https://truthout.org/articles/standing-rocks-surprising-legacy-a-push-for-public-banks/
Standing Rock’s Surprising Legacy: A Push for Public Banks
By
Deonna Anderson,
YES! Magazine
Published
January 7, 2019
In February 2017, Seattle became the first city to pass legislation to
divest from a financial institution because of its role in funding the
Dakota Access pipeline.
Months of rallies, public testimony at city council meetings, and
protests at Wells Fargo branches across Seattle led to the unanimous
vote to divest billions from the bank. Los Angeles and Philadelphia
would follow. But when the time came to withdraw its money from the bank
at the end of 2018, Seattle instead renewed its contract with Wells
Fargo. The political decision to divest city money from one of the
biggest banks funding DAPL was reversed because the city hadn’t found an
alternative financial institution to house its money.
Pipeline Divestment Starts at Standing Rock
Throughout 2016 and after, indigenous activists (often referred to as
water protectors) protested the DAPL at the Standing Rock camp in North
Dakota. Despite opposition, the camp at Standing Rock was cleared in
February 2017, and oil started flowing through the DAPL in June 2017.
But the camp wasn’t the only site of resistance. In October 2017,
organizers — under the name Mazaska (“money” in Lakota) Talks — launched
a campaign that urged individuals and larger entities, especially
cities, to take money out of banks funding the DAPL and other pipeline
projects transporting oil from Alberta’s tar sands, including Keystone
XL, Trans Mountain, and Energy East.
The idea was that removing money from the banks could put a stop to the
projects. The phrase “Kill the funding. Kill the pipelines” was commonly
spoken by divest advocates.
Wells Fargo was one of 17 funders of the DAPL; others included Bank of
America, Goldman Sachs, and JPMorgan Chase. In September 2017, Mazaska
Talks reported that the divestment movement was responsible for over $5
billion being withdrawn from DAPL-funding banks. That figure included
the billions divested by Seattle, Philadelphia, and Los Angeles and more
than $80 million in individual accounts.
When Seattle announced it would stop banking with Wells Fargo, city
officials cited the bank’s choice to fund the DAPL — as well as the 2016
customer fraud scandal — as reasons to move its money.
Public Banks as an Alternative
Moving city money out of Wells Fargo was a way for local politicians to
put their money “where their values are,” said Seattle resident Matt
Remle, co-founder of Mazaska Talks and a member of the Standing Rock
Sioux tribe. That’s because council members would be removing city money
from financial institutions that fund projects that hurt the environment
and communities. Some of the banks that fund fossil fuel projects also
fund private prisons, detention centers, and weapons manufacturers.
“We want an avenue through which ordinary people can access banking
services regardless of income and in a way that does not engage in any
exploitative practices,” said Seattle City council member Kshama Sawant,
who was a co-sponsor for the divestment ordinance.
Once Seattle had committed to move its money, the city needed somewhere
to move it to.
“When we were organizing around getting [Seattle] to divest, the
question all along was what to do with the city’s money,” Remle said.
“And our philosophy was it’s not going to be a victory to close accounts
with Wells Fargo and go to Bank of America.”
Organizers saw public banks as the solution.
A public bank is an institution owned by a governmental body, funded
with taxpayer money, and mandated to serve the public interest. In
summer 2017, Remle and other Seattleites started advocating for the city
to establish a public bank, a process that could take years.
Sawant said a public bank “would be accountable to the people of Seattle
in a way that you could never hold a private bank accountable,” adding
that the city could better direct the bank’s resources, like loans, to
projects that support community-directed goals. Remle noted affordable
housing, homelessness services, and funding for higher education as
causes the city might fund.
Ultimately, the city’s historic move to divest from Wells Fargo was
undermined. It intended to end its relationship with the bank at the end
of 2018, but the city failed to find a new place to house its $3 billion.
So it renewed its contract with Wells Fargo for three more years.
“At that moment there was no other choice but to continue with Wells
Fargo, but it’s a reminder of how the movements work. Winning the Wells
Fargo divestment was sort of step one,” Sawant said.
The next step, the council member said, is to demand that obstacles —
such as the inability for credit unions to serve municipalities and the
Washington law that bars cities from establishing any type of business
entity — are removed so that the city or state can establish a public bank.
Bank of North Dakota
As it stands, North Dakota is the only place in the continental US with
a state bank. Bank of North Dakota was founded in 1919 and, for public
bank advocates, it serves as a model.
Opponents of public banking have pointed to the failures of the 1800s
public banks in Vermont and Indiana as examples of why public banks
don’t work. While serving as the director of financial regulation
studies at the Cato Institute, Mark Calabria argued that the public
banks of this era were “characterized by rampant corruption.”
But advocates point to the success of Bank of North Dakota, established
at a time when farmers in the state had trouble obtaining credit for
their businesses, as evidence that a state bank could work. The bank was
started to provide farmers credit and serve as the state’s financial
repository. It has since evolved to finance the state’s infrastructure
projects.
