Chicago’s City Council this week is applying pressure to banks to improve their dismal mortgage lending records in Black and Latino neighborhoods, using a pair of hearings to turn up the heat.
On Monday, aldermen refused to vote on an annual measure certifying 13 banks as “municipal depositaries,” and openly questioned why the city should keep its money with banks that don’t lend equitably.
“JPMorgan Chase only did 1.9% of their [home purchase] loans in Black communities. Bank of America, 2.89%,” said Ald. Daniel LaSpata, 1st Ward, at the finance committee hearing, citing reporting from WBEZ and City Bureau. “How do we make that case to Chicagoans that these institutions should be generating any revenue from our city?”
At any given time, Chicago has $400 million to $500 million in the bank, according to the city treasurer’s office, and uses large banks — including Chase, Fifth Third, BMO Harris and PNC Bank — to collect payments, pay its bills and for operations like payroll.
“We need to put our foot down,” said Ald. Greg Mitchell, whose 7th Ward on the Southeast Side covers parts of South Shore. “If we’re gonna do business with you, we need reciprocity. There’s things we need in our city, from homeownership to small business loans.”
This is the first time in recent years there has been any City Council debate over the question of which banks hold city funds. It comes after WBEZ and City Bureau last year documented gaping racial disparities in home purchase lending, with whole neighborhoods seemingly redlined, and also after a summer of street protests demanding racial justice sparked by the police killing of George Floyd in Minneapolis.
If aldermen fail to take a vote certifying municipal depositaries, all currently approved banks can continue to do business with the city.
Aldermen seek a conversation with banks
Aldermen also blasted banks that hold city funds for refusing to participate in a second hearing scheduled for Friday, this one on equitable mortgage lending.
“Time and again, many of these institutions have not shown their support of Chicago communities who needed it the most,” said Ald. Harry Osterman, 48th Ward. “And I think when we talk about equitable investments, it goes beyond government funds, it goes into other lending that can help communities and lift up communities.”
Osterman chairs the City Council’s Housing and Real Estate Committee, which is organizing Friday’s mortgage lending hearing. A formal invitation from Osterman’s office asked mortgage lenders to “designate a representative for the hearing that has regular oversight and knowledge of your lending processes and can engage in a substantive discussion on the topic.” But as of Tuesday evening, only a single lender had responded, Chicago-based Guaranteed Rate.
“If the banks are really committed to racial equity like they say they are, then they should be participating in this conversation with us,“ said Anthony Simpkins, president and CEO of Neighborhood Housing Services of Chicago, who has helped organize the hearing.
Simpkins said recent lending commitments announced by major banks “don’t get at the root causes of a system that has been developed over generations to intentionally lock Black and brown people out of access to mortgages, to the American Dream.”
Those scheduled to speak Friday include City Treasurer Melissa Conyears-Ervin, State Treasurer Michael W. Frerichs, Chicago Housing Commissioner Marisa Novara, Congressmen Jesus Garcia and Mike Quigley, along with housing groups and advocates for fair lending.
Late Tuesday afternoon, WBEZ reached out to several of the invited banks seeking comment but did not immediately receive any responses.
Cities have limited resources to hold banks accountable
At Monday’s hearing, a number of aldermen also questioned why smaller, community banks aren’t given a shot at becoming municipal depositaries.
City Comptroller Reshma Soni said her office reached out to 54 banks to ask them to apply to hold the city’s deposits, but she said federal interest rates at 0% mean “it’s not financially feasible for many smaller banking institutions to become a municipal depository at this time.”
Soni acknowledged that “there is a sense of prestige to be with the city and do business with the city, and I think that’s where we need to push more” for greater equity.
Other cities have tried to sever ties with big banks — for instance, over support for fossil fuels — including Seattle, San Francisco, Los Angeles and New York City.
That has proven difficult, said Horacio Mendez, president and CEO of the Woodstock Institute, which watchdogs lending in Chicago communities. Mendez, who has also helped organize Friday’s hearing and is slated to speak, said cities have limited recourse for holding national banks accountable.
And he said “the sad fact” is that a handful of very large financial institutions are the only entities with the internal sophistication and product suite “to actually meet the financial service needs of large cities. So your hands are tied.”
Mendez, who worked at the Federal Reserve Bank of San Francisco and later as a bank executive before becoming an advocate, said banks view hearings like those taking place in city council this week “you know, probably the same way you view going to the dentist.”
“It’s just a necessary evil, nobody really enjoys it,” Mendez continued. “You show up and you know you’re gonna get bashed, and you just grit your teeth to try not to say anything that’s gonna bite you in the butt afterwards. And then you leave knowing that for the most part, things aren’t going to change.”
He said the biggest impact of such hearings is in “educating and informing.”
Linda Lutton covers Chicago neighborhoods for WBEZ. Follow her @lindalutton.