The Los Angeles City Council took a significant step forward on Tuesday by allocating funds for consultant services to conduct a comprehensive analysis of the policy and economics involved in establishing a public bank.
Councilwoman Nithya Raman emphasized the importance of this study in determining the structure and strategy of the bank. She explained that a second phase of the study would include developing a business plan and submitting a formal application to the state.
Raman expressed her excitement about the potential of a public bank to address the gaps in financial services left by traditional commercial banking. She believes this will particularly benefit communities of color and working-class individuals.
“We have the opportunity to provide banking services to underbanked and unbanked residents of Los Angeles. We can also avoid predatory practices and excessive fees,” she added.
The recommendations put forth by the city council include allocating an initial amount of $460,000 for a Phase 1 study on the formation of the public bank, to be conducted by HR&A Advisors. The estimated cost of Phase 2 is $240,000, which will be funded later.
Councilman Hugo Soto-Martínez acknowledged the ongoing debate surrounding public banks and their functions. He agreed with Raman’s assertion that a public bank could meet the financial needs of the residents of Los Angeles.
He referenced a recent report by the Jain Family Institute and the Berggruen Institute, which proposed various approaches for establishing and managing a public bank. These approaches include implementing lending programs to support affordable housing, such as providing lower-cost debt for construction and creating an acquisition fund for affordable housing preservation. The report also suggests expanding assistance for low- to moderate-income home buyers.
The recommendations approved with a unanimous 12-to-0 vote on Tuesday were initially proposed by former Councilman Herb Wesson in 2019. Wesson’s motion aimed to leverage the benefits of AB 857, a state legislation that established a framework for public bank formation in California.
According to AB 857, a local agency must meet the same requirements and approval criteria as a private sector applicant, including deposit insurance provided by the Federal Deposit Insurance Corporation.
The council’s Economic and Community Development Committee previously gave their unanimous approval to the recommendations put forth by the city administrative officer and chief legislative analyst on June 7.
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