Last June, Washington’s Department of Financial Institutions (DFI) sought a $1.5 million fine against the company Bitcoin Depot for overcharging customers at its crypto kiosks. According to the charges, the crypto kiosk company overcharged customers 42% above market value on exchanges, thus violating Washington’s Uniform Money Services Act. In addition to the fine, Washington’s DFI is seeking to revoke the company’s license and prohibit the company and its leadership from operating in the state.

However, the restrictions might not be entirely necessary. On May 18, Bitcoin Depot announced that the company was filing for bankruptcy in the U.S. Bankruptcy Court of Southern Texas. In addition to Washington state, the company operates crypto kiosks in another 33 states, with more than 9000 kiosks available, mostly found in grocery and convenient stores. In those operations, the company has been sued by several states, including having to pay a $1.9 million settlement in Maine.

In announcing the bankruptcy filings, CEO of the company Alex Holmes claimed that his business was not profitable, not because of its illegal activity, but because of an overly onerous regulatory landscape and a bias against crypto kiosks. “States have imposed increasingly stringent compliance obligations, including new transaction limits, and in some jurisdictions, outright bans on BTM operations,” Holmes told the press.

States have put stringent restrictions on crypto kiosks, with three states—Tennessee, Indiana, and Hawaii—banning them outright. Canada is considering a nationwide ban. In Washington, during the 2025 legislative session, lawmakers considered passing SB5280. The bill was proposed by the state’s DFI, and would have introduced new record keeping requirements, limited transactions to $1,000 per day, limited transaction fees to either $5 or 5% of the transaction, and required that all transactions at the crypto kiosks be disclosed on the receipt. The bill was supported by Democrats, including Claudia Kauffman (District 47), chair of the Business, Financial Services, and Economic Development committee. Nonetheless, the bill failed to make it to the senate floor for a vote.

Many of Washington’s local municipalities are not waiting for state legislators to act. So far, five Washington cities—Spokane, Spokane Valley, Kennewick, Anacortes, and La Conner—have all banned crypto kiosks. Spokane, Washington’s second largest city with a population of 470,000, was the first to institute the ban. The city did so in response to a high number of its residents being targeted by scammers. The scammers would contact victims and claim they represented law enforcement, the courts, or debt collectors. They would then spin a confusing story that implicated the victim in a serious legal or financial issue. Once the victim becomes desperate to get out of the supposed predicament, the scammer offers to resolve the legal or financial issue if the person is willing to transfer funds at a nearby crypto kiosk. Crypto kiosks are the preferred venue for financial transactions by scammers because such transactions are difficult to track. Once relinquished, it is often impossible to retrieve any funds.

Spokane originally waited for the state to take action on the matter. However, when SB5280 failed to pass, it instituted its own ban on June 17, 2025. Since then, neighboring cities have instituted similar bans, resulting in a slow cascade of local governments seeking to protect consumers from crypto scammers.

Some of the stories of the victims are heartbreaking. In Ashford, which is an unincorporated area located in Pierce County, a 71-year-old woman was swindled out of $14,800 after a scammer called her and claimed that she was being investigated by the Federal Deposit Insurance Corporation. The scammer told the victim that the only way for her to resolve the issue was to do a bank transfer through a crypto kiosk at the local Eatonville grocery store. When the victim could not figure out how to operate the crypto kiosk, the scammer arranged to meet the victim in person. The scammer would have gotten away with his ruse, but the day after the transfer he came back to the victim with another elaborate story and told her that she needed to transfer $25,000. Fortunately, after the victim’s family realized what was occurring, law enforcement was contacted and the scammer was arrested.

Most situations, however, do not end in an arrest, and very few even get reported. The Federal Trade Commission has estimated that only 2%-6% of victims report their losses, while the FBI has calculated that various crypto and other internet scams have cost Americans nearly $21 billion.

One of the reasons that crypto scammers have been so successful and prolific in recent years is that they receive cover from President Trump’s decidedly pro-crypto stance. Wanting to make the United States the “crypto capital of the world,” the administration has purposely loosened regulations around crypto, making it much easier for scammers to utilize kiosks, platforms, and digital currencies to bilk people.

Both scammers and the formal industry are aware that they can take advantage of this permissive environment. In Tacoma, which is also located in Pierce County, a social media post was circulated that claimed a crypto coin was being launched by the city. The post specifically referenced President Trump, and his promotion of the crypto industry. Later, the city acknowledged that the post was fake and that its X account had been hacked.

As for supposedly legitimate businesses like Bitcoin Depot, Washington’s DFI also alleges that Bitcoin Depot knew its kiosks were being utilized by scammers but did not care. It could have and legally should have intervened to stop or at least report some of the transactions, but it continually looked the other way because of the revenue it receives from those same transactions. In doing so, DFI alleges that it routinely violated laws against money laundering, suspicious activity, and bank secrecy.

The lack of regulation at the federal level of the crypto industry has meant that states must be even more diligent. When states fail to act, the responsibility falls to local communities. In all likelihood, more county and municipal governments throughout Washington will attempt to ban crypto kiosks to protect consumers from fraudulent practices. However, without more dramatic structural changes at the federal level, scammers will find they can jump from community to community, swindling residents while hiding behind the malfeasance of the more powerful and seemingly more legitimate larger crypto companies. Meanwhile, those larger crypto companies will continue to receive the safe haven from an administration that has made it clear they have no intention to regulate an industry on behalf of the public.

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Since the COVID19 pandemic, American economists have been discussing the implications of the United States’ “K-shaped” economy. High‑income households and capital-intensive industries have seen their wealth explode. Meanwhile, America’s middle class is shrinking. In 1971, 61% of the population was considered Middle Income. Today, that number has dropped to 51%, while both the lower and upper classes have expanded. Low-income families and labor-intensive sectors of the economy are falling behind.

However, a report from US Bank released earlier this year noted that America’s “K-shaped” economy has been occurring for decades. According to the report, the pandemic “underscored a decades-long trend of widening inequality. Pandemic-era stimulus and lockdown-driven conditions briefly narrowed the gap to levels not seen since the early 1990s… Yet the reversal was fleeting. Income concentration has since returned to pre-COVID peaks. And recent policy shifts are expected to push inequality to new record highs.”

While the report from US Bank accurately describes America’s “K-shaped” economy, it also partially excuses it. The report goes on to claim that while inequality is unfortunate, it is also “necessary for a market economy to function, as it incentivizes investment and expansion.” In this way, the solutions to address inequality should only be modest measures, such as “investing in digital education and financial literacy for both the current and future workforce” and programs that make housing more affordable to first time homebuyers.

An ignored driver of America’s economic inequality, and one that US Bank would be reluctant to mention, is banking consolidation. In the early 1980s, when the United States entered a new era of inequality and the “K-shaped” economy began to emerge, the United States fundamentally restructured its banking system, and this restructuring remains one of the main reasons for the persistence of inequality today.

When the country was first established, banking was considered an activity that was largely regulated on the state-level. No common paper currency existed. People were expected to pay their taxes and debts in specie or metal currencies that were hard to get access to. To stimulate their economies, states would charter commercial banks. Those commercial banks would then issue their banknotes, which would circulate as currencies. However, because there were few banking regulations and no deposit insurance, bank failures were common. Overnight, the value of a banknote could evaporate. To contain any contagion, commercial banks were only authorized to act within a state, and even then, only within a specific region. It was not until the Civil War, when the federal government authorized the chartering of federal banks and issued “greenbacks”—the forerunner to the modern dollar—that banking was seen as an activity that could occur beyond a local area.

Still, federally chartered banks that were able to operate across state lines were a small minority. For literally two centuries—including several banking crises and the Great Depression—America’s banking sector was dominated by small banks that specialized in a geographical location. State boundaries essentially functioned as a protectionist measure that limited competition within a region but ensured competition across the nation by preventing any commercial bank from becoming too big and muscling out smaller rivals.

Starting in the 1980s, that changed. States began to broaden the regional area that banks could operate. Soon after, they allowed banks to provide services across state boundaries, at first through reciprocity agreements, and then just generally. Then, with the passage of the Riegle–Neal Interstate Banking and Branching Efficiency Act of 1994, interstate banking became the new norm. The consequence of these changes was a new era of relentless banking consolidation. From 1994 to 2005, the number of out-of-state banking branches grew from 62 to nearly 25,000.

In 1992, there were 14,423 FDIC insured commercial banks in the United States. Today, there are only 4,287. A decline of approximately 70%. Most of the decline has occurred in the last 20 years. In the aftermath of the Great Recession, where the “too-big-to-fail” banks survived through unprecedented bailouts from the federal government, many of the country’s smaller banks collapsed, and their assets were eventually devoured by larger institutions. For Washington, which was never a significant banking state, the drop has been even more dramatic. In 1992, Washington had 126 commercial banks chartered or headquartered in the state. Today, that number has declined to 30. It is a decline of approximately 76%. Last year alone, the state lost six commercial banks. Most of these Washington banks—90%--are small community banks with less than $10 billion in assets.

Figure 1

Unfortunately, it does not appear that the hemorrhaging of community banks is going to stop. Recently, the Office of the Comptroller of the Currency (OCC) has changed its definition of a “community bank” from a commercial bank that has under $10 billion in assets, which is how it is defined by the Federal Reserve, to any bank with under $30 billion in assets. Not only does this significant jump mean that several formerly mid-sized regional banks are now considered “community banks,” but the OCC also changed its rules to make it easier for community banks to purchase other community banks. However, since several of these “community banks” are actually mid-sized regional banks, the rule change will likely lead to even greater banking consolidation.

This banking consolidation is directly related to America’s overall inequality in a way that other industries are not. As a recent report from the Kansas City Federal Reserve explains, community banks play a vital role in ensuring that working families, small businesses, and rural communities—all losers of the “K-shaped” economy—get access to credit. According to Better Markets, community banks use 75% of their deposits for direct lending and approve approximately 55% of all small business loans. In contrast, the large megabanks only use 40% of their deposits for direct lending and approve 45% of all small business loans. Even though community banks hold 14% of commercial bank deposits, they hold 32% of commercial real estate loans, and 78% of the commercial real estate loans worth $100,000 or less.

With fewer community banks in the United States, there are less opportunities for people on the lower end of the income spectrum to receive access to credit. With less availability to access credit, these groups have a harder time investing in small businesses, purchasing a home, or getting a personal loan to help them through a difficult period; in other words, being less able to access credit means being less able to secure and grow your wealth. Because they lack the means to grow their wealth, they cannot catch up to those who the economy is working for, and the “K-shape” of the economy becomes more pronounced.

In the last financial quarter, America’s richest banks announced historic profits. Combined, JP Morgan Chase, Goldman Sachs, Bank of America, Citigroup, and Wells Fargo reported profits of $49 billion; a 39% increase from the previous year. Meanwhile, from the first quarter of 2025 to that of 2026, the United States lost 130 commercial banks. That is another swath of community banks that not only made the market more competitive but were more likely to convert their deposits into loans for the real economy. If the United States is going to turn around the “K-shaped” economy, and address its growing inequality, then policymakers need to find strategies that counter banking consolidation. Otherwise, the divergence between the haves and have-nots in the “K-shaped” economy can only get so far apart before the entire system snaps apart.

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Attend an evening of presentations and discussions on public banking in Washington featuring Don Morgan, President and CEO of the Bank of North Dakota, and special guests. Come learn how the Bank of North Dakota operates and how its unique model can be brought to Washington.

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Information on the events is below.

