1. WHAT'S A PUBLIC BANK?
A public bank is a government-owned financial institution that exists to serve the public. Its purpose is to meet the needs of the local community rather than generate profits for private shareholders. Public banks provide services such as loans for affordable housing, small business financing, and infrastructure projects. They use public funds to invest directly in the community, supporting residents and local businesses. By focusing on long-term community benefit instead of short-term profit, public banks help build stronger, more resilient local economies.
Read our Resource Booklet to learn more about public banking.
2. WHAT'S THE MISSION OF THE CALIFORNIA PUBLIC BANKING ALLIANCE?
The California Public Banking Alliance (CPBA) works to establish public banks throughout the state that are centered on social and environmental responsibility. These banks are designed to support local economies, follow transparent and ethical practices, and invest in ways that are sustainable and regenerative. CPBA also builds partnerships with community banks and credit unions to strengthen existing financial institutions and ensure that all people, especially those who have been historically underserved, have access to fair and community-focused banking services.
We wrote the laws. Built the coalitions. And sparked a movement thatâs shifting national policy. With cities ready and policies in place, CPBA is working to rollout municipal banks in California and implement the statewide CalAccount program and create a model for the nation.
3. WHO ARE THE TYPICAL CUSTOMERS OF A PUBLIC BANK?
Public banks will primarily serve municipal service providers, such as school districts and public utility commissions, and partner with local community banks, credit unions, and CDFIs to fund projects that meet community needs. These banks will also create investment programs that align with their municipalityâs economic development plans, such as housing lending (especially affordable housing), enterprise lending (small and medium size businesses), and infrastructure spending that is financially feasible and environmentally sound. Public money will be recycled locally, rather than being sent to climate-destructive projects and shareholder returns, and public banks will support the work of local financial institutions while focusing on meeting the financial needs of municipal agencies.
4. CAN INDIVIDUALS OPEN ACCOUNTS OR USE SERVICES AT A PUBLIC BANK?
There are two main reasons why Californiaâs local public banks will not take deposits from individuals. First, under AB 857, public banks are not intended to compete with existing local banking services. Instead, they will support community banks and credit unions by backing loans and evaluating local projects for investment. Second, public banks will not operate retail branches and will only handle the funds of municipal agencies.
5. WILL PUBLIC BANKS BE INSURED?
The California Public Banking Act (AB 857), which allows cities and counties to establish their own banks, requires California public banks to obtain Federal Deposit Insurance Corporation (FDIC) insurance before they can be chartered by the state. Public deposits in these banks will be collateralized in the same way as deposits in private banks, and public banks will be subject to the same regulations as private banks and will receive the same deposit protection benefits.
6. WHERE WILL THE MONEY COME FROM TO START MUNICIPAL PUBLIC BANKS?
Investing in the start-up of municipal public banks is an investment in the future of our communities and local businesses. Public banks amplify the impact of public funds by returning money to our communities. There is a range of options for funding the start of a public bank, and each municipality will determine which sources are most appropriate for their bank based on its size and scope. These options include appropriations from the local governmentâs budget, earnings from investment pools directed towards the public bank, bonds authorized by a citizen vote, grants from the federal government, and voluntary contributions from supporters of public banking.
Once a public bank receives a charter under the California Public Banking Act, it will be able to accept deposits from municipal departments and neighboring municipalities, as well as funds from pension funds, socially responsible mutual fund investment vehicles, and other institutional investors, or in partnership with a local financial institution.
7. HOW WILL PUBLIC BANKS BE GOVERNED?
Each public bank will be governed by a board of qualified directors selected based on their reputation, financial knowledge, and commitment to advancing the mission and soundness of the bank. Unlike private banks, where board members are typically the largest investors and can earn millions for their time, public banks are owned by the public. Elected representatives will appoint a board of qualified individuals who are held to a higher standard of accountability and transparency in their management decisions and receive reasonable compensation for their work. This is a key guardrail to help ensure that public banks are managed in the communityâs best interestânot for the benefit of a select group of investors.
The governance of each public bank will be informed by public input during the creation of the business plan and based on the following principles:
- Governed by independent boards composed of community residents and experts in public finance, banking, affordable housing, and climate solutions;
- Strictly regulated by the State of California and the FDIC, and operating under mandates to safeguard and grow public funds;
- Designed to operate for public benefit instead of private shareholders or executives.
Public banks can also go further than traditional models by embedding democratic governance structures that ensure ordinary residents, not just political insiders or financial elitesâhelp shape how public dollars are invested. Drawing on the Democratic Governance Frameworks from the Jain Family Institute and Berggruen Institute, cities like Los Angeles are exploring tools like Peopleâs Assemblies, randomly selected and demographically representative groups of of residents who deliberate and recommend investment priorities for the bank on multi-year cycles.
