Banks holding New York City treasury funds will be required to disclose their investments and business practices in neighborhoods under a law passed today by the City Council.
The council’s approval of the banking act, introduced in February 2011, comes amid increased scrutiny of the industry after the Occupy Wall Street movement and last week’s disclosure by JPMorgan Chase & Co., (JPM:US) the biggest U.S. lender by assets, of a $2 billion trading loss. Mayor Michael Bloomberg has said he intends to veto the bill, even though the council has enough votes to override such a move. It passed 44 to 4.
The measure creates a community-investment advisory board in the Finance Department that would use census data to review banks’ branch locations, loans, delinquencies and foreclosures. Officials can use the information to determine whether the city should deposit its funds there, according to the text of the bill.
“The goal of the bill is not to punish banks or to point fingers,” Council Speaker Christine Quinn, a Manhattan Democrat, told reporters at a City Hall press conference before the session. “Rather, the legislation seeks to increase transparency and encourage banks to reinvest in the communities they serve.”
The bill will help encourage responsible corporate behavior, said Council member Albert Vann, a Democrat from Brooklyn who sponsored the measure.
“The foreclosure crisis is still a serious problem, the demand for affordable housing remains overwhelming and small businesses continue to need access to credit in this difficult environment,” he said.
New York has designated 31 banks that can hold city deposits totaling as much as $8 billion, and averaging about $5 billion a month, to pay vendors and employees, said Owen Stone, a spokesman for the Finance Department.
A report last year from the Association for Neighborhood and Housing Development, which backed the bill, found diminished bank support for communities even as profits and deposits grew.
The industry deployed less capital in New York in every major category of lending and investment, including a 43 percent decrease in home-purchase lending, a 37 percent drop in community-development lending and a 14 percent decrease in multifamily lending, according to the association, a nonprofit group of 98 neighborhood-based housing groups serving low- and moderate-income consumers.
Total deposits for the city’s largest banks rose 8.6 percent, or $38.5 billion, from 2008 to 2009 while profits increased almost 83 percent to $70.8 billion, according to the report.
“You would think that between the federal government and the state government we’d have enough bank regulations,” Bloomberg said at a bankers’ breakfast May 11. “I don’t know why the City Council thinks that they have the expertise to really add anything other than just adding costs to banks who try to comply.”
Bloomberg said Congress and the state Legislature should review “federal and state regulations and make sure they’re appropriate. That’s where you should be regulating banks. You can’t regulate banks in just one city.”
Council member Brad Lander, a Brooklyn Democrat, said state and federal regulations don’t require banks to disclose data on their efforts to modify mortgages for homeowners at risk of foreclosure, as the city’s law would.
The New York Bankers Association also opposed the bill.
“This measure could reduce choices for managing taxpayer funds, could require the disclosure of confidential information, mandate the provision of products that may not be safe or sound and be pre-empted by state and federal law,” Michael P. Smith, chief executive officer, said by e-mail. “It would clearly act as a disincentive to do business with the city.”
Also today, council members overrode the mayor’s veto of a so-called prevailing-wage bill setting minimum pay for workers in city-owned buildings. A vote on a resolution asking the Legislature to raise the state’s minimum wage to $8.50 from $7.25 an hour was also scheduled.
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
To contact the reporters on this story: Esme E. Deprez in New York at Edeprez@bloomberg.net; Henry Goldman in New York at firstname.lastname@example.org
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