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Have you ever wondered what banks do?
Many have the impression that banks take deposits from people or institutions who don't need to spend them now and loan them out to those who do, functioning as intermediaries.
But that's not quite the case, especially in today's economy.
Many have the impression that banks take deposits from people or institutions who don't need to spend them now and loan them out to those who do, functioning as intermediaries.
But that's not quite the case, especially in today's economy.
Banks create money. Not just central banks, but commercial banks, too. When a bank makes a loan, it doesn't take the money out of your savings account, it creates a ledger entry on the other side of its balance sheet. That ledger entry — that's new money.
For Paul Pryde, who had just retired from a five-decade career, coming to terms with this reality was an epiphany at the start of what is technically his retirement from a career spent increasing access to credit for historically marginalized groups.
Pryde is now a member of @calpba, which is fighting to harness that money-creation power for public goals, like making sure BIPOCs don't get left behind by the recovery from the pandemic.
In my latest for @NextCityOrg, the latest on those efforts: https://nextcity.org/daily/entry/could-a-state-owned-bank-help-strengthen-californias-recovery-efforts
In my latest for @NextCityOrg, the latest on those efforts: https://nextcity.org/daily/entry/could-a-state-owned-bank-help-strengthen-californias-recovery-efforts
It might sound crazy. There are many obstacles even w/o opposition from banking industry lobbyists. How do you guard against corruption & mismanagement? How do you provide the necessary assurance that public deposits won't be lost? CA legislators and advocates are working it out.
Only one other state owns its own bank — North Dakota, where the state-owned @BankofND holds state govt and some local govt deposits & uses the other side of its balance sheet to support the state's economic development. Its 101st birthday is next Tuesday.
It is hard, maybe impossible, to know whether @BankofND is truly "replicable” in other states. Some of what it does, like financing the state's shale oil boom in the last 10-15 years, others definitely don't want to replicate.
Over the course of 101 years, it's hard for any institution to avoid scandals. @BankofND has seen its share, like this infamous 1986 “Honduran potato deal.” https://thebndstory.nd.gov/new-frontiers-for-the-bank/the-honduran-potato-scandal/
One group can always be counted upon in ND to come to the defense of @BankofND.
Community banks. Instead of competing with them, the @BankofND partners with them: https://www.yesmagazine.org/issue/world-we-want/2020/02/19/public-bank-north-dakota/
Which largely explains why there are more banks per capita in ND than any other state.
Community banks. Instead of competing with them, the @BankofND partners with them: https://www.yesmagazine.org/issue/world-we-want/2020/02/19/public-bank-north-dakota/
Which largely explains why there are more banks per capita in ND than any other state.
Even the Federal Reserve is taking a page from @BankofND's playbook to help with the pandemic. https://nextcity.org/daily/entry/to-keep-the-economy-afloat-the-fed-turns-to-north-dakota
Should more states or cities own banks? I can't answer that question. But here is how some folks in CA are trying to make that a reality as part of a response to a crisis we've never seen before that is exacerbating crises we've never dealt with before. https://nextcity.org/daily/entry/could-a-state-owned-bank-help-strengthen-californias-recovery-efforts
