BILL NUMBER:S2780

TITLE  OF BILL:  An act to amend the public authorities law, in relation
to funds of the state

PURPOSE:  This bill would prohibit public  authorities  from  depositing
their moneys in a banking institution with a federal Community Reinvest-
ment Act rating of less than satisfactory.

SUMMARY OF PROVISIONS:

Section  1 of the bill amends Article 9 of the public authorities law to
specify that notwithstanding any other provision  of  this  chapter,  no
public authority or public benefit corporation chartered by The State of
New  York shall deposit its moneys in a banking institution to which the
Community Reinvestment Act of 1977, United  States  P.L.95-128  applies,
unless  such  institution  has received a record of performance no lower
than satisfactory.

JUSTIFICATION:  In 1977, Congress passed the Community Reinvestment  Act
(CRA),  a law that sought to eliminate discriminatory behavior by banks.
The CRA requires banks to meet the financial needs of their  communities
by  investing  in low to moderate-income neighborhoods. One of the CRA's
most powerful tools to spur banks to return capital to the neighborhoods
from which they extracted it, is the CRA's focus upon neighborhood lend-
ing target compliance, and enforcement against banks that fail  to  meet
              

federal  lending  guidelines.  The overall goal is to encourage banks to
lend in distressed communities, and by creating such a  pool  of  liquid
funds,  to  increase  economic  development, small business and consumer
lending, and homeownership.

A recent report by the Association for Neighborhood and Housing Develop-
ment (ANHD) concerning New York City's  17  largest  banks  reveal  that
while  deposits  grew  by more than $452 billion in 2007 and 2008, these
institutions reduced community lending 20.2% or  $560  million  dollars.
Furthermore,  the  report  concludes that these banks also reduced their
multi-family loans in low-income areas by nearly twenty-five percent, or
$1.3 billion dollars. While this report may be no  more  than  a  window
into  a problem whose parameters are different outside of New York City,
the dramatic declines in lending portrayed during a period  of  consumer
credit  crisis  are distressing and endanger the prosperity and recovery
of New York's communities.

In New York, billions of dollars are held on deposit by public  authori-
ties,  commissions  and  public benefit corporations, and the deposit or
withholding of such funds can act as a power incentive for  CRA  compli-
ance.  This  bill  would further enhance CRA compliance by directing the
public authorities continued or created in New York not to deposit funds
in those banks that have not received a CRA rating  of  satisfactory  or
better.

PRIOR  LEGISLATIVE HISTORY:  2011-12: S.2850/A.5947 - Referred to Corpo-
rations, Authorities and Commissions/Referred to Ways and Means 2009-10:
S.8507/A.11713 - Referred to Rules/Referred to Corporations

FISCAL IMPACT ON THE STATE: None.

EFFECTIVE DATE:  This act shall take effect on the one hundred-eightieth
day after it shall have become law.