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Finance & Banking

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Promises of Public Banks Don’t Match Reality

March 5, 2015

By Mark Calabria

The big-bank bailouts during the financial crisis angered many people, including myself. Some have suggested that state- or city-owned banks could be a substitute for big banks and eliminate many of the problems associated with them, ranging from bailouts to consumer abuses, conflicts of interest and sometimes outright corruption.

Public banking options are currently under consideration in a number of cities and states including Colorado, Seattle and Santa Fe. But while we must search for a sustainable solution to the flaws in our financial system, government banks would be a cure worse than the disease.

Public banks have a long history dating back to 1408, when the first such known institution was established in Genoa, Italy. Its mission statement could have been taken from Occupy Wall Street: among its purposes was “to eradicate certain bad practices of bankers, who are so devoted to their own interest that they barely blush as they ruin the public good.”

Like many public banks that followed, Genoa’s Banco di San Giorgio later failed, in part because of losses on loans to its sponsoring government...

Read the full article at American Banker: Promises of Public Banks Don't Match Reality

Issue Categories : Finance & Banking, Privatization