Have you followed the recent news (Community Group to Oppose CIT-OneWest Deal) about a proposed merger of CIT Group and OneWest Bank?
Do those names sound familiar to you?
When IndyMac Bank failed, the FDIC sold it to a group of investors, including John Paulson, an investor who made billions of dollars betting that the housing market would collapse. As part of the purchase, the FDIC offered a “loss-share” agreement to the new owners of IndyMac. You can read more about loss-share agreements on the FDIC website.
The investors who bought IndyMac bank renamed it OneWest bank.
CIT Group, headquartered in New Jersey, is proposing to federal regulators to purchase OneWest bank. The newly merged bank would have almost $70 billion in assets, placing it in the Systemically Important Financial Institution (SIFI) category. That’s regulator speak for “Too Big to Fail.”
CIT Group received $2.3 billion in TARP funds, but then declared bankruptcy, meaning they never paid back the $2.3 billion.
CIT Group is led by John Thain, the same man who spent over $1 million redecorating his office at Merrill Lynch while the company was faltering. It would later be sold to Bank of America.
It’s unclear if the FDIC would continue the loss-share agreements it has with OneWest bank after this merger is completed. So, CRC submitted a Freedom of Information Act (FOIA) request to the FDIC.
We asked for the following information from the FDIC:
1) Documents that reveal the amount and timing of payments from
the FDIC to OneWest under the March 19, 2009 shared-loss
agreement (Indymac), and any shared-loss agreements relating to
the OneWest purchase of La Jolla Bank F.S.B. and First Federal
Bank of California, F.S.B.
(2) Documents supporting these payments, including as documented in
the “Loss Share Data Specification” templates by OneWest to
receive payments from the FDIC under the shared-loss agreement
or agreements and any documents submitted to or produced by the
FDIC in their process of monitoring OneWest’s compliance with
the terms of the shared-loss agreement or agreements.
(3) All documents that contain correspondence between OneWest and
the FDIC with regard to their participation in loan modifications
programs as required by the share-loss agreement or agreements.
(4) All documents containing correspondence between the FDIC and
CIT Group and/or OneWest and its affiliates and representatives
relating to the possibility of transferring shared-loss agreements.
(5) Criteria used by the FDIC in determining whether to approve the
transfer of a shared-loss agreement from one company to another.
In response, the FDIC informed CRC that they considered our request “commercial in nature,” and that “the subject matter of your request is not now of interest to the general public.”
CRC will continue seeking this information, because we believe the five questions raised above are of interest to the general public.
Are you concerned after reading this? Sign our petition, asking bank regulators to do their job:
Want to learn more about this merger? Here’s some additional resources: