Op-Ed: At a time when runaway corporate profits masquerade as inflation, a proposed public bank in New York would center the interests of black and brown communities and fund projects for them.
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More than a decade after the Great Recession, America is once again experiencing a supply-side recovery. Whether via the $700 billion bailout of 2008 or the unchecked exponential growth of 2022, commercial banks and financial firms eat first — while most Americans, especially black and brown working-class communities most affected by the crisis, struggle without support. Then and now, this contrast is particularly stark in New York, the global center of finance, home to countless banks and the early epicenter of the pandemic.
Members of Public Bank NYC (PBNYC), a coalition of organizations and other stakeholders committed to financial justice in New York City, had a different vision, rooted in racial equity and environmental justice. Instead of investing public money in private, for-profit banks that actively harm vulnerable communities, they propose a public bank, a financial institution owned and accountable to New Yorkers, dedicated to serving the public interest and mission-based lending to the local economy.
Latest Demos The case study is the third in a series of four that focuses on community campaigns working across the United States to regain power over economic resources. The study highlights PBNYC’s transformation framework for a public bank, current legislation in state and local governments to create the bank, and how the coalition helped bring the idea of public banking into the national conversation .
As Deyanira Del Rio, co-director of the New Economy Project, the organization that first convened the PBNYC coalition, explained: “A public bank would have a mission to invest in permanently affordable housing, small businesses owned by workers and other communities. – directed development that reinforces and roots wealth in the same color neighborhoods that banks have consistently demarcated over generations.
As the a case study shows, a public bank would be owned and controlled by the city and accountable to New Yorkers. It would create community wealth by investing in neighborhoods – investing in the priorities and unmet needs of New Yorkers such as permanently affordable housing, renewable energy, worker and financial cooperatives, and fair banking.
Community-led institutions are already deploying funding to meet these needs. They are already building affordable housing, helping residents start small businesses, and investing in sustainable energy solutions. A public bank would allow these projects to develop widely. For example, a public bank could allocate more capital to community land trusts, an affordable housing model in which a nonprofit organization owns land and leases it for affordable housing, with provisions to limit resale prices to maintain affordable housing over the long term. A public bank could also allocate more capital to worker-run cooperatives and small businesses, invest in sustainable energy generation, or simply allocate more low-interest loans to families. These investments would create jobs and help New York City meet its ambitious climate change goals.
Several types of public banks exist internationally with separate structures; they generally operate more fairly than private, for-profit banks and have more transparency about how they invest the money, who gets the funding and why. Most have greater public accountability through independent governance, transparency or public engagement and strong oversight. In PBNYC’s vision, the public bank’s board of directors would include government officials and, most importantly, community leaders who represent low-income communities of color.
Such a structure stands in stark contrast to existing private, for-profit banks, with predominantly white boards whose sole responsibility is to their shareholders and the making of profits, with little or no transparency about what they fund. As Linda Levy, former CEO of the Lower East Side People’s Federal Credit Union, a founding member of PBNYC, explains, “Right now, the way things are set up, New York City has all this money that it places in the banks of Wall Street. It’s hard enough to know which banks they put the money in, let alone know exactly where that money ends up in terms of investments. In turn, Levy added, “New Yorkers are basically funding things they have no desire to fund. It ranges from building monster skyscrapers to climate offenses to private prisons.”
Although laws such as the Dodd-Frank Wall Street Reform and Consumer Protection Act have limited some elements of predatory Wall Street practices, they have not reduced the concentrated power of the big banks or their ties to the city government. The most of New York City’s municipal funds — money generated by the city, including those generated by state and federal taxes and payments — are held by just three giant private, for-profit banks. Every year, New York City transfers $100 billion through Wall Street banks – the same banks that consistently highlight New York’s neighborhoods of color, fund private prisons, fund fossil fuel extraction and other destructive industries, and drive communities to accept high-interest loans and charge them exorbitant fees, including $31 billion in overdraft fees in 2020 alone.
PBNYC, while still young, has already made critical strides in reversing years of these practices and achieving its ultimate goals. Several candidates for the 2020 municipal elections in New York have pledged their support for the public bank. The New York City Council is considering The Banque Populaire Law, a set of bills that would lay the foundations for a public bank, starting with more clarity and transparency around the current system and leading to the development of a business plan and the drafting of the bank’s statutes. Starting in April 2021, New York City will no longer deposit funds with Wells Fargo, following reports that in 2020 the bank turned down more applications from black homeowners than it has accepted. Wells Fargo, as New Economy Project associate director and board member Sandy Nurse wrote, denied black candidates a crucial opportunity to lock in low interest rates and build generational wealth.
At the state level, currently 87 state legislators and more than 100 groups support the New York Public Banking Act which would create legal and regulatory frameworks for local public banks that reflect the coalition’s vision for racial justice and economic and transformational change. The struggle extends beyond New York and the state – the Philadelphia City Council recently passed legislation laying the groundwork for a public bank. Other efforts to establish a public bank at the state and regional level are underway in Massachusetts and East Bay. The California State Legislature passed a public banking bill in 2019. There’s even progress nationwide: Rep. Rashida Tlaib and nine co-sponsors introduced the Public Banking Act in 2020.
The PBNYC campaign pushes back against the exploitative and extractive practices of Wall Street and gives momentum to institutions that put the public good first. If elected officials in New York are committed to repairing the damage wrought by decades of disinvestment in black and brown communities, they should leverage the vast economic resources at their disposal to prioritize community-driven economic development, by especially for the most underserved and harmed people. by the financial sector.
A public bank is the foundation of this process, ensuring that public money is used for the public good.
Lebaron Sims is associate director of policy and research at Demos.
