The answers to these questions should be made public, as argued in the FOIA appeal and complaint filed by ICP in connection with Wachovia - SouthTrust (the FRB was served with the complaint on October 25, 2004). ...

Respectfully submitted,

Matthew Lee, Esq., Executive Director

  This will be updated; for or with more information, contact us.

  In other news - better late than never?  Huntington and Unizan on November 12 announced that they’ve extended the term of their merger agreement by one year to Jan. 27, 2006... The banks’ earlier announcement blamed the delay in regulatory inquiries including under “the Community Reinvestment Act.” ICP’s comment on Huntington’s record, filed back in April, will remain pending -- and will be updated if and when the proposal’s revived...

November 8, 2004

   Huntington’s bad karma, from AP of November 4: “Huntington has put on hold its pending merger with Canton-based banking firm Unizan and is negotiating a one-year extension of the merger agreement. Huntington said it will withdraw its current application with the Federal Reserve to acquire Unizan and resubmit its application later. Both companies are dedicated to completing the merger, but those plans need to wait until Huntington's regulatory issues are resolved, Huntington Chairman Thomas E. Hoaglin said.  ‘We're highly confident in our ability to address those concerns, but we don't know how long it will take,' he said, adding that the bank couldn't discuss details of its talks with banking regulators.” 

The Columbus Dispatch added that “Huntington said it recently hired a Washington-based consulting firm run by Eugene A. Ludwig, the former chief of the Office of the Comptroller of the Currency, to assist in addressing the regulatory issues.”  Nice work, following the Citibank-Japan stint, for Gene Ludwig, et al.  Or, what a racket...

 From CBS MarketWatch of November 1:  “PNC Financial Services may not have the stomach to acquire scandal-tarred Riggs National, a research analyst said Monday... Riggs, which built its name in part by serving the capital's embassy community, was accused in September of helping former Chilean dictator Augusto Pinochet hide money. That came days after survivors of those killed in the Sept. 11, 2001 attacks sued the bank for allegedly aiding terrorists. Earlier this year, Riggs was shamed in a money-laundering scandal involving Saudi Arabian diplomats and ordered to pay $25 million in fines. Meanwhile, community group Inner City Press/Fair Finance Watch has opposed the deal, saying PNC is acquiring a ‘crime scene.’”

  Where-are-they-now update: a reader has responded to our “extra credit” question regarding the whereabouts of ex-Skadden Arps Citi-defender Stacie E. McGinn. According to this reader -- who would know, and whose contact we appreciated -- Ms. McGinn is now in Charlotte, NC, in the consumer financial services legal division of Bank of America...

November 1, 2004

Deutsche Bank is threatening to take its ball offshore:  "Germany is not the most obvious location for a holding company... We have to change this," Deutsche supervisory board Chairman Rolf was quoted last week by the German magazine Stern.  Breuer added that the bank's retail banking business would stay in Germany: "No one would think of serving German private clients from Amsterdam or Jersey or from wherever a holding could be based."  Ah, Jersey - or the Isle of Man?  Why not the Caymans?

In Texas micro M&A, on October 26 Prosperity Bancshares announced a proposal to buy FirstCapital Bankers for $135.7 million...

   The scourge of payday and car title lending, and big banks’ funding and enabling of these predators, continues to be our focus.  On November 1, ICP / Fair Finance Watch filed opposition to Wells Fargo’s application to expand in Texas, documenting Wells’ funding of fringe financiers throughout Texas (as well as its targeting of people of color of higher-cost loans from Wells Fargo Financial).  This followed ICP’s timely October 28 filing on Fifth Third’s application to acquire First National Bankshares of Florida, for $1.6 billion.  See, “Consumer Group Challenges Fifth Third Deal,” American Banker, October 29, 2004.   The Federal Reserve has finally started asking PNC questions about its proposal to acquire [toxic] Riggs -- but PNC is trying to keep its answers confidential.  ICP is preparing an appeal, under the Freedom of Information Act. This follows ICP’s FOIA lawsuit against the Fed for withholding Wachovia’s and SouthTrust’s list of payday and car title lenders funded.  Enabling and coddling, these veils must be pierced...  

