Council Considers Rewarding Banks For Helping Local Communities

Los Angeles - Cost concerns were raised today about a proposed city ordinance that would reward banks for working with local communities to prevent foreclosures and create jobs.

A decision on whether to back the measure was postponed by the City Council's Budget and Finance Committee until the city's budget analysts can determine the cost of implementing the so-called "Responsible Bank Initiative."

The measure would require banking institutions to report to the city's treasurer every year about their lending activities within Los Angeles, as well as their community investment goals.

The banks would have to disclose information about their home mortgage loans, both conventional and affordable; refinancing activities; loan modifications; and foreclosed properties.

They would also have to list their small business loans and community development loans, which boost job creation; as well as charitable and philanthropic activities.

Banks would have to state whether they have policies that let unemployed borrowers qualify for home loan modifications based on unemployment insurance; and allow tenants in foreclosed homes to continue to rent the properties until they are sold.

The city's treasurer would use the information to assign banks a "Community Reinvestment Score" that could be a factor in helping the city's managers decide whether to award them contracts.

Banks found to have exhibited "a pattern of discriminatory or other illegal credit practices or violating criminal or civil laws" would be disqualified from doing business with the city.

Councilman Richard Alarcon is pushing for the new rules.

"The bottom line is every household that has a bank account does what I'm asking us to do as a city, and that is to determine who is the best bank that we should do work with in terms of all the services they provide," he told the committee.

"We have a responsibility to ensure that the taxpayers' dollars are being used in a way that benefits those same taxpayers in the best way possible," he added.

Interim City Treasurer Steve Ongele said his office would have to hire personnel to review all the reports that banks would be required to submit under the proposed ordinance.

For that reason, Councilman Greig Smith vowed to vote against the ordinance.

"We're 4,000 employees less than we had two years ago," Smith said. "We've closed our libraries, our parks, our daycare centers, parked fire engines ... I can't imagine us going out creating new programs at a time like this."

Maya Zutler, with the Valley Industry and Commerce Association, also spoke out against the proposed ordinance.

"We understand that there is a great deal of frustration in our communities across Los Angeles. However, we believe that this ordinance before you today keeps a significant bureaucratic layer of compliance on top of an already existing and well-established regulatory framework," she said, adding the proposed requirements are "inconsistent with existing state and federal laws already regulating (the banking) industry."

Alarcon and religious leaders, including Father Michael Mandela of Blessed Sacrament Church, are planning a rally to call for the passage of the "Responsible Bank Initiative."

"People are clear. We need jobs. Hard-working families are being forced from their homes because banks refuse to modify their loans. Enough is enough!" Mandela said.

"Banks, it is time to do your part," he said. "We need you to invest in the community that invests in you."