Public Banking in the News — The Boulder Weekly: Banking on the environment

A public bank can benefit local governments and economies in many ways. There can be a clear benefit to local infrastructure and businesses through community banks, and, as this article makes clear, there can be great improvements to our environment through investment in renewable energy.

From the Boulder Weekly


Thursday, February 5, 2015

Banking on the environment

A growing movement in Boulder sees public banking as the answer to a greener future

By Caitlin Rockett

Banking might not seem like the answer to a healthier environment, but there’s a growing movement in Boulder that believes public banking could fund environmental projects from solar development to local organic farms… even a municipalized electric grid.

Brad Thacker
Brad Thacker

Public banking is a simple concept: it’s a bank owned by the people for the benefit of the people. Unlike a credit union, a public bank’s profits go to all of the taxpayers of whatever entity forms the bank — whether that’s a city, state or even just a community within a city — not just the members of a single credit union. Also unlike traditional banks, public banks don’t allow for individual or business checking accounts. Deposits are accepted only from the municipality or state body that created the bank. Essentially, a public bank allows a municipality to invest its own money in its own bank and make interest on that money, then the bank can issue itself — or citizens — loans for infrastructure or other projects.

“The beauty of public banking is that the public sets the agenda of the banks,” says Gwen Hallsmith, executive director of the Public Banking Institute in Sonoma, Calif. “If the mission of the bank is to foster sustainable food and renewable energy and locally created businesses and jobs, then that’s where the bank will focus its resources instead of in the risky derivatives market and overseas investments involving slave labor and environmental destruction.”

Sounds like a good fit for the environment-loving population of the Centennial State. In fact, the concept of public banking has gained enough traction in Colorado to merit a conference on the topic that took place on Jan. 31 in Denver. In addition to the Denver conference, Clean Energy Action of Boulder held a special breakout session at Impact Hub on Jan. 29, where Hallsmith discussed the role that a public bank funded by the City of Boulder could play in financing not only Boulder’s stalled municipal electric utility, but could also create affordable housing, increase farm-to-table agri culture and renewable energy, enhance energy efficiency and improve public transportation.

“In Germany, where there is public bank in every community, they have been leaders in the field of solarizing their electric grid and creating all sorts of green economic development and new job opportunities,” Hallsmith says. “That’s the important point: public banks are owned by the public and they can therefore respond to our most pressing public priorities.”

For Alison Burchell, a geologist and founding member of Clean Energy Action, Boulder’s muncipialization effort is a pressing priority. Burchell says that she began to seriously look into how public banking could push municipalization forward about two and a half years ago.

Burchell took a look at the city’s financial statement for 2013 and found that all combined — from general reserves to waste water and downtown funds — the city has $269 million in reserve funds.

“So [on average] you need $25 million to set up a bank,” Burchell says. “Every $25 million gets you $250 million in loan credits. The thing that stopped me in my tracks is what is the other $250 million number we know floating around our community?”

The estimated funds needed to municipalize Boulder’s electric utility.

“The interesting thing about that money, [and] I don’t know where that money sits, but let’s say it sits in Wells Fargo. What’s the interest we’re getting on it now — 1 percent, something like that?” Burchell says. “When we go to borrow it back we have to pay loan fees and interest on what we borrow back.

“Whether with municipalization or not, there are going to be improvements to the way we produce and consume our electrons,” she says. “It’s very, very expensive if we go through a series of banks and a series of loan agencies … These are high risk projects, and it’s very expensive to loan or bond them. If we set up our own bank, we can begin to loan to ourselves and collect interest on our own money, and it doesn’t have to be these exorbitant interests, it could be more reasonable rates of interest, 3 or 4 percent, and still make a great profit.”

As a geologist, Burchell says she is drawn to concepts like public banking because of the environmental projects such institutions can fund. She makes no attempt to disguise that for her, municipalization is key where public banking in Boulder is concerned — and she’s not alone.

Amanda Bybee, vice president of Namesté Solar in Boulder, originally hails from Austin, Texas, where the utility is municipally owned. Bybee sat on a panel at the Jan. 31 public banking conference in Denver to discuss the need for local funding.

“I think there’s a lot to be said of public institutions that are accountable to the public. In Austin the utility is the primary fund that supports every other budget the city has, and that’s a great thing,” Bybee says. “And they’re able to say, ‘We care about where our energy comes from, we care about climate change, we care about economic development’ … but it’s hard to do. Look at what Boulder has had to put in place to even get as far as it is has [with municipalization].”

Beyond municpalization, Bybee says that public banking could simply provide a better option for individuals and businesses that want to get loans to install solar systems.

