February 20, 2025
Gerald Epstein – University of Massachusetts Amherst[1]
Introduction
The return of Trump and Trumpism to power, with its dangerous and chaotic economic mix of “crony capitalism”, authoritarianism, and neo-liberalism, puts any national project in the service of egalitarian values – or even the public welfare – at risk. This is especially true of publicly oriented initiatives in the area of banking and finance, where the Trump administration has begun to dismantle financial regulations, regulatory agencies (eg. the Consumer Financial Protection Bureau) and promote its own finance-crypto-fossil-fuel-techno bloc.
In the face of this Federal assault, opposition voices have suggested that progressive initiatives in “blue” states and locales might have the ability to protect and build egalitarian, green and socially effective institutions and activities, despite the regressive policies pouring down from the center. Public Banking initiatives offer a good example of the prospects and pitfalls of this Trump trumping approach. Ever since the Great Financial Crisis (GFC) and Occupy Wall Street days of 2008-2011, an activist-driven public banking movement centered in the states and municipalities has worked to build socially productive financial alternatives to a Wall Street-dominated US financial system that, among other mis-deeds, nearly brought down the global economy in the GFC of 2007-2009, receiving massive bailouts from the US government.[2]
An activist in California described the situation: “Money flows to the wrong investments: luxury housing, fossil fuels production and infrastructure, private prisons just to name a few examples. Meanwhile socially necessary investments such as affordable housing and green transitional infrastructure are not being made. Lastly, the financial system is draining the economy. Resources that could be put to productive uses are diverted to executive salaries, huge bonuses, share dividends and stock buyback schemes.”[3] A New York activist added: “The banks are bigger than ever. They’re more consolidated and powerful than ever. The amount they’re spending lobbying our government and undermining our democracy is greater than ever.”[4]
This movement has achieved several important wins, but it has also faced a significant number of set-backs in the last decade. Esra Uğurlu and I identified 35 public state and municipal banking initiatives around the country in various stages of creation in 2021. Some of them, notably in California, Massachusetts, New York, Pennsylvania and New Jersey are still in existence, but others have stalled and are quite possibly in hibernation.
The Public Banking Movement before Trump 2.0
Following the GFC, working in mostly decentralized fashion, public banking advocates initiated state and local actions to establish public banking institutions. As part and parcel of these actions, networks of organizations and advocacy groups were created, including The Public Banking Institute (PBI), the California Public Banking Alliance (CPBA), and the National Public Banking Alliance (NPBA). These organizations forged connections with a panoply of non-governmental organizations and grassroots movements to help develop existing coalitions and mobilize support for legislation. Thanks to these collective efforts, more than thirty states proposed legislation to create public banks.
Esra Uğurlu and I undertook a survey and interviews in 2020-2021 to identify these initiatives and learn about their goals, strategies, and achievements as well as the obstacles they faced. From these surveys and interviews with more than 30 activists, we found that the main objectives of these public banking initiatives are: improving the management of local resources, increasing infrastructure investment, creating more affordable housing, supporting small business lending, implementing environmental justice programs, reducing financial exclusion, improving racial justice, and reducing gender inequalities.
The early burst of energy and organization that drove the creation of these initiatives has borne some fruit, to be sure, but many of these initiatives have bogged down in the last several years. This indicates that these efforts face significant challenges.
Establishing a public bank entails a long process with potential challenges at every step of the way. In most cases, existing regulations present an obstacle for establishing public banks, given that most state constitutions and regulatory frameworks are built around the assumption that all banks are privately owned. Typically, public banking initiatives must run through a gauntlet of tests. These include undertaking a feasibility study, creating a business plan, securing funds for capitalization, and securing legislative approval for the plan (which requires mobilizing support and fending off opposition within and outside government). Then, the activists and allies face the daunting task of actually implementing the plan if initially approved. Though most groups are based on volunteer labor, eventually funds must be secured to create a sustainable organizational infrastructure for the banking initiative.
Political barriers are also prevalent and difficult. One is the lack of familiarity on the part of the public with public banking. A second, probably more important, is the systematic opposition of the private banking sector and their allies in government against public banking initiatives. This opposition remains despite the fact that most public banking initiatives adopt the State of North Dakota “Partnership Banking Model” which attempts to minimize competition with, and even helps to support, private banks. In California, the California Bankers Association issued a statement warning against “the risks of putting public dollars into money-losing public banks.”[5] The opposition to public banking initiatives by the private banking interests is often expressed by the American Bankers Association. For instance, in response to the efforts to establish a public bank in Philadelphia, CEO Bob Nichols, stated that “public banks are expensive to start and vulnerable to political control.”[6] In New York, discussed below, banker opposition has been fierce. As I wrote in Busting the Bankers Club:[7]
[T]he Independent Bankers Association of New York sent an opposition memo on the public banking bill claiming that “a critical consideration is not only taxpayer cost but also the inherent risk…which would be backstopped by taxpayers.” The group also claimed that the public bank could hurt local community banks “who would be unable to compete with the salary, healthcare and pension benefits that would be available to employees of a state bank.” State records also list several big banks, including JP Morgan, Capital One and HSBC, as having hired firms to do direct lobbying on bills in Albany, including the public banking measures, over the last three years.
