By Oscar Perry Abello for NextCity | JUNE 27, 2023

From Los Angeles to the East Bay, major public banking plans are emerging from California cities.


Prince Osemwengie has been looking into every tool in the toolbox to help stem the tide of local businesses being displaced due to rising rents and rising property values in South Los Angeles: Technical assistance and legal aid for small business owners, commercial rent subsidies, tax credits for small business oriented economic development, community ownership of commercial real estate, and all the above.

But with the financial system so tilted against local businesses, especially Black- and Brown-owned businesses, he believes the time has come for a more drastic solution: L.A.’s first city-owned bank. And with a recent city council vote, that solution is one step closer.

Osemwengie is a policy associate at Inclusive Action for the City, a nonprofit that provides support to street vendors and other micro-entrepreneurs across South L.A. In interviews with small businesses and developers, he’s heard that these businesses would love to acquire the commercial properties they’ve been renting in the commercial corridors or hubs they’ve served for years. But existing tools like the Small Business Administration’s various loan guarantee programs have requirements that keep them out — even though the programs are advertised to help those who wouldn’t otherwise qualify for small business loans.

That’s why Inclusive Action for the City is also part of the grassroots coalition calling for the creation of a city-owned wholesale bank, tentatively named the Municipal Bank of Los Angeles. Last week, Los Angeles City Council voted unanimously to move ahead with the next step toward creating such a bank – a move that could shift the whole local financial landscape in favor of the street vendors and minority business owners Osemwengie has been supporting.

As a wholesale bank, the Municipal Bank of Los Angeles wouldn’t raise deposits from people or private businesses or make loans directly to them. Instead, it would hold deposits from the city government or maybe also local anchor institutions like hospitals, universities, transit agencies and port authorities. Its lending would flow through other financial institutions — like Inclusive Action for the City — to support more loans on more favorable terms for borrowers or projects that typically can’t get access to responsible, non-predatory loans.

It’s a model that takes lessons from other sectors like housing, where public or quasi-public financial institutions like Fannie Mae and Freddie Mac work through private lenders to support residential lending.

“Right now the city could deposit $400 million in Bank of America, but there’s no say on what Bank of America does with those deposits,” Osemwengie says. “So they could be funding gas and oil because it has a higher return. Whereas with a [Municipal Bank of Los Angeles] it could be a case where that money is only invested into our communities or carbon neutral industry or green infrastructure or something of that nature.”

Los Angeles is one of several cities and states across the county where organizers have been pushing for the creation of government-owned banks, also known as public banks. But there’s more than one model proposed for a public bank. Some want a public option for consumers and businesses locked out of other banking and credit options to open up free checking accounts or access low-cost, non-predatory loans. That’s not what is being proposed for Los Angeles, or anywhere else in California.

The local governments of Oakland, Berkeley and Richmond have endorsed a plan for a jointly-owned wholesale bank serving their jurisdictions. Meanwhile, San Francisco’s Board of Supervisors appointed a commission last year that worked with consultants to draft a business plan for a similar city-owned wholesale bank, released for public comment earlier this year. Los Angeles City Council voted last week to approve funding for a contract with consultants to do the same.

Creating a vision

Help has recently arrived. A new report series produced by two think tanks lays out both the potential structure and the potential impact of a hypothetical Municipal Bank of Los Angeles.

The New York-based Jain Family Institute and L.A.-based Berggruen Institute first reached out to the organizers at Public Bank Los Angeles about a year ago about producing a joint report series. Some of the organizers have been rallying around the idea for more than a decade, originally as part of other movements like Occupy Wall Street or environmental activism against big banks continuing to invest public deposits in the fossil fuel industry.

A year ago, Public Bank Los Angeles was beginning to draft a hypothetical business plan for a Municipal Bank of Los Angeles. They shared what they had outlined so far with the two think tanks, who took that as a starting point and fleshed it out into a five-part series of reports. The series includes an interactive tool allowing users to simulate a hypothetical loan portfolio for a Municipal Bank of Los Angeles and see how the dollars invested translate into outcomes like affordable housing units financed, worker-owners created, or megawatt hours of renewable energy produced.

“They went above and beyond our expectations in providing a roadmap for the establishment and some of the operational elements of an L.A. public bank,” says Trinity Tran, Public Bank LA co-founder and lead organizer. “These reports really will help set the stage and shape the boundaries of acceptable discourse and drive the vision for some of the policies and the framework of the L.A. public bank. It was important to be able to frame this as doable.”

Overall, the hypothetical Municipal Bank of Los Angeles envisioned in the series would work across three sectors: housing, small business and renewable energy. For each sector, the series includes a report detailing multiple lines of business, each with average loan sizes, interest rates charged and annual lending volumes.

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