While big corporations enjoy ready access to financing, many small Philadelphia businesses cannot obtain needed funding. A study conducted for the City by HR&A Advisors last year identified an annual "lending gap" of $840 million, representing an untapped potential for billions of dollars of additional economic activity. "Working in partnership - not in competition - with community banks, credit unions, CDFIs, and other financial institutions, the Philadelphia Public Bank will help to close the lending gap, creating jobs and building wealth in currently underserved communities," said Distinguished Professor of Economics, Deborah Figart of Stockton University.
To accomplish this mission, the Philadelphia Public Bank will draw upon the example provided by the successful experience of the Bank of North Dakota during the past century. The Bank of North Dakota partners with local banks to enhance the financial ecosystem.
While over one-quarter of the banking in the world is performed by public banks, the Bank of North Dakota has been the only public bank in the United States until recently. However, noted Walt McRee, Chair Emeritus of the Public Banking Institute , "the territory of American Samoa created a public bank two years ago, California has authorized up to ten public banks, a Public Bank Act has been introduced in Congress, and many states are in the process of establishing public banks - notably, New Jersey." Philadelphia is in the vanguard of a movement; and if Councilman Green's bill is enacted quickly, our City will establish the first municipal public bank in the country.
"There are so many things our bank could do to build wealth in our communities," said Tonya Bah of Philly Neighborhood Networks . "A public bank can provide low-interest financing for government infrastructure projects, thereby lowering their costs dramatically and freeing up funds for additional needs of the City while keeping taxes low." And Vanessa Lowe, Chair of POWER's Economic Dignity Team, noted that "a public bank can also manage programs that support low-income housing, renewable energy and energy efficiency projects, small businesses, cooperative businesses, and a range of other activities and institutions that big banks normally turn away from, either because they've redlined the communities involved or because these projects are not profitable enough for shareholders. A public bank can help the City respond to and recover from disasters such as the COVID-19 pandemic, civic disturbance, and storm damage."
The Bank of North Dakota is the economic engine of its state; and the Philadelphia Public Bank can be a similar catalyst for economic development in our city. North Dakota is the only state that did not face a budget crunch after the Great Recession of 2008, nor an explosion of unemployment, because its bank kept credit flowing when the big banks seized up. The Bank of North Dakota has consistently operated profitably and has returned almost $1 billion to the state over the past 30 years.
"Councilmember Green's bill provides safeguards to assure that the bank is independent, that it upholds the values of transparency and accountability, and that its policies and practices serve the community," pointed out A SMART Collaboration president Peter Winslow. The structure of its Board of Directors is designed for professional management, representative democracy, and stakeholder engagement. The Thirteen member Board will include nine financial experts and community advocates, including six people with at least five years' experience working on various issues of concern to underserved local communities, and three people who have experience with community-focused financial institutions. The Mayor, Council President and City Treasurer or their designees will fill three slots; and the bank's CEO will be selected by the other twelve members and then have a seat on the Board. With this governance structure, the bank will be laser focused on supporting the community.
The bank will be run with integrity. Its Board and employees will be subject to the same strict Code of Ethics that applies to City officers and employees. It will also be subject to regular audits of its financial affairs and its performance.
On behalf of the Philadelphia Public Banking Coalition , Susan Windle said, "With the introduction of this bill, Philadelphia is poised to blaze a path toward financial independence and prosperity. We must all now turn to the task of being sure it is enacted into law."