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Do State-owned Banks violate Constitutional Provisions? NO

December 4, 2011

by Ellen Brown

Prepared in consultation with Timothy Canova, Professor of Law, Chapman University; and Robert Bows, board of directors, Public Banking Institute

The recent interest in state-owned banks has provoked challenges on grounds that they violate state constitutional prohibitions against lending the credit of the state. The argument is not valid, for several reasons:

The U.S. Supreme Court has already considered it and rejected it.

A number of states have owned banks historically, and many states have infrastructure banks today, which are specifically authorized by 23 U.S. Code Section 610.

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