“So [the] solar [industry] is in a good position in the sense we have a good number of financing options, and there are a number of groups out there that provide solar loans and opportunities to make this accessible to people,” she says. “But the question for [Namesté Solar] is less about ‘Do we have access at all?’ and more about ‘Is there a better way to go about it that benefits the local economy?’”

On the Jan. 31 panel with Bybee was August Miller, co-founder of FoodShed Productions in Longmont, a group that works with local residents and farmers to teach them how to produce organic food. Unlike the solar industry, small farmers struggle more to secure financing to purchase land or equipment because of the extremely low average pay for a U.S. farm worker — according to Miller, between $2,500 and $5,000 annually.

“My wife and I earned a little over $6,000 in 10 months working for one farm,” Miller says. That was about $80 a week, with a minimum of 50 hours a week and a maximum of 60 to 70 hours a week. When they went to a bank seeking a loan in early 2014, they were told they were “too risky.”

“In terms of the surplus of farmers without land or access to land, public banking could go a long way to address the obvious dilemma for farmers not only in Colorado or Boulder, but throughout the nation.

“Having a low-interest loan that is long term, it’s very fitting for agriculture because you can’t move your farm because your investment is the soil and your knowledge is based on that investment in the soil,” Miller says. “The two fit nicely with each other. Having a 1 percent loan for 30 years would keep people here, it would make sure that they were invested in their community not just short term. It would change the whole mentality of how we do business and who our neighbors are.”

But is public banking feasible for Boulder or even Colorado?

“This is how change happens, right? A small group of committed individuals can change the world,” says Bybee. “Who’s to say that this group at the public banking forum can’t make it happen? I’m not going to bet against them.”

Respond: letters@boulderweekly.com


The original article with reader comments is on the Boulder Weekly website at Banking on the environment.

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Bill Introduced in Maine Legislature to Establish a State Public Bank

A bill to establish The Maine Street Bank was introduced in the Maine legislature on 13 January 2015. Titled An Act to Create a Public Bank, the bill proposes to create a public bank by 1 July 2017 for the state of Maine that is largely modeled after the nearly century old Bank of North Dakota. It would also authorize the formation of public banks in municipalities and cities around the state.

To summarize the bill as it currently stands:

The purpose of the bank would be

  1. Economic development. To support job creation and economic development in Maine by increasing access to capital for businesses and farms within Maine in partnership with local financial institutions;
  2. Financial stability. To provide stability to Maine’s financial sector, but not to compete with state-chartered financial institutions, credit unions or other financial institutions within Maine;
  3. Basic banking services. To reduce costs paid by the State of Maine for basic banking services; and
  4. Return profits. To return profits, beyond the revenue needed to accomplish the purposes and for continued sound operation of the bank


The operation, management, and control of the bank would be by a Board of Directors consisting of five voting members appointed by the Governor and subject to approval and confirmation by the State Legislature. The Treasurer of Maine and the Commissioner of Administrative and Financial Services would serve as ex officio non-voting members of the Board. The voting members of the board would serve without compensation.

The Board would appoint and determine the compensation of the President of the Bank, who should have extensive banking experience, and other subordinates they deem necessary for the operation of the bank.

The Board would also appoint a seven-member Advisory Committee who must be representatives of the Maine’s financial, business, agricultural and labor sectors and at least two must by officers of financial institutions chartered in Maine and who do not maintain offices outside the state.

The proposed powers of the bank are given in detail in the legislation, found at the link — An Act to Create a Public Bank.

Hearings were held in the Joint Committee on Insurance and Financial Services on 3 February 2015. The written testimony of six individuals, representing themselves or a private or governmental organizations, can be found through the links below. It is no surprise that of these the only written testimony in support of the bill was from its sponsor and one private citizen. The individuals and organizations representing the establishment all submitted testimony in opposition to the bill.

In support of the bill were


In opposition to the bill were

  • Carlos Mello – Director of Business and Finance of the State of Maine
  • Terry Hayes – Treasurer of the State of Maine
  • John Witherspoon – President and CEO, Skowhegan Savings Bank – Representing the Maine Bankers Association
  • Doug Ray – Director of Legislative Affairs and Communications, Maine Department of Economic and Community Development


The Senate committee should be voting on the bill today, 5 February 2015. We will post further information as it becomes available.

We should be prepared in Colorado to see the same sort of opposition to the formation of either a state bank or municipal banks. We can learn from the testimony in other states and municipalities that have proposed legislation.

Please read and these testimonies and comment on how to rebut the opposition arguments and to improve the supporting arguments in the form below. If you don’t support the idea of establishing public banks, we would like to hear from you today. Your ideas are important to us.