Tacoma:
Tuesday, July 21st, 6:00 pm - 7:30 pm

First United Method Church of Tacoma

621 Tacoma Ave S, Tacoma, WA 98402

Featuring:
Don Morgan, President and CEO of the Bank of North Dakota

&

Yasmin Trudeau, State Senator of District 27

Register Today

Seattle:
Wednesday, July 22nd, 6:00 pm - 7:30 pm

The Metropole Seattle

423 2nd Ave Ext S, Seattle, WA 98104

Featuring:
Don Morgan, President and CEO of the Bank of North Dakota

&

Tiffani McCoy, CEO of Seattle’s Social Housing Developer

Register Today

*limited seats available

Bellingham:
Thursday, July 23rd, 6:00 pm - 7:30 pm

The Bellingham Unitarian Fellowship

1207 Ellsworth Street, Bellingham, WA 98225

Featuring:
Don Morgan, President and CEO of the Bank of North Dakota

&

Liz Lovelett, State Senator of District 40

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Last April, Washington’s Department of Commerce and its Department of Ecology released their report, “Washington State Comprehensive Climate Action Plan.” The nearly 400-page report is intended as a decarbonization roadmap for the state. While offering a variety of strategies to address climate change, the report strenuously advised against legislators doing nothing. Damage caused by global warming is likely to cost the state’s economy a staggering $10 billion per year by 2030, and potentially $35 billion per year by 2050.

The report suggested a series of investments strategies, especially in energy transmission, that the state could make to ameliorate the impact of climate change. However, the report does not specify where this money will come from. That is a problem.

In the coming years, Washington’s budgets are expected to be tight. Early in June, Washington’s Office of Financial Management (OFM) sent a letter to state agencies warning them that they will experience “significant budget shortfalls“ for the 2027-2029 biennial budget cycle and that they should focus on “protecting core services.”

Unfortunately, the state’s recently passed millionaire tax will not offer much relief. It does not kick in until 2029, and after that it merely helps the state tread water.

To the surprise of many, there is a pool of money that the state could utilize to make investments in climate mitigation that does not involve drawing from the budget: the state’s public deposits.

When public institutions—i.e. a county government, municipality, school board, port, or other governing body—in Washington receive taxes and fees, that money gets deposited into a private bank. That private bank then uses those public deposits to make loans.

The overwhelming majority of those deposits are not held by local institutions, but instead by huge megabanks that are chartered outside the state. Not only do these banks make lending decisions without regard to Washington state, but they do not even make them with regard to the planet, as many of those megabanks are major lenders to fossil fuel production.

Earlier this month, the report “Banking on Climate Chaos” was published by a consortium of environmental groups. In it, the authors describe how the world’s largest banks continue to lend to fossil fuel projects. For 2024-2025, the total financing of fossil fuel production from the globe’s 65 largest financial institutions reached $906 billion. That is an 8% increase from the year before.

Frustratingly, even though the earth’s temperature continues to rise, the world’s largest banks refuse to abate their lending to fossil fuel companies. Since the International Energy Agency issued its net zero emissions roadmap in 2021, the world’s top banks have lent over $4 trillion to the fossil fuel sector, including over $2 trillion to fossil fuel expansion. Since the 2017 Climate Paris Agreement, the total has climbed to over $9 trillion. Leading the charge was JP Morgan Chase, which financed $6.5 billion in fossil fuel projects in 2025 alone.

Washingtonians are not off the hook. Many of the banks that made the list are also financial institutions that hold Washington’s public deposits. That means that a significant portion of local tax dollars is being used to finance fossil fuel companies.

As Table 1 demonstrates, Washington’s public deposits are held by two of the most aggressive financiers of fossil fuel projects—JP Morgan Chase and Bank of America—while all the holders of our public deposits except for BMO Harris increased the amount they invested in fossil fuels from the previous year. In total, these banks held over $3.6 billion of public money. For 2025, that was approximately 1/3^rd of the total public deposits.

Even while Washington takes bold steps to tackle global warming, it undermines its own efforts by depositing its public funds into large megabanks that continue to finance fossil fuel companies.

Fortunately, there is a way out.

Instead of handing off our public deposits to these private banks, where they only compensate us with meager interest rates, Washington should charter a public bank and transfer all the public deposits to that institution. Then, the public bank could partner with Washington’s green lending infrastructure—such as the recently established Washington Green Bank—to help finance the decarbonizing of the state’s economy.

Doing so redirects funds from fossil fuel companies to sustainable projects and does so without taking money from the state’s general fund. All it does is move a major asset away from the private sector to the public sector and ensure that public deposits are held by a public institution.

On top of all that, the public bank could be used to help Washington with its budgetary woes. If the public bank turns a profit, those funds can be given back to the state as a dividend. If done so, Washington could start seeing its green financing as a source of revenue rather than an expense that is paid for out of the general fund.

If Washington is going to move forward on addressing climate change, then it needs to put real money behind its sustainability goals. That is unlikely to happen soon with our tight budgets. However, it can happen if we merely transfer our public deposits to a public bank. Considering the existential threat of climate change, that should happen without delay.

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“Washington’s Public Banking Future”

Featuring Don Morgan, President and CEO of the Bank of North Dakota

Don Morgan, President and CEO of the Bank of North Dakota—the only state owned and operated public bank in the country—is touring Washington state. During his talk, President Morgan will discuss how the Bank of North Dakota operates, and how we can bring this unique institution to Washington.

Information on the events is below.

Tacoma:
Tuesday, July 21st, 6:00 pm - 7:30 pm

First United Method Church of Tacoma

621 Tacoma Ave S, Tacoma, WA 98402

with Special Guest: State Senator Yasmin Trudeau

Register Today

Seattle:
Wednesday, July 22nd, 6:00 pm - 7:30 pm

The Metropole Seattle

423 2nd Ave Ext S, Seattle, WA 98104

Register Today

Bellingham:
Thursday, July 23rd, 6:00 pm - 7:30 pm

The Bellingham Unitarian Fellowship

1207 Ellsworth Street, Bellingham, WA 98225

Register Today

Support Washingtonians for Public Banking

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In previous writings, we advanced an inventive new model for municipal finance: what we call the Seattle Loop. By establishing a city-owned public bank, we propose, Seattle can not only expand public investment through municipal lending and provide residents with low-cost financial services; it can also purchase its own bonds and “loop” the interest back to the city itself, rather than to Wall Street. Over time, the Loop promises to save Seattle (and any other municipality that adopts the Loop) hundreds of millions of dollars in interest payments annually. More important, it stands to turn the city’s public debt into a self-reinforcing system of public finance, capable of addressing community and environmental needs far more democratically and robustly than ever before in the city’s fiscal history.

Here, we take a more granular approach to some of the Loop’s key operations—capitalization and maintaining reserve balances—zooming in, as it were, to address logistical specificities that our broader model facilitates.

How precisely can a city like Seattle capitalize a public bank? That is, how will Seattle secure enough funds to, first, acquire a banking charter, and second, steadily marshal sufficient owner equity, or “capital,” to meet ongoing regulatory requirements? Concomitantly, how can a Seattle Municipal Bank attain and maintain adequate reserve balances, ensuring daily liquidity in managing interbank payments with the rest of the U.S. financial system?

In what follows, we explain both processes. Ultimately, we demonstrate that capitalization and reserves are not separate stumbling blocks to be surmounted, but deeply interrelated operations that—when designed in tandem—create a mutually reinforcing engine for public provision.

No Cap: A Closer Look at Capitalizing the Loop

Since we first introduced the Seattle Loop, several interlocutors have expressed concerns regarding the city’s capacity to sufficiently capitalize a new public bank. Frequently, these anxieties rest on the erroneous notion that much of Seattle’s current holdings are functionally off-limits, either because they are supposedly locked in high-yield investments or because tax revenues earmarked for future spending are deemed unavailable for democratic deployment.

In reality, all funds Seattle presently holds in private banks and investment portfolios are readily available to the city. This includes earmarked revenues, waiting to be spent according to legislative directives. No city, state, or federal laws prevent the city from mobilizing its assets toward the capitalization of a new public bank.

The scale of Seattle’s public wealth is immense, totaling over $8.1 billion in managed assets. This figure rests on two primary pillars: the city’s $3.8 billion Treasury Investment Pool, which handles daily operating cash and earmarked reserves, and the $4.3 billion managed by the Seattle City Employees’ Retirement System (SCERS).

The trouble is, under current municipal arrangements, this $8.1 billion foundation is sequestered in private financial institutions, reducing the city’s greatest strength into a passive subsidy for Wall Street. As a result, Seattle is forced into a perverse position: the city pays hundreds of millions of dollars in predatory fees and exposes retirement savings to volatile speculative markets, all while providing the very liquidity that private banks use to underwrite their own exploitative and destructive regime of lending.

Seattle possesses the capacity to liberate its public wealth from private capture, reallocating its massive holdings to capitalize a democratic municipal bank. While this transition demands adept financial management—including the careful disaggregation of funds and a move away from speculative vehicles—the challenges are solely logistical. Potential liquidity bottlenecks and termination fees from private vendors represent one-time and short-term transitional hurdles rather than systemic barriers. Any payment or dip in yields marks the final extraction by private intermediaries, a cost that will be swiftly recovered as the Seattle Loop commences in earnest.

After Seattle secures this initial capitalization and, with it, a banking charter, the city’s reclaimed equity then serves as its public bank’s regulatory foundation, providing the balance sheet capacity necessary to absorb municipal debt and extend credit at a scale far exceeding the initial investment. From here, Seattle can begin issuing bonds directly to—and, when necessary, receiving loans from—its own public bank. Henceforth, the city will systematically retire its legacy obligations to private investors. However, all future interest payments will remain within the public circuit. Consequently, Seattle recuperates wealth once lost to the rentier class, looping interest back into the general fund to support social provisioning. It also effectively democratizes debt issuance, wresting control from bond rating agencies and private intermediaries to empower local government and the voting public.

Throughout this process, it is essential to recognize a more fundamental point about the entire logic of capitalization. Capital requirements do not obey immutable natural laws; they are legal constructs subject to democratic redefinition.

As California Assembly Bill 857 (2019), or Public Banking Act, demonstrates, it is entirely possible to legally codify what counts as capital in the first place. This landmark legislation reclassifies existing investment portfolios as suitable for bank capitalization, providing a clear regulatory roadmap for municipal entities. Recognizing that these definitions are flexible opens the door to creative capitalization strategies that were previously unimaginable. Indeed, Assembly Bill 857 utilizes the same powerful assumption to endow California public banks with depository functions. In addition to reclassifying what assets can be used to capitalize a bank, the legislation also legally redefines what counts as a public depository to explicitly include public banks. All this is to say that when we treat monetary terms and procedures as flexible tools of governance, the perceived limits of municipal finance reveal themselves to be legal constructs that can be rewritten for transformative action.

Of course, legal redefinition is nearly always a complex process. Bill 857, for example, explicitly reclassifies anticipated state tax revenue as credit that can be counted toward the capitalization of a public bank. Currently, however, federal law excludes projected tax revenues from Tier 1 bank capitalization requirements. What this means is that, while the State of California cannot use anticipated taxes as credit to capitalize its initial public bank, Bill 857 does give the state and its municipalities legal authority to leverage future taxes toward the capitalization of a second, third or fourth public bank. After the first public bank is founded, in other words, California may leverage future taxes as credit to create more public banks. The federal requirement for Tier 1 capital is met at each step, but the actual source is the anticipated taxes revenues. Hence, even though state and municipal legislation is never at total liberty to restructure monetary rules, it can effectively establish the strategic legal scaffolding necessary to expand the boundaries of public finance over the long term.

