Public Comments
July
2021
9
Public Banking and Shared Equity
This response to the Shared Equity RFI discusses ways in which a local public bank in NYC would advance shared equity goals, and provides context on current state and municipal policy efforts toward creating a municipal public bank in NYC. Fundamentally, we see public banking as a catalyst for cooperative and community-led development in Black, brown, and immigrant communities, including those hardest hit by the pandemic.
Any inquiry into shared equity strategies for community wealth-building and racial and economic equity in NYC must include the local movement for a municipal public bank. A public bank in NYC would serve as both an important shared equity strategy in-and-of-itself and as a powerful tool for financing a wide range of local shared equity initiatives. Groups building shared equity models in NYC communities understand this, which is why many of the most active members of the Public Bank NYC coalition include community development credit unions, community land trusts, worker cooperative associations and development organizations, and other shared equity leaders.1
The agencies conducting this RFI already understand the enormous potential for public banking to support shared equity initiatives. Included in the Department of Consumer and Worker Protection’s 2020 “Municipal Policies for Community Wealth Building” report is a profile of the Bank of North Dakota (BND), which has successfully financed public projects and made responsible loans to small businesses and others for more than a century.2 Since COVID-19 struck, BND and other public banks around the world have responded quickly and effectively to the economic devastation caused by the pandemic, shoring up small businesses and other critical infrastructure. That’s because public banks have an explicit social justice mission and specifically invest in sectors that provide direct economic, social and environmental benefits.3
These comments are intended to incorporate and build on the “Joint Statement of Principles on Shared Equity,” submitted by New Economy Project and many other organizations in response to the RFI. We would welcome the opportunity to convene a meeting at which members of the Public Bank NYC coalition could speak with your agencies about the critical need for a NYC municipal public bank, in the context of shared equity, racial and economic justice, and a just recovery.
A NYC public bank would serve as a powerful tool for advancing shared equity strategies for racial and economic justice.
Right now, large commercial banks hold the vast majority of NYC’s public deposits, which total in the billions of dollars. Many of these “designated banks” invest in fossil fuels, landlords responsible for evicting large numbers of NYC tenants, and other sectors and activities that run counter to the city’s stated public policy goals. They also systematically redline and otherwise exploit New Yorkers and NYC neighborhoods.
According to our research, the City’s designated banks extracted nearly $1.3 billion from NYC residents during the pandemic, in the form of overdraft, maintenance, and ATM fees4—fees that disproportionately extract wealth from low-income, Black, brown, and immigrant New Yorkers.
Ending the City’s relationship with extractive financial institutions, and creating a transparent, accountable public bank to hold city deposits, would be a major step toward shared equity. A public bank would leverage its lending capacity toward a wide array of local shared equity initiatives, including community development credit unions, community-controlled renewable energy, community land trusts, and worker cooperatives.
Public banking and shared equity in financial services and community development finance.
Public banks partner—rather than compete—with local banks and credit unions to drive responsible lending and expand safe and affordable financial services in Black and brown historically-redlined neighborhoods.5 Thanks to the century-old Bank of North Dakota, for example, North Dakota has more local banks and credit unions per capita than any other state in the U.S.6
The public Banco Bienestar in Mexico serves as the institutional bank for “Popular Savings and Credit Institutions” (similar to U.S. CDFIs) and facilitates a national program of small low-and-no-interest loans to individuals and microbusinesses that was expanded as a key component of Mexico’s COVID-19 response.7
New York is home to the second largest network of CDFIs in the nation. These mission-driven financial institutions have a demonstrated track record of providing responsible financial services, financing shared equity initiatives, and, more recently, getting relief funds to New Yorkers that the big banks have failed to serve. Research shows that public investment in CDFIs is smart public policy that leads to significant, measurable economic impact; CDFIs leverage every public grant dollar with at least 12 additional dollars from other sources. A key function of a municipal public bank in NYC would be to partner with, and support the expansion of, CDFIs, to bring these critical institutions to greater scale.
