Banking On America
Banking On America
Across the country, states are considering proposals to move general revenue deposits out of the Wall Street banks that dominate the banking business today, and use them to capitalize a new local public structure with a mission to grow the local economy. A “Main Street Partnership Bank” would be modeled on the nearly 100-year-old public Bank of North Dakota (BND). This public policy innovation—also known as a Public Bank or State Bank—could contribute to the health of local community banks, state budgets and small business job growth in an era of rapid banking concentration, budget deficits and disinvestment on Main Street.
Partnership Banks can raise revenue for states without raising taxes, and increase loans to small businesses precisely when Wall Street banks have cut back on lending and raised public borrowing costs. A Partnership Bank would act as a “banker’s bank” to in-state community banks and provide the state government with both banking services at fair terms and an annual multi-million dollar dividend.
If modeled on the successful Bank of North Dakota, Partnership Banks in other states would:
- Generate new revenues for states directly, through annual bank dividend payments, and indirectly by creating jobs and spurring local economic growth. The table above shows projected dividends for established Partnership Banks in the states considering such proposals, based on BND’s 2009 dividend payment to North Dakota’s General Fund.
- Lower debt costs for local governments. Like the Bank of North Dakota, Partnership Banks can get access to low-cost funds from the regional Federal Home Loan Banks. The banks can pass savings on to local governments when they buy debt for infrastructure investments. The banks can also provide Letters of Credit for tax-exempt bonds at lower interest rates.
- Strengthen local banks even out credit cycles, and preserve real competition in local credit markets. There have been no bank failures in North Dakota during the financial crisis. BND’s charter is clear that its goal is to “be helpful to and to assist in the development of [North Dakota banks]... and not, in any manner, to destroy or to be harmful to existing financial institutions.” By purchasing local bank stock, partnering with them on large loans and providing other support, Partnership Banks would strengthen small banks in an era when federal policy encourages bank consolidation.
- Build up small businesses. Surveys by the Main Street Alliance in Oregon and Washington show at least 75 percent support among small business owners. In markets increasingly dominated by large corporations and the banks that fund them, Partnership Banks would increase lending capabilities at the smaller banks that provide the majority of small business loans in America.