Straight Talk On Public Banks

Over the last two years, I have written about California's nascent entry into public banking.  See Would You Bank On Los Angeles?Governor Signs Bill Authorizing Public Banks - What Could Possibly Go Wrong?, and When, If Ever, Will California Charter A Public Bank?  California does not yet have a public bank in which local agencies may deposit taxpayer moneys.  That is likely a good thing given the track record of public banking in the United States.  According to a report issued by the State Treasurer in 2018: 

"All public banks have ceased to exist either by regulatory order, financial failure, or the state or municipality closing the public bank, with the sole exceptions of the Bank of North Dakota and the recently approved American Samoa Bank."

A subsequent study by a San Francisco Office of the Treasurer and Tax Collector task force estimated that the start-up costs for a depository public bank would be $119 million and that it would take more than three decades for the bank to break even.  Still, public banking does have its proponents and the Department of Financial Protection & Innovation has proposed rules that would allow local agencies to apply for a public bank charter.  The comment period on those rules ended last month.

Recently, I was invited by New York Senator James Sanders Jr. to participate in a podcast discussing public banking.  That podcast premieres this afternoon at 2:00 p.m. (Pacific) and can be viewed here.  Senator Sanders chairs the New York Senate Committee on Banks.