It’s time to hold Banks accountable! Recently, the Department of Justice handed down the biggest civil penalty of its time – $4 billion to Citigroup for its role in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) prior to Jan. 1, 2009. These instruments were not only predatory in nature, but fueled the financial crisis of 2008. In addition to the $4 billion civil settlement, the resolution requires Citigroup to provide $2.5 billion in relief to underwater homeowners, distressed borrowers and affected communities through a variety of means, including financing affordable rental housing developments for low-income families in high-cost areas. Even though a resolution was reached, the bank as well as some of its employees could still be hit with criminal charges.
This has been the largest penalty dealt under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). A total of $20 billion has been recovered so far for consumers and investors who were misled by these financial institutions. In the resolution, Citigroup acknowledged its wrong doing – internal emails between Citigroup employees state that one “went through the Diligence Reports and think[s] [they] should start praying . . . [he] would not be surprised if half of these loans went down. It’s amazing that some of these loans were closed at all.” This conscious negligence and disregard for consumers and investors show the ugly motives of that exist within and often drive our financial institutions- profits over everything.
Supported by Manna, Inc. and over 15 local organizations and coalitions, the Community Development Act of 2013 seeks to leverage city deposits to hold the District’s financial institutions accountable for reinvesting in all of the District’s wards and residents, not just the more affluent ones. These financial institutions can’t be expected to prioritize the development of the communities around them: that is our task. A responsible banking ordinance, which evaluates the reinvestment plans of the banks that the city does business with, would be a step in the right direction.