banks – RI Future

December 10, 2015December 10, 2015

Banking for Equality

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As of January 1, the Rhode Island minimum wage will be raised to $9.60. Although a good step towards financial equality, it cannot compensate for the nation’s polarizing wealth divide. We need banks to do that.

In 2013, 63 million Americans spent a combined $455 billion nationwide on alternative financial services, as reported by the Federal Deposit Insurance Company. This includes scams such as payday loans, pawnshops, and check-cashing services. Pay day loans offer immediate loans with steep interest and short payback, pawn shops take expensive collateral with hefty fees for small cash loans, and check-cashing services charge significant flat-rates, often around $40 per paycheck. United For A Fair Economy believes alternative financial services outnumber McDonald’s and Starbucks franchises combined in America today. Alternative financial services set up in areas they believe densely impoverished to prey on the financially disadvantaged. Institutionally, they operate to widen the wealth gap.

In his 2014 campaign, Rhode Island General Treasurer Seth Magaziner highlighted that one in four Rhode Islanders are underbanked. In Magaziner’s words, underbanked citizens “don’t have a bank account at all, or they have a bank account and they’re still relying on high-cost financial services like payday loans, pawn shop check cashing and so on.” Of the 63 million consumers that are underbanked in America, 24 million of them have no bank account at all. The families with limited bank account usage spend an average of $3,000 a year working while the average underbanked family spends $43,000 in their careers on check-cashing services. For these 63 million underbanked Americans, the vision of banks is a dark one. Among the most common reasons for using alternative financial services instead of banks, the top responses were “lack of money”, “I don’t like dealing with or trust banks”, “inconvenient hours or location.” These responses show a fundamental misunderstanding of the comparably greater convenience, affordability, and security of banks.

Communicating this is one of the smaller barriers banks have traditionally held, like extensive documentation, high minimums and maintenance fees, and new account screenings. Others responded “account fees are too high or unpredictable.” Many of these individuals live paycheck to paycheck and do not earn enough to meet minimum balance or direct deposit requirements for free checking. What should they do?

Put money in the bank. Bank accounts provide the financial security needed to build wealth. While accumulating interest, your money is protected from fires, burglary, misplacement, or other damage. With a bank account you build a credit history, critical for loans for cars, for home mortgage, and for higher education. And bank accounts are cheaper and more convenient than alternative financial services, from free bill pay, to free check cashing, to free ATM withdrawal.

As of 2015, nine banks or credit unions in Rhode Island have little to no minimum balance requirement nor require direct deposit for free checking. Many have no minimum balance and free checking. Almost all have free online statements, credit building opportunities, mobile banking, and free ATM access. Looking to the future, financial literacy is on the rise in Rhode Island’s schools, and a new state backed program College Bound incentivizes saving for the higher education of Rhode Island’s next generation.

Banks still need lower entry barriers for Rhode Islander’s looking to open checking accounts. New account screenings must offer forgiveness for previous debts. With financial guidance banks could aid in paying off the prior institution to which their new customer is indebted. It is equally as crucial that banks and credit unions offer an entry-level checking account with no minimal fees and balances.

Some banks would object to the operating cost they incur for maintaining an account with little immediate return. These banks need to look forward. The short term loss in revenue will be returned manifold as Rhode Island’s poor accumulate the wealth they then reinvest in said bank. Banks understand the delayed but greater return of a bond. Banks need to bond with Rhode Island’s consumer, for delayed but greater returns for both.

America today resembles a plutocracy. The assets of the top 1 percent is now approaching 45 percent of the nation’s wealth, having steadily risen toward levels unseen since the Great Depression. The wealth of the bottom 90 percent continues to hover between 10-20 percent of the nation’s wealth for the last century. The stagnant trend makes clear that growth in national income has not yielded a more equitable distribution of wealth.

Expert on urban and racial inequality and poverty, Melvin Oliver says, “Income feeds your stomach, but assets feed your head.” Many Rhode Island stomachs will be fuller by sixty cents an hour come January 1st. But will their heads will still be hungry? Wealth breaks the cycle of living day to day. Alternative financial services drain wealth while banks can nurture it. Rhode Island and Rhode Island’s banks: stop living day to day on pennies, and bond.

December 3, 2013

Tom Sgouros’ new book explains problems, solutions to banking crisis

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Coming soon to your winter reading list: Tom Sgouros’ second book.

His first book focused on conservative mythology about the Ocean State, and this time the RI Future contributor and well-respected progressive policy analyst sets his sites on a national level with a look into the banking industry. It’s called, ‘Checking The Banks: The Nuts and Bolts of the Banking System for the People Who Want to Fix It.”

He calls it “a primer on banking language and practices… a modest list of useful concepts, a discussion of how banks work, and how they fail, as well as some suggestions for new institutions that might help make change.”

