Money / Argument

New York City’s Forgotten Public Bank Plan

Lessons from a 1975 proposal for a state-owned public bank.

by Andy Morrison via Jacobin on December 3, 2025

...cash flow and fund public investment. This was not an innovation of the 1970s. It was a normal feature of urban governance in an era when cities were expected to build housing, infrastructure, transit, and public institutions at scale. The real constraint was never spending — it was revenue.

Then as now, New York City lacked meaningful taxing authority. The state legislature and governor dictated when — and if — the city could raise revenue, even as local needs grew more complex and expensive. When fiscal pressure mounted, the city could not simply change its tax structure. It turned instead to borrowing — not as a reckless gamble but as a rational response to a structural constraint.

At the same time, the city’s tax base was being hollowed out. Manufacturing jobs fled south and overseas in search of cheaper, nonunion labor. Federal funding from Great Society programs began to dry up under Richard Nixon, even as demand for public assistance rose. White flight, driven by discriminatory housing and education policies, further eroded the tax base. Economic development increasingly prioritized corporate subsidies. Gleaming office towers and stadium renovations kicked off even as entire Bronx neighborhoods were burning.

Just as important, Wall Street’s priorities were shifting. By the early 1970s, municipal lending occupied a shrinking place in an expanding global financial system. New York was no longer central. It was governable.

“A Threat to Capitalism”

It was at this moment that Steingut, leader of the state’s lower house — known in New York as the “People’s House” — moved to turn the tables.

Steingut proposed something that, even by the standards of 1970s New York politics, was extraordinary: a plan to remake the financial order in the public’s image. His 1975 bill called for the creation of a state-owned public bank and authorized New York City to establish a municipal bank of its own — institutions designed not to serve private profit but to meet public need.

In a press release that March, Steingut framed the proposal as a direct indictment of Wall Street. He pointed to recent New York City bond offerings carrying interest rates of nearly 9.5 percent, calling them “unreasonably high” and arguing that banks were extracting excessive profits by marketing government debt “at the expense of the taxpayers.” At a moment when bank deposits sat at an all-time high, credit for cities and residential housing had dried up. In Steingut’s view, private financial institutions had failed their “social and economic responsibilities.” The public bank, he argued, was necessary to curb “the powers which banks have abused in recent years” and to stop taxpayers from being forced to “take a bath” so that private banks could profit from public borrowing.