San Francisco revived an effort to open a municipal bank Tuesday at a time when banking for the marijuana industry remains stuck in a legal limbo and ethical concerns persist around financial institutions.
Leading the effort is Supervisor Sandra Fewer, who on Tuesday requested the budget analyst to update a previous 2011 study on municipal banking — an idea that has grown in popularity following the 2008 mortgage crisis.
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“Motivated by the unethical behavior of some of our banking partners, I have begun researching alternatives to these large corporate banks that do not serve our city and county needs nor the interest of low-income communities and communities of color,” Fewer said.
In recent months, The City has adopted sanctions against Wells Fargo for its recent banking scandal of opening accounts without customers’ knowledge and called on The City’s treasurer to divest from financial institutions investing in the Dakota Access Pipeline, a resolution also introduced by Fewer.
The updated study will explore different models of public and community banking options, and what other municipalities are doing, as well as examine state legislation needed to create a local public bank.
The request by Fewer is seen as the first step in restarting the debate in what is expected to be a “long process.” A public hearing on the budget analyst report would be called once it is prepared.
A public bank could provide a place for those in the cannabis industry to deposit their funds. Currently major banks do not do business with dispensaries or cultivators for fear of federal prosecution since the drug remains illegal under federal law.
Marijuana banking is more pressing than ever since the voter-approved legalization of the recreational use of the drug goes into effect next year.
Multiple cities continue to explore opening public banks. “If combined with well-crafted local tax and land use policies, municipal banks offer a powerful tool for supporting investments in affordable housing, providing funds for land trusts and cooperative rental housing, and nurturing local business and worker cooperatives,” reads an April 2016 report from the Roosevelt Institute by Karl Beitel, director of the Public Bank Project.
The 2011 budget analyst report, drafted upon request by then-Supervisor John Avalos, found that “the primary impediment” for San Francisco to create a public bank is state law that maintains “a county shall not, in any manner, give or loan its credit to or in aid of any person or corporation.”
The report pointed to the only public bank in the U.S., the Bank of North Dakota, to identify the benefits of having a public bank, including creating a new revenue stream without raising taxes, decreasing borrowing costs and increasing support for community development programs and small businesses.
The Oakland City Council has recently discussed creating a public bank. Also, in Santa Fe, the council commissioned a study that found “a public bank was feasible in Santa Fe” and “has the potential to provide enhanced fiscal management, improved net interest rate margins, and a more robust local lending climate.”