Fits and Starts
The survey conducted by Esra Uğurlu and I found that activists faced significant challenges each step of the way, but in several states they were able to overcome most of them. A brief history of some of the public banking initiatives initiated in this period illustrates the fits and starts they have faced:
Pennsylvania
The Commonwealth of Pennsylvania had hopes of becoming the first state in the country to create a city-run public bank basing their proposal on the North Dakota partnership model. After much collaboration between the Philadelphia Public Banking Coalition, the City Treasurer, and the Pennsylvania Department of Banking and Securities, the Philadelphia City Council voted 15-1 to pass an ordinance in 2022 that created the “Philadelphia Public Financial Authority” (PPFA) an entity that allows the City of Philadelphia to create a municipal public bank. Despite the success, the effort was soon slowed by city politics. Former Mayor Jim Kenney refused to fund the PPFA and declared that even if the group was funded by the city council he would decline to appoint board members. Kenney lost his seat to Mayor Parker in 2022, but even though Parker had been a member of the city council that voted for the PPFA, there has still not been any forward movement on the bank.
New York
New York State hosts important initiatives to establish public banks at local and state levels. The state introduced a bill for a “New York Public Banking Act” (S1992)[8] which aims to facilitate the creation of public banks at city and county levels across New York State. The bill authorizes the New York State Department of Financial Services to issue public bank charters to New York cities, countries, and regions. Therefore, if it passes, the bill will make it easier for local governments to create their own public banks while requiring public banks to comply with certain financial and ethical standards. In addition, the bill creates a regulatory framework for municipal banks with strong governance and oversight provisions. ‘Public Bank NYC,’ a powerful coalition representing more than 30 advocacy groups, including the New Economy Project, has been organizing for several years to this end.
Other cities in New York state have also made attempts at public banking. For example, Rochester, with a poverty rate twice the national average, the fifth-highest child poverty rate, and a 50% decrease in community banks over 20 years, has taken steps to enact public banking.
But these initiatives have so far been foiled by strong opposition. The New York legislature was unable to vote on a previous New York Public Banking Act in 2021 to give municipalities and local governments the ability to create public banks. Although the bill was supported by a majority of state senators and the Attorney General in New York, big bank lobbies were successful in keeping the bill in committee and away from a vote. In 2023 State Senator Harry Bronson sponsored the Bank of Rochester Act. The bill is supported by Mayor Evans and the City Council. It did not get out of committee and had to be reintroduced this legislative session.
New Jersey
New Jersey has also taken significant steps to create a public bank. Governor Phil Murphy, a former Goldman Sachs executive, introduced the idea during his gubernatorial campaign in 2017. The process began in 2019 when the “Governor’s Executive Order 91” created the Public Bank Implementation Board which was tasked with creating a plan within one year.
Despite Governor Murphy’s backing, the legislature chose to create the New Jersey Social Impact Investment Fund (SIIF) with a 20-million-dollar appropriation, rather than a public bank. See S3977/A5670 (June of 2023). The SIIF is managed by a private hedge fund manager with the goal of investing in affordable housing, infrastructure, and early childhood education facilities.
In February 2024, the New Jersey Public Bank Implementation Board submitted its final recommendations. The report proposed that a public bank be structured as a private entity and overseen by state appointees, the private sector, and community members. It advised that the public bank not be a depository institution but rely on state funding to meet liquidity requirements. The New Jersey Bank would not take deposits from citizens but still house government funds away from private banks. Assuming that goal, New Jersey will need to continue to support the SIIF until a fully functioning public bank can absorb it; they also recommend cultivating partners such as the banking community, credit unions, and philanthropic funders. Moving ahead with the plan will require that the legislature pass appropriate legislation. This has not yet occurred.
Massachusetts
The Massachusetts public banking movement has had some success in mobilizing support for public banking in the Commonwealth and in making some headway in the legislative process. According to Massachusetts Public Banking, a volunteer organization that promotes public banking to achieve social goals, “A Massachusetts public bank will bolster local economies, especially those in underserved communities. It will help provide cost-effective financing for small businesses and municipalities, land trusts and cooperatives, and projects for climate change adaption and remediation.”
