Public Banks Can Now Be Formed In California

October 3, 2019 1:04 PM

Gavin Newsom signed into law today AB857, which allows for public banks to form in California. The only other state in the US with a public bank is North Dakota. Vox covers how California could take inspiration from North Dakota in setting up its own. AOC has congratulated CA on its passage, which isn't surprising since both she and Bernie Sanders have proposed their own take on a public bank by using the US Post Office. Elizabeth Warren has also endorsed the idea.
posted by toastyk (15 comments total)

Create a Public Option for Simple Banking : Under current authority, the post office can expand its financial services options. A major postal workers union even has it in their bargaining contract. (American Prospect)
posted by The Whelk at 1:06 PM on October 3, 2019 [3 favorites]

The L.A. times article focused on businesses, affordable housing, infrastructure, and municipal projects, instead of personal accounts, where the Bank of North Dakota (bnd.nd.gov !) "offers basic checking and savings accounts and other retail banking services to North Dakota residents," but it sounds very limited:

Because of our unique structure as a state-owned bank, it is the Bank’s policy not to compete with the private sector for retail deposits. Therefore, convenience products such as ATM cards, debit cards, credit cards or online bill pay are not offered. BND has one location at 1200 Memorial Highway in Bismarck, North Dakota. In order to open a checking or savings account or purchase a CD, you must come to the Bank location during business hours, 8 a.m. – 5 p.m. CT, Monday – Friday.

Institute for Local Self-Reliance summarizes them as such:

BND functions mainly as a “banker’s bank” — meaning that most of its lending is done in partnership with local banks and credit unions. About half of the bank’s $3.9 billion loan portfolio consists of business and agricultural loans that are originated by a local financial institution and funded in part by BND. By participating in these loans, BND expands the lending capacity of North Dakota’s community banks, giving them added strength in competing against big out-of-state banks.

The article The Whelk linked to from Prospect is a much different thing -- widely available public banks, particularly where bank branches aren't currently located, namely poor neighborhoods. That article notes that

More than one in five Americans relies, at least in part, on institutions outside of traditional banks. Six percent of Americans have no bank account at all—including 14 percent of black people and 11 percent of Hispanics—and another 16 percent are “underbanked,” meaning they have a bank account but also turn to nontraditional services. Families that make less than $40,000 a year are far more likely to fall into these categories than those who earn more.

In short, I'm interested to see what public banks look like in California. North Dakota doesn't look like the boon for the public at large as expanding the USPS to include banking services would.
posted by filthy light thief at 1:21 PM on October 3, 2019 [5 favorites]

Forgot to mention originally John Chiang (former CA Treasurer and gubernatorial candidate) also was a proponent of public banking, but just specifically to serve CA's growing marijuana industry, who are, for the most part, cash-only.
posted by toastyk at 1:38 PM on October 3, 2019 [1 favorite]

convenience products such as ATM cards, debit cards, credit cards or online bill pay are not offered

It's 2019. ATM cards and debit cards are part of basic checking services. Even credit unions offer that much.
posted by Faint of Butt at 1:52 PM on October 3, 2019 [8 favorites]

I think the point of those omissions is to keep the large commercial banks at bay and everyone out of court.
posted by Thorzdad at 1:54 PM on October 3, 2019 [4 favorites]

Forgot to mention originally John Chiang (former CA Treasurer and gubernatorial candidate) also was a proponent of public banking, but just specifically to serve CA's growing marijuana industry, who are, for the most part, cash-only.

From your link:

Roetzheim and his team wrote that the thorny banking issue has to be ultimately settled at the federal level, given that marijuana is still classified as an illegal drug under federal law — in the same class as heroin and LSD. Therefore, most banks will not open accounts for cannabis-related enterprises. They fear losing their banking charters, something that would put them out of business.

Emphasis mine -- this federal limitation is hindering states from potentially reaping the full tax reward of legal marijuana sales, and making it more dangerous for legal shops to manage their finances. Which I'm sure is a beneficial side-effect, as far as the Trump administration is concerned.
posted by filthy light thief at 2:18 PM on October 3, 2019 [1 favorite]

So what are the advantages of a public bank over a co-op bank or credit union?

(I already find my credit union to be a thousand times more trustworthy than the big national banks. I'm honestly perplexed why anyone still uses bank of america, wells fargo, etc...)
posted by kaibutsu at 2:40 PM on October 3, 2019 [1 favorite]

kaibutsu, the short answer: so poor people can use them and not get shafted on fees, overdrafts, onerous loans, etc.
posted by toastyk at 2:51 PM on October 3, 2019 [7 favorites]

I'm not sure if it's still the case but when my wife and I went to North Dakota State U, the best place for student loans was the BND - lowest interest, least barriers.
posted by Ber at 3:10 PM on October 3, 2019 [1 favorite]

So if a public bank can transact marijuana related business in a post office, does the FED raid them on horseback?
posted by clavdivs at 4:08 PM on October 3, 2019

While North Dakota is the only other state with a public bank, American Samoa founded a public bank in 2016 after the only two regional banks in the territory stopped providing lending and credit products:

When Roberts first arrived in the territory and drove past a branch [of regional bank ANZ], he saw cars parked at the drive-through and a line of customers stretching far out the door.

“The first thing we thought was that it was a run on the bank,” Roberts said. Only it wasn’t an old-school bank run. It was just payday, when everybody scrambled to turn their paychecks into cash before the bank ran out of bills.

Like literally every word of that WaPo article is FASCINATING.
posted by Snarl Furillo at 5:12 PM on October 3, 2019 [1 favorite]

"It's 2019. ATM cards and debit cards are part of basic checking services. Even credit unions offer that much."

My understanding is that the advantage of a public bank is in its (primarily, but not exclusively, commercial) lending and credit products, not in retail deposit products. It's a place to get a small business loan or credit card, not keep your personal checking account.
posted by Snarl Furillo at 5:22 PM on October 3, 2019

It's 2019. ATM cards and debit cards are part of basic checking services.

It's 2019; everyone just uses their phone.*

I'm honestly perplexed why anyone still uses bank of america
I really miss my credit union, but mobile banking is the only way I've been remotely able to get my finances in order, and none of the credit unions available to me have anything resembling the sophistication of a real mobile banking app.

*for some percentage of everyone not including myself - I won't use my phone for store or restaurant transactions, and have a chunk of my finances totally siloed despite the above reliance on mobile banking to keep track of most of it. These facts aren't entirely unrelated.
posted by aspersioncast at 6:18 PM on October 3, 2019 [1 favorite]

Regarding the weed issue, keep your eye on the SAFE Banking Act, which has been creeping slowly forward this summer. (AFAIK this is part of the lobbying job John Boehner is doing now...)
posted by Lyn Never at 8:27 PM on October 3, 2019 [1 favorite]

Does anyone know if it will have online banking - they only said they don't have bill pay. It seems like it would be better for an institution with only one location with conventional hours to be available 24/7 through technology to the average person with a smartphone and/or library access.
posted by Selena777 at 7:56 AM on October 4, 2019 [1 favorite]