Testimony: Reject Irresponsible Banks, Support Public Banking

Testimony: Reject Irresponsible Banks, Support Public Banking

Oksana MironovaHilary Wilson

Thank you to the New York City Banking Commission for holding a Banking Designation hearing this year. Our names are Oksana Mironova and Hilary Wilson, and we are senior policy analysts at the Community Service Society of New York (CSS), a nonprofit that promotes economic opportunity for all New Yorkers. CSS uses research, advocacy, and direct services to champion a more equitable city and state. We work to address urgent issues facing low-income New Yorkers, including the city's chronic unaffordability crisis.

Overleveraging as Business Practice

One of our core areas of focus is protecting the city's rent stabilized housing stock. According to our analysis of the 2023 New York City Housing Vacancy Survey (HVS), 37 percent of low-income households (earning under 50 percent of Area Median Income, or AMI) live in rent regulated apartments-totaling 434,300 households. That is nearly three times as many as those living in public housing and subsidized rentals combined.

Prior to the pandemic, multifamily properties sharply increased in value in two waves, between 1995 and 2007, and once again from 2010 to 2018. Fueling that rise in the rent stabilized stock were landlords who exploited loopholes to push out long-term tenants, drive up rents, and increase their buildings' net operating income.

With an increased income, landlords would go back to their lender-like Signature (now Flagstar Bank)-and refinance their building's mortgage for a higher amount. As the Association for Neighborhood and Housing Development's Equitable Reinvestment Committee has shown, some multifamily lenders' core business practices relied on "making multifamily loans to bad acting landlords." For example, "year after year, building after building, Signature consistently made multifamily loans that were speculative and underwritten to practices of displacement, harassment, or building neglect."^[1]

Landlords do not have any obligation to use this debt-generated profit to improve their existing buildings and make living conditions better for their tenants. As CSS's annual surveys of New Yorkers have shown over and over again, there is no direct relationship between rising rents and improved conditions for tenants. Instead of putting money into the building in which conditions continue to decline, landlords used the money provided to them by their lenders to buy more rental buildings, or as cash payouts to themselves or their investors.

Failing to Meet New Yorkers' Financial Needs

Another core focus of our research and advocacy is in the area of financial security. In our most recent survey of a statistically representative sample of New York City residents, we found that 13 percent of respondents had no savings or checking account at a bank or credit union. Unbanked respondents were more likely to be low-income and unemployed. Additionally, over a third (37 percent) of unbanked New Yorkers had no money saved for a rainy day, more than four times the rate for those with a bank account. Unsurprisingly, the most common reason respondents gave for not having a bank account was unaffordable fees and minimum deposit amounts. For those who lack income, savings, or employment, even a $25 minimum deposit and $3 maintenance fee (the maximum amounts for basic banking accounts at New York State-regulated banks) can be onerous. Moreover, in the context of continued attacks on the federal regulatory infrastructure, New Yorkers will likely face increased fees for overdrafts and late payments, constituting additional barriers for those already struggling to access banking services.

Fortunately, credit unions and other mission-driven financial institutions are filling the gaps left by commercial banks like those that currently hold all of the city's deposits. For instance, in the Bronx, which has the highest rate of unbanked households and has been plagued by waves of bank branch closures over the last two decades, the Lower East Side People's Federal Credit Union recently partnered with the Bronx Financial Access Coalition to open a new credit union branch.^[2] These institutions operate under tremendous constraints, particularly in terms of the capital they can raise given their relatively low-income client base. This is where public banking comes in. By partnering with a public bank through participation loans, mission-driven financial institutions could scale up their services and reach to finally meet the banking needs of low-income New Yorkers across the city.

Reject Irresponsible Banks, Support Public Banking

In an era of extreme financial uncertainty, it is important for New York City to protect its financial assets from political interference. Earlier this year, the federal government seized $80 million from the city's account at Citibank, without authorization. Citibank processed the reversal without questioning it, overdrafting the city's account and forcing New Yorkers to absorb the loss.

The city must move toward establishing a public bank: a democratically controlled financial institution, chartered to serve the public interest, and committed to equitable, community-driven investment.

A public bank would allow New York City to invest billions of dollars in affordable housing, expand financial services, and address other critical needs-particularly in low-income, Black, brown, and immigrant communities that Wall Street banks routinely fail or exploit.

If you have any questions or want to discuss further, please reach out to us at hwilson@cssny.org and omironova@cssny.org.

Notes

1. Williams, Barika. "ANHD Statement on Signature Bank's Closure," March 13, 2023.

2. Lower East Side People's Federal Credit Union, "Building Roots in the Bronx: The Evolution from Mobile to Physical Branch," (n.d.).

Issues Covered

Economic Mobility & Security

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