Officials in New York City limited account deposits on Thursday at Capital One and KeyBank after the financial institutions failed to submit required anti-discrimination plans.
The city issued mandates earlier this year for banks which hold public funds to detail “specific steps to combat different forms of discrimination in their operations.” An announcement from the office of New York City Comptroller Brad Lander claimed that Capital One and KeyBank “outright refused” to comply with the requirement.
“Banks seeking to do business with New York City must demonstrate that they will be responsible managers of public funds and responsible actors in our communities,” Lander said in a statement. “Unfortunately, despite several opportunities to do so, five banks failed to comply with the New York City Banking Commission’s designation process, leaving us to conclude that they are not taking meaningful actions to combat discrimination in their operations and are not responsible stewards of public dollars.”
Capital One held $7.2 million in city funds at the end of last month, while KeyBank held $10 million in city funds. Officials voted to freeze new deposits at the two companies for as many as two years, while Lander contended that International Finance Bank, PNC Bank, and Wells Fargo also neglected to comply with the anti-discrimination policies, through which the firms were asked to detail ways in which they avoid “discrimination in branch openings and closings, lending decisions, hiring, and other operations.” The latter firms do not currently hold city funds.
New York City officials received criticism for compelling banks to comply with the environmental, social, and corporate governance movement, also known as ESG, which asserts that businesses should leverage their financial power to advance certain social objectives.
Peter Schiff, a stockbroker and financial commentator, said on social media that banks “only discriminate based on competence and credit worthiness” since they are focused on maximizing profits. He said that New York City wants banks to “hire and make loans to minority applicants, even if they are less qualified and more likely to default.”
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Democratic officials have indeed introduced policies which would introduce considerations for personal loans divorced from the debtor’s financial responsibility. Federal Housing Finance Agency Director Sandra Thompson, an appointee of President Joe Biden, recently unveiled a policy that will require Americans to pay higher mortgage rates and monthly fees if they have robust credit scores, while those with lower credit scores and smaller down payments will receive better rates. Buyers with credit scores above 680, for instance, would pay an additional $40 each month on a home loan of $400,000, while homebuyers who make down payments between 15% and 20% will receive the largest fees.
Republican state financial officers wrote in a letter to Biden and Thompson that the move renders home purchases “significantly more expensive” for families with strong credit. “For decades, Americans have been told that they will be rewarded for saving their money and building a good credit score,” they contended. “This policy turns that time-tested principle upside down.”
Treasury Secretary Janet Yellen likewise launched an Advisory Committee on Racial Equity at the end of last year to consider “efforts to advance racial equity in the economy and address acute disparities for communities of color.”