“Our money comes into our bank,” Don Kendrick declared in a public talk about the Public Bank of Pomona Valley.
A movement to create public banks is coming to fruition, where approval can forge a new relationship between local communities and their banks. I have been writing about the local Public Banking movement since 2021, and it appears that plans have been moving apace, as the Public Bank of Pomona Valley study group is ready to present its ideas to the city councils of Pomona, Claremont and La Verne. On May 23, the University Club of Claremont hosted Don Kendrick, former mayor of La Verne, for a discussion of the latest work of the PBPV study group. They look to be going public with the plan!
Kendrick is a genial speaker, whose family helped found the city of La Verne in l885. He has been a city councilman and mayor of La Verne, following his grandfather’s and father’s footsteps in public service. It seems as if a movement that has flown under the radar is now ready for prime time. Kendrick allowed how he has spoken to the cities, groups and other interested parties.
Kendrick explained that the funds and earnings from this public bank would come from and return to the community. Because the stakeholders would be civic depositors rather than distant investors, local values and local projects would be primary in decisions about loans, project investment, and credit given.
The movement was made possible by legislation at the state level that allowed for the creation of ten public banks in local towns and regions of California. In 2019, California Governor Newsome signed AB857, to allow the creation of those banks. At this point in time, there is only one public bank that operates in the nation: The Public Bank of North Dakota. But there are nearly a dozen interested groups studying the feasibility of creating such banks in California, as in the Bay area, San Diego, and of course, in Pomona VAlley. AB857 sunsets in ten years, so there is a time limit for the study groups. Then in 2022, Newsome signed AB1177, allowing for the creation of a statewide public bank.
I stumbled upon the topic purely by accident during the pandemic, when public meetings were rare, we stayed home or indoors or at least away from crowded places like theaters, meeting halls, even churches. One day, as I scrolled through my facebook feed, I noticed an open zoom meeting about public banks. Not having anything else to do, I listened in and was astonished at how persuasive the advocates were.
At that time, it was argued that public banking is needed because 25% of the country, and that includes 1 million Californians, are ‘unbanked” or “underbanked.” These are mainly the poor and very hardworking people who cannot afford the fees to use the commercial banks. During the pandemic, fees for bank services totaled some $30 billion in what one can only think of as “nickel and dime” fees levied against low income workers who could least afford them. In addition, many of the “unbanked” include immigrants who must use expensive check cashing businesses to cash their paychecks or to buy money orders when they can’t pay for things with cash.
Then last month, the local Claremont University Club invited Don Kendrick to update the club on the work of the Public Bank of Pomona Valley in the work volunteers were doing to bring about a regional bank for the cities of Pomona, Claremont and La Verne. I signed up for their plentiful luncheon and eagerly looked forward to his update.
It was a surprise that the reasons for pushing a public bank had changed. The PBPV Study Group apparently was designing a public banking structure that would take only city and municipal deposits of tax revenue from Pomona, Claremont and La Verne. The public bank would use those funds in a way very different from the commercial banks, like Bank of America, Wells Fargo or Chase, for example. All profits from the PBPV would be returned to the depositors, that is to Pomona, Claremont and La Verne. No deposits would be accepted from individual citizens, so the “unbanked” would be excluded from having savings accounts in this bank. (Kendrick argued that a postal bank could serve this population well, as well as shore up the USPS at a time when it faces economic challenges.)
Instead, the bank would receive deposits of tax revenue, city fees, sales taxes. This cash flow currently is deposited in commercial banks where its use benefits their investors. The Public Bank would use the deposits in a similar way but with some dramatic differences. Commercial banks lend out money based on how much they have in deposits, not on a one to one basis, but on a 90% to 10% ratio of loan dollars to reserve (money kept at the bank) dollars. The PBPV would use a lesser of ratio of 50% or 60% loan dollars. It is a more conservative lending ratio, leading to greater stability.
But the greatest argument Kendrick made for a local public bank is that decisions about public projects will be based on what’s best for the community and at a cost much lower than the commercial banks. These public projects can run the gamut from local playgrounds, public housing that is energy efficient, transportation and energy projects that are “green” environmentally. All of these civic projects depend upon credit to begin the work and current bank fees can increase total costs by 50%. Public Banks have the ability to reduce that cost to 25%
But more important, any profits made when the loans are repaid, go to the depositors, that is, the cities, municipalities and regions. In other words, the return on investment is returned to the citizens. When the public bank is established and financially stable, the three cities of Pomona, Claremont and La Verne will enjoy some $50 million to use as general revenue. That can fund parks, better programs for children or older adults, programs to feed the hungry, green energy projects. Whatever the citizens deem worthy.
At the moment, the PBPV plans to accept deposits from the three cities, but Kendrick has been speaking to interested parties, including a local hospital, the state fair board, local college presidents. One executive declared, “Sign me up!”
So the Study Group is ready to present a plan for a public bank to the city councils for approval. Who will engage in this battle? Kendrick expects that commercial banks will fight against this proposal. They will object to their loss of civic depositors, banking and credit fees that would soon go to the public banks.
“The big banks are the enemy,” Kendrick declared, adding that he hoped citizens will add their voices in support of the movement.
I think they are ready to rumble.
To keep informed about the work being done and to connect with the study group volunteers, check: