Public Bank |

What is Public Banking? (Question and Answer)

Public banking is banking operated in the public interest, through institutions owned by the people through their representative governments. Public banks can exist at all levels, from local to state to national or even international. Any governmental body which can meet local banking requirements may, theoretically, create such a financial institution.

Public banking is distinguished from private banking in that its mandate begins with the public’s interest. Privately-owned banks, by contrast, have shareholders who generally seek short-term profits as their highest priority. Public banks are able to reduce taxes within their jurisdictions, because their profits are returned to the general fund of the public entity. The costs of public projects undertaken by governmental bodies are also greatly reduced, because public banks do not need to charge interest to themselves. Eliminating interest has been shown to reduce the cost of such projects, on average, by 50%.

When the public interest demands, the mission of public banks is to respond immediately, to assure the long-term prosperity of the community.”
Public Banking Institute – Introduction to Public Banking

With the recent economic crisis many are asking what can be done to prevent another. There has been discussion from both the left and the right about auditing and ending the federal reserve. Fortunately there is a simple, more cost effective solution to saving taxpayers money while furthering public safety and infrastructure, public banking. Some cities such as San Fransisco, Philadelphia, Chicago and Santa Fe are not waiting for states to enact a state bank and instead are starting their own municipal public bank.

Solution:
A municipal or state public bank will save taxpayers money, grow the private sector and provide a buffer between the lone star state and wall street. Instead of allowing private banks to play with taxpayers money on wall street, we will instead put our finances in an autonomous public bank away from the whims of politicians.

Use the state bank to provide construction loans to local school districts. The Bank of North Dakota is providing school districts with $250 million dollar loans with a 2% interest rate.

After a year of residency allow Texans to refinance, consolidate or take out student loans from the Bank of Texas, just like North Dakota. The bank could have a policy that education resources can only be used for public and non-profit schools.

The Bank of Texas could offer small loans to fund infrastructure in rural communities where too-big-to fail banks cannot make a profit

How:

Fill out the proper financial paperwork with the Texas Department of Banking

Cost: Per the Texas Department of Banking we estimate the start up cost to be no more than $5 Million

A municipal public bank can be created either through an ordinance or charter amendment. Because the Texas constitution only allows for cities to amend their charter once every two years, we recommend a voter-ratified charter amendment. The hope would be to eventually replace all TIRZ and the entire rebuild program with a municipal public bank.

All state banks must have at least one organizer and a minimum of 5 and not more than 25 directors

The City of Santa Fe (New Mexico) is suggesting two separate approaches to appointing board members (page 20)

The principal means of enforcing compliance with strict underwriting criteria is to mandate regular independent external review of the Bank’s balance sheet and lending practices (page 9)

Explore the possibility of codifying into the municipal bank charter amendment the ability to finance affordable housing (page 15)

Public banks reduce the need for capital appreciation bonds that have been shown possibly bankrupt municipalities and states

Close corporate loopholes in the state sales tax and use revenue to start a state public bank

Texas constitution
code – local government code
chapter – 105 depositories for municipal funds
section 105.001 – definitions
section 105.031 – qualification as depositor
section 105.034 – condition to acting as a depository

chapter 116 – depositories for county funds
section 116.001 – definitions
section 116.024 – selection of depositories and sub depositories
section 116.051 – qualification as depository or sub depository

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