Across the United States, newspaper headlines lead with stories about financial reform. Members of Congress want to better regulate Wall Street and to take on the fat cats at the big banks, with their golden parachutes and big bonuses, who took our hard-earned tax dollars in the form of a federal bailout, despite the fact that they got us in to this mess in the first place. And Congress is right to take on the big banks - reform at the national level is long overdue and obviously needed. But in the hubbub that is the national overhaul, the seeds of this reform, the work done at the state and local level, cannot be overlooked nor can we let up on this work. True reform of our banking and financial systems will take pressure and action at every level and across the nation.
Americans are fed up with billionaires who are bilking us for all we are worth, making the middle class the biggest losers. Our friends and neighbors have lost their homes, found out that the pensions or retirement savings they worked for are gone and are struggling to find work in the worst economy of our lifetimes. In the meantime, Wall Street is back to business as usual, posting new profits, while those on the other side of the deals have lost their homes, their jobs, and their retirement savings.
With all of the anger and distrust of Wall Street, we have hit a place where we are ready for a basic cultural shift - one that turns away from looking at our investments and banking solely on the basis of short-term profits, and toward the production of true long-term growth: by investing our funds in economic growth opportunities that directly impact our communities.
We cannot let this historic opportunity pass us by. We must channel our inner Howard Beale and scream from our windows, "I'm mad as Hell, and I'm not going to take it anymore" - our outrage must be heard, not just in words but in action.
At the City level, leveraging this cultural shift means investing our money in banks that are helping grow Main Street by offering small business loans, working with homeowners to renegotiate mortgages when they're faced with foreclosure, and opening up bank branches and the cycle of credit in under-served areas, by creating local versions of the Community Reinvestment Act standards. After all, what good does it do Los Angeles if the banks in which the bulk of our tax dollars sit in are reinvested in another City, far away?
That's why the Los Angeles City Council unanimously supported my proposal to create Responsible Banking Standards in Los Angeles, based on a Philadelphia model put in place in 2002. Los Angeles alone has a cash and pension portfolio of over twenty-five billion dollars, which allows us to leverage these investments in such a way to benefit the residents of our city - not just through the rate of return, but by looking at how the banks and financial institutions reinvest in our community. The ordinance will require that any bank looking to do business with Los Angeles would have to submit a report to the City Treasurer who, in turn, would grade the banks based on their investments in Los Angeles.
And we're not the only ones - cities including Boston, Carson, Charlotte, Dallas, Denver, Independence, Muskegon and Watsonville are all looking into creating similar standards for Responsible Banking. And this week, Boston City Councilor Felix Arroyo is hosting a Council hearing to examine how the Boston City Council can hold big banks accountable in their city. The States of California, Massachusetts, Minnesota, New Mexico, Ohio and Washington are also all considering or have implemented sweeping financial reforms, including looking at the creation of State-run banks or investing only in State-chartered banks.
The anger is palatable and the time for reform is now.
We've lost our trust in the banks that took our bailout money, and let hundreds of thousands of homes fall into foreclosure.
We've lost our trust in Wall Street, where companies gained enormous profits, betting on the demise of investments.
We've lost trust in the rating agencies, when 93% of the subprime-mortgage-backed securities issued in 2006 for which they gave AAA ratings are now "junk" status.
The only way that trust is going to be restored is with sweeping reform. That's why Congress must pass substantive financial reform, so that Americans can begin to believe again. But at the same time, reform - just as powerful - must come from the cities and states. Collectively, our leverage is enormous. I introduced a resolution at the National League of Cities in support of local reform, because I know the power we could have if we banded together. Local and state officials know the pain of our constituents, and know the benefit that can be derived from holding banks and financial institutions more accountable.
The notion that we can create real change is not just pie in the sky. The City of Philadelphia has had theirpolicy in place since 2002, which has resulted in increased consumer and small business lending to historically under-served areas of that city. And on April 16, Massachusetts State Treasurer Timothy Cahill announced that the State of Massachusetts will begin divesting $243 million in taxpayer dollars from three of the nation's largest banks - Bank of America, Citibank, and Wells Fargo. The decision came after the banks were asked, and refused, to voluntarily comply with an 18% interest rate cap on credit cards and other consumer borrowing for Massachusetts residents. The cap, which is required of all Massachusetts state-chartered banks, does not apply to federally-chartered banks.
These actions are just the beginning of our cultural shift. More Cities and states are needed to create real pressure on the banks. I urge every City to create standards for how tax-payer dollars are invested and find ways to ensure that the dollars are going to banks and financial institutions that are behaving well.
Shouting may not get what we want - but you can bet that billions and billions of dollars taken elsewhere will get banks' attention.
We are mad as Hell - and we don't have to take it any more.