A County Public Bank

It is in the County’s vested interest to establish a Public Bank. This would allow the County to acquire and keep for its own needs the significant benefit of credit creation, instead of lining private bond investor pockets with County tax dollars.

A Public Bank would operate similarly to a private bank and would be run in a transparent manner by banking professionals paid as regular employees, not the millions in salaries typical of private bankers. Profits generated would not be kept by shareholders and CEOs, but would be returned to the County for the benefit of the county, such as paying off debt and funding more road maintenance. It takes about six months after the initial application for a charter from the state Banking Regulatory Agency to establish a mission statement and fulfill requirements.

The County Public Bank would not compete with regional banks and credit unions for customer deposits and checking accounts. It would be used to generate the credit the county needs for its own infrastructure repairs, redevelopment, small business loans and other county projects not financeable by the private banking sector, and in the process create local jobs and eliminate the need to issue any type of municipal bonds.

The Federal Reserve Bank of Dallas explains on its website “Banks actually create money when they lend it. Here's how it works: Most of a bank's loans are made to its own customers and are deposited in their checking accounts. Because the loan becomes a new deposit, just like a paycheck does, the bank holds a small percentage of that new amount in reserve and again lends the remainder to someone else, repeating the money-creation process many times.”

Under the Federal Reserve Act of 1913 banks are allowed to operate under the fractional reserve system, that is, banks are required to keep 1/10 or 10% of their assets on hand in case customers want to withdraw their money. In practice and with mortgage securitization, private mega-banks have fractionalized at far greater than 10 times, generating a conservative estimate of $70 trillion dollars in fiat credit. This is one of the reasons the country is in such a mess and the federal government is worried that the entire financial system will collapse.

The Public Bank of ________ County would be capitalized with county assets, such as the land, buildings and pension funds the county owns, as well as any securitized loans the county seized via Eminent Domain. Holding the county’s cash accounts, plus the loan payments the county would receive from the seized loans, the public bank would have the necessary reserves to generate the credit the county needs to fund its own projects. Having the ability to fund its own projects at will and at 0% interest rate would be a huge boon to the county.

EMINENT DOMAIN OF SECURITIZED LOANS

The “Eminent Domain of Securitized Loan Solution” is based on four facts:

1. The “money” created to fund each securitized loan was fiat credit created by private bank fractionalization.

2. Banks are NOT modifying loans for owners so they can keep their homes in spite of the best efforts of the Federal Government to make banks do so.

3. The use of MERS and mortgage securitization created a legal morass which requires servicers to forge legal documents and break securitization investment rules in order to foreclose clouding millions of property titles. 4. When a securitized loan defaults, the securitized loan insurance pays for that defaulted loan. This is proven beyond any doubt by that loan’s securitization audit.

So why are banks foreclosing? Not because they lost money on the loan, but because the government has made it very lucrative for them to foreclose. It is a government giveaway designed to stave off systemic failure.

Each of these facts is a glaring emergency signal to counties and cities to eminent domain these loans and to modify them to fair market value with low interest rates for the borrowers as soon as possible. Doing so will immediately stop the foreclosure crisis in that county or city, clear all clouded titles created by the securitization fiasco, keep the owners in their homes, and generate a new revenue stream revitalizing the community prior to any financial system breakdown or breakup of mega-banks.

We can rely on the experience of the Nevada and Massachusetts ‘Affidavits of Foreclosure Authority’, that when a State or Recorder uses the State’s Penal Code (ie: CA Penal Code 115) and requires the bank aver upon recording a Notice of Default that it has that authority to foreclose under penalty of perjury, the bank stops filing foreclosures.

In California, SB900, which took effect January 1st, 2013, states that banks have to prove they have the authority to foreclose, but unfortunately penalties are minimal, and enforcement is up to individual owners that must file a lawsuit to enforce their rights.

Under California Penal Code 115, the penalty for causing a false document to be recorded is a felony and loss of license. However, owners have not yet been able to get their District Attorneys to use this law on their behalf, and California’s court system is filled with judges ignoring established law and allowing banks to foreclose on homes even with numerous legal violations in the foreclosure paperwork.

Especially as owners have not been able to get justice from the courts, we feel it is absolutely imperative the County step up immediately to stop this theft of homes and willful devastation of the County’s real estate market, values, economy and jobs. The basic facts of Eminent Domain require whatever is seized be used for the benefit of the public and paid for at fair market value. Since banks cannot prove under penalty of perjury that they have the right to foreclose, then they cannot prove under penalty of perjury they have a right to payment for these loans. They don’t. And they know they don’t.

Therefore, it behooves the County to seize all the securitized loans they can, modify the loan principals for the owners to a bit less than fair market value, keep interest rates very low, at 1%-2%, and begin generating as quickly as possible this new, lucrative 30 year revenue stream for the county.

Once these new modified loans and payment streams are in place, the County can focus on the eminent domain of vacant foreclosed properties, rescinding those foreclosures and reinstating the former owners with the same loan program made available to others. These actions will stabilize home values, allow real estate transactions to return to a normal (as opposed to a short sale or bank foreclosure), help stabilize the income of those that depend on real estate for a living, remove the fear and lawsuit costs from owners facing foreclosure, let owners keep their homes, and allow the natural process of appreciation to bloom, naturally bringing back contractor and construction jobs.

This happy turn of events will increase the ability of community members to shop and buy other goods and services, expanding retail operations, which in turn will generate even more jobs and economic growth.

I urge the Board to establish a working committee to collect and review the information the Board needs to proceed with the establishment of a Public Bank and start the Eminent Domain of securitized loans process. CJ Holmes, Founder of Home Owners For Justice, and Marc Armstrong, Public Banking Institute, both in Sonoma County, offer their help and support if desired.

—Occupy Mendocino, CJ Holmes, Home Owners For Justice, Jan 8, 2013