Public Banks: Declaring Independence from Wall Street
When the big Wall Street banks crashed the economy a decade ago due to their financial speculation, many people began to ask “why should we put our money at risk with Wall Street?” Although the federal government bailed them out with billions of dollars at taxpayer expense, it was a clear warning of the danger of trusting our financial future to private banks. Homeowners lost their mortgaged houses, homelessness and unemployment rose, local and state governments found their budgets squeezed, and public services were curtailed. Many realized there must be a better way.
The State of North Dakota had a better way. During the 2008 national crisis North Dakota had the lowest mortgage foreclosure rate in the country. Unemployment was among the lowest and local governments enjoyed healthy budgets. How was that possible? It was because North Dakota had a public bank. It had a bank owned by the citizens of the state. Rather than depositing tax revenues in private Wall Street banks, North Dakota kept that money in the state and used it to support the local economy. Founded in 1919, the Bank of North Dakota used its money for farm loans, student loans, small business loans in partnership with small local banks around the state. As a result North Dakota has more local banks than any other state. It has a healthier economy because it declared independence from Wall Street a century ago.
The lessons of public banking have been taken to heart across the country over the last decade. Local groups of citizens have advocated for public banks in Philadelphia, Vermont, New York, Michigan, Illinois, Washington state, Arizona, Alaska and elsewhere. In 30 states legislation has been proposed in support of public-owned banks. California has just passed legislation that is opening the way for public banking across the state. And the governor of New Jersey is championing a public bank for that state.
The Public Banking Institute has been the primary resource for activists promoting public banking across the US. Go to www.publicbankinginstitute.org to learn more about how finance is being democratized.
Ellen Brown, who founded the Public Banking Institute, is the leading advocate of public banking. In a video talk by Brown, she explains how when a state government has its own public bank it can finance infrastructure projects without issuing bonds, saving 50% of the cost of such projects. The state can direct credit to serve the public good rather than private profit. Interest on loans comes back into the state coffers, reducing taxes. Public banks do not pay multimillion dollar compensation to their executives since they are public servants. And when public banks are democratically accountable, they empower citizens rather than the wealthy few.
Since public banks follow an old fashioned home town management philosophy, they are risk adverse and in tune with local needs. In fact, the Bank of North Dakota has been judged to be a safer bank than the Wall Street giants.
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