Why We Need The LA Public Bank

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1. Save money

By depositing Los Aneles public tax dollars into a publicly owned and accountable financial institution, Angelenos will keep our money in our city, creating credit from our own revenue, instead of giving that power to Wall Street to finance petroleum pipelines and production, armaments and private prisons, among other socially and environmentally harmful projects—projects chosen by the banking industry, not public representatives. Nearly 50% of the cost of all public infrastructure projects currently goes towards paying bank interest and fees. If we fund public projects through a Los Angeles public bank, we can dramatically reduce the cost of improving infrastructure, increasing our power to invest in our own communities. In addition, banking fees and interest payments servicing public bank loans could be reinvested into our communities, instead of being siphoned out by Wall Street banks.

The Bank of North Dakota is currently the nation’s only state-owned and operated bank. The Los Angeles Public Bank, like the Bank of North Dakota (BND), will be carefully regulated and prohibited from unsafe and unsound banking practices.The BND shows a nearly 17% return on investment—in some years more thanGoldman Sachs—with a better credit rating than JPMorgan Chase. The state of North Dakota thrived during the economic crash of 2008 because the BND does not engage in high-risk financial schemes as do the large private banks. The BND reduces the cost of student debt to both state residents and students attending higher-education institutions in the state. During the COVID-19 pandemic, North Dakota disbursed the most PPP loans per capita of any state, through partnerships with local financial institutions.

2. Community Development

The Los Angeles Public Bank will focus on the long-term prosperity of LA communities by funding local economic development initiatives including: affordable and supportive housing, green energy infrastructure and conservation measures, co-ops, and other critical community improvements. By partnering with local financial institutions, the Los Angeles Public Bank will be guaranteeing their loans for locally-directed economic development, public works financing and jobs creation. Small and medium-sized businesses remain the core economic driver forCalifornia. Local public banks can serve as sole originators, or convene loan participations, driving small business lending through a partnership relationship with community banks, credit unions, and community development financial institutions (CDFIs). Money spent at small businesses stays in the local economy and builds wealth locally. Public banks will be able to fund a variety of local projects:

• Affordable and supportive housing and neighborhood stabilization efforts by extending credit lines through the public bank’s loan portfolio. In partnership with local lenders, the Los Angeles Public Bank can bring down the cost of financing housing developments because they won’t be bound by a need to maximize profit margins.

• Working with local financial institutions, the Los Angeles Public Bank will provide access to capital assisting their development and increasing their ability to scale up their operations.

• Transition towards decarbonization and renewable energy. The German Sparkassen/KfW public banking networks have funded over 70% of the country’s investment in renewable energy infrastructure. Renewables are nowGermany’s largest source of energy, with one-third of the nation’s electricity derived from wind and solar.

• Enterprises that alleviate wealth inequality by making capital available to those that corporate banks exclude: Black and Brown households and businesses, women-owned businesses, single-parent households, the LGBTQ community, worker cooperatives and non-traditional forms of home ownership.

• Low-interest loans, or interest-free loans, for students to invest in education and stimulate the economy.

3. Ethical Allocation of Money

The municipal public banking movement advocates for banks to be chartered with socially and environmentally responsible mandates. Each bank’s Board ofDirectors will be held to an ethos of transparency and anti-corruption to ensure the bank operates under sustainable and ethical guidelines. The Los Angeles Public Bank's lending activities would be subject to strict mandates which will require the Board and staff to adhere to the founding principles and fulfillment of its public policy goals.

4. Local Self-Determination

Cities often pay large sums to corporate banks for their services. The City of Los Angeles annually pays $3.14 billion in debt servicing (the cost to borrow money). That money goes to Wall Street banks which often invest it in distant places and harmful initiatives such as fossil fuel production. The Los Angeles municipal bank enables city residents to recapture public dollars by keeping the money in our communities and having a voice in deciding which projects are financed. A chartered public bank maximizes public good within the community rather than maximizing profits for a small group of investors. Public bank revenue and profits are returned to the public, expanding lending capacity for the benefit of the local economy.

5. Create a Stronger, More Resilient Los Angeles

California’s local governments face increased needs and revenue shortfalls exacerbated by the COVID-19 pandemic. With the federal government in deadlock, local governments are being forced to cut critical services such as schools and food programs, and spend far more on public health than could have been anticipated before 2020. Limitations in these services disproportionately harm communities of color and poor communities. Public banks will not only provide California’s municipal governments (city, county, water district, transportation district, JPA, and more) with inexpensive depository services and cash management, they will also supply revenue to supplement government spending, freeing up money for crucial services.