“More breakthroughs for public banking, from our monetary expert Ellen Brown, author of “Banking on People“ and many other books, founder of the Public Banking Institute, on which I’m honored to serve as an advisor.
~Hazel Henderson, Editor”
March 4, 2021
Faced with the dire Covid-19 crisis, some lawmakers are starting to see publicly-owned banks as the key to ensuring an equitable economic recovery.
Just over two months into the new year, 2021 has already seen a flurry of public banking activity. Sixteen new bills to form publicly-owned banks or facilitate their formation were introduced in eight U.S. states in January and February. Two bills for a state-owned bank were introduced in New Mexico, two in Massachusetts, two in New York, one each in Oregon and Hawaii, and Washington State’s Public Bank Bill was re-introduced as a “Substitution.” Bills for city-owned banks were introduced in Philadelphia and San Francisco, and bills facilitating the formation of public banks or for a feasibility study were introduced in New York, Oregon (three bills), and Hawaii.
In addition, California is expected to introduce a bill for a state-owned bank later this year, and New Jersey is moving forward with a strong commitment from its governor to implement one. At the federal level, three bills for public banking were also introduced last year: the National Infrastructure Bank Bill (HR 6422), a new Postal Banking Act (S 4614), and the Public Banking Act (HR 8721). (For details on all these bills, see the Public Banking Institute website here.)
As Oscar Abello wrote on NextCity.org in February, “2021 could be public banking’s watershed moment.… Legislators are starting to see public banks as a powerful potential tool to ensure a recovery that is more equitable than the last time.”
Why the Surge in Interest?
The devastation caused by nationwide Covid-19 lockdowns in 2020 has highlighted the inadequacies of the current financial system in serving the public, local businesses, and local governments. Nearly 10 million jobs were lost to the lockdowns, over 100,000 businesses closed permanently, and a quarter of the population remains unbanked or underbanked. Over 18 million people are receiving unemployment benefits, and moratoria on rent and home foreclosures are due to expire this spring.
Where was the Federal Reserve in all this? It poured out trillions of dollars in relief, but the funds did not trickle down to the real economy. They flooded up, dramatically increasing the wealth gap. By October 2020, the top 1% of the U.S. population held 30.4% of all household wealth, 15 times that of the bottom 50%, which held just 1.9% of all wealth.
State and local governments are also in dire straits due to the crisis. Their costs have shot up and their tax bases have shrunk. But the Fed’s “special purpose vehicles” were no help. The Municipal Liquidity Facility, ostensibly intended to relieve municipal debt burdens, lent at market interest rates plus a penalty, making borrowing at the facility so expensive that it went nearly unused; and it was discontinued in December.
The Fed’s emergency lending facilities were also of little help to local businesses. In a January 2021 Wall Street Journal article titled “Corporate Debt ‘Relief’ Is an Economic Dud,” Sheila Bair, former chair of the Federal Deposit Insurance Corporation, and Lawrence Goodman, president of the Center for Financial Stability, observed: