With CIT Group Merger Under Fire, OneWest Asks Wall Street to Lobby Yellen, Fair Finance Watch Puts on Record to the Fed

By Matthew Russell Lee

UNITED NATIONS, January 10 -- The US government's ongoing corporate bailout following the 2008 meltdown triggered by predatory lending continues to reverberate in one of the largest proposed mergers of 2014 now into 2015.

  On December 22, pressing for approval of its application to acquire OneWest, CIT told the Federal Reserve, "CITB and OWB are not yet able to provide specific details about the expanded Community Reinvestment Act portfolio because this will be based, in part, on input from CITBNA’s to-be-formed Community Development Advisory Board following the closing of the Transaction."

  That's basically saying, approve our merger (on which the Fed is required to consider CRA), and THEN we'll tell you about CRA.

 Now it gets worse. Here is an email that OneWest CEO Joseph Otting sent to Wall Street and other financiers, to lobby the Fed, h/t CRC:

From: Otting, Joseph M [at] owb.com
Sent: Wednesday, January 07, 2015 5:00 PM
Cc: Haas, Alesia Jeanne; Tran, Cindy; Kim, Glenn
Subject: Support For OneWest Bank

Dear Friends,

We were excited to announce on July 21, 2014, that IMB HoldCo LLC, the parent company of OneWest Bank entered into a merger agreement with CIT Group Inc. As part of the applications for regulatory approval of the transaction, our regulators are interested in the perspectives of the public. We are writing you to seek your support of the Bank and pending merger. This merger, if approved, would create the largest bank headquartered in Southern California with a full suite of banking products and services, which will allow us to better serve our customers. We would retain and grow jobs and are committed to continuing and expanding our efforts to serve the economic and development needs of our community. I would like to ask you to take a moment to click on the link below and submit a letter of support adding any of your own words or thoughts.

Please submit your letter by clicking here, or by visiting our website at www.OneWestBank.com/merger-support (if the link isn't clickable or part of the link is cut off, please copy and paste the entire URL into your browser's address bar and press Enter)

Thank you for your support.  Best wishes for a successful 2015 and please call on me if I can ever be of assistance.

Joseph M. Otting
President and CEO
OneWest Bank N.A.
888 East Walnut Street
Pasadena, CA 91101

  Now Inner City Press / Fair Finance Watch, along it's sure with the California Reinvestment Coalition, has submitted this to the Fed demanding that public hearing in fact be held, after what an independent bank consultanttold Bloomberg News is "unusual" outreach to Wall Street contacts by OneWest.  What will the Fed do?

  The Fed had asked CIT to "provide the final version of the document 'CIT Bank N.A. Community Reinvestment Act Plan,' the draft of which was included as Annex C to the letter responding to the public comments submitted to the Federal Reserve Bank of New York."

  One question is, will the Federal Reserve Board in this case and in others coming up, and fast, require the actual submission for CRA plans and allow for public comment on them?

 On December 18 CIT gave the Fed statements from the FDIC, in essence not to worry about the Loss Share Agreements OneWest has won from the FDIC:

"OWB acquired assets from three failed banks — IndyMac Federal Bank, FSB ('IMFB'), First Federal Bank of California, and La Jolla Bank, FSB (the 'Failed Banks'). The FDIC entered into Shared-Loss Agreements with OWB in these acquisitions with respect to certain of the acquired assets."

  Now the regulators say, don't worry as CIT seeks to take these loss-shares over, although their value will not for now be disclosed:

“The FDIC's Division of Resolutions and Receiverships does not release shared-loss payment information on individual acquirers or assets because those records often contain material, non-public information, and their release could harm the negotiating posture of the acquirer with respect to a particular borrower or asset, thereby potentially increasing the amount of a covered loss to the FDIC.”

  This is called stonewalling, or a cover-up. We'll have more on this.

* * *

  Back on November 17, four days before a rare Senate hearing on the regulatory capture of the Federal Reserve, the Federal Reserve Bank of New York posed a series of questions to CIT Group, trying to buy OneWest. 

