By KATIE LAUER for | February 26, 2023

Financial lending would focus on affordable housing, small business, green energy and municipal finance

Image above: Trader Michael Gallucci works at his post on the floor of the New York Stock Exchange, Wednesday, March 11, 2020. Stocks are closing sharply lower on Wall Street, erasing more than 1,400 points from the Dow industrials, as investors wait for a more aggressive response from the U.S. government to economic fallout from the coronavirus. (AP Photo/Richard Drew)

RICHMOND — When the shorting of the U.S. housing market contributed to a recession in the late 2000s, Americans received a harsh reminder of how many big, private banks worry more about maximizing profits than protecting their cash.

But one very different financial institution weathered the Great Recession better than others — just as it had the Great Depression almost a century earlier.

The Bank of North Dakota, the only public bank of its kind in the country, was founded in 1919 to better protect the state’s farmers and ranchers from outside price hikes and market manipulation. By managing financial resources in-house by the state government, the bank was able to dole out more loans and mortgages that directly benefit the local communities and industries that fund it.

Since then, the Bank of North Dakota has reported decades of record returns. By 2021, profits exceeded $144 million and total assets — counting loans, securities and cash — hit a record $10 billion.

The Bank of North Dakota’s headquarters in west Bismarck, N.D. The bank, the only public bank of its kind in the country, was founded in 1919 to better protect the state’s farmers and ranchers from outside price hikes and market manipulation. (AP Photo/Dale Wetzel)

Despite those numbers, no other public bank has opened in the U.S. But now, elected officials in Richmond, Berkeley and Oakland are seeking to duplicate the North Dakota bank’s success in the Bay Area with the Public Bank East Bay (PBEB), a cooperative venture that would allow local municipalities to invest taxpayer dollars closer to home, especially in areas where people face discriminatory banking practices, lack access to quality financial services and have missed out on opportunities to reach economic freedom.

The plan for the PBEB is modeled on mission-driven policies of racial equity, environmental regeneration and democracy. The bank’s initial loans would focus on supporting affordable housing, small business, green energy and municipal finance.

Richmond Councilmember Gayle McLaughlin, who was appointed last year to represent the city’s interests alongside a 10-member governing board, has been pushing to explore financial options beyond private institutions like Bank of America and Wells Fargo, which have been ordered to pay almost $4 billion between them in the last year alone for violations such as charging egregious fees and fines, wrongfully foreclosing on homes, and mishandling the distribution of government benefits during the pandemic.

“There is a great advantage in doing this because it becomes our bank — we’re not putting the profits into the hands of the private banks,” McLaughlin said, adding that the PBEB’s banking attorney, Gary Findley, has helped start more than 100 community banks in California in the last five years. “We’re still in the process of getting things rolling, so it’s going to take a couple more years before we really launch the bank.”

After months of initial studies and internal conversations, the Richmond City Council unanimously voted this week to ask city staff to start working out the terms of agreement for the business plan, alongside counterparts from the other two founding cities.

Once Richmond, Berkeley and Oakland pitch in $40 million to get operations up and running — with a little extra help from Alameda County — the bank is estimated to reach profitability within three years and manage a lending portfolio of over $250 million in the first 10 years of business, according to a viability study that Richmond reviewed in April.

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