How a public bank could work in San Francisco

San Francisco is a step closer to having the first city-owned public bank in the country, following the release of a plan outlining how one could operate in the city.

Why it matters: While private banks need to maximize shareholder profits, a public bank — set up and operated by the city — has a mission to serve the public interest.

• A draft plan released last week from the city's Reinvestment Working Group said a public bank would seek to better serve the needs of low-income residents and communities of color in San Francisco, who have historically faced redlining and limited access to banking services.

Currently, just one public bank exists in the U.S., the Bank of North Dakota. The process in San Francisco is likely to take years due to state and federal regulatory hurdles the city needs to overcome.

How it works: If implemented, the city would deposit its money into the public bank, reinvesting any profits earned back into the community. Currently, the city's treasurer manages the banking relationships for San Francisco's more than 200 bank accounts.

• The public bank would focus its initial lending on affordable housing development and homeownership, small businesses and climate change.
• In the future, the bank could expand its lending services to other areas, including student loans, according to the plan.
• The proposal calls for $50 million in initial funding, which could come from sources that include the city's general fund, local taxes and philanthropy, Jackie Fielder, co-founder of the San Francisco Public Bank Coalition, told Axios.

What they're saying: If residents care about meeting the city's affordable housing goals, supporting small businesses and meeting climate goals, "then they should care about a public bank," Fielder said. "It's not a silver bullet, but it's a really important part of all these pieces."

• A challenge that exists, however, is getting residents to trust that a public bank can be "effective, accountable, transparent and better, frankly, than a private bank," Thomas Marois, a political economist, told the San Francisco Examiner.

The bottom line: While a full-fledged public bank could take three to five years to achieve, it's "one of the best ways to ensure that our city dollars are used to reverse inequities, not perpetuate them," San Francisco Supervisor Dean Preston said in a press statement.

What's next: The plans for the public bank are set to be finalized in May and then submitted to the Board of Supervisors for review.

• If approved, the plans would then head to San Francisco Mayor London Breed.
• The group is also considering the creation of a green bank, which could eventually lay the groundwork for a public bank.