LA Voters to Consider Creating Nation’s First Municipal Public Bank
A Los Angeles ballot measure could put the city one step closer to creating a public bank, which Phoenix Goodman of Public Bank LA says could help the city “transform banking from a source of evil” to a force that fights climate change and inequality
DHARNA NOOR: Welcome to The Real News Network, I’m Dharna Noor.
A charter amendment that will go before Los Angeles voters on November 6 could put LA on track to create the nation’s first municipal public bank. If created, the bank would put public dollars, that’s things like tax dollars and electric bills, into the hands of public officials. Proponents of the historic measure say that unlike for profit banks, which finance things like weapons manufacturers and fossil fuel extraction, the public bank would make loans to LA for things like public education and transit and invest in solutions to issues like homelessness and climate change.
Now joining me to talk about this ballot initiative is Phoenix Goodman. He’s a co-founder of Public Bank LA, an organization which evolved from Divest LA, you may know them for successfully lobbying LA City Hall last year to support divesting its accounts from Wells Fargo. He’s also a co-founder of California Public Banking Alliance, a coalition of municipal public bank organizations in California. Thanks so much for joining us today.
PHOENIX GOODMAN: My pleasure, thank you.
DHARNA NOOR: So, let’s start with the very basics. What exactly is a public bank? I mean, obviously it’s a bank which is publicly owned, in this case by the municipality of Los Angeles. But what does that concretely change about it, and why is it better than a privately owned bank like Wells Fargo, which you pushed LA to stop doing business with?
PHOENIX GOODMAN: Well, Wells Fargo and similar banks on Wall Street have one impetus, and that’s to maximize profits on a quarterly basis. And so, they’re not bound by any ethical guidelines in how those dollars are spent and what they do with their investments. What we want to create is something more than just a public sector bank, but really a people’s bank that takes us this immense power of banking, which is to create money and decide where the flow of funds goes into our economy and put that into publicly accountable hands to democratize the economy itself.
DHARNA NOOR: Yeah. Here in Baltimore we’re intimately familiar with some of the dangers of big banks like Wells Fargo operating with near impunity. Baltimore is the birthplace of the subprime mortgage crisis. In 2012, they agreed to pay a one hundred seventy five million dollar settlement because they steered mostly Black people into subprime loans. But if this amendment passes, if Charter Amendment B passes, what exactly would it do? What would the path to the creation of a public bank look like?
PHOENIX GOODMAN: That’s a good question. The Charter Amendment B is actually pretty simple and a really low hanging fruit towards a much longer process for the ultimate success. All it does is it removes a single barrier in the amendment to allow this discussion to begin. Right now, the city cannot engage in commercial enterprises, as the charter currently states, and it would simply amend that to create an exception for a public bank. Once that’s created or passed, assuming it passes, there’s going to be a whole slew of steps ahead; creating a business plan, creating a new type of charter at the state level and other details like that that will have to unfold over the next few years until the bank is actually created. But Charter Amendment B is the very first step in beginning that process.
DHARNA NOOR: And who is supporting this initiative? Who would benefit from the creation of this bank, and whose support do you have?
PHOENIX GOODMAN: Well, we have the support of City Council President Herb Wesson, who’s champion of this. A number of unions, many, many activist organizations across Los Angeles, Democratic clubs. So far, the opposition, as far as official opposition, has really only come from a few business organizations. But we even find that somewhat ironic, because actually this would help the local community. People’s concern about it is usually coming from a dogmatic assumption that anything public sector is automatically going to be incompetent and a squander of taxpayer dollars. But in reality, the status quo is that the benefit of handling our accounts goes to private Wall Street firms, which intrinsically by definition don’t have our interests in mind. So, we can only make something better, because at least this way, we have something that we can hold publicly accountable.
DHARNA NOOR: One of your opponents is the LA Times editorial board. They came out squarely against this Charter Amendment last month. They said this is “one of the most ill-conceived, half-baked ballot measures to come out of City Hall in years.” They went on, “there has been no formal study, no plan, nothing of substance to determine whether a Bank of Los Angeles is even feasible, much less a good idea.” They go on to say it’s expensive because it would require a big up front investment and changes to state and federal law. What’s your response to all of this?