Sgouros uses his talent for making complex subjects easier to understand

The growth of banks from small institutions to large has had profound effects on all of us, not the least because of the necessary change in strategies to manage banking risk. When a bank makes a loan, it takes a risk that the loan may not be repaid. Banking is fundamentally about managing that risk, and other risks associated with the enterprise. But there are many ways to manage a risk. One way is to get to know your borrowers, to assess their needs, perhaps even to help them repay the loan with the occasional extension or refinance. In the case of a business loan, a bank could sometimes ease risk through introducing the borrower to potential customers for his or her businesses. Another way to manage risk is simply to find someone else to assume it. One way manages risk by reducing it; the other simply foists it onto a sucker.

But he not only points out the problems the banking industry faces, he also offers solutions with chapters on regulations, starting a bank, government funding, public banks and credit unions, among other ideas.

Traditionally, starting a bank is something for rich investors to do, but there are plenty of others out there who have the capaicty to have an impact on our financial system…

The book, published by Light Publications, a Providence company owned and operated by Mark Binder, will be available commercially in the near future.

June 3, 2013June 3, 2013

Banks flout landlord laws when they foreclose on rentals

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The foreclosure crisis hasn’t only been bad for members of the ownership society, it hit renters hard too. Oftentimes, when landlords can’t pay their mortgage, it’s the tenants who lose their home. A bill before the General Assembly would change that by making banks adhere to the same rules that other people who profit from property have to follow.

According to Christopher Rotondo, of Direct Action for Rights and Equality, an organization that advocates for marginalized Rhode Islanders, the bill “would mandate banks accept rent from tenants who live in buildings that bank owns because of foreclosure. The title refers to “just causes” for eviction which are established by RI landlord-tenant law. The bill clarifies banks’ ambiguous role as a landlord under that law.”

Rotondo added, “If our bill became law, a bank – just like any landlord – would need a “just cause” to evict tenants (and the bill makes clear that people must be “bona-fide” tenants, not squatters). Currently, bank’s general practice is to evict all of the residents once they take over a building, even if those tenants are up to date on rent and have done nothing to warrant eviction.”

In short, the bill protects tenants from being punished for their landlords actions while closing a loophole banks were taking advantage of. It makes a lot of sense and, after meeting with industry lobbyists eight times and agreeing on language, advocates were looking forward to smooth sailing through the committee process. But in true end-of-the-session fashion, there are some last minute changes that Rotondo said violate their previous agreements.

“We were stunned to find out that House leadership had changed our bill right before it was scheduled for consideration in House Judiciary,” Rotondo said. “We’d like to make clear that House and Senate leadership are siding with banks and against residents on this important issue.”

Rotondo sent me an email detailing DARE’s opposition to the amendments:

– Our bill makes banks that take over ownership of foreclosed buildings accountable to the RI Landlord – Tenant Act. This would mean a bank would be responsible for conditions, accepting rent, and other provisions of the act (just like any other landlord in the state) and tenants would be required to abide by the laws provisions as well. Our goal with the bill was to clarify banks’ ambiguous role as property owners, especially when those properties are occupied, by making the same laws apply to them as currently apply to all other landlords.

The banking lobby wanted to be exempt from the RI Landlord-Tenant Act, but still wanted to collect rent from the tenants!

– Our bill mandated that banks maintain (law-abiding, rent-paying) tenants until the house is sold to a third party. Once a purchase and sale agreement was signed, the bank could evict tenants without just cause, if the purchaser made it a condition of the sale.

The banking lobby wanted to limit tenancy to 120 days, at which point tenants could be evicted without just cause. I was told this 120 day provision was included in the bill that came down from House leadership. A federal law already protects tenants in foreclosed property from eviction for 90 days. This means the bank lobby only wanted to extend the time allotted a tenant by 30 days.

– Finally, the bank lobby introduced a sunset clause into their “compromise” during the study commission, which would make the bill sunset on December 31, 2014. They claimed that the foreclosure crisis was a temporary situation and that the law would not need to remain on the books.

We did not agree to this sunset provision, given that our bill has a natural sunset – when the housing market recovers, and banks are no longer foreclosing on loans, or maintaining ownership of foreclosed property, the law would simply not apply. Their proposed sunset is the same date at which the federal law – the Protecting Tenants in Foreclosure Act – would sunset.

April 15, 2013

Jack Reed takes it to the banks and their regulators

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There’s been a surprising dearth of coverage in the local press of Jack Reed’s exemplary work last week, as he stuck it to the Office of the Comptroller of the Currency (OCC) alongside Sherrod Brown and Elizabeth Warren. Here’s a .

Here’s the rub, from Dave Dayen at Salon:

The vast majority of borrowers – 3.4 million – will receive $1,000 or less. To pick a category at random, 234,000 borrowers had a loan modification approved, were kicked out of their homes anyway, and will receive for their trouble – for having their home effectively stolen – a whopping $300 (for comparison’s sake, the third-party consultants got $10,000 per review).

