Suddenly every city on the West Coast wants to have its own public bank. Los Angeles just agreed to spend $460,000 studying how to make one. San Francisco has a measure on the November ballot to create one. Berkeley is voting on a parcel tax to fund one. These are all bad ideas.
In this edition of The New Pragmatic: How a city-owned public bank will inevitably lead to a city’s bankruptcy.
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Republican Amanda Blackwood and Democrat Jay Cheng agree on one thing: a public bank is a terribly dumb idea. On our podcast, we dive into how public banks are a solution to a problem already solved. Plus, how public banks cause corruption. Watch the episode:
You Can’t Trust City Hall to Run a Bank
By Jay Cheng
I often hear folks on the progressive left argue that government can’t and shouldn’t be run like a private business. Broadly, I agree.
There are always opportunities for the public sector to learn from the private sector, but on the whole, government and business are designed to do two different things.
Which is why I find it ironic when many of the same folks want government to fill the exact same functions private businesses do.
The latest example is the public bank: a financial institution owned and run entirely by a city government. The idea has popped up in cities across the country, most notably this year as Proposition B in San Francisco and Measure Z in Berkeley. Both are on the ballot this November, and both would create a public bank for their city. Measure Z would fund its bank with a parcel tax. The Los Angeles City Council just voted to spend $460,000 to study the creation of a public bank. Oakland, Seattle, and Portland have debated the idea too.
Proponents argue that a city-owned bank could finance projects that struggle to find capital, like affordable housing and green energy. It could make low-interest loans to help local small businesses get off the ground, or provide down-payment assistance to first-time homebuyers.
It could also bankrupt a city. There’s a very simple reason a public bank is a terrible idea: you can’t trust City Hall to run a bank.
Don’t get me wrong. I’m very much a pro-government Democrat. Local governments can and should do many things: public education, homeless services, public safety. These services shouldn’t be left to private markets.
But handing San Francisco’s elected officials and bureaucrats a bank that takes in and lends out billions of dollars a year (and effectively reports only to itself) is begging for a corruption scandal.
First of all, San Francisco already has enough corruption problems. A public bank will only make it worse - there are too many people, in too many obscure city divisions, hired for too many different reasons, to know whether the slate is being kept clean.
To be clear, I’m not saying today’s city leadership is untrustworthy. As you know, I’ve been a strong supporter of many of the people elected over the last six years. But in local democracy, leadership changes constantly. Officials term out, and their replacements bring different visions and different levels of competence. People get elected Mayor or Supervisor for all sorts of reasons, most of which have nothing to do with running a bank. You don’t know who will hold office in the future, or what they’ll do with it.
A public bank is also enormously expensive. The City Controller estimates that the administrative setup alone would cost $310 to $460 million over eight years (I think he’s still lowballing it), and that figure doesn’t include the money needed to actually capitalize the bank.
For the 2026 budget cycle, the City had to close a $642 million deficit. Stack a public bank on top of that, and we’re getting dangerously close to a billion-dollar hole.
Of course, there’s an easy way to find the money: taxes. Berkeley’s Measure Z proposes a $58.3 million parcel tax to fund its bank. San Francisco’s original proposal, written by Supervisor Jackie Fielder, would have raised taxes on private financial institutions to pay for it.
Taxing people to fund a public bank is a bizarre concept: we’ll take your money so we can lend it back to you.
Proponents say I’m being alarmist and point out that more than 25% of the world’s banking assets are already held by public banks. That’s true - the public banks they’re talking about are giants like the U.S. Federal Reserve, the State Bank of India, and ICBC (which is majority-owned by the Chinese government). Putting a San Francisco public bank in the same category is ludicrous.
Speaking of alarmism, consider what happens to a public bank in a recession or after a bad run of loans. When a private bank fails, the FDIC steps in with a structured receivership. When the Federal Reserve runs short, it can print money.
When San Francisco’s public bank fails, the only backstop is San Francisco taxpayers. Just like with pension liabilities, City Hall would have to dip into the General Fund to cover the shortfall, pulling hundreds of millions of dollars away from basic public services or raising taxes to fill the gap.
