NextCity – Twice a year, when property owners pay their local property tax bills, Alameda County Treasurer Hank Levy sees a huge influx of cash into county coffers. After paying off the countyâs own bills and other expenses, thereâs always some cash left over that doesnât need to be spent right away â though itâs all earmarked for salaries, programs, projects and other costs that come up later. As do most local or state treasurers, Levyâs office invests whatever he doesnât need to spend right away, earning some interest for the county in the meantime.
Right now, Levyâs office holds an investment portfolio of around $7 billion. About half of that is invested in U.S. Treasury Bonds or other securities backed by the Federal Government â assets that donât earn very much interest right now but they are considered âhighly liquid,â meaning Levy can sell them easily to other investors when the county needs the cash. Another 20% of the portfolio is invested in certificates of deposit at banks, which Levy can schedule out to mature on a fixed timeline that matches up with the countyâs cash flow needs. Levy recently moved $200 million into certificates of deposit at 10 local banks that committed to lend at least the same amount to Alameda County residents and businesses.
A group of local activists want to give Levy a new option for the countyâs portfolio â depositing some of that $7 billion in a public bank, meaning a bank thatâs owned by a unit of government, holds cash from those governments, and whose lending policies and priorities are set democratically by constituents.
Friends of a Public Bank East Bay formed in 2017 to push for such a bank. It released a blueprint in March for a bank that would be jointly owned by Alameda County as well as the Cities of Oakland, Berkeley and Richmond. The blueprint envisions the bank would make loans to support more deeply and permanently affordable housing, for small businesses owned by Black, indigenous and other people of color, and potentially even do some infrastructure lending for municipalities. It would be modeled in part on the Bank of North Dakota, established in 1919 and until recently the only state-owned bank in the country. Nearly all of the Bank of North Dakotaâs deposits come from the state government, which is required by law to deposit all of its revenues in the state-owned bank.
People’s World – For too long a handful of corporate banks have controlled the financial destiny of the overwhelming majority of Americans. Throughout American history, a commercial oligarchy was responsible for feeding corporate greed and when markets collapsed from too much debt and not enough resources to adequately fund it, countless millions of workers and their families paid the price for other peopleâs folly and suffered disastrous consequences.
In recent years there have been severe recessions, collapsing financial markets, and subsequent government bailouts of corporate banks, protecting the interests of stockholders at the expense of depositors and helpless debtors.
There are alternatives to corporate banking though there are very few available to consumers.
The traditional savings, or building and loans, prominently featured in the Christmas classic âItâs A Wonderful Life,â are being swallowed up and taken over by larger corporate banks as a direct result of banking deregulation in the 1980s.
Recently there have been proposals in various states to authorize the creation of state-owned banks. There is already one state-owned bank in North Dakota that has been in existence for nearly a century and has been very successful in providing loans and other means of financial support to small farmers and business owners, as well as consumers.
That same year California Governor Gavin Newsom signed into law the Public Banking Act which empowers county and municipal governments to establish their own community owned banks, and last year the New York Public Banking Act was introduced in the New York State Assembly, and the State Senate. Unfortunately, the recent pandemic, and fierce opposition from corporate banking and business interests, have delayed and frustrated attempts to proceed with successfully establishing publicly owned banks.
Public banking is on a roll! On Wednesday March 30, 2022, over 170 community members joined the California Public Banking Alliance (CPBA) Town Hall featuring elected officials from cities and regions actively working to form public banks. People across the nation are turning out to learn more about public banking â and Californians are at the forefront of making public banks a reality for the first time in generations.
Public banking activists, politicians and financial experts are busy producing viability studies and business plans so that public banks can come online in the near future. Public banks are a powerful tool to keep taxpayer dollars reinvested in local communities. Weâre grateful for the leadership provided by legislators from five cities (Los Angeles, San Francisco, Long Beach, Richmond, and Santa Cruz) joining us to discuss their commitment to making public funds work for the public by their courageous efforts to establish local public banks.
SF Gate – March 15, 2022. A vision for a public bank in the East Bay– and possibly only the second one in the country– got a boost Tuesday when Alameda County Supervisors voted to give $75,000 to a group aiming to start one.
Supervisors voted unanimously to give the money to Friends of the Public Bank East Bay, which has already taken steps to start a bank. (Supervisor Richard Valle was excused from the meeting.)
The money from the supervisors is for planning activities, according to a letter to the board from Supervisor Dave Brown. The money is coming from Brown’s fiscal management reward funds.
“A public bank would provide many public benefits to the community,” Brown wrote. “It would create a long-term multigenerational source of capital for East Bay communities, and would cut infrastructure construction costs significantly by providing low-interest loans.”
Brown added that such a bank “would return profit and interest to local communities and bring transparency and democracy to banking and investment of public funds. Lastly, a public bank would help strengthen local banks and credit unions by backing their loans and letters of credit.”
Friends of the Public Bank East Bay have already completed a viability study for a public bank, according to the group’s website. A viability study is a necessary step under the California Public Banking Act.
The California Public Banking Act was established by Assembly Bill 857 and signed by Gov. Gavin Newsom in 2019. The law enables government entities to form public banks.
Friends of the Public Bank East Bay are now working on a business plan, another step in the process required by law.
