What is public banking?
Local Press Coverage
In general, public banking can be...
• Viable solutions to the present economic crises in US states.
• Counter-cyclical, meaning they are capable of reducing the negative impact of recessions, because they can make money available for local governments and businesses precisely when private banks decrease lending.
• Potentially available to any-sized government or community able to meet the requirements for setting up a bank.
• Owned by the people of a state or community.
• Economically sustainable, because they operate transparently according to applicable banking regulations
• Able to offset pressures for tax increases with returned credit income to the community.
• Ready sources of affordable credit for local governments, eliminating the need for large “rainy day” funds.
• Required to promote the public interest, as defined in their charters.
• Constitutional, as ruled by the U.S. Supreme Court
However, public banking is not...
• Operated by politicians; rather, they are run by professional, experienced bankers.
• Boondoggles for bank executives; rather, their employees are salaried public servants (paid by the state, with a transparent pay structure) who would likely not earn bonuses, commissions or fees for generating loans.
• Speculative ventures that maximize profits in the short term, without regard to the long-term interests of the public.
How it can work...
Public banking is distinguished from private banking in that its mandate begins with the public's interest. Privately-owned banks, by contrast, have shareholders who generally seek short-term profits as their highest priority. Public banks are able to reduce taxes within their jurisdictions, because their profits are returned to the general fund of the public entity. The costs of public projects undertaken by governmental bodies are also greatly reduced, because public banks do not need to charge interest to themselves. Eliminating interest has been shown to reduce the cost of such projects, on average by 50%.
When the public interest demands, the mission of public banks is to respond immediately, to assure the long-term prosperity of the community. In the U.S., the Bank of North Dakota is a prime example of such a public bank.
Most states, with the exception of North Dakota, currently deposit their tax revenues (the public's money) in private Wall Street banks, which use these deposits for their own private gain. This money could be deposited in the city's or state's own bank and used to fund projects and programs that benefit the public over the long term - the very same projects/programs that are currently being cut from state budgets.
The Times reports how it could be "a controversial and somewhat revolutionary step, but Councilmember Nick Licata says a public bank would operate in the interest of the city’s government and its residents."