Partner lenders to community banks, credit unions, CDFIs, and accept local government deposits.

California’s public banks have the potential to play a significant role in supporting community development and economic revitalization. By working closely with community banks, credit unions, and community development financial institutions (CDFIs), public banks can help these smaller institutions to secure funding, leverage their capital, and generate the revenues needed to become more sustainable. This can be achieved through mutually supportive relationships that allow these institutions to expand their lending to small businesses and local residents, as well as through various incentives such as lower interest rates on loans.

By pooling and redistributing credit risk among loan participants, public banks can also help to expand affordable housing and sustainability initiatives in the state. This is especially important given the significant drop in the number of community banks and credit unions in most states, including California, which has forced many individual and business depositors to rely on Wall Street banks. One notable exception is North Dakota, which has benefited from the presence of the only state-owned bank in the country, the Bank of North Dakota. This bank has helped to support local financial institutions and contributed to the state’s quick recovery from the Great Recession of 2008. It has also been effective in distributing Paycheck Protection Plan money in an efficient and equitable manner.

Credit unions and community banks offer an alternative to traditional financial institutions because they are owned by their customer members or locally staffed and managed, respectively. This means that they are focused on serving the needs of their local communities, rather than on maximizing profits for private shareholders. In contrast, California’s public banks will be owned by local governments, and the profits they generate will be returned to the state revenue pool. This structure ensures that public banks, along with community development financial institutions (CDFIs), put the interests of local communities first. By choosing to bank with these institutions, customers can be confident that their money is being used to benefit the local community and support their values.

California’s public banks have the potential to make a significant positive impact on local communities by investing in California projects through local financial institutions. These institutions are accountable to the communities they serve, and are focused on meeting the needs of those communities. By keeping money where it is created and investing in areas such as affordable housing, schools, climate change infrastructure, and small business lending, public banks can help to strengthen California’s cities and counties.

Public banks have the unique ability to leverage capital up to ten times, meaning that every dollar of capital can enable ten dollars of loans. This can provide a valuable source of funding for addressing local issues and meeting the needs of the community. By investing in projects that benefit residents and supporting local businesses, California’s public banks can make a tangible difference in the lives of those who live and work in the state.



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