By Matthew R. Lee
NEW YORK, March 20 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks like Goldman Sachs - through those in the upper bulge like Huntington, seeking to buy First Merit and close more than 100 branches.
Inner City Press / Fair Finance Watch has filed with the Federal Reserve a challenge to Huntington's application to acquire First Merit and close branches:
"This is a timely first comment opposing and requesting a complete copy of an and an extension of the FRB's public comment period on the Application by Huntington Bancshares to acquire First Merit Corporation.
"This proposed merger would, if approved, result in the closure of more than 100 branches -- nearly 50 are in the Cleveland, Akron and Canton areas Two of these areas are analyzed below; more will follow. These closures would cause harm; what would be the countervailing public benefit? Public hearings are needed.
In Ohio alone, the proposed merger would outright close the following branches, for the record:
FIRST MERIT HUNTINGTON
80 Severance Circle, Cleveland Heights 39 E. Market St., Akron
111 W. Rich St., Columbus 3899 A Median Road, Akron
1156 E. Powell Road, Lewis Center Road, Lewis Center 3630 Center Road, Brunswick
5710 Mayfield Road, Lyndhurst 965 E. Cherry St., Canal Fulton
5393 Ridge Road, Parma 3504 Tuscarawas St., W. Canton
210 N. Main St., Rittman 1600 Bethel Road, Columbus
7530 Kings Point Road, Toledo 5801 Darrow Road, Hudson
801 Crocker Road, Westlake 1011 East Aurora Road, Macedonia
888 Lake Avenue, Ashtabula
Huntington in the Akron MSA in 2014 made 197 home purchase loans to whites -- and only nine to African Americans and only three to Latinos.
For refinance loans, Huntington in the Akron MSA in 2014 made 263 loans to whites and only nine to African Americans and only ONE to Latinos. Its denial rate for Latinos was 77.8%, versus only 50.7% for whites.
For home improvement loans, Huntington in the Akron MSA in 2014 made 23 loans to whites and only FOUR to African Americans and NONE to Latinos. Its denial rate for Latinos was 100%.
Huntington in the Cleveland MSA in 2014 made 582 home purchase loans to whites -- and only 37 to African Americans and only nine to Latinos.
For refinance loans, Huntington in the Cleveland MSA in 2014 made 680 loans to whites and only 58 to African Americans and only 14 to Latinos. Its denial rate for Latinos was 80%, versus only 54% for whites; Huntington's denial rate for African Americans was 72%.
For home improvement loans, Huntington in the Cleveland MSA in 2014 made 88 loans to whites and only NINE to African Americans and only one to Latinos. Its denial rate for Latinos was 96.4%, versus only 72.8% for whites; its denial rate for whites was fully 94%.
We will have more comments, but for now the comment period should be extended; evidentiary hearings should be held; and on the current record, the application should not be approved."
There is talk of how divestiture might impact this; some seem inappropriately resigned to it.
One development pointing in the other direction is the Community Reinvestment Act downgrade of Regions Bank. Inner City Press has previously commented to the regulators on disparities in Regions' record, while noting that the bank has timely provided its Home Mortgage Disclosure Act Loan Application Register data.
As simply one example, in the Jackson, Mississippi MSA in 2014, Regions Bank denied the applications for convention home purchase loans of African Americans 3.21 times more frequently than whites.
Now, no new mergers. Shouldn't this apply to some other banks as well?
Republic was caught on its overdrafts, an issue Inner City Press has raised and will continue to raise.
On Republic, Inner City Press / Fair Finance Watch in late 2015 challenged its proposal to acquire Cornerstone Bank, stating among other things:
" In the Louisville MSA in 2014 for home purchase loans, Republic made 651 such loans to whites and only 22 to African Americans, and only13 to Latinos. It denied the applications of African Americans 2.15 times more frequently than those of whites. For refinance loans, it made 215 loans to whites and only 10 to African Americans; for home improvement loans it made 129 loans to whites and only ONE to an African American, while denying 7 of 10 applications received from African Americans.
