While you and I can decide to move our money from a big bank to a community bank or credit union to support our local economy, it can be harder for local and state governments to do the same. 

Smaller banks may lack the capacity to serve the needs of large government accounts, forcing governments to deposit public funds into larger private banks. These private banks, legally obligated to maximize profits for their shareholders, overwhelmingly invest in Wall Street over Main Street.  Some states and regions are exploring an alternative—a model called a public bank—to offer local governments an alternative to private banks. 

“Local public banks would enable local governments to divest public money from Wall Street and reinvest in community needs,” states Andy Morrison at the New Economy Project, which leads Public Bank NYC. “Each year, New York counties and municipalities collect many billions of dollars, including revenue from taxes and other sources, to fund public services. Most of this money currently is placed on deposit with private, commercial banks, including banks that systematically harm New Yorkers through redlining and predatory lending, and by financing fossil fuels, speculative real estate, and other destructive industries.”

Once established, a government deposits its funds into its public bank. It then earns interest on those funds until it is ready to reinvest them in the community. Public banks also lend their funds to community banks and credit unions for projects aligned with the government’s community economic development goals. Interest earned on these loans is reinvested in the community rather than being funneled out of the region. Public banks also match loans from smaller community banks or credit unions, boosting a community’s access to capital.

“Public banks partner—rather than compete—with local banks and credit unions to drive responsible lending and expand affordable financial services,” continued Andy. “Successful public banks exist around the world, and studies show they frequently outperform commercial banks in terms of safety, accountability, and profitability. In fact, countries with public banks have been shown to be more resilient than those without them.”

While public banks exist in countries around the world, there’s currently only one state in the United States with one.  No, it’s not in Vermont—but North Dakota.

In 1919, the Bank of North Dakota (BND) was formed in response to its farmers facing foreclosure by out-of-state banks offering predatory loans. Throughout the years, BND has helped North Dakota weather economic storms—from the banking crisis of 2008 (North Dakota was the only state holding a significant budget surplus in 2009 and ranked number one for the lowest unemployment, foreclosure, and default rates) to the most recent federal government shutdown (North Dakota rolled out the Furloughed Federal Employee Relief Program, a food assistance package, and a debt refinancing program for farmers).  The Public Banking Institute describes a public bank as a “First responder in a crisis, not a profiteer.”

Proponents of public banking note that BND has also cultivated a strong banking ecosystem, as evidenced by the state boasting the highest number of local banks and credit unions per capita in the US. BND keeps these community banks and credit unions lending even when larger private banks cut off lending. In 2024, BND earned $200.4 million in net income and held $10.8 billion in assets, reinvesting a majority of its funds in agriculture, education, and infrastructure.

Learn more about BND’s history.

The Public Banking Institute describes BND as a “bankers’ bank which means they partner with local North Dakota banks to help them with liquidity and capitalization, rather than providing checking accounts for individuals (although it does have a few private depositors). The focus is on making loans that serve state and community needs, such as building infrastructure and supporting local businesses.”

Our New Year’s Resolution includes learning more about public banks. Is this a model a good fit for New Hampshire? 

Following are some questions we want to dive deeper into (And thank you to the community members who have shared their opposing perspectives on public banking so far—please keep them coming!):

• How much of our state and municipal funds are deposited in big commercial banks?
• Do the matching loans made to smaller community banks or credit unions actually increase the capital available to a community overall, or just move the sources of funding around?
• How do public banks balance political pressure with long-term community economic development goals? What happens if a public bank fails?

Let the learning continue!

Aside from public banks, we look forward to learning more about how community banks and credit unions can help us re-circulate more of our money locally and incentivize investing in local businesses. Let us know your thoughts at jen@thelocalcrowd.com. Happy New Year!