What is a public bank?

Public banks are owned by the people through their representative government. This could be a Tribe, City, County, State, or Federal Government. The bank can receive deposits of public funds (such as taxes, fees, fines, or interest earned) from the representative government that owns it, and can also make loans to that same representative government.

Public banks are mandated to serve the public good. The interest and profits earned by the bank’s functions belong to the community and are reinvested back into the community.

What are the benefits of public banks?

• Public banks can cut the cost of public infrastructure projects in half by providing loans at much lower interest rates than corporate Wall Street banks. They can also provide low-interest loans for important projects and services like affordable housing, public safety, environmental protection, and humanitarian services.
• Public banks spur economic growth and create new jobs by reinvesting their earned interest and profits back into the community. And because the earned interest and profits from public banks are a new form of public revenue, they serve to lower local government debt.
• Public banks give state and local treasuries a place to deposit their money that divests from fossil fuels, and instead invests under socially responsible standards.
• Public banks can also provide a safe place for banking cannabis earned cash that is currently prohibited by the federal government from being deposited into private banks.
• Public banks have no exorbitantly-paid bank executives, thus cutting off the Wall Street middlemen from profiting off of our local tax dollars.

How do public banks work?

Since the passage of California AB 857 Public Banking Act, California municipalities are allowed to deposit their funds into a public bank instead of private banks. Once a public bank is established, community funds and assets can be deposited into the bank. Public banks can make loans just like any other bank, but they make loans at a much lower interest rate in order to save the community’s money. Because the purpose of the bank is to benefit the community, all interest and profits earned by the bank are reinvested back into the community.

Public banks act as a “mini-Fed” for their region by assisting local private banks and credit unions by guaranteeing loans. They can also partner with small banks and credit unions to fund local projects at low cost.

Public banks are self-funding and self-sustaining, so they do not require state funds or tax dollars. They each have a board of directors that is independent from political control. Each public bank would establish a citizen advisory board to monitor its investments.

Find more information at the Public Banking Institute website.