Tom Butt
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  Public Bank East Bay Viability Study
March 11, 2022

Several years ago the Richmond City Council voted to join Oakland and other cities in paying for a feasibility study to charter a public bank. From the October 3, 2017 Minutes:

The matter to discuss and consider donating funds to the City of Oakland to conduct a study on the feasibility of a public bank, was presented by Councilmember Martinez. Councilmember Martinez recommended that the Council considered making a $5,000 donation. The following speakers gave comments: Don Gosney, Bea Roberson, Kathy Robinson, Marilyn Langlois, Craig Brandt, and Doug Ricketson. Discussion ensued. On motion of Councilmember Martinez, seconded by Vice Mayor Beckles, approved the City of Richmond to make a $5,000 investment into the process of said feasibility study, by the following vote: Ayes: Councilmembers Choi, Martinez, Recinos, Willis, and Vice Mayor Beckles. Noes: Mayor Butt. Absent: None. Abstentions: Councilmember Myrick.

Today, that study has been completed by The Friends of the Public Bank East Bay and shared here.

As required by the California Public Banking Act, each founding agency (Richmond is one) must approve the Viability Study before Friends of the Public Bank East Bay can move on to the Bank’s Business Plan. It comes before the Richmond City Council on April 5.

If you have any questions or comments about it, please address them to Susan at Friends of the Public Bank East Bay. 510-866-6743.

Most of us have a visceral dislike of banks. They are somewhere in the same constellation as utility companies, lawyers, car dealers, landlords, cell phone service providers and purveyors of warranties for cars. They are risk averse (when we are convinced how little risk there is in our particular need to do business with them), favor the big guys over the small guys, charge excessive interest, demand unfair terms, have way to much paperwork and foreclose on people who can’t make their mortgage payments. And, it was banks profiting from subprime loans that caused the Great Recession. It’s hard to love them.

A public bank purports to fix all that. The Viability Study extolls all those things that could make us love a (public) bank, but tends to minimize the downside risks. The Viability Study is more an advocacy piece than an objective study. The author is an East Coast activist and author of the book, “Checking the Banks, The Nuts and Bolts of Banking, for People Who Want to Fix It,” not exactly a neutral and objective expert.

On the other hand, there are successful models of public sector entrepreneurship, such as the CCA model of electrical generation that now dominates much of California, solving a problem the investor-owned utilities could not or would not confront – selling cleaner energy at a lower price. I currently chair the board of the MCE, California’s first CCA that now has a credit rating higher than PG&E, serves half a million accounts in four counties at a cost of half a billion dollars.

The banking industry obviously has not embraced the idea. See the editorial below:

Opinion: Risky California public bank plan would duplicate services


PUBLISHED: April 28, 2021 at 5:15 a.m. | UPDATED: April 28, 2021 at 5:29 a.m.

Public Bank East Bay Viability Study
Steve Andrews is president and CEO of the Western Bankers Association. 

This week, the Assembly Banking and Finance Committee will consider the state’s creating an unnecessary and unwieldy government-run banking system that carries enormous financial risk to Californians.

Proponents of Assembly Bill 1177, the California Public Banking Option Act, claim this measure is needed to address challenges faced by the state’s unbanked or “underbanked” population. There could be no stronger supporters of the goal of giving all Californians access to safe and affordable banking products than the members of our association.

However, proponents of AB 1177 are trying to sway public opinion with misleading data that claim the portion of some groups of Californians lacking access to banking services surpasses 40%. This is a completely inexplicable assertion in the face of credible data from the FDIC and Federal Reserve that show just over 5% of American households do not have a bank account and roughly 6% are unbanked. We strongly caution against creating sweeping new public policy based on highly questionable statistics contained in the legislation.

Californians do not lack access to banking services. They are served by more than 150 banks and nearly 300 credit unions, the overwhelmingly majority of which offer low or no-cost banking options specifically designed to serve the unbanked. Additionally, there is a network of more than 100 certified community depository institutions, supported by the U.S. Treasury and commercial banks, that are structured specifically to serve low-income communities.

If the true concern of policymakers is to discourage the use of alternative, high-cost non-traditional financial companies such as check-cashing services and payday lenders, they should focus on narrowly tailored solutions designed specifically to address this issue. And they should partner with financial institutions to educate these communities on the options already available.

One such option banks are proud to be a part of is the BankOn program, established in 2015 and run by the non-profit Cities for Financial Empowerment Fund. The program specifically works to ensure everyone has access to a safe, affordable transaction account.

BankOn-certified accounts meet robust national account standards, developed by consumer advocates and based on the FDIC’s Safe Account pilot conducted in 2011. These accounts must contain low or no monthly fees, no overdraft fees, robust transaction capabilities, such as a debit or prepaid card, online bill pay and unrestricted access to free customer service.

All major banks and credit unions with a California presence participate in the BankOn program, which offers a geographically diverse network of free ATMs. Building a strong and collaborative California BankOn coalition would be of significant consequence. We encourage legislators to help promote bank and consumer adoption of these accounts. This would be a much-more-effective, less-expensive and less-risky option than efforts to stand up a public-banking network.

The magnitude of the costs and risks in this proposed endeavor cannot be ignored. AB 1177 would put taxpayers on the hook for what would be exceedingly high start-up and operational costs.

California’s banking community remains unwaveringly committed to serving the needs of our communities and helping to support economic growth and vitality. We remain opposed to the concept of public banks. We hope that community leaders and elected officials will take note of the risks associated with establishing a public bank before opting to explore this unnecessary public option.