A Seattle public bank would support local development by keeping our tax money at work at home.
PUBLIC banks have an excellent track record in helping states and cities finance infrastructure, among other public services.
In his Jan. 1 guest column, Michael Waite overlooks this fact, failing to mention that North Dakota has used a state-owned bank for nearly 100 years to offer low-cost lending to school districts, public utilities, and small business. It has a sterling credit record and earned for the state $130 million in 2015 alone, with total assets of $7.4 billion (its 12th consecutive year of record profits for the people of the state).
Waite raised three “red herrings,” citing public banking practices that our Seattle Public Banking Coalition would never endorse:
There would be:
• No “conflict of interest”: We propose the Seattle City Council use North Dakota’s model of lending. Instead of its public bank being “in the competitive mix with private banks,” the bank actually lends in partnership with local banks and credit unions, jointly vetting each loan with them on a commercial basis.
As in North Dakota, a public bank here could help local banks improve the availability of credit for business and student loans by buying down the interest rates these banks must otherwise apply. This model of backing up local banks helps them thrive amid stiff competition with large out-of-state banks.
• No “administrative mistakes”: We propose an independent bank board that includes business and banking professionals, who tightly govern a public bank’s practices. Cooperative reliance on the lending expertise of our local banks eliminates the need for a public bank to hire “hundreds, possibly thousands, of bureaucrats,” as the Op-Ed alleged.
• No “bad debts”: With its independent board, a public bank could never “become a politically focused weapon” that forgives bad debts for insiders. In fact, we propose a public bank in Washington that lends primarily to public institutions — such as school districts, affordable housing programs, public utilities — in order to reduce the state’s or a municipality’s reliance on the expensive bonds and fees in Wall Street markets.
Washington’s public infrastructure bonds enjoy an excellent record. The state’s Public Works Assistance Account has never had a default on repayment of loans in its nearly 30-year history of supporting necessary water, sewer and roads projects, making this lending nearly risk free for a public bank.
Once it has grown its assets like North Dakota’s, the bank can support broader lending for home mortgages, small business and student loans. This cooperative, private lending through its local financial partners significantly reduces the risk of accumulating bad debt, certainly less so than has proved to be the case with Wall Street banks.
It’s time for new thinking about how to support local development by keeping our tax money at work at home with a public bank. In my career as a diplomat, I saw how public banks played a major role in boosting economic growth and services in Germany, Japan and Switzerland.
A public bank in Washington is a way to mobilize our local assets to strengthen public services and individual opportunity, instead of serving the interests of large banks and campaign donors thousands of miles away.
It’s a “no-brainer” to borrow from ourselves and pay ourselves back.
Indeed, our one point of agreement with the Op-Ed is that the $1 billion in Washington’s interest payments this year “would be enough to pay for more than 10,500 new teachers, or give a 25 percent pay increase to every current teacher.” Recapturing some of this $1 billion and cycling it back into our local economy for education, infrastructure and housing — rather than sending it all to Wall Street — is the merit of a public bank.