  CIT provided Inner City Press with a copy of its answer to the Fed's November 17 questions (answers to the Fed's November 25 questions have not yet been provided.)

  CIT says "OneWest has discussed the Transaction with staff of each of FannieMae and FreddieMac (the 'GSEs') and will be filing an application in connection with the change of control of OWB in order for OWB to continue as a seller/servicer for the respective GSE. OneWest is now in the process of preparing the appropriate applications, which it expects to submit as soon as possible, and no later than year-end."

  But will OneWest provide notice of these applications to the GSEs to the groups which have timely protested its applications to the Fed and OCC? The OCC heard much about OneWest, and CIT, at a December 2 EGRPRA hearing in Los Angeles. Why not just hold public hearings on this proposed mega-merger? And on another one, announced but not yet applied for?

 On November 21, Federal Reserve Bank of New York President Dudley described anti revolving door safeguards and a desire for "good culture" at banks.

  Good culture? How then did the predatory lending meltdown take place? And anti-revolving door? How can it be, then, that a former Federal Reserve Legal Division supervisor is writing for BB&T's deals to those who used to work under her?

  As soon as Dudley left the stand, a more serious anti revolving door protection was proposed.

  Dudley was asked about Goldman Sachs' warehouses, and JPM Chase's abuse of the energy markets, but didn't directly answer.  Since then he has toured The Bronx - we'll see what if any difference it makes.

  The Fed on November 17 asked for answers to four questions it sent to the CIT Group, with a copy to Inner City Press.

  Inner City Press and others have challenged CIT's application to acquire OneWest; as previously set forth below, Inner City Press / Fair Finance Watch has been challenging BB&T, showing the disparities in BB&T's lending record.

  On BB&T's application to acquire 41 branches in Texas from Citibank, Fair Finance Watch showed the FDIC for example that for conventional home purchase loans in the Houston Metropolitan Statistical Area in 2013, BB&T made 65 such loans to whites, and NONE to African Americans.

  The FDIC's Acting Deputy Regional Director for Compliance replied that "the FDIC deems your correspondence to constitute a protest."

  BB&T through law firm Wachtell, Lipton, Rosen & Katz submitted a response which admitted that in Houston “the percentage of Mortgage Loans made to low and moderate income borrowers during the first six months of 2014 was also below the 2013 aggregate industry average.” BB&T Response at Page 11, which also notes at 10 that at least one of the Citibank branches BB&T seeks to acquire, it would shutter.

  And so on November 10 Fair Finance Watch submitted more extensive comment opposing BB&T's application to acquire Bank of Kentucky, including that bank's disparities in the Cincinnati regional area and BB&T's in the Louisville MSA, where in 2013 BB&T made 229 conventional home purchase loans to whites, and only 12 to African Americans and only six to Latinos, while denying 41.7% of applications from Latinos versus only 17.5 of application from whites, a disparity of 2.38 to 1.

   How will the Fed's precedent(s) on CIT - OneWest be applied?

  The secret recordings of then Federal Reserve examinerCarmen Segarra about Goldman Sachs and regulatory capture have given rise to calls for oversight hearings by at least two US Senators. Their hearing will now occur on November 21. Relatedly, BB&T's response from the law firm of Wachtell, Lipton, Rosen & Katz is penned by a former Federal Reserve Board Legal Division supervisor.

 On November 7, Inner City Press was sent a redacted copy of CIT Group's "Cash Flow Projections" and "Risk Management" from its application to acquire OneWest and go above the $50 billion, Too Big Too Fail threshold. Inner City Press immediately put the partially redacted document online on its website, here.

  First, how could such information be withheld for a bank seeking to become Too Big To Fail?

  Second, how could the Federal Reserve insist that the comment period is closed, while information that was improperly withheld is belatedly released?