PHOENIX GOODMAN: Yeah, I mean those types of concerns are going to be par course for a movement like this. The fact is, is what we’re doing is not some pie in the sky idealism. It’s based on empirical evidence. The state of North Dakota already has a public bank and has done very well for it. It’s well run, it has record profits for 14 years in a row, has a better credit rating than many Wall Street firms and actually deposits a portion of their profits into the state general fund. Germany has a public banking system that’s similar to what we’re trying to recreate, called Sparkasse. It’s a network of regional public banks. They’re well run and have similar benefits to their locations as North Dakota’s bank does for it.
So really, we would be replicating a model that’s already proven to work. What their rebuttals are is that once we allow this to happen, then you’re gonna hand the keys over to people that don’t know what they’re doing. But the reality of the situation is, is even if we wanted the banks to be created as of day one, we wouldn’t be able to because the process would necessarily require a business plan and feasibility study, so that by the time this bank ever got up and running, it would quantitatively be figured out exactly how this investment portfolio would be run and what the checks and balances are between competent money managers and social oversight from the members of the community as well.
DHARNA NOOR: Yeah, I’d love to talk more about some of those measures. The Times editorial board also said that a public bank runs the risk of political interference, because elected officials might put pressure on the bank to make risky loans and investments in favor of individuals, causes and communities. I guess one obvious response to this, of course, is that it’s not like private banks are not making political decisions with their investments. But how would you sort of ease some of these concerns, some of these fears?
PHOENIX GOODMAN: Yeah. If it does not pass, and if we don’t go the direction of attempting to create a public bank, then we are guaranteed status quo of these criminals running our economy. And that’s what it is, it is criminality. The callous acts of fraud, corruption, unethical investments, predatory lending is nothing less than criminal activity. So, to assume that that status quo is the best that we could ever do is just a ridiculous cynicism. So, the alternative is creating an option that is publicly accountable. And it’s very obvious to everybody on all sides that, assuming this bank begins to come into fruition, that every step along the way is going to be combed through with a fine tooth comb to make sure that every detail of this bank is constructed in a way to act not only ethically and within socially responsible guidelines, but to also hire expert bankers to underwrite loans responsibly.
Nobody wants to throw around money irresponsibly. But I think it’s very cynical to assume that you either have to maximize profits or have something that’s not going to work. We’re challenging that narrative and saying we can have an institution that provides profitability for the city, while still being socially and environmentally responsible. And I think anybody that realizes that you can have the two of those will realize that this is the only way to achieve that.
DHARNA NOOR: And talk about some of the investments that this bank could make if this amendment does pass and if it is put into practice.
PHOENIX GOODMAN: Right. So, by having a public sector bank, you’re able to tie policy needs towards this economic power that will determine which ways these investments go. So, for example, really good empirical evidence of what we have is in Germany. Sparkasse banks are between 40 and 45 percent of all German banks which are public. Now, some people are aware of the fact that Germany is, I believe per capital, the number one green energy infrastructure country in the world. And Germany by no means is a sunny country, but they had a green energy boom revolution. Why? Well, 75 percent of all German solar installations were financed by these 40 percent of public banks.
And so, by identifying specific policy needs and then creating a fiscal network or leverage through good financing from these banks to actually make these things happen, we could replicate that here with green energy. Same with affordable housing. Affordable housing is hard to come by, because when you leave it only up to the invisible hand, it’s simply more profitable to create luxury housing. And so, they have this natural tendency towards gentrification. So, I would say only, but a major contributor to what could reduce housing prices is by creating competitive financing for affordable housing to make it more economically viable. And that could also be included for any general infrastructure needs that the city has.