While the Massachusetts legislature has so far failed to take action on public bank bills,[9] supporters have renewed their efforts. HD.2541, “An Act to Establish a Massachusetts Public Bank” was recently filed in the House by Representatives Mike Connolly and Antonio Cabral. An identical bill, SD.1213, was also recently filed in the Senate by Senator Jamie Eldridge. The movement had backing from a number of municipal leaders and organizations and extremely important technical support from banking and law experts both near (Harvard Law School, Boston University School of Law) and more distant (University of Colorado, University of New Hampshire).
California: Where things are Happening
California is currently attempting three different models of public banks: A state-wide public bank model, regional/city banks, and free bank accounts known as Cal Accounts. Here I discuss the first two of these.
IBank
The first consists of a stalled attempt to create a state-wide public bank. The current plan is to build on California’s current infrastructure bank, IBank, which has existed since 1994. The IBank has financed 54 billion dollars in infrastructure and economic development projects. It provides important financing for several parts of California’s economy but is restricted to infrastructure and unable to accept deposits. In 2020, the California Legislature attempted to pass Assembly Bill No. 310, which would change the IBank into a depository institution, but the measure failed. The Public Banking movement is trying to revive the state public bank plan. To kick start this initiative, Neha Singh, a fellow at the Goldman School of Public Policy, completed a comprehensive study on the strategic opportunity to transition the IBank into a fully functioning state bank in August, 2024.
Singh concludes that because the IBank serves only as a revolving loan fund, it is currently underutilized to address marginalized communities and provide equitable access to low-cost capital. She argues that a state-wide bank would be better equipped to handle fractional reserve lending and that to accomplish this goal organizers need to develop a proof of concept, adopt a framework similar to the Bank of North Dakota, and restructure the conception of the board to be more transparent. The key goals of the state bank would include housing affordability, climate change, supporting small businesses, and promoting alternative ownership models.
Still, moving from the IBank to a state bank entails significant state-imposed requirements, including being accepted as a member of the Federal Deposit Insurance Corporation (FDIC).
Regional/City Banks
Regional and city banks are much further along than the state bank plan. In 2019, the California State Legislature enacted the Public Banking Act (AB 857), which was signed into law by Governor Gavin Newsom. Like the New York Public Bank Act, this landmark legislation created a framework for local governments to apply to the state Department of Financial Protection and Innovation (DFPI) for licenses to operate publicly-owned banks. These public banks would facilitate the reinvestment of taxpayers’ money into local communities, promoting economic development and addressing pressing local needs. The CPBA, which is the main organization facilitating this process, has targeted 10 cities/regions to establish public banks.
Here I first discuss the LA initiative and then the San Francisco and East Bay actions.
Public Bank LA is led by labor groups, Community Development Financial Institutions (CDFIs), and affordable housing groups including SEIU 721, Inclusive Action, and ACCE LA. Two prominent think tanks, the Jain Family Institute and the Berggruen Institute, issued a series of five reports and developed lending models for the LA Public Bank covering affordable housing, green energy, and small businesses. This political support from unions and engagement of foundations is unique in the recent history of public banking. In terms of further progress, the Chief Legislative Analyst released a Request For Proposal to hire consultants for the public bank viability study and business plan in September 2022. In June 2023, the City Council voted unanimously to approve funding Phase 1 of the LA Public Bank feasibility study and business plan, about $460,000. In May of 2024, the city council unanimously passed a vote to fund the feasibility study for the public bank and advocated for phase 1 funding in the fall budget. This support from the Treasurer and the state in terms of funding initial studies is crucial for the project moving forward. As discussed below, however, the LA bank continues to face significant challenges.
The San Francisco Public Bank Coalition is another community-led coalition that has achieved some important successes. The SF Board of Supervisors passed the Reinvest in San Francisco Ordinance in June 2021, which initiated a year-long process of creating business plans for an interim green bank, which could later transition into a public bank. The city hired consultants to co-create these plans with representatives from the city, local communities and small businesses, credit unions, and CDFIs. The primary goals of the public bank include funding affordable housing, supporting small business, and promoting climate justice while providing justice projects in partnership with community financial institutions. On September 2023, the Board of Supervisors unanimously passed a resolution accepting receipt of the consultants’ proposed plans to create a public bank. As reported by the California Public Banking Alliance, the San Francisco Public Bank Coalition is working with public institutions to implement the plans. The consultants believe that the revolving loan fund could transition into a public bank by 2028.