When it comes to maintaining capital requirements, meanwhile, the Seattle Loop departs from the reactive logic of private banking. Rather than viewing the bank as a mere vehicle for attracting private investors or balancing risk against maximized yields, we approach the Seattle Loop as an actively constructed system of public coordination. We can strengthen this system and insulate it from the volatility of private markets by requiring partner community lenders to open and maintain deposit accounts within Seattle’s public bank. This creates a symbiotic effect wherein the public bank serves as a stable foundation for the entire local financial ecosystem.

The partnership model allows the Seattle Municipal Bank to pursue projects that are currently beyond the reach of smaller, mission-driven lenders. Through participation lending, the bank can supplement loans for critical public works, such as low-income housing development. If a developer requires $50 million for a housing project but a local credit union only has the balance sheet capacity for $10 million, the municipal bank can purchase the remaining $40 million of the loan. This is not a theoretical novelty; it is a proven model of public coordination successfully utilized by the Bank of North Dakota—which is primarily a wholesale lender to other banks—for over a century to anchor regional development.

To safeguard the long-term vitality of the public bank, we can also augment its capital base by instituting a policy of retained earnings. In mandating that a small portion of the bank’s net interest income remain within the institution rather than being fully remitted to the general fund, we establish an autocatalytic growth curve for public credit. In technical terms, these retained profits build up the bank’s Tier 1 capital—the core, loss-absorbing equity that serves as a primary regulatory buffer.

Because banking operates on the logic of leverage, this public accumulation of capital has a disproportionate impact on the city’s provisioning power. Given that the minimum Tier 1 capital ratio is typically set at 6%, every dollar retained by the bank potentially unlocks over sixteen dollars in new lending capacity. Committing to this steady internal capitalization, the Seattle Municipal Bank does not only maintain its solvency, but also structurally expands the horizons of what the city can afford to build, fund, and sustain.

The bank further strengthens its capital base by integrating the city’s broader economic transactions into its circuit. For example, city contractors can be auto-enrolled to receive funds—from grants to large-scale construction payments—directly into Seattle Municipal Bank accounts. While contractors remain free to move their funds at any time, the Loop Bank can offer unique institutional benefits and seamless integration that incentivize them to remain within the public circuit.

The Seattle Municipal Bank can extend this invitation to the city’s most vital resource: its employees. If the city invites public sector workers to hold payroll accounts directly with the public bank or its partner banks, it can offer exclusive financial services and benefits tailored to the needs of public servants. This transforms payroll from a seemingly neutral administrative task into an active tool for expanding the fiscal reach of the public bank, ensuring that Seattle’s wealth continues to circulate in the interest of those who make the city run.

Finally, the Seattle Loop achieves a structural advantage regarding fiscal retention that private intermediaries simply cannot match: immunity from federal taxation. While private commercial banks are subject to federal corporate taxes—representing a steady loss in municipal wealth—public banks operate as tax-exempt governmental entities. Therefore, the Loop does more than shield the city from Wall Street’s extractive fees; it ensures that the surplus generated by public credit remains entirely within the local circuit. This effectively closes a major valve of fiscal siphoning, retaining every dollar of generated value to support the city’s own provisioning.

Settling In: Building Reserves & Internalizing the Clearing Process

To operate as a viable financial institution, the Seattle Municipal Bank must participate in the complex infrastructure of interbank settlement. This process is mediated by reserves—the specialized, high-powered money that banks use to clear and settle obligations with one another. Unlike the commercial bank deposits used by the public for daily transactions, reserves exist as digital entries on the balance sheet of the Federal Reserve, serving as the ultimate medium for the final settlement of payments.

Only the Fed has the authority to issue and destroy these reserves, whether through routine open-market operations and repurchase agreements or via emergency lending facilities and large-scale asset purchases during periods of systemic crisis. Critically, these reserves are not redeemable outside of the central bank circuit; they are a wholesale instrument for institutional settlement, not a retail medium for public commerce. One cannot use reserves to purchase a cup of coffee or a car. Instead, they function as the specialized money, which banks use to cancel out debts with one another as their customers transfer and transact between financial institutions.

In the current financial landscape, every time a check is cleared or a wire is sent between different institutions, a corresponding volume of reserves must move across the central bank’s ledger to satisfy the debt. For most municipal entities, the requirement to maintain and manage these balances has long been framed as an insurmountable barrier to entry into the specialized world of chartered banking and interbank settlement, often resulting in a costly and forced reliance on large private correspondent banks to handle the technical plumbing of settlement. With the design of the Seattle Municipal Bank, however, we build our own public system of liquidity, enabling the city to insulate itself from the extractive pressures of the settlement circuit, while also meeting ongoing reserve requirements.

One of the most common technical objections to our proposal is the problem of reserve acquisition. Critics ask how a new public bank can possibly compete in the interbank market without a pre-existing stock of Fed funds. Our answer is simple: reserves follow deposits. When the City of Seattle transfers its holdings out of private accounts and into its own municipal bank, the banking system mechanically expedites that move by transferring the corresponding reserves across the Fed’s ledger. In this light, the problem of reserve acquisition disappears. The city’s deposits furnish the very liquidity needed to settle the city’s payments.

While acquiring initial reserves is a mechanical byproduct of capitalization, maintaining them is a separate operational challenge. To see how this works, consider a simplified scenario: the City of Seattle receives a $10 million deposit from a private institution. In the interbank system, this deposit is accompanied by a transfer of $10 million in reserves. So far, the bank is flush. However, if the city then sells $10 million of its bonds to its own bank, it creates $10 million in new deposits. The moment the city attempts to spend that credit at vendors who bank in the private sector, the Seattle Municipal Bank must have enough reserves on hand to clear the payment. In this sense, reserves are the exit fee for transactions leaving the public circuit.

Still, a critical point remains: any payment clearing within the public-to-public system requires no reserves at all. When the city transfers funds between departments or pays an employee who also banks with the Seattle Municipal Bank, the transaction is settled via a simple ledger update—pure municipal bookkeeping. This allows for the creation of a relatively insulated, high-volume system of payment clearing, which lessens the demand for the Seattle Municipal Bank to keep up with settlements in the Fed funds market.

That said, the Seattle Loop’s capacity for internal settlement reaches its full, transformative scale only through the project we have previously championed: a comprehensive digital public payment infrastructure. By establishing a municipal payment utility—akin to a “Public Venmo” or “Seattle Square”—the city will broker both free and surveillance-free transactions that circumvent exploitative credit card companies and tech oligarchies.

Imagine a digital municipal wallet that serves as the primary interface for civic life: your ORCA card, your library card, and your portal for utility payments and local event tickets, all integrated into a singular, public circuit. As payments circulate and clear within this internal system, the exit fee of private reserves effectively vanishes. This infrastructure is particularly vital for rewarding care work, as it allows the city to directly recognize and pay public service workers tending to our community. At its core, however, creating a digital public payment system expands the city’s internal clearing capacity, diminishing the burdens involved in attracting and maintaining reserves in the Fed funds system.

The Seattle Loop ensures that fiscal expansion is no longer tethered to the liquidity bottlenecks of the private market, but is instead limited only by our collective capacity to provision for the public good.

Conclusion: The Future is Fiscal Resilience

By zooming in on the technical foundations of the Seattle Loop, we see that capitalization and reserves are not mere obstacles to be overcome, but the very instruments of a new municipal financial architecture. Once this architecture is in place, the Seattle Loop functions as a vital automatic stabilizer for the regional economy.

Unlike private commercial banks, which are structurally compelled toward pro-cyclicality—lending aggressively during booms and retreating during busts—the Seattle Loop operates under a mandate of counter-cyclical investment. During economic downturns, when private credit freezes, the city can strategically expand its lending capacity, acting as a public credit guarantee that maintains the city’s future wellbeing when the present is uncertain or unstable.

As part of this mandate for counter-cyclical investment, the Seattle Loop can endow the city with a powerful tool for public refinancing. The public bank can systematically retire the city’s extractive legacies by purchasing older, high-interest loans currently held by private institutions. It can also extend refinancing options to non-profits and community organizations that have long been burdened by predatory private debt.

In the final analysis, what all such possibilities demonstrate is that the Seattle Loop is not merely technically feasible. It is an active and generative construction that supplies the city with maximal fiscal resilience. By re-engineering the city’s financial plumbing into a permanent infrastructure of social and environmental stewardship, the Loop guarantees that Seattle’s wealth is never again treated as a compliant subsidy for Wall Street, but is rather deployed as a powerful tool for a just and plentiful tomorrow.

With the ratings downgrades, Washington’s Republicans have emphasized that the state’s budget has been balanced through accounting gimmicks and spending down reserves, rather than a close look at cuts. Talking to the Washington Standard, Republican Senator Chris Gildon (District 25), who leads the Republican budget process in the Senate, referred to the Washington’s latest budget as a “$80 billion House of Cards that’s built on a very shaky foundation.”

The criticisms from the state’s conservatives are partially accurate, but not the entire story. To balance budgets, Washington has been dipping into its reserves to a dangerous degree. Nationally, Washington’s Rainy-Day Fund is the second worst in the country. If a crisis were to hit the state, and governmental operations had to function solely on reserves, Washington state would not last more than two weeks before it ran out of money. In comparison, Wyoming, which is the best state in terms of its reserves, could operate for nearly an entire year.

Even outside a crisis, the lack of reserves could cost the state tens of millions in borrowing costs. If Moody’s Ratings downgraded Washington credit further, from AAA (negative) to Aa1, Washington’s borrowing costs would likely increase by 0.1%. That might not seem like a lot but considering that Washington issues around $4 billion in bonds each year, including underwriting the bonds for school districts, the 0.1% increase in interest would approximately result in $60 million a year in servicing debt. In comparison, the Washington Green Bank, a revolving loan fund established by the state to make strategic investments to mitigate the impact of climate change, will be capitalized at $50 million, with $25 million this current budget cycle and the next $25 million committed the following budget cycle. Meaning, if Washington’s credit rating is degraded further, the state will pay more in interest in one year—and for every proceeding year it has the debt—than it has paid in four years on a major climate mitigation plan.

Unsurprising, in an interview with KOMO News, State Treasurer Mike Pellicciotti emphasized the importance of the issue for future sessions: “It’s like when your check engine light comes on — you know you have to fix something.”

However, the solution from conservatives—to slash spending and redirect funds to the state’s reserves—will not solve the problem. Moody’s Ratings and other rating agencies have highlighted the lack of the state’s reserves, but that is not the only force weighing down the state’s credit rating. According to Moody’s, another significant factor is the “surge in costs of living, outpacing all other states over the last decade” which “continues to drive spending pressure for social related services.”

A report produced by the Washington Roundtable found that Washington is the 5^th most expensive state in the country, and first in the nation in regional price parity, meaning that the gap is widening, and at a rate far quicker than other states. This is especially true for western Washington, where the Seattle-Tacoma-Bellevue area ranks as one of the priciest metro-statistical areas (MSA) in the country, and eight of the 12 MSAs in Washington have a regional price parity above the national average.

A survey from Washington Roundtable’s report indicated that a key factor driving the affordability crisis is the cost of housing. In the last 40 years, Washington’s housing costs have increased by 828%, more than any other state in the country. Fundamentally, Washington has had a chronic housing shortage. Recently, legislators have allocated $960 million for affordable housing investments, the largest ever in a single biennium, but this investment will only create or preserve 4,000 units of housing for the state.

Thus, the conundrum that Washington finds itself in. If it cuts spending to divert funds to the state’s reserves, especially for housing, it will contribute to the state’s affordability crisis, which will damage the state’s long-term economic prospects. However, if it continues as it has, without replenishing its reserves, it will have to pay more in servicing its debt and potentially runs the risk of getting caught in a downward debt cycle.

