A Wall Street rally for public banking (photo: @PublicBankNYC)
In recent memory public banking was an idea that belonged either to a distant utopian future or a distant populist past. But today, not only is public banking on the agenda of major New York politicians, but competing visions of public banking are on offer.
The coalition Public Bank NYC (PBNYC) is running a grassroots effort to create a public bank for New York City, while mayoral candidate Andrew Yang proposes to initiate public banking through the mayor’s executive authority. Despite the two camps sharing certain goals, they do not represent the same movement.
Whereas PBNYC’sgoal is to disentangle the city’s finances from Wall Street, Yang includes collaboration with Wall Street companies as part of his public banking proposal. At the same time that Yang’s proposal signals growing support for public banking it also complicates the issue of just what is meant by “public banking.”
PBNYC is a coalition of more than 40 community, labor, and cooperative groups including the New Economy Project and New York Communities for Change. The collective mission of PBNYC is the creation of a municipal chartered bank. That would mean a bank that is both owned and managed by the City of New York, and so is accountable to New York voters. One of PBNYC’s goals for a public bank is the reduction of underbanking. Many of New York’s poorest communities suffer from a lack of access to financial services, especially historically redlined communities of color. Such a lack of access drives individuals to use alternatives like check-cashing services, prepaid debit cards, and high-interest loan services, which are expensive and generally do not contribute to a credit score. One role of a public bank, then, would be to fill this gap left by the market through partnerships with community-based credit unions and loan funds.
But PBNYC’s core goal for a public bank is divestment of public funds from Wall Street. New York City finances its public institutions with tens of billions of dollars of municipal funds collected from taxes and other sources. The city government entrusts these funds to private banks like JPMorgan Chase and Bank of America, which invest the funds in the stock market to generate additional revenue. These private banks are known to invest in the fossil fuel industry and the private prison industry, and to engage in banking practices such as high overdraft charges that PBNYC deems harmful to New Yorkers. For these reasons, PBNYC states that a public bank should take on the role of investing the city’s municipal funds, both to stop subsidizing Wall Street banks and to make the investment of public funds more transparent and democratically accountable.
Once municipal funds are in the hands of a public bank, PBNYC says they can be diverted out of extractive industries and into green energy, small businesses, workers’ cooperatives, and community land trusts. To realize their mission, PBNYC is putting its organizing behind several legislative initiatives.
One is the New York Public Banking Act, which is sponsored by Queens State Senator James Sanders in the State Senate and Bronx Assemblymember Victor Pichardo in the State Assembly. The Act would not itself create a public bank, but would instead create a legal framework for the creation of a future public bank, as none of New York’s current laws were written with a public bank in mind. The bill is currently in committee in both houses.
PBNYC also supports the banking reform legislation put forward to the New York City Council by City Council Member Mike Levine of Manhattan. If passed, the legislation would mandate that the city government be more transparent in its dealing with the banks that manage municipal funds, and would establish the Council’s official endorsement of the New York Public Banking Act. On April 28 members of the coalition testified at a hearing where the Council was discussing Levine’s legislation.
At the hearing, Andy Morrison of the New Economy Project said, “Together these bills represent the first steps toward formation of a democratic financial institution that can ensure that New York City’s public money is used for the public good, to advance racial equity and a just recovery [from COVID-19].” The public banking legislation in the City Council and the State Senate is the present culmination of PBNYC’s long and ongoing struggle to establish a public bank for New York City.
In January, Andrew Yang entered the field of New York’s public banking movement. The entrepreneur and 2020 presidential candidate, best known for championing universal basic income, announced that he was running for mayor of New York, and that public banking was on his agenda. His platform includes a proposal for what he calls a “People’s Bank of New York.”
The People’s Bank would not, in fact, be a public chartered bank. Rather it would be a nonprofit corporation that would use loans from city government to support existing credit unions, community banks, minority depository institutions, and loan funds. Yang has stated, however, that the People’s Bank “will build the case for a true public chartered bank.” Yang’s core goal for the People’s Bank, and for public banking generally, is the reduction of underbanking. He also hopes to use the People’s Bank to distribute regular cash grants to the poorest New Yorkers and, like PBNYC, to financially assist small businesses.
Superficially, the respective public banking visions of PBNYC and Yang seem to overlap, but there are marked differences between the two. For one, PBNYC represents a grassroots movement for public banking, whereas Yang plans to enact his public banking agenda by getting elected and using the executive authority of the mayor’s office.
Jamie Tyberg of New York Communities for Change expressed the concern among some members of PBNYC towards public banking initiatives that are not connected to working people’s experiences at a grassroots level, saying: “If you’re not struggling to pay rent, if you’re not living paycheck by paycheck, then you’re not understanding how Wall Street has been our enemy and the main force of destabilizing our communities, and therefore you won’t be able to provide the best solutions.”
A second major difference between PBNYC and Yang is over financial technology, or “fintech,” companies. Fintech companies research and develop new technologies for financial institutions. A key aspect of Yang’s People’s Bank proposal is the establishment of an “Innovation Lab” wherein city government would partner with fintech companies to “bring the benefits of fintech products to more consumers.” But there is widespread skepticism toward fintech companies within PBNYC.
In testimony before the U.S. House Committee on Financial Services in January, representatives of the New Economy Project said that “companies identifying as ‘fintechs’ claim to ‘eliminate banking deserts’ or ‘empower communities’ redlined by banks, when in fact they are exploiting communities’ unmet needs and perpetuating inequality in our banking system.”
But the most significant difference between PBNYC and Yang is over divestment from Wall Street. Divestment forms the core of PBNYC’s mission, whereas it is entirely absent from Yang’s proposal. There is thus a concern over the usage of the language of public banking by figures like Yang who do not share a commitment to divestment.
“Divesting from Wall Street is non-negotiable for us,” said Tyberg, “and so if you don’t have that at the core of your plan then that means you are not speaking with us, that means you don’t know what the actual problems are, that means you don’t know who is causing these problems. Or maybe you do and you want to maintain [those problems]. Then you can say that, just don’t use our language.”
Although PBNYC does not take a position on political candidates, and Andrew Yang has made no statement as to PBNYC’s proposals, their differences over divestment may mark the beginning of a wider political struggle over the meaning of the term “public banking.”
There are nonetheless those who hope for unity in New York’s public banking movement. State Assemblymember Ron Kim of Queens has both co-sponsored the New York Public Banking Act and endorsed Andrew Yang for mayor. Kim is optimistic that PBNYC’s and Yang’s visions will converge in the long run. He supports the People’s Bank proposal because he thinks it would be “a step in the right direction” that could “help uplift the underbanked communities.” PBNYC itself made the statement that it is “encouraged that so many candidates are coming out in support of public banking.” Regardless of differences, the fact that more mainstream politicians are showing at least nominal support for public banking is seen as a promising development.
In New York, public banking has gone from a marginal idea to a relatively mainstream progressive idea. For proponents of public banking, that carries the strong benefit of increased support for the idea among both politicians and the public. But it also carries the difficulty of competing visions, and disagreements over just what is meant by the term “public banking.” Whether PBNYC’s and Yang’s visions can be reconciled is yet to be determined. What is ultimately at stake is the wellbeing of working New Yorkers. As PBNYC stated, “Fundamentally, any public bank proposal must be laser focused on advancing financial, housing, worker, and climate justice. We welcome all candidates to join this important fight."
Sam Copeland is a freelance journalist.
Note: this article has been changed to remove mention that NYCC endorsed Scott Stringer for mayor, given that the organization rescinded its endorsement.