Banking on Sustainability

My wife is a HGTV addict.  I get hysterical and start frothing at the mouth at the “flip this house” kind of mentality I see on shows…I’ve learned to not watch, and make her put on the headphones.

In the Post Flip this House Bubble era, I see an entire industry, from builders and realtors to investors and interior decorations wringing their hands and wondering if they will ever have an industry again.  I say to them, “Cheer up Bucko! you will if you all get innovative in every part of the industry and cater to the unmet demand!”

Post Bubble

Post Bubble Bummers

The Unmet Demand lies in the third of the Boomers who want a simpler walkable lifestyle, and their children, the Millenniels, of whom 88% want a more urban vibrant, alive lifestyle.

There is market. The question is, do you, the industry, have the chops to capture it?? Can you get creative, and do whatever it takes to innovate your piece of the industry into the emerging sustainable economy?

Here’s an amazing opportunity;  Publicly owned Banks funded with property taxes. …

Farid A. Khavari, Ph.D., economist, lays it out using Miami-Dade County, Fla as an example.

This bank can be established at no cost to the taxpayers, and earn billions of dollars per year for MDC’s treasury, while saving MDC residents even more billions per year in interest costs.

A publicly-owned bank is not unprecedented. The State of North Dakota has owned a bank since 1918. North Dakota has the lowest unemployment in the U.S. (less than 4% compared to MDC’s 13+%), and a budget surplus of over $1 billion, because they do not rely on Wall Street for money. MDC can do even better.

Under the same Fractional Reserve regulations that govern all banks, the Bank of Miami-Dade County can create $900 of new money through loans, for every $100 of new deposits. Since the BMDC will not be encumbered by massive derivatives liabilities and bad loans, and will operate for the benefit of the people of MDC rather than Wall Street, the BMDC can make substantial profits by paying higher rates for deposits than it charges for loans. Thus we can have:

4% Certificates of Deposit, 6% for long-term IRA’s

2% fixed rate, 15-year mortgages (new and refinance) for MDC residents and businesses

6% credit cards

3% car loans

3% business and construction financing

2% student loans (new and refinance)

2% alternative energy loans

2% financing/refinancing for MDC government and school projects

and more.

Farid goes on to spell out the benefits to be had…I find them quite astonishing.

Profits from loans paid back to the County eliminates Property taxes.  By attracting only 10% of the deposits already in banks in MDC, the BMDC can create another $90 billion in new money, ENOUGH TO PROVIDE A $100,000 2%/15-YEAR MORTGAGE LOAN FOR EVERY HOUSING UNIT IN DADE COUNTY.  which would bring even more profits to the county.

I would stipulate the loans be directed to real value, highly insulated homes in sustainable “Mixed use, mixed income neighborhoods, with lifelong learning and open space”.

So let’s do it people!! This creative, outside the box thinking exemplifies the way we can be making sustainable real!

Share your ideas on implementing financing innovations!

2 comments to Banking on Sustainability

  • Farid,a good article.Who would be a good “base” for a PB? Small progressive businesses? Unions? Students? Foreclose homeowners?Workers-own business? Good ideas only work when they have strong support.You have my support. Thanks

  • Brian Skeele

    Jessie, PB-public bank, I’m assuming. I remember hearing of 20 neighbors in Australia, who put their homes up for collateral and started a bank. The beauty of Farid’s suggestion to me, is collecting property taxes, and then investing back into the community. These funds could become readily available for small homes in row house configuration, with commercial on the bottom floor for instance, “product types” that Fannie Mae doesn’t invest in.

    In this way, local dollars stay local, innovation is funded, and a local safety net could be created. Setting up twice monthly payments cuts 7 years off a 30 year mortgage.Another possibility is if a payment is missed, the mortgage is extended at the last payment by a month. These are all strategies that a friend would extend to a friend,and yet conservative, common sense; the kind of bank I would like to be a part of!

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