wells fargo, bank of america, chase, and citigroup, all of whom have $5.40 trillion in assets. compare that to smaller banks around the country which have $1.40 trillion in assets. smaller banks to a much greater job of supporting local economies and have a broader portfolio of loans to small businesses. almost four times the amount of these banks that have $4 trillion in assets. how can we figure out, as a city -- and this is something that is being grappled with at the state level -- how can public entities use their public dollars in a way that will help stimulate the local economy, and greater accountability for our financial

institutions? that was the purpose of asking for the report from the legislative analyst. with the feeling out in the street, occupy wall street, occupy sf, oakland, all the other cities around the country where this is going on, we do not feel like we have been bailed out. main street has not had its bailout. fillmore has not had its bailout. mission street had not had its bailout. how can we create the conditions to support small property owners and local business owners here in san francisco with public dollars? in the southern part of san francisco, including my district, district 10, to some extent, district 4, we have high

rates of foreclosures. last week i saw a map for a look at the number of foreclosures and it was densely populated in the southern part of the city. that was something that alarmed me. when we say all these defaults and foreclosures, these are household that are losing wealth. especially for working-class and middle-class families, our wealth is in our property. we have property that we are not able to maintain, we are seeing a loss of our diversity. we talk about african-american out-migration. a lot of that is due to housing costs and the foreclosures occurring in the community. as well, in the hispanic and chinese and asian communities as well. the purpose of today's hearing

is to explore how we can use our local dollars to get greater accountability from the banks. across california, we have a foreclosure crisis that continues. in san francisco, 4210 foreclosures alone in our city. that is an astronomical number. in california, $200 billion worth of property that are under water. in san francisco, we have many as well under water. what is the response, how can we change the situation? the timing of this is interesting because of what is happening outside this room, in the country with the occupied movement, but we also of some great local timing as well. the city treasurer is in the

process of putting out another rfp for begging services for the city and county of san francisco. this is an opportunity to see how we can use the time to leverage this rfp process to get greater social responsibility and support for our local economy and banking institutions. he will be talking about that when he comes to the podium later on. i thought i would start with our treasurer who can give us an overview. he has some activity later on this morning, so he should go first. then we will hear from the legislative analyst about the report that they had done for my office. then we will get into public comment. mr. cisneros, come forward, please. >> good morning, supervisors. i am pleased to be here to talk about the city's banking

business, how we transact that business and the process we are about to undergo to review how we manage the city's banking business. i want to spend a minute talking about different types of activities we undertake in managing the city's money, as it comes in, and as we hold it and keep it safe. the first thing i would like to talk about is how we manage the city's investment pool. technically, a county investment pool that every county in california holds and maintained. this is where all the money that has been brought into the city, funneled through our bank accounts, but we need to hold onto for some timbered period of time, is managed and invested. we managed that pool deliberately and carefully. our average balance of that investment pool has been a little bit more than $4 billion. it is mostly comprised of money that would not technically be considered the city's general

fund money. these are, to a large degree, bond proceeds, bonds issued by large departments or government entities. those might be the san francisco airport, the san francisco port, mta, the san francisco unified school district, or our local community college district. by comparison, the general fund money in that overall imbalance represents one of the smaller portions in there. how we manage those funds is strictly governed by state law, and state law prioritizes three major items that we must follow when we invest those funds. first and foremost is safety of the city's money to make sure it will always be there. we will never lose any of it. the second high priority that they require us to focus on is liquidity.

and this means the money will be available when we need it. we cannot allow it to be tied up for a longer prado of time that would make it difficult for us to access when it comes to use those funds. thirdly, we are required to prioritize yields. make as much return on the investment of those funds as possible. these criteria are put in place by state law, i believe, very appropriately, because we have seen counties in the past have difficulties. some of us may remember more than a decade ago when the orange county, through mismanagement of its county pool, ended up going bankrupt. this is, of course, what these exact strict rules are meant to avoid. so we take the management of the pool very seriously. the overwhelming majority of our

funds these days, in these difficult economic times, are invested in very safe investments. over 90% of everything we have invested from the $4 billion investment pool is in guaranteed investment. we know that our money will be safe. we take this responsibility very seriously. that is the description of the work we do for the investment pool. now i would not like to talk to what you were referring to, supervisor at avaloavalos, how e banking services. just like any other entity, public or private, we manage and number of banking relationships. in san francisco we have an estimated 133 bank accounts that are open and spread over 40

different city departments. the reason these bank accounts exist is so the city can manage and complete its many, many transactions it must do to run its business. when you think about it, it is all about receiving payments into the city, tax payments, fees, revenues, cash flows, and making payments out. over $12 billion of funds move in and back out. if you total up all the value of the transactions, that occur in the city, and the literally thousands of transactions a year occur. right now we are dealing with early numbers, but almost 2 million deposit transactions and more than 3 million disbursement

