By Jeanmarie Evelly
The City Council’s finance committee took up a slate of bills Wednesday that aim to increase public transparency around where the city does its banking—what advocates say would be the “first key steps” towards starting a public bank in New York City.
The legislation would require the city to publish quarterly reports detailing its existing accounts with corporate banks and other financial entities, and to better publicize civic meetings about the city’s banking activity. Lawmakers are also weighing a resolution that would urge the state legislature to pass two bills of its own: one that would allow cities and counties to lend public credit and own stock in public banks, and another that would establish a public bank at the state level.
The bills are part of a campaign, Public Bank NYC, that aims to better scrutinize where the city holds its money, with an effort to shift the government away from doing business with corporate banks that advocates say work at odds with the city’s goals of equity and racial justice. They point to historical practices like redlining and more modern predatory practices like overdraft fees, and the fact that many big-name banks fund harmful industries like fossil fuels and assault weapons. Public money, they argue, shouldn’t be held on Wall Street but be deposited instead into a public bank that could invest the city’s holdings into things like worker coops, affordable housing and to increase financial services in under-served communities.
“Mainstream financial institutions have long exacerbated racial inequality,” Councilmember Mark Levine, who sponsored two bills that would require the city to regularly report on its financial holdings, said at a press conference ahead of Wednesday’s hearing. The City Council’s efforts, he said, are part of a wider public banking movement that is “gaining momentum nationally” with two dozen states and municipalities exploring related legislation.
The issue has also come up on the New York City mayoral campaign trail: Democratic contender Diane Morales’ platform calls for public banking, while Andrew Yang has proposed using a $100 million loan from the city to launch what he would call the “People’s Bank.”
“[A public bank] would tap the potential of the billions of dollars our city has on deposit right now at commercial banks. This is the public’s money and it could and should be invested in our communities,” Levine explained. “It would let us put some of the city government’s deposits in an institution that is accountable only to us.”
The city holds money in nearly 3,200 depository accounts at dozens of “designated banks,” according to city treasurer Mary Christine Jackman, who testified at Wednesday’s hearing. While funds are constantly moving in and out of those accounts, they collectively held $1.2 billion in city funds at last count, she said.
Every other year, the city’s Banking Commission is charged with approving which designated banks can hold deposits from city agencies; the list approved in 2019 includes 30 institutions, among them JP Morgan Chase, Bank of America, Amalgamated and Citibank.
Advocates say the city’s current designated banks include bad actors that invest billions each year into industries like fossil fuels, and commit other practices that harm low-income communities. They specifically called out corporate banks for extracting overdraft fees from customers whose withdrawals or payments exceed the amount in their accounts. The New Economy Project, one of organizations leading the Public Bank NYC campaign, says the city’s designated banks together charged $5 billion in overdraft fees during the COVID-19 crisis.
“[When] your account balance dips below zero, it could be a $1 it could be $5, the banks hit you with maybe a $40 fee, and they can hit you daily in many cases,” Andy Morrison, the group’s associate director, said in a virtual press conference Wednesday. “This is a matter of big Wall Street banks extracting money from struggling people that are their customers.”
The campaign says a public bank could, among other things, invest the city’s deposit funds into entities like Community Development Financial Institutions, or CDFIs, which channel investment to distressed communities. These include the Lower East Side People’s Federal Credit Union, which CEO Linda Levy says strives to offer “fair and reasonable financial services,” to underserved communities and won’t charge things like overdraft fees.
“We don’t charge that, ever—if you don’t have enough money in your account, well, you don’t pay your bill. We’re not going to pay it for you and then charge you $40 for that service; we want you to know how to handle your money,” Levy said during Wednesday’s virtual rally. “The fact that our city continues to support and put money into these institutions that are actually terrorizing our communities through this kind of financial extraction of money, that’s to me the worst aspect of it.”
When asked what factors the city uses in deciding which banks to do business with, and if they include whether institutions invest in industries like fossil fuels, treasurer Jackman said the considerations are myriad.
“The Banking Commission has a number of different factors that are considered. I don’t know that fossil fuels are specifically considered,” she said. But she pointed to the city’s earlier decision to stop doing business with Wells Fargo because of the bank’s poor record of lending in low-income communities.
“The fact that we decided not to use Wells Fargo’s services for the last time period exemplifies the fact that we put the city’s values into our actions,” Jackman told councilmembers. (Wells Fargo, she added, has applied to become a designated bank once again; the city’ Banking Commission will vote to approve its list of designated banks for the next two years by the end of May, officials said.)
Jeffrey Shear, the Department of Finance’s deputy commissioner for Treasury and Payment Services, told council members Wednesday that the agency would “refer to the state legislature regarding the establishment of a public bank.”
But he did testify that doing so would be a challenge (experts have said that establishing a public bank would be a long-term process requiring extensive regulatory review).
“We do feel that establishing a public bank is a very complex task to do, and that it can be challenging for a public bank to balance the need to protect the public funds that establish the bank, capitalize it, versus the important public goals to provide better, cheaper services for the banking community,” Shear said. “There is a tension there and we think there has to be a lot of work done.”
Advocates say the bills the City Council is considering would be the first steps towards starting a public bank, by engaging the public more directly and increasing transparency around the city’s current banking decisions. Shear said the DOF is largely supportive of the bills in question, but did raise some concerns.
Intro. 2164, introduced by Councilmember Helen Rosenthal, would require the city’s Banking Commission to better publicize its meetings, giving notice at least 30 days in advance of such events. Shear said that the 30 day requirement “could prove problematic” if a meeting needs to be rescheduled and the Commission is facing an immediate deadline. Shear also raised questions about Levine’s two bills, Intros 2099 and 2100, which would require the DOF as well as the Office of Management and Budget to publish quarterly reports on the city’s deposit accounts and other financial services it uses.
Both Shear and the OMB testified that these reporting requirements could prove too “burdensome” for the agencies. The OMB proposed filing an annual report instead of quarterly ones; Shear suggested that instead of providing reports on all 3,176 of the city’s depository accounts, it focus on those with balances exceeding a certain amount.
“Doing a report on all 3,200 would be onerous, and some of those accounts are small or have very little activity, so we would like to work with you in the council on establishing some type of threshold,” Shear told council members.
Levine countered that it is in the public’s interest to know how the city is handling public money.
“We’re all sensitive to reporting burdens, but there’s a real imperative for the public to understand, because the stakes are so high,” he said. “It shouldn’t take a FOIL request for the city or advocates to learn some basic questions about the fees we’re paying and the interest we’re earning.”