When Alaskans complain about encroachment on state's rights, the federal government is always the villain. But during the drive for statehood, it was Seattle-based businesses that were exploiting Alaska's resources without regard for its people. Today its the big national banks that are serving their own interests at the expense of workers across the entire country. So if our political leaders don't want any outside entities interfering with our economy, then one of the solutions they should consider is creating a publicly-owned Alaska State Bank.
Before anyone evokes the Reagan rallying cry that government isn't the solution, they should look to the legislators in sixteen other states who are moving in the direction of establishing state owned banks. And this isn't a socialist movement either. Among the sixteen are Arizona, Idaho and Montana, three conservative western states who philosophically oppose big government just as many Alaskans do.
What's happening across the country is a legislative reaction to the 2008 financial crisis. And every state bill has one other common feature -- the Bank of North Dakota (BND) is their model because it's the only state owned bank in the United States.
This is a success story that began about a hundred years ago when North Dakota's agricultural economy was dominated by outsiders. Grain dealers in Minnesota and Chicago dictated the prices for North Dakota wheat. The state's farmers were at the mercy of the railroads for exporting it to the marketplace. And out-of-state banks controlled access to capital. Part of the legislative strategy to regain control of the state's economy was the establishment of the Bank of North Dakota. It wasn't an instant success. But that BND has endured for almost a century suggests the concept is worth a look.
BND's primary mission is financing economic development across the state. It's not in competition with locally owned commercial banks. Only 1.5 percent of its deposits come from private businesses and citizens. However, it is the sole depository of all revenue generated by state taxes and fees.
Every other state in America uses commercial banks to hold its operating capital. Right now the Alaska State Treasury Division has depository service contracts with KeyBank, Wells Fargo, and the First National Bank of Alaska (FNBA).
KeyBank is owned by Cleveland based KeyCorp. It's the state's primary depository bank, and it has a separate contract with the state for warrant processing. Wells Fargo is a San Francisco-based bank that provides the state's automated clearing house services and serves as an alternate depository. FNBA, an Alaska-owned bank headquartered in Anchorage, is also an alternate depository bank. All told, the state spends $1.7 million each year for these services. Of that, less than five percent stays in Alaska.
On the surface it would seem that banking with the bigger institutions is less risky. But during the 2008 financial crisis, it was Wells Fargo and KeyBank that nearly went bankrupt. Wells Fargo took $25 billion from the controversial Troubled Asset Relief Program (TARP). It returned that bailout money, but only with the help of $190 billion worth of emergency loans from the Federal Reserve. The figures for KeyBank were $2.5 billion from TARP and $40 billion in emergency loans. And even as they floundered, their CEOs were pocketing $13 million and $8 million respectively.
Neither FBNA nor BND needed help from the feds during the crisis. In fact, BND not only remained solvent, it was registering record profits. And all of it went back into the state's treasury.
Who knows what would have happened to Alaska's deposits if the federal government hadn't bailed out Wells Fargo and KeyBank. As it is, the chaos created by the country's financial tyrants resulted in major losses for the Alaska Permanent Fund.
In this day and age where the financial sector dominates so much of the economy, we don't need outsiders like Wells Fargo and KeyBank to provide the state's banking services. All we're doing is giving them more power to dictate the economic terms under which we all live. Our legislators should direct the state's Treasury Division to dump them as soon as their contracts expire. The state should use Alaska-owned institutions like FNBA for their banking needs. Or we can take a page from history books of North Dakota and create an Alaska State Bank owned by the people to serve all Alaskans better.
Rich Moniak is a supervisory engineer for the U.S. Coast Guard in Juneau. He has been writing an opinion column for the Juneau Empire since 2007. He is also on the Capital Community Broadcasting Board of Directors.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.