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In February 2017, Seattle became the first city to pass legislation to divest from a financial institution because of its role in funding the Dakota Access pipeline.

Months of rallies, public testimony at city council meetings, and protests at Wells Fargo branches across Seattle led to the unanimous vote to divest billions from the bank. Los Angeles and Philadelphia would follow. But when the time came to withdraw its money from the bank at the end of 2018, Seattle instead renewed its contract with Wells Fargo. The political decision to divest city money from one of the biggest banks funding DAPL was reversed because the city hadn鈥檛 found an alternative financial institution to house its money.

Pipeline divestment starts at Standing Rock

Throughout 2016 and after, indigenous activists (often referred to as water protectors) protested the DAPL at the Standing Rock camp in North Dakota. Despite opposition, the camp at Standing Rock was cleared in February 2017, and oil started flowing through the DAPL in June 2017.

But the camp wasn鈥檛 the only site of resistance. In October 2017, organizers鈥攗nder the name Mazaska (鈥渕oney鈥� in Lakota) Talks鈥攍aunched a campaign that urged individuals and larger entities, especially cities, to take money out of banks funding the DAPL and other pipeline projects transporting oil from Alberta鈥檚 tar sands, including Keystone XL, Trans Mountain, and Energy East.

The idea was that removing money from the banks could put a stop to the projects. The phrase 鈥淜ill the funding. Kill the pipelines鈥� was commonly spoken by divest advocates.

Wells Fargo was one of 17 funders of the DAPL; others included Bank of America, Goldman Sachs, and JPMorgan Chase. In September 2017, 听that the divestment movement was responsible for over $5 billion being withdrawn from DAPL-funding banks. That figure included the billions divested by Seattle, Philadelphia, and Los Angeles and more than $80 million in individual accounts.

When Seattle announced it would stop banking with Wells Fargo, 听the bank鈥檚 choice to fund the DAPL鈥攁s well as the 鈥攁s reasons to move its money.

Public banks as an alternative

Moving city money out of Wells Fargo was a way for local politicians to put their money 鈥渨here their values are,鈥� said Seattle resident Matt Remle, co-founder of Mazaska Talks and a member of the Standing Rock Sioux tribe. That鈥檚 because council members would be removing city money from financial institutions that fund projects that hurt the environment and communities. Some of the banks that fund fossil fuel projects also fund private prisons, detention centers, and weapons manufacturers.

鈥淲e want an avenue through which ordinary people can access banking services regardless of income and in a way that does not engage in any exploitative practices,鈥� said Seattle City council member Kshama Sawant, who was a co-sponsor for the .

A public bank is an institution owned by a governmental body, funded with taxpayer money, and mandated to serve the public interest.

Once Seattle had committed to move its money, the city needed somewhere to move it to.

鈥淲hen we were organizing around getting [Seattle] to divest, the question all along was what to do with the city鈥檚 money,鈥� Remle said. 鈥淎nd our philosophy was it鈥檚 not going to be a victory to close accounts with Wells Fargo and go to Bank of America.鈥�

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 鈥渨ould be accountable to the people of Seattle in a way that you could never hold a private bank accountable,鈥� adding that the city could better direct the bank鈥檚 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.

Ultimately, the city鈥檚 historic move to divest from Wells Fargo was undermined. It intended to end its relationship with the bank at the end of 2018,听.

So it renewed its contract with Wells Fargo for three more years.

鈥淎t that moment there was no other choice but to continue with Wells Fargo, but it鈥檚 a reminder of how the movements work. Winning the Wells Fargo divestment was sort of step one,鈥� Sawant said.

The next step, the council member said, is to demand that obstacles鈥攕uch as the inability for credit unions to serve municipalities and the Washington law that bars cities from establishing any type of business entity鈥攁re removed so that the city or state can establish a public bank.

Bank of North Dakota

As it stands, North Dakota is the only place in the continental U.S. with a state bank.听听was founded in 1919 and, for public bank advocates, it serves as a model.

Opponents of public banking have pointed to the failures of the 1800s public banks in Vermont and Indiana as examples of why public banks don鈥檛 work. While serving as the director of financial regulation studies at the Cato Institute,

But , established at a time when farmers in the state had trouble obtaining credit for their businesses, as evidence that a state bank could work. The bank was started to provide farmers credit and serve as the state鈥檚 financial repository. It has since evolved to finance the state鈥檚 infrastructure projects.

