Tell Bank Regulators: Main Street Wants a Cop on the Beat for Wall Street!

CIT and OneWest Bank Merger

Last week, Senator Warren asked Federal Reserve Bank of New York President William Dudley if he considered himself a ‘cop on the beat.’

He responded no, and that he thought of himself as a fire marshal.

Yes, you heard that right.  There are new scandals breaking almost every week, and one of the main bank regulators says that his job isn’t to stop crimes, but to put out the fires later.

We think this is the wrong message and wrong perspective for one of the most important bank regulators in the U.S.

Join CRC in telling the New York Federal Reserve that we DO want a cop on the beat when it comes to regulating Wall Street.

A first step the Federal Reserve could take would be to hold PUBLIC hearings about a bank merger that was recently proposed in California.  The merger would combine OneWest bank (renamed Indymac- which cost the FDIC $10 billion and counting) with CIT Group ($CIT) (borrowed $2.3 billion under TARP, and then declared bankruptcy, meaning it doesn’t have to pay back the debts).

Join us and urge the Federal Reserve to hold hearings:

Join Us in Telling Bank Regulators: We Need a Cop on the Beat!

What you didn’t hear at today’s Senate Hearing on Bank Regulator Capture: Bank Mergers

Greenspan Explains

 

Editor’s note: We just added a petition urging regulators that we DO need a cop on the beat when it comes to regulating Wall Street.  Add your name and share with your networks! New Petition

This morning, the Federal Reserve Board of New York President, William Dudley, testified to the Senate Committee on Banking, Housing & Urban Affairs.

The hearing was called after disturbing reports about bank regulator capture.  You can see them here , herehere and here.  One of the key takeaways from the hearing is that the American people have lost their faith that bank regulators are doing their job and protecting consumers and communities over the banks.  This is due not only to the foreclosure crisis that erupted in 2007, but also to the many ongoing bank scandals, like LIBOR rigging, the $6 billion London Whale escapade, the BNP Paribas settlement, and others.

At one point, in response to a question from Senator Elizabeth Warren, NY Fed President William Dudley explained that he viewed his role more as a fireman than a “cop on the street.”  So, if the New York Fed is the firefighter, then who is the cop on the street?

One of the issues that wasn’t discussed- but should have been-is the role that bank regulators like the NY Fed also play in approving bank mergers.  When a bank prepares to merge or acquire other banks, it has to request permission from its bank regulator to do so.  Bank regulators will then consider a few factors about the merger, such as:

  • What are the additional risks created by this merger?
  • Is there public benefit to this merger?
  • Is the bank properly capitalized?

A bank merger that has been recently proposed in California is especially relevant to this conversation.  When IndyMac Bank failed, it was purchased by a group of billionaire investors who renamed it OneWest, and secured a lucrative “shared loss” agreement from the FDIC.

Under this agreement, the FDIC agreed to help cover the cost of losses from a $13 billion portfolio of mortgages that IndyMac had originated.  OneWest also agreed to modify mortgages when possible, using the FDIC’s mortgage modification program, and later the HAMP program.

Unfortunately, as CRC pointed out in an American Banker blog post earlier this week (Is the FDIC Subsidizing a ‘Too Big to Fail’ Merger?), OneWest’s foreclosure track record suggests that the bank did NOT modify mortgages where possible.  Worse, outside of one 2011 audit, we still don’t know if the FDIC conducted any other audits of OneWest bank’s compliance with its obligation to modify mortgages where possible.

Fast forward to 2014, and OneWest bank is proposing to merge with CIT Group.

CIT Group unpaid TARP $2.3 billion

Does that name sound familiar?  Talk about corporate welfare!  CIT Group received $2.3 billion from the US taxpayers, via TARP.  A little while later, CIT Group filed bankruptcy, and eliminated its obligation to repay the government.  Yep, $2.3 billion in free money from Uncle Sam.  How many homeowners might have been able to keep their homes if that money had gone to modifications instead?

Commode

Did we mention that the current CEO of CIT Group, John Thain, is the same John Thain that spent $1 million redecorating his office in the middle of the financial crisis?   What’s it like to own a $35,000 commode?

