By Errol Louis
Give credit to Mayor de Blasio and the City Council’s progressives for focusing like a laser on many of the deep-seated factors that depress New Yorkers’ income, from the state’s pitifully low minimum wage to the ongoing scourge of wage theft, in which tips, overtime and other pay is simply stripped from workers.
Many of these issues will figure in the mayor’s announcement Tuesday of a new Contract with America, which will hopefully spark an important national debate.
It’s great for de Blasio to start a conversation, but Hizzoner should realize that the earnest battle to improve middle-class lives will be lost before it starts if he doesn’t forcefully attack the twin problems of redlining and predatory lending.
As far back as the mid- to late 1980s, New York experienced a troubling trend of bank branches closing in low-income neighborhoods and communities of color. In those same areas, credit was scarce for small businesses, mortgages or consumer needs like home repairs, furniture or back-to-school expenses.
Fast forward 30 years, and the same problems are still crippling far too many New York neighborhoods.
“There’s a serious lack of brick-and-mortar branches in communities of color. That means people are once again denied access to banking services. The same problems with redlining are persisting,” says Josh Zinner, co-director of the New Economy Project, a leading advocacy group.
That fact is underscored by a recently-published report issued by a newly created government body, the eight-member Community Investment Advisory Board, which conducts formal studies of the banking needs of New York neighborhoods. The body was created by a 2012 law that passed the City Council over the veto of ex-Mayor Mike Bloomberg and then survived a string of legal challenges by the banking industry.
The law mandates regular studies and hearings to determine the credit and banking needs of New York neighborhoods and indicate the ways in which institutions are meeting — or ignoring — those needs. And according to the first CIAB report, posted on the website of the city’s Department of Finance, the news isn’t good.
The largest banks in New York — including JPMorgan Chase, Citigroup, Capital One and Bank of America — appear to be clustering branches and lending in well-to-do areas while providing few or no services in struggling communities.
That has serious consequences.
“Banks’ failure to locate branches in communities of color despite the apparent demand for branch banking services may contribute to the huge disparities in the use of bank services by black and Latino households compared to white households,” Zinner testified at a CIAB hearing earlier this year. “More than 20% of black households and nearly 18% of Latino households do not have bank accounts, compared to less than 4% of white households.”
This, in turn, creates a two-tiered financial system that short-circuits economic development for the families and communities that need it most. Last week, a lawsuit filed against JPMorgan Chase and City World Ford, a car dealership in the Bronx, alleges that auto salesmen swindled Olga Arroyo, a Manhattan resident who gets by on Social Security, food stamps and a Section 8 voucher.
According to Claudia Wilner, one of the lawyers who filed the lawsuit on Arroyo’s behalf, the elderly woman, who wanted to co-sign a loan for her son, was instead tricked into filling out paperwork making her the sole owner of a $51,000 vehicle with an $830 monthly payment she can’t afford. The dealership’s paperwork, says Wilner, includes a fraudulent claim that Arroyo makes $90,000 a year.
The courts will sort out whether or not City World Ford violated the law. In the course of doing that, the courts must also ask some much-needed questions of Chase, which allegedly approved the transaction.
Obviously, all consumers should be on the lookout for deals that sound too good to be true, and shun them like the plague. People should also make use of community banks and community development credit unions, which tend to offer lower fees and better credit terms than big banks.
But at the very same time, the city must press the banking practices of the big banks that hold massive amounts of city funds.
“The banks are holding $6 billion in city deposits. They should be investing in New York City, especially in communities of color,” says Zinner. “They should be held accountable.” Meaning that banks that redline or rip off needy communities should be barred from getting city deposits.
That’s a progressive policy we should all be able to agree on.