Jacobin – August 2, 2021. By Julian LaRosa.

The basic functions of investment are too important to be left in the hands of private banks only interested in accruing profits. We need public banks — something the Public Banking Act, introduced by Reps. Alexandria Ocasio-Cortez and Rashida Tlaib, would provide.

While only a few dozen people across the country might tune in to a Wednesday morning subcommittee hearing under the House Financial Services Committee on solutions to increase access to our nation’s banking system, millions have now seen the viral clip of Rep. Alexandria Ocasio-Cortez taking her colleagues to task for failing to read the legislation on which they were commenting. And if you’d read the bill before hearing their comments, it’d be clear as day.

The Public Banking Act, introduced in October 2020 by Representatives Ocasio-Cortez and Tlaib, mirrors legislation that has been introduced in several states and passed in California, establishing a federal regulatory framework to oversee and service publicly owned banks at the municipal and state levels that place communities’ needs over corporate greed. After all, if private banks have FDIC insurance, access to the Federal Reserve and Treasury, and are (insufficiently) regulated by governments, then why wouldn’t public banks?

What does it not do? Establish a national bank (the Federal Reserve is our central bank), take over private banks, create a single public bank, or funnel unlimited amounts of taxpayer revenue into high-risk loans, as Republicans on the committee claimed. Nevertheless, they insisted that a public-banking option would usher in an economic apocalypse and the death of American industry and innovation.

The hearings on public banking are the same every time. With every opportunity, Wall Street lobbyists and think-tank pundits — consistently the sole critics of public banking — pop up to repeat the same tired talking points: “Have you been to a DMV?” or “Big Brother is coming to crush competition and steal our freedoms and property!” These claims come despite legislation in numerous cities, states, and now Congress explicitly stating otherwise, and primarily serve to muddy the waters.

The CATO Institute and Competitive Enterprise Institute (both directly funded by the Charles Koch and fossil-fuel corporations, among others) and the American Bankers Association (the lobbying arm for Wall Street megabanks) have blatantly lied and misrepresented what public banking legislation clearly states to protect a status quo of private banks that have failed to invest in socioeconomic and environmental crises when they’re not deemed profitable. While Republicans in Congress didn’t bother to read the bills, they had no problem memorizing the talking points fed to them by the bankers and their think tanks.

What is public banking and why is it so scary? All one has to do is look to the Bank of North Dakota (BND), a bank owned and operated by the State of North Dakota. BND partners with credit unions and community banks across the state to increase lending capacity to the residents of North Dakota at more affordable rates, rather than letting Wall Street giants price gouge North Dakotans to maximize profits.

The result? North Dakota has more credit unions and community banks per capita than anywhere else in the country, and BND routinely returns its surpluses into the state’s general fund to increase funding for public projects. Most impressively, through its requirements to make safe and sound investments, it was one of only a few banks in the country to operate in the black throughout the 2008 financial crisis and the 2020 recession sparked by COVID. Additionally, it has been a shining example and processed more PPP loans to North Dakotans than any financial institution in the country.

Over the past several years, we’ve seen what looks like an apocalypse as wildfires left California’s skies bloodred and choked by smoke, entire towns reduced to rubble, nearly all of which were found to be directly due to mismanaged infrastructure by the state’s largest energy corporations. For decades, hurricanes have been leaving cities across the South underwater and ravaged after hurricanes.

Every year sees more carnage across the world as the clock to complete climate catastrophe ticks toward zero. The only path forward to save humanity is to face these crises head-on and build a new economic foundation capable of overhauling our energy grid to 100 percent renewable, building sustainable and truly affordable housing and transit systems and much more. It’s vital that our governments are equipped with every tool possible to mobilize the resources needed.

Thanks to the work of grassroots organizers in cities up and down the state, 2019 saw the first public-banking legislation in a century pass in California, creating a regulatory framework and pathway for municipalities to establish public banks. Through the creation of public banks in California, cities like San Francisco, Los Angeles, New York, Philadelphia, Seattle, Chicago, San Diego, and many more would have additional tools to invest their public revenues and assets into large projects like public infrastructure, renewable energy, affordable housing, and partnering with local banks to further increase their lending capacity and spur more affordable investment in small business, housing, education, and more.

