Category: Municipal Finance

By Will Beaman

Seattle is once again being told that a projected budget deficit requires difficult choices about which public commitments the city can continue to honor. Councilmember Robert Kettle recently used the city’s projected $175 million shortfall to call for a budget “realignment” around essential needs, explicitly opening the door to withdrawing from public work judged to benefit only particular groups. Money on the Left’s Seattle Loop model offers a way to enlarge the city’s financial capacity while reorganizing the relationships among public commitments, institutions, and constituencies.

The Seattle Loop is a proposal to establish a municipal bank that can purchase Seattle’s bonds. When the city pays interest on those bonds, the money flows back from the bank into the city’s own general fund, where it can support further lending and public investment. This creates a continuing circuit between the city’s commitments and the financial capacity available to fulfill them. Rather than allowing municipal interest payments to leave the public realm as income for private creditors, the Loop keeps that income circulating through Seattle’s own institutions.

The Loop also offers a prototype for a different way of governing. Progressive programs are usually introduced into a fiscal system that treats the public budget as a fixed quantity to be divided. Every commitment consequently appears to reduce the amount available for another commitment. Political constituencies enter the budget process as competing claims on scarce money, even when meeting their needs would strengthen the same social fabric.

This structure shapes how people understand one another. A new public commitment comes to appear as a cost imposed on everyone whose own needs remain unmet. The budget thus translates social interdependence into fiscal competition. People who depend on different institutions are encouraged to ask whose program must shrink and whose expectations must be deferred.

Even progressive governments can enlarge the funds available for public provision and distribute them more fairly while remaining caught in this antagonistic structure. So long as public needs must be assembled into a finite package, the pressure to rank them does not disappear. It shifts toward defining which commitments are sufficiently basic, universal, or broadly beneficial to deserve inclusion. Those categories can always be narrowed, and people whose needs are less easily represented as common can be cut away from the public they are supposed to share. Coalition then becomes an exercise in negotiating which differences the budget will recognize and which forms of life must be excluded or deferred.

Once we question the background assumption that money is inherently scarce, however, the social fabric comes into view as an additive ecology. A well-supported institution expands the capacities of the people and institutions around it. Its workers receive income and the communities it serves gain resources to participate in public life. These effects cascade throughout society, far beyond the line item where the initial spending appears.

Conventional public budgeting has difficulty representing this additive quality. It records the financial commitment at the point where money is spent, while the real capacities provisioned through that commitment are represented only where they generate profits. What appears in the budget as a collection of separate costs functions socially as a mutually reinforcing ecology.

The Seattle Loop gives this ecology a more honest financial expression. The city’s commitments become part of the asset base of a public bank, while the bank’s activity generates income and financial capacity that can support further commitments. Budget priorities enter a circuit in which spending helps sustain the institutions that make additional spending possible.

All of this works because money itself is an expandable accounting instrument, even when the productive capacities it mobilizes cannot be expanded all at once. Those capacities can impose real limits on what a city can accomplish at any given moment. The Loop makes those limits questions of coordination and sequencing rather than reasons to treat every new commitment as a subtraction from a fixed fund. It asks what Seattle can produce now, where additional capacity must be developed, and how public investment can expand what becomes possible over time.

This changes the meaning of fiscal responsibility. Responsibility extends beyond keeping each commitment within its assigned budgetary container to designing relationships through which public institutions can support one another over time. The city can govern its financial system as part of the social ecology it is responsible for sustaining.

For progressives, this points toward an additive conception of coalition. Constituencies do not enter public life solely as claimants seeking their share of a common fund. Their flourishing can expand the capacities on which others depend. Public finance can organize these connections, making solidarity into a durable institutional relationship rather than an appeal for groups to accept sacrifices on one another’s behalf.

The Seattle Loop is a local proposal, but its political implications extend beyond Seattle. It suggests that progressive governance can build institutions through which public commitments accumulate, reinforce one another, and generate new possibilities for collective action. A budget that forces constituencies to experience one another as costs will continually weaken the public it is supposed to serve. An additive financial architecture can help our democracy become more stable and resilient through the very act of providing for itself.

By Tyler Suksawat & Scott Ferguson

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.

By Tyler Suksawat & Scott Ferguson

A palpable, but indecisive enthusiasm permeated a recent Seattle arts forum, revealing a city desperate for a future that no one quite knows how to build, let alone finance. Despite the proliferation of sticky notes with compelling schemes, as Amanda Manitach describes in The Stranger, the arts roundtable lacked a cohesive strategy for gathering its aspirational potpourri into an actionable mosaic. The obstacle, per usual, is price. How can Seattle even begin to envision a just, prosperous, and creative tomorrow when it can barely afford extant annual expenditures? 

A path forward exists. Yet it requires that we redesign Seattle’s current fiscal architecture.

The crux of the problem is that every year millions of Seattle’s tax dollars line the coffers of capitalists outside the city. When the city borrows money for bridges, schools, or transit, it pays massive interest fees to private banks on Wall Street. This “leak” is a primary cause of local austerity—the feeling that the city is always broke, even when there’s plenty of good ideas and idle resources to go around.

The time has come to plug that leak. By creating a city-owned public bank, Seattle can not only provide residents with low-cost financial services; it can also buy its own debt and pay interest to the city instead of private creditors. This simple shift transforms debt into a self-replenishing fund, giving us the financial hardware to build what our communities actually need—from social housing and municipal grocery stores to green jobs and a thriving arts scene. Manitach lists a public bank as one potential fix among many. But a municipal bank is not just one sticky note in the pile; it is the very foundation upon which every other progressive initiative depends. 

Such a plan transforms municipal finance from a leak into a loop. Instead of tax dollars leaving the city to pay private bank interest, a public bank creates a self-growing circuit. 

Here is how it works: (1) Seattle passes legislation, issuing debt to finance vital programs; (2) the municipal bank creates enough credit to purchase the city’s debt; (3) that money moves into the pockets of community members and local businesses; (4) the city next pays off the debt’s principal and interest to its own public bank; (5) the bank then transfers the interest and any additional banking revenue back into the city’s general fund; (6) the proceeds are finally re-invested into the next community project. With this, we stop the drain and grow the loop.  

The Seattle Loop is an engine for an entire ecosystem of loops. As Seattle’s public bank anchors the city’s finances, it can simultaneously empower myriad additional circuits of desperately needed public provisions. These smaller loops do not just draw from the city’s credit; they expand it. Weaving these connections together, we construct an adaptable web of public collaboration and value that becomes more powerful with every new participant who activates the city’s many circuits. 

How, then, to push the Seattle Loop from a visionary blueprint to a governing, democratic reality?

Feeling Loopy 

At its heart, the Seattle Loop is a generative mechanism of public credit that routes city finance through a new public bank, equipping us to provision our own city. This strategy internalizes Seattle’s public debt, utilizing a non-profit public bank to purchase the city’s municipal bonds. Capturing the interest payments that currently leak to private creditors and speculative markets, the Loop transmutes the city’s debt into a self-generating fund that increases Seattle’s capacity to secure public goods without the constraints of traditional austerity. 

To appreciate this plan’s innovativeness, we must correct a persistent myth: the idea that a bank’s ability to purchase bonds is constrained 1-to-1 by its existing deposits. As any modern banker knows, financial institutions do not lend out deposits. Rather, they routinely create credit anew from thin air. Loans create deposits, so to speak, not the other way around. Banks expand their balance sheets first and manage reserves afterward. Like it or not, that’s just how banking works. 

The constraints on bank lending are, in truth, regulatory capital ratios and liquidity coverage rules, not a finite quantity of available deposits. So, were Seattle to sell municipal debt to its own non-profit bank, the operation would generate fresh lines of credit (and associated interest) that would have never existed otherwise. Regularly overlooked, this inherently generative dimension of banking enables the Seattle Loop to dramatically enlarge the city’s fiscal ambit.

Rather than asking groups to adopt a single, rigid policy, our approach centers on the co-creation of specialized cross-city loops. We view the city’s central public bank as a foundational infrastructure that allows labor unions, housing advocates, and arts and culture coalitions to fashion their own distinct loops according to unique needs. Each time a new initiative launches—whether that’s a public payment system, municipal Job Guarantee or public entertainment venue—it does more than utilize existing credit; it expands the project’s collective reach. By bringing together these diverse loops, we turn municipal finance into enduring public cooperation and wealth. This growth doesn’t happen solely from the top down; it spreads through every new connection, ensuring that each project’s success bolsters the stability of the entire city. When you get in the loop, you are helping to engineer a flourishing ecosystem that thrives on mutual reinforcement.

