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In 2018, at a conference in New Mexico, public banking advocate Trinity Tran shared her grassroots group’s efforts to create the first urban public bank in the United States. When a member of the audience asked, “How much money do you have to accomplish this?” Tran responded, “We have zero dollars and zero cents.” The crowd laughed.
A year later, California passed the California Public Banking Act (AB 857), the nation’s first legislation allowing local governments to establish public banks and universal banking services. This law provides a legal framework for cities like LA to streamline the process of forming their banks.
Angelenos are increasingly questioning why their city cannot leverage its financial resources to fund critical community needs such as housing, small businesses, public services, and climate infrastructure, especially after the devastating wildfires. Instead of investing in these areas, Los Angeles has been diverting public funds to private banks that only support projects beneficial to their shareholders, claims Tran. “Now we’re in a moment when there’s a real urgency to get these banks off the ground. Regardless of who resides in the White House.”
Trinity Tran, co-founder of the California Public Banking Alliance and Public Bank LA, is a community activist, a woman, and a non-economist—qualities that typically do not resonate in Wall Street. Nevertheless, she learned its language. As we meet virtually, she mentions at the beginning of our conversation that she follows in the footsteps of Ellen Brown, an author and public banking pioneer who has advocated for public banks since the 1970s. She is the founder and chair emerita of the Public Banking Institute. However, Tran and her group have added a grassroots dimension to this advocacy by addressing broader issues such as affordable housing, climate change, and the lack of financial support for Black and brown small businesses, which Wall Street often shuts out.
“I had to learn finance, mainly to simplify it,” she explains. As her group worked to move the public banking bill through the legislature, a significant portion of their work has been to demystify finance so that ordinary citizens, policymakers, staffers of cities, senators, assembly members, “understand it as well and outweigh the impact and transformative power that public banking has in our communities if we take that power back.”
Only last year, Public Bank LA received a grant for its advocacy work for the first time after eight years of fighting. Tran admits that she hesitated to seek funding earlier due to the challenge of reaching out to national philanthropic foundations, many of which have board members tied to Wall Street or the banking industry. Her concerns were not unfounded. Her public banking movement stemmed from a grassroots campaign she launched in 2017 in solidarity with Indigenous groups at Standing Rock, North Dakota, to divest from Wells Fargo, a major financier of the Dakota Access Oil Pipeline. Such actions would not have landed well on Wall Street.
In 2016, Indigenous groups were confronting oil companies that were constructing pipelines on their land, jeopardizing clean water supplies for the Standing Rock Sioux reservation, and encroaching on sacred tribal land. “From those conversations at Standing Rock came a simple yet powerful idea: you can’t build pipelines without funding.” In January 2017, council member Kshama Sawant mobilized community members and Indigenous groups to persuade the Seattle City Council to divest $3 billion from Wells Fargo Bank.
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This landmark victory was momentous. Around the same time, the Los Angeles City Attorney had filed a lawsuit against Wells Fargo for fraudulently opening over two million unauthorized checking and credit card accounts. The bank ultimately settled with the County and City of Los Angeles for $185 million. In response, Tran and a group called “Revolution LA” launched a petition urging the LA City Council to pass an ordinance to sever the city’s relationship with Wells Fargo and to amend the current Responsible Banking Ordinance (RBO) to include stronger social and environmental criteria when considering banking contracts that align with ethical values.
During the campaign, Tran realized that disinvestment wouldn’t be enough; the city would simply transfer the money from Wells Fargo to another large Wall Street bank. “So the only real form of structural change was to create a transparent bank that would be 100% accountable to the people and integrate social, environmental, and equity mandates into its operations,” she explains. In 2017, as Trump began his first administration, Tran recognized the need to focus on the local level and founded Public Bank LA, while collaborating with other activist groups at the state level to establish the California Public Banking Alliance. “We created this broad-based coalition that transformed public banking from an esoteric policy into a law,” she says with a smile.
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Notably, the debate surrounding public banks in the U.S. has been nonpartisan. While often considered a progressive initiative, North Dakota, a conservative red state, is home to the only public bank in the country: The Bank of North Dakota (BND). This unique institution has been successful for over 100 years, achieving an 18.2 percent return on investment in 2023.
So, what is a public bank? It’s not a brick-and-mortar bank with retail locations, ATMs, and tellers; it functions as a wholesale bank that acts as a depository and lender like any other bank. The deposits are exclusively public funds that the city accrues from taxes, fees, fines, and other revenues. Additionally, mission-aligned institutions, such as public universities and pension funds, could deposit funds into a public bank. “Instead of placing local government money and cash reserves in private banks, which earn little interest for citizens, cities could deposit those funds in a public bank to serve the public interest,” explains Tran.
For their lending activities, public banks partner with local community banks, credit unions, and Community Development Financial Institutions (CDFIs) to support local needs. The public bank provides these institutions with funding so that they can, in turn, offer low-cost services to consumers, such as home mortgages. The interest earned on these loans would flow back to the city through the public bank, creating a cycle where public money is reinvested in local priorities rather than being diverted to the shareholders of private banks.
