[Spurred by the heavily cash-reliant cannabis industry, Los
Angeles residents will be the first in the country to vote on a public
banking mandate, after the City Council agreed on June 29 to put a
measure on the November ballot...] [https://portside.org/] 



 Ellen Brown 
 July 3, 2018

	* [https://portside.org/node/17722/printable/print]

 _ Spurred by the heavily cash-reliant cannabis industry, Los Angeles
residents will be the first in the country to vote on a public banking
mandate, after the City Council agreed on June 29 to put a measure on
the November ballot... _ 

 A medical marijuana shop at Venice Beach in Los Angeles, Calif., Adam
Jones/CC BY-SA 2.0 


Spurred by the heavily cash-reliant cannabis industry, Los Angeles
residents will be the first in the country to vote on a public
banking mandate, after the City Council agreed on June 29 to put a
measure on the November ballot that would allow the city to form its
own bank.

The charter for the nation’s second-largest city currently prohibits
the creation of industrial or commercial enterprises by the city
without voter approval. The measure, introduced by City Council
President Herb Wesson, would allow the city to create a public bank,
though federal and state legal hurdles would remain to be cleared.

The bank is also expected to save the city millions, if not billions,
of dollars in Wall Street fees and interest paid to bondholders, while
injecting new money into the local economy, generating jobs and
expanding the tax base. It could respond to the needs of its residents
and reinvest in low-income housing, critical infrastructure projects
and clean energy.

The push for such a bank comes amid ongoing concerns involving the
massive amounts of cash generated by the cannabis business, which was
legalized by California’s Proposition 64 in 2016. Wesson has said
cannabis has “kind of percolated to the top
of the public bank push, “but it’s not what’s driving” it,
citing affordable housing and other key issues. He added the concept
of a public bank should be pursued
[https://www.dailynews.com/2018/02/28/la-city-council-supports-proposed-state-marijuana-bank/] regardless
of the cannabis issue.

However, the prospect of millions of dollars in tax revenue is an
obvious draw. Los Angeles is the largest cannabis market in the state,
with Mayor Eric Garcetti estimating it would bring in $30 million in
taxes for the city.

State Board of Equalization member Fiona Ma
who is running for state treasurer, says California’s $8 billion to
$20 billion cannabis industry is still operating mostly in cash almost
two years after state legalization. She adds that the majority of
businesses are operating on the black market without paying taxes.
This is in large part because federal law denies them access to the
banking system, forcing them to deal only in cash and causing
logistical nightmares when paying taxes and transferring money.

Cannabis is still a forbidden Schedule 1 drug under federal law, and
the Federal Reserve has refused to give a master account to banks
taking cannabis cash. Without a master account, they cannot access
Fedwire transfer services, essentially shutting them out of the
banking business.

In a surprise move in early June
President Trump announced he “probably will end up supporting”
legislation to let states set their own cannabis policy. But Ma says
that while that is good news, California cannot wait on the federal
government. She and state Sen. Bob Hertzberg, D-Los Angeles, have
introduced Senate Bill 930
which would allow state-chartered banks and financial institutions to
apply for a special cannabis banking license to accept clients after a
rigorous process that follows regulations from the U.S. Treasury
Department. The bill cleared a major legislative hurdle when it was
approved by the state Senate on May 30.

SB 930 focuses on California state-chartered banks, which can operate
under a closed-loop system with private deposit insurance, unlike
federally chartered banks. As Ma explained in a May 17 article in the
Sacramento Bee:

There are two types of banks—those with federal charters, and banks
with California charters. Because cannabis is still considered a
Schedule 1 narcotic, we cannot touch federal banking wires. We want
state-chartered banks that are protected, regulated and certified
under California law, and not required to be under the FDIC.

State income taxes, sales taxes, unemployment, workers’ compensation
and property taxes could all be paid through a closed-loop system that
takes in revenue from the cannabis industry, but is apart from the
federal banking system. … Cannabis businesses could be part of a
cashless system similar to Apple Pay, and their money would be insured
by a state-licensed institution.

That is a pretty revolutionary idea—a closed-loop California banking
system that is independent of the Federal Reserve and the federal
system. The provisions of SB 930 would allow only cannabis cash to
bypass the federal system, and the bill strictly limits what the
checks issued by pot banks can be. But the prospects it opens up are
interesting. California is now the fifth-largest economy in the world,
with 39 million people. It has the resources for its own cashless
“CalPay” or “CalCoin” system that could bypass the federal
system altogether.

The Bank of North Dakota, currently the nation’s only state-owned
depository bank, has been called a “mini-Fed” for that state.
California, with more than 50 times North Dakota’s population,
merits its own mini-Fed as well. The Bank of North Dakota partners
with local banks to make below-market loans for community purposes,
including 2 percent loans for local infrastructure, while at the same
time turning a tidy profit for the state. In 2017, it recorded its
14th consecutive year of record profits
with $145.3 million in net earnings and a return on the state’s
investment of 17 percent.

It is significant that the proposal for a closed-loop California
system is coming from players that have political clout. Ma won the
June primary election for state treasurer by a landslide, and the
current state treasurer, John Chiang, has been exploring for over a
year the possibility
of a public bank that could take cannabis cash. Lt. Gov. Gavin Newsom,
the front-runner for governor, also has called for the creation of a
public bank
These are not armchair academics but the people who make political
decisions for the state, and they have substantial popular support.

Public bank advocacy groups from cities across California have joined
to form the California Public Banking Alliance, a coalition to advance
legislation that would make it easier to establish municipal banks
statewide under a special state charter.

A press release by Public Bank Los Angeles
[https://www.facebook.com/publicbankla/], one of its founding advocacy
groups, notes that 15 pieces of legislation for public banks are being
explored in the U.S. through municipal committees and state
legislators, and more than three dozen public banking movements are
growing across the country. San Francisco has created a 16-person
Municipal Bank Feasibility Task Force; Seattle and Washington, D.C.,
have approved $100,000 each for public banking feasibility studies;
and Washington state legislators have added nearly $500,000 to their
budget to produce a business plan for a public depository bank. New
Jersey state legislators, with the backing of Gov. Phil Murphy, have
introduced a bill to form a state-owned bank, and GOP and Democratic
lawmakers in Michigan have filed a bipartisan bill to create one in
that state.

Cities and states are seeking ways to better leverage taxpayer dollars
and reinvest them in the needs of local communities. Public banking
serves that purpose, providing local determination and the opportunity
for socially and environmentally responsible lending and investments.
The City Council of Los Angeles is now taking it to the voters, and
where California goes, the nation may well follow.

_Ellen Brown is an attorney, chairman of the Public Banking Institute,
and author of twelve books including "Web of Debt" and "The Public
Bank Solution." _

_Thanks to author for permission to reprint this article._

	* [https://portside.org/node/17722/printable/print]







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