California local governments may soon have power to create 'public banks,' as Legislature passes bill
A California bill that would allow local jurisdictions to charter their own “public banks” to address local needs passed the state Assembly on Friday and now heads to Gov. Gavin Newsom’s desk for his signature.
Newsom will have until Oct. 13 to sign the bill, Assembly Bill 857.
Authored by Assemblymembers David Chiu, D-San Francisco, and Miguel Santiago, D-Los Angeles, the bill passed the Assembly on a concurrence vote and “would open a pathway towards creating public banks in California and ensure the public’s money benefits local communities rather than the largest financial institutions,” according to a statement from Chiu’s office.
Supporters of the bill have said it would allow publicly owned banks to fund local projects in participation with local banks and credit unions, edging out the national banks that often handle larger municipal accounts.
“California is putting the people before Wall Street profits,” said Chiu in a statement. “This bill has the potential to do tremendous good by ensuring the public’s money is reinvested in our local communities.”
Another backer of AB 857 is Chris Petlock, administration and finance manager for the Valley of the Moon Water District just outside the city of Sonoma and a supporter of the legislation and public banking in the North Bay.
“For the bank to be profitable it’s going to require quite a few municipalities to come together to say that they want this,” Petlock previously told the Business Journal.
The banking community statewide has pushed back against the bill and the California Bankers Association previously told the Business Journal they do not believe the public is clambering for another alternative to the current financial system.
Another group that opposes the bill is the Van Nuys-based Valley Industry and Commerce Association. In a Friday statement, the trade group said AB 857 “will allow municipalities to establish and operate risky and expensive publicly-owned banks.”
“Though touted as a means of financing affordable housing and infrastructure projects, public banking is not the solution to the problems facing our state” said VICA President Stuart Waldman in the statement. “There are already nearly 200 private banks serving California, providing greater choice through market competition.”
The bill would not directly create any public banks but would instead allow counties, cities and joint powers authorities to apply to the California Department of Business Oversight for a charter to create a publicly owned and run bank after completing due diligence, including a feasibility or viability study plus a business plan.