By Matthew Russell Lee, Patreon
SDNY, Jan 2 - On the day of his inauguration as Mayor of NYC, Zohran Mamdani announced the "first major action of his administration; intervening in the bankruptcy proceedings of Pinnacle Realty, a landlord responsible for more than 5,000 housing violations, 14,000 complaints across 83 buildings, and money owed to the City."
The Pinnacle portfolio, in the U.S. District Court for the Southern District of New York Bankruptcy Court, is up for sale to Summit with price contingent on actions of Flagstar Bank.
Fair Finance Watch and Inner City Press predicted that the proposed merger of New York Community Bank and Flagstar would flounder, on disparate lending and legal compliance failures.
A lawsuit against Flagstar's CEO proved the later, regarding not only the banks and its regulators but also its law firms. "In March 2023, NYCB bought a large segment of the failed Signature Bank and the board installed DiNello as chief executive. The bank’s anti-money laundering system flagged a client for illegal “structuring” of deposits. After Marrazzo’s investigation confirmed at least three instances of the activity, he informed DiNello that the account needed to be closed. DiNello urged Marrazzo to keep the account open..
In early 2024, during a video meeting with law firm Skadden Arps, Slate, Meagher & Flom, where material nonpublic information was discussed, DiNello had “a clearly-visible junior NYCB employee sitting on his lap and rubbing his head.” Marrazzo reported the incident to the chair of the audit committee, and outside counsel from the law firm Cravath, Swaine & Moore investigated the matter. Despite the investigation, DiNello faced no disciplinary action. Nor regulator action.
Fair Finance Watch found that Flagstar made 60,982 mortgage loans to whites, with 13,963 denial to whites - while making only 3799 loans to African Americans with fully 1777 denials to African American. This was significantly worse than other lenders.
New York Community Bank's record led Inner City Press file a Community Reinvestment Act challenge to its then-proposed merger with Astoria Bank, which fell apart.
Inner City Press has gone back to find Flagstar's comments on the proposed and still pending Community Reinvestment Act regulations - tellingly, full of resistance: "Because Flagstar supports the goals of the CRA, the Bank submits this comment letter. This Proposal would force banks to spread limited CRA resources thin and undermine the effectiveness of their CRA programs; and place banks at a competitive disadvantage to nonbanks and other lenders not subject to the CRA.
In late January 2025, Flagstar CFO Lee Smith said Flagstar is closing about 60 retail branches, most of which it leases; about 20 private-client retail locations; and a couple of operating centers that are owned by the bank.
And Flagstar deregistered as a bank holding company to try to avoid scrunity, as happened on a recent $7B-plus merger. We'll have more on all this.
***
Your support means a lot. As little as $5 a month helps keep us going and grants you access to exclusive bonus material on our Patreon page. Click here to become a patron.
Feedback: Editorial [at] innercitypress.com
SDNY Press Room
