Last year, the CEO of Bank of America made $26.5 million in total compensation. The CEO of Wells Fargo made $18.4 million. Kat Taylor, the CEO and cofounder of Oakland-based Beneficial State Bank, made nothing. She opts not to take a salary, and the bank funnels all profits to a nonprofit called Beneficial State Foundation. “Bylaws mandate that it reinvests all profits in the low-income communities that we serve and the environment upon which we all depend,” Taylor says.
Twelve years ago, Taylor and her husband Tom Steyer, the billionaire founder of the hedge fund Farallon Capital (and a 2020 presidential candidate), recognized deep flaws in the banking system, from the billions that big banks spend on lobbying against regulations to their financing of the fossil fuel industry. They decided to launch a new bank that would work differently. “We set it out to be a triple bottom line model of a bank—so, serving social justice and environmental well-being as well as being financially sustainable,” she says. “It has provided enormous insights, and we have a more sophisticated view of what banking should be and how it might change for the good.”
Customer deposits are used to make loans to support projects such as affordable housing or renewable energy or worker-owned cooperatives. “We consider banking to be the original and most powerful form of crowdfunding,” Taylor says. The bank, which now serves customers in California, Oregon, and Washington, also takes care of customers differently, avoiding the excessive fees that are common at larger banks.
There are some signs that other banks are beginning to follow its example. “You’ll see now that Bank of the West is mimicking a lot of our language and promoting the positive lending that they’re doing and also the lending that they won’t do,” she says. But she’s skeptical that the largest banks will change.
“We honestly don’t have much hope that the biggest banks will pivot,” Taylor says. “It’s very hard for them to change their business model. You see that with Wells Fargo, because for all of their apologies, they really haven’t changed their banking model very much. For the biggest banks in the system, about half their balance sheets are in trading assets for their own accounts. So they’re not really engaged in the practice of banking, the mainstream economy. They’re making a lot of money in high-risk securities and derivatives and so on. So we’d rather see them exit the banking industry and become the hedge funds that they actually are—and then work with the large regionals to bring them back to a beneficial banking practice.”
To inspire regional banks to move to more responsible practices, she says, Beneficial State Bank needs to be “very, very economically viable, so we quell the naysayers who say, ‘Well, sure, you can do all that good stuff because you’re a weird niche bank and you’re subsidized somehow.’ We aren’t subsidized, and it’s important for us to prove out the model for that reason, but we don’t need to spend a lot of time scaling to some massive level. It’s our voice that matters more than our size.”