Philadelphia Bill Would Establish First Ever Municipal Public Bank Entity

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      In order to avoid competing with the private sector, the state-owned bank primarily uses what’s known as “loan participations” — private lenders originate the loans, but behind the scenes the Bank of North Dakota agrees to supply a share of the borrowed amount in exchange for a share of the interest paid on the loan. Loan participations are a way for banks to manage risk and do more loans or larger loans than they otherwise might by themselves. In a typical year, the Bank of North Dakota says it makes around 800 business and agriculture loans in partnership with private lenders across the state. In 2020, it made more than three times that amount: 2,500 loans as well as emergency grant distributions.

      Green envisioned a city-owned bank in Philadelphia holding municipal deposits and operating in much the same way. Like the Bank of North Dakota, the new Philly institution would partner with existing private lenders including community development financial institutions, United Bank (Philly’s only Black-owned bank), and other investment funds to expand their work using loan participations, or loan guarantees or other partnership models.

      As a former small business banker himself, Green came to believe in this public bank model as an idea that could increase access to credit for Black businesses in a city that is 45% Black but only 2.5% of businesses with employees are Black-owned. As an experienced policy staffer in city government, he knew it would be a heavy lift — possibly too heavy. The politics and the practicalities of the public sector owning a depository institution are fraught, to say the least. How would the city-owned bank’s lending decisions be made, and what would happen if the institution loses money or fails?

      All that said, Green is getting close to his first big victory on this front. Today, Philadelphia City Council is discussing a bill that establishes the Philadelphia Public Financial Authority. The final vote on the bill is currently scheduled for March 3. There would still be a few more big steps after passage of the vote before the authority could hold municipal deposits, if indeed they eventually meet the requirements to take deposits. But this would make Philly the first municipality to establish a city-owned entity with the expressed intent of doing so.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

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