2014 found the movement for public banking growing throughout the nation. Discouraged by foot-dragging and reversals on national banking reform, and alarmed over continuing municipal budgetary shortfalls, groups in New Mexico, Washington state and elsewhere stepped up efforts to put public banks on their cities' and states' agendas. These local groups were emboldened by news that the Bank of North Dakota, the nation's only public bank, continues to outperform big private banks.
2015 promises at least as much momentum. In Maine, Illinois, Arizona, New Hampshire, and Hawaii, state legislatures are debating public bank legislation. The Santa Fe City Council passed a feasibility study, Coloradans are pushing for a referendum, and local candidates in Madison, Wisconsin and Spokane, Washington are waving the public bank flag.Read more
A bill providing that Illinois state funds be deposited into a public bank, to be called the Community Bank of Illinois, had its first reading on January 14, 2015, then went to the Financial Institutions on March 10 where, after hearings featuring well-known Chicago activist Amara Enyia and others, the bill moved forward to the Illinois General Assembly.Read more
Public banking is not an end in itself. Some supporters see it as an engine of traditional economic growth. The Bank of North Dakota, for example, facilitated infrastructure development for that state's oil boom. Not everyone loves oil economies, but BND was there when the state needed to accommodate rapid development of transportation and build a full-service economy for the impending activity to follow. In this way, a public bank can serve a very traditional economic purpose.
Other supporters, including a few who've published valuable articles early this year, see public banks as engines of a new kind of economy--and as tools for the transition from the old economy to the new. Because big, private banks are beholden to shareholders and tied to traditional notions of "profit," those banks may not see the long-term potential of projects like renewable energy, worker-owned cooperatives, clean/green mass transit, or other projects that aim for long-term sustainability (although these projects do facilitate long-term sustainable growth and are economically smarter than the systems they replace).Read more
Big Banking Interests Push Back, Part Two: Wall Street Interests Deceive the People about Public Banks
At the beginning of March, responding to the impressive wave of state-level public banking movements in the news, Mark Calabria of the Cato Institute wrote a template that became two different published OpEds. The Denver Post titled Calabria’s piece “Colorado would be wise to reject state-owned banking,” while American Banker titled the piece “Promises of Public Banks Don't Match Reality.” The wording differs in the two pieces, but the message points are the same. In the course of delivering those points, Mr. Calabria distorts other scholars’ published research, gets some historical anecdotes wrong, and plays on tired old fears of “government control” while glossing over the rampant, widespread corruption of Wall Street banking.Read more
Last week, Occupy published my essay on the disastrous effects--and fiscal causes--of water privatization. The cause of water shut-offs in Detroit and elsewhere, water contamination, and other hurdles to universal access to H2O, I argued, were not found in some "natural" level of resource scarcity. Rather, water crises result "from local governments going broke – in debt to big banks, regulated by unfunded mandates from an aloof and cronyist federal government, unable to finance their own control over water, or raise the capital to design and implement their own sustainable water systems. Space only allowed me to make a cursory mention of public banking as a means to avoid the privatization debacle. The argument is simple, but important to lay out explicitly: Governments turn to privatization when they perceive their budgets as irredeemable.Read more
Big Banking Interests Push Back, Part One: Wall Street Doesn’t Want Community Bankers to Know the Truth about Public Banking
After seven years of economic instability caused by irresponsible financial practices, the big banks haven’t learned their lesson, and neither have many policymakers. Legislation enacted at the end of 2014 allows Wall Street banks to hold risky assets (such as interest rate swaps and other derivatives) in the banking unit backstopped by FDIC deposit insurance. This places the U.S. taxpayer on the hook for bailouts when these banks again go under due to derivatives failures. Changes adopted at the end of the year by the Federal Reserve threaten to increase interest rates for municipalities, raising the costs of municipal projects, school funding, roads, bridges, and other public service and infrastructure needs. Big banks continue to wreck our economy.Read more
With new news of public banking advances in different states and cities coming almost weekly, it's easy to lose sight of ongoing progress in Pennsylvania, where the very first Public Banking Institute conference took place in 2012, and where public banking advocacy is constantly happening throughout the state. But according to Mike Krauss, Pennsylvania, and specifically Philadelphia, continues to be a nexus for the public banking movement.Read more
For many years now, the state of Maine has been fertile ground for economic innovation. Public banking has been part of that story, and 2015 has featured passionate speeches, intelligent advocacy, and hard-hitting economic analysis. Randall Parr has been instrumental in keeping the movement alive and, importantly, in communicating goings-on in Maine with the rest of the nation.