Will Public Banking Take Root in the Golden State?
Signed in October 2019, the California Public Banking Act paves the way for state-owned and operated banks — a concept that only exists in the continental United States in North Dakota. In a nutshell, the act allows California cities and counties to create public banks that could take deposits and provide local agencies access to low-interest loans for projects ranging from infrastructure to affordable housing.
According to Next City, state and local governments across the country currently hold $502 billion in bank deposits and $4.3 trillion in state and local public pensions, the vast majority of that held in private banks. In California, more of that money would theoretically stay local.
As other states watch California and take their own tentative steps toward public banking, what might this trend mean for larger, private banks? Does this represent real competition? Is it a call to action for big banks to up their game in the communities they serve? Or is it an opportunity for greater public-private partnerships in the banking space?