A simultaneous solution to both of these problems is for the state to charter a public bank, similar to the Bank of North Dakota (BND).

The BND operates by being the sole depository institution for all the state’s public deposits. Meaning that all the governing entities in North Dakota—the state, counties, municipalities, school boards, special districts, and so on—are required to deposit their revenue, the taxes and fees they collect, into the public bank. Then, using this deposit, the BND purchases assets, often partnering with the state’s community banks and credit unions, in addition to its various public revolving loan funds. The BND increases liquidity throughout the state’s current lending infrastructure while also directing funds to the areas where it is most needed.

Because of the state’s lack of reserves, there is very little the state could deposit in the public bank. However, not all of Washington’s governing institutions have so consistently raided their reserves to stay afloat. According to the state’s Public Deposit Protection Commission, there is approximately $11-12 billion in public deposits held in private banks. The majority of these private institutions are large megabanks that receive their charters from outside the state.

By transferring these public deposits to a public institution, the public would retain control over those deposits and could use them to make critical investments in the state, especially toward housing. Currently, the state operates a Housing Trust Fund (HTF) Program, which, since 1986, has invested $2.6 billion to help build or preserve 59,000 units. Yet, if less than 1/3^rd of the current public deposits (approximately $3-4 billion) was utilized for housing loans, then more could be invested in affordable housing in a single year than the entire history of the HTF.

Additionally, the state public bank could purchase municipal and state bonds. If Washington continues to under-fund its reserves—which it should not do!—and experiences a decline in its credit rating, then the state public bank can ameliorate the situation by agreeing to purchase state bonds at below market rate. Since the public bank would be a not-for-profit public institution that is exempted from taxation, it can afford to do this. And, because the deposits from the public bank come from Washington’s local governing institutions, the public bank has an interest in lowering the state’s borrowing costs; higher costs related to servicing debt means less money invested in Washington’s local communities.

For nearly two decades, there has been an ongoing movement to create a public bank in Washington. In that time, Washington has faced a series of budgetary crises and often it only escaped those crises by the skin of its teeth. It should not let its current Gordian-Credit-Rating-Knot, stuck between a lack of reserves and a lack of affordable housing, become the next one. A public bank that utilizes public deposits can solve both problems at once.

According to reporting in the Olympian, the employees of Peak Credit Union were blindsided by the decision. Shortly before 9:00 am, employees were asked to participate in a remote video call with the CEO and senior vice president of people and culture. The layoffs were announced during the 15-minute call. Five minutes later, former employees lost access to their work computers. The severance pay offered by the company totaled less than one month of wages, and the health benefits continued but transitioned employees to COBRA, which required former employees to pay the full cost of their premiums. To receive the benefits, employees had to agree to sign a nondisclosure agreement.

“It was the most un-credit union experience I’ve ever had,” one employee told the Olympian.

Aside from how Peak Credit Union handled the layoffs, it is not surprising that they occurred. Throughout the United States, credit unions have been on the steady decline. With the rise of interstate banking in the 1980s and 1990s, the industry has undergone a dramatic period of banking consolidation. Large banks have gotten bigger, while smaller financial institutions have downsized or disappeared altogether. For credit unions, the reality of banking consolidation has meant a precipitous decline. Despite still having over 145 million members, approximately 44% of the American population, in the last decade the number of credit union in the United States has dropped by 29%.

Figure 1

Peak Credit Union is both a product and a victim of this market consolidation. Its layoffs come just three years after Peak formed through a merger between TwinStar Credit Union and Northwest Community Credit Union in fall of 2023. Once combined, Peak Credit Union became the fifth largest credit union chartered in Washington, with over $4.3 billion in assets. The merger was supposed to make it a stronger and more adroit institution. In terms of assets Peak Credit Union is in the top 10% of credit unions. Approximately 90% of credit unions having less than $1 billion in assets. In Washington, there are 75 credit unions chartered by the state. Only 18 (roughly a quarter) of them have more than $1 billion in assets.

Some credit unions have actually been able to weather the storm of consolidation by gobbling up smaller community banks. In 2024, 22 credit unions acquired community banks—a record—with five of the mergers happening in Washington state, the most for any state that year.

However, these numbers require caveats.

First, credit unions acquiring community banks, while noticeable, is still a relatively minor occurrence, and the numbers have decreased from 22 to 16 in 2025. In 2025, none happened in Washington state, and the state has made future mergers less likely through changes in the tax code. As not-for-profit institutions, credit unions are exempt from most taxes. Still, on January 28, the Washington Department of Financial Institutions (DFI) announced that credit unions acquiring commercial banks would be required to pay the state’s business and occupation tax. The law does not apply to credit unions chartered outside of Washington or to federally chartered credit unions, which might give out-of-state credit unions an edge, or encourage current in-state credit unions to change their charters.

Second, in terms of assets, credit unions still only make up a small portion of the banking market, and in the grand scheme of things, institutions like Peak Credit Union are considered extremely small. In total, credit unions in the United States hold $2,433 billion in assets, The largest credit union in the United States, by a significant amount, is Navy Federal Credit Union, with over $197 billion in assets. In contrast, the Federal Reserve reported that in the 2025 fourth quarter that commercial banks had $24,534, more than 10x as much, and approximately 17% of them had more than $1 billion in assets. The largest commercial bank in the United States is JP Morgan Chase with $3,753 billion in assets. Meaning that JP Morgan Chase has more wealth than the entire asset portfolio of all the credit unions in the United States combined.

Figure 2

Being smaller institutions, credit unions were hit particularly hard by post-pandemic hyperinflation. Since 2015, the loan portfolios of credit unions had been steadily increasing, and during the pandemic, the amount they were issuing in loans hit its peak. This all made sense. The government was mailing people stimulus checks. Not willing, or not able, to go out and spend their money, a lot of people deposited the funds in their local credit union or bank. Because of this, deposits swelled, and in response, credit unions felt comfortable issuing more loans. Their returns on assets hit new highs.

Figure 3

However, as the pandemic subsided, and the war in Ukraine spiked energy prices, the Federal Reserve was forced to raise interest rates to mitigate the emergence of rapid inflation. The increase in interest rates caused the number of loans to plummet. As a consequence, the return on assets dropped. By 2025, returns on assets appeared back on track, but they remain far below their peak during the pandemic when financial institutions were flush.

Table 1

In addition to struggling through the post-pandemic inflation, credit unions are facing a record number of delinquent loans, with $17.7 billion owed in past due payments. This is not a problem unique to credit unions but appears to be hitting nearly all aspects of the market. In 2025, student loan delinquency exploded, climbing to approximately 25% of all borrowers. Auto loans have hit a 15-year high, while subprime auto loans have had their highest delinquency rate in 32 years.

So far, Mortgages are a notable exception, but there are some worrying signs. In February, there was a sharp rise in "severely delinquent" loans or those in foreclosure over the past four months, especially for loans Federal Housing Authority loans, which are directed at low-income home buyers.

Figure 4

The dramatic increase in the number of delinquent loans is an obvious sign of an oncoming recession. Indeed, it is possible that it is already here. According to Mark Zandi, the top economist at Moody’s Analytics, the country has already entered one. It is only a matter of time before it is more reflected in the data and its impact felt more seriously throughout the economy.

What this means is that if things do not change, more credit unions will lay off employees or, worse, close their doors. The great credit union decline will continue, but at a more rapid pace.

If credit unions are going to survive, they will need two things, both of which our current economy is providing in short supply.

First, they need greater liquidity. When credit unions have access to funds, they can still cover their deposits—despite delinquent payments—or, better still, they can easily transfer those funds into more loans. The reward for that lending is a higher rate of return on assets, which keeps them secure. Yet, with interest rates still high, getting easy access to liquidity has become harder and harder for small financial institutions. The threat of stagflation is creating an impossible scenario for many locally focused lending institutions. They cannot do what a healthy economy would expect them to do: work countercyclically, lending out more when times are tough to make sure their communities are able to weather economic storms.

Second, and perhaps much more important, average Americans just need to be a lot more economically healthy. Either paychecks need to rise, prices need to drop, or both need to happen. If that occurs, even if an explicit line of liquidity is not opened for credit unions, credit unions will be better off. Credit unions mostly serve working people within a specific geographic area. As not-for-profit institutions, they are focused on providing financial services to members, not chasing after exotic financial products or gambling on Wall Street for big returns. When average Americans do well, credit unions do well because their borrowers are better able to pay back their loans and their members can keep more of their money deposited in their accounts.

Ideally, credit unions would bounce back because more Americans kept a greater portion of their income in savings accounts. After all, this is what happened during the pandemic, and the benefits were clear. The problem is that in a post-pandemic economy, Americans are feeling squeezed. They are already having trouble paying back their current loans, much less having enough left over to save. Nonetheless, the lesson is that if credit unions are going to survive, perhaps even grow, then policymakers need to focus on rebuilding the American economy from the bottom up and middle out.

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Don Morgan, the president of the Bank of North Dakota, has agreed to come to Washington state from July 20-24 to promote public banking. President Morgan will talk to community leaders and activists about how the Bank of North Dakota operates, and how its model can be duplicated in Washington.

Washingtonians for Public Banking (WPB) is currently fundraising to pay for President Morgan’s flight and accommodations. Please consider donating today to help us cover the cost. This is an excellent opportunity to inform public officials and the public how public banks work and what they could do for our state.

Please consider donating to WPB, preferably on a monthly basis—no contribution is too small—to help us continue with our work. It is because of all our supporters that WPB can keep up the fight for public banking. With your support, we can win a more democratic, equitable, and sustainable banking sector in Washington state.

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While it is not certain, Washington Governor Bob Ferguson is set to sign SB5998, the fiscal biennium supplemental operating appropriations bill for 2025-2027. In Washington, the operating expenses of the state are funded on a biennial basis by an omnibus budget passed in the odd-number years. In the even years, the legislature is allowed to pass supplementary bills that adjust and modify the budget.

This year, legislators increased spending, moving the Near General Fund-Outlook (NGF-O), which constitutes the majority of Washington’s discretionary spending, from $77.9 billion as originally planned to $80.2 billion. The budget will include additional investments in housing and infrastructure, $370 million of additional spending in SNAP and Medicaid, and a historic new tax on incomes making more than $1 million, which is expected to generate $4 billion for the state.

SB5998 also includes Section 156, which appropriates $300,000 for a public banking work group to study the creation of a public bank in Washington between the legislative sessions. The work group will include the director of the Department of Financial Institutions, a representative from the Office of the State Treasurer, a representative from the Office of the State Auditor, a representative from the State Insurance Commission, a member of the Senate, chosen by the President of the Senate, a member of the House, chosen by the House Speaker, and at least three industry experts, including those from organizations who research public banking.

The work group is a step forward for the public banking movement in Washington, but not without its compromises. The work group was added to the supplemental operating appropriations after SB5754, a bill to create a public bank for the state, failed to make it out of the Senate Ways and Means Committee. Public banking bills have been introduced into the state legislature since 2009. At the January 15th public hearing for SB5754, a record number of supporters, perhaps the most ever, spoke in favor of the legislation, with proponents outnumbering opponents 19 to 3. Nonetheless, the bill did not have the votes to make it out of committee.

The creation of the work group was the step down, and even then, the funding for the work group was originally going to be $400,000. $100,000 was slashed from the budget proviso as part of the negotiations.

