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Banking on Ithaca
|by Paul Glover|
Money is power. It's the main tool for buying homes, feeding kids, starting businesses, planting orchards or dropping bombs. Money is therefore a license to heal or destroy. Printing our own HOUR money and spending it with each other is an important way to take power to create new jobs and help each other.
Another way to control money is to put our dollars into banks that loan back to us for what Ithaca needs. When we deposit money, we give bankers great power to shape our community. Because bankers decide who to rent money to, they can feed or starve businesses, neighborhoods, and jobs. They can boost or bankrupt entire communities. That's why it's important to know whether Ithaca bankers care about Ithaca as much as they care for stockholders.
And that's why a group of local people, representatives of 15 local organizations (including Ithaca Money), have ganged up to require Ithaca's banks to meet Ithaca's credit needs. The Coalition for Community Reinvestment has begun by challenging the sale of Citizens Savings Bank to Manufacturers & Trust (M&T), of Buffalo. During the past four months, we have met with representatives of both Citizens and M&T to tell them what this city needs. These negotiations are a high stakes poker game, because millions of dollars of potential bank re-investment in our local economy far exceed the federal grants the city tries so hard to get.
We're backed by the Community Reinvestment Act of 1977, which gives community groups authority to negotiate with banks. The CRA entitles us to know where banks make loans, so we can see whether they discriminate based on race or income. Banks are granted federal charters by the public, therefore communities can require banks to satisfy their credit "convenience and needs." That includes "aggressively marketing special credit services" to "economically disadvantaged persons or services." When banks fail to do so, they can lose the right to expand.
Does M&T deserve to expand into Ithaca? Can we welcome M&T here to invest our deposits? We've been especially concerned to learn that M&T has been taking money from lower-income central cities and pouring most of its mortgage funds into wealthy suburbs. Citizens Savings, by contrast, concentrates 90% of its lending locally.
Notwithstanding that M&T received an "outstanding" CRA rating, its low-income mortgage lending beyond their Buffalo headquarters is worse than Citizens in Ithaca, which has a low CRA rating. M&T spends more on advertising in Rochester than it does there in affordable housing loans.
M&T's racial discrimination in mortgage lending is the worst among large NYS banks. In 1992 thay denied loans to 14% of white applicants and denied 49% of black applicants of comparable income (1992 HMDA Disclosures). Home improvement loans were denied to African-Americans 18-21% more often than to whites.
Binghamton's CRA community groups have found a clear pattern of "redlining" by M&T in "low/moderate income areas in the city of Binghamton" (BCA letter to FRB, 8/23/94). Specifically, M&T's proportion of loans to people in low income census tracts of the Binghamton MSA was 12% in 1992, dropping to 7% in 1993. In all MSAs combined, 90% or more of all types of loans were made by M&T in census tracts with fewer than 20% minorities. Depositing in a bank like this is like investing in apartheid.
Nevertheless, Ithaca's Community Reinvestment Coalition has negotiated patiently, firmly and politely with M&T to help them change. Our intention has been to develop a responsible partnership. We have asked for what dozens of other local CRA groups have been given by banks that respect their depositors/depositers. So far, though, we've asked for rosebushes and gotten empty flowerpots. Says CCR member Jacqueline Scott, "They've been stalemating us on the harder issues. I question whether they believe in the CRA process. They weren't being honest."
For example we're expecting M&T to meet the needs of people normally excluded from business loans: women, African-Americans, youth, Co-ops, nonprofits and small farmers. We want them to do as follows: to make "micro-loans" as small as $400. To join with other banks to fund a small business incubator for food processing enterprises. To train bank staff to work with minority entrepreneurs. To provide low-interest loans to land trusts, mutual housing developers, and home businesses. To establish a housing trust fund for low-income borrowers (30% of our population is low-income).
We're asking M&T to expand their Board of Directors to represent the whole community, especially including women and minorities, rather than just stockholders. To retain at least 85% of full-time bank jobs and to not replace them with part-timers. To hire local people. To facilitate home ownership for bank employees. To permit unionization of bank employees. To permit job sharing and flexible schedules. To join with nonprofit lenders, like union pension funds, to sponsor affordable housing projects.
We expect them to open a branch in Southside. And to establish an affirmative action hiring program. To work with local agencies. To establish an internship program for ten high schoolers. To establish two paid adult internships. To meet with this Coalition at least quarterly.
M&T has either said no to the above, or has agreed only 'in principle' with others; either making only easy concessions, refusing to specific target numbers or merely agreeing to "study" our proposals. As CCR member Ruth Mahr says, "Although M&T talked with us, they really weren't negotiating. They refused to commit to specific targets and goals." Community groups elsewhere, when faced with closed vaults or closed minds, have reacted forcefully. They have shut down stubborn banks with direct action, or campaigned for withdrawal of funds.
Other banks, however, have seen the CRA process as an opportunity to become more creative bankers. "CRA gives us the chance to talk about the things we may not have talked about before," says Ronald Samuels of Dominion Bank of Nashville. "We have set up an incubator center for small minority businesses that allows them to rent space below market price and gives them access to business advice" (Bank Marketing 5/90). The Catalog of Community Reinvestment Agreements describes dozens of similar agreements between banks and communities all over America. We will settle for no less here.