The Friends of the Public Bank East Bay, a volunteer-run public benefit corporation, has proposed a regional public bank that will be jointly owned by Oakland, Berkeley, Richmond, and Alameda County, and governed by a diverse board including representatives from local governments, financial experts, and community leaders. Following the Bank of North Dakota model, the bank plans to partner with local financial institutions to provide lending services for affordable housing, small businesses, green energy, and refinancing municipal bonds. As reported by the California Public Banking Alliance, “[a]s of March 2023, the slate of bank board candidates was finalized, and the consultant completed the first draft of the business plan for the public bank. In November 2023, the Friends of Public Bank East Bay hired the veteran credit union executive Scott Waite as the public bank CEO. The Friends are currently negotiating with the three cities and the county regarding capitalization commitments. They have completed a full draft of their viability plan and are working with local financial institutions on initial partnership discussions. They are also working with foundations to secure deposit commitments which will help collateralize public deposits and strengthen the Bank’s bottom line.”[10] In 2024, the city of Richmond passed a resolution to apply for state and federal charters. East Bay is by far the furthest along of all the regional banks because they have picked a CEO. Although getting a charter will still be difficult and could require further legislation regarding the FDIC, some within the coalition are now pushing for a green bank with a transition period to public banking instead. The Public Bank of East Bay estimates that they will be functioning in 2025.
Common Obstacles
Although the regional and city banks in California are at different stages in the process, they all face a few similar challenges. First, the California Public Banking Act was created as a pilot program with licenses only valid for approval until 2029. Since the process has taken longer than advocates had expected, they will have to try to push back the sunset date to give more time. Public banking advocates Seth Jones and I interviewed for this article are concerned that opponents, including the private banks, might try to use the opportunity to block the extension.
A major problem for regional and city banks on their path to creating a public bank is the Public Banking Act’s requirement that public banks shall obtain and maintain deposit insurance provided by the FDIC. According to public banking advocates we interviewed, the FDIC requirement was put into the bill by private bank lobbyists as a means to throw a roadblock in front of public banking. The FDIC, especially under the Trump administration, might not want to cover public banks as members. Public banking advocates object to the FDIC provision. They argue that FDIC certification is unnecessary for an organization under the partnership model that is therefore unable to accept retail deposits. The FDIC exists to protect public confidence in banking by insuring money and reducing bank runs. Without satisfying the FDIC requirement, some municipal governments have turned to creating investment funds for their area, but these entities can only loan out money they have acquired and are unable to engage in fractional reserve lending, significantly curtailing their power. This revolving loan fund method is already in practice in New Jersey and San Francisco.
Concluding Remarks
As Trinity Tran, the cofounder of the California alliance and leading member of Public Bank LA organization, told Seth Jones and I, the movement is well suited for a Trump presidency because it reminds citizens that local issues are important. When states cannot rely on federal funding for progressive issues like public banking, climate policies, and supporting small businesses, it is critical to establish other means to push their agenda. In the current system, communities lose out on billions of dollars through fees and debt services to private banks. CDFIs and credit unions are losing funding. Public banking, say these advocates, is about taking control for your neighbors and bringing that money back to support initiatives in the community. As Rick Girling, a San Francisco activist, also told us, private banking is not popular. Ordinary people believe that private banking is extractive, risky and ultimately filled with fraud when they trigger bailouts. The bigger problem is that people know little about public banks. They may not trust them either, and need proof that public banking can be successful. Despite the challenges, Trinity Tran believes that public banking could be a key area of resistance and progress.
[1] The author thanks Seth Jones who provided outstanding research assistance for this essay and Christine Desan and Ignacio Orellana Garcia for very helpful comments.
[2] For more information on this movement, see Esra Nur Uğurlu and Gerald Epstein “The Public Banking Movement in the United States: Networks, Agenda, Initiatives, and Challenges” Political Economy Research Institute Working Paper, No. 538 (2021), https://scholarworks.umass.edu/server/api/core/bitstreams/032b5314-0893-444d-9997-a2aabfdb3db4/content.
[3] Gerald Epstein, Busting the Bankers’ Club: Finance for the Rest of Us (University of California Press, 2024), 243-4.
[4] Ibid, 244.
[5] Epstein, Busting the Bankers’ Club, 254.
[6] Ibid, 255.
[7] Ibid, 264 (footnotes omitted).
[8] Senate Bill S1992 is the most recent iteration in a series of bills attempting to establish or promote public banks in New York State. Others include Senate Bill S5565, Assembly Bill A9665A, Senate Bill S1762B, Assembly Bill A8290A, Senate Bill S1754, and Assembly Bill A3352. In addition, Assembly Bill A2720A, introduced during the 2023-2024 legislative session, sought to “[e]stablish[] a temporary state commission to conduct a feasibility study on the formation and control of a state public bank.”
[9] See, for example, Bill H.1223, Bill H.975, and Bill S.693.
[10] The 2022 Public Bank East Bay Viability Study commissioned by the Friends of the Public Bank East Bay can be found at https://www.publicbankeastbay.org/pbeb-viability-study.