A State-Owned Bank: Is it a good idea?

There have been many articles in the papers recently like the one that appeared in Bloomberg Businessweek last week.  It's about the Bank of North Dakota, the U.S.A.'s only state owned bank.  North Dakota, remarkably enough, has a budget surplus and the credit is flowing to small local business.  This seems largely due to North Dakota's state-owned bank.  The bank does not take consumer deposits, but North Dakota's state agencies are required to put their funds in in the bank.  The funds are used for economic development in the state including student loans, venture capital and disaster relief loans.  The bank gives half of all its profits to the state.

I like the model but the down side, as pointed out by Amy Cortese in her book Locavesting, is that a state-owned bank creates a link between money and politics (although I would suggest that link already exists in a way that politicians benefit from but the citizens do not).  The governor of North Dakota essentially controls the bank because whoever is in office acts as the bank chairman and appoints the bank's advisory board.

Representatives in my home state, Washington, and many other states are launching initiatives to start local banks mostly because of the successes in North Dakota.  According to the Washington State Bank Analysis done by the Center for State Innovation, a Washington State Bank could "could help
create or retain 7,400‐10,700 jobs....could generate roughly 8.2% or about $2.6B in new lending activity" and "could generate dividends for the state starting in year 3."

A group of Democratic leaders introduced House Bill 1320 to the Washington State Legislature in January of 2011.  Progress and a summary for the bill can be found here.

Although the state bank in North Dakota seems to have increased the health and number of banks in North Dakota, many people are wary of the movement toward state-owned banks. The Bloomberg article says, "Democratic and Republican lawmakers in 13 states introduced bills this year to study or start state-run banks....a prospect that does not sit will with commercial lenders. It's 'socialistic' says Camden R. Fine, president of the Independent Community Bankers of America, a Washington-based lobbying group that represents more than 5,000 community banks."

I think we could benefit from a well regulated state-owned banking system.  Perhaps I'm naive, but I think the officials in Washington are interested in the benefit to the local business community and the citizens of our fair state.  What do you think about the prospect of state-owned banks?

Surfer Kyle Theirmann Moves his Money

Kyle Thiermann, a surfer tells us about banking and reminds us:

"You have the power to stop funding the problem and start funding the solution." 

"Through your daily decisions you have the power to Change the World."

Kyle has been responsible for people moving hundreds of millions of dollars out of the big banks into local banks and credit unions.  His website, surfingforchange.com has some great movies of surfing and more excellent information.  

Here's his video on the importance of buying local:

Hooray for Kyle!  He's showing everyone can make a difference.  You too!

Crowdfunding with a Return

A good friend of mine told me he had been playing the investor on Lending Club, a crowdfunding site where people in need of a loan can connect with people (maybe lots of people) willing to lend to them.  He was excited by the fact that he could look at the investment possibilities (people who need a loan) and see their credit history, their story and other information and he could make his own decision about whether or not to lend to them.  So far, he's making an excellent return!

Lending Club was number 20 on Forbes' list of the 100 most promising companies in America. As of the beginning of this month lending club has originated more than $430 million in loans and investors on the site have made more than $36 million in interest.  Sounds pretty good!  No wonder my friend is happy.

Another crowdfunding site that is getting some press these days is CrowdCube. Crowd Cube claims to be the world's first crowd sourced equity finance for private businesses.  The Rushmore Group raised one million pounds sterling in equity financing on the site.  Rushmore Group is the sixth deal to close on Crowd Cube.

It might be possible to do this kind of thing in the United States before too long.  The House Bill that passed in November, The Entrepreneur Access to Capital Act, is now in the Senate.  It's been renamed The Democratizing Access to Capital Act of 2011 and is numbered S1791. Scott Walker, a lawyer wrote an excellent blog post on What StartUps Should Know About the U.S. Crowdfunding Bill. The bill had a hearing in the Senate Banking Committee on December 1st.

Moving Your Money: Investments

Is your money, like mine, in gigantic Mutual Funds you know almost nothing about?  I hate to think about what I’m actually invested in so I took a look at what Fidelity’s Asset Allocation fund, Asset Manager 60%, is invested in.  Their top 10 include a number of treasury notes and bonds and Fannie Mae and Freddie Mac and Barclays and Apple.  They have almost 3000 different holdings in the fund.¹  The treasuries tend to support the big financial institutions and I’m just not sure how I’m feeling about Fannie Mae and Freddie Mac these days. 