October 28, 2004

   Inner City Press / Fair Finance Watch (ICP) has just filed a challenge to the application by Fifth Third Bancorp to acquire First National Bankshares of Florida.   See, “Consumer Group Challenges Fifth Third Deal,” American Banker, October 29, 2004. ICP's timely comment, filed with the Federal Reserve Board in Washington, is based on lending disparities and, particularly, Fifth Third’s enabling of high-cost payday lenders, car title lenders, pawnshops and other predatory fringe finance.

            ICP's ongoing review of Uniform Commercial Code (UCC) filings from Michigan, Ohio and Indiana through Tennessee and Florida has found Fifth Third funding and enabling for example Instant Cash Advance, Inc. (sample payday lender); Auto Pawn of Franklin, Inc. (sample car title lender); Capital Pawn, Inc. and Presto Financial Services / Presto Pawn of Naples, Florida; Buckeye Pawn Shop, Inc.; Pike County Pawn Shop Incorporated; R & R Pawn, Inc. of Indianapolis; Harbor Pawn, Inc. of Benton Harbor, Michigan; Fresh State Rent to Own, Inc. and Universal Rent to Own, Inc. of Big Rapids, Michigan.

            This is an issue ICP has raised throughout 2004; in July in response to ICP's comments, as reported by CBS MarketWatch and elsewhere, SunTrust announced it will no longer fund payday or car title lenders.  ICP asks: why should Fifth Third continue to blithely enable predatory fringe finance?

Mortgage lending (HMDA) data reported for 2003 show that Fifth Third disproportionately excludes and denies African Americans and, where applicable, Latinos.  For example, in the Grand Rapids, Michigan Metropolitan Statistical Area (MSA) in 2003, for mortgage refinance loans, Fifth Third Bank (Michigan) denied African Americans’ applications 3.29 times more frequently than whites, and denied Latinos’ applications 3.61 times more frequently than whites.  For conventional home purchase loans in this Grand Rapids MSA, Fifth Third Bank (Michigan) received 39 applications from Latinos, and denied 35 of them. The bank denied all such applications it received from African Americans.

Fifth Third Bank (Ohio) is also disparate, for example in the Cleveland MSA, where in 2003 cumulated with Fifth Third Mortgage Co. (OH), it denied the conventional home purchase applications of African Americans 2.39 times more frequently than whites, and denied Latinos 2.29 times more frequently than whites (in Columbus, Ohio, the two denied Latinos 2.42 times more frequently than whites). Nor does adding Fifth Third’s two mortgage companies make Fifth Third’s record better. Cumulated in Chicago with Fifth Third Bank (Michigan), the three together denied the conventional home purchase applications of African Americans 2.88 times more frequently than whites, and denied Latinos fully 3.37 times more frequently than whites (in Detroit, the three denied Latinos 2.45 times more frequently than whites).

In the Flint, Michigan MSA in 2003, for refinance loans, Fifth Third Bank (Michigan) denied African Americans’ applications 2.91 times more frequently than whites.

Fifth Third Bank (Michigan) had 100% denial rates for African Americans’ applications for conventional home purchase loans in a range of MSAs, from Chicago through Lansing, Michigan down to Naples, Florida.

In the Detroit MSA, for conventional home purchase loans in 2003, Fifth Third Bank (Michigan) denied 100% of the applications of both African Americans and Latinos.

These disparities reflect and foreshadow the effect that acquisition by Fifth Third has on pre-existing lenders: Fifth Third Bank (Michigan) was previously known as Old Kent, before Fifth Third Bancorp bought it in 2001.  Since then, beyond fair lending and support of predatory lending, Fifth Third has had documented managerial problems -- accounting irregularities, to put it diplomatically, resulting in an inexplicable $54 million charge in September 2002. In fact, Fifth Third was until earlier this year barred from acquisitions, and was one of very few banks to have financial holding company status stripped from it (see, e.g., American Banker of March 28, 2003, “Sharp Rebuke for Fifth Third's Controls,” and of March 24, 2004, “Fifth Third Gets Holding Co. Status Back.” The prospective effects of paying a whopping 6.2 times tangible book value should also be explored).

