By Matthew R. Lee
NEW YORK, January 15 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks like Goldman Sachs - and 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. There should now be more fair lending questions.
Now 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 documents Inner City Press has obtained under FOIA show that on May 14 and May 18, Goldman Sachs and its outside counsel Rodgin "Rodge" Cohen of Sullivan & Cromwell told the Fed and its General Counsel Scott Alvarez of their plans for GE Capital Bank.
On May 28, the Fed met with Goldman which presented a "deck" of information about "Project Apple," much of it still redacted as provided to Inner City Press (which is appealing under FOIA).
As precedents, Goldman Sachs cited Capital One - ING and RBC - City National (see below).
This was followed by a May 29, 2015 letter from "Rodge" to the Fed's Scott Alvarez, asking for confidential treatment of everything including the letter, and including from any Governmental inquiry. (Page 28 of FOIA response to ICP.) A similar letter was submitted by Cohen on June 16, attaching a letter the Fed has redacted in full from Goldman Sachs' Esta E. Stecher.
Scott Alvarez took the conversation onto the telephone, not subject to FOIA, on June 16. His accompanying e-mails, as redacted, only say "Thanks! Scott."
On June 26, the Fed' Alison Thro wrote that "Rodgin Cohen was in today briefly to discuss, among other things, GS’s plans to acquire the deposits of GE’s ILC. He asked what the next steps might be." What were those "other things"?
On July 13, the Fed sent Cohen a "request for additional information concerning the proposal by GS Bank to purchase certain assets and assume the deposit liabilities of GE Capital Bank."
A request for additional information is usually what the Fed sends a bank or bank holding company after it has submitted an application; a commenter would get a copy. Here, the Fed was pre-reviewing Goldman Sachs' proposal, entirely outside of any public scrutiny. (The later public questions are as if by rote: the fix was already in.)
On Friday, July 17 the Fed's Thomas Baxter wrote to Scott Alvarez that the transaction would be public announced the next Monday -- AFTER the Fed's "additional information request" -- based on a long voicemail from Harvey Schwartz of Goldman Sachs. (Page 59 of FOIA response to ICP). Alvarez was on the phone with "Esta of GA and Rodge Cohen."
Alvarez said he was willing to talk with Goldman Sachs on Sunday, July 19. Cohen had written to Alvarez:
"In view of the various communications on Friday and the intended announcement of the deposit assumption transaction on Monday, GS believes that it must decide over this weekend whether it can proceed as scheduled and, as a matter of fairness and transparency, what it can tell GE. As we have discussed, this transaction appears to be a centerpiece of the GE restructuring. We would therefore most appreciate the opportunity to have a conference call as soon as possible over the weekend to obtain as much clarity as possible as to timing and other relevant matters.
We apologize for intruding into your weekend and thank you your consideration of this request." (Page 65 of FOIA response.)
The reference to "fairness and transparency" was apparently without irony. But Goldman stood the Fed up.
But this announcement was postponed. Alvarez wrote on July 20 that "Rodge just sent a note that GS wants to postpone signing the deal with GE and the announcement for 2 to 3 weeks." More review continued, outside of public scrutiny. Alvarez made himself available on Sunday, July 26. But to no avail.
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?
On October 20, the Federal Reserve asked Goldman Sachs five questions, but not on the predatory lending issues raised:
"October 20, 2015 This letter relates to the proposal by Goldman Sachs Bank USA (“GS Bank”), New York, New York, to assume certain deposits and acquire certain assets of GE Capital Bank (“GE Bank”), Holladay, Utah, pursuant to section 18(c) of the Federal Deposit Insurance Act. Based on staff’s review of the current record, the following additional information is requested. Please provide responses to all of the following questions, including those in the confidential annex. Please provide relevant supporting documentation as appropriate. Further information may be required as staff continues its review of the proposal.
1. Explain how the proposed acquisition of GE Bank’s retail deposit platform is consistent with GS Bank’s 2015-2016 Strategic Plan (“Strategic Plan”) and specifically which parts of the Strategic Plan the proposed acquisition would facilitate. Also, explain the aforementioned in the context to GS Bank’s ongoing business plans. Provide a copy of the Strategic Plan.
2. Discuss how GS Bank’s level and composition of assets and funding would change over the next three years. Provide a table that depicts the asset and funding types and respective amounts for years ending in 2016, 2017, and 2018. In addition, provide annual balance sheet and income statement projections for 2016, 2017, and 2018.
3. Discuss how GS Bank’s customer base would change over the next three years.
4. Provide a description of the general backgrounds, and roles and responsibilities of the GE Bank employees to be hired by GS Bank.
5. Indicate the approximate number of retail accounts to be acquired from GE Bank and a general description of the types of accounts. Provide an estimated number of retail accounts that GS Bank expects to have by year-end 2016, 2017, and 2018."
Inner City Press still had its 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.
