Testimony of Public Bank NYC Before the New York State Assembly
Standing Committee on Small Business
Standing Committee on Ways and Means
Standing Committee on Agriculture
Standing Committee on Banks
Office of State-Federal Relations
Task Force on Food, Farm, & Nutrition Policy
June 24, 2020
Thank you for the opportunity to testify today regarding steps the Legislature and the state should undertake in response to the COVID-19 pandemic. My name is Tousif Ahsan. I am the Civic Engagement Coordinator for the New York Public Interest Research Group (NYPIRG). NYPIRG is a non-partisan, not-for-profit research and advocacy organization. Consumer protection, environmental preservation, public health, healthcare quality, higher education affordability, and governmental reforms are our principal areas of concern.
NYPIRG presents this testimony on behalf of Public Bank NYC –a broad coalition of more than 35 community, labor, environmental and economic justice groups, small, worker-owned businesses, and community development financial institutions – of which we are a member.
Public Bank NYC is pressing for creation of a public bank – accountable to New Yorkers, and rooted in principles of racial, economic, and environmental justice. Public banks are financial institutions created by a public entity—such as a city, county, or state—and chartered to serve the public interest. They hold public deposits and leverage those funds to support local economic development.
Through public banking, New York can reinvest in local communities and strengthen our economy. Public banks would support small and worker-owned businesses, affordable housing, living-wage jobs, responsible financial services, renewable energy and other sustainable infrastructure, and more–meeting critical community needs and strengthening our ability to withstand future crises.
As the COVID-19 crisis exacerbates poverty and inequality across the state, we urge the NYS Assembly to take bold action to transform our economy. New York needs strong institutions, like public banks, to ensure a just recovery and future for all New Yorkers.
In this testimony, we will briefly cover:
1. How big banks have shut out small businesses from desperately-needed emergency relief;
2. How public banks would support small businesses hardest-hit by COVID-19;
3. Why the NYS Assembly should pass the“New York Public Banking Act” (S.5565A/A.9665A).
1. Big banks have shut out small businesses from desperately-needed emergency relief.
On June 15, Chairman James E. Clyburn and all Democratic Members of the House Select Subcommittee on the Coronavirus Crisis announced an investigation into whether big banks created two-tiered systems for processing Paycheck Protection Program (PPP) loans that prioritized their more lucrative customers and shunted struggling small businesses in low-income communities and communities of color. (1) Just days later, The Washington Post reported similar concerns about the Federal Reserve’s Main Street Lending Program, explaining that “[b]anks are telling small-business owners that they want to offer these loans only to existing clients of the bank.” (2)
These developments serve as yet another warning that we must address structural barriers that block low-income people, immigrants, and people of color from mainstream banking. From persistent redlining of neighborhoods of color to the high cost of maintaining accounts, Wall Street banks routinely employ practices that not only restrict banking access, but that also perpetuate poverty and inequality.
2. Public banks would support small businesses hardest-hit by COVID-19.
Another recent article in The Washington Post paints a very different picture: An analysis of PPP loan awards nationwide found that North Dakota small businesses “secured more PPP funds, relative to the state’s workforce, than their competitors in any other state.” (3) What is North Dakota’s secret? “Much credit goes to the century-old Bank of North Dakota,”explained the article. (4)
The Bank of North Dakota has successfully financed public projects and made responsible loans to small businesses, farmers, and others for more than a century. Although New York and North Dakota differ economically and politically, the benefits of public banking to our state would be similarly broad. Public banking should not be seen as not a one-size-fits-all model. States, regions, and local communities can shape public banks to meet their particular needs. That is one reason public banking is so common throughout the world, from Costa Rica to Germany.
Here in New York, public banks would partner with our state’s numerous community-based lenders in historically-redlined neighborhoods to deliver responsible financing and emergency funding to small and worker-owned businesses – including MWBEs – hardest hit by COVID-19. Public banks would also help to build more resilient communities, by supporting locally-rooted economic development initiatives and providing affordable loans to ventures that lack access to traditional financing.
3. The NYS Assembly should pass the “New York Public Banking Act” (S.5565A/A.9665A).
As a first step, we urge the NYS Assembly to pass the “New York Public Banking Act”(S.5565A/A.9665A).
This bill creates a safe and appropriate regulatory framework for cities, counties, and regions seeking to establish public banks. It authorizes the NYS Department of Financial Services to issue special-purpose public bank charters – paving the way for public banking in New York. This is a legislative memo in support of the “New York Public Banking Act,” containing further details.
Last year, California enacted legislation to facilitate public banking at the local level. It’s time for New York to take action and usher in democratic financial institutions that meet the needs of New York’s communities, during the COVID-19 crisis–and beyond.
Thank you for the opportunity to testify today. For more information, please visit publicbanknyc.org.