Today, Rep. Anthony Weiner (D -- Queens and Brooklyn), a member of the House Energy and Commerce Committee, released a report finding that although the number of bank branches in New York City has increased by 191 since 2006, low-income neighborhoods are being left behind. The study found that over the last four years, the 20 wealthiest neighborhoods in this City have gained 48 more banks; while only 8 additional banks stand in the poorest 20 neighborhoods.
Even in the midst of an economic recession, the number of bank branches in New York City has increased by 12% since 2006. The boom, unfortunately, has largely been concentrated in wealthy neighborhoods, leaving low-income New Yorkers without the benefits a financial institution can offer.
Access to banking institutions and their credit and investment capital is essential to create and retain jobs, develop affordable housing, and support small businesses. But, banks in this city are disproportionately serving wealthy New Yorkers. For instance, there is a bank for every 2,300 New Yorkers living in neighborhoods with a median household income above $53,000 - but there is only one bank for every 9,000 people in neighborhoods with a median household income below $31,000.
Furthermore, over the last four years the number of banks in the Bronx, the borough with the lowest median income, grew by only 18 branches. On the other hand, the number of bank branches in Manhattan, the richest borough in the City, increased by 73 -- more than four times the growth in the Bronx.
"Poor neighborhoods in this city are being squeezed out of the benefit a local bank can provide," Weiner said. "We need better incentives and stronger regulatory authority to increase the presence of banks in neighborhoods that need them the most. Banks can't keep getting a free pass when they are not meeting standards set by Congress."
"New Yorkers without access to traditional bank accounts are at the mercy of illegal and predatory lenders and check cashing outlets," said Megan Ahearn, Consumer Rights Organizer for the New York Public Interest Research Group (NYPIRG). "After taxpayers came to the rescue of the nation's financial system during the 2008 meltdown, the obligations of the banking industry could not be more clear. It's time to strengthen the community reinvestment laws to ensure that banks are serving the needs of all New York's communities."
Highlights of the Weiner Study:
* Nearly 70% of the bank growth in the last four years occurred in neighborhoods where the median income was above $40,000.
* In neighborhoods with a median household income above $53,000, there is a bank for every 2,300 New Yorkers, whereas neighborhoods with a median household income below $31,000 have only one bank for every 9,000 people.
* In Bedford, Brooklyn, which has a median income of just over $23,000 residents are served by only 2 banks, down from three in 2006. In Manhattan's Turtle Bay, with a median income of $80,000, there are 64 banks currently open, which is up from 63 in 2007.
* Since 2006, 40% of the net growth of banks occurred in Manhattan, which gained 73 branches. In comparison, the number of bank branches in the Bronx only increased by 18.
* Brooklyn, the City's largest borough, added 30% fewer bank branches than Manhattan.
Washington and Albany have both established programs meant to encourage banks to provide services in poorer neighborhoods -- but they have proven to be insufficient. The New York State Banking Department offers tax breaks, job training, and public fund deposits to banks that set up shop in underserved communities. And in 1977, Congress created the Community Reinvestment Act (CRA) to prohibit financial institutions from under-serving low-income areas and ensure equal access to housing finance resources, consumer and business lending, community investments, and low-cost services.
Four federal agencies were selected to rate banks on their effort to serve the needs of low-income neighborhoods. But the regulators, representing the Federal Deposit Insurance Agency (FDIC), Office of Thrift Supervision (OTS), Office of Comptroller of the Currency (OCC), and The Federal Reserve (The Fed) rated over 98% of banks as either Outstanding or Satisfactory even though the banking industry continues to deny the mortgage loan applications of African Americans and Latinos twice as frequently as those of whites. Further, the agencies are largely without the authority and power to require banks to open branches in underserved areas.
To help address the banking disparity in NYC, Rep. Weiner proposed the following measures:
The Weiner Plan:
* Allow bank regulators to penalize banks with few branches in low to moderate income neighborhoods through denying merger and acquisition requests and through fines. The money collected from these fines can then be used to incentivize banks to open more branches in these neighborhoods by helping them cover their risks.
* This carrot and stick approach can be achieved through revising the Community Reinvestment Act's (CRA) bank examination ratings, giving banks with more branches and services in low to moderate income neighborhoods the highest scores, and making sure that those contributing to the problem don't get a free pass.
* Incentivize banks to offer and actively market a portfolio of safe, no fee services to low income customers. This can be achieved by revising the CRA's service test to give banks who offer these services higher ratings. These ratings could then be used to reward banks in a variety of ways.