The Daily Bell is pleased to present this interview with Marilyn MacGruder Barnewall (left).
Introduction: Marilyn MacGruder Barnewall served as president of The MacGruder Agency, Inc., a bank financial consulting firm, from 1979 through 1993. She was known as the “guru” of North American Private Banking (so-called by Town and Country and Trust and Estates magazines) and a 1989 issue of Forbes magazine called her the “Dean of American Private Banking.” Today, Ms. Barnewall is retired and has devoted her energies to writing books, articles and legislation focused on state banking and, generally, the devolution of American banking. Some of her ideas are similar to those of “public-banking” advocate Ellen Brown.
Daily Bell: Tell us more about your background and how you got into this field.
Marilyn MacGruder Barnewall: I became a banker quite by accident in 1972. I worked at Denver’s largest bank and I started the first private bank in the United States. I started the MacGruder Agency when I left the bank in 1979, and was a consultant implementing credit-driven private banks until 1993.
I have also written a number of books. The first book I wrote, which I think is still one of the only books on private banking, is called Profitable Private Banking: The Complete Blueprint, which was published by the American Bankers Association and sold for $5,000 a copy. I went back to writing and have written hundreds of articles for Internet publications since.
Daily Bell: What is “credit-driven private banking”?
Marilyn MacGruder Barnewall: There are two types of private banking, and it is different than what you might think. Traditionally, private banking is and always has been the management of other people’s money or assets. The one I created was a credit-driven form of private banking.
Basically, credit-driven private banking is done in a way that strengthens and broadens the middle class. During my time as a bank advisor, I basically created a concept of banking that enabled lenders to make business purpose loans based on personal assets and cash flow. So a business-purpose loan, a commercial loan, depends for repayment on the purpose of the loan. If the purpose of the loan is to make cars, then the source of repayment comes from the sale of those cars, the dealers or the public. In other words, individuals can’t do that because they aren’t in the business of selling cars or building condominiums. It’s recognizing all the potential available.
Daily Bell: Tell us about the work you have been doing in relation to state banks and the resolution for the State of Colorado.
Marilyn MacGruder Barnewall: I recently wrote the legislation for the State of Colorado for state banks. The movement to create state banks is a growing one. I started writing about state banks a little over two years ago. Many people are very confused about what a state bank is. Basically, it is two things: it is an administrator and it is a correspondent bank. That’s it. It is not the bank that sits on Main Street. A state bank also takes in tax revenues; all of the fees that are taken in by the state are held in the state bank instead of being sent to Washington or a money center bank. In a state bank, the money is held within the state.
All the banks in, say, North Dakota, are privately owned by investors and they are chartered by the state bank of North Dakota. Now, national banks also still do business in the state of North Dakota. Wells Fargo can be there, Bank of America can be there, but there are about seven state chartered banks that are privately owned by private investors. The other part of state banking is the correspondent bank relationship. Right now, when an independent bank has a loan that is too large for it to make, it goes to a money center bank or a bigger bank to partner in that loan with them. So those are the two things that a state bank does.
People tend to hear “state bank” and think it’s a socialized system of banking with the state owning the bank that sits on Main Street but it isn’t. It’s very much the opposite of that and a very conservative approach to banking.
Daily Bell: There are numerous additional states that are investigating the possibility of state banks.
Marilyn MacGruder Barnewall: Correct. The problem we have is too much centralized power in Washington, DC and a lot of states have figured that out. Right now you have Washington, Oregon, California, Hawaii, Montana, Colorado, Illinois, Florida, Virginia, Maryland, Massachusetts and a few others that are actively investigating the possibility of their own state bank. Let’s go back to North Dakota, and look at the reasons why they did and the results they had and why other states are looking at state banks now.
North Dakota formed their state bank in 1919, 94 years ago. They have a tremendous history and a population of about 650,000 people. The North Dakota state bank, during the last 10 years, has paid the state treasurer more than $325 million from bank profits. In 2010, the worst economy in recent history, North Dakota had its largest budget surplus in the state’s history. North Dakota tops the list of state economies year after year.
