hello and welcome to kqed nutz rom. i'm scott shafer in for thuy vu. cannabis at a crossroads. controversial plan to level the playing field. and new report assesses how diverting felons from state prisons is affecting crime rates. and talk to bay area mcarthur genius about his program. >> first treasurer announced major sanctions against wells fargo bank. amidst unprecedented move the

state will discontinue investing in securities and stop asking the company to underwrite bond deals for a year. largest issuer of municipal bonds and could cost the company millions. what is the message you're sending to wells fargo by suspending this relationship? >> i want to send a strong and clear message the behavior is abhorrent and they need to clean up their culture. storied franchise grew up with the state of california and helped grow california communities but today their train is off the track. >> are there criminal wrongdoings that the attorney general ought to look into. >> the law enforcement should look in and suspending activity to get them back on the right

path. >> is this symbolic or real punishment? what does it cost them? >> california is big factor. we are the largest. suspended three most highly profitable lines of business with the state of california. when people say they do business with the state of california, enhances ability to do business with others. >> how much money will it cost them? >> we don't know. which opportunities they would have bid for and which won. that's speculation. >> so when? today, now, yesterday have no more business with state of california? >> i suspended a deal a few days ago. was going to be lead on the project and took them off. it's in effect. >> you left the door open to resuming that relationship. been doing business with them 17 years and had no idea this was

happening. how are you going to know they cleaned up their act or another bank isn't doing something similar or worse? >> we're going to monitor them, make sure following all the enforcement actions against them. make strong queries as to whether they're following the rules or not. >> you don't have investigative powers. >> we're going to track closely. they're subject to liability with the s.e.c. we are investors. i was offended by that, they represented promises to us and breached them. we're going to work in concert with others to make sure they become great actors, fulfill obations. do good and you will do well. >> what is this going to cost california? there are 49 other underwriters in the pool. going to encourage and track them. get competitive bids. we've dropped down the cost of

bohring from the state. saved over $4 billion in benefits. >> not going to cost anything? >> we don't think so but drive the others to get good bids. >> company and its ceo have become human pinata up on capitol hill, any indication they haven't done a good job for california? >> not in the lines we've suspended actions. we've monitored their activity. the way we have changed practices is competitive negotiated selections of our underwriters so that if you do well in a competitive, we're look favorably perhaps -- >> you had no indication up to now they've been screwing up in some way? >> no. >> as treasurer you we have

investments in wells fargo stock, would you lead the charge to divest? >> leading charge to make sure we have proper governance reforms in place. don't get independent judgment and thought and review when you have the ceo and chairman as same person. so i am pushing that we have in the past, with wells fargo in this case to make sure we separate those positions. >> affect other banks? >> yes. >> you're a candidate for governor, running in 2018. to those say you're politically grandstanding what would you say? >> i would say i've proved i'm tough. i took on governor schwarzenegger when missedant budget, the legislature and insurance companies when wouldn't pay beneficiaries money they were owed. audited city of bell.

i've held all finance offices in the state of california and make sure california is on the right track. >> do you have wells fargo visa cards inny you are wallet? >> i do no. >> it's hard to avoid. big in california. john chung, thank you so much for coming in. turning now to continuing coverage of cannabis at a crossroads. city of oakland has a controversial in you plan to regulate marijuana businesses. half of permits would go to perceived victims of the war on drugs. residents jailed for marijuana offense or live in parts of east oakland. at tuesday meeting brooks said the equity program would level the playing field for the cannabis industry in oakland. >> by end of 2020 this will be a $44 billion industry and when you look at industry across the

united states and in oakland, the vast majority of people who are making money in this industry are white males. we need to make sure there is equity in this industry. and we need to make sure oaklanders have an opportunity. >> some think it could exclude the very people it's trying to help. >> many other people throughout entire city who have actual victims of the war on drugs you're choosing to turn a blind eye to and be callous and uncaring to. >> joining me now to discuss the unusual program. swan, oakland reporter and buckston, owner of a cannabis program in oakland. tell us rachl a little bit about it. what is it intended to do? >> well this is ostensibly attempt to develop a permitting system now required by the state and will allow people to get

