A recent extended article in Nation of Change by Rudy Avizius explains how eliminating the middle-man of Wall Street would allow money to remain in our communities. The article includes video of a discussion last year with PBI Chair Ellen Brown, former PBI Chair Walt McRee, and economist Michael Hudson.
“With the current banking system, we have witnessed the largest concentration of wealth in human history, while the vast majority of people have experienced stagnant wages, declining wealth, and recurring recessions. …
“Wouldn’t it be wiser for communities to be able to obtain local funding at reduced interest rates where any interest payments would remain in the community and get recycled? Any good businessman would tell you that it is sound business to eliminate any middleman in a business transaction. Wall Street is nothing more than a middleman between funding and community needs, and if the Wall Street middleman was eliminated, more money would remain in our communities."
“The Bank of ND does not compete with community banks, but rather partners with them. There is a correlation between this partnering and the fact that North Dakota has the largest number of community banks per capita of all states in the nation. Additionally, the Bank of ND has only one office and no branches, no tellers, and no ATMs that compete with community banks.
“This partnering with local community banks means that the Bank of ND does not lend directly to small local businesses, but relies instead on the local community banks to originate those loans. The public state bank can provide funding beyond the deposit base of a small community bank allowing the community bank to finance projects it could not have financed without the partnership. If a local bank had a $5 million limit, and a business wanted $10 million for a new showroom, the bank would have to say no to the loan, forcing the business to go to a Wells Fargo, Citi, JP Morgan Chase or other large Wall Street bank. This results in the loss of business for the community bank.
"With the public state bank, the community bank could partner on the loan, raising its loan ceiling, retain the money in the community, and provide the services needed.
“One very important issue that needs to be raised is that of the safety of the loans being made. It is important to be sure that bank loans are made to people and entities that are truly creditworthy. In North Dakota there is a double check on this process. Any loan that a community bank requests a partnership with would require approval by both the community bank and the state bank officers, since both would be providing the funds. This results in a lower default rate as two sets of eyes are examining and approving the loan.”