Everyday Americans, small businesses, and local governments face an unprecedented health and economic crisis. Many face unemployment and are unable to pay rent or even afford food. Yet the response from Washington has been to bail out Wall Street and multinational corporations. A lesson we failed to learn from 2008.
Last week, a series of class action lawsuits were filed against Bank of America, Wells Fargo, U.S. Bank and JP Morgan Chase for attempting to maximize the fees they collected from distributing loans as part of the Payroll Protection Program, which was meant to keep small businesses open and people in our communities employed.
It’s time we act to protect San Jose families from this greed and learn from the cycles of economic recession and recovery. We know that during economic recessions spending halts without aggressive government intervention and that poor communities and communities of color do not recover like the rich.
Twelve years after the 2008 financial crash and before COVID-19, many San Jose and District 6 residents never recovered with almost 25 percent of families in our district rent burdened. Now, with no real relief in sight, bankruptcy and eviction are all too close of a reality for many. Federally, over $6 trillion in stimulus money has been allocated and San Jose is expecting just 0.003 percent of that money, $178 million, despite being home to 0.3 percent of the population of the U.S.
Most frustrating of all is the stock market and billionaire assets are still hitting record highs, further exacerbating the already pervasive and egregious economic inequality right here in San Jose. To incentivize banks to lend, the Federal Reserve has dropped interest rates to near zero, eliminated reserve requirements, and relaxed capital requirements.
Essentially, banks can now effectively borrow for free, without restrictions. They can and will make funds available to their investment branches and private equity firms to buy up our communities’ distressed assets as they declare bankruptcy for pennies on the dollar—all of which further consolidates wealth in their own hands.
As San Jose City Council members Sylvia Arenas and Maya Esparza wrote in a recent memo on the matter: “A recovery that leaves out our vulnerable families and marginalized communities is not a recovery at all.”
We must re-evaluate what a thriving and resilient local economy looks like for our city. San Jose must find a way to adopt a counter-cyclical financial approach that is essential for a just and sustainable recovery. Despite the $178 million in federal assistance, the immense impact of the COVID-19 crisis has led San Jose to project $110 million in budget shortfalls over the next two years due to losses in sales tax revenue, construction and development fees and airport funds.
Because cities cannot run deficits, we are forced to respond with cuts to critical city services, implement layoffs and other cost cutting measures that only worsen the local economy’s ability to recover. With Santa Clara County and the city of San Jose being the first and fourth largest employers in the South Bay, respectively, their responses are critical in either exacerbating the downward spiral or jumpstarting the economy.
Luckily, AB 857 passed last year, a bill that provides a framework for cities and counties to create public banks. Such a bank would allow our city to take advantage of the Fed’s lending incentives to quickly disperse loans to our communities’ most immediate needs without a middle man maximizing their cut.
A public bank could recharge our local economy by lending at reduced rates to our small businesses, municipal agencies and even school districts. With over $15 billion in assets held by the county and city combined, and access to the financial tools being handed to Wall Street to protect their profits through federal action like the CARES Act, a public bank would be able to provide vital support right now.
This means small business loans hyper-focused on small and medium local business instead of corporate franchises, rental assistance to families and investments in public infrastructure to get city employees and local contractors back to work quickly.
We can start reclaiming public funds for our local economy instead of speculative investment instead of spending close to $200 million per year in interest and fees that could be used to better serve our community.
As we engage in much needed community discussions on what a post-COVID world looks like, there is a silver lining we cannot lose sight of. More than ever we recognize and thank the workers that were always essential, it's now time we also listen to them. For decades these workers have been asking for living wages, equitable opportunity for themselves and their children, an affordable roof over their head, food for their families, and a safety net for emergencies.
The way to show our thanks is by building a better world for everyone, by transitioning to an economic system that values people first, a system that is democratically controlled, not Wall-Street owned. A public bank would be a smart step for our community.
Jake Tonkel is a candidate for San Jose’s District 6 council seat, the former chair of the South Bay Progressive Alliance Public Banking Action Team and one of the founding members of the California Public Banking Alliance. Email him at [email protected].
Nick Cortez chairs the California Progressive Alliance, co-coordinates the South Bay Progressive Alliance, heads the SBPA Public Banking Action Team and is a founding member of California Public Banking Alliance. Contact: [email protected].