{"id":9169,"date":"2018-07-21T09:43:28","date_gmt":"2018-07-21T16:43:28","guid":{"rendered":"http:\/\/occupysf.net\/?p=9169"},"modified":"2018-07-21T09:44:54","modified_gmt":"2018-07-21T16:44:54","slug":"is-2018-the-year-of-the-public-bank-in-america","status":"publish","type":"post","link":"https:\/\/occupysf.net\/index.php\/2018\/07\/21\/is-2018-the-year-of-the-public-bank-in-america\/","title":{"rendered":"Is 2018 the Year of the Public Bank in America?"},"content":{"rendered":"

By\u00a0Aaron Fernando<\/a><\/p>\n

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February 27, 2018 (progressive.org)<\/p>\n

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.<\/p>\n

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.<\/p>\n

New Jersey Governor Phil Murphy, who began his term earlier this year,\u00a0campaigned successfully<\/a>\u00a0on 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\u00a0foreign banks.<\/p>\n

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.<\/p><\/blockquote>\n

According to the\u00a0Public Banking Institute (PBI)<\/a>, 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.<\/p>\n

Beyond New Jersey, cities and states around the country are exploring the possibility of public banks. In the past year, city council members in\u00a0Washington, D.C.<\/a>,\u00a0Santa Fe<\/a>,\u00a0Portland<\/a>, and\u00a0Seattle<\/a>\u00a0have conducted feasibility studies in their cities and many others cities are moving in that direction.<\/p>\n

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The\u00a0Bank of North Dakota (BND)<\/a>\u00a0is 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\u2019s economy, mostly agricultural at the time, which was buffeted by external forces.<\/p>\n

BND was started before the Great Depression and therefore before the formation of the FDIC. It is not insured by the FDIC, and it doesn\u2019t need to be\u2014FDIC insurance only covers up to $250,000 and BND manages much larger State of North Dakota accounts. Instead, all deposits are insured by state of North Dakota itself. BND is often touted as a notable success because of its track record of providing economic stability during most national and international financial crises, including the\u00a0Great Depression<\/a>\u00a0and the\u00a02008 Crisis<\/a>.<\/p>\n

\u201cPublic banks are known all over the world and have a very-well established reputation or record, but they are still new here,\u201d says Walt McRee of PBI. \u201cAnd because they\u2019re new here, we\u2019re 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.\u201d<\/p>\n

As expected, many private banks and bank lobby groups have come out against this trend. Phil Murphy\u00a0met with resistance<\/a>\u00a0when he spoke to the New Jersey Bankers Association last year, when former Lieutenant Governor Kim Guadagno, the Republican candidate who ran against Murphy\u00a0derided the proposed state bank<\/a>\u00a0as \u201cthat wacky bank.\u201d<\/p>\n

Yet after Murphy\u2019s victory, the establishment of a New Jersey state bank seems highly likely. \u201cI think if we are able to pull the New Jersey thing through, we will see a real sea change,\u201d said McRee.<\/p>\n

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Interest in public banks is growing particularly quickly in California, where the state treasurer\u00a0recently laid out a plan<\/a>\u00a0to create a state bank to serve the state\u2019s newly legalized cannabis industry.<\/p>\n

Beyond the cannabis industry, cities in California are exploring the possibility of creating their own municipal banks, including\u00a0San Francisco<\/a>,\u00a0Oakland, and Berkeley<\/a>. Los Angeles recently divested from Wells Fargo and is moving toward creating a city-wide public bank following a highly successful campaign. This campaign,\u00a0Divest LA<\/a>, is a program of\u00a0Revolution LA<\/a>, a grassroots organization.<\/p>\n

Revolution LA partnered with more than thirty progressive, indigenous, environmental, and social justice organizations, and rallied over a hundred neighborhoods to support their campaign. Ultimately, Los Angeles not only divested, but adopted a thirty-point Social Responsibility scoring system for all banks with which it enters into contracts, currently the most progressive in the country.<\/p>\n

The push for a public bank naturally followed.<\/p>\n

\u201cOnce we were tasked with finding out where to move the money next,\u201d explains Phoenix Goodman, organizer with Revolution LA, \u201cwe realized, that all the other banks that would be applicable would be other Wall St. banks.\u201d Los Angeles is now has been\u00a0exploring<\/a>\u00a0the possibility of a municipal bank.<\/p>\n

As an example of ethical public banking, Revolution LA and many other American public banking movements look to the German Sparkassen system as a model. The\u00a0Sparkassen<\/a>\u00a0is a group of publicly owned savings banks which not only finance 70 percent of German small and medium-sized businesses, but have also been some of the\u00a0largest financers of the transition toward green energy in Germany<\/a>.<\/p>\n

\u201cWe see public banking as the cornerstone for the green energy movement in Los Angeles,\u201d says Trinity Tran, also of Revolution LA. \u201cIf the city was able to control its own money and everything was localized, we\u2019d be able to direct those funds to finance green energy infrastructure and green energy investment.\u201d<\/p>\n

\u201cWe see public banking as the cornerstone for the green energy movement in Los Angeles,\u201d<\/p><\/blockquote>\n

In 2018, Walt McRee believes, \u201cthe biggest advances are going to be in public awareness, involvement, and support.\u201d Phoenix Goodman and Trinity Tran agree, and they have seen firsthand what an informed and motivated public can accomplish through strategy and organization.<\/p>\n

For those inspired by their success, it should be noted that Revolution LA began as an informal meeting group in 2014. \u201cThe intent was just to get a younger generation of politically-aware people together to figure out\u00a0the problems and the solutions,\u201d says Tran, explaining that by 2015 \u201cwe’d outgrown coffee shops.\u201d Once Trump won the presidential election, the organization seized on the energy and frustration to work toward local solutions and focused on divesting LA from Wells Fargo using simultaneous protest tactics and legislative action.<\/p>\n

\u201cRight from the beginning, we knew this was going to be a fight, going up against one of the most powerful banks in the world,\u201d says Tran. \u201cWe played their game. We just did it better. We were told by a legislative director two days before the final vote was delivered that Wells Fargo was lobbying up to the very end. And then they waved their white flag.\u201d<\/p>\n