Banks must invest in community key to Lavelle’s new banking bill

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One of the last legislative acts by Pittsburgh city council in 2011 was the 5-4 passage of a bill that would direct the city to deposit its funds in banks that reinvest the most in the city’s poorest neighborhoods.

The idea is to use the potential deposits of $350 million as leverage to have banks invest even more and assist the city in its redevelopment efforts. But while laudable, Councilman R. Daniel Lavelle, who voted against it, said it did not really address the needs of those communities, and he convinced Mayor Luke Ravenstahl to veto the bill.

Lavelle
R. DANIEL LAVELLE

On Jan. 10, Lavelle reintroduced the legislation, now called the Responsible Banking Bill.

“At its heart, this bill does what the other one failed to do,” he said. “It holds institutions accountable for assisting low- to moderate-income communities.”

The new legislation adds language that requires banks that bid to hold city monies to submit more detailed reporting on their investments, lending practices, services and branch presence in those communities.

Both the city controller and director of finance would then grade the institutions from high to low on a five-point scale weighing several criteria and recommend them as depositories based on those grades.

The bill also refines how banks report those activities.

“Currently they report loans and development funding by census tract, but that can be misleading,” said Lavelle. “An institution could make a business loan in Shadyside, but get credit for a low-income loan because that tract also includes Point Breeze or North Homewood. This bill requires reporting down to the block level.”

The data to be reported and evaluated include; the number and type of residential loans, small business loans, community development loans and investments, the number and location of branches, and the total dollars on deposit.

Additionally, participating institutions must submit a Community Reinvestment Plan every two years that describes current and proposed initiatives within the city aimed at addressing its financial needs and those of its residents and businesses, including low- to moderate-income and minority residents.

Banks must also provide the city with 90 days notice of any branch closing or opening, and city monies must be held on deposit in branches within the city limits.

Additionally, institutions found to be engaged in predatory lending practices will be barred from consideration.

Lavelle told the New Pittsburgh Courier he had wanted to include institutions such as nonprofit Community Development Financial Institutions or entities like the Hill District Federal Credit Union, but because of the varying federal limitations on how they can operate, he did not include them in the bill.

“When discussion came up on the idea of providing resources to those institutions, we couldn’t get an answer on whether we could,” said Lavelle. “We also wanted to get this banking bill back on the table as quickly as possible. If we can involve them at a later date, we’ll do that in another piece of legislation.”

(Send comments to cmorrow@newpittsburghcourier.com.)

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