Washington has funded research on public banking and alternative mechanisms for accessing credit before. In 2018, the state spent $480,000 on a public banking work group that contracted out a research project to the Evans School of Public Policy & Governance at the University of Washington. On December 18, 2018, the researchers published their findings, making it clear that they were not examining the creation of a public bank on the “North Dakota” model. Instead, they were focused on creating “a state-chartered, public cooperative bank,” that would accept deposits and make loans to the state’s local governments. However, since the deposits would likely be insufficient for the borrowing needs, the authors argued that the “public cooperative bank” would in practice function more like a credit system that issued bonds and then restructured those bonds into loans to local governments. In 2021, a public bank bill based off the “public cooperative bank” model passed in the Senate, but it failed to make it to the floor for a vote in the House.

The hope is that the second time around advocates of public banking will be more successful. As of now, people are waiting for the governor to sign the bill. SB5998 was delivered to the governor on March 13^th, a day after the session ended. According to Washington state law, legislation that is delivered to the governor more than five days before the session ends has five days to be acted on, while legislation that is delivered fewer than five days before the session ends has 20 days to be acted on. This means the fate of the legislation will possibly not be decided until April 2^nd. Even then, Governor Ferguson has the power to utilize a total veto, a line-item veto, or a sectional veto.

Still, it seems unlikely that Governor Ferguson will get rid of the public banking proviso in the bill. Regardless of what happens, public banking advocates in Washington see this as a win. There is no doubt that the public banking movement in the state is going to continue until they reach their goal.

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Throughout the United States, legislation on public banking continues to move forward, with the movement making slow, but nonetheless persistent, progress.

In New Mexico, HB 130, a bill to create a public bank for the state was introduced during the 2025 legislative session. Though the bill did die in committee, supporters of the legislation organized a public forum with Don Morgan, current president of the Bank of North Dakota (BND), on January 8^th. The forum was organized by the Alliance for Local Economic Prosperity (AFLEP), a successor organization to the advocacy groups Banking on New Mexico and Public Bank for Central New Mexico, and the Public Banking Institute (PBI). The forum was an opportunity for legislators and community leaders to hear about the workings of the BND, and how it is able to provide affordable credit, at times even below market rate, to farmers, students, homebuyers, and municipalities.

In Washington, the state’s Senate Ways and Means Committee had a public work session and public hearing on SB 5754, a bill to create a cooperative infrastructure bank for the state’s local, municipal, and tribal governments. During the work session, President Morgan again presented on the benefits of public banking for North Dakota. Meanwhile, a record turnout of supporters spoke in favor of the legislation, including the State Superintendent of Public Instructions Chris Reykdal and State Insurance Commissioner Patty Kuderer.

Despite the strong support during the public comments section, the bill failed to get an executive session, which means that it could not make it out of Ways and Means and to the floor for a vote. At the same time the legislation was not entirely dead either. Instead, Ways and Means Chair June Robinson (District 38), has ensured supporters that there will be a budgetary proviso to fund an interim work group which will draft a new bill for the next legislative session.

In Sacramento, California, community leaders and residents gathered on January 27^th at Parkside Community Church for a form on creating a public bank for their city. The event was organized by the Sacramento Climate Coalition and Sacramento Area Congregations Together. In 2019, the Sacramento City Council authorized the exploration of a public bank after state legislators passed AB 857, the California Public Banking Act, which enabled municipalities to charter public banks for their areas. Initially, the efforts seemed promising, with the city dedicating $50,000 to researching the issue, but the work soon stalled, especially as Sacramento became overwhelmed with the COVID19 pandemic. Now, organizers are hoping to get back on track with community meetings and a petition that calls for the city council to take up the issue once again.

In San Francisco, the movement for public banking is even farther along, as Supervisor Jackie Fielder has announced that is pushing for a ballot measure for the November 3^rd, 2026 election that would tax large financial institutions to raise capital to create a San Francisco public bank. The proposal would increase the gross receipts tax from 1.5% to 3.36% to 1.69% to 3.85% on companies that are involved in arranging loans and linking lenders and borrowers but are not chartered as banks. Starting in 2027, the tax will likely bring in $40-50 million a year and will be earmarked for the city’s “Public Bank Fund” until 2035. Afterwards, revenue from the tax will be moved to the general fund. Under the ballot measure, the public bank will begin as a municipal finance corporation, which will be empowered to make loans by 2029, however it is unlikely to become a fully-fledged bank, approved by the California Department of Financial Protection, until 2032. While the measure is promising, it does have a high burden to cross. The ballot measure requires voter approval by a 2/3 majority. It is a high threshold, but a poll taken in October indicated that 67% of San Franciscans supported the creation of a public bank.

All this incremental change is a sign that the public banking movement in the United States continues to make progress. There is still a long way to go, but the potential that a public bank will be chartered in a city, county, or state in the coming years is inching ever so closer to reality.

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SB5754 follows a long line of previous bills that have attempted to create a public bank in the state. Since 2009, legislation to create a public bank for Washington has been introduced in either the House or Senate, with varying degrees of success. Similar to other recent bills, SB5754 would create a cooperative membership organization that could lend to local, county, and tribal governments throughout Washington. Additionally, the public bank would be democratically managed, with five of the nine seats on its board reserved for representatives of the local, county, and tribal governments that choose to join.

The bill’s main sponsor, 11^th District Senator Bob Hasegawa, has been a leading advocate for public banking in Washington for almost two decades, and organized the work session for the committee, which included representatives from the California Banking Alliance and Don Morgan, the current president of the Bank of North Dakota (BND).

The BND is currently the only state owned and operated public bank in the country. During the presentation, President Morgan explained that the BND has four primary objectives: one, manage risk; two, provide liquidity; three, contribute to economic growth; and four, optimize returns. The objectives are prioritized in that order. According to Morgan, the purpose of the BND is not to ensure the fullest returns to the state, rather it is to make responsible loans to sections of the North Dakota economy that are not being served by the private sector.

The BND fulfills its mission by forming a close relationship with the state’s community banks, credit unions, and community development financial institutions (CDFI). Rather than competing with them, the BND partners with these institutions by purchasing loans from them and acting as an expert liaison on regulatory changes and emerging financial products such as fintech and cryptocurrencies.

During the public hearing portion of the event, the overwhelming majority of participants spoke in favor of the legislation, including multiple state-level elected leaders. Chris Reykdal, the State Superintendent of Public Instructions, testified that a public bank was needed to provide critical lending opportunities for small school districts that desperately require new renovations and buildings. Meanwhile, State Insurance Commissioner Patty Kuderer testified that a public bank was necessary to meet the insurance needs of the state, as a lack of investment in infrastructure, particularly climate resilience, runs the risks of causing premiums to hike and coverage to shrink.

Local leaders also offered their support. Snohomish County Treasurer Brian Sullivan, who also serves on the advisory board of the Coalition for a National Infrastructure Bank, praised the benefits of public banking, pointing to the examples of two revolving loan programs in his county. Similarly, Whatcom County Executive Satpal Singh Sidhu testified to the discrepancy in treatment that local get from working with large banks, namely, when they give their money to these institutions, they are offered 1-2% interest, but when they request a loan or issue a bond, they are charged application fees, brokerage fees, and much higher interest rates.

Several civil society organizations and community groups also spoke in favor of the legislation, including three representatives from Washingtonians for Public Banking, one from the Washington State Labor Council, and another from Washington Build Back Black Alliance.

In total, 19 people signed up to speak in favor of the bill and only three were opposed, and of those three only two showed up to speak. Those opposed included Brad Tower of the Community Bankers of Washington and Skagit County Treasurer Jackie Brunson.

The outpouring of support was a dramatic shift from the previous legislative session. During that public hearing only three people signed up to speak in favor of the bill, five were opposed, and one was neutral. Of those, the three supporters spoke, two of the opponents spoke, and the one neutral speaker was from the Washington Bankers Association, and his comments were quite skeptical of legislation.

The significant increase in support demonstrates that the public banking movement in Washington is growing. Indeed, the recent hearing for SB5754 has had the most supporters testify in support of public banking legislation since the 2021-2022 session, when a similar bill—SB5188—passed in the Senate and was sent to the House.

Nonetheless, SB5754 still has a long way to go, and given legislators preoccupation with the state’s current budget crisis, including the potential of introducing a graduated income tax, the chances of it passing are unlikely. At the same time, because of the budgetary crisis it is more important than ever for the state to create a public bank, if not now than in the immediate future. Otherwise, Washington’s local communities will continue to struggle to find affordable credit to satisfy their most basic needs.

Don Morgan—President of the Bank of North Dakota

SB5754--a bill to create a public bank in Washington--has a work session scheduled on Thursday, January 15, at 4 pm in the J.A. Cherberg Building with the Washington Senate Ways and Means Committee. The work session will include a brief presentation from Don Morgan, current president of the Bank of North Dakota, the only state-owned public bank in the United States. After the work session, the committee will take public comments. This is the time to make your voice heard! Washingtonians for Public Banking is asking all its supporters to testify. Advocates can also submit written testimony and register their support. Use the links below to support the bill.

Register Support

Submit Written Testimony

Testify At Hearing

In addition to registering support for the bill, Washingtonians for Public Banking is calling on all our supporters to send a letter today to the Washington Senate Ways and Means Committee telling them that now is the time for a public bank in Washington.

Send Letter Urging the Passage of SB 5754

Take Action

Visit Washingtonians for Public Banking’s website to find out about other public financing and financial reform legislation introduced during the 2025-2026 legislative session.

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Washingtonians for Public Banking (WPB) needs your help! Keep our movement alive by donating to WPB, preferably on a monthly basis. It is because of all our supporters that WPB can keep up the fight for public banking. With your support, we can win a more democratic, equitable, and sustainable banking sector in Washington state.

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Katie Wilson wants to transform Seattle; she will need a public bank to do so.

With a narrow victory of less than 1%, progressive political outsider Katie Wilson will become Seattle’s next mayor. Undoubtedly, she will be one of the city’s farthest leftwing mayors, at least in contemporary history. Like her counterpart in New York City, mayor-elect Zohran Mamdani, Wilson describes herself as a democratic socialist and defeated her establishment opponent by emphasizing the need to address Seattle’s affordability crisis, especially the city’s crushing housing cost.

The question now is how will she do it?

In many ways, her ability to wrestle the city’s economy to the ground and force it to work for Seattle’s working class is far more limited than her predecessor. Yes, Bruce Harrell did have to manage the city’s post-pandemic economy, including relentless inflation, but he could fall back on the fact that Seattle was America’s leading city in economic growth, increasing by a vigorous 6.2% from 2022 to 2023.

Wilson, on the other hand, will likely take office amidst a significant slowdown, potentially even a recession. One third of the city’s GDP is made up of the tech industry, and that sector has seen massive layoffs recently. Additionally, she will have to navigate the utterly cruel cuts made to Medicaid, the Supplemental Nutrition Assistant Program (SNAP), and student loans in President Trump’s deranged One Big Beautiful Bill Act. All of this will be on top of the fact the city expects a $140 million deficit in 2027.

To keep programs funded, Wilson has vowed to pursue progressive revenue sources. Here, she has the expertise to push meaningful reforms. Wilson served on the Seattle Revenue Stabilization Workgroup in 2023, and—unlike Harrell—has promised to actually implement some of its suggestions rather than filing them away in a bureaucratic black hole.

Still, even with exceptional persistence and creativity, revenue options are limited. With the passage of HB 2049, Seattle does have a higher cap on raising property taxes, but property tax increases can be politically perilous. Meanwhile, a graduated income tax is still not possible without a constitutional amendment or convincing the Washington Supreme Court to overturn Culliton v. Chase (1933); those are two things that are unlikely to happen soon.

These challenges of course do not mean that Wilson should give up. Rather, it means the fight for economic justice in Seattle needs to move beyond progressive revenue and into a fight over progressive credit, namely through chartering a city owned and operated public bank.

