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June 20, 2013
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 Public-Sector Banks: From Black Sheep to Global LeadersPosted on Mar 8, 2012
By Ellen Brown, Truthout This article originally appeared at Truthout.
Public-sector banking is a concept that is relatively unknown in the United States. Only one state—North Dakota—owns its own bank. North Dakota is also the only state to escape the credit crisis of 2008, and has sported a budget surplus every year since, but skeptics write this off to coincidence or other factors. The common perception is that government bureaucrats are bad businesspeople. To determine whether government-owned banks are assets or liabilities, then, we need to look farther afield. When we remove our myopic US blinders, it turns out that, globally, not only are publicly owned banks quite common, but countries with strong public banking sectors generally have strong, stable economies. According to an Inter-American Development Bank paper presented in 2005, the percentage of state ownership in the banking industry globally by the mid-nineties was over 40 percent. The BRIC countries—Brazil, Russia, India and China—contain nearly 3 billion of the world’s 7 billion people, or 40 percent of the global population. The BRICs all make heavy use of public-sector banks, which compose about 75 percent of the banks in India, 69 percent or more in China, 45 percent in Brazil and 60 percent in Russia. The BRICs have been the main locus of world economic growth in the last decade. China Daily reports, “Between 2000 and 2010, BRIC’s GDP grew by an incredible 92.7 percent, compared to a global GDP growth of just 32 percent, with industrialized economies having a very modest 15.5 percent.” Advertisement
A May 2010 article in The Economist noted that the strong and stable publicly owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the rest of the world in the last few years. According to Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil:
Surprising Findings In a 2010 research paper summarized on VoxEU.org, economist Svetlana Andrianova and her colleagues wrote that the post-2008 nationalization of a number of very large banks, including The Royal Bank of Scotland, “offers an opportune moment to reduce the political power of bankers and to carry out much needed financial reforms.” But, wrote Andrianova, “there are concerns that governments may be unable to run nationalised banks efficiently.” Not to worry, say the authors:
Expanding on this theme in their research paper, the authors write:
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By diamond, May 11, 2012 at 3:30 pm Link to this comment
Iceland had a model and prosperous economy, low unemployment and a high standard of living, but in 2001 they de-regulated their banks. Eventually the bankers destroyed Iceland’s economy and then fled to London with their ill-gotten gains. In spite of an Interpol warrant out for their arrest they are protected by the British government. The people of Iceland threw out their government, refused the IMF bailout after holding a referendum in which 93% of voters voted not to accept the bailout and set about fixing the mess. Presumably they have now nationalized the banks again and are putting the broken furniture out for rubbish collection and getting their house in order without any ‘help’ from the IMF.
Egypt’s empire lasted 3,000 years - they had no banks and no credit.
Report thisBy moonraven, March 11, 2012 at 1:16 pm Link to this comment
I suggest you wait sitting down.
I also suggest that it could be worth your while to put one or more of my other suggestions to the test.
Nothing you or anyone else on this site has suggested has accomplished jack shit.
Report thisBy frecklefever, March 11, 2012 at 1:03 pm Link to this comment
MOONER…LIFE IS SHIT…OVERTHROW THE FEDERAL GOVERNMENT…BY
Report thisFLOODING WASHINGTON WITH A MILLION CARS…TAKE A SECOND
CONSIDERATION OF LENIN…THESE ARE A FEW OF YOUR SPOT ONS…
A GIANT TRAFFIC JAM IN WASHINGTON WOULD HAVE RESULTED IN THE
DRIVERS TRYING TO KILL EACH OTHER OVER WATER FOOD AND BREEDING
RIGHTS…YOU EVEN CHIDED THE OTHER POSTERS FOR NOT BEING SMART
ENOUGH TO COME WITH THAT BRILIANT IDEA..AND COUNTRIES THAT LIVED
UNDER LENINS DREAM…AT THE FIRST OPPORTUNITY ABANDONED IT…BUT
YOU ARE CORRECT…YOUR POSTS AWAYS DO HAVE SPOTS ON THEM…I WILL
AWAIT YOUR OLD STANDBY…INSULT…
By moonraven, March 11, 2012 at 11:15 am Link to this comment
My postings are ALWAYS spot on, freckle.
Sorry if it makes you pimps for patriotism mad.
I couldn’t possibly care less.
Report thisBy moonraven, March 11, 2012 at 11:15 am Link to this comment
My postings are ALWAYS spot on, freckle.
Sorry if it makes you primps for patriotism mad.
I couldn’t possibly care less.
