BY MALIA ZIMMERMAN – Most of us have heard of the store, Abercrombie and Fitch, and of course, Gov. Neil Abercrombie, but what about the Bank of Abercrombie?
House Bill 1033, which, according to House Minority Leader Gene Ward, recently had its contents “gutted and replaced” by House Finance Chair Marcus Oshiro, would create a state bank that would put Gov. Neil Abercrombie, D-Hawaii, as its chairman.
The bank would actually be called the Clean Economy Bank of the State of Hawaii. There would be six other members on the board, including two appointees by Gov. Abercrombie, one by House Speaker Calvin Say, D-Palolo, and another by Senate President Shan Tsutsui, D-Maui.
Bankers and businesses and Republicans in the legislature would have no representation on the state bank’s politically appointed board of directors, but union leaders from the AFL-CIO and the Change to Win Federation would get to appoint one member each.
The bill, which passed the House Finance committee on Friday, March 2, and is expected to pass the final reading in the House, would deposit money from the state general fund into the state bank.
The state taxpayers would guarantee the funds as the FDIC does with other financial institutions.
Several union leaders and community organizing groups such a Faith Action for Community Equity, which is made up of several of Hawaii’s religious leaders, support the measure. FACE said in testimony a state bank would “create jobs, address foreclosure and affordable housing and aid small businesses” and allow money to stay in Hawaii rather than “flow offshore to Wall Street and private investors.”
Kalbert Young, Director of the State Department of Budget and Finance, opposed the bill saying it would over extend the state resources in such a way that it could negatively impact the state’s credit rating and hurt other existing state programs.
Iris Catalani, a former legislator who is now commissioner of state Financial Institutions, suggested rather than establishing a state bank, legislators should consider establishing an alternative, such as an investment authority or a Green Loan Guarantee Fund, if they want to invest in clean energy initiatives.
The Office of Information Practices notes the bill creates new level of secrecy in state government by making records in the proposed government bank only available through litigation.
The Department of Commerce and Consumer Affairs, the agency that would likely be charged with the task of setting up the bank, did not take a position on the proposal but said before the state takes any action, a task force should explore the issue in more depth.
The bill is up for third and final reading in the House on Tuesday, March 6, and is expected to crossover this week to the Senate.
The only Representatives to oppose the measure so far in committee are two House Republicans, House Minority Leader Gene Ward, R-Hawaii Kai, and Rep. Corrine Ching, R-Liliha.
Ward said the plan is costly, bureaucratic and has a “huge infrastructure startup cost.” He said there is no detailed business plan that addresses any of the implementation issues including startup time and diversion of funds; unknown funding sources; state liability; policy conflict of social good versus profits and tying up of public funds.
“The bill has good intentions, but unknown state bank start-up costs will add a further burden to Hawaii’s dire fiscal situation, in addition to the unfunded liability of over $7 billion for the state retirement system. A similar state bank proposal had estimated start-up costs of almost $3.2 billion,” Ward said.
He added, “Per Hawaii Credit Union League, funds would be deposited into a state bank that would be insured by the state itself. Without the benefit of being insured by a separate entity, the state would be in an extremely precarious situation in the event of any financial difficulty within the bank or in the state.”
According to the legislative web site, the remaining six of a total of eight House Republicans supported the measure “with reservations” including Reps. Gil Riviere, R-North Shore, Barbara Marumoto, R-Kahala, Rep. George Fontaine, R-Maui, Aaron Johanson, R-Aiea, Kymberly Pine, R-Ewa Beach, and Cynthia Thielen, R-Kailua.
Riviere said there were three banking bills heard on Wednesday, March 1, in addition to HB 1033, including HB 1840, HD1, that creates a task force and another, HB 2103, to create a full blown bank. He supported the task force in committee and voted with reservations for the green state bank. He said he opposes the move to create a straight up state bank.
He said in the Finance Committee, there was testimony about the possibility of the green bank morphing into some form of loan and grant agency to assist in green projects.
“I figured I could give this bill a chance and see what happens, so I voted Aye with Reservations. It is likely I will vote No later because I do not think it will turn out well by the end of the session,” Riviere said.
No House Democrats have so far opposed HB 1033. Those supporting the proposal include: Representatives Marcus Oshiro, Marilyn Lee, Issac Choy, Ty Cullen, Heather Giugni, Sharon Har, Mark Hashem, Linda Ichiyama, Jo Jordan, Derek Kawakami, Chris Lee, Dee Morikawa, James Tokioka and Kyle Yamashita.
The only other state bank is The Bank of North Dakota, founded in 1919, which largely receives bank deposits from public funds. The bank deposits are guaranteed by the State of North Dakota taxpayers not the Federal Deposit Insurance Corporation.
Sixteen states have introduced bills to either study or create a state bank or investment trust since 2010, including Massachusetts, which in 2011, formed a 21-member commission that ultimately recommended against it, and California, which in 2012, passed a bill that was vetoed by the governor to study the proposal.
What are our elected officials thinking? We can’t handle the financial liabilities we have now and they want to create another liability for us to shoulder. As taxpayers we are buckling under the weight of tax burdens. We are not a bottomless pit of money, very soon the kettle will be empty and we will be another bankrupt state. What I see in store for us is a train wreck with rail, double dipping pensions, unfunded mandates, a wiped out rainy day fund, cost of living increases faster than incomes can keep up and now the gov. wants to start a bank that we the taxpayers will finance and insure! And we can be sure only the select few will benefit. Are there others out there that are getting mad or is it just me?
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