We will update this post as the bill progresses through the Maine Legislature. You can find details of the bill’s progress at the link, HP23

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A Short History of Postal Banking – from Slate.com

Postal Banking provides an alternative to the usury that pay-day lenders are now practicing on the Americans that can least afford to pay the exorbitant interest rates these lenders are charging. The following article, pulled from the pages of slate.com, looks at the history of Postal Banking and how it can provide relief to these Americans.

Postal Banking is one piece of a strategy to create a more sustainable banking system in America, which includes establishing Public Banks for state, tribal, county, and city governments across the nation. For more information about Public Banks, what they are and how they can benefit American, please see our Public Banking page on this site. An advocacy organization supporting the resumption of Postal Banking in the United States is BankAct.org.

The author of this piece, Mehrsa Baradaran, is an Associate Professor at University of Georgia School of Law and is an authority on the subject of Postal Banking. She gives a concise history of Postal Banking and a look at its potential for the future. Her book on the subject is forthcoming.

From Slate.com:


A Short History of Postal Banking

As the debate over reinstituting postal banking heats up, we should know we had it. And it worked.

Posted: Tuesday, August 18, 2014 1:51 pm


By Mehrsa Baradaran

Last week John Oliver offered up an exposé on payday loans, describing them as “the circle of debt” that “screws us all.” And at the conclusion of Oliver’s takedown on payday lending Sarah Silverman offered low-income borrowers better alternatives—including donating blood and jumping in front of rich folks’ cars. But there is a burgeoning alternative to usurious payday lending: postal banking, which allows low-income Americans to do their banking—from bill payment to small loans—at the same post office where they buy stamps. As states try to regulate away the payday-lending sector, their desperate customers may be pushed either into the black market or bankruptcy. Postal banking is a much better solution. It is time to consider a “public option” for small loans.

Every other developed country in the world has postal banking, and we actually did too. It is important to remember this forgotten history as we begin to talk seriously about reviving postal banking because the system worked and it worked well. Postal banking, which existed in the United States from 1911 to 1966, was in fact so central to our banking system that it was almost the alternative to federal deposit insurance, and served as such from 1911 until 1933. The system prevented many bank runs during a turbulent time in the nation’s banking history—essentially performing central banking functions before the Federal Reserve was up to the task. Postal banking helped fund two world wars and reduced a massive government deficit after the Great Depression.

Postal banks started in Great Britain in 1861 and, from the outset, the primary goal was financial inclusion. But in the U.S., postal banking had other uses as well: In 1871, President Ulysses S. Grant’s postmaster general, John Creswell, proposed post office savings banks to pay for a new telegraph system. President Grant himself endorsed the postal banks as a way to free up hoarded money in far-flung regions of the country. But the nation’s bankers opposed it. They objected to the notion that all the deposits would go directly to the Treasury. Everyone feared centralized bank power, and localism in banking was as sacred as the Constitution at the time. The American Bankers Association objected to the competition with the federal government. Ideological opponents called it communist, socialist, and paternalistic. While they claimed that the private markets and savings banks were sufficient, in fact 98 percent of all savings banks were in the five northeastern states, leaving the South and the West virtually unbanked.

Once the idea was first proposed, nine postmasters and almost every president, except Grover Cleveland pushed the issue for 40 years. Almost 100 bills died in Congress before anything happened.

After the panic of 1907 (A panic that started on Wall Street and led to bank runs across the country) momentum finally shifted. In the 1908 presidential election, banking reform became a major issue with William Taft actually campaigning on postal banking as a way to stabilize the banking sector and help credit-starved regions like the South and the West. Taft won and his administration initiated postal banking.

Taft’s clear support of postal banking and his electoral mandate still weren’t enough to overcome bank and Democratic opposition. The Postal Savings Bank Bill, as passed, finally acquiesced to both localism and private bankers by mandating that almost all of the postal deposits stay in the community of origin. The debate at the time over whether postal banks were needed is illuminating today. Opponents claimed that anyone with money to save was already saving it. The Boston Globe opined, “It is easy enough for anybody to find a savings bank; the trouble is to find the savings to put in it.” Others urged that the reason rural dwellers were not saving in banks was because of the “ignorance of the common people,” or because “the inhabitants of remote rural districts are not so well posted in the world’s wicked ways as those who have the opportunity of perusing the daily papers.” In other words, some people are just too dumb and too poor to bank. Today we hear similar claims that the problem with the poor and unbanked is that they “lack financial literacy” or that they just don’t have enough money to open a bank account. The truth is that they are plenty literate, but they either don’t trust banks or the banks left their neighborhood years ago, leaving only payday lenders.

