Feb 27, 2015- Los Angeles- Yesterday, community reinvestment advocates spoke against the proposed merger of CIT Group and OneWest Bank during a day-long hearing hosted by the Federal Reserve and Office of the Comptroller of the Currency. Some believe the hearing was held in response to the over 21,000 individuals who signed petitions opposing the merger, in addition to 100 California and national organizations who are opposing the merger. CRC live-tweeted the hearing.
Critics raised concerns at the hearing that can be claified into three main categories.
First, the history of OneWest Bank and CIT Group raises serious questions about how communities would fare if the merger is approved.
Second, promises to help individual nonprofits may be helpful for those nonprofits (especially in the short-term) but they do not constitute a comprehensive, robust, Community Reinvestment Act plan.
Third, communities who have already been harmed, and continued to be harmed by OneWest Bank, are watching the Federal Reserve and Office of the Comptroller of the Currency to see what actions the two regulators take with this merger, and how the regulators will assess the “public benefit” or lack thereof from the merger- something the regulators are required to do.
Kevin Stein, associate director of the California Reinvestment Coalition, explained that the billionaire investors who bought IndyMac from the FDIC knew they were buying a foreclosure machine. “Foreclosure is how the majority of Californians know this bank. And, the owners of OneWest knew they were buying a foreclosure machine because they negotiated a sweetheart deal with the FDIC to get reimbursed for their costs of foreclosing on Californians– to the tune of $1 billion already received, plus another $1.4 billion expected before 2019.”
Roberto Barragan, president and CEO of VEDC, questioned why OneWest bank officials only began reaching out to the community when the merger was announced. As the Los Angeles Times reported, critics like Barragan believe the recent outreach by OneWest Bank has merely been conducted to “grease the skids” for regulatory approval.
Isela Gracian, Vice President of Operations for East LA Community Corporation raised the $2.3 billion in TARP funds that CIT Group received and never paid back: “OneWest and CIT were saved by US taxpayer subsidies and they have failed to return the investment to the communities they are required to serve.”
Robert Villarreal, Senior Vice President of Community Development for CDC Small Business Finance (the largest SBA 504 and 7(a) Community Advantage lender in the country) also expressed concerns about OneWest’s dismal small business lending record in his testimony: “In 2013 OneWest made zero loans; that is zero loans for under $100,000 in California (FFIEC website). In that same year here in Los Angeles, only 8 loans were made under $250,000 and less than half the dollars funded were made to businesses located in LMI neighborhoods.”
Promises made to non-profits do not constitute a CRA plan
A number of people from organizations who received grants or promises of grants from OneWest also testified at the hearing to express gratitude for grants they had received from OneWest, for promises that OneWest would do more if the merger was approved, or that a bank official had met with them.
Paulina Gonzalez, executive director of the California Reinvestment Coalition, reminded the audience that individual grants, while helpful for individual nonprofits, are not a replacement for a comprehensive, public, and robust Community Reinvestment Plan.
Gonzalez also pointed out that much smaller banks, like Banc of California, have already committed to stronger reinvestment plans than the current proposal by OneWest and CIT Group. (See Banc of California’s plan here).
Michael Chan, the president of Asian Inc, raised that CIT Bank is able to track which communities it receives its deposits from, and questioned why the bank wouldn’t use that information to reinvest those deposits in the communities where it receives the money, which is the goal of the Community Reinvestment Act.
Communities Look to Regulators
Consumer attorneys, widowed homeowners, and LA community leaders reminded the Federal Reserve and Office of the Comptroller of the Currency that the regulators ultimately have a responsibility to look out for communities in the merger and to see if there truly is a “public benefit” to the merger.
Cynthia Amador reminded regulators that OneWest has previously closed branches in predominantly Latino communities.
Rachel Mehlak, an attorney from Bet Tzedek, shared the story of an elderly, disabled client, who lives on Social Security and supports her daughter and four grandchildren. She had difficulty keeping up with her property taxes, and despite multiple pleas from her attorney, OneWest’s reverse mortgage subsidiary, Financial Freedom ultimately foreclosed on her: “Three generations of my client’s family were kicked out of their home for less than $1300 owed to Financial Freedom.”
Pictures from the event are available here, and testimony from individual speakers are available upon request, and affected homeowners are also available to speak.