The city of Los Angeles is putting banks it does business with on the spot. The unanimous directive coming from the city council is that banks need to help Los Angeles slow the pace of foreclosures ravaging its neighborhoods and battle a local unemployment rate that far exceeds the national average. If the banks don't comply, they risk getting replaced by banks that do. The price for getting tossed: Lost access to nearly $30 billion in city savings and pension funds.(source: associated press) Is right for the City of Los Angeles to get involved in this matter? Last time they have done it they had asked the banks to give loans to home owners with no money down and without sufficient income. So they had contributed to the housing bubble. So the question is: Should government get involved in this matter?
Don't fool yourself. It's just the City of Los Angeles talking here. The city itself is not that big - only 3.8mm souls. The entire metro area, comprised of a bunch of different, independent cities, is closer to 13 million.
this makes sense while i hate when gov't intervenes with business via regulation - but intervening with business makes sense. Hey - if you have a large account at Chase, and they decide to charge you some silly fees on your line of credit. You have the right to take the other business elsewhere (even threaten to take your biz account). Thats what LA is doing. Good.
So LA will not invest its money with banks that employ their workers, but will maybe go to outside banks? Don't thay already have an unemployment problem?
The city's new rules, which are expected to be ratified by the council next month, will go farther than what's required of banks under the federal Community Reinvestment Act. That law, enacted in 1977, requires banks to disclose their local investments but not to the extent the Los Angeles ordinance will do. ----------------- hmnnnn... there's those words.....Federal Community Reinvestment Act...... More of a good thing. Hard to believe they can improve on that..... it is what it is.... but new and improved......
Regardless of how the banks behave, maybe the LA government, in their role as trustees, stewards, and fiduciaries, should look at, and seek to wring out any sort of excess compensation given to any financial institution, for any services rendered. If Vanguard, a co-operative, can provide complete portfolio management and retirement services, and charge a mere dozen basis points -- why isn't that good enough for the people of LA? The fact that the LA gov't even believes that it has leverage over financial institutions, is prima facie evidence that they have not been seeking the best deal possible for the people it manages funds on behalf of, including its pensioners.