Where is Your Money?

A consideration of public banking

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
~Henry Ford

Cash wall 3

Where is your money?  Well…okay…if you actually had some, where would you put it?  Why? Wherever you store your monetary wealth, do you gain benefit from allowing that storage solution to reliably insure your financial security? Can you trust that solution to work in your best interest?

Previously, this blog introduced the idea of public banking as a potential tool for correcting the economic imbalances in the world. This week, to conclude the seekingGood series on economic inequality, we take a more in-depth look at the potential and actuality of the idea of public banking.

Cannabis Leading the Way?

In 2016, California’s Proposition 64 opened certain California-based businesses to vast profits as well as an attendant cash management problem.  These “certain” highly profitable businesses comprise the burgeoning cannabis industry, now legal because of Proposition 64.  However, this legal shift does not extend to federal banking laws.  As such, the cannabis industry must skirt the federally supported banking system and banks bound by them.

Enter Public Banking.  On June 29, 2018, the Los Angeles City Council decided to “put a measure on the November ballot that would allow the city to form its own bank”—a “public bank”.  (You can read about the LA situation in a July 3, 2018 truthdig! article by Ellen Brown).  Los Angeles City Council President Herb Wesson insists that the vast profits from marijuana sales is “not what’s driving” this public bank initiation.  Perhaps that is true, but regardless of the impetus, Los Angeles and a growing number of cities (and even a few states such as New Jersey) across the U.S. are considering the establishment of a localized public banking system.

What is a Public Bank?

According to the Public Banking Institute, a “public bank” is

a chartered depository bank in which public funds are deposited.  It is owned by a government unit—a state, county, city or tribe—and mandated to serve a public mission that reflects the values and needs of the public that it represents.  In existing and proposed US Public Bank models, skilled bankers, not the government, make bank decisions and provide accountability and transparency to the public for how public funds are used.

Public Banking Institue logo (1)While public banks are popular throughout the world, interestingly, the U.S. has only one state-controlled public bank –the Bank of North Dakota  (BND). This is interesting in that as reported previously on this site and elsewhere, the U.S. maintains one of the highest GINI scores, that is, one of the highest degrees of economic inequality in the world. If this pairing of economic inequality and public banking seems like a non-sequitur, read on.

One of the most salient characteristics of public banks is that they are mandated to serve the public interest, not the interests of the bank itself (which usually means a small collection of wealthy individuals). Private banks—those of which almost all of us must currently endure, operate as a profit wing of its shareholders. These banks are mandated to maximize profit, usually short-term profit, with the shareholders as the beneficiaries.  Conversely, any governmental body, regardless of size or jurisdiction, can operate a public bank.  This means that the federal government could operate such a bank. So could your local community.

Public banking is distinguished from private banking in that its mandate begins with the public’s interest.  Privately-owned banks, by contrast, have shareholders who generally seek short-term profits as their highest priority.  Public banks are able to reduce taxes within their jurisdictions, because their profits are returned to the general fund of the public entity.  The costs of public projects undertaken by governmental bodies are also greatly reduced, because public banks do not need to charge interest to themselves.  Eliminating interest has been shown to reduce the cost of such projects, on average, by 50%.  (from the Public Banking Institute website).

Public banks can take many forms.  The Bank of North Dakota (BND), like privately owned banks, operates on behalf of its “shareholders”.  In this case, however, the “shareholders” are the citizens of North Dakota. While other states deposit the state’s revenues (usually comprised to state taxes—the public’s money) into private banks, North Dakota deposits all state revenue into the BND.  While private banks use deposits for their own private gain, BND uses it deposits to fund projects and programs that other states are cutting due to lack of state funds. BND also issues low-interest student, business and start-up loans from its deposits.  The people’s money is deposited into a bank which then serves The People.

How Do Banks Work?

The modern banking system manufactures money out of nothing.  The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity. … Bankers own the earth.  Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again.”  Sir Josiah Stamp, governor of the Bank of England, 1927

Let’s take a step back before delving further into the issue of public banking.  Let’s just consider banking in general—that is, the collection of financial institutions that take your money to hold with a low-interest return, institutions that offer you high-interest loans and fee-based services and institutions whose sole purpose is to enrich those who own them.

What is Banking?  Take a look at this brief overview video.

Wall Street Wealth Drain

So banks take deposits so that they can make loans to individuals and businesses so we can get on with life, right?  Well, not exactly.  Take a look at the following videos which focus on (1) reinforcing the previous video, the banking industry as it is (2) the potential of public banking and (3) the specific case of a successful public banking system.

