SACRAMENTO, Calif. (AP) — A new state law in California lets local governments form their own banks to handle taxpayer money.

Gov. Gavin Newsom announced Wednesday that he signed a law co-authored by Assemblymen David Chiu of San Francisco and Miguel Santiago of Los Angeles.

They argued that because public banks don’t have to worry about shareholder profits, they can invest in things commercial banks are reluctant to provide, including affordable housing and infrastructure.

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But they warned the approval process will be rigorous. Local governments would need a business plan and state-approved insurance. The law only allows for 10 public banks in the state, with no more than two licenses issued each year.

The law takes effect Jan. 1.

The California Bankers Association said public banks would be unfair competition for community banks.

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