In Nashville in 2014, Republic made 13 home purchase loans to whites, NONE to African Americans or Latinos.
“Washington-based Fenway Summer LLC, in January reached a deal with Louisville, Ky.-based Republic Bancorp Inc. to offer a credit card that is being pitched as a more affordable alternative to payday loans, which are short-term loans that often charge triple-digit interest rates. The Build Card, which is being rolled out later this year, will charge an annualized interest rate of 25% to 30% and will cap borrowers’ initial credit lines at $500.”
Thirty percent interest? In New York, that's called usury."
And, in fact, Inner City Press has photographed Republic's high cost tax loan posters in New York City. Now the Fed has asked:
In Republic’s letter to the Federal Reserve Bank of St. Louis dated December 17, 2015 (the “Letter”), Republic asserted that, “[RepublicBank] no longer offers refund anticipation loans and will not provide tax refund anticipation loans as a result of the proposed transaction. The fact that [RepublicBank] previously provided refund anticipation loans does not relate to the
competitive effects of the transactions contemplated by the [a]pplication, does notrelate to Republic’s financial and managerial resources, does not have any bearing on Republic’s ability to meet community needs, does not relate to compliance with the Bank Secrecy Act, and does not affect the financial stability of the United States. Consequently, we respectfully submit that the fact that [Republic Bank] previously provided refund anticipation loans is simply not relevant to any of the
statutory factors the FRB is required to consider under the Bank Holding Company Act.”
But now it does...
So the Fed asks, "consumer advocates have expressed
concern that tax preparers may pass along RAL fees to customers. Please respond to this concern. Your response should include a description of Republic Bank’s monitoring and auditing plans."
There's also those in the middle, seeking to become a Systemically Important Financial Institution like New York Community Bancorp is, applying to buy Astoria Bank.
After Inner City Press / Fair Finance Watch filed a timely protest, the Federal Reserve On January 8 asked NYCB 14 questions. Inner City Press has put the Additional Information letter online here, including a request to know which branches NYCB would close, how it would try to sell of Astoria's loans, etc. Inner City Press said, there should now be more fair lending questions, and the comment period should be extended.
On January 21, the Federal Reserve informed Inner City Press / Fair Finance Watch that the Fed is re-opening and extending its comment period on NYCB - Astoria until Tuesday, February 16. We'll have more on this (see here).
Back on January 15, after Inner City Press / Fair Finance Watch also filed comments with the FDIC, that agency has written to NYCB's Joseph Ficalora asking for a response, and stating that
"We are writing in reference to the enclosed e-mail that we received from Executive Director Matthew Lee, of Inner City Press/Fair Finance Watch concerning your institution's application to acquire Astoria Bank. We reviewed the subject e-mail in accordance with the guidelines of 12 C.F.R. Section 303, and deemed it a Community Reinvestment Act (CRA) protest for the purpose of your application. The subject e-mail raises issues regarding your institution's record of lending to African American and Latino persons. The anticipated time and research required to investigate these issues has contributed to the removal of your institution's application from expedited processing."
NYCB's home mortgage lending is extremely disparate; its multi-family lending, some to slumlords, is no defense. Inner City Press / Fair Finance Watch has filed this with the Fed:
“On behalf of Inner City Press / Fair Finance Watch, this is a timely first comment opposing and requesting a complete copy of an and an extension of the FRB's public comment period on the Application by New York Community Bancorp ('NYCB') to acquire 100% of the voting shares of Astoria Financial Corp and indirectly acquire Astoria Bank.
The applicant NYCB in the New York City MSA in 2014 made 109 home purchase loans to whites -- and only THREE to African Americans. For refinance loans, NYBC in the the NYC MSA in 2014 made 27 loans to whites and only ONE to an African American.
While NYCB may attempt to minimize these severe disparities by pointing to multi-family loans, there are significant complaints about that lending; note also this account of the CFPB which lists the ostensibly mostly multi-family NYCB with more complaints against it than banks that are both larger and more “retail."
