Cities Could Replace Wall Street Financing With Public Banks
TED Fellow Trinity Tran argues that cities should treat financing as a local public function by creating publicly owned banks rather than relying solely on Wall Street to structure and fund municipal borrowing. Cities will still need long-term capital, she says, but public banks could keep interest and loan repayments circulating locally while allowing communities to set lending priorities around housing, infrastructure, small businesses or emergency recovery. Tran points to the Bank of North Dakota as evidence that a publicly owned lender can pursue public purposes while generating returns.
Public banking would make financing itself a local public function
Trinity Tran argues that the question behind a bridge, transit system, housing development or sustainable-infrastructure project is not simply whether a city supports it. It is who supplies the capital, who sets its terms and where the returns ultimately go. “Money decides what gets built,” she says. “Money decides what survives. Money decides what future becomes possible.”
Cities generally cannot pay upfront for major projects, Tran explains. They issue bonds: long-term loans that Wall Street banks structure and sell. The government receives money upfront and repays it over time with interest; private lenders also charge fees for structuring and selling the bonds. In Tran’s account, the public therefore pays not only for the project but also for decades of financing costs.
Los Angeles pays private lenders hundreds of millions of dollars, Tran says, while California pays $4 billion in interest annually. She characterizes that as money leaving communities for Wall Street banks and private investors. Her broader claim is not that cities can avoid borrowing, but that they can change the institution through which borrowing occurs.
How do we do more with the dollars that our communities generate without raising taxes? But by lowering the cost of financing itself.
A public bank, as Tran defines it, is owned by people through a city, region or state government. Residents already generate public revenue through taxes, she notes. The proposed institution would use money communities already generate; as its loans are repaid, the money returns to the public bank rather than going to shareholders.
| Conventional municipal financing | Public-bank model described by Tran |
|---|---|
| Cities issue bonds structured and sold by Wall Street banks | A city, region or state owns the bank |
| Loan principal is repaid with interest and lender fees | Loans are repaid back into the public bank |
| Interest and fees are paid to private lenders; private banks are shareholder-owned | The institution has no shareholders to pay |
| Private lenders structure the financing | Local authorities define the bank’s mission and priorities |
The practical question is who sets the bank’s priorities
A public bank would not be a generic pool of cheap money. Its practical significance, in Tran’s formulation, lies in the decisions that determine what it is for: its mission, mandates, lending priorities, investment priorities and capitalization strategy.
That makes local control consequential. Tran says the California Public Banking Act created a legal framework through which cities and municipalities can form their own banks, while leaving those operating details to the local level. A bank’s stated mission would be to support the economic development of the community it serves, but each locality would define how that mission translates into lending and investment.
The contrast with private banking is central to her argument. Private banks are owned by shareholders and, Tran says, invest in areas that make them substantial money—not necessarily in areas that serve a community’s interests. A public bank would have no shareholders to pay. Its mandate could instead be designed around the community’s own priorities.
That does not make the underlying choices disappear. It makes them public and local choices: whether to prioritize housing, infrastructure, small businesses, sustainable development, or another use of capital; how much capital to establish; and what terms or safeguards to set. Tran’s proposal is therefore as much about control over financial decisions as about the interest charged on a particular loan.
North Dakota is Tran’s case that public ownership can survive a crisis and earn returns
Tran presents public banking as an operating model with international scale rather than a speculative institutional design. There are 900 public banks globally with nearly $50 trillion in assets, she says. In Germany, she adds, a network of 400 municipal banks supported the country’s renewable-energy transition.
Her principal U.S. example is the Bank of North Dakota, a public bank founded in 1919 and now about a century old. Tran says it was established by socialist farmers who were being gouged by out-of-state New York bankers. She locates its formative test in the Great Depression, when nearly 200,000 farms were being foreclosed on.
According to Tran, North Dakota’s public bank allowed the state to buy farms, lend them back to families for a dollar, and sell them back once families had stabilized at a price they could afford. The example depicts a bank used to preserve local economic capacity in a crisis, rather than one focused solely on the highest available return.
Tran also says that over the past century the Bank of North Dakota has supported small businesses, infrastructure and local economic development while generating returns on equity of 15 to 18 percent. Those returns, she says, have sent hundreds of millions of dollars back into the state’s general fund year after year.
The point is not that public purpose replaces financial performance. In Tran’s telling, the bank’s public ownership changes the purpose around which lending decisions are made while still allowing the institution to generate returns.
A standing local lender would change the response to emergencies
Tran distinguishes the ordinary case for lower financing costs from a second promise: readiness when a community suddenly needs credit. She applies the North Dakota example’s logic to Los Angeles’s recent wildfire. Had Los Angeles had a public bank, she says, it could have offered immediate, low-cost loans rather than waiting for federal aid, which she describes as potentially unstable.
That is a claim about having an institution already in place before an emergency. Its lending mandate, investment priorities and capitalization strategy would have been determined locally in advance, allowing it to respond to the needs it was created to address.
Tran says cities and states are already working toward public banking. Her case is that communities already generate public revenue and already borrow to build. The consequential decision is whether the terms, priorities and recycling of that financing remain principally organized through private lenders or are governed through a publicly owned institution.