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How to start a public bank: A Modeled Exercise

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(Please see for fully illustrated version with spreadsheet screenshots:

How to Start A Public Bank

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by Scott Baker, New York Coordinator for the Public Banking Institute

Why write a How-To Guide to starting a Public Bank?

A lot has been written about why we need Public Banks, from the books and articles of Ellen Brown -- essentially the founder of the modern American Public Banking Movement in the 21st century - to individual State or City Public Banking chapters creating their own feasibility studies and documenting their results and projections.

Unfortunately, for the average activist looking to take on this kind of reform in his or her community, there is very little to actually show them the way in a step-by-step nuts and bolts fashion. Where will the money come from? Will that money be needed back and if so, when and is that feasible? What are the balances, operating and performance ratios you must maintain (if you don't know what these terms mean, don't worry, that's another thing that will be explained in the following pages), how much money can a community of X population expect a public bank to be able to lend? How will this change over the years as the bank becomes more profitable?

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There are some banking basics books and articles available that explain how to create a small, basic commercial bank, and we will use a three-page section from one of them: Banking Basics (pgs 19-21) from the article Money Basics by Christopher D. Moore, 2003 (see Appendix). But the requirements and options for a Public Bank are substantially different, and advantageous as we will see, and so require modifications to the basic banking spreadsheet created by Moore. These have been made to the working spreadsheet that accompanies this document.

Both this Adobe Acrobat document and the MS Excel spreadsheet may be found and downloaded from the files section of the Public Banking for New York State Facebook Page:

Even though the Facebook page is set up for New York, my work as the New York Coordinator for the Public Banking Institute has brought me projects from New York City; Goshen, NY; Pennsylvania; Philadelphia; Vermont; New Jersey (Princeton, Trenton, etc.); Tacoma, Washington; Arizona; New Mexico; California (Santa Cruz); and, most importantly for this exercise, the moderately sized city of Oakland, California.

The members of the Oakland chapter first hired me to assess the assets potentially available to create a Public Bank in the summer of 2015. I completed that assignment in early 2016, but quickly realized that it was not enough to just identify the pools of money available (more on that later) without specifying how that money will be used to set up a bank and critically, since it will be borrowed from existing funds under the scenario I've been promoting for 4 years, how and when it will be repaid.

The CAFRs (CAFRs = Comprehensive Annual Financial Reports)

The Comprehensive Annual Financial Reports (CAFRs) contain every Federal, State, County, City agency's or enterprise's assets for all time. Think of the budget as the yearly account of revenues and expenses, and the CAFR as the report of all the entity's assets, for all time. The last part is very important, especially for large stashes of cash like pension funds, because most of this money is never spent, just invested and added to, year after year. For example, a well-run pension fund will spend 4% of its assets and retain 96% in various investments. In fact, if a pension fund -- whether through over-promising, but mostly from under-performance -- were to spend even 5% of its assets on pensioners in a given year, its managers would start to get concerned they were depleting the fund too quickly. At 6%, they would go into a panic, leading to reducing allocations most commonly, and, more rarely, to reallocating investments.

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One of the purposes of this document, and my personal career path as a Public Banking advocate, has been to convince activists, politicians, and media that a good investment for part of these funds would be to capitalize a Public Bank. I had a chance to detail how this would work to Public Banking Institute coalition members on a monthly conference call in January 2016. That call is archived here:

But, until recently, there was no way to actually prove that on a spreadsheet, for all to see how it could be done, what the pitfalls are, and whether assumptions are in conformance with existing regulations and practices or whether the assumptions need to be changed. (In spite of the violations and fraud of the Systemically Important Financial Institutions (SIFIs), most small to medium-sized banks are actually subject to a series of tight regulations. We won't discuss specific regulations here; they vary significantly from state to state, and even in cities, but the spreadsheet is flexible enough to handle most of the basic possible regulatory requirements. I leave it to the reader to discover for him or herself what the regulatory requirements are for his or her particular area).

So, without further ado, here is how the spreadsheet works, using Oakland, California as a specific example, from actual 2015 CAFR figures, population and other information from that city. A city of the same approximate size -- 413 thousand - and fiscal stability may expect similar results.

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Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:

Scott is a former President of Common Ground-NYC (, a Geoist/Georgist activist group. He has written dozens of articles for (more...)

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