https://truthout.org/articles/wall-street-beware-the-public-banking-movement-is-coming-for-you/
[links in online article]
Wall Street Beware: The Public Banking Movement Is Coming for You
Robert R. Raymond, Truthout
Published July 5, 2019
It may not come as a surprise to hear that the majority of Americans
don’t trust the banking system in this country. Only 27 percent of those
surveyed in a 2016 Gallup poll said they had “a great deal” or “quite a
lot” of confidence in the institution — less than half of the record
high set in 1979. And the lack of trust is spread relatively evenly
across the political spectrum — it’s not just liberals or those on the
left: Almost everyone is fed up with the banks.
And if banking institutions don’t exactly spark joy, their lead
characters — morally bankrupt investment bankers whose greed and
arrogance almost singlehandedly collapsed the entire country’s economy —
certainly don’t spark joy either. It’s an old story: Bankers made
obscene amounts of money destroying the economy, we bailed them out,
they walked away from it all without a shred of accountability and
there’s nothing anyone can do about it. But that’s not where the story
has to end. Spurred by the need for an alternative to the for-profit,
extractive model of finance exemplified by Wall Street, there is a
budding movement in the United States that is working to reimagine
banking as an institution that truly serves the public.
Public banking is an old idea, but it has never been very common in the
United States. The first and only public bank in the country was founded
exactly 100 years ago in North Dakota, and it wasn’t until relatively
recently that the idea has begun to find new life in cities and states
across the country. Growing largely out of the need for more democratic
ownership over capital, the aim of this budding movement is to create a
robust public banking infrastructure across the nation that is rooted in
the principles of economic, environmental, racial and social justice.
The renewed interest in public banking really took off right after the
financial collapse in 2008 as people began exploring the option of
moving their money into alternative banking institutions, such as local
credit unions and community banks. But despite being useful for
small-scale, personal banking, these institutions do not operate on a
scale where they are able to handle a city or state’s financial assets —
they’re just too small. What was needed was a much larger institution
with a clearly defined charter that could take in the municipal deposits
of a state — or even a city like San Francisco, whose budget topped $10
billion in 2018.
As public banking advocates began exploring larger-scale solutions, the
Bank of North Dakota quickly became a potentially replicable option.
Founded by the Nonpartisan League in 1919 during the Midwest’s agrarian
populist period, the Bank of North Dakota is the only public bank in the
mainland U.S. (American Samoa also has a public bank.) Intended to free
the state’s farmers from predatory lenders, the Bank of North Dakota
survived a Wall Street boycott and has since become institutionalized
within the state’s banking ecosystem.
The Bank of North Dakota has many functions: By law, all state deposits
and revenue must go through the bank, which then works with community
banks and credit unions throughout the state to provide a number of
services, from liquidity and loan guarantees to low-cost student lending
to disaster-relief lending and more. It’s proven to be a very successful
model.
“The state of North Dakota experienced the financial crisis very
differently from any other state,” Thomas Hanna of The Democracy
Collaborative, a national research institute dedicated to developing new
strategies for a more democratic economy, told Truthout. “It had a low
rate of foreclosures, it was the only state in the country that didn’t
have a single bank collapse, it had a lower unemployment than many other
states and had a better fiscal outlook for state government.”
Of course, the statewide public bank was not able to completely mitigate
the effects of the financial crisis in North Dakota. The state’s
unemployment rate did rise in 2009, for example. And yet — and this is
key to public banking advocates like Hanna — it still remained
significantly lower than the national average at that time. Hanna and
many others believe that the state bank’s model was responsible for many
of the less severe outcomes experienced in North Dakota, and it was
around this time that the public banking movement began to explore
bringing a similar model to states and municipalities around the country.
“The movement has really taken off like wildfire since then,” Hanna told
Truthout. “Many cities in California, cities in Washington, Oregon,
Pennsylvania, New York and various other places all across the country
are making real advances.”
What makes public banks different from traditional banks is that they
are actually accountable to the public — they’re democratic. So the
public can not only decide what services the bank provides and where
their taxpayer dollars are invested, but they also have a say in what
kinds of investments are off limits.
“It was during the Dakota Access Pipeline resistance when many people
began to focus on the role that Wall Street plays in financing pipelines
and climate change,” Hanna told Truthout. “People started realizing that
their money, their local tax dollars were being used to invest in
destroying their communities and destroying the planet. So instead of
having our money going to purposes that are antithetical to our values,
public banking is a way to move toward a more equitable and sustainable
economic system.”
Despite gaining traction on both the national and state levels, the push
for public banking has really taken off on a municipal level, with
cities like San Francisco leading the way.
“We see the need for public banking all over the country right now, but
there’s no better example of it anywhere else than in San Francisco,
which is one of the wealthiest cities in the world but also one of the
most unequal in terms of income,” Kurtis Wu, an organizer with the San
Francisco Public Bank Coalition, told Truthout. “We have 7,000 unhoused
residents on the streets of San Francisco. Rent is now approaching
$4,000 for a one-bedroom apartment. Our infrastructure is crumbling, our
public transit system is embarrassing. We see public banking as a
mechanism that can really start to redirect capital toward these things.”
