California Public Bank Bill Becomes Law

California Governor Gavin Newsom signed into law on October 2 a bill authorizing local governments to charter public banks.

The bill (AB 857) will take effect in January and permits the chartering of two public banks per year. The maximum number of public banks at any one time will be capped at 10.

According to the bill, a public bank will be organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation.

Any public bank would be required to obtain FDIC insurance to obtain a charter.

The bill authorizes public banks to accept deposits from local agencies; but prohibits public banks from competing with local financial institutions.

Proponents for the bill argue that public banks will be able to address local needs, such as the financing of affordable housing, small businesses, and infrastructure.

However, voters don't appear to be clamoring for public banks. Last year voters in Los Angeles rejected the option of creating a public bank.

Read the bill.