state licenses. it's also an attempt to deliver some form of reparations for the u.s. drug war. so oakland is trying to kind of priorityize permits for people who have been arrested for marijuana offenses in the past and for people who lived in neighborhoods that were, i guess, affected by the drug war. >> so equity is for people who have been what arrested in the fact or unfairly treated? >> arrested or harassed. cab bis was used by police for gateway to investigate other things. very specific how they chose which people to go after this. certain communities police used this as way to get involved in the community. >> so this program tries to give those folks a leg up. >> absolutely. lot of places in the country if you have cannabis convictions you can't get in the industry.

there's been people in the industry for many years but now locked out because of the laws in other placesment wanted to make sure the people in this community even about legal issues were part of the industry. >> this was announced and passed in may but permits not offered up. why is there a delay? >> i've heard the applications are ready go and city is not releasing them because now several council members have come to regret the law they passed. >> having second thoughts about it. so they've just not implemented it? >> city staff is trying to figure out what is going on with the equity program. been so much back and forth with people in the community and industry having issues. city staff wants the council to get it figured out before issuing licenses. >> we heard in the clip from the council woman that industry in

oakland although proliferated is largely run by white male. is that your experience? >> across the country dominated by white males. some run by people of color but in general. >> so this is theoretically on how people live to give preference to people of color rachel? >> that's the basic concept. the problem that -- what a lot of people are saying, criteria they've set up are just way too narrow. they're saying we want half the permits in oakland to go to people who live in these six east oakland neighborhoods or who have had a marijuana conviction in the past ten years. >> sounds like they're saying if you have a drug record we want you. >> absolutely. >> that's kind of the opposite of what most other places do. exactly the opposite.

>> what are your concerns about that or any other aspect of this? you got a chance to speak. >> i did and there is a desire to see balance. assist the people just trying to get in the industry who previously felt they couldn't. but don't want to drive away the current industry and companies around paying taxes. >> having hoops to jump through or had a? >> talking about a 25% tax on profits will scare a lot of companies away. my understanding is that was put on the table to start the conversation and get people together to start negotiating what will work for everybody. but sound of initial 25% scares a lot of people. >> so fear is don't bother with oakland but go to berkeley. >> other cities are developing permit system and seem to be more lenient and fear is that -- the way law is currently set up,

city cannot give out a regular permit until it gives out -- it has to give out equity permit for every regular permit. >> and at 25%, what is that going to be a tax? or hand over profits if you get a permit? >> called it different things at different points. last i heard referring to it as last. first saying take 25% of the people's business. i don't know what thoo tha would look like and chair on the board would go to the city. make it financially unviable. >> dropped that? >> using it's negotiating point. getting people to table to talk about what would work. 5% gross tax would be equivalent in general. but the concern -- 25% taxes are preexisting businesses. concern is business been here

illegally, building upd, have leg-up on people waiting for legality. balancing that. >> so program is kind of a set aside, in a way. are there constitutional problems because it's kind of affirmative action perhaps, preference for these individuals. >> i spoke with a lawyer yesterday who said this is flat-out unconstitutional, i mean you can't give preferential treatment to anyone including an ex-convict. you know or person who lives in certain neighborhood. >> brings up point too, they have a record because of the war on drugs, what is going to say whether or not they have what it takes to run a successful business? >> think the idea is they weren't going to make the determine nation, just didn't want to lock people out because of a piece of paper that happened years ago. >> they get a preference if they

