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Public Banking for a Just Recovery: A How-To Guide for NYC

(URBAN MATTERS) December 3, 2021

Recently, the New York City Board of Health passed a resolution directing the Health Department to work with other City agencies to eliminate systemic racism in policies relating to housing, economic opportunities, and other social determinants of health – key drivers of health inequities. “The Covid-19 pandemic must render unacceptable that which has been condoned for generations,” emphasized Health Commissioner Dave A. Chokshi. 

As a new City government prepares to take office in January, it is fair to ask whether such words will translate into action. Will the next mayor and City Council do what is urgently needed to root out entrenched inequities, when doing so requires them to challenge Wall Street and other well-established interests? 

One way to tell if they mean business is if they answer the call from dozens of community, labor, and cooperative groups to establish a municipal public bank. 

A public bank is what its name suggests: A financial institution created and owned by the City, accountable to New Yorkers, and chartered to serve the public interest. 

Public banking is common throughout the world. In many countries, public banks are advancing workers’ rights, investing in a renewable future, and responding quickly and effectively to the Covid-19 pandemic. In the U.S., the Bank of North Dakota has successfully financed public projects and made responsible loans to small businesses and others for more than a century. 

New York City should put our public money to work for racial equity and a just recovery. Through public banking, the City can leverage its vast resources to support cooperative and community-led development – from permanently affordable housing to small and worker-owned businesses – in Black, brown, and immigrant neighborhoods hardest hit by Covid-19. 

This year, the City will collect almost $100 billion in revenue from taxes, bond sale proceeds, Federal stimulus funds, and other sources. By law, the City must deposit all of it in commercial banks designated by the “NYC Banking Commission,” an obscure but powerful body composed of the mayor, City comptroller, and commissioner of the City Department of Finance. 

In fact, a handful of the country’s biggest banks hold most City funds, with JPMorgan Chase holding the largest share. Banks pay modest interest rates on public deposits while exacting service fees and making money from “the float,” or the period between when funds are deposited and withdrawn. That means our public money is implicated in an array of ignoble bank activities – redlining, racial wealth extraction, and fossil fuel finance – that systematically harm people, communities, and the planet. 

During the first year of the pandemic, for example, the City’s designated banks extracted $1.3 billion in fees from New Yorkers, according to research by the New Economy Project. Nearly two-thirds of this sum came from predatory overdraft fees, hitting banks’ lowest-income account holders. Chase was by far the worst offender, siphoning $1 billion from struggling New Yorkers.

Source: Urban Matter