I want to put my money somewhere that is controlled by real people not Wall Street algorithms.  I want my money to be put to work to create real value for real people; health, happiness, well being.  The things Robert Kennedy suggested were missing from our GDP in this wonderful speech of his:

I discovered a fund that seems to hold real value at the heart of its investments AND make a good return.  Portfolio 21.  Portfolio 21 was written up in the June issue of  Financial Advisor’s article, New Ways to Measure Risk: Portfolio 21’s Black Swan Strategy has Delivered Alpha Nine Years Out of Ten.  Their strategy of investing based on sustainability factors has been very successful when measured against the S & P 500 Index.  Portfolio 21's 10 year performance is nearly twice the S & P 500.

Check them out and let me know what you think.  I'm moving my money!

¹ Accessed November 26, 2011: http://fundresearch.fidelity.com/mutual-funds/summary/316069582?refpr=MFEval_40f

Occupy Thanksgiving

What is Occupy Wall Street about?  While people continue to camp out in the streets in cities all over the country, many of us are discussing them. The Occupy movement is about basic values and principles of social justice.  Many of us feel that the government is not adhering to our principles of fair play and mutual loyalty and support.  Perhaps if we stand in the street someone will notice – notice that our work, our lives, our families, our homes, our country, matter to us. 

Photo: Tom Giebel

Our government seems to have forgotten that we are the country, and that our wellbeing is the wellbeing of our country.  The GDP doesn’t measure us.  Vast -- almost unimaginable -- sums of money are being poured into the banking system.  Wars are being fought for we know not what.  Laws are passed to benefit the oil industry and agribusiness at the expense of the rest of us. That money needs to come home to America – to the people in the opening words of the Constitution, “We the People”. We need jobs, we need health care, and we need homes and a decent education for our children.  We need to pay off our debts and let go of a lot of our stuff.  We don’t care about having more; we care about having enough. We care about each other.  We care about our neighbors, our land, our towns and our cities. 

As we give thanks this week, we think about the simple things that we are actually thankful for, the people we love, the earth beneath our feet, the beauty of love and life.

Crowd Funding Private Equity is on its way!

What is crowdfunding?  This video gives you an introduction.  Why can't we crowdfund as investors already?  Because in order to invest in private businesses you must be someone wealthy (over $1 million in assets) and have gone through a process to become an accredited investor.  Even if you've gone through that process, it's not always easy to find the kinds of investment opportunities you're looking for because the regulations limit publicizing private equity opportunities.  These regulations were put into place to protect the public from schemers and shysters. They figured the people of high net worth were less vulnerable to schemers. 

AND by not allowing the 99% to invest in private businesses (except their own or their family's) the opportunities to get our money out of Wall Street and on to Main Street are very limited. This bill, which seems likely to pass, would make give the opportunity to invest in private businesses to all of us.  That gives us the opportunity to support businesses we know about and care about.

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So, just one week ago, I let out an involuntary whoop! when I saw this image on twitter: 

Introduced by a Republican member of the house, Patrick McHenry of North Carolina, the Entrepreneur Access to Capital Act is a truly bi-partisan bill.  President Obama made an official statement in support of the bill the day before it passed. The bill amends securities law to be user-friendly (or not at all so onerous) for small businesses to attract small-time equity investors who are not necessarily wealthy (accredited) investors.  The official text of the bill is likely to change in the Senate so keep an eye out!

Although I like the game-changing aspect of unleashing the small money of the masses to help small businesses  there are big potential pitfalls to investing in private businesses.  Small businesses, especially startups, often fail and then you're left with nothing.  Your shares in small business can't easily be liquidated.  If you need to get your money out of your shares in private business, that is pretty much impossible to do.  These investments are not publicly traded.  You can't just put them on the market to sell, because there isn't a market and regulations are different for private equity shares then for the kinds of stocks you're used to!  So watch out! This stuff is risky.  

Finance for a Better World

With the growing Occupy Wall Street movement, the Oscar winning documentary, Inside Job, and the continual news about financial failure all over the world, it seems that the finance, banking and investment industry has been taken over by a wild-eyed group who can’t see beyond the dollars piling up in front of them. Yes, since the Federal government began deregulating in the early 1980’s, many people in the financial industry have been making themselves very wealthy by exploiting new ways to pump money out of others while damaging the businesses and lives of the rest of the global economy. And alternative institutions to provide sustainable finance are growing and new innovations in sustainable finance are being developed.

Sustainable finance supports people and places.  

 

Two books, David Korten’s Agenda for a New Economy, and Bill Mckibben’s Deep Economy, show what sustainable finance looks like.  Sustainable Finance creates real value, making people and communities stronger, healthier and more beautiful without depleting non-renewable resources or destroying ecosystems. 

Existing alternative financial institutions include credit unions, non-profits that forego speculative investing on Wall Street for investing locally.  As people become aware of what has been going on in the Wall Street financial system, they are moving their money out of the four large banks and into credit unions – even churches, municipalities and PTA’s!

