Other voices, other views by Wayne Mellor
Public banks and our local economy

Adrian Kuzminski’s recent article on the benefits of local business ownership and how a simple regulation can effectively hold off big business consolidation gives us another opportunity to better understand the current state of rural economies like ours.

The consolidation and productivity increases in the dairy industry have nearly wiped out the small business farm economy in our region. That economy supported myriad small businesses such as mechanics, electricians, feeds stores, and so on that kept their profits and capital here. This capital was deposited in local banks like Wilber National and rein-vested here as this was their market.

In 2020, Otsego County lost our remaining, local, full-service bank — The Bank of Cooperstown —
when Wayne Bank, a mid-sized regional bank located in northeast Pennsylvania, purchased it. The name
has not changed yet due to the Bank of Cooperstown’s strong local brand.

Don’t be surprised when this happens.

Prior to this merger, our other local bank, Wilber National Bank was bought out by the much larger, regional Community Bank NA in 2011. Don’t let the name fool you. According to 2020 FDIC data, Community Bank NA out of DeWitt, N.Y., has assets of $13.6 billion compared to $1.8 billion for the Wayne Bank and $464 million for the Bank of Cooperstown (USNY Bank). Prior to the takeover, Wilber National Bank had $895 million in assets.

The rampant consolidation of banking in the United States, now entering its third generation, has created very large financial institutions almost totally disconnected to local communities. The days of George Bailey from “It’s a Wonderful Life” and the local building and loan are long gone.
Larger regional banks are much less likely to underwrite loans to small businesses with local markets and especially to start-up businesses that tend to be higher risk due to the need for working capital to run the operation until it is profitable.

Even more perverse is that larger regional banks have the resources to offer up to 85 percent guaranteed Small Business Administration or USDA agricultural loans. Many small, local banks do not have these resources. Combined with normal underwriting standards, the guaranteed loans are essentially risk free for the bigger banks. The upshot is no guarantee, no loan for many small businesses.

A thriving local economy needs a strong local bank. New York State Senate Bill S1762A allows the chartering of public banks whose public benefit purpose is “achieving cost savings, strengthening local economies, supporting community economic development, and addressing infrastructure and housing needs for localities.”

A public bank provides the services of commercial bank with those services confined to their community. The bill would also allow public ownership of the bank.

A locally oriented, public bank would be a better evaluator of higher risk loans, give local depositors, county and municipal governments and investors a way to directly invest in their communities, and stem the flow of local dollars to regional and megabanks using our citizens deposits to support loans in other places. The profits of the bank could directly reduce local taxes too.

There currently is one public bank in the United States, the Bank of North Dakota, although many exist in Europe and elsewhere. Using the Bank of North Dakota’s returns, we can envision an Otsego County Public Bank with assets of $900 million returning $10 million to the local tax base. That is almost the entire pre-pandemic Otsego County property tax levy of $12 million.

Otsego County would be well-served to have a public bank to fill the void created by the loss of Wilber National and the Bank of Cooperstown.

Wayne Mellor is the chair of Sustainable Otsego, an informal social network and non-partisan political action committee based in Otsego County