By Matthew R. Lee, Exclusive
SOUTH BRONX, May 18 – The US Treasury Department is in a process to try to weaken and take the community out of the 1977 Community Reinvestment Act. Docket file here. The protagonist, akin to Scott Pruitt when he was at the US Environmental Protection Agency, is Comptroller of the Current Joseph Otting. On September 12 Fair Finance Watch (and on FOIA, Inner City Press) commented to the OCC, here. Now on October 11, more on Otting's assault on the CRA has become known. In April 2018 his OCC approved an application by E-Trade Saving Bank which Fair Finance Watch had challenged based on the bank having no fewer than six states rare "Needs to Improve" CRA ratings.
FFW notedrare Needs to Improve ratings for the entire states of Arizona, Colorado, Florida, Georgia, Michigan and Oregon, and an undeserved “Satisfactory” for New York. Otting's OCC, after the approval, helpfully contacted E-Trade Bank to tell it that upon (Otting's) reflection, it was no longer even subject to the Community Reinvestment Act.
Back in October 2018 Inner City Press asked the OCC for documents about this under FOIA - while the OCC has sought to evade by accessing fees, to this day. But in May 2019 while withholding 1000 pages the OCC released to Inner City Press, like a needle in a hay stack, its June 16, 2018 letter from Assistant Deputy Comptroller for Midsize Bank Supervision William Russell to E*TRADE's Karl Roessner telling him that E*TRADE's banks are exempt from CRA, here. We'll have more on this.
Inner City Press on October 11 raised the E-Trade (and another bank) issue into the record on the Advanced Notice of Proposed Rulemaking. Many more are resisting Otting, but Federal Reserve Bank of Cleveland President Loretta J. Mester on October 3 saidthat "the OCC, a part of Treasury, has put out an advance notice of proposed rule-making (ANPR) seeking comment on ways to modernize the CRA regulations. The Federal Reserve is also undertaking efforts aimed at ensuring that the CRA regulations continue to meet the goals of the legislation amid the evolving financial services environment" - with these as her footnotes for that: "Brainard, Lael, “Community Development in Baltimore and A Few Observations on Community Reinvestment Act Modernization,” Baltimore, Maryland, April 17, 2018a and Brainard, Lael, “Keeping Community at the Heart of the Community Reinvestment Act,” New York, NY, May 18, 2018b. Both of those Brainard speeches were before Otting's proposals. And since? In the docket file as of October 8 are 42 comments, now including the President of First National Bank & Trust in Elk City, Oklahoma who writes, "I firmly believe that this form of oversite was meant for metropolitan areas and banks with multiple branches. There’s got to be a better way of monitoring and locating those banks that aren’t helping the population it serves. I would be surprised to find there are very many banks that fail the CRA examination." It's called grade inflation. On September 29 The Intercepthas dug into it, citing FFW's formal request that Otting recuse himself - and so here now are some of the Freedom of Information Act documents. On October 2 in the Senate Banking Committee, Otting insisted he is not trying to weaken the CRA; he called the ANPR an "Advanced Notice of Public Rulemaking" instead of Proposed. He said he met with 1100 individuals - still undisclosed - and expects five to ten thousand comments on the ANPR. (So far there are 33 listed but only 29 visible). Senator Sherrod Brown began by asking him indirectly about the blogs at CFPB of Eric Blankenstein. We'll have more on this. And this - as obtained by Inner City Press and fellow NCRC member CRC, here are more of the documents, for (this time) free download on Patreon.
On October 1 Inner City Press / Fair Finance Watch submitted the documents obtained under FOIA into the record before the OCC, stating that "These documents, which must be considered as part of this ANPR and any subsequent formal rulemaking, show that fraudulent comments supporting Otting's OneWest were submitted to the OCC - presumptively attributable to Otting.
The documents show that the OCC sought an explanation from Otting's / OneWest's outside counsel - and the OCC's and Justice Department's response to date reflect that no such explanation was ever provided. The OCC nevertheless approved the merger and even gave weight to the fraudulent comments. On this record we again insist that Otting be recused from this ANPR and any related rulemaking or proceedings. We have other substantive concerns about this ANPR but view the question of Mr Otting's recusal (and of with whom he has met, on which Inner City Press has another long-pending FOIA request) as threshold matter than must be addressed as quickly as possible."
The documents show that the OCC sought an explanation from Otting's / OneWest's outside counsel - and the OCC's and Justice Department's response to date reflect that no such explanation was ever provided. The OCC nevertheless approved the merger and even gave weight to the fraudulent comments. On this record we again insist that Otting be recused from this ANPR and any related rulemaking or proceedings. We have other substantive concerns about this ANPR but view the question of Mr Otting's recusal (and of with whom he has met, on which Inner City Press has another long-pending FOIA request) as threshold matter than must be addressed as quickly as possible."
The FOIA document as provided by the OCC and US Department of Justice reflect that the OCC never followed up on its lone (and wan) question to Otting's counsel as Sullivan & Cromwell to explain the fraudulent comments. Nor did this counsel respond to questions from The Intercept's David Dayen, who reports: "AFTER A YEARLONG effort to obtain the information, which included ongoing litigation, the OCC made available 15 pages. They contain emails to and from David Finnegan, an OCC senior licensing analyst who was a point of contact for public comment on the merger.
Four individuals contended in emails to Finnegan that they never sent the comment letters supporting the merger. “This is to bring to your attention that I received an email from the office of OCC regarding a subject I am completely unaware of,” wrote one individual (the OCC redacted the emailers’ identifying information). “I DID NOT send the email below that you responded to. This is a fraudulent use of my email account.” The other three sent similar complaints.
The letter of support attributed to these individuals was identical to the letter posted at the OneWest Bank website.
