Is a State Bank A Useful Economic Development Tool in the USA?


 The possibility of creating a state bank has received much recent attention in the USA. In 2021, six states introduced legislation to create a state bank; in 2019, similar legislation was enacted in California for municipal banks. This article develops a framework to evaluate state banking, reviews prior experiences with state banking and related alternatives to traditional private banking, and identifies five questions determining the advisability of creating a state bank. The overall goal is to shed some light on whether a state bank can be a useful tool to further state economic development and the welfare of state residents (JEL codes: G21 (banks), G28 (government policy, financial institutions), and H70 (state and local governments)).