Additional public bodies such as standing commissions focused on workers, Indigenous communities, and climate justice can review mandates, propose areas of inquiry, and ensure the bankâs direction aligns with the values and priorities of the people it serves. These democratic mechanisms increase transparency, protect against elite capture, and keep the bank rooted in community needs.
By combining rigorous financial oversight with meaningful public participation, public banks are structured to be stable, transparent, and truly accountable to the communities they serve
8. ISNâT IT RISKY TO PUT THE MANAGEMENT OF PUBLIC BANKS IN THE HANDS OF POLITICIANS?
Public banks will not be managed by politicians. Instead, they will be governed by professional bankers and overseen by a board of directors, which may include elected representatives. Public officials will help set up the structure within the legalities allowed under the controlling legislation, but professional bankers, directed by accountable boards of governors, will handle all operations.
The Bank of North Dakota (BND), the only publicly owned state bank, is extremely profitable â more profitable than Goldman Sachs and JP Morgan Chase, according to the Wall Street Journal. It is very risk-averse, lends conservatively, does not gamble in derivatives, or put deposits at unacceptable risk. It is able to lend at lower than market rates because its costs are very low. It does not pay bonuses or commissions, has no high paid executives, nor shareholders bleeding off profits in the form of dividends. It does not compete with local banks, but partners with them, allowing them to become the front office dealing with customers and keeping the public bankâs costs low.
Public sector banks, while rare in the US, are common in other countries and studies have shown that they are actually more profitable, safer, less corrupt, and more accountable than private banks.
9. WHY HAVE PUBLIC BANKS IF CREDIT UNIONS EXISTS?
Credit unions are great alternatives to the Big Bank Bullies, as the National Association of Federally-Insured Credit Unions characterizes Wall Street Banks. We strongly encourage people to do their banking with credit unions and local community banks. Credit Unions are owned by defined customer members, not private shareholders. Customers join because they know that their credit union is focused on providing them with the best services, not on maximizing profits for distant shareholders. Credit unions are accountable to their depositors, and not the general public.
On the other hand, public banks are owned by governments so they are accountable to elected representatives. Public banks support credit unions and community banks by making joint participation loans, providing them credit, purchasing their mortgages, and cooperating in other ways that make more capital available to them to provide low-cost consumer services. North Dakota, with its state public bank, has more credit unions and community banks per capita than any other state.
10. HOW DO PUBLIC BANKS SUPPORT ECONOMIC REDEVELOPMENT AND AFFORDABLE HOUSING?
California is facing a severe shortage of affordable housing, with many residents paying over 50% of their income on rent and utilities. This is one reason the state has one of the highest numbers of unhoused people in the nation. Public banks can help alleviate this crisis by providing loans to develop affordable housing, including construction loans and long-term bond and mortgage loans for multi-unit housing developments. By partnering with local community banks, credit unions, and community development financial institutions (CDFIs), public banks can become significant suppliers of long-term affordable housing credit through partnership loans. Public banks could also support property acquisition programs to convert existing rental properties into permanently affordable cooperative housing and land trusts.
A July 2021 NBC Bay Area special explained one aspect of the glacially slow process of building affordable housing: âDevelopers have to put together a jigsaw puzzle of funding from government agencies and private investors before they can build. They say that process can take up to a decade.â This observation is supported by the research done for the Public Bank East Bay viability study and the HR&A Team Lending Gaps and Priorities Analysis report for the San Francisco Public Bank task force.
Public banks offer a smoother pathway to funding and an alternative to reliance on private investors and the for-profit housing market. They can provide bridge financing, construction loans, and flexible capital that streamlines development and preservation timelines. In
Municipal Bank of LA: Housing Solutions and Portfolio Options, the Jain Family Institute and and Berggruen Institute propose specific tools such as a Rapid Acquisition Fund to help community land trusts compete with corporate buyers, recapitalization loans to preserve aging affordable units, and homebuyer assistance programs tailored to owner-occupied multi-family properties. These strategies enable public banks to invest in housing solutions that conventional lenders often overlook.
Public banks can also help ensure that future housing development linked to publicly funded transit investments does not result in the widespread displacement of residents in predominantly African-American, Asian, and Latino working-class neighborhoods. By co-lending with local private banks and encouraging or backstopping investments in socially responsible local housing initiatives, public banks serve as a stabilizing force, keeping communities rooted while advancing affordable housing at scale.
