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A Huge Victory for Public Banking in SF

A Huge Victory for Public Banking in SF

an illustration titled The Banking system split in half detailing the private banks and public banks

The San Francisco Board of Supervisors took a giant step for public banking June 15 when it voted 10-0, a veto-proof majority, to pass the Reinvest in San Francisco Ordinance, legislation to ensure a long term equitable recovery in our San Francisco economy ravaged by the COVID pandemic by beginning the process to charter a Public Bank. Supervisor Dean Preston was the lead author when the Government Accountability and Oversight (GAO) Committee, which he chairs, unanimously voted to send the ordinance for a vote by the full Board of Supervisors. Although the June 3rd GAO hearing on the public bank was the first during this Board session, it is not the first time public banking has been discussed in City Hall. 

Reinvest In San Francisco builds on years of work by former Supervisors John Avalos and Sandra Lee Fewer, the San Francisco Public Bank Coalition and many others who see the need for a municipal bank to counter the concentrated power of Wall Street banks.  The San Francisco Public Bank Coalition, which has led the effort to push for a public bank, includes Lawyer’s Committee for Civil Rights, the SF Defund DAPL Alliance, PODER, UESF, DSA, BiSHoP, and CCHO.  This legislation will result in San Francisco redirecting city funds from “too big to fail” banks into community banks and credit unions that are much better at investing locally. The Public Bank of San Francisco will serve as a “banker’s bank” redirecting a portion of investment funds from the city’s huge $13 billion portfolio into the hands of community banks, credit unions and Community Development Financial Institutions (CDFIs) that invest to benefit SF communities.

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A Process for Starting the Public Bank


Last year, an extensive report by the Budget and Legislative Analyst on a Municipal Bank for San Francisco recommended a phased-in transformation of City banking by beginning with a non-depository municipal financial corporation (MFC). Lending by the MFC will begin with demonstration projects bringing immediate relief to struggling San Franciscans. Loans for small businesses, hotel acquisitions for affordable housing and construction of sustainable infrastructure will result in earnings for the city and build a track record for establishing a public bank with depository functions. Once chartered, the public bank will gain an account with the Federal Reserve Bank giving it access to low cost funds with the same regulations that all banks are subject to. As a depository bank, it will be able to leverage its capital multiple times in loans, amplifying its lending capabilities.  

After the SF Public Bank is fully functional, it will be able to make substantial below-market funds for securing and building affordable housing. When public improvements are financed by corporate banks, about half of the cost goes to interest and fees paid to them to cover expenses, profits and executive salaries. A public bank will reduce lending costs and return earnings from loans to City coffers or for expanding lending opportunities. Modernizing transportation, electrical power and public buildings through a municipal bank will bring cost-savings and result in badly needed climate-resilient infrastructure. Considering the increased frequency of climate-related disasters, a public bank is essential as a means for rapid availability of funds for climate-resilient recovery, reconstruction and mitigation projects.

an illustration titled The Banking system split in half detailing the private banks and public banks
Illustration: Chiara Di Martino

Giant financial institutions and corporate-friendly organizations claim that there is no need for public banking because the Big Banks are doing a fine job already. They say public banking will lead to politicians playing favor to pet projects and believe privately run companies are better than public entities. They say a huge number of public bank failures in the past killed the idea. However, private banks have suffered greatly from bank failures.  There were 561 bank failures between 2001-2021 according to the Fed; none of these were public banks. In fact, public banks that were established during the Progressive Era to counter the monopoly power of the banking giants (including postal banking which operated from 1911 to 1966) were driven out of business largely due to corporate bank lobbying and political pressure, not bank failures. The one exception, the public Bank of North Dakota, has operated profitably for over a century and weathered every financial crisis while returning a surplus to the state’s general fund. 

Benefits of Public Banking

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Advocates of public banking stress the financial sovereignty that comes with having a public financial institution handling taxpayer funds. They address potential problems by structuring the bank with a Board of Directors made up of financial professionals and community representatives acting independently of City politicians. Public banking supporters assert public bankers will act more responsibly than the profit-seeking Wall Street bankers who caused ruin with rampant speculation in recent times. They say it’s ironic that the very bankers who crashed the economy in 2008 and used  taxpayer funds to bail themselves out, are now saying it’s wrong to have public funds in a public bank. 

Public bank management will be accountable to residents and assure that investments are financially sound and align with standards favored by San Franciscans. Responsible community development that can reduce wealth and income inequality needs deliberate planning and simultaneous financing in a variety of different areas in order to succeed. Public financing can help coordinate these activities and expand available capital. The SF Public Bank will focus on investing in communities of color and others neglected by the Big Banks to finance affordable housing acquisition, renovation and construction as well as small business renewal, green infrastructure, workers cooperatives and community-based financial services.  

Rick Girling, a long time resident of the City, is a retired economics instructor who is active with United Educators of SF and volunteers his time with the San Francisco Public Bank Coalition.

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