With $10 trillion in assets at their collective disposal, big banks like Chase and Wells Fargo could do a lot of good. Yet, despite being “too big to fail,” these banks fail people every day. Whether it’s the persistent use of predatory practices, their enduring discrimination, or their insistent investment in exploitative and extractive industries, these formidable financial institutions have a corrosive influence on our country.
Yet, in spite of this, local governments put their assets—the collective wealth of communities collected through taxes—in the hands of these institutions. In New York City alone, $100 billion in the city’s money is handled by private banks every year. While the city’s assets sit in the corporate coffers of these Wall Street staples, the banks are free to invest them at their discretion. Their sole goal: pump up their profits. The result is that public dollars may be invested in projects that act against the public good, such as speculative real estate, private prisons, and fossil fuels.
To address these and other overlapping injustices, New York City’s New Economy Project, a community-based organization dedicated to advancing economic justice, has coordinated the Public Bank NYC coalition since 2018 with the end goal of investing city dollars in projects that would address community needs. Over four years, the coalition has come to comprise dozens of community organizations from across the city, working on projects as diverse as climate justice, affordable housing, and worker empowerment. Its primary focus is to advance city- and state-level legislation that will allow its visions to manifest.
“To do something as big and bold as a public bank, you really have to have a movement,” says Andy Morrison, associate director of the New Economy Project, “particularly in New York, where Wall Street lobbyists are numerous and powerful.”
Building that movement hasn’t been difficult. A public bank would offer benefits to justice-focused organizations of all shapes, sizes, missions, and visions. After all, as the argument is laid out in a report co-produced by the New Economy Project and Demos, a policy think tank, public banking is a key step toward community self-determination in housing, investments, and land use. This would put a community’s fate at their fingertips and enable them to address compounding crises and injustices.
One of those ongoing injustices is the lack of access to banks and financial services for many New Yorkers.
Albert Scott, board president of the East New York Community Land Trust, which is a member of the Public Bank NYC coalition, says the organization joined the movement “to address the banking desert in Brownsville and East New York.” The lack of banking options puts the members of these neighborhoods at a severe disadvantage. These two communities have just nine bank branches between them, compared with 47 in the Upper West Side and Manhattan, says Hannah Anousheh, staff coordinator of the East New York Community Land Trust. A public bank would alleviate this inequity and others like it that stem from the economic logic of big banks.
To make a public bank a reality, the coalition is pushing to change the state’s finance, banking, and municipal laws through the New York Public Banking Act. This act has been introduced to the State Assembly and Senate, but despite receiving 87 co-sponsors in both houses in 2021 and 94 in 2022, the legislation died in committee during both sessions. But Sen. James Sanders Jr., the prime sponsor, plans to reintroduce the bill in 2023. “We will keep on fighting until we establish public banks for everyone’s benefit,” the senator said in an email.
Once passed, this bill would allow local governments to “form and control public banks” to hold public funds, which could then be administered in support of the public good. One important point needs to be made clear: The public bank wouldn’t open its own retail branches. There’s nothing in the act that explicitly prohibits a public bank from going brick-and-mortar, but the coalition envisions something different.
A public bank would instead invest its holdings in credit unions and community development financial institutions (CDFIs), says Linda Levy, board member and former CEO of the Lower East Side People’s Federal Credit Union, another coalition member. Such investment would increase their “capacity to grow and serve more communities.”
Which credit unions and CDFIs receive investments would ultimately be decided by the public bank based on its own policies. These would in turn be shaped by banking professionals hired under the direction of the bank’s board. Three of the board’s directors would be appointed by the mayor, two by the city council, and one by the city treasurer. Each of those officials would be required to nominate at least one independent director and one director with community banking experience—defined as having served in a leadership role at a credit union, CDFI, or similar institution.
The six directors who seed the board would then be responsible for selecting an additional three to five directors with the intention of maximizing board diversity, including with representation from community-based organizations and labor unions. In a large, diverse city like New York, the board, at its discretion, may ultimately have as many as 15 directors.
