The pandemic has laid bare the failure of the federal government to justly deal with the economic fallout wrought by a disaster. Public banks at the state and local level could have helped our country get through the pandemic, and they could be vital in our recovery.
Public banks can provide a financial bulwark in our federal system by supporting local banking systems. They achieve this both by providing banking services to state and local governments and by financing credit programs to assist those most harmed by disasters, who are inevitably part of our most disadvantaged communities.
Many analysts have observed that the federal policy response to the pandemic has exacerbated our nation’s existing racial caste system, pushing Black and Latinx business-owners to the back of the line. Instead of ensuring survival for the most vulnerable small businesses, the Paycheck Protection Program (PPP) awarded billions of dollars in fees to the nation’s largest banks. The US Small Business Administration’s own inspector general criticized the agency for failing to prioritize rural and underserved markets in rolling out the PPP.
Better ways were available. Public banks could have helped finance small businesses in partnership with local banks, as well as support local government initiatives and projects that create jobs.