LOS ANGELES (CNS) - Los Angeles voters could be given the opportunity to decide if they want the city to form its own municipal bank, according to a motion before the City Council today.
A motion introduced last week by Council President Herb Wesson 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,” and would authorize the city attorney to prepare and present the documents necessary to place the issue on the November ballot.
The idea of Los Angeles forming its own bank was first put forward by Wesson in July 2017 during a speech, where he said the bank could be used to finance local entrepreneurs and affordable housing while also providing a safe avanue 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.
“As a city, we might run into problems if we were to accept deposits from the cannabis industry,” Deputy City Attorney Gretchen Smith said.
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, she said.
In directions to city staff after receiving the report, Wesson said he wanted to stress “the thought behind this -- is this feasible to create a municipal bank? I just want to go into this one more time. It is not creating a bank so that it can bank cannabis. That is something that kind of came along after. So when you are doing your research, you shouldn't say, `Oh, they shouldn't do this because of cannabis.”'
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.
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