Consider the potential of a city partnership with UFCW 3000, which represents a pivotal cross-section of grocery and agricultural workers. Through the Seattle Loop, we can maintain a municipal jobs program that establishes public grocery stores, ensuring both community food access and stable union employment. The Loop’s banking infrastructure can further provide essential financial services to the cannabis industry—a sector currently marginalized by federal banking restrictions and harassed by thieves—offering much-needed stability and security to both local businesses and their employees. At the same time, city-owned venues, a public payment system, and a complementary currency can work in tandem to wrest control over local arts and culture from corporate monopolies and manipulative ticket vendors. 

Loop Initiatives

The Seattle Loop provides the administrative and financial structure to implement a host of programs, transforming community hopes and dreams into a coordinated system. The following list, though hardly exhaustive, offers several concrete possibilities, beginning with the municipal bank. 

• Public Bank: A central municipal financial institution that provides low-cost banking services to community members, local firms, and nonprofit organizations, while routing all city debt through this public channel. Internalized municipal borrowing ensures the vast majority of banking revenue—and the interest that would escape to Wall Street—stays in the city’s general fund. This recaptured wealth serves as a permanent, self-replenishing resource that dramatically widens the city’s fiscal capacity to provide for the public good.
• Public Payment System: A fee-free municipal digital wallet that allows residents and businesses to bypass the extractive tolls of private credit card processors and ticket vendors.
• Complementary Currency: A local digital money generated and managed by the city and its public bank. It is designed to extend the city’s fiscal reach, further stimulating commerce and keeping money within the community.
• Municipal Job Guarantee: A permanent public employment program offering a living-wage job and benefits to any resident who wants one, focused on community care and infrastructure.
• Public Arts & Culture: A public option for the arts, which secures the entire infrastructure of creative production—including venues, media platforms, and management—via a public payment system, complementary currency, and Job Guarantee that insulates local expression from corporate control and extraction. 
• Youth Employment Program: A targeted initiative that integrates young people into the city’s productive life through paid mentorships and meaningful public service roles in cooperation with public schools.
• Publicly Owned Housing: Socially managed residential developments that prioritize stable, well-furnished shelter as a human right rather than a speculative asset.
• Municipal Groceries and Supply Chains: City-run food distribution networks that eliminate food deserts and secure affordable and reliable supply lines for essential goods. 
• Vacancy Taxes on Property: A fiscal tool used to discourage property hoarding and incentivize the productive use of urban spaces for the public good.
• Public Nonprofit Childcare: A model for repurposing underutilized school infrastructure into high-quality, universal childcare hubs as a proactive alternative to school closures.
• Commercial Rent Controls: Protections that cap lease increases on commercial real estate to prevent the displacement of local small businesses and cultural venues.
• RCV Competency: Educational workshops and pilots for Ranked Choice Voting to assist communities in navigating more democratic and representative election formats.
• Public School Credit Access: A shift in K-12 financing that allows school districts to tap into municipal credit to fund facilities and enrichment without traditional debt dependency.
• Public Worker Pensions: A strategy for reinvesting pension funds in the municipal bank to safeguard retirees’ wealth, while directly supporting local community stability.
• Zero Waste and Right to Repair: A public program for circular economies that provides community repair clinics and municipal composting to end the era of planned obsolescence and food waste.

Myriad Paths to Success

The strongest and most efficient path forward for establishing a Seattle Municipal Bank is to create a legal framework and pathway at the state level. To this end, Seattleites can help revive and pass a refined version of the Washington State Public Bank Act (previously SB 5188), a legal framework championed by State Senator Bob Hasegawa that has already cleared the State Senate in past sessions. Rather than reinvent the wheel, then, we accelerate a movement already in motion.