12. HOW WILL PUBLIC BANKS SUPPORT RACIAL EQUITY?
California public banks, as mission-driven institutions, will prioritize racial equity and serve the needs of underrepresented communities by including these commitments in the bankâs mission statement and charter. In part, public bank directors will be chosen based on their understanding and support for racial equity and combating systemic racism. Boards of directors whose ethnicity, gender, and class backgrounds reflect the communities they serve are a rarity in the traditional banking industryâpublic banks can buck that trend.
Public banks aim to support racial equity by using their lending capabilities to contribute to affordable housing projects in a targeted and impactful way, which could include making loan approval contingent on plans for tenant diversity and community involvement in decision-making during construction. Loans for small businesses can be evaluated with consideration for the specific needs of BIPOC business owners and the importance of their connections to the community. Public banks could also focus on supporting green infrastructure projects in neighborhoods that would benefit the most from them.
All of these initiativesâhousing, business loans, and green infrastructureâcontribute to the goal of building long-term wealth for BIPOC communities within the public bankâs city or region. This is well-documented to positively impact the health, education, and overall well-being of marginalized communities and their neighborhoods.
11. HOW DO PUBLIC BANKS SUPPORT GREEN ENERGY INFRASTRUCTURE AND DEVELOPMENT?
A city- or region-owned public bank could play a significant role in addressing the environmental crisis and reducing the impacts of climate change by financing clean energy infrastructure, increasing renewable energy lending, and incorporating sustainability investment goals into city redevelopment plans.
Germany provides a compelling model. The Sparkassen network of regional public banks has been central to the countryâs green energy transition, with 73% of renewable energy investment coming from the public banking sector, according to the JFIâBerggruen brief Municipal Bank of LA: Clean Energy Portfolio Options. This public-driven investment has helped Germany generate over 40% of its electricity from renewable sources, compared to just 11% in the U.S. German public banks, including Sparkassen and the development bank KfW, offer interest rates as low as 1%âfar below typical commercial bank ratesâmaking renewable projects more financially feasible for municipalities, cooperatives, and local developers.
Costa Ricaâs Banco Popular, a worker-owned public bank, provides another example. It funds environmentally responsible infrastructure like hydroelectric and solar energy, and works with co-ops and underbanked communities, demonstrating how public banks can align financing with long-term environmental and social priorities often neglected by Wall Street lenders.
Public banks offer a powerful tool for cities and states to move capital into projects that meet community sustainability goals, while saving money and reducing reliance on extractive financial institutions.
13. WILL PUBLIC BANKS BE ABLE TO SERVE CANNABIS BUSINESSES?
Providing safe and reliable banking services for Californiaâs legal cannabis industry remains a major challenge. Many licensed cannabis businesses still lack access to basic financial services needed to operate. Public banks are often considered a possible solution. However, because cannabis is still classified as a Schedule I drug under federal law, public banks would face significant barriers to serving these businesses. Without changes to federal law, it would be extremely difficult for public banks to obtain the necessary approvals from regulators such as the FDIC and the Federal Reserve. Public banks also do not operate as commercial banks for private businesses, which further limits their ability to serve the cannabis industry at this time.
14. ARE THERE PRECEDENTS FOR PUBLIC BANKING IN THE US?
The Bank of North Dakota (BND) is a profitable public bank established in 1919. In 2021, the state-owned BND achieved a healthy 15% return on investment. It has a history of weathering economic downturns, including the Great Depression, the Great Recession, and the COVID-19 pandemic. During COVID-19, BND provided the largest per capita Paycheck Protection Program (PPP) loans to small businesses in all 50 states, helping them to recover quickly and efficiently. The Bank of North Dakota offers low-interest loans to small businesses and start-ups and below-market student loans. The BND works with private banks to provide a secondary market for mortgages and supports local governments by purchasing municipal bonds.
Since the passage of the California Public Bank Act (AB 857), municipalities and regions in California, including Los Angeles, San Francisco, the East Bay, San Diego, and the Central Coast, have begun formulating public bank business plans. Many cities and states are pursuing the formation of public banks. Advocates in New Mexico are working with legislative officials to create a state public bank, as are activists in New York, New Jersey, Illinois, Maryland, Massachusetts, Mississippi, Ohio, and Washington. The cities of Seattle, Denver, Chicago, Philadelphia, and the District of Columbia all have active public banking campaigns. Support for public banks transcends political divides. Democratic and Republican lawmakers in Michigan have jointly introduced legislation to establish a state public bank. Also, it's important to note that the only state-wide public bank currently in the United States is in the state of North Dakota, which is traditionally a Republican-leaning state, with no Democratic state legislators.