Creating a full-service Metro Go-To Card would benefit transit users and those without access to traditional banking services. It would also benefit the Met Council. There are examples of public institutions acting as lending agencies that provide great benefit to a range of people. The largest example of a public institution bank is the Bank of North Dakota (BND).
In 1919, North Dakotans, in a wave of populist progressivism and angry at the financial control wielded by Twin Cities’ banks, created a publicly operated bank that could provide loans and hold savings. Created by and for the people, BND was designed to provide more affordable loans to struggling farmers and families out on the prairie. Over the last 80 years it has provided a tremendous service to the state of North Dakota and continues to receive large support for citizens.
Banks make money by charging a higher interest rate on loans than needed to pay the smaller interest rate of depositors. As a private institution they seek to maximize these profits. Banks can make small loans to farmers that need new equipment or to governments that need new infrastructure, making money on each of them. North Dakota found that a public bank worked better for them.
As a public institution, BND has a different objective, to provide a quality service to its citizens. Instead of profits being placed in the hands of bankers, they are returned, in various ways, to the people of North Dakota. Mostly profits are returned through lower interest rates. Farmers and students can better escape the stress of high levels of debt that plague them both. It can also provide low interest rate loans to the cities and state of North Dakota. Studies have shown that interest from private loans composes 30-50 percent of public loans. Without needing to pay back expensive interest to private banks, cities can build better schools and the state can build sewers more affordably. This makes North Dakota a better place to live.
The Met Council can learn from the success of the Bank of North Dakota by creating a bank that could provide loans for infrastructure improvements. The Met Council has recently invested in the water and sewer system so these will need little large investments in the coming decades (Thrive 2040). The Met Council and the region do recognize that we need to significantly invest in transportation infrastructure for the next couple of decades. These projects would benefit from the assistance of a public bank. I want a bank that begets better buses. Don’t you?
This post first appeared on MN2020