Our immediate goal would then be to institute a statewide legal architecture that follows the successful precedent of California’s Public Banking Act (AB 857), which in 2019 allowed local municipalities to charter their own public banks. Adapting these proven models to Washington, we can overcome the antiquated interpretations of our State Constitution that currently hem in municipal power. Our legislative strategy focuses on three pillars:

• Codifying Public Authority: Building on the “Public Financial Cooperative” model from SB 5188, we will authorize cities and counties to establish public depository institutions, giving them the same financial agency recently won by cities like Los Angeles and San Francisco.
• Modernizing Lending Protections: Washington’s Constitution (Article VIII, Sections 5 and 7) rightly forbids using public credit to aid private profit. We will clarify that a public bank, by definition, serves a fundamental government purpose—conducting public finance for public goods—and therefore acts as a shield against, rather than a vehicle for, private subsidies.
• Enabling Inter-Municipal Cooperation: The final pillar authorizes cities and counties to pool their credit and deposits into an interdependent statewide system. Such cooperation allows a municipal pilot in Seattle to evolve into a resilient network, ensuring that smaller communities and rural counties can access the same low-cost credit as the state’s largest urban centers.

With this state legal framework in place, setting up and capitalizing a Seattle Municipal Bank gains a clear institutional blueprint and, with this, becomes a relatively straightforward procedure.

There are myriad paths to success, however, none of which should be ruled out. A more circuitous, but still legitimate strategy is to build toward a municipal bank by introducing a Public Development Authority (PDA).

This process involves several elaborate steps. First, Seattle charters a PDA as a legal entity and moves some of its assets to the PDA. Next, the city sets up a governance structure and begins building up capital in order to apply for a banking charter from the Washington State Department of Financial Institutions. If the banking charter is secured, then the PDA must substantially increase its investment portfolio, enough to eventually back the city’s massive public holdings and to meet Tier 1 requirements. From there, the city can apply to the Washington Public Deposit Protection Commission to become an approved depository. Finally, the Seattle Municipal Bank seeks a master account at the Federal Reserve.

Needless to say, the PDA pathway is much more complex, involving a series of hurdles and potential setbacks. For this reason, the PDA should be treated as a backup option, deployed only if the state legal effort stalls out.

Reclaiming the Public Interest

The Seattle Loop represents more than a financial intervention; it is an open invitation to develop and share municipal wealth. 

In this movement, the call to reclaim the public interest acts as a double recovery. Literally, we recapture the enormous interest payments currently siphoned off by private debt service, routing those resources back into the city’s generative circuits. More deeply, however, we reclaim the very purpose of municipal governance, ensuring that the public interest—our collective well-being and democratic intent—once again directs our collective life.

This is our moment to build a city where the power of public credit is as resilient and expansive as the people who make it. 

Join us in the Seattle Loop.

* See here for a more granular approach to some of the Loop’s key operations, including capitalization and maintaining reserve balances.

By Tyler Suksawat & Scott Ferguson

Editor’s Note: The following essay, originally published on February 22, 2026, offers a foundational theoretical framework for what has since been concretized as The Seattle Loop. The Seattle Loop is a fiscal strategy that utilizes municipal banking to purchase city debt, “looping” interest payments back into public provisions like social housing and green jobs. While this piece was written prior to our specific pivot toward the Seattle-based organizing effort, it articulates the core logic of public credit and municipal finance that underpins the current project.

What chance do local governments have in fighting authoritarian austerity, especially when they are left to rely on feckless legislators at the state and federal levels who refuse to push back? Right now, we see austerity budgets appearing across every institution and major employer in the U.S. If the federal government continues to sabotage municipalities, and the state governments (even in liberal states) are proposing cuts-only budgets, then what hope do cities have? In truth, there are several meaningful alternatives to the present order, particularly if we follow the lead of what Money on the Left calls Democratic Public Finance. We only need to get creative about local monetary design. 

Extending money creation powers from the federal level directly to local governments remains an urgent political project. In the meantime, however, we propose that a powerful public option for municipal finance exists at the intersection between bond issuance and public banking. What if a city established a public bank and that public bank regularly purchased the city’s debt? Such a mechanism would liberate the city’s munis from private bond markets and punishing rating agencies, while expanding the city’s fiscal capacity beyond projected tax revenues. 

To understand why this works, we must discard a pervasive myth: banks do not lend deposits. They create credit “endogenously” through acts of authorization. Banks certainly have to meet liquidity and reserve requirements. However, meeting such requirements is a separate matter from crediting operations, which are legally enabled and protected by the Federal Reserve. A bank’s crediting operations do not recycle a limited pool of pre-existing investor funds. They actively expand the amount of total credit that is presently available. 

