Following the passage of a new state bill, local public banking advocates say they plan to make Los Angeles the first city in the country to establish its own bank.
They got the support of L.A. City Council President Herb Wesson on Monday. Wesson said he plans to introduce a motion this week to begin the process of recruiting a banking expert who would advise the city on creating a public bank.
These moves follow Gov. Gavin Newsom's approval last week of a bill allowing local governments to establish public banks. Newsom's signature makes California the only state aside from North Dakota to permit government-run banks.
Wesson acknowledged it could take years before a public bank would actually be up and running in the city. But he said he wanted to "put in place the foundation as quickly as possible."
"We are almost there, but we're not there yet," Wesson said. "With this motion that I'm introducing, I think we will move this ball further down the court."
Advocates want L.A. to withdraw its deposits from commercial banks like Wells Fargo and put them into a new, publicly owned financial institution. They argue a public bank could fund projects like affordable housing and green infrastructure at lower interest rates and without concern for maximizing profits or shareholder returns.
LA VOTERS SHOT DOWN PUBLIC BANKING LAST YEAR
But last year, Los Angeles residents voted down a ballot measure that would've also allowed the formation of a local public bank. Just 44 percent of voters favored the idea.
The movement toward public banking has also attracted strong opposition from the traditional banking industry, which says most Californians are satisfied with private banking services and are skeptical that decisions at a public bank could be made free from political influence.
"We think the voters of Los Angeles spoke loud and clear last November when they solidly voted against the city taking the first steps towards establishing a public bank," said Beth Mills, a spokesperson for the California Bankers Association. "There's nothing to suggest that the public's sentiment has changed."
Trinity Tran, lead organizer for the group Public Bank LA, said the concept was still new to many voters. She said when organizers explain how a public bank could prioritize financing for housing and environmental initiatives, more people support it.
"They just need to be presented with a solution," Tran said. "We're constantly faced with the problem, how do you pay for it? The key is to be able to recapture the money that we're paying to private shareholders to invest in our own communities."
Public banks could also decide to serve California's cannabis industry, which has been largely unable to use commercial banks. But that was not a primary goal of the legislation.
NORTH DAKOTA → LOS ANGELES
So far, North Dakota is the only other state with experience running a publicly owned bank. Founded 100 years ago this July, the Bank of North Dakota was established because the state's sparse population -- mostly farmers -- felt that traditional banking services were not meeting their needs.
California's problems today are very different than those of early 20th century North Dakota farmers. But the bill's co-author, Los Angeles Assemblymember Miguel Santiago, blamed banks for the foreclosure crisis and recent spikes in homelessness.
"In California, we've become the fifth largest economy, and more and more people are living on the streets," Santiago said. "The banking industry chose Wall Street professionals and shareholders over people living in their homes."
The bill signed into law by Gov. Newsom last week includes limits on public banking in California. No more than 10 public banks could exist at one time, and the state's Department of Business Oversight would not be allowed to license more than two public banks each year.
If Los Angeles does end up creating a public bank, don't plan on stashing your personal savings there. Public banks would not be designed to cater to your typical retail banking needs. The bill restricts public banks from competing with local banks and credit unions, instead calling on them to partner with existing local financial institutions to help under-served communities.