Matthew Lee of Inner City Press expressed outrage at the fake comments. “There’s nothing more offensive of speech rights than artificially presenting someone as saying something you don’t believe,” Lee said. “You have the right to be silent. It’s so beyond the pale.”
Four individuals contended in emails to Finnegan that they never sent the comment letters supporting the merger. “This is to bring to your attention that I received an email from the office of OCC regarding a subject I am completely unaware of,” wrote one individual (the OCC redacted the emailers’ identifying information). “I DID NOT send the email below that you responded to. This is a fraudulent use of my email account.” The other three sent similar complaints.
The letter of support attributed to these individuals was identical to the letter posted at the OneWest Bank website.
Matthew Lee of Inner City Press expressed outrage at the fake comments. “There’s nothing more offensive of speech rights than artificially presenting someone as saying something you don’t believe,” Lee said. “You have the right to be silent. It’s so beyond the pale.”
FOIA Finds: OneWest CIT Ban... by on Scribd
Finnegan responded to these emailers, thanking them for letting him know. He also sent two emails to Stephen Salley, an attorney with Sullivan & Cromwell, who was representing OneWest in the merger. “FYI and review. We would appreciate any information you can provide regarding this submission,” Finnegan wrote to Salley on both occasions.
Presumably, Finnegan reached out to OneWest’s lawyer about the fake comments because they featured the same form letter that OneWest had written to encourage public support. But the two emails are the only record that OCC did any investigation of the fake comments. There is no reply from Salley or Sullivan & Cromwell to the OCC, at least not in written form. “By reaching out to the attorneys immediately, it suggests something serious, and yet there’s no follow-up that’s apparent whatsoever,” said Kevin Stein of the California Reinvestment Coalition...Olivia Weiss, a spokesperson for CIT, forwarded a request for comment to her colleague Gina Proia, who declined to comment. Salley did not respond when asked whether he or his law firm responded to the OCC....In his public comment for Inner City Press, Lee asked for Otting to recuse himself from the new rule-making, highlighting the fake comment controversy. “Public participation is key to CRA, on performance evaluations and crucially on bank merger and expansion applications,” Lee wrote. He added that it’s unclear whether the OCC has improved its processes to prevent fake comments from being submitted again in the CRA rule-making. The public comment period ends in November.
Otting is scheduled to appear at a Senate Banking Committee hearing on October 2, where his CRA push could be a topic of discussion." We'll have more on this Why didn't the OCC more seriously look into this fraud? What has been improved since? Shouldn't Otting be recused, as Fair Finance Watch has already timely requested? One analogy, also noted by The Intercept, is to the gaming of the FCC's process on net neutrality, when even Senator Jeff Merkley and Pat Toomey's identities were borrowed, as reported by the Washington Post's Hamza Shaban. Unlike Otting to date, at least the FCC's Ajit Pai responded, if only to blame David Bray, as reported by Adam Jacobson in RBR. Otting simple refuses to answer - for now. From the Fair Finance Watch / Inner City Press comment: "Fair Finance Watch (and where applicable Inner City Press) appreciate the opportunity to comment on the Office of the Comptroller of the Currencys (OCC) Advance Notice of Proposed Rulemaking (ANPR) regarding the Community Reinvestment Act (CRA). CRA has leveraged significant amounts of loans and investments for low- and moderate-income communities.
We began enforcing the CRA in the South Bronx then beyond starting in 1994, in connection with the applications for mergers or expansions on which banks' records are considered. Numerous banks excluded the South Bronx and Upper Manhattan from their CRA assessment areas even though, as we proved, they collected substantial deposits from area residents. We got six banks to open branches and make lending commitments, in the Bronx and beyond.
We concerned that the OCC's proposal threatens to weaken CRA, see below. As as relevant here, we commented along with others on the CIT - OneWest proceeding, and were concerned both by OneWest's record under now-Comptroller Otting and by what emerged as the gaming of the system with pre-fabricated comments Otting openly solicited. We may comment in more detail on this later in his ANPR proceeding.
For now we wish raise particular concern about the approach signaled by Questions 21 and 15 and to emphasize that public participate is key to CRA, on performance evaluations and crucially on bank merger and expansion applications. Inner City Press, which often submits FOIA requests to the OCC (which is, frankly, slow), the Federal Reserve, FDIC and even non-USA regulators many of whom are faster than the OCC, emphasizes that comment periods should never close while information that is not specifically exempt from disclosure under FOIA is being withheld. Inner City Press has pending with the OCC, but not yet responded to, FOIA requests related to this proceeding / process, that should be responded to in full, including any necessary appeal, during this proceeding.
If the OCC proceeds to significantly diminish the importance of assessment areas on CRA exams, the progress in increasing lending to low- and moderate-income neighborhoods will be halted. NCRC estimates that low- and moderate-income neighborhoods could lose up to $105 billion in home and small business lending nationally over a five year time period. We join in the comments of NCRC, of which we are members... We urge the OCC to go back to the drawing board and develop reform proposals with the Federal Reserve Board and the FDIC.
And, for the reasons above and yet to be submitted, we contend Comptroller Otting should be recused from this process. Thank you for your attention to this."
While Reuters blandly noted that he is "a former banker," the bank he headed, OneWest, was accused of predatory lending and when its acquisition by the CIT Group was challengedby Fair Finance Watch, CRC and others Otting arranged for seemingly counterfeit or compelled comments supporting the merger. In this light, Question 11 of his "Advanced Notice of Proposal Rulemaking" or ANPR is noteworthy: "11. How can community involvement be included in an evaluation process that uses a
metric-based framework?" How, indeed. Here's what Otting wrote as a banker, already long public, in support of his merger:
metric-based framework?" How, indeed. Here's what Otting wrote as a banker, already long public, in support of his merger:
"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"
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"