The Global Alliance for Banking on Values is creating a network of banks that share the value of “using money as a tool for enhancing the quality of life through human, social, cultural and environmental development.” (gabv.org) This consortium of banks from all over the world are working to re-invent finance to be something life-enhancing.

Slow Money is bringing people together to redefine investment – fostering financial institutions that are connected to people and places, and is “fixing our economy from the group up… starting with food!”

Another development is crowdsourcing, where small individual contributions from huge virtual crowds accumulate into the financial support for business creation.    Kickstarter and Kiva are two popular crowd-funding web platforms benefitting small business and individuals all over the world.  On these websites we can give money to people and contribute to ventures we find worthwhile.

At BGI, I’m working with a team of students whose purpose is to empower people to invest in each other.  We’re working on creating a model local investment market making it possible for each of us to invest our money in people and places we care about. Many Americans have retirement savings in 401-Ks or similar savings instruments.  The idea is to put your investment dollars into people you know about, who are making your community and your world a better place.  Your retirement savings could finance the kinds of small businesses you believe in. 

This blog entry first appeared on the BGI.edu blog on October 27, 2011. 

Dream of the Week

I've been reading the blog of a friend, Dream of the Week, http://thedreamoftheweek.blogspot.com/.  It talks about the dreams we dream, some of them find the support of synchronicity and others turn out less well.  I recommend the blog; it makes me feel good about dreaming big!

So my dream, my big audacious hairy dream, is that we change the whole way the economy works.  And WE do it!  Not the pundits, the politicians and the policy wonks but WE the people change the whole economy.  Because we can!  In fact, we're already doing it.

With Occupy Wall Street:

Photo Credit: Atomische * Tom Geibel

And through "We are the 99%"

Photo Credit: wearethe99%.tumblr.com

By moving our money

Photo Credit: wisaflcio

And we're spending what we have in support of a new economy-- one that makes our communities stronger and our earth healthier.

By shopping at Farmer's Markets:

Photo Credit: Justin Sewell

By shopping in local businesses

Photo Credit: NNECAPA Photo Library

By investing in what we believe in

According to John Gerzema, author of Spend Shift and chief insights officer of Young & Rubicam (a marketing company), over 55% of consumers are favoring companies they believe have strong social values.

It is OUR MONEY!  Our spending is our power.  Pay attention and use your dollars well.  Spend them in your community with people and organizations you care about.  Lots of us are doing this already-- Join me and the other Spend Shifters!  We are changing the world.

Finance for a Better World

I wrote a piece on Finance for a Better World for my graduate school's website, the BGI.edu blog.  Check it out!

Having an Impact

I spent the past few days at the Net Impact Conference in Portland.  There were more than 2500 business professionals, Graduate Students and Undergraduates there to network and learn how to make business work for the greater good.  Net Impact is a network of business people using their skills to work for good.  I spent most of my time at the conference going to sessions about Finance.  Impact Investing was the buzzword of the day.  Impact Investing, as the Economist defined it in their article Happy Returns, are those investments "designed to yield both a financial return and a broader benefit to society."  JP Morgan estimates there could be a trillion dollars invested this way in less than ten years. Interesting stuff!

Ray Whitehouse/The Oregonian

I was also able to see the Occupy Portland people march by the convention center because Bank of America was holding an event there (while Net Impact was going on!). One of the protesters stopped to interview me on my opinions about the Occupy movement.  He was particularly interested in what I thought people who weren't comfortable with heading into the streets for the Occupy movement could do from their own homes.

I told him about Move Your Money project and how I thought the movement to get money out of the big banks and in to Credit Unions was the first thing people could do.  We talked about how every dollar each of us spends, whether on food or clothing or at other businesses, was a vote for something helpful or something damaging.  Shopping at local businesses helps keep money in the local economy.  Buying clothes made in the USA helps keep jobs on our shores.  Everything we do with our money makes a statement and even when we don't have much, we can use it to buy local produce or eat at local restaurants and not huge chains.

Time for me to move MY money!

I have been meaning to move my money out of Bank of America for over a year and I'm finally doing it!  After reading Think Progress's Five Reasons to Move Your Money Out of Bank of America, I just had to find the time to figure out what to do.

I found a really useful website started by Arianna Huffington: http://moveyourmoneyproject.org/.  It has a great video using It's a Wonderful Life.

I used the website to find local banks and credit unions near my house.  I'm in the process of moving my money out of Bank of America and in to BECU, a local credit union.  Here's a handy checklist to help you move your accounts:

7 SIMPLE STEPS TO MOVE YOUR CHECKING ACCOUNT

1. Open Your New Account

In most cases, you should be able to open a checking account with an initial deposit of $35 to $100. At a credit union, you'll also become a member and co-owner at the same time.

