Banks for the People

by Public Bank LA
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The public banking movement is gaining momentum in the United States as more people seek alternatives to traditional banking institutions. Unlike traditional banks that prioritize profit above all else, public banks aim to promote community development and social justice. Piper French, a journalist with Noema Magazine, recently spoke with Trinity Tran and other organizers across the country to discuss the movement and its goals.

The rise of public banking is a response to the growing discontent with the banking industry's practices, particularly in the wake of the 2008 financial crisis. Many people see public banking as a way to reestablish trust and accountability in the financial system. Public banks can prioritize the needs of local residents and businesses by focusing on community investment rather than profits for shareholders.

Gregory Jost noticed the first two bank branches close in the Bronx about six months before the pandemic. They were right next to each other: a Chase and a Bank of America, about three blocks from his son’s school in Norwood, and one day, he walked by and saw they were gone.

When COVID hit, the trend accelerated. “We kept getting more and more updates: Oh, this bank is closing. Oh, this bank is closing. Oh, this bank is closing,” Jost recalled when we talked on the phone in September. He is a community organizer and researcher who works with the Banana Kelly community improvement association. Branches were disappearing right and left, and the reason bank officials gave Banana Kelly was both simple and maddening: It just wasn’t profitable for them to stay. This was happening around the country: 4,000 bank branches shut their doors between March 2020 and October 2021, many in rural areas or low-income communities of color. 

Though it is replete with check cashers, pawn shops and other “alternative lenders” profiting off the fact that poor communities of color generally have difficulty accessing their own money, the Bronx was already severely underbanked before the pandemic. To Jost, one Bank of America outpost at the Hunt’s Point subway stop perfectly captures this imbalance — a massive sign visible from blocks away advertises its presence, but it’s just an ATM. And not even a working one: It has a laughable 1.7 stars on Google, where people complain that you can barely get through the door, that it is rarely open during normal business hours, and sometimes when it is, the machine has no cash. 

This isn’t the first time that big corporate banks have failed low-income neighborhoods in New York and beyond, in both dramatic and quotidian ways. Jost recalled a similar exodus from the Bronx after the 2008 financial crisis; 1,826 branches shuttered in the years since, according to Bloomberg — 93% in postal codes with household incomes below the national median. In the 80s, as downtown Manhattan was ravaged by the crack epidemic, banks fled: By 1984, there were zero branches within a 100-block area of the city’s Lower East Side. 

The infamous practice of “redlining” — denying loans to people in communities of color because property values were supposedly lower in their neighborhoods — began in the 1930s and persists stubbornly into the present despite various attempts to eradicate it. Black homeowners are habitually offered higher interest rates than white homeowners of the same or even much lower income. In January 2023, the Los Angeles-based City National Bank was forced to pay out a $31 million settlement after allegedly refusing to underwrite loans in Black and Latino neighborhoods between 2017 and 2020.

Is there a better way to bank, one that would invest in low-income neighborhoods and communities of color instead of spurning their money? Jost and others are part of a growing movement in the U.S. that seeks alternatives to traditional banking. Their hope is to establish something that may sound like a contradiction to American ears: public banks.  

In the broadest possible definition, public banks are financial institutions owned and run by the government. They store money for the state, not individual consumers, and their transformative potential lies in the simple fact that they can have a purpose other than the single-minded pursuit of profit for shareholders. This creates a wealth of possibilities: lower-interest loans, investments in green energy and affordable housing and in the neighborhoods that big banks tend to exploit or ignore. “What we envision is a public institution that would invest in community-controlled economic development that builds wealth rather than extracts wealth,” said Andy Morrison, the associate director of the New Economy Project, which launched New York City’s public banking coalition in 2018. “We see in public banking an opportunity to invest in the communities that the banks have long excluded.”

Enthusiasm for public banking has been building in the U.S. as people confront intertwined social, economic and environmental crises. This momentum “reflects the very real failures of private banks to resolve questions like community poverty and access to financial services, to confront the ecological crisis, to effectively respond to the COVID pandemic at the speed or scale necessary,” Thomas Marois, a political economist and public banking expert affiliated with SOAS University of London, told me. 

Public banking proponents have been inspired to join the movement by everything from Occupy Wall Street to Standing Rock to Black Lives Matter. To hear them tell it, public banking could be part of a solution to the underlying problems that sparked those movements, such as private banks’ greed and willingness to fund harmful industries or the chronic underfunding of social services that leaves police operating as untrained mental health and homelessness caseworkers.  

At times, organizers’ hopes and dreams for everything that a public bank could accomplish can verge on the utopian. “This is about trimming the fat and cutting out Wall Street as a middleman so that we have money to be able to fund the things we need, whether that’s more community services or social housing or solutions for homelessness,” Trinity Tran, who was integral to kickstarting the public banking movement in California, told me. “This is about mobilizing our public revenue to fund the world that we want and that we deserve.”

But public banking is not a magic bullet. It could help finance a global just transition, but it could also end up fueling the same state repression and extractive industries that kickstarted public banking movements across the U.S. in the first place. It may be years yet before public banks are operational here, but the work that will determine whether they usher in new practices of spending and saving money or merely replicate the failures of the existing system is already underway.

The California public banking movement kicked off in 2017. Halfway across the country, Indigenous people defending their ancestral land from the Dakota Access Pipeline (DAPL) and their allies began calling for more scrutiny on the banks financing both the construction of the pipeline and the militarized police crackdown on protestors. Divestment campaigns sprang up across the country. 

In Los Angeles, Tran took note. The city then kept most of its money with Wells Fargo, which had furnished DAPL with a $120 million line of credit. It had also recently been exposed for a massive fraud that involved the creation of thousands of fake accounts. Tran and her fellow organizers formed a coalition of Indigenous, environmental and social justice groups, won over many of L.A.’s neighborhood councils, and showed up to give public comment at city council meeting after city council meeting. Within months, the city opted to remove its assets from Wells Fargo’s coffers. 

The organizers were then faced with the next question: Where should the money go instead? 

“At the end of the day, with a city the size of Los Angeles — the money would move to another large, predatory Wall Street bank,” Tran recounted. (Sixteen other banks funded DAPL construction alongside Wells Fargo.) “So it was obvious to us the only true form of divestment would be to create our own bank,” she went on. “A bank that was owned by the city, accountable to the people of Los Angeles and socially and environmentally responsible.”

Things have moved quickly since then. In 2018, Tran and others ran an unsuccessful campaign to establish a public bank via a local ballot measure. Soon after, they helped launch the California Public Bank Alliance, made up of over 200 organizations. The coalition then worked closely with legislators, fending off bank lobbyists all the while, to produce the Public Banking Act, which Governor Gavin Newsom signed in 2019. 

The act is the first of its kind to become law in the U.S. It created a regulatory framework for municipalities across the state to establish public banks of their own, opening the door for up to 10 local public banks in California by 2029. 

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