City Backs Banks Opposing Investment Advisory Board
Less than a week before leaving office, Mayor Bloomberg's Corporation Counsel, Michael Cardozo, filed a brief in support of a group of banks challenging a New York City law that would create an advisory board to decide which banks should handle the city's roughly $6 billion in deposits based on how well the banks serve low- and moderate-income communities.
The New York Bankers Association, which has close to 150 members including Citibank, JPMorgan Chase, Bank of America, HSBC and Goldman Sachs, sued the New York City Council and the city in October (NYLJ, Oct. 17). The bankers' group claims in NYBA v. City of New York, 1:13-cv-07212, before Southern District Judge Katherine Failla, that Local Law 38 is preempted by state and federal banking regulations. The law, passed over the veto of Bloomberg, has not yet been enforced.
The law would create a Community Investment Advisory Board, which would include the mayor and comptroller, which would consider criteria such as whether banks offer credit to small businesses and mortgage modifications to homeowners facing foreclosure. The information would be public and could guide the City Banking Commission in deciding where to deposit its money. The law does not require particular decisions by the banking commission or impose any penalties.
On Dec. 16, the City Council moved to dismiss and the bankers' association moved for summary judgment.
On behalf of the city, Cardozo on Dec. 23 filed a memorandum in support of the banking group's summary judgment motion. Cardozo noted that the New York Supreme Court had struck down a law passed by the City Council in 2002 that barred banks found to be associated with "predatory lending" from doing business with the city.
Although Local Law 38 "appears crafted to avoid the pitfalls of the predatory lending law" because it does not impose specific penalties, the memorandum says, its "unmistakable purpose and intended effect…is to shape many aspects of bank conduct," making it regulatory.
The city's brief was written by Joshua Rubin. The banks are represented by Sullivan & Cromwell. Elizabeth Fine is representing the council.