Tag Archives: Mike Krauss

In Texas, drowning in debt

By Mike Krauss | Intelligencer

Watching the broadcast media reporting on the catastrophe in Texas, I heard the team on Fox News wonder aloud what the evacuees would do and where to turn to find shelter and safety? Many left their homes with little more than the clothes on their backs. What resources could they draw on?

Commentator, Chris Stirewalt put it in perspective when he observed that most Americans cannot, in times of crisis, lay their hands on more than $500. Other published estimates put that at $400.

Texas may be drowning in water, but the American people are drowning in debt. This is the legacy of decades of neo-liberal economic policy enforced by both political parties, in the Congress and the White House: Americans trapped in a web of debt spun over four decades by a parasitical finance “industry.”

The “capitalism” endlessly extolled by talking heads on networks like Fox and in leading publications like The Wall Street Journal and the Economist is dead; having been steadily degraded into a global economics of trans-national monopolies, with wealth and income monopolized by the few.

It’s simple, really. It takes capital to be a capitalist. Most Americans don’t have any. They have debt. Families, students, small businesses, state and local governments, school districts and the taxpayers that support them are drowning in debt.

The proposed way out? It’s just another step deeper into the web of debt. As in Pennsylvania and across the nation, the same old, same old: more debt and taxes.

The burden of debt will come quickly into focus as Congress is asked to appropriate the many billions that will be needed to fund the federal participation in the recovery from Hurricane Harvey. Deficit hawks are already insisting that whatever amount is appropriated must be offset by cuts elsewhere in the federal budget.

There is an alternative. To understand its utility, it is first necessary to understand how the money of the United States is created. Look at a dollar bill, or any bill. It says clearly at the top, “Federal Reserve Note.” The Fed has a monopoly on the creation of our money. It works like this.

The Fed takes the “full faith and credit” of the United States (Nothing more — no gold, no silver), sells bonds and transfers the credit raised to the Treasury. The majority of the buyers are the global cabal of parasites in pinstripes and some foreign governments. The roughly two dozen banking and finance companies with a license to sell those bonds make a fortune. The Treasury then pays off those bonds, at interest, with the money raised in income taxes. The interest is killing taxpayers and keeping Americans in debt.

Interest on mortgages, car loans, student loans, credit cards, municipal bond issues and built into the chain of production and supply for almost everything we purchase. One example. The new Bay Bridge in San Francisco cost about $6 billion. But there is another $6 billion in interest costs for California taxpayers to pay off.

The alternative is the one used by Lincoln in the Civil War, to bypass the banksters and their high interest. The Treasury can issue the money directly, as “U.S. Treasury Notes,” and avoid the interest paid to the banksters. Cut out the middleman.

Lincoln had the Treasury issue $450 million of “greenbacks,” which went directly into the productive economy, buying goods and services. That $450 million in 1864 is equal to roughly $6.7 billion in today’s dollars, a tiny fraction of the current $4 trillion federal budget and almost $20 trillion U.S. economy.

Trump has proposed a $1 trillion infrastructure package. It will come at interest. The Treasury could issue three times that as low, almost no cost interest (the same terms on which the Fed loaned an estimated $17 trillion to Wall Street) to underwater homeowners and businesses, students and cash strapped state and local governments and school districts, to pay off older, more costly debt and start rebuilding the entire national infrastructure.

The Treasury can be repaid easily by an elimination of debt-service costs, an explosion of wealth-generating productivity, the growth of tax receipts at all levels of government and the future employment of well-educated young people.

The Treasury can bypass the Fed — which is nothing more than the administrative arm of Wall Street and the banksters — and rescue the American people from their high interest racket.

The banksters will howl, making more noise than a hurricane.

Music to our ears.

PBI Launches Public Banking Caucus


PBI logoPBI Chair Walt McRee has announced the creation of a bi-partisan Public Banking Caucus, a strategic campaign to link together the many local and state elected and appointed officials (and candidates) already supporting public banking.