The for-profit megabanks have almost completely monopolized public finance and failed miserably to provide the services needed by the communities they’re chartered to serve. Due to a lack of public options, every city in the country is forced to turn to Wall Street titans for banking services, held hostage by the banks’ profit margins and predatory practices. Millions across the country lack access to most basic financial services such as a checking or savings account, which the for-profit banking industry has continuously failed to provide, forcing the most vulnerable residents across the country to turn to payday lenders and the check-cashing industries that charge up to 400 percent interest rates. And their investments have accelerated environmental destruction and wealth inequality by directly financing fossil fuels, weapons manufacturers, and private prisons.

Amid all of this, there is virtually no mechanism to hold such banks accountable for their crimes, let alone democratize our financial sector. It seems like common sense to many. We pay taxes to a government and expect them to use those funds to provide services to residents and improve quality of life. Yet the reality is that the taxes we pay are shipped off to Wall Street and used to underwrite loans to finance oil pipelines, defense contractors, and overpriced student loans.

These conditions call for immediate governmental intervention, ironically creating the competition that reactionary politicians cry for as a driver of progress and innovation, failing to realize that a robust network of public banks is the very competition that can set a new industry standard by charging lower interest rates on public infrastructure and providing capital to credit unions and community banks to more affordably meet the needs of local economies.

For-profit giants have branded themselves “too big to fail,” yet continuously fail to meet the most basic needs of the communities they’re tasked with investing in. It’s time to embrace the opportunity to build a better, more equitable alternative — one that’s accountable to the public and will uplift and empower the communities left behind by Wall Street. As Rep. Rashida Tlaib argues, it’s not that the banks are too big to fail, but that the people are too important to fail.

Read on Jacobinmag.com.

Capitol Weekly – July 1, 2021

San Francisco has taken its first major step toward establishing a public bank, and other California municipalities are also moving forward in exploring public banking, including a regional effort by cities and counties on the Central Coast.  

The moves come nearly two years after Gov. Gavin Newsom signed AB 857, enabling California cities and counties to form public banks. These are locally-controlled financial institutions into which municipal revenues — such as taxes and fees — are deposited. The money is then lent out to small businesses and infrastructure projects, among others, through partnerships with community banks. The goal is to directly benefit residents, while providing not-for-profit services for citizens who choose to use the bank.

A state public bank was formed in North Dakota more than a century ago, although no cities or counties in the nation have public banks. But the California statute reportedly is adding fuel to a nationwide public banking effort.

By law, a public bank in California must be run by banking professionals responsible to a board and overseen by California’s Department of Business Oversight. 

“We finally have the option of reinvesting our public tax dollars in our local communities instead of rewarding Wall Street’s bad behavior,” Assemblyman David Chiu, a San Francisco Democrat and coauthor of AB 857, said at the time of the governor’s signing.

On June 15, San Francisco’s Board of Supervisors unanimously approved the San Francisco Reinvestment Working Group ordinance. Penned by Supervisor Dean Preston, the ordinance authorizes the creation of a working group made up of financial experts, community members, and representatives of the city’s Controller and Treasurer. 

The working group has one year from its first meeting to create a business plan to present to the Board of Supervisors and Local Agency Formation Commission, which, if approved, will be submitted to the California Department of Financial Protection and Innovation.

However, before the working group can convene, it must be funded. Currently, there is no money earmarked in the mayor’s proposed budget to support a reinvestment working group. 

The creation of the working group is the latest in San Francisco’s decade-long drive to establish a public bank which includes dozens of hearings, meetings and studies, including last year’s Municipal Bank Feasibility Task Force Report.  That study outlined three possible routes that San Francisco get into public banking, all of which, if approved, will take years to see to fruition.   

Cities and counties on California’s Central Coast are in the starting stages of creating a regional public bank.

Led by Santa Cruz County, resolutions supporting a Central Coast Public Bank viability study have been passed in Monterey and Santa Barbara counties, as well as the cities of Santa Cruz, Capitola, Seaside, Scotts Valley, Del Rey Oaks, and Watsonville.

