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Thu Oct 3, 2019, 01:03 AM

Public Banks Can Be Formed In California As Newsom Signs New Law

Source: LA Times

California cities and counties will be allowed to establish public banks under a controversial bill signed into law Wednesday by Gov. Gavin Newsom, making California only the second U.S. state to allow such institutions.

Public banks are intended to use public funds to let local jurisdictions provide capital at interest rates below those charged by commercial banks. The loans could be used for businesses, affordable housing, infrastructure, and municipal projects, among other things.

Proponents say public banks can pursue those projects and support local communities’ needs while being free of the pressure to obtain higher profits and shareholder returns faced by commercial banks. Support for public banks also has grown since the financial crisis a decade ago and since Wells Fargo & Co. was embroiled in a slew of customer-abuse scandals in recent years.

“Today’s signing sends a strong message that California is putting people before Wall Street profits,” said Assemblyman David Chiu (D-San Francisco), who co-authored the bill (AB 857) with Assemblyman Miguel Santiago (D-Los Angeles). “We finally have the option of reinvesting our public tax dollars in our communities instead of rewarding Wall Street’s bad behavior,” he said. -More...

Read more: https://www.latimes.com/business/story/2019-10-02/public-banks-can-be-formed-under-bill-signed-by-newsom



North Dakota is the only other state with public banks. Critics of the institutions say a government-owned banking system would be expensive, risky and carry a threat of political influence.



Assemblyman David Chiu (D-San Francisco) co-authored of the bill allowing California cities and counties to set up public banks.

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 02:44 AM

1. Sounds like a good start

although it seems to me that the real benefit might be in having public banks take in tax funds and disburse payments to provide government services, without spending more $$$ for Wall Street profits. It doesn't sound as though the initial wave of public banks in CA will be performing such a role, or at least I didn't get that impression from the LA Times article.

I prefer that my state tax dollars not go to make Wall Street richer.


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Response to not fooled (Reply #1)

Thu Oct 3, 2019, 02:48 AM

3. It's all good; took 100 years to get another state public bank.

Wall Street will be just fine.

Bank of North Dakota est. 1919.

https://en.wikipedia.org/wiki/Bank_of_North_Dakota

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 02:48 AM

2. K&R Thanks for posting.

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 03:03 AM

4. It's time to give Wall Street the finger. I love this idea. Wish I lived in CA.

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 06:11 AM

5. Maybe it's just me

I hope I'm just being extremely pessimistic because it sounds great especially after reading that "i worked for capital one" article, but I could see how this could go horribly, horribly wrong.

What if everyone defaults? Or not everyone, what if the normal amount of people who would have defaulted, default? Who will enforce the debt? Will it be the local police? Will laws be passed that punish people for defaulting?

Just think about what could happen with someone like trump in charge.

I hope I'm wrong. I hope it works fantastically. And if so, I hope it spreads over to Michigan. I could use a loan to fix my garage door

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Response to woundedkarma (Reply #5)

Thu Oct 3, 2019, 06:18 AM

6. From the looks of it, the Ca. banks will not be loaning $$$ to the likes of us.

It is for governmental entities.

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 06:45 AM

7. Critics of the institutions

"Critics of the institutions say a government-owned banking system would be expensive, risky and carry a threat of political influence."

Doesn't sound any worse than what we get from the commercial banking system.

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Response to ToxMarz (Reply #7)

Thu Oct 3, 2019, 09:12 AM

8. Except the public is on the hook for all bad loans,

And banks may be run by the the same group of people taking the loans.

While this seems like it could do some good, it also seems like a massive honeypot for corruption.

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Response to hughee99 (Reply #8)

Thu Oct 3, 2019, 12:11 PM

11. Who was on the hook for all the bad loans that caused the last recession

The public had to bail out the too big to fail commercial crooks! And they got rich on BOTH ends!

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Response to ToxMarz (Reply #11)

Thu Oct 3, 2019, 03:33 PM

12. The public had to bail out the banks. Some of it was repaid.

Ultimately, the public wasn’t on the hook for all the bad loans the bank had ever written. These banks are going to operate with public money. The public is on the hook for every single bad loan.

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Response to ToxMarz (Reply #7)

Thu Oct 3, 2019, 11:09 AM

10. Yeah

Like there is no "political influence" in the private banking system. As for "risky", I still remember the 2008 financial meltdown. One advantage of a government owned banking system is it is more likely that laws and regulations will be followed. Private financial institutions tend to look for ways to skirt the law.

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 09:29 AM

9. Good idea, but it has to be highly regulated and monitored with very tight controls in place.

My fear is that unscrupulous characters may try to exploit them both for personal gain and to show how corrupt, inept public institutions can be.

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Response to appalachiablue (Original post)

Thu Oct 3, 2019, 10:20 PM

13. Would these banks be available for marijuana dispensaries to use for fund accounts?

Since the feds won't allow it, they are at an extreme disadvantage.

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