Los Angeles city council is pressuring their banks to help stop the unemployment and foreclosure crisis by offering competitive interest rates and lower fees on investments. They are also looking for banks to invest and reinvest inside the community. For those banks that do not comply, the city council is threatening to deny them access to $30 billion in city savings and pension funds.
Los Angeles will be tracking bank’s investments, specifically who they are lending to and where geographically they are located. They will also be looking for those banks who are modifying mortgages. While the national unemployment rate is 9.7%, Los Angeles’ is 13.7%. The idea is that the more people that will be able to hold on to their homes, the more that will stay employed, and the better businesses will perform.
The city’s new banking legislation will require all city banks to submit a yearly investment report, going beyond the already existing 1977 legislation, the federal Community Reinvestment Act. “We have a lot of power with our investments,” says Alarcon, who represents part of the San Fernando Valley. “We want the banks to know that the health of the community is more important than a low interest rate.”
The American Bank Association acknowledges what the Los Angeles city council is doing, but says that there will have to be some sort of balance between remaining competitive and turning a profit, and helping the community. Uneconomically sound moves won’t help anyone. Similiar programs have been considered in Massachusetts, Maryland, Pennsylvania, and Minnesota.
For the original AP Article
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