What's next for San Francisco's public bank plan
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San Francisco's public bank ambitions are moving forward, following city supervisors' approval of a plan to begin creating the nation's first municipal bank.
Why it matters: A public bank, according to the plan approved last week, would seek to better serve the needs of San Francisco's low-income residents and communities of color by financing affordable housing projects and providing loans to small businesses, for example.
Yes, but: The process to create a public bank in San Francisco, however, is likely to take years due to state and federal regulatory hurdles the city needs to overcome.
- Before San Francisco can create a public bank, it must first pass an ordinance to create a municipal financial corporation (MFC) to serve as a city-owned, non-depository lending corporation.
- After years of operations, the city would need to convert the MFC into a public bank, pending approval from the Federal Deposit Insurance Corporation and the California Department of Financial Protection and Innovation.
Details: If implemented, the city would deposit its money into the public bank, reinvesting any profits earned back into the community.
- The public bank would focus its initial lending on affordable housing development and homeownership, small businesses and those addressing climate change.
- Of note: The bank would not provide personal banking services, like checking and savings accounts, per the plan.
What they're saying: San Francisco forming its own public bank is "a crucial strategy to ensure that our city funds are used to reverse inequities, not perpetuate them," Supervisor Dean Preston said in a written statement.
Context: Currently, San Francisco's treasurer manages the more than 200 accounts the city has with private banks.
- Meanwhile, just one public bank exists in the U.S., the Bank of North Dakota.
Between the lines: President Biden's Inflation Reduction Act presents an "exciting opportunity to start a green bank" with funds from the federal government for its public bank ambitions, Jackie Fielder, co-founder of the San Francisco Public Bank Coalition, told Axios in a text message.
- The MFC, per the plan, would also function as a "green bank," as it would use public funds to make climate-related investments.
What's next: Preston told Axios he is now working with the city attorney to draft legislation to create the MFC next year.