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

In: Financial Innovation and Resilience

Author

Listed:
  • Gerald Epstein

    (University of Massachusetts)

  • Devika Dutt

    (University of Massachusetts)

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.

Suggested Citation

  • Gerald Epstein & Devika Dutt, 2018. "Public Banks, Public Orientation and the Great Financial Crisis of 2007–2008," Palgrave Studies in the History of Finance, in: Lilia Costabile & Larry Neal (ed.), Financial Innovation and Resilience, chapter 0, pages 327-343, Palgrave Macmillan.
    • Handle: RePEc:pal:psitcp:978-3-319-90248-7_15
    DOI: 10.1007/978-3-319-90248-7_15
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