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ANSWERS
Why should I trust you?
That's really up to you to discern. But take a look at who is behind the Common Good Bank plan. Most of our partner organizations are well-established nonprofits and their website links are on our Who Are We page. Likewise many of our advisory board members are well-known and respected. They would be happy to confirm their involvement. Many of them could also serve as character references for the Project Director.
We are not currently accepting deposits or investments. If you are worried about a multi-level marketing scam, rest assured that donations are made to Society to Benefit Everyone, a 501c3 nonprofit (founded in 2006) regulated by both federal and state government.
top Why all the secrecy about investment?
Under SEC regulations, we cannot mention publicly (in press releases, group emails, public meetings, or even groups of four or more) whether we have a private stock offering. Otherwise we could face criminal prosecution. This leaves it up to you to ask.
Like any bank startup, we will have to raise about $1.5 million through a private offering, available only to accredited investors. An accredited investor is anyone with a net worth of $1 million or more OR an organization with assets of $5 million or more.
We also cannot discuss the terms of any private offering with you unless you are an accredited investor. We CAN discuss terms with official representatives of qualifying organizations, including board members and senior staff, even if those board members and staff do not qualify individually as accredited investors.
top What are the risks to founding investors?
We have taken several steps in the Common Good Bank plan, to minimize the risk to founding investors (investors who buy stock before the bank has a charter). However, as in most startups, 100% of those investments will be at risk. See the investment documents for details. The risks are different in each of four stages in the Common Good Bank investment plan:
- Pre-charter, there is zero risk. We will not ask for actual money until we have commitments for the whole $1.5 million.
- Post-charter: After the state regulators and the FDIC have formally approved the Common Good Bank business plan (affirming that in their judgment the plan will succeed), we will move forward with the business plan, raising an additional $8 million from the 4,000 future depositors, then spending most of the $1.5 million preparing to open, according to the approved plan. In the unlikely event that the bank does not acually open, the founding investors would lose whatever part of their money had been spent.
Unlike most bank startups, we will not apply for a charter until we know where the next $8 million is coming from (we are asking future investors to predict NOW how much they will invest). Also unlike most bank startups, we are lining up our depositors and borrowers in advance, so that we can operate profitably from Day One.
- In the first years after opening, in the unlikely event that the bank makes a large number of bad decisions right away and fails, then ALL of the investors (founding investors and stockholder/depositors) could lose their entire investment.
- Once there are many Community Divisions, loss will become even less likely. Still, ALL investors could lose all of their money, if the overall Common Good Bank system fails.
- The risk of NOT investing is that the world would be much worse off without Common Good Bank communities.
top What are the benefits to founding investors?
Founding investors will have the joy of shepherding the common good bank plan through to fruition.
We can make no promises about financial results. But see our business plan for projected results. Also see the Sound Investment page and the video for two types of projected social returns. Social benefits are by far the largest incentive to investors.
We cannot discuss publicly any details about investment in a the Common Good Bank or in any pre-charter private offering (see "Why all the secrecy...", above). We can say that in the Common Good Bank design there is a planned return for investments. The planned resale price of common good bank stock is designed to give each investor an inflation rate return upon reselling. Inflation will be estimated at prime minus 1.5% through the bank's first year of operation (about the same rate as a high interest CD). The true rate of dollar inflation has averaged about 6% over the past three decades -- about the same as prime minus 1.5% and also about the same as the overall average return on stock market investments.
top Shouldn't I get a higher return, since I'm taking the biggest risk?
Our investors need to understand that this is not a "for profit" investment. It is an investment in a better world, a thriving community, and the well being of all people. The Common Good Bank is designed to level the playing field, giving everyone the same deal. We are doing everything we can to make the risk very close to zero for investors in every stage of the plan, so there will be no great difference in risk from one stage to the next. And regardless of what you deserve, it would look really bad if wealthy investors took a big chunk of the profits right from the start. So everyone gets the same deal: a Planned Return equal to the true rate of inflation.
top How about Exit Strategy? When can I recover my investment?
An easy exit is crucial to our plan. In particular, low income investors MUST be able to treat their investment like a deposit. Here's how we plan to keep stock sales fluid:
- Our Planned Appreciation (matching the inflation rate) is an easy target. It's just maintaining purchase power.
- The bank will sell stock continuously at the Planned Price (again matching inflation).
- Ten percent of the deposit funds in every Common Good Account will be held as stock. That is, if a depositor adds $100 to his or her account, then $10 worth of stock is automatically bought on behalf of that depositor. Since some deposits will be made every day, there will be a constant demand for stock. Shares will not necessarily be sold immediately when the depositor withdraws funds, so overall 90% of the bank's deposits will serve as a buffer to protect the fluidity of stock sales.
- In order to participate and have profits to give away, a community must maintain the same stock to deposits ratio as regulators require overall. So if common good banks are attractive at all (and we expect that they will be extremely actractive) then membership will grow and new communities will want to join, so there will be a growing demand for stock at the Planned Price.
- The bank will retain enough earnings to maintain a static net worth, resulting also in a static book value for its stock, equal to the planned resale price.
All of these factors tend to make your investment predictable and secure. In short, we expect that our socially-conscious high-net-worth early investors will be able to reclaim their investments within a year or two after the bank opens, thanks to ongoing automatic stock purchases by thousands of moderate-income depositors.
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