If you thought Bob Hasegawa's embarrassing defeat in the mayoral primary was the last you were going to hear about a municipal bank, think again. Seattle City Council member Kshama Sawant wants to allocate $200,000 in next year's budget to study the feasibility of a public bank in Seattle.
The study would "focus on the legal issues and implementation details," including the "actual feasibility of a public bank, the participation of surrounding municipalities, banking requirements, the ability to provide community benefit lending and the ability to handle cannabis business deposits," according to Sawant's proposed amendment to the 2018 city budget.
Advocates often cite the only statewide public bank in the U.S., the Bank of North Dakota, but no major city has created a municipal bank. San Francisco and Santa Fe have also recently considered the idea.
Creating a municipal bank will be legally complicated in Washington. The city council has been toying with the idea since at least 2014. In 2015, City Attorney Pete Holmes wrote that there is little legal clarity on whether cities can create a public bank. He advised the city to do further study and planning about how exactly the bank would function. Council Member Lisa Herbold told Publicola in May, "There are some very specific things we need to do in state law before pursuing a municipal bank, and those things haven’t occurred yet."
Earlier this year, local indigenous activists successfully pushed the city to end its relationship with Wells Fargo next year because of the bank's financing of the Dakota Access Pipeline. (The bank currently has a contract with the city through the end of 2018.) Sawant's proposal calls studying a municipal bank "especially timely" because of the Wells Fargo move. A municipal bank is unlikely to fill Wells Fargo's role right away, though. The state requires banks contracted by cities to have enough collateral on hand to match maximum city deposits. For Seattle, that means a bank would need between $300 and $400 million. Only a few banks meet that threshold.
Sawant will need two other council members to sponsor the proposal for the public bank study, then will need a majority of the council to vote to add it to the budget. The bulk of the city's $5.6 billion annual budget is determined by the mayor. City council members then tinker at the edges with proposals like this, Council Member Rob Johnson's proposal for a new municipal broadband study, and a proposal from Sawant and Council Member Mike O'Brien to stop city spending on homeless encampment sweeps. O'Brien and Council Member Kirsten Harris-Talley are also proposing a new business tax to raise $24 million a year for housing and homelessness services. The council is currently discussing proposed changes to the budget and will vote on the full budget next month.
