Los Angeles voters had a chance last fall to eliminate a key barrier to creating a public bank that would be owned by the city.
The question was whether to amend the City Charter to allow L.A. to create a “purely commercial” enterprise. City Council President Herb Wesson said the ballot measure would help city leaders gauge whether to press forward.
“If people say, ‘We don’t want you to do this,’ then we don’t move forward with it,” Wesson said.
Under a proposal introduced Friday at City Hall, Wesson wants city staffers to hire consultants to help L.A. establish a public bank. His proposal states that it is “essential that the city proceed at this time with obtaining consultants to help structure a public bank in Los Angeles and ensure that we are able to provide banking services necessary to meet the needs of our residents and businesses.”
“Creating the first municipal bank is a major undertaking,” Wesson said in a statement. “In the wake of the recent success in the Legislature we must not rush this process. We should take whatever time is needed to carefully study and develop a plan that offers the best chance of success, shaped by public input.”
Before the state bill passed, city analysts had reported that setting up a municipal bank could require changes to both city and state law. David Jette, legislative director for the advocacy group Public Bank L.A., said that Assembly Bill 857 had cleared many of those obstacles and laid out a clear path for cities to create public banks.
“Most of the barriers have been lifted — but other guardrails have been put in place,” Jette said. “Now L.A. has a road map for how to build a bank that satisfies all the requirements of regulators.”
Under the new law, cities or counties must conduct a study to assess whether a public bank would be viable and get approval from a state agency to form one. Such banks must also get insurance from the Federal Deposit Insurance Corp. And California will approve only a limited number of banks, capping the total at 10.
Wesson spokesman Michael Tonetti said Thursday that, in light of the new law, his office was trying to clarify whether establishing a public bank would still require the city to get voter approval.
Trinity Tran, lead organizer and co-founder of Public Bank L.A., said the state law does not require prospective charter cities to seek a ballot measure to establish a public bank — a hurdle that she said put “the grass roots” at a disadvantage against banking interests that could dramatically outspend them. Tran said that, even without a ballot measure, any process would be democratic.
“Ordinary citizens can come in and lobby City Council, do public comment and be part of the process,” she said.
Progressive activists have championed the idea of banks owned by cities or states as a way to avoid predatory lending and socially irresponsible practices, refinance public debt at lower rates and invest profits to help the community.
In L.A., critics have been dubious that the city would be able to run such an entity effectively without political meddling. The California Bankers Assn., an industry group, has raised concerns about taxpayer money being used to start up public banks.
“I don’t think Los Angeles should be the guinea pig with taxpayer dollars,” said Stuart Waldman, president of the Valley Industry & Commerce Assn. He said he was surprised to see Wesson pushing for a public bank after the ballot measure was defeated.
“It had no organized opposition and no campaign whatsoever to oppose it — and the voters rejected it,” Waldman said.
When Wesson pushed forward the ballot measure, some backers of public banking feared it could be premature and risky for their movement. Much of the criticism of the measure centered on the lack of details. Jette said that this time around, public banking advocates would bring forward a detailed plan driven by what the community wanted.
“There’s a lot of work to do on what kind of bank L.A. needs and wants before we propose anything,” he said.
Wesson is renewing his push for a public bank as he campaigns for a new position — a seat on the Los Angeles County Board of Supervisors — against rivals including state Sen. Holly Mitchell and former City Councilwoman Jan Perry. It is unlikely, given the lengthy process prescribed for forming a bank, that he would still be on the council to see it happen.