The bill eventually passed in 1910 and created what was called the United States Postal Savings System.* The interest on accounts was set by statute to a low 2.5 percent to avoid luring customers away from banks. The postmasters and supporting congressmen also called the postal banks “the poor man’s banks” to set bankers at ease. Accounts were capped at $100 deposits allowed per month and a total savings cap of $500—the limit was raised to $2,500 dollars in 1918.

By 1913 (just two years later) the banks had received $32 million—most of which came from “stocking banks,” as reported by the New York Times in 1913. The Times reported with frustration that many larger deposits were turned away and that the current deposits likely represented a fraction of those available. Princeton University historian Sheldon Garon claims that it was these caps and concessions that ultimately doomed the postal banking system in the United States. And ultimately, it was not southerners and westerners that most needed the banks as had been expected (although they eventually came around). It was the raft of recent immigrants in urban areas who immediately took to these banks. The reason (from congressional testimony in 1913): “Hundreds of thousands of our newly made citizens distrust banks and will not patronize them. They have absolute confidence in the Government and know what postal savings banks are.” The post office offered information to customers in 24 languages and would pass out leaflets right outside the ports of entry into the U.S. Consequently, the busiest postal banks were those right near the ports. By 1915, immigrants owned more than 70 percent of the postal bank’s deposits even though they were less than 15 percent of the population. There were accounts of deposits coming in stockings and cans with the paper money rotting and the coins rusted.

By 1934, postal banks had $1.2 billion in assets—about 10 percent of the entire commercial banking system—as small savers fled failing banks to the safety of a government-backed institution. And this trend might have continued if President Franklin Delano Roosevelt didn’t have broader banking reform in mind. But Roosevelt chose the FDIC over postal banking as a way of stabilizing things. Paradoxically, the same Roosevelt who forged an unprecedented expansion of the federal government during the New Deal would choose a bank-funded insurance scheme as opposed to a public banking system.

But even this was not the end for postal banking. FDR used the postal banks to sell Treasury bonds in 1935 to pay off the budget deficit after the Great Depression. In 1941, the postal banks started selling “Defense Savings Stamps” to help fund the war. The campaign was a phenomenal success. By the end of World War II, the government had raised $8 billion in war funding from the post office alone.

Deposits also reached their peak in 1947 with almost $3.4 billion and 4 million users banking at their post offices. In part this was because in 1940, the post office introduced the world to banking by mail, which appealed to soldiers stationed abroad.

But it was the beginning of the end. In 1946, 68 percent of the nation’s towns and cities had both postal savings depositories and banks. And because banks could charge higher interest than the post office and were just as safe, the USPSS was no longer an attractive option for deposits. This is no longer true today as banks have been squeezed on all sides by money markets, capital markets, and foreign banks. Banks began to abandon poor areas and post offices remained, but without banking services. And once banks deserted low-income neighborhoods starting in the 1970s, the high-cost payday lenders and check-cashers flooded in.

In 1965 the postmaster generals started to endorse ending postal banking. In 1966 it was officially abolished as part of Lyndon Johnson’s streamlining of the federal government. The postal banking system died a quiet death without public discussion. The public and press failed to note the centrality of postal banking in one of the most turbulent periods of banking in our country. Postal banking was America’s most successful experiment in financial inclusion—a problem we face again today. As we contemplate whether it has a place in our future we must recall the vital role it played in our past.

Mehrsa Baradaran is an associate professor at the University of Georgia School of Law specializing in banking law and is author of a forthcoming book on the subject.


The original article is at A Short History of Postal Banking.

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A Post Office Bank — An Institution that Could Greatly Reduce the Usury of Predatory Lenders

A concept that is very closely related to a Public Bank is that of a Post Office Bank. They are both institutions that can help wrestle power away from the big Wall Street Banks and better support Main Street. Post Office Banks could be part of the transformation of our financial sector by providing services to those individuals in underserved communities for whom banking is not possible. One-in-four American households are “unbanked” — either partially or completely excluded from the current banking system. These individuals generally live in underserved communities that are routinely victimized by predatory payday lenders and where there is almost always a United States Postal Service (USPS) branch.

Continue reading A Post Office Bank — An Institution that Could Greatly Reduce the Usury of Predatory Lenders

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Philadelphia Symposium on Public Banking — Public Banks for Public Works: Banking on the Common Wealth — October 18, 2014

Pennsylvania Public Bank Project and the Public Banking Institute together presented a national public banking symposium, Public Banks for Public Works: Banking in the Common Wealth — A symposium to educate and inform the citizens of Pennsylvania and its neighbors about the role a public bank could play in supporting an economy that serves us all, not just the wealthy.

