Yesterday, on the same day, city councils in New York and Los Angeles passed laws designed to move public dollars into banks that lend locally and act responsibly. Dozens more cities and towns are poised to follow suit.
City Responsible Banking ordinances add firepower to a growing grassroots movement to hold big banks accountable for the damage they have done to local communities. Individuals and religious institutions have already moved tens of millions of dollars out of Chase, Wells Fargo, Bank of America and Citi into local financial institutions that are closer to the community.
Organizations that have helped lead the coast-to-coast fight to pass the New York and Los Angeles ordinances, including Brooklyn Congregations United and LA Voice, which spent countless hours building grassroots support for the measures, are made up of congregations and individuals who moved their own money before asking their cities to do the same.
The big banks know that public dollars are a profit center and that public divestment further damages their battered brands, which is why they have lobbied heavily to water down the legislation in New York and Los Angeles. Neither law is as tough as it should be, but the trend is clear.
Local and state elected officials are stepping into the vacuum created by federal inaction. People who serve on local city councils struggle to close revenue shortfalls and deal with vacant and blighted properties caused by the reckless behavior of the big banks. They get the connection between Wall Street fraud and Main Street pain.
Local officials I have talked to do not have any illusions that city governments can successfully regulate Wall Street. But many are fed up with the how easy the federal government has been on the big banks. They share the frustration that drove the State Attorneys General to take much harder line on foreclosure and mortgage fraud than the Obama Administration.
The revelation that JPMorgan Chase has continued to make huge speculative bets with taxpayer-backed deposits is a reminder of how little has changed since the financial collapse and bailouts in 2008. Chase alone spent more than $7 million over the past two years to buy influence in Congress.
Despite being bailed out, the big banks continue to sit on hundreds of billions of dollars in cash that they ought to be lending to create jobs. They continue to push off the day of reckoning on debt owned by underwater homeowners, and they continue to flood local housing markets with unnecessary foreclosed properties.
When individuals, religious institutions and local and state governments decide to move their money, it puts direct pressure on banks and on the federal government to change their policies. Cities and states have incredible leverage if they chose to use it. Just as important, local action by cities and organized people is beginning to lay out a new framework for an economy that supports community development and creates job opportunities for working people -- a new bottom line for an economy that aligns profit with job creation rather than speculation.
Virtually every significant social and economic change in American history has come from grassroots movements in which people take matters into their own hands, not from Washington, D.C. elites -- and this is what is happening now as people wrestle back the federal government from the clutches of Wall Street.
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