ICP’s comments note that, as a consumer matter, inquiry must be made into the branch closing and service reduction foreshadowed by this sample report:

The company said it expects to cut the bank's annual costs by $50 million a year... Schaefer said some of the cost savings would be severance related and said it is too early to say how many positions will be eliminated. He did say Fifth Third expects cuts in overlapping operations, specifically in Naples, where both banks have their Florida headquarters. Other cuts could come in.. loan processing and data processing, bank officials said.  [Cincinnati Enquirer, August 3, 2004]

ICP’s main contention is that, particularly in light of Fifth Third’s standardless support of predatory fringe financiers, Fifth Third should be re-barred from acquisitions, on CRA and predatory lending grounds.

ICP has requested a hearing and that Fifth Third’s applications be denied, particularly on the basis of the UCC filings it has provided to the FRB:

--an Indiana Secretary of State UCC filing evidencing Fifth Third’s relationship with Instant Cash Advance, Inc., secured by “all assets including proceeds and products” (the relationship lasts at least through May 2006);

--a Tennessee Secretary of State UCC filing evidencing Fifth Third’s relationship with Auto Pawn of Franklin, Inc., a relationship which Fifth Third expressly “continu[ed]” this year, in June 2004;

--a Florida Secretary of State UCC filing evidencing Fifth Third’s relationship with Capital Pawn, Inc, of Naples, Florida (the relationship, as extended last month on September 20, 2004, lasts at least through October 2008);

--another Florida Secretary of State UCC filing evidencing Fifth Third’s relationship with Presto Financial Services / Presto Pawn, secured by the “inventory” (of the pawn shop) and all “accounts receivable;”

--an Ohio Secretary of State UCC filing evidencing Fifth Third’s relationship with Buckeye Pawn Shop, Inc. of Ashville, Ohio (the relationship, as extended in August 2003, lasts at least through October 2008);

--another Ohio Secretary of State UCC filing evidencing Fifth Third’s relationship with Pike County Pawn Shop Incorporated, secured by the “inventory” (of the pawn shop) and all “accounts” and “chattel paper” (the relationship lasts at least until July 2007);

--an Indiana Secretary of State UCC filing evidencing Fifth Third’s relationship with R & R Pawn, Inc. of Indianapolis, secured by the “inventory” (of the pawn shop) and all “accounts” and “chattel paper” (the relationship lasts at least until December 2006);

--a Michigan Secretary of State UCC filing evidencing Fifth Third Bank (Western Michigan)’s relationship with Harbor Pawn, Inc. of Benton Harbor, secured by “all assets” and the “inventory” (of the pawn shop) and all “accounts” and “chattel paper;”

--another Michigan Secretary of State UCC filing evidencing Fifth Third Bank (Northern Michigan)’s relationship with Fresh State Rent to Own, Inc. (this relationship was expressed “continu[ed]” in June 2004;

--another sample Michigan Secretary of State UCC filing evidencing Fifth Third Bank (Western Michigan)’s relationship with Universal Rent to Own, Inc. of Big Rapids, secured by “all assets” and the “inventory” (of the pawn shop) and all “accounts” and “chattel paper” (this relationship was “initia[ted]” in August 2003). ICP has also submitted UCC filings showing Fifth Third’s relationships with, for example, Southern Ohio Gun Distributors, Inc. of Lebanon, Ohio, and with Express Check Cashing, Inc. of Kalamazoo, Michigan, see sample FRB question(s), below).

            ICP’s comments ask: what standards does Fifth Third have?  Apparently none. As a necessary first step, the Federal Reserve must ask Fifth Third the questions as to standards (and full disclosure of fringe financial links) that it has asked, among others, SunTrust, Wachovia - SouthTrust, and Huntington (whose Unizan application, which ICP opposed in April, is still pending).  ICP has suggested this question, among others, modified from the still-pending Huntington / Unizan proceeding:

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that Fifth Third or FNBF or any of their  affiliates have with any subprime lenders (including providers of non-traditional banking products, such as check cashers, title lenders, pawn shops, or rent-to-own businesses): (i) identify the relevant business parties and (ii) describe the nature of the business relationships... Additionally, to the extent not otherwise covered in your responses to the comments of the Inner City Press Community on the Move & Fair Finance Watch, describe any due diligence that Fifth Third or FNBF typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to Fifth Third or FNBF entering into these business relationships, including... (c ) any monitoring or other ongoing procedures Fifth Third or FNBF has adopted to access compliance with these laws. Provide a copy of such procedures that are used to determine whether third party originators are engaged in, or facilitating, abusive and/or predatory lending practices."