Seattle has examined the possibility of public banking before. During the height of the protest against the Dakota Access Pipeline, the city considered pulling its deposit out of Wells Fargo—a major financier of the project—and moving it to a public institution. In 2018, the city commissioned a feasibility study on public banking. Despite affirming the concept of public banking, the study emphasized numerous regulatory and financial challenges, but often these challenges were based on erroneous assumptions.

First, the study noted the constitutional obstacles to creating a public bank, especially the “prohibition on gifts of public funds” as defined in Article VIII, Section 7, which prevents governments from lending credit or funds to private entities except under narrow circumstances. It also recommended amending the Seattle charter to explicitly allow the city to engage in banking activities. However, all this handwringing over these supposed legal barriers is unnecessary. The city can bypass the constitutional restrictions or any hurdles within its own charter by establishing a public bank as a public development authority (PDA). PDAs are the most common ways cities in Washington engage in economic development, and already many of them have lending programs to private businesses. Since PDAs have a separate governing structure and are denied the power to tax or exercise eminent domain, they operate outside of Article VIII, Section 7, and with multiple Seattle PDAs already in existence no changes to the city charter are needed to make more.

Second, the study noted the city would have to raise capital—both to protect deposits against potential losses and for operations and maintenance—for the public bank, which would be a sizable sum that the city would need to extract from the general fund or another revenue source. While this is true, pulling from current sources or a new tax are not the only ways the bank could become capitalized. Instead, the bank could become self-capitalized by initially operating as a revolving loan fund for housing projects. Instead of putting money toward capitalization, and have it sit there while the regulatory process plays itself out, funds that Washington or Seattle would want to utilize for housing could be transferred to an intermediate revolving loan fund that would eventually operate as a public bank. Once those loans are on its books, the soon-to-be public bank could then sell them on the secondary market to other institutions that will package them as mortgage-backed securities, thus raising its own capital. Additionally, by primarily acting as a lender for housing provided by public institutions the bank can collateralize its deposits to the satisfaction of the state’s Public Deposit Protection Commission. Gradually, as its capital grows, it can eventually diversify its assets and start lending to projects other than publicly owned housing.

Even as a more limited transitional institution that is primarily focused on lending to publicly owned housing projects, the bank would still be of tremendous use to Seattle. One of Wilson’s campaign promises is to pursue a $1 billion bond for “union-built affordable housing.” Instead of issuing a bond of that size, which would have to be repaid with interest and fees, a Seattle public bank could leverage the city’s current assets into loans for the same goal.

While many of these ideas might seem out-of-the-box, it is important to recognize that public banking is not alien to the United States. For over a century, North Dakota has had a state owned and operated public bank. Not only is the institution a vital pillar of the state’s economy but has successfully provided a shield against the economic dysfunction coming from the Trump administration.

Trump’s One Big Beautiful Bill Act has reduced payment options for student loan borrowers, leading to higher monthly payments and a lower borrowing limit. In some cases, the maximum allowable amount is lower than the cost of a four-year medical program. Fortunately, students in North Dakota have a workaround. For years the Bank of North Dakota (BND) allowed prospective students to borrow up to $60,000 for their education with no fees, opportunities to refinance, and special repayment options for medical professionals and veterinarians practicing in under served areas.

The One Big Beautiful Bill Act also rapidly phases out tax credits for clean energy and dramatically expands rules regarding “foreign entities of concern,” meaning that all new clean energy projects must adhere to strict ownership and sourcing requirements or lose their subsidies. Meanwhile, the BND has instituted its Clean Sustainable Energy Authority Loan Fund (CSEA) that allows clean energy developers to borrow up to 50% of project cost from the BND, with a minimum loan amount of $10 million and interest rates capped at 2%.

Trump’s erratic and irresponsible trade war has cost American farmers more than $27 billion. A survey from the National Corn Growers Association found that nearly half of all farmers in the United States believe that America is on the brink of an agricultural collapse. Nevertheless, in early October the BND’s head announced that the bank would be preparing a specialized loan program to help farmers and ranchers weather the trade war storm.

Even the effects of the shutdown were partially mitigated by the bank. On October 8^th, the North Dakota Industrial Commission approved the Furloughed Federal Employee Relief Program, which authorized the BND to offer low-interest loans—as low as 2%—to the state’s estimated 9,200 federal workers who were furloughed during the shutdown.

What the BND has demonstrated is that the best way to “Trump-proof Seattle” is for the city to establish a parallel and publicly controlled financial system that can mitigate, maneuver, and meliorate the Trumponomics that are spewing out of the White House.

As implied above, Seattle might not have a choice. No less than JP Morgan-Chase CEO Jamie Dimon has warned of a potential recession in 2026. If it does occur, our private lending institutions are not going to be much help in crawling us out of it. A major reason that affordability has become such an important issue is because decades of banking deregulation and consolidation have made credit extremely scarce.

The too-big-to-fail megabanks are entirely dedicated to financialization; they have essentially given up on the day-to-day loans that everyday Americans rely on. The small and community-based lending institutions which used to stretch across the United States are on the brink of extinction. In 1992, there were 126 state-chartered commercial banks in Washington. Today, that number has dwindled to a mere 37. Meanwhile, the smattering of Community Development Financial Institutions (CDFI) trying to fill the gap are currently under attack by the Trump administration. Office of Management and Budget Director Russell Vought recently issued reduction-in-service notices to the employees of the federal CDFI Fund, indicating that the administration plans to terminate the program permanently by mid-December.

As credit becomes less available, so too do all the goods and services that rely on credit to grow. Housing, real estate, food and agriculture, clean energy, and public infrastructure are all extremely dependent on the availability of credit. When credit declines, these sectors do as well, and as the products of these sectors become less available, simple supply and demand dictate that the cost of what remains goes up.

With the election of Katie Wilson, Seattle has an opportunity to lead America out of Trumpism. It can do this by not only rejecting Trump’s hateful bigotry, but by providing a genuine model of affordability. Trumpism will not go away until it is pulled out at its roots, which are the economic resentments people feel living in a country that no longer works for them. People are less inclined to blame marginalized groups for their problems when governments work to ensure that they do not have so many problems. Considering how much Americans have been screwed over by the banking sector, with this country never having a true reckoning with the 2008 financial collapse, public banking is a critical element in building a better America, which begins with building a better Seattle.

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During this holiday season, it is important to reflect on the history and purpose of Thanksgiving. While the holiday had existed in an informal manner for over two centuries, it was not until 1942, under the direction of the Roosevelt administration, that the day was officially recognized by Congress. Previously, its recognition was entirely left to the discretion of the president. Roosevelt broke with tradition in urging Congress to make the holiday official, and in also moving the holiday to the fourth Thursday in November, rather than the last Thursday of the month. The reason was to give businesses more opportunities to sell goods and services during the holiday season, with the hope that such extended festivities would stimulate the economy as the nation pulled itself out of the Great Depression.

Fiddling with the holiday calendar was of course not the only means the Roosevelt administration sought to get the nation economically back on track. As part of the New Deal, the Roosevelt administration robustly supported the Reconstruction Finance Corporation (RFC). Originally created under Hoover, the RFC was a national public bank that functioned from 1932-1957. Under Roosevelt’s direction, the RFC generously distributed loans to state and local governments, infrastructure projects, businesses, and mortgage associations. Most historians acknowledge that without the RFC the United States would not have been able to overcome the Great Depression or pay for the war mobilization that was necessary to defeat fascism.

“The liberty of a democracy is not safe if the people tolerated the growth of private power to a point where it becomes stronger than the democratic state itself. That in its essence is fascism:ownership of government by an individual, by a group, or any controlling private power.”

-Franklin D. Roosevelt

On this giving Tuesday, please consider donating to Washingtonians for Public Banking. Any amount is highly appreciated, especially recurring donations, which allows us to plan for the upcoming year. With your support, the fight for public banking can go on.

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Just as important as a financial contribution is having people actively involved in the public banking movement. Please attend our upcoming coalition meeting on December 10th, from 6:00 pm - 7:00 pm. Find out how you can help out to make public banking a reality for your community.

After years of being considered a niche concept, relegated to a few academic articles and zealous activists, the idea of public banking is about to hit the mainstream. From coast to coast, 2025 witnessed a blossoming of support for public banking, especially on the local level. Not only did several activist groups hold conferences to drum up support for public banking, but numerous municipalities took concrete actions to inch closer to creating their own public banks, and politicians who supported public banking achieved historic victories during the most recent election.

Arguably, the state with the strongest public banking movement is California. In 2025, the public banking movement experienced growth across the state, especially for local and city-owned public banks.

For years, activists in Los Angeles have been fighting to create a public bank for the city. In 2018, organizers were successful in getting a measure on the ballot to amend the city charter to allow for the creation of a city-owned public bank. Unfortunately, the measure was defeated. Undeterred, a year later public banking advocates convinced California’s state legislature to pass AB-857, which granted local governments the power to create their own public banks.

Since then, municipalities and counties throughout California have been exploring the option.

On May 30^th of this year, members of the Los Angeles City Council introduced a motion to fund a feasibility study for a Los Angeles public bank. In 2023, the council voted 12-0 to approve $460,000 for a public banking feasibility study, but the funding was eventually diverted. Refusing to give up, supporters continued to press their council on the issue, and on June 23^rd, the city council unanimously passed the motion and reallocated funds to the study.

Inspired by Los Angeles, organizers in Fresno are pressuring their city to also commission a feasibility study. In late September, public banking advocates organized an educational event through the Fresno City College to push local leaders on the concept of public banking. Eric Payne, the executive director of the Central Valley Urban Institute, told the nonprofit news outlet Fresnoland, that Fresno residents “know that Wall Street isn’t going to give us the pass that we need… It’s going to have to come from us.”

Meanwhile, on November 1^st, the San Francisco Board of Supervisors unanimously passed a nonbinding resolution requesting that the mayor and city departments explore the creation of a public “green” bank to provide low interest loans to clean energy and other environmentally related projects. In 2023, the San Francisco Board of Supervisors had already passed a plan to create a public bank using funding from the Inflation Reduction Act. However, despite the plan’s unanimous approval, the project awaits implementation from the city’s executive. Still, public banking advocates in the city do not appear to be waiting. A recent poll showed that 67% of the city’s voters support the creation of a public bank, and activists are considering a ballot measure in 2026 to force the city’s hand.

On the east coast, New York state’s public banking movements also experienced significant gains.

On August 5, in Rochester, New York, community leaders and activists gathered at an event called the Community Outreach Forum to address the city’s poverty, including the creation of a public bank. For years, advocates have been working with local leaders to get the city council to create a public bank. Included among their ranks is the Genesee Co-op Federal Credit Union, which sees public banking as a means to support community banks and credit unions through lending partnerships.

Most noteworthy, public banking advocates cheered when one of their champions, democratic socialist Zohran Mamdani, was elected mayor of New York City on November 4^th. As a member of the New York State Assembly, mayor-elect Mamdani cosponsored Assembly Bill A3352. Modeled off California’s AB-857, New York’s A3352 would have empowered local governments to create their own public banks. As a candidate for mayor, Mamdani emphasized his support for public banking. Prior to his election, the editors of Money on the Left, an online journal and podcast, published a document calling for New York City to adopt a new financial paradigm that the authors referred to as Democratic Public Finance, which included public banking, in addition to other strategies to bring the financial sector under popular control.

In Washington’s elections, public banking advocates scored two victories, with the mayor-elects of two of Washington’s largest cities—Tacoma and Seattle—being supporters of public banking.

In Tacoma, mayor-elect Anders Ibsen has been interested in public banking for years. At a mayoral campaign forum organized by Tacoma for All—a coalition fighting for worker and tenant rights—he explicitly mentioned his willingness to explore public banking as a means of leveraging the city’s assets to deal with the Tacoma’s housing shortage.

