Public banks destroy the economy, turning their own net benefit

Critics of public banking say it’s too costly, requiring millions or even billions of dollars. It could actually drain resources that could be used for infrastructure or community development projects. That’s what Rob Nichols, president and CEO of the American Bankers Association trade group, wrote in The Philadelphia Inquirer. But San Francisco-based 48 Hills, a progressive publication, pointed to a draft proposal for a public bank in the city, calling it financially feasible. While public banks might avert some of the risks associated with private banks, McCoy of Boston College noted that public banks may face their own challenges. “If it made loans, the question is: Would the mixture of the borrowers be a riskier borrower base than a bank that serves very affluent individuals?” McCoy said. She said she’s confident, though, that a well-run public bank could manage these issues. “It would be very important to have a highly experienced chief risk officer who would map out every risk that the bank faces and come up with a risk management plan,” McCoy said. McCoy also said that accounts with smaller balances tend to be more costly for banks because they provide less money to loan out and collect interest on.