Across the United States, local governments are reconsidering their relationships with private financial service firms. In The Municipal Banking Movement: An Opportunity for Baltimore, historian Sean Vanatta explores how the latest national banking trends are affecting Baltimore and how public banking models from other cities, states, and countries could inform a municipal banking movement in the city.
The report finds that there is a growing public banking movement in the U.S. This movement often follows two distinct paths. Government officials tend to focus more on developing public financial institutions that serve the needs of local governments and generate broad-based economic development. Consumer rights advocates dedicate more attention to overcoming financial exclusion and ensuring capital flows to traditionally marginalized communities.
Individuals and small businesses in Baltimore have been hard it by banking consolidation. The top five banks in the city are all based elsewhere and control nearly 80 percent of the banking market. Nationwide, those same five banks control nearly 50 percent. Additionally, large national banks are beginning to close branches and focus on online service. This creates banking deserts, often in already underserved communities. In the Baltimore Metropolitan area, for example, 21 percent of people overall are underbanked. For African Americans, however, the number of underbanked is 41 percent.
Baltimore clearly understands the longstanding problems of urban disinvestment and financial exclusion in the city. In addition to existing public programs aimed at revitalizing neglected communities, such as the city’s Land Bank and Community Catalyst Grant Program, Baltimore has eight active CDFIs providing community development and lending services. And, the recently launched Neighborhood Impact Investment Fund looks a lot like a public bank with its mission to invest in inclusive and equitable growth in historically disinvested neighborhoods.
