Robert Villarreal’s testimony about the proposed OneWest and CIT Group merger is featured in its entirety below. If you were unable to attend the hearing, CRC live-blogged it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures are available here.
Thank you for allowing my statement to be read into the record. My name is Robert Villarreal and I am the Senior Vice President of Community Development for CDC Small Business Finance. CDC is the largest SBA 504 and 7(a) Community Advantage lender in the country and it recognizes its responsibility to economic development and its communities. To that end, over the last 25 years CDC has created a number of small business lending products to serve small businesses located in low-moderate income communities and those owned by minority entrepreneurs. All of the lending through these programs is under $250,000
The small businesses that we serve with our programs were devastated by the Great Recession. Banks which eagerly, and sometimes recklessly, provided capital through 2007, suddenly went silent. Loans under $100,000, which have been proven to be effective in reaching minority businesses and those located in LMI neighborhoods, fell dramatically. In fact through 2013, loans under $100,000 have yet to reach one-third of their 2007 level. Here in Los Angeles, for example, loans under $100,000 from regulated financial institutions fell 68% between 2007 and 2013. But at least they are doing better than the Inland Empire, where similar lending dropped 72%.
While we believe that the large banks have failed the State’s small business community, at least some have made efforts to improve access to capital. However, one player absent in those efforts has been OneWest. 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. In San Diego, where CDC is headquartered, no loans at all were made under $250,000 in 2013.
While it has failed to directly serve the small businesses discussed here, it has also done little to nothing in reaching out to mission-based lenders across its assessment area to support lending programs, technical assistance or referral initiatives; all programs which much smaller institutions readily participate.
OneWest and CIT have not demonstrated the integrity and commitment to the communities it is required to serve, yet it has benefited from the largesse of the US taxpayer. Therefore, I implore the Federal Reserve to require that CIT and OneWest develop a comprehensive and publicly written CRA plan with commitments applicable to the size of the new bank and that also take into consideration the errors of their past and the benefits they have received from the public trust.