In Seattle, political outsider Katie Wilson—who also identifies as a democratic socialist—narrowly defeated incumbent mayor Bruce Harrell with just over 2,000 votes. Recently, Wilson has appointed Tiffani McCoy, the president of Washingtonians for Public Banking and the co-executive director for House Our Neighbors, as part of her transition team. In addition to being a champion for public banking, McCoy was instrumental in winning the ballot initiative and tax increase to create Seattle’s social housing developer.

All this momentum means that it is only a matter of time before a city breaks free from the grip of the nation’s megabanks and establishes the first public bank within a state in the United States since North Dakota took the visionary step in creating the Bank of North Dakota in 1919. Considering that affordability, and with it the frustration over the high cost of essentials such as housing, utilities, and groceries, has become the new central focus of American politics, it is not surprising that public banking as seen a recent surge in support.

As Victor Hugo once wrote, “No army can withstand the strength of an idea whose time has come.”

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We are living in the age of shutdown politics.

The government shutdown continues, with no apparent end in sight. The Democrats, tired of being railroaded are determined to stare down Trump and Republicans until they blink. They have drawn the line on healthcare, insisting on a continuation of the COVID era subsidies that drove the rate of uninsured Americans to historic lows by making health insurance more affordable. With those subsidies gone, healthcare premiums could double for millions of Americans.

Meanwhile Republicans, reluctant to give any inch to Democrats, have refused to negotiate over healthcare premiums until the shutdown ends. Some Republicans have proposed moving the issue of healthcare subsidies to a small bipartisan package as part of a full-year funding bill. However, without the leverage of a shutdown, Democrats have no means of ensuring that Republicans will stick to their word.

In many ways, this standoff was expected. Government shutdowns were not a regular occurrence in the United States until the end of the Carter administration. From that time, government shutdowns have become more frequent, especially when Democrats control the presidency and Republicans have control of at least one chamber of Congress. In the Trump era, government shutdowns have reached a new level of chronicity, with President Trump overseeing more days where the government has been shutdown than all other presidents combined and having most of his shutdowns occur when Republicans controlled a chamber in Congress. This most recent shutdown is suspected be the longest in American history, surpassing the previous record that was set by President Trump in his first term.

Each time, the government does get back on track, and furloughed workers do get back pay, but it is not like these shutdowns are without costs. Already, the American economy is being impacted. According to Treasury Secretary Scott Bessent, the shutdown is costing the American economy $15 billion a day.

On Monday, the federal court system ran out of funding to maintain normal operations, forcing the furloughing of approximately 30,000 workers. A complete shutdown of the court system could occur by November 1^st, leading to the stalling, even the potential derailing, of cases throughout the United States.

The court system is not the only institution that is facing down a November 1^st deadline. Federal funding for essential government programs, such as the Supplemental Nutrition Assistance Program (SNAP or food stamps), are sent out monthly and will expire at the end of October. Panicked states who are running out of money are warning SNAP recipients to buy shelf stable foods to avoid hungry days if their benefits are cut.

And of course, furloughed federal workers are feeling the squeeze, as they are being forced to miss multiple paychecks. To prepare for the worst, the Seattle Food Lifeline is using reserve funds to set up emergency distribution sites specifically for federal workers.

Democrats, in an attempt to soften the blow, have introduced legislation in the Senate to pay all federal workers during the shutdown. The Military and Federal Employee Protection Act, sponsored by Senator Gary Peters (D-Mich.), would pay military service members, federal employees, and contractors during the shutdown, while the True Shutdown Fairness Act, sponsored by Chris Van Hollen (D-Md), would pay all federal employees and prevent the Trump administration from using the shutdown to engage in mass layoffs or reduce the federal workforce. Both pieces of legislation failed to pass in the Senate.

Meanwhile, Republicans have tried to pass their own version of federal employee relief. The Shutdown Fairness Act, sponsored by Ron Johnson (R-Wis.), would have also funded all military service members, federal employees, and contractors during the shutdown, but unlike the Democratic bills it would have given the president the power to pick and choose which federal employees get paid and which ones are furloughed. With this deal-breaker, nearly all Democrats voted against the bill.

While Washington D.C. remains mired in dysfunction, North Dakota, thanks to its state-owned public bank, can weather the shutdown storm in a way that other states are unable.

North Dakota is offering an estimated 9,200 federal workers in the state a lifeline. On October 8^th, the North Dakota Industrial Commission approved the Furloughed Federal Employee Relief Program, which authorizes the state’s public bank, the Bank of North Dakota (BND), to offer low-interest loans—as low as 2%--to federal workers impacted by the shutdown. These loans are designed to cover up to three months of wages. Applications for the loans are available from October 10^th to January 2^nd, and repayment plans only begin once the shutdown ends.

The loan program was conceived by North Dakota’s Republican Governor Kelly Armstrong. In a press conference announcing the program, Governor Armstrong contrasted the politics of his own state to that of Washington D.C., stating, “In a time where people have sometimes lost faith in government, we want to be able to look at them and say we’re here to help in a situation where the most are really going to need this help.”

The loan program is being modeled after the Bank of North Dakota’s similar disaster relief programs. In 1997, the BND helped North Dakotans recover from the devastating impacts of the Red River flood with $200 million in lending. Since then, the BND has expanded its disaster relief lending to include farmers and ranchers who are impacted by extreme weather. Earlier this month, Don Morgan—the head of the BND—announced that the bank would be preparing another specialized loan program for farmers to help them manage the tumultuous economic situation caused by sustained high interest rates and President Trump’s trade war.

Even after the shutdown eventually ends, the disorderliness of the federal government will continue. North Dakota is showing that states can make themselves resilient to the chaos, on the condition that they are willing to charter state-owned public banks. If they do so, they can reclaim their local economies from the dysfunctional whims of Washington D.C.

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After meeting on September 16 and 17, the Federal Reserve’s Federal Open Market Committee (FOMC) agreed to reduce interest rates by a modest 25 basis points. The move was expected, though not without its controversy. Since the start of his second term, President Trump has aggressively attacked the Federal Reserve, especially Chair Jerome Powell, for not doing more to lower interest rates.

Trump’s economic approach, dubbed “Trumponomics” by Bloomberg, seeks to move the American economy away from the Washington Consensus, which was accepted at home and abroad, and into a new paradigm that focuses on four pillars: protectionism, low-taxes, the creation of a cryptocurrency market, and low interest rates. So far, President Trump has been extremely successful in accomplishing the first three, but the independence of the Federal Reserve has made it difficult for him to influence the final pillar.

However, that appears to be changing. Already, President Trump has appointed two Federal Reserve Board Governors, Michelle Bowman and Christopher Waller. As Trump appointees, Bowman and Waller have broken with the Federal Reserve’s majority in calling for much lower interest rates.

Next, on August 1^st, Federal Reserve Governor Adriana Kugler announced that she was stepping down from the Federal Reserve Board before her term ends in January of next year. The early resignation allowed President Trump to appoint Kugler’s replacement, and on September 15, the Senate confirmed Stephan Miran, who was serving on Trump’s Council of Economic Advisers, in a largely partisan 48-47 vote.

It is suspected that Stephan Miran is being positioned to replace current Federal Reserve Chair Jerome Powell when his term as chair expires in May 2026. Even though his time as chair will be ending next year, Powell can stay on the board as a governor until January 2028, though historically Federal Reserve Chairs have typically chosen to resign once their time as chair ends.

Finally, President Trump is aggressively and dubiously attempting to remove Federal Reserve Governor Lisa Cook. On August 20, Trump called on Governor Cook to resign after Federal Housing Finance Agency Director Bill Pulte alleged in a post on X that Cook was engaging in mortgage fraud. According to Pulte’s post, Cook designated a condo in Atlanta as her primary residence after taking a loan on her home in Michigan. When Governor Cook refused to step down, calling the allegations baseless, Trump fired her.

Governor Cook is fighting her termination, and it is important to recognize that the accusation of “mortgage fraud” has become a common tactic used by President Trump against his political enemies. Earlier this summer, Pulte requested that the Justice Department investigate Democratic Senator Adam Schiff—who oversaw President Trump’s 2019 impeachment proceedings—for mortgage fraud. And again, on September 20, Trump chided Attorney General Pam Bondi for not indicting New York Attorney General Letitia James—who successfully prosecuted a civil case against Trump—for mortgage fraud.

Still, there is a good chance Trump could get his way. As an independent governmental agency, the president is prohibited from removing board members of the Federal Reserve, unless it is “for cause,” which is generally interpreted to mean gross negligence or malfeasance related to their job. After Trump announced her termination, Governor Cook sued to keep her position. On September 15, the D.C. Circuit of Appeals rejected President Trumps efforts to remove her. The Trump administration has appealed the case to the Supreme Court, and so far the high court has allowed the President to remove officials from independent agencies while their cases are being argued.

The intense meddling and pressure that President Trump has placed on the Federal Reserve has provoked a backlash. With opponents of the administration criticizing the president for not respecting the Federal Reserve’s independence. While it is important to prevent any federal agency from becoming overly partisan, or—in President Trump’s case—loyal to a specific individual, it is important to remember that the Federal Reserve is not a democratic institution, and historically Federal Reserve “independence” has meant that it is controlled by the nation’s commercial banks.

The Federal Reserve behaves as if it was the United States’ central bank, but it is wrong to think of it as a specific institution. Rather, it is more of a sprawling and somewhat fragmented network, that has chaotically evolved over the years through a mixture of economic necessity and political compromise.

First created in response to the Panic of 1907, the Federal Reserve System is a network of twelve regional banks, all responsible for determining monetary policy in the United States. Its regional banks are considered public-private institutions, mandated to operate in the public good, but are still expected to return a profit for their shareholders, which are not individuals but commercial banks.

The governing structure of the Federal Reserve System is a convoluted mess. The regions are not proportionate to the states. Some regions, such as the Federal Reserve Bank of San Francisco, includes multiple states, while others, like the Federal Reserve Bank of Dallas, only includes one state and parts of other states.

The board of each regional bank has nine members. Three of those members are appointed by the Federal Reserve Board of Governors, while the remaining six are elected by the commercial banks that own stock in the institution. The member banks are supposed to elect three members that are there to represent banking interest, and another three that are supposed to represent the public’s interest, but there is no way to ensure that those representing the public interest do so outside of the discretion of the commercial banks.

At the national level, the Federal Reserve Board of Governors has seven members that are appointed by the President—and must be confirmed by the Senate—for fourteen-year terms. While the board is responsible for the overall governance of the institution, it does not have the ability to set interest rates. Instead, that power solely belongs to the FOMC, which includes the seven members of the Federal Reserve Board of Governors, plus five additional members from the regional Federal Reserve banks. The Federal Reserve Bank of New York has a permanent seat on the FOMC, while the remaining four seats are rotated between the other banks on a one-year basis.

What this means is even if Trump is successful in securing a majority on the Federal Reserve Board of Governors, it will not ensure he has control over interest rates. The remaining Federal Reserve Governors and the representatives from the regional Federal Reserve banks could out vote his lackeys.

However, it also means that the Federal Reserve System is largely impenetrable to the democratic will of the people. To be clear, no one—except for Trump’s Make America Great Again movement—thinks the Federal Reserve System, and with it the power to determine interest rates, should be left up to the whims of the president. Undoubtedly, without some checks-and-balances, that power will be abused. The question is whether it should also be left up to the commercial banks who have a disproportionate influence over the system.

