Why Public Banks Outperform Private Banks: Unfair Competition or a Better Mousetrap?

[marmar]

Why Public Banks Outperform Private Banks: Unfair Competition or a Better Mousetrap?
Posted on February 10, 2015 by Ellen Brown

Public banks in North Dakota, Germany and Switzerland have been shown to outperform their private counterparts. Under the TPP and TTIP, however, publicly-owned banks on both sides of the oceans might wind up getting sued for unfair competition because they have advantages not available to private banks.

In November 2014, the Wall Street Journal reported that the Bank of North Dakota (BND), the nation’s only state-owned bank, “is more profitable than Goldman Sachs Group Inc., has a better credit rating than J.P. Morgan Chase & Co. and hasn’t seen profit growth drop since 2003.” The article credited the shale oil boom; but as discussed earlier here, North Dakota was already reporting record profits in the spring of 2009, when every other state was in the red and the oil boom had not yet hit. The later increase in state deposits cannot explain the bank’s stellar record either.

Then what does explain it? The BND turns a tidy profit year after year because it has substantially lower costs and risks then private commercial banks. It has no exorbitantly-paid executives; pays no bonuses, fees, or commissions; has no 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 wholesome wholesale bank that partners with local banks that have located 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.

Lest there be any doubt about the greater profitability of the public banking model, however, this conclusion was confirmed in January 2015 in a report by the Savings Banks Foundation for International Cooperation (SBFIC) (the Sparkassenstiftung für internationale Kooperation), a non-profit organization founded by the the Sparkassen Finance Group (Sparkassen-Finanzgruppe) in Germany. The SBFIC was formed in 1992 to make the experience of the German Sparkassen – municipally-owned savings banks – accessible in other countries.

The Sparkassen were instituted in the late 18th century as nonprofit organizations to aid the poor. The intent was to help people with low incomes save small sums of money, and to support business start-ups. Today, about half the total assets of the German banking system are in the public sector. (Another substantial chunk is in cooperative savings banks.) Local public banks are key tools of German industrial policy, specializing in loans to the Mittelstand, the small-to-medium size businesses that are at the core of that country’s export engine. The savings banks operate a network of over 15,600 branches and offices and employ over 250,000 people, and they have a strong record of investing wisely in local businesses. ................(more)

The complete piece is at: http://ellenbrown.com/2015/02/10/why-public-banks-outperform-private-banks-unfair-competition-or-a-better-mousetrap/

[Scuba]

1. Boy, oh boy, just wait 'til President Obama learns about this! He'll tell everybody!

And Hillary! She'll be touting this on the campaign trail, right??!!??

[marmar]

3. Only if Citigroup, Wells Fargo and B of A rebrand themselves public banks.

[L0oniX]

5. Re-brand: Shitygrope, Hells Cargo and Skank of America.

[marmar]

6. I remember when I had a Citibank credit card, before I finally paid the bastard off.....

...... Shitibank would be a very apropos name.

[Agnosticsherbet]

2. Public banks don't make risky choices only to make a profit.

[L0oniX]

4. My credit union is doing just fine ...thanks.