With the sale of recreational marijuana set to become legal in California next year and most financial institutions unwilling to open accounts for marijuana related companies, pot entrepreneurs are scrambling to figure out what to do with their piles of cash. Now, some want the state or cities to get involved.
Over the last year, there has been increasing interest among cannabis businesses and public officials in the idea of public banks: government-owned institutions that would take deposits, make loans and, in California at least, be willing to work with marijuana companies.
Gubernatorial candidate and California Lt. Gov. Gavin Newsom has called for the creation of a public bank and has discussed the idea with members of the cannabis industry. This week, L.A. City Council President Herb Wesson said he wants to look into creating a city-owned bank that might serve cannabis businesses.
Could This Actually Work?
Possibly, stated Matt Stannard, who has been an advocate of public banking long before California residents voted to legalize recreational pot use last year.
He’s optimistic, but also warns that there are plenty of potential pitfalls.
“I’m not going to say that if you create a public bank, it’s going to solve all of the marijuana industry’s banking problems,” he said. “But it’s worth a try.”
A public bank is much like a private one, taking deposits and making loans. There are a few big differences:
Owned by shareholders.
Run by a board of directors selected by shareholders.
Run to generate profit and return profit to shareholders.
Owned by the public.
Run by elected or government-appointed officials.
Run to support public priorities and return profit to the public.
Stannard, policy director for Sonoma, Calif.-based advocacy group Commonomics USA, said there are a handful of potential benefits of public banks, some economic and some social, irrespective of their use by the marijuana industry.
If California had a public bank, the state could deposit tax revenue there rather than at a private bank. Those deposits would then be used to make loans.
But unlike at a private bank, those loans could be used to support state needs — such as affordable housing — and profits could be returned to the state coffers.
The Bank of North Dakota, the only publicly owned bank in the country, has paid $85 million into various state government funds over the last four years, according to its most recent annual report. It makes low-interest student loans and farm loans and helps finance local public-works projects, all priorities set by state leaders.
Newsom, in a series of tweets in May during the California Democratic Party convention, said California should develop a state bank to offer student loans and finance the construction of healthcare facilities and housing.