Report thisBy Fat Freddy, March 11, 2012 at 8:52 am Link to this comment
Ellen Brown? She’s a neo-Greenbacker.
http://www.garynorth.com/public/department141.cfm
Report thisBy Laurence Tribe, March 10, 2012 at 4:42 pm Link to this comment
(Unregistered commenter)
Congress shall have the Power: To coin Money, Regulate the value Thereof and of Foreign Coin and fix the Standard of Weights and Measures. Article I,Section 8, Clause 5, Constitution of the United States.The Federal Reserve Act of 1913 was not a Constitutional Amendment, but it granted to a private corporation the power and authority to control the value of every dollar in your wallet/purse.At least some are aware that the Fed’s quantitative easements (QE’s) I and II inflated (les-sened) the value of every dollar in circulation, which means higher prices, a huge rise in the cost of living to the poor. A N.Y. judge sued for a pay increase based on the devaluation of her paycheck:the dollar was worth 1/265th of an ounce of gold at hire but now worth 1/1,300th ounce of gold, a big loss in pay - and won. Bastiat:It is impossible to introduce into society a greater change and greater evil than this: the conver-sion of the law into and instrument of plunder.
Report thisBy Fullblad, March 9, 2012 at 4:59 pm Link to this comment
With proper oversight I don’y see why publicly owned banks would not be an asset to any governing body.Interest rates would nominally be low and any profits would accrue to the government and taxpayer. This has obviously worked to some degree for N.D. over the years. Private banks have proved economically unstable with booms and very intensive busts adding social irresponsibility to their failings. An idea who’s time has come and probably should have arrived a lot earlier as a counter to the private banks and their societal destructiveness.
And yes the Federal Reserve needs to be legislated from existence and it’s responsibilities encorporated under public scrutiny with the treasury board. Time for our Federal Government to retake the power to create money and control credit for the good of the people and the economy as a whole.
“Until the control of the issue of money and credit
Report thisis restored to government and recognized as it’s
most conspicuous and sacred responsibility,
all talk os sovereignity of Parliament and
democracy is idle and futile…Once a nation parts
with control of it’s credit, it matters not who
makes the laws..Usury once in control will wreck
any nation.” MacKenzie King-Canadian Prime Minister
WWII era
By frecklefever, March 9, 2012 at 1:35 pm Link to this comment
MOONRAVING…READ ELLEN BROWNS…THE WEB OF DEBT..THEN YOUR
Report thisSPOUTING WILL EVEN SEEM RIDICULOUS TO YOUR ON PUFFED UP
INTELLIGENCE…FOR SOMEONE CLAIMING TO HAVE A PHD…YOUR POSTINGS
ARE CHILDISHLY INSULTING…
By Dr. Roger Kotila, March 9, 2012 at 1:20 pm Link to this comment
(Unregistered commenter)
Ellen Brown’s leadership toward publicly owned banking is helping to open doors which have been slowly closing due to privateering—privatization of publicly owned assets and services which should really remain public utilties. Ellen has yet to discuss the need for regulation and control of international finance and banking: That is where the Earth Federation Movement under the Earth Constitution becomes critically important to replace the obsolete UN global political system which is unable to cope with either Big Money, or multinational corporations.
Report thisBy moonraven, March 9, 2012 at 11:49 am Link to this comment
freckle: Which nuthouse are you posting from?
As if the world wasn’t insane enough, you have to kick up the amps of silliness here.
Report thisBy proletariatprincess, March 9, 2012 at 7:36 am Link to this comment
I believe it will be impossible for the USA to overcome the yoke of corporate capitalism until it overcomes the irrational fear of all social justice issues it labels socialism. The Cold War and the Red Scares that followed WW2 insured that at least 2 generations of USAmericans were innundated with misinformation and propaganda. The truth, we have seen, does not always set us free but has a liberal bias…..
Report thisBy frecklefever, March 9, 2012 at 6:30 am Link to this comment
THE FEDERAL RESERVE BANK IS PRIVATELY OWNED BY MAJOR U.S. AND
Report thisEUROPEAN BANKS…THE USE OF THE WORD FEDERAL…IS TO GIVE THE
IMPRESSION ITS A BRANCH OF THE GOVERNMENT…THATS WHY IT MUST BE
NATIONALIZED…
By Marian Griffith, March 9, 2012 at 1:22 am Link to this comment
(Unregistered commenter)
I do agree with the general principles outlined in this article.
Report thisHowever, there is one logic fallacy that needs to be adressed. There is no, or at least not necessarily a, causal relation between the huge growth of the BRICs countries and the fact they have a national bank.
Their growth may well be because they reached a point in their economic development where such growth became possible, same as happened to Europe and (slightly later) the USA at the mid 1800s when they transited from a primarily agrarian to an industrial economy. Because of the nature of industrial manufacture the productivity increases very rapidly indeed, allowing for a huge increase in income. The BRICS countries did not have to go through a century of robber barons and world wars to give their populace a part of that increasing wealth, thus allowing for a much greater economic base.
