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City Council President Wesson Proposes a Municipal Bank

A municipal bank could potentially solve a number of immediate problems facing the city.

An Op-Ed I never got around to writing and that the venerable LA Times would never have published anyway would have called on the LA City Council to pursue a public bank in Los Angeles, as Oakland has taken steps toward. But my laziness and procrastination are no big deal, as it seems the psychic force of my boiling rage alone is enough to make things happen in this town.

Earlier this week, Council President Herb Wesson proposed just such a government-owned and operated municipal bank.

A municipal bank, which is what we talk about when we talk about nationalizing private sector services, could potentially solve a number of immediate problems facing the city. Atop most Angelenos’ list, and explicitly cited by Wesson, is the issue of cannabis legalization. Medical dispensaries are well acquainted with the clusterfuck that is interstate banking regulations and federal drug laws in relation to their business, and the situation will only get worse as we move toward legalized recreational use.

The legality of a municipal or state bank doing business with federally-criminal enterprises is still murky. But a municipally-owned bank can also serve other, less obvious and to my mind more important, progressive policy goals. The #DivestLA movement, for one. On June 27th, the council voted unanimously to divest from Wells Fargo — but obviously Wells Fargo is only one bad apple in a barrel of rotten financial apples, and any attempt to divest city funds from morally problematic investments would be a slow, complex process of looking into which funds invest in which industries. Then dealing with the private sector fund managers, who are not ethically required to act in the best financial interests of their clients (us). A municipal bank, in contrast, could easily invest city money in whatever manner it sees fit, and, credit where credit is due, it looks like the city council would here prefer to do the right thing for the planet — and, given that extractive industries underperform the market even after receiving hundreds of billions of dollars in annual subsidies, the right thing financially as well.

In terms of housing, Council President Herb Wesson told the assembled council: “Imagine, if this is possible, to have a bank, where its vision statement is to finance the building of affordable housing.”

And not just “affordable” housing, but housing generally. North Dakota has shall we say had its share of problems this past year (#NoDAPL), but the northernmost Dakota also has a state bank, and they were the one state of our 50 that was not crippled by the housing crash of 2008 and ensuing Great Recession. In fact, since 2008 North Dakota has been running budget surpluses. Because ND’s state bank was not in the business of predatory loans and the state’s mortgages were not chopped up and sold to chumps as worthless derivatives, it avoided being swept up in the crash.

And let’s not forget the impending student-loan meltdown involving our nation’s combined $1.3 trillion student debt.

Finishing his sentence quoted above, Wesson continued: “Imagine if we have a bank that is focused on working with small-business entrepreneurs to give them loans.” This sounds like more of the neoliberal doublespeak we’ve come to know and loathe from both centrists and the right, but he’s not wrong. More promising is the opportunity to make loans to Metro and to finance other much-needed infrastructure projects (still fuck the streetcar, though).

In other words, direct control over city finances equals the power to invest city money — unrestrained by a profit motive — in projects that we deem valuable. And since progressive, socially responsible companies often outperform the market as a whole, and we won’t be forking over astronomical fees to useless hedge fund managers, our city finances will be in much better shape.

Again, I am all for giving credit where it is due, and the city council has stepped up to begin the process of doing right by us on the public finance front. Whether or not this actually comes to pass, and whether or not the investment capabilities of municipal banking are used for more than just laundering pot money, is like all things with this city council up to us, through public pressure, to determine.