The symposium was held at the Quaker Friends Center in Philadelphia, PA on Saturday, October 18, 2014.

We provide here, videos from all sessions of the Public Banks for Public Works: Banking in the Common Wealth Symposium.








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Seattle Forum on Public Banking — December 10, 2014

The city council of the City of Seattle recently held a public meeting, Public Forum: The Possibility for a Public Bank in Seattle to discuss, with experts in the field, the possibility of establishing a public bank in Seattle. Of particular interest is a “Public Banking 101” presentation by Gwendolyn Hallsmith, Executive Director of the Public Banking Institute and one of the invited speakers at our Banking on Colorado: Bring Our Money Home to be held on Saturday, January 31. 2015. Information about the Conference, including a link to the registration page are in the column to the right.

The video is set to start at the beginning of Gwen Hallsmith’s presentation. The start times of other speakers at this forum are given below the video.

At t = 15:04 — Karl Beidel, Director, The Public Bank Project

At t = 27:22 — Thomas Keidel, Director, German Savings Banks Association (DSGV)

A 40 minute session of public participation begins at t = 1:04:43.

 

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NYTimes OpEds: Room for Debate – Should States Operate Public Banks?

While many of us understand the importance and benefit of public banks for stimulating local economies, there are many who have the opposite point-of-view and can present arguments that are reasonable, given their set of assumptions. It is important that we understand these arguments and can respond to them. The link below is to a recent New York Times Opinion Page Forum entitled Room For Debate, in which arguments are given by both supporters and opponents of public banking.

Room for Debate – Should States Operate Public Banks?

PDFs of references cited in Mark Calabria’s piece can be found Government Ownership of Banks and Why Do Government Banks Perform Worse? — A Political Interference View.


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Observations of Ellen Brown on WSJ Article about the Bank of North Dakota

In an article in The Wall Street Journal dated November 16, 2014 and entitled Shale Boom Helps North Dakota Bank Earn Returns Goldman Would Envy, Chester Dawson relates a largely factually correct representation of the Bank of North Dakota. However, the interpretation of these facts is easily questioned. Ellen Brown, a major intellectual leader of the Public Banking movement, critiques the article in her blog, ellenbrown.com and reprinted below. This blog entry is also a very accessible summary of the benefits of a public bank.

If you are a subscriber to wsj.com, the original Wall Street Journal article, including comments, can be accessed here. Those who don’t have this access can view a reprint of the article here.

From the The Web of Debt Blog:


WSJ Reports: Bank of North Dakota Outperforms Wall Street

Posted on   November 19, 2014   by   Ellen Brown   at   ellenbrown.com

While 49 state treasuries were submerged in red ink after the 2008 financial crash, one state’s bank outperformed all others and actually launched an economy-shifting new industry. So reports the Wall Street Journal this week, discussing the Bank of North Dakota (BND) and its striking success in the midst of a national financial collapse led by the major banks. Chester Dawson begins his November 16th article:

Continue reading Observations of Ellen Brown on WSJ Article about the Bank of North Dakota

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Public Banking in the Press — NYTimes Blog, You’re The Boss: What North Dakota’s Public Bank Does for Small Businesses

One of the major roles of the Bank of North Dakota (BND) is to support small businesses within the state. This story, which was in the New York Times Blog, You’re the Boss — The Art of Running a Small Business on March 13, 2014, gives some detail about how BND can help a small business through its partnership loan program. It further gives some details of the operations of the BND. We reprint the article here. The original article can be found at http://boss.blogs.nytimes.com/2014/03/13/what-north-dakotas-public-bank-does-for-small-businesses/

From NYTimes.com:


What North Dakota’s Public Bank Does for Small Businesses

By ROBB MANDELBAUM        MARCH 13, 2014 7:00 AM

Five years ago, Brian Brasch, president of Branick Industries, a maker of specialty automotive tools in Fargo, N.D., took a phone call from a stranger. The caller was an auto mechanic in Florida who had an idea for a new kind of drain plug for an oil pan, one with an O-ring that expands to stop oil leaks.

Continue reading Public Banking in the Press — NYTimes Blog, You’re The Boss: What North Dakota’s Public Bank Does for Small Businesses

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Banking on Colorado Speaker Gwendolyn Hallsmith on the Tim Danahey Show

Tim Danahey set up his portable studio in the Green Room of the Banking On New Mexico Symposium to interview several of the invited speakers at the Symposium. The Symposium, whose principal topic was public banking, was held at the Santa Fe Community Convention Center on Saturday, September 27, 2014. Videos of the full program of events can be found on this website at Symposium Videos.

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Bringing Our Money Home