  On October 10, Inner City Press was sent heavily redacted copies of two letters from the CIT Group concerning its proposed acquisition of OneWest to the Federal Reserve Bank of New York, supposedly in compliance with the Freedom of Information Act - nowuploaded to Scribd here and here. 

   On October 18, Inner City Press & Fair Finance Watch challenged these redactions under FOIA, and submitted  comments on CIT's mockery of the Community Reinvestment Act to both the Federal Reserve and the Office of the Comptroller of the Currency.

  CIT sought to withhold even its CRA plan. Inner City Press raised the issue to Fed Chair Yellen in Washington - and on October 15, the Federal Reserve called Inner City Press and left a voice mail to say its request for extension of the comment period, because of the incorrectly withheld CIT documents, has been granted until October 22. 

   While appreciating the Fed's comment period extension, the context and public policy questions recently raised must be noted.

  For now, on October 18 Inner City Press & Fair Finance Watch submitted a fourth timely comment to the Fed, critiquing the belatedly released CRA Plan, and demanding release of still - withheld information:

   The CIT CRA Plan which CIT improperly withheld states, in Section III, that “the Bank has lending and support operations primarily located in Florida, New York and New Jersey” -- then states its CRA Program is in Salt Lake City, Utah and “the western United States.”

  This is makes a mockery of CRA, explicitly separating the bank's lending operations from its “CRA” operations.

  In Section IV, CIT makes claims about outreach and “public participation” in its CRA Plan - but in outreach and participation excluded the communities in which CIT has its lending operations (FLA, NY and NJ) and from which, on information and belief, it collects insured deposits.  

  This is makes a mockery of CRA, explicitly separating the bank's deposit taking from its “CRA” operations and outreach. See limited list of contacts in Appendix C, and proof of publication in (only) the Salt Lake Tribute and Deseret News.

  Even in its artificial limited assessment area, CIT's “New CRA Assets” are less than 1% of its Assets.

  While still improper, the above provide a motive for CIT's attempt to withhold its CRA Plan from the public...

  As to CIT's October 8 letter, ICP has already timely commented “there is also the question of the agreement the FDIC reached with IndyMac / OneWest, and whether wannabe SIFI CIT would assume it, as a windfall. These are important questions militating for both the required extension of the comment period, and for public hearings.”

  In the October 8 letter, CIT begins a sentence on page 3 “Clawback provisions exist for the First Fed and La Jolla portfolios [REDACTED.]” CIT also redacts, on page 6, information related to the OnWest / IndyMac Consent Order; HAMP (Page 7); deposits collected over the Internet (Page 8); Lending (Page 9); Governance and Risk Management (page 10-12); and Resolution Plan (Page 12). CIT also heavily redacts what it calls “confidential questions” (pages 14-16), and exhibits. This information must be released, and the comment period extended.  In an abundance of caution, ICP has submitted a FOIA request to this effect.

  The Fed's secrecy is endemic.  The head of the FRBNY since 2009, William Dudley, has insisted that supervision by the Fed and its regional banks is "completely in the public interest." He cites, in support of this, something he calls "horizontal" supervision, which to many has the context of being supine. 

  And the Federal Reserve Banks are, in fact, owned by the banks they ostensibly regulate. And as Inner City Press has previously reported, while merger applications go in the first instance to the Federal Reserve Bank, they have only the power to approve, not deny or even impose conditions, the applications.

  Horizontal, indeed.

  This horizontal position is the rule, not the exception. Inner City Press routinely submits Freedom of Information Act requests for communication between the Fed and banks applying for mergers.

  Most recently, the Fed has extended its deadline for responding to Inner City Press' request on CIT - OneWest, on which it purported to close its public comment period on September 24:

FOIA Request No. F-2014-00380

Dear Mr. Lee,

On August 27, 2014, the Board of Governors ("Board") received your electronic message dated August 26, pursuant to the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552... On August 28, 2014, the Board’s Freedom of Information Office made an interim production of responsive documents consisting of the public portion of the application by CIT Group Inc. and Carbon Merger Sub LLC to acquire and merge with IMB HoldCo LLC, and thereby indirectly acquire voting shares of OneWest Bank... Pursuant to section (a)(6)(B)(i) of the FOIA, we are extending the period for our response until October 9, 2014, 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 9, 2014, we will respond to you promptly.