Now, state economies should be the number one concern of the people. State unemployment statistics are another issue and anyone who believes the stats that are being handed out right now are accurate is crazy. In Mesa County, where I live, the unemployment rate is 19.3%. In North Dakota the unemployment rate is 3.3%. In 2009 and 2011 there were tax reductions in North Dakota. There are tremendous financial advantages to being a state bank and having a state bank and that’s why all these states are looking into it.
Daily Bell: How does that differ from what Ellen Brown says?
Marilyn MacGruder Barnewall: Ellen Brown is very positive about North Dakota and the state bank concept. Where Ellen and I differ is fractional-reserve banking. If you look at what Ellen has written about state banks, she talks in terms of the large increases in loans outstanding for the state bank. With fractional-reserve, when a bank makes a loan of a million dollars, they send 10% or $100,000 to the Federal Reserve and they can get a credit of up to $900,000 in new loans. That is what has created “debt capitalism,” and they want to bring the whole debt capitalism concept to the state level. I am adamant that if a state bank is implemented, the charter that is passed by the people prevents that debt capitalism from happening.
Daily Bell: Define ‘debt capitalism.’ Did you coin this term?
Marilyn MacGruder Barnewall: I started using this term a few years ago, but debt capitalism is where the emphasis for bank growth is placed on debt. Now, when I was a banker back in the ’70s, we loaned our customers deposit-based loans. I think most people think that is still happening but that is not true with the fractional-reserve system that is in place today. In the past, we would loan up to 70% of our deposit base and we would be audited two or three times a year to make sure the quality of loans were good. In order for us to grow as a bank, or for any bank to grow in those days, the bank had to place emphasis on the growth of deposits. As you know, the only way you can grow deposits it to grow business, and that meant the bank had to be supportive of business growth within the community. If you don’t have new jobs and new businesses, you are not going to have new business at the bank.
Today, a bank makes loans, gives 10% to the Federal Reserve and gets a credit to be able to loan 90% of the loan they just made to the public. So they’re totally dependant on loans for growth, which has resulted in this entire debt mentality. In the old days it was always based on community business growth; new companies depositing and new employees depositing. Under the debt capitalism concept, which isn’t capitalism at all, in my view, everything is dependent on debt. It’s how they create money out of thin air, and it depreciates the currency at the same time.
Daily Bell: If you have a state bank, do you have to have state currency?
Marilyn MacGruder Barnewall: The answer is no. Obviously, you don’t. North Dakota has had a state bank for 94 years and they use Federal Reserve notes because right now, that is the law. They also have a relationship with the Federal Reserve, which is the law, and the FBIC, which is the law. But if the federal system failed tomorrow, the bank of North Dakota would be able to clear checks for all of its member banks and all of their customers. They would be able to do all of the things that the Federal Reserve System does. With the other 49 states, if the federal system fails, the banking system fails.See, if the federal system fails tomorrow, North Dakota could create its own system in a heartbeat because it has a distribution system in place with its state bank. The other 49 states don’t have a distribution system.
And as far as declaring sovereignty, there are a few things that have to be in place before you can declare sovereignty. You have to have a defined territory; of course, a state has that. You have to have population and a state has that. But the other thing you have to have is control over your own financial system and if you don’t have a state bank, you don’t have that.
Daily Bell: Good foresight on North Dakota’s part?
Marilyn MacGruder Barnewall: I have to tell you, I do not consider the Federal Reserve System in this country to be a legitimate central bank
. I am hoping some of these states get state banks implemented before Congress passes some legislation to prevent it. At the moment, states have sufficient sovereignty to say, ‘Hey we’re going to have our own state bank.’ The Federal Reserve is a private corporation; it is not part of the government and it has no authority over the independent states of the United States.
