Angelenos have had enough.
After receiving billions in taxpayer bailouts–money that was intended to free up capital and get banks lending again–the large corporate banks sat on their hands and their wallets.
Predatory mortgages were not modified, new loans for small businesses were not approved, and the myriad hidden fees we all are subject to only increased. What should have been a moment of self-reflection, or even humility for the banking industry was instead arrogance and punitive measures against the very customers who saved many of them from dissolution.
So on Nov. 5, thousands of Angelenos, along with millions of other Americans, participated in “National Bank Transfer Day” by moving their money from large corporate banks to small neighborhood banks and credit unions. The message was clear: if you won’t listen to our voices, then we will vote with our dollars.
Will the banks listen this time? Maybe. But whether the banks have listened or not, City Hall has.
Monday marked the beginning of discussions (although not votes) on the Responsible Banking Initiative in the Los Angeles City Council. Although originally passed in March of 2010, the measure authored by Councilman Richard Alarcon, has been slow to be implemented. However, the recent “Occupy” movement in Los Angeles, along with the support given to it by the City Council, has breathed new life into the measure, and it has begun to be debated again.
At its core, the measure seeks to force big banks to be socially responsible members of our city.
Under the Responsible Banking Initiative, any bank doing business in Los Angeles or seeking to do so would submit a report to the city treasurer detailing their local investments, at which point they would then be graded.
Finally, Angelenos could decide whether or not to do business with a bank investing in their community, or find a bank that is.
But even more than the threat of private citizens moving their money if banks don’t mend their ways, the biggest incentive to shape bank behavior is the more than $25 billion in investments that the city has in these large banks.
Bottom line: If banks are not willing to be good citizens, then the city of Los Angeles may no longer be willing to be a loyal customer.
In the world of sticks and carrots $25 billion is an awfully large and effective stick.
So, just why should ordinary Angelenos care about who City Hall banks with and the investment of banks in the local economy?
For too long, the large banks have been fixtures in our community, but not reliable community partners. Some have taken the money of hard-working Angelenos and invested it far outside the city limits. Through predatory lending practices and a refusal to renegotiate mortgages, some banks have been complicit in economically decimating communities in parts of Los Angeles. This is especially true in economically disadvantaged and minority communities.
The big banks have a long way to go before earning the public’s trust, which is why the Responsible Banking Initiative is so important. Angelenos deserve a scorecard to see just who is willing to reliably build the public/private partnerships that are needed to rebuild our local economy.
Far from using the “heavy hand of government” to dictate business practices, the Responsible Banking Initiative simply provides information to consumers–and city officials–so they can decide who they want to do business with.
Appropriately, this represents a free-market solution to a market-created problem.
Now let’s see who is willing to be responsible.
Nii-Quartelai Quartey is founder and CEO of The Sankofa Group for Civic Engagement.