Therefore, when a public bank purchases its own city’s municipal debt, the result is not a closed loop in which a finite amount of money is passed back and forth. Because the public bank actively generates money to purchase the debt, the operation dramatically enlarges the city’s fiscal space. In such an arrangement, the municipal government acquires funds in the short term to meet community needs. The public bank grows its holdings by receiving interest payments from the city. The loops, then, are not redundant; they are kinetic. Far from an inert circuit, a public bank that purchases city debt is a dynamic design that defies the artificial gravity of austerity.

Most importantly, this arrangement halts the depletion of fiscal capacity by ensuring that debt service payments remain on the city’s own public ledger. Unlike with the private bond market, the public bank would be legally required to deposit earned interest into the city’s general fund. By cutting out the rentiers, the city thus transforms a parasitic financial drain into a regenerative cycle, guaranteeing that public interest is no longer just a yield for private financiers, but a shared benefit in the public interest.

We do not have to look far for a successful precedent. The Bank of North Dakota (BND) already acts as the depository for all state taxes, fines, and fees. While BND operates more conservatively than the model we propose—acting primarily as a registrar and facilitator rather than a direct purchaser of munis—it still remits its profits to the state’s general fund. In 2023 alone, the bank posted profits of $192.7 million. To put that in perspective, this figure greatly exceeds the $115 million in annual revenue projected for Washington State’s highly contested wealth tax proposal. For states like Washington, which rely heavily on regressive property tax levies to pay for almost everything, the BND model offers a wealth of untapped potential.

While the BND focuses primarily on state and municipal operations, if a new generation of public banks were chartered to provide consumer financial services alongside municipal finance, the benefits would be exponential. Private retail banks routinely generate massive profit margins of 15% to 30% through rapacious fees and predatory lending. Crucially, a public bank would not simply transfer this rentier model to the public sector. By functioning as a true public utility, it would offer high-quality, low-cost financial services instead. Public banks should provide an affordable, non-predatory alternative for working people. Even without exorbitant fees, however, it would still generate a robust and ethical source of revenue to be invested directly back into the community—funding the very policies, programs, and budgets voted on by the people the bank serves.

To realize this vision, establishing democratically accountable public banks—whether at the municipal or state level—must become a top political and legislative priority. Chartered as public utilities rather than profit-seeking enterprises, these institutions would be governed by public appointees and remain 100% accountable to city halls, county commissions, or state legislatures. By legally mandating that all net earnings (derived from interest and fees) be deposited back into the government’s general fund, municipalities can organically grow their revenues over time without continuously hiking taxes. As an added democratic benefit, their daily operations would be entirely transparent, with balance sheets published for the public.

The practical strength of this arrangement lies in the specific mechanics of the yield. With the federal funds rate currently sitting at a target range of 3.50% to 3.75%, a municipality could intentionally set its internal bond yields just above this floor. Because the public bank holds the debt, the spread guarantees a steady stream of revenue for the public ledger. Furthermore, by indexing the yield to the rate of inflation, the city constructs a resilient financial instrument in the face of unpredictable circumstances. Should an emergency or unforeseen project cost require rapid liquidity beyond the public bank’s immediate capacity, this competitive yield would generate intense demand from the private sector to hold the city’s munis—effectively subordinating private capital to the public interest.

Unlocking a municipality’s latent ability to sell bonds directly to its own public bank reveals a startling truth: the primary limits on local finance are not economic, but political. The constraints cities currently face are mostly self-imposed regulations—arbitrary debt ceilings or rules enforced by oversight boards captured by private banking interests. While every municipality will navigate different statutory limits on bond issuance, we can begin by maxing out current legal capacities and organizing to expand those horizons later. 

Consider the political implications for building local public capacity. Lately, wealth taxes have dominated local discussions around budget expansion. While taxing the rich remains a vital tool for combating economic inequality and checking the anti-democratic power of concentrated wealth, relying on taxation as the sole lifeline for municipal survival is politically precarious. A public bank shifts this paradigm. By carefully managing the yields and maturities on internally held municipal bonds, a city can steadily expand its general fund. Wealth taxes would no longer be a desperate necessity for basic funding, but rather one tool among many. 

Instead of begging for scraps from state legislatures or private bond markets, local governments can directly create the capacity to care for their communities. Once we are willing to get creative with Democratic Public Finance, we see that the blueprint is already here. We only need the political will to use it, guaranteeing that every local dollar created is an investment in the public interest. 

