We Will See?

The meeting of the MA State Banking Committee - Public Banking Study group did meet on June 15th and was covered by the Springfield Republican "partially".  (So you and he will (may) never know what happened at that meeting.)

 

The reporter stayed for the testimony of the MA Bankers Association.  He left with the president of United Bank who read a prepared statement that was unavailable to most other participantsm and no discussion of his comments was allowed.  He stated that there is no problem that private banking can not solve in MA.  Loans are available to any qualified borrower with and/or without the copious help from the State via various public assistance programs.  He did not address how the State should fund any infrastructure programs or where State loans originate or why the current State borrowing is all done through large out-of-state banks.

 

As a result of testimony that followed  David Cotney, Co-Chair, Commissioner of the Division of Banks, explained how frustrated farmers led by Daniel Shays ended up at the Springfield Armory because they had no money to pay taxes and had taken up arms against the state to protect themselves.  

Ronald Marlow, Co-Chair, Assistant Secretary, Executive Office of Administration and Finance, described the testimony that the last six presenters offered as "revolutionary" after a discussion of how banking really works offered by John Root, Jr., member of the Common Good Bank.   The question was raised whether banks actually lent depositor's funds or whether the loan process happened in a different way?

 

John described it from the perspective of purchasing something that required a formal loan.  He asked whether any of your personal deposits had ever had a hold issued as the result of the bank where they were deposited having lent them so that they were not available for your use?  He then proceeded to show that a chartered fractional-reserve-bank in deed never has any participation in their loans.   Participation refers to the inclusion of assets of the bank in the loan transaction.  Lack of participation is linked to the fact that the loan from the bank's perspective is simply an accounting entry rather than the transfer of bank owned assets.

 

Another way to look at it is seen in the everyday use of a credit card.  The credit for any sale is created out of nothing by the bank.  Your action of signing the paper saying you will repay the loan to the holder of the note you signed within the conditions of your contract with the issuer of the card is what creates the credit.  The bank credits the merchant's account with the amount of the purchase (less their fees, 3+/-% plus monthly charges) and debits your account for the amount of the purchase plus interest at the end of the billing period.  There was no personnel of the bank present for the transaction and no physical funds were exchanged by the bank.  It was all done through accounting entries, and many banks bundle credit card account activity into a unit that can be sold as soon as possible after the transaction.  So the bank really is just a middleman for contracts between the buyer and seller.  It is the willing buyer and willing seller who make the credit.  The credit is created by the contract and exitinguished when the contract is fulfilled.

 

The point was made that the State has a different role than a bank does.   No child is responsible for the economic conditions at the time of conception, and yet every child is completely dependent on the conditions of their parents before and during pregnancy (medical research is showing much greater involvement of the parental stress levels and historical conditions than most imagine), each child's development is conditioned by the level of nutrition and parental involvement in the years after birth.  However, the State is currently ham-strung by economic conditions when it comes to insuring that each child is as capable as possible and as fit as possible.  Today we see basic services being cut as a budgetary device so that States can pay bills.

This is not the reason that the state exists.  The payment of bills will not assure the health and well being of its citizens 15 or more years later.   We are being cheated of the purpose for which we came together to maintain this union.  There is more to say.

Comments

[Alan Page]

There should have been a concerted effort to get public involvement but there was no interest in extending notice beyond the obscure web based state site.

All hearings were non-entities with no real sharing being done beyond the necessary compliance for legal purposes. Almost none of the testimony was reported in the 103 page final document denying the need for a public bank.

We will rue the day that this travesty occurred!

[SophieTorres1]

These meetings ought to have the 'be a doer' theme, so everyone will apply and put action to all agenda discussed. :-)
http://www.phenterminehcl375.org

[Alan Page]

You can find the Table of Contents for the Comprehensive Annual Financial Report for the State of MA here:

http://www.mass.gov/Aosc/docs/reports_audits/CAFR/2010/TITLEPG%20AND%20TOC%20LINKED.pdf

It will take some digging to find the pages with the sources of infrastructure loans but it is worth the hunt.