CA and NY respond to crisis with public bank legislation

Jay Owen Reforming Global Finance, Community Development Solutions, Latest Headlines

California introduces bold new bill for a state-owned depository bank

The Covid 19 economic shutdown has left the states with serious funding problems. Costs are up and revenues are down. Unfortunately, Congress has done little to help. The nearly $3T CARES Act has gone mainly to bail out Corporate America and the stock market. Only 5% of the funds were allocated to state and local governments, and they came with strict limitations on what they could be used for. The Federal Reserve hasn’t helped much either. Its Municipal Liquidity Facility will buy state and municipal bonds only at the market rate plus a penalty, so few states are likely to use it.

States desperately need new sources of funding, and one option is to form their own banks. The state-owned bank could then borrow from the Fed’s discount window virtually interest free, and it could multiply its available loan funds by leveraging its capital. Low interest loans could then be directed into the local economy where needed.

Two California legislators took that bold step last week, when Assemblymembers Miguel Santiago and David Chiu, the legislative team behind last year’s successful AB 857, introduced a repurposed AB 310 to convert California’s Infrastructure Bank (I-Bank) into a depository public bank. The California Public Banking Alliance, pictured above, is working to rally support through the broad network that endorsed AB 857. For more information and how you can help, see here.

Read the text of AB 310 here.

Related press:
California bill to establish nation’s second public bank applauded as ‘historic challenge to Wall Street domination’ | Jake Johnson, CommonDreams

Bill to create state public bank could jumpstart SF efforts | Ida Mojadad, San Francisco Examiner

Capitol Alert: Bill calls for a state public bank | Andrew Sheeler, Sacramento Bee

State bill would establish California public bank for coronavirus relief | Laura Waxmann, San Francisco Business Times