Now Vermont May Want All Your Money

by Kevin Joseph Ryan

You may have thought the State of Vermont only wanted to control the share of your money they were entitled to by tax law, plus your health care money, but it doesn’t end there. Next, the State may want your bank deposits.

Working it’s way through the Vermont Senate this week, at the tail end of the Legislative session, is Senate Bill S. 204, which would create a panel to study the creation of a Vermont State Bank. This bank would serve as the central repository for all state funds and accounts, and would be loosely modeled on the only other existing state bank in the United States, the Bank of North Dakota.

Should the bill pass the Senate this week, which appears favorable, it would have be approved by the Vermont House. While the session is planned to end soon, the bill (H. 542) had 64 initial sponsors in the House and so may very well pass into law.

Seventeen other states are looking at similar proposals, and name the North Dakota State Bank as an inspiration. The North Dakota bank provided that state with $70 million dollars in profits, but depending on how such a bank would implemented here in Vermont, the Green Mountain version may look quite different.

In North Dakota, the BND functions as a central bank, much like the Federal Reserve, and provides check clearing services, accepts all state revenue and outlay and deposits are guaranteed not by the FDIC as with most banks, but rather the general fund of North Dakota. With Vermont this year facing a shortfall of $45 million dollars, such a move could be financially shaky for the State. State taxpayers would be on the hook for any losses.

There are other potential differences. The Bank of North Dakota until recently had only functioned as an clearing house for the state and for municipalities, government economic development schemes and underwritten student loans. In fact, North Dakota is the only state permitted under a provision of the Obamacare Bill to provide student loan financing, thanks to a provision written to obtain support from Senate Budget Committee Chairman Senator Kent Conrad (D- ND). Also recently, the BND has undertaken home mortgages as well.

Senator Anthony Pollina (P- Washington), who has been advocating for such a bank for years, has suggested that a Vermont State Bank might be quite similar, providing low-interest loans to small business as the Small Business Administration Program does now and allowing Vermont to acquire a similar exemption as North Dakota to the Federal ban on student loans. This would certainly help Vermont Student Assistance Corporation, which had administered such loans in the past and will be shut out of future underwriting under the Obamacare law.

However, North Dakota is not Vermont, and with taxpayer potentially on the hook for any losses a State Bank might suffer, the significant differences in state economies must be considered. North Dakota has only a 4.4 unemployment rate, compared with Vermont’s 5.6, in large part to conventional energy production, something Governor Peter Shumlin’s Sustainable Energy Portfolio would prevent. North Dakota produces 90% of it’s energy from lignite coal, and is 2nd the nation for coal production. The Brakken formation of Western North Dakota holds up to 400 billion barrels of oil by most estimates, 25 times larger than that of the ANWR of Alaska.

Most of the North Dakota oil can only be obtained through hydraulic fracturing however, a process the Vermont Legislature banned this year. Currently, North Dakota is producing 355,000 barrels of oil per day, which accounts for $1.9 billion dollars of revenue to the state in resource extraction taxes alone this year. This may account for the windfall assets of Bank of North Dakota, which Vermont would not have available.

Bank of North Dakota weathered the recent recession quite well, actually growing its portfolio. The Bank’s President Eric Hardmeyer says one reason for that is that the bank did not invest in derivatives or sub-prime mortgages, however, until recently, it was not in the mortgage business at all. “We think of ourselves as kind of a little mini-Federal Reserve.” Hardmeyer said. Hardmeyer went on to say that the bank is not responsible for North Dakota’s economic prosperity. “To put this at our feet is flattering, but it frankly isn’t true.”

The State of Vermont needs to be very careful before it makes the decision to enter into the banking business. Bank of North Dakota has been in operation since it’s formation in 1915 by Socialist A.C. Townly and has been a financial success for it’s own state, however, North Dakota is financially prosperous in it’s own right. In fact, North Dakota is doing so well that in June of this year, it will be voting on a popular constitutional amendment proposal to abolish its property tax. Vermont is not quite in that league, financially speaking.

Here’s a proposal for the Vermont State Legislature: The State gets to establish it’s own bank, and the Legislature abolishes property tax. Any takers?

