Public Banking Initiatives March Onward in California
In late 2019, California passed a landmark public banking bill that allowed for the creation of public banks at the county and municipal levels across the Golden State. That law, known as AB 857, the Public Banking Act, was the first law authorizing public banking in the United States in over 100 years. Drawing on the momentum of AB 857’s passage, the coalition that drove that law across the line, spearheaded by the California Public Banking Alliance, is now pressuring lawmakers to create a statewide public bank, principally in order to address the drastic economic fallout of the pandemic.
Their next legislative priority, AB 310, would expand the lending ability of the state’s infrastructure bank (IBank) and then create a statewide public bank by converting the IBank into a depository bank.
Currently, the only statewide public bank in the United States is the Bank of North Dakota, which was created in 1919 after a populist campaign, led by small farmers who had been abused by predatory lenders and abandoned by the private sector banks.
Today, in California and across the country, the failures of our financial system resemble the challenges facing North Dakota farmers 100 years ago. In the midst of a pandemic, tens of millions of Americans remain without access to even the simplest of financial services. Unable to cash checks, pay bills or access small loans, millions of people fall victim to usurious pay-check cashers, payday lenders and other predatory financial instruments.
The pandemic has only underscored the crisis of the unbanked and underbanked in this country, as poor and working-class people – those most likely to be underserved by the financial system – are also disproportionately affected by COVID-19. Their communities and local governments services are in turn most likely to suffer as well.
“AB 310 is about shifting power away from big Wall Street banks and back into the hands of our real shareholders; the taxpayers,” said California State Assembly member Miguel Santiago, a leader in the public banking organizing in California. “As we deal with the ghastly economic crash from the pandemic, we simply do not need to be suckered into the predatory banking practices of Wall Street. The state bank is a direct, efficient, fast way to give small businesses, local governments and the people of California financial peace and justice.”
While AB 310 would not lead directly to the creation of a public bank with retail services for individuals, it would promote programs among California’s public banks at the municipal level to directly serve those communities most impacted by the pandemic. By increasing the borrowing authority at the IBank for community-based banks, the bill would help extend credit to affected small businesses and others that rely on local credit unions or the municipal public banks.
Additionally, by converting the IBank into the State Public Bank, the new statewide public bank could offer long term, affordable financing for municipal governments, allowing them to invest in pandemic-relief programs that would otherwise be unsustainable for local governments.
During this time of pandemic, with local budgets being placed under such strain, additional, affordable borrowing for local governments would help alleviate much suffering and lay the groundwork for a more just and equitable recovery.
Postal banking supporters should keep a keen eye to the political developments in California. Since the campaign for public banking in Los Angeles gained traction a few years, the movement in the Golden State has been a driving force in the broader movement for financial reform. After an initial, narrow electoral defeat in the LA ballot initiative, they have since continued to build incredible momentum behind public banking up and down the state. The advance of AB 310 would be another inspiring victory for everyone eager to create a financial system that works for the people and not just private profits.