WASHINGTON—Today, Congresswomen Rashida Tlaib (MI-13) and Alexandria Ocasio-Cortez (NY-14) introduced the historic Public Banking Act, which allows for the creation of state and locally administered public banks by establishing the Public Bank Grant program administered by the Secretary of the Treasury and the Federal Reserve Board which would provide grants for the formation, chartering and capitalization of public banks. It also codifies that public banks may be members of the Federal Reserve. Public banks can offer lower debt costs to city and state governments, fund public infrastructure projects, and encourage entrepreneurship by providing loans to small businesses at lower interest rates and with lower fees. The legislation also creates a pathway for state-chartered banks to gain federal recognition and recognizes a framework for public banks to interact with Fed Accounts, postal banking, and Digital Dollar platforms. As such, the passage of The Public Banking Act would provide a much-needed financial lifeline to states and municipalities, as well as unbanked and underbanked residents, that have been left in dire straits by the COVID-19 pandemic.
The Public Banking Act is the latest effort of Congresswomen Tlaib and Ocasio-Crortez to secure the aid state and local governments need—they previously wrote to the Federal Reserve urging it to do more to support state and local governments, adding to criticism that the central bank is being too cautious in some of the programs it set up to help the economy during the pandemic. With a current financial system that has forced billions from accessing the most basic financial tools and cash-strapped cities and states staring down plunging tax revenue and climbing pandemic-related costs, the Congresswomen believe it’s time to finally enact banking as a public utility, a proven model worldwide, to keep money local and cut costs by eliminating Wall Street middlemen, shareholders and high-paid executives.
The legislation also:
- Allows the Secretary of the Treasury and the Federal Reserve Board to provide public banks grants for: bank formation, capitalization, developing financial market infrastructure, supporter operations, covering unexpected losses, and more without the requirement to provide matching funds.
- Allows the Federal Reserve to charter and grant membership to public banks, and in conjunction with the appropriate federal agencies, establish a separate regulatory scheme with respect to these.
- Establishes public banking incubator program to provide technical assistance to public member banks to develop technologies, practices, and data that promote public welfare.
- Establishes new liquidity and credit facilities at the Federal Reserve to provide direct federal support to state and local public banks and their communities;
- Prohibits investment in fossil fuel projects.
- And more.
“We spent $30 trillion in the global crisis from 2007-2009 propping up financial institutions that held the country hostage for their reckless behavior. Only $8 trillion dollars has been committed thus far in the COVID-19 pandemic. These banks have been, are, and will continue to depend on the public dollar. It is time for this relationship to be reciprocated and have the banks work for the people and not solely privatized profits wreaking havoc on communities of color,” Congresswoman Tlaib said. “It’s long past time to open doors for people who have been systematically shut out and provide a better option for those grappling with the costs of simply trying to participate in an economy they have every right to—but has been rigged against them. The COVID-19 pandemic has also plunged city and state governments into a financial crisis unlike any other they’ve ever experienced—and public banks could offer a much more tenable option for dealing with their debts at a time when they need it most.”
“I am proud to partner with Rep. Tlaib on this monumental bill. Public banks are uniquely able to address the economic inequality and structural racism exacerbated by the banking industry’s discriminatory policies and predatory practices,” Congresswoman Ocasio-Cortez said. “The creation of public banks will also facilitate the use of public resources to construct a myriad of public goods including affordable housing and local renewable energy projects. Public banks empower states and municipalities to establish new channels of public investment to help solve systemic crises.”
In the short term, public banks would be a seamless and effective way to deliver relief funds to all eligible recipients. In the longer term, public banks would remedy long-standing systemic problems with our banking system that have disproportionately burdened low-income communities, ultimately bringing about transformational change to the American monetary-financial system. That’s, in part, why The Public Banking Act has garnered the support of nine of the Congresswomen’s colleagues in the U.S. House of Representatives: Reps. Jesús G. “Chuy” García (IL-04), Pramila Jayapal (WA-07), Ayanna Pressley (MA-7), Ilhan Omar (MN-05), Al Green (TX-9), Bennie G. Thompson (MS-02), Earl Blumenauer (OR-03), Barbara Lee (CA-13), and Jan Schakowsky (IL-9). 29 organizations that have long advocated for the public banking system it would make possible also support the legislation, including the California Public Banking Alliance (CBPA), Take on Wall Street, Americans for Financial Reform, Beneficial State Foundation, Communications Workers of America, Friends of the Earth, Food & Water Action, Americans for Financial Reform, California Reinvestment Coalition, Center for Popular Democracy, Community Change, Farm Aid, Institute for Policy Studies, Jobs With Justice, NJ Citizen Action, Oil Change International, Oil Change International, People’s Action, Strong Economy for All, UNITE HERE, Working Families Party, Democracy Collaborative, ACRE, and Public Citizen.
“The public needs an alternative to Wall Street. By providing federal recognition and a regulatory framework for public banks, this bill gives cities and states a proven model that will facilitate investment in an equitable recovery and a sustainable economy,” CBPA Legislative Team Organizer David Jette said. “We cannot face the crises of our day with the financial infrastructure that led us to those same crises. We need accountable, publicly chartered banks that invest in the well being of the many, not the few. This bill gets us there, and not a moment too soon.”
“As we learned recently from the Paycheck Protection Program, when you pay big Wall Street banks to provide public goods, they inevitably reward themselves and their friends at the expense of white, Black, and brown working families,” Take on Wall Street Campaign Director Porter McConnell said. “Take on Wall Street supports the Public Banking Act because public banks can create jobs and boost the local economy, save cities and states money, and lend counter-cyclically to blunt the impact of Wall Street booms and busts. We deserve a financial system for working families, not the big banks, and this bill moves us closer to that reality.”
“We are excited to see the introduction of the Public Banking Act that scales out the leadership of our members Asian Pacific Environmental Network and People Organizing Demand Environmental and Economic Rights (PODER) demonstrated in the passage of public banking in California,” Climate Justice Alliance Policy Coordinator Anthony Rogers-Wright said. “We are very excited to see our values regarding the need for a rapid Fossil Fuel phaseout represented in this bill. More evidence is pointing to the fact that, economically, Big Oil is in big trouble and the people don’t want the money they keep in their banks utilized to bailout or finance an industry that’s killing people and planet. Representatives Ocasio-Cortez and Tlaib have the gratitude of frontline communities nationwide.”
“The federal government, which issues the U.S. dollar, is uniquely responsible for the health and character of the American financial system,” said Willamette University Assistant Professor of Law Rohan Grey said. “Rep. Tlaib and Rep. Ocasio-Cortez’s bill critically combines Congressional leadership and vision with strong and genuine support for grassroots economic democracy.”
“As a strong supporter of financial innovation in the public interest, I applaud the offices of Rep. Tlaib and Rep. Ocasio-Cortez on the introduction of the Public Banking Act,” Public Money Action, Ltd Director and Yale Law School Associate Research Scholar Raúl Carrillo, Esq. said. “By facilitating the steady development of public options for 21st century financial services at the federal, state, and local levels, they are not only helping communities divest and invest public money as they see fit, but creating higher standards for equitable financial inclusion across the board.”
The full text of the Public Banking Act can be read here.