By the Money on the Left Editorial Collective

Public banking has been gaining traction for years, driven by a growing recognition that our current financial system often fails to serve the public good. The Bank of North Dakota has operated successfully for over a century, and states like New York have recently seen legislation proposed to establish their own state-level public banking systems. Success at the state level informs the effort for a nationwide Public Banking Act proposed in Congress, which offers a vital first step towards building a more equitable and sustainable economy by establishing a federal charter for local and state public banks and creating a systemic channel to direct public deposits toward community investment.

To fully realize public banking’s potential, however, we must recognize that loans alone are insufficient for addressing all public needs. The loan model makes urgent community investment dependent on the ability to generate a profit and repay, when, in fact, the entire reason these initiatives require public support is the absence of a prospect for private sector profit. 

For this reason, we need to expand the public’s financial toolkit beyond traditional loans to include grants. The operating paradigm for the next generation must empower public banks to issue grants, thereby giving communities the financial resources they need and freeing them from the constraints of expected repayment. In what follows, we explore the groundbreaking potential of a Public Grant-Making Bank, which promises to revolutionize the meaning of money as a mechanism of Democratic Public Finance.

The Public Banking Act, as previously proposed, makes significant strides. It seeks to establish a national framework, providing legal clarity for states and municipalities to create publicly owned banks. This structure would confer local control over investment, ensuring these banks are governed by public mandates that prioritize community needs over shareholder profits. The Public Banking Act would give public banks access to the Federal Reserve’s payment systems and liquidity facilities, integrating them into the broader financial architecture. The legislation allows them to fund local priorities like infrastructure, affordable housing, and renewable energy. Crucially, it mandates adherence to standards related to environmental justice and democratic governance, steering financial capacity toward the public good. 

The Public Banking Act’s proposed changes to the existing financial system are powerful; however, the legislation still operates within a capitalist paradigm of loan-based financing. By focusing primarily on loans, even at favorable rates, the model retains a core capitalist constraint: the expectation of financial repayment. This expectation means that any essential community investment must carry a calculable path to profit or guaranteed revenue sufficient to service the loan. When a project is defined by its social or ecological necessity rather than its ability to yield a private return, the loan structure fails. For instance, a loan for constructing protective sea walls, implementing watershed restoration, or funding universal local public transit will never meet a private profitability threshold. We cannot allow the constraints of private profit to obstruct the necessary path toward collective flourishing and stability. Such projects are essential, non-revenue-generating public goods that communities require for collective well-being.

To meet critical needs, we must expand the financial toolkit of public banking beyond traditional loans. We need a revised Public Banking Act that establishes a new class of financial institution: the Public Grant-Making Bank. A Public Grant-Making Bank actively tackles pressing social and ecological challenges where traditional, loan-based financing proves inadequate. 

The first pillar of this model involves restructuring finance as direct grants, rather than as loans. Instead of relying on future repayment, public banks would issue grants to projects based on their public mission. A Public Grant-Making Bank evaluates proposals by assessing their anticipated social and ecological effects. For example, funding the establishment of community-owned broadband networks would be evaluated on their contribution to equitable digital access and educational opportunity, not on a financial return model. If the qualitative assessment is strong, the grant is made. On this logic, a grant is still debt; only, it is a qualitative obligation to improve social and environmental conditions, rather than a quantitative obligation to repay a financial sum.

A core commitment to qualitative assessment requires a decisive legal shift. Local public banks, overseen by community-led boards, ought to be granted full discretion to issue finance based on community needs. Granting this authority requires major overhauls of banking laws, such as the Community Reinvestment Act, to legally authorize such non-financial metrics over traditional financial prudence. This authorization must be coupled with a legal liability shield for bank directors, protecting them from fiduciary duty claims when making mission-aligned grant decisions.

Any radical institutional change demands an equally radical monetary theory. Our financial regulatory system is typically conceived according to an erroneous, yet dominant “loanable funds” model, which posits that banks act as mere intermediaries, collecting pre-existing savings from lenders and then allocating those scarce funds to borrowers. Under this view, money is a finite resource, and any capital loss resulting from a grant poses an existential threat to the bank’s ability to maintain its pool of savings. However, we know from the credit theory of money that banks actually create money as credit when they extend financing. This means that when a bank issues a grant, it does not transfer pre-existing savings, but rather generates fresh financial assets in the community’s accounts.