            The answers to these questions must be made public, ICP contends, as it has argued in a FOIA complaint just filed in connection with Wachovia - SouthTrust (the FRB was served with the complaint on October 25, 2004; see Dow Jones Newswires of October 26, 2004). ICP has requested a hearing and that Fifth Third’s applications be denied. 

October 25, 2004

   In an October 20 earnings conference call with stock analysts, PNC's Jim Rohr further back-tracked on his bank's commitment or ability to acquire scandal-plagued Riggs. Rohr, acknowledging that he knew the analysts "have a lot of questions about Riggs," said PNC was "obviously monitoring events there very closely. New items have been announced since the date of our agreement. We have to see how those play out." Beyond Pinochet and Equatorial Guinea, the US Justice Department has launched a criminal probe, and Riggs has been named in lawsuits seeking damages for its alleged ties to 9/11 terrorist funding. In a conference call last month, Rohr said he was prepared to scuttle the deal if the mounting troubles made the acquisition too risky. "We simply have to wait and watch developments," Rohr said on October 20.

   For the proposition that deals can die, consider that last week, Farm Credit Services of America terminated its agreement to sell itself to Rabobank Group, and the proposed Carver - Independence deal fell apart...

  Earlier this month, Federal Reserve Governor Bies denied Inner City Press' Freedom of Information Act appeal for a list of the payday lenders and pawnshops funded by merger partners Wachovia and SouthTrust.  On October 21, Inner City Press filed a FOIA lawsuit in the U.S. District Court for the Southern District of New York, challenging the Fed's systematic withholding of predatory lending-related information.  The case has been filed; we will update its progress on this site.

   Meanwhile, in its second timely filing opposing Citigroup's proposal to buy First American Bank in Texas, ICP has documented the two's funding of pawnshops and check cashiers, including College Station Pawn & Cash Station Jewelry and Loan, Q-Pawn, Inc., Decker Prairie Pawn, Inc., Zerega Check Cashing Corp., Montgomery Check Cashing Corp. of 403 East Third Street, Mount Vernon, NY; Castle Check Cashing Corp., continued in 2002; City Check Cashing of Jersey City, NJ; and Rite Check Cashing Inc. and G&R Check Cashing Corp. of New York.  And what, after delay, will Citigroup say?

October 18, 2004

In micro-purchase news, F.N.B. Corp. last week announced a proposal to acquire NSD Bancorp Inc. for about $135.8 million. In a press release Friday, F.N.B. said it expects the deal to add to earnings per share and regulatory capital ratios in 2005.  F.N.B acquired Pittsburgh-based Morrell, Butz, and Junker Insurance Agency, renamed First National Insurance Agency, in July and First National Bank of Slippery Rock, which operates north of Pittsburgh, Oct. 8.  Ah, Slippery Rock...

  Speaking of slippery, on October 14, ICP/Fair Finance Watch received a letter from Citigroup’s outside law firm, Skadden Arps.  The letter recounted:

“Earlier this week, Citigroup’s offices at 425 Park Avenue suffered a fire. Mail to that address has been redirected, and consequently, Mr. Howard has yet to receive the original [ICP] letter. The October 6^th Letter was carbon copied to Stacie E. McGinn who is no longer with our law firm. The letter was received by our law firm on October 12 and redirected to my attention yesterday. I have forwarded a copy of the letter to Mr. Howard. In the October 6^th Letter, the FRBNY indicates that if Citigroup intends to respond to ICP’s comments, it should do so within eight business days of the date of the letter... Citigroup intends to respond to ICP’s comments and hereby requests an extension of time to respond until October 25, 2004”--

  Which just happens to be the day on which the comment period is slated to expire... ICP has responded. Extra-credit question: where has Ms. McGinn gotten to? For or with more information, contact us.

