So, What Is Public Banking?

by Judy Davis; Women, Money & Democracy

     October marks one year since Representatives Rashida Tlaib and Alexandria Ocasio-Cortez introduced the Public Banking Act of 2020 (H.R. 8721).  And …“while the bill doesn’t directly create new public banks, it solves a number of problems faced by public banking advocates:

  • Legitimizing the idea of public banking to moderates/conservatives/skeptics as an institutional option
  • Providing substantial technical, legal, and financial assistance to start up public banks, currently undertaken largely by volunteer organizers
  • Carving out privileged access to federal finance tools for public banks
  • Leapfrogs the siloed efforts of changing individual state banking regulations with mixed success”

Presented to Congress in the middle of our federal government’s emergency response to the Covid-19 pandemic, it is an attempt to guarantee financial recovery for smaller businesses, local governments, and individuals—those without access to Wall Street funds (where banking neglects working people).  Additionally, these federally supported public banks would be prohibited from “investing in or doing business with the fossil fuel industry.”  

The idea of public or ‘state-owned’ banking is not new.  In the US, colonial governments established “land banks” to finance farming and development and generate revenue.  Globally public banks facilitated the industrial revolution of the late 19th and early 20th centuries in both socialist and capitalist countries.  But gradually, institution by institution, our public banks have been privatized (a familiar theme).  

However, often cited as an exemplary example of a state-owned, state-run (public) financial institution, the Bank of North Dakota (BND) is still going strong.  Established in 1919 as a populist response to wildly fluctuating agricultural conditions and lines of credit, their “mission is to ‘promote agriculture, commerce, and industry’ and ‘be helpful to and assist in the development of …financial institutions…within the State.”  Initially struggling to meet their economic goals, they received little help from competing private Minnesota and east coast banks.  Today BND stands relatively unaffected by the 2008 financial crisis; in fact, in 2017, “recording record profits for the 14th year in a row.”

This accomplishment has not gone unnoticed and public banking initiatives abound.  All of them envision public banks as, among many things, tools for shared prosperity.  As recently as 2017/2018 cities and states around the country were forming task forces to study the feasibility of and proposing ballot initiatives to authorize the formation of public banks.  Indeed, in her 2017 book SCREWNOMICS, Ricky Gard Diamond builds eloquently to the need for women especially to become involved in this issue… Enter the pandemic. 

By 2019/2020 most of these studies and initiatives met with daunting results—the costs and risks of setup could not be supported by the relatively limited means of “community-centric alternatives to corporate banks”.  (Sigh!)  But you do not tell Rashida or Alexandria or Ricky no:  HB8721 is steadily gaining sponsors (all Democrats), and WILPF has launched the Women’s PUBLIC BANKING LEARNING CIRCLE.  Current subscriptions to the Learning Circle are full (hopefully there will be a Winter offering), but you can still lend your support to HB8721 (you know the drill).

Leave a Reply