By Mark Anderson – Staff Writer, Sacramento Business Journal
April 17, 2019 (bizjournals.com)
The city and county of San Francisco and the city of Los Angeles on Tuesday approved support for an assembly bill that would allow local governments to form their own public banks.
Having the two highest-profile cities in the state show support is a sign that a “coalition is coming together,” said Jonathan Underland, communications director for Assemblyman Miguel Santiago, D-Los Angeles, who, along with Assemblyman David Chiu, D-San Francisco, introduced Assembly Bill 857 in March.
“We want cities and counties to have the ability to create a public bank if that makes the most sense for their constituents,” Underland said. “Now, we don’t have the ability to even consider it. It is a local control bill. It would allow municipalities to experiment with this. It gives cities the opportunity to explore this.”
The city of Sacramento is aware of the bill, but hasn’t taken a side on the issue yet, said Mary Lynne Vellinga, spokeswoman for Sacramento Mayor Darrell Steinberg.
The city of Roseville also hasn’t taken a position on the bill. “Like many other cities, we are watching it and will continue to track it,” said Brian Jacobson, a Roseville spokesman.
By supporting the bill, cities and counties aren’t approving public banks, but they are allowing local jurisdictions the option to pursue them.
The bill was a response to requests from cities and counties that have shown interest in operating banks to manage their own money, Underland said.
The idea is that local governments could charter a bank to collect the benefits and earnings on large municipal accounts that commercial banks and Wall Street banks are taking now. Unlike private banks, which prioritize shareholder returns, a public bank could consider community needs in its decisions, Underland said.
The California Bankers Association, the state’s banking association, opposes the bill, which it says could put taxpayer dollars are risk.
Any bank chartered under the legislation would be required to maintain deposit insurance and approval from the California Department of Business Oversight, according to Santiago’s office.
California lawmakers have considered allowing public banks several times, starting in the depths of the financial crisis. Then, some suggested a state bank as a potential lender for community development. In 2011, then-Assemblyman Ben Hueso, a democrat from San Diego, sought to create a commission to examine the potential for a state bank similar to the Bank of North Dakota, the only state-run bank in the continental U.S.
The Bank of North Dakota offers some services like savings accounts to consumers, but it has very few retail customers. The Bank of North Dakota has only one location, in the state capital of Bismarck, and no ATM.
Then-Gov. Jerry Brown vetoed Hueso’s bill on the grounds that it set up a commission to study the issue, and Brown said the state’s financial regulator could study it.
