Bank accountability

One of every six people in San Diego County keeps his money with Bank of America. Bank of America's also the city of San Diego's bank, handling the municipal checking account and payroll and, most recently, agreeing to loan the city up to $172 million to refinance bonds sold to cover Petco Park's construction costs.

But some people want the bank's biggest local customer to rethink that relationship.

According to the San Diego County Reinvestment Task Force, a group that monitors fair-banking practices, Bank of America ranks last when it comes to the percentage of deposits it reinvests back into the community through things like small-business loans, affordable-housing development and mortgage loans to people in lower-income neighborhoods. Though the bank did an impressive $616 million in what's known as “community reinvestment activity” in 2005—up from $453 million in 2004—that amount represents only 7.7 percent of the more than $8 billion San Diegans have deposited with the bank.

“They're the big man on the block-it's the largest bank in San Diego County,” said Jim Bliesner, director of the reinvestment task force. “Six hundred and sixteen million dollars—is that a lot, or is that a little, compared to how much you take out of the economy?”

By comparison, according to the task force report, Citibank West reinvested 48.6 percent of nearly $1 billion in deposits back into the community, Comerica Bank reinvested 17 percent of $600 million in deposits, and Washington Mutual put 12.6 percent of $7 billion in deposits back into the community. Bliesner attributes Bank of America's relatively poor performance to its merger with North Carolina-based NationsBank in 1998. “We became a very small blip in their economic map,” he said.

In 2004, when the bank was seeking federal approval to merge with Fleet Bank, Bliesner testified at a Federal Reserve hearing about the bank's performance in the community. Bank of America had not renewed an agreement it made with San Diego County back in 1992 concerning community reinvestment, Bliesner testified.

“Nope,” Bliesner responded when asked if that agreement's been updated since.

Angie Lucero, Bank of America's director of community development for San Diego, did not return CityBeat's phone call by press time.

Under the Community Reinvestment Act (CRA), a 30-year-old federal law, banks with more than $250 million in assets are subject to regular review by federal banking agencies to ensure that the bank's providing services to all segments of the population—not just focusing attention on moneyed neighborhoods and refusing loan applications from lower-income communities, also known as “redlining.”

“If a bank has a federal charter, part of that includes the responsibility to lend in all communities equitably,” Bliesner explained. Bank of America received an “outstanding” for its CRA performance nationally. But San Diego County takes the oversight process one step further through the reinvestment task force, which looks at how much a bank reinvests in terms of its overall deposits.

Compared to other banks the task force examined, Bank of America's performance is “low,” said San Diego City Councilmember Tony Young. Young's the chair of the reinvestment task force and also represents parts of San Diego that have traditionally struggled to get equitable banking services. Young wants the city to expect more from the bank it chooses to do business with.

The city's “going to start coming out of this financial morass at some point, and there are going to be people lining up to do business with us, and we need to say, ‘Hey, listen... we're just not going to accept you doing poorly when it comes to your investments in the communities I represent and Ben [Hueso] represents and Donna [Frye] represents and Toni [Atkins] represents. And we're not going to support you if you do predatory lending.”

If anything drags down a bank's reputation with CRA watchdog groups, it's predatory lending. Many large banks partly own payday-lending operations, which loan money at interest rates as high as 395 percent.

At the Jan. 17 City Council meeting, during discussions about refinancing the ballpark bonds, Young brought up Bank of America's reinvestment activity and quizzed Lucero: “How is your bank's performance or its subsidiaries' performance when it comes to predatory lending?”

Lucero told Young that her bank does not engage in predatory lending.

Bill Oswald, chair of the San Diego Coalition for Fair Banking, a group that advocates for responsible-banking practices in low- to moderate-income neighborhoods, said that's not necessarily true. According to a report compiled by the coalition, Bank of America administers a pool of capital provided by a larger group of banks that's then made available to payday lenders, like Advance America. Advance America has 26 locations in San Diego County. As an administrator, Bank of America can charge administrative fees and makes money from the interest Advance America charges its customers.

“So they're not actually, or necessarily, involved in directly lending to payday-lending companies,” Oswald said, “but they administer a loan; they cover the administrative side of that investment pool.”

Oswald said his group has been calling on banks to get out of payday lending and encouraging banks to “create products that are accessible to people who are now barred from banking.” They've had success working with San Diego National Bank, Washington Mutual and Citibank, he said, but not with Bank of America.

“I think the issues that Tony Young is raising are important because the city has some leverage with a bank,” Oswald said. “The bank's getting significant, sizable deposits [from the city] and they get to make money on that money.... And I would certainly support—and the coalition would support—the city deciding to put its money in the bank that does the most for the community.”

San Diego National Bank has Oswald's vote. “But other banks do more certainly than B-of-A does,” he said.

Jay Goldstone, the city's chief financial officer, said the city solicits proposals every five years to find the bank that best meets its needs. “This fall or summer we will be issuing a request for proposals for banking services. Bank of America will apply, as will any bank have that opportunity,” Goldstone said. The City Council will decide which bank to go with.

A bank's performance in community reinvestment “could be a tiebreaker,” Goldstone noted. “It's a very, very important factor. But if somebody does a good job on the CRA activity, but can't meet our needs from an operational standpoint, meeting our operational needs has to carry more weight in the decision.”