Part of this repayment would go toward satisfying a $465 million debt obligation to JPMorgan Chase, one of the nation’s biggest and most profitable banks. In its most recent earnings report, JPMorgan posted an $11.9 billion profit, up 155 percent from a year earlier. The bank also made billions last year on overdraft fees, largely from the same vulnerable communities that would benefit from ARPA relief.
Banks make money by lending money out and charging for doing so.
The poster child of this effort is Chicago, where Mayor Lori Lightfoot’s office proposed in April to use more than half of its funding allocation of $1.89 billion to pay down city debt. This would specifically pay off certain so-called “scoop and toss” borrowing deals that use new issuance of long-term debt to pay off debt coming due.
Paying off debt would reduce banking profits by removing their ability to charge for lending money they’re not lending.
When Joe Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) in March, he framed it as an effort to “giv[e] people in this nation—working people and middle-class folks, the people who built the country—a fighting chance.” That presumably does not include enriching Wall Street banks, though several cities have proposed doing just that.
Among other things, ARPA provided $350 billion in state and local fiscal recovery funds, enabling communities to reverse some of the economic hardships of the pandemic as well as rebuild for the future. But according to Bloomberg, “at least two dozen local governments and lobbying groups” have urged the executive branch to give them the authority to use those recovery funds to pay down debt built up in previous years. This would have the effect of directing ARPA dollars to financiers, in most cases big banks, rather than to meeting the immediate needs of community residents.
Paying off debt enriches bankers.