Dollars and Sense features Rick Girling’s article in the September/October issue. Read his follow-up piece  “Corporate Bankers Wary of Public Banking” on Page 8 of the November/December Issue.
Ever-growing inequality has helped consolidate and concentrate corporate control over the U.S. economy. The financial sector is a prime example. This issueâs third feature article, by public banking activist Rick Girling, describes an alternative approach to banking that can âchallenge unelected and unaccountable corporate bank executivesâ control over the nationâs financial system.
AN HISTORIC HEARING TOOK PLACE ON JULY 21 WHEN THE House Committee on Financial Services for the first time in recent history discussed public bank- ing. Deyanira Del Rio from the New Economy Project, along with other panelists, presented proposals for revamping the American financial system to rebuild the economy and reach the one-fifth of Americans who are either unbanked or underbankedâthose lacking bank accounts, and those who have bank accounts yet rely on payday lenders and other predatory financial services.
In her remarks to the committee, Del Rio explained the importance of public banks in this historical moment:
“Public banking would serve as an especially powerful tool as cities and states throughout our country work to advance a just recovery from the pandemic and to withstand future crises. Weâve seen that countries that have public banks are significantly more resilient in the face of crises than those without them and thatâs precisely because local public banks invest in sectors that provide direct economic, social, and environ- mental benefits.”
Next City – October 12, 2021. Out of eight million unbanked households across the country, one million are in California alone. The state is now looking to address this by taking a page out of the former USPS savings account playbook.
Assembly Bill 1177, passed in September and signed by Governor Gavin Newsom last week, envisions a state-branded bank account service, dubbed âCalAccount.â The state would set the parameters for each account, including debit card and ATM access, no overdraft fees, no minimum balance requirements, online bill pay, and direct deposit capability. The state would also serve as the public face and marketing force behind the program â there would be CalAccount branding on debit cards, for example. I wrote about the details of this program over the summer.
Supporters bill CalAccount as a âpublic optionâ for banking â but behind the scenes, like the former USPS program, the accounts would still be held at private banks. The idea is to have the stateâs seal of approval and its power as an intermediary to ensure consistency and transparency for CalAccount holders, who wouldnât have to worry, for example, that features like no fees or no minimum balance will disappear with little notice and no say from consumers.
ABC7 News – October 8, 2021. Los Angeles might be the first major metropolitan city to create a public bank. A public bank would be owned and operated by the city.
Los Angeles City Council voted unanimously to take the first steps in seeing the viability of a public bank. According to city councilmembers, it aims to help low-income communities and could provide investment opportunities at a local level. And they say the bank operations would include:
Credit access for small businesses Financing for affordable and social housing Plus, opportunities for green energy investments
Continue reading and watch the video on ABC 7 News.
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 â 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 nationâs 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 youâd read the bill before hearing their comments, itâd 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 communitiesâ 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 wouldnât 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 â consistently the sole critics of public banking â pop up to repeat the same tired talking points: âHave you been to a DMV?â or âBig Brother is coming to crush competition and steal our freedoms and property!â 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 theyâre not deemed profitable. While Republicans in Congress didnât 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 stateâs 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, weâve seen what looks like an apocalypse as wildfires left Californiaâs 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 stateâs 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. Itâs 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 theyâre 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 banksâ 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 âtoo big to fail,â yet continuously fail to meet the most basic needs of the communities theyâre tasked with investing in. Itâs time to embrace the opportunity to build a better, more equitable alternative â one thatâs accountable to the public and will uplift and empower the communities left behind by Wall Street. As Rep. Rashida Tlaib argues, itâs not that the banks are too big to fail, but that the people are too important to fail.
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 â such as taxes and fees â 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 Californiaâs Department of Business Oversight.
âWe finally have the option of reinvesting our public tax dollars in our local communities instead of rewarding Wall Streetâs bad behavior,â Assemblyman David Chiu, a San Francisco Democrat and coauthor of AB 857, said at the time of the governorâs signing.
On June 15, San Franciscoâs 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 cityâs 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 mayorâs proposed budget to support a reinvestment working group.
The creation of the working group is the latest in San Franciscoâs decade-long drive to establish a public bank which includes dozens of hearings, meetings and studies, including last yearâs 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 Californiaâs 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 cityâs 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 BNDâs scale and when it was established render such comparisons moot. Other critics, such as the CATO Instituteâs 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 âinfers that banks are not serving their communities, an argument repeatedly made by public bank activists in a variety of forums,â wrote the California Bankers Association, a leading public banking opponent. âCommercial 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.â
But supporters of public banking arenât 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 âsave local governments money, increase investment in affordable housing, infrastructure and other essential items,â says Santa Cruzâs Zach Friend.
âAt a minimum, itâs important to explore the viability and possibilities of the formation and then to see whether this model makes sense for our region,â he added, âany method that would help improve investments in these challenges and save money to our communities is worthy of serious exploration.â
CBS Bay Area – SAN FRANCISCO (BCN/CBS SF) â June 15, 2021 San Franciscoâs 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.
âThe pandemic has laid bare the deep disparities that exist along social, economic, and racial lines,â Preston said. âAs we chart a path to economic recovery, we need to look beyond corporate banks that prey on our most vulnerable communities.â
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.
