San Jose’s elected leaders are debating whether to endorse a state bill that would give Californians an alternative to mega-banks like Wells Fargo and Citibank—companies increasingly under scrutiny over ethical lapses, wage theft and dubious investments.
AB 857, introduced by assemblymen Miguel Santiago (D-Los Angeles) and David Chiu (D-San Francisco) would enable local governments to charter their own public banks. With the bill currently wending its way through the state Legislature, the San Jose City Council on Tuesday will decide whether to grant its official endorsement of the measure, which could lay the foundation for a first-of-its-kind public bank in Silicon Valley.
Unlike their shareholder-run counterparts in the private sector, public banks would be wholly owned by government entities such as a city, county or joint-powers authority.
The publicly owned alternatives would offer banking services to unbanked or underbanked populations and partner with other local financial institutions, such as credit unions and smaller community banks. They would also save taxpayers money by dispensing with the costly management fees charged by private institutions.
According to Chiu and Santiago, public bank funds—just like all banks in the United States—would be insured by the Federal Deposit Insurance Corporation (FDIC).
Council members Magdalena Carrasco, Sergio Jimenez and Raul Peralez, who teamed up earlier this year in a push for the public banking option, said the idea has a long history in the U.S. The Bank of North Dakota—widely considered a model for the public option—was established exactly a century ago in response to a farmers revolt against out-of-state banks foreclosing on their properties.
More recently, Bank2 in Oklahoma kicked off in 2002, around the same time as the Bank of American Samoa. Throughout the globe, about 14 countries operate some form of national, state or regional public banks.
“The city should be proactive in the legislative process and strongly consider how this bill could benefit the 10th largest city in America,” Carrasco, Jimenez and Peralez wrote in a shared in a shared memo supporting AB 857.
AB 857 is endorsed by about 100 organizations across the state, according to the California Public Banking Alliance, one of the bill’s main backers. Should the statewide bill pass, San Jose expects to launch an exploratory committee that would assess the feasibility of establishing a public bank to manage its billions of dollars in assets.
More from the San Jose City Council agenda for May 21, 2019:
- The city and Allied Waste have agreed to increase the maximum commercial solid waste rates by 1.85 percent, according to a contract up for consideration Tuesday.
- The city will consider a measure to rename the marijuana business tax the cannabis business tax. The measure would replace all mentions of the term “marijuana” and replace them with “cannabis,” the scientific name of the plant from which the cannabis drug is derived. The measure would also add manufacturing, distribution and laboratory testing to the categories of regulated cannabis businesses in the city. Currently, those categories of regulated cannabis are taxed by the city at 10 percent, but the council will discuss whether to slash that rate to somewhere between 1 and 4 percent. The new regulated streams of cannabis, according to a city memo, can bring up to an estimated $13.5 million for the renamed cannabis business tax.
WHAT: City Council meets
WHEN: 1:30pm Tuesday
WHERE: City Hall, 200 E. Santa Clara St., San Jose
INFO: City Clerk, 408.535.1260