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For the first time, Seattle is incorporating principles of social responsibility into its banking practices.
This follows from Council Resolution 31337 that I sponsored, in response to Occupy movement. Resolution 31337 included a commitment to review the City’s banking practices, “to ensure that public funds are invested in responsible financial institutions that support our community.”
The resolution further stated the Council will “consider future legislation to promote responsible banking and provide an incentive for banking institutions to invest more in our City, particularly with regard to stabilizing the housing market and supporting the creation of new businesses.” I will be proposing legislation to enshrine social responsibly banking principles into city law.
State banking law sets the parameters for cities: for example, banks must have collateral equal to the City’s aggregated deposits (the City has historically used $1.1 billion). In addition, cities can deposit only $100,000 in credit unions. Because of these rules, using small banks or credit unions isn’t legally viable. In 2011, Seattle deposited $20 billion through its operating account.
This is a common dilemma for cities across the country. Those that have addressed banking practices have adapted by incorporating principles of social responsibility into how they award contacts for banking services. These include providing banking services for underserved areas and lower-income residents, home lending for underserved communities, small business lending, assistance in avoiding foreclosures, policies for foreclosed and vacant residences, inclusion plans for outreach to women and minority owned businesses, and outreach to local, small business.
Shortly after the Council passed Resolution 31337, I met with the Department of Finance and Administrative Services (FAS); they were in the process of developing a request for proposals for city banking services. They agreed to incorporate social responsibility principles into the request for banking proposals, something the Mayor also supported.
After reviewing what worked well, and what lessons we learned, I’ll be introducing legislation to assure that in going forward all future city contracts with banks holding our deposits must meet our socially responsible banking goals. I’m using the 11 reporting disclosure recommendations that the National Community Reinvestment Coalition provided in their July 2012 report summarizing Local Responsible Banking Ordinances.
With regards to the immediate work before the Council, I had a follow-up meeting this week with FAS staff, and told them that the City must have clear annual reports monitoring the bank’s community involvement, investments and practices. I will be working with FAS to assured that the City will have access to the most relevant data possible in these areas. I also want to identify how the bank can assist local small businesses in securing loans and encouraging their economic development. Lastly it will be important to retain the City’s right to shape future reports to capture and track any change in Seattle’s financial and economic environment.
I look forward to writing an ordinance where Seattle will join a number of other cities that closely monitor the banks managing their funds, in order to maximize their positive impact on the communities that they do business in.