Saturday, October 17, 2015

On Goldman Sachs - GE Capital Bank, Federal Reserve Ignores Oct 16 FOIA Deadline, Collusion Like CIT?


By Matthew R. Lee
NEW YORK, October 17 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks, with CIT and OneWest a major, and Goldman Sachs the most recent, example. Goldman is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed so far seems bent on helping. It began by overbroad withholding of basic parts of Goldman's application, click here to view, which Goldman in an October 14 submission to the Fed, here, says has been cured (it has not been).
  Inner City Press still has a pending Freedom of Information Act request; Fair Finance Watch and others, including NCRC, asked the Fed to extend its comment period, which has now been done, until October 30, with the Fed's FOIA response to Inner City Press due on October 16. But as of October 17, no response from the Fed, despite this letter:
"Re:       Freedom of Information Act Request No. F-2015-0336

Dear Mr. Lee,

On September 2, 2015, the Board of Governors (“Board”) received your electronic message dated September 2, pursuant to the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, for the entirely of the “Application by Goldman Sachs Bank USA for the Acquisition by Purchase and Assumption of Certain Deposit Liabilities and Certain Very Limited Non-Financial Assets of GE Capital Bank,” and for all records reflecting FRS communications with Goldman Sachs for the past twelve (12) months. On September 3 and September 9, the Board provided you with the public portions of the application.

Pursuant to section (a)(6)(B)(i) of the FOIA, we are extending the period for our response until October 16, 2015, in order to consult with two or more components of the Board having a substantial interest in the determination of the request.

If a determination can be made before October 16, 2015, we will respond to you promptly.  It is our policy to process FOIA requests as quickly as possible while ensuring that we disclose the requested information to the fullest extent of the law.

Very truly yours,

/signed/

Jeanne M. McLaughlin
Manager, Freedom of Information Office"
 But even by October 16, no response from the Fed. Only this from Goldman Sachs, only snail-mailed by its counsel:

 On October 13 Inner City Press published the Federal Reserve's communications with the CIT Group's outside counsel, which shows how the release of public documents is allowed by the Fed to be delayed. CIT made disingenuous requests for confidential treatment of information that could not be withheld, without any repercussion. They were rewarded with FOIA appeal denials by Fed Governor Jay Powell; now Goldman is trying to withhold information that should be public. Will there be any repercussion or accountability? Watch this site.

 After requests from Fair Finance Watch, NCRC and other NCRC members, the Federal Reserve belatedly responded:
"The Federal Reserve Board on Monday announced that the public comment period has been extended through October 30, 2015, on the application by Goldman Sachs Bank USA, New York, New York, to assume certain liabilities and acquire certain assets of GE Capital Bank, Holladay, Utah, under section 18(c) of the Federal Deposit Insurance Act... The original comment period, which closed on September 19, 2015, is being extended to allow interested persons more time to review the proposal and to provide comments... Comments regarding this application must be received at the Federal Reserve Bank of New York (Attention: Bank Applications Officer, 33 Liberty Street, New York, New York 10045; comments.applications@ny.frb.org) or the Office of the Secretary of the Board (20th Street and Constitution Avenue, NW, Washington, D.C. 20551) on or before October 30, 2015."
  Just last week, the Fed told Inner City Press a comment it submitted on Goldman Sachs, with new Home Mortgage Disclosure Act data, was "untimely" --

"Dear Mr. Matthew Lee, Executive Director Inner City Press/Fair Finance Watch

We acknowledge receipt on September 22, 2015 of your email dated September 22, 2015  ("Comment Letter"), commenting on the application filed by Goldman Sachs Bank USA... The public comment period for this application ended on September 19, 2015. Since your Comment Letter was received after the end of the public comment period, it will not be made a part of the record of this application unless the Board in its sole discretion determines to consider your late comments. However, you previously submitted timely comments that have been made part of the application record that the Board will consider."
 Now it must be considered. reviously, the Federal Reserve wrote to Inner City Press, extending its own time to respond under FOIA until October 16 -- all while maintaining that the comment period closed on September 19:
"Dear Mr. Lee, On September 2, 2015, the Board of Governors ('Board') received your electronic message dated September 2, pursuant to the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, for the entirely of the “Application by Goldman Sachs Bank USA for the Acquisition by Purchase and Assumption of Certain Deposit Liabilities and Certain Very Limited Non-Financial Assets of GE Capital Bank,” and for all records.... Pursuant to section (a)(6)(B)(i) of the FOIA, we are extending the period for our response until October 16, 2015, in order to consult with two or more components of the Board having a substantial interest in the determination of the request.

