New York's in a Move Your Money State of Mind, But CRA Reform Must Follow

The Move Your Money campaign has some new allies: elected officials in the Empire State. Recent legislation passed by both houses of the state legislature directs that all state funds be deposited in financial institutions that meet the credit needs of low- and moderate-income communities. Similarly, New York City Comptroller John C. Liu has teamed with unions to press banks to improve their service to local communities by increasing the number of loan modifications they undertake so that these banks will reduce the number of foreclosures in New York City's neighborhoods. If the big banks fail to do so, there is the threat that these institutions will move their money to banks and credit unions with better track records of meeting community needs. These approaches combine two important concepts: the need for conscientious banking by consumers and making sure banks respond to community needs.

The most important federal legislation to address whether banks meet such community needs is the federal Community Reinvestment Act (CRA). While other states and localities are pursuing Move Your Money strategies, New York, like a handful of other states, has now passed legislation that gives those strategies the force of law. Not only should Governor Paterson sign the legislation into law, but other states should consider following suit. At the same time, if Move Your Money approaches are to tie themselves to CRA compliance and the extent to which bank conduct meets the needs of local communities, then Congress and federal regulators need to reform the CRA to expand its reach and fulfill its purpose.

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