City of L.A. to Grade Banks it Invests Through

Alarcón's Report Card Proposal Moves Closer to Becoming Law

Richard Alarcón's proposed ordinance requiring financial institutions to submit local investment “report cards” about how socially responsible and committed to the local economy they are has been drafted and is one step close to becoming law. The ordinance is to be presented to the City Council within 45 days.

Currently, the City of Los Angeles has nearly $30 billion in investments, including savings and pension funds.

A source close to the councilman's recently confirmed to RepublicOfL.A. that he has had conversations with Arianna Huffington about her online newspaper, The Huffington Post's so-called "Move Your Money" campaign, encouraging people and institutions to abandon large banks in favor of smaller, community banks and credit unions.

However, the source made clear that Councilman Alarcón's proposed investment report card law is not an outgrowth of that movement.

“The City of Los Angeles has an obligation to ensure that not only are our taxpayers dollars spent properly, but that they are also invested in a way that gives the greatest benefit to our City, and the report card created by the Responsible Banking Initiative will give us the information we need so we can invest smarter,” said Councilman Alarcón.


The councilman said even better interest rates are not enough for the city give business to institutions that under serve the community.

"A slightly lower interest rate isn’t much of a deal, if the same bank is taking advantage of homeowners, refusing to issue small business loans or not opening branches or ATMs in low-income areas.”

Alarcón was joined by colleagues on the council who share the belief that the city's investment portfolio should be placed with financial firms that demonstrate a commitment to the city's residents and businesses.

“...This ordinance will put the City in a position to have a more meaningful relationship and ensure the banking industry is a partner in not only the investment aspect, but also the community benefit," said Councilman Bernard Parks.

Alarcón will be presenting the Responsible Banking Initiative to leaders of other cities during next week’s National League of Cities meeting.

Interestingly, a statement issued by Alarcón's office referenced the use of a "national model to promote investment in banks that are operating in a socially responsible manner, including investing back into local communities and providing much needed services to residents, especially those in lower-income areas."

As mentioned, there is a national movement afoot already: Huffington's "Move Your Money" campaign, which state legislators in New Mexico have attempted to do in recent weeks. It looks like L.A. is next.

While Los Angeles would be the biggest City to create comprehensive reporting requirements for banks wanting to do business with the City, it is not without precedent. In 2006, the Philadelphia City Council unanimously approved a law requiring all banks that do business with the City fill out a Statement of Community Reinvestment Goals within Philadelphia. This year, five states have introduced bills to look at how State deposits can be used to ensure reinvestment within their State.

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: