California State Senators Mike McGuire and Steven Bradford took a bold step toward establishing a state public bank on November 23, 2020 by chairing a joint hearing with the Governance and Finance, and Banking and Financial Institutions Committees. The Senators unleashed testimony from a wide range of financial professionals and community activists supporting legislation for a state public bank.
The State Public Bank’s coauthor, Assemblymember Miguel Santiago stated the urgency of financial transformation for COVID-19 recovery by emphasizing “the need to reimagine a financial system that puts the public good before profit.” His appeal for California’s financial sovereignty was reinforced by Assembly cohort, David Chiu, stating that a state public bank “…could keep the people’s financial power in our state to ensure that we are jump-starting our state’s economic recovery, to catalyze the development of local financial institutions in their communities, providing infrastructure, capital, and support.”
Three issues stood out from a myriad of speakers.
- Wall Street banks have failed our communities, particularly people of color.
- Taxpayers’ money needs to be used efficiently to assist those most in need by providing capital to revitalize small businesses and rebuild communities devastated by COVID-19.
- A state public bank will counter the corrupting influence of big banks by providing investment opportunities for those doing social good: to build affordable housing; to build sustainable infrastructure; to support small business survival; to put people back to work while rebuilding our communities, especially those that are ignored by big banks.
Public banking proponents gained traction with a series of well-informed presentations from public servants, entrepreneurs, community financial institutions and community groups. California State Treasurer Fiona Ma made it clear that she supports a thorough, appropriate study for the feasibility of a public bank. Henry Levy, Alameda County Treasurer and Tax Collector, noted “a lot of the county treasurers are in support of the goals of a public bank.” Senator Maria Elena Durazo spoke of the critical need for an alternative to Wall Street to address community and small business needs that the current system has failed to support. Durazo emphasized that officials should find ways to move bold ideas forward rather than dismiss them, and acknowledged “The private sector takes advantage of our funds but doesn’t reciprocate the way that it should for our communities.”
Ameya Pawar from Open Society Foundations pointed out that the government gives banks “…the license to create money. That is what the public provides private sector banks.” Mr. Pawar offered a solution to Senator Durazo’s concern, saying “There is no reason why the public sector couldn’t also obtain a license to create money, to fill in the gaps that are created by private sector banks.”
Noni Ramos from Enterprise Community Loan Fund explained how a state public bank would help Community Development Financial Institutions be more effective. “CDFIs work to bring capital to low income and underserved communities and financial resources from the public bank could be leveraged by CDFIs.” Mark Herbert, Vice President of California Small Business Majority concurred, saying public banks provide “… the opportunity to think about, how do we get more tools and more resources and more capital to the smallest businesses?” He concluded that “…fundamentally we need to think about not just this moment — and meeting the significant needs that small business owners and our state face — but how do we build a more equitable economy in the future?”
Scores of community activists made their voices heard in public comment. Trinity Tran from the California Public Banking Alliance made it clear that a public bank will enable public funds for rebuilding and recovery. Ms. Tran reminded legislators at the hearing that while campaigning Governor Newsom committed to breaking the hold of Wall Street banks by establishing a state public bank. Jennifer Tanner, speaking on behalf of Indivisible CA: StateStrong’s over 70 groups with 40,000 members, registered strong support for a state public bank. Ben Hauck of Public Bank Long Beach, called on legislators to take bold action for public banking as a systemic solution to a broken financial system.
United Food and Commercial Workers (UFCW) Local 770’s Political Director Nam Le spoke on behalf of 150,000 grocery and retail frontline workers. The union supports public banks capable of partnering with community banks and credit unions to lend responsibly to localities, especially communities of color, which have suffered the greatest losses in the pandemic. Steve Sittig of Public Bank Pomona Valley pointed out that a state public bank can smooth the way for setting up local and regional public banks.
Joining the overwhelming support for a state bank in the public comment section were California Reinvestment Coalition (CRC), a key ally in California Public Banking Alliance’s effort, representing over 300 California small businesses and CDFIs, and the People’s Alliance for Justice testifying on how a State Public Bank will be able to support CDFIs in their work with the unbanked, leveling the playing field for our most needy.
Richard Girling of United Educators of San Francisco and SF Public Bank Coalition urged legislators to look to Germany’s Sparkassen, a network of hundreds of public banks that have operated for a couple hundred years. Rose Anwich from Ventura County expressed her concern that Wall Street banks continue to finance extractive industries and that public banks are needed for financing climate resilient initiatives. Bonnie Petty, from North Bay Jobs with Justice, noted that had there been a state public bank, recovery funds could have been leveraged to provide much more relief from the fires that destroyed communities.
In a recent newsletter by the Public Banking Act’s co-author Asm. Phil Ting, the Legislative Analyst estimated “a one-time $26 billion windfall in revenues this coming year. However, deficits are projected for several years thereafter. In addition, COVID-19 cases are surging, potentially exacerbating our economic challenges and the number of vulnerable Californians in need of assistance.” Using some of this windfall as the foundation for a state public bank in 2021 will be critical in enabling California to leverage funds in future years to assist in rebuilding and restructuring our local economies.
The California Public Banking Alliance (CPBA) is a coalition of public banking activists in California working to create socially and environmentally responsible city and regional public banks.