There are several states that have legislatively declared the right to be sovereign, like Alabama, Nebraska, Rhode Island, Wyoming, Washington, Indiana, Kentucky, Georgia, Kansas, Missouri, Mississippi and Maryland. So this goes to my question: Does declaring themselves to be sovereign make them sovereign? No, because they don’t have a state bank system in place they don’t have control by international law, control of their own system. All I am saying is that state banks are critical to the sovereignty process or to the creation of a new currency.
So when North Dakota implemented their state bank six years after the Federal Reserve was implemented in 1913, Eastern bankers said ‘That’s a socialist system!’ OK, look at it today and tell me which system is socialist. North Dakota just had a national meeting for all state treasurers around the United States in September, and the state treasurer of every state spent a full day becoming informed about the Bank of North Dakota.
Daily Bell: Give us some idea about the process each state will go through to have a state bank.
Marilyn MacGruder Barnewall: It’s a very interesting political process, and it won’t be pretty. What I have found out about the resolution I wrote for Colorado is that nothing is going to happen until after this election because the big banks will fund their opponents. They will put lots of money into negative advertising.
State banks, if they’re going to happen in this country, are going to come about because of a public initiative, meaning people getting petitions signed, getting involved, learning more and so on. A state bank will turn an economy around within a year if it is properly managed and properly run. But it’s a political hot potato so politicians who can’t afford to have the negative publicity during an election year are passing approvals to study state banks rather than actual legislation. Is that crazy or what?
Daily Bell: You sound frustated about the process. Why did you leave the banking business?
Marilyn MacGruder Barnewall: There were endless changes that were not for the good. Basically, the Community Reinvestment Act that was passed in 1977 said bankers had to make mortgage loans to people who couldn’t afford to repay them. if you didn’t make the loans that the government said you should make, you would be penalized; you could be fined or they could deny you the right to expand or open a new branch. That bothered me.
Following this leglslation came the low interest rates that Greenspan was putting in place. Suddenly the private bankers didn’t have time to make business purpose loans because suddenly everybody wanted to refinance their mortgage. That puzzled me greatly, I just watched what was going on and couldn’t believe it. I thought, no government would do this kind of thing to its people if it wanted a healthy economy. It shocked me.
I wrote the first article about Fanny Mae and Freddy Mac back in 2003, called “Freddie Mac’s Ethical Woes.” You can see it at World Net Daily along with many other articles of mine. In July 2003, I wrote an article about Freddie Mac’s problems. At that time, Freddie Mac was under investigation by the US Attorney’s Office, the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight.
All these changes encouraged me to begin writing my first book, which ended up becoming two fiction books. When the Swan’s Neck Broke was the first one. I wrote the book in a fictional format to try to explain fractional reserve banking to the American people and explain the destructive nature of the central banking system. It discusses what was happening internationally and talked about all the corruption that was involved. It also goes into education and what has happened to the education system and why it’s so dumbed down.
Swan’s Neck Broke came out in 2008 and last year, in 2011, Flight of the Black Swan came out, which was a follow-up to the first one based on how do we recuperate, how do we take down all this corruption? I ended up realizing that what we have to do is a series of citizen grand juries, to identify the corruption and get rid of it. You will have to read the book to find out how that ends. It turned out really well.
Further to my books, I have continued to write several articles on how the Congress literally has gone through the various pieces of legislation that made it possible for this takeover of the American government. It’s disgusting. (See If We Don’t Learn from History, Part 1 of 2 and Part 2 of 2).
Daily Bell: How would you restructure the banking system in America?
Marilyn MacGruder Barnewall: I would decentralize it, and I think that’s the only way to do it. That’s why I feel so strongly about state banks. State banks create decentralization of what is too much centralized power within the financial services industry in the United States.
Daily Bell: Would you further regulate Wall Street?
