What is a Public Bank? 

A Public Bank is a bank owned by a national, state, or local government in which all of its funds, taxes, and revenues are deposited. It is mandated to serve a public mission that reflects the values and needs of the public it represents. 


What is the most basic difference between a public and private bank?

The most fundamental difference is that a public bank has a mission to serve the public interest while private banks are owned by shareholders and their primary goal is to maximize profit for their shareholders, which can work against the public interest.  


What are the primary advantages to a state, city, or county of having a public  bank? 

  1. Public banks invest in the local community–in small and medium sized businesses, infrastructure, affordable housing, renewable energy, health care, sustainable agriculture, education, student loans, and other sustainable and locally beneficial enterprises.  In contrast, private banks often invest primarily in high profit or risky non-sustainable enterprises elsewhere, such as weapons and war, fossil fuels, big pharma, chemical agriculture, private prisons, and privatization of public assets through public-private partnerships (3Ps) and outright sale of public assets, causing big increases in fees and tolls and decreased public access.
  2. Public banks create many more jobs in local communities.
  3. Public banks like the Bank of North Dakota lend in partnership with local private community banks, enabling community banks to take on loans they could not otherwise take on, to be more profitable, to help them comply with burdensome regulations, and for them together to better serve the local community. 
  4. Public banks operate with very low overhead: no advertising, no ATMs, no huge salaries or bonuses, no branches; local community banks serve as their front office; and they have no shareholders to whom to pay dividends.
  5. Public banks lend conservatively and avoid speculative lending, making them very stable. 
  6. As a result of these practices, public banks are more profitable and more stable, often considerably more so than the major Wall Street banks.  They thus can avoid and end the recurrent so-called “business cycle” to which the normal business practices of the major banks are a substantial contributor.  In contrast, public banks through their countercyclical lending, as explained below, help prevent and dampen the business cycle.
  7. Public banks provide a major source of new income to a community without raising taxes, and may sometimes enable a reduction of taxes.
  8. Public banks lend counter-cyclically.  Thus, they lend more in a recession to offset the decline, thus preventing and reversing the recession, while major private banks always cut lending in a recession, making it worse if not severe as in the Great Recession of 2008.  For example, the public Bank of North Dakota enabled North Dakota to be the only state to experience no recession in 2008, but record income each year instead.  Some said that oil was the reason why North Dakota experienced no recession in 2008. However, Montana and Alaska had as much oil as North Dakota but unlike North Dakota experienced high unemployment and budget deficits.  Further, the oil income from fracking did not kick in until 2010.  In 2015, when the price of oil collapsed, the Bank of North Dakota and its state again had record profits unlike other oil-rich states.
  9. In a recession, public banks work with borrowers to refinance loans and to ensure payment, while private banks often move quickly to foreclose on property, knowing they can resell it, or can buy foreclosed properties, businesses, and smaller banks for a fraction of their real value, siphoning ever more of the country’s wealth into the hands of the richest members of society.
  10. Unlike private banks, public banks do not pay commissions and fees to loan officers for making loans.  This aspect of counter-cyclical lending helps prevent subprime lending, “liar’s loans,” and bubbles, which inevitably burst, causing economic collapse and recession. 
  11. Public banks lend to create new goods and services, whereas private banks often lend for investment in existing assets such as stocks, real estate, or commodities, which promotes inflation and bubbles.  Investing in real goods and services helps prevent inflation because the new money or demand is balanced by the supply, or the new goods and services.