Mike Krauss, PBI founding director and chair of the Pennsylvania Project, has been selected to lead this effort. The Pennsylvania Project was the first PBI affiliate.

“As many in the public banking community know, Mike Krauss is one of our ablest and most respected public banking advocates,” said McRee. “As a former officer of Pennsylvania county and state government, and a former Executive Director of the Pennsylvania Republican State Committee, he brings to the task a unique understanding of the way in which public policy is advanced by citizens through the political process.”

Efforts to identify local and state officials (and candidates) who support public banking are already underway.

Krauss is asking the PBI community to assist in assembling a roster of public banking advocates who are either currently in local or state government or running for public office.

Forget Clinton’s and Trump’s Plans for the Economy: It’s Time to Erase Debt and Create Jobs

Mike Krauss
Mike Krauss is a founder of the Public Banking Institute and chair of the Pennsylvania Project, which supports government finance reform and the creation of public banks.

So far, neither Donald Trump nor Hillary Clinton has offered a credible plan to restart the long-stalled U.S. economy.

Trump favors lowering taxes to spur demand, a reduction in the supply of illegal foreign labor to boost wages, and modifying trade policy to encourage investment in U.S. manufacturing and create better-paying jobs. He also touts an unspecified infrastructure investment. Some argue that this approach will not provide jobs in the magnitude required, and will likely increase the federal deficit.

Clinton favors higher taxes on the wealthy and more spending for infrastructure. To keep the debt off the federal government balance sheet, she has specifically proposed so-called public-private partnerships. This is the Wall Street solution. Public guarantees will be used to attract private investors, who will finance, own and rent back to the people the entire public infrastructure of the United States.

Neither program gets at the real problems: Americans—families, students, businesses, state and local governments, school districts, etc.—are drowning in debt, and there is not enough money in circulation for productive, job-creating purposes. Instead, it is eaten up paying off debt.

There is an alternative. The U.S. Treasury has the power to extinguish debt, rebuild publicly owned infrastructure and propel the economy forward like a rocket. It is the power to create the nation’s supply of money, which Congress surrendered to the private banks that own the Federal Reserve upon the Fed’s creation in 1913. It’s time to take that power back.

First, the Treasury can extend about $3 trillion (roughly the total of all U.S. state and municipal debt) in almost zero-interest loans to state and local governments and school districts to pay off debt. This would immediately reduce the debt service taxpayers pay and dramatically redirect local taxes away from Wall Street to Main Street.

Second, the Treasury can extend another $3 trillion on the same terms to state and local governments for infrastructure projects. Millions can be put to work on the job site and in the supply chain of goods and services.

Third, the Treasury can partner with state-chartered public banks, community banks and credit unions to buy up and refinance at far lower interest the estimated $1 trillion of student debt. Then, going forward, it can offer truly affordable credit for higher education for every American, taking care to prevent colleges and universities from eating up that money in higher tuition costs.

This proposal is similar to—but more far-reaching than—the action taken by President Lincoln during the Civil War, when to bypass that era’s banksters and the usurious interest they extracted to finance the war, he had the Treasury issue $450 million of greenbacks.

That $450 million in 1864 is equal to roughly $6.4 trillion in today’s dollars.

In 1999, then-Republican Congressman and later U.S. Transportation Secretary Ray LaHood proposed something similar in the State and Local Government Economic Empowerment Act: $360 billion, interest-free, for infrastructure. But that sum was too little then and is hopelessly inadequate now. And it would have done nothing to ease the debt burden that keeps Americans in virtual servitude to the world’s financial cartel.

The terms of the Treasury credit I propose might be 1.5 percent, simple and not compound interest (the latter includes interest on interest), over 20 years [LaHood proposed no interest over five years]. The Treasury can be repaid easily by an elimination of debt-service costs, an explosion of wealth-generating productivity, the growth of tax receipts at all levels of government and the future employment of well-educated young people.

The Treasury can create this new money directly, bypassing the Federal Reserve and cutting out the bankster middlemen and their usurious interest charges.