In the Nassau Suffolk (Long Island) MSA in 2014 NYCB made 107 home purchase loans to whites -- and only ONE to an African American, while denying African Americans 4.7 times more frequently than whites. For refinance loans, NYBC in the the Long Island MSA in 2014 made 52 loans to whites and only three to African Americans and only TWO to Latinos, while denying Latinos 2.32 times more frequently than whites.
In the Cleveland, Ohio MSA (where NYCB bought Ohio Savings), NYCB in 2014 made 17 refinance loans to whites in 2014 and only one to an African American, while denying African Americans, while denying African Americans three times more frequently than whites. Similar disparities exist for NYCB in New Jersey, Arizona and Florida -- ICP is requesting public hearings on this ill-conceived proposed merger.
As the Federal Reserve surely knows, this proposal was driving by activist investor pressure on Astoria (by Basswood Capital Management LLC); both institutions' securities fell significantly in price when it was announced. The price to consumers would include the closure of branches, disclosure of which should be demanded during the extended comment period and at the requested public hearing(s).
The comment period should be extended; evidentiary hearings should be held; and on the current record, the application should not be approved.”
Inner City Press / Fair Finance Watch, which also opposes NYCB's requests for approvals from the FDIC, New York and other regulators, has prepared this comparison of NYCB to other lenders:
“In the Nassau Suffolk (Long Island) MSA in 2014 NYCB made 107 home purchase loans to whites -- and only ONE to an African American, while denying African Americans 4.7 times more frequently than whites.”
While NYCB made 107 home purchase loans to whites for one to an African Americans (ratio of 107-to-1), the aggregated in 2014 for home purchase loans on Long Island had a ratio of 13.41 loans to whites for every loan to an African American (15,081 loans to whites, 1125 loans to African Americans). NYCB is eight times more disparate than other lenders.
Also on Long Island, compared to NYCB's 4.7 denial rate disparity between African Americans and whites, the aggregate denied African Americans 1.66 times more frequently than whites. NYCB is 2.83 times more disparate than other lenders.
NYCB in the New York City MSA in 2014 made 109 home purchase loans to whites -- and only THREE to African Americans.
While NYCB made 109 home purchase loans to whites and three to African Americans in NYC (ratio of 36.3-to-1), the aggregated in 2014 for home purchase loans in the New York City MSA had a ratio of 11.39 loans to whites for every loan to an African American (47,166 loans to whites, 4,140 loans to African Americans). NYCB is 3.19 times more disparate than other lenders in the New York City MSA.
Meanwhile Goldman Sachs is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed, documents released to Inner City Press under the Freedom of Information Act (FOIA) show, is inappropriately bent on helping, including by closing its comment period... The Federal Reserve has belatedly responded to Inner City Press / Fair Finance Watch's September 2 FOIA request, with some of its internal documents, many heavily redacted. FOIA letter here; FOIA documents released to ICP here, and embedded below.
While Inner City Press is appealing, even as released the documents show that Goldman Sachs through its law firm Sullivan & Cromwell reached out to Fed General Counsel Scott Alvarez in May 2015 about the transaction, and was largely able to vet it with the Fed's staff by July, even receiving an "additional information" request before any application was filed.
Since the public cannot comment or ask questions before a transaction is announced, this "pre-review" by the Fed in essence cuts public review and transparency out of the process. The Fed's rules against ex-parte communications can't be triggered before there is an application. But should Fed review be held, and apparently completed, before there is any public notice?
The deal was publicly announced on August 13 and Goldman Sachs on August 18 submitted the apparently pre-approved application. Inner City Press / Fair Finance Watch submitted a comment and FOIA request (delayed until now); the end of the FOIA response has a redacted reaction to the "public comment." Now others have commented and a campaign has begun. But has the Fed already made up its mind? The Fed has been asked.
On October 20, the Federal Reserve asked Goldman Sachs five questions, but not on the predatory lending issues raised... 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.
