Public Banksters - Part VIII

Gwendolyn Hallsmith has the public banking Sadz.

This past week Hallsmith, supposedly the executive director of the California based Public Banking Institute, posted at Rob Williams' hate blog a ludicrous claim that the Vermont secessionist allies at her Vermonters for a New Economy front group had scored a win in the Vermont Senate. You really can't blame her for trying to make lemonade from such a steaming pile of lemons.

First off, I should explain to recent readers of this blog that Rob's hate blog has long been host to some of the most extreme, hateful thinking centering around the Vermont secesher movement. Back when Rob was co-chairman of the Second Vermont Republic he had on his advisory board an assortment of hate group members from the white supremacist League of the South, the racist and anti-immigrant Lega Nord (Northern League of Italy), anti-Semites like Kirkpatrick Sale and Thomas DiLorenzo (who has written neo-Confederate claptrap for a Holocaust denial journal), along with other lowlifes. Rob's hate blog has included the contributions of anti-Semites like Dennis "Hit List" Morrisseau and the castration fixated misandrist Carol Moore, white supremacists like UVM's Robert S. Griffin and a League of the South Board of Directors member (and convicted felon), Franklin Sanders, as well as the anti-Semitic, racist co-founder and baas of the Second Vermont Republic, the still dead Thomas H. Naylor who, along with the Canadian racist and anti-Semite Sebastian Ernst Ronin, was a proponent of a white homeland in northern New England and the Canadian Maritime provinces, and a host of conspiracy theorists including Rob himself - 9/11 Truthers, contrail hoaxers, aliens trading technology with the US military for mineral assets on the darkside of the moon, to, well, you name the nuttiest conspiracy you can think of and it's got an adherent at Rob's hate blog.

Gwen Hallsmith's own particular delusion has to do with her imagining that she can claim a win in the effort to convince the Vermont Senate that her public banking proposal has merit. Here's what she said at the hate blog:

"... it starts to look like we’ll have a modest win on the public banking front as the 10% for Vermont theme struck by Senator Anthony Pollina will likely make it through the legislature, and 10% of the money the state has on deposit will be transferred to the Vermont Economic Development Authority. To win that, it is also likely that VEDA will not get a banking license, but it will still be a step in the direction we all want to go – reclaiming public, democratic control over one of the critical drivers of economic health – the monetary system itself."

Not so fast there, Gwen. That's just the kind of "we-didn't-lose" sort of spin that one expects to hear from a lobbyist, even the unregistered sort like Gwen and her secesher cohort Gary Flomenhoft. Fact is, Vermont has been doing just such a thing for more than a year before the secesher public bankster proposal made it to the legislature but then Gwen and Gary probably already knew that.

In her report the the Vermont Senate Committee on Government Operations of February 5, 2014 the Vermont State Treasurer, Beth Pearce, speaking directly to the 10% local investment plan outlined in the Hallsmith/Flomenhoft plan put forward in the Senate under the bill S. 204 by Senator Anthony Pollina, Pearce advised,

"I want to emphasize that I do support the local investment concept incorporated in S. 204. That said, I differ on significant portions of the proposed mechanics of achieving local investment through the creation of a state bank. The 10% of the state’s cash for local investment in Vermont is something I support..."

"Over the past year we have already made commitments that will get us to $17 million in local investments from our treasury funds (under Act 87). That’s roughly half way to the 10% objective. I am committed to getting us the rest of the way. But as fiduciary I want to address this in a way that is a win-win for Vermont. While I support the concept of 10%, will work to achieve it, and hope to even exceed it, there are portions of the bill that I believe need to be revised to make it a true win for Vermont. Without these changes, I believe there would be great risk—unnecessary risk—for Vermont taxpayers.

Addressing Hallsmith and Flomenhoft's larger plan to morph the Vermont Economic Development Authority into a public bank, Pearce added,

"What I do not recommend is expanding VEDA’s authority to accept deposits from municipalities or other entities, or to engage in banking operations..."