This is what Japan is now proposing to do, with an initial infusion of $100 billion, and it is what the Fed could have done when Wall Street crashed in 2008. Instead, officials pumped an estimated $17 trillion to $20 trillion in quantitative easing into Wall Street, in which the new money was swapped for assets in the reserve accounts of banks, leaving liquidity trapped in bank balance sheets and doing nothing for Main Street.

Debt relief for the American people and millions of new jobs funded from the Treasury they own—not the bank-owned Fed—would drive an explosion of growth in the private sector—the “multiplier effect” that Congress and the Fed promised when they bailed out Wall Street but which never materialized.

New money for productive purposes—debt-free for Main Street rather than more debt to Wall Street—is the way out of the Wall Street web of debt in which America is ensnared and back toward financial health and prosperity. But Americans must force Congress to act.

Op-Ed: Don’t Be Afraid of a Municipal Bank. There’s so much to be gained.


Bank pic

(This op-ed is in response to recent articles on Phillymag.com about mayoral candidate Anthony Williams’s proposal to create a municipal bank. Otis Bullock supports Williams and has volunteered for his campaign.)

Lately there has been much talk about the merits of a municipal bank here in Philadelphia. Mayoral candidate Anthony Hardy Williams has been touting it as a part of his mayoral platform; and Nelson Diaz thinks it’s a good idea too. Lynne Abraham, in classic Lynne Abraham fashion, shot the idea down saying, “That scares me.” Philly Magazine’s Patrick Kerkstra added, “City Hall often struggles to deliver basic municipal services as well as city residents would like. Now it’s supposed to act as a banker, too?”

Well actually, no. The city would not act as a banker. The reasons the concept “scares” people is because 1) they don’t understand banking or the banking industry generally, and 2) they don’t understand municipal banking specifically. The third most damning reason is that Philadelphia just doesn’t think big enough. We are quick to talk about what we CAN’T do, and hesitant to dream about the great things that we CAN do. So I decided to talk to someone who DOES know something about municipal banking: Mike Krauss, Chairman of the Pennsylvania Municipal Banking Project.

Krauss helped to dispel a few myths about municipal banking and showed me a successful model:

The City Will Not Operate a Bank

The City of Philadelphia will create the municipal bank. However, it will not run the bank. Because public banks partner with community banks in making loans that extend credit into their communities and do not compete as retail banks, public banks need no branches, tellers, ATMs or broad and expensive marketing. As the Pennsylvania Public Bank Project notes, “Public banks are chartered to serve the public not exploit it. Hence, there are no mega salaries, bonuses or commissions to provide incentives for imprudent risk taking. The business model of public banks means that its profits are returned annually to the municipal general fund and reinvested in growing the partnership loan portfolio. This helps balance the operating budget without raising taxes, cutting vital programs, taking on more debt, asking for givebacks from employees or raiding pension funds.”

A Municipal Bank Can Work and Can Grow Philadelphia’s Economy

A prime example of a successful public bank is the public Bank of North Dakota (BND). BND earned $94 million last year in profits for North Dakota’s 740,000 residents. BND deposits roughly half its profits into the State’s general budget and uses the other half to increase its capitalization in order to make more loans. In the past decade, BND has returned over $300 million to the general fund. In addition to lending based on a formula that includes both its public deposits and its capitalization, BND also has access to low-cost Federal Home Loan Bank capital. BND is not required to contribute to FDIC insurance because it is not a retail bank and it is backed instead by the full faith and credit of the State of North Dakota. This and its partnership arrangements with local banks lower its operating costs considerably. The BND has averaged more than 25 percent return on equity over the past 16 years. Since 2008, BND’s annual return on investment has been between 17 percent and 26 percent.

The Pennsylvania Public Bank Project estimates that the startup phase of a new public bank during which time it attains profitability is from two to three years; less than the three to five year range for commercial de novo banks. This is because of the regularity of its deposits and outflows combined with its unique partnership business model.

