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Public Banks, Public Orientation and the Great Financial Crisis of 2007–2008

  • Gerald Epstein
  • Devika Dutt
Chapter
Part of the Palgrave Studies in the History of Finance book series (PSHF)

Abstract

Are publicly oriented financial institutions stabilizing forces in the modern financial world, and if so, at what cost? In recent decades, we show that publicly oriented banks contribute to financial stability by lending less pro-cyclically and even, in some cases, counter-cyclically, than did their private banking counterparts. Further, while earlier studies of public banking tended to show that they were inferior to private banks in terms of resource allocation, more recent literature finds that this is not generally the case. We are left in the end with a more interesting question: Given both the cyclical and secular net benefits of publicly oriented banking, should we encourage more publicly oriented financial institutions in our economies? Our answer: probably, but it’s complicated.

Keywords

Public banks Financial crisis Financial stability Social orientation Pro-cyclical Counter-cyclical 

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Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Gerald Epstein
    • 1
  • Devika Dutt
    • 1
  1. 1.University of MassachusettsAmherstUSA

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