Yoshi's: That time SF played Public Bank
SF tried its hand at public banking once. It didn’t go well.
The need for a “public bank” in San Francisco, according to a Draft of its business plan, is:
the historic inability of traditional financial institutions to equitably serve the needs of low-income communities and communities of color
A key goal of the Bank, according to the Draft, is:
Local enterprise lending for small businesses unsupported by traditional banks [which] likely runs to several tens of millions of dollars annually.
This scheme has no real precedent, since the private sector provides cheap and abundant banking services. But the case of Yoshi’s SF gives an idea of how things will likely unfold.
In 2004, the owners of the famous Yoshi’s jazz club in Oakland needed funding to open a San Francisco location. The project was public bank-perfect. It was minority owned, the location would be in the historically Black Fillmore District, and (since the project made little financial sense) the owners couldn’t get traditional bank financing.
There was no public bank at the time, but there was money that could be loaned in an identical fashion through something called the San Francisco Redevelopment Agency, which provided state funds for such projects.
Based on a proposal by the SF Board of Supervisors, the SFRA loaned Yoshi’s $4.4 million for the project, which opened to great fanfare in Nov 2007. But by Sept 2008, Yoshi’s required another $1.3M to stay afloat, and yet another $1.5M in Jan 2009, all of which the SFRA happily provided. That’s $7.2M total if you’re counting, which the local bureaucrats doling out the funds probably weren’t.
You know how this story ends: Yoshi’s finally closed its doors in 2014, and the loans were never repaid.
The Draft plan has all the buzzwords that make simple minded progressives glow with happiness: “equity”, “communities of color”, “affordable housing”, “clean energy”, and even SF’s “Climate Action Plan”.
But SF is saturated with financial services companies offering banking to everyone, even those here illegally, which is unheard of in most countries. If Bank of America makes a bad loan to a jazz club, it loses. When SF’s public bank makes a bad loan, you, the taxpayer are on the hook. And given SF City government’s long history of waste, corruption, and incompetence, that should terrify you.