Maine Money Invested Out-of-State, Public Banking is Solution

North Dakota is the only state that stashes all of its cash into its state-owned bank. Maine stores its money in Japan, France, Canada, and other U S. states.  Maine state cash that is deposited in “too big to fail” mega-banks, which are Global Systemically Important Financial Institutions, risks loss, since bankruptcy agents could confiscate deposits to pay creditors under the Dodd-Frank law if a mega-bank failed. In a recent report, two-thirds of Maine Treasurers Cash Pool was invested in institutions without local public-deposit branches. This included two French banks, CA and BNPP, the 10th and 8th largest banks in the world. BNPP closed 3 hedge funds in 2007 prior to the 2008 financial collapse and paid a $140 Million fine and $8.8 B settlement for violating fund transfers laws in 2015. Maine's taxpayer's funds are also invested in a Japanese institution, TMCC; and in Wall Street banks that paid fines for crimes: JPMC was fined over $25 Billion for mortgage fraud and other malfeasance; Citigroup was fined for hundreds of millions of dollars; BAC paid fines and penalties of over $150 billion.

I don't gamble. But if I did I wouldn't bet more than a small fraction of my pocket cash, because I wouldn't lose more than I could afford. Derivatives, like wagers, are bets on future activities, like price or interest rate changes. An Office of Comptroller of Currency report shows how much U S banks invest in derivatives. The biggest U S banks on the OCC report have more derivative money wagered than their assets. Losses on future asset prices bets could exceed bank assets, causing repo-man, FDIC, to repossess the bank. Maine has deposits in the largest U S bank, JPMC, with assets over $2.3 trillion and derivatives over $70 trillion. Maine deposits are in BAC whose assets are over $2.1 trillion and over $40 trillion in derivatives. Federal bankruptcy laws gave derivatives counter-parties super-priority to receive losses before all other creditors, including depositors, such as our Maine Treasury, if banks collapse. JPMC, which has over 3000 global subsidiaries, has been fined over $25 Billion for mortgage fraud and other malfeasance. BAC which has over 1000 subsidiaries, paid fines and penalties of over $150 Billion. Maine also invests in FNMA and FHLMC, which failed during the 2008 financial collapse, put under conservatorship, and bailed out by taxpayers. FNMA and FHLMCpaid over $400 Million in fines and its former officers were fined for wrongdoing. If one bank failed, its thousands of subsidiaries around the world, and their customers, could disappear with it, causing another global crash which could affect everyone. Why is Maine taxpayer money being risked in hazardous outside institutions, which won't benefit our state's economy?

North Dakota found a solution, public banking, to declining incomes and Wall Street risk. Maine, 1.3 million, has almost twice North Dakota's 0.7 million population, yet North Dakota banks have over double Maine's banks' yearly earnings. In 2015 Maine community bank earnings were $164.5 million; North Dakota banks earned $352.8 million. North Dakota has lower foreclosure, bankruptcy, past due loan, and unemployment rates, smaller tax burden, lower negative equity, higher educational spending growth per capita, better credit ratings, and more stable property values than Maine. North Dakota per capita gross public state financing assets are 75% higher than Maine. North Dakota has 84 community banks while Maine has 28. North Dakota has been a red state, a Republican stronghold with Republican Governors and legislatures for years. Maine bankers and Maine Republicans were critics of Maine public bank legislature proposals and, paradoxically, one reason that they stalled.

Share this blog post with your friends!


get updates