The IG found banks do turn in their paperwork, but the city “does not evaluate the banks’ community investment and equitable lending efforts,” meaning the city might be partnering with banks that continue to lend inequitably. Beyond that, the Finance Department, the Treasurer’s Office and the City Council rarely coordinate their depository efforts, which has held back any movement finding alternative banks whose practices might better align with the city’s goals. Aldermen and Treasurer Melissa Conyears-Ervin have publicly supported allowing credit unions to serve as such depositories, but talks haven’t gone anywhere, the IG says.
Inequitable lending has been a hot topic of late: A 2019 Urban Institute study that looked at private-sector investment in city neighborhoods found from 2011 to 2017 investment in low-poverty neighborhoods was 4.3 times greater than in high-poverty ones. Investment in majority-white neighborhoods was 2.6 times higher than majority-Latino neighborhoods and 4.6 times greater than in majority-Black neighborhoods.
Similarly, a 2020 WBEZ report found racial disparities in lending: Four majority-white communities individually received more home mortgage dollars than all majority-Black neighborhoods in Chicago combined.
Banks turn over data to the city on residential, consumer and commercial lending, including on interest rates, down payments and the total number and amount of loans broken down by census tract. Chicago’s current municipal depositories—Amalgamated Bank of Chicago, BMO Harris, Citibank, Fifth Third, JPMorgan Chase and PNC—hold just over $450 million in city cash and certificates of deposit.
But the Finance Department “has no process for evaluating the equity of service provision—i.e., its relation to race, geography and median income,” the IG review of 2021 bank submissions found. The inspector general found a single staffer was tasked with reviewing them. Most were delivered as hard copies, making analysis harder. While the department “does identify potentially predatory loans, such as those at interest rates higher than the federal funds rate” and follows up with banks about the conditions, the city has “never declined to designate a bank as a municipal depository on the basis of such lending conduct.”
Ald. Harry Osterman, 48th, chairman of the City Council’s Housing & Real Estate Committee, is one of nine aldermen sponsoring a proposal to require municipal depositories to publish data on their patterns of purchase and home equity loans within the city, inspired by the WBEZ investigation. That data would include financing terms and down payment sizes as they vary in different census tracts, and tallies of mortgage refusals broken down by race and gender. A January hearing with major lenders only resulted in one lender, Guaranteed Rate, showing up. Osterman’s ordinance is up for a hearing next month.
In response, the city says it’s forming an evaluation committee with the treasurer’s office to make sure banks meet their request of proposals requirements. The city has also formed a task force along with the treasurer’s office, state treasurer and banking institutions “to explore alternative solutions” to push for equitable lending, potentially outside the current city ordinance.