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California Democrats Propose State-Backed Banking Program

Nearly 20 Democratic legislators on Tuesday introduced a bill to establish a statewide public banking program to provide low-income workers with access to no-fee money transactions and debit cards.

A digital dollar
<a href="" target="_blank">Shutterstock/anttoniart</a>
(TNS) — Nearly 20 Democratic legislators on Tuesday introduced a bill to establish a statewide public banking program, which would partner with private sector financial institutions to provide low-income workers with access to no-fee money transactions and debit cards.

Labor advocates said the program could save hundreds of dollars annually for households who do not have bank accounts or rely on alternative services such as money orders and payday loans,
"For an equitable recovery, we cannot look to the same institutions, the Wall Street banks that have long seeded the problems laid bare at this time," said Jyotswaroop Bawa, organizing and campaigns director for the California Reinvestment Coalition.
Compared to previous attempts to create a public banking system, the bill will not actually create a new bank. The program, for instance, is not intended to offer loans.
The new bill faces opposition from the California Bankers Association, which said it is impractical and premature. "We would be remiss to ignore current news headlines regarding the $30 billion liability California is poised to assume due to issues related to antiquated technology and (unemployment) fraud," the association said in a statement. "But somehow we should support the idea of the state getting into the very complex business of banking?"
The California Bankers Association in its statement said many banks already offer low or no-cost banking account options. The association also noted that a recent Federal Reserve study found that only 6% of Americans don't have a bank account. A larger share of Americans, 16%, said they have bank account but also used alternative services such as check cashing or payday loan. Under Assembly Bill 1177, California would establish a board of nine members, including the state treasurer, which would oversee the program. The program would contract with existing financial institutions, which would provide services such as debit cards, direct deposits and automatic bill pay at no fees.
All Californians would be eligible to be a part of the voluntary program if the bill passes. Participants could use existing ATMs, local stores or a smartphone app to access their account, said Cecille Isidro, a spokeswoman for SEIU California, which is sponsoring the bill. The program would be funded initially by the money from the state. Once launched, the program is designed to become self-sustaining primarily by fees from debit card purchases, said Rene Bayardo, a lobbyist for SEIU California.
Legislators pushing for the bill said it will provide financial security to low-income Californians, especially Black and Latino households who make up nearly 80% of those who don't have bank accounts in California. "If a rich person earns money, that money makes money," said Assemblyman Miguel Santiago, D-Los Angeles. "When a poor person earns money, that money is gouged from every area, every corner you could possibly get it."
Sofia Lima, a fast food worker in San Francisco, can relate. She said she has to take a 30-minute bus ride each way to cash paychecks at a store and pay $12 in fees. She estimates having lost over $500 in fees cashing per paychecks over the last two years. "Workers like myself are prevented from being able to save money because banks don't make it easy for us to sign up for accounts," Lima said at the press conference through a translator.
The idea of governments directly getting involved in banking has gained traction across the nation. Legislators from six other states have proposed bills to facilitate the creation of public banks, according to the Public Banking Institute which advocates for the policy. Gov. Gavin Newsom in 2019 signed a bill allowing cities to start their own public banks, but none of them has done so yet.
The bill is expected to be heard in a California Assembly committee in about a month.
©2021 The Sacramento Bee, Distributed by Tribune Content Agency, LLC.


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