The race to create the next Public Bank in the United States has been won by far flung American Samoa! In early April, the Federal Reserve — after two years of delay — allowed the Territorial Bank of American Samoa access to the U.S. payments system.
An article in American Banker by editor-in-chief Rob Blackwell quotes PBI Chair Ellen Brown:
“It does set a precedent. … It definitely will add impetus.”
The article continues:
“It’s a huge deal for the people of American Samoa,” Phil Ware, president of the Territorial Bank, said in an interview. …
“There hasn’t been a commercial loan made on the island in five years or more,” he said. “So one of the first things we want to start doing is extend credit to the small-business community. That is a necessary part of the economy.”
Public-bank supporters, meanwhile, see the Fed approval as a sign that there won’t be regulatory hurdles to the creation of additional public banks in the U.S."
The step taken by Sen. Kirsten Gillibrand last week to introduce new legislation that would require every Post Office in the country to provide basic banking services has generated quite a few articles.
The Hill published an excellent opinion article by two economists articulating just how expensive it is to be poor in this country without any banking access: “The average payday loan charges the equivalent of nearly a 400 annual percentage rate (APR).” The authors describe the “banking deserts” that exist in many poor communities and praise the Public Bank model:
“To fully participate in the modern economy, people need access to financial infrastructure — the ability to cash and write checks, send money, pay bills, have access to credit, etc. A public bank, if done well, could address these glaring problem in the current financial services landscape.”
Another article in ThinkProgress makes the point that Gillibrand’s bill ups the stakes while riding on the coat tails of tireless work done for many years by behind-the-scenes advocates such as law professor Mehrsa Baradaran and Katherine Isaac of the Campaign for Postal Banking. Isaac said in response:
“We’re happy to have Sen. Gillibrand’s enthusiasm added to the chorus, but we’re still pushing for the things the postal service can do now.”
David Dayen: The ultimate cash crop: How a pot crisis restarted a conversation about Public Banking in America
David Dayen has written an insightful article in The New Republic on the serious problems legal cannabis raises when there’s no banking services to be had for the industry, and how these real issues are jumpstarting renewed serious interest in Public Banking. But, as Dayen points out:
“Public banking can do more than just warehouse pot dollars. The model is fairly simple: A public bank takes deposits from city and state tax revenues, giving it a capital base of potentially tens of billions of dollars. Then it could leverage those deposits to make loans for local public works projects, small businesses, affordable housing, or student loans. … But more than anything, public banking is about regaining democratic control. America is the richest country in the world; public banking advocates want to put that wealth to work on behalf of the people who created it.”
The more often the details of what a Public Bank can do are in public conversation, the more widespread the understanding becomes.Read more
Charles Grigsby writes to the Boston Globe: How Mass lawmakers could lead by creating a bank for infrastructure
Public Banking advocate Charles T. Grigsby, immediate past president of the Massachusetts Growth Capital Corp., explains in the Boston Globe that Boston need not despair in the face of attempting to fund its future infrastructure needs. Currently under consideration in the Massachusetts Legislature is House bill 3543 that would authorize the formation of a state-owned bank focused on providing lower-cost infrastructure financing across the state.
“It’s drafted to become self-sufficient after initial capitalization and especially to avoid competing with banks and credit unions in the state.”
Postal retail banks would be immediately dramatically helpful to 34 million families in the country. Yesterday Sen Kirsten Gillibrand introduced legislation that would require every US post office to provide basic banking services. This is a service the Post Office offered until the 1950's.
Having the ability to cash checks and obtain low-cost short term loans at the local post office would free millions of people from the clutches of the unscrupulous, predatory payday lenders to which people routinely pay triple digit fees to borrow money for bills that come due before their next paycheck. If you need a typical payday loan of $375, expect to pay an extra $520 in interest and fees, according to Pew Charitable Trusts. These outrageous charges throw working people into a never-ending quagmire of debt just to keep the lights on.
Nearly a quarter of American households — one in four — are either unbanked or underbanked and rely on payday loans or “alternative” lenders, and the situation overwhelmingly impacts people of color.
In an interview with Daniel Marans in HuffPost, Gillibrand said:
“This is a solution to take on payday lenders, to take on the problems that the unbanked have all across the country. It’s a solution whose time has come. … Literally the only person who is going to be against this is somebody who wants to protect payday lender profits.”
