+ What's wrong with the way our state currently banks?
- Our tax dollars are invested in projects and industries that are bad for our state and our planet like the Keystone XL, Dakota Access and Vermont Gas Systems pipelines.
- A study by the Gund Institute for Environmental Economics determined there are presently 40.8 billion dollars in unmet financing needs in Vermont, mostly in the development of renewable energy infrastructure.
- The state sends roughly $80 million per year to out of state banks in interest costs and administrative fees. This money stays out of state and is not available for use in meeting the needs mentioned above.
- Some of the institutions that the state contracts with for financial services have engaged in illegal/unethical activities including price fixing, interest rate rigging, mortgage fraud and manipulating foreign exchange rates.
- In the event that TD Bank fails or gets into serious financial trouble it is possible that Vermont’s deposits in TD Bank will be lost to “bailing-in” the bank.
+ Who would benefit from a Public Bank?
Vermonters from all walks of life will benefit from a public bank. This includes:
Students -- Who can access low interest education loans from the bank. Since Vermont would control it, we could also offer flexible repayment terms for people who go into public service and education, so our young people are not saddled with unreasonable debt.
Homeowners – who could get mortgages and home loans from the bank.
Entrepreneurs – they’ll have access to credit lines, loans, and other forms of finance to help their businesses succeed.
Municipalities – the bank can offer competitive interest on public deposits and lower cost financing for public works. This will make public project by the State of Vermont lower cost as well.
Taxpayers – Who will benefit from both the profits the bank makes and the services the bank offers.
Workers – The Gund Study concluded that $236.2 million in credit for economic development could be created by a state bank. It determined that this credit could result in the creation of 2535 new jobs, add $192 million to the gross state product
The Bottom Line – A public bank “could save close to $100 million in interest costs on FY 2012-13 capital expenditures due to interest payments no longer leaving the state.”
Local Banks -- Can benefit from the assistance that a state bank can supply to them in complying with federal regulations, relieving them of some of the costs involved in this endeavor.
+ How would a state bank work?
Legislation could expand the Vermont Economic Development Authority into a public bank. The State of Vermont would deposit its revenues into the pubic bank. The bank would use these funds in ways that would create economic sustainability in Vermont by partnering with community banks to make loans and engaging in other activities that would leverage state funds to promote economic well-being in the state. The interest from these loans would be returned to the bank instead of out of state interests and would be available for further investment in the local economy or could be transferred to the state general fund. The bank would not invest in the risky financial instruments that big banks do. The bank’s activities would be open and available for public scrutiny.
+ Does a state bank compete with local community banks?
No. A state bank does not engage in retail banking. It does not take deposits from people. It is a depository for state and possibly municipal monies. It leverages these deposits to partner with the community banks in making loans which will contribute to the economic well being of the state.
Community banks in North Dakota have an excellent working relationship with the publicly owned Bank of North Dakota. With the backing of the BND, community banks are able to make loans they would otherwise not be able to make. This has allowed the community banks in ND to flourish and diminished the role of the out of state mega banks which would extract money from the economy of ND by sending interest and fees to private stockholders and investing it in derivatives and other questionable investments which benefit the few at the expense of the many.
+ I don’t like the idea of government running a bank.
Vermont already has agencies that perform many of the functions of a bank-Vermont Economic Development Authority (VEDA), Vermont Housing Financing Agency (VHFA), Vermont Student Assistance Corporation (VSAC) and the Vermont Municipal Bond Bank (VMBB). These agencies presently partner with banks to loan money in their respective jurisdictions. Since none of them are banks, they must get the money they use to back loans generated by private banks through bonding, from appropriations of state revenues by the legislature or by borrowing from other institutions. Legislation could make VEDA a state bank. State monies would be deposited in the VEDA Bank which could leverage this money and eliminate the need for the state to float bonds, thereby saving the state millions each year in interest and administrative fees.
+ What is the difference between a public bank and any other bank?
A Public Bank is owned by the State of Vermont. That means that the money it makes by making loans comes back to the people of Vermont, rather than to private banks and investors. It has many of the same privileges as the private banks, however, in that it can use the fractional reserve system to multiply the value of its deposits through loans to students, homeowners, municipalities, and enterprises.