A Good Start

California just passed a law allowing public banks to be formed by counties and cities:

California cities and counties will be allowed to establish public banks under a controversial bill signed into law Wednesday by Gov. Gavin Newsom, making California only the second U.S. state to allow such institutions.

Public banks are intended to use public funds to let local jurisdictions provide capital at interest rates below those charged by commercial banks. The loans could be used for businesses, affordable housing, infrastructure, and municipal projects, among other things.

Proponents say public banks can pursue those projects and support local communities’ needs while being free of the pressure to obtain higher profits and shareholder returns faced by commercial banks. Support for public banks also has grown since the financial crisis a decade ago and since Wells Fargo & Co. was embroiled in a slew of customer-abuse scandals in recent years.

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The only other state with public banks is North Dakota. Critics of the institutions say a government-owned banking system would be expensive, risky and carry a threat of political influence.

The history of public banks in North Dakota makes it pretty clear that this is a good idea.

It saves the taxpayers money, and it just works.

About the only people who lose in such an arrangement are banking executives and Wall Street.