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The Los Angeles Public Bank could use the city’s existing deposits as its primary source of funding. Right now, the City of Los Angeles holds billions of dollars in checking and short-term investment accounts at commercial banks. These accounts generate little interest and come with significant banking fees. Much of the city’s money sits idle in low-yield accounts. The Reserve Portfolio alone holds over $7.2 billion, with about 75% invested in treasury bills that mature in 2.9 years and earn just 2.76%. These funds aren’t being put to work for Angelenos. Moving even a small portion into a public bank would allow the city to lower costs and reinvest public dollars into the local economy. Los Angeles currently spends over $340 million per year on banking fees and pays $1.4 billion annually in debt service, which includes both principal and interest.

A public bank wouldn’t replace the city’s existing financial tools, it would work alongside them. It would give the city more control over how its funds are managed and help keep money circulating locally for public priorities like affordable housing, transit, and clean energy. The bank would begin with a narrow focus and expand lending over time as it builds reserves and reinvests earnings.

Start-up capital could come from several sources: budget appropriations, earnings from city investment pools, voter-approved bonds, or federal grants. The mix of funding would depend on the size and scope of the bank.

Once it receives a California State Public Bank Charter, as allowed under the California Public Banking Act, the Los Angeles Public Bank can accept deposits from city departments and nearby public agencies. It may also receive funds from pension systems, socially responsible mutual funds, and other institutional investors. The bank can also partner with community lenders to move capital into projects that meet local needs.

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To build a solid and trustworthy business plan, the Los Angeles Public Bank will focus on doing the work of a real bank. That means offering basic services like checking accounts, credit card processing, and helping the city manage its cash flow. It will coordinate with city departments and agencies to handle accounts payable and receivable, merchant accounts, wire transfers, ACH payments, payroll, credit card processing, account invoices, adjustments, and banking fees. It will also support the Office of Finance with collecting and reporting taxes, making sure city finances stay organized and accountable.

As it starts managing deposits, the bank can begin making loans and buying interest-earning assets. Lending and investment decisions will follow the bank’s founding mission and be shaped by its Board of Governors. That could include loans to support city infrastructure, small business lending done in partnership with local banks, and financing for key priorities like affordable housing and clean energy. Under the California Public Banking Act (AB 857), public banks are required to partner with local financial institutions, like community banks, credit unions, and CDFIs, so they work alongside existing lenders, not against them.

The Los Angeles Public Bank will operate as a wholesale “banker’s bank,” offering liquidity and support to community banks that need a strong local partner to stay competitive with large national institutions. It could also provide clearing services and interbank liquidity to strengthen the region’s financial network. As the bank demonstrates stability and results, it could expand its role in collaboration with local lenders to lower banking costs and increase access to capital for residents and small businesses.

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Like any bank that holds public funds, the City of Los Angeles will continue collecting tax revenue and storing it in bank accounts as deposits. The public bank would manage some of these accounts directly, helping the city reduce its reliance on commercial banks. By bringing services like credit card processing and merchant accounts in-house, the city can cut costs and improve oversight.

While the bank will need an initial reserve to get started, it will not rely on ongoing tax dollars to operate. Instead, it will become self-sustaining by making loans backed by city deposits. These deposits will remain insured and protected, with safeguards in place to avoid risk to public funds. The goal is to create a stable, transparent institution that uses existing resources more efficiently, without putting taxpayer money on the line.

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The primary customers of the Los Angeles Public Bank will be municipal service providers such as school districts, public utility commissions, and city departments. The bank will operate as a “banker’s bank,” providing financial services and liquidity support to local community banks, credit unions, and CDFIs. It will partner with these institutions to increase their lending capacity and strengthen their ability to serve local businesses and residents.

The public bank will also act as a kind of “mini-Fed” for the region, backing up community lenders, helping guarantee loans, and supporting projects that align with the City’s economic priorities. This includes affordable housing, infrastructure upgrades, and support for small and mid-sized businesses. All lending will be done in a way that is financially sound and environmentally responsible. By recycling public dollars locally instead of sending them to Wall Street, the bank will help keep capital recirculating in Los Angeles and build long-term economic stability rather than sending it out-of-state or to distant shores.

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The Los Angeles Public Bank will not be run by City Council or elected officials. It will operate as a separate, nonprofit financial institution with its own independent board, professional management, and strong regulatory oversight. It will not function as another city department. Instead, it will be governed like a real bank, regulated at the state and federal levels, including oversight by California’s Department of Financial Protection and Innovation and potentially the FDIC.

Board members will be selected for their financial expertise, public service experience, and commitment to the bank’s mission. Unlike private banks, where board members are often major investors earning large payouts, the public bank’s board will be accountable to the public, with fair compensation and high transparency standards.

The bank’s governance structure will be shaped through community, expert, and public input during the development of the business plan and will follow these core principles:

– It will be governed by an independent board made up of community members and professionals with backgrounds in public finance, banking, affordable housing, and climate-related investments.
– It will be strictly regulated by the State of California and the FDIC, with safeguards to protect and grow municipal assets.
– It will be required to serve the public interest, not private shareholders or executive profit.

