New York Mayor Bill de Blasio announced $350 million in loans for affordable housing provided by banks led by Citigroup Inc. (C) as he forges closer ties to Wall Street, once one of his loudest critics.
The New York-based bank agreed to provide $75 million loans at a 2.75 percent interest rate as part of a larger fund made available to a nonprofit that works with construction firms, de Blasio said today at an event in the Bronx. Wells Fargo & Co. (WFC) committed $50 million, while five New York City pension funds provided $40 million.
A self-described progressive and the first Democrat to run the biggest U.S. city in 20 years, de Blasio has begun a 10-year plan to build or preserve 200,000 units of affordable housing. The funding announced today is expected to finance the construction or rehabilitation of 7,500 units, according to a statement from his office. Buildings with between 20 and 100 apartments will be targeted, de Blasio said.
"This is essential to our vision," de Blasio, 53, said at a press briefing held at a community center. "The private investment, of course, is deeply necessary for what we are doing here today and everything that we intend to do with our plan."
When de Blasio, as a mayoral candidate, first proposed taxing the rich so every child in the city could attend all-day preschool, wealthy New Yorkers who would pay more under his plan said it offended them. Kathryn Wylde, president of the Partnership for New York City, a network of 200 chief executive officers from industries including finance, said in September that the plan showed a "lack of sensitivity to the city's biggest revenue providers and job creators."
Since then, Wall Street has softened its tone as de Blasio assured bankers, real estate developers and corporate executives that he understands their importance. The mayor said the partnership is an example of how his administration is working with Wall Street.
"We have had a productive relationship with the financial community," he said. "We have a lot of common ground."
Morgan Stanley, Deutsche Bank AG, and Bank of America Corp. also contributed to the deal.
The arrangement is an opportunity for lenders to improve their public image as the industry has been blamed for sparking the financial crisis with risky home lending. Citigroup agreed to pay $7 billion this month to the U.S. Justice Department and other entities to resolve a probe into sales of mortgage securities that went bad. Consumer relief including financing affordable housing is set to account for $2.5 billion of the total.
For Citigroup, the commitment adds to more than $6 billion in affordable housing it has helped finance in New York since 2006, Chief Executive Officer Michael Corbat said at the event. The bank's involvement shouldn't be seen as philanthropy, he said.
"This is a business decision as well as an investment in our hometown," Corbat said, evoking the bank's 200-year history as he stood at the lectern.