On Banking and Bankruptcy

WOM Berkeley Article Catalyzes Record Public Engagement and Conflicting Statements from the Public Bank East Bay and City Council

Record Public Engagement

It has been a fascinating seven days since our analysis of the proposed $40 million taxpayer funded Public Bank East Bay. As of this writing, there have been nearly a thousand page views making it the most popular WOM Berkeley post ever. Rodger Hallsten deserves credit for this engagement as he drove an incredibly informative Nextdoor post with over 250 comments. WOM Berkeley thanks all who contributed as we believe this robust discussion will serve to better inform this important public policy proposal.

On Banking and Bankruptcy

On Friday, the FDIC announced the failure of Silicon Valley Bank. The California Commissioner of Financial Protections reported a sudden “run on the bank” caused the failure despite being in “sound financial condition” only the day before. This failure underscores the inherent risks faced by the banking sector in general, and in particular, comparatively smaller institutions. SVB was the 14th largest bank in the US as measured by total assets.

Conflicting Statements by Public Bank East Bay on City of Berkeley’s $25,000 Allocation for a Viability Study

WOM Berkeley originally reported that $25,000 in funds had been received by the Friends of the Public East Bay. This was based on a statement in a Berkeley City Council Resolution:

The City of Berkeley began formally assessing the feasibility of establishing a public bank with a $25,000 allocation made in 2017 to support the development of a feasibility study for the Public Bank of the East Bay

However, the chair of the Friends of the Public Bank East Bay disputed this and responded in the Comments of the   article  with “corrections of fact” stating:

Berkeley (and the other cities) did not put any money into the viability study, which was totally funded by the Friends of the Public Bank East Bay.

Consequently, WOM Berkeley retracted the original statement based on the “correction” provided by the Public Bank of the East Bay. However, we also contacted Councilmember Robinson’s Office for clarification regarding the language above. Robinson’s Office responded by stating:

Thank you for reaching out. This [$25,000] funding was allocated to Friends of the Public Bank East Bay.

WOM Berkeley has made repeated attempts to contact the chair of the Public Bank East Bay to reconcile these conflicting statements, but they have not responded. It is somewhat unsettling that an organization that wants to be entrusted to manage $40 million in startup costs cannot account for $25 thousand dollars.