Our work is featured by world renowned progressive economist Gerald Epstein in his book Busting the Bankers’ Club: Finance for the Rest of Us. Los Angeles and California have been a major hub for the public banking movement, inspiring efforts nationwide. From the foreclosure crisis to the fight against Wall Street’s role in the Dakota Access Pipeline, our roots run deep in people power.
With the passage of our California Public Banking Act bill (AB 857), California became the first state to authorize municipal public banks, turning the vision of keeping public dollars local into law. AB 1177 followed, paving the way for CalAccount and universal fee-free banking access.
Read excerpts below:
California
California has been a center of the public banking effort in the United States, and its recent successes have inspired public banking activists in other states. These efforts evolved first from the foreclosure crisis following the Great Financial Crisis in 2007-2009, and then received new energy from the grassroots movement advocating for divestment against the Wall Street banks supporting the Dakota Access Pipeline Project. The idea of divestment brought up an important question: where could local governments keep their funds instead? The lack of alternatives to Wall Street banks gave rise to the Public Bank LA initiative, which began a campaign to establish a municipal bank that would be owned by the city of Los Angeles and would manage city funds in the public interest.
One of the first major accomplishments of Public Bank LA was to facilitate a city referendum to form a public bank. Although the referendum fell short at 44.15 percent support, this momentum was translated into the formation of the California Public Banking Alliance, a coalition of ten public banking grassroots groups across the state. This alliance developed and fought for legislation that would authorize the creation of municipal and regional public banks.
In 2019, this coalition won a great victory: the state of California passed the first municipal banking legislation in the country, AB 857, authorizing the state to charter ten municipal banks over seven years. This victory set in motion actions by public banking organizations in multiple California municipalities and several regions to attempt to establish municipal and regional public banks. The precise forms of the municipal public banks that will be created are still not determined—they are likely to be “partnership” public banks, similar to the Bank of North Dakota model. The municipalities will deposit some or all of their cash balances in these banks, and they will use these funds, presumably supplemented by other resources, to lend to credit unions, CDFIs, and community banks to expand their ability to provide credit for important, marginalized activities.
This legislation was followed by a second victory, the passage of the Public Banking Option Act (AB 1177), which, according to the California Public Banking Alliance, is “landmark legislation guaranteeing universal free banking access to all Californians. AB 1177 sets into motion the creation of the CalAccount program guaranteeing all California residents access to basic banking services without fees or penalties. The California Public Banking Option Act addresses the inequities in financial services acutely felt by communities that have been hardest hit by the pandemic and recession, inequalities such as discrimination, predatory lending, and vicious spirals of debt.”
The passage of these two pieces of legislation has inspired public bank groups in other states. An important lesson from California is that a broad coalition with intensive organization and persistent activity is necessary to pass and implement such legislation over the opposition of the Bankers’ Club, going up against the inertia of the ideological prejudices and risk aversion characteristics of many key officers in legislatures and state and local bureaucracies.