This is not about growing government or spending more. It’s about putting the city’s existing funds to better use. Los Angeles currently spends over $1.4 billion a year on debt service, with hundreds of millions in interest and fees going to Wall Street. A public bank would keep more of that money circulating locally, helping the city avoid budget shortfalls, tax hikes, and cuts to essential services. It gives the city long-term financial tools that are publicly accountable and built to serve local needs.

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Credit unions are a solid alternative to big banks. They’re owned by their members, not private shareholders, which means their focus is on serving customers rather than maximizing profits. They’re accountable to their depositors and often provide more affordable banking services. However, credit unions are not accountable to the general public as a whole, and they are limited in how much capital they can access and deploy.

Public banks, by contrast, are owned by governments and accountable to the public through elected representatives. They are designed to work alongside, not compete with CDFIs, credit unions, and community banks. A public bank can support local financial institutions by making joint loans, providing access to credit, purchasing mortgages, and other forms of cooperation that increase lending power. This helps credit unions and community banks expand services without relying on Wall Street. North Dakota, which has the only state-owned public bank in the U.S., also has more credit unions and community banks per capita than any other state.

Public banks are not subject to the same restrictions as credit unions, which allows them to access capital at lower costs and lend with greater flexibility. Cities and states manage large revenue streams and reserves, and public banks offer a way to invest those funds directly into local priorities, like affordable housing, climate-ready infrastructure, and small and mid-sized businesses, without the high fees and barriers that come with commercial banking.

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Los Angeles is facing a serious housing crisis. More than 400,000 households are living in substandard conditions, and many residents spend over half their income on rent and utilities. The city also has one of the highest homelessness rates in the country. In 2017, over 58,000 people were unhoused. A rent increase of just 5 percent could lead to an estimated 2,000 additional people losing their housing. Statewide, the median home price is more than two and a half times the national median, making homeownership and stability even more difficult to attain.

A public bank can help address this crisis by financing affordable housing directly. Public banking expert Karl Beitel has outlined how a municipal bank in Los Angeles could issue construction loans, long-term mortgage loans, and bond-backed financing for multi-unit affordable housing. Over time, it could also support a property acquisition program to purchase existing rental units and convert them into permanently affordable homes through land trusts or cooperative ownership.

Public banks offer a reliable alternative to depending on private investors or the for-profit housing market. They can put public funds to work on long-term housing solutions that serve local needs. This includes supporting housing development around transit without triggering the displacement of residents, particularly in historically impacted Black, Latino, and Asian working-class communities. Public banks can also co-lend with local banks and credit unions, helping expand local investments and reduce risk for partners working on community housing initiatives.

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The Los Angeles Public Bank can be an important tool for tackling the climate crisis and advancing the city’s sustainability goals. By financing clean energy infrastructure and prioritizing loans for renewable energy projects, the bank can help drive the transition to a low-carbon economy. It can also integrate environmental criteria into its investment strategies to align with the city’s long-term climate and energy plans.

Public banks in other countries have shown how this approach can work. In Germany, the Sparkassen network of public banks has played a major role in the country’s move toward renewable energy. Public banks there have provided 73 percent of the investment in the renewable energy sector. In Costa Rica, the worker-owned Banco Popular has supported a range of environmentally focused projects, including hydroelectric power, sustainable water systems, and energy-efficient building retrofits.

These examples show how a public bank in Los Angeles could invest directly in local clean energy projects and provide the kind of stable, low-cost financing that is often hard to secure through private lenders. By keeping capital local and aligned with public priorities, the bank can help the city meet its climate goals while supporting long-term economic and environmental resilience.

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Yes. The Bank of North Dakota (BND) is the only publicly owned state bank currently operating in the United States. Established in 1919, it has a strong record of profitability and stability. During the COVID-19 pandemic, the BND delivered a 17 percent return on investment, reflecting its careful approach to lending and long-standing financial discipline. Its conservative investment strategy has helped it navigate major economic crises, including the Great Depression and the Great Recession.

The BND provides low-interest loans to small businesses, below-market-rate student loans, and support for local governments through the purchase of municipal bonds. It also works with private banks by backing loans and supporting the secondary mortgage market. During the pandemic, it played a key role in distributing Paycheck Protection Program (PPP) loans to small businesses across North Dakota.

Interest in public banking is growing across the country. Cities and regions working to establish public banks include Los Angeles, San Francisco, the East Bay, and the Central Coast in California, along with Seattle, Denver, Chicago, Philadelphia, and Washington, D.C. These efforts are gaining traction at both local and state levels. In Michigan, bipartisan legislation has been introduced to create a state public bank. While North Dakota remains the only state with a public bank, it operates with strong backing from a Republican-led legislature and shows that public banking can be both financially sound and widely supported.

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Public banks in California are designed to manage public funds, not operate as retail banks for individuals. They will not have physical branches for everyday consumer banking. However, Public Bank Los Angeles and the California Public Banking Alliance are exploring ways to expand access for the general public.