Having national banks however is helpful in that there is less skimming off the top by banks seeking to earn trillions.
By Jeff N., March 8, 2012 at 6:10 pm Link to this comment
Seems like a no-brainer to me.. can go ahead and add that to the list of things that will never happen in the U.S.
glenn, how about government as a public utility too! Wouldn’t THAT be something.
Report thisBy moonraven, March 8, 2012 at 4:52 pm Link to this comment
Venezuela has nationalized several banks because they ripped off the banking clients and failed to maintain acceptable levels of capitalization.
Report thisBy moonraven, March 8, 2012 at 4:49 pm Link to this comment
frecklefever: The Fed doesn’t need to be nationalized. It is an autonomous unit within the US federal government.
It was created by the US Congress in 1913, and that same body has oversight responsibiity in its regard.
I cannot believe how little some of you folks know about your government.
Report thisBy glenn, March 8, 2012 at 3:52 pm Link to this comment
(Unregistered commenter)
As a business owner, I am a big fan of capitalism and free markets, generally. But I see no reason why the currency, the lifeblood of capitalism, should have ever become an object of capitalism / profit. It should just be a public utility, enabling the flow of goods and services. It took me a while, but I can also see health care as a public utility. Then, the real economy is basically everything else. Thanks Ellen for all your work in this area. Looking forward to attending your PBI conference next month in Philly!
Report thisBy PatrickHenry, March 8, 2012 at 2:58 pm Link to this comment
Public sector banks are a great idea. Besides having the employees tied into a structured pay scale the thought of the bank officers giving each other huge bonuses with bail out funds while giving me .2% interest makes it sound even more worthwhile.
Banks should stick to banking and stop with the promos for air miles, free kitchen equipment, $100 sign up bonuses and return to providing interest on savings and loaning money on secured collateral.
Report thisBy Ernie Messerschmidt, March 8, 2012 at 1:57 pm Link to this comment
Yes, add the military to the list too, Felicity. There should be no private profit motive for mass murder and military aggression. That’s the third big monkey on our backs.
Report thisBy felicity, March 8, 2012 at 1:31 pm Link to this comment
I have long held that the health-care system should be
Report thisa public utility. After reading this article, I’m
adding banks to the list.
By Derryl Hermanutz, March 8, 2012 at 1:29 pm Link to this comment
(Unregistered commenter)
Great article, Ellen. Antipathy toward public banking is more of a vague ideological
prejudice than a rational objection to what is in fact a very sound approach to finance. It’s
kind of amazing that, after the virtually complete implosion of private banking in the US
and Europe, people still assume that private bankers are inherently ‘prudent’ and that our
nations’ finances should be left exclusively in their ‘capable’ hands. Certainly the bankers
have proven themselves “capable” of paying themselves enormous salaries and bonuses
while they were systematically bankrupting their banks, and so far they have “prudently”
collected trillions of government bailout money and avoided prison, but I don’t think
rewarding kleptocracy is really an optimal public policy approach to operating a national
banking system.
The real world track record, not theory but actual history, is that public banking is a more
Report thissound approach to finance than is private monopoly banking. At minimum public banking
should play a dominant role in public finance such as infrastructure development, using
the people’s own credit to develop their economies and preventing private bankers from
extracting fully one half of all ‘infrastructure’ spending as interest payments.
By Ernie Messerschmidt, March 8, 2012 at 1:10 pm Link to this comment
A very auspicious report—public banking appears to be the wave of future because it works! The BRIC countries that have embraced it are doing much better than we are in terms of economic growth. No wonder, with the monkey of parasitic private finance off their backs! China is predicting a very bad year for them, with only 7.5% growth, after pretty consistent 10% growth since the early 80s. India about the same. Russia is doing fine, predicted to be the richest country in Europe by 2030 by GS economnist O’Neill. Brazil is kicking A. This while the USA and the UK, staunchly committed to the virtues of capitalist banks reigning supreme, are imploding economically at equally phenomenal rates, despite media denial. While the quintessence of private Western banking is the derivative, which is nothing but irresponsible rip-off flam-flam according to derivatives expert Satyajit Das, the quintessence of public banking is the public service loan, responsibly improving social well-being and nurturing important industry without the necessity of making a quick buck.
Report thisThis public banking option deserves further close study. We ignore these facts to our detriment. Many thanks to Ellen Brown for bringing them to our attention!
By frecklefever, March 8, 2012 at 1:10 pm Link to this comment
THE FED NEEDS TO BE NATIONALIZED…THUS THE NATIONAL DEBT COULD
Report thisBE FORGIVEN WITH THE STROKE OF A PEN…AND A BALANCED BUDGET
WOULD BE INSTITUTED…WITHOUT POLITICAL GRANDSTANDING…