By Mike Andrew
On Thursday, September 27, PSARA will host a forum on one of the most important issues facing this state – the creation of a Washington Investment Trust. The forum begins at 1:30 p.m. and will be held at the Filipino Community Center, 5740 Martin Luther King Jr. Way South, in Seattle.
The forum features State Treasurer Jim McIntire, who opposes the idea, community banker Darel Grothaus, and Representative Bob Hasegawa, the prime sponsor of the state investment trust bill.
Admittedly, banking policy can make most people’s eyes glaze over, but the fact is that no issue has a more direct impact on the way people in this state live.
“The concept is pretty simple,” Hasegawa explains. “Right now in the state we have a $32 billion biannual budget. When the state needs to put its money someplace – it used to put it in a vault in the Treasurer’s office, but I don’t think all that money would fit in a vault – now we put it in the Bank of America.
“Why should we let the Bank of America make money off of our money?” Hasegawa continues. “Why don’t we just create our own institution? We’ll keep the money here, we make money off of our money, and then we control the money so we can leverage it back into our communities.”
The idea for a Washington Investment Trust (WIT) draws heavily on the success of the 92-year-old Bank of North Dakota (BND), currently the only state-wide publicly-owned U.S. bank. The BND has helped North Dakota escape the budgetary crisis other states are in the midst of..
In 2009, in fact, North Dakota sported the largest budget surplus it had ever had. The BND “is literally floating North Dakota,” Hasegawa says.
The reason the BMD has been successful, and that WIT could be just as successful is that states’ budget deficits are not the result of over-spending, as Republicans claim.
Instead, they’re caused by loss of revenues and increased borrowing costs resulting from the Wall Street banking crisis. Jammed with toxic assets and derivatives, on top of the subprime mortgage debacle, the Wall Street credit machine ground to a halt in the fall of 2008 and has still not recovered.
By providing affordable, low interest credit for business expansion, new businesses, and student loans, the BND has helped North Dakota sidestep the credit crisis altogether.
The BND partners with private banks, providing a secondary market for mortgages; offers “wholesale” banking services such as check clearing and liquidity support to private banks; and invests in North Dakota municipal bonds to support local economic development.
In the last ten years, the BND has returned more than a third of a billion dollars to the state’s general fund. North Dakota is one of the few states to consistently post a budget surplus.
Hasegawa said a key feature of the WIT is that it will partner with financial institutions, community-based organizations, economic development groups, and guaranty agencies. He said the Washington Investment Trust will offer “transparency, accountability, and accuracy of financial reporting,” a welcome change from the secretive accounting methods common among large Wall Street banks..
Hasegawa has been working on the investment trust bill since introducing what he calls the “first test bill” in 2010. The next year, a companion bill was also introduced in the state senate, and the measure got committee hearings in both houses of the legislature.
“We saw a very good response from the public [at the committee hearings] – the public just came out for it,” Hasegawa says, “unfortunately we couldn’t get the votes to get it out of committee,” in part because of McIntire’s opposition. The legislation will be re-introduced in the next session.