On November 6, Los Angeles voters will decide on a ballot measure that would allow the city to create a public bank to hold the city’s funds. Cities around the country are looking at this alternative to parking their money with predatory Wall Street banks. It’s not a totally radical concept: North Dakota has had a successful public bank for almost 100 years.
Measure B is, as you might expect, opposed by the California Bankers Association, which describes it as “a significant threat to commercial banks.” The CBA formed a committee, Californians For Financially Responsible Government, for which it is soliciting donations on its website. It hasn’t filed any disclosure or independent expenditure reports with the city yet; a spokesperson told Bloomberg this month that “no mailers or ads are in the works yet.”
We spoke with Trinity Tran, lead organizer and co-founder of Public Bank LA, the organization leading the charge for the ballot initiative. She was previously involved in Divest LA, the successful campaign to get the city to divest its funds from Wells Fargo. Our conversation has been edited for length and clarity.
Splinter: What exactly is a public bank?
Tran: A public bank is a public depository for our tax dollars. In Los Angeles right now, we have billions of our tax dollars sitting in checking and short-term investment accounts of Wall Street banks. So a public bank creates a public option for our depositories of the city. You can compare it to a larger version of a credit union for our city, for our city departments. What we’re aiming to do in Los Angeles is to create a public bank that keeps our dollars here recirculated back into our local economy to finance things that we need as Angelenos, like affordable housing, green energy, and small business loans.
Splinter: How would a public bank allow the city to fund things like affordable housing more effectively than banking with, say, banking with Bank of America?
Tran: We spend about $1.1 billion in interest annually that goes to Wall Street banks. That accounts for about half of our infrastructure costs, so if we were to create a public bank, we’d save billions of dollars, we would double our investment power through the money that we save, and we’d have the ability to finance these projects, because a very big problem with financing progressive things like green energy, serving the needs of unbanked populations, and creating affordable housing is that we don’t have the money. So by saving our city money we can then redirect the savings into creating a stronger local economy.
Splinter: So would the public bank be something that regular people can use instead of their bank, or would it just be for city funds?
Tran: It’s a bankers’ bank, so it’s a bank for the city. A bankers’ bank is also called a wholesale bank. So it wouldn’t be a bank where ordinary people could bank, and that works out in the interest of creating something as monumental as a public bank, because then if you have a bank that’s just for the city, you cut down on costs as far as creating bricks and mortar buildings and ATM machines. So that would tremendously reduce the capitalization costs of a bank by making it just a bank for the city.
But what the bank would do is something similar to what the Bank of North Dakota does, which is it works with smaller banks, with community banks and credit unions, and it extends their credit lines so that they’re able to create low-interest loans for ordinary people.
Splinter: You mentioned the Bank of North Dakota. I’m curious about the fact that you’re trying to create a public bank at the city level. Presumably, if the State of California wanted to, they could do this at the state level too.
Tran: Yes, we’re actually working on a state bill. We created the California Public Banking Alliance a few months back, and it’s an alliance of about eight California cities and regional centers that have joined together to create a state bill that would create one uniform framework for a network of municipal and regional banks throughout California. So we’re supportive of smaller regional banks as well as municipal banks, in addition to state banks, because municipal banks would be able to address loans and needs of people in the more local area versus state banks, which would be able to address larger infrastructure swaps that affect a larger number of people.
Splinter: My understanding is that the initiative itself wouldn’t create the bank, it would just allow the city to create the bank, so what’s next if this passes?
Tran: So Charter Amendment B, also called Measure B, would just lift one restriction. Currently the city of LA isn’t able to create a public bank. So this would amend one section of the city charter to allow the city to explore the creation of a bank. It doesn’t mandate that the city create a bank, it just allows the city to take the next steps, which are to create an economically viable business plan and make sure this bank addresses the need to create jobs in Los Angeles, how is this bank going to help with affordable housing, how is this bank going to be capitalized.
