Description and History

Public banks are publicly-owned or controlled lending and/or depository institutions that allow governments to address community needs, pursue public priorities, reduce borrowing costs, and raise revenue.

Compared to traditional banks who steer investment wherever returns are highest, public banks invest in their own localities, prioritizing the public good. Governance structures within public banks are also more transparent, with community members often making up an advisory board or board of directors. For public banks that make loans to municipal governments, they are actively involved in building local infrastructure and advancing local business. Further, when governments finance their debts with a public bank, they often do so at much lower costs—saving, on average, $160 billion annually just on interest on loans from commercial banks—resulting in savings for community members in the form of lower taxes (Public Banking Institute 2024). 

While both the ethos and practice of public banking has been around for centuries around the world (Lazu 2024), the earliest accounts of public banking infrastructure in the United States can be traced back to colonial Philadelphia. Introduced by the Quakers, public banks were intended to lend and spend in their respective communities (Public Banking Institute 2024). Since then, many have advocated for a national public bank while others have pursued state-level public banking institutions. However, the only public bank which still remains in the United States is in North Dakota (Scott 2022).  

Today, according to a 2020 estimate, there are 910 public banks around the world managing nearly $49 trillion in assets (Marois 2023). These banks can take a variety of forms—from retail or commercial banks that take deposits and provide credit to development banks that loan large, long-term sums to the private or public sector to “universal” public banks that do all the above (Marois 2021). 

Public Banking, Locally Rooted Finance, and the Community Wealth Building Wedge 

Because public banks don’t have to answer to private shareholders, don’t necessarily have marketing or branch operating expenses, and can enjoy tax-exempt status, they can offer lower-cost loans or services (Sgouros 2022). For example, when purchasing bonds, public banks can help municipalities reduce their borrowing expenses by lending at a lower cost. When underwriting a bond, public banks can charge lower commissions, saving governments on fees that normally make up about half of issuance expenses (Joffe 2015). 

In the US, advocates have called for public banks to facilitate a green Just Transition and develop renewable energy (Chi and Sevier 2020), build affordable housing (Merritt and McWilliams 2023), provide COVID-19 economic relief (McDonald et al 2021), provide emergency loans to low-income families (Public Banking Institute 2024), and more. As a corollary, public banks can also ensure that public deposits (like tax revenue) are held by socially responsible financial institutions—like CDFIs, community banks, and/or credit unions—and are leveraged to not only serve immediate public needs, but also to seed and scale the CWB ecosystem. For example, a public bank can prioritize small business development by providing seed money for elder care cooperatives or create a sector for community solar. They can also provide the initial capital needed to build out a community land trust. In these ways, public banking can enable the democratization of capital, labor, and land, critical for CWB in the US.  

Examples

Bank of North Dakota 

The Bank of North Dakota is the only public bank in the United States. It was launched in 1919 by farmers tired of paying exorbitant interest rates to private, out-of-state banks. Today, the Bank offers business, student, home, and agricultural loans. Most of these are what are known as “participation loans” made in partnership with community banks and credit unions, which lowers costs for consumers and lowers risks for partner banks, expanding their lending capacity. Because the BND supports community banks, North Dakota has the highest number of banks and credit unions per-capita in the country (Mitchell 2015). In 2023, the Bank had $10.1 billion in assets, a net income of nearly $200 million, and a total loan portfolio of $5.7 billion (BND 2023). The BND even turned a profit during the years following the 2008 Great Recession, and North Dakota was the only state reporting major surpluses during that period.

Challenges & Limitations

For some critics, public banking seems to be too costly an intervention (Nguyen 2023). Indeed, the Federal Deposit Insurance Corporation (FDIC), a key player in the capitalization and technical assistance processes, has little to no experience with public banks (Redmond 2023). However, when considering the money lost to commercial banks in interest, debt, and subsidies, public banking—with the appropriate expertise—is seemingly a much more affordable alternative to its commercial counterpart.

It is also important to note that public ownership—by itself—does not guarantee that democratic demands will necessarily outweigh profit-seeking interests or neoliberal practices. Institutional governance, policy design, and trust building among community members is key (Friedline 2023).  

Taking It Forward

What was once considered a legislative pipe dream has gained significant traction in the past decade (Lazu 2024). Over half of the states have some kind of legislation or community group organizing toward public banking (Public Banking Institute 2024). 

For example, Public Bank NYC worked tirelessly to have the New York Public Banking Act introduced into the state senate in 2021. In 2023, Public Bank East Bay—after publishing a viability study the year prior for a regional public bank—hired its first CEO, Scott Waite, becoming the first public banking effort in the nation to bring on a chief executive. In December of 2023, Congresswomen Rashida Tlaib and Alexandria Ocasio-Cortez (NY-14) introduced the Public Banking Act of 2023 to facilitate the creation of state and local public banks (Congresswoman Rashida Tlaib 2023). Even some banks themselves are advocating for a public bank to help bolster their own lending efforts in communities (Abello 2024)! 

Additional Resources 

• Public Banking Institute, a national organizing supporting the development of public banks in the United States 

• Friends of Public Banking, a project launched by PBI

• Banking for the People, an e-book collaboration between Next City and Common Future illustrating the ills of our current banking system and compiling a series of articles that imagine different possibilities