By refusing to fund the Public Bank, Mayor Kenney hurts the City’s finances.
A Public Bank is an old idea, it has successfully helped the people of North Dakota for over 100 years.
As many people know, City Council unanimously passed a bill to establish a board that will fund a public bank; and nominated people to serve on that board. Mayor Kenney did not veto the bill, he allowed it to become law without his signature.
And then, the Mayor decided he would not follow the law. He refused to appoint the board members and has said he will not fund the board that would establish the bank.
The Mayor claimed that there are other agencies and authorities that can invest in local businesses; that a public bank isn’t needed. What he didn’t explain is if those agencies can invest in local businesses, why have they failed to do so? But more importantly, the Mayor ignored the savings taxpayers would see if a Public Bank was established.
To be clear, a Public Bank is not a new idea. The State of North Dakota has a public bank which it uses both to help local businesses obtain funding and save tax dollars by replacing the wall street banks in bond financing. And, of course, that is the real savings and may be the reason why the Mayor refuses to allow Philadelphia to establish a public bank.
To make it easy to understand just how much money a public bank would save, consider how the City currently borrows for capital programs.
Philadelphia and its various departments and authorities keep hundreds of millions of dollars in stockholder-owned banks. In some cases, like the Water Department, a City Department keeps its money in a bank that has no retail branches in the City. In other cases, the money is kept in a bank that does business in the City. As you read this, the City has hundreds of millions of dollars of City money on deposit. The banks have been paying less than 1% interest on the deposits.
When the City wants to build something for the future, new water treatment plants, new roads or police headquarters, new schools or even make major repairs, the City borrows the money.
And here is where you can see just how helpful a public bank will be. As it stands now, the city hires a law firm to be “bond counsel”, an investment house to buy and/or sell the bonds and to make the interest payments, and other “professionals” as needed. Of course, the investment banks lend the money at a much higher interest rate than what the banks pay the city on the city’s deposits.
The banks hold the City’s money, pay the City less than 1%, and then, unbelievably, can lend the City its own money back at a much higher interest rate. The taxpayers lose; the bondholders, the investment banks, stockholders, and lawyers win.
When Mayor Kenney refuses to fund the public bank, he protects the stockholder-owned banks, law firms, and others and makes us all pay for it. It really is that simple.
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