Another landmark piece of legislation was passed today.
The City Council of Los Angeles voted 12-0 to pass Councilman Richard Alarcon's motion 09-0234, also known as the "responsible banking practices" motion. This will set the City on a path to require banks doing business with the City, or seeking to do business with the City, to report on the details of their local reinvestment in the community. The ordinance to be drafted will tie a bank's involvement in the community to contracts for the City's operating funds and pension programs worth up to $28.9 billion dollars.
The legislative template, based on a 2006 act by the City of Philadelphia, calls for an updated approach to measuring banks, along the lines of a locally focused version of the Community Reinvestment Act (CRA), with special near-term emphasis on tracking foreclosure prevention and outreach to unbanked and underbanked persons. The ordinance also calls for a review of certain swap agreements entered into by the City in the past.
Unlike New Mexico's initiative to shift its funds to local banks within state, the Los Angeles law doesn't preclude any bank, large or small, from doing business with the city. Instead, it places a premium on banks that can deliver tangible proof that they are locally involved. Both approaches are designed to concentrate the local circulation of money.
Alarcon took up the motion as Agenda Item #11 for the day, starting with a short public hearing limiting speakers, including myself, to one minute statements. All oral statements given to Council were supportive. Rising rather eloquently to speak in support of the Alarcon measure were councilmembers Janice Hahn, Ed Reyes, Paul Koretz, fellow Jobs and Business Development Committee member Bernard Parks, and finally Tom LaBonge. Interestingly, LaBonge referenced the metaphor of George Bailey versus Mr. Potter that the Move Your Money campaign used in its video introduction.
After accepting a few friendly amendments calling on the city staff to make sure to cross all t's and dot all i's, Council Alarcon called for the vote. The electronic screen indicated a straight up, unanimous yes vote.
You don't see truly groundbreaking events like this very often. This template -- the effort of a major U.S. city to codify how measuring "investing local" works as a means to leverage local economies -- represents a major systemic step as governments awaken to the need to ensure regional economies are sustainable in the 21st Century. Everyone on the planet should study it.
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