So, Gwen claims credit for that which the Treasurer has been doing for more than a year. Pret-ty chees-ey. And to suggest that the 10% local investment plan came about because,"(t)o win that, it is also likely that VEDA will not get a banking license" is nothing but a straight out lie. There was no quid pro quo and Hallsmith damn well knows that. She not just spinning here, she's bullshitting in a way that shows complete contempt for the ability of average Vermonters to know better.

As for Gwen's reference to Pollina's theme, here's what he's said that's being repeated by public banksters around the country,

"it 'doesn’t make any sense for us to be sending Vermont’s hard-earned tax dollars to some bank on Wall Street which couldn’t care less about Vermont or Vermonters when we could keep that money here in the state of Vermont where we would have control over it and therefore more of it would be invested here in the state.'”

Treasurer Pearce directly refutes Pollina's untruthful assertion by stating in her report to the Senate committee,

"The Treasurer recently sold just under $25M in bonds to Vermonters and approximately 80% of VMBB financings are sold to Vermont investors. Other instrumentalities have significant local investment. We hope to do even more with local investors. Further, when we sell bonds to investors outside of Vermont, capital actually surges into the state and then trickles back out as principal and interest are repaid. Replacing this outside capital with the state’s operating cash would actually represent a loss of state financing resources."

The truth here is that the Hallsmith/Flomenhoft/Pollina public banking proposal scored no "win" or change to existing state investments policy. The proposal died in committee and no action was taken on any part of Senate bill S. 204.

For anyone keeping track at this point, I'd predicted nearly two years ago on April 9, 2012 that Gary Flomenhoft's economic hokum would come to naught when brought again before the Vermont legislature. I'm making the same prediction today should he and Hallsmith take another stab at it with the legislature. And just to make it interesting, I'll predict that Hallsmith will be just as unsucessful in her new scheme to liberate Detroit from the clutches of government and capitalism.

Gwen Hallsmith, buh-bye.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

For the archive of the Free Vermont Framework listserv, click here.

Public Banksters. - Part VII

A Vermont State Public Bank - Too Great of an Idea to Fail?

According to the folks at the California based Public Banking Institute where Vermonters for a New Economy co-founder and public banking cheerleader Gwen Hallsmith now serves as its executive director (although the PBI makes no mention of such a role at its website), the notion of a public bank is "a no-brainer."

The public banksters frame the narrative in this way:

"(Is public banking) riskier than the current system? In fact, the opposite is true. The only thing that saved the private banking system from complete bankruptcy in late 2008 and early 2009 was a backroom deal in which the U.S. taxpayer bailed out the so-called “too big to fail” (TBTF) banks..."

This is just another one of the fact contorting misrepresentations that have come to define the factual assertions of the national and local public banking proponents. Let's just take a look at the public banking failure noted by Vermont Treasurer Beth Pearce that puts the lie to the public banksters claim that they are the sole source of banking purity on the scene:

"In 1807, the Delaware General Assembly passed an act to establish the “Farmers’ Bank of the State of Delaware,” and in 1837, the General Assembly authorized the state’s purchase of 40% of the common stock of Farmers’ Bank. The Farmer’s Bank became the state’s exclusive depository and took on various revenue collection and accounting functions. The state’s ownership was later increased to 49.8% giving it effective control. While the Framers’ Bank was in operation for many years, the bank, according to one study, was “permeated by cronyism, politics, lack of oversight, and crisis management.”i In 1976, the bank became saddled with bad loans. This put the state’s uncollateralized deposits at risk. It escaped failure only after the FDIC bailed it out using extraordinary measures that had been used but five times since 1950."

