2018 could be a turning point in the way banking is done in America. The creation of publicly owned banks could save the public millions in fees and interest each year, lead to improved financial infrastructure, and drastically reduce the cost of public projects. In recent months, more than a dozen American cities and states have been exploring the idea of transferring their accounts from private banks into banks of their own.
Unlike private banks, public banks (also called publicly owned banks) are run by an individual municipality, county, or state and must serve the public interest rather than the interests of private shareholders. In practice, when a city or state channels its revenue through its own public bank and funds projects this way, it significantly reduces its financing costs to the tune of millions or in some cases billions of dollars each year, by lowering the cost of borrowing.
New Jersey Governor Phil Murphy, who began his term earlier this year, campaigned successfully on a public banking ticket. As a former Goldman Sachs executive, Murphy knew the cost savings such a state bank could bring, by reducing fees and interest payments on its billions in revenue and spending, including $1.5 billion in deposits held by foreign banks.
Funding public projects though a publicly owned bank reduces the costs by a whopping 50 percent on average by reducing or eliminating interest and debt service payments that would otherwise get paid to private banks.
According to the Public Banking Institute (PBI), funding public projects though a publicly owned bank reduces the costs by a whopping 50 percent on average by reducing or eliminating interest and debt service payments that would otherwise get paid to private banks.
Beyond New Jersey, cities and states around the country are exploring the possibility