A Public Bank Could Boost Access for those Left Behind by Wall Street

Imagine seeing every bank branch in your neighborhood, one-by-one, close up shop until the closest brick-and-mortar bank requires a subway or bus ride. This is the reality for a growing number of New Yorkers in lower-income, Black and Latino neighborhoods.

Despite its status as a global financial hub, New York has a shockingly low rate of bank branches relative to its population, as residents in places like the Rockaways and the Bronx know all too well. As in-person banking declined during the COVID-19 pandemic, big banks moved services online, swallowed smaller competitors, and pocketed the savings in the form of massive profits.

These days, plenty of banking can be done from a phone or computer. But what if you’re a small business owner who needs a loan and prefers to meet face-to-face? What if you’re a first-time homebuyer with questions about mortgages? Or you lack broadband access, like 1 in 4 New York City residents?

These same Wall Street banks have long subjected Black and brown communities to discriminatory lending and redlining, helping create today’s racial wealth gap. Though outlawed decades ago, discrimination in banking is not just history—it’s happening right now. A 2023 report by New York’s Office of the Attorney General documented persistent racial inequality in mortgage lending, from the rate at which applications were denied to how much borrowers were charged in interest and fees. The research showed that Black and Latino borrowers who took out loans between 2018 and 2021 stood to pay an astounding $200 million more than their white and Asian counterparts.

Meanwhile, tens of thousands of New Yorkers are unbanked, meaning they don’t have a checking or savings account. For these households, who are disproportionately low-income, some can’t afford the fees or minimum deposits, some don’t trust banks, and some just don’t have a branch nearby. Instead, they turn to check-cashing places, pawn businesses, or shady financial apps that promise “earned wage access” but function more like high-interest payday loans. These often predatory services might be easy to use, but they come with steep costs, especially if a borrower misses a payment.

So, what’s the solution? Credit unions and community development financial institutions (CDFIs) have stepped up to fill gaps in financial access across the city. Places like the Lower East Side People’s Federal Credit Union have been lifelines for many underbanked New Yorkers. It teamed up with the Bronx Financial Access Coalition to open a Bronx branch after yet another wave of bank closures.

Unlike commercial banks, credit unions and CDFIs focus on serving communities over maximizing profits. Evidence shows that by offering more individualized financial services and lower interest rates, credit unions are often more effective than commercial banks at improving their members’ financial well-being.

But they have limitations. Because of their nonprofit status, they have fewer ways to raise capital, thus limiting the amount they can lend. The federal CDFI Fund was created 1994 in part to increase the amount of capital available to these vital institutions. New York State even created the first state-based CDFI fund in 2007. However, the capital needs in historically redlined communities far outstrip the available resources.

That’s where public banks come in. Owned and operated by the government, public banks exist to serve people, not maximize profits. Over 900 public banks worldwide are already proving that this model works.

The U.S. has only one–the Bank of North Dakota (BND)—but it’s been incredibly successful. Founded over a century ago to help local farmers access credit at affordable rates, today BND partners with community banks and credit unions to expand affordable lending.

This partnership model has helped North Dakotans weather financial crises. During the Great Recession, the state had one of the lowest foreclosure rates and even recorded a budget surplus. During COVID-19, BND ensured more small businesses received federal relief loans per capita than in any other state. North Dakota also has the highest density of small community banks. And unlike Wall Street banks, BND reinvests its profits back into the state’s general fund.

Public banks in New York could do the same. Bills authorizing the creation of municipal public banks have been introduced at the state and local levels, including in Rochester and New York City. One study found a New York City public bank could generate nearly $6 billion in new lending in its first five years by partnering with CDFIs and credit unions. This would allow these institutions to offer low-interest mortgages, business loans, and other lines of credit at the scale needed to finally close the racial wealth gap in New York.

Wall Street’s consolidation shows no signs of slowing down, and it’s unclear whether we can count on federal regulators to step in. That means we need local solutions to fix our broken financial system. A recent Community Service Society of New York survey found a majority of New Yorkers, especially Black and Latino residents, support public banking. It’s time for our elected leaders to make it a reality.

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