Study of Viability of Public Bank of Vermont

vermont flagVermontStateBankStudy

In September of 2013 the Political Economy Research Institute at the University of Massachusetts, Amherst prepared a study on how the State of Vermont could establish a public bank and whether this bank could help grow the economy of the state. Here are the 5 main findings:

1. Based on the state of Vermont’s 2013 unrestricted cash funds, we estimate a public bank could make loans equal to 66% of state funds on deposits, or $236.2 million in credit for economic development in the state of Vermont. This would expand the total credit supply available for state lending agencies by $236.2 million.

2. This new credit would be at low cost to the state because a public bank does not have to borrow moe first by selling bonds. It makes loans directly based on deposits. Interest would return to the state both on deposits and on loans. The Treasurer’s office would receive interest on its bank balance as they do now, and the bank would receive interest on the loans. The state would essentially be loaning money to itself. Currently state lending agencies pay interest on bonds and commercial paper, and receive interest on loans. Interest payments on loans based on state fund deposits by TD Bank and Peoples bank, even if made in Vermont, do not return to the state but to the bank and its shareholders.

3. If used for VEDA and VHFA loans, $236.2 million in public bank lending could result in:
a. 2,535 new jobs
b. $192 million in value added (Gross State Product)
c. $342 million increase in state output

4. If used to finance state captal expenditures, funding through a public bank could save close to $100 million in interest costs on FY2012-13 capital spending, due to most interest payments no longer leaving the state.

5. In the case of State Capital expenditures, financing through a public bank could create over 1,000 jobs in the first two years, without the loss of 100-200 jobs per year thereafter.

(emphasis from the original)

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