In the midst of the Occupy movement’s righteous anger toward big banks and their role in the Great Recession, activists floated an idea: What if state-owned banks managed public funds, like San Francisco’s $11 billion annual budget, themselves?
Advocates say public money could be invested in affordable housing, clean energy, and small businesses. Cities could fund student loans at affordable rates, instead of immigrant detention centers, oil pipelines, and other institutions San Franciscans inherently oppose. A public bank has practical applications too, like saving millions of taxpayer dollars in fees spent on financial services.
A public bank is defined as a financial institution owned by a state, city, or county. Unlike big banks with chains nationwide, they aren’t motivated to maximize profits, all of which go back to the jurisdiction that runs it. To open, it would still need insurance, a bank charter granted by the government, access to the Federal Reserve, about 10 percent of its assets saved, and enough money to cover start-up costs.
Upcoming projects that need bonds, such as fortifying the seawall, could be issued through the bank instead of a major bank with millions of dollars in fees. San Francisco could save a staggering $68 million each year just on debt obligations, according to a 2016 study titled “Municipal Banking: An Overview.”
In 2011, at the height of Occupy, the city published a report at the request of then-Supervisor John Avalos, who added it to his mayoral platform — but the lack of support from Board colleagues meant it stayed a pipe dream. A decade after the 2008 mortgage crisis, the political will necessary to carry it through has finally arrived.
“You have to have inside people who have to be for it,” Avalos says. “It can’t just be from the outside.”
Timing has lined up for San Francisco to have both. Supervisor Malia Cohen — another political candidate, this time for the tax revenue distributor State Board of Equalization — in 2017 established a Municipal Bank Feasibility Task Force that Avalos sits on. Fellow Supervisor Sandra Lee Fewer has also advanced the idea in City Hall.
Along the way, the activist-run SF Public Bank Coalition has offered its own vision of principles and potential lines of business for the task force to adopt. Investing in infrastructure and underserved communities and steering clear of the fossil fuel industry and prisons are their guiding principles.
Local politicians have endorsed the idea, too. The coalition got supervisorial candidates Tony Kelly, Matt Haney, Christine Johnson, and Nick Josefowitz on the record as supporting a public bank.
As coalition member Jackie Fielder emphasizes, it also means transparency and public accountability — which aren’t synonymous with private, commercial banks.
“I think at this point, we are in a faith crisis in government [and] a faith crisis in this economic system,” Fielder says. “A public bank is another way to reroute money in the way we want to see [it] spent.”
Other cities and jurisdictions see this faith crisis. Massachusetts, Vermont, New Jersey, Oregon, and Santa Fe, N.M., produced feasibility studies, while movements exist in Oakland, Santa Rosa, Santa Barbara, Seattle, and New York. Los Angeles officials have placed a measure on the November ballot to make a city-owned bank legal.
The Bank of North Dakota, which opened in 1919 and holds all of that state’s funds, is the only operating public bank in the country. According to San Francisco’s 2017 policy analyst report, it withstood the 2008 financial crisis because it had a steady flow of credit for its member banks and commercial banks didn’t.
Since San Francisco has different needs and values than North Dakota, there are a few paths it could go down. The city could simply invest more in credit unions and community development banks, or it could go all in with a city-operated bank that phases in approved financial services.
It sounds like a great idea, but not everyone is on board. Jim Lazarus, a task force member and senior vice president of public policy for the San Francisco Chamber of Commerce, has some reservations. He says there are too many unknown hurdles, doesn’t think it will be legal, and isn’t sure if the effort is worth it.
“There’s no guarantee that somehow the city’s going to save money,” Lazarus says. “There’s still some things that can be done that doesn’t put the public’s money at risk.”
The City Attorney’s Office found that state law does not prevent cities from creating a bank as a separate legal entity. It would be allowed to extend credit while consumer services like checking accounts are not necessarily part of the vision so far.
With a draft of recommendations coming in September, the San Francisco Treasurer’s Office is mum on the details for now. The report will still be largely conceptual, says task force member Lauren Leimbach, who’s also the executive director of the Berkeley anti-poverty nonprofit Community Financial Resources.
Then it will be up to the Board of Supervisors to review and act on, including how to capitalize a bank that could manage the city’s $11 billion budget. A potential 2019 ballot measure put forward by the Public Bank Coalition would give officials a starting point, although Fielder says it would be focused on setting a bank mission statement.
This gives advocates time to educate the public and rally voters before the details are hammered out. Starting next month, the Public Bank Coalition will host information sessions to gather the public’s ideas — while making their case for dramatically changing the city’s finances.
“It’s an incredibly stressful and dark time, but this is also the time for bold ideas — because we have nothing to lose,” Fielder says. “We realize that local politics and local policy is where the magic happens.”
Ida Mojadad is a staff writer at SF Weekly.
Imojadad@sfweekly.com | @idamoj