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  • Public Banks – Yes or No?

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    July 26, 2019

    July 22, 2019Valerie NeraFinance

    A bill establishing a process for local agencies to create a public bank continues to move through the Legislature.  Several amendments have been taken to more closely align private bank regulatory requirements to public banks.  However, a few questions remain unanswered: (1) What need is not being met by private banks?  And (2) How will the author/sponsor ensure that the public banks will be protected from political influence in their investments?

    The author of AB 857, Assembly Member David Chiu, maintains that a public bank could invest in more community-minded projects like affordable housing, which more closely aligns with local sentiment rather than investments in fossil fuels.  One of the main duties of a bank is to grow investments for its shareholders, or in the case of a public bank, the taxpayer.  Affordable housing projects or low-cost small business or startup loans may not turn a profit for many years or may default.  Private bank shareholders absorb the costs of defaulting loans, whereas, taxpayers will be responsible for public bank losses.  Read More