What Is Our Intent?
The public bank is meant to provide banking services to benefit the local economy as well as residents rather than enrich private interests. This means that it will need to follow several guidelines meant to promote this purpose:
- Make business loans available to interested parties at low-interest rates, thus enabling them to start businesses, expand businesses, and otherwise improve the state of the local economy.
- Prioritize smaller businesses, co-ops, and other entities that are likely to remain focused on the local economy, thus keeping the latter strong rather than helping its one-time constituents expand beyond it.
- Blunt the impact of economic downturns on local residents and businesses by keeping credit available under conditions that would cause private banks to restrict credit.
- Provide credit to both local residents and local businesses at an accelerated pace in times of emergency so that they can avoid the worst of the impact while getting assistance with getting themselves out of such situations.
- Provide low-interest loans for students interested in college, technical courses, and other forms of education in the local region, thus making educational opportunities more available to interested individuals while also bolstering local institutions.
- Encourage desirable goals, such as homeownership, energy efficiency, and renewable power for the local region by making credit available as well as using the power of other banking services.
- Enable local governmental entities to issue bonds without having to pay private bank fees that can produce a significant upswing in overall costs. Something that should enable them to borrow at a reduced cost for projects that are beneficial to the local region.
- Since the public bank will exist to benefit the local region, it will need to come up with a system for determining which entities can and cannot make use of its banking services. Presumably, this will be based on the percentage of the relevant entities’ activities that happen within the local region rather than elsewhere. Those that have operations elsewhere won’t be automatically disqualified. However, they will need to make sure that most of their activities happen within the local region, with the exact threshold remaining to be determined.
- To an extent, the public bank will also exist to bolster the banking system that operates within the local region as a whole. To this end, it will make loans in partnership with both local banks and regional banks. However, the public bank will require said partners to handle both underwriting and processing fees while underwriting at least 30 percent of the resulting loans, thus ensuring that they will have a stake in whatever happens. Furthermore, other precautions will be required of said partners. One, they will not be allowed to sell off such loans. Two, they will not be allowed to securitize such loans. Three, they need to structure such loans in a manner that ensures that they will assume any losses up to the amount of their participation before the public bank assumes the rest.
How Do We Propose the Public Bank Be Run?
Besides this, the public bank will be run professionally to ensure its continuation into the future. Loans and other banking services can come with a fair amount of risk. As a result, the public bank must behave in a manner that won’t expose it to excessive risk, which could have catastrophic consequences for itself as well as its backers.
Having said that, the public bank will not be run to make a profit. As such, it should be able to make loans as well as other banking services available to interested parties at lower thresholds than its private counterparts, thus enabling it to make such things available to those who were previously either unbanked or underbanked.
Summed up, there is a balance that must be struck here. The public bank is committed to benefiting the local economy as well as local residents. To this end, it will refrain from pursuing profit maximization, thus enabling more of the value to go to its clients. However, the public bank will nonetheless run things safely and professionally so that it can be sure of providing its banking services for the foreseeable future.