Editor’s note: We often ask our daily newsletter subscribers what their thoughts are on everything from workplace culture to the dynamics of power within the nonprofit and social impact sector. One of our subscribers, Constance Billé, sent us a great response to one of our questions — a response which deserved to be more fully explored in a guest column. To our delight, she agreed to write one for us. We love when this interaction with our community introduces us to thoughtful and valuable new (to us) voices!
Postal banking is a form of public banking with tremendous advantages for providing basic banking services for people who are ignored by private banks. Other forms of public banking offer advantages beyond basic banking, like creating jobs and lowering taxes.
Public banking embodies the idea that public wealth should be used for public benefit. The concept has been gaining momentum since the 2009 Wall Street banking meltdown. In 2012 the first national conference on Public Banking was held in Philadelphia and kicked off a local initiative to establish a public bank.
This is not a new idea: the Quakers had a public bank in Pennsylvania back in the 18th century: Ben Franklin thought it was a great idea. The State of North Dakota has had its own public bank for 102 years. New Jersey is organizing a state bank under Gov. Phil Murphy’s mandate and California just passed enabling legislation. There are hundreds abroad.
Right here in the Big Pretzel, Councilmember Derek Green has introduced legislation with 17 co-sponsors to form a Philadelphia Public Bank and the city’s lawyers are putting together a plan to establish what may become the first municipal public bank in the US!
We citizens pay local taxes, yet we don’t control what happens with our own tax dollars. When the city puts our money in Wall Street banks, those banks use it to finance oil pipelines, private prisons and high-speed railroads in Asia. Those same banks overcharge us with crazy fees and high interest rates. They won’t lend a homeowner $3,000 to replace a roof, but they will lend $1 million to a developer to gentrify the neighborhood and force the homeowner to leave. We don’t get a vote on what Wall Street does with our money.
A public bank directs investments to fund its mission. How about helping the biggest job creators in the city who need to raise cash — small businesses, like tattoo parlors and coffee shops? How about erasing the redlining that walls off communities of color? Public banks answer to their communities. They must return profit to build wealth and wellbeing in their community. They must also avoid any political corruption through a professional, well-regulated design.
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By leveraging deposits to make profitable loans and reducing costs, a public bank can reduce taxes and the interest charged for public projects. In emergencies, like floods, a public bank can respond immediately. These benefits are enjoyed by the citizens of North Dakota whose public bank is also the most profitable bank in the United States. According to the Wall Street Journal, it does better than Wells Fargo and Citibank, with up to 17% return on investment!
How does the public Bank of North Dakota beat Wall Street? It eliminates skyscraper salaries and million-dollar bonuses, costly promotion and marketing, and retail branch expenses. In contrast, it pays public sector salaries, has no marketing expenses, and maintains no branches. BND’s plan operates by lending through local banks.
Philadelphia will need its own plan.
Philadelphia has twice as many people as the state of North Dakota. We also have a lot more money. Billions of dollars flow through the city from tax collection, pension funds, and agencies like PGW and the Water Department, amounting to $9.8 billion in operating funds. As a financial strategy a public bank that in the long run could generate revenue year after year is a better idea than selling off public assets like a gas company.
We can create a successful public bank with the right design and plan. It’s our money!
For more information check out https://philapublicbanking.org/
Read related articles:
- ‘Postal banks helped people of little means to be able to save a few hundred dollars’
- Postal banking could provide free accounts to 21 million in US without access to a credit union or community bank
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