How can the public be shut out before it has the basic information it has requested? Now, only because CIT mis-published public notice, the Fed's comment period has been extended to October 10. (A new Office of the Comptroller of the Currency comment period has opened, through October 24.)

  The Federal Reserve Board has asked CIT some questions, including “discuss CIT Group's plans to manage OneWest Bank's mortgage servicing assets and nontraditional mortgage loan portfolio." Nontraditional mortgages - that would be, subprime.

Tellingly, when lawyers leave the Federal Reserve's Legal Division, many go to white shoe law firms that submit bank merger applications to the same people they until recently worked with or supervised.

  Inner City Press, Bronx-based Fair Finance Watch and NCRC have repeatedly raised this to the Fed, without meaningful response.

So here's hoping that Carmen Segarra's courage, in secretly making the recordings and then releasing them, leads to increased oversight of and reform at the Fed. 

 The problem is, while some in Congress are willing to criticize the Fed, the real parties in interest here are the largest banks and investment banks in the country. Who in Congress will directly challenge those? Watch this site.

   

On Midterm Elections Eve, Of Faux Federal Reserve Meetings and UN Scribes' Campaign Cash: Voice of America

By Matthew Russell Lee

UNITED NATIONS, November 3 -- On the eve of the US midterm elections, when President Barack Obama issued a read-out of his meeting with the Federal Reserve's chair Janet Yellen citing economic grown and strong regulation, dubious in the wake of the predatory lending meltdown and the Fed's Goldman Sachs / Segarra tapes, some irregularities are even more clear.

How can mainstream media purporting to cover the election make campaign contributions at the same time? Inner City Press, reporting on this from the UN, notes that the past and seemingly future president of the UN Correspondents Association Giampaolo Pioli is undeniably a campaign contributor even as he publishes political and electoral “analysis” in writing and on video here, here andhere (albeit with only seven views.)

  Pioli writes for Poligrafici Editoriale Group and its Quotidiano Nazionale, La Nazione, Il Resto de Carlino, Il Giorno and Quotidiano.net? The companies' Stefania Dal Rio was asked about this, but after confirming receipt, never responded.

Is this ethical? Well, the editor of the Boston Globe Martin Baron, among many others, opines that "It is simply not appropriate for any journalist to make a campaign contribution."

But this is at the UN, where Pioli also rented one of his apartments to Palitha Kohona, the ambassador of Sri Lanka, and then used his position as UNCA president to get the Sri Lankan government's war crimes denial film “Lies Agreed To” screened inside the UN, video here.

When Inner City Press reported on the screening and the previous financial relationship, Pioli told Inner City Press he would get it thrown out of the UN. Soon, Voice of America wrote to the UN demanding the “review” of Inner City Press' accreditation, here. These documents, it should be said, were obtained under the Freedom of Information Act.

 But at the UN, which as noted by the new Free UN Coalition for Access has no FOIA, nothing has yet been reformed. These are your tax dollars at work. Watch this site.

   

IMF's Lagarde Lauds Janet Yellen, After Urging US Federal Reserve to Communicate More, FOIA Questions

By Matthew Russell Lee

UNITED NATIONS, July 2 -- When the International Monetary Fund's Christine Lagarde introduced Federal Reserve chair Janet Yellen to give the first Michel Camdessus Central Banking Lecture on July 2, she did not repeated whatshe said only two weeks earlier, that the Fed should communicate more frequently. 

  In laying out lessons learned from the subprime financial meltdown of 2008, Lagarde did not question the role of the Federal Reserve in failing to take action on the predatory lending by the Big Four banks, or the pooling and pitching by investment banks of predatory mortgages by Ameriquest, New Century, et al.

  So what, really, was learned?

