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.”