“This is not a new idea, these exist all over the world. Germany is fueled by public banks, and look, they have the best economy in Europe.”

California will be permitted to establish public banks after a new bill was signed into law Wednesday by Gov. Gavin Newsom, in what supporters view as a powerful rebuke to Wall Street. California will be only the second U.S. state to allow public banks after North Dakota.

As Common Dreams’ Jake Johnson notes, “the Public Banking Act—which was backed by a diverse coalition of labor unions, climate justice groups, and civil rights organizations—makes California the second state in the U.S. after North Dakota to allow the creation of public banks.”

Vox’s Will Peischel writes that while California’s economy and population strongly differ from North Dakota’s, the predatory nature of the Gilded Age that motivated the midwestern state to create a public bank in 1919 bears similarities to the “increasing income inequality and predatory practices on the part of financial institutions” in California a century later. North Dakota, a deeply red state, still broadly approves of the Bank of North Dakota (BND) and supporters view it as a model for California.

The Public Banking Debate

Opponents of the bill point to a failed ballot measure to institute public banks in Los Angeles last year that the city’s voters decided against. Others believe it would be prohibitively expensive and vulnerable to political influence.

“We don’t think the government should be in the business of banking,” Stuart Waldman, the president of the Valley Industry & Commerce Assn., a business advocacy group, told the Los Angeles Times. “When you look at government programs, be it the DMV or L.A.’s recycling program, the last thing we want is to hand over banks to public employees. It just doesn’t work.”

Others, like co-writer of the bill Assemblyman David Chiu, argue it will contain extensive checks and balances and only allow for 10 public banks in all of California. “The approval process will be rigorous,” said Chiu’s office.

Supporters believe public banks offer an alternative to the profit-driven models of private banks like JPMorgan Chase, which is frequently brandished with multi-million dollar fines for consumer deception, such as its $13 billion “penalty” for contributing to the 2008 recession by pushing subprime mortgage securities.

The other major banks hold similarly suspect records, as seen by Bank of America’s $42 million fine this year for deceiving customers about its handling of stock trades, HSBC’s $1.9 billion fine for laundering drug cartel money, or Wells Fargo’s $185 million fine for opening fraudulent accounts for customers without their knowledge or permission, among countless other examples.

Supporters also believe public banks will be unable to lavish their leaders with multi-million dollar bonuses and pay packages, unlike the private bankers who gave themselves massive bonuses after receiving a tax-payer bailout for crashing the economy.

The Public Banking Alternative to Wall Street

Proponents also argue public banks are more likely to focus on investing in community development projects rather than high-risk derivative speculation and unsavory industries like private prisons and Saudi Arabian oil.

“It’s a way to keep our money here as opposed to holding it in these large Wall Street banks that we pay egregious interest and financial fees to,” Kayvan Khalatbari, a 2017 mayoral candidate in Denver, told Westword. “This is not a new idea, these exist all over the world. Germany is fueled by public banks, and look, they have the best economy in Europe.”

Some experts argue that while public banks are a positive force, they are no economic panacea. While the BND likely helped North Dakota endure the great recession better than most other states, for example, the state was also buoyed by an oil boom.

“Some of its proponents really think this is the key to prosperity,” economist Dean Baker told the New Republic’s Sarah Jones last year. “And I just can’t see that. I think it could bring fees down. I think, again, it could help to expose abuses in different areas because clearly the banks do a lot of gouging. I think that those are very, very good things. But I really can’t see a story where a public bank qualitatively changes the state of the economy in a city or state that institutes it.”

Others point to the symbolic power in breaking from the too-big-to-fail banks’ hold on the economy.

“Today’s signing sends a strong message that California is putting people before Wall Street profits,” said Assemblyman David Chiu. “We finally have the option of reinvesting our public tax dollars in our communities instead of rewarding Wall Street’s bad behavior,”