By Aaron Fernando, The Progressive. The Progressive Magazine talks with Phoenix Goodman and Trinity Tran of Revolution LA/ Divest LA/ Public Bank LA and Walt McRee of the Public Banking Institute on the rising public banking movement.
2018 could be a turning point in the way banking is done in America. The creation of publicly owned banks could save the public millions in fees and interest each year, lead to improved financial infrastructure, and drastically reduce the cost of public projects. In recent months, more than a dozen American cities and states have been exploring the idea of transferring their accounts from private banks into banks of their own.
Unlike private banks, public banks (also called publicly owned banks) are run by an individual municipality, county, or state and must serve the public interest rather than the interests of private shareholders. In practice, when a city or state channels its revenue through its own public bank and funds projects this way, it significantly reduces its financing costs to the tune of millions or in some cases billions of dollars each year, by lowering the cost of borrowing.
New Jersey Governor Phil Murphy, who began his term earlier this year, campaigned successfully on a public banking ticket. As a former Goldman Sachs executive, Murphy knew the cost savings such a state bank could bring, by reducing fees and interest payments on its billions in revenue and spending, including $1.5 billion in deposits held by foreign banks.
According to the Public Banking Institute (PBI), funding public projects though a publicly owned bank reduces the costs by a whopping 50 percent on average by reducing or eliminating interest and debt service payments that would otherwise get paid to private banks.
Beyond New Jersey, cities and states around the country are exploring the possibility of public banks. In the past year, city council members in Washington, D.C., Santa Fe, Portland, and Seattle have conducted feasibility studies in their cities and many others cities are moving in that direction.
Funding public projects though a publicly owned bank reduces the costs by a whopping 50 percent on average by reducing or eliminating interest and debt service payments that would otherwise get paid to private banks.
The Bank of North Dakota (BND) is often cited as the longest-running and only current public bank in the United States. It was started in 1919 to increase stability to the state’s economy, mostly agricultural at the time, which was buffeted by external forces.
“Public banks are known all over the world and have a very-well established reputation or record, but they are still new here,” says Walt McRee of PBI. “And because they’re new here, we’re seeing that as we progress, the barriers and the opposition are starting to come up more and many are bringing out oppositional positions that are either based on a lack of information or an intentional sullying of the truth by the vested interests.”
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