Public Banking Advocates Make Their Voices Heard In Vermont

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During the first week in March, at town meetings across Vermont, citizens voted in support of a bill to empower the Vermont Economic Development Authority to function as a state-run bank, where the state would deposit its revenues and use the funds to partner withcommunity banks to fund economically sustainable projects in the state. As John Nichols reported in The Nation on March 9, “In many cases, the votes were overwhelming.” Eighteen cities and towns voted in favor of the bill.

Yesterday, on March 18, the Vermont Senate Finance Committee heard testimony on S. 204, the bill that would grant the Vermont Economic Development Authority a banking license and direct 10% of the Treasurer’s bank deposits to VEDA for investment in Vermont. Curiously, in light of the overwhelming support for a state bank displayed in the results of the town meetings campaign, the Barre Montpelier Times-Argus  called the proposal “politically unpopular” — and offered no contextual explanation for that description.

A press release from Vermonters for a New Economy offered a clue to the source of the proposal’s alleged “unpopularity,” pointing out that “opposition to the legislation is well-represented on the schedule of [Senate Finance Committee] testimony – Chris D’Elia from the Bankers Association and the Deputy Treasurer are listed, who both oppose the bill, along with Senator Anthony Pollina, one of the bill’s main supporters. No representatives from the public, from the 18 cities and towns who passed a resolution directing the legislature to establish a public bank, or from Vermonters for a New Economy were invited to testify.”

“It is clear that the bank lobby has a lot more traction in the State House than the cities, towns, and the citizens,” said Gwendolyn Hallsmith, one of the founders of Vermonters for a New Economy, and the new Executive Director of the Public Banking Institute, a national organization devoted to facilitating the establishment of public banks on the local, regional, state, and national level.

Nevertheless, grass roots supporters of the public banking initiative showed up anyway, and insisted that their voices be heard. Erik Esselstyn and Peg Elmer, who were responsible for theTown Meeting votes in East Montpelier and Royalton, made the trip to the Senate Finance Committee on Tuesday. Mr. Esselstyn’s requested and received permission from the Committee to speak.

“I emphasized that the committee members had heard from paid lobbyists representing corporations (banks) whose legal mission is to maximize profits for shareholders,” Esselstyn said. “And I said that resistance was to be expected from the public servants of the state financial bureaucracy who would defend the status quo.”

Esselstyn, who said that he “felt like Atticus Finch addressing the jury in To Kill a Mockingbird,” also shared CEO compensation figures for TD Bank and People’s United Bank, large banksresponsible for moving Vermont dollars out of state, and pointed out that “a Vermont State Bank would be in business to serve the citizens of Vermont.”

Nat Frothingham of The Bridge in Montpelier attended the meeting, and said he was not optimistic about the legislation passing. “The bankers I have talked with are telling me that they can’t function without the very big banks and that a state bank in Vermont is not indicated, not advised.”

Hallsmith questions that conclusion. “It has been our contention that the state chartered banks stand to gain by the legislation, and that their interests and the interests of the large out of state banks diverge on this issue. The banks in North Dakota were the key supporters for a State Bank when they realized how it would help them.  ”

Robb Mandelbaum’s recent New York Times piece, “What North Dakota’s Public Bank Does for Small Businesses,” provides support for Hallsmith’s and Vermonters for a New Economy’s position. That article concludes that the Bank of North Dakota contributed substantially to the stability of both small businesses and small banks in that state, that the BND is “exceptionally well-managed,” and that, according to DePaul University Professor Rebel Cole, Vermont’s public bank efforts “could be very beneficial to the small community banks and the state.”

The politics of public banking pit the common sense of Vermont citizens against the vested self-interests of a powerful bank lobby in the State House. The banking “experts” use scare tactics, threatening lowered bond ratings, dire economic consequences, and scoff at the idea that everyday citizens would have intelligent things to say about state finance.

Yet their arguments are hard to back up with solid data – North Dakota has the same bond rating as Vermont. A recent study by the University of Vermont’s Gund Institute, in cooperation with the University of Massachusett’s Political and Economic Research Institute found that creating a State Bank would create over 2,500 jobs (a decrease in state unemployment of nearly 18 percent) and add over $340M in gross state product, not insignificant numbers in a state with a total of 366,000 jobs and an annual state product of $27 billion.

The citizens of Vermont, in Town Meetings across the state, looked at the evidence and voted overwhelmingly to support public banks. It remains to be seen if the legislature will listen to the people, or listen to the banks.