The result inverts the traditional view of deficits. When a Public Grant-Making Bank issues a grant, it creates financial capacity for a community. In the process, the bank does not draw down its capital. It undergoes no depletion of pre-existing funds. Instead, the grant constitutes a creative act of democratic public provisioning in its own right. Modern Monetary Theory (MMT)’s sectoral balances approach is illuminating here. Just as, according to MMT, public sector deficits are private sector assets, we must recognize that the bank’s alleged deficit is actually the community’s financial surplus. The grants are not a loss; they are creative endowments that increase the net financial wealth of the public. For these institutions, therefore, we must reframe the reigning ideology of the balance sheet entirely.

While the credit theory explains the mechanics of how all banks create money, current law is designed to punish institutions that act on this reality for the public good; therefore, we must redesign the legal framework to make public grant-making possible. If the bank’s financial deficit is simply the community’s newly created financial asset, specific legal changes are required, such as amendments to the Federal Reserve Act and the Federal Deposit Insurance Act to establish what we could call a Systemically Essential Public Grant-Making Charter. Crucially, this charter and all associated exemptions would apply only to the bank’s non-repayable grants. The charter would exempt these banks from closure based on mission-related grants. We would mandate the creation of a Public Commitment Reserve—a dedicated and nominally inexhaustible fund explicitly backed by the full faith and credit of the United States that covers the necessary operational deficit, effectively making the federal government the implicit equity partner. This mechanism ensures the bank’s stability while validating its singular mission by giving the granting function a 100% Risk Weight Exemption from standard capital rules like those stemming from Basel III.

Meanwhile, the new regulatory framework must reflect a new collective purpose. Regulatory oversight would necessarily shift from strict capital ratios to a Public Mission Fulfillment Index (PMFI), a qualitative and quantitative assessment tool that measures the Public Grant-Making Bank’s effectiveness. Instead of narrowly auditing assets and liabilities, the PMFI would evaluate the bank’s adherence to its public mandate, its effectiveness in achieving social and ecological outcomes such as specific climate adaptation goals or public health milestones, and its transparent governance structure. Performance would be judged not by profit margins, but by documented progress toward communal problem-solving, making the mission, not a zero-sum balance sheet, the legal measure of success.

The Public Banking Act can incentivize the creation of new banking institutions across state and municipal levels, but we hardly need to start from scratch. The existing landscape is already rich with institutions that currently implement grants, demonstrating that non-loan-based provisioning is a deeply established practice. Consider the vast network of federal bodies that allocate grants based on qualitative criteria: organizations like the National Institutes of Health and the National Science Foundation fund research based on merit and public benefit, alongside cultural institutions such as the National Endowment for the Arts and the National Endowment for the Humanities. This federal effort is mirrored at the state level by agencies like the Departments of Labor, Health, and Energy; development-focused bodies such as the Appalachian Regional Commission; and, of course, our public university systems. Beyond government, the sector includes myriad non-profits and community foundations, including large institutions like the Robert Wood Johnson Foundation and the Ford Foundation, programmatic groups like Habitat for Humanity, and even small, local initiatives run by churches and food pantries. These well-established institutions prove that grant-based financing beyond profitability is already a central function of financial life in the United States. 

The Public Banking Act already contains language for empowering these organizations to become licensed public credit issuers. Like for-profit banks, such organizations draw on systemic knowledge of their recipients’ projects and the shifting contexts in which they operate. All that is needed is to equip them with financial capacities to expand and transform their current mandates in response to communal and ecological needs. Importantly, then, there is no one-size-fits-all model for Public Grant-Making Banks. We need diverse and nimble credit allocators for a heterogeneous and changing world.

The design of the Public Grant-Making Bank yields a robust new approach for achieving economic stability. Rather than naturalize private market prices while fetishizing liberal budget-balancing, public granting banks allow us to challenge the political composition of investment and pricing in the first place. The work of economist Isabella Weber is instructive here, as her analysis highlights how public management of supply chains and targeted price control mechanisms for essential goods can be powerful tools for ensuring stability. Extending this logic to finance, the Public Grant-Making Bank establishes a powerful counterweight to capital markets, where the price of credit and the required rate of return are set by private risk and profit motives. A strong public sector that effectively sets the price of capital at zero shifts essential financial resources from speculative activity to necessary public provisioning. The current political volatility, including the rise of radically anti-democratic policies, behaviors, and sentiments, often stems from a deep-seated economic insecurity that financial systems designed purely for private profit have created. The Public Grant-Making Bank offers a design intervention that directly addresses this insecurity, ensuring new financial capacity is continuously deployed where it is needed most.

