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ABOUT CALIFORNIA PUBLIC BANKING ALLIANCE

Public banking serves as a powerful tool to keep taxpayer dollars in local communities. Cities and counties currently hold billions of dollars of public money in Wall Street banks. Legally, these corporate banks control this money and can use it for strictly profit-motivated purposes, without regard for environmental impacts, social good, or betterment of the local economy that provided the funds. Their investments prioritize harmful industries including private prisons, immigrant detention centers, weapons manufacturers, fossil fuel pipelines, and other investments that place profit over small local businesses, regional infrastructure such as public housing and recreation, and care for the planet. These too-big-to-fail banks engage in risky and fraudulent practices similar to or worse than those that crashed the global economy in 2008.

The California Public Banking Alliance (CPBA) is a coalition of public banking activists in California founded in 2018 to create socially and environmentally responsible city and regional public banks. Public banking advocates in Los Angeles, San Francisco, the East Bay, the South Bay, Santa Rosa, Santa Barbara, Humboldt-Eureka, the Central Coast, and San Diego worked together to write and pass AB 857, the California Public Banking Act, in 2019. This legislation made California the first state in the nation to authorize the chartering of municipal public banks.  

Since the passage of AB 857, multiple local governments including San Francisco, Los Angeles, the Central Coast, and the East Bay, have passed legislation to move forward with implementing public banks in their localities. We have the opportunity now to build a new alternative banking system through locally-controlled socially and environmentally responsible public banks, enabling cities and counties to recapture public dollars and have a say over the financing of our own communities.

Beyond banking municipalities, CPBA is also working to bring essential financial services to the 25% of unbanked and underbanked Californians. AB 1177, the Public Banking Option Act (CalAccount), signed into law by Governor Newsom in October 2021, will begin the process of offering fee-free and penalty-free debit cards to all Californians making available basic financial services such as check cashing, deposits and bill paying.

In addition to our work at the local and state-level, CPBA is also involved with federal legislation to support public banking. The Public Banking Act, a 2021 bill co-sponsored by Congresswomen Alexandria Ocasio-Cortez (D-NY) and Rashida Tlaib (D-MI) would make it easier for states and local governments to form public banks.  

WHAT IS A PUBLIC BANK?

Public banks are lending and depository institutions owned by a government entity (“local agency”), like a city or county, with a non-profit public purpose governed by a public mandate responsive to local needs. Public banks leverage their deposit base and lending power to benefit residents with affordable housing, small business loans, modernization of public infrastructure and other community needs. They differ from existing financial institutions in that the purpose of public banks is to serve the needs of the communities to which they are accountable rather than seeking the greatest profits for private shareholders. 

BENEFITS OF A PUBLIC BANK

  • Keeps public money invested locally.
  • Returns profit and interest to local communities.
  • Reduces cost of banking to participating agencies, which increases available revenue to spend on other priorities.
  • Reflects community values and invests in community-identified priorities.
  • Brings democracy and transparency to banking and investment of public funds.
  • Uses a bank’s ability to leverage money to benefit the public instead of private shareholders.
  • Cuts infrastructure construction costs significantly by providing low-interest loans.
  • Strengthens local banks and credit unions by backing their loans and letters of credit.
  • Creates a multi-generational source of capital that invests long term to benefit residents and local businesses.

WHY PUBLIC BANKS?

  • Divest from Wall Street. To divest our state and local treasuries from fossil fuel and pipeline investments and invest using socially responsible standards favoring social justice, racial and economic equity, and environmental protection.
  • Cut infrastructure costs dramatically. To provide funding for public infrastructure, and housing for low-income and the unhoused at low interest rates. Public banks allow for greater planning and coordination of local investment to meet community needs. 
  • Safer than private megabanks. Public banks are safer than corporate banks because they do not condone speculative investment strategies driven by profit motives. The Bank of North Dakota survived the Great Depression and the Great Recession of 2008 with humane policies, such as severely limiting foreclosures on farms, that put community welfare above maximizing profits while preserving the state’s prosperity.  
  • Spur economic growth and create new jobs. Public banks can prop up local economies suffering from financial downturns.  Corporate banks withhold investment dollars during downturns due to their demands for excessive profits. Public banks promote the economic stability of their communities with countercyclical investment, making loans to build back economies that have been harmed by unfortunate circumstances.  
  • Save money and generate revenue. Public banks can operate with very low overhead: no advertising, no ATMs, no huge salaries or bonuses, and no branches because local community banks serve as their front offices.  Also, they have no shareholders demanding dividends or executives demanding exorbitant salaries.. Public banks provide a means of expanding municipal revenue without increasing taxes. Profits made from loans can be returned to the General Fund. 

HOW PUBLIC BANKS WILL WORK

  • The California Public Banking Act allows municipalities to deposit their funds into public banks, thus removing those dollars from private banks. Government departments, such as the treasurer’s office, can deposit taxes, fees, fines and funds from state and federal programs that they receive into the public bank. 
  • Public banks lend for needed community improvements such as affordable housing, climate-resilient infrastructure, and small business support at low interest rates due to their lower overhead, with the added advantage that profits earned can be returned to the municipality’s general fund.  
  • Public banks will act as a “mini-Fed” for their region, assisting local banks and guaranteeing loans. They will be established as “banker’s banks” meaning that they will offer loans in concert with community banks and credit unions. When there are public banks, local banks will have greater lending ability and solvency.  
  • Due to the partnership with small banks, credit unions and CDFIs, public banks will enable funding of local projects at lower cost.  The self-funding and self-sustaining nature of public banks means they will not imperil state funds or tax dollars.
  • Public banks will have experienced bank managers and boards of directors independent from political control to assure that they are not captured by special interests. 
  • Public banks will establish citizen advisories to monitor investments and ensure community concerns are represented.