Divestment and Solidarity Part 2 The Public Bank optionTweet
There are an array of viable stakeholder oriented financial institutions ready to take the deposits of many individuals and businesses. Things get a little bit more tricky when we think about a city, like Seattle, divesting and reinvesting.
Cities have financial needs that are not easily accommodated by the existing ecosystem of stakeholder oriented financial institutions. Broadly speaking, there are three possible solutions to the puzzle: (1) making creative use of the existing system; (2) creating new private institutions; or (3) creating a new public bank.
Future writings will outline the detail how to explore options (1) and (2), but this post will discuss the public bank option. The public bank movement has been working for years in Vermont, is picking up steam in Oakland, and seems to be garnering quite a bit of focus from divestment activists.
The Public Bank Option
A public bank is a bank owned by a state or municipality. The idea has considerable potential. Lets walk it through our four important questions.
Who owns it?
A municipal bank is owned by the municipality and a state bank is owned by the state. Any profit that the bank generates flows back into the general account of the government that established it. That money can then be used for whatever the government decides is in the best interest of the people. This will be decided by whatever political process operates within the public entity that owns the bank.
An added benefit of this structure is that it gives a public entity more control over their financial destiny. This allows them to be less subject to the whims of the market or the pressure of presidents who threaten to revoke federal funding because cities refuse to comply with mass deportations of residents.
2. How is it governed?
The answer we often hear is “democratically and transparently,” the full answer is, well, quite a bit longer. It all depends on the chartering documentation for the bank and the legislation that surrounds. A public bank would be a public institution subject to public pressures; just like city councils, the police, many prisons, and detention facilities. Placing the power and influence of a bank in the hands of a State apparatus that proven track record of oppression carries an array of complications. It may be a viable option, but it carries with it all of the complication and intersectional issues that are present in the current governmental structures and processes.
A whole array of interests and risks need to be carefully balanced when creating an institution with the power of a public bank. If the bank’s board were appointed by the mayor, then the bank would be subject to the whims of whoever assumed political power. If the board were elected by the district the same way a city council is, then there would be money poured into campaigns for bank board positions and the interests of the those already in power might coopt the bank. All the while, we would need to ensure that the governance of the bank did not fall prey to petty politics.
The question of what makes for good governance of the bank is a political one; it is all about whose interests the system gives power to. The balance can be struck well, but it is not a given. It will require a firm charter that directs the mission of the bank; tightly cabined power of board members that are elected and appointed through political processes; powerful positions for voices that represented historically marginalized communities, and a decision making mechanism that can enable employees to make responsible decisions in service of the community.
3. What is its loan portfolio?
The answer to this question will ultimately be a function of the governance. If the governance of the bank is appointed by the executive administration, the loans will reflect that administration’s politics. That could range from supporting low income housing, to financing gentrification. This will be limited by the chartering documentation of the bank, but the important thing to note is that a public bank does not necessarily imply alignment with progressive values. For example, the North Dakota public bank financed a militarized response to peaceful water protectors at Standing Rock.
4. What are its legal obligations?
The legal obligations of a public bank will be determined by the chartering documentation and the legislation surrounding it. These documents could mandate that the bank refuses to do business with any entity that finances, operates, or constructs pipelines or private prisons; or the documents could be toothless guidelines that can be ignored on a whim. They could sharply define what the “community interests” are in order to focus the bank on activities that will create dignified livelihoods for residents, or they could leave the door open for exclusively market rate lending.
Legal obligations are often worth no more than the paper they are written on. Just ask Native people who have had their treaties broken time and time again. A charter will not be enough to protect an institution like a bank from cooptation by people who do more deeply feel for the well being of all of their relations. In some ways, having public funds in private hands creates some leverage because we can pit competitors against each other.
Consolidating more power in the State is a risk. A charter will not be enough to protect it from the corrupting influence of the very institution that creates the laws and will interpret the charter.
Bringing Public Banking in Alignment with #NoDAPL Divestment: The Perspective of Defenders of Mother Earth- Huichin
In some ways, a public bank is the best possible option for divestment. It creates the potential for a genuinely transparent institution that operates in accordance with democratically determined principles for the good of the community while creating a surplus the government can use to provide even more services. It is an option worth pursuing, but it carries risks. A patient movement with strong solidarity and a deep political/economic/social analysis could shepard a public bank through the legislative process in Oakland, California, or anywhere in the country. But the path is fraught with danger and potential fractures. It’s best that we talk about them up front.
“Public ownership” hasn’t been a good thing for plenty of people. State control has committed a genocide of indigenous people, placed Africans in bondage, locked Black people in jails, and committed an uncountable number of atrocities against people from all walks of life.
The system of state governance we have in place is imperfect at best. As we know, it affords vastly different opportunities, access, and impositions to different people based on characteristics such as race, ethnicity, gender, ability, and income. Though we have a one citizen- one vote system, the entire mechanism takes place within the context of capitalism and concentrations of power that often leverage the state apparatus to oppress people.
On top of this, the State apparatus has always oppressed certain people. Consider the issue from the standpoint of indigenous people. Why would a native Ohlone person be excited about Oakland having a public bank? How good has the government of Oakland or California been to native people? It is the government itself that rationalized and permitted the very behavior that we are trying to stop. Not just investment behavior, but the continued physical, psychological, and structural violence against Native people. Why do we trust a political system that we know has failed to serve indigenous people to be able to manage a bank in a good way?
If we assume that a bank is good because it is public, we will have completely ignored the relationship between capitalism and the State, we will have completely ignored how oppression actually works. The profit of the few and the force of the State have been deeply intertwined from the very beginning of the United States’ emergence. The Catholic Church’s Doctrine of Discovery created ‘religious right’ for European Christians to violently conquer land around the world in order to extract profits. This laid the groundwork for this extraction to be validated and enforced by the United States law. The doctrine has been cited as recently as 2005 by Ruth Bader Ginsburg to rationalize the seizure of indigenous land. This whole process enabled the people who dominated the government (at a time that only white men could vote) to create rules that governed who could do what with land and resources. It built up the legal and economic artifice that has created the gross wealth disparities that we see today.
Our indigenous leaders and their history teach us that it is not just private capitalist entities we must resist, it is often the State itself. The State operates to serve the interests of some and deny the interests of others. This has been the case from colonization, to slavery, to Jim Crow, to the denial of rights to women, to internment camps for Japanese people, to the invisibilization of trans folks, to the marginalization of people with disabilities, to deportations, to mass incarceration, and more. If we need any more reason to be skeptical of the official political processes of our country, we need only look to the person who currently occupies the oval office.
All of these intersecting oppressions are aspects of a system that leverages State violence in service of a financial system that consolidates wealth in the hands of the few. In many ways, the government and private capital have collaborated in the establishment of the system. While grassroots social movements and champions within government have made gains for justice, inclusion, and equality, they have not fundamentally altered the basic governance of the physical space we call the “United States.” Different groups still have different access to the political system, different abilities to direct their own lives, and different abilities to have their voices heard by the government that is “by, of, and for the people.”
If we are going to work with the State system to create an institution that can move this thing we call “money” in ways that actually begin to transform our society, empower frontline communities, and regenerate the planet then we need to be be cognizant of the forces we are dealing with. We need to know that creating this institution need an innovative and ingenious governance model and a business plan that grows out of a deep understanding of systemic issues. Again, the issue is much less “what must we divest from?” and much more “what must we divest into?”. And the real question is how do we make a new solution that does not reproduce the problems we are trying to escape from.
This is part two in a multi part series on the divestment. This piece was written by Simon Mont on behalf of Defenders of Mother Earth-Huichin
Read part one here