The New York City Council and a group of banks traded briefs on Monday over the banks’ legal challenge to a law that could influence $6 billion in deposits from the city.
The city law creates an advisory board to examine how well banks serve the city’s low- and middle-income communities. The information would then be given to city officials and made public. The banks could choose not to participate.
The suit was filed by the New York Bankers Association, which has close to 150 members including Citibank, J.P. Morgan Chase, Bank of America, HSBC and Goldman Sachs. It has moved for summary judgment against the council, while the council has moved to dismiss the case.
On Monday, both sides filed briefs in opposition to each other’s motions.
The council passed the law, Local Law 38, in 2012. It would create a Community Investment Advisory Board, including the mayor and comptroller, to gather the information from banks.
The law passed over former mayor Michael Bloomberg’s veto, and he declined to enforce it. Mayor Bill de Blasio has made no announcement about the law. However, in late December, the city’s Department of Finance issued a request for information from third-party vendors to help implement the law, leading the banks to say in Monday’s brief that enforcement is “imminent.”
The banks are challenging the law on grounds that it’s preempted by state and federal banking regulations. The city said in Monday’s brief that the law is not preempted because it’s not regulatory, since the advisory board has no authority to demand information, let alone impose penalties.
The banks, meanwhile, said in their brief that the law is effectively regulatory because it “seeks to change bank behavior, through public shaming and threat of disbarment, in regard to certain communities around the City.”
The banks are represented by Sullivan & Cromwell partners Robert Giuffra, Mark Trevino and Matthew Schwartz and senior chairman H. Rodgin Cohen.
The City Council is represented by its associate general counsel Lauren Axelrod.
The case is NYBA v. City of New York, 1:13-cv-07212, before Southern District Judge Katherine Failla.