Yesterday, Councilmembers Kirsten Harris-Talley and Mike O’Brien joined Kshama Sawant in pushing for a feasibility study for a Seattle public bank to be included in next week’s budget deliberations. The Economic Opportunity Institute helped write the language in the statement of legislative intent that Sawant submitted on Oct. 9. Similar studies have been approved in the past months for public bank projects in Washington, DC and Oakland, California.
The city of Seattle has pressing reasons to create a public bank. In February, the City Council resolved to end its contract with Wells Fargo in light of the bank’s widespread fraudulent practices and implicit sponsorship of the Dakota Access Pipeline and the for-profit prison industry. The contract expires in 2018, requiring the withdrawal of $3 billion.
The city does not, however, have a meaningful alternative to depositing its funds with Wells Fargo. It is legally obligated to bank with institutions of a certain size, and not with credit unions. This leaves multinational private banks that are structurally similar to Wells Fargo as the only depository institutions large enough to accept the city’s money. Without a public option, Seattle’s decision to end its relationship with Wells Fargo will be purely symbolic.
Structurally, a city-owned public bank could provide significant opportunity for all of Seattle. Large private banks do not prioritize lending to small businesses, while small and new businesses are important drivers of job growth and economic activity. Germany has a multi-tiered public bank system that prioritizes small- and medium-sized enterprise lending, driven by a mandate of social progress rather than shareholder profit. German community-level public banks showed high resilience and consumer confidence during the 2009 crisis period, requiring almost no state aid while maintaining stable business environments in their respective regions.
In addition, a public bank can also finance affordable housing construction, where finding sufficient funding has proven to be a significant hurdle, and private banks have been loath to intervene.
Most fundamentally, a public bank would circulate the region’s revenues and savings locally, using Seattle’s money to fund Seattle’s public projects, at significantly lower cost than outside loans.
The idea of a publicly owned bank capable of circulating funds within a municipality independent of large, privately owned commercial banks is not new — the Bank of North Dakota was formed a century ago to provide financial autonomy for the state’s agricultural sector in response to usurious lending practices by large private out-of-state banks.
North Dakota’s model has proven to be successful to the broader financial well-being of the state. As a result of the public bank’s symbiotic participation with smaller community banks in the state, North Dakota has maintained a robust local banking environment — especially for small businesses — that is additionally more resilient to crisis. Nationwide momentum for public banking has returned with particular relevance following the crash and recession of 2009, as cities and states confront the irony of depositing billions in public funds with institutions that have proved themselves unworthy of public trust.
Seattle finds itself at a critical moment to explore public banking and establish economic security and agency for communities rather than shareholders. In 2018, the city can move its money from Wells Fargo to another Wall Street bank that prioritizes profits over people, or it can create a meaningful path forward to benefit our communities with our money.