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In recent years, several states and localities around the country have considered proposals to create public banks to operate in competition with the thousands of existing private, for-profit, taxpaying banks that serve our communities.
Public banks create undue risk and exposure for taxpayers. Their deposits, if they choose to forgo or are not provided access to FDIC deposit insurance, would be backed by the full faith and credit of the state or municipality that chartered them, posing substantial risks to taxpayers, a risk heightened by lack of federal supervision. Further, such banks would be subject to political manipulation as favored groups would receive credit and other services on preferential terms. Credit should be allocated on an impartial basis to ensure sound lending and a competitive economy.
The creation of state-owned banks to serve the cannabis industry is not a solution that would resolve the fundamental conflict between federal and state law. Community banks must be allowed to serve the cannabis industry in states that have legalized cannabis, which would obviate the need for state-owned banks for this purpose.
Certain policymakers are supporting a proposal to create a national infrastructure bank. Such a proposal would create distortions in the municipal bond market and disrupt the financing of local services and investments. Further, the municipal bond market, from both a supply and demand perspective, has historically worked well. There is no demonstrable need for a taxpayer-backed national infrastructure bank, and one was not included in a recently enacted $1.2 trillion bipartisan infrastructure package without inclusion or mention of a National Infrastructure Bank.