We at Mass Public Banking are delighted that Governor Healey announced last week the formation of a “Green Bank” initiative to fund climate-friendly affordable housing.

So how does this Green Bank differ from the proposed Massachusetts public bank?

The Green Bank, starting up with $50 million from the Department of Environmental Protection, is an investment fund that will loan only what will be appropriated by the Legislature or redirected from existing funding elsewhere, including through federal programs.

The Massachusetts Public Bank will be an actual bank. Banks play a unique role in our society–they can “multiply” their capital because they operate as part of a national network of banks where loan liabilities offset each other. This allows the bank to advance loans on a “reserve” that is a fraction of the deposit amount in the bank (thus the phrase “fractional reserve lending”). Once established, the Public Bank will benefit from that unique structure and operate sustainably without needing additional funding from the legislature, even as it increases its loan portfolio.

Green investments will be part of the Public Bank’s portfolio which will also address other areas of special need such as financing for minority and women-owned small businesses, small farms and cooperatives. And the Public Bank will make loans by participating with existing local banks to provide more financing in keeping with its specified purposes.

The bottom line is that the Massachusetts Public Bank will function and be regulated as a bank, and the Green Bank will be an investment fund. The two institutions can and will complement each other.

We thank the Governor and her administration for this important “bank shot” to address sustainable, green affordable housing.