Los Angeles voters will be given the opportunity to decide if they want the city to form its own municipal bank after the City Council approved the addition of the question to the November ballot Friday.
A motion introduced by Council President Herb Wesson calling for the ballot measure says that the L.A. charter states that the city “shall not engage in any purely commercial or industrial enterprise, except upon a majority vote of the voters of the city voting on the question.”
The idea of Los Angeles forming its own bank was first put forward by Wesson in July 2017, when he said the bank could be used to finance local entrepreneurs and affordable housing while also providing a safe avenue for cannabis businesses to do banking, although he has since backed off somewhat from the cannabis idea due to potential legal issues it could raise with the federal government.
“There are many milestones that must be met in order to achieve the formation of a municipal bank,” the motion says. “Changes in federal and state law are necessary and significant decisions regarding the governance structure of a municipal bank must be made. One of the critical steps in the process is ensuring that the city charter allows the city to form a municipal bank.”
In December of last year, lawyers with the City Attorney’s Office told the Ad Hoc on Comprehensive Job Creation Plan Committee that the public bank would be subjected to the same laws that any other bank is when it comes to marijuana businesses, and that because marijuana is still a Schedule 1 drug at the federal level, accepting deposits from cannabis businesses could violate the Banking Secrecy Act and open the city and employees at the bank to potential liability.
However, there are efforts both at the state and federal level to change current laws that would allow for cannabis businesses to freely use banks, and the Rules, Elections, and Intergovernmental Relations Committee earlier approved a resolution supporting the SAFE Banking Act, which is under consideration by a Senate committee and would make banking legal for the cannabis industry in states that allow the sale of the drug.
No city in America has its own bank, and the only public bank in the nation is the Bank of North Dakota, which was created in 1919. The motion Wesson introduced calling on the city to explore creating its own bank said the Bank of North Dakota is a successful model on how cities and states could use their banking needs to give back to the community.
The ordinance was approved on a 12-0 vote.