The push for a municipal public bank in San Francisco originally came
out of the Occupy movement, but really gained momentum during the
Standing Rock resistance efforts that targeted the financial
institutions responsible for funding the Dakota Access Pipeline. This
effort was led by the organization SF Defund DAPL, whose efforts
eventually persuaded the city’s Board of Supervisors to pass numerous
resolutions calling for a public bank and which compelled the Office of
the Treasurer to explore its feasibility.
But the San Francisco Public Bank Coalition isn’t planning to just wait
around while the policy seeds for a public bank slowly make their way
through City Hall — the group has taken the lead in building a
grassroots movement around the initiative. They’ve assembled a broad
coalition of groups — including the San Francisco chapter of the
Democratic Socialists of America, the northern chapter of the California
Nurses Association, the San Francisco Tenants Union and many more — to
build public support.
But there are still major roadblocks on the state level that would have
to be lifted in order to allow California cities like San Francisco to
create municipal banks. At the moment, the only banking licenses
available in the state are for commercial banks or credit unions — there
are actually no licenses for public banking.
This might change very soon, however, as a bill that would pave the way
for municipalities to create their own public banks makes its way
through the state legislature. Designed by the California Public Banking
Alliance and authored by Assembly members David Chiu (D-San Francisco)
and Miguel Santiago (D-Los Angeles), AB 857 passed in the
Democrat-dominated state assembly in May and is now making its way
through a number of committees before it comes to a final floor vote in
the state senate.
“If the state bill successfully passes, we will likely push for the
creation of a public bank through a ballot initiative,” Wu told
Truthout. “So, putting this issue directly to the voters — so it’s
ultimately decided by the people. There’s a fierce urgency to this, and
we want to make sure that the timeline keeps up with that. I think that
it’s possible for a fully-fledged and operating public bank to be
created in five years.”
The movement toward municipal banking is an important part of the push
toward a more democratic and accountable banking sector in the United
States, but it’s just one component of what advocates see as a broader
set of reforms that must be made.
“On the one hand, we should have this robust, local movement for public
banking — we should build, from the ground up, small, local banks at the
city-county level, at the state level,” Hanna told Truthout. “But I also
think that we need to do something about the big Wall Street banks,
because they’re going to be a massive impediment to anything that we
want to do in terms of economic democracy more broadly.”
This top-down approach is also something that’s being discussed across
the country as well, and has gained quite a bit of momentum thanks to
high-profile contenders for the Democratic presidential nomination, like
Sen. Bernie Sanders (I-Vermont) and Sen. Elizabeth Warren
(D-Massachusetts), who have made breaking up the big banks key
components of their economic policies. And along the same lines, Senator
Sanders and Rep. Alexandria Ocasio-Cortez (D-New York) just recently
announced legislation that would build and expand post office banking
services while imposing a 15 percent federal cap on interest rates.
“If this movement is going to be successful, we’re going to have to see
political action on public banking from the top down as well,” Hanna
said. “We’re going to need politicians like Sanders and Ocasio-Cortez to
be on board so that if and when we’re able to get into positions of
power nationally, we have candidates who are committed and who
understand what needs to be done to enable public banking at the federal
level.”
Of course, any public bank is only going to be as progressive as the
government under which it operates. For example, the fact that the Bank
of North Dakota provided a $7 million loan to fund the state’s brutal
treatment of Water Protectors during the Dakota Access Pipeline
resistance is not lost on organizers like Wu and Hanna. They understand
that public banking can never be a success unless it is underpinned by a
diverse grassroots movement that puts economic, social, racial and
environmental justice front and center.
“Public engagement and community input in this process are critical
because there’s no guarantee that a public bank will fund issues like
environmental, racial and economic justice,” Wu said. “So we need to
create levers for accountability, transparency and self-determination.
That’s the only way we’re really going to be able to address these things.”
There are a number of ways to ensure that accountability and
transparency are embedded into a public bank from the start, including
creating a charter that clearly details what the bank can and cannot
invest in, or ensuring that there is community representation on the
bank’s board of directors.
Of course, transforming the banking system into one that puts people and
planet before profit is a lofty ambition. And as it continues to grow,
the public banking movement will likely come into direct conflict with
those who are currently profiting from the predatory and extractive
banking system. So far, organizers have been focusing much more on the
municipal level because they can operate more freely there, somewhat
under the radar of the powerful banks whose interests public banking is
in direct conflict with.
But at some point, it seems inevitable that the two opposing interests
will confront each other in a real and direct way. Will a mobilized,
grassroots movement be able to stage a successful insurgency against the
forces of concentrated wealth and influence? It’s still very much an
open question — one that has come to define much of the 21st century.
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