Dakota proves – Public Banking helps improve impoverished communities and can reduce the wealth cap

Recently, more cities are looking at the creation of public banks as a potential solution. In 2019, the state of California passed legislation that would allow up to 10 cities or counties to create public banks. This legislation has moved several cities like Long Beach, San Francisco, and others to look at the possibilities. This momentum builds off the state-owned Bank of North Dakota (BND) – currently the only public bank operating in the US. BND prioritizes public access over profit and offers fair banking services to North Dakotans when private banks can’t or won’t. It does this through a partnership with other financial institutions and serving as the backstop for those loans that private banks don’t feel they can offer. In addition to supporting public banks, cities can play a key role connecting more BIPoC, and low-income residents, to financial services through established financial institutions that prioritize safe, affordable, and wealth-building financial products and services. Community Development Financial Institutions (CDFI) and credit unions are among them. How to do this? City leaders can connect with these institutions and incentivize them to operate in their community’s bank deserts. More than 80 communities around the country have established Bank On programs that connect residents to affordable options in participating financial institutions that offer safe accounts that meet a set of national criteria. Cities can also raise the profile of these consumer-focused financial institutions by sharing information about the products that they offer or leveraging their municipal loan fund to partner with a local CDFI to help their funds reach more local business owners. Cities can also support efforts to help preserve the legacy of Black banks and help improve economic conditions in communities they serve. It is important for local leaders to be aware of their city’s financial partners and what they do. Cities can conduct an impact analysis to determine how current financial services affect residents and how such services can improve the lives of BIPOC and low-income people, and as a result – the overall financial health of their municipality. A few questions to consider: How many business loans have financial institutions issued in your jurisdiction? What is the overall amount, and what is the mean loan size? What percentage of the financial institution’s lending is going to businesses of color within your jurisdiction (i.e. SBA 7(a), etc.)? Does the financial institution operate branches or ATMs within your jurisdiction and if so where are they located? For those operating ATMs what are their fees for non-customers? How recently did the financial institution complete an examination of their small-business lending practices to minority and businesses of color and what is their plan to address any obstacles found? What partnerships do they have with CDFIs operating within your jurisdiction? Do they offer a Bank On approved product that your residents can access? How many people within your community have this product? What Community Reinvestment Act (CRA) activities have they done within your jurisdiction and at what amounts? What is the ethnic and racial composition of their staff operating within your jurisdiction? What is the ethnic and racial composition of their senior leadership? Once you have the collective information you can then see how or if there is an opportunity to leverage your municipal financial activities in a way to build a stronger community for all of your residents. Now more than ever, city leaders have an opportunity to alleviate unfair and unjust economic conditions that have resulted from years of institutional and structural racism, and an opportunity to build wealth in Black, Indigenous, and Communities of Color. A city’s financial security depends on the financial security of all its residents – through partnerships with community-oriented financial institutions and innovative strategies such as public banking – equitable financial inclusion can become a reality.