A new University of Michigan study finds Chicago residents are receptive to the idea of a city-run public bank, but they have questions about how the bank would operate and what measures would ensure public banking benefits for their communities.

A public bank is owned by a state, city or other public actors. By replacing private shareholder profit with public investment, public banks have the potential to more equitably provide loans and other financial products to groups that are underserved by private financial institutions. Public banks also can have more accountability to the local community and invest in resources that residents need, such as grocery stores, affordable housing and reliable public transportation, while divesting from harmful fossil fuels and other environmental pollutants.

Public banking has been a topic of interest in Chicago in recent years, including in the city’s 2023 mayoral election. A new policy brief by Terri Friedline and Sofia Da Silva of U-M and Ameya Pawar, senior adviser to the Economic Security Project, summarizes views on public banking of 35 Chicago residents interviewed in spring 2023.

This builds on their previous research that analyzed complaints about the private banking industry that Chicago residents submitted to the Consumer Financial Protection Bureau and considered public banking as a potential mitigating response to problems with bank accounts, lending and credit.

“The residents we interviewed were hopeful about the potential for public banking to address needs in their communities,” said Friedline, U-M associate professor of social work. “As experts of their experiences and the needs in their communities, residents were very specific about how they thought a public bank could help.”

Residents shared examples of the types of investments they’d like to see a public bank make, including grocery stores and healthy food options, more opportunities for young people, affordable housing and cleaning up environmental hazards. One woman described stale produce in her local grocery, “I would love to take hold of someone’s hand and walk ’em through our store. … There’s no green lettuce. It’s all yellow. … I know that sounds mundane, but it’s not.”

The researchers focused on interviewing residents of majority-Black neighborhoods that have received comparably limited investments from the city. They found many residents were not familiar with public banking, but they were interested in learning more about the concept.

Popular education about public banking could help raise awareness of the idea and analyze the power held by existing financial institutions, the researchers said. They also recommended connecting public banking to community needs.

“Efforts to establish a public bank can consider how a city-owned bank could address residents’ most pressing community needs, which may be more expansive than the priorities identified by politicians,” said Pawar, who proposed establishing a city-owned bank to focus on affordable housing and economic development as part of his 2019 campaign for city treasurer.

The study found residents distrust local politicians to use a public bank to benefit marginalized communities. One woman brought up the Tax Increment Financing program, a funding tool used by the city to steer public and private monies into communities, which critics say is not transparent and has invested heavily in Chicago’s whitest and wealthiest neighborhoods.

Other residents pointed to the Community Commission for Public Safety and Accountability intended to provide civilian oversight of the police force. Chicago voters elect people to the commission, and several candidates backed by the police union were elected.

“I think that just needs to be thought about with the structure,” said a man who works at a nonprofit organization that serves Chicago’s South Side neighborhoods. “We just went through this process for the very first time to elect some people who will eventually work to oversee the police from a civilian capacity. The Fraternal Order of Police ran a lot of people for elections and got some of them into those slots. I don’t think that was the intent for what people originally wanted to have happen.”

The researchers recommended public banking advocates be prepared to address concerns about a public bank forthrightly and transparently, taking into account residents’ attitudes about local government.