Exploring the Idea of Creating a Public Bank in Austin, Texas

Austin City Council members are exploring the idea of creating a public bank, following in the footsteps of North Dakota, the only state in the U.S. with an operating public bank. Councilman Zo Quadri presented the idea at a recent city council session, emphasizing the potential benefits of cheaper banking services and using profits for community projects.

Matt Patton, Executive Vice President at Angelou Economics, explained the key differences between a public bank and a traditional bank. While traditional banks are funded by private shareholders, a public bank would be owned by and for the city of Austin, allowing for more flexibility in interest rates, loan terms, and project funding.

The Bank of North Dakota, established in 1920 to support rural farmers, still operates successfully today, offering services like student loans. However, David Flynn, a professor at the University of North Dakota, highlighted some limitations of the public bank model, such as the lack of federal deposit insurance and restrictions on certain types of loans.

Flynn emphasized the importance of defining specific goals and protecting public money when considering the creation of a public bank. Councilmembers in support of the idea, including Ryan Alter, Vanessa Fuentes, and Jose ‘Chito’ Vela, aim to focus on investments related to climate change, economic growth, and housing.

Despite some opposition, with Councilmember Mackenzie Kelly voting against the public bank item, the city plans to conduct a feasibility study to determine the viability of establishing a public bank in Austin and ensure the protection of customers’ funds. The discussion around creating a public bank in Austin reflects a growing trend among cities in the U.S. seeking alternative banking solutions for the benefit of their communities.