A groundswell of interest in public banking has advocates pondering how city-owned banks could transform the way municipalities collect and spend their money.
It’s no surprise that Malia Cohen worries about what local public dollars are doing. As a member of the San Francisco Board of Supervisors, the municipal legislative body, it’s her job to know how, where and why the city’s money is coming in and going out. But recently, Cohen has joined a growing number of public officials around the country who are wondering what happens in between — what happens when the money in the city coffers goes to sleep at night.
In fiscal year 2017, the city of San Francisco took in an average of $508 million a month in revenues and put out $467 million a month in expenses. But in between, the banks that handle all that cash sometimes used public dollars in ways that, in the opinions of Cohen and others, contradict the reasons why that money is coming and going in the first place.
“The existing banking and financial structures we’re operating in don’t always mirror our city’s values,” Cohen says. “For example, we had many people opposing the Dakota Access Pipeline. Many of the banks we bank with support the funding of this pipeline.”
For some cities, like Philadelphia, Chicago, Seattle and elsewhere, the Wells Fargo fake accounts scandal was the last straw. The bank’s subsequent downgrade on its federal community reinvestment rating even forced New York, the nation’s largest city, to initiate the process of moving its deposits and banking services away from Wells Fargo.
But where else could all those dollars be kept other than in a large, private financial institution? State and local governments hold around $458 billion in deposits, according to the Federal Reserve Bank of St. Louis, while state and local pensions hold $3.7 trillion in investments. That’s a lot of money and a lot of daily transactions, which would overwhelm most community banks in most cities. For a solution, Cohen and others have turned to what seems like an unlikely place for big city legislators: the windswept plains of North Dakota. The state is home to the the Bank of North Dakota, the nation’s only public bank, a government-owned deposit-taking institution.