Four Los Angeles City Council members took a critical step to bolster the campaign to develop the city’s first public bank.

Councilman Curren Price Jr., a moderate who represents the city’s ninth district, has pledged $15,000 toward an effort to fund a feasibility study for a public bank, according to the city council agenda released on June 27. 

He joined three of his progressive-leaning colleagues – council members Eunisses Hernandez, Hugo Soto-Martinez and Ysabel Jurado – all of whom in late May announced during a press conference their plans to earmark the same amount in funding toward the study.

“It’s a necessary step to move the work forward,” said Price in a statement. “I’ve supported this effort from the start, which is why I committed discretionary funds to help launch the study.”

All four pledges are crucial in reinvigorating a campaign for a L.A. municipal bank that’s been underway since 2017—though the total cost for the study is around $460,000. In 2023, the city council approved a plan to finance the study to begin the process, but those funds were later diverted to balance the budget, said Trinity Tran, executive director of an advocacy group Public Bank LA, and a leading advocate for municipal banks.

“This seed money is an important step toward creating a public bank for Los Angeles,” said Tran. “It gives the city a way to stop outsourcing control of its resources and start using public dollars to solve public problems without raising taxes or cutting essential services. With deficits mounting, we can’t afford business as usual.”

A long road ahead

The response to a public bank in L.A. has been mixed.

In 2018, Angelenos voted against a ballot measure to establish a municipal bank. Tran blamed the loss on an underfunded campaign overwhelmed by its opponents.

However, the push for public banking received a boost in the following year, when Gov. Gavin Newsom signed a state law creating the legal framework for California municipalities to establish public banks. In 2023, U.S. Reps. Rashida Tlaib and Alexandria Ocasio-Cortez also sponsored the Public Banking Act, which would establish a national framework for this category of financial institutions.

What would a public bank do?

A public bank would save the hundreds of millions of dollars that go to debt service and bank fees, Tran said.

Local community banks and credit unions could partner with a public bank. These financial institutions could lend at lower interest rates for businesses, residents and minority communities underserved by banks.

Public banks would not compete with commercial banks. Public banking’s supporters include the Service Employees International Union, Move LA and Democratic Socialists of America. However, public banking is not a specifically the domain of left-leaning groups, Tran said.

“It makes sense from a fiscally conservative standpoint,” she said. “(Public banks) cuts out the middleman, management fees, external fund managers. It lowers borrowing fees, so we can borrow from ourselves at a lower rate.”

Opposition from commercial banks

Banking advocacy groups like American Bankers Association have routinely opposed public banks. Ana Helman, a representative of Sacramento-based California Bankers Association, said public banks could become a burden on taxpayers with financial and banking governance risk.

“Public banking requires substantial upfront capital, ongoing political oversight, and unproven management structures, lacking the rigorous oversight that regulated private banks have,” said Helman. “This could lead to serious fiscal liabilities for the city and its residents.”