By Errol Louis
New York has been making slow, halting moves in the direction of creating a public bank — a publicly owned financial institution that would facilitate financial services, especially loans, to help students, families and small businesses, using the billions of dollars in tax revenue, fees and fines and operating cash the city controls.
It’s long past time to move beyond baby steps and get it done. Legislation in Albany and at City Hall would make it possible to smartly reinvest city funds that are currently sitting idle.
Ever wonder where New York’s $98 billion budget gets stashed before the city pays for stuff — everything from salaries, paperclips, lightbulbs and flags to fire trucks, homeless shelters and a million other items? The short answer is that the money sits in special accounts at major banks like, Bank of America, JP Morgan Chase and Wells Fargo — institutions whose consumer and commercial divisions can be distinctly unfriendly to New York consumers, charging hefty fees and refusing to make loans in many communities that need credit.
Advocates say it’s time to end the cozy arrangement that allows megabanks to handle tens of millions of dollars in government deposits while overcharging the same citizens whose taxes generate those huge deposits in the first place.
“All that money is flowing through Wall Street banks,” says Sarah Ludwig, co-director of the New Economy Project, a leading advocate for public banking. “They’re extracting money from communities. They should be building wealth, not pulling wealth out.”
But pulling wealth out is exactly what the banks are doing. Across New York State, customers got hit with $1.6 billion in overdraft and ATM fees last year, slamming accounts of people and businesses during the pandemic. Of the statewide total, $1.2 billion came from people living in the five boroughs, according to an analysis by Ludwig’s organization. JPMorgan Chase, Bank of America and TD Bank accounted for 80% of the fees.
The typical account being hit with these fees has less than $350, according to the Center for Responsible Lending, and a small slice of bank customers — 9% — end up paying 84% of the billions the banks reap from fees.
Sen. Elizabeth Warren recently read the riot act to Chase CEO Jamie Dimon at a congressional hearing. “You and your colleagues come in today to talk about how you stepped up and took care of customers during a pandemic, and it’s a bunch of baloney,” she said.
Fee-gouging isn’t the only questionable bank practice. The state Department of Financial Services found extensive redlining in metropolitan Buffalo, with financial companies refusing to make mortgage loans in Black communities. The New Economy Project found similar patterns in Rochester and Syaracuse.
And then there’s climate justice. Bill McKibben, the author and environmental visionary, wrote in 2019 about the fact that big banks invest more money in the oil and gas industry — much more — than big names like ExxonMobil and British Petroleum.
“In the three years since the end of the Paris climate talks, Chase has reportedly committed $196 billion in financing for the fossil-fuel industry, much of it to fund extreme new ventures: ultra-deep-sea drilling, Arctic oil extraction, and so on,” McKibben wrote in 2019. “In each of those years, ExxonMobil, by contrast, spent less than $3 billion on exploration, research, and development…By this measure, Jamie Dimon, the C.E.O. of JPMorgan Chase, is an oil, coal, and gas baron almost without peer.”
McKibben and other environmental activists have made a public show of holding demonstrations, cutting up credit cards and closing accounts at Chase and other banks that finance polluters.
A proposed state law would allow cities to create a specialized, government-owned financial institution, capitalized by billions of dollars currently sitting in big banks, and create a “people’s bank.” The bank would be required to provide reasonably priced services to families and communities rather than rack up profits.
New York is poised to get on board. A statewide coalition of more than 100 organizations — including well-known labor unions like DC37 and UAW Local 9A, along with climate justice groups, credit unions and cooperatives — have pushed state lawmakers to pass a law that would allow cities around the state to create public banks. A City Council bill would require regular reports on where our city currently places taxpayer funds — a prelude to moving the funds to a public bank in the future.
When the dust settles from next week’s election, this smart reallocation of public capital should be at the top of the agenda for the next administration and City Council.
Louis is political anchor of NY1 News.