HuffPo notes Reed’s role here:

Under questioning from Sen. Jack Reed, a Rhode Island Democrat, regulators came the closest to acknowledging that the reviews, which resulted more than $2 billion in payments by the banks to consultants, were poorly conceived and supervised.

exity of the task,” said Daniel Stipano, a top lawyer at the OCC. He cited the number of financial institutions, consultants and homeowners involved and the difficulty in negotiating state law as among the challenges that reviewers and regulators had to negotiate.

Dave explains how this hearing and the OCC mortgage fraud settlement relate to the broader housing collapse. Dave’s thrilled to see that the foreclosure fraud issue is FINALLY getting some play with the national press — with the tag-team effort by Reed, Warren, and Brown appearing — and even leading — on many national network news casts this week.

I have spent the better part of four years trying, with little success, to raise awareness aboutforeclosure fraud, the largest consumer fraud in the history of the United States. In fact, there’s a whole little band of us writers and activists and foreclosure fighters. We have provided multitudes of evidence about fake documents, forged documents, illegal foreclosures, foreclosures on military members while they served overseas, foreclosures on homes with no mortgages, breaking and entering into the wrong homes, suicides by foreclosure victims, and above all the complete lack of accountability for these crimes and abuses.

But instead of giving voice to thousands upon thousands of victims of illegal foreclosures, instead of documenting the banks’ criminal practices, maybe what we all should have done is simply let the Office of Comptroller of the Currency – part of the Treasury Department — and the Federal Reserve construct their own settlement with the banks. Then, when it utterly unraveled — as it has over the past couple of months — the unimaginable fraud heaped upon homeowners would get more attention than ever before, particularly from a frustrated and angry Congress led by Sen. Elizabeth Warren.

The OCC’s pathetic response to the housing crisis, its attempt to cover up its own corruption/ineptitude, and Warren’s star power make this the perfect moment to bear down on these issues. Reed deserves praise for helping to lead the charge — let’s hope he keeps plowing forward.

May 7, 2012May 8, 2012

Bank of America Protest: First PVD, Then NC

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OLYMPUS DIGITAL CAMERA — A recent DARE rally in front of the Bank of America in downtown Providence. (Photo courtesy of DARE)

After a protest in front of the downtown Bank of America building this afternoon at 5pm, about 15 Rhode Islanders are heading off to Charlotte North Carolina to join thousands of others from across the United States to protest at the bank’s annual shareholder’s meeting.

Today’s action in downtown Providence in front of the Superman building, said Christopher Rotondo, of DARE or Direct Action for Rights and Equality, “is so Bank of America knows there is a local group here in Rhode Island taking up these demands.”

The demands, according to a DARE press release:

Principal reduction for all homeowner and full restitution for all those who lost homes. Bank of America has promised principal reduction to current value for 200,000 households. That (verbally) goes much further than any other bank in the recent Attorney General’s settlement. We therefore demand a principal reduction plan byall banks.
Banks should hand over all their unoccupied, foreclosed housing to community and non-profit ownership that is not subject to foreclosure or speculation
Reparations to communities of color targeted for predatory lending, including below-market loans to all communities of color
We Want an end to evictions and for banks to commit to protecting the right of tenants to stay in their homes by healthy and habitable properties

Members of DARE and the Environmental Justice League of RI will then be taking a new-to-the road bio-diesel bus to Boston before making another 16 hour bus trip to Charlotte starting at 11 p.m. tonight.

DARE has been leading or lending to support to direct action against Bank of America id downtown Providence since October.

Here’s more from release from DARE and the Environmental Justice League of RI:

The rally is part of a massive nationwide effort called 99% Power which Will be protesting outside shareholder meetings across the country to hold corporate America accountable. “Because of big banks like Bank of America, many families don’t have basic rights in this country. Because of banks like Bank of America, the gap between the rich and the poor is getting Wider. The rich are getting richer and the poor are getting poorer. We the people bailed out the banks and they don’t feel justified or righteous enough to help provide jobs or help people in foreclosure,” explains Theresa, Board Glaixperson of DARE. “That’s why DARE and our alliance called Right to the Gty are going to North Carolina to protest Bank of America, RrtC Wants the people in the city to take back the city and to build cities that are just, democratic, and sustainable. The banks should not have us, we should have the banks.”

“The E] League understands that foreclosure and eviction are environmental justice issues. Bank of America evícts families and decimates whole blocks, attracting litter and rats, which impacts the environment and health of the entire neighborhood. Three of our Youth members are going to Charlotte to tell Bank of America to stop evicting families and stop bank-rolling fossil fuels and climate change,” explains Rodriguez-Drix, organizer with the Environmental Justice League.

The Right to the City Alliance will be converging in Charlotte, North Carolina as part of 99% Power to shed light on the divisions between the 1% and the 99%. Alliance members in attendance include: City Life/ Vida Urbana, Boston., MA, Mothers on the Move and Community Voices Heard, NY, Miami Workers C/enter and Power U, Florida, Direct Action for Rights and Equality, Providence, RI, Springfield No @ne Leaves, Springfield, MA and the Environmental Justice League of Rhode Island.