Public banking advocates release economic study

Gwen Hallsmith (from left); Gary Flomenhoft; Sen. Anthony Pollina, P/D-Washington; Sen. Richard McCormack, D-Windsor; and Rep. Susan Hatch Davis, P/D-West Topsham, presented a preliminary study of public banking in Vermont at the Statehouse on Tuesday. Photo by Hilary Niles/VTDigger

Gwen Hallsmith (from left), Gary Flomenhoft, Sen. Anthony Pollina, P/D-Washington, Sen. Richard McCormack, D-Windsor, and Rep. Susan Hatch Davis, P/D-West Topsham, presented a preliminary study of public banking in Vermont at the Statehouse on Tuesday. Photo by Hilary Niles/VTDigger

Advocates of public banking, so far unsuccessful in their quest to get the Vermont Legislature to study the possibility of setting up a state-owned bank, have taken the task upon themselves. At a news conference Tuesday in the Cedar Creek Room of the Statehouse, Sen. Anthony Pollina, P/D-Washington, and others presented research commissioned by the group Vermonters for a New Economy.

The research was conducted by the Political Economy Research Institute at the University of Massachusetts-Amherst and prepared by Gary Flomenhoft, fellow at the Gund Institute for Ecological Economics at the University of Vermont. It was paid for by the Donella Meadows Institute of Norwich.

Flomenhoft said about $236.2 million of new credit could be created in the state, as well as 1,000 jobs and $100 million in savings. For the full report, see the document link below.

The numbers are neither comprehensive nor final, Gwen Hallsmith said. She’s an organizer with Vermonters for a New Economy and a board member at Donella Meadows. Hallsmith is also the director of planning and community development for the City of Montpelier, but she emphasized she was not wearing that hat at the news event.

“This is not the kind of study we (are) pushing the state to do,” Hallsmith noted. She indicated that more data points would be incorporated into a legislative study, which also would ask more questions. “(This) is really a very small study that can be seen as the first step for more work that needs to be done to understand this fully,” she said.

For example, a longer timeframe might be necessary if the state were to officially engage the issue. The New Economy study based its calculation of new credit on the the state’s average daily balance of unrestricted funds in fiscal year 2013. State Treasurer Beth Pearce noted in a memorandum to Pollina in July that “cash balances are very volatile,” and as recently as 2003 the state had to borrow money for operational costs.

Aside from more numbers, some persistent questions that advocates hope will be addressed in a legislative study include the amount of capital that would be required to start a state bank; the arrangements between the state bank, state lending agencies and private banking institutions; and risk management.

Pollina stressed that the goal of the research was not to undermine local banks, but to examine the possible economic impacts of a state-owned bank. His proposal, loosely modeled after a state bank that North Dakota set up in 1919, would move the state government’s cash deposits from commercial banking institutions into a state-owned bank.

A state bank could consolidate the state’s existing lending agencies into a new financial and organizational architecture, Pollina said in an earlier interview. The Vermont Economic Development Authority, Vermont Housing Finance Agency, Vermont Student Assistance Corp. and Vermont Municipal Bond Bank technically are not banks, although they do make loans.

Correction: This article was updated on Wednesday, Nov. 6, to reflect Treasurer Beth Pearce’s memo regarding the volatility of the state’s unrestricted funds.

Hilary Niles

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13 Comments on "Public banking advocates release economic study"


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Jim Barrett
3 years 2 months ago

This is another attempt by the socialist to now get a state run bank to do what has been done for years in the private market. This is expected as this state has gone to a socialism unseen in the history of Vermont. Run all banks in Vermont out of business and expect the rest of us to pay and pick up the pieces left by this bunch in Montpelier. Again, many of you voted for this left wing extremist group and now you can enjoy.

Alex Prolman
3 years 2 months ago
A) Not an “extremist” position at all. Conservative North Dakota started theirs some 75 years ago. Most countries around the world have one. Many states across the country, regardless of political bent, are pursuing this option. If taxpayers send millions to Wall Street each year that they could keep in their communities, help funding a neighbor’s business, etc, why not try to hold onto some of that? We’re just giving away your money if we choose *not* to form a public bank. B) A public bank will not run VT banks out of business; it will help them compete against… Read more »
Nathan Gardner
3 years 2 months ago

It is not just Wall Street in NYC in the USA – taxpayers are also sending millions to other countries – Canada (TD Bank), Scotland/UK (Citizens Bank) and Spain (Sovereign Bank).