Researchers at the St. Louis Federal Reserve reviewing Bitcoin and other cryptocurrencies say that a “Fedcoin” on the cryptocurrency model would not be feasible. What they recommend instead is that the Fed allow individuals to bank at the Fed in digital dollars, just as banks are allowed to do now. This ability would eliminate the risk of bank runs, since the Fed can’t run out of dollars, and would force private banks to raise the interest rates they pay on deposits if they want to keep their depositors. The Fed would be issuing digital dollars, expanding the supply of "legal tender" issued by the government. Currently legal tender is only 5% of the money supply (the 5% that is in paper dollars); the other 95% is issued privately by banks.
Now we just need to make the Fed truly “federal.” The Fed is actually our biggest “public” bank. The problem is — as we all know — it’s not really public. We need to nationalize the Fed, making it a true public utility!
From an article in CCN:
“In an effort to assign Bitcoin one of the above monetary categories, the researchers concluded that Bitcoin actually defied traditional categorization – it’s none of the above …
From the St Louis Fed report:
“We believe that there is a strong case for central bank money in electronic form […] central bank electronic money satisfies the population’s need for virtual money without facing counterparty risk.”
Ellen Brown’s latest article in TruthDig tackles the Fed’s current penchant for raising its benchmark interest rate — and the disastrous effects it’s already having. Ellen says the Fed’s reasons don’t pass the smell test. Instead, it’s another case of follow the money: Who benefits from increasing interest rates? Good guess ... the banking sector (and, naturally, the Fed’s seven member Board of Governors).
“Wall Street calls the shots, and Wall Street stands to make a bundle off rising interest rates. ... The Federal Reserve calls itself independent, but it is independent only of government. It marches to the drums of the banks that are its private owners. To prevent another Great Recession or Great Depression, Congress needs to amend the Federal Reserve Act, nationalize the Fed and turn it into a public utility, one that is responsive to the needs of the public and the economy.”
On the day of Bank of America’s shareholder meeting in Charlotte, North Carolina, an alliance of 14 organizations including Public Bank SF, Divest SF, Friends of Public Bank of Oakland, Mazaska Talks, California Nurses Association, Code Pink, SEIU and more rallied at a Bank of America financial center in San Francisco and marched to City Hall to call on the SF Municipal Task Force to create a fully functioning Public Bank within the next five years.
From the group's press release:
“Our organizations represent San Franciscans who want a greener, more LGBTQ friendly, anti-racist, decarcerated, pro-indigenous, and more affordable city. … The organizations cosponsoring today’s protest are concerned that public bank task force members may follow Santa Fe and Los Angeles officials in using exorbitant start-up and operational costs of a public bank as an excuse to continue the city’s relationship with Bank of America and other Big Banks. … [Startup costs] would pay off in the long-run as a public bank can provide lower interest rates than the ones offered by Wall Street banks for public infrastructure projects …”
A new report issued by the William J. Hughes Center for Public Policy at Stockton University touts the important specific benefits that New Jersey could expect from starting its own state bank. The report recommends that Gov. Murphy implement both a feasibility study and a draft business plan to help a state bank hit the ground running.
Deborah M. Figart, PhD, Distinguished Professor of Economics writes:
"Every $10 million in new lending by the State Bank of New Jersey would yield an additional $16 - $21 million in state output (Gross State Product), raise state earnings by $3.8 - $5.2 million, add 60 – 93 new state jobs, and increase state value-added by roughly $9 – $12 million. ...
"Despite numerous accounts documenting the Bank of North Dakota's longstanding success, [currently the only Public Bank in the US], this exemplary model has only recently generated serious consideration by other states, including New Jersey."
Community members and public officials alike often ask how would a Public Bank be run? In true keeping to the nature of "public", ultimately, the structure of a Public Bank is the responsibility of the community to actively decide. The values of the community it serves would be reflected in the charter of the Public Bank.
Determining those values could include surveying the population and voting on the bank's principles.
As one example, the Oakland advocacy group Friends of the Public Bank of Oakland has completed a comprehensive bank governance document put together by its governance committee. Their proposed Oakland Public Bank policy outlines:
- Strong progressive values
- A Board of Directors with a majority of members drawn from the community, as well as representation from various experts
- Board decisions by consent, rather than simple majority rule
- An Academy to train Directors (based on the practice of the Sparkasse public banks in Germany)
- Expansive and community-centered loan policies