“We need banks that are publicly owned so we can take our very
substantial public deposits and public revenues and public resources and
leverage them for local purposes instead of sending them to Wall
Street,” said Ellen Brown, founder of the Public Banking Institute. “Cut
out the middle man, basically, which is what the Bank of North Dakota does.”
While some profits from Bank of North Dakota are used to fund
mission-driven loan programs related to economic development and
infrastructure, the bank has also faced criticism for lending nearly $10
million for the law enforcement response to the #NoDAPL protests in
North Dakota.
With that in mind, advocates in Seattle and elsewhere have been
considering how to ensure transparency and accountability in municipal
bank charters.
Barriers to Public Banks
Seattle is just one entity looking to move its money out of corporate
banks and into socially responsible ventures from which local
communities would benefit.
Philadelphia, New Haven in Connecticut, and Santa Monica and Davis in
California have divested money from large banks, and others — like Santa
Fe in New Mexico, Oakland in California, and Washington, DC — have
completed feasibility studies for public banks. But not many of these
efforts have really taken off. Each location comes with its own set of
challenges.
One barrier to getting a public bank off the ground is high startup
costs. This was the case in Massachusetts, where a 2011 report from the
Federal Reserve Bank of Boston — which used Bank of North Dakota as a
model — estimated that startup costs for a state-owned bank in
Massachusetts would have been $3.6 billion. Some advocates say this
figure is an overestimate; banks generally need tens of millions to
start, Brown said. The figure varies based on the bank’s location,
growth prospects, and risk profile, according to the Partnership for
Progress, a program of the Federal Reserve System.
Because proposed banks have unique business plans, market competition,
and local economic context, among other factors, the FDIC does not
prescribe a minimum of initial capital. But the agency does suggest that
organizers examine “the risks inherent in the institution’s business
model, the potential variability in earnings projections, and the skill
and ability of the management team to carry out the business plan” when
planning to apply for insurance.
There are also legal challenges to establishing public banks in some
locations. Many states and cities — including Sante Fe, San Francisco,
and Los Angeles — have clauses in their charters that inhibit them from
establishing public banks. There’s movement in some cities and states to
overcome institutionalized policy barriers to establishing public banks.
In Los Angeles, a measure on the November ballot would amend the city’s
charter and allow it to explore establishing its own financial
institution. And in San Francisco, a task force was established in
February 2018 to examine legal barriers and startup needs, such as
insurance, a government-issued charter, and costs. In November 2018, the
task force will have wrapped its examination.
Both Los Angeles and San Francisco are part of the California Public
Banking Alliance, with members across the state working to establish
city and regional public banks that are “socially and environmentally
responsible,” as noted on the coalition’s website. Additionally, the
alliance has pushed for state legislation that would instruct the
California Department of Business Oversight to issue a special license
for cities to form public banks and allow them to bypass regulations
that apply to private banks.
Taking the First Steps
Over the years, Seattleites and Washingtonians have been pushing for a
public bank. Since 2009, state Sen. Bob Hasegawa — who represents
Seattle’s 11th state Senate district — has introduced nine bills to
establish a state bank, and he championed a city-owned bank during his
mayoral campaign in 2017. While none of the bills passed, state
legislators funded a feasibility study in the 2017–19 operating budget.
The main obstacle to starting a public bank in Washington is that the
state constitution prohibits the state and its cities from loaning money
or credit to individuals, associations, or corporations.
The fight against the DAPL brought new energy to the effort in Seattle.
Organizers believe a public bank could allow the city to have more funds
to address the needs of residents.
“Recapturing some of that would create major savings that could help us
fund things like education, housing, and transit,” wrote organizer Alec
Connon on a blog for the climate justice group 350 Seattle. “Done right,
a public bank would save city money, create jobs, and provide affordable
loans to small businesses.”
While Seattle had to postpone its divestment from Wells Fargo,
organizers — and city council members — have continued to push for the idea.
“That movement for divesting from Wells Fargo not only did the
groundwork, but also set a line in the sand that this is something that
we believe the city of Seattle should be going toward,” Sawant said,
noting that there is still hope of establishing a public bank in the city.
“We don’t expect a straightforward path but we also believe that this is
the correct thing to do.”
In December 2017, city council members voted to allocate $100,000 to
conduct a feasibility study for a municipal bank. The study was released
in October 2018 and concluded that creating a public bank would be an
involved and long-term process. One of the next steps identified was for
the city of Seattle to develop a business plan for a municipal bank that
would meet all the legal and regulatory requirements in Washington.
Council member Sawant has submitted a request for a business plan in the
budget development process for 2019.
“We’re still looking at very long term. Even if the study comes back
positive, the city council says yes, the mayor approves — we’re still
looking at probably, I would assume, another year plus to get the actual
infrastructure and everything kind of set,” Remle said. “But the wheels
are definitely in motion.”