The stability provided by the Public Grant-Making Bank acts as a profound form of local political agency and resilience. Decades of unnecessary austerity, perpetuated by establishment Democrats, conservatives, and authoritarians, have destabilized communities by systematically robbing them of financial resources required to provide for basic needs. Will Beaman highlights this vulnerability in his argument for fiscal insurgency, noting that the political viability of progressive public projects is often threatened by legislative sabotage. At the same time, Beaman reminds us, the history of the United States is replete with inspiring examples of local and national credit creation that successfully resisted and overcame austerity. This in mind, the Public Grant-Making Bank represents a critical mechanism for fiscal insurgency. Because it operates on the principle of the legally protected creation of public credit for social ends, its budget is untethered from the state and municipal budgetary processes that constrain investment by recourse to poisonous neoliberal and authoritarian ideologies. This grants local administrators the authority to direct public investment, ensuring their decisions are democratically accountable while actively bypassing those financial constraints. Such enduring capacity acts as a vital institutional guarantor of political stability, ensuring communities can maintain essential provisioning even when political conflicts over the budget attempt to impose sudden cuts.

Thus a Public Grant-Making Bank is more than a policy fix; it is a profound political act that challenges the hegemonic conception of money as a fundamentally capitalist tool. Regrettably, progressives and leftists regularly equate money with capitalism, viewing currency as a mere expression of private competition and exploitation. This dominant view, however, not only fortifies capitalist interests, but also fails to see that money is a contestable and inexhaustible public system, a complex and interdependent hierarchy of obligations and benefits that can always be restructured to serve communal ends. Others on the left attempt to redeem money by embracing the promise of truly egalitarian “exchange.” Examples of this impulse include schemes advocating a return to allegedly pure, decentralized systems like direct barter, or proposals that champion digital currencies built on blockchain technology. Yet these approaches—rooted in the myth that money evolves from direct barter—typically accept the capitalist premise that money is merely a facilitator of micro transactions, thereby failing to embrace the hierarchy of money as a democratic design problem.

The Public Grant-Making Bank is a political project that importantly defamiliarizes what money is. By showing that financial capacity can be intentionally created and distributed based on social and environmental needs rather than the expectation of repayment, the bank clears the way for wide-ranging contests and creative building when it comes to democratic monetary design. Moreover, this approach reframes and reclaims the very idea of granting, not as the decree of a ruling authority, but as a shared commitment to the community and an affirmation of public trust. As a result, the Public Grant-Making Bank becomes an essential step toward achieving what we have elsewhere called Democratic Public Finance, a radical vision where our collective financial system is explicitly designed to serve society, not extract profit.

Passing the extended Public Banking Act and establishing the Public Grant-Making Bank requires a focused national political campaign, starting today. The immediate challenge is immense, given the second Trump administration’s active use of state power to defund social programs, attack democratically-controlled cities, and punish political enemies. Compounding this political sabotage, a nationwide affordability crisis continues to push prices higher across essential goods and services. Yet a clear political opening exists: the recent 2026 blue electoral sweep, a victory underscored by the election of democratic socialist Zohran Mamdani as New York City mayor, signals an urgent public demand for structural solutions to the affordability crisis. The Public Grant-Making Bank can be a vital ingredient in this effort. We can begin straightaway by forging powerful coalitions, bringing together progressive legislators with organizations like the Working Families Party, the Democratic Socialists of America, and the Debt Collective. Success is hardly certain, but the collective activity of imagining and organizing for this transformative financial architecture is itself a crucial political project that helps transform what counts as possible for public finance.

When we finally acknowledge money as public credit, we empower public banks to transition from mere lenders to catalysts of collective prosperity, underwriting the essential work of ecological restoration and community-making with direct grants. The initial Public Banking Act gives us the start. Our challenge now is to extend its vision and construct a system where financial design itself actively guarantees a just and ecologically stable world.