Banking Regs Enlivened |by de Blasio Draw Fire

MANHATTAN (CN) - New York City's attempt to build on federal banking laws has become ripe for federal court review by way of its new mayor, the industry claims.

Tuesday's complaint by the New York Bankers Association takes aim at a law that would collect and publish data such as bank foreclosures and mortgage modifications.

Though Mayor Michael Bloomberg vetoed the bill after the city council passed it in 2013, the NYBA says Bloomberg's successor, Mayor Bill de Blasio, has reversed course.

The NYBA concedes that an earlier challenge it brought over the same law failed because Bloomberg's inaction made its claims too "attenuated" and "conjectural," as a federal judge put it.

Since de Blasio took office in January 2014, however, the NYBA says "all of these events and more have now come to pass."

Citing the "aggressive steps" that New York City has taken of late to implement the law, the association notes that the city's financial department demanded in December 2013 that vendors provide information to help the Community Investment Advisory Board implement that law.

The city even hired two new employees, to the tune of $140,000 in salaries, to enact Local Law 38, according to the 60-page complaint.

A consulting firm meanwhile received $350,000 in September 2014 to collect and analyze data from banks, the complaint alleges.

This past February, the eight-member Community Investment Advisory Board allegedly held public hearings in all five boroughs to discuss the law.

The city released its first "needs assessment" in April, asking banks to share information "to determine if [residents'] needs are being met so that disadvantaged communities have fair access to ... important financial products and services," according to the complaint.

On the heels of that announcement, the agency allegedly asked the city's deposit banks for a host of information on how it handles small businesses and ways to offer financial services for the poor.

The NYBA says the agency's first annual report is due by the end of this year.

It claims that the law "violates the clear prohibition in federal law on local regulation of federally chartered depository institutions, which bars local laws and regulations ... that empower local authorities to collect information from, and supervise the banking activities of such institutions," according to the complaint.

"The city cannot escape the fact that Local Law 38 is preempted by federal and state law," the complaint states.

By enacting the law, the city will not be acting as a "participant in the market for banking services, but as an examiner and regulator .... with the power to threaten [banks] with public criticism and loss of status ... if those banks do not respond" to their demands for information, the NYBA adds.

More than 140 commercial banks and federal associations in New York state with aggregate assets of more then $9 trillion and 200,000 employees belong to the NYBA.

Back when the NYBA brought its first challenge to Local Law 38, a spokesman for the city noted that the lawsuit's pre-emption allegations "are consistent with, and supported by, the mayor's position in his veto message."

The NYBA is represented in its latest lawsuit by Robert Giuffra, Jr., with Sullivan & Cromwell.

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