California Will Allow Its Own Cities and Counties To Open Their Own Public Banks

The state of California becomes the 2nd state nationwide to have public banking after Democratic Governor Gavin Newsom signed into law a bill that will permit cities and counties to start their own public banks. North Dakota became the first state nationwide to form and operate its own public bank since 1919.

According to the new law, a city or county would have to establish a separate corporation with an independent board of directors, and it would have to get official approval from the Federal Deposit Insurance Corporation to obtain deposit insurance. Furthermore, a new public bank and its own business plan also would need approval from the California State Department of Business Oversight.

Public banking options will provide affordable options to individuals who are underbanked or dissatisfied with private commercial banks as well as fund community projects such as affordable housing and secure cannabis sales. Critics have argued that public banking options would require new taxes and drive smaller private commercial banks out of businesses.