Marilyn MacGruder Barnewall: Well, one of the first things I would do is eliminate the Gramm-Leach-Bliley Act. I would put Glass-Steagall back in place. There has always been a need for a strong, big wall in between commercial banking and stockbrokers. I don’t care how much JP Morgan calls itself a bank – it’s a stockbroker; it is not a bank. I understand they like calling themselves investment bankers because it gets them respect or whatever they think, but commercial banks and stockbrokers are two different things. There is a natural conflict of interest built-in between the two, from which we were protected by the Glass-Steagall Act. We the consumers and we the commercial banking industry were protected from the moral hazard that results from that conflict of interest until they did away with the Glass-Steagall Act. That’s the first thing we need to re-implement.
Whenever government wants more power it ignores the regulations that are in place, and then everything goes to hell. I don’t believe in a lot of regulation but I do believe you’ve got to have the proper structure in place to minimize the conflicts of interest involving greed and corruption. But regulations are not worth the paper they are written on if they are not enforced and adhered to. We have to make sure that the financial services industry is structured in a way that does not encourage fraud, corruption and greed.
Daily Bell: Where do we go from here? What needs to be done?
Marilyn MacGruder Barnewall: I’ll tell you what I think. In America, if we don’t get state banks in place we are well over the cliff of economic disaster. I think the European Union is history. I believe Greece is going to default. The Federal Reserve System has totally devalued the American dollar and we can expect a depreciation of the dollar in the not too distant future. In my opinion, and no one has said this before, but I believe the state bank concept would work as well to solve the problems in Germany and France as it does in North Dakota. There’s too much centralized banking power.
Daily Bell: Is there a power elite that wants to create one-world government?
Marilyn MacGruder Barnewall: Absolutely. I think that’s been the objective since the beginning. I believe that in order to get one-world government, they first had to have in place a world economy. Once they have all the world economic systems coordinated, it is child’s play to flip into world government. I believe that’s been the purpose. I also believe that economic failure internationally has been a planned failure and I believe the reason behind that planned failure is to create world government. The evolvement into technocrats and electronic money is horribly dangerous.
Daily Bell: What do you think of Austrian economists?
Marilyn MacGruder Barnewall: I agree with a lot of what von Mises says but I disagree somewhat on the gold/silver standard because I believe we need commodities as a whole to back our currency. In other words, I believe gold, silver, natural gas, coal, timber, fishing, etc., all of the natural resources of any state, should be able to back a state currency, for example. In my opinion, all wealth comes from the earth.
Daily Bell: Is the Internet making a difference in terms of getting out your message?
Marilyn MacGruder Barnewall: I have to say it is. You have to do a combination of public speaking and publishing to keep the message going. It’s a very concerted effort.
Daily Bell: Do you have any other books in the works right now?
Marilyn MacGruder Barnewall: Yes. I am currently working on a manuscript about one of the most intricate stories in the world right now. It will take some time to complete but it is about Ambassador Leo Emil Wanta who has been an intelligence operative since his teens and who reported directly to Ronald Reagan. This will be my final book of the trilogy, Swan Song for a Shadow Government, and should be finished in about a year. It will have a lot of biographical data and be more fact than fiction.
Daily Bell: Any other thoughts you would like to share?
Marilyn MacGruder Barnewall: One of the biggest things I have come to realize is that people’s lack of knowledge, not just in the United States but people all over the world, as to how their own financial systems works is the reason that the powers-that-be have been able to perpetrate this rape of our financial resources, which is what it has been. It’s a financial resource rape.
I also want to say that the reason I wrote my two books in fictional format, in an international, intrigue, intelligence, operative kind of book, is because it was the only way I could think of to get the attention of the American public. It’s not a good situation. People need to learn more and do more.
Daily Bell: Thank you for your time, and your insights.
Marilyn MacGruder Barnewall: Thank you. The Daily Bell is very respected among the financial people I speak with. Most of them read it and I am very pleased to have this opportunity to speak about state banks.
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