Another city — this time New York — is trying to impose a restrictive law on banks.
Granted, such municipal intervention is not new, and the core issue in the Big Apple — whether to require bank branches to install glass "bandit barriers" to stem a tide of robberies — is relatively limited.
But the specter of local-politician activism looms larger when one aggregates that effort with ordinances recently enacted or being considered by cities nationwide to deal with the massive foreclosures spawned by the financial crisis. A recent Supreme Court decision that limited federal preemption adds a possible wild card.
"We're in a period of much more activist government at all levels," said Sanford Brown, the managing partner in Bracewell & Giuliani's Dallas office. "From top to bottom, elected officials seem to be empowered to micromanage things because of the state of the economy and the fact that banks are very much out of favor generally."
The New York City Council last month introduced a measure to require that banks install bullet-resistant Plexiglas walls spanning teller stations in order to minimize contact between tellers and would-be robbers.
Meanwhile, Providence, R.I., is considering whether to mandate mediation between banks and borrowers nearing foreclosure, using a counselor approved by the Department of Housing and Urban Development before the bank acts.
About 200 cities have stiffened their building codes and are fining banks for violations on deteriorating properties that have been abandoned during foreclosure.
Several cities in Florida, including Miami and Deerfield Beach, have adopted ordinances requiring banks that hold mortgages on properties in foreclosure maintain the properties — even before the banks obtain title.
The Florida Bankers Association is considering whether to lobby the state Legislature to stop cities from imposing property maintenance requirements on banks before they acquire title, said Anthony DiMarco, the group's lobbyist.
Mathew Street, the American Bankers Association's deputy general counsel for state relations, said that states and the federal government are better suited than cities or counties to make policy for the "business of banking."
"Those who charter ought to be the ones who govern how banks operate," he said.
A number of state lawmakers have agreed in the past. After a spate of cities tried to enact predatory lending ordinances this decade, a half-dozen states, including Maryland and Ohio, enacted laws to prevent cities or counties from adopting measures that dictate the business of banking, Street said.
Yet problems in housing, financial companies and the overall economy seem to have prompted a flare-up.
And L. Richard Fischer, a partner in the Morrison & Foerster law firm, said last month's Supreme Court decision to let states enforce their fair-lending laws against national banks could embolden cities and counties to legislate anew on bank policy.
"There will be more lawsuits about whether or not those laws would be preempted by the National Bank Act, and more lawsuits [about] whether the right that the Supreme Court has given state attorneys general should be shared by cities and counties," Fischer said. "It all means more litigation."
The New York Bankers Association and some large banking companies are fighting the teller-window legislation, though 90% of branches in the city have bandit barriers.
Gregory B. Braca, the president of New York City operations at TD Bank, a unit of Toronto-Dominion Bank, said nearly two-thirds of the city's bank robberies in 2008 were at branches with bandit barriers.
He also cited evidence that bandit barriers could frustrate would-be robbers and boost the potential for violence.
"All of our customers and many of our employees are on the same side of the glass as the robber," Braca said.
Moreover, bandit barriers would cramp the bank's more casual coffee-café style of banking, he said. "Our customers love that they can talk to somebody without having this two-inch wall between them, like the Department of Motor Vehicles."
Bank of America Corp. has bandit barriers in all its New York City branches, as well as in many other urban markets, said Jeff Barker, B of A's market president for the city. The Charlotte banking company uses the barriers — in conjunction with other advanced security measures such as digital surveillance cameras that can relay photos to police cars within seconds — at sites with a high incidence of bank robberies and in branches that have high transaction volumes, he said.
However, B of A opposes an ordinance that would mandate bandit barriers, said Barker, who also sits on the board of the New York Bankers Association. Bankers argue that should have flexibility to cope with security crises. "With any regulation, sometimes there are unintended consequences," Barker said.
The New York City Council next meets at the end of July but may not vote on the bandit-barrier issue then because members of the public safety committee have asked for additional data and other information.
