Fresh off his electoral victory, Eric Adams declared that his administration will look abroad for policy solutions to New York City’s myriad social and economic problems. “Let’s learn what they’re doing there so we can do it here,” he urged.
It just so happens, there’s a broad-based citywide coalition pressing for a bold policy solution that is common throughout the world: public banking. Bringing public banking to New York, as a proven strategy for addressing racial and economic inequality, should rank among Mayor-elect Adams’ top priorities.
More than 900 public banks exist worldwide in many shapes and sizes — from national development banks to municipal banks providing everyday financial services. What they share is an explicit mission to serve the public interest.
That may indeed seem like a foreign concept in New York, where banks have long redlined and systematically extracted wealth from communities of color. To name just one recent example: During the first year of the pandemic, banks siphoned $1.3 billion in fees from struggling New Yorkers, according to a New Economy Project analysis. Approximately two-thirds of that sum came from predatory overdraft fees, mostly paid by the lowest-income account holders.
Instead of courting highly speculative, unregulated cryptocurrencies that threaten financial stability and our environment, Adams should embrace measures that would actually address inequities in our financial system. He can find inspiration in a new report by the Cyrus R. Vance Center for International Justice surveying seven public banks on four continents.
In Costa Rica, the worker-owned Banco Popular de Desarrollo Comunal promotes gender equity and community representation in decision-making. A Workers Assembly — consisting of 290 delegates from community development, labor and other sectors — appoints a majority of the bank’s directors. At least half of the delegates from each sector, and half of the directors they appoint, must be women.
Banco del Estado de Chile, another example highlighted in the report, has expanded financing for renewables and energy efficiency and operates a green mutual fund that invests in sustainable projects, among other initiatives. The municipal Banco Ciudad de Buenos Aires, in Argentina, goes further — actively screening out investments in deforestation, tobacco and other activities at odds with the bank’s public policy principles.
As Wall Street continues to pump trillions of dollars into fossil fuels and other destructive industries, these examples demonstrate how cities like New York can invest in climate solutions and other critical needs.
Public banks also have responded quickly and effectively to the economic devastation caused by COVID-19. Many swung into action within weeks of the start of the pandemic, shoring up struggling local governments, public hospitals and small businesses.
As Dr. Thomas Marois of University College London has detailed, in March 2020, Germany’s KFW, one of the world’s largest public banks, was already delivering financial support to small and medium-sized businesses, freelancers and others impacted by the crisis. That’s because the bank’s mandate is to provide for the “sustainable improvement of the economic, social and ecological conditions of people’s lives,” not to maximize profits.
Compare that with the experience in the U.S., where banks came under fire for prioritizing their wealthy customers for Paycheck Protection Program loans. One exception was the Bank of North Dakota, a century-old public bank that has been credited with helping North Dakota small businesses secure more PPP loans, per capita, than small businesses in any other state.
Not surprisingly, a growing number of U.S. cities are now mulling the creation of public banks. New York should be the first.
Through a municipal public bank, New York City can leverage its vast resources to support permanently-affordable housing, small and worker-owned businesses, community solar and other critical needs, helping to ensure a just recovery in Black, Brown and immigrant neighborhoods hardest hit by COVID-19.
A public bank would also address persistent banking inequality in our city, by partnering with community development financial institutions to expand responsible lending and economic opportunity in historically redlined communities.
Creating a public bank in the home of Wall Street will be no small feat. It will require leadership from the top.
Adams should work with the City Council to advance legislation laying groundwork for public banking and put the full weight of his administration behind the effort.
He also should use his bully pulpit to push for action in Albany. The New York Public Banking Act would establish a special purpose charter for local public banks, ensuring strong governance and accountability and paving the way for cities like New York to move forward. Sponsored by state Senate Banks Chair James Sanders of Queens and Assembly Banks Chair Patricia Fahy of Albany, the bill has garnered support from more than 100 organizations and dozens of state electeds.
Adams is right to think globally. New Yorkers will need him to act locally.
Morrison is associate director of the New Economy Project. Del Río is co-director of New Economy Project and a board member of the Lower East Side People’s Federal Credit Union.