Lawyers propose Philadelphia public bank for addressing racism

Because of the COVID-19 pandemic, which has exposed systemic inequities, some say a public bank could be a key asset to Philadelphia’s financial recovery. The details about the creation of this bank and its benefits are detailed in an article published by WHYY.

Advocates, including the Philadelphia Public Bank Coalition, whose supporters include POWER, the Philadelphia Area Cooperative Alliance and Reclaim Philadelphia, argue this model could save the city money by way of lower interest rate loans. This way, its own profits could be reinvested into local infrastructure, education, housing and economic development projects.

Advocates also argue that giving the city a way to invest in those kinds of projects could help address longstanding problems caused by systemic racism. This situation can be seen in the city’s 25% poverty rate which disproportionately impacts African-American and Latino residents, according to a 2019 study from the city’s Department of Public Health.

Advocates also argue Wall Street banks have a history of discriminatory practices that contribute to Philadelphia’s disproportionate poverty rate among African-American and Latino residents, and public banks offer the opportunity for divestment.

For example, a 2018 analysis of Home Mortgage Disclosure Act records found private banks denied Black and Latino people conventional mortgage loans at higher rates than white people in 61 metro areas. In Philadelphia, white borrowers received conventional mortgage loans 10 times more often than Black and Latino borrowers in 2015 and 2016. The analysis, conducted by Reveal from The Center for Investigative Reporting, found that the more African-American or Latino people lived in a neighborhood, the more likely banks were to deny loan applications there.

The analysis also found banks placed about 75% of their branches in mostly white neighborhoods and only 10% in African-American neighborhoods.

The practice is a modern iteration of redlining, a discriminatory practice now outlawed by the federal government that designated nonwhite areas as unworthy of investment. Research has found that redlining and its reverberations are key contributors to poverty and gun violence.

The city plans to release a feasibility study on the concept in the fall. “There are gaps in the private banking market in communities that are underserved,” said the city’s treasurer Christian Dunbar. “So certainly I think the valuation of a public bank is to see how we can provide value in some ways to communities that don’t have the same level of access to some of these banking products or access to capital.”

“If we can use the public bank as a way to provide credit enhancement for small businesses, especially African American-owned businesses, that makes it easier for them to get traditional loans from banks, that’s a way to help them to grow,” he said.