Recognizing the economic hurt that the coronavirus pandemic has inflicted on low-income San Francisco residents, members of the Board of Supervisors are pushing to create a so-called “public bank” — a city-run financial institution that would provide low-interest loans to small businesses and to public-benefit projects, like affordable housing.
“Our banking institutions play a key role in society in exacerbating … inequities and centering profit over the well-being of our communities,” said Supervisor Dean Preston, the legislation’s author. “As we look forward and chart a path to economic recovery, public banking is a powerful tool to regenerate our economy based on our shared values.”
Broadly defined, a public bank is a financial institution run by a city or state government that administers low-interest loans. And the bank would use any profits on future loans or return the money to the city’s general fund, as it would not be beholden to Wall Street or private investors.
The public bank loans could be granted to small businesses, for example, or used to fund large projects aimed at the “public good,” such as affordable housing or green infrastructure, proponents say.
Just how a public bank would be structured, where it would initially receive capital to provide loans, and how low interest rates would be all remain big questions. Preston’s legislation merely establishes a working group composed of banking experts, community members, and city officials tasked with setting the course for the bank’s creation.
Within one year, the working group would create a business plan for San Francisco to create a lending entity called a “municipal financial corporation.” Once that is approved by the Board of Supervisors, the working group would then create a plan to have that financial corporation transform into a fully-fledged public bank in five years.
The bank would be licensed through a process established by AB 857, a state law legalizing public banks in California, which was signed by Gov. Gavin Newsom in October, 2019.
During a Tuesday news conference, Jackie Fielder, the cofounder of the San Francisco Public Bank Coalition, said that the intention is to create a bank that works similarly to the Bank of North Dakota, the country’s only public bank. Established in 1919, the bank administers loans through small banks and credit unions, providing low-interest student loans, and loans for agriculture and infrastructure.
“That’s what we want here in San Francisco,” Fielder said.
The push to create a public bank in San Francisco appears to have enough votes to pass. In addition to Preston, five others — Supervisors Connie Chan, Matt Haney, Myrna Melgar, Hillary Ronen, and Board President Shamann Walton — spoke in favor of the legislation on Tuesday.
Walton said he was committed to making public banking a reality in the city.
“We need a city-run financial institution where our assets are invested in things that benefit our communities in San Francisco,” he said. “We put a lot of money in banks that banks benefit from, and we need to make sure that the investments we make as a city — and the resources and assets that we have as a city — go back to the community.”