No. The Los Angeles Community Development Bank (LACDB), which shut down in 2003, was not a bank in either a regulatory or operational sense. It was not chartered, did not accept deposits, and was not supervised like a traditional financial institution. LACDB was a federally funded loan program created after the 1992 civil unrest to distribute Community Development Block Grant (CDBG) funds through high-risk loans to underserved small businesses.

It was never designed to be financially self-sustaining. Its role was to absorb risk that private lenders would not take on, similar to how SBA loan guarantees work. It lacked proper oversight, capital reserve requirements, and a sound governance structure. The board was a mix of public and private appointees, and the bank struggled with poor underwriting, political interference, and weak accountability. These problems ultimately led to its closure.

The proposed Municipal Bank of Los Angeles would be fundamentally different. It would be a state-chartered public bank, required to meet the same regulatory standards as private banks.

The proposed Municipal Bank of Los Angeles would be fundamentally different. It would be a state-chartered public bank, required to meet the same regulatory standards as private banks. It would be overseen by regulators, the DFPI and the FDIC. The bank would hold capital reserves, follow sound risk management practices, undergo regular audits, and be managed by experienced financial professionals.

The bank would hold capital reserves, follow sound risk management practices, undergo regular audits, and be managed by experienced financial professionals.

Unlike LACDB, the Municipal Bank would not be set up to take on high-risk losses. It would be structured to be financially self-sustaining while focusing on public priorities like affordable housing, small business lending, and infrastructure investments. A more relevant comparison is the Bank of North Dakota, which has operated successfully for over 100 years. In 2023, it reported an 18.2 percent return on equity while supporting local lending and reinvesting in the state’s economy.

The failure of LACDB highlights the importance of sound regulation, strong governance, and professional management. The Municipal Bank of Los Angeles would be built with these lessons in mind.