It may not come as a surprise to hear that the majority of Americans don’t trust the banking system in this country. Only 27 percent of those surveyed in a 2016 Gallup poll said they had “a great deal” or “quite a lot” of confidence in the institution — less than half of the record high set in 1979. And the lack of trust is spread relatively evenly across the political spectrum — it’s not just liberals or those on the left: Almost everyone is fed up with the banks.
And if banking institutions don’t exactly spark joy, their lead characters — morally bankrupt investment bankers whose greed and arrogance almost singlehandedly collapsed the entire country’s economy — certainly don’t spark joy either. It’s an old story: Bankers made obscene amounts of money destroying the economy, we bailed them out, they walked away from it all without a shred of accountability and there’s nothing anyone can do about it. But that’s not where the story has to end. Spurred by the need for an alternative to the for-profit, extractive model of finance exemplified by Wall Street, there is a budding movement in the United States that is working to reimagine banking as an institution that truly serves the public.
Public banking is an old idea, but it has never been very common in the United States. The first and only public bank in the country was founded exactly 100 years ago in North Dakota, and it wasn’t until relatively recently that the idea has begun to find new life in cities and states across the country. Growing largely out of the need for more democratic ownership over capital, the aim of this budding movement is to create a robust public banking infrastructure across the nation that is rooted in the principles of economic, environmental, racial and social justice.
The renewed interest in public banking really took off right after the financial collapse in 2008 as people began exploring the option of moving their money into alternative banking institutions, such as local credit unions and community banks. But despite being useful for small-scale, personal banking, these institutions do not operate on a scale where they are able to handle a city or state’s financial assets — they’re just too small. What was needed was a much larger institution with a clearly defined charter that could take in the municipal deposits of a state — or even a city like San Francisco, whose budget topped $10 billion in 2018.
As public banking advocates began exploring larger-scale solutions, the Bank of North Dakota quickly became a potentially replicable option. Founded by the Nonpartisan League in 1919 during the Midwest’s agrarian populist period, the Bank of North Dakota is the only public bank in the mainland U.S. (American Samoa also has a public bank.) Intended to free the state’s farmers from predatory lenders, the Bank of North Dakota survived a Wall Street boycott and has since become institutionalized within the state’s banking ecosystem.
The Bank of North Dakota has many functions: By law, all state deposits and revenue must go through the bank, which then works with community banks and credit unions throughout the state to provide a number of services, from liquidity and loan guarantees to low-cost student lending to disaster-relief lending and more. It’s proven to be a very successful model.