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Gerardo Espinoza

Executive Director of the Local Enterprise Assistance Fund, which supports Greater Boston businesses and organizations that provide jobs for low income people

Gerardo Espinoza
Gerardo EspinozaSebastian Garay

From my experience as executive director of the Local Enterprise Assistance Fund — a Community Development Financial Institution — I strongly support establishing a Massachusetts public bank. Here’s why:

One of LEAF’s clients had the dream of starting a business, a brew pub and restaurant in downtown Boston. He also wanted his business incorporated as a worker cooperative. But he had little equity to invest in the business and the only collateral he could offer for a loan was his bicycle — hardly a prime bank borrower. Thanks in part to technical assistance and an affordable loan from LEAF, he now operates his brewery in downtown Boston.


Financial intermediaries like LEAF help make such dreams a reality. But we can only do so much. The creation of a public bank — the subject of proposed legislation — would provide additional resources to help more businesses access needed financing. Groups like ours could also partner with the public bank — and other local banks — to expand our own impact.

A leader of a national Community Development Financial Institution that I know likes to say, “We love to lose clients.” She means that often, the small businesses her organization supports grow large enough that their needs are better served by a commercial bank. Similarly, the public bank would not compete with local banks and credit unions; rather, it would help clients become eligible for their services.

How would the public bank work? Under the proposed legislation, the state would capitalize the public bank with $200 million over four years, and deposit funds into it through transfers from the Massachusetts Municipal Depository Trust, which manages the state’s investments.


The bank would make low-cost loans to our communities, local businesses, and farmers. This assistance would lower debt costs for local governments, and encourage entrepreneurship by providing loans with flexible and attractive terms — particularly in communities of color and Gateway Cities. Additionally, it would provide financing to organizations such as community land trusts and farmer and worker cooperatives not currently served by existing financial services.

Massachusetts is a prosperous state, but not everyone shares in that prosperity. A public bank could help more people realize their dreams.


Kathleen M. Murphy

President and CEO, Massachusetts Bankers Association

Kathleen M. Murphy
Kathleen M. MurphyHandout

Massachusetts has an extremely competitive banking marketplace affording consumers and businesses a wide variety of choices for their banking needs. With more than 120 banks, 150 credit unions, and dozens of non-bank financial firms serving our communities, ours is one of the most well-banked states in the nation. Massachusetts banks also work with a variety of nonprofit, quasi-public and public organizations to provide services to individuals, businesses, and organizations.

Despite this, bills to create a public bank in Massachusetts have been filed in the Legislature for many years and in 2011, a state commission report found that a public bank would be costly for the state and put taxpayer dollars at risk. The Federal Reserve Bank of Boston conducted its own study that year, which also cited the high cost and said it might take years for the public bank to have any impact on the state’s economy.

Those advocating for a state bank over the years have offered a changing rationale for why it is needed: to address the foreclosure crisis; to fund energy efficiency initiatives; and even to serve the cannabis industry. Proponents point to the Bank of North Dakota, the only state-run bank in the United States, as a model for a public bank in Massachusetts. Yet unlike Massachusetts, the Bank of North Dakota was established more than 100 years ago to serve the needs of a rural, agricultural state that offered few banking choices.


Creating a public bank in Massachusetts would be extremely expensive — current proposals before the Legislature designate $200 million in taxpayer funds to capitalize the bank and require millions of dollars in public funds to be deposited in the institution, putting them potentially at risk. Perhaps most importantly, the Commonwealth would be responsible for covering losses if the bank became insolvent — putting a significant strain on the state’s budget and credit rating.

Massachusetts banks stand ready to work with policymakers to invest in programs to help our state’s consumers and small businesses. We believe that bolstering existing programs to meet the needs of our citizens is a more effective way to use taxpayer funds than creating a public bank.

As told to Globe correspondent John Laidler. To suggest a topic, please contact laidler@globe.com.

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