By Matthew R. Lee
NEW YORK, October 1 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks, with Hudson City, trying to be bought by M&T, and Goldman Sachs trying to buy GE Capital Bank the most recent examples.
The Federal Reserve's September 30 M&T approval order exemplifies this lack of seriousness. Less than a week after Hudson City settled racial discrimination changes, the Fed approved the application, declining to compare fair lending with the M&T money laundering in which it engaged inthis dicta:
"The Board expects that a banking organization will resolve all material weaknesses identified by examiners before applying to engage in expansionary activity. See, e.g., SR Letters 14-2 and 13-7. As noted, M&T’s issues largely arose during processing of
this application, and the Board took the highly unusual step of permitting the case to pend while M&T addressed its weaknesses. The Board does not expect to take such action in future cases. Rather, in the future, if issues arise during processing of an application, the Board expects that a banking organization will withdraw its application pending resolution of any supervisory concerns."
Fair Finance Watch raised Hudson City's disparate lending record to the Federal Reserve throughout the stalled review of the M&T proposal, stating to the Fed that "Hudson City's record was even worse in 2013 than in the 2011 data cited above. In the NYC MSA for conventional home purchase loans, while Hudson City made (only) five such loans to African Americans in 2011, this fell to only FOUR such loans to African Americans in 2013, compared in 2013 to 427 such loans to whites: a more than one hundred to one ratio, totally out of step with the demographics and other lenders' records."
Hudson City on September 24 announced a $32 million settlement with the Justice Department and Consumer Financial Protection Bureau. But Fair Finance Watch and Inner City Press, reviewing the just-released 2014 data, found that Hudson City did WORSE in 2014, even while it knew its deal was stalled.
In 2014 in the New York City MSA, Hudson City made 233 home purchase loans to whites - and only ONE to an African American, denying African Americans' application 4.16 times more frequently than those of whites.
In this context, is the $32 million anything more than a discrimination tax? Inner City Press and Fair Finance Watch have now raised to the Fed: watch this site.
Meanwhile Goldman is trying to speed through Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed so far seems bent on helping; opposition now comes from NCRC and members nationwide. It began by withholding basic parts of Goldman's application, click here to view.
Now, even after the New York State Department of Financial Services granted the requests to extend its comment period, the Fed has said nothing - while still not even ruling on Inner City Press' FOIA request.
On September 22, 2015, the Federal Reserve belatedly released the 2014 Home Mortgage Disclosure Act data. A quick review of the lending of Goldman Sachs Bank USA in the New York City Metropolitan Statistical Area shows the Goldman Sach focus which should require publish hearings in this case.
Fair Finance Watch, hours after the data was released, has commented to the Federal Reserve at the highest level that "in the New York City MSA in 2014, for conventional home purchase loans (Table 4-2), Goldman Sachs Bank USA made 45 such loans to whites, only two to African Americans and only one to a Latino. For refinance loans (Table 4-3), Goldman Sachs Bank USA made 16 loans to whites and NONE to African American or Latinos. This is inconsistent with the demographics of the New York City MSA and with other lenders' records; it further militate for the timely requested public hearings."
Goldman Sachs has purported to respond to the comments of Inner City Press / Fair Finance Watch by releasing a small amount of the withheld information, and arguing that what the wider Goldman Sachs does cannot or will no be considered by the Federal Reserve on this Bank Merger Act application by Goldman Sachs Bank. We've put Goldman Sachs' response online, here. It says:
“FFW states that the audio released by examiner Ms. Carmen Segara requires an extension of the comment period and a public hearing... GS Bank believes the issue is outside the scope of the statutory factors for Board consideration under the Bank Merger Act... Goldman Sachs Bank USA ('GS Bank') hereby submits its response to the three comment letters, submitted on September 2, September 3 and September 9, 2015 (the 'Comment Letters'), by the Inner City Press's Fair Finance Watch ('FFW')....
"FFW makes accusations of 'predatory practices' in the 'mortgage field' and 'municipal finance,' and states that there are a number of compliance settlements that must be reviewed in connection with the Application. FFW references several articles related to lawsuits, settlements and other events, all but one of which involve Goldman Sachs but not GS Bank. GS Bank respectfully submits that such comments are not substantiated by specific arguments or facts. GS Bank notes that none of the articles relate to GS Bank itself, and believes these issues are outside the scope of the statutory factors for Board consideration under the Bank Merger Act.”
Goldman Sachs is arguing that the acts of a parent company cannot be considered when its bank applies to buy ($16 billion) in insured deposits, an absurd argument. FFW has submitted another comment to the Fed, including that
"ICP has received by mail from Goldman Sachs' counsel a purported response which claims that issues ranging from conflict of interest and under-regulation by the FRB (evidenced for example by the audio leaked by whistleblower Carmen Segarra) is not cognizable under the Bank Merger Act - an absurd argument. The FRB would be the decision maker, therefore such issues must be addressed.
