Why public banking is the right choice for states

The following is an article in support of public banking from the July SPEEA Spotlite. It has been reposted here in its entirety with the permission of SPEEA Staff.

Member editorial

Why public banking is the right choice for states

By Evan Wipf
SPEEA activist

[Editor’s note: Evan Wipf is the chair of the Northwest Legislative and Public Affairs (L&PA) Committee and serves as a Council Rep for SPEEA in Bellevue.]

Almost every time you look at the news, you read about unmet infrastructure needs in our state: deteriorating bridges and roads, inadequate public transportation systems, overcrowded and antiquated school buildings – the list goes on. A big part of the cost of these long-term capital projects is the expense involved in financing them through the big for-profit banks. Those costs make it that much harder for capital projects to compete for limited tax dollars with ongoing state obligations like basic education and human services.

Wouldn’t it be great if there was a way to free up more state revenue by drastically reducing the financing cost of capital projects? Actually, there is – it’s called public banking.

Public banking is banking operated in the public interest by institutions owned by the people through their representative governments. Public banks can exist at all levels – local, state, national or international.

Public banking saves money compared to financing through private banks, because the need to satisfy shareholders interested primarily in short-terms profits is eliminated. A public bank for Washington would keep our money here, where it can serve ordinary citizens, rather than being used by Wall Street for the kind of risky lending and speculative investment that caused the economic crisis of 2008.

Does this work?

Are you thinking that public banking sounds like just another liberal economic idea unlikely to succeed in the real world? Think again. A shining example of the value of public banking comes from North Dakota, traditionally one of the most conservative states in the nation.

North Dakota created its state bank (BND) in 1919, one result of the populist movement to protect farmers from predatory lending practices. All of North Dakota’s state tax revenue is deposited into the BND, which in turn invests in small businesses, infrastructure projects, student loans, and other economic activity.

Rather than competing with the private sector, the BND works in partnership with a network of small private community banks in the state. Profit generated by BND investments go right back into the state coffers.

In every other state, as much as 50% of the cost of financing large capital projects ends up going to shareholders in the giant Wall Street banks and to the exorbitant compensation paid to those bank’s top executives.

Washington State Senator Bob Hasegawa, a long-time friend of SPEEA and a tireless advocate for labor issues, has introduced legislation in Olympia to create a similar bank for our state.

How it could work here

Senate Bill 5464, sponsored by Hasegawa and 16 senate colleagues, would create a state bank called the Washington Investment Trust. Once created, the trust would become capitalized and solvent from a variety of sources – money currently deposited in Wall Street banks, federal transportations funds, general obligation bond proceeds, and more as directed by a commission of elected officials established by the bill.

The value of a state bank could be especially great for SPEEA members, since one of the factors that Boeing considers in work location decisions is the quality of available public infrastructure – transportation, schools, etc. Recognizing the positive impact public banking could have, the SPEEA Northwest Council approved a resolution in support of SB 5464 or similar legislation at their April meeting.

SPEEA members are encouraged to learn more about the public banking option and to voice support to their elected officials.

For those who live in Seattle, expect to hear much more about public banking in the coming months, as Sen. Hasegawa has made it a cornerstone of his recently-announced Seattle mayoral campaign.

Links for more information