The city of Los Angeles is putting banks it does business with on the spot.
The unanimous directive coming from the city council is that banks need to help Los Angeles slow the pace of foreclosures ravaging its neighborhoods and battle a local unemployment rate that far exceeds the national average.
If the banks don't comply, they risk getting replaced by banks that do. The price for getting tossed: Lost access to nearly $30 billion in city savings and pension funds.
"We need to challenge the financing institutions that got us into this mess," says Richard Alarcon, a Democrat who introduced the city council's motion that passed 12-0 earlier this month. "Responsible local investments are critical for our economy."
Think of what's happening as a reward system for any banks that are willing to help Los Angeles's population of 3.8 million.
Banks are going to have to offer more than just a competitive interest rate or lower fees on investments to keep the city's business. They must prove they are investing within the city's boundaries.
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