If you asked bank executives to list things that they don't want more of, that list would probably look a lot like this:
- Vince Vaughn monologues on True Detective
So you can understand why the banks are bristling a little bit to learn that New York City is asking a judge to let them grab a little regulatory power over banks that hold city cash.
We'll defer for a moment to Crain's New York Business' excellent coverage of this topic;
Here’s the background: Back in 2012, the City Council passed the Responsible Banking Act, which requires banks that process more than $6 billion on behalf of city agencies to provide detailed information about their branch locations, foreclosures and loan modifications, among other data. The idea is the city might take business away from banks whose services in lower-income neighborhoods are deemed inadequate or sub par.
More paperwork? To prove whether or not it looks like banks are preying on poor people? What could go wrong?
The banks understandably fear that releasing data about low-income lending could cost them business and damage their reputations. The paperwork could be a nightmare, too. But their main argument against the law is that the city has no authority to regulate banks. Such power, they argued at Wednesday's hearing, is pre-empted by federal and state agencies.
But aside from the ass pain paperwork and perceived persecution, what else is bothering the banks? It can't be the first time they've dealt with this.
The city's lawyer, Joshua Rubin, observed that federal authorities already require banks to provide considerable information about their dealings in poor neighborhoods; the city is merely asking for more. He observed that Philadelphia and Cleveland have adopted similar laws to New York's and the banks haven't complained about being harmed in those places.
A-ha! Precedent! What makes it so easy to deal with regulation from Philly and The Cleve but not The Big Apple?
Oh right, purported former Sandinista/provenly unpopular New York City Mayor Bill de Blasio.
Unleashing the de Blasio agenda as a regulatory force on banks would be akin to letting PETA write menus at KFC, but the reality is a little more nuanced than that.
While banks would not have to deal directly with the New York City Council (a legislative body whose leader just pithily blamed Puerto Rico's crisis almost entirely on "hedge funds," they would have to deal with the city's Banking Commission. That body has three official members; the Notorious BdB, the city's Commissioner of Finance Jacques Jiha (a de Blasio appointee who has never worked at a bank), and the city's Comptroller Scott Stringer.
Of the three, only Stringer could be logically relied upon to not reflexively punish banks in order to score quick political points. That level of self-control could be crucial as banks would have a pretty potent revenge mechanism to any overreach by city officials.
Many financial institutions are already pulling jobs out of the five boroughs at an alarming rate, and that pace could be accelerated if banks having to deal with city regulations don't like how they're being treated. Shifting jobs to Jersey and The Carolinas wouldn't make them immune to the Responsible Banking Act, but it would be a cagey retaliation for having created it at all.
But de Blasio and Co. are clearly playing a little hardball at the moment. With a judge set to decide on the legality of this whole mess in the next few days, the mayor's office is taking a very Brooklynese approach in its messaging.
The city, for its part, insists it isn’t seeking to regulate banks, it is merely collecting more information about their activities; and if banks find that information embarrassing, they should do something about it. The banks’ contention rests on "an overly sensitive view of shame and overly broad notion of what constitutes regulation," according to the city.
Basically the mayor of New York City is going full Jerry Orbach, telling Wall Street "If you got nuthin to hide, then you shouldn't mind me having a look around."
But why gave him a fake TV badge in the first place?