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 The California Alliance For Consumer Protection
37 Derow Court, Sacramento, Ca. 95833
(916) 923-2215 fax (916) 923-2216
www.consumeradvocacy.com * ssorleahcim@comcast.net
“Competition Is The Highest Form Of Consumer Protection”
Legislative Proposal
The California Savings Bond Act
PROBLEM(S):
The world’s 8th largest country does not have a way for small investors to purchase state issued investments - like bonds - in reasonable, consumer oriented denominations. This problem manifests itself as follows:
1) Consumers (California voters) are having problems finding quality, long term investments that they not only can afford, but believe in.
2) Under current public practice, the only way consumers can currently purchase state issued bonds is to purchase them in “large” denominations (usually $5,000 or more). For many consumers, this is unrealistic for a variety of reasons, with the largest being that it’s just simply out of their price range, and thus hinders their purchase.
3) California is continually short on cash, and this causes problems for our budget, threatening our credit rating, economy and operations.
EXAMPLE:
Recently California placed a bond before the public. Because of both its denomination size and amount needed to be raised, the bond was only made available to institutional investors. Why shouldn’t small investors profit also? Or better yet, could we not have sold more if small investors were also able to invest? For example, if half of our state’s citizenry purchased one $100 bond a year, that would equate to over $1.5 billion dollars a year.
SOLUTION:
1) Create a program establishing a state saving bond program that is available in denominations of $50, $100, and $1,000. The program will be paid for by earmarking 10% of the bond act to be used in this program.
2) Earmark $2 million to “start” this program and get it running.
POSSIBLE SUPPORT:
1) Financial Institutions
2) Treasurer
3) Consumers/Investors
POSSIBLE OPPOSITION:
1) Unknown at this time
ARGUMENTS IN SUPPORT:
1) This is a Fair and Reasonable proposal because it begs the question: why shouldn’t the small investor be able to profit from California’s success?
2) This measure not only educates consumers about the most basic of fiscal premises, but can be designed to get the average consumer directly involved in fixing California’s economic problems, and does so without raising taxes.
3) Money can be earmarked to a specific program or set of programs.
4) We already sell bonds, all we are doing now is asking that they be sold in smaller denominations and be made available to the general public, not just institutional advisors.
ARGUMENTS IN OPPOSITION:
1) Hard to implement this project/program – how will we keep track of it?
2) This is going to be an expensive program, with a lot of up front costs.
3) Conflicts with Federal Government’s program.
4) Might be declared Unconstitutional because the state is “printing money”.
ADDRESSABLE ISSUES:
1) What denominations are needed?
2) Can we sell enough bonds to make this program worthwhile?
3) How can this program be undertaken without directly competing with the Federal Government?
4) Is competing against the Federal Government good or bad?
5) Will financial institutions support this program?
6) Will consumers support this?
7) How long will it take for us to recoup the upfront costs?
SECTION AFFECTED: As per Legislative Council
LANGUAGE ATTACHED: yes.
Suggested language: version
Section 1: Intent:
- Whereas small businesses and investors are the backbone of our economic system; and
- Whereas when California profits economically from consumer spending; and
- Whereas California currently sells bonds in various denominations, to various institutions and individuals around the country and world; and
- Whereas California is searching for a way out of continual budget problems; and
Section 2: The state of California hereby establishes the California Savings Bond Program.
- Bonds shall be made available and are redeemable in 7, 9, or 11 year increments.
- The program is to be modeled after the National Program.
Section 3: The program affects any and all bonds issued after Jan. 1, 2010.
Section 4: 10% of each California bond issued by the public or legislature shall be made available along with the overall offering, in the following denominations: $50, $100, $500 and $1,000.
Section 5: The bonds shall be redeemable in accordance with the provisions outlined in the initial bond act.
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