"The State of Delaware was also required to join in the bailout, tying up millions of dollars. The state’s purchase of a new class of preferred stock at Farmers’ Bank for $20 million pushed its ownership up to 83.8% in exchange for the FDIC purchase of non-performing debt.iii In the end, special legislation enacted by the General Assembly and signed by the Governor in 1978 permitted the expedited sale of the bank. Legislation authorizing the sale stated that “the sale of the state’s interest in the Bank will limit such financial jeopardy to the public.” iv It was finally sold to Girard Bank of Philadelphia in 1981, which was subsequently acquired by Mellon Bank and is now Citizens Bank as a result of the Citizens/Mellon asset purchase."

Sounds like a "backroom deal" to bail out a TGTF (Too Great to Fail) public bank to me, no? And that was less than 35 years ago! Is it at all surprising to find that when people are involved the potential for fiscal or political problems never seem to change or go away?

Treasurer Pearce exposed yet another lie from the unregistered lobbyists in their proposal that didn't escape her notice:

"A recent document from one public bank advocate (at a website created by longtime Vermont secessionist Jim Hogue) states that Vermont “sends roughly $80 million per year to out of state financial institutions in interest costs and administrative fees. This money stays out of state.” Treasurer’s Office debt payments to investors are in that approximate range, but in fact, many of those dollars go to Vermonters."

Treasurer Pearce then dropped this bombshell on one of the myths of the public banksters, specifically that the Bank of North Dakota is well run:

BND’s History Demonstrates it is Not Immune to Politics

"As discussed above, BND’s board of directors is the Industrial Commission, which is composed of, amongst others, the North Dakota governor, agriculture commissioner and attorney general. While I am impressed with its current management, BND struggled as it developed alongside changing political landscapes. In 1985 BND was criticized by an independent audit firm (then Touche Ross and Co.) for making loans against the advice of its top management and for inadequate loan documentation. The bank CEO at the time was quoted in news articles as saying that due to ''political reasons'' the bank got involved with ''some loans that we probably wished we wouldn't have.” According to reports, auditors also “criticized BND for not having any long-range plans or any measure of departmental performance.” In the mid-1990s there was significant discussion about questioned loans."

"Political or external pressures to reap success in certain investments could take precedence over a state bank’s long-term view and fiduciary responsibilities. The state might also be pressured to get projects off the ground by charging less for loans than the market rates. The State Treasurer is bound by the prudent investor provisions in state statute."

And this was by no means the BND's only occasions of questionable banking practices. Improper assessment fees was another controversey that BND was involved in but you'll never hear about BND's repeated banking improprieties from the public banking lobby. No, it's just the fairy tale that the public banksters want Vermonters to know, not anything close to the whole truth.

Treasurer Pearce continues:

"Vermonters buy our bonds and both the VMBB and the Treasurer’s Office have expanded their use of retail or “citizen bonds” providing Vermonters the opportunity to invest in Vermont. The Treasurer recently sold just under $25M in bonds to Vermonters and approximately 80% of VMBB financings are sold to Vermont investors. Other instrumentalities have significant local investment. We hope to do even more with local investors. Further, when we sell bonds to investors outside of Vermont, capital actually surges into the state and then trickles back out as principal and interest are repaid. Replacing this outside capital with the state’s operating cash would actually represent a loss of state financing resources."

What the unregistered lobbyists for the public banking proposal for the State of Vermont haven't disclosed is that their California based leadership has another great idea - county public banks. And they've solved that pesky capitalization problem that plagues their statewide proposal; simply seize public employee pension's investment assets to fund their bank. Never mind that pension fund employees have a seat at the investment table; merely seize the pension funds by legislative fiat. What could possibly be wrong with that?

This sort of dictatorial, "what's yours is mine" is the very essence of neo-Georgist economic hokum on steroids. If they dare, I'd expect the Vermont secessionist public banksters to be just as spectacularly unsuccessful with this scheme as they were with their proposal outlined in Senate bill S. 204.

Next up in the Public Bankster series: Gwen Hallsmith declares victory!

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * For the archive of the Free Vermont Framework listserv, click here.