The city of LA can’t just go out and create a bank, there are various levels—the business plans, the feasibility studies, that then to be assigned through a committee and City Hall. The bank would ultimately have to be approved by the California Department of Business Oversight to make sure that it adheres to their strict standards on business practices and capitalization and insurance. So this is a few years out, but this is a very important first step to allow the city to even explore an option that’s something aside from predatory and extractive Wall Street banks.
In 2017, the LA City Council voted unanimously to divest our commercial banking services from Wells Fargo. That push was from our grassroots initiative, Divest LA, which was all volunteer-led, a coalition of about 30 social justice, environmental, and progressive organizations came together to create stronger, socially responsible guidelines for how our city does its banking practices. So that was an ethical stance from the people of Los Angeles to say, we don’t want our tax dollars sitting in banks that finance harm to our communities.
So because the City of Los Angeles took such a bold step to divest the second largest city in the country from the second largest bank in the country, divesting our city from Wall Street was kind of the next logical step, because we didn’t want Los Angeles to move their money out of Wells Fargo and then into another big bank, we wanted to create a real solution to banking services that would put people and planet over profit first.
Splinter: Are elected Democrats supportive of this?
Tran: Oh, absolutely. We have the endorsement of the LA County Democratic Party, which represents 2.4 million registered Democrats in LA County; it’s one of the biggest Democratic organizations in the country. We also have the support of Eric Bauman, who is chair of the California Democratic Party, which represents over 8 million registered Dems. We have the endorsements of over 100 organizations from various Democratic clubs to social justice groups, environmental groups, including labor. We just got the endorsement of the United Teachers, UTA LA, as well as the Latin Labor Council, part of the AFL-CIO. So we’re seeing broad base support from people in Los Angeles who really want to see a real alternative to Wall Street.
Splinter: Another angle to this is that it would help people in the marijuana industry people—people who sell legal pot, basically. Can you explain how that would work?
Tran: It potentially could, but the reason why our grassroots movement has framed our narrative around it being a people’s bank is because there are still various federal hurdles that a cannabis bank would have to endure because cannabis is still a Schedule 1 drug. At some point, the federal government, especially under a Trump administration, would be able to seize its assets because of that, so because of the complications at the federal level, it made a lot more sense for us to push for this bank as not being just a cannabis bank but being a people’s bank at first. We understand that there is a real need to house cannabis cash—because there are billions of dollars in Los Angeles, across the state of California—billions of dollars waiting to be able to legally enter commerce.
But our first priority here are the people of Los Angeles, where we’ve got three out of ten Angelenos who don’t have access to a checking account. We have 600,000 LA residents who live in what’s called a banking desert, where they don’t have access to any sort of commercial banking services, so they don’t have access to loans, especially low interest loans, and can’t afford homes. So there’s a real need to address historically underserved areas which are mostly made of up of black and Latinx folks, so that’s first and foremost our priority for creating this bank.
Splinter: To most people, I don’t think this is the most self-explanatory, intuitive issue; I think some people would probably say it’s a little technical and even kind of boring. So how are you messaging this to voters, how are you whipping people up to support this initiative?
Tran: I think coming out of Occupy, it’s already in the public consciousness that Wall Street and the big banks are bad, but they’ve never been presented with a solution until now. A lot of what we’ve been doing is trying to educate people on the existing model and the success of the public banking model in North Dakota as a bank that outperforms Wall Street. So it’s about engaging people, for them to understand that we can take our financial power back from Wall Street to create an alternative that works in the interest of the people, that Wall Street and the big banks aren’t our only solution to financial services.
So our messaging is this is our money, this is our value, and this is our bank. What we’re seeing in Los Angeles isn’t isolated here. Across the country, there is a growing movement for public banking, there are 15 existing pieces of public banking legislation moving through cities and states. This is an idea whose time has come, and that’s why this is so important for us to push for a landslide victory at the ballots in Los Angeles because it’s a determinative vote that would really help amplify the national public banking conversation and movement.