Once Seattle had committed to move its money, the city needed somewhere to move it to.
“When we were organizing around getting [Seattle] to divest, the question all along was what to do with the city’s money,” Remle said. “And our philosophy was it’s not going to be a victory to close accounts with Wells Fargo and go to Bank of America.”
Organizers saw public banks as the solution.
A public bank is an institution owned by a governmental body, funded with taxpayer money, and mandated to serve the public interest. In summer 2017, Remle and other Seattleites started advocating for the city to establish a public bank, a process that could take years.
Sawant said a public bank “would be accountable to the people of Seattle in a way that you could never hold a private bank accountable,” adding that the city could better direct the bank’s resources, like loans, to projects that support community-directed goals. Remle noted affordable housing, homelessness services, and funding for higher education as causes the city might fund.
…The next step, the council member said, is to demand that obstacles—such as the inability for credit unions to serve municipalities and the Washington law that bars cities from establishing any type of business entity—are removed so that the city or state can establish a public bank.
…Because proposed banks have unique business plans, market competition, and local economic context, among other factors, the FDIC does not prescribe a minimum of initial capital. But the agency does suggest that organizers examine “the risks inherent in the institution’s business model, the potential variability in earnings projections, and the skill and ability of the management team to carry out the business plan” when planning to apply for insurance.
…There are also legal challenges to establishing public banks in some locations. Many states and cities—including Oregon state, as well as Sante Fe and Los Angeles—have clauses in their constitutions or charters that inhibit the establishment of public banks. There’s movement in some places to overcome institutionalized policy barriers to establishing public banks. In Los Angeles, a measure on the November ballot that would have amended the city’s charter and allow it to explore establishing its own financial institution did not pass. And in San Francisco, a city report recently showed that state laws could not prevent the city from creating a public bank.
…The main obstacle to starting a public bank in Washington is that the state constitution prohibits the state and its cities from loaning money or credit to individuals, associations, or corporations.