Benefits of Public Banks

Public banks can address the local needs of a community that may not appeal to the national or global banks and may substantially reduce the cost of bond issues.

Support Local Needs  Public banks can help our families and businesses and nurture the social fabric. They can do this not by competing with the community banks to issue loans but by partnering with them to help write down interest rates for loans for worthwhile local projects.  Public banks can also support loans that help build the community but might otherwise not be economically feasible.

Support Community Banks  Partnering with community banks in this way helps keep them strong.  In the wake of the financial collapse of 2008, big banks are reported to have grown by 37% in size while 25% of smaller community-oriented banks have closed down. Most of these community banks do not have sufficient collateral to meet the requirements for taking government deposits greater than $250,000, the amount insured by the Federal Deposit Insurance Corporation.

Increase Local Government Revenue Without New Taxes  The interest earned from loans would not go to shareholders but directly to the governing body which owned the bank.

Cut Government Costs  Public banks can provide less costly financing for public works projects than bond issues can offer.  When cities and counties finance through bonds, they pay interest and fees to the bonding agencies, which may contribute 30-40% to the cost of public projects. These costs are much less if the local governments own their own banks.  Furthermore, the money stays and circulates in the community longer than if it went directly to outside funding sources.

Make Finances More Secure  Public banks are more secure than global banks that have invested trillions of our dollars in derivatives which could collapse again as they did in 2008. Whatever its size, if a bank goes bankrupt, owners of derivatives have first claim on the remaining assets, putting the depositors, including governmental entities, in jeopardy of losing their deposits. Moreover, bailing out banks that are “too big to fail” directly costs the American public.