A public bank is essentially a nonprofit organization, owned by a local, state or federal government that manages its own checking/savings accounts, accepts deposits and makes loans. The Bank of North Dakota, which has been in operation since 1919 with great success, deposits all tax and fee revenue in the state bank and uses it to provide low-cost student loans, housing loans, commercial loans, and to finance public infrastructure.
Many states (e.g. California, New Jersey and New York) and municipalities (Santa Fe, San Francisco) are considering setting up a Public Bank, instead of depositing their money in private banks, like Wells Fargo or Citibank, who make interest income off those deposits. A public bank need not get into the business of loaning money for housing or commercial investments, as the Bank of North Dakota does. Instead a public state bank could only loan money to cities and villages, interest free, for public infrastructure projects. Many states have an enormous amount of money invested in private banks that could be deposited in public banks and invested in projects that benefit the state. The public could save money by eliminating the interest paid to private banks for loans for capital improvement projects or paid to bond holders for those projects.
Watch an interview with Walt McRee, Public Banking Institute.
Ellen Hodgson Brown’s The Public Bank Solution: From Austerity to Prosperity details the history and theory of public banking. Dollars and Sense explains a similar solution to government-run public banks, the co-operative bank.
The United States Postal Service also has a plan for providing banking services to people who otherwise use costly payday loan service or check cashing services or who can’t make online purchases due to a lack of a credit card or bank account.