Economy Ellen Brown Original

Will 2021 Be Public Banking’s Watershed Moment?

Faced with the dire Covid-19 crisis, some lawmakers are starting to see publicly-owned banks as the key to ensuring an equitable economic recovery.
[joshua twentythree / CC BY 2.0]

By Ellen Brown / Original to ScheerPost

Just over two months into the new year, 2021 has already seen a flurry of public banking activity. Sixteen new bills to form publicly-owned banks or facilitate their formation were introduced in eight U.S. states just in January and February. Two bills for a state-owned bank were introduced in New Mexico, two in Massachusetts, two in New York, one each in Oregon and Hawaii, and Washington State’s Public Bank Bill was re-introduced as a “Substitution.” Bills for city-owned banks were introduced in Philadelphia and San Francisco, and bills facilitating the formation of public banks or for a feasibility study were introduced in New York, Oregon (three bills), and Hawaii. 

In addition, California is expected to introduce a bill for a state-owned bank later this year, and New Jersey is moving forward with a strong commitment from its governor to implement one. At the federal level, three bills for public banking were also introduced last year: the National Infrastructure Bank Bill (HR 6422), a new Postal Banking Act (S 4614), and the Public Banking Act (HR 8721). (For details on all these bills, see the Public Banking Institute website here.)

As Oscar Abello wrote on in February, “2021 could be public banking’s watershed moment.… Legislators are starting to see public banks as a powerful potential tool to ensure a recovery that is more equitable than the last time.”

Why the Surge in Interest?

The devastation caused by nationwide Covid-19 lockdowns in 2020 has highlighted the inadequacies of the current financial system in serving the public, local businesses, and local governments. Nearly 10 million jobs were lost to the lockdowns, over 100,000 businesses closed permanently, and a quarter of the population remains unbanked or underbanked. Over 18 million people are receiving unemployment benefits, and moratoria on rent and home foreclosures are due to expire this spring. 

Where was the Federal Reserve in all this? It poured out trillions of dollars in relief, but the funds did not trickle down to the real economy. They flooded up, dramatically increasing the wealth gap. By October 2020, the top 1% of the U.S. population held 30.4% of all household wealth, 15 times that of the bottom 50%, which held just 1.9% of all wealth. 

State and local governments are also in dire straits due to the crisis. Their costs have shot up and their tax bases have shrunk. But the Fed’s “special purpose vehicles” were no help. The Municipal Liquidity Facility, ostensibly intended to relieve municipal debt burdens, lent at market interest rates plus a penalty, making borrowing at the facility so expensive that it went nearly unused; and it was discontinued in December. 

The Fed’s emergency lending facilities were also of little help to local businesses. In a January 2021 Wall Street Journal article titled “Corporate Debt ‘Relief’ Is an Economic Dud,” Sheila Bair, former chair of the Federal Deposit Insurance Corporation, and Lawrence Goodman, president of the Center for Financial Stability, observed:

The creation of the corporate facilities last March marked the first time in history that the Fed would buy corporate debt… The purpose of the corporate facilities was to help companies access debt markets during the pandemic, making it possible to sustain operations and keep employees on payroll. Instead, the facilities resulted in a huge and unnecessary bailout of corporate debt issuers, underwriters and bondholders….This created a further unfair opportunity for large corporations to get even bigger by purchasing competitors with government-subsidized credit.

….This presents a double whammy for the young companies that have been hit hardest by the pandemic. They are the primary source of job creation and innovation, and squeezing them deprives our economy of the dynamism and creativity it needs to thrive.

In a September 2020 study for ACRE called “Cancel Wall Street,” Saqib Bhatti and Brittany Alston showed that U.S. state and local governments collectively pay $160 billion annually just in interest in the bond market, which is controlled by big private banks. For comparative purposes, $160 billion would be enough to help 13 million families avoid eviction by covering their annual rent; and $134 billion could make up the revenue shortfall suffered by every city and town in the U.S. due to the pandemic. 

Half the cost of infrastructure generally consists of financing, doubling its cost to municipal governments. Local governments are extremely good credit risks; yet private, bank-affiliated rating agencies give them a lower credit score (raising their rates) than private corporations, which are 63 times more likely to default. States are not allowed to go bankrupt, and that is also true for cities in about half the states. State and local governments have a tax base to pay their debts and are not going anywhere, unlike bankrupt corporations, which simply disappear and leave their creditors holding the bag.