"If a determination can be made before October 16, 2015, we will respond to you promptly.  It is our policy to process FOIA requests as quickly as possible while ensuring that we disclose the requested information to the fullest extent of the law."
  But what about the request to extend the comment period? Is the Fed extending its time to rule on that, as well?
  Inner City Press made a similar request to the New York State Department of Financial Services and on September 25, some information was released -- not enough -- and the NYS comment period was extended for 30 days. 
 NYSDFS Senior Attorney George Bogdan wrote:
"Dear Mr. Matthew Lee: Your FOIL request has been granted in part. My response letter and 2 Goldman Sachs documents are attached to this e mail. Also note that the comment period for the Goldman Sachs application has been extended by 30 days. An official notice for the extension will be posted online in the DFS Weekly Bulletin for the week ending September 25, 2015."
  While Inner City Press prepares a FOIL appeal, why hasn't the Federal Reserve even ruled on its FOIA request, and extended the comment period like its state counterpart? We'll have more on this.
  On September 22, 2015, the Federal Reserve belatedly released the 2014 Home Mortgage Disclosure Act data. A quick review of the lending of Goldman Sachs Bank USA in the New York City Metropolitan Statistical Area shows the Goldman Sachs focus which should require publish hearings in this case. 
  Fair Finance Watch, hours after the data was released, has commented to the Federal Reserve at the highest level that "in the New York City MSA in 2014, for conventional home purchase loans (Table 4-2), Goldman Sachs Bank USA made 45 such loans to whites, only two to African Americans and only one to a Latino. For refinance loans (Table 4-3), Goldman Sachs Bank USA made 16 loans to whites and NONE to African American or Latinos. This is inconsistent with the demographics of the New York City MSA and with other lenders' records; it further militate for the timely requested public hearings."
  Goldman Sachs has purported to respond to the comments of Inner City Press / Fair Finance Watch by releasing a small amount of the withheld information, and arguing that what the wider Goldman Sachs does cannot or will no be considered by the Federal Reserve on this Bank Merger Act application by Goldman Sachs Bank. We've put Goldman Sachs' response online, here. It says:
“FFW states that the audio released by examiner Ms. Carmen Segara requires an extension of the comment period and a public hearing... GS Bank believes the issue is outside the scope of the statutory factors for Board consideration under the Bank Merger Act... Goldman Sachs Bank USA ('GS Bank') hereby submits its response to the three comment letters, submitted on September 2, September 3 and September 9, 2015 (the 'Comment Letters'), by the Inner City Press's Fair Finance Watch ('FFW')....
"FFW makes accusations of 'predatory practices' in the 'mortgage field' and 'municipal finance,' and states that there are a number of compliance settlements that must be reviewed in connection with the Application. FFW references several articles related to lawsuits, settlements and other events, all but one of which involve Goldman Sachs but not GS Bank. GS Bank respectfully submits that such comments are not substantiated by specific arguments or facts. GS Bank notes that none of the articles relate to GS Bank itself, and believes these issues are outside the scope of the statutory factors for Board consideration under the Bank Merger Act.”
  Goldman Sachs is arguing that the acts of a parent company cannot be considered when its bank applies to buy ($16 billion) in insured deposits, an absurd argument. FFW has submitted another comment to the Fed, including that 
"ICP has received by mail from Goldman Sachs' counsel a purported response which claims that issues ranging from conflict of interest and under-regulation by the FRB (evidenced for example by the audio leaked by whistleblower Carmen Segarra) is not cognizable under the Bank Merger Act - an absurd argument. The FRB would be the decision maker, therefore such issues must be addressed.

 "Goldman Sachs cavalierly states that since it withdrew some of its indefensible requests for confidential treatment of its application, that issues is resolved. It is not - too much is still being withheld. Significantly, Goldman Sachs has offered no explanation of the specious requests for confidential treatment it made, denying commenters access to information during the comment period. As others now argue, the comment period would be extended and hearing held."
  Inner City Press will be covering this wider National (Community Reinvestment Coalition) protest, in which it joins; it has also submitted more comments to the New York State regulator, in a proceeding currently slated to come to a head on September 28, the first day of the UN General Assembly debate.

