Last Monday, a delegation of community advocates traveled to the Federal Reserve to
deliver 15,000 Daily Kos petitions along with a letter from
51 state and national organizations addressed to the Federal Reserve and the Office of the Comptroller of the Currency. The letter and petitions built on
months of opposition to a proposed, controversial bank merger that would combine two banks with troubled histories to create a “Systemically Important Financial Institution, aka a Too Big To Fail Bank.
Four days later, the Federal Reserve and Office of the Comptroller of the Currency announced that they would hold a public hearing on this merger in Los Angeles on February 26, 2015.
The message was clear to the regulators: Enough with public subsidies and taxpayer dollar giveaways, enough with unjust foreclosures on families, widows and seniors, enough with weak promises by the bank to do more for our communities or to do right by us “next time”.
The national sign-on letter urged the Federal Reserve to hold public hearing on this troubled merger, while the petition bluntly told the Federal Reserve “no thanks” on this proposed merger.
When banks propose merging, they have to explain how the public benefit of the merger will outweigh the risks of the merger. One way to look at the potential benefits is to look to the history of the community reinvestment by a bank, as well as any proposed, future reinvestment plans by the banks.
Thus far, both banks have a mediocre reinvestment history, and their proposed Community Reinvestment Plan would rank the new bank at the bottom of the pack when compared to its peer banks in California.
Beyond a scant reinvestment record, the history of the two banks also raises (or should raise) red flags for the question of “risk.” CIT Group received $2.3 billion in TARP from US taxpayers that it never paid back. Meanwhile, OneWest has been receiving a generous subsidy from the FDIC, which is reimbursing OneWest for costs related to foreclosing on families unlucky enough to have IndyMac mortgages.
The announcement to hold a hearing was a good first step to have a more public dialogue about the many troubling aspects of this merger. Hearings are not readily given by the banking regulators, and we achieved this important victory because we stood together and demanded that our communities not be ignored.
But the bank CEOs, their billionaire owners, the high-priced attorneys, and the financial services industry are all betting that the regulators are going to rubber stamp the merger after the hearings.
In the LA Times, just before hearings were announced, a banking consultant was quoted as saying, “OneWest and CIT should have done their CRA homework and realize that the Fed has never met a merger it does not like.”
After hearings were announced another consultant was quoted in the LA Times discussing the OneWest merger saying, “We must have attended at least a dozen Federal Reserve hearings on bank mergers during the bank [merger and acquisition] wave of the late 1990s, the Federal Reserve approved every single merger after the hearing."
Cornelius Hurley, director of the Boston University Center for Finance, Law & Policy, interviewed in American Banker, called the deal "lawful but awful" and said transactions like this are the reason "people are cynical and outraged with our financial system."
If you already signed the Daily Kos petition, thank you, and if you’d like to continue your advocacy, there’s a few more things you could do. First, if you, your friends, or family members had or have a loan serviced by OneWest Bank (it was likely originated by IndyMac), consider sharing your experience with the regulators, especially if you encountered difficulties in dealing with them.
Likewise, if you, your friends, or family members have a reverse mortgage serviced by Financial Freedom (a subsidiary of OneWest Bank), consider sharing your experience with the regulators.
Second, if you are in Los Angeles on February 26th, consider attending part of the hearing. If you can’t join in for the hearing, but would like to weigh in with the regulators, please submit a comment letter to the Federal Reserve before February 26th.
Third, get the word out about this merger. As we saw from the Daily Kos petition, when people learn the facts about this merger, they are disgusted. Regulators need to know that “business as usual” of propping up banks, giving them free bailouts, and not holding them accountable for their foreclosure practices will not be tolerated by Main Street any longer.
For more information on the merger please visit the California Reinvestment Coalition’s OneWest and CIT Group’s Proposed Merger Resource Center.