Few crises in American history have exacerbated inequality as much as the Covid-19 pandemic. This is especially true of New York City, where billionaires’ wealth rose by the time more than 1 million residents were unemployed and thousands of small businesses were forced to close.
The scale of this crisis requires courageous action – and a break with the financial practices that have marginalized low-income neighborhoods and color communities for decades.
This is the ideal time for New York City to start a public bank.
Every day, the New York government has billions of dollars in deposits with commercial banks – money that is too often used by these institutions in ways that contradict our values and interests. This is public money, but Wall Street banks use it to fund fossil fuel mining, private prisons, weapons manufacturers, and other harmful industries.
Bad behavior in banking is nothing new. From redlining to the foreclosure crisis to high-yield payday loans, incumbent financial institutions have long exacerbated racial inequality. In this current crisis, large banks have been responsible for channeling most of the Payroll Protection Program (PPP) loans to their incumbent customers, keeping small businesses in color communities far less than their fair share of which urgently needed funding.
Public banking offers a better way. A bank created and controlled by our city government would not be driven by the profit motive but by the public interest. It would provide an alternative custody option for some of the city’s own cash holdings – funds that could be used to support public interest projects that mainstream banks are too often denied credit for. A public lender could support affordable property developers, MWBEs, workers’ unions, renewable energy projects, community land trusts, and other equitable economic development initiatives.
A public bank could be a great boon to existing New York City community development financial institutions by providing them with bridging loans to expand their loans to small businesses, first-time homeowners, and unbanked families. Our city has several community development credit unions that would be strengthened and expanded through this type of support, including the FCU Neighborhood Trust, the FCU Brooklyn Cooperative, and the FCU of the Lower East Side People. In the mid-1990s, Alderman Levine helped found the FCU’s Neighborhood Trust, knowing it could fill the void that left many workers and local businesses in Washington Heights and Inwood without access to credit and credit. The organization has continued to do what big financial institutions refuse to do – invest in color communities.
The idea of a public bank is nothing new in America. For over a century, the state government owned Bank of North Dakota (BNK) has been a source of funding for critical infrastructure and underserved businesses. During the Covid-19 crisis, BNK was credited with the aid Get more PPP fundingrelative to the state’s workforce than its competitors in any other state. Although the Bank of North Dakota was originally founded by grassroots populists, it now enjoys active support across the political spectrum.
So it’s no surprise that the public banking movement is gaining national momentum. Enabling laws have been introduced in over two dozen states and municipalities. California issued a groundbreaking law last January the state’s local governments were given the authority to set up such institutions.
A big one is growing here in New York City coalition has brought together grassroots groups, trade unions and civil rights organizations to work towards creating a community bank. Enabling legislation has already been introduced in both houses of the state parliament. Levine recently introduced City council bills requiring the city to disclose details of its current banking relationships in order to assess the amount of funds available to a public entity.
We must seize this moment and act boldly to combat the profound inequality that is exacerbated by this pandemic. A return to the status quo is not an option. Now is the time to create a banking institution that will do what Wall Street hasn’t and what hasn’t: investing public money to advance economic, racial, and environmental justice in New York City.