Lea Suzuki/San Francisco Chronicle via AP
Many Rochester residents lack access to conventional banking services due to bank closures across the country.
Rochester, New York, has become a focal point in the movement for public banking, a push driven by the urgent need to address poverty and economic inequities in the region. The city, one of New York’s largest, with around 210,000 residents, is more than 40 percent white, nearly 40 percent African American, about 20 percent Latino, and roughly 4 percent Asian. The poverty rate in Rochester is nearly 30 percent, which is more than double the national rate. A public bank can help alleviate these problems by recirculating the money Rochester’s citizens already pay in taxes to support lending for community development.
“There is historic poverty, redlining, and disinvestment across the state, but it is especially pronounced in Rochester,” Tousif Ahsan, public banking campaign organizer at the New Economy Project, a New York–based organization that advocates for equitable economic policy, told the Prospect. “This presents a great opportunity for Rochester to create a public bank as a solution to these problems.”
Moreover, the number of community banks has declined by nearly 50 percent in the past two decades, from about 7,620 in 2003 to 4,129 in 2023. This sharp decline can be attributed to many factors, including the 2010 Dodd-Frank Act compliance requirements and the mergers with larger banks that can handle the more sophisticated regulatory and technological demands.
“It’s asking a lot for community banks to carry the load on themselves, and as community banks shrink, the people don’t have access to the kind of money that they need,” Walter McRee, president of the Public Banking Institute, a nationwide organization that researches and promotes the benefits of public banking, told the Prospect. “The public banking movement is committed to the rights of citizens to control their own money and the idea that banking should be treated as a public utility.”
The Rochester Public Banking Act, sponsored by Assemblymember Harry Bronson (D), who represents sections of the city, aims to create a public, city-owned bank to better meet the financial needs of city residents. Introduced earlier this year, the proposal focused on wholesale lending to community banks and credit unions and would be restricted from directly competing with commercial and retail banks. Loans and financial services would be directed toward businesses and projects that benefit the local community.
Political resistance, regulatory hurdles, and the private banking lobby pose formidable obstacles.
“Supporting the local economy from the ground up through a nonprofit, wholesale bank is effective and would be a great asset for the Rochester community to not only support our neighbors but invest in Rochester’s future,” Bronson told the Prospect. “The Rochester municipal bank would work to reinvigorate marginalized communities that have been left on economic sidelines for too long.”
However, the bill did not advance to the full Assembly during the 2023-2024 legislative session and must be reintroduced when the legislature reconvenes in January.
The bill has garnered support from Rochester Mayor Malik Evans, who spent over 20 years working in both a private bank and a credit union supporting small businesses and community development projects in the city. Key progressive groups like the New York Public Interest Research Group and Democratic Socialists of America have also expressed support. Gov. Kathy Hochul (D) has not commented on the Rochester initiative.
“Public banking is a tool for broader racial and economic justice, rather than an end in itself,” Ahsan said. “The coalition remains optimistic and prepared to keep fighting for public banking in New York.”
The Bank of North Dakota (BND), founded in 1919, is a compelling model for New York. As the only state-operated bank in the United States, the BND has showcased the benefits of a public banking system, including financial stability, support for local businesses, and significant contributions to the state’s economy. Moreover, North Dakota has more credit unions and community banks per capita than any other state, largely attributed to the supportive role played by the Bank of North Dakota. The BND partners with local banks and credit unions to enhance their lending capacity, making it possible for them to compete more effectively against the big banks—which is what the Bank of Rochester would do if created.
The BND returns its profits to the state’s general fund, which helps increase funding for public services, like education, infrastructure, and disaster relief, thereby reducing the tax burden on residents and businesses. In 2023, the BND reported record profits of $192.7 million, a strong return on investment.
“[The Bank of North Dakota] has been around for a long time … and they perform well. Profitability goes back to the state. So why wouldn’t we do this? Why should the profits go into private hands when it could be returned to the public?” Melissa Marquez, CEO of the Genesee Co-op Federal Credit Union in Rochester and one of the most prominent supporters of the proposed public bank, told NPR in 2023. “Let’s make sure enough money is circulating in Rochester to benefit Rochester residents.”
Despite the clear benefits, establishing a public bank has remained a significant challenge for local and state governments. Since the creation of the BND, no other public bank has been successfully established in the United States. Political resistance, regulatory hurdles, and the private banking lobby pose formidable obstacles.
The New York Bankers Association, which represents the interests of the private banking sector, has already voiced opposition to a public bank in New York, citing high startup costs, lengthy timelines for the bank to become a self-sustaining entity, and historical failures of other public banks in the U.S. However, several U.S. cities like Austin, Philadelphia, and Los Angeles are also conducting studies to determine the feasibility of establishing public banks.
As Rochester recalibrates its legislative efforts, the city could set a precedent for public banking initiatives across the country. By stepping up engagement with residents and community banks and credit unions, the city could pave the way for an alternative to private, for-profit banks and foster more economic development in underserved areas.
This article has been updated.
