Public-owned banking concept gaining support

MIDDLETOWN — Local stakeholders are hoping to enlighten people about the possibility of creating a public banking system which potentially could become a financial lifeline to struggling communities.

An upcoming Zoom meeting sponsored by Public Bank Connecticut will be conducted in partnership with the East Haddam-based Sanctuary at Shepardfields, a management services company led by the city’s energy coordinator, Michael Harris, who owns Harris Management Services, and administrators with the Public Banking Institute.

These lending entities have been shown to respond more rapidly, effectively and equitably to crises than privately-owned banks, according to California-based PBI, led by Ellen Brown, a world-renowned author and founding director.

“These things can really benefit Main Street, and communities and municipalities in Connecticut, which is what we’re trying to spread awareness,” Harris said. “I want to get Middletown’s attention on this topic.”

“This is an attractive option both to conservative and more progressive people. The money that’s produced in the state stays in the state,” according to Cimbria Badenhausen, who runs PBI’s engagement and support efforts.

The only such bank in the continental United States was established in North Dakota, and made possible after a Supreme Court ruling, she said.

“As a bank, it’s more successful than Goldman Sachs,” Badenhausen said.

Wall Street’s interests have prohibited the model from being replicated in other states, she said.

“They fund the big stuff. We can fund the small stuff through community banks.”

“It can be an incredibly valuable tool for managing life going forward amid the convergence of crises known as climate disruption and COVID-19, and equity, social and economic justice issues that are all inter sectional,” Harris said.

Brown will be the guest speaker at Wednesday’s 6 p.m. Zoom session.

Expected to attend are veteran public bank advocate state Rep. Susan Johnson, D-Willimantic, along with Reps. Josh Elliot, D-Hamden, and Christine Palm, D-Chester; Chester Selectwoman Lauren Gister; and East Haddam Selectwoman Theresa Govert, as well as other influencers.

New Haven community organizer Jayuan Carter owns a landscaping company. “I love economics. Economics to me is a team sport,” he said.

He’s keen on offering additional options to people looking to borrow funds. “That way, they can have more access to capital so we can have a better quality of life. The system is not quite working for everyone,” said Carter, who called the subject a passion of his.

Johnson proposed legislation five years ago, which is now gaining more interest, Badenhausen said.

Currently, there is some opposition to the plan, including consultants who work to steer people toward private loans, Carter said.

Setting up these public financial institutions at the state and municipal levels is a matter of economy of scale, Harris said. Larger cities are more conducive to the concept.

There are two ways these public banks could be set up in Connecticut, he said. The quickest would be for the governor to make an emergency declaration. An alternative, which would take longer, is legislative action.

Privately held banks have capital resources they leverage by creating credit, Harris said. “They can create money out of thin air at a ratio of $10 to every $1 of capital resources they have.”

These companies have access to extremely lowcost money through federal emergency measures caused by the economic downturn due to COVID, he added.

“All that leverage and profits derived from the way banking takes place today in the world accrue to the capital owners, to private investors through a profit modem,” Harris said.

Justin Good, co-executive director of the Sanctuary, which is dedicated to community development, sustainability and other missions, said the Connecticut Bankers Association has come out in opposition to the legislation, saying such banks would mean more competition.

“That’s absolutely false. It does just the opposite,” Good said. “Bank of North Dakota has the highest number of community banks per capita in the states. It increases their lending capacities.”

For instance, if Hartford needed $4 billion for infrastructure issues, the city, doing business as the Hartford Bank, could lend itself $4 billion at 1 percent interest. It would be paying 101 percent of the loan rather than traditional, much higher interest levels, Badenhausen said.

“Banks are not intermediaries, they actually create money when they create loans,” Good said.

Carter gives an example of banks whose policy is to keeping deposited checks for two days, which he considers a questioning of his ability to cover that amount in his own account. “In holding that check, they’re depositing and making money in the process.”

“A car dealer can’t sell more than they actually have, but a bank can make more money than it actually has,” Good said.

A study in Chicago showed banks there loaned more money to those in white neighborhoods than all others combined, he said. Individual banks loaned 20 to 40 times more funds to white families than to those of color, Good said.

“The deepest level of social injustice is in the banking industry. They didn’t find explicit racial discrimination because of how they factor risk. This is a problem that, even though redlining is illegal, it still continues with a vengeance. A public bank could address that at the deepest level,” he said.

“If it were to deposit those revenues into its own public bank, they could leverage that capital resource 10:1 and lend the community’s money at extremely low interest rates, Harris said. “The articulated mission is for the community’s good instead of for-profit investors and private owners of capital.”

To register for the Zoom meeting, go to CTPublicBank. The event will also be livestreamed on Facebook. For information, visit the Public Banking Institute website and its Facebook page.