In a San Francisco Chronicle op-ed today, ABA President and CEO Rob Nichols warned that California’s municipalities should avoid chartering new public banks under recently enacted state law A.B. 857. “The reality is America’s experience with dozens of public banks over the years is littered with painful and costly failure,” Nichols wrote.
A public bank would pose grave risks to taxpayers, he argued. Nichols cited studies from California government officials finding that starting a public bank to meet municipal banking needs and engage in politically driven lending would require decades of subsidies—and amounts in the billions.
“Public banking is a concept that has been tried, tested, and found wanting,” Nichols said. “The American Bankers Association joined the California Bankers Association in opposing A.B. 857, and we continue to oppose the creation of any new public bank in a state with a vibrant and competitive private banking sector.”