I want to make three overarching points in my testimony:
- Barriers to banking access addressed in today’s hearing are longstanding and systemic in nature, and call for systemic solutions. Congress and the federal banking regulators must take comprehensive action to address persistent redlining and barriers that block—or actively expel—the working poor and people of color from mainstream banking, including prohibitive minimum balance requirements, exorbitant overdraft fees, discriminatory identification policies, and consumer reporting databases that determine whether banks will open accounts for people. Policymaking must combat Wall Street’s systemic wealth extraction from communities of color, on the one hand, and support affirmative and community-driven solutions on the other. Ultimately, an equitable financial system and economy require strong political will and action to curb Wall Street banks’ dominance over our financialized economy.
- There are no quick fixes to “banking the unbanked,” nor do products and services on their own address deeper inequities. The rhetoric of financial technology (or “fintech”) firms, especially, has simply failed to match the reality for low-income communities, which too often are exposed to broad and invasive data collection, racially-biased underwriting algorithms, and other risks in exchange for limited and often inferior financial services. Financial inclusion efforts must prioritize equitable and full access, and not inadvertently promote “alternative” products that reinforce our two-tiered financial system. At the same time, we must combat the notion that financial products—and credit, in particular—are solutions to entrenched poverty and inequality. For example, the antidote to predatory 400% APR payday loans that extract wealth from the working poor is not a “less usurious” debt trap, but rather living wage jobs, housing affordability, strengthened safety nets, and other measures that address root causes of economic insecurity.
- We need public banks, CDFIs, and other institutions to create a financial services system and economy that work for all. Public banking is common throughout the world and on the rise across the U.S. as a strategy to expand fair banking access and deepen public investment in affordable housing, living wage jobs and workplace democracy, infrastructure and other critical economic sectors. Public banks would achieve these aims by partnering with and scaling up CDFIs and other community development lenders that understand local economic conditions and needs. In the context of the growing and interrelated health, housing, racial inequality, and climate crises we face, public banks can help shift large-scale financing away from fossil fuel extraction and other harmful industries, toward sustainable and regenerative economic activity. We strongly support the federal Public Banking Act of 2021 (sponsored by Reps. Ocasio-Cortez/Tlaib) to facilitate the formation of state and local public banks.