On Wednesday, July 17, we’ll have a briefing and discussion of legislation I am sponsoring to incorporate principles of social responsibility into Seattle’s banking practices. The briefing will be in the Government Performance and Finance Committee.
The legislation, Council Bill 117845, is the result of my collaboration with the Department of Finance and Administrative Services (FAS) and the Mayor’s office.
The legislation states that FAS will use criteria of social responsibility in selecting depositories for city money, and establishes that socially responsible banking performance be a factor worth at least 15% of the total point value in determining the winning bid.
The ordinance has three main areas.
First of all, it establishes socially responsible banking bid criteria that include, but are not limited to, community involvement and reinvestment; meeting community banking needs; supporting small business lending and community development; providing for home ownership and consumer credit; assisting distressed homeowners; and allowing for products and services that are advantageous for the City and its residents.
Second, there is a statement of tasks that requires work on progress in community involvement and reinvestment, community banking needs, small business lending, and home ownership and consumer credit.
Third, it requires reporting information about residential lending, small business lending, community development loans and investing, and consumer loan data. Examples include reporting on modifications of distressed loans, small business loans by zip code, and loans for women and minority-owned businesses citywide.
The City faces limits on what it can do regarding banking, stemming from state law. State law requires banks have collateral equal to the City’s aggregated deposits (historically, the city has used a $1.1 billion figure). In addition, state law limits city deposits in credit unions to $250,000. Because of these rules, using a small bank or credit union for city banking services—as some constituents requested—isn’t viable.
This is a common dilemma for cities across the country. Cities such as Cleveland and Philadelphia have established programs for social responsibility in banking; New York, LA and Pittsburgh passed laws in 2012.
A vote on the ordinance could come next month.
Background on earlier work on socially responsible banking is available in UP #329.
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