Putting “Community” Back in “CRA”
The Community Reinvestment Act and regulators have been unable to hold banks accountable to distant and distinct local communities—so nonprofits have stepped in to do the heavy lifting.
You can call New York City a lot of things: the Big Apple, Gotham, and the Empire City just to name a few. But “The City That Brought Home CRA”? Following a two-year-campaign to keep this Financial Capital of the World in check, that’s certainly a possibility.
In May 2012 New York City became the sixth city in the nation and the third that month to pass a Responsible Banking Act. The act requires the 31 banks with whom the city has deposits, and any others looking to do business with the city, to be vetted for their performance in meeting residents’ credit needs and investing in the city’s neighborhoods.
The law was the crowning achievement of a campaign led by the Association for Neighborhood and Housing Development (ANHD), along with the organization’s members (community-based development organizations) and other citywide advocates including the Neighborhood Economic Development Advocacy Project (NEDAP) and Legal Services NY. And while the ongoing economic crisis and its effect on the city can be largely credited for prompting this particular effort, advocates have for years recognized the need for a new tool to keep banks focused locally. The federal Community Reinvestment Act and regulators have not done the job when it comes to holding banks responsible.
Even robust local engagement in a specific neighborhood may not be effective given the growing size of banks, their expanding footprint, and regulators’ focus on volume of activity, not quality. City deposits and other business opportunities provide substantial leverage to induce banks to be better partners, and this is why we’re seeing a growing tide of municipalities pursuing this strategy.
The Ground Game
But first you have to get an ordinance passed. With New York City at the center of the banking industry and a mayor deeply opposed to most new regulation, actually winning was considered something of a long shot early on.
The strategy to “actually win” was built into the campaign messaging and tactics from the beginning. We recognized that passing the Responsible Banking Act would be a heavy political lift in New York City, and that, realistically, ANHD and its allies did not have the pure outside power to make it happen. Throughout the campaign, ANHD and its partners sought to build a large, active coalition that reflected deep support in neighborhoods across the city.
But we could not count on our ability to mobilize grassroots events and activists to shame our city council (we had written off the mayor at this point) into passing the bill. We would have to make a strong policy case to the city council and bring them to actually accept our point of view, while at the same time keeping the grassroots energy and pressure on.
One key early decision was about messaging. We were thrilled by the energy coming out of the Occupy Wall Street encampment that was underway only a few blocks from our office and a few blocks from City Hall. But we realized early on that the New York City Council would not deeply embrace a “populist” message that focused on bashing banks for their terrible behavior during the crisis. Instead, we focused the campaign message on community development and the logic of a new, local CRA-like law to hold banks more accountable and give communities a place at the table. At times, the amount of press coverage we could generate suffered because we steered away from populist headlines. But our calculation that the city council would be more able to embrace a “let’s get business done” message turned out to be correct. The banks repeatedly tried to kill the bill, going so far as to make overtly political threats against our council allies. But those efforts proved weaker than the combination of genuine personal support by key city council members and the pressure of regular grassroots mobilizing by local community groups.
The measure passed city council 44-4 and even overrode a veto attempt by Mayor Michael Bloomberg. That margin of victory represented a three-year effort to make our case through data and analysis.
Building a Campaign to Last
Despite the high level of excitement and engagement in the campaign, we knew a local Responsible Banking Act could lose its luster over time without formal mechanisms for keeping the community at the table in the future. As a result, the coalition made a priority of passing a bill that provided resident access to local information and opportunities for commenting on bank performance. This effort helped to shape several landmark provisions in the bill. In the end, the New York City Responsible Banking Act:
- Focuses on banks receiving a benefit from local taxpayers because the bank seeks to provide “depository services” to the city.
- Creates a Community Investment Advisory Board with eight members representing government, the banking industry, and the community. The board will be housed and staffed within the city’s finance department, report to the city’s banking commission, and have a voice in the process for designating which banks are eligible to hold city deposits.
- Requires the board to hold public hearings every two years in every city borough, soliciting input from the community. It also requires the board to draft and publish a needs assessment that details the specific banking issues and credit needs of low- and moderate-income communities.
- Requests that each bank submit a “community investment plan” that lays out how it will respond to the issues detailed in the city’s needs assessment. The board will use these plans to help measure a bank’s progress in meeting goals relative to the needs assessment.
- Encourages the board to collect detailed local-level information annually from banks seeking to provide depository services. That information will be made public and the board will hold citywide public hearings to solicit community input on the performance of each bank.
- Requires the board to publish an annual report summarizing information provided by the banks and the public with a detailed evaluation of each bank.
These provisions will give the city and local communities the information, opportunity, and leverage we need to encourage more accountable and responsive local bank policies. Of particular note is that, for the first time, the public will have access to bank data at the community level. ANHD will not only conduct its own analysis but it will also train local residents in how to access, interpret, and discuss this information.
An Accessible Act
Even as this act goes into effect, ANHD is planning for the long run and taking steps to build a strong foundation so the community is knowledgeable, prepared, and armed with the tools to use all of these mechanisms. ANHD is partnering with the Center for Urban Pedagogy, a nonprofit that uses design and art to improve civic engagement, to create spread the word about the act as part of its “Making Policy Public” poster series, which aims to make information on policy truly public, by which it means accessible, meaningful, and shared.
In graphic terms, the poster will detail how the process will work and how to maximize its potential. For example, there are several key milestones, including when data is released, when public borough and citywide hearings are held, and when the city’s Banking Commission will vote on banks’ applications. The poster will present a visual timeline of the process, directing all the various stakeholders to times when there are opportunities to get involved.
Additionally, since many residents have a limited understanding of banking, we envision the poster explaining where banks receive their capital from and how it is reinvested in the community, if at all, as well as the various types of credit, investment, and services offered by financial institutions. This will help the public be able to analyze the bank data for their neighborhood and submit informed comments.
With this tool and existing resources, especially ANHD’s Initiative for Neighborhood and Citywide Organizing, we believe New York City is positioned to build a whole new reality in which we have engaged, innovative financial institutions that provide the lending, investment, and services that our neighborhoods rely on to be vibrant, affordable places to live and work.
Benjamin Dulchin is executive director of the New York City–based Association of Neighborhood and Housing Developers, Inc.
- “Keeping Banks Accountable to Our Communities,”report from a national convening on local responsible banking ordinances, Association for Neighborhood and Housing Development, Inc., 2011
- “The State of Bank Reinvestment in New York City,” Association for Neighborhood and Housing Development, Inc., 2011