To cover the initial capitalization and startup costs, Tran suggests that Los Angeles issue bonds to launch the bank. Furthermore, the public bank could use funds from the central bank through fractional reserve lending. This means that a dollar in a public bank can be leveraged to $10. A million dollars can be leveraged to $10 million. Ten million can be leveraged to $100 million in community lending. “The difference between a public bank and a private bank is that you’re leveraging funds to support a public mandate, such as building homes and schools, rather than financing industries outside the city, like fossil fuels or weapons manufacturers. So you’re taking the power of leveraging and putting it into the hands of the people.”
The California Public Banking Alliance advocates for a three-pronged strategy to revolutionize the financial ecosystem: municipal banks, like Public Bank LA, would provide tailored solutions for local communities; a state bank would collaborate with municipal banks and focus on significant infrastructure projects that impact all Californians; and lastly, the creation of the so-called CalAccount program. This program will be the nation’s first universal banking service, partnering with existing banks to offer all Californians zero-cost, zero-fee, and zero-penalty basic bank accounts. “More than 7 million Californians are unbanked or underbanked. So as we’re working on banking our cities, we’re also working on banking the general public,” emphasizes Tran.
Every time the city or one of its departments issues bonds for building homes or infrastructure, commercial banks demand fees for structuring and selling those bonds, in addition to the repayment of the bonds, which includes principal and interest. Fix LA Coalition’s report in 2015 revealed that the City of Los Angeles paid over $1 billion annually in debt service, including more than $300 million in interest and fees to Wall Street banks and financial firms. Tran highlights that the banking costs are by now much higher: “Every dollar in interest and debt service that leaves our community, that’s another dollar less for our public budget to support city services.”
This situation has gotten on Angelenos’ nerves, especially in the aftermath of LA’s wildfires. For instance, LA’s fire chief has attributed understaffed fire services to budget cuts. Although the mayor has dismissed any links between the budget and wildfire response, questions have arisen about why some fire hydrants were not operational. Municipalities and local governments throughout the state are grappling with budget deficits, and Los Angeles is no exception. “We have just gotten out of a series of budget hearings, and there were many angry people because the city has a one-billion-dollar budget hole and is threatening to cut 1600 city worker jobs—those who maintain our streets and keep our libraries open,” says Tran.
CDFIs and community lenders feel the hostility from the current federal government’s stance, fearing that funding for community programs and affordable housing may be jeopardized. All these issues have made the discussion surrounding public banking increasingly urgent.
Seven local governments are already at different stages in exploring or establishing public banks. The East Bay—Oakland, Berkeley, and Alameda County—has jointly completed a business plan and is now building political support to capitalize a regional public bank. The Sacramento City Council, California’s state capital, has issued a request for proposals from consultants to develop a business plan and is working to secure funding for it. The Central Coast is working on a regional public bank feasibility study involving a four-county, 12-city collaboration. San Francisco has finalized its business plan, initially focusing on creating a green bank that will eventually expand into a full-scale public bank.
In Los Angeles, Public Bank LA has partnered with nonpartisan think tanks, including the Jane Family Institute and the Berggruen Institute, to produce a series of five reports detailing how a public bank could support affordable housing and collaborate with the municipal energy department to enhance green energy infrastructure. Meanwhile, the Los Angeles City Council has approved funding to hire consultants to conduct a public bank feasibility study and create a business plan. “The next step is to choose a financial model and submit an application to state and federal regulators. We’re also working with the city council to ensure that funding is allocated to start that process,” explains Tran.
While progress is being made, public banks face a significant hurdle. The California Public Banking Act requires approval from state and federal regulators, specifically the Federal Deposit Insurance Corporation (FDIC). With the new Trump administration, federal approval seems distant. However, California’s public banks could adopt a model similar to North Dakota’s, where the public bank is not FDIC-insured, unlike other financial institutions. Instead, its deposits are guaranteed by the full faith and credit of the state.
Another barrier could be asking citizens to trust government-owned banks to manage public funding effectively. It would require a vast campaign to gain the public’s confidence. In Germany and Spain, publicly owned banks have faced criticism following conflict of interest and mismanagement cases. “Discussing these issues is essential, as people often associate city-owned banks with corruption. They fear that public banks could be misused as slush funds for politicians,” Tran responds.
“It’s also important to clarify that politicians will not run these public banks; they will be overseen by an independent board of directors composed of banking professionals. The state bill does not outline a governance structure for public banks, leaving it up to elected representatives, banking experts, and constituents in each region to create a governance model that embodies their vision of a democratic institution,” explains Tran. Oversight will occur at five levels: the independent board of directors, the local government that owns the bank, state regulators, federal regulators, and the general public. This contrasts with commercial banks, where decisions are often made in closed boardrooms.
Therefore, this year, Tran and her team’s primary goal is to bring community lenders and public-minded bankers to the forefront of their movement. For Tran, representatives and citizens cannot continue to trust taxpayer money to commercial banks focused solely on shareholder interests. A public bank could foster meaningful change for Los Angeles. Often, for the better, Californians set examples that others will follow.
