Should Philadelphia start its own bank?

Mike Krauss, from the Public Banking Institute, writes to applaud Philadelphia City Council's unanimous vote last Thursday "taking the first step toward formation of a public bank for the city," modeled on the Bank of North Dakota, the lone survivor of what were once a constellation of state- and city-owned banks. (S&P cut Bank of North Dakota's stand-alone credit rating by a notch, to A, last fall, citing "revenue instability and asset quality deterioration" at the energy-dependent state-run lender, according to this report on the bank's own Web site.)

Philadelphia's resolution "was introduced by veteran council members Curtis Jones, Jr. and newly elected councilman-at-large Derek Green" and backed by President Darrell Clarke "and a coalition of Philadelphia neighborhood, civic, business, labor and religious organizations," Krauss adds. Their goal: "Stimulating economic development and job creation, reducing municipal debt service, expanding the tax base through local lending at below-market rates, developing local commercial corridors and small businesses, and generating funds for the city school district."

And who doesn't want all that? But who will make it happen? Council is taking guidance from "Emma Chappell, a prominent Philadelphia banker, former municipal treasurer and a leader of the Pennsylvania Project, the citizens' group spearheading the drive for a public bank." Remember Chappell, who used city pension funds to help finance United Bank of Philadelphia?  Taxpayer deposits, private borrowers, politicians in charge, private borrowers -- what could possibly go wrong?

In a statement after Thursday's vote, Chappell hailed Council's action as "the beginning of a revolution in municipal finance... Instead of budget cuts to vital services, layoffs, employee givebacks, more debt or more taxes, here is a tool that adds to the prosperity of the city and its people... The first American revolution was launched in Philadelphia. Why not the second?" Council's resolution calls on the Commerce and Economic Development committee to hold hearings.

If the city starts a bank, do you suppose it will do an effective job depositing and investing public funds, finding private businesses and government-affiliated agencies to lend to, and getting paid back? Will it manage a bank better than the city's political class managed the School District, or the woefully underfunded Board of City Pensions, which blew half a million on Chappell's last bank? And will it find more effective advisers? More here.