February 18th, 2021

Testimony supporting Proposed Bill No. 6323 by Justin Good, Ph. D.

Dear Banking Committee,

On behalf of Public Bank Connecticut, I am writing to express my strong support for Proposed Bill No. 6323 Establishing a State of Connecticut Bank. Seldom do great ideas and political realities come together in such a way as to deliver opportunities which at once address urgent social and economic crises facing our state, while at the same time fundamentally improving structural defects in our financial economy which have plagued us for decades and may signal the death knell of American Democracy.

As political winds continue to polarize our country, we need non-partisan ideas which can unite the people around their true common interests, and public banking is one of these unifying ideas. The power to create new money in the form of bank loans is a truly awesome power. When in the hands of private interests, I can be used to gain endless riches. When de-privatized and returned to public oversight, it can serve to help the public to invest its vast wealth, not in the stock value of the shareholders of Wall Street’s biggest banks, but in the people, businesses, municipalities and neighborhoods which make up our real community. We can begin to truly look after the long-term sustainability of our great state.

As a founding member of the volunteer-run group Public Bank Connecticut, I have been working with other concerned citizens help educate and advocate for this idea, this opportunity, to structurally improve the way the public’s wealth is used to invest in her health, well-being, equity and sustainability. In June of 2020 we organized a virtual town hall in partnership with the Public Banking Institute, the world’s most visible educational organization dedicated to public banking. The Public Banking Institute’s brilliant founding director Ellen Brown explained that the pandemic had revealed the inadequacy of our current financial system to meet the credit needs of local agencies or to serve our most disenfranchised populations; that we urgently need the means to bring desperately needed funds into urban and rural communities ignored by Wall Street banks. Minimally, the bottom line is this: a Connecticut State Public Bank could strengthen the financial positions of local governments and local financial institutions, helping to facilitate a just and speedy economic recovery for the people of Connecticut. The Public Banking Institute is not alone, but just one unusually articulate voice in a movement that is sweeping the nation. Last year federal legislation was introduced that would offer substantial federal help for state’s setting up their new public-owned banks.1 Many financial commentators, including the conservative and respected financial magazine Forbes2, are arguing with great force and consistency that the time for public banking is NOW. Other states like New York, New Jersey, New Mexico and others are now following California’s lead. New York’s Empire State Public Bank Bill has worked out many of the details and is a marvel of sound financial architecture mixed together with a social justice mission.3 Connecticut could make history by acting on this bill and joining the handful of forward-thinking states who will benefit enormously by redirecting the power of their wealth to look after their own back yard. Beyond expressing my informed support for this bill you are considering, I would like to share the following six points about public banking gleaned from the consensus wisdom forming around this topic. These points serve as answers to the basic questions that any thinking person trying to understand and evaluate this admittedly complex subject will almost immediately think of.

1. A much needed tool to help the local economy

Public banks help small businesses through lending, rather than letting Wall Street decide where the money should go. They provide a long-term source of stable financing for local governments, redirect existing investment funds into the state economy, and lay the foundation for resilient and equitable growth. They partner with community banks and credit unions so they can expand much-needed investment in their neighborhoods. They create a sustainable stream of revenue for emergency funding so we can better prepare for the future.

2. Start-up is neither expensive nor risky

The process of creating a public bank is easier and cheaper than you think. A state bank could be set-up within weeks by purchasing an existing bank charter, setting up an office with a computer, and using 10% of the funds in the state’s checking account (currently invested in large Wall Street banks) as a reserve base for the creation of new

1 https://www.vox.com/policy-and-politics/21541113/rashida-tlaib-aoc-public-banking-act? fbclid=IwAR1PlXDN6P58Ysb1Wl3bw5tiUvLOUtbA0n5jbyggM55vyj3glujfO3kXndQ 2 https://www.forbes.com/sites/nikmilanovic/2020/08/26/the-us-needs-banking-as-a-public- service/?sh=7d78b1ce13a5 3 https://www.nysenate.gov/legislation/bills/2019/s1778 credit, new “money.” All that is needed is the political will. This is not a partisan issue, it is about gaining financial sovereignty from Wall Street for the state and local economy.

3. This is not public subsidizing of loans, it is a way to save the state a lot of money.

While some people think a public bank would cost the state big money, the truth is that a public bank will save the state big money. If you consider that approximately 50% of the cost of all public infrastructure projects goes to fund the interest and bank fees for the private financing of these projects, you immediately get a sense of the astronomical savings. A $5 billion bridge project, which will cost the state a total of $10 billion after financing charges are included, can be constructed for literally half the cost. The state is in effect lending the money to itself, and any profits earned through the financing are returned to the state.

4. A state bank will not compete with community banks and credit unions.

A state public bank will not compete with local banks because it is a “banker’s bank” designed to support local community banks by a variety of tools it has to increase their lending capacity. Individuals cannot hold deposits in the state bank. The bank is easy to set up in part because it has no branches. The local banks are its branches.

5. A state bank can address inequality in CT better than any other tool.

Racial inequality is not a natural byproduct of credit markets, it is the legacy of racist lending policies which continue today. Public banks can address this inequity at the deepest level by using the power of money-creation to offer low-cost loans to communities historically cut out of access to capital. Unlike the big Wall Street banks, a public bank is chartered not simply to make a profit for its owners, but to look after the economic well-being of all of its citizens. Public banks can help us to make black lives matter, working class lives matter and New American lives matter. A more democratic economy awaits a more democratic banking system.

6. A public bank will be owned by the state but not run by the state.

Public banks owned by the state are not run by the state. They are just like regular commercial banks, being independent organizations, subject to all the standard oversight and regulatory conditions, and lending practices. The key differences lie in their (a) ownership, and their (b) mission. While private corporate banks are legally required to maximize the return on investment of their shareholders, state public banks are chartered to promote the economic well-being of the residents of their states. Like other states, Connecticut still suffers from grave inequities in lending and investment rooted in the profit-driven mission of corporate banks. In contrast, built into the governance structures of public banks are guidelines, advisory committees and auditing practices to ensure that the bank lends in ways which support a broader mission to promote greater diversity, equity and a local economy which benefits everyone.

We have created a website to help educate and promote the public bank concept: https://www.publicbankconnecticut.org.

We greatly appreciate your vision and initiative in bringing forth this important and inspiring concept. Thank You.

Sincerely, Justin Good, Ph. D.