In 2021, California passed the Public Banking Option Act (AB 1177), which will create the CalAccount program. This program aims to provide zero-cost, zero-penalty bank accounts to all Californians, with the goal of reaching millions of unbanked and underbanked residents. Local public banks may eventually become designated partners to hold CalAccounts, though public banks are generally restricted from direct retail banking activity.

There are limited exceptions. Public banks can offer some retail-like services, such as accepting deposits or making loans to public entities, if no local financial institutions are offering those services within the community. While individual residents cannot open checking or savings accounts directly at a public bank today, the broader goal is to create a public banking ecosystem that works alongside community banks, credit unions, and programs like CalAccount to expand financial access for everyone.

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There are two existing public bank models that can help inform the governance structure of the Los Angeles Public Bank: the Bank of North Dakota and the Sparkassen system in Germany.

Bank of North Dakota: The Bank of North Dakota is governed by a board of three elected state officials who set policy in the public interest. It also includes an advisory board made up of bankers who provide input but do not control decision-making.

Sparkassen in Germany: The Sparkassen banks operate under a three-part board structure. One-third of board members are elected by a regional parliament, one-third are employees, and one-third are community members with proven economic expertise. This model combines public accountability, worker representation, and financial experience.

For Los Angeles, it will be up to elected officials, banking professionals, and community stakeholders to design a governance model that meets the city’s needs while staying true to the bank’s mission of social and environmental responsibility. The structure should ensure transparency, strong oversight, and a clear public mandate.

One possible path was suggested by Michael Brennan, a researcher at The Democracy Collaborative, who proposed incorporating Los Angeles Neighborhood Councils into the governance framework. These 99 councils each represent about 40,000 residents and offer localized input on citywide issues. Brennan’s report, Constructing the Democratic Public Bank: A Governance Proposal for the Los Angeles Public Bank, explores how neighborhood-level participation could help shape a more democratic and accountable public bank.

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There is strong interest in finding a safe and reliable way to provide banking services to California’s legal cannabis industry, which generates millions of dollars each year. Many licensed cannabis businesses still struggle to access basic financial services, forcing them to operate in cash and creating public safety and compliance risks.

Public banks are often discussed as a possible solution, but under current federal law, this remains a challenge. Cannabis is still classified as a Schedule I controlled substance at the federal level. As long as that remains the case, public banks will likely not be able to serve cannabis businesses. Doing so could jeopardize their ability to receive approval from federal regulators, including the FDIC and the Federal Reserve.

Public banks in California are not chartered to serve private businesses directly. Their role is to manage public funds and work with local financial institutions to expand access to capital for public benefit. If federal law changes in the future, public banks may be better positioned to support cannabis-related businesses, but for now, they are unlikely to be a viable option for this sector.

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Opponents of public banking often raise concerns about bureaucracy, inefficiency, and corruption in the public sector. However, the public bank will not be run by politicians, but by professional bankers who are accountable to a board of governors. These bankers will be mandated to serve the public, rather than shareholders or executives.

The Bank of North Dakota (BND) is a successful example of a publicly owned state bank. According to the Wall Street Journal, it is more profitable than Goldman Sachs and JP Morgan Chase. BND is known for its risk-averse lending practices, low costs, and partnerships with local banks. It does not pay bonuses or dividends, and does not compete with local banks.

Public sector banks, while not common in the US, are found in many other countries. Studies have shown that they are often more profitable, safe, and transparent than private banks.

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Public banks in California will be insured and regulated like other financial institutions. They will be required to apply for deposit insurance through the Federal Deposit Insurance Corporation (FDIC), which protects public deposits up to established limits. To qualify, public banks must meet the same safety, soundness, and compliance standards as private banks.

In addition to FDIC insurance, public banks will be regulated by California’s Department of Financial Protection and Innovation (DFPI). This includes regular examinations, capital requirements, and risk management standards. These protections are in place to make sure public funds are safeguarded and that the bank operates responsibly over the long term.

Some public banks may also choose to insure funds through private deposit insurers or through collateralization agreements, where deposits are secured by high-quality public assets. These options provide an extra layer of protection for funds held at the bank.

The goal is to ensure that public banks maintain strong oversight, protect public money, and meet the regulatory requirements needed to operate with long-term stability and trust.

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Public banking has support across the political spectrum. The Bank of North Dakota, the only state-owned bank in the country, has long been backed by both Democrats and Republicans in one of the most conservative states in the U.S. Its popularity comes from its steady performance and practical value. The bank supports North Dakota’s economy by providing low-cost loans to farmers, small businesses, students, and homeowners, and it returns profits to the state treasury, which helps reduce pressure to raise taxes.

In California, where public banking has gained strong support in a Democratic-controlled legislature, the focus has been on using public banks to address urgent local needs. The California Public Banking Act (AB 857) was passed to give cities and counties a tool to invest in affordable housing, support small businesses, and fund infrastructure projects that respond to the climate crisis.

Public banks are accountable to the communities they serve, not to private shareholders. That gives them the flexibility to invest in ways that reflect the needs and values of local residents, whether the priorities are economic development, fiscal responsibility, or environmental sustainability. This ability to respond to local priorities is part of why public banking has drawn support from both conservatives and progressives.

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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.