Mad as Hell: Los Angeles City Government Could Move Investments out of Large Banks

Chase, Other Bigs Fear Losing City's Multi-billion-dollar Portfolio

Los Angeles City Councilman Richard Alarcón recently ordered the city's legislative analyst to create a points system for grading the social responsibility of financial institutions that want to handle the city’s investment portfolio.


But Councilman Alarcón didn't stop there. He also said the city should, as Arianna Huffington has said both on her online newspaper, "The Huffington Post" and on network television, "Move Your Money." The "Your" in this case means the taxpayers of the City of Angels. The move would, presumably, be from big banks such as BofA and Chase to smaller community banks and perhaps even credit unions.
Alarcón proposed that the city create a “report card” to evaluate the number of small business loans provided, evidence of working with homeowners facing foreclosure, the number and location of branches and ATMs and the use of federal TARP funds.


“During these times of the financial meltdown and the federal bailout of big banks, it is more important than ever that we ensure that our money is being invested in institutions that are investing back in our community—not those that are taking advantage of our residents and ripping off their clients,” said Alarcón, whose district is in the northern part of the San Fernando Valley.


“Creating investment criteria will help us ensure the city is investing taxpayer money responsibly and making the most out of our multi-billion dollar portfolio.”
After a hearing on the city’s investment practices, Alarcón, who is chairman of the Jobs and Business Development Committee, led a contingent of union members, staff, members of the public, and media to the downtown offices of Chase Bank. Inside the bank’s lobby, the group delivered a letter demanding the bank act more responsively to the needs of the community.

Pictured above: L.A. City Councilman Richard Alarcón (second from left) and an unnamed woman ask a bank employee at Chase Bank near City Hall to help get a letter of demands to Chase's Wall Street headquarters.

Below: A draft of the councilman's proposed report card for banks who want to handle L.A.'s investments:

Banks Hoarding Bailout Money, Won't Even Loan to Themselves

Banks across America are hording money given them (okay, loaned to them--theoretically) by the U.S. Government. The the bailout money was meant to free up stalled credit markets, i.e., give banks money to lend to businesses and consumers. The idea is to reinvigorate the economy with a little spending. But we have just learned (again) banks who got bailout money loaned less money in March than they did in February! A Wall Street Journal investigation found that the more money banks got, the less they lent.

Though not a bailed out bank, and having told me late last year for a story I wrote in the Business Journal that they have money to lend and are lending it, I posted this Union Bank of California image because of an interesting anecdotal connection to the tight-credit angle of this post: Union Bank of Calif. has had a new branch under construction on Santa Monica Blvd. in West Hollywood for almost two years now. Progress on construction has been slow to say the least. Even banks borrow money to build. Has UBOC found credit markets too tight to get on with opening the much-anticipated (the nearest location now is in the heart of Beverly Hills' worst traffic area) branch in WeHo? Stay tuned...I'll learn and let you know Wed., April 22 what's the delay.

Mark to Market: Other Big Financial News

FASBE, the rule-making body for the accounting industry (think of it as the lawyers' bar, except for CPAs), has bowed to political pressure and approved "more flexibility," i.e., more generosity, in the valuing of legacy, i.e., toxic, assets. The bottom line? Better-looking bottom lines for banks and other financial institutions. But is this just institutionalizing the kind of willy-nilly analysis that was the problem way back with Enron, and during the current crisis on Wall Street? Or, is it a necessary evil to grease the gears of the U.S. and world economies? I'll try to get some answers from leading accounting firms later at the Business Journal's website: sfvbj.com. (Maybe accounting is not such a bad beat for this reporter after all). Meantime, here's Reuters U.K.'s take on the so-called mark to market issue: http://uk.reuters.com/article/regulatoryNewsFinancialServicesAndRealEstate/idUKN0226528020090402