Economic struggles spur calls for public banking
— -- Spurred by the recession, bank bailouts and the difficulty consumers are having getting loans, members of the Occupy movement and others are stepping up calls for a public banking option.
North Dakota currently has the nation's only state-run bank. Supporters point out that the state is the only one to have had a budget surplus since the economic crisis began, and has an unemployment rate below 4%.
"People are becoming more aware that our existing banking system isn't serving us," said Ellen Brown, one of the founders of the Public Banking Institute, a non-profit formed in January to advocate for public banking.
This year, the Institute reports 14 states have considered legislation to either create some form of a state-run bank or study whether it is feasible. In 2010, four states debated similar bills. So far three — California, Hawaii and Massachusetts — have passed legislation forming committees. California Gov. Jerry Brown vetoed the bill in September, saying there already was a committee with authority to study the idea
"In most of the states where bills were introduced last year, legislators are planning to introduce them again," said Sam Munger, managing director of the Center for State Innovation at the University of Wisconsin-Madison, which has researched the issue. Lawmakers in other states (Colorado, Montana, Pennsylvania, New Jersey) also are planning bills, he said. "The banking collapse of 2007 made a lot of people nervous about too-big-to-fail banks," Munger said.
In North Dakota, all state agencies are required to deposit their funds in the 92-year-old Bank of North Dakota. The bank uses that money to support economic development, make student loans and partner with community banks to make small-business and farm loans. Deposits are backed not by the FDIC, but by the state. The bank had its strongest year ever in 2010, reporting its seventh-consecutive year of record profits. It has more than $4 billion in assets and $325 million in capital, according to its annual report.
Officials at the American Bankers Association declined to comment on the movement, saying it's a state issue. State banking associations argue that state-run banks would be risky for taxpayers, would drive smaller banks out of business and that creditworthy individuals and businesses already have plenty of access to loans, Munger said.
"There's a reason no other state has enacted a model like North Dakota did in 1919," said Linda Navarro, president and CEO of the Oregon Banker's Association. "Today in Oregon and in every state, there are a lot of viable banking options for people and businesses."
The Public Banking Institute is planning a national public banking conference in Philadelphia in April, Brown said.
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