Senate Bill S8507

                                BILL NUMBER:S8507

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 Reinvestment 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 lending
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:
None. This is a new bill.

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.