Our state, its people and businesses are drowning in unsustainable debt. Our fellow citizens face a flood of foreclosures, many with home values that are "under water." Banks have kept credit tight, drying up the very resources that businesses need to hire more people and get the economy moving again. If Illinois had its own public banking institution, the state's financial situation would be improved.
North Dakota is the only state to have a state bank. In 2010 it had the lowest unemployment and default rate in the country. It also had the most community banks per capita. This suggests that the presence of a state-owned bank has not hurt local banks.
What is a state-owned bank? It is a bank that is owned by the people through their representative government. Public banks, as distinguished from private banks, have a mandate to operate in the public interest. Private banks have shareholders whose highest priority is short-term profits. Public banks reduce taxes by returning its profits to the state's general fund. Public banks also have access to low-cost funds from the regional Federal Home Loan Banks. A state bank can help a town issue a new bond at a lower interest rate than could be gotten on the open market.
The cost of state projects are also greatly reduced because public banks do not need to charge interest to themselves. Eliminating interest has been shown to reduce the cost of such projects on average by 50 percent.
Illinois currently deposits its tax revenues in private Wall Street banks which use these deposits for their own private gain. Many of these banks take state money and use it to participate in the derivative markets which do not benefit our state. State revenues could be deposited in the state's own bank and used to fund programs which benefit our citizens in the long run — the very same programs that are currently being cut or eliminated.
A state bank in Illinois and its municipalities would have the potential to leverage their revenues to a much greater degree than it does today and invest those proceeds into Illinois. This is an idea whose time has come. For more information, go to www.PublicBankingInstitute.org.