The Government’s ALL NEW Banking System

June 16, 2023

How do you know whether a business idea is or isn’t ready for prime time?

You could spend months (or longer) planning and developing every detail of it…

Or you could invite feedback from other entrepreneurs…

But pretty much the most definitive way to know is by taking your product, plan, or whatever to your market. To the people who will ultimately buy it. They’ll decide if it is a success, needs a few tweaks, or is destined for the scrap heap.

In other words, it’s a good idea if the market will buy it. 

In fact, smart entrepreneurs will tell you, because of that, the best way to achieve success is by going to the market with something called a “minimally viable product.” Something that barely fits the bill. (Apple’s original iPhone didn’t even have a copy and paste function.) Then adjust based on the feedback you get from the market. 

This kind of strategy keeps your costs to a minimum and pretty much ensures that you’ll be spending your cash in the most productive way possible. 

Which is critical. Because when you’re out of money, you’re out of business.

I’ve seen tons of start ups with a decent product go down in flames simply because they overspent and ran out of cash. 

It is the inviolable rule No. 1 where businesses go. (Keep it in mind as you read through this article.)

Unfortunately that rule doesn’t apply if you’re the government. Because the government, unlike every other business organization in the world, doesn’t have to worry about running out of cash. 

Ever. 

So the question for them goes from how to best spend their capital to create a successful product, to where to spread it around so their product gets forced into everyone’s lives. 

They’ve come up with enormously creative ways in the past. And now your government has come up with yet another entirely new way to spend your money.

How to Sell Buggy Whips in a Tesla World

I’d like to point out that windmills had been a dominant energy source since the 12th century and were only displaced by the rise of steam power and eventually the dreaded internal combustion engine.

Of course today’s green energy is more advanced (a little). You still need the wind to blow and the sun to shine. 

I’ve written over and over about why the green revolution isn’t a viable alternative to replace our present energy infrastructure…

…to point to just a few.

In those past articles, I’ve tried to explain specific and inherent hurdles that exist where green energy goes. And for the record, let me say this again…  

I’m not against green energy per se. I’m against the government trying to replace the underlying force of our entire economy (yes, the energy we get from fossil fuels drives our economy) with something that could in no way match it in terms of output or costs. 

Put a little more bluntly, I’m against the government screwing around where they shouldn’t be. 

Of course that’s never stopped them before. And it’s not stopping them now. 

They seem to operate on the idea that none of this would be a problem if everyone just got on board all at once.

But if nobody’s willing to invest in it, how on earth can you make the dream reality?

Introducing the Green Banking System

Green banks aren’t actually a new thing. For maybe the past 10 or so years, a number of states have authorized these new financial entities to operate in their jurisdictions. But now they’re poised to go national. A provision in the president’s Inflation Reduction Act sets aside money for a National Green Bank.

So what is a “green bank?” Well according to the National Renewable Energy Laboratory (NREL):

A green bank is fundamentally “a focused institution, created to maximize clean energy adoption,” according to the Coalition for Green Capital. Some green banks make direct loans while others provide credit support to local lenders who make the loans. Green banks can also make equity investments

But apparently they don’t provide one important banking service: 

…they don’t take deposits.

(So strictly speaking, they’re not really banks.)

So if they don’t take deposits, the heart of the banking business, where do they get their money? Their two main sources, as the EPA explains, are…

Public funds are the most common source of initial capital for a new green bank. Governments may choose to either provide one upfront infusion of capital or set up the bank to receive funds over time from a dedicated stream of revenues, including regular budget funds, tax revenues, municipal bonds, or municipal utility surcharges.

This appears to nearly always be the seed capital for a green bank. And apparently it comes with rules. For instance, “a larger initial infusion of public funds can help raise investors’ perceptions of the bank’s potential impact, which could lead to increased private capital. Most of the rest of the funding comes from…

Private funds can supplement initial public funding for a green bank. Private funds may come from private investors and financial institutions. … Philanthropic organizations and socially minded investors may be another option. These potential funders may offer less than market-based returns in exchange for the benefit of a project’s social outcomes.

