Advocates for the poor are using the Occupy Wall Street protests in city halls to push municipalities to divest from banks blamed by demonstrators for the global financial crisis and persistent unemployment in its wake.
San Francisco’s Board of Supervisors weighed such a move yesterday during a hearing in which activists, including supporters of the local Occupy SF encampment, urged the adoption of policies that would prompt big banks into modifying mortgages for struggling homeowners.
Communities from California to New York are considering demands to halt doing business with some of the biggest U.S. banks, or at least to focus attention on their local investment activity. The Los Angeles City Council on Oct. 12 accelerated plans to issue report cards on lenders that may lead the nation’s second-most populous city to withdraw funds from those that score poorly on criteria such as home-loan modifications. New York City may make a similar change in bank-selection rules.
“There is a lot of suspicion or frustration with the current financial institutions not doing enough at the local level,” said San Francisco Supervisor John Avalos, who called yesterday’s hearing. “I see that dramatically in my district, where a lot of small businesses are suffering.”
The New Bottom Line, a coalition of more than two dozen small-business, community and faith-based groups, will introduce so-called divestiture resolutions in more than 50 U.S. cities in coming months, according to Ilana Berger, executive director of the New York-based organization.
Picking Up Steam
While community groups have been pushing such measures for at least two years, the campaign has gained momentum since the Occupy protests began in New York Sept. 17, calling for an overhaul of financial-services laws, Berger said. The campaign’s goal is to cut banks and brokers out of municipal financial-services contracts if they can’t prove they are modifying loans for homeowners in distress.
“People from all walks of life are saying we’re not going to do business with you,” Berger said by telephone. “We’re not going to let you steal any taxpayer dollars until you fix the foreclosure crisis.”
The New Bottom Line campaign, whose members include nonprofit groups such as Seattle’s Alliance for a Just Society and Oakland, California’s PICO National Network, has been giving divestiture tool kits to activists. The kits provide a glossary of municipal-finance terms, such as electronic benefit transfers, purchasing cards and securities trading.
Divestiture Tool Kit
The kits contain sample divestiture measures that say: “This ordinance is intended to cover any and all contractual relations between the city and ‘bank/investment bank x.’”
San Francisco Treasurer Jose Cisneros last week began requesting proposals for banking services. Bank of America Corp. has most of the city’s 133 accounts, Cisneros told the Board of Supervisors yesterday. He said banks collect about $2.7 million a year in fees from the municipality.
Bidders for the city’s business will be judged partly on a set of “social responsibility” criteria being developed by the Greenlining Institute, Cisneros said. The Berkeley-based nonprofit institute advocates for “racial and economic justice,” according to its website.
“We are interested in seeing what we can do to bring social responsibility into our banking RFP and make sure the work we’re doing and the contracts that we are considering entering into can be done in a way that best support our community,” Cisneros told the board.
Bank of America, based in Charlotte, North Carolina, provided more than $3.1 billion “in lending and investing to San Francisco’s low- and moderate-income communities and customers for local small business, affordable housing, and community development needs,” Colleen Haggerty, a spokeswoman, said by e-mail.
The bank supports the city’s efforts to evaluate such activities in selecting vendors for financial services, Haggerty said. The lender is the second-largest U.S. bank by assets.
The supervisors may want to consider setting up a public bank run by the city, according to Fred Brousseau, a principal in the board’s Budget and Legislative Analyst’s Office.
“Obviously, the big advantage is profits that the bank makes stay with the city,” Brousseau said at the hearing.
“The bank will be able to access lower-cost credit and make that available to lenders,” he said. “The city would have complete control of the policy goals to the extent to which the money is used to serve underserved communities.”
Supporting Occupy Protest
In Los Angeles, the City Council voted to support the Occupy LA protest and to accelerate bank evaluations using “report cards” to score foreclosure, charitable and other local activity by those lenders that have city accounts.
Cutting off some banks and brokers may cost tens of millions of dollars in termination fees and additional borrowing costs, according to Miguel Santana, the city manager. The firms provide letters of credit to a Los Angeles infrastructure program where expenses could rise if new lenders had to be found, he said in a memo to the council last week. In an interview, he named JPMorgan Chase & Co., the biggest U.S. bank by assets, and Wells Fargo & Co., the largest by market value, as among the firms involved.
Richard Alarcon, the Los Angeles councilman who co-sponsored the resolution on ratings, said that even if one or more of the firms were dropped, the city would find other institutions to do the work.
“The CAO is taking an extreme position but it indicates the Occupy movement is working,” Alarcon said by telephone, referring to Santana, the city administrative officer.
Dana Obrist, a Wells Fargo spokeswoman, declined to comment on the issue last week. The bank didn’t respond to further requests for comment yesterday.
Even before the Los Angeles vote, activists had success pressing city officials to consider banks’ local business when deciding whether to hire them. In March, suburban Hempstead Village, New York, with about 54,000 residents on Long Island, passed a resolution to close a $12 million JPMorgan account for its general fund, Mayor Wayne Hall said.
“They were not modifying mortgages for residents here,” Hall said. “The banks were bailed out by the federal government with taxpayer money. The least Chase could do was consider modifying mortgages so people wouldn’t lose their homes.”
Switched to TD Bank
After Hempstead’s five-member board of trustees passed the resolution to close the account unanimously, the village asked banks for bids to hold the funds, Hall said. Hempstead has since begun working with Toronto-Dominion Bank, he said.
Cornell University’s hometown of Ithaca, with about 20,000 residents in upstate New York, passed a resolution in August saying it won’t hire JPMorgan when issuing bonds, according to Herb Engman, the town supervisor. The New York-based bank wasn’t doing enough to modify mortgages for residents who were underwater, he said.
“It was symbolic more than anything else,” Engman said, as the town already was going through another bank to sell debt.
Earlier this year, Tompkins Trust Co., a local bank, underwrote $2 million of bonds for the town. The borrowed cash will be used to rebuild a water main, and fix a roof, among other projects, Engman said. The town is paying an interest rate of 2.89 percent on the bonds, “the lowest ever,” he said.
Justin Perras, a spokesman for JPMorgan, declined to comment.
New York Measure
Banks that hold funds on behalf of New York City may be put under greater scrutiny for the investments they make in local communities if the City Council passes the Responsible Banking Act. The measure would require lenders report on loans and investments they make in poorer neighborhoods.
“Banks can play a critical role in supporting and improving communities,” Council Speaker Christine Quinn said in a statement. “We want to ensure that New Yorkers' deposits are reinvested into local communities to the maximum extent possible.”
In San Francisco, Cisneros requested bids on Oct. 21 for firms to help manage the city’s finances from property taxes to public transit fares. In a statement, he said the city was seeking “to improve pricing and services, as well as influence our banking vendors to better serve San Franciscans.”
At the City Hall hearing on the issue of banks yesterday, public comments revolved around pushing lenders to modify loans for people at risk of foreclosure.
William Ortiz-Cartagena, a 32-year-old parking-lot operator and supporter of the Occupy SF movement, told the board of supervisors that he was in “loan modification purgatory” with Bank of America on a three-bedroom San Francisco home he bought for $890,000 in 2005.
“Bank of America won’t give me access to credit to expand my business,” Ortiz-Cartagena told the board. “I’m still working with them to modify my house loan.”
“How are they helping us?” he said. “Let’s hold them accountable.”
Editors: Ted Bunker, Dan Reichl.