How Publicly-owned Banks Can Help 

Banks do not have the funding problems of local governments. In March 2020, the Federal Reserve reduced the interest rate at its discount window, encouraging all banks in good standing to borrow there at 0.25%. No stigma or strings were attached to this virtually free liquidity – no need to retain employees or to cut dividends, bonuses, or the interest rates charged to borrowers. Wall Street banks can borrow at a mere one-quarter of one percent while continuing to charge customers 15% or more on their credit cards. 

Local governments extend credit to their communities through loan funds, but these “revolving funds” can lend only the capital they have. Depository banks, on the other hand, can leverage their capital, generating up to ten times their capital base in loans. For a local government with its own depository bank, that would mean up to ten times the credit to inject into the local economy, and ten times the profit to be funneled back into community needs. A public depository bank could also borrow at 0.25% from the Fed’s discount window.

North Dakota Leads the Way

What a state can achieve by forming its own bank has been demonstrated in North Dakota. There  the nation’s only state-owned bank was formed in 1919 when North Dakota farmers were losing their farms to big out-of-state banks. Unlike the Wall Street megabanks mandated to make as much money as possible for their shareholders, the Bank of North Dakota (BND) is mandated to serve the public interest. Yet it has had a stellar return on investment, outperforming even J.P. Morgan Chase and Goldman Sachs. In its 2019 Annual Report, the BND reported its sixteenth consecutive year of record profits, with $169 million in income, just over $7 billion in assets, and a hefty return on investment of 18.6%. 

The BND maximizes its profits and its ability to serve the community by eliminating profiteering middlemen. It has no private shareholders bent on short-term profits, no high-paid executives, no need to advertise for depositors or borrowers, and no need for multiple branches. It has a massive built-in deposit base, since the state’s revenues must be deposited in the BND by law. It does not compete with North Dakota’s local banks in the retail market but instead partners with them. The local bank services and retains the customer, while the BND helps as needed with capital and liquidity. Largely due to this amicable relationship, North Dakota has nearly six times as many local financial institutions per person as the country overall.

The BND has performed particularly well in economic crises. It helped pay the state’s teachers during the Great Depression, and sold foreclosed farmland back to farmers in the 1940s. It has also helped the state recover from a litany of natural disasters.

Its emergency capabilities were demonstrated in 1997, when record flooding and fires devastated Grand Forks, North Dakota. The town and its sister city, East Grand Forks on the Minnesota side of the Red River, lay in ruins. The response of the BND was immediate and comprehensive, demonstrating a financial flexibility and public generosity that no privately-owned bank could match. The BND quickly established nearly $70 million in credit lines and launched a disaster relief loan program; worked closely with federal agencies to gain forbearance on federally-backed home loans and student loans; and reduced interest rates on existing family farm and farm operating programs. The BND obtained funds at reduced rates from the Federal Home Loan Bank and passed the savings on to flood-affected borrowers. Grand Forks was quickly rebuilt and restored, losing only 3% of its population by 2000, compared to 17% in East Grand Forks on the other side of the river.

In the 2020 crisis, North Dakota shone again, leading the nation in getting funds into the hands of workers and small businesses. Unemployment benefits were distributed in North Dakota faster than in any other state, and small businesses secured more Payroll Protection Program funds per worker than in any other state. Jeff Stein, writing in May 2020 in The Washington Post, asked:

What’s their secret? Much credit goes to the century-old Bank of North Dakota, which — even before the PPP officially rolled out — coordinated and educated local bankers in weekly conference calls and flurries of calls and emails.

According Eric Hardmeyer, BND’s president and chief executive, BND connected the state’s small bankers with politicians and U.S. Small Business Administration officials and even bought some of their PPP loans to help spread out the cost and risk….

BND has already rolled out two local successor programs to the PPP, intended to help businesses restart and rebuild. It has also offered deferments on its $1.1 billion portfolio of student loans.

Public Banks Excel Globally in Crises

Publicly-owned banks around the world have responded quickly and efficiently to crises. As of mid-2020, public banks worldwide held nearly $49 trillion in combined assets; and including other public financial institutions, the figure reached nearly $82 trillion. In a 2020 compendium of cases studies titled Public Banks and Covid 19: Combatting the Pandemic with Public Finance, the editors write: 

Five overarching and promising lessons stand out: public banks have the potential to respond rapidly; to fulfill their public purpose mandates; to act boldly; to mobilize their existing institutional capacity; and to build on ‘public-public’ solidarity. In short, public banks are helping us navigate the tidal wave of Covid-19 at the same time as private lenders are turning away….