The board would then be responsible for shaping the governing documents and defining the priorities of the public bank. The Public Bank NYC coalition members hope the priorities will address the concerns of underserved and underbanked communities, which the coalition went to painstaking lengths to define and document through the distillation of community feedback collected across town halls and public forums. These priorities are codified in a set of four pillars: financial justice, housing justice, worker justice, and climate justice.
On the ground, that would look like strengthening community banks, investing in affordable and democratically structured housing models, bolstering worker-owned cooperatives, and supporting community-owned clean energy projects, among other initiatives. However, when the public bank is one day established, the coalition can’t simply stand by and hope the board follows through and enshrines these priorities in its governing documents. To get them reflected and ensure accountability to the public’s desires, “it’ll take continued organizing,” the New Economy Project’s Morrison says.
However, if the public bank follows through on these goals, it could spark a surge of solutions to an assortment of social problems. “This is economic legislation that can actually help us and benefit us,” Scott says. “They’ll be putting money in the CDFIs that have a track record of helping communities like ours and have a physical presence in the community.”
The Lower East Side People’s Federal Credit Union is one such institution. Levy makes it clear that a public bank would boost its ability to benefit its members and the surrounding community. “Right now, we are limited in our ability to open branches in more neighborhoods due to a lack of capital,” she says. “Investments would increase our capital, allowing us to accept more member deposits and serve additional communities.”
Expanding banking access for low-income communities, immigrant communities, and communities of color is one of the central objectives of the Public Bank NYC coalition. This is, presently, one of the only ways to address the banking deserts in places like East New York. But the public bank would do more than that. By putting the public funds in CDFIs and credit unions, the funds would likely be invested in efforts to address social problems, efforts that have struggled to secure funding from conventional banks.
“Traditional banks are reluctant to support alternative housing models like community land trusts,” says Anousheh. “They’re not providing the low interest loans that will allow us to get to the affordability levels we need. But if we had a public bank, it could provide loans for non-speculative housing, like community land trusts and mutual housing associations.”
But there’s no guarantee a public bank would function this way. The only operating public bank governed by a city or state government in the United States, the Bank of North Dakota, has a mixed history of supporting the public good.
While the Bank of North Dakota helped small-business owners secure more PPP loans than in any other state, the bank has also invested heavily in fossil fuels and even loaned almost $10 million to local law enforcement efforts to break up the protests against the Dakota Access Pipeline at the Standing Rock reservation. Among the many structural oversights that made such investments possible is the lack of even a single Native American director on the bank’s board, despite the state having one of the largest per capita Indigenous populations in the nation.
To avoid reproducing the toxic practices of traditional banking, there’s a panoply of provisions in the current New York bill that makes Morrison believe it to be “the strongest bill of its kind in the country.” The bank’s board would be intended to reflect the population of the chartering city with directors representing community organizations. Public banks in the state would be required to abide by the United Nations’ Declaration on the Rights of Indigenous People and include representatives from Indigenous communities. An advisory committee would provide additional oversight. And the chartering municipality could choose to prohibit investments in fossil fuels, private prisons, and other industries detrimental to the public good.
Of course, with two consecutive years of death-in-committee for the legislation, it might be a while before it passes. But already there’s a good deal of support for the public bank outside the coalition. The New York City Council unanimously passed a resolution calling on the state legislature to pass the act, and 82 elected officials, including New York’s comptroller, co-signed a letter with the same call.
With all this support, Morrison is confident progress will be made in the upcoming legislative session. Their biggest obstacle, he says, are leaders in the legislature who are influenced by Wall Street lobbying. But this blockage is just another part of what Morrison says has been a massive public policy failure on the part of elected officials to address a crisis in New York.
There is a solution, Morrison says, adding, “They just don’t want to rock the boat.”
Elected officials might not want to shake things up, but the Public Bank NYC coalition has no such qualms. They know what a public bank would mean for their communities. So, as Morrison puts it, they’re “going to go all in” to win.