Senate Bill S6804

                                
 
BILL NUMBER: S6804

SPONSOR: SANDERS
 
TITLE OF BILL:

An act authorizing and directing the department of financial services to
study, evaluate and make recommendations concerning the formation and
control of public banks by municipal and local governments; and provid-
ing for the repeal of such provisions upon expiration thereof

 
PURPOSE OR GENERAL IDEA OF BILL:

This bill would direct the department of financial services to study,
evaluate and make recommendations concerning the formation and control
of public banks by municipal and local governments.

 
SUMMARY OF SPECIFIC PROVISIONS:

The scope of such study shall include, but shall not be limited to:

(a) the purposes of such public banks;
              

(b) an analysis of cost savings, impacts on local economies, community
economic development and infrastructure, housing and additional needs of
localities, including but not limited to:

(i) appropriate governance structures;

(ii) appropriate sponsors and corporate structures;

(iii) minimum capitalization requirements;

(iv) appropriate insurance and risk management tools;

(v) charter requirements;

(vi) financial and operations framework;

(vii) deposits;

(viii) permitted activities;

(ix) benefits;

(x) potential challenges that such public banks may encounter;

(xi) how the lack of accessible financial services contributes to the
cycle of poverty;

(xii) barriers to small business formation and growth;

(xiii) impacts of such public banks on small businesses, including
minority-and women-owned business enterprises; and

(xiv) impacts of such public banks on the unbanked, the underbanked and
banking deserts.

 
JUSTIFICATION:

As a result of COVID-19, many injustices and deficiencies with the
state's economy and in society were greater exposed. The pandemic also
exposed how public banks could not and/or unable to respond to providing
banking services to unbanked and under-banked communities or the needs
of the small businesses and MWBES, particularly when it came to securing
PPP loans to non-clients or refinancing student loan debts. A public
bank would effectively address the racial and economic injustices that
existed in this state for many years and generations.

A public bank is a financial institution created by a city, county, town
or village for a "public benefit" to the community. The Bank of North
Dakota, founded in 1919, is currently the only public bank that exists
in the United States, although many public banks exists in Europe and
Costa Rica. The undisputed fact that the Bank of North Dakota secured
more PPP loans for its businesses than another states in this country
and North Dakota's economy survived the pandemic and even thrived the
pandemic is a testament to how effective a public bank will be to jumps-
tart our economy. Since 2010, 28 States in the United States have passed
legislation to establish a public banking taskforce or to create a
public bank in the state. The State of California enacted a law in 2019
allowing municipalities to form a public bank.

The municipality or county that creates a public bank would make public
deposits into the public bank. The public bank would be chartered by the
NYS Department of Financial Services and operated by a board whose
composition determined by the municipality. The public bank could exist
in communities that have little to no access to banking services. The
public bank could refinance student debts and provide low cost student
loans; fund local projects at axeduced cost, generate profits for local
government to hold the line on taxes, and provide access to credit small
businesses and MWBEs, and financial assistance to farmers.

Who benefits from a Public Bank? Taxpayers will benefit from both: (a)
the profits the bank get returned to the general fund of the munici-
pality to hold the line on taxes; and (b) the services the bank provides
to the community, particularly to unbanked and under banked communities
with the Sponsor's jurisdiction. This bill would direct the Department
of Financial Services to study, evaluate and make recommendations
concerning the formation and control of public banks by municipal and
local governments.

 
PRIOR LEGISLATIVE HISTORY:

New bill

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

Use existing resources within the Department of Financial Services.

 
EFFECTIVE DATE:
This act shall take effect immediately.