have the paper. >> everything lines up. business is permitted and solid business plan and meet all the criteria athat everybody else has to meet. in line and wouldn't have to wait as long. hundreds of people, will become thousands applying. permissive environment and situated between humboldt and l.a. is good location. >> it's one thing to say hey we're not going to flat-out turn you out because you have a past felony. it's another thing to say we're going to set aside a permit for you because you have a felony. >> complicated. >> what does law enforcement say? >> when they come to meetings, i think trying to go with the city. they know we're far along with cannabis being regulated and about to be legal. i think staying out of the way. whenever they come to meetings are just nice. >> very good. i'm sure be hearing more about

this as it gets implemented if it does. mr. buckston and ms. swan, thanks for coming in. public safety. number of people locked in california years has dropped significantly due largely to sweeping criminal justice reform governor brown calls re-alignment. away from prisons toward county jails and. measure decriminalized other offenses and put another dent. joining me now is coauthor of report, mia byrd. welcome. one of the goals of re-alignment is reduce recidivism, that churn of prisoners going from prison to the streets and back again

for parole violations. what impact has re-alignment had on that? >> rearrest and reconviction rates about the same as before. >> and same kind of offenses? why isn't the rate coming down? >> i don't think we're ready to conclude it isn't working. only looking at those released if prison so far and large segment of the re-alignment population held locally and experiencing more of the local treatment. those are folks just starting to look at recidivism rates. >> i would assume the population in county jails is drifting upwards. what are you seeing? >> right after re-alignment saw that, the jail population shoot up and prop 47 saw a lot of

population pressure release. >> and jails unlike prisons are not built for long-term stays. how big a problem is it? >> most of the jails built to hold for about a year in terms of program space and jails are restructuring what they have. and jails have received new construction money. >> money is available? that was a concern of re-alignment, counties didn't believe would get money to implement this correctly. >> i think counties have gotten a significant amount of money but would like more. >> what about overall spending, think if spending more money on preventing crime and rehabilitating inmates, getting them out of the state prison overall would be spending less. are you seeing that? >> unfortunately seeing correction spending overall slowly increasing. not getting the spending returns

we expected. >> why would it be going up? >> we've been a mass incarceration state for decades, a growing problem and now trying to make a transition and invest in re-entry programs and services to change the criminal trajectories, does cost a lot of money. >> it's not building new prisons but investing money in rehabilitation so when they get out, less likely to go back in? >> that's the hope. >> that's the theory. what about crime rates. hear anecdotal data about the murder rate going up or san francisco see people smashing windows on cars, is that attributable to re-alignment or prop frefb? >> it was a huge fear. only saw property crime

increase. motor vehicle theft. don't have data to tell if prop 47 increased crime rates. >> will be looking at it seriously because how can you assess the success is this that's something politicians pay attention to around re-election. what do you want to know you don't know now? >> key things, want to see recidivism rates for locally held population and also see what kinds of re-entry programs are effective and help local governments target those programs. really want to understand the effect of prop 47 on recidivism and crime rates. >> more data you have, this works and that doesn't, you should be doing this and this. >> yes.

with all the counties, great opportunity to learn a great deal. >> lot of the concerns the state had with lawsuits overcrowding would become county problems. to what extent has it happened? >> populations grew and counties are facing overcrowded jails and prop 47 has relieved the crowding issues. >> less of a problem than might have been. >> maybe. crowding on the one hand, conditions are another question. >> thanks so much for coming in. and now a man with a mission. last week a san francisco financial expert was named one of 23 recipients of this year's prestigious macarthur fellowships, genius grant. jose quinonez is founder and ceo of mission fund. helps build good credit through

a unique program that taps into a long-used informal model of community lending. thuy vu sat down with him earlier. >> pleasure to be here. >> your nonprofit mission asset fund builds on community based lending model. where people all contribute to a pot of money and lend to each other. why did you choose to focus on this model? >> reason is because when we were starting our work, convent wisdom at the time was had the notion that people were somewhat just financially illiterate, just didn't know enough or doing everything wrong and needed us to go in there and help them, set them straight. and so we deviated from that. actually if you really look at what is happening particular in immigrant communities really financially savvy individuals. know more about interest rates

