A few weeks ago, a group called Protect USannounced the launch of an effortto create the Bank of Virginia, a “socially responsible public bank” modeled on the Bank of North Dakotathat “would provide low-cost public financing to municipal governments and state agencies.”  The Bank would lend money only to “companies and organizations that Virginians support.” (Hat Tip: Blue Virginia).

This makes me think of efforts at the federal level to bring banking to post offices.  Gillibrandand others seem to be proposing the kind of retail Post Office banking I remember from my time in the Army stationed in Germany. People could start basic interest-bearing savings accounts at local post offices with paychecks from any employer (Americans could do this at US Post Offices until 1967).

Government payments like Kindergeld (every parent in Germany gets a small stipend for…being a parent) went automatically to these accounts. For a time, I used such an account to handle household bills.  In the US context a system like this would help working people who earn a paycheck but only qualify for commercial bank accounts that carry fees and conditions (e.g., monthly fees without direct deposit, minimum balances).  These fees eat into their already small budgets.  Many people have to pay a fee to WalMart or a grocery store, or a check cashing service every Friday when they get paid by check for their construction or other gig labor that week.  So a state bank where low-wage workers could open simple passbook accounts with no fees would improve the lives of working people.

As far as I can tell from the Protect US site, the Bank of Virginia proposal does not address this issue. Without a look at specific legislation it’s hard to know, but it appears to focus more on making sure that Virginia Retirement System and Commonwealth tax revenue, which must be parked somewhere until spent, don’t find their way into fossil fuel investments or big bank accounts subject to fees.  I support this goal, but it’s not clear how Protect US locks in which Virginians just what “causes” the Commonwealth should support.  Without seeing the details, I’m also wondering whether a Bank of Virginia ensures socially conscious investment over the long term. Political winds change.

The Protect US proposal has another potential problem: it would form the Bank of Virginia by combining the functions of the Virginia Housing Development Authority( VHDA), Assistive Technology Loan Fund Authority (ATLFA), Virginia College Savings Program, and the Virginia State Employee Loan Program.  This could perhaps make sense from an efficiency standpoint given that these agencies have at least some of the experience and infrastructure needed to create a bank.  

But unless the Bank of Virginia created under this plan would continue – and expand – the services provided by these organizations, it would not make the Commonwealth of Virginia materially more socially responsible. Shifting funds to more environmentally friendly investments has value, but state government exists to create opportunities for and improve the lives of working people, not supporting corporations whether socially conscious or not.  I’m especially concerned about the employee loan program – ending it would send low-wage state employees to payday loan companies.  

This proposal could be a good idea – but needs more work.