BY GENE WARD — A bill being considered by the Hawaii State Legislature could potentially put taxpayer funds in jeopardy and could hurt local banks in Hawaii.
HB 853 would create a State run Bank, diverting millions of tax revenues from our local banking institutions and hurting their ability to loan funds into the community.
This State run bank would be governed by persons without a banking background including Governor Abercrombie and the State Director of Labor.
I cannot see how Governor Abercrombie, who would be designated as Chairman of the Bank, and three of his political appointees could operate this bank while also managing the entire State.
It is likely this bank would not meet the basic standards of the Federal Deposit Insurance Corporation (FDIC). There are no protections in the bill should the bank fail, and it is unclear who would make decisions about which people or organizations could get loans from this bank.
Experience in foreign countries has shown that government owned banks could be subject to political pressures not in the best interests of the residents of the state and which could put taxpayers’ funds at risk.
The House Finance Committee considered the bill late Thursday night and received testimony from the Hawaii Bankers Association unanimously opposing this measure. The State Acting Financial Institutions Commissioner also raised concerns about this proposal and suggested a study be undertaken before this idea is seriously considered.
Under questioning from members, the State Budget and Finance Director noted that his agency already serves as the Treasury for State funds and uses all major banks in the State who have the expertise and collateral support to protect and invest state tax dollars.
The current system of using local banks to diversify our investments and pay interest to the State has worked for decades. We cannot afford to gamble with state funds, particularly during this period of fragile economic recovery and we need to protect every dollar the state has.
Hawaii Rep. Gene Ward is the House Republican Leader.