SACRAMENTO, Calif. – California may have a new type of bank by next year – the result of a bill signed October 3, 2019 by Gov. Gavin Newsom that sets up rules for the creation of public banks.
The new financial institutions would be owned by and would primarily serve public agencies – and unlike private banks, they’ll be required to put the public good over profits. Debbie Notkin, a member of the California Public Banking Alliance, predicts the agencies will save a ton of money.
“Local public banks return the money that cities and counties now pay in fees and interest back to those cities and counties as bank profits,” says Notkin.
The only public bank in the U.S. right now is the Bank of North Dakota, which has been around for about a century and makes about 18% in profits each year.
Wall Street banks have criticized California’s legislation, saying banking is too complex to be entrusted to government. However, Notkin notes all five of the biggest Wall Street banks have felony charges on their records and have paid huge fines for their misdeeds in recent years.
She’s also convinced that public banks will be more responsive to local and regional concerns.
“We’ll be in a position to build affordable housing at reasonable rates, to do wildfire mitigation,” says Notkin. “All the things that California really needs, our own banks can help us do.”
The first public bank may spring from Alameda County and a coalition of agencies in the East Bay – perhaps by the end of 2020.
The cities of San Francisco and Los Angeles are also moving quickly to establish public banks.