L.A. May Seek Bias Data Before Placing City Deposits
LOS ANGELES -- Banks and thrifts that want to get deposits from the City of Los Angeles may soon be asked for extensive disclosures about home, consumer, and commercial lending by census tract.
Mayor Tom Bradley and City Councilman Mark Ridley-Thomas announced the proposed ordinance covering the disclosures last week. Recent studies show a pattern of bias against lending to minorities in Los Angeles, they said.
"There will be no more business as usual when it comes to practices that amount to redlining," said Mr. Ridley-Thomas.
About $4 billion in city deposits is at stake, according to the mayor. Banks that do not wish to bid on city deposits will not have to make the disclosures, the mayor said.
Rankings to Be Compiled
The city will use the disclosures to rank banks and award the deposits by ranking. The rankings will be made public.
According to the city treasurer's office, Bank of America and Security Pacific National Bank are currently the only two institutions holding city deposits. An official added that the city has no time deposits placed, but that can change, depending on cash flows.
Because of the added disclosure burden some banks may not bid for city deposits. A Wells Fargo & Co. spokeswoman said Wells has a policy never to bid on deposits that are linked to some standard.
A BankAmerica spokesman said his bank could not comment until it has seen the ordinance. But he added, "The city's business is important to us."
Ian Campbell, senior vice president of Great Western Bank, said, "We cannot comment on the ordinance until we have seen it, but we are concerned about costs and red tape that we might encounter trying to prepare the data."
But Mr. Campbell added, "We do think we have an excellent track record in lending [to minorities], and thus should be in a good position to compete for city deposits."
It will be easier for the thrift industry to comply with the ordinance. Thrifts primarily make home loans and are already gathering these data under requirements of the Home Mortgage Disclosure Act.
The mayor and city council, which must approve the disclosure ordinance, are concerned about data revealed by a study done by the University of Southern California and the Western Center on Law and Poverty that shows a pattern of discrimination in lending.
The study found that "banks and savings and loan associations make fewer and smaller loans in African-American and Hispanic neighborhoods than in white neighborhoods in which residents have comparable incomes."