Trinity Tran is a powerful speaker. Addressing a rally in downtown Los Angeles for New York congressional nominee Alexandria Ocasio-Cortez, the 33-year-old activist and organizer thundered, “We are witnessing the emergence of a solution, from profit and greed to collective prosperity. We can empower our community from the ground up. It’s time to take our power back.”
Tran’s organization, Public Bank LA, is leading the revival of an idea that had largely been discarded until the financial crisis. In November, Los Angeles voters will have the opportunity to approve a public bank for the city. If the measure passes, it would become the first government-owned bank developed in the United States since 1919.
The term “public bank” may confuse some into thinking that Los Angeles is about to create a bunch of branch offices where residents can open a free checking account. The idea is much more ambitious. Public bank enthusiasts want to finance local improvements in housing, infrastructure, and community development by employing the money citizens already pay to state and local
governments for services. To them, it’s about democratizing the financial system.
The public has yet to be brought in on this idea, until now at least. The Los Angeles vote represents the first popular referendum on public banking since the financial crisis brought the public bank idea back into the conversation. For the vote to go their way, activists will have to demystify a technical financial concept, and answer charges from critics that a city-owned bank will prove too risky and too costly for taxpayers.
The activists say they’re ready for the challenge. “Until now, activists have been fighting in the ivory towers of legislatures, and off the radar of the populace, even though it’s in their best interest,” said Phoenix Goodman, an organizer with Public Bank LA. “We have the opportunity to bring this down to the grassroots, where it belongs.”
If you live in a city, anytime you buy something that includes sales tax, pay a parking ticket, swipe your transit card or renew a business license, money goes to the city treasury. It doesn’t immediately fly back out into the paycheck of a police officer or schoolteacher. All state and municipal governments have cash reserves they hang onto. The numbers are significant; Los Angeles has a current portfolio of close to $10 billion.
Cities and states typically store this short-term cash in bank accounts or plain-vanilla investments. Big banks like Wells Fargo or JPMorgan Chase use the funds to generate profits, through loans or trades, or whatever else they can conjure. They, for example, fund private prisons that house immigrant families. They fund pipelines that carry fossil fuels and are displacing Indigenous Americans from their land. And big banks continue to act badly with relative impunity ― wrist-slap fines ultimately paid by shareholders, and no executive seeing the inside of a jail cell.
Divestment activists have demanded that cities abandon big banks, with some success. In Los Angeles, activists won a separation from Wells Fargo, holder of $101 million in city bank deposits. But they soon discovered that the alternative to Wells Fargo is just another Wall Street giant. Community banks and credit unions lack capacity and often face legal hurdles and onerous collateral requirements to handle public funds.
“We knew divestment from one big bank to another predatory bank was unsustainable,” said Tran, who led the divestment movement in Los Angeles. Soon after, Tran co-founded Public Bank LA, which demanded a city-owned institution to keep government revenues out of Wall Street’s hands. A public bank could use those dollars as a deposit base, she argued, funding loans within the community for local public works projects, small businesses, or affordable housing.
These needs are critically unmet at the local level. Banks are reluctant to finance projects with a perceived risk, like affordable housing, and private investors don’t see the return on investment in replacing water pipes. If a city or state wants to fund something big, they usually turn to either the municipal bond market ― a $3.8-trillion financial industry giant that adds significant lifetime interest costs, or public-private partnerships with investors who have a profit motive at heart.
Source : https://www.huffingtonpost.com/entry/public-bank-los-angeles_us_5b6bef33e4b0ae32af954495777