Opinion: Public banks offer an opportunity to reclaim local power and build inclusive economies

On July 4, President Donald Trump signed into law a sweeping reconciliation bill designed to gut nearly every provision of the Inflation Reduction Act — eliminating climate investments, slashing social programs and stripping states and localities of the tools they need to govern effectively. It’s the latest move in a broader effort by the Trump administration and its allies to consolidate control in Washington, cut off funding for progressive priorities, and force compliance from cities and states pursuing their own agendas.

Local leaders in New York City and across the country are pushing back. Earlier this year, the Trump administration clawed back $80.5 million in Federal Emergency Management Agency funds provided to New York City, intended to reimburse the city for spending on shelter and humanitarian aid. New York City filed a federal lawsuit demanding a reinstatement of the funds and a temporary restraining order.

The more the federal government intrudes, the more urgent it becomes for cities and states to reassert fiscal power – and public banking offers a new and needed solution. Public banks are government-owned financial institutions that can manage public funds and reinvest them in ways that directly serve local needs such as building affordable housing, financing infrastructure, and supporting disaster recovery and climate resilience. As the federal government halts its support for local communities, public banking provides cities and states a way to protect their resources, regain autonomy and invest in their futures.

Last month, we published two reports on public banking that describe how these democratically governed institutions can build local power and help cities and states address challenges related to climate, infrastructure, and racial and economic inequality. While the United States currently has just one locally-owned public bank (the Bank of North Dakota), they are common around the world, with more than 1,000 public banks managing over $90 trillion in assets. Unlike private banks, which are required to maximize shareholder profits, public banks are designed to serve the public interest – making them an especially valuable tool when higher levels of government fall short.

The urgency couldn’t be clearer. The Inflation Reduction Act was the largest climate investment in U.S. history – channeling hundreds of billions of dollars to states to reduce emissions, create green jobs and transition to clean energy. But since taking office, the Trump administration has moved aggressively to reverse that progress. In March, it froze Inflation Reduction Act-related funding via executive order, partially fulfilling campaign promises to “Drill, baby, drill” and “Terminate … the Green New Scam” while dismantling programs that support communities of color dealing with the negative impacts of pollution and toxic waste. 

Then in April, FEMA cancelled its Building Resilient Infrastructure and Communities program, which funded state and local efforts to prepare for floods, tornadoes and other disasters. For New York City, this stalls $300 million in projects across the five boroughs strengthening the city’s infrastructure on the heels of Hurricane Ida and Superstorm Sandy.

Not only will communities lose the financing they need to transition to cleaner sources of energy, but also to mitigate climate disasters. This puts their residents at greater risk while raising the cost of response and recovery. 

With public banks, states and local communities could finance climate resilience and infrastructure on their own. For example, by responsibly managing public dollars from taxes and pension funds, public banks can funnel emergency relief to communities experiencing environmental disasters, support water and sanitation infrastructure and fund affordable housing development. Public banks can also be designed to step in when the federal government abandons people and local communities, such as when the Trump administration terminated support to rural Black communities in Alabama dealing with inadequate sewage infrastructure and cancelled energy assistance programs for low-income households. If designed intentionally – with the right mandates, governance structures, and functions – public banks can play powerful roles in strengthening local communities. 

In the face of the Trump administration’s attack on local financial power, states and cities should act now to stand up public banks, building on a groundswell of momentum across the country. 

This year, the state Legislature considered legislation legislation to establish a public bank in Rochester that would lend to other financial institutions like credit unions, Community Development Financial Institutions and community banks to support community economic development and meet infrastructure and housing needs. Supporters also hope the public bank can address racial disparities in lending and build community wealth. Private banks in Monroe County, where Rochester is located, originate only about five cents in mortgage loans in majority Black and brown communities for every dollar originated in majority White communities.  

In California, ten cities and regions from Los Angeles to Eureka are working to establish public banks to finance deeply affordable housing, support climate disaster recovery and lend to minority-owned businesses, among other community-building purposes. California is also considering CalAccount, a state-wide public banking initiative to provide all residents with a no-fee, federally insured checking account. This retail banking option would allow Californians to manage their money without worrying about overdraft fees, monthly service fees or minimum balance requirements. CalAccount could also provide the infrastructure for cities and states to distribute cash payments, making it easier for people to receive guaranteed income and government-issued checks, potentially creating a model for other states amidst a growing movement for guaranteed income. 

State and local governments need public banking to respond to urgent challenges – whether those challenges stem from the accelerating climate crisis or a hostile presidential administration. While the private banks that currently hold state and local government money invest many of those public dollars into the fossil fuel industry, public banks provide a powerful alternative. As mission-driven institutions, they are designed to safeguard public dollars and reinvest them in ways that advance equity, sustainability and resilience. And they spur economic development: the Center for New York City Affairs estimates that a public bank in NYC would lead to $5.8 building in new lending, more than 17,000 new or rehabilitated housing units, and nearly 25,000 new permanent jobs.

As federal support for clean energy, basic services and local decision-making evaporates, public banking isn’t just a good idea – it’s a necessary strategy for preserving democratic control and building a just, livable future from the ground up. The tools exist. The momentum is growing. Now is the time for cities and states to act.