According to Santa Cruz County Supervisor Zach Friend, San Benito and San Luis Obispo counties have also been asked to back a viability study. Currently, neither county has signed on. The viability study is the first step municipalities must take to create a public bank.

In May, Los Angeles made progress in its quest for a public bank. In a unanimous vote, the city’s Economic Development and Jobs Committee approved the motion for the formation of the Municipal Bank of Los Angeles. The motion now goes before the full city council, though no date has been set for its hearing. 

North Dakota, through the efforts of its farm community, established a public bank in 1919, an institution that has  survived Great Depression, widespread bank and savings-and-loan failures, and the Great Recession. If San Francisco, Los Angeles, or the Central Coast are able to establish their own, it will be the first for an American city or county.

While public bank proponents point to the Bank of North Dakota (BND) as a success story, critics of public banking counter that both BND’s scale and when it was established render such comparisons moot. Other critics, such as the CATO Institute’s Mark Calabria, use public bank failures from the 1800s in states like Vermont and Indiana as proof that public banking is a disaster waiting to happen. 

The public banking law “infers that banks are not serving their communities, an argument repeatedly made by public bank activists in a variety of forums,” wrote the California Bankers Association, a leading public banking opponent. “Commercial banks, particularly community banks, will be harmed by the taking of local agency deposits which would otherwise be used as a source of liquidity by these banks to make loans into their communities.”       

But supporters of public banking aren’t buying it, saying the public banks would retain revenues for the community and save the costs associated with private banking, among other benefits.

Public banks have the potential to “save local governments money, increase investment in affordable housing, infrastructure and other essential items,” says Santa Cruz’s  Zach Friend.

“At a minimum, it’s important to explore the viability and possibilities of the formation and then to see whether this model makes sense for our region,” he added, “any method that would help improve investments in these challenges and save money to our communities is worthy of serious exploration.”   

CBS Bay Area – SAN FRANCISCO (BCN/CBS SF) — June 15, 2021 San Francisco’s Board of Supervisors on Tuesday unanimously approved an ordinance that moves the city closer to creating the first public bank in the U.S.

The Reinvest in SF ordinance, authored by Supervisor Dean Preston, creates a working group of community leaders and financial experts to come up with a business plan to submit to the California Department of Financial Protection and Innovation for approval.

In addition to a business plan, the group will also come up with a timeline for the city to apply for a public banking license.

“The pandemic has laid bare the deep disparities that exist along social, economic, and racial lines,” Preston said. “As we chart a path to economic recovery, we need to look beyond corporate banks that prey on our most vulnerable communities.”

According to Preston, a public bank would allow the city to reinvest millions of its revenues toward initiatives that support working San Franciscans, including economic recovery, affordable housing, green infrastructure and small business loans.

Sacramento, CA – Today, the California State Assembly approved landmark legislation that would guarantee all Californians access to basic banking services without fees or penalties. The California Public Banking Option Act, AB 1177 (BankCal), addresses the inequities in financial services acutely felt by communities that have been hardest hit by pandemic and recession: discrimination, predatory lending, and vicious spirals of debt. AB 1177 is endorsed by SEIU California, California Reinvestment Coalition, California Public Banking Alliance, and 200 racial and economic justice groups, faith-based and climate justice organizations, businesses, and labor unions.

“Struggling families are hit by fee after fee at every corner, and BankCal will help them keep their hard-earned dollars for food and rent,” said Assemblymember Miguel Santiago, lead author of AB 1177. “Providing a public banking option for essential financial services will help close the racial wealth gap. AB 1177 is a key tool to social and economic mobility, and I’m excited to continue pushing to pass this bill in the Senate.”

“We applaud the Assembly for supporting this bill and ensuring access to financial services for all Californians regardless of how much money they make, their zip code, or the color of their skin,” said Bob Schoonover, SEIU California President and SEIU 721 Executive Director. “Limited access to basic banking services like check cashing are a problem that disproportionately impacts low-income communities and communities of color. BankCal is a concrete step in making sure that everyone has the opportunity to recover and come back stronger from the devastation caused by the pandemic.”

Seventy-eight percent of unbanked households make less than $30,000 annually and 42% make less than $15,000 annually. Nearly half of all Black-identifying households and Hispanic-identifying households in California are unbanked or underbanked.

