LOS ANGELES (CBSLA) – Would a city-owned public bank address some of Los Angeles’ pressing issues — such as affordable housing, small business growth and financing for municipal projects — while also freeing the city from the influence of private banks who put shareholder interests over those of the public good?
That’s what L.A. City Council President Herb Wesson believes. In July, Wesson issued a challenge to the council to create the nation’s first ever city-owned bank.READ MORE: Free Hollywood Bowl Event For Frontline Workers Marks First Concert At Landmark Venue Since November 2019
The Ad Hoc on Comprehensive Job Creation Plan Committee will begin to debate the issue Wednesday.
The city currently does the majority of its banking with Wells Fargo through roughly 800 different accounts, but the City Council is exploring cutting ties with Wells Fargo following the scandal in which bank employees created more than 3.4 million unauthorized accounts as a way to meet aggressive sales goals set by management.
L.A. settled a lawsuit with Wells Fargo in September 2016 for $185 million.
Wesson’s motion cites the only current publicly-owned bank in the nation, the Bank of North Dakota, as a successful model for L.A. The Bank of North Dakota “was created in 1919 in a populist wave when farmers there were unhappy with decisions being made by major banks heavily influenced by railroads and out-of-state agricultural interests,” Wesson wrote in his motion.
BND, which in 2016 reported 12 straight years of record profits, does not have ATMS or debit and credit cards. It has only one location. Among its services, BND offers low-interest student and school construction loans.
A city-owned bank “may also provide the best financial solution to reducing the cost of the creation and rehabilitation of affordable and workforce housing in the City of Los Angeles, while at the same time providing low cost financial services for city residents and local governments,” Wesson said in his motion.READ MORE: No Injuries In 2 Shootings Reported Saturday Night On 91 Freeway, CHP Is Investigating
Wesson isn’t alone in his thinking. In May, California Lt. Gov. Gavin Newsom on Twitter proposed a state bank that would “build our infrastructure, construct new health care facilities, provide student loans, & build 3.5 million new housing units by 2025.”
Jack Humphreville with LA Watchdog argues that funding for such a bank would be a challenge for the cash-strapped city. He says that the city would need between $125 million and $250 million in equity to support a bank with up to $2 billion in assets.
Along with financing for local entrepreneurs and affordable housing, Wesson also argues that such a bank will allow the marijuana dispensary operators a place to access banking services. Due to the current discrepancy between federal and state laws on marijuana, many banks are wary to provide financial services to cannabis-related businesses.
“We cannot bury our heads in the sand on the issue of recreational and medical cannabis legalization. Instead we must strive to reasonably regulate the emerging industry while creating opportunities for Angelenos,” Wesson said back in July.
Cannabis, which has been legal for medical purposes for more than two decades in California, will become legal for recreational use in 2018. Legalized cannabis could bring the city up to $100 million in new tax revenues per year, and the City Council is currently working on multiple motions and ordinances to create a legalized industry in the city that can be taxed and regulated.
The Responsible Banking Ordinance was created in 2012 and requires banks doing business with the city to disclose information on loans and foreclosure activity.MORE NEWS: Arson Suspected In Pacific Palisades Brush Fire That Continues To Burn; Mandatory Evacuations Ordered
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