Legislation introduced Monday could lay down the foundations for the creation of public banks in California and provide an alternative to San Francisco’s use of profit-driven commercial banks.
Currently there are no public banks in California, and no legal avenues to create one. But Assemblymembers David Chiu, D-San Francisco, and Miguel Santiago, D-Los Angeles, hope to change that with the introduction of Assembly Bill 857, which would allow jurisdictions to create public banks through a charter process.
The idea of a publicly-owned bank has gained traction in recent years as advocates and elected officials have called upon The City to divest its $11 billion budget out of commercial banks and into community centered projects that would better reflect San Francisco values.
“Wall Street banks have invested in oil pipelines, gun manufacturers, private prisons and companies with unfair labor practices,” Chiu said at a news conference Monday. “The opposite of what our state stands for.”
The bill was introduced on the heels of a Board of Supervisors resolution, introduced by Supervisor Sandra Lee Fewer, that won unanimous approval last month supporting publicly-owned banks and calling upon state legislators to do the same.
“We have seen the behavior of these wall street banks, we have seen the predatory lending, the targeting of the black and brown communities….and a hand slap is not enough,” Fewer said.
Public banks, free from a profit driven model, would be able to service the community by financing local infrastructure projects, affordable housing and small business loans, according to Chiu.
The legislation requires any local governments applying for a charter to create a public bank to follow steps similar to those outlined for the creation of a credit-union.
“It is not meant to have public banks compete with community banks and credit unions,” Chiu said. “Where possible a public bank will partner with those entities.”
The legislation marks the latest development in San Francisco’s exploration of the possible creation of a publicly owned financial institution. A policy report presented to the board of supervisors as early as November 2017 tackled the issue at the urging of Fewer and former Supervisor Malia Cohen.
By February of 2018, a 16-member task force was assembled by the City to study the feasibility and costs of creating a public bank that would provide low-interest loans for low-income residents and affordable housing development.
The task force’s draft report, issued earlier this year, stated that the goals of creating a public bank to divest from Wall Street banks and reinvest in the community could be met only decades after the initial significant startup and capitalization costs.
CORRECTION: This story has been updated to reflect that the public bank task force has issued a draft report but has not finalized it yet.