鈥淲e need banks that are publicly owned so we can take our very substantial public deposits and public revenues and public resources and leverage them for local purposes instead of sending them to Wall Street,鈥� said Ellen Brown, founder of the Public Banking Institute. 鈥淐ut out the middle man, basically, which is what the Bank of North Dakota does.鈥�

While some profits from Bank of North Dakota are 听related to economic development and infrastructure, the bank has also faced criticism for lending nearly $10 million for the law enforcement response to the #NoDAPL protests in North Dakota.

With that in mind, advocates in Seattle and elsewhere have been considering how to ensure transparency and accountability in municipal bank charters.

Barriers to public banks

Seattle is just one entity looking to move its money out of corporate banks and into socially responsible ventures from which local communities would benefit.

, 听in Connecticut, and 听补苍诲 听in California have divested money from large banks, and others鈥攍ike 听in New Mexico, 听in California, and 鈥攈ave completed feasibility studies for public banks. But not many of these efforts have really taken off. Each location comes with its own set of challenges.

One barrier to getting a public bank off the ground is high startup costs. This was the case in Massachusetts, where a 2011 report from the Federal Reserve Bank of Boston鈥攚hich used Bank of North Dakota as a model鈥斕齣n Massachusetts would have been $3.6 billion. Some advocates say this figure is an overestimate; banks generally need tens of millions to start, Brown said. , according to the Partnership for Progress, a program of the Federal Reserve System.

Because proposed banks have unique business plans, market competition, and local economic context, among other factors, the .听But the agency does suggest that organizers examine 鈥渢he risks inherent in the institution鈥檚 business model, the potential variability in earnings projections, and the skill and ability of the management team to carry out the business plan鈥� when planning to apply for insurance.

While the city of Seattle had to postpone its divestment from Wells Fargo, organizers have continued to push for the idea.

There are also legal challenges to establishing public banks in听some locations. Many states and cities鈥攊ncluding听, as well as听听补苍诲听鈥攈ave clauses in their constitutions or charters that inhibit the establishment of public banks. There鈥檚 movement in some听places听to overcome institutionalized policy barriers to establishing public banks. In Los Angeles, a measure on the November ballot that would have听听did not pass. And in San听Francisco,听a city report听recently showed that听.

Both Los Angeles and San Francisco are part of the California Public Banking Alliance, with members across the state working to establish city and regional public banks that are 鈥渟ocially and environmentally responsible,鈥� as noted on the coalition鈥檚 website. Additionally, the alliance has pushed for state legislation that would instruct the California Department of Business Oversight to issue a special license for cities to form public banks and allow them to bypass regulations that apply to private banks.

Taking the first steps

Over the years, Seattleites and Washingtonians have been pushing for a public bank. Since 2009, state Sen. Bob Hasegawa鈥攚ho represents Seattle鈥檚 11th state Senate district鈥攈as introduced nine bills to establish a state bank, and he championed a city-owned bank during his mayoral campaign in 2017. , state legislators 听in the 2017鈥�19 operating budget.

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.

The fight against the DAPL brought new energy to the effort in Seattle. Organizers believe a public bank could allow the city to have more funds to address the needs of residents.

鈥淩ecapturing some of that would create major savings that could help us fund things like education, housing, and transit,鈥� . 鈥淒one right, a public bank would save city money, create jobs, and provide affordable loans to small businesses.鈥�

While Seattle had to postpone its divestment from Wells Fargo, organizers鈥攁nd city council members鈥攈ave continued to push for the idea.

鈥淭hat movement for divesting from Wells Fargo not only did the groundwork, but also set a line in the sand that this is something that we believe the city of Seattle should be going toward,鈥� Sawant said, noting that there is still hope of establishing a public bank in the city.

鈥淲e don鈥檛 expect a straightforward path but we also believe that this is the correct thing to do.鈥�

In December 2017, city council members .听The study was released in October 2018 and would be an involved and long-term process. One of the next steps identified was for the city of Seattle to develop a business plan for a municipal bank that would meet all the legal and regulatory requirements in Washington. Council member Sawant has submitted a request for a business plan in the budget development process for 2019.

鈥淲e鈥檙e still looking at very long term. Even if the study comes back positive, the city council says yes, the mayor approves鈥攚e鈥檙e still looking at probably, I would assume, another year plus to get the actual infrastructure and everything kind of set,鈥� Remle said. 鈥淏ut the wheels are definitely in motion.鈥�

颁辞谤谤别肠迟颈辞苍:听January 8, 2019.
础听previous version of this article wrongly indicated that San Francisco鈥檚 city charter prohibits public banks.听We have replaced it with Oregon state.听

Correction: January 2, 2019.
This version classifies Bank of North Dakota as a public, not municipal, bank.

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Deonna Anderson is a freelance digital and radio reporter and a former Surdna reporting fellow for YES!

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