"Goldman Sachs cavalierly states that since it withdrew some of its indefensible requests for confidential treatment of its application, that issues is resolved. It is not - too much is still being withheld. Significantly, Goldman Sachs has offered no explanation of the specious requests for confidential treatment it made, denying commenters access to information during the comment period. As others now argue, the comment period would be extended and hearing held."
Inner City Press will be covering this wider National (Community Reinvestment Coalition) protest, in which it joins; it has also submitted more comments to the New York State regulator, in a proceeding currently slated to come to a head on September 28, the first day of the UN General Assembly debate.
As Inner City Press exposed last month, Royal Bank of Canada jumped the gun and began doing business with City National Bank without any Federal Reserve approval (see Los Angeles Times, here.)
Inner City Press immediately submitted a Freedom of Information Act request for all of Goldman Sachs' GE Capital application and related records. The Federal Reserve has provided a heavily redacted copy, on which Inner City Press / Fair Finance Watch has commented to the FRB in Washington:
"Among many other things, Goldman Sachs believes it can withhold the volume of deposits it seeks to acquire from GE Capital Bank, WHAT is seeks to acquire (and what not to acquire) from GE Capital Bank, its number of employees in Utah, the contact people on its application, the number of non profit organizations it tells the FRB it serves on the board of -- presumptively public -- and even the NAMES of the exhibits it seeks to withhold entirely. This is abusive and unprecedented and the FRB must, in response, have the comment period begin again. Otherwise, applicants only benefit by making absurd and abusive requests for confidential treatment. There is much more to be said, including at the public hearings ICP is requesting, but it is imperative that the Board act on this as quickly as possible."
When Goldman Sachs became a bank holding company literally overnight in 2008, Inner City Press / Fair Finance Watch and others including NCRC asked the Fed how this was done with no public comment period at all.
But with the Federal Reserve, you can never be too sure, or too careful.
When Community Bank System of upstate New York filed with the Fed nine answers to questions asked after Inner City Press' challenge, it tried to withhold fully eight of the nine responses. More here.
Inner City Press immediately filed a Freedom of Information Act request for the whole submission - and even the Federal Reserve saw through Community Bank System's absurdly -- and tellingly -- overbroad withholding, releasing all but one part of one of the eight withheld responses. But since then, all the Fed has done is seek a mere antitrust control commitment.
We'll have more on this.
Background: The largest bank merger recently proposed, that of Royal Bank of Canada and affluent-focused Los Angeles-based City National Bank, has since April been the subject of a Community Reinvestment Act challenge by Fair Finance Watch.
The LA Times has reported on the "letter from the Fed [which] asks the banks to respond to questions raised in written comments by [FFW]. Spokesmen for the banks declined to comment.... Fair Finance Watch, a New York advocacy group for minorities, questioned a deal between the banks in a June 11 comment letter to the Fed."
Inner City Press first put that Fed letter online, here; then Canada's National / Financial Post reported without credit it had "obtained" it.
By contrast, in the pending proposal of Community Bank System - Oneida, the Syracuse Post-Standard disclosedthat "Inner City Press forwarded the letter to news outlets. Some of the Fed's questions focus on whether Community could improperly control matters at Oneida in advance of the acquisition. Community is working on Fed's questions, said Hal Wentworth, Community's senior vice president for retail banking."
One common theme is that non-control (and therefore antitrust) laws are being violated. One difference is that Community Bank System does comment to the media -- if only to blame the messenger -- while larger RBC and CNB do not. Arrogance?
On Community Bank System's blaming the messenger, FFW has commented to the Fed that it will "will comment again when Community Bank System I has provided a copy of its response to the FRS' questions of July 13. Beyond the CRA and impermissible “control” questions raised therein, we wish at this time to raise the issues that, in a public response to ICP's comments, Community Bank System's SVP for retail banking said the following, in a prepared statement no less:
'In a statement today, Hal Wentworth, Community's senior vice president for retail banking, said that Inner City Press is not a local group and pointed out that letter was the only one filed on the Oneida deal. "This activist does not do business with either Oneida or Community Bank."'
If it would be inappropriate for Community Bank System to comment on or disclose information about its customers, in this context the same applies to the above-quoted, which, separately, is reminiscent of human rights abusing countries emphasizing where the rights groups who study and report on them are based."
Now Community Bank System is trying to withhold eight of its nine responses; Inner City Press is challenging this under the Freedom of Information Act, comparing Community Bank System's outrageous withholding at the Fed with other banks, and with Community Bank System's to the OCC, more here.
