Over the past decade, concerns have continued to mount over the unsavory ethical practices of many large banks. Financial institutions such as Wells Fargo, Bank of America, Citi Bank and Chase have made headlines for financing everything from private prisons and weapons manufacturers to fossil fuel projects that have no doubt contributed to massive pollution and global warming. Many activists are beginning to suggest that it’s time we put our money back into the hands of the public by introducing the rise of public banking.

Your tax dollars at questionable work

Unfortunately, closing your private accounts at a bank because you don’t support their ethics isn’t currently enough to ensure that they won’t see any more of your money. After all, tax dollars have to be deposited somewhere and big cities almost exclusively depend on large financial institutions to store their money. This generates some hefty business for big banks which, last year alone, profited $170 million dollars in fees and $1.1 billion in interest off of the City of Los Angeles alone. Unfortunately, many such banks then use the profits they make from taxpayer dollars to finance industries that not everyone has a desire to support.

All of these facts, of course, only compound to the trust issues that many Americans developed during the financial crisis of 2008. If that whole ordeal wasn’t enough to convince the public of the massive fraud and lack of integrity that runs rampant throughout large Wall Street financial institutions, then what is?

That said, the problem is that these days the financial industry has become incredibly monopolized. At this point, withdrawing a large city’s financial assets from a big bank over ethical concerns comes with the problem of where exactly to move it to next. Smaller community banks simply don’t have the resources to deal with large city accounts. Currently, the only other option is to move the city’s money to another large bank which will likely just result in the same concerns that prompted the move in the first place. Unless, of course, we can come up with a better option. This is exactly where many are beginning to hope that public banks could come into play.

What is a public bank?

A public bank is controlled and mainly funded by the governing body, such as the city, that created it, rather than private investors or Wall Street. If Los Angeles, for example, decided to implement a public bank that would handle the city’s money, then it would more or less be an extension of the city’s government and answerable to its public.

This would help cut down on the billions of dollars that cities are losing in fees and interest to private banks each year. “That’s our tax dollars that get siphoned off to profits on Wall Street,” explains Phoenix Goodman, co-founder and policy director for the activist group Revolution LA. “If that same mechanism can be owned by the people themselves within the city, that interest can be reinvested as profits for the bank to be used and reinvested again into new projects, so it would be profitable for the city rather than private interests. Because it can save money, fiscally conservative people have found value in that as well.”

Not only would public banks cut down on fees and interests for the cities who created them, but they would also provide the freedom for the city to develop their own banking charter. This would mean that the city itself would be allowed to bar unethical sectors from investment, in order to align itself with companies and organizations more in line with its own goals and ethics. Such charters would also have the power to cap executive pay in order to avoid excessive salaries or bonuses, demand transparency, and reinvest funds in social issues relevant to the region.

Public banks also have the potential to benefit taxpayers and citizens, depending on the charter that the city decides to implement. Possibilities include affordable financing for public projects as well as low-interest loans for college, mortgages, or local businesses. Individual charters could also take state law into account and could be a huge leap for businesses such as the marijuana industry in legalized states. At the moment, many legalized cannabis businesses are still forced to deal and pay taxes exclusively in cash due to the fact that they can’t get bank accounts because of concerns over federal law.

The public banking track record

Okay, so all of this sounds reasonable, but has it ever actually been done? It has indeed. Over 100 years ago, the Bank Of North Dakota was established and it’s been all the proof many people need that public banking isn’t just a viable option, but a really good one. Not only was it able to protect its local economy during the Great Depression and Great Recession, but in 2014 the Bank of North Dakota actually outperformed Wall Street. When times got tough, the BND was able to provide low or no-cost loans to the state. This helped boost the economy and ensure that essential services were still able to operate, regardless of what was happening at the national level.

Several cities, such as Los Angeles, Portland, Oakland, and Santa Fe, as well as states like New Jersey and Colorado, are currently gaining a large number of supporters who hope to incorporate the idea of public banking soon. Given that many supporters feel that America’s private banking institutions may be flawed beyond the point of repair, the success of just a few major public banks may be all that’s needed to set off a national chain reaction in the years to come.