3 years 2 months ago

Jim Barrett you made this claim about a state bank running private banks out of business in a post to another article and I asked you how a state bank would run them out of business. You did not answer my question in that thread so I will ask it again. How would a state bank run the private banks out of business?

Paul Donovan
3 years 2 months ago

Actually, it’s not the first time Vermont has “gone to a socialism”. There was a Vermont State Bank in the early 1800s, for a time the center of Vermont’s financial system. There is a report from 1808 authored by Royall Tyler, Theophilus Herrinton and Jonas Galusha, justices of the Superior Court – pinko socialists to a man, no doubt.

Rep. Jim Condon
3 years 2 months ago
The State Bank of North Dakota was started by the Non Partisan League, an off-shoot of the Socialist Party of North Dakota. That was in 1919. Under socialist control, the bank became insolvent in 1921. Even when more conservative types were brought in to salvage it, the state bank still failed to turn a profit until the end of World War II. Mortgage lending is, thankfully, much fairer across the board these days then in the distant past on the prairie. The Fair Housing Act of 1968 and the Community reinvestment Act of 1977 put an end to “redlining” and… Read more »
john c. halasz
3 years 2 months ago
!921 was a steep recession year and the entire 1920’s was essentially an agricultural depression. However, the BND wasn’t rendered insolvent by mis-management then, but rather had trouble selling its required capitalization bonds, due to entrenched opposition from out-of-state financial interests, which had been previously dominant. Here’s a link to the history of the BND: In my view, the proposal for a public bank in VT is a moderately progressive idea that is worth pursuing. However it is a limited initiative and not nearly as much of a game-changer as some of its supporters seem to think. And there… Read more »
Paul Bogosian
3 years 2 months ago

This is one of the most interesting and timely public debates we could have. My hope, here, is that facts are allowed to prevail, and my justification for that hope is that it’s being debated in the Green Mountains of Vermont.

Peter van Schaick
3 years 2 months ago
A question for Mr. Jim Barrett about his concern that “this state has gone to a socialism unseen in the history of Vermont.” What about the Common Benefits Clause of the Vermont Constitution? Our Common Benefits Clause provides: “That government is, or ought to be, instituted for the common benefit, protection, and security of the people, nation or community; and not for the particular emolument or advantage of any single man, family or set of men, who are a part only of that community; and that the community hath an indubitable, unalienable and indefeasible right, to reform, alter or abolish… Read more »
Gary Flomenhoft
3 years 2 months ago
Let the red baiting begin! A sure sign hysteria will reign and the facts will take second place. I doubt any of these critics has actually read the report. “Run all the banks out of business” False-North Dakota has 102 banks. Vt has 22. “The State Bank of North Dakota was started by the Non Partisan League, an off-shoot of the Socialist Party of North Dakota.” False, it was an offshoot of the Republican party. The main organizer A. C. Townley was a former socialist. “Creation of a state bank will cut into deposits of VT banks” True-$236.3 million… Read more »
Bruce Post
3 years 2 months ago
Having been the State Director for a U.S. Senator from North Dakota and also the Executive Director of the North Dakota Education Association, I learned a bit about the history of North Dakota. The NPL was a complex organization and over time it proved somewhat reactionary. It made its share of mistakes, but it faced tremendous opposition from the out-of-state banks and the Minneapolis millers who wanted to have their way. That said, North Dakota is a very conservative state, but many, many North Dakotans appreciate the Bank of North Dakota. Here is a link to a Prairie Public Broadcasting… Read more »
Scott McCarty
3 years 2 months ago

I would still like there to be a debate in the Legilsature. If North Dakota can make it work, I don’t see how we couldn’t.

At least debate it and have a conversation. That’s why we send folks to the Legislature.

3 years 2 months ago

Very simply, the BOND works and has for 100 years to the dismay of wallstreet, which has repeatedly and is now trying to put it out of business because private creation of “money” is criminal according to the Constitution; art. 1, sec. 8, par. 6. the only fair way to generate money and put it into circulation is to have the government do it under strict controls, and I would add control by the states collectively using the 10th amendment to stop especially the federal reserve from this totally abusive and usurious activity.

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