This week the Austin City Council voted unanimously to move city banking from Bank of America to Chase, just three weeks after voting unanimously to investigate responsible banking options. What is clear now is that this move to Chase Bank was already decided even before the March 1st vote on the responsible banking resolution, since the city had sent out a request to 112 financial institutions in August 2011 and received exactly three replies – Bank of America, Wells Fargo, and Chase Bank – institutions that made good use of their bailout money to position themselves as collateralized enough to handle the city’s finances.
The city’s Interim Chief Financial Officer Elaine Hart read from her four-page memo, reiterating Austin’s financial needs and how only the largest banks can provide for them. When questioned by Council Member Bill Spelman about whether the city’s contracts could be split between several smaller institutions, the response was no, because making sure that the financial arrangements were being followed by the banks would be a nightmare for city staff. There were, however, no concerns as to whether the contract with Chase Bank would be in the city’s best interest. The contract was awarded despite JPMorgan Chase’s settlement in July of last year with the Securities and Exchange Commission over the rigging of the municipal bond market. Chase has also settled lawsuits dealing with excessive overdraft fees, cheating veterans and defrauding the federal government, among other egregious activities. When questioned by Council Member Kathie Tovo as to whether the Chase contract could be limited to one year while the city gathered more information, city staff responded that no bank would enter into a one-year contract, that the shortest contract could be 36 months, and that reopening the bidding would be a logistical nightmare for city staff.
And of course, there was the mention of those other cities – San Francisco, Berkeley, Seattle, Philadelphia, all with responsible banking resolutions, and all still tied to contracts with Bank of America or Wells Fargo. Since those cities couldn’t make the move, why should Austin try to change anything.
Several citizens spoke at the meeting, reminding the Council of Chase Bank’s horrible treatment of its customers and of its settlements with the federal government, not to mention the bailouts. But when Claire Hirschkind spoke, she noted that at least one credit union, Members’ Trust FSB, was interested in a contract with the city, but was never contacted. While not a local institution, it is a credit union that might have a better record with its clients than Chase Bank.
One of the more surreal moments was the discussion about which of the three finalists, now famous for ripping off their customers, including governments both federal and local, was best able to handle Austin’s finances for the lowest price. Chase was deemed the winner of that sweepstakes, having scored the highest on the city’s grading system.
So now Austin will bank with another too-big-to-fail institution for at least the next three years. While Occupy Austin and others tried to stop this fiasco from occurring, it is now incumbent on all of us to keep the pressure on the City Council, to push them to work with responsible banking institutions. The contract we are now stuck with has a two-year renewal option. Let’s make sure the City Council understands that this three-year contract is the most we will grudgingly accept.
UPDATE (March 26th):
Today a member of Occupy Austin’s Bank Action Committee spoke with Council Member Bill Spelman concerning the City of Austin’s vote awarding a banking contract to Chase Bank. The following statement/questions were sent to Mr. Spelman, indicating Occupy Austin’s continued work on this issue.
Thank you for taking a moment out of your breakfast time this morning to speak with me. While we are collecting information from various member trusts operated on behalf of local and regional credit unions, we want to make sure that you, your colleagues, and staff have a clear understanding of the questions we’d like answered. These questions are attached and pasted and the bottom of this message.
Our folks look forward to your response. Thanks again.
There are over 30 days left for the City Manager Office to examine the city’s banking contracts. We are asking you to get answers to the following questions:
- Were you, or someone from your staff given a copy of the RFA issued in August of 2011? If so, we are asking you for a copy, as well as a list of the 112 banks it was distributed to.
- What criteria were used to determine which banks would receive the RFA?
- After multiple requests for information regarding city financial contracts dating from October to February, we were never told about the already-issued RFA. Why did members of City Council and staff withhold this information?
- Why were responsible banking criteria like foreclosure rates, payday lending, etc not included in the RFA?
- Has the contract with JP Morgan Chase already been signed?
- What is the history of the city’s relationship with JP Morgan Chase? How many contracts have been signed between the City and JPMC, and what caused the city to change banks in previous years?
- Why didn’t the Deputy Chief Financial Officers and the City Manager consider extending the current depository contract with Bank of America for one year in order to reopen the RFA and include responsible banking criteria?
- If the city signs with JPMC, are you willing to push the City Manager to leverage this new relationship by requiring that JPMC invest a certain percentage of the city’s assets in the local economy? Are you willing to push for a moratorium on foreclosures by JPMC in the Austin/Travis County area?