Public banks are essential to the Green New Deal

Public banking’s appearance in the Green New Deal resolution drafted by Ocasio-Cortez and Markey in February further cemented its potential as a tool to create a more stable and just economy—and one that can center concerns of the public, like environmental matters, in its operations. The success of a Green New Deal, Ocasio-Cortez and Markey wrote, will require: Providing and leveraging, in a way that ensures that the public receives appropriate ownership stakes and returns on investment, adequate capital (including through community grants, public banks, and other public financing), technical expertise, supporting policies, and other forms of assistance to communities, organizations, federal, state, and local government agencies, and businesses working on the Green New Deal mobilization. The Green New Deal calls for an aggressive decarbonization of the economy through investment in green infrastructure, innovation, and overall systems change coupled with equity aims including access to education, work opportunities, and affordable housing for all. And one of the concerns that’s attached to the proposal is how to pay for it. Estimates put the total cost of the sweeping proposal at over $12 trillion. Both levying a carbon tax (and potentially others on wealth and inheritance) and rolling back existing fossil fuel subsidies could free up funds. ADVERTISEMENT But in order for this revenue to flow efficiently toward funding projects under the Green New Deal (for example: a high-speed rail network, or a revamped energy grid to accommodate an influx of wind and solar), it would need publicly responsive and flexible system to manage it. Brown has studied this extensively. She points to the fact that Franklin Delano Roosevelt’s New Deal (the obvious antecedent to the Green New Deal) was financed largely by the Reconstruction Finance Corporation, a publicly owned credit-lending agency, which backed thousands of projects ranging from national infrastructure to small-business enterprises. The New Deal was transformative for both the economy and the infrastructure of the United States, and its scale is one that the Green New Deal aims to emulate and surpass, with the added layer of urgency due to climate change. And “it would be very difficult to come up for the money for a Green New Deal without a public banking system,” Brown says. So many of the initiatives the Green New Deal resolution calls for—from radically expanded public transportation, to affordable housing, to local efforts to boost access to clean energy—are, quite simply, things that would struggle to attract mainstream capital from big banks. Or if they could, California’s debt-riddled infrastructure projects show that they could sink cities and states into financial holes. Brown believes that a robust network of public banks could unlock the low-interest capital needed to fund these diverse projects at the state, local, and federal levels. And it could do so in a way that keeps the money flowing through those economies, instead of up and away toward private shareholders and executives. [Source Images: maystra/iStock, coolkengzz/iStock, medesulda/iStock] HOW WOULD A PUBLIC BANK HELP DECARBONIZE THE ECONOMY? In an economy shaped by the principles of the Green New Deal, a network of publicly owned banks would make loans to governments and the private sector alike to finance decarbonization efforts, including carbon-neutral manufacturing and clean energy initiatives. People could help shape how public banks invest funds through a participatory process to draw up the bank’s charter. For cities and states, public banks present an opportunity to avoid the high interest fees on loans that big banks impose. Consequently, they could pursue more projects, like public transportation and affordable housing, that benefit people in their backyards. A public banking system in the U.S. to support decarbonization efforts could function as a network. A national public bank could access initial capital from the federal government, and make loans to state banks, which in turn offer funding to a network of local institutions, much like North Dakota already does. “We need to harness the power of the Federal Reserve to do something other than bail out big private banks,” Brown says. It’s well within the entity’s capability to seed large amounts of capital, and it could provide the backing to a potential network of public banks via a central, public finance institution like the Reconstruction Finance Corporation (Brown has been advocating for the use of a public bank for the U.S. since the recession in 2008). This would not, Brown says, mean that the existing big, private banks like Wells Fargo and J.P. Morgan would go away entirely; they play an important role in international trade. Rather, their role would be diminished, particularly for the purposes of financing public projects. Wolff believes they could be nationalized and brought under the control the federal government, as was proposed but ultimately not carried through after the 2008 financial crisis, and as was done in Europe after the Great Depression. Furthermore, public banking institutions, Wolff says, could present an opportunity to change up their governance structures: Rather than a hierarchical leadership model, decision making for banks at every level could be carried out by a diverse board of representatives comprising public and private sectors, and, especially in the context of the Green New Deal, the interests of the environmental and equity movements.