National Progress Creating Public Banks Surrounds New Jersey
While NJ Governor Phil Murphy’s Public Bank Implementation Board continues deliberations, solid new progress on starting public banks is picking up speed in Philadelphia, San Francisco, Los Angeles and the states of New York and California. These efforts employ different institutional framing and approaches to bank implementation, and their accelerating efforts demonstrate that public banks are being seen as key tools for creating the cost-effective capital needed to impact a growing list of civic and economic concerns. Significantly, this building momentum is supporting creation of other variations of public banks such as a National Infrastructure Bank, modeled on the highly successful Reconstruction Finance Corporation of the 1930’s which financed America’s world leading-infrastructure investments of the last century. This new version of that national public bank could create $5 TRILLION in infrastructure financing, without raising taxes or the national deficit! Such a prospect, and growing public support, should inspire our Garden State efforts in the months to come.
Saying that it’s time for New Jersey to use a banking system that reflects community values and invests in community-identified priorities, Jersey City Finance Director and Acting Business Administrator John J. Metro published an op-ed in NJ Spotlight urging creation of a new public state bank. Citing several advantages as well as common-sense warnings, Metro stated that new Federal support funding for state and local governments creates a good opportunity to accelerate the bank creation process. His article is linked here.
The editorial board of The Philadelphia Inquirer recommends that City leaders consider Councilmember Derek Green's proposal for a public bank saying it “could help Philly overcome [the] troubling racial wealth gap.” The board writes:
“Overcoming the racial wealth gap, providing the capital Black entrepreneurs need to succeed, and increasing the business density and economic health of the city are all essential public policy goals. It’s up to stakeholders — including Green and his colleagues on City Council — to make it a reality.”
Advocates in Philly and Pennsylvania have been hard at work for public banking since 2012. After so many years of effort, it's gratifying to see a major paper's editorial board join in support.
In a major victory for public banking advocates, San Francisco's Board of Supervisors have voted unanimously to establish the San Francisco Reinvestment Working Group tasked with developing business and governance plans for both a non-depository Municipal Finance Corporation and for a public bank. The ordinance was signed by Mayor London Breed, following 30 hours of city budget negotiations.
Authored by Supervisor Dean Preston, the ordinance creates a nine-member working group that includes four community leaders, three financial institution experts, and one representative each from the city's Controller and Treasurer's offices. It gives the working group one year to deliver the plans. Budget negotiations with the mayor allocated $375,000 for the effort.
“Both models [are] feasible and could operate profitability. We recommend that the City establish a non-depository MFC, at least initially, for lower operating costs, bigger impact, and no requirement for FDIC approval.”
KPIX San Francisco quoted Supervisor Preston: “The pandemic has laid bare the deep disparities that exist along social, economic, and racial lines. As we chart a path to economic recovery, we need to look beyond corporate banks that prey on our most vulnerable communities.”
Key to the success of any public bank is its ruling governance architecture. Michael Brennan, Public Banking Institute Board member and Research Fellow at the Democracy Collaborative, has just published a new report that examines this critical issue, by addressing the question “How do we structure financial institutions to be functionally excellent and truly democratic?
“[T]his report proposes a governance design for the Los Angeles Public Bank and a more general democratic public bank model. The aim is to provide Los Angeles’ residents, organizations, policymakers, and other community stakeholders a starting point to draw from for questions of who the public bank serves and how. The strategic framework here provides a critical method of analyzing the bank’s functions—its mandates, missions, programs—and forms—its governance structures and the political-legal sequencing to get it fully operational.”
A bill to create a National Infrastructure Bank (NIB), HR 3339 (formerly HR 6422), was reintroduced in May by Representative Danny Davis. The Coalition for the NIB reports this public bank would “lend up to $5 trillion for infrastructure projects in every county in America — and meet economic and other policy objectives — all without reliance on new deficits or taxes!”
In a recent newsletter, the Coalition stated that the bill complements the Senate Bipartisan Infrastructure Plan and that “such spending has the potential to create millions of new, great-paying jobs in every state, and re-employ Americans currently out of the workforce, creating the quickest path out of our current economic crisis. Meanwhile, supercharged economic growth, and improved local revenues, ensure that loans can be repaid.”
[read the Coalition's quick summary of the legislation]
A recently published article in The Nation focuses on the need and efforts for a publicly-owned financial institution in New York City. PBI Chair Emeritus and co-Director of Banking on New Jersey Walt McRee was quoted:
“If we don’t try and control some of our own money, we’re not going to be able to implement the policies that we want to [effect] change. ... The Golden Capitalist Rule pertains: Whoever has the gold, makes the rules.”
The Public Banking Institute has launched a Friends of Public Banking initiative to encourage individuals and organizations to declare their support for the creation of public banks. The easy-to-remember URL simplifies asking your own friends and groups to support the movement.
As signatures build, the initiative will demonstrate to lawmakers and potential allies the broad-based interest that is materializing in operating banking as a public utility.
This short animated video by the Public Banking Institute has helped thousands of people understand the basic concepts of public banking. Please help us make public banking common knowledge by sharing it with your friends and groups. Thank you for all your help!
Our thanks to the Public Banking Institute
for contributing portions to this newsletter
Banking on New Jersey
Directors Joan Bartl & Walt McRee