President Trump is not the only political figure who has criticized the Federal Reserve, and Jerome Powell specifically, for keeping interest rates high. Several progressive Democrats, such as Elizabeth Warren, have been outspoken in their critique of the Federal Reserve, lambasting its disproportionate focus on inflation instead of employment, failing to properly regulate banks, and fostering a “culture of corruption” where officials violate ethics rules and engage in duplicitous trading.

An obvious solution to this dilemma is to transform the Federal Reserve System from a collection of public-private regional banks, into fully public banks, with the institutional safeguards to protect it against an imposing president and the private commercial interest it is supposed to be regulating. As a system of public banks, democratically controlled by the states in their region, the Federal Reserve System could do more than just ensure price stability. It could structure lending in a manner that serves the public interest by offering affordable credit to those areas of the economy where investment is desperately needed, such as housing, clean energy, and infrastructure.

On the national level, the Federal Reserve Board of Governors should be reorganized. The term limits of its governors need to be dramatically reduced, even cut in half, and the prestige associated with the chair should be diminished by shortening the length of the term and rotating it among governors.

Additionally, there is no reason to have the FOMC structured in such a way that it gives preferential treatment to the New York Federal Reserve Bank. Instead, the FOMC should be expanded to thirteen seats, with seven of the seats given to governors and the remaining six given to the regional Federal Reserve banks, who rotate through the FOMC on a yearly basis.

The plan sketched above is merely a suggestion, and there are other possible roads to follow, but the primary point is that the American people deserve more than a banking system beholden to either the private interest of commercial or the emotive whims of a despotic president. What they deserve is a public banking system that is truly designed to work in the public interest.

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The Trump administration is considering selling the federal government’s shares or selling new shares in the government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac. Created during the Great Depression, the Federal National Mortgage Association, known colloquially as “Fannie Mae,” works to boost the liquidity banks have available for housing lending by purchasing mortgages and reselling them as mortgage-backed securities. Starting in 1968, Fannie Mae’s work was splintered off into separate organizations. Originally, this included the Government National Mortgage Association, known as “Ginnie Mae,” and eventually into a sibling organization formed to create competition in the market, the Federal Home Loan Mortgage Corporation, known as “Freddie Mac.”

As government-sponsored enterprises, it is possible for private individuals to purchase shares of Fannie Mae and Freddie Mac, leading the GSEs to having a conflicted mission of both serving an essential public purpose and maximizing returns for shareholders. The difficulty of serving this dual mandate was evident during the 2008 global financial crisis, when both Fannie Mae and Freddie Mac were on the verge of bankruptcy after they had heavily invested in worthless subprime mortgages in a rush to make profits for shareholders.

In response, the George W. Bush administration, at the behest of Treasury Secretary Hank Paulson, injected nearly $200 billion in the GSEs, the largest bailout in American history, and put them under the conservatorship of their regulator, the Federal Housing Finance Agency (FHFA). Conservatorships are not intended to be indefinite, but the Obama administration, which inherited the conservatorship from the Bush administration, was unwilling to end it unless Congress passed legislation which reorganized Fannie Mae and Freddie Mac. However, that day never came, and it was clear after the first two years of Obama’s presidency that it was not going to arrive.

Instead, the Obama administration used the conservatorship to its advantage and gradually reformed Fannie Mae and Freddie Mac through a series of regulatory changes. They delisted the GSEs from the New York Stock Exchange, though their stocks are still available for purchase in other markets, and insisted that they adhere to stricter requirements. Additionally, the two GSEs were ordered to adopt more programs that helped people purchase homes, implement credit risk transfer transactions to reduce the likelihood of another massive bailout, reduce their investment portfolios, adhere to higher standards of safety and soundness, and have their prices regulated.

The framework was successful. In time, both Fannie Mae and Freddie Mac were making consistent and robust profits. As of 2019, the two GSEs had paid $301 billion to the United States Treasury in dividends. Official stress test of the two GSEs found that their likelihood of losses in the case of a Federal Reserve defined “severe adverse” economic downturn declined by 98% from 2013 to 2021. While no act of Congress has officially sanctioned it, since the 2008 Great Recession, Fannie Mae and Freddie Mac have been gradually replaced by better and more regulated versions of themselves; for many in Washington, the creation of mortgage-backed securities is now seen as a public good for the financial sector that requires a public-utility-like federal organization to execute.

That is, until Trump’s second term.

Even during his first term, President Trump was interested in ending the FHFA’s conservatorship and selling the government’s shares in Fannie Mae and Freddie Mac. The administration was initially divided between two camps, one—led by former Treasury Secretary Steve Mnuchin— who promoted certain deregulatory changes to the GSEs, but did not want to take any actions that would create instability in the financial markets or jeopardize the availability of 30-year mortgages. The other camp, led by Mark Calabria—who Trump appointed to head the FHFA—wanted to not only end the conservatorship, but to tear down the two GSEs, returning the United States to a pre-Great Depression framework, as soon as possible.

In his second term, it appears that the Calabria faction has won. As a sidenote: while Steve Mnuchin is no longer part of the Trump administration, Mark Calabria was reappointed as the Office of Management and Budget’s (OMB) Associate Director for Treasury, Housing, and Commerce.

The Trump administration appears to be pursuing an initial public offering of Fannie Mae and Freddie Mac, which could involve a 5% to 15% sale of their shares, with a combined valuation of $500 billion, potentially more; it is a move that could become the largest public offering in history. To create excitement for the plan, a fictitious image of President Trump ringing the bell of the New York Stock Exchange in front of a banner for the fake entity “The Great American Mortgage Corporation” has begun circulating across social media and shared by Trump.

In recent weeks, the administration has met with major bank CEOs, including JPMorgan’s Jamie Dimon, Goldman Sachs’ David Solomon, and Bank of America’s Brian Moynihan, to discuss the parameters of the initial public offering, but experts remain leery if any plan could actually be accomplished, especially in the timeframe—by the end of 2025—that the Trump administration has indicated is its goal.

The fundamental problem the Trump administration has in selling off Fannie Mae and Freddie Mac, outside of the sheer complexity of the deal, is the reintroduction of a dual mandate for the GSEs. Lending for housing remains a major pillar of America’s financial sector. Valued at $9 trillion, it is one of the most important global markets, second only to US Treasuries. If Fannie Mae and Freddie Mac again adopt an exuberant amount of risk, as they did prior to 2008, it will have significant consequences for the entire economy, potentially leading to a drying up of liquidity and a collapse of 30-year mortgages.

All this is worrying, but if Fannie Mae and Freddie Mac do run into trouble again, the entirety of the blame cannot rest with the Trump Administration. Problematically, for over a decade Congress has remained sclerotic on financial reform and has failed to address the underlying issues which led to the Great Recession. Conservatorship is a temporary measure, but it became a permanent solution as a consequence of Congress’s inaction. Because the job was never completed, the dismantling of the Consumer Financial Protection Bureau, the weakening of the 2010 Dodd-Frank Act, and now the potential reprivatizing of Fannie Mae and Freddie Mac have been able to move forward under the Trump administration.

Callously, and perhaps blindly, the United States is racing back toward the economy and regulatory framework which created one of the worst economic collapses in modern history.

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On July 18^th, President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law. The GENIUS Act is the first attempt by the federal government to regulate cryptocurrencies by requiring the issuers of stablecoins—cryptocurrencies that are backed by a reserve—to back the value of their currency with U.S. dollars and short-term Treasuries, make monthly public disclosures of their reserve compositions, and mandate that issuers with more than $50 billion in market capitalization are annually audited.

The new law essentially codified practices that were already occurring within the industry, but by moving stablecoins from a legal grey zone into a federally regulated framework, the law provides a pathway for private companies to start issuing their digital currencies. That does come with some benefits. Companies will be able to sidestep interchange fees from credit cards and potentially easily convert foreign currencies to dollars when engaging in cross-border transactions. However, the legitimization of cryptocurrencies also comes with many drawbacks, namely that of corruption.

The GENIUS Act prohibits any member of Congress or senior officials in the executive branch from issuing their own stablecoins while in public office. Noticeably absent from the legislation is any restrictions on the president’s ability to issue cryptocurrencies.

Since in office, the Trump family-linked crypto firm, World Liberty Financial, has gone gangbusters. Launching in September, World Liberty Financial has made the Trump family over $500 million, with one of its major investors including an Abu Dhabi-backed firm, which poured billions into the stablecoin. Literally a day before Trump signed the GENIUS Act into law, World Liberty Financial announced it was making its stablecoin tradeable within the next two months.

Even more outrageous is Trump’s memecoin banquet. On May 22, 220 wealthy and mostly anonymous crypto investors attended President Trump’s private crypto dinner. Attendees were drawn from the top purchasers of President Trump’s volatile digital token: $TRUMP. Since the banquet was exclusive to top cryptocurrency owners, the price of admission effectively ranged from $55,000 to $37.7 million and had a combined value of more than $394 million. The top 25 holders of the $TRUMP token got an exclusive reception with the president, and included Justin Sun, a Chinese-born crypto entrepreneur, who is currently the largest holder of the $TRUMP token. In 2023, Sun and three of his wholly-owned companies were sued by former President Biden’s Securities and Exchange Commission (SEC) for fraud.

Worst still, the GENIUS Act is only the first major crypto-related legislation that the Republican controlled congress is attempting to pass. Also being considered is the Digital Asset Market Clarity Act or CLARITY Act, which passed the House on July 18^th. The CLARITY Act would transfer much of the regulatory infrastructure for cryptocurrencies from the Security and Exchange Commission to the less stringent Commodities Future Trading Commission, effectively legalizing the activities that Biden’s SEC sued Sun from committing and making it much harder to indict blatantly fraudulent operations, like Sam Bankman-Fried’s crypto exchange FTX.

While President Trump and the Republican-controlled Congress, with an assist from some Democrats, are determined to make the federal regulatory infrastructure more amenable to crypto, there are some things that states can do to fight back.

While many states require virtual-currency kiosks or crypto automatic teller machines (ATMs) to obtain a money transmitter license, New York has gone a step further. Since 2014, New York has required crypto businesses to obtain “bitlicenses,” overseen by the state’s Department of Financial Services, to engage in digital currency activities. In response to the licenses, multiple cryptocurrency firms announced that they were leaving the state rather than accept public oversight. Regardless, other states have followed suit. Most noticeably California, who, in 2023, passed the Digital Financial Asset Law, its own licensing regime for cryptocurrency firms, which will go into effect on July 1^st, 2026.

Licensing is valuable, but the attempts to reign in crypto have not stopped there. Again, New York is the leader. In 2023, New York Attorney General Letitia James sought to strengthen the state’s crypto regulation by introducing the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act. The CRPTO Act is sweeping legislation that would prevent conflicts of interest within the industry, including preventing crypto brokers from trading on their own accounts, keeping custody of customer funds, and borrowing or lending customer assets. It would also require reporting on financial statements, including mandatory audits, and enhance investor protections, such as requiring platforms to reimburse customers who are victims of fraud.

Additionally, while Trump’s SEC has dropped its case against the cryptocurrency firm Coinbase for operating as an unregistered securities exchange, broker, and clearing agency, five states—California, New Jersey, Maryland, Wisconsin, and Washington—are continuing with their lawsuits, with all the states except Washington prohibiting Coinbase from engaging in staking, a practice where crypto users earn rewards for locking up their holdings on the company’s blockchain.

Prevalence of crypto in America’s financial landscape is only going to grow, and with it the potential for graft. This does not mean that the fraud and corruption associated with the industry should be considered inevitable. The federal government is failing to protect Americans’ wallets, with the president acting as Con-Artist-in-Chief. Still, if states can get their acts together, and establish their own regulatory regime in time, there is a chance that the worst can be avoided.

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