Could Public Banks Help Cities Keep Their Money Away From Wall Street?

The bill, A.B. 857, would create a process for local governments to start their own public banks, if they choose to.

“Currently California cities turn over hundreds of billions of taxpayer dollars to our country’s largest Wall Street banks, who invest our money in industries antithetical to our state’s values and policies,” Assemblyman David Chiu, one of the bill’s authors, told me. “This is an idea driven by millions of consumers who in recent years have experienced predatory lending, foreclosures, student loan debt, lack of access to small business capital and having millions of fake bank accounts opened in their names.”

Mr. Chiu and others have pointed to the century-old Bank of North Dakota as a potential alternative model. The California Public Banking Alliance listed a roster of endorsements, including from some of the state’s biggest cities.

Still, experts and observers have cautioned that starting a new bank and figuring out the priorities of such an institution could be expensive, time-consuming — and yield questionable returns.

Even if public banks don’t invest in companies that, say, deal in fossil fuels, they still have to invest in things that will grow the city’s money over time. And affordable housing may not make as much money.

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