Christine A. Desan, Harvard Law School, has posted Public Banking in the United States: Historical Lessons for Today, which is forthcoming in the Williamette Law Review:
This article reviews the long history of American public banking from its start in colonial Pennsylvania to current state-level initiatives. That history includes banks owned exclusively or in part by states – every one of the original 13 states owned stock in some of the banks it chartered. States also conditioned charters to private investors on activities conducive to the public welfare and imposed significant taxes on bank capital. Public ownership declined over the 19th century for several reasons, including the development of legal doctrines that enlarged corporate autonomy and their privileges as business entities, as well as the rise of profits available to banks as commercial actors. There is a strong case for returning to public banks. At the economic level, private retail banking lends according to criteria overly narrow to reach all deserving borrowers, particularly those whose wealth accumulation has been limited by past discrimination. At the ethical level, a return to public banking comports with the way money is created. That operation is pervasively supported by public authority, a reality that public banking would make more transparent.
--Dan Ernst
