By Geeta Minocha and Ricardo Williams, Orlando Sentinel | March 12, 2021
A Public Bank for New Mexico would not offer bank accounts to the public, but could offer NM the other benefits mentioned in this article
There’s a joke that’s been floating around on the internet: “The bank says I can’t afford $800 a month for a house, so instead I’m paying $1,400 a month in rent.” To understand why this is funny is to know the painful truth: it is very expensive to be poor.
According to the Federal Reserve, nearly 63 million adults were considered unbanked or underbanked in 2019. This means they lack a bank account, or have a bank account but also require the use of alternative (and often predatory) services like payday lending and prepaid credit cards. Without the essential resource of banking, it is nearly impossible to get low-interest loans, take out a credit card, build wealth, buy a home or even just plan for the future.
Because so many of our friends and neighbors are working paycheck to paycheck, they often do not have enough money to meet minimum balance requirements. Meanwhile, another one-third of unbanked people do not have an account because they simply do not trust banks with their money. With the depth of illegality that has existed on Wall Street and the scandals that have shaken up Bank of America and Wells Fargo, consumer distrust is warranted.
Enter public banks, local financial institutions owned by taxpayers.
Public banks offer bank accounts with little to no balance requirements, making them an effective way to reconnect the unbanked to the financial system. The public ownership engenders trust from locals in a way that Wall Street banks could never replicate, and the lack of a profit motive allows these banks to provide very low interest rates to homeowners, small business owners, and college students. They can also cheaply fund local projects of direct interest to the community.
Public banks are not a radical idea. In fact, North Dakota has been running a state-owned public bank since 1919. And The Bank of North Dakota (BND) is proof-positive that public banking works: The state’s agricultural sector has flourished through BND’s loan partnerships with private banks. The private banking sector in turn remains strong, weathering competition from major banks due to BND’s ability to expand their loan portfolios. The bank has turned over $1 billion in profits over the last 20 years — all of which was reinvested into state projects and services. And North Dakota’s student loan rates are some of the lowest in the country.
We live in a society where the COVID-19 pandemic has exposed existing cracks and exasperated disparities. As the gap between the wealthiest and poorest Americans continues to increase and national economic catastrophe looms ever-closer, we can’t afford status-quo solutions. Central Florida must widen its social safety nets and create a public bank.
When the Venn diagram of people in economic anxiety and those losing faith in existing systems inches closer to being a circle, the government must do more to improve the material conditions of working people. Public banking is an opportunity to help patch the hole of distrust and show Americans that we’re all in this together.