2. Order New Checks and an ATM/Debit Card

These typically arrive within 1 to 2 weeks. You should also consider applying for a credit card from your new local bank or credit union at the same time.

3. Ask Your Employer to Reroute Your Direct Deposit

When you open your new account, ask the bank or credit union for a direct deposit authorization form that includes your new account information. Give this form to your employer and anyone else who makes direct deposits to your account. It may take one or more pay cycles for the change to be made, so keep your old checking account open and watch for the swith.

4. Contact Companies that Direct-Debit Your Account

Using your last bank statement, make a list of any businesses that you've authorized to directly debit your account. Ask your new bank or credit union for an automatic payments authorization form that includes your new account information. Send this to the businesses on your list.

5. Set-up Online Bill Paying for Your New Account

If you like to pay bills online, set up bill payment information for your new accoutn. Also, top automatic, recurring payments you have established through your old account.

6. Close Your Old Account

Once you have started receiving direct deposit into your new account and are sure that there are no outstanding checks or automatic debits that need to clear, close your account. Warning: do not just withdraw the last dollar and assume the account will fade away on is own. Your old big bank may start chargin you fees for having an empty or inactive checking account. Instead, follow the bank's procedure for closing out the account.

7. Enjoy Your New Local Banking Relationship!

This checklist was produced by the New Rules Project’s Community Banking Initiative. Visit newrules.org/banking for articles, graphs, studies, and more.

I made my own video about what I've been studying (sustainable finance) and making my money move.!

Stay posted for more information on how to move your investments so they too will support a better world!

Encouraging signs: moving money toward values

The resonance of the Occupy Wall Street movement is resounding.  All over the world people are gathering in cities and towns objecting to the corporate power and greed that has been the hallmark of the past years.

While the protesters were gaining strength and numbers this last week, it was the 3rd annual national gathering for Slow Money an organization founded several years ago to bring money together with values. As they say on their website: "the Slow Money Alliance is bringing people together around a new conversation about money that is too fast, about finance that is disconnected from people and place, about how we can begin fixing our economy from the ground up... starting with food.." Their annual gathering took place in San Francisco and hundreds of people came together to work to change the way that capital flows, bringing money to farms and producers and encouraging a "new generation of entrepreneurs, consumers and investors who are showing the way from Making A Killing to Making a Living."  Slow money is creating a network of members and investors who believe that we must "bring money back to earth."

Sign on to their network here: http://slowmoney.org/

MarketWatch wrote a piece about the gathering: Slow Money Offers Investing Alternative to Wall Street Protests.  With the Occupy Wall Street movement gaining steam, Slow Money offers one network of people committed to making real change in the financial system.

David Korten, author of Agenda for a New Economy, is an outspoken proponent of aligning our economy with our values.  He says, "The old economy of greed and dominion is dying.  A new economy of life and partnership is struggling to be born. The outcome is ours to choose." He recently wrote a great piece for Yes! Magazine, Why I'm in Solidarity with #OccupyWallStreet.

Sustainable Industries latest issue, Down on Main Street, suggests that Small Business could save the economy. Their article, Crackin' Piggy Banks talks about the latest trends in Micro Lending, Peer to Peer  Lending and Crowdfunding.

It's Our Money

This photograph is from the We are the 99% website.  The stories and pictures there are beautiful and tragic.  A powerful testament to the difficulties most Americans are facing today.  Story after story is told in photographs and handwriting.  Real people sharing with each other their difficulties and hoping that the community that has come together in the Occupy Wall Street movement will make a difference. 

This woman writes "I want kindness and truth and compassion and integrity in government!"  She also writes "All we want is for our children to have a fair opportunity to succeed." We are a citizenry feeling betrayed by our government.  Why?  

Even before the economy tanked income inequality had been growing.

And the difference between a CEO salary and the average worker is frightening and it is unique to the United States.  No wonder we're outraged!

Kindness and truth and compassion and integrity.  How do we make our money work for our values? How do we the 99% bring our resources together to create an economy which supports real people doing real jobs?  How do we make the world that creates opportunities for our children?

We have resources as we can see in the thousands and thousands of people peacefully sitting in cities in every state saying, we have had enough.  Wall Street isn't supporting us.  Corporations aren't creating something we value.  Our tax dollars should be working FOR the 99% not only for the wealthiest among us.  Paul Krugman in his column in the New York Times on October 6, 2011 said, "The protesters' indictment of Wall Street as a destructive force, economically and politically, is completely right."

We need to find creative ways to use our money to invest in the world we want.  After all, it's our money.