Banking in the Public Interest

The state of North Dakota owns a bank, and it is doing very well. The state derives revenue from the bank. They use their bank to help drive growth for small businesses. The state lends to local governments at reduced rates in order to support infrastructure projects. According to a study by the Center for State Innovation, over a 15-year period the Bank of North Dakota has contributed more to the state budget than oil taxes have. So, why haven't other states gotten in on this action?

In fact, according to the Public Banking Institute, seventeen states are taking introductory steps toward the creation of public banks. They have introduced legislation for publicly owned banks or derivations, or for studies or task forces to determine how a publicly owned bank would operate in their jurisdiction. Three of these states have bills that were submitted in 2012, and eleven states had bills submitted in 2011.

Although Florida doesn't have any pending legislation, I came to know about public banks during the last gubernatorial campaign. Fred Khavari ran on a platform that hinged on the creation of a Florida State Bank. As candidate Khavari, an economist, pointed out, When the house is on fire, you don’t call in the plumber, you call the firefighter. When the economy is tanking, you don’t call in a politician, you call in an economist. I might beg to differ on that point, but this economist did sway me with his platform. Unfortunately for the State of Florida, he did not win election. However, the economic ideas he espoused have found another outlet in the Public Banking Institute. This Institute formed in order to further the understanding, explore the possibilities, and facilitate the implementation of public banking at all levels -- local, regional, state, and national.

I was in Washington DC for NOW DC's Social Forum and heard Marc Anderson, the Executive Director of the Public Banking Institute. I also met Ruth Caplan and Steve Seuser, some very articulate folks working on the formation of a Washington DC Partnership Bank. These are well thought out responses to public demand for banking reform. Marc and Ruth explain some of the benfits/issues surrounding public banks in the following video.

On the final day of the Social Forum, there was a two hour Great Public Banking Debate between representatives of the Public Banking Institute and the CATO Institute. Of interest was that both sides oppose Wall Street's role in the banking industry. Watch here.

Currently, the profits that private banks earn are funnelled to corporate executives and shareholders. This seemed a workable model, until 2009, when taxpayers found themselves bailing out the big banks. Privatized profits and socialized losses did not sit well with many folks. The Move Your Money Movement concentrates on individuals moving their savings and their loans into community banks and credit unions. Public Banks are an additional avenue for reform.

Sources: Public Banking Institute, Fred Khavari's proposal for a Florida State Bank, NOW DC Social Forum, Bank of North Dakota, Center for State Innovation: State Banks Initiative.