Let’s not bank on it
At least since Andrew Jackson wrestled with Nicholas Biddle’s “hydra of corruption,” the president’s not-so-affectionate nickname for the Second Bank of the United States, America has had an uneasy relationship with public banking. Today, outside the Federal Reserve System, the Bank of North Dakota is the nation’s sole example of a government bank. While a few local officials want to change that, the Bay Area should hew to this historical skepticism about public banking.
San Francisco Supervisors Malia Cohen and Sandra Fewer have proposed a task force to consider forming a municipal bank, The Chronicle reported, saying it could fulfill unmet needs among marijuana businesses and undocumented immigrants, while also providing an alternative to ethically challenged private banks like San Francisco’s own Wells Fargo. The Oakland City Council likewise voted to look into a public bank last year, also citing the emerging cannabis sector, and legislation to study a state bank has been floated in Sacramento.
Citing North Dakota’s generally well-regarded bank, which was born of agrarian populism nearly a century ago, a 2011 report to the San Francisco supervisors noted that a public bank could boost city revenues, ease municipal borrowing and support local businesses and community groups. It also noted such significant impediments as starting capital and state law, which would have to be changed to make way for a city bank. A wary observer of local government might also note the propensity for such institutions to become patronage mills and harbor other questionable uses of public funds, phenomena to which neither San Francisco nor Oakland is a stranger. As for serving the marijuana market or the undocumented, a public bank would face the same risks that keep private institutions away. And there are easier ways to expand financial services among the disadvantaged. City Treasurer José Cisneros’ Bank on San Francisco program, for instance, has had some success in encouraging private banks to provide services to low-income residents. Banking is simply not a core skill or service of government, and cities on both sides of the bay have plenty of pressing problems — from public safety to housing — that are far more central to their missions.