Now, these two banks, with very troubled histories, are assuring the bank regulators that they are equipped to merge. You won’t find this in most of the financial media reporting on this merger, but one of the interesting aspect of this merger is that the leadership of the banks are both expecting the FDIC to allow OneWest to transfer the shared loss agreement to CIT Group, and that it will be continued at this new, Too Big To Fail bank.  This apparently is key to the merger, as investors have asked the bank about it, and they’ve assured them it will continue.

OneWest Bank Merger

Yes, you heard that right.  The bank leadership is claiming it’s ready to take on the Systemically Important Financial Institution designation, but also holding out its other hand for an ongoing subsidy from the FDIC.  Any contradictions there?

California communities, who are reeling from the thousands of foreclosures by OneWest bank, including on seniors and their surviving spouses (American Banker earlier this week: HECM Non-Borrowing Spouses Renew Class Certification Attempts) , are rightfully concerned about whether bank regulators will approve of this Too Big To Fail bank merger.

What YOU can do about it:

If you are one of those Californians, might we suggest you get in touch with your bank regulators and let them know about your concerns? CRC and our members are asking the Federal Reserve to hold hearings in Los Angeles about this merger, and you may also want to let your bank regulators know that you support the transparency and public dialogue about this proposed merger. They’d also likely be interested to hear if you’ve had any experiences with OneWest or its subsidiary, Freedom Financial.

Here’s their contact information, and be sure to email both regulators: comments.applications@ny.frb.org andWE.Licensing@occ.treas.gov

 

If you’d like to learn more about this merger, a few resources we might suggest:

Can We Have Bank and Regulator Hearings in California Too? California Progress Report Op-Ed

Is the FDIC Subsidizing a ‘Too Big to Fail’ Merger?  American Banker Op-Ed

Groups oppose CIT’s planned acquisition of OneWest Bank Fifty organizations are opposing the CIT Group and OneWest Bank merger, and this article quotes CRC members and allies about why they are opposing the merger. Kevin Smith. Pasadena Star News. Oct 27, 2014.

 

Activists’ Protests On the Money  Paulina Gonzalez, executive director at CRC, is interviewed about CRC member’s successful negotiations with Banc of California that resulted in a strong Community Benefit and Reinvestment Plan. Gonzalez also discusses CIT Group and OneWest bank merger that would result in a Systemically Important Financial Institution (SIFI), otherwise known as “Too Big To Fail.” Matthew Pressberg. Los Angeles Business Journal. Oct 20-26, 2014. (Subscription required)
 
Groups urge U.S. to reject CIT takeover of OneWest Bank CRC and Greenlining Institute’s opposition to the creation of a Too Big To Fail bank merger of CIT Group and OneWest Bank is cited in this article. E. Scott ReckardLos Angeles Times. October 14, 2014.
 
Are Regulators About to Let Another Bank Get Too Big to Fail? The many unanswered questions about the CIT Group and OneWest bank merger are highlighted in this article. David Dayen.The Fiscal Times. October 10, 2014.

 

You may also be interested in our 5 Days of Questions about the CIT Group and OneWest Merger:

 

 

Day 2: Advocates Question If FDIC Loss-Share Agreements Should Continue As Part of Bank Merger

 

OneWest Loss Share Agreement with the FDIC: What You Need to Know

Austin Powers

Do you remember the failed IndyMac Bank?  It’s failure cost the FDIC over $10 billion.  The FDIC eventually sold IndyMac bank to a group of billionaire investors, along with a “shared loss” agreement wherein the FDIC agreed to help pick up the tab for the costs associated with shoddy mortgages that IndyMac had originated.  This agreement was made in 2009, and there has been very little information about it made available to the public.

Today, Kevin Stein, associate director at CRC, and Daniel Rodriguez, director of the Community Wealth Department at East LA Community Corporation, have a post on the American Banker blog (BankThink) about this topic.

Check it out:  Is the FDIC Subsidizing a ‘Too Big to Fail’ Merger?

Los Angeles Payday Lending Reform Strategy Convening A Success!

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

Coalition Against Payday Predators

IMAG1295Eighty-five community leaders attended the Payday Lending Reform Strategy Convening at the Los Angeles Labor Federation, AFL-CIO in downtown Los Angeles.  Attendees heard interesting discussions and presentations about payday lending reform approaches from numerous leaders and experts, including Congresswoman Maxine Waters, Los Angeles City Attorney Mike Feuer, and Los Angeles County Labor Federation director Maria Elena Durazo.