transactions each year. so literally, millions of money moving, large and small amounts, is what we transact through these 133 accounts across our city departments. i want to be clear. these accounts are primarily and strictly for the purposes of handling these transactions correctly and accurately. once any funds go into the account, just like any other organization, a private company, government agency, any money that goes into that account does not stay there. it would not make fiscal sense for us to leave it there. by and large, these accounts are not interest-paying accounts. so we provide a function where it at the end of the day, it is swept out of those accounts into a concentration account. then that concentration account balances are reviewed and

managed by our investment pool managers, the folks i was talking about earlier, who take that money and make sure it is put somewhere safe, make sure we have liquidity in place, as well as the option to earn a return on it. that is a description of what we are using these accounts for. just to go into more detail, the inbound deposits are all various types. people bring us cash, checks, payments that come through the mail. we have bought automatic transfers, wires, things like that. all sorts of different transaction that we are taking through these accounts. similarly, a similar variety of different transactions where we are sending money out. also, as people are getting more

and more interested in paying their fees and taxes in different ways, we are processing more and more credit- card and debit card transactions, as people are moving away gradually from paper checks or cash payment, to some form of credit or debit card payment. we have a fair amount now of work we are doing to process those payments from all the different channels they come through. the fees that we pay on those transactions are similar to what retail a establishments -- to what we tilt astonishments have them. annually, they have been costing more than the credit card transaction fees. that is costing us more than the fees we paid to our banks for just the management of the account.

so you are correct, we are correc. it is important for us to solicit our business so that we get the best product and at the best price women do business with our banks. we have come in fact, because we do not do this every day, every year, so we are perhaps not the most expert at doing this, but we secured an outside consultant who has done this work for many municipalities to help us with our procurement to make sure we are engaging with these financial institutions the best way possible, getting the most productive services, most efficient services, and getting them at the most competitive prices. when we are meeting now is a process to engage our city partners. we need to know what their needs are. we need to know how rec and

park receives its funds. similarly with the airport, and on and on for all the different departments. what are their banking needs? what types of improvements mind week, with the knowledge that we gained from our financial institutions and consultant, what may we be able to look at to do better? how can we improve the efficiency we bring into our practice and move our money more efficiently and perhaps more safely? we want to take every opportunity to improve service internally as money moves around the city family and apartments, but we also want to make sure we are offering the best service to our constituents, so folks can pay as in whenever way is most convenient for them. we are gathering that information right now from internal sources, and we are hoping to be able to compile all that. shortly after next year, we will

be able to have all of that constituted into our rfp that we will send out to financial institutions. certainly, we want to be very careful of how we do this. we want to give financial institutions time to respond carefully and thoughtfully to our proposal. then if we imagine moving some or all of these hundred-plus bank accounts, we are going to need a series amount of time to implement those changes. we are being careful to plan this process deliberately so that we can do the appropriate steps in the most responsible way. as you mentioned in your introduction, supervisor at avalosavalos, we're doing what n to work the rfp into the

process and ensuring that the contracts that enter the process but the support our community in sanfrancisco. as many of you know, the treasurer's office has a long history of rolling out financial empowerment programs, but as we call them, to do positive things in our community. one of the first things was an effort to get people away from predatory check captures and enduring relationships with healthy, lower cost, more mainstream financial institutions, where they could seek -- keep their money safe and not pay outrageous predatory fees. since then, we have been working directly with credit -- credit. we are still in the beginning of the pilot program and are hopeful we can show there are ways that credit unions and

hopefully banks, can someday provide low-cost loans to low- income people in a way that is not as predatory as pay lenders. >supervisor avalos: who were those institutions involved? >> we wanted to make it as broad as possible. when launched the program five years ago, we had three quarters of the banks and credit unions in down participating. all the banks that you mentioned earlier, many medium and small banks. i want to say the majority of credit unions in town agreed to be part of the program. in order to do that, we insisted they meet our project goals, which is to provide a low-cost account, offer forgiveness of a first overdraft fee, opportunity for people who have had problems in the past, to earn their way back

into good standing. a variety of things that we got to change their practice so that folks have an easier time from beingunbanked to banked. our goal was to tell people that joining the mainstream can offer them options. go where you want. creethat was our goal, to make s as universally as possible. we also want to make sure -- as we begin to roll up our banking rfp, we take many of the same mission and values we have that in our previous programs to this procurement as well. we want to ensure this procurement reflects the values and goals of the city and county of san francisco. so we are trying to learn and gather information about that,

the same way we are meeting with city departments to learn what their banking needs are as well. we are very proud of the fact that last week we bring in the to announce that one of our long-term partners in the various programs i just mentioned is joining us in this effort to help us craft a banking rfp that has a strong social responsible aspect to it. we are in discussions with other organizations to hopefully be able to announce soon that they will be helping us to review the different policies, practices that we may be able to bring and incorporate into this rfp. for those of you who do not know, the green lighting institute is a national policy institute working for racial and economic justice. they are well known by the financial industry for their aggressive pursuit of the