than any of us, managing budgets across households and countries. doing a lot of great things and don't give them credit. we found out people do come together and save money together. we wanted to lift that up, start a conversation there and then help them use this practice as a way to actually get into the financial mainstream. >> and lot of cultures have this. latino, asian cults. my own vietnamese culture, has lots of different terms. and once you do this, you take it to next step, you formalize this with financial institutions so the participants can have credit history and relationships with established financial institutions. how do you do that? >> first thing was one recognizing it as bon aified financial information, to say this is people lending.

informal and nobody knows about it but the people in the group. we formalized informality, in such a way that all the participants have to sign a promissory note saying that i have to pay this a month. that is legal document that transforms it into a viable financial product and gives ability to service that loan and report the information to the credit bureaus. one of the things we found out, no matter what we do in terms of helping people develop financial security, if we didn't help them build or improve credit scores all be talk because without having the credit score or report, really impossible to do anything in our world today. without a credit report people can't even get permits or

insurance or in a lot of cases jobs. we wanted to address that barrier head-on, reporting it is helping them. >> build new lives. >> you have an interesting background yourself. building new lives, nine years old when you immigrated from mexico into california after losing your father and then your mother, how has the immigrant experience shaped your work and motivation to do it? >> i am immigrant, came as 9-year-old boy, undocumented and lived in the shadows of society, fearful of deportation, taught to me. don't say a word or speak up. make yourself invisible. because afraid. that shaped me but me and my family were able to get amnesty through the 1986 law that president reagan signed and i

was unshackled in a way to live out rest of my life here. so i continued on with my education, went to uc davis, to princeton and worked in congress. but never forgotten that experience of being in the shadows. i knew there's more to the story that we have people in the shadows because i know that people are there, are people that are hardworking, dignified and really just want opportunity to really live out the true human and economic potential. i dedicated my life and career to actually do that for them. thankfully through lending circles able to find a tangible way to help people build financial security. >> what is the default rate like? >> we've managed $6.2 million in loans. repayment rate is 99.3%. so default rate is low.

there's a lot of reasons why. this is their money. >> personally and emotionally invested. >> do you follow up with participants after they leave the fund? how has this transformed lives? >> we do follow up, we have a lot of clients that come and have a second or third lending circle with us. one story i go back to, had a client who moved after leaving abusive husband, came to san francisco to start her life anew with two kids but because didn't have credit report couldn't find apartment. nobody would rent to her. essentially homeless with kids living couch to couch or sleeping in the hallways. but once she got a credit report was able to get apartment and came to our office to deliver the news and literally in tears because her life was transformed because of that. >> all right. real quickly you get a grant of

$625,000, what are you going to do with it? >> go to disneyland. >> and then what? >> i'm going to keep doing what i'm doing. this is a phenomenal recognition, resources, but providing a jet fuel to our work so thankful i want to continue to do this work for years to come. >> all right jose quinonez, mcarthur winner. thank you very much. thanks for watching. i'm scott shafer in for thuy vu. for all of kqed news coverage please go to kqed.org.

announcer: discover short films next on "film school shorts." announcer: "film school shorts" is made possible by a grant from maurice kanbar celebrating the vitality and power of the moving image, and by the members of kqed. max: yeah. thank you. i'm sorry about the other car. yeah. no, no, no, no, no. i'm all aboard, christoph. christoph: we don't have a lot of time. max: yeah. oh, no. this is the best thing to come out of germany in a very long time. that's why i'm trying to push this thing, so trust me. oh, yeah. oh, no. he's big money, this guy. yeah. yeah, oh, he's crazy about this. yeah. no, no, no. i-i-i'm serious. he can't stop calling me. christoph: yeah, well, we've got to close the deal. max: no, no, no. i assure you that i am invested in this more than anyone.