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March 18, 2023. By Trinity Tran, Truthout. 

The recent collapse of Silicon Valley Bank (SVB) and Signature Bank — the second and third largest bank failures in U.S. history respectively — has laid bare the vulnerability of the private banking sector.

With over 563 federally insured banks toppling between 2001 and 2023, it’s impossible to ignore: The status quo is unsustainable. Amid this financial turbulence, the need for public banking has never been more pressing. It’s high time we seriously consider public banking as a stable, transparent, and accountable alternative that would firmly anchor public interest at the heart of the financial system. After all, banking should be a public utility that benefits everyone, not a high-risk game played by bankers trying to score big profits.

The failures of SVB, Signature and Silvergate banks can be traced back to poor management decisions and high-risk strategies. SVB invested in long-term government securities amid concerns about rising interest rates as well as the volatile venture capital industry, while Signature and Silvergate banks ventured into speculative cryptocurrencies. All three banks shared one common problem: massive uninsured deposits from a handful of ultra-wealthy customers.

When the banks teetered on the edge of collapse, the Biden administration, FDIC, and Treasury swooped in with a bold bailout. They created a “systemic risk exception” to protect all deposits, even those beyond the $250,000 threshold. Ironically, all depositors were “made whole” from the Deposit Insurance Fund — the very fund that Silicon Valley Bank had previously lobbied against, arguing that increased contributions would hurt their bottom line.

This intervention raises a crucial question: If the government is ultimately responsible for ensuring the banking system’s stability, why not opt for public banks designed to serve the public interest from the outset?

Continue reading on Truthout.

Nathan Newman builds the case for public banks: regulation is necessary, but a better solution is to provide alternatives that better support local businesses and communities.

"Los Angeles is considering setting up a local bank and projects that it would save local governments $100 million per year just in banking fees and interest paid by the government itself. As the graphic below highlights, the City has billions it could use to capitalize a local bank and use to support local businesses and communities, while actually generating revenue.

Public banking advocates also focus on the fact that public banking could radically cut the financing costs of borrowing money to build infrastructure projects like mass transit. Analysts estimate public banking could reduce 50% of those financing costs, which could eliminate an estimated $161 billion in annual interest payments that might otherwise substantially be going to infrastructure and human needs.

While the Bank of North Dakota does not encourage individuals to bank with it, California passed AB 1777 in 2021 to develop a plan to offer direct retail banking, including debt cards and direct deposit, through the public banks being established to support the unbanked around the state."

Continue reading the article at nathannewman.substack.com.

The public banking movement is gaining momentum in the United States as more people seek alternatives to traditional banking institutions. Unlike traditional banks that prioritize profit above all else, public banks aim to promote community development and social justice. Piper French, a journalist with Noema Magazine, recently spoke with Trinity Tran and other organizers across the country to discuss the movement and its goals.

The rise of public banking is a response to the growing discontent with the banking industry's practices, particularly in the wake of the 2008 financial crisis. Many people see public banking as a way to reestablish trust and accountability in the financial system. Public banks can prioritize the needs of local residents and businesses by focusing on community investment rather than profits for shareholders.