Public Banking is Taking Control

Advantages of Public Banks

California [for instance] has the financial ability … right now … to fully fund education, support small business, rebuild our infrastructure, protect homeowners from Wall Street predatory lending, become a leader in protecting our environment while saving money on energy, and significantly expand low-cost public transportation. With a state-owned, public bank we can make all these changes and more.  ~Ellen Brown, Founder and President of the Public Banking Institute

Such claims are not theoretical.  In any discussion of public banking, the Bank of North Dakota becomes a centerpiece. The folks in North Dakota have been reaping the benefits of running their own bank for over a century.

BND intro

As the video indicates, the major theme within the public banking idea is taking control of money and independence from private banks, the interests of which remain at odds with the interests of the state’s general public.  In specific, even in the early days of BND, control resided outside of North Dakota.  Grain prices, shipping rates and interest rates for formal loans and mortgages were all controlled by “others” rather than the citizens of North Dakota themselves.  Such is currently true for most states—for now.


The public banking idea is picking up momentum. Both states and cities are looking into the issue.  Senator Kirsten Gillibrand even introduced legislation in the U.S. Senate to create a “public option” for banking through the U.S. Postal Service.  Many varying models on different scales are possible.

However, as depicted in the BND video above, formation of a public bank is not an easy task.  The process can be long, difficult and confusing.  This process of establishing a public bank, particularly a bank on the scale of an entire state is so difficult that few have even attempted more than feasibility studies.  That resistance, perhaps out of necessity, has begun to change.  Michigan, Massachusetts, Illinois, West Virginia, Pennsylvania, Oregon, and New Jersey represent states currently considering the establishment of a state-wide public banking system. (Note: The 2011 InContext video below, although a bit dated,  is a very clear, understandable presentation).

banking comparison

Public banking is feasible on a smaller scale than an entire state.  Philadelphia, Seattle and Santa Fe, not to mention cities in California are leaning toward establishment of municipal public banking systems. In this regard, consider this template entitled “Public Banks for U.S. Cities”, an overview of the various considerations for a city to establish a municipal public bank.

New Jersey: Public Banking in the Offing?

Seth Kaper-Dale, a Green Party candidate in the New Jersey governor’s campaign, speaking about the public banking idea, issued the following statement:

NJ invests its revenues into hedge funds managed by Wall Street banks. Our state pays excessive fees to allow Wall Street banks to loan our money anywhere in the world, often fueling wars or building oil pipelines rather than investing in the future.  A public bank would allow capital investments made by the people of New Jersey to invest in the future of New Jersey. The state would not only invest its revenue in a public bank with a clear mandate on how the money can be loaned, we would also be able to lend out $10 for every $1 in assets – that is how banks work.  We would also have access to loans at less than 1% interest, and we could pass on the low interest in loans to those who need them.  The mission for the NJ state bank will include providing low interest loans to counties and municipalities for infrastructure projects, buying out mortgages of homes in contested processes of foreclosure and re-negotiating fair mortgages and providing low interest loans to NJ university students to make higher education affordable. Banking professionals and stakeholders will play an important role in oversight of the bank to ensure it does not fall under the influence of politicians. We would partner with local community-based banks and credit unions to provide low cost loans to small businesses, rather than leaving them at the mercy of banking profiteers.

Former New Jersey gubernatorial candidate Phil Murphy included public banking in his campaign platform.  He won.  Without delay, former candidate now Governor Murphy has directed his team to move forward with his state banking initiative.   The New Jersey proposal is beginning to transcend the idea stage, as embodied in a bill (S885) introduced by state Senators Richard Codey ad Nia Gill.  During his campaign, Gov. Murphy presented many ambitious ideas for sociopolitical and economic change.  His critics wonder how he, as governor, plans to pay for such ideas.  While the timing might represent problems, the public banking option can begin to meet some of those fiscal concerns.

Toward True Social Change

In the video above which described the aspirations of Philadelphia, Mike Krauss speaks directly to the value of public banking and its importance to ameliorate the concentration of wealth.

I believe in American democracy.  I believe it is being stolen from us. … In any government, political power flows from wealth.  And when wealth is highly concentrated, so too, political power is concentrated.  So to deconcentrate political power, to maintain a democracy, we have to deconcentrate wealth. ~Mike Krauss, Pennsylvania Public Bank Project Chairperson

OUQUOTE - we cant do anything - moneyNot only does the implementation of public banking make sense, such a change might be necessary for any truly equitable change to occur in the economy, in the world and in our local communities. Thomas Marois–author and Senior Lecturer in the Department of Development Studies, SOAS, University of London–considers public control of banks critical to positive social change (video).