 As Inner City Press exposed last month, Royal Bank of Canada jumped the gun and began doing business with City National Bank without any Federal Reserve approval (see Los Angeles Times, here.)
 Now, even as New York regulators says their comment period on Goldman Sachs' GE Capital proposal extends at least through September 28, Goldman has published fine print notices in the New York Post and a newspaper in Utah saying the Federal Reserve will stop listening on September 19.
  Really? After the Fed made Goldman Sachs a bank holding company with no public comment period at all, so Goldman could get a bail-out? After the Fed's coziness with Goldman Sachs was again demonstrated, by the audio taped by then-Fed examiner Carmen Segarra?
  Inner City Press immediately submitted a Freedom of Information Act request for all of Goldman Sachs' GE Capital application and related records. The Federal Reserve has provided a heavily redacted copy, on which Inner City Press / Fair Finance Watch has commented to the FRB in Washington:
"Among many other things, Goldman Sachs believes it can withhold the volume of deposits it seeks to acquire from GE Capital Bank, WHAT is seeks to acquire (and what not to acquire) from GE Capital Bank, its number of employees in Utah, the contact people on its application, the number of non profit organizations it tells the FRB it serves on the board of -- presumptively public -- and even the NAMES of the exhibits it seeks to withhold entirely. This is abusive and unprecedented and the FRB must, in response, have the comment period begin again. Otherwise, applicants only benefit by making absurd and abusive requests for confidential treatment. There is much more to be said, including at the public hearings ICP is requesting, but it is imperative that the Board act on this as quickly as possible."
 
  When Goldman Sachs became a bank holding company literally overnight in 2008, Inner City Press / Fair Finance Watch and others including NCRC asked the Fed how this was done with no public comment period at all. 
  The answer, it seems, is to be found in the audio leaked by Carmen Segarra of the Federal Reserve, showing further Fed favors for Goldman Sachs.
 With this history, and Goldman's history in predatory lending with Litton Servicing and as an underwriter, see Occupy Wall Street video here, and UN / migration connection here, it seems clear that the Fed must hold public hearings on Goldman Sachs' GE Capital application, when it is filed. 
  But with the Federal Reserve, you can never be too sure, or too careful.
  When Community Bank System of upstate New York filed with the Fed nine answers to questions asked after Inner City Press' challenge, it tried to withhold fully eight of the nine responses. More here.
  Inner City Press immediately filed a Freedom of Information Act request for the whole submission - and even the Federal Reserve saw through Community Bank System's absurdly -- and tellingly -- overbroad withholding, releasing all but one part of one of the eight withheld responses. But since then, all the Fed has done is seek a mere antitrust control commitment.
  Here's is the Federal Reserve's letter to Inner City Press granting most of its FOIA request:


We'll have more on this.
Background: The largest bank merger recently proposed, that of Royal Bank of Canada and affluent-focused Los Angeles-based City National Bank, has since April been the subject of a Community Reinvestment Act challenge by Fair Finance Watch.
  The LA Times has reported on the "letter from the Fed [which] asks the banks to respond to questions raised in written comments by [FFW]. Spokesmen for the banks declined to comment.... Fair Finance Watch, a New York advocacy group for minorities, questioned a deal between the banks in a June 11 comment letter to the Fed."
  Inner City Press first put that Fed letter online, here; then Canada's National / Financial Post reported without credit it had "obtained" it. 
  By contrast, in the pending proposal of Community Bank System - Oneida, the Syracuse Post-Standard disclosedthat "Inner City Press forwarded the letter to news outlets. Some of the Fed's questions focus on whether Community could improperly control matters at Oneida in advance of the acquisition. Community is working on Fed's questions, said Hal Wentworth, Community's senior vice president for retail banking."
  One common theme is that non-control (and therefore antitrust) laws are being violated. One difference is that Community Bank System does comment to the media -- if only to blame the messenger -- while larger RBC and CNB do not. Arrogance?
 On Community Bank System's blaming the messenger, FFW has commented to the Fed that it will "will comment again when Community Bank System I has provided a copy of its response to the FRS' questions of July 13. Beyond the CRA and impermissible “control” questions raised therein, we wish at this time to raise the issues that, in a public response to ICP's comments, Community Bank System's SVP for retail banking said the following, in a prepared statement no less:
'In a statement today, Hal Wentworth, Community's senior vice president for retail banking, said that Inner City Press is not a local group and pointed out that letter was the only one filed on the Oneida deal. "This activist does not do business with either Oneida or Community Bank."'
If it would be inappropriate for Community Bank System to comment on or disclose information about its customers, in this context the same applies to the above-quoted, which, separately, is reminiscent of human rights abusing countries emphasizing where the rights groups who study and report on them are based."
   Now Community Bank System is trying to withhold eight of its nine responses; Inner City Press is challenging this under the Freedom of Information Act, comparing Community Bank System's outrageous withholding at the Fed with other banks, and with Community Bank System's to the OCC, more here.

   
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