 On July 2, Lagarde compared central bankers to mountaineers, and told Yellen, "Janet, you may not be surprised to know that when you give your press conferences a group of passionate staff here at the IMF get together to watch you live on screen. I am told they even bring pop corn to the meetings!"

  Back on June 16 the IMF assessment was that

"Enhancing the Fed’s communication toolkit would be a natural evolution that could help temper the likelihood of market volatility along the exit path. This could include scheduling press conferences by the Fed Chair after each FOMC meeting (to provide a more frequent, structured environment to explain the committee’s evolving thinking). It could also involve publishing a quarterly monetary policy report, that is endorsed by the FOMC and which conveys more detail about the majority view of the FOMC on the outlook, policies, and the nature of uncertainties around the baseline. Such a report may also convey dissenting views on the FOMC as well as broader information on how the FOMC thinks about policy reactions in plausible, non-baseline scenarios. Finally, the FOMC could provide greater clarity about how financial stability considerations figure into its monetary policy calculus."

  She might have added: the Fed can and should do better under the Freedom of Information Act, on which in full disclosure Inner City Press has litigated with the Fed. Then again, at least the Fed accepts that it is covered by FOIA - the United Nations doesn't (see below).

  While the IMF is more frequently taking Press questions online, we note for example that a repeatedly asked question about whether the IMF includes Western Sahara in Morocco's data has been stonewalled, including the days Lagarde was in Rabat.

  Lagarde was asked who she favors in the World Cup and said she was "delighted to see French team did as it did." Well, that's some transparency.

The UN also has a position on the US Federal Reserve, it emerged on May 21, at least a position favoring new Fed chair Janet Yellen over her predecessor Ben Bernanke.

  Inner City Press asked Pingfan Hong of the UN Department of Economic and Social Affairs about DESA's mid-year update of the UN World Economic Situation and Prospects, which called on the Fed to communicate more clearly as it tapers away from quantitative easing -- does the UN favor an audit of the Fed, and what of the impact on tapering QE on emerging markets? Video here.

  Pingfan Hong recounted that an IMFC meeting he attended, Yellen admitted to negative impacts on emerging markets, which he said Bernanke obfuscated by claiming positive impacts too. (Bernanke now is speaking at $250,000 dinners, so criticism from DESA may not concern him.)

  Inner City Press also asked Pingfan Hong about the WESP's call for the implementation of IMF quota reform -- was this really related to the IMF's ability to lend to Ukraine, and what are its economic impacts?

  Pingfan Hong replied that it is more of a “long term” issue, but that countries should follow through on what they commit to. What about democracy, though? And what about democratizing the Federal Reserve? We'll have more on that. Watch this site.

   

ICP Asks UN about the US Federal Reserve and IMF, Pingfan Hong Is Pro Yellen & Quota Reform

By Matthew Russell Lee

UNITED NATIONS, May 21 -- The UN has a position on the US Federal Reserve, it emerged on May 21, at least a position favoring new Fed chair Janet Yellen over her predecessor Ben Bernanke.

  Inner City Press asked Pingfan Hong of the UN Department of Economic and Social Affairs about DESA's mid-year update of the UN World Economic Situation and Prospects, which called on the Fed to communicate more clearly as it tapers away from quantitative easing -- does the UN favor an audit of the Fed, and what of the impact on tapering QE on emerging markets? Video here.

  Pingfan Hong recounted that an IMFC meeting he attended, Yellen admitted to negative impacts on emerging markets, which he said Bernanke obfuscated by claiming positive impacts too. (Bernanke now is speaking at $250,000 dinners, so criticism from DESA may not concern him.)

  Inner City Press also asked Pingfan Hong about the WESP's call for the implementation of IMF quota reform -- was this really related to the IMF's ability to lend to Ukraine, and what are its economic impacts?

  Pingfan Hong replied that it is more of a “long term” issue, but that countries should follow through on what they commit to. What about democracy, though? And what about democratizing the Federal Reserve? We'll have more on that. Watch this site.