Sponsors of the event included the Coalition Against Payday Predators, Law Foundation of Silicon Valley, Center for Responsible Lending, California Reinvestment Coalition, and Public Counsel.  Experts from Housing and Economic Rights Advocates, Bet Tzedek, National Council of La Raza, Western Center on Law and Poverty, East LA Community Corporation, L.A. Financial Empowerment Initiative, and Consumers Union participated.

Four television stations covered the event, including Univision.

For photographs of the event, please visit the CAPP Facebook album below:

Payday Lending Reform Strategy Convening Event Photos

To view live tweets of the event, search #paydayreform…

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CRC Celebrate Los Angeles 2014

Celebrate LA

Last week, California Reinvestment Coalition members and friends gathered to celebrate Los Angeles Reinvestment at the Japanese American Cultural and Community Center.

We’d like to extend a big thank you to all of our sponsors, our Honorary Host Committee members, and attendees.

Also, congratulations to our honorees, Patrick Dunlevy who was honored for his work on behalf of under-represented communities as the Directing Attorney at Public Counsel’s Consumer Law Project.  The Environmental Justice Committee of the Asian Pacific Policy & Planning Council (A3PCON) was honored for their work advocating for a healthy, equitable, and sustainable environment.

 

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Why Do Hundreds of Organizations Want Strong CFPB Rules For Payday Loans?

Editor’s note: The CFPB, a federal agency, has proposed new rules for payday, car title, and high-cost installment lenders.

BUT, they need to hear from consumers- that means you! We have an easy-to-use page where you can weigh in- it only takes a minute and will help bring about important consumer protections with these loans. Please share a line or two in the comments box about why you care about this issue and want to see strong federal reforms.

PS: You do NOT have to be a payday, car title, or installment borrower to sign the petition.

 

ACE Cash Express

Training Manual from ACE Cash Express on how to keep consumers stuck in the debt trap. Obtained as part of CFPB settlement with the company.

In October this year, 466 organizations signed onto a letter to the Consumer Financial Protection Bureau, urging the agency to design rules for payday loans that would end the so-called debt-trap.

What is the debt trap?  Well, imagine you’ve run short on money for the month, so you think you’ll use a payday loan to make ends meet (after all, that’s what their marketing tells you it’s for, right?).  Unfortunately, two weeks later, when you’re expected to repay the loan, your income situation may not have changed, meaning you don’t have enough to pay back the loan and have enough money left to pay your regular bills.  So, you pay back your loan, and take out a new one.

This cycle repeats itself over and over and over again.  In fact, new research from our colleague at the Center for Responsible Lending, finds that lenders generate 76% of their revenue from borrowers who take out 7 or more loans per year.

This research, once again, contradicts industry claims (and marketing) that the loans are for “one-time, emergency use.” In fact, the loans are designed to keep people in debt because that’s how the industry makes its profits.

You can read the more in-depth letter, (link here) written by Americans for Financial Reform to get a better understanding of the problems with payday loans and the ways that the CFPB can address the problems and protect consumers.

If you’d like to stay informed as the CFPB develops these rules, sign our petition to the CFPB, and we’ll keep in touch. Also, if you have a story you’re willing to share about payday loans, we’d also appreciate your input:  Petition to CFPB

The letter struck a nerve in California, where 35 organizations signed onto it, many of whom are CRC members and allies:

Asian Law Alliance
California Association of Food Banks
California League of United Latin American Citizens (LULAC)
California Partnership
California Reinvestment Coalition
CALPIRG
City Heights Community Development Corporation
Community Legal Services in East Palo Alto
Consumer Credit Counseling of San Francisco
Consumers for Auto Reliability and Safety
East Bay Community Law Center
East LA Community Corporation
Faith in Community
Habitat for Humanity Greater San Francisco
LA County Consumer Affairs
Labor Community Services
Law Foundation of Silicon Valley
Mission Assets Fund
Mission SF Community Financial Center
Mutual Housing California
New Economics for Women
Northbay Family Homes
Nuestra Casa de East Palo Alto
Opportunity Fund
Public Counsel
St. Joseph’s Family Center
T. Cooke and Associates
The Fair Housing Council of San Diego
Treasurer, City and County of San Francisco
United Policyholders
United Way Silicon Valley
West Valley Community Services
Working Partnerships USA
Yolo Mutual Housing Association
Youth Leadership Institute