Public banking and shared equity in renewable energy
A public bank in NYC would serve as a financial catalyst for a clean energy economy built on principles of shared equity. NYC’s ongoing transition away from utility-scale fossil fuel electricity production and toward distributed renewable energy production represents a massive opportunity for shared equity and community wealth-building.
Cooperative and community-owned clean energy production models, such as the Sunset Park Solar program, currently in development, offer low-income New Yorkers and New Yorkers of color the opportunity to save on electricity, build wealth, and exert shared control over a major community asset. Similar cooperative models of renewable energy are increasingly common around the world and have often been developed in partnership with public banks. In Germany, the Sparkassen, a network of more than 400 local public banks, have reportedly been a contributor to community renewable energy infrastructure.8 In Costa Rica, the Banco Popular, a hybrid public/cooperative bank, has played a similar role.9
Public banking and shared equity in housing
A public bank would provide a powerful tool for increasing capital available to shared equity housing strategies such as community land trusts, mutual housing associations, limited equity cooperatives, and more. The public bank could support shared equity in housing through direct investments, or in collaboration with CDFIs, including through partnership lending and by helping to establish a secondary market.
Public banking and shared equity in the workplace
NYC is home to one of the largest and fastest-growing collections of worker cooperatives and other worker-owned businesses in the US,10 in part due to sustained support for cooperative development, training, and technical assistance from the Department of Small Business Services and the City Council. However, worker-owned businesses in New York still consistently face obstacles accessing financing from commercial banks. Instead, the majority of financing for worker cooperatives comes from a handful of small and under-resourced CDFI loan funds that specialize in lending to co-ops.11 A public bank would be well-positioned to make partnership loans with these CDFIs, significantly increasing the capital available to worker-owned businesses and bolstering existing City initiatives to support worker-ownership in NYC.
NYC should continue to advance a strong policy agenda towards creation of a municipal public bank.
The New York Public Banking Act
“The New York Public Banking Act” (S.1762A/A.5782) would pave the way for municipal public banking in New York. Under current state law, a New York locality seeking to establish a public bank must apply for a commercial bank charter, forcing local governments to fit their public banking business models into a regulatory system designed for private, commercial banks. The New York Public Banking Act creates “special purpose” public bank charters that the NYS Department of Financial Services may grant to New York cities and counties that apply to create a local public bank. The legislation includes strong safeguards to ensure safety and soundness of local public banks that DFS would regulate.
The bill has gained major traction throughout the state, with more than 65 legislative supporters in the NYS Senate and Assembly, and massive support from more than 100 community and labor organizations, and New York CDFIs. California passed similar legislation in 2019 and several California cities are now making progress toward establishing local public banks.12 With enactment of the NYS public banking bill, the City can take concrete action to create a public bank that will advance racial, economic, and environmental justice.
NYC Public Banking Bill Package
As groups across the state continue to push for the enactment of the New York Public Banking Act, New York City can lay important groundwork for a municipal public bank—starting with passage of three pending bills that will increase transparency around existing municipal banking practices. The City Council Finance Committee held a well-attended hearing on the bills on April 28, 2021,13 which Council Members reportedly expect to bring to a vote later this year.
Conclusion
In his recent Daily News column, “An idea New York should invest: a municipal bank makes great sense,” Errol Louis underscored the timeliness of public banking in NYC, and stated that “this smart reallocation of public capital should be at the top of the agenda for the next administration and City Council.”14 We agree and look forward to continuing to work with the City to press for public banking as a core strategy for advancing shared equity in New York City.
1 http://www.publicbanknyc.org/about
3 https://publicbankscovid19.org/images/PDF_FILES/Public_Banks_and_Covid19_-_Full_Book.pdf
4 https://www.newsday.com/long-island/banks-fees-coronavirus-poor-1.50273094
6 http://www.romeroinstitute.org/blog/ab-310-a-just-recovery-from-covid-19
7 https://publicbankscovid19.org/images/PDF_FILES/Public_Banks_and_Covid19_-_Full_Book.pdf
9 https://www.shareable.net/will-public-banking-bring-more-clean-energy-programs-to-california/
10 https://institute.coop/resources/2019-worker-cooperative-state-sector-report