The Board of Supervisors has made it loud and clear with a unanimously co-sponsored resolution that San Francisco needs its own bank. In February, the Board sought a state-approved public bank charter to take the city’s $11 billion budget out of the hands of Wall Street, and into the hands of the people.
Now, it appears those calls — first urged by activists — have been answered. Assemblymember David Chiu, a former supervisor who represents part of San Francisco, introduced state legislation on Monday allowing local governments to seek a needed charter to create their own banking systems. Though Chiu hinted at a tough legislative fight, Assembly Bill 857 is a notable step forward for a movement rooted in distrust of big banks, which were unequivocally responsible for the 2007-2008 financial crisis that led to the Great Recession.
“We can’t make significant progress on addressing the challenges and crises of the day if we don’t do something significant around the banking industry,” Chiu tells SF Weekly. “The public money needs to be used for the public good.”
Wall Street banks are known to dole out high-interest loans to low-income people, while investing money in things like private prisons and oil pipelines. If given its own bank, San Francisco could instead invest in affordable housing, small businesses, and renewable energy — all critical issues the city is grappling with. The publicly-operated Bank of North Dakota, created in 1919, provides a solid model. Grassroots efforts to establish public banks similar to San Francisco’s exist in Santa Rosa, San Jose, San Diego, the East Bay, Santa Barbara, Los Angeles, and even Orange County.
“These issues don’t arise in a vacuum. There is a structure of capital and politics and conscious decision-making by people in power behind there,” said Jackie Fielder, a San Francisco Public Bank Coalition leader, of the high cost of living and climate disasters at a press conference on Monday with elected officials standing behind her. “Today, we tell Wall Street we have no more time in California.”
The California Public Banking Alliance took model legislation to state representatives until Chiu — and Los Angeles Assemblymember Miguel Santiago — picked up AB 857, with another nudge of Supervisor Shamann Walton. But Chiu says he faced resistance to the idea well before he introduced the bill on Monday, and expects more to come.
“We know this is not going to be an easy fight,” Chiu says.
After the Board of Supervisors passed the resolution supporting a state charter, the California Bankers Association sent a letter calling a public bank “unnecessary given the numerous choices in the financial services marketplace.” The group also touted its “significant philanthropic financial donations” to nonprofits and said it was unconvinced San Francisco public bank could contribute the same level of commitment to the community as its current banks.
Chiu emphasized that AB 857, which fellow San Francisco representatives state Sen. Scott Wiener and Assemblymember Phil Ting intend to co-author, did not establish a public bank but merely sets up the process, and that it encourages partnerships with community banks and credit unions should a city like San Francisco launch one. He also assured that a public bank would be set up to ensure financial feasibility and responsibility where the California Bankers Association cast doubt.
Popularity for a public bank has come a long way. Former Supervisor John Avalos first asked for a City Hall report on the issue in 2011, but the next step lacked support until then-Supervisor Malia Cohen established a task force in 2017. Now that the final report borne out of those task force meetings is nearly complete, supervisors — now led by Sandra Lee Fewer on this issue — will have to decide how far to take the idea. The Board’s resolution from February made a point of saying that it doesn’t commit San Francisco to a specific kind of public bank, which has been the subject of debate among activists and the 16 task force members. And, how exactly it should be operated will be rife with controversy.
The Treasurer Office’s first draft report landed in September, and was criticized for offering versions of a public bank that diluted the grand vision by either being: a wholesale bank that issues real estate, small business, and student loans; one that expands small business loans and small-dollar consumer loans; one that secures funds to become a commercial lender and doesn’t take cash deposits; and a hybrid option that transitions from a commercial lending program to a bank after six years.
At the task force’s final meeting in January, the draft report was significantly revised to encompass three banking models that either purely invests, purely divests from US Bank and Bank of America, or does both. Sushil Jacobs, a task force member and senior attorney for the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area, thinks it’s important to prioritize investment in loans so everyday people feel the immediate impacts.
“Public banking is one way we can restore economic power to our communities,” says Jacobs, who is also part of the California Public Banking Alliance. “It is time to end our city’s reliance on predatory Wall Street banks and start building an equitable and inclusive Bay Area economy for the many, not the few.”
San Francisco may see a ballot measure on public banks as soon as November, but proponents will likely be taking notes from Los Angeles. Only 42 percent of voters down south approved the creation of a public bank in the 2018 midterm election, though organizers said they had little time to properly inform people on a complex issue. The San Francisco Public Bank Coalition, on the other hand, has spread the idea onward with several events to build support and have elected officials urging the rest to think big.
“If anyone can get it done, it’s the city of San Francisco,” says Cohen. “We have to be courageous and we have to be smart and thoughtful about what we’re proposing. We’re really onto something.”