There is really no option.  We can’t simply relegate the question of money, finance and credit to neoliberals, to the private sector.  We can’t do anything until we are in control of money.  And to just say we are going to leave that to the private sector is a strategic mistake. Because then they control that agenda, they control credit, they control access to money. ~ Thomas Marois

So what do we do now?  What can we do? Where do we go from here?  Perhaps the first thing we need to do in an effort to right the financial wrongs that have placed so many of us on the short end of the economic stick is to refocus what we think is important. We must begin by disengaging from the artificial spectacle presented by mass media.  We need to pursue topics like public banking—boring and difficult as such issues might be—instead of Russia probes, border walls and other such divisive situations which offer little more than enticingly salacious entertainment.

Instead of directing our attention to elements of other people’s experience which we cannot change, we can begin to seek solutions to issues which actually alter our day to day experience and for which we can actually do something to change these situations—solutions leaning toward resolution or at least amelioration of our common problems.  Our individual and collective financial situations represent one of those common problems. As long as this domain is dominated by institutions and individuals motivated by self-interest and, simultaneously, by those who are are willing to trample the well-being of common people, we will remain cash strapped, in debt, with only a bleak future for ourselves and our descendants.

Who Stands in Our Way?

If this public banking idea is so great, why is this idea not more prevalent in our everyday lives? The New Jersey proposal is interestingly ironic in that it is being championed by the newly elected governor, Phil Murphy, a 23 year veteran of Goldman Sachs.  However, reinforcing the complication of this banking issue, Murphy’s proposal is not a shoe-in as the many existing community banks in New Jersey fear that the centralization of “public banking” could actual take money away from more local institutions.  Senator Raymond Lesniak, a Murphy former challenger for the Democratic gubernatorial nomination pointed to the difference between the BND model and New Jersey.  A highly populated, industrial state like New Jersey presents many special challenges to the public banking idea as compared to the relatively low population of rural, agrarian North Dakota.  In the typical, suave manner of many such politicians, Lesniak commented, “New Jersey ain’t North Dakota”.

Love Over Money - Graffitti artFurthermore, we all know the problem with public banking—with public anything for that matter: people. In consideration of NJ Governor Murphy’s interest in a state owned bank, Walt McRae, a member of “Banking on New Jersey” which has, for years, advocated a state owned bank, commented:

“…the key would be in writing the legislation, ensuring that the bank is operated at least two arms’ length away from politicians, by having it run by bankers hired by a board of directors appointed by a government commission.”     

Potential corruption? Perhaps. Addressing the potential corruption issue (among other things), noted economist Deborah M. Figart, in a thirty-page report (PDF) offered specific suggestions to New Jersey Governor Murphy regarding any attempt to establish a state-wide public bank.  Applauding the endeavor, Ms. Figart commented, “If the state of New Jersey could borrow money for lower interest rates and fund more infrastructure and economic development projects, why pass this up?” This can be a long, involved process, to be sure.  But, consider what is at stake—and consider the currently dominant banking paradigm.  Is that the option we would choose if (since) we have a choice?

In a speech at a June 2013 Public Banking Institute Conference, journalist Matt Taibbi commented:

“Each corner of the financial universe is densely complicated and full of labyrinthine bureaucratic rules over which powerful financial interests and lobbyists exert tremendous control and have been for decades… We have abdicated our responsibility to know how our world is being run…. One of the things I found out…when I started to learn about this, one of the things you realize almost immediately is that this subject can be intensely boring. It is cloaked in almost impossibly difficult, camouflaging verbiage.  It is a language all to itself that is even more inane and difficult to fight through than even the law or any other professional jargon.  And I think they intentionally make it that way so that the rest of us will not understand it.”  ~Matt Taibbi

The subject is complicated, boring, and uninteresting to most of us.  It is so bland and simultaneously difficult that our fiscally-focused media will not touch it except in the most spectacular, headline grabbing instances.  As such, hidden from view by our personal as well as journalistic disinterest, financial institutions begin to cross legislative lines unnoticed.  “The financial sector has realized that nobody really understands what’s going on and so they are continually pushing the envelope.  They are going farther and farther into more and more overtly criminal schemes realizing that the public will not catch on.” (Matt Taibbi)

While many issues divide us, our financial well-being is something we all seek.  Ideology should not prevent people from getting together to reach our common goals. Watch and re-watch the videos above.  Explore the Public Banking Institute website and blog.  Subscribe to their newsletter.  More importantly, commit to finding out what YOU can do to return wealth, and in that, power to The People.

Where is your money?  Most likely, you need to get it back!