And it’s one of those rare cases where we can have our cake and eat it too, because unlike other social programs which require increased taxes and spending in order to get funds, because this would be a public sector bank that would produce profits, all the interest that we currently pay to Wells Fargo – which by the way, in Los Angeles, it’s 1.1 billion dollars a year to the various Wall Street firms, including Wells Fargo, that we pay for infrastructure or on interest – that would be recaptured by the public bank. And instead of going to their quarterly profits, which end up getting either sent to offshore tax havens or reinvested it into weapons and private prisons and all the other things that they invest in, or their bonuses that are unearned, that would be recaptured by the city, and then can be used to reinvest.
So, you actually have something that can save the city money, and if we recreate what happens in North Dakota, use the profits from the bank to actually deposit money into the general fund, thereby creating another revenue stream while at the same time investing in the infrastructure.
DHARNA NOOR: And I guess my last question is, what impact could this ballot measure have on others throughout the country who are pushing for a municipal or state-wide public banks to be created?
PHOENIX GOODMAN: I think that’s actually one of the most important questions, to be honest, because I’ll be quite honest with you, really this movement is a lot bigger than Los Angeles. My colleagues and I came from divestment in Los Angeles, were involved in Los Angeles politics, and we believe wholeheartedly that public banking is actually the big elephant in the room. It’s the solution that people in 2008, and then in 2011 when Occupy emerged, it’s the solution, we think, that people viscerally craved. But there just wasn’t a narrative for it yet at that time, so it still wasn’t right.
Sure, jail the bankers that that are guilty of crimes. Sure, break the banks up, regulate them. But all that still is playing within a specific paradigm, right? What we want to do is create a new paradigm from the bottom up and transform banking from a force of, in many cases, what is evil, and which has created, unfortunately, a lot of cynicism among people that the banking system is evil and that’s just how it is. We want to say no, that’s not just how it is. This is the solution. So, to answer your question, what we want to do is inspire cities across the entire United States, states across the entire United States, to do what we’re doing here.
Because the vision is, is every major city in the United States develops their own public bank. Not only do you move trillions of dollars eventually from Wall Street into the various main street, we transform banking from unethical to ethical. And you also transform it from these big behemoths in Manhattan to local determination and local self-reliance economically. So, we believe that this is actually the paradigm shift. And we would even make an official call to anybody watching this in other cities, start a public bank in your city and let’s get the domino effect going.
DHARNA NOOR: Phoenix, are there any projections about whether this is going to pass on November 6? And in your organizing to spread awareness, what kinds of challenges have you guys faced?
PHOENIX GOODMAN: So, the main challenge that we found is that this has been a relatively unknown solution. And so, we have had to face, really, the main challenge of this being an educational campaign. What we have found though, for the most part, is that when we bring this up to people, usually what happens almost every time is they first say, “Oh I’ve never heard of that.” Then when we explained the tenets of it, almost always people end up saying, “Wow that actually makes a lot of sense.” So, the main hurdle to overcome is transforming this movement from something that’s wonky and French to something that’s very mainstream.
And we believe that, frankly, no matter what happens in this election, we won, and I’ll be honest about that. We are putting everything in our power to win this. It’s going to be a huge boon to the to the public banking movement if and when we win. But you know what? No matter what happens, today, significantly more people have heard about public banking than one year ago. And we wanted to take the same trajectory as many other progressive policies took. For example, Fight for 15 or single payer health care, which hasn’t passed nationally, but compared to 10 years ago, that was considered French. Gay marriage, right?
So, this is the trajectory of movements. They always start off with a visionary minority. And with relentless will, you cross a critical threshold. And we believe that at the rate we’re going, literally no matter what happens in November, within the next few years if not sooner, we’re going to reach a critical threshold and we’re going to see people demanding public banks across the country. And then, the politicians won’t be able to stop that that wave. So, no matter what, we’re on our way to victory.
DHARNA NOOR: All right. Well, as we see what happens leading up to November 6 and on November 6, we’d love to follow up with you again. So, thanks so much for coming on today.
PHOENIX GOODMAN: Please, thank you.
DHARNA NOOR: And thank you for joining us on The Real News Network.