October 11, 2004

  Ditching some predators, but not enough: on October 8, North Fork announced a proposal to sell GreenPoint Credit LLC, which finances purchases of manufactured housing, to Green Tree Servicing LLC...

   Another stealth subprimer, GE Money, reveals its gaming of the regulatory system in documents just obtained by ICP, after GE withdrew its frivolous request for confidential treatment.  GE’s Dillard application states, in response to the required question about CRA, that “[t]he FSB does not anticipate changing its CRA Plan as a result of the Transaction,” and then makes reference to the FSB’s “business plan,” which is not provided.  However, among other documents just provided by the OTS in partial response to ICP’s FOIA request, there is a June 8, 2004 letter from the OTS Northeast Region director to GE, approving (without explaining any basis) applications by GE to change the FSB’s name to “GE Money Bank,” and the “transfer of approximately 3,500 loan customer service and collections employees from affiliates of the Savings Bank to (a) a newly-established wholly-owned operating subsidiary of the Savings Bank called GEMB Servicing Company, Inc. and (b) an existing wholly-owned operating subsidiary of the Savings Bank called GE Home Finance, Inc.”

GE and the OTS between them are designing more and more loopholes to the CRA, deeming the Savings Bank owned by the world’s largest corporation (by market capitalization), a thrift engaged in home finance, through operating subsidiaries and otherwise, an exemption from CRA’s lending test.  The twisting and evisceration of CRA, and the lack of transparency, are outrageous, and contrary to the letter and spirit of the CRA.  ICP is preparing additional comments, while awaiting the OTS’ continuing response to its FOIA request.

ICP Reg FD question, based on the NYT of Oct. 7: “Mr. Ransom of Fox-Pitt, Kelton said he arranged a conference call with other analysts who follow A.I.G. yesterday because its stock '’was getting beaten up, and I thought this was grossly overdone.' In the call, Mr. Ransom said of the dispute between the company and regulators: 'A.I.G. reacts to these things depending on whether they think they have done something wrong. And I think in the present case, they don't think they have done anything wrong.' Joe Norton, a spokesman for A.I.G. confirmed that Mr. Greenberg spoke with Mr. Ransom and said he had no reason to believe Mr. Greenberg had not been quoted accurately.”

  ICP’s question: how do these actions by AIG comply with the SEC’s Regulation Fair Disclosure?

 And how could we not note Thomson Media’s October 8 sale of The American Banker, The Bond Buyer, National Mortgage News and other titles to “buyout shop” Investcorp for $350 million?  From the NYT of October 9: “The publications' value, the Investcorp officials say, lies not only in their subscription base but in the niche those clients represent: a targeted opportunity for advertisers to reach bankers, accountants and bond traders, among others. 'When you think of the assets American Banker has, it's a community of advertisers and subscribers that have a commonality of interest,' said Sean Madden, a managing director for Investcorp.”  Ah, journalism: a conflux of advertisers and subscribers...

October 4, 2004

   Our action over the weekend was filing 21-page protests to Citigroup - First American Bank, with the Federal Reserve Board and OCC.   Click here to view.   At the Fed, issues mount about BNP / Bank of the West (including its embroilment in the Oil for Food scandal -- click here for ICP’s comments), and, to an absurd degree, on PNC-Riggs and money laundering.          

   On prospective M&A, the American Banker of September 30 mused that “Compass Bancshares Inc. and AmSouth Bancorp, both of Birmingham, Ala., and SunTrust Banks Inc. of Atlanta are the most attractive near-term targets, said David Hendler of CreditSights Inc. Any of the three could find themselves in the sights of large out-of-region banks seeking to expand into the Southeast, he said Wednesday. Compass is the most likely to do a deal, Mr. Hendler said. It has an attractive banking network that stretches from Florida to Texas, Arizona, and Colorado, and its chief executive, D. Paul Jones Jr., is nearing retirement age.  But with a market capitalization of just over $5 billion, Compass may be too small and have too low a deposit share in the most attractive markets for giants such as Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co., Mr. Hendler said. That is only 2% of Citi's asset size and 4% of JPMorgan Chase's, he pointed out. Compass also has only 2% of the deposits in Texas, which may be too little for a big out-of-region acquirer, he said.”   AmSouth, we opine, is toxic...

