Public Banking in Vermont
November 5, 2013
For Immediate Release
Contact: Matt Stannard
Development Director, Public Banking Institute
Public Bank of Vermont Could Create Thousands of Jobs, Save Millions of Dollars: Report
A report released yesterday by Vermonters for a New Economy concludes that a publicly-owned bank in Vermont could yield over 2,500 jobs in the state, add almost $200 million to the Gross State Product and over $300 million in state output, and save the state “close to $100 million in interest costs.”
The results of the report led Vermont State Sen. Anthony Pollina to announce today that he will be filing legislation this session that would give the Vermont Economic Development Authority a banking license. Such a bank would, according to Vermonters for a New Economy, “enable Vermont to keep our taxpayer dollars in Vermont, working for our economy.”
Vermonters for a New Economy commissioned the report from the Political Economy Research Institute, an independent unit of the University of Massachusetts, Amherst, with close ties to the school's Department of Economics.
The study demonstrates that public goods can be funded without putting governments in debt to private lenders with outlandishly high interest rates, says Marc Armstrong, Executive Director of the Public Banking Institute, a nonpartisan group devoted to education and advocacy on publicly-owned banks. “Vermont is already in the banking business with the extensive loan programs in place at the Vermont Economic Development Authority (VEDA), Vermont Housing Finance Agency (VHFA), and the Vermont Student Assistance Corporation (VSAC),” Armstrong said. “This study confirms the merits of funding these same loans with inexpensive bank credit, something only available to licensed banks.” The report points out that the new credit generated by the bank would be at low cost to the state because a public bank does not need to sell bonds to borrow money.
Public banking advocates argue that democratically-run, publicly-owned banks avoid the diversion of public money and private deposits into speculative instruments and foreign industries that compete with domestic industries, and avoid high interest rates in the financing of public services. The Bank of North Dakota, the only state-owned bank in the continental United States, was founded in 1919 and has been profitable every year since 1971. In 2012, BND set a new profit record for the ninth straight year, making $81.6 million in profits in 2012. Return on Equity was 17.6% and its assets grew 14% -- to almost $6.2 billion. During the 2008 economic crisis, North Dakota had its largest budget surplus in state history.
Armstrong believes the study also demonstrates that public reliance on private sector banking is “wasteful,” because it places taxpayer money into private banks, only to be borrowed back at higher rates. “This is like lending your snow blower to your neighbor, only to have your neighbor charge you when you want it back,” Armstrong said.
On Friday, November 8, Vermonters for a New Economy will hold a roundtable discussion on the results of the study, at the North Branch Winery, in Montpelier, at noon eastern time.
Supporters of public banking are currently launching a Friends of Public Banking campaign with a goal of creating public banks in all fifty states in the U.S.
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