Bad ideas are often bad because they end in bankruptcy. A public bank is one of them: when it makes poor decisions, we’ll all be stuck with the bill.
Of course, affordable housing should be financed, and local small businesses should get loans. But we don’t need a public bank to do either. San Francisco already has 77 banks and credit unions meeting many of these needs. And it’s not just the big players like JPMorgan Chase and Wells Fargo. The SF Federal Credit Union and SF Fire Credit Union are strong, well-capitalized institutions that make thousands of loans a year to first-time homebuyers, small businesses, and housing projects.
With so many measures on the ballot every cycle, there’s always one bad one that slips through the cracks. This year, it’s Proposition B in San Francisco (and Measure Z in Berkeley). I’m voting against Prop B because I don’t trust City Hall to run a bank, and I don’t think you should either.
You Can’t Run a City. But You Want to Run a Bank?
By Amanda Blackwood
San Francisco and Berkeley have completely lost the plot.
There is something almost impressive about a city that can’t balance its own budget deciding what it really needs is to open a bank.
And yet, here we are.
This November, San Francisco and Berkeley voters are being asked to support measures that would help establish government-owned banks. The pitch? More money for affordable housing, small businesses, and clean energy.
All worthy goals. All words that voters like. But since when did running a bank become the job of city government? And what makes anyone think these particular governments are equipped to do it?
A real problem doesn’t automatically make a good solution.
Access to capital is a legitimate issue. But the community lenders these banks are supposed to support already exist. They’re called Community Development Financial Institutions, or CDFIs, and they’re already financing the very projects these cities want to help. If they need more capital, why not fund them directly?
Instead, San Francisco’s Proposition B proposes creating a new financial institution that could eventually become a public bank. Estimated cost? Between $310 million and $460 million over eight years. Funding provided by the measure? Zero. Berkeley’s Measure Z takes the opposite approach. It would raise $58.3 million through a parcel tax to help fund a regional bank. Except that bank doesn’t exist. It has no charter, no federal deposit insurance and no complete funding commitment from its proposed government partners.
So San Francisco has a bank plan without the money, and Berkeley wants the money without an established bank. Seems like we should probably figure out both before asking taxpayers to get involved.
Now consider who’s asking.
San Francisco is projecting structural deficits that could exceed $1 billion by 2029–30. Berkeley has been cutting spending, freezing hiring and laying off employees to address its own persistent budget problems. It’s even asking voters for additional taxes and infrastructure bonds to cover existing needs.
And somehow, starting a bank is the priority?
This is what frustrates me about California politics. We have developed an extraordinary talent for proposing ambitious new government programs while struggling to deliver the basic services government already promised. Something isn’t working? Create another agency. Add another commission. Build another bureaucracy. Ask taxpayers for more money. Post that press conference on TikTok and then call it progress.
I believe government has an important role in creating economic opportunity. But I also believe it has a responsibility to know its job — and do that job well. Keep communities safe. Maintain infrastructure. Deliver essential services. Manage taxpayer money responsibly. Those are enormous responsibilities. And they’re not optional. Good intentions are not a business plan.
I’m not questioning whether the people behind these measures want to do good. I’m questioning whether their solution makes any financial or operational sense.
What’s the plan? Where’s the money? Who’s accountable? What happens if it fails? And why is this better than funding the lenders we already have? These are basic questions that should be answered before asking voters for permission or money.
My vote is no on San Francisco’s Prop B and Berkeley’s Measure Z.
Not because affordable housing and small businesses don’t matter. But because competence matters too.
Government doesn’t get points for ambition when it can’t deliver on execution.
Fix the streets. Balance the books. Deliver the basics.
Then come talk to me about opening a bank.
Thanks for reading The New Pragmatic: New politics for pragmatic people. Read us at TheNewPragmatic.com, follow us on X, Instagram, and TikTok, and watch or listen on YouTube. You can email us at jay@thenewpragmatic.com and amanda@thenewpragmatic.com.