“Today’s vote advancing BankCal, moves the state closer to being on the right side of history,” said Paulina Gonzalez-Brito, Executive Director of the California Reinvestment Coalition. “AB1177 carries with it the potential to finally build an alternative to the extractive and exclusive Wall Street banking system that has failed historically low-income communities and Black, Indigenous, People of Color. A banking system that centers people instead of profits is a start toward addressing long-standing racial and economic inequities in the state.”

“Today’s Assembly vote in support of BankCal affirms that banking services are essential in allowing full participation in our economy–it is a necessity, not a luxury,” said Trinity Tran, lead organizer of the California Public Banking Alliance. “The Assembly’s passage of AB 1177 comes at a critical moment for struggling Californians and advances the movement toward a more equitable banking system.”

AB 1177 is modeled from the success of CalSavers and CalKids, similar programs aimed at creating greater financial stability for working families. To study the most effective and efficient way to operate the BankCal program, AB 1177 requires a market analysis. Upon completion of the market analysis and approval by the Legislature, AB 1177 establishes the BankCal program.

The BankCal program would allow Californians to create a BankCal account, use a BankCal debit card, deposit funds, automate bill pay, and set up direct deposit without fees or penalties.

KCET- LOS ANGELES (CNS) – June 1, 2021 The Los Angeles City Council today voiced its support for creating a statewide public banking option for California residents in an attempt to reduce racial and income inequalities in financial services.

“There’s no question that there’s a need for a public bank. The simple fact is that the current banking system has never truly worked for working people and specifically for communities of color,” said Councilman Kevin de Leon, who introduced a resolution to support the California Public Banking Option Act currently pending in the state Assembly. The resolution was unanimously passed by City Council members.

“The public banking option will level the playing field so that everyone — no matter how much money they make, the color of their skin, or which zip code they live in — can fully participate in our economic recovery.”

The California Public Banking Option Act would create the BankCal program, which would be the first statewide program in the U.S. to offer residents access to a no-fee, no-penalty bank account, including a debit card, automatic bill pay, direct deposit capacity and an infrastructure for the account holder to build credit. The bill was co-authored and introduced by Assemblyman Miguel Santiago, D-Los Angeles.

According to the resolution, which was introduced by de Leon and Councilman Curren Price, a quarter of California residents are “unbanked” or “underbanked,” and rely heavily on payday lenders, prepaid cards and pawn shops, causing them to proportionally pay more for their financial services, lack savings accounts and opportunities to build credit and face an increased rate of loan rejection.

The problem disproportionately affects low-income people and communities of color, and nearly half of Black and Latino households in California are unbanked or underbanked, according to the resolution, which used information from a survey conducted by the Federal Deposit Insurance Corporation.

“Providing banking services to the unbanked and underbanked is too expensive for community banks, credit unions and (Community Development Financial Institutions) to do efficiently,” stated the resolution, which was seconded by Councilwoman Nithya Raman.

The California Public Banking Option Act “would close the financial services divide, bolster the economy and ensure an equitable recovery by creating a stable, accessible financial services platform with the BankCal program,” according to the resolution, which added that it would “reduce Californians’ risk of falling into catastrophic debt traps and bring us closer to bridging the racial wealth gap.”

The Assembly bill would create a nine-member Public Banking Option Act that would design and implement the BankCal program. The board would select existing financial institutions to partner with and manage and coordinate the vendors for the program.

Ben Gordon, an organizer with Public Bank L.A. and the California Public Bank Alliance, called into the City Council meeting Tuesday to urge council members to approve the resolution. “This bill is an important step forward to bridge the racial equity and wealth gap in our state,” he said.

https://www.kcet.org/news-community/los-angeles-city-council-unanimously-supports-statewide-public-banking-option

LAist – Millions of low-income Californians might be able to bank free of penalties and fees if state lawmakers approve the latest attempt to create public banking.

AB 1177 would form a state-supported public bank board, which would partner with private banks to offer the free accounts. The program would be called “BankCal.”