8 thoughts on “Now Vermont May Want All Your Money

  1. The Vermont Legislature needs to start using some common-sense. They don’t need to be in the banking business. They need to focus on lowering taxes, increasing the average household income, and creating an environment that would have businesses wanting to move to Vermont, rather than leave it.

  2. Bottom line – ND has revenue through production of natural resources and yet VT has stopped all opportunities to do so here (i.e. natural gas) so we aren’t even close to being able to sustain ourselves at this level. VT needs to start loosening up the regulations here, turn VT into a state that produces without the need of grant welfare from Washington DC and then let’s have this discussion again in about 30 years.

  3. Other misinformation about North Dakota aside, Emily Peyton perpetuates the myth that fracking in that state has anything to do with potable water. Bakken oil wells are fracked roughly two miles below the surface; there is no contact–none–with water tables. There are thousands of Bakken wells producing energy, all without issue.
    As I see it, the main difference between Vermont and North Dakota is that the latter is open for business. North Dakota would do well, state bank or no state bank, thanks to a balanced blend of agriculture, manufacturing, energy (wind, gas, oil, lignite, hydro), good schools, right-to-work laws, fine transportation network, frugal citizens, reasonable regulation, low taxes, etc. A state bank is not a silver bullet.

  4. Amen Mary!! VTs single payer scheme is unfunded and if any reasoning person is reading this article VT has tourism.. That’s it! Even if VT did have the loads of conventional energy resources to make the state solvent do you think this group of Progressives would allow us to use it??? Nope! VT is all in on this green energy scheme which is at best unproven based on all these companies with tons of Obama bucks at their back have folded up regardless. No. VT has no business getting into banking.. That requires business savvy and our legislature has proven time and time again, they don’t have it..

  5. Too much, too fast. Our State can’t handle it’s current business commitments. So, why should they take on more?

  6. Dear Friends,
    The State bank of Vermont would NOT control YOUR bank deposits. This writer is incorrect, right now the State of Vermont invests in Wall Street with pensions and tax money, then wall street leverages this money ( a fancy term to describe legalized multiplicity effects of accounting) and Vermont send its value to wall street. The State Public Bank which is simply one form of democratic involvement in what money (credit) gets created for the purposes we need. There are more localized versions that will not involve an elected politicians, except as local depositors. This bank will not be on every street corner, it is a back up bank to other small commercial banks ( in ND there are more small commercial banks than anywhere else in this country) and is localized in Vermont, where we the people will be able to correct its malfunction, should that arise far more effectively then we are able to effect wall street.
    This is an extremely important step to take to shake off federal enslavement- and to begin an independence of Vermont economically. I urge the writer to do far more research and to leave off his paranoia. Here is a link to a film that describes democratic monetary policies. Peter Shumlin will be opposing this bill, for the one and only reason that he is climbing the political ladder, and does not wish to discourage is wall street support.
    Other points to be aware of: North Dakota’s oil revenue was not in play when ND began to return a profit to the State treasury, in 1945, and noting the date, shortly after the great depression. Lastly, the creation fo the Federal Reserve was the hijacking of our democracy, and Vermont did not respond with corrective policy as ND did, but we are now.
    Finally hydro-fracking is the ultimate of idiocy, I hope the writer would not dream of pouring oil and gas into his well, and drinking the resulting poison, this is pure criminal insanity to prevent the creation of loans/credit for a multitude of non centralized energy sources- ( a VT state bank could create the money for each of us to pay off a solar array at the price of our monthly electric bill, and pay for hemp production to build house that use 75% less fuel to heat) . Thank you for you attention to my points!
    http://www.youtube.com/watch? v=-fAtVVq6ZgI Organic Money, created for the good of all in the absence of greed.
    Emily Peyton, artist/activist in the running ( entering political races to move knowledge and power to the people for equality’s sake) See http://www.emilypeyton.org

  7. Vermont cannot handle any more of these schemes du jour where citizens cannot even comment, let alone comprehend and off to work we go, poorer every day. Go for it P’s, and public asset robbers, take all we have, you cannot have my soul, yet you try. Swap for abolition of prop taxes? In your dreams.

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