Wall Street vs. Public Good: How big banks divest from our communities
Who Runs Philly? is an ongoing project from Philly Power Research focused on highlighting the powerful people, organizations, businesses, and interest groups that shape Philadelphia. This post focuses on the relationship Philly has with exploitative private banks and the need to create a public bank, as a result. To explore campaign finance data on your own, check out our tool: The Philadelphia Campaign Finance Data Explorer
Last weekend, over 1,000 Philadelphians called on candidates for city council to adopt “The People’s Platform,” a wide-ranging vision of a new coalition - Alliance for a Just Philadelphia - for a city that is rooted in justice and works for everyone. One component of The People’s Platform is creating a publicly-owned bank for the City of Philadelphia. A public bank would help ensure Wall Street banks could no longer carry out their racist policies in Philadelphia.
As the California Assembly introduces legislation that could end its abusive relationship with for-profit commercial banks and create a Public Bank, Philly should be doing the same. Commercial banks or private banks use their deposits to make investments that do not extend credit back to communities or their residents, making exorbitant profits that are never seen or felt by Philadelphians.
Big banks have a long history of predatory, racist policies in Philly
Philly’s relationship with private banks has not been a passive one, but aggressively predatory. Let’s take Wells Fargo for example. Wells Fargo's discriminatory practices in Philly caused foreclosures to increase and resulted in the loss of much needed tax revenue. The analysis of the bank’s discriminatory lending found that 23% of Wells Fargo's loans to black and brown customers in Philadelphia were high-cost or high-risk, compared with 7.6% of loans made to white borrowers. Philadelphia filed a lawsuit in 2017 against Wells Fargo for violating the Fair Housing Act by taking "advantage of minority borrowers to maximize profits." Profiting on the backs of black and brown people is nothing new for the bank; they’ve financed private prisons and immigrant detention centers and financially backed racist politicians.
The exploitative lending practices don’t stop there. In September 2016, Wells Fargo was issued a combined total of $185 million in fines for creating over 3.5 million fraudulent checking and savings accounts and credit cards that its customers never authorized. The Bank is a financier of predatory, payday loans- short-term, high cost loans, generally for $500 or less, that is typically due on your next payday. Wells Fargo has invested over $460 million in companies building the Dakota Access Pipeline which threatened the water, lands, sacred sites, and burial grounds of Indigenous Nations. Lastly, Wells Fargo heavily contributed to the financial crisis in Puerto Rico, leading to severe cuts to public services throughout the island.
Wells Fargo’s business practices align closely with the collusive practices of other major banks. In February 2019, Philly filed an antitrust lawsuit against seven major banks- Bank of America Corp, Barclays Plc, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co, Royal Bank of Canada and Wells Fargo & Co- for conspiring to inflate interest rates for municipal bonds, costing the city billions of dollars in excess fees. The amount paid in fees takes away from citizens added revenue to public services such as schools, transportation and hospitals.
Even after the city cut ties with Wells Fargo, the bank continues to lobby city council
In 2017, the City of Philadelphia recognized Wells Fargo’s unethical lending practices and voted to replace it as the bank in control of Philadelphia’s $2 billion payroll. But the City has not cut all ties from the bank or other predatory banking institutions. Wells Fargo remains on the City’s list of depository banks - meaning the bank still makes money from the fees associated with the deposits the City makes. In 2018, Wells Fargo spent $20,491 in lobbying expenses and approximately $13,900 of that in direct communication with the City Treasurer’s office, City Council Member At Large Derek Green and the CFO of PGW Joseph Golden, offering underwriting services.
Wells Fargo and PNC are the big banks contributing the most to Philly elected officials
Wells Fargo and PNC are two of the top six investors in the Chamber of Commerce. The Chamber contributed $3,700 to current city council members and city council candidates last year. To date, the Chamber has donated only to incumbent candidates, including a $1,500 donation to Cherelle Parker. They have also given $500 donations to Allan Domb, Derek Green, and Mark Squilla.
PNC’s PAC contributed $4,000 to four incumbent city councilors last year--$1,500 to Bobby Hennon, $1,000 to Kenyatta Johnson, $1,000 to Mark Squilla, and $500 to Derek Green.
Public Banks Give Power to the People
After all this drama and squandered public dollars, Philly residents deserve a public alternative to for-profit banks. A public bank is a bank controlled and primarily funded by a government body rather than by private investors. So in this case, the City of Philadelphia would be that governing body for the bank’s deposits, all its revenue, taxes, fees, and other earnings. In addition, the bank could make affordable loans to the City and cut out the expensive fees that often come with borrowing from traditional private lenders, such as Wells Fargo or JP Morgan Chase.
A public bank would save Philly some money and allow for more dollars to be funneled into starved public services. The City can also choose what it invests in through public charters that dictate the terms of lending and spending. This means Philly residents could have a say in how their tax dollars are invested and spent.
Philadelphia learned the hard way that big banks are bad for business in our city. Instead of continuing to be exploited by profit driven lending institutions, it’s time to explore a public alternative that puts decision making power into the hands of Philly residents. Whether through unethical business practices or lobbying elected officials, big banks use their money to dominate political agendas locally and nationally. Public banks remove these bad actors from the equation and allow use to rethink how we want to spend our money with fewer fees attached.
Philly does not need another banking scandal to know, it is time for a public bank.
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