In other words, they’re willing to earn less on their capital if they know some good is being generated from their money.

And how do these green banks earn money from these financial dealings? In that regard they operate a lot more like a regular bank does with its loans. 

The banks will underwrite the loans they make and warehouse them — store them until there’s enough to bring to a secondary market. Then they can sell the individual loans off or securitize them into a bundle and sell them as interest bearing securities like a mortgage backed security.

In theory, that’s how they refinance themselves — absent deposits.

The Market They Serve

You might ask, why wouldn’t regular commercial banks simply finance these investments? Green energy advocacy group RMI offers an answer:

Importantly, green banks fill market gaps where critically important climate investments lack the scale, financial returns, or maturity for commercial financing

In other words commercial banks, which you’d have to assume include small to mid-sized banks which cater to small to mid-sized interests, find the projects either too small or too risky. 

Again RMI adding a few details:

Green banks can accelerate deployment of new technology and business models by blending concessional capital with private investment to bring down the overall cost of capital and mitigate downside risks to private investors.

Now we’re getting somewhere! (If you’re not familiar, “concessional capital” is one of those government / financial euphemisms that refers to loans with especially friendly terms: like below market rates or loan guarantees — i.e. terms you or I could never get.) Green banks are there to offer cheap money to “approved” borrowers while minimizing risk to the private participant. 

And according to USAFacts:

In other words, green banks create new opportunities for private investment by using financial tools to reduce real or perceived risk.

So these are financial enterprises that purport to target a niche to finance new and upcoming green energy technology all while “mitigating downside risks.”

Why the hell isn’t everyone jumping in?

Because It’s All Bull$#!%

Larry Behrens at Real Clear Energy sums it up…

Biden is pouring  billions of taxpayer dollars into a financial system independent of the ones regular businesses use for a reason: he knows these green projects are financial losers. Biden and his supporters claim their pet environmental projects are reliable, affordable and inevitable. If that were the case, they should not need massive subsidies and taxpayer capital through special banks to get off the ground.

That’s the truth — and in this case it’s TIMES TWO.

Think about it… if the green energy investments these banks are promoting were the investments of the future they want you to believe, they wouldn’t need public money to “attract private capital” or “mitigate risks.” 

And if the green banks themselves served such an in-demand service, they wouldn’t need infusions of public cash to launch either. 

Yet in the insanely-named Inflation Reduction Act there is funding to establish a National Green Bank that is supposed to help grow the green banking system across the country.

Let’s go back to the story I opened with. When a failing startup gets done blowing through its own money, it’ll start blowing through investors’. And it’ll keep doing it until investors say enough. 

And while the government has no idea about the concept of enough, they certainly understand money where their green agenda goes…

Earlier this year I shared this tweet of John Kerry speaking at this year’s Davos Globalist Jamboree.

He was pretty unequivocal…

He went on to say in his remarks…

“We have to find a way to get really serious about bringing the corporate world on board around the world.”

We have to unleash the trillions of dollars for bankable deals. How do you create the bankable deals? You have to leverage. You have to bring people together. To take first loss to minimize the risk.

Of course he didn’t mean the attendees should personally take losses. Their job is to schmoose the politicians at the event with promises of campaign funding if they pass legislation that doles out subsidies and tax credits that transfer risk from businesses to taxpayers of the countries they’re operating in. Because that’s how the political process works everywhere (and it’s why the WEF is truly a job fair for future ex-politicians.)

“Everybody is interested in green banks now,” said Reed Hundt, CEO of the Coalition for Green Capital, a climate-focused nonprofit that has spearheaded such efforts across the country. “[The federal funding] is adding a lot of oomph. Nobody should get left out.

That’s the attitude that free money and no responsibility for it breeds.

Let me say it one more time. Ultimately the market will ALWAYS decide what works and what doesn’t. And there’s no amount of money you can throw at it that will change that reality.

But now we have the new green banking system: just another way for the government to throw your money at the things they want.

Make the trend your friend,

Bob Byrne
Editor, Streetlight Confidential