The push for public banking (photo: @PublicBankNYC)
Here’s something that might surprise you: Almost all of the $100 billion in revenue New York City will collect this year to pay for schools, buses, and other public services will be deposited in three big banks – JPMorgan Chase, Bank of America, and Citi. That’s because New York State requires local governments to put our public funds in banks, essentially handing Wall Street a lucrative monopoly that it has lobbied to uphold for more than a century.
Talk about easy money. We give big banks our public dollars, from which they profit handsomely, and New York City gets no meaningful commitments from them in return. It’s time to change the way the City does its banking and use our considerable leverage to ensure that public money works for the public good.
The City has begun taking steps in the right direction. New measures by Mayor Eric Adams and Comptroller Brad Lander aim to hold the City’s designated banks “more accountable to the public,” and will bring needed sunlight to the NYC Banking Commission. The Commission, a three-member body, composed of the Mayor, Comptroller, and Commissioner of Finance (a mayoral appointee), is charged with designating which banks are eligible to hold City deposits.
Now, when banks apply for designation, the Commission will require that they submit detailed plans to prevent lending and employment discrimination in their operations. The Commission also will, for the first time, open up the designation process to public comment and testimony.
The City’s recent decision to cut ties with Wells Fargo helped spur the Commission to revamp its designation process, according to Comptroller Lander. In fact, New York City’s bumpy relationship with the scandal-ridden bank is a case in point of how compromised we are when we entrust our public money to Wall Street.
In 2017, environmental and indigenous rights activists called on the city to ditch Wells Fargo amid nationwide protests of the bank over its financing of the Dakota Access Pipeline, which threatened the ancestral land of the Standing Rock Sioux tribe. At the same time, regulators had slapped Wells Fargo with a rare and long overdue downgrade of its Community Reinvestment Act rating, following the bank’s notorious “fake accounts scandal” – giving the City the legal hook it needed to begin drawing down its accounts with the bank. But the Banking Commission never formally removed Wells Fargo’s designation, and by 2021 the City had welcomed the bank back into the fold.
That is, until last summer, when Wells Fargo was exposed, yet again, for lending discrimination, this time against Black homeowners seeking to refinance their mortgages. Public Bank NYC, a citywide coalition of more than 40 community and labor groups, demanded that the City cut ties with the bank, and two weeks later, Mayor Adams and Comptroller Lander did just that.
Thanks to the dogged efforts of Public Bank NYC and others, the New York City Banking Commission is now in the spotlight. New Yorkers are gaining greater awareness that where we bank as a city has profound public policy implications.
Imagine if the City deposited our public dollars in a bank dedicated to advancing racial, economic, and environmental justice.
With a public bank, created by the City and chartered to serve the public interest, we can ensure that public funds are managed accountably for the benefit of all New Yorkers. It would enable the City to leverage billions of dollars toward investments in affordable housing, small and worker-owned businesses, renewable energy, and other critical needs in low-income, Black, brown, and immigrant communities that the big banks routinely fail to serve.
The City Council is primed to act. A supermajority of Council Members supports “The People’s Bank Act,” a legislative package that lays the foundation for a public bank. For starters, the People’s Bank Act would require that the City publicize quarterly summaries of its accounts with designated banks, including account balances and fees charged. This measure would ensure transparency, now missing, regarding the City’s bank deposits, and help New Yorkers assess the scale of deposits available for a public bank. Another bill in the works would establish a working group to guide the creation of a business plan and draft articles of incorporation for the public bank.
At the state level, the New York Public Banking Act would create a safe and appropriate regulatory framework for public banking in New York, making it easier for New York City and other local governments to get public banks off the ground. More than 150 community, labor, and cooperative organizations support the bill, as do dozens of state and local elected officials from Buffalo to Long Island.
The banking lobby alleges that a public bank would hurt local financial institutions, but it’s just the opposite. Public banks partner, rather than compete, with community development credit unions and local banks to expand responsible financial services in historically-redlined neighborhoods. The claim that public banks would put public funds at risk also misses the mark. Unlike private banks, public banks do not seek to maximize profits and therefore eschew the kind of Wall Street-fueled speculation that collapsed our economy in 2008.
The New York City Banking Commission is finally letting in some sunlight and New Yorkers will have the opportunity to demand that our public money works for the public good. The best way for New York City to achieve this goal is to establish a public bank.
Andy Morrison is Associate Director of New Economy Project, which coordinates the Public Bank NYC coalition. On Twitter @PublicBankNYC.