ever since The collapse of Silicon Valley Bankthe banking industry, federal regulators, and the U.S. government have shown impressive solidarity in unity to “strengthen the banking system.”
Eleven of the nation’s largest banks have teamed up to bail out distressed First Republic Bank with $30 billion. Meanwhile, two of his largest US banks, JP Morgan and Citi, agreed. Do not poach staff or businesses From stressed local and community banks.
This is a striking recognition that the fate of our banking system is indeed interdependent, but whether such solidarity extends to those far removed from wealth and influence is uncertain. It’s not very clear.
We are particularly concerned about whether First Citizens Bank bought SVB $16.5 billion discountto respect Previously Negotiated Community Interest Agreements promised $11 billion — Allocating $9 billion to California — primarily for the financial and economic infrastructure of low-income communities of color.
The agreement follows SVB’s acquisition of Boston Private two years ago, a move that required approval from US banking regulators.in the spirit of interdependence, and Community Reinvestment Acta long-standing federal law that guarantees a public voice in such decisions – the banks agreed with the demands of community groups and showed how a merger could guarantee local investment.
The $11 billion deal included $4 billion in small business loans under $1 million. He has $4 billion in community development loans and investments. $1 billion in low- and middle-income mortgages. $60 million in charitable contributions.
It won’t be enough to close the racial wealth gap that many have lost their cushions over the past three years of the pandemic, but it’s a start.
SVB has now stumbled — not because it agreed to help the community, but because maturities and yields on deposits and assets did not match. The tech giants, who are often liberal in their political leanings, have insisted the federal government take extraordinary steps to save wealthy depositors, the SVB, and the banking system. , is silent on whether obligations to disadvantaged communities in California will be similarly honored.
I think we should. After all, bankers generally embrace the ideology that markets are efficient, failures are personal, and governments should always step back, but their philosophy is that their own assets are at risk. The massive bailouts during the 2008-2009 financial crisis, the expansion of government support for employers and workers during the pandemic, and the surge in aid in recent weeks have all , confirms what we already know (and financiers are reluctant to admit). Vulnerability is systemic and governments have a role.
Public support should be accompanied by public interest. Where new entrepreneurs can start and maintain a business, where investments are made in the neighborhood, where prospective homebuyers aren’t living paycheck to paycheck to get a mortgage – these are the places where you can better yourself. It’s the type of community that can be maintained and support a healthy bank.
A perfect banking system requires a perfect community. An important step is for First Citizens Bank to fully respect and implement the already negotiated community benefit agreements.
What the community knows and has on our minds: this is our economic. We create it together, and as the recent bank bailout shows, we protect it together. we prosper.
Paulina Gonzalez-Brito is CEO of the California Reinvestment Coalition. Manuel Pastor is Director of the Equity Research Institute at the University of Southern California. They wrote this commentary for his CalMatters.
https://www.eastbaytimes.com/2023/03/31/opinion-will-svb-honor-9-billion-promise-to-low-income-californians/ Will SVB keep its $9 billion promise to low-income Californians?