community responsibility act. they are experts and running grass-roots networks to hold financial institutions accountable to the many responsibilities that we share with the communities we serve. so with that, we are at the beginning of this process. i am grateful to you, supervisor, for bringing more attention to this topic. together, we can dialogue and have a good conversation about what kinds of opportunities this banking rfp can have come in if we can then present goals, missions, and different outcomes, to the different various financial institutions looking at the city and considering bidding for our services. that is very exciting. it is a great opportunity. we must also consider that we have to do this hand in hand, at the same time, making sure we

are safeguarding these millions of dollars of financial tracks -- transactions which occur every year, making sure that they occur accurately and safely for the city and county. >supervisor avalos: we met the other day and that was very informative. i really appreciate how you say that we need to make sure our money is secure. that is the role you play. you also created some new program working with financial institutions that, i think, are besht -- beneficial to individuals and households. those are models of good social responsibility programs. when it comes to doing the work of -- these financial

institutions are providing these benefits, which are good, but doing more to conform to the needs of our communities around sanfrancisco suffering from the recession. what more can the treasurer's office do to help bring about some change in financial institutions, how they function in this state? >> i think this is actually very new territory for many cities. as far as getting the focus in recent months, it is relatively new for cities and municipalities to think about how we can make a difference. i do not know if i or anyone else has any set precedents, prior practice, or specific examples of how we could do that. i appreciate partnership in this, but i think we need to have a dialogue. we need to bring ideas to the table, analyze them, look at how

they may be able to help us achieve these goals. of course, how they can coexist with our fiduciary responsibilities and our important transaction and money goals that we have for our selves. this is an exciting opportunity to discuss that. i am certain we will be one of the first cities in the country to do that. i would also cautioned, while we know we are a sizable player come here in the community, there are something the city can do that are very different from what the state of california or government can do. these various layers of government have different opportunities and limitation we need to be mindful of as well. supervisor avalos: i think the legislative analyst's report can touch on some of those legislative issues. we have the rfp coming out.

before this is issued, i would like to have the general framework presented here, back in committee? >> we would like to keep an ongoing discussion with you. i would look forward to us continuing to meet, review the process we are making, as well as keeping you and other supervisors or city leaders involved in the conversation of how we are formulating the different requests and requirements placed in the rfp. i would be happy to share those outcomes and draft versions at any time. >supervisor avalos: not to put you further on the spot. prior to actually coming to the hearing -- we will probably continue this item to the call of the chair with an introduction specific to the rfp -- i wonder if it would be possible to meet with my office

and stakeholders? just to find out where we are with the rfp, give you some ideas that might influence the process as well come on top of the word of the green lighting institute is doing. is that something you would be interesting in -- is that something you would be interested in doing? >> it absolutely. we will do what began to craft some of those rfp requests and talk with you as well. -- >> absolutely. >> that would be a request, to be a part of the rfp. i did not know if that would necessarily be included, but that can be food for thought before we need. >> thank you. i appreciate that. that is a great thing to look at

and consider. this is our opportunity to put questions out there to the financial institution, to the marketplace. i am not sure what we will get back, but this is our chance to ask the question. when it comes time to see the answers, we will have to be thoughtful about how we review that and what we see might be realistic at that time. supervisor avalos: who would respond to the rfp? how many financial institutions are out there that would typically respond to the rfp for doing services here? >> i would not want to offer too much of a guess around that. as i mentioned, the city posset banking business is actually quite complex. there are literally millions of transactions and often different transaction types that we are handling. so the volume is huge and the complexity of the different types are are still quite large.

what we are looking at, working on with our outside consultants, from examples we see in other similar sized organizations, both government and corporations, because they have many of the same challenges and do the same work we are engaged in and looking at here, is i think there are different ways to look and maybe carving up our business. maybe parcelling some of that out to one institution compared to another. when we offer our responding financial institutions and opportunity to not only discuss how they might be able to discuss all of the various complexity of our banking business, but also talk about how they could handle well and just one piece of it, i think that prevent it opportunity for more diverse types of

organizations to come in and say, i may not be able to do all of that concentration account with the sweeping, but i have a great service for credit card processing over here. if we take a flexible approach, we could get even more diversity and more numerous responses. but i think it is to be determined. supervisor avalos: ok. long term, looking at the idea of the municipal bank. from my conversation with you, it seems there are some constraints to that. in particular, the security of our public dollars. that is something that i would ultimately like to see, tackle in the months to come. just making sure we can have a partnership in that discussion. >> very much looking forward to that conversation. we have all heard that kind of

goal for a while. one of the things i am anxious to hear about are some of the outcomes that are being predicted, hoped for out of something like that. if we could get more clarity around that, we might find that there are some ways that that might be a good way to do that. there could be other methods as well. at least in the interim. supervisor avalos: when we talk about a miscible back, people think about the retail bank with atm's, dennis kearns, but our partnership with other states spreads are risk out, but that is down the line. >> sure. we have programs here in san francisco that we can look at, where the city departments are offering small loan guarantees, different types