Economic Development

Is a State Bank a Useful Economic Development Tool

Artwork from GFR

Healthy banks and a robust economy tend to go hand in hand. Banks perform three basic tasks—creating money, facilitating transactions, and allocating credit—that are essential for a well-functioning economy. But there has been a longstanding concern as to whether private banks operating in private markets are serving the public interest.

So far in 2021, four states have introduced legislation to create a state bank, and in 2019, similar legislation was enacted in the State of California for municipal banks. This concern has been amplified by the disproportionate economic impact the COVID-19 pandemic has had on small businesses.

This article explains lessons learned from prior public banking experiences.

  • Publication date: August 2021
  • Author: Robert S. Chirinko