The Quest for a Public Bank

After the success of last year’s public banking legislation (AB 857), several cities and regions in California launched initiatives to create a public bank for their localities. Bets were being placed as to which would open its public banking doors first – would it be Los Angeles? San Francisco? East Bay?

Those initiatives were derailed by the devastating economic effects of the pandemic. Enter Assemblymember Miguel Santiago (D- Los Angeles and co-author of the public banking bill) with AB 310, a bill that calls for the expansion of the California Infrastructure and Economic Development Bank (“I-Bank”) into a full-fledged state depository and loan source–in short, a public bank.

Public banking proponents were quick to jump on this newly arrived bandwagon. The California Public Banking Alliance, the digital hub for public banking efforts throughout the state, launched the website and produced talking points and one-page explainers for every aspect of the bill. Los Angeles Mayor Eric Garcetti and Long Beach Mayor Robert Garcia have endorsed the bill. On July 28, the San Francisco Board of Supervisors passed a resolution endorsing the bill.

Controller Betty Yee, however, said in a letter to Sen. Mike Maguire (D-Healdsburg) that turning the I-Bank into a public depository institution was a “proposal (that) is fraught with risk.” And State Treasurer Fiona Ma also cautioned against using the Pooled Money Investment account (PMIA) as a piggybank during these uncertain times.

Proposals to add money to the I-Bank and use it to provide banking services have surfaced before, for example when former State Treasurer John Chiang was looking for a bank for cannabis cash. State Treasurer Fiona Ma, who favored the cannabis bank idea, now helps govern both the I-Bank and the $101 billion PMIA. In this moment, the popular appeal of the public banking movement is coupled with the need to find a way to make fair loans to small and minority-owned businesses as they try to recover from the pandemic.

The bill’s first hearing (testimony-only, no vote) took place Monday, August 3 in Sen. Mike Maguire’s Governance and Finance Committee. Expert witnesses from the Lawyers Committee for Civil Rights and the California Reinvestment Coalition spoke in favor of the bill; Controller Yee spoke in opposition, and Treasurer ma spoke in opposition unless amended.

The bill’s authors said that they will continue working through the roadblocks to passage of this bill in the coming months.