The city of St. Louis could soon be exploring the idea of establishing a public municipal bank to address some of city’s most pressing issues — such as affordable housing, small business growth and financing for municipal projects.
St. Louis Board of Aldermen President Lewis Reed introduced a resolution that would create a 13-member task force to study the idea on March 9.
“It’s meant to set the stage for us to begin to get some information about a public bank,” Reed said. “When you look at the mass unbanked population, when you look at the challenges that people have with getting and receiving loans, and also being able to fund developments and things of that nature throughout the city, praticularly in some of our more challenged neighborhoods, I believe there’s some benefit to looking at how we leverage our tax dollars.”
The idea of a public bank can take many forms. Reed said he doesn’t expect the city to start its own bank independently, but would rather see a partnership with a reputable, experienced institution.
“Because of all the regulations and how complex banking is, I don’t believe it would be wise for the city of St. Louis to try to open up or establish its own bank,” he said. “But through this research project, where we have a group of knowledgable individuals, we can work to see what are the possibilities and what are the benefits for a city like St. Louis to begin to look at ways of leveraging its tax dollars within the boundaries of the city.”
Of the 13 or fewer members appointed, three would be selected by Comptroller Darlene Green, three by Treasurer Tishaura Jones, three by Mayor Lyda Krewson, three by Reed, and the financial analyst of the Board of Aldermen.
Within its 13-member panel, the task force must also include an expert on banking regulation — especially one familiar with the Federal Reserve Board — an appointee from a local university’s MBA department, a member of the Missouri Division of Finance, an expert in economic and workforce development, a representative of the Affordable Housing Commission and an advocate for and expert of public banking.
According to the resolution, the establishment of a public municipal bank may offer the possibility of achieving multiple policy objectives, including increasing economic development, spurring job creation, providing an alternative to predatory lenders, addressing the problems associated with an underbanked population, increasing funding of affordable housing developments, reducing municipal debt service, and expanding the income stream of the city through direct and long-term local lending at below-market rates.
The resolution cites the Bank of North Dakota serves as a model for public banking in the United States. Since 1919, it has reinvested state tax revenue and other deposits to make loans to small and medium sized businesses within North Dakota, limiting management costs, allowing community influence on development, and earning the state hundreds of millions of dollars in returns.
The resolution also reads that a public bank could build partnerships with community banks to extend reliable and affordable credit to small businesses and other community stakeholders, neither acting as a retail establishment in competition with private banks.
Other cities like San Francisco, Oakland, Seattle and Philadelphia have taken measures to examine public banking.
Los Angeles has also considered the idea for its growing cannabis market, but the cost to start its own bank could be an uphill battle, according to a report in the LA Times, which identified a bevy of potential roadblocks, including the need for changes to state and city law and potentially “exorbitant” start-up costs.
“Some cities have gone full-fledged into it. But because of the complexity and all of the federal guidelines, for us, if indeed we took a step into that, it should be with an experienced partner that does it. An experienced partner that already operates within that field with a great reputation nationally,” Reed said.
If the resolution is approved, the task force will report to the committee monthly, followed by a report and recommendation in front of the full Board of Aldermen by Friday, Nov. 16.
“I don’t think we lose anything by looking at what we’re currently doing and looking at the possibility of establishing a different means of working,” Reed said. “Could there be some benefits for us? Sure. The one way to find out is for us to just take a look at it and that’s all the resolution does.”