If Philadelphia replicates North Dakota’s model, we can create astonishing economic growth and a new non-tax revenue stream that can support our schools, fully fund our pension, etc.

A Municipal Bank Can Play a Huge Role in the City’s Economic Development

Not only do public banks return profits to the municipality as non-tax revenue, but by providing reliable and affordable credit, they facilitate economic development, create jobs, and grow the tax base. Further, public banks can reduce public debt and the debt service costs loaded onto annual municipal budgets. A public bank allows a municipality to direct local lending, offer below market-rate loans, and leverage other capital for specific public purposes such as affordable housing, neighborhood development, infrastructure, small business development, education, and job creation. Loans for qualifying entrepreneurs are offered at a 1% interest rate.

Like North Dakota, dedicated loan funds in Philadelphia can be set up in the bank’s charter and it can modify its loan portfolio priorities from year to year with input from board members, local government and the public. A process like the participatory budgeting already used in cities such as New York and Chicago would allow for public input to help set broad portfolio priorities, without designating specific investments, something done by professional bankers and lending officers. Credit becomes local and supports longer-term investments. Partner banks facilitate hiring local contractors rather than large out-of-state companies often favored by directors of major, private banks.

Because quarterly profits for stockholders are not paramount, the public bank and community bank working in partnership can invest for the longer term. Some profits, such as that from a highway improvement that brings in new business may not be measureable in quarterly increments. Because local banks in North Dakota are supported by a public bank, they are able to make a greater proportion of small business loans than banks in other states.

Ellen Brown wrote:

Over the last ten years, the amount of lending per capita by small community banks (those under $1 billion in assets) in North Dakota has averaged about $12,000, compared to $9,000 in South Dakota and $3,000 nationally. The gap is even greater for small business lending. North Dakota community banks averaged 49 percent more lending for small businesses over the last decade than those in South Dakota and 434 percent more than the national average. In other states, increased regulatory compliance costs are putting small banks out of business. The number of small banks in the US has shrunk by 9.5 percent just since the Dodd-Frank Act was passed in 2010, and their share of US banking assets has shrunk by 18.6 percent. But that is not the case in North Dakota, which has 35 percent more banks per capita than its nearest neighbor South Dakota, and four times as many as the national average. The resilience of North Dakota’s local banks is largely due to their amicable partnership with the innovative state-owned Bank of North Dakota.

In 2010, the Center for State Innovation published a study analyzing the effects of moving Massachusetts State Funds from large banks (assets greater than $100 billion) to medium banks (assets of $1 billion to $10 billion) and small banks (assets less than $1 billion). This complex study included bank limits to absorb deposits and the willingness of different sized banks to lend. The study found that for each $10 million moved, small banks created between 4.50 and 7.23 jobs and medium banks created between 4.67 and 5.75 jobs. This was simply the result of moving deposits. With a partnership public bank, the entire lending system is refocused to create local jobs.

Community banks tend to make loans to local businesses that create the bulk of new jobs. By contrast, large banks tend to rely on computerized FICO models that eliminate most businesses requiring less profitable loans of below $5 million. Apparently these banks not only exclude “relationship” criteria, they are eliminating loan officers.

Now there is much more to this municipal banking conversation. For the sake of brevity, I will end with these points to consider here in Philadelphia:

  • Municipal banks are a way to generate additional non-tax revenue.
  • By providing affordable and reliable credit, municipal banks facilitate economic development, create jobs, and grow the tax base.
  • Municipal banks reduce public debt and debt service costs.
  • Municipal banks reduce banking costs and maximize return on municipal deposits.
  • Municipal Banks are more secure than banking with large Wall Street banks.

My only question is “Why wouldn’t we want that?” Is our failure to think big the only thing that is holding us back?


Otis Bullock is an attorney who’s worked in City Council and for Mayor Nutter. He researched this article in cooperation Mike Krauss and the Pennsylvania Public Bank Project.

