Opinion: NYC Should Expand Credit Unions for Future Pandemics

Congress has passed a $2 trillion relief bill meant to stimulate the economy following an extreme shock from the coronavirus. The law includes individual payments of $1,200 or more (technically an advance on a tax rebate), new rules for student loans and retirement, greatly expanded unemployment coverage, and more. While the investment is definitely generous, it is unlikely to restore business and investor confidence to avert a major recession.

New Yorkers should recognise that in the event of a devastating economic downturn, it’s unwise to depend on a rabidly conservative government to provide long term relief and support to vulnerable communities. While the federal stimulus is definitely welcome, and will help with living costs, the municipal government should create local networks of support to complement (and in future pandemics maybe even substitute for) relief from Capitol Hill. This local initiative would be an extension of more generous local welfare, paid for with new taxes like on real estate and financial transactions on Wall Street, in addition to grants, and zero-interest loan provision, that work through the credit union system. Clearly, such a push would only be possible through grassroots control over the Mayor’s Office, the Offices of Public Advocate and Payroll Administration, and New York City Council, in addition to other important political institutions.

New Yorkers should move towards expanding credit unions, as a tool for welfare and social relief, because they are a far better alternative to large banks, for poor and working people. Unlike large banks, credit unions often don’t charge fees, don’t attempt to make huge profits off their financial activities, and tend to be much more responsive to the local communities in which they’re rooted. They’re an excellent way to make an otherwise hostile financial system an ally of people who fall outside the banking system or get treated poorly by their current banks. Credit is a powerful thing: it is vital for business and consumption, financing important infrastructure, and making everything from mortgages to auto leases a possibility. Beyond one-time checks, from the government, New Yorkers need to be able to access credit for communities to properly recover from the disease’s impact with reliable investment and real economic activity.

City officials should begin by reforming the existing credit union infrastructure, so that it can potentially include New York City’s entire population of 8.6 million people. Existing credit unions should be brought together for this purpose, ensuring that the system’s asset pool for underwriting spending and investment is as large as possible. From there, a New York resident should have the option of registering with a local office of the combined union when they do routine tasks like paying municipal taxes, registering for an IDNYC identity card, or getting other forms of ID like library cards and driver’s licenses. Obviously, this isn’t a perfect option, since it requires a fixed home address. Yet it is a start, and would provide a basis for recruiting people who don’t have bank accounts and rely on predatory financial institutions to do basic things like cash their paychecks. A combination of new taxes and steady investment from the Office of Payroll Administration would help keep the system afloat as it absorbs minimum balances ($5 to $25) from its members.

The real strength of a citywide credit union scheme would be its ability to dole out investment in a socially equitable and responsible manner. During future pandemics, New York City would have the ability to conduct its own miniature stimulus by injecting money into credit union accounts, in case a Republican-led Capitol Hill is even less generous the next time around (borrowing money against the new citywide assets, if necessary). Yet even outside of that, the credit union would provide a potential source of investment for low and medium-income people who would otherwise be unable to find necessary loans, grants, and cash advances, outside of illegal sources. An account holder could apply for a smaller loan or investment through the scheme, with a decision that is reached by elected officials, in line with values of equal citizenship and economic redistribution, rather than simply profit or the applicant’s credit score. Wider access to credit may be enough to greatly stimulate economic activity and reverse vicious cycles in poorer boroughs. Larger decisions, particularly as it relates to infrastructure, could be financed following public meetings and balloting of members, which would be far more transparent and community-driven than executives meeting behind closed doors.

Ultimately, this scheme would require a wider grassroots takeover of major political offices, including the New York City Council as a legislative body, and the different parts of New York City’s Executive Branch. It wouldn’t be possible to take it far without the support of borough presidents, public advocates, the Comptroller, and so on. While ambitious, such an institutional arrangement is not impossible. It would simply require that dedicated organizers and community members recognize that New York City is one of the world’s richest cities, which means that its government is able to provide much more to its residents than is currently taking place. Indeed, a citywide credit union could potentially be an important part of a new welfare state that could be a model for the rest of the country.

It’s become popular to say “Medicare For All,” and “Free College For All,” so why not, “Accessible Credit For All”? And why not make those things true, within New York City, even if they’re not currently true in the whole of the country? New York City has the wealth and resources to make these demands a reality, and New Yorkers shouldn’t hesitate to push for them. Of course, a citywide credit scheme would definitely have to face down stiff lobbying and competition from the banking sector, particularly when it comes to their low and medium-income customers. But it’s a fight that is worth having, because a people’s financial infrastructure would allow for much greater flexibility in dealing with new challenges like the coronavirus.

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Bilal Zenab Ahmed is an activist, freelance writer and editor, and doctoral student at SOAS, University of London, studying the philosophies and economics of Northwest Pakistan.