Resources

• You might have questions!  Here's a great and authoritative source.                   https://www.publicbankinginstitute.org/faq/

The CA Public Banking Alliance has put together this great collection of one-page docs to lay out the many advantages of public banking, and how the banks will address the social good.  Browse away!

• Correspondence:  We recently sent the following letter to Mike McGuire, Chairman of the state Senate's governance and finance committee :

The Honorable Mike McGuire

California State Senate

State Capitol, Room 5061

Sacramento, California 95814

Re: AB 310 (Santiago, Chiu) - California State Public Bank – SUPPORT

Senator McGuire,

I represent as Convenor the Public Bank Pomona Valley Steering Committee.  We write in strong support of AB 310, which both provides immediate COVID-19 relief and paves the way for a California State Public Bank. This important legislation will expand the lending capacity of the State’s Infrastructure Bank (IBank) by moving 10% of California’s Pooled Money Investment Account (PMIA) into the IBank’s loan fund. It will also convert the IBank into a depository bank able to leverage its capital up to ten times and direct its lending toward a just and equitable economic recovery.

These two primary changes will provide a pathway to recovery and continued success for California’s small businesses and local governments, as well as funding renewable infrastructure. The State Public Bank will partner with local banks and non-profit credit institutions to extend credit to communities and expand services to the underbanked. By acting now, we will reduce the overall social and economic costs faced by taking a slow response, which would inevitably give more power to external entities to dictate California’s future.

The State Public Bank will invest in California projects according to California priorities, with California labor and California results. Unlike Wall Street banks that funnel the money to where the bank can make the most profit, our Bank will strengthen our state and our communities by keeping money here in California and investing for the public good while reinvesting returns locally. The bill’s requirements ensure that the State Public Bank will be operated with the same safety and integrity required of all chartered banks and maintain a greater degree of accountability to Californians than private commercial banks.

The California State Public Bank will:

• Create a long-term source of stable financing for the state and its local governments, redirect existing investment funds into the state economy, and lay the foundation for resilient and equitable growth.

• Create jobs, conform to standards set by unions, and strengthen workers’ rights to organize to move towards a more equal distribution of power towards labor.

• Invest in much needed renewable infrastructure projects and green technology initiatives—large and small, local and statewide—that create jobs and result in quality of life improvements and the long-term outlook for Californians on every level. 

• Provide stable financing to help local governments address critical services such as schools, food programs, and public health, which are facing calamitous revenue shortfalls that disproportionately harm communities of color.

• Allow for a stable means to divest public funds and investments from large banking organizations and industries that may not align with the values of our communities.

• Return interest and fee revenues to the state, creating value and revenue reserves.

• Bolster and enhance community banks and credit unions, allowing them to expand much-needed investment in their neighborhoods.

• Enable a viable means of publicly financing housing and infrastructure projects to remediate our statewide housing crisis.

• Promote a transparent, independent and publicly governed finance system accountable to the people.

Unlike a privately-owned bank, which prioritizes shareholder returns, the California State Public Bank will leverage its capital and lending power to benefit the public. This allows it to focus on pressing local needs, like COVID-related expenses, affordable housing, small business loans, and public infrastructure projects such as rebuilding after wildfires and floods. The State Public Bank’s lending guidelines and decisions will consider the needs of the community and leverage public funds to meet those needs at a lower cost than the private sector.

AB 310 creates financing mechanisms that will require partnerships with existing local financial institutions to provide retail services, enabling the State Public Bank to provide loans and lines of credit to support their activities.

For these reasons, we the undersigned organizations urge you to support AB 310 (Santiago, Chiu) and respectfully ask for your “AYE” vote.

Sincerely,

 Public Bank Pomona Valley:  Steven Sittig, Convenor

Cc:   Members of the California State Senate

Assemblymember Miguel Santiago, author

Assemblymember David Chiu, author

• A friend of mine teaches high school economics, and hadn't heard about Public Banks!  I guess we shouldn't be surprised; it may not be in the standard macroecon curriculum.  So I wrote up this little starter for him:

Hey, John,  Here’s my attempt to introduce public banking in a few sentences.  For more, I can give you a reading list and a few websites.  But you may have seen some of those already. 

So here we go:  Municipalities (cities, counties, states, even regional governmental agencies like water boards and transportation authorities) have funds to deposit, some for checkbook-like use, some for holding for a period.  Where to put that money?  Community banks (restricted in how much they can hold, often too small), or the big banks (mostly consolidated and national, so referred to as Wall St. banks).  These funds generate interest, and are used to secure loans, usually at a rate of 10:1.  So a million in the bank can fund ten million in loans. The interest earned on the $10M is pretty darn good.  Good for the shareholders of the bank, from which they pay savings interest and overhead, and huge salaries and bonuses.  That’s the system we have.  

Public banks, on the other hand,  are set up like public utilities, using a common asset like river water or libraries or schools for the common good.  Why let Wall St. banks make a profit off this when we don’t let the water company do that (or we regulate the heck out of it anyway).  And the banks do what for us? Pay a pittance of interest on savings, charge hefty fees for service, and will loan money to the municipalities at a huge multiple of what they pay to borrow from the Fed (about 0 to 0.25% right now). What to do? Do what the State of North Dakota has done for over a century, and was done during WWII and the 1950s – set up public banks and lending institutions funded by public assets, for the benefit of the customers, the public. 

Of course, there are lots of details to work out, but some 26 states are currently moving legislation to make it happen – California is, of course, a leader.  The banks will fight it, despite noncompete regulations built in to the legislation.  Noncompete?  Yeah, the public banks won’t be taking deposits from individuals (with a small exception you can ask about), just public institutions, and much of the lending for local infrastructure and social programs will be in a co-lending form with community (small, private) banks. 

Hope this helps, and leads to further questions!

Steve

• California Public Banking Alliance

  • The California Public Banking Alliance is a coalition of public banking activists working to create socially and environmentally responsible city and regional public banks. Their website links to various local and regional public banking initiatives across the state. The website also includes detailed information about AB 857 The California Public Banking Bill (enacted into law in 2019) that will make it easier to establish public banks in the state (including  endorsements and a fact sheet) and other state news.

• Postal Banking in California?

  • US Senators Bernie Sanders and Kirstin Gillibrand have introduced legislation to establish small public banks at your local post office, to provide services for those who are overlooked by the big banks, and compete with the payday lenders and loan sharks that prey upon the unbanked citizens.  Learn more from this link about what CA is hoping to do.

  • And here's a link revealing some interesting history behind the NONPUBLIC bank the Trump administration wants to have set up ATMs at Post Offices, in lieu of Postal Banks.  

• Public Banking Institute

  • The Public Banking Institute (PBI) is a non-partisan think-tank, research, advocacy, and advisory organization dedicated to exploring and disseminating information on the potential utility of publicly-owned banks, and to facilitate their implementation.  Their website features Research  and Legislation, the History of Public Banking, informational videos, and much more.

• How to Start a Public Bank       by Scott Baker, New York Coordinator for the Public Banking Institute  

                A fairly technical but informative exploration of models for public banks. 

• Oregon has a model!   A long read, but lots of concrete info.