Read More About: InsidersMayor’s Race 2015Municipal Bank

Read more at http://www.phillymag.com/citified/2015/05/05/op-ed-dont-be-afraid-of-a-municipal-bank/#BqJqtdMe8Me2dO8E.99

Mike Krauss  —  Chair, the Pennsylvania Project

Founding Director, the Public Banking Institute

Skype: mikekrausscomments



The Old Economy wins a round: Public banking loses in Vermont

Mike Krauss

By Mike Krauss

Bucks County Courier Times, February 9, 2015

Across the nation, in Pennsylvania and more than two dozen state legislatures and city councils, a well organized effort is underway to create a new tool to insure sound municipal finances and economic development:  public banks, to take hundreds of millions of taxpayer funds out of Wall Street banks and put them to work locally with our community banks and credit unions for locally directed economic development and jobs creation.

The Wall Street banks and their allies are not anxious for the competition for our deposits, and want to keep them to underwrite their speculation in derivatives and commodities.

Last November nearly two dozen town meetings in Vermont voted strongly to support the creation of a state public bank. A solid measure of voter intent.

Armed with that support and the data to demonstrate conclusively the benefits, public bank advocates pressed the state legislature for a bill to create the bank.

But the political and economic elites of the state, led by the state treasurer, closed ranks and turned that effort aside, agreeing only to vote an appropriation of ten percent of the state’s revenue reserve to fund a new economic development initiative, apart from several other existing development agencies.

Supporters of this initiative rightly claim that it will make new funds available for investment in the state, this year about another $10 million.

But it is a setback for public banking.

Vermont public banking advocates have been maneuvered into creating yet another political lending agency, of the kind typical of the old, controlled economy which the voters in the town meetings were hoping to escape.

The network of interests that will manage and benefit from this new Vermont agency — politicians, political appointees, the professionals they retain and fund in the deal making process, the politically connected borrowers and the politicians they support — will grow politically more enabled and will resist any future diminution of their position, personal advantage and political power with the creation of a public bank that will make a claim on their funding source.

And while more of the state’s revenue will now be directed into some form of economic activity in the state, few if any of the other benefits of a public bank will be realized.

This agency will not direct any profits into the state’s general fund and will not be self-sustaining, requiring an annual appropriation of state revenues which could easily be cut or eliminated altogether in the next economic downturn.

This agency will not be a replacement for municipal rainy day funds that yield next to nothing. Nor will it be a source of immediate and low cost emergency relief funds, to meet natural or man- made disasters or budget shortfalls.

And as it is not a bank, this new agency must deposit its funds in a bank — no doubt, the Canadian mega bank now favored by the state treasurer — and pay the substantial fees for services common to such arrangements.

This new Vermont agency is a vertically integrated lending process controlled by political and economic elites. What was not achieved in this legislation is the singular benefit that owning a bank provides — the ability to create “new money” at affordable interest in the form of loans into the local economy.

Public banks facilitate a lateral and collaborative sharing of decision making in the creation of public credit and its cost, and its distribution into the local economy, separated from political management and working through a network of independent commercial lenders which are part of the local community.

The forward looking energy of those November town meetings has been deflected. There is now no public bank legislation pending in Vermont. Nor will there be, any time soon. It has been pushed off the agenda.

The new loan program was set to automatically expire in July, but the Vermont Bankers Association, representing the mega banks, already supports its continuation as a hedge against creation of a public bank.

Supporters of public banking in other states and municipalities should take heed of this cautionary tale. The path to a new and more democratic economy does not lead through creation of yet another political lending agency of the status quo and the old economy.

The first step on that path is clearly marked: banks owned by the public.

Mike Krauss is a founding director of the Public Banking Institute and chair of the Pennsylvania Project.   Email: mike@mikekrausscomments      www.publicbankingpa.org


Public Banking in the Press: Public bank advocates gain advice from experts – A Report from the Banking On New Mexico Symposium

From The Santa Fe New Mexican:

Public bank advocates gain advice from experts

Posted: Saturday, September 27, 2014 10:00 pm | Updated: 11:18 pm, Sat Sep 27, 2014.

