Could California succeed where Wall Street fails? Five things to know about a state-run bank

public banks in California

Photo courtesy CalMatters


A recent CalMatters article by Felicia Mello and Ben Christopher examines the arguments made for public banking in California. What is the precedent? How could it work? They cover five things to know.

“If California had a bank controlled by the government rather than profit-hungry shareholders, public banking advocates argue, the state could fund social goods that often get the cold shoulder from commercial institutions: infrastructure projects, low-interest student loans and affordable housing.”

Mello and Christopher continue:

“[By converting the existing I-Bank to a depository bank,] ‘you’re not making risky loans,’ said Ellen Brown. … ‘You’re already making those loans. But you’re refinancing at a lower interest rate and the reason you can do that is (the deposits).’

“It’s an idea that shows up in the California Democratic Party’s 2018 platform, and [Gov.-elect Gavin Newsom] has said he wants to direct some of the state’s $15 billion surplus towards rebuilding the I-Bank [— currently a non-depository bank with a limited $1 billion in financing]. That plan could address one of the main critiques of public banks — that new ones are costly and complicated to create. …

The California Public Banking Alliance plans to sponsor legislation this year that would exempt public banks from these [state regulated] collateral requirements. …

Assemblywoman Monique Limón hopes to answer some of these questions at a joint committee hearing she will be organizing in the coming months.

“This is the fifth largest economy in the world,” she said. “We can’t afford to get this wrong.”

[Read the full article]

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