Consumer alert: New York legislature considers bill to create public bank for Rochester

ROCHESTER — Lawmakers are considering a bill to create a public bank in Rochester. The goal would be to invest in underserved communities and help some who would not have been able to apply to a private bank get a loan. I spoke with one of the bill’s authors, New York Assemblyman Harry Bronson, who represents the 138th District. I told him about a young man I interviewed who got a 27.5 percent car loan from a subprime lender.

Deanna Dewberry: “Could this young man have hoped for a better interest rate at a public bank?”

Harry Bronson: “Yes. That’s part of it. By using participatory banking, we will be able to offer better financial services.”

This means that the public bank partners with a private bank, which gives the private bank more confidence in lending to people with bad credit because the loan is essentially backed by the public bank, so having bad credit wouldn’t necessarily stop you from getting a loan.

Deanna Dewberry: “The other side of the argument would be that this young man has a credit score of 580. He represents a greater risk. Is that good for the bank?”

Harry Bronson: “Credit scores have value for them, but there are many studies that show that when you look at the borrower more comprehensively, their repayment can be just as positive as someone with a much higher credit score.”

But running a bank is complex, and bankers argue the city shouldn’t be in the banking business. As president of the Greater Rochester Chamber of Commerce, he agreed to speak to me on behalf of his members in the banking industry.

Bob Duffy: “Running a bank is a highly complex process. The state DFS (Department of Finance Services) will not oversee this, so it is essentially the city’s responsibility.”

Bronson argues that the state would have oversight and the city wouldn’t actually run the bank. He points out that the city wouldn’t handle the banking. Instead, the city would create a nonprofit that would apply for a banking license. And the nonprofit would actually run the bank. But Duffy argues that competition from a public bank could actually weaken Rochester’s banking sector.

Bob Duffy: “We have very few banks and credit unions of our own. We have branches from outside, but I know that the tables I sit at are the banks and credit unions that are heavily involved in projects in Rochester.”

Both men agree on that. Bronson points to ESL Credit Union, which is also run by a nonprofit organization and invests heavily in philanthropic activities, much of which benefits Rochester’s underserved.

Harry Bronson: “That’s not to say they’re not doing a good job. It’s just to say we’re not doing enough, and this is another tool for us to improve it.”

But Duffy points out that there is only one public bank in the country. He says that’s because other attempts and public banks have failed. Duffy met with bank executives on Monday who are unhappy with this legislation. He says this bill should be put on hold and lawmakers should work with bankers to achieve the goal of better serving the underserved. The sponsors of this bill have just a few days to get it passed as the session ends later this week.