In the News
Gothamist: NYC has $60M in Signature Bank Accounts, Fueling Calls for More Scrutiny
By David Brand
A run on New York-based Signature Bank put tens of millions of taxpayer dollars at risk, fueling calls for more scrutiny of banks the city uses to hold the public’s cash.
New York City currently has $60 million deposited in accounts at Signature with no plans to move it after the federal government took control and pledged to make customers whole, said Department of Finance spokesperson Ryan Lavis.
“For now, the money is secure and we’re confident that we can take time to make the right decision as the situation evolves,” Lavis said.
Signature, which specializes in real estate lending, is one of 30 large- and mid-sized banks the city government can utilize for its various accounts. None were supposed to go bust the way Signature did Sunday, as nervous customers pulled cash out of a bank that bet big on cryptocurrency.
The city has held tens of millions of dollars in Signature accounts since at least 2017, according to records shared with the nonprofit New Economy Project in response to Freedom of Information requests.
New York City had just over $50 million in Signature as of Dec. 31, 2021, the fifth-highest total among banks that held city deposits at the time. The amount was about the same in late June 2017 and March 2018, according to earlier records obtained by the organization. In mid-September 2018, the city had more than $87 million in Signature accounts.
Those deposits are only a fraction of the city’s total holdings. At the end of 2021, the city held $645 million in JP Morgan Chase and around $500 million in Bank of America.
Signature’s collapse is fueling calls for added scrutiny of the banks the city uses to deposit taxpayer dollars.
“We should have more guardrails and protections for the banks we deposit with,” said Councilmember Sandy Nurse. “How are we stress-testing them? What makes a bank worth our deposits?”
The Council’s Finance Chair Justin Brannan said the Council “will continue to monitor the performance of our current depositories.”
Last month, Mayor Eric Adams and Comptroller Brad Lander announced a public comment period for selecting which banks will hold city funds. Eligible banks must also provide specific plans for combatting discrimination.
The new procedures come after the city stopped opening new accounts with Wells Fargo as a result of “disparate mortgage practices” following a Bloomberg investigation that revealed the bank rejected more than half its Black loan applicants, while approving more than 70% of white applicants.
At the time, Adams said the new rules would ensure the city’s banking commission “is designating only those banks that have shown that they can protect taxpayer money and that are committed to promoting equity in all aspects of their operations.”
In a statement Monday, Lander called for stricter banking regulations generally, and said his office is “continuing to monitor potential impacts” on public funds.
Housing experts and tenant groups have long criticized Signature’s practices, which included loans to real estate speculators and large investment firms that sought to drive out tenants and raise rents as a core business model.
Signature remains a major New York City multifamily mortgage lender, financing about 3,000 multifamily buildings with around 80,000 tenants, according to the University Neighborhood Housing Program’s Building Indicator Project.
Last year, New Economy Project and a coalition of community groups and elected officials named Signature the city’s “Worst Funder of Bad Landlords,” for making loans to corporate property owners that oversaw worsening building conditions.
The organization is calling for a government-controlled “public bank” to invest in community needs, rather than private institutions that make risky loans or gamble with cryptocurrency.
“The city needs to create a public bank exactly because of something like this,” said New Economy Project Senior Program Associate Will Spisak. “Public money should be used for public good.”