Another financial crisis is coming.
At a recent public meeting put on by DC’s Department of Insurance, Securities and Banking (DISB) — ostensibly “to educate District of Columbia residents, small business owners, and other stakeholders on the core tenets of public banking” — panelists talked about the risk of government getting into private industry. What key District decision-makers, including Chief Financial Officer Jeffrey DeWitt and the regulators at DISB, don’t seem to want to talk about is the existential risk posed by our current banking setup.
Ten years ago, generations of black wealth was wiped out when whole communities lost their homes to aggressively marketed subprime mortgages. Today, illegal modern-day redlining continues apace. Affordable housing has essentially disappeared from the marketplace, as the strategy to preserve global capital drives needless luxury development, and private equity securitizes our rent payments. Resulting housing precarity drives displacement, and a homelessness crisis subjects DC residents to utterly inhumane living conditions.
Wall Street financial institutions have proved over and over they can’t help but pursue ever wilder speculation schemes, no matter the cost to our communities. The big banks are most certainly not interested in what the public actually needs to survive.
It’s thus highly troubling that DC’s CFO claims there’s just one bank that can handle the District’s daily financial transactions: Wells Fargo. The District’s current bank of record, Wells Fargo holds a $12 million contract for comprehensive banking services and a $1 million contract for custodial services pertaining to DC’s $2 billion investment portfolio (of which some portion of $330 million is invested in a Wells Fargo money market fund). Wells Fargo is the third-largest megabank in the United States, with a mind-boggling $1.7 trillion in assets.
The Federal Reserve has voted unanimously to ban Wells Fargo from growing any larger, in just the latest of a series of record fines and penalties levied against the bank for a litany of illegal and unethical practices. If you’ve been to Union Station lately, you’ve been bombarded by the pricey ad campaign bank execs hope will convince the District they’re sorry. Meanwhile, Wells Fargo continues to invest in human misery, propping up payday lenders, for-profit prisons and immigration detention centers, and the Potomac Pipeline that threatens DC’s drinking water and is unanimously opposed by the DC Council.
Not to mention that Wells Fargo failed its most recent Community Reinvestment Act exam, which should be disqualifying on its face under current District law. With our CFO asserting that Wells Fargo has the District over a barrel (of course it doesn’t, since Philadelphia, a city more than twice DC’s size, successfully pulled its $2 billion payroll business from Wells Fargo in February), why on earth would the bank ever clean up its act?
The District government, unlike Wells Fargo or any Wall Street financial institution, has a duty to actually serve DC residents. Policymakers must grapple with the concept of housing as a human right, not a commodity. And the CFO and DISB must reconceive of the provision of essential financial services as a public utility available to all, in the form of a public Bank of Washington, DC.
“By managing all city taxes, fees, and local revenues (which are currently spread around various accounts with corporate banks), the public bank would aim to provide an alternative, socially oriented financial resource for the city’s economy,” Michelle Chen wrote last month in The Nation. The bank would become a powerful tool not just for meeting vulnerable residents’ most critical material needs, but also for advancing important public values and policy goals that otherwise get short shrift in the face of persistent market failures (or funding shortfalls from an antagonistic federal government).
At-large DC Council member David Grosso, who secured the $200,000 budget line item behind DC’s ongoing public bank feasibility study, has suggested that $800 million of the city’s reserves be released for spending, including on capitalization. (The public Bank of North Dakota, established in 1919, was capitalized with an amount equivalent to $28 million in today’s dollars.) Mayor Muriel Bowser and the city’s CFO have both confirmed that the District is swimming in cash.
A useful point of comparison on how much the District might save by ending its relationship with Wells Fargo comes from a community responsive banking analysis commissioned by the San Francisco Board of Supervisors. It found that San Francisco could retain and reinvest $864,000 annually from the fees on its short-term cash management accounts alone. A public banking bill to be introduced this fall in San Francisco will be guided by the work of the city’s 16-member Municipal Bank Feasibility Task Force, which includes relevant city, state and regional agencies; civil rights and social justice advocates; community lenders; and legal and policy experts.
San Francisco’s process led by an inclusive task force stands in sharp contrast to the closed, consultant-led process currently taking place mostly under the radar in DC. DISB rejected a Freedom of Information Act request seeking any documents related to the public bank feasibility study, including communications with the DC Council and its own statement of work, claiming a trade secrets exemption.
As a result, the stakeholders who manage to learn of the department’s poorly advertised and hastily thrown together public meetings are flying blind about the scope of its study, including whether it’s even aligned with the affordable housing, environmental sustainability and cultural-infrastructure goals outlined by the Council.
The lip service official DC gives to concerns for human needs is wholly misaligned with its entanglement with financialist capitalism, as these stealth maneuvers indicate. Activists and affected residents need to insist on a different approach to how the city manages its money – a public bank.
Kim Lehmkuhl is an at-large member of MDC DSA’s Steering Committee and organizer with the DC ReInvest coalition. A version of this article has appeared in the DC Line blog.