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California’s New Public Banking Option Opens Door for Real Community Investment

Advocates hope California’s new law will set a precedent for banking around the country.

Don’t expect a lot of corporate media love for public banks.

Janine Jackson: The October 2 Fresno Bee reported that California Gov. Gavin Newsom signed a law allowing cities in California to start their own public banks, to make it easier to fund projects in the public interest. Atypically for such a story, the Bee led with opponents’ argument that “such ventures are risky and impractical,” before offering supporters’ successful view, and a statement from the bill’s author, which the story then undercut with the reporter’s claim that “analyses” determined public banks “could reduce state tax revenue.” Followed by a statement from the California Bankers Association that public banks could “harm local banks,” put taxpayer dollars at risk, and “aren’t always in the best interest of the public.” Before closing with the words of the head of the Howard Jarvis Taxpayers Association that the commercial banking industry already provides any services public banks could, and “government tends to mess up most of the things it touches.”

While that story was almost humorously negative, don’t expect a lot of corporate media love for public banks, precisely to the extent that they represent, as David Dayen wrote recently, “a radical shift in understanding money, what it represents, and how it can work collectively.” Of course, that’s exactly why the idea, and this historic step, is so exciting. Joining us now to talk about what just happened in California is Trinity Tran. She’s the co-founder and lead organizer for Public Bank LA, and a founding member of the California Public Banking Alliance. She joins us by phone from Los Angeles. Welcome to CounterSpin, Trinity Tran.

Trinity Tran: Thank you, Janine, thanks for having me.

Well, this is a big deal. But I haven’t seen too much media yet, outside of California. So let’s just start with what the Public Banking Act, formerly AB 857, that Newsom signed–what does it do? Why is it historic?

Yes, this has been a low-key win. But it’s been quite incredible, because it essentially is a David vs. Goliath story of an all-volunteer group of activists that went toe-to-toe with well-funded banking lobbyists to push this bill through the California state legislature. And, of course, as you just mentioned, Governor Newsom signed the bill last week.

So what AB 857 does is, it sets up a legal and regulatory framework for public banks to be regulated by the California Department of Business Oversight. It allows and empowers California cities and counties to form their own banks.

Currently in California, we don’t have a public banking option. The only public bank in the United States is the Bank of North Dakota, in the state of North Dakota, which is one of the only banks that survived the economic crash of 2008, really, and has been highly successful for the last century. Returned 18% on investment back to the general fund. So that provides a great model for us to emulate here in California.

So now that Governor Newsom has signed this bill, it opens the doors for cities and counties in California to be able to create a business plan, and submit the business plan to the Department of Business Oversight for approval, to begin the process, to be able to recapture all the interest and fees that right now we pay to out-of-state Wall Street banks, who don’t have a fiduciary duty to invest in California communities.

So this is a very exciting step for California, and is potentially going to shift the national conversation behind finance. What we’re doing is reenvisioning what finance is; it can be something that helps rather than harms our communities. We’re redirecting the flow of money. Instead of our taxpayer dollars going to Wall Street banks, who then leverage our funds to finance private prisons and immigrant detention centers and fossil fuel projects, we’re able to circulate that money back into our local economies, to actually address things that we need in California, such as affordable housing and green energy infrastructure and small business loans.

Part of what is so different about public banks is not just what they would fund, but how they work. The idea that they would be more transparent than commercial banks and more accountable and more, essentially, local. It’s not just a what; it’s also how it works and who’s involved, isn’t that right?

Exactly. Deposits are made locally, investments are local, the decisions are made locally. It’s a return to local control. In California, over the last 20 years, we’ve lost over 75% of our local banks. And that means that wealth is getting siphoned out of the communities, to line the pockets of out-of-state bankers.

One of the most widely circulated columns was this column by Dan Walters, in which he worried that if the bill became law, we could see political pull being used to direct loans from these banks. And that made me think of how withholding loans and redlining, how much lasting damage that did and does, in the black community in particular, and the idea that somehow having it in the hands of the public would introduce the idea of this kind of interference…is very disturbing. But what I really wanted to say was, what I think is so interesting about public banking, is that it’s not trickle-down. Democratized finance really helps the worst-off first, in a way.

Absolutely. Regarding the decision-making process on loans and investments, the bank will have an independent board of directors.


And that’s going to be worked out in the business plan, that has to get approved by the California Department of Business Oversight, to ensure that there isn’t any political interference. And, of course, activists will be working hand-in-hand with legislators across the state to ensure that the banks are going to be the most democratic and transparent as possible.

And then, just the idea, to the point that communities of color might see themselves particularly invested in this sort of effort, as having been particularly harmed by the private banking industry.

Yes, having stakeholders be a part of the buildout of the banks is going to be very critical to its success. We don’t want these banks just to be built by financial experts and bankers. We plan on, here in Los Angeles, and I know with our allies across the state, we plan on having community forums to educate constituents and bring in community leaders and stakeholders, to be part of the conversation on what the buildout of these banks is going to look like.

AB 857 was created as a very lightweight bill, so we would be able to give flexibility to localities and local governments across the state to design a bank with lending priorities that would reflect the needs of their constituents.

Some of the coverage that I’ve seen has noted that North Dakota, as you mentioned earlier, the only other state with a public bank system, or a public bank; that was 100 years ago, and now California. It seems unlikely that we will wait another hundred years to see another place take up public banking. You do see what happened in California as a flexible frame, as you’re putting it, but still a frame for something that other places could take up?

Absolutely. It really is the inevitable evolution of a financial system that’s only served a very small handful of people. And this has been said many times before: It is an idea that is long overdue, it’s an idea whose time has come. So we were so thrilled to get the endorsement of over 180 organizations across the state, from grassroots to grass-tops, elected officials, including 17 cities and counties who signed on to endorse the bill, Democratic central committees from across the state, social justice groups, environmental groups; all across the board, people are unifying behind this idea. So we hope that this sets a precedent, California can set a precedent, for cities and states across the country.

We’ve been speaking with Trinity Tran of Public Bank LA and the California Public Banking Alliance. Trinity Tran, thank you so much for joining us today on CounterSpin.

Thank you, Janine. Appreciate it.