Authors: Ruth Caplan, Douglas Cliggott, Christine A. Desan, Cate McAnulty, Nadav Orian Peer, Nancy Ryan, Michael Swack, and Rory Van Loo
Massachusetts Public Banking, a volunteer organization seeking to harness the power of banking to promote social goals, has recently submitted a written testimony before Massachusetts’s Joint Committee on Financial Services in support of bill S665/H1223, An Act to Establish a Massachusetts Public Bank. The testimony stresses that the current financial system underserves marginalized communities as well as decarbonization projects, blocking the path towards a just transition. It describes how the proposed act addresses these shortfalls by creating a public institution that would leverage banking’s unparalleled lending capacity, amplify the impact of public funding, and expand credit allocation through partnerships with both public and private institutions. This public bank would also supplement, rather than crowd-out, existing financial institutions and initiatives; be subject to a robust credit- and liquidity-risk-management framework; and incorporate governance mechanisms that ensure its accountability to both the Commonwealth of Massachusetts as well as the broader public. From the written testimony’s introduction:
“Public banking provides a structural solution to a structural problem: the shortfall in credit that haunts underserved neighborhoods, low-income residents, and communities of color in Massachusetts, as well as our municipalities, small and women-owned businesses, farmers, climate change entrepreneurs, and other deserving borrowers. Those needs are particularly sharp today given the high interest rate environment. The record shows that existing creditors, including commercial banks, cannot meet these needs on their own. Again, current conditions exacerbate the problem, as commercial banks struggle with long-held low-yield assets. By contrast, a Massachusetts public bank could use banking capacity to reach the unmet financing needs of credit-worthy borrowers. The public bank would work in cooperation with local private banks, CDFIs, and state-based quasi-public agencies.”