“If a rich person earns money, that money makes money,” said State Assemblymember Miguel Santiago (D-LA), the bill’s author. “When a poor person earns money, that money is gouged from every corner you could possibly get it. You get gouged when you go to payday lendings, you get gouged at the banks. You get gouged on every transaction and every fee.”

The California Public Banking Alliance sponsored the measure. Co-founder Trinity Tran said the bill would help bridge the racial wealth in underserved communities:

“Because when poor folks have to pay for their financial services, that means they have fewer opportunities to grow credit, they’re rejected for loans, and that all amounts to a real disadvantage for millions of families.”

Gov. Gavin Newsom signed a bill in 2019 to allow independent municipalities to create their own public banks, but this would create a state-backed banking system.

Correction: A previous version of this article stated that previous California bills allowing public banking option failed. Actually, Newsom signed a bill years ago to allow independent municipalities to create their own public banks.

https://laist.com/news/banking-without-penalties-fees-ab117

Noozhawk – May 29, 2021

The Santa Barbara County Board of Supervisors passed a resolution this month expressing interest in participating in a viability study that would determine the feasibility of establishing a public bank with the five Central Coast counties.

“At least studying this as a possibility is a responsible decision in light of the hedging of risk and diversification as a way to minimize risk and at least have the possibility or returns,” First District Supervisor Das Williams said at the May 4 meeting. “I think it would be a responsible decision to analyze that, to analyze the possible benefit for the taxpayer and for the county. And if there is no benefit, then you don’t move forward.”

California Assembly Bill 857 created a process for local agencies to create a public bank, which is defined as a corporation organized for the purpose of engaging in the commercial or industrial banking business that is owned wholly by a local agency, local agencies or a joint powers authority, according to a letter filed to the board.

Before forming the bank, the bill requires the local agency to conduct a study to assess its viability.

Santa Cruz County Supervisor Zach Friend sent a letter requesting statements of interest in participating in the study to the five Central Coast counties: Santa Cruz, Monterey, San Benito, San Luis Obispo and Santa Barbara.

The study must include a discussion of the purposes of the bank, including achieving cost savings, strengthening local economies, supporting community development, and addressing infrastructure and housing needs for localities.

A fiscal analysis of costs associated with starting the bank and financial projections for the first five years of the proposed bank also must be included in the study. The financial projections should include an estimate of the time period for when expected revenues meet or exceed the expected costs and an estimate of the total operating subsidy that the agency may be required to provide until the proposed bank generates sufficient revenue to cover its costs, according to the board letter.

The study also must include an analysis of how the proposed governance structure of the public bank separates from unlawful insider transactions and apparent conflicts of interest.

The majority of board members were interested in participating in the study and thought the proposed bank offers an opportunity to reinvest money locally, reduce taxes or provide a major new source of income.

“This offers an opportunity to reinvest money that we are already collecting in taxpayer revenue and invest it locally,” Third District Supervisor Joan Hartmann said. “My real interest in this is that it could reduce the cost of public infrastructure projects by 35 to 50%.”

Williams said that a huge position of advantage would be if cannabis was part of the study’s analysis because the bank’s lending opportunities are fewer.

“I would imagine that there is at least a possibility of a competitive advantage on a public bank that is really looking to financing, borrowing or investing via that industry simply because we would not be shackled by the same federal prohibitions that most lending institutions have,” he said.

https://www.noozhawk.com/article/county_interested_in_study_discussing_feasibility_of_a_central_coast_public

Monterey Herald – May 5, 2021.

SALINAS — Monterey County elected officials have OK’d exploring the concept of joining other Central Coast counties to develop a public banking system that would provide benefits for economic development, infrastructure needs and affordable housing.

The Board of Supervisors on Tuesday gave the nod to exploring how interested Monterey County would be in joining Santa Cruz, San Benito, San Luis Obispo and Santa Barbara counties in a regional public banking system called the Central Coast Public Bank.

Introduced by Supervisor Luis Alejo, the decision was exploratory only and no taxpayer dollars would be used. If enough interest is generated, the county would then debate joining partner counties in conducting a feasibility study that would cost between an estimated $100,000 to $500,000.

The Santa Cruz County Board of Supervisors is taking the lead on developing funding for a viability study.