Meanwhile, here’s a list of other Texas targets, along with the Texas deposits in billions (assist credit to Houston Chronicle):  Frost National Bank, $8.0;  Guaranty Bank, $6.9; Southwest Bank of Texas, $3.7; Texas State Bank, $3.4; International Bank of Commerce, $3.4; Sterling Bank, $2.6; Beal Bank   2.2; Laredo National Bank   2.2; Bank of Texas National Association   2.0; Prosperity Bank, $1.7;  PNB Financial Bank   1.6; Coastal Banc, 1.6; First National Bank   1.4; Texas Capital Bank   1.4; American State Bank   1.2; Woodforest National Bank, $1.2; Amarillo National Bank, $1.2; Broadway National Bank, $1.1; and Texas Bank, $1.1 billion. We'll see..

September 27, 2004

            While Riggs and PNC tried to pep-talk Riggs’ employees on September 24, PNC’s Jim Rohr has been quoted backing away from the deal.  And AIG now facing an SEC enforcement action for having helped PNC’s accounting games can’t be helpful.  Ex-Fed man Jack Wixted continued to stand on his previous statements for PNC. Managerial resources, anyone?

            Last week, ICP/FFW filed comments based on the Senate Riggs report’s findings regarding HSBC and Santander, click here for article in the Glasgow Herald, reporting that “A US-based human rights group has written to Britain's financial regulator urging it to halt Santander's £8bn acquisition of Abbey National until it fully investigates its part in the alleged "violation" of US money laundering laws.Inner City Press and its Fair Finance Watch, based in New York, has drawn the Financial Services Authority's attention to the US Senate's recent report on Riggs Bank's alleged money laundering for former Chilean dictator Augusto Pinochet, and the dictator of Equatorial Guinea;” click here for more.

            While the clock ticks on Wachovia / SouthTrust (in the most recent S-4, the records date for SouthTrust holders has moved, but not for Wachovia, viewed as springing from differences in NC and Delaware law but who knows), Wachovia last week settled discrimination charges. So it was gender, and employment - discrimination in one field is often mirrored in another (lending).  And still they withhold the list of payday and car title lenders, and pawnshops, that they fund...

Where’s the beef? Last week, Bank of America loudly announced it’s making Boston the headquarters for its “wealth and investment management” arm.  The upshot? Ten wildly-overcompensated people, including Columbia fund management President Keith Banks, investment services boss Michael Santo and Premier Banking head John Morton will be in Beantown by Oct. 18.  Perhaps it’ll help if they pay taxes.  But beyond that, where’s the benefit?

September 20, 2004

            BofA spreads the pain to New Jersey: BofA announced on September 16 that a check-processing center in Ridgefield Park, N.J., that employs about 300 people may be among the former Fleet operations that will be shut down in whole or in part. Anne Finucane admitted to The Record’s intrepid Rich Newman that "a couple hundred" jobs have been eliminated in New Jersey since the $ 48 billion deal closed on April 1. Officials in April said BofA acquired 6,200 Fleet employees in New Jersey. Finucane told Newman that BofA now has "roughly 5,500" full-time equivalent employees in the state. But that doesn't mean 700 jobs have been eliminated, she explained. With so-called "full-time equivalent" tallies, two part-timers who work 20 hours a week would be counted as one employee.  Or not -- BofA and WalMart are not all that difference, except that BofA’s not even cheap on price...

            By letter dated September 14, BNP answered another round of questions from the Fed, concerning BNP’s Community First and USDB proposals, and each bank’s “programs to monitor compliance with fair lending and consumer compliance laws... including pricing, overrides, and exceptions.”  The answers are convoluted and not persuasive...

            ICP has now filed a formal FOIA appeal for the information Wachovia and the Fed are withholding about Wachovia’s and SouthTrust’s support of payday and car title lenders, pawnshops and other fringe financiers. Meanwhile by letter dated September 13, Wachovia responded to Fed questions of September 9 about SouthTrust’s fair lending compliance program. The answer’s convoluted - but not was bogus as the answer to the Fed’s question about branