Two California Democratic lawmakers have introduced a bill that would develop a state-owned banking system, modeling it on a program run by one of the smallest states in the union.
California Assemblymen Miguel Santiago, D-Los Angeles, and David Chiu, D-San Francisco, have introduced Assembly Bill 857, which would enable local governments to charter their own public banks.
Santiago and Chiu would bring a similar system to California’s 39 million residents, arguing that a public institution might better serve the interest of low- and moderate-income households.
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“It’s pretty obvious that the Wall Street system of wealth distribution has created an income inequality crisis,” Santiago said in a statement announcing the bill’s introduction. “And nowhere is that more visible than right here in my district, where luxury condos loom over Skid Row. Instead of making rich men even richer, our resources should be invested in community development: parks and green spaces, free community college, new schools, smooth roads, and cleaner air.”
Amendments for the bill are still being processed but the full text is expected to be online by the end of the week, according to a Santiago spokesman.
Unlike the North Dakota system, AB 857 wouldn’t create a state-owned, statewide bank. Instead, it would empower local governments to charter their own such public banks.
The bill “also encourages partnerships between a public bank and existing local financial institutions to provide retail services, enabling public banks to provide affordable loans and lines of credit to local businesses and nonprofits, and increase the lending capacity of the local banking system,” according to the fact sheet.
The bill is co-sponsored by the California Public Banking Alliance, as well as several other public banking advocate groups.
The bill also has the support of Herb Wesson, president of the Los Angeles City Council, and Jeffrey Prang, Los Angeles County Assessor. AB 857 co-sponsor Chiu said in a statement that publicly owned banks would allow Californians to invest in institutions that fit California values.
“Time and time again, we have seen big banks invest our money in institutions most Californians are opposed to — oil pipelines, gun manufacturers, private prisons, and companies with unfair labor practices. This legislation allows us to take a first step towards ensuring the public’s money is used for public good,” he said.
It’s not the first time that California leaders have proposed bills that would create public banks. Former Treasurer John Chiang last year commissioned a study on whether the state should develop a public financial institutions for the cannabis industry.
The study released in December recommended against launching a public bank for marijuana retailers and growers, finding that opening a public bank would be costly and potentially risky.