California Public Bank Charter

WHO – California Public Banking Alliance, a coalition of public banking activists working towards creating socially and environmentally responsible municipal and regional banks. 

WHAT – AB 857, creating a state-level public bank charter for which local jurisdictions (e.g. cities, counties) in California may apply. A public bank is a bank that is owned, operated, and governed by a city or county in a given place. 

WHERE – Across the state of California

WHEN – AB 857 was signed into law on October 2, 2019. It went into effect January 2020. Members of the California Public Banking Alliance have been organizing for the last few years in their various locales and came together for the first time in 2018 to work towards the state law.

WHY – To generate more resources and opportunities for public investment; to provide accessible and fair banking services (including access to capital) via a public option, which, ideally, meet the needs of communities where other financial institutions fall short.  Public banks provide local governments an alternative place to hold public funds, like taxpayer money, outside of private Wall Street banks that do not serve public interests. Public banks end the extraction of public money (via fees) to Wall Street, and align public funds with the public’s values. 

Background

California does not have any deposit-taking public banks. All of the taxpayer dollars for all of the cities and counties, which are spent on programs for the benefit of the people, are held in private institutions, mostly Wall Street banks. None of that public money sits in public places. With the rise of Occupy Wall Street and Move Your Money campaigns, many people were alerted to the importance and opportunity to move their money out of Wall Street banks and into community banks. 

The public bank concept has existed for a long time, often in academic (rather than organizing) spaces. The Bank of North Dakota is a century old public bank and provides a model for the rest of the country.  Recently though, the public bank movement gained immense momentum building on the enthusiasm and progress of divest/invest movements, particularly Indigenous-led efforts. The Financial Crash (and subsequent recession), Occupy Movement, and the rise of the Standing Rock #NoDAPL movement increased public scrutiny of the violent, unfair, and predatory practices of Wall Street banks. In particular, banks faced criticism — and in many places, broke the law — for shady activities such as sub-prime lending that disproportionately impacted (and has major lasting effects on) Black and Latinx homeowners. People like those at Standing Rock who were defending their rights to water and land, fighting against these banks’ funding of pipelines, began to push cities like San Francisco and Los Angeles to divest their public monies from these banks. 

As activists across California started to agitate their cities to divest from Wall Street, they soon realized there were often no viable bank alternatives for cities. (For instance, Oakland broke off its relationship with Chase Bank, and moved to Union Bank, which is owned by a giant Japanese conglomerate.) Small local banks are not equipped to handle the scale of the banking needs of counties and cities. In order to manage a city’s money, for example, these local banks and their operating  systems must comply with stricter rules, have a higher degree of protection, be able to provide collateral and more. These barriers constrain how much money in public deposits local banks can receive or will want to receive. So, taxpayer money is not usually going into local credit unions or community development banks, and instead is going to Wall Street. 

Studying the Bank of North Dakota, members of the California Public Banking Alliance then began to put together legislation to demonstrate what it might look like for cities and counties to create their own banks.

In addition to the active harms that these Wall Street banks are causing, they also have little  obligation (predominantly mandated through the Community Reinvestment Act) to serve people whose money they hold. This results in little public investment toward supporting local communities. Communities are looking for banks that would actually care about and want to support the needs of local people.

Policy summary courtesy of: Pathways to a People’s Economy