Public banks have crafted unprecedented responses to allow micro-, small- and medium-sized enterprises (MSMEs), large businesses, public entities, governing authorities and households time to breathe, time to adjust and time to overcome the worst of the crisis. Typically, this meant offering liquidity with generously reduced rates of interest, preferential repayment terms and eased conditions of repayment. For the most vulnerable in society, public banks offered non-repayable grants.

The editors conclude that public banks offer a path toward democratization (giving society a meaningful say in how financial resources are used) and definancialization (moving away from speculative predatory investment practices toward financing that grows the real economy). For local governments, public banks offer a path to escape monopoly control by giant private financial institutions over public policies.

Ellen Brown
Ellen Brown

Ellen Brown is a regular contributor to ScheerPost. She is an attorney, founder of the Public Banking Institute, and author of thirteen books including the best-selling Web of Debt. Her latest book is Banking on the People: Democratizing Money in the Digital Age and her 400+ blog articles are at


  1. I wish you’d learn Modern Monetary Theory (MMT)!

    You sound less than knowledgeable when you talk about “the Fed” doing this and “the Fed” doing that.

    The Fed doesn’t make policy. Congress does.

    The Fed is the government’s bank. It is a branch of the United States Treasury Department. It is used when the government needs to cash a check (appropriations bill) just like you and I need to have a bank when we cash a check.

    You’re deflecting the blame for the disaster that the US is in on the wrong target. Congress is responsible, not the Fed.

    1. Yes agreed, Congress could fix it, but they haven’t. My point was that the money system isn’t working for the people. Everyone looks to the Fed to fix it. The Fed purports to be able to regulate and control the financial system, but they haven’t succeeded in doing it in a way that serves the public interest or the local economy. When they tinker with it, it’s all about saving the stock market, the big corporations, the big banks and the big investors. We the people don’t have much influence on Congress or the Fed. Where we can have an influence is on our local governments. We can show up at city council meetings and get them to move. Our local public banking groups have shown that.

    2. You’re forgetting in the Dodd/Frank legislation, Congress gave the power to inject liquidity into the market as they saw fit so that Wall St bankers wouldn’t have to come to Congress in the future begging like they did in 2008. Since then the FED has acted many times without Congressional approval. Just look into the REPO market scandal that pretty much went unreported by the MSM while the FED was printing almost a trillion dollars just to keep the REPO markets afloat. The FED in effect has been independent from Congress for over 10 years now.

      1. Thanks Scott, I agree! the Fed is supposedly in charge of “monetary policy” and insists on being “independent.” Who told it to lower the interest rate at its discount window to one-quarter of one percent for all banks in good standing? That included JPM, which used it extensively after that — probably in lieu of the repo market that the Fed was tired of supporting in order to keep JPM afloat!

    3. And who runs the Fed? Those are NOT people at all interested in the public good.

    4. Last time I checked, members of the FED don’t get a government pension. If we still had phone books, they wouldn’t be listed under “Gov’t.”

      If you traced the flow of funds, the FED “works for its cronies,” – the private banks and their affiliates, and not the general welfare.

      Scott brings up an important recent example with Dodd/Frank allowing the FED to unilaterally fund the Repo market without Congressional approval. There are others, like the SPV’s that were created to give Blackrock hypothecation power – effectively more privatization of the money power.

      If you follow those funds, they went into accelerating polarization of our society towards a financial and corporate elite, just as Ellen states.

      Congress cannot fix things because they are monetized by the party system and hence have to prostrate themselves to corporate donors…

      Thomas Massie dropped the dime on why Congress is bought off:

      There will be no top-down solutions. The States are bottom up solutions, and they have to seize the money power back from a grabbing oligarchy.

  2. Our present system’s bias toward further enriching the super-rich is depressing. I agree with Ellen Brown’s proposed state-owned-banks solution. Current events are illustrating how people who vote for puppets of the super-rich are screwing (and in many cases killing) themselves!

    1. That state bank of North Dakota is held in high regard by residents there. And that’s not a liberal state!

  3. Fantastic ! Keep up the good work. People of America and the rest of the world, time to wake up.

  4. The brief answer to this headline is “no.” The answer why it should be “yes” is in the excellent article.

  5. what’s w/ women? leading a rebellion in finance?
    the once-secretive clique is being exposed by Sheila Bair, former chair of the Federal Deposit Insurance, Nomi Prinz, Liz Warren proposing a “wealth tax,” and of course Ellen for some time now…you could toss a little AOC et SQUAD….AND serve w/ some naomi klein on that.
    Finance has been smokin’ in da old boyz room too long.
    i’d be interested if ms yellen would sit in w/ this knitting clatch. a little vignette i remember from Tale of Two Cities….we need names. taking names now. like Fink, Rubin, Blankfein, Fuld, Dimon, Mnunchkin, more….

