Public bank sought in California by citizen activists, cannabis growers
For the last seven years, Shelly Browning and her volunteer army of community activists have tried to pitch a public bank for the city of Santa Rosa.
The task is the political policy equivalent of the Greek myth of Sisyphus, who pushed a rock up a steep hill only to have it roll back as he neared the top. The topic is very wonky. The opponents are very powerful. The legislative and regulatory hurdles are numerous.
Yet, there have been recent breakthroughs. At the local level, a Santa Rosa City Council subcommittee this fall heard a presentation on the topic. In the U.S. Congress, the proposal is included as part of a funding mechanism for a New Green Deal offered by incoming Rep. Alexandria Ocasio-Cortez, D-New York, and other progressive lawmakers.
“I say it’s a vibrant nationwide movement. There is a lot of awareness,” Browning said. “This is not an isolated incident. It’s because the country is looking for new ways of doing business.”
The outlook is even brighter in 2019. State lawmakers in Sacramento are expected to grapple over whether a state-owned bank could help bring the multibillion-dollar cannabis industry into the financial mainstream as the sector is still a largely cash business - even almost a year after legalization for recreational use. State Treasurer John Chiang will release a feasibility study very soon on the proposal along with an analysis from the state Attorney General’s Office on the legal challenges that such a bank could face.
“There is absolutely an eagerness to flesh out these type of solutions,” said Hezekiah Allen, chairman of Emerald Grown, a Humboldt-based cooperative of cannabis growers. Allen has been a leading proponent of a public bank for his sector, where the denial of traditional banking services is a major impediment for growth.
Like many debates, the concept boils down to money and who controls it. Specifically, can a publicly owned bank play a role within a community or a sector where traditional financial institutions are not filling the void?
In the United States, the idea has been around for centuries and tried at the federal and state level. Yet until recently, the only public bank operating in modern times has been the Bank of North Dakota - where it is politically sacrosanct. The bank, which celebrates its centennial next year, was formed to help North Dakota wheat farmers who were charged exorbitant interest rates at the time from banks in Minneapolis and Chicago.
All state funds through taxes and fees are deposited into the bank, but it is not insured by the Federal Deposit Insurance Corp. The bank partners with local banks to support agriculture, commerce and industry within the state and doesn’t view itself as a competitor. It largely doesn’t venture into the retail sector and does not offer ATM cards, debit cards, credit cards or online payment for bills.
Instead, it targets broader efforts to help North Dakota residents, such as recent programs to promote rural mortgages and student-loan consolidation into a lower interest rate.
The results have been impressive. The Bismarck-based bank has $7 billion in assets and reported 14 consecutive years of profits at the end of 2017, turning over $145.3 million in net earnings for taxpayers.
For proponents, the Bank of North Dakota has become the gold standard for how public banks can benefit a community.
“That’s the best model,” said Mark Armstrong, an advocate who co-founded the Public Banking Institute in 2011. “The Republicans in North Dakota are doing a far more effective job with this public bank than many of the liberals in California could dream of.”
The push for a public bank emerged as a result of the Great Recession. Wall Street banks were at the center of the financial crisis in the late 2000s, which was sparked by a home mortgage sector that ran amok until defaults started to rise and the big bets placed on the overall market started crashing down on major banks.
The aftermath spawned the Dodd-Frank financial overhaul law as well as the Occupy Wall Street movement, where Browning started showing up locally to meetings. She owns a sign-language interpreting agency and was incensed in 2009 when she was paid in IOUs by the state of California for some of her contracts, which forced her to borrow from her father to make payroll.
“I did not feel that it was my father’s responsibility to float the state, and I did not want to ever have to ask that of him again,” she said in an email.
Browning along with a core group of supporters have formed the Friends of Public Banking Santa Rosa, lobbying City Council members, educating the public through community forums and networking other with other like-minded groups in California.