Public banks can be formed in California as Newsom signs new law

Public banks can be formed in California: Newsom signs new law

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.

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.

For example, the city or county would have to establish a separate corporation with an independent board of directors, and it would have to obtain approval from the Federal Deposit Insurance Corp. to obtain deposit insurance, Jacob said.

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