Public banking isn’t much talked about. However, it has nonetheless seen a surge of support in the United States in recent times. For proof, look no further than the fact that several states either have or are in the process of introducing public banking bills, with examples including but not limited to New York, New Jersey, and California. This makes it very clear that this interest isn’t restricted to a single place.
What Are Public Banks Anyways?
For starters, interested individuals should know that public banks are financial institutions owned by the public rather than private parties. They aren’t a new concept. One excellent example would be how the German banking system is separated into private banks, public banks, and cooperative banks. Another excellent example would be the postal banks that can be found throughout both the developed world and the developing world. For that matter, it should be mentioned that public banks are not a new thing in the United States, as shown by the existence of the Bank of North Dakota, which was created in 1919.
Naturally, there has been a great deal of discussion about the pros as well as the cons of public banking. The supporters of public banks tend to focus on several key arguments. One would be how public banks can lower the costs of government services as well as government infrastructure. Another would be how public banks can provide banking services to segments of society that are underserved by their private counterparts. On top of this, public banks can be used to promote certain kinds of economic development that are beneficial for their host communities but not as profitable as what private banks would like to see.
Meanwhile, the opponents of public banks have many key arguments as well. In particular, there is the claim that starting up a public bank would require a huge amount of capital, which can be quite difficult to muster for public entities that are on the smaller side of things. Besides this, there is concern over how political interests can influence public banks and vice versa, which could produce everything from corruption to excessively risky lending.
Why Is Support for Public Banking Rising in the United States?
Having said that, chances are good that interested individuals can guess why public banking is seeing increased support in the United States. After all, the COVID-19 crisis is still ongoing, meaning that its impact promises to be felt for years and years to come. On top of that, this isn’t the first financial disaster that a lot of U.S. residents have witnessed in their lifetimes, so they have a heightened awareness of everything that can go wrong in the recovery because of either firsthand or secondhand experience.
In any case, the COVID-19 crisis has been brutal for a lot of U.S. residents. Higher-income earners have managed to come out in relatively good shape. In part, this is because they have more wealth to serve as a cushion in difficult times. However, higher-income earners also tend to have jobs that can become remote, meaning that they saw fewer disruptions. Meanwhile, lower-income earners haven’t fared nearly as well, as shown by the loss of almost 10 million jobs as well as how more than 18 million people are on unemployment benefits. As such, it should come as no surprise to learn that there is an interest in new systems as well as new institutions that can help out a huge swathe of U.S. residents.
This is particularly true because it has become clearer and clearer that a lot of the existing systems just aren’t working. For example, the Federal Reserve offered emergency lending that was meant to keep people employed by enabling businesses to keep on running. Unfortunately, this turned into an effective bailout of corporate debt issuers, underwriters, and bondholders, meaning that it did little to combat the long-running trend of big businesses becoming bigger by either overwhelming or snapping up their smaller counterparts. Similarly, underbanking isn’t a new concept, though the COVID-19 crisis has caused it to stand out more than ever before. Currently, something like a quarter of the U.S. population is either unbanked or underbanked.
Summed up, there is an increased sense of awareness that something needs to be done. Simultaneously, there is an increased willingness for people to push for new solutions for long-running problems. To some extent, this is because more and more people are becoming aware that current systems can’t solve everything out there. However, it should also be mentioned that times of crisis tend to make people more willing to make significant changes. So it is understandable that support for public banking is rising throughout much of the United States.