People Are Talking about Public Banking!

Ellen Brown, President, Public Banking Institute

The amazing Ellen Brown has been talking about public banking for years. She has published two excellent brand-new articles in the last couple of weeks.

How Public Ownership Could Revive Community Banks: You don’t expect Ellen Brown (or any of us) to be favorably quoting the current Treasury Secretary, Stephen Mnuchin, but for once we are all in agreement:

At his confirmation hearing in January 2017, Treasury Secretary Stephen Mnuchin said, “regulation is killing community banks.” If the process is not reversed, he warned, we could “end up in a world where we have four big banks in this country.” That would be bad for both jobs and the economy. “I think that we all appreciate the engine of growth is with small and medium-sized businesses,” said Mnuchin. “We’re losing the ability for small- and medium-sized banks to make good loans to small and medium-sized businesses in the community, where they understand those credit risks better than anybody else.”

Brown breaks down how that happened, and what the problems are, and looks to (no surprise!) North Dakota for an alternative success story.

In an article a few days later, Brown points out how public banks are “safer, local, and half the cost.”

With a loan fund, a dollar invested is a dollar lent, which must return to the bank before it can be lent again. By contrast, as the Bank of England acknowledged in its 2014 paper, “banks do not act simply as intermediaries, lending out deposits that savers place with them.” A chartered depository bank can turn one dollar of capital into ten dollars in bank credit, something it does simply by creating a deposit in the account of the borrower. If the bank’s books don’t balance at the end of the day, it borrows very cheaply from other banks, the Federal Home Loan Banks, or the repo market. It borrows at bankers’ rates rather than retail rates, and that is one of the many perks that a publicly-owned bank can recapture for local governments. Borrowing from banks rather than the bond market actually expands the circulating money supply, stimulating the local economy.

In this article, Brown spends some time talking about Phil Murphy, likely to be elected governor of New Jersey next Tuesday, and a huge supporter of public banks. She’s not the only one looking at Murphy’s public blank platform plank. , feature this topic at The Hill:

… momentum has picked up with a proposal by Phil Murphy, a leading New Jersey gubernatorial candidate, for a public bank as a centerpiece of his economic platform. This proposal was received favorably by the state’s largest newspaper, The Star-Ledger.

New Jersey has approximately $12 billion of public funds invested in large banks such as Wells Fargo, Capital One and Bank of America. In 2015, Bank of America made only three small business loans in the state. Characterizing New Jersey as “the most under managed asset I’ve ever seen,” Murphy wants public deposits reinvested in the state. This plan is one component of Murphy’s broader objective to stabilize state finances and revive New Jersey’s reputation as an investment hub for technology and innovation.

All eyes are on the New Jersey (and Virginia) elections for many reasons, and from our perspective, this is one key issue.

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