Every New Yorker should be alarmed by the federal government’s brazen, unauthorized seizure of $80 million from the city’s coffers. But just as troubling is Citibank’s failure to question or push back — processing the withdrawal from the city’s own account without warning.
As the former longtime CEO of LES People’s Federal Credit Union (LESPFCU), I can tell you: this is not how banking should work. New York City deserves better — a public bank, created by the city and chartered to serve the public interest, would safeguard public funds from federal overreach, while ensuring public money works for the public good.
Here’s what happened: The federal government instructed Citibank to reverse an $80 million Automated Clearing House (ACH) transfer, essentially pulling back an electronic payment. This happened despite Congress having already allocated the funds and the city holding a signed contract. The money was intended to reimburse the city for emergency shelter and services it had already provided.
Rather than notifying the city, Citibank approved the reversal — even though the city had already moved the funds. So when the account didn’t have enough to cover the reversal, what did Citibank do? It processed an overdraft — fronting the federal government’s dubious withdrawal and forcing the city to absorb the loss.
Banks routinely deny reversals when funds are no longer available — but not this time. Instead of standing up for its client, Citibank offered no apparent resistance, setting a dangerous precedent that leaves municipal funds vulnerable to federal seizure.
This is hardly the first time big banks have failed New York. Their legacy of redlining, abandoning communities in times of crisis, and funding industries that undermine the city’s policy goals — like fossil fuels and predatory lending — makes it clear: Wall Street banks work for their shareholders, not for New Yorkers.
That’s banking for profit. A public bank offers something better.
Public banks are created by governments, accountable to the people, and chartered to serve the public interest. With a municipal public bank, New York could divest from Wall Street banks like Citibank and leverage its deposits to invest in community needs. While Wall Street chases profits, public banks have a clear mission to advance racial, economic, and environmental justice.
A recent report from The New School’s Center for NYC Affairs demonstrates the tremendous impact a public bank would have on NYC’s economy. The report found that in just its first five years, a public bank would create more than 70,000 local jobs, build and preserve more than 17,000 units of affordable housing, invest more than $1 billion in climate solutions, and channel nearly $6 billion in new loans to support small business development and other community needs in historically redlined neighborhoods.
A public bank would partner with the rich network of credit unions and community lenders, like LESPFCU, to direct these investments where they are needed most. Unlike the big banks, which prioritize profits over community impact, a public bank would work alongside mission-driven financial institutions to expand access to capital, increase liquidity, and support participation loans — helping responsible lenders reach even more New Yorkers.
The city is now locked into relationships with banks like Citibank because its vast public deposits are too large for smaller institutions. A public bank would give the city a safe place to hold its funds, keeping public money in public hands and strengthening local banking. Instead of relying on financial giants that routinely fail New Yorkers, a public bank would reinvest city dollars into affordable housing, small businesses, worker co-ops, and climate resilience, aligning our financial system with the needs of the people it serves.
The Public Bank NYC coalition, of which LESPFCU is a part, has urged New York City to take decisive action in response to the federal government’s seizure of public funds and to demand answers about Citibank’s handling of the city’s deposits. City officials must work with the Legislature to take concrete steps toward establishing a public bank. We also call on all mayoral candidates to commit to establishing a public bank, if elected, to ensure the city’s money is safeguarded and works in the public interest.
This bank-enabled federal seizure should be a wake-up call. New York must take control of its public funds and stop relying on Wall Street banks that won’t protect its interests. A public bank would protect public money from federal overreach and ensure it is reinvested directly into housing, small businesses, and community infrastructure — strengthening New York’s economy instead of Wall Street’s bottom line.
Levy was the CEO of LES People’s Federal Credit Union (LESPFCU) for more than 30 years.
