LA To Study Formation Of Los Angeles Public Bank

LOS ANGELES, CA — The Los Angeles City Council Tuesday moved forward to fund consultant services needed to conduct policy and economic analysis for an initial study on the formation of a public bank.

Councilwoman Nithya Raman said the study would provide details of what the bank would look like and lay out a strategy for its formation. A second- phase study will include a business plan and a formal application that will have to be submitted to the state, she added.

"I think what's really exciting is that we have a potential to fill the gaps that our reliance on commercial banking has left us with," Raman said. "I think those gaps are really felt most keenly for communities of color, and for working class people."

"We have the opportunity to offer banking services to underbanked and unbanked Angelenos. We have the opportunity to sidestep predatory practices and excessive fees," she added.

The recommendations called for the city to identify and report an initial $460,000 in the mid-year Financial Status Report to retain HR&A Advisors, who will conduct a Phase 1 study on the formation of a public bank.

Phase 2 of the study would cost the city an estimated $240,000, which would be funded at a later date.

Councilman Hugo Soto-Martínez said that in the last few years there's been "a lot of debate about public banks and their functions." The councilman agreed with Raman that a public bank could fund the needs of Angelenos.

He also cited a recent report by the Jain Family Institute and the Berggruen Institute, which outlined approaches the city could take to establish and administer a public bank.

According to that report, the city could implement lending programs that could create more affordable housing through lower-cost debt for construction and an acquisition fund for affordable housing preservation, and expand low- to moderate-income home buyer assistance.

Tuesday's recommendations, approved in a 12-to-0 vote, were initiated by a motion introduced by former Councilman Herb Wesson in 2019. The motion sought to benefit from AB 857 -- legislation that established a framework for the formation of public banks in California.

According to AB 857, a local agency would need to meet the same general requirements and approval criteria as existing law requires of a private sector applicant, including deposit insurance provided by the Federal Deposit Insurance Corporation.

On June 7, the council's Economic and Community Development Committee unanimously approved the recommendations provided by the city administrative officer and chief legislative analyst.

City News Service