Legislature(2017 - 2018)BARNES 124
04/09/2018 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s) | |
| HB193 | |
| HB358 | |
| HB376 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 358 | TELECONFERENCED | |
| + | HB 193 | TELECONFERENCED | |
| *+ | HB 376 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 376-ESTABLISH THE ALASKA STATE BANK
4:20:42 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 376
"An Act establishing a state bank; relating to insurance,
mortgage lending, securities, and permanent fund dividends; and
providing for an effective date."
CHARLES DUNCAN, Staff, Representative Chris Tuck, Alaska State
Legislature, introduced HB 376 on behalf of Representative Tuck,
prime sponsor. He paraphrased the sponsor statement [included
in committee packet], which reads as follows [original
punctuation provided]
The Alaska State Bank is designed to create the legal
ability to access Federal Reserve and United States
Treasury monetary policy funds and use fractional
reserve banking methods to promote a science,
education and infrastructure recovery.
As federal fiscal policy funding continues to decline
for state governments and as Federal Reserve support
for liquidity in the monetary base continues to be
maintained at high historical levels, the opportunity
is opened for state governments to create new legal
mechanisms to access monetary policy. Fiscal policy is
taxation and spending by government and monetary
policy is control of the money supply and interest
rates.
In the traditions of Benjamin Franklin and the
Reconstruction Finance Corporation, local decision-
making is a requirement in guiding monetary policy and
the best method to do that today is to create state
development banks.
The basic proposal is to use existing state
development institutions to create packages of state,
municipal, borough, port authority, and development
finance authority bonds, grants and shares that are
rediscounted through the Federal Reserve and combined
with federal bonds and Treasury currency. The Alaska
State Bank then leverages or transfers the packages
back to the State of Alaska, municipalities, boroughs,
port authorities, development finance authorities,
local banks, credit unions, universities,
corporations, small business and entrepreneurship.
The Alaska State Bank will begin as an infrastructure
bank that leverages loans with our local banks and
then evolve into a full featured development bank in
the future. The first goal will be to access Federal
Reserve funds to provide reserve and capital
requirements for the Alaska State Bank. Very low
interest rates combined with the function of the grant
and equity process will guarantee payment stability
and long-term investments into jobs, science,
technology, education and infrastructure.
The Alaska Permanent Fund or other existing State of
Alaska financial institutions will not be required by
statute to dedicate reserve or capital requirements
and there will not be mandatory state revenue deposits
into the state bank. Maintaining existing financial
agreements while using the self-interest of voluntary
participation will be important keys for insuring
long-term financial success.
Self-interest will identify partnerships with our
local banks in retailing some of the new funds.
Local banks and credit unions will become more
valuable assets for increasing transactions efficiency
and helping to choose viable loan partners.
Creating an infrastructure development bank with the
legal ability to access federal and Federal Reserve
monetary policy funds is a much better solution to
Alaska's fiscal crises than increasing personal
taxation or confiscating the Permanent Fund Dividend.
Less than $5 billion per year in total transactions
will make the Alaska State Bank the primary solution
to Alaska's fiscal crisis.
4:25:27 PM
REPRESENTATIVE CHRIS TUCK, Alaska State Legislature, introduced
HB 376 as prime sponsor. He shared the Alaska State Bank
project was modelled on the Bank of Japan and the Reconstruction
Finance Corporation established after the U.S. Civil War. He
said at one time the state had a foundation which contributed to
science and technology. He mentioned the Committee for
Measurable Objectives. He spoke to infrastructure needs of the
state. He said the state could access federal funds using
fractional reserve banking practices.
4:29:39 PM
REPRESENTATIVE STUTES said [the aim of the proposal is] to
facilitate access through the federal banking system. She asked
whether the Alaska state bank could "handle any of the marijuana
dollar."
REPRESENTATIVE TUCK answered it is not the focus of the bank.
He said it would be the "insulating institution between them and
the federal government." He said the proposed bank could help
with required reports. He described ways in which the proposed
bank could help the industry.
REPRESENTATIVE BIRCH said it seems like a terrible idea. He
said he spends his time trying to restrain the growth of state
government. He asked about the genesis of the proposal.
REPRESENTATIVE TUCK answered that the proposal would be allowing
money to be created in Alaska through the Federal Reserve. He
stated it cannot be done with Alaska Industrial Development and
Export Authority (AIDEA) or Alaska Housing Finance Corporation
(AFHC) because those institutions cannot work with fractional
reserve banking.
REPRESENTATIVE BIRCH asked about liability.
REPRESENTATIVE TUCK said that one way that money is being
created is through the Federal Reserve buying up debt. He said
the idea is to take advantage of that to expand the monetary
supply in Alaska.
MR. DUNCAN said the proposal would be asking for money from the
Federal Reserve. He said there are three ways to access that
money loan guarantees, capital purchase in which the Fed buys
bonds, and credit stimulus.
REPRESENTATIVE TUCK said it is called the capital stimulus
method, but it is really a debt stimulus method.
4:38:18 PM
CHAIR KITO asked whether there are any other financial entities
that have access to the proposed type of financing.
MR. DUNCAN answered that a bond-creating institution such as
AIDEA can access two of the methods mentioned. He reiterated
those institutions cannot act with fractional reserve bank. He
explained that is what the proposal is.
CHAIR KITO suggested the proposal would open access to reserves
to which the state does not currently have access.
MR. DUNCAN answered that is correct.
4:40:13 PM
REPRESENTATIVE BIRCH stated he is not comfortable with using
debt to acquire more debt. He asked how the proposal would
produce new money.
REPRESENTATIVE TUCK said the aim is to create money in Alaska.
He said banks have a lot of surplus. He said the bank would be
an infrastructure and development driver. He spoke to using the
university system to enhance development.
MR. DUNCAN answered the central issue in monetary policy is what
the money is being increased for. He said the proposal is to
subsidize science and technology rather than speculation.
4:44:14 PM
REPRESENTATIVE STUTES asked for a simple explanation of the
proposal and how it would access federal dollars.
MR. DUNCAN answered that currently there is a debt-based
monetary system. He said the state institutions create bonds.
Those bonds are put into an account with the Alaska State Bank.
The bank issues stock, and that package is put on account with
the Federal Reserve. The account is considered the capital and
reserve requirement for loaning new money.
REPRESENTATIVE TUCK said that is where the confusion comes in.
CHAIR KITO shared his understanding that the proposal is to
create a revolving loan fund. The bonds on account with the
Federal Reserve, which in turn gives credit on the bonds. The
money is then lent out for other things.
REPRESENTATIVE STUTES said it sounds like the state would then
always owe someone money.
CHAIR KITO said that with the proposed bank, the federal
government would loan money based on the bonds on account with
the state bank.
REPRESENTATIVE STUTES suggested the bonds sold would then be
sold to the Fed.
MR. DUNCAN corrected that the bonds would be on account with the
Fed, not sold to it.
REPRESENTATIVE TUCK added that AIDEA could do the same thing but
does not. He added the Fed prefers to have the bonds on
account.
CHAIR KITO asked whether it would be correct to say that the
bonds would be used as collateral.
REPRESENTATIVE TUCK answered in the affirmative.
4:49:20 PM
REPRESENTATIVE SULLIVAN-LEONARD asked about a fiscal note.
MR. DUNCAN said the fiscal note would be the next step in the
process. He said the total cost would not be great. He
explained there would be four boards for the bank.
4:50:42 PM
CHAIR KITO opened public testimony on HB 376.
CHAIR KITO held over HB 376.