© by Mark Dempsey
Pedestrian-friendly, mixed-use, mixed-income McKinley Park--the region’s most valuable real estate--mansions for the rich, in front of granny flats for the not-so-rich
Sacramento’s environmentalists have resisted sprawl development for decades now with little success. Public banking could help them--and the population at large--do better development, enrich the public realm, and perhaps even provide a better investment for pensions--after all, in recent times, North Dakota’s state bank has been more profitable than Goldman Sachs.
If the region’s current planning process weren’t bad enough--it delivers predominantly auto-centric sprawl--when developers actually build the environmentally-sustainable neighborhoods essential to improve air quality and climate, banks can sabotage the result. Laguna West had a pedestrian-friendly mixed use design, but viable transit and pedestrian-accessible commerce require enough riders and shoppers within a walk of those stops and shops. When it was built, private banks would not finance apartment / condo construction there, so now Laguna West is pedestrian-friendly but with lower than designed density, and less-than viable neighborhood commerce and transit.
Where would a public bank get its money?
Most people believe banks lend money they have on deposit, but that’s not true. Modern banks practice “fractional reserve lending,” a custom medieval goldsmiths established. Since the goldsmiths had the safes, they would store people’s gold, issuing receipts for what they had on deposit. For convenience, depositors would use the receipts as money. It didn’t take long before clever goldsmiths discovered they could make loans, and issue more receipts than they had gold. That practice still persists in modern banks as fractional reserve lending with depositors’ dollars (or dollars borrowed from other banks) rather than gold providing the reserves.
Public banking offers an alternative to private lenders that could finance environmentally-friendly projects otherwise impossible to fund, both in transportation (RT wants to buy electric buses) and in the land-use improvements that make transit viable, and, not incidentally, a healthier population. It would be cheaper than the private sector financing, too. Despite local public policy makers’ indifference to public input, such an alternative could be successful too, but we’ll never know if no one brings it up.
Financing often accounts for as much as half of any projects’ costs, and lenders retain a veto over what gets built. Public banks would be cheaper and let us build what we cannot finance now. One example: suburban shopping centers seldom include housing. Coincidentally, we’re also short of affordable housing, and “lifestyle” centers that include housing generate 50% more revenue that single-use shopping centers. Public bank financing could retrofit housing in suburban shopping centers and, besides reducing commutes to the mall, inject transit-friendly mixed use back into sprawl, and inspire private banks to imitate them.
Another example: The region spends an estimated $40 million on the homeless. Homeless advocates say we could save 50% - 80% of those costs by housing homeless people, providing them with transitional counseling (a policy called “Housing First”). Salt Lake and other cities have already demonstrated such savings are real, not just hypothetical. A Public bank could lend the critical up-front costs, and receive its payment out of the long-term savings.
In my humble opinion, unless the public starts to grasp the levers of power implicit in public banking, the current failed public policy in the region will continue with business as usual, and politicians will continue to say “We’d love to do [whatever it is], but we’re out of money….” In other words "There is no alternative to austerity." But that’s an excuse that simply doesn’t hold water.
Mark Dempsey is a former Realtor, appraiser, loan officer and Community Planning Advisory Council vice chair, and knows the California Infrastructure Bank already exists. Unfortunately, like many other public institutions, that bank is inhibited, to say the least. It cannot make the loans described above. It could not even fund the new Bay Bridge--Goldman Sachs underwrote that. Changing its underwriting standards would be the simplest way to get Public Banking.
Pedestrian-friendly, mixed-use, mixed-income McKinley Park--the region’s most valuable real estate--mansions for the rich, in front of granny flats for the not-so-rich
Sacramento’s environmentalists have resisted sprawl development for decades now with little success. Public banking could help them--and the population at large--do better development, enrich the public realm, and perhaps even provide a better investment for pensions--after all, in recent times, North Dakota’s state bank has been more profitable than Goldman Sachs.
If the region’s current planning process weren’t bad enough--it delivers predominantly auto-centric sprawl--when developers actually build the environmentally-sustainable neighborhoods essential to improve air quality and climate, banks can sabotage the result. Laguna West had a pedestrian-friendly mixed use design, but viable transit and pedestrian-accessible commerce require enough riders and shoppers within a walk of those stops and shops. When it was built, private banks would not finance apartment / condo construction there, so now Laguna West is pedestrian-friendly but with lower than designed density, and less-than viable neighborhood commerce and transit.
Where would a public bank get its money?
Most people believe banks lend money they have on deposit, but that’s not true. Modern banks practice “fractional reserve lending,” a custom medieval goldsmiths established. Since the goldsmiths had the safes, they would store people’s gold, issuing receipts for what they had on deposit. For convenience, depositors would use the receipts as money. It didn’t take long before clever goldsmiths discovered they could make loans, and issue more receipts than they had gold. That practice still persists in modern banks as fractional reserve lending with depositors’ dollars (or dollars borrowed from other banks) rather than gold providing the reserves.
Public banking offers an alternative to private lenders that could finance environmentally-friendly projects otherwise impossible to fund, both in transportation (RT wants to buy electric buses) and in the land-use improvements that make transit viable, and, not incidentally, a healthier population. It would be cheaper than the private sector financing, too. Despite local public policy makers’ indifference to public input, such an alternative could be successful too, but we’ll never know if no one brings it up.
Financing often accounts for as much as half of any projects’ costs, and lenders retain a veto over what gets built. Public banks would be cheaper and let us build what we cannot finance now. One example: suburban shopping centers seldom include housing. Coincidentally, we’re also short of affordable housing, and “lifestyle” centers that include housing generate 50% more revenue that single-use shopping centers. Public bank financing could retrofit housing in suburban shopping centers and, besides reducing commutes to the mall, inject transit-friendly mixed use back into sprawl, and inspire private banks to imitate them.
Another example: The region spends an estimated $40 million on the homeless. Homeless advocates say we could save 50% - 80% of those costs by housing homeless people, providing them with transitional counseling (a policy called “Housing First”). Salt Lake and other cities have already demonstrated such savings are real, not just hypothetical. A Public bank could lend the critical up-front costs, and receive its payment out of the long-term savings.
In my humble opinion, unless the public starts to grasp the levers of power implicit in public banking, the current failed public policy in the region will continue with business as usual, and politicians will continue to say “We’d love to do [whatever it is], but we’re out of money….” In other words "There is no alternative to austerity." But that’s an excuse that simply doesn’t hold water.
Mark Dempsey is a former Realtor, appraiser, loan officer and Community Planning Advisory Council vice chair, and knows the California Infrastructure Bank already exists. Unfortunately, like many other public institutions, that bank is inhibited, to say the least. It cannot make the loans described above. It could not even fund the new Bay Bridge--Goldman Sachs underwrote that. Changing its underwriting standards would be the simplest way to get Public Banking.
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