The Santa Clara County Board of Supervisors on Tuesday unanimously voted to explore the legality of creating a county-operated public bank in support of a California bill that, if passed, will allow local governments to form their own banks.
Advocates say that public banks would help strengthen local institutions, keep public money within the local economy and finance public projects.
“I think we have an opportunity for being able to use public dollars better and also comport ourselves more as a public benefit corporation,” said Supervisor Cindy Chavez, who added that frustrating challenges with banks such as Wells Fargo and growing national attention on the prospect of a public bank system both contribute to her support.
“Public banks not only save taxpayer money, but they can also make money,” added Santa Clara resident Judy Young. “Bankers know their customers as opposed to big banks that are so far removed by their customers they don’t really know what the risk is. With a local public bank, you know what the risk is with a customer. It would also make sound investments in local community projects and keep money circulating in the local economy.”
The proposed bill — Assembly Bill 857 — would allow cities, counties and municipalities within the state to set up their own banks for the first time in history, giving local government the control to deposit and regulate public funds. The landmark bill was authored by Assemblymember Miguel Santiago (D-Los Angeles) and Assemblymember David Chiu (D-San Francisco).
Other cities in the Bay Area have also signed onto the idea of a public bank, including San Jose after its City Council approved a memo in March that abandoned a proposed contract with Chase bank. Chase won a bid for the city’s banking contract, but the council members decided against partnering with the institution after it was accused of wage theft violations.
“While the State deliberates over the proposed AB 857 during this legislative year, the City should be proactive in the legislative process and strongly consider how this bill could benefit the 10th largest city in America,” said council members Raul Peralez, Magdalena Carrasco and Sergio Jimenez in a memo.
While all the county supervisors supported the idea Tuesday, some were cautious about the costs of forming a public bank, especially among the growing list of other infrastructure projects the county has in the pipeline.
“There’s nothing guaranteed about banking,” said Supervisor Mike Wasserman, who added that the creation of a public bank will not necessarily “create more money for the county.”
While he agrees that a public bank will provide an alternative means of assistance to the most needy, citing how loan sharks often rack up interest rates for the working poor, Wasserman said there’s only so much money that can be invested for new endeavors, as the county continues to approve funding for projects such as a new jail, the Public Safety and Justice Center and the remaining phases of the Civic Center Master Plan.
“If we put money into a venture such as this, then we don’t have those dollars to use elsewhere,” added Wasserman. “I ask to keep that in mind as we move forward. There’s a risk, if we put money there we don’t have money over here, so we need to have our priorities right.”