more than 90 years ago.

Ellen Brown: "I think the main thing about a public bank is that the banks actually create credit, they create money in the form of credit, and that's a privilege that we've given away to Wall Street banks. Only Wall Street banks are really big enough to take state revenues. So if you bring that back to the state then you can - in North Dakota they have credit lines with municipal governments, with state agencies, so they can give low-cost credit to government itself, they can save - well there was one study that showed that 40 percent of public projects goes to interest, so if you own the bank, basically, you get to keep the interest, so you can cut the cost of public projects almost in half. So there are many benefits. In North Dakota they use it for disaster relief, and they don't have to wait for FEMA."

Tom Porter: "You would say it's easier credit for small businesses to access so they can stay afloat."

Ellen Brown: Right. Well in North Dakota in the model is the local bank deals with the customers so the Bank of North Dakota just comes in and partners with the local banks so it expands the potential portfolio of the local banks, it participates in the loan, adds capital, actually guarantees the loan in lieu of capital and provides liquidity."

Tom Porter: "There are some in the banking industry in Maine, they point out that Maine is not the same as North Dakota, which has huge resrves of natural resources to underwrite a state bank, and we don't have that here."

Ellen Brown: "Well, they set up their bank when they - I mean oil has only been something that's been big in North Dakota recently, and the bank has done very well for quite a long time. And 40 percent of banks globally are publicly-owned. These are largely in the 'BRIC' countries - Brazil, Russia, India, China - and those countries all escaped the credit crisis, as did North Dakota, it's the only state that really escaped the credit crisis. Other states like Alaska and Texas actually have more oil than Dakota and they're not doing so well. So there's something special about North Dakota, it's the way they use their resources, they can use their state bank to build infrastructure."

Ellen Brown is president of the Public Banking Institute. Critics of plans for a Maine State Bank have argued that Maine already has a strong banking industry, with nearly 30 banks headquartered here, holding $26 billion in assets - plenty of funds to provide liquidity for small businesses.

I put this point out to Diane Russsell.

"It's true we do have a lot of community banks. Interestingly enough, North Dakota is the number one state for community banks per capita, and that has a lot to do with the bank of North Dakota. The Small Business Coalition a couple of years ago did a survey of their membership - I think they had membership of 2,500 people or so, who are small business owners, and what they came back saying is that they do not have access to affordable capital in the way that community banks are saying they do."

Some in the mainstream banking community, however, remain opposed to the idea of a state bank. Chris Pinkham is president of Maine Bankers Association. He could not be reached for comment on this occasion, but speaking to MPBN last year on the issue, Pinkham said Maine's community banks have ample funds to lend and insufficient applicants.

And if small business owners, are having trouble accessing enough credit under the right terms, he says, they should consult their local small business development center and shop around for a better deal.



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