    1. Humorous and cogent. Madame La Farge leading that chorus of clicking knitting needles is causing some scrotums to constrict no doubt.

    2. The old boyz room is filled with agents of mammon. Women can also be agents, but maybe less so than men. Perhaps it is their maternal and protecting instincts that don’t allow them to be predators and usurers.

      Religion is also part of the problem, where some religions give cover and sanction for usury.

  6. Ms Ellen Brown nailed it again! If any person with the discerning abilities to reason carefully and reasonably on what is and has been going on in the United States for far too long doesn’t think it’s time to “change the system” from an oligarchy to a real democracy, then we , and I’m talking about the overwhelming majority of our fellow citizens, are doomed as a nation and will descend down the abyss of poverty, insecurity, hunger, sickness and disease, and various forms of despair, including suicide. It’s not hyperbole, folks, it’s happening now!

    Ms Brown is in the vanguard of a movement who’s time has come. Educate yourselves and pass on the information to your friends and loved ones before it is too late. “Publicly owned banks for needs of the people and the community, rather than further enrichment of the super-rich who already own most of the wealth in the nation. We need to build an egalitarian society rather than regress back in time when there were only to classes of people: the master and the slave, then later, the lord and the serf.

    Please support the public banking institute, and read Ms. Brown’s books on the subject and other writers working toward that goal. Thank you Ellen for a timely and poignant article!

  7. Aside from the lending capacity to recover from disasters there is also the convenience of making a quick trip to your local public depository bank and getting cash. Think about all of Texas without electricity. That means ATMs were not functional and credit/debit cards could not be used to buy eggs, milk and hamburger. SNAP programs issue debit cards through commercial banks that exact a charge on use by people who are already strapped. Public banks could issue those debit EBT cards with no charge to the user meaning that not only does the user get more money but the economy benefits from that money flow.
    You would expect that Wall Street would oppose the establishment of these public banks but that opposition is non existent or weak. Perhaps Wall Street realizes that it is an easy effective way to stimulate the economy without giving up much power. Wall Street can thrive for only so long on direct Fed stimulus. The public will revolt. If the economy is stimulated through public banking the 99% will remain uninformed and Wall Street will benefit from an improved economy. Maybe Wall Street has been watching China and realizes that to survive it has to give.

  8. Excellent article. The US should experiment with several forms of public banking at all levels of govt.

  9. Although the creation of public banks is an important step in the right direction, I am sure Ellen agrees this is not a panacea. The systems of law, taxation and public policy are plagued by systemic design flaws going back to the first state and then the U.S. constitution. Ever since there has been a back-and-forth political battle over the balance between rights to property (and how property is to be defined) and human rights (and what are our human rights). After many panics and economic depressions, our political leaders at the beginning of the 20th century decided the best they could come up with was the Federal Reserve System, giving this new quasi-government entity more and more authority over time to manage the expansion of the money supply and at what rates of interest banks (and the treasury) can borrow. There are many other issues monetary reformers raise that continue to demand attention, not the least of which is whether the U.S. government should directly issue and spend money into circulation (i.e., creating “debt free” money), subject to restrictions that would prevent inflationary price increases. Another issue is whether commercial banks as members of the Federal Reserve should be permitted, as is now the case, to put loans on their books without actually having the cash on hand.

    Of equal importance to all of the money issues is the continued privatization of economic rents. This is an issue that has been debated by political economists going back to Richard Cantillon, Adam Smith and A.R. Turgot. Henry George turned the issue into an international movement at the end of the 19th century and at least some economists over the decades have expressed either strong or general agreement with the position that rents are unearned to individuals and rightfully belong to the community.

    What is important for readers to know, I think, is that absent the public collection of economic rents there is nothing to prevent the credit-fueled and speculation-driven character of property (i.e., land) markets from building to a crisis every 18-21 years. The last such crisis occurred in 2008 and began its renewed upward climb in 2011. Thus, the next financial and economic crisis is on the way and will occur sometime right before, during or after 2026. I am now compiled the statistics to show how this is happening and will have a recorded version up on my Youtube channel in a few days.

      1. Search Youtube on my full name: Edward Dodson. I have completed a PowerPoint version of the analysis but have not yet recorded it. I hope to do so this weekend. The Youtube channel does have recorded versions of other lectures and courses that cover some of the same ground.

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