State Treasurer Duane Davidson releases long-awaited report on public banking.

Legislative building

A letter from Treasurer Davidson to preface the Study of the Studies — a detailed report on public banking by the Office of the State Treasurer.

Seal

In recent years, we have heard discussions around the idea of a state bank, including hearing from various working groups formed by the Legislature to address the concept.  This year, the Legislature funded a study, providing $480,000 to hire consultants to develop a proposal for the creation of a public cooperative bank.

During the legislative session last year, I made a commitment that my office would conduct a thorough review of all the previous studies completed by other states and municipalities on this topic.  Each of these studies were completed over a great deal of time and at a great public expense.

This summer I assigned my staff, who are banking and finance experts, to analyze these studies and first determine why these other governmental entities wanted to create a public bank; and second, discover why it was not pursued.

Our “study of the studies” focuses on the data and conclusions from each study completed around the country, and examines some examples of existing public banking institutions.

Within this report are both a strong series of empirical facts and detailed findings taken from the observations, as well as decisions local municipalities and state governments made based on their own studies.  It is preceded by a presentation summarizing the findings which includes relevant talking points on each section.

Similarly to many of the conclusions within, I firmly support building upon Washington’s existing structure of banking and do not support public banking because of the higher risk and lower return on investment compared to the current private banking system.   I take my fiduciary responsibilities seriously serving on the Board of the public employee retirement accounts.  Also, as guardian of Washington’s local government investment funds and Rainy Day Fund, I have a deep-rooted interest in doing the right thing by protecting Washingtonians’ finances.  Using any of these resources to capitalize a bank would be reckless.  The evidence from this and other municipalities’ studies has established there is too much taxpayer risk, and not nearly enough proven benefit from the formation of a state bank.

My hope is in the future we can put an end to studying this idea and focus efforts to revitalizing the Public Works Assistance Account, a program currently underfunded but with a rich history of success financing infrastructure for local governments.

I want to thank the OST staff members who devoted their time to this study of studies.  I feel it is important to consider this issue from an objective standpoint, which is why the team that took on this project did so with the ultimate goal of ensuring their comprehensive review accurately reflects the findings from each study.

Sincerely,

 

 

 

Duane A. Davidson