By Aaron Fernando
The other day in front of the New York Stock Exchange, a diverse group of demonstrators held colorful signs and chanted, “Hey, hey! Ho, ho! Wall Street banks have got to go!” The rally on June 5 was reminiscent of the Occupy Movement seven years ago—a microcosm of organized, strategic social and political demonstrations across states.
But the new movement extends beyond protest to present a practical solution to the problem caused by big banks that continue to fail large segments of society. The rally on Wall Street called for establishing a public bank for New York City, as part of a broader movement to establish public banks in cities and states across the United States.
In contrast with big private banks, which balance customer satisfaction against generating shareholder profit, public banks are fully operated with the public interest in mind.
Most of New York City’s deposits are now held by private banks, who collect fees on managing that capital and use it to make loans and investments. Between 2005 and 2015, more than $2 billion was paid in fees to Wall Street money managers of pension funds alone. Even though these banks invest in industries such as fossil fuels, private prisons, weapons research, and arms manufacturing, cities like New York have no choice but to use them.
This lack of choice is because credit unions and community banks are too small to service cities and states (in terms of capital and services offered) and are subject to federal restrictions on how much they can lend.
In fact, the biggest three U.S. banks—JP Morgan Chase, Bank of America, and Wells Fargo—hold a third of the value of all U.S. deposit.
“Right now, New York City is kind of held hostage by Wall Street banks,” says Deyanira Del Río, co-director of the New Economy Project, which organized the June 5 rally. “We’ve been doing some initial groundwork research to try and understand some of the possible pathways for New York City to create a public bank.” This involves “building a coalition of groups to sort of shape the vision for a public bank and the strategy for pressing New York City to create one.”
All of this activity comes amid a push for further deregulation of the big banks sought by the Trump Administration. On the same day as the public banking rally on Wall Street, the Securities and Exchange Commission voted to roll back regulations that restrict banks from making risky investments with depositors’ money. This would weaken the Volcker Ruler, part of Dodd-Frank regulations, and exempt many banks from needing to comply with certain regulations based on their size.
The banks claim these regulations are too complicated to comply with and hinder profitability. Yet banks are earning record profits, and this rollback will enable them to make investments with more complicated financial products, the likes of which triggered the financial crisis of 2008.
Just as banks wish for deregulation and more market freedom to play with public money, cities, states, and the general public want the market freedom to opt out of keeping their deposits with these financial institutions. One participant at the New York rally, Hyung Nam of Portland, Oregon, spoke of that city’s divestment from all corporate securities due to public concerns.
“These were largely human rights concerns, specifically over what Israel is doing in the Occupied Territories, human rights concern about the plight of immigrants that are being pushed into for-profit prisons and then major concerns, both human rights and environmental,” said Nam, a member of the city’s Socially Responsible Investment Committee. “It just made sense that we should be able to control what happens with our public money in our city, to not fund these things that so many of us are concerned about.”
There are signs that the public banking movement is gaining momentum.
Last month, American Samoa in the Pacific was authorized to open its own public bank after the Bank of Hawaii left the island territory six years ago, resulting in a near total freeze in banking services for American Samoans. It will be the second public bank in the United States after the Bank of North Dakota, which was started more than a century ago.
In late May, California passed a bill to create a state-chartered bank for cannabis businesses to serve an industry that still largely operates on a cash-only basis due to risk of federal penalties. But many are looking to expand public banking beyond cannabis banking. Organizations in nine cities—Los Angeles, San Francisco, Oakland, Santa Rosa, Santa Barbara, Sonoma County, Eureka, Santa Cruz, and Palo Alto have joined together to form the California Public Banking Alliance, or CPBA.
According to Trinity Tran of Revolution LA—a member organization of CPBA which successfully led LA’s divestment campaign and its public banking push—CPBA members are drafting a public bank license and charter that would standardize how public banks come into existence. The goal is to ensure that these banks actually serve the needs of the public and the long-term health of the environment and economy.
Once approved by the California state legislature, Tran explains, this would put in place “a special license for charter cities to form public banks. This would create a uniform regulatory framework with an explicit socially and environmentally responsible charter.”
Meanwhile, Alaska, Massachusetts and Michigan have active bills to create state banks, and cities and states around the country are looking into how public banks could be implemented. The public banking movement has made significant progress this year and seems to be growing, but many challenges remain.
“We’re still at the beginning,” says Del Rio. “We have no illusions that this is a quick, one-session campaign. This is a multi-year effort.”