OpEdNews ran an article which introduced how massive – educational in this case – debt was accumulated by the likes of Goldman Sachs derivatives but only as way to highlight how one US state avoided same, whereas the others were hard hit. This has interest – good word Batman – in regard to the Greek ‘deviation from the norm’; so those of good faith may take notice and continue with the drop out, turn on and tune in to what’s new in economic theory.

The entire article is at http://www.opednews.com/articles/Swimming-with-the-Sharks–by-Ellen-Brown-Goldman-Sachs_Public-Banking_Tuition-150221-383.html – here we quote the noteworthy conclusion.

Remember when Goldman Sachs – dubbed by Matt Taibbi the Vampire Squid – sold derivatives to Greece so the government could conceal its debt, then bet against that debt, driving it up? It seems that the ubiquitous investment bank has also put the squeeze on California and its school districts. Not that Goldman was alone in this; but the unscrupulous practices of the bank once called the undisputed king of the municipal bond business epitomize the culture of greed that has ensnared students and future generations in unrepayable debt.

According to Demos, per-student funding has been slashed since 2008 in every state but one – the indomitable North Dakota. What is so different about that state? Some commentators credit the oil boom, but other states with oil have not fared so well. And the boom did not actually hit in North Dakota until 2010. The budget of every state but North Dakota had already slipped into the red by the spring of 2009.

One thing that does single the state out is that North Dakota alone has its own depository bank. The state-owned Bank of North Dakota (BND) was making 1% loans to school districts even in December 2014, when global oil prices had dropped by half. That month, the BND granted a $10 million construction loan to McKenzie County Public School No. 1, at an interest rate of 1% payable over 20 years. Over the life of the loan, that works out to $.20 in simple interest or $.22 in compound interest for every $1 borrowed. Compare that to the $15 owed for every dollar borrowed by Anaheim’s Savanna School District or the $10 owed for every dollar borrowed by Santa Ana Unified.

How can the BND afford to make these very low interest loans and still turn a profit? The answer is that its costs are very low. It has no exorbitantly-paid executives; pays no bonuses, fees, or commissions; pays no dividends to private shareholders; and has low borrowing costs. It does not need to advertise for depositors (it has a captive deposit base in the state itself) or for borrowers (it is a wholesale bank that partners with local banks, which find the borrowers). The BND also has no losses from derivative trades gone wrong. It engages in old-fashioned conservative banking and does not speculate in derivatives. Unlike the vampire squids of Wall Street, it is not motivated to maximize its bottom line in a predatory way. Its mandate is simply to serve the public interest.

North Dakota currently has a population of about 740,000, or the size of Santa Ana and Anaheim combined. If a coalition of several such cities were to form a municipally-owned bank, they too could have their own low-cost capital funding mechanism, allowing them to escape the budget-sucking tentacles of Wall Street’s vampire squids.

Ellen Brown bio: Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including WEB OF DEBT. In THE PUBLIC BANK SOLUTION, her latest book, she explores successful public banking models historically and globally.
Her websites are: http://EllenBrown.com
http://PublicBankSolution.com  and
http://PublicBankingInstitute.org