I'm left wondering how much benefit there is with public banks.

First, we already have not-for-profit credit unions and member-owned cooperative banks. Why does the bank need to be owned and run by the city?

I'm a big fan of credit unions. They offer a not-for-profit alternative to banks. However, when you look at their rates, they aren't some order of magnitude different from banks. They can often be better, but they usually aren't so far off because ultimately banks remain reasonably competitive.

I guess my question is: how would a city-run bank do substantially better than a credit union?

The article talks about trying to finance affordable housing, but one of the biggest impediments to affordable housing tends to be residents opposing it, not its financing. Even then, housing financing is a quite competitive market and the question becomes whether the city-run bank would issue riskier loans with less possibility of repayment. However, if the city lends with a lower repayment rate, that's just a subsidy. I think the government needs to spend on affordable housing, but this just seems like a way of doing it inefficiently (but sneaking it by taxpayers who don't notice it since the city isn't "deciding" to spend money on affordable housing).

Either you lend money at rates similar to what credit unions lend at for projects of similar risk or you decide to lend at lower rates or to riskier projects and lose money - essentially offering subsidized loans.

It sounds like advocates 1) dislike for-profit banks (and it can be easy to feel that way) and 2) want to lend to/invest in projects likely to have a bad repayment rate or worse returns, but fit something they want for other reasons. Really, it sounds like they want subsidized loans to substitute for grant money the cities won't give them.

Now, I think combatting global warming is of huge importance and I think we're facing an affordable housing crisis. However, I don't see a city-run bank as the solution to these problems.

Frankly, the reason it's a bad idea can be seen when one thinks about pensions. Why don't we have the public pensions of California invest in these socially responsible projects? Because we've made a commitment to those retirees and if we invest in underperforming projects, taxpayers will have to make up the rest - and there will be less money for all the good projects we want to accomplish.

There is an opportunity for a city-owned bank to offer benefits. If it's as efficiently run as a private bank, the city would essentially reap the profits from it. However, they could also reap those benefits from using a credit union. I guess I'm left wondering why advocates don't try and get cities to move their money to a credit union first. That's probably where I distrust their idea most. It feels like they want a city-owned bank because they think once the city spends millions setting it up, the city won't be able to back away from it and they'll be able to siphon money out of it for socially responsible projects.

I'm guessing that cities have explored credit unions. Seattle wanted to dump Wells Fargo in a 9-0 vote and found that no one else could really handle their business. Seattle tried many things including slicing up its business into smaller chunks and trying to court smaller banks.

It's also important to note that while cities have a lot of yearly revenue, it doesn't just sit in the bank to really be invested or lent. Seattle puts $3B through Wells Fargo each year, but has an average daily balance of only $10M. The article says that they "park" money in banks, but I don't think that's really the case (at least it certainly isn't in Seattle).