DALLAS — Decades after the term “redlining” was coined, an ongoing WFAA investigation has shown that many banks are still choosing not to make loans, or do meaningful business, in low-income parts of town, even though federal law mandates they act equitably and don’t discriminate.
Since last fall, our “Banking Below 30” series has explored how banks extend credit to richer, whiter customers north of Interstate 30 and withhold it from low- to moderate-income ones to the south.
We’ve demonstrated how the federal government does little to stop 20 percent of banks from refusing to do business in southern Dallas neighborhoods, and how regulators incentivize big banks to profit off owning subsidized apartment complexes that add to crime and blight to those same neighborhoods.
Now, it’s time to talk about a solution. It's called a responsible banking ordinance.
James McGee is a former bank compliance manager who runs the nonprofit Southern Dallas Progress. He said the concept will improve lending below I-30.
“I think it would be very powerful, very effective,” he said. “I mean, you have somebody local, city government, also the community, holding (banks) accountable for what they are doing."
Here's how it works.
You may not realize it, but local governments keep your tax dollars in banks – the same banks we all use. A responsible banking ordinance requires a local government to evaluate how well a bank serves all its citizens, from high- to low-income, before choosing to do business with the bank.
The concept was developed in part by the National Community Reinvestment Coalition which advocates for greater reinvestment by banks in low- to moderate-income neighborhoods and has drafted model legislation that local governments can work from.
No local governments in North Texas have a policy like this. But 13 cities around the country do have some form of a responsible banking ordinance, including Cleveland, Minneapolis, Los Angeles, Kansas City and Pittsburgh.
In theory, the idea works because local governments have a lot of cash – hundreds of millions in taxes and fees – to deposit, and that gives them leverage.
Earlier this year, we asked some local governmental entities what banks they use, and how much they had on deposit at the end of February.
The city of Dallas uses Bank of America, where it has $257 million dollars on deposit.
Dallas County also uses Bank of America with deposits of $215 million.
Dallas Independent School District has $39 million deposited with Wells Fargo.
Parkland Hospital District? They have $6.7 million with JPMorgan Chase, $28 million with Regions Bank and $371 million with BNY Mellon.
That's $917 million in taxpayer money.
McGee isn't singling out these banks, or government entities, for doing anything wrong. But if banks want to keep the taxpayers’ deposits, he believes local governments should incentivize them to do better.
“They have a huge ethical responsibility,” McGee said of local governments. “Just as it’s our right to ask what our (personal) bank is doing, it is the cities’ right to know what that bank is doing – where are they investing their money, where are they issuing loans -- so it's 100%, just as a customer, in their realm.”
It's a similar picture in Tarrant County, where local governments have a combined $822 million on deposit with banks:
Fort Worth banks with Chase with $117 million in deposits.
Tarrant County also has $605 million with Chase.
Fort Worth ISD has $22 million with Chase.
JPS Hospital District has $57 million with Chase and $21 million with Southside Bank.
Tre Black is a prominent business leader below I-30. He runs a second-generation company, On-Target Supplies & Logistics, with more than 250 employees. He says he has a good relationship with his current bank but has – at times – been treated unfairly when applying for loans.
“We've been offered predatory rates,” he said. “We have had issues with excessive terms. We have had issues with ridiculous guarantees. So those things, we've pushed back against.”
Black supports the idea of local governments using their leverage to hold banks accountable.
“I think the responsible banking ordinance is a matter of good governance,” he said, “so that companies here locally can have greater access to capital. We need it.”
So, how would a responsible banking ordinance work?
Banks would be required to submit loan data showing how much, and in what neighborhoods, they lend. They would also submit reinvestment plans setting targets for future lending.
Local governments, on the other hand, would create an oversight body to evaluate banks, publish findings and hold community hearings to discuss those findings and future lending targets.
Philadelphia has a responsible banking ordinance. Wilson Goode Jr., is a former councilman there who helped get it passed 20 years ago. Now he consults with cities – including Philly – on responsible banking issues.
“You can have impact if you organize around the issue with the data in hand,” Goode said. “The banks are forced to respond, because they have the government as a customer, and they have the individual citizens as customers.”
Philadelphia combines several factors to rank banks on how well they distribute mortgage and business loans in low-income areas.
Between 2008 and 2018, the banks Philadelphia chose to make deposits with became more active lenders, increasing their share of business loans by 18 percent in low-income census tracts, records show.
“It's a tool that everyone absolutely should employ, so I will just be continuing to focus not just on Philadelphia, but other jurisdictions because, first and foremost, you must have the data, but then secondly, you must find out how to use the data,” Goode said.
McGee says a responsible banking ordinance is a creative way for a local government to improve the everyday lives of all taxpayers, no matter the color of their skin, or on which side of I-30 they live.
“I think that's a win-win, but it has to be intentional and it kind of starts with the city,” he said.
Black said it’s not about special treatment, but equal treatment.
“Give us an opportunity to employ people, give us an opportunity to grow our businesses so we can all be a part of that American Dream that we all dream to be a part of," he said.
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