Public Banking

A public bank is owned by a state, municipality, or Joint Powers Authority. Current examples of successful public banks include the following:

Public banks come in many forms. They can be capitalized through initial investment by cities/states, invest tax revenues, create money in the form of bank credit, and lend at very low interest rates. The specific operations of each public banking entity is determined by the bank's charter, which is the document that creates each bank. Public banks empower local residents to design financial solutions that best serve their communities.

Cooperation Humboldt is partnering with the City of Eureka and local leaders from the sectors of finance and organized labor on a citizens’ task force to investigate the feasibility of participating in a regional public bank.

Check out our forum on Public Banking on 2/21/21, where  David Cobb (Cooperation Humboldt), Jake Varghese (Public Bank East Bay) and Paul Pryde describe the groundbreaking new CA law that allows for the creation of 10 local regional public banks. They also discuss the growing momentum for AB310, which would create a statewide Public Bank for California.

Want to learn more? Take a look at our May 14, 2018 forum on Public Banking in Eureka, and read below for more details -


by Friends of Public Banking

What Makes a Bank a (Depository) Bank?

A bank (private or public) must:

  1. Be a corporation.
    • Lots of discussion going on regarding if it can be a Joint Powers Authority (JPA) similar to the community choice energy JPA’s.
  2. Be “licensed” or “chartered” as a “depository” bank.
    • Banking license is issued at either state level (CA Department of Business Oversight) or at federal level (Office of the Comptroller of the Currency).
    • A license is issued once a business plan is submitted, reviewed and accepted.
    • “Depository” bank simply means that the bank has “deposit accounts.”
  3. Have a master account routing number with the Federal Reserve.
    • Nine digit number used to identify the financial institution in a transaction.
    • Without it, a bank cannot participate in electronic payments.

What Makes a Depository Bank “Public” (not “Private”)?

A public bank must:

  1. Be a state-licensed depository banking institution with regulatory oversight (as opposed to a unlicensed financial institution that uses revolving loan funds to lend borrowed money from investors).
  2. Be owned by a democratically elected government entity.
  3. Have a mission statement that prioritizes people over profit.
  4. Have transparent and accountable governance structure.

And can also:

  1. Be designed with flexible and scalable capitalization alternatives that can be acted on immediately. NOTE: “State of ND is doing business as the Bank of ND”
  2. Offer regenerative lending policies that prioritize local investment in small business and worker-owned cooperatives and that make use of an annual scorecard review. NOTE: all problems are design problems.
  3. Have an open and democratic annual meeting, including participatory decision-making on loan policies. NOTE: BND had over 40 community meetings in 2016 before announcing an infrastructure lending program.
  4. Create opportunities for community banks, local organizations and individuals to make local investments which follow a proscribed regenerative investment policy. NOTE: follows lead of Sparkassen Banks.
  5. Make a commitment to helping other publicly-owned government and quasi-government organizations more effectively serve the public.
  6. Work cooperatively with other public banks to identify and enable best practices and to strengthen the national network of Public Banks.

What Problems Do a Public Banks Solve?

  1. Deficiencies in the (deposit services) banking market
    • Un- and under-banked (about 25% of households in the USA, rural & urban)
    • Cannabis market
  2. Deficiencies in the (credit) banking market
    • Affordable infrastructure financing
    • Affordable student loans with loan consolidation
    • Affordable business expansion and commercial operating loans
    • Affordable housing
    • Affordable climate mitigation loans
  3. Credit issuers (private banks) all follow the same model so this concentration exacerbates credit contractions (as we saw in 2008/09 Great Recession). A public bank is counter-cyclical.
  4. Lack of long-term economic planning by the government.
  5. Lack of democratic processes in economic planning.

Key Steps in Public Banking Advocacy

  1. Know what kind of public bank that you want long term
  2. Know what your “ask” is in the short term
  3. Get a champion
  4. Build a financial pro forma that models long term public bank
    • Is a stepping stone to building consensus
    • Can be re-used in a business plan
    • Clarifies who is on what side
    • Can be used as leverage to focus the debate
    • Can use more than one pro forma
  5. Educate, educate, educate
  6. Get commitment for funding for a business plan with feasibility analysis built into it

Public Banking Rejoinders

  1. A public bank is just like a big credit union, so why a bank? Credit unions are restricted by federal law to have no more than 12.5% of their loan portfolio in commercial loans.
  2. Why not just let the free market take care of itself? Markets have to be defined by government -- the playing rules have to be identified. When a market is not doing what it’s supposed to do, like meeting the needs of all people, government can either regulate or set a standard with a public option. As we know, banks are too big to regulate effectively (CRA is one example, there are others…) so a public option is necessary.
  3. Taxpayers have to guarantee the public bank when it fails. No thank you. In 2008 we learned that it is taxpayers who guarantee the private banks when they fail. What’s the difference?
  4. Government and banking? It’s destined to fail. There’s no arguing with a cynic.