By Ed Moreno
For The New Mexican

The path to establish a publicly owned bank will be scattered with legal and political obstacles, but scores of citizens, public officials and public finance experts gathered in Santa Fe on Saturday to make the case that it can, and should, be done.

The spirited gathering, organized by “We Are People Here,” brought local, national and international perspectives on why it is necessary to try to establish publicly owned and operated banks that serve local communities, and not the “plutocracy” that controls the nation’s wealth, the event’s organizer said.

“We are gathered here because we recognize to the degree greater than in any time in the last 40 years that we are on our own,” said Craig Barnes, the founder of the organization. He cited the concentration of wealth and power and said “the life’s blood is being sucked away from our local communities.”

“We’re not here to blame, we’re not here to complain. We’re here to get up off our knees, because it’s in our nature as Americans to be on our feet,” he said.

Continue reading Public Banking in the Press: Public bank advocates gain advice from experts – A Report from the Banking On New Mexico Symposium

Santa Fe Mayor Javier Gonzalez: Public banking worth exploring in Santa Fe

Santa Fe Mayor, Javier Gonzalez, talks about the importance of the Banking on New Mexico Symposium: Funding Local, Sustainable Economies for the City of Santa Fe.

The Symposium is happening today, Saturday, September 27, 2014 from 10:30 am to 9:00 pm, at the Santa Fe Community Convention Center. Registration for the Symposium starts at 9:30 am at the door. The registration fee is $40.

Continue reading Santa Fe Mayor Javier Gonzalez: Public banking worth exploring in Santa Fe

Money and Banking 101 — Issues and Solutions (Part 3 of 3)

From time-to-time we will post items that we are calling Money and Banking 101. These come from various sources around the world. This is the first in that series. The three videos presented here come from the Public Banking Institute and the Pennsylvania Public Bank Project. This is the last post of three in this series.

The third of these videos shows us an important part of the solution to the problems outlined in the first two videos–the formation of public banks. Our cities are not broke. They are struggling with onerous interest payments to Wall Street bankers who are nothing but middlemen. These interest payments impoverish your communities, while enriching Wall Street. This video shows how municipalities, counties, universities and states can significantly reduce their interest payments by creating their own public bank. This has already been done and proven, and could cut the costs of public projects by at least half.

Money and Banking 101 — Issues and Solutions (Part 2 of 3)

From time-to-time we will post items that we are calling Money and Banking 101. These come from various sources around the world. This is the first in that series. The three videos presented here come from the Public Banking Institute and the Pennsylvania Public Bank Project. This is the second post of three in the series.

The second video informs you of perils your deposits face in large global banks — as set by law. People think that money is safe in the big banks because the FDIC will protect the deposits. This assumption is not based on fact. This video will show official government documents that describe the plans for confiscating deposits when (not if), a big bank fails. Individual, as well as public funds from municipal, university, county deposits are at serious risk. Your taxpayer money will disappear in the next crisis! Public officials in charge of taxpayer funds need to be aware of the dangers here. The loss of taxpayer funds and the inability to meet payrolls and obligations will certainly prompt a response that will both immediate and forceful.

For more information about current law and how it jeopardizes your bank deposits, see Legal Framework for Big Banks Puts Depositors at Risk by Steve Seuser, Co-Director, DC Public Banking Center.

Part 3 — Tomorrow

Craig Barnes’ Interview of Public Banking Institute Experts

Craig Barnes, Gwen Hallsmith, Mike Krauss

Listen to Craig Barnes interview two experts on public banking, Gwen Hallsmith, Executive Director of the Public Banking Institute, and Mike Krauss, a director of the Public Banking Institute and chairman of the Pennsylvania Project–an organization dedicated to the formation of Public Banks at the state and municipal level in Pennsylvania. They recently visited Santa Fe on behalf of We are People Here! to meet and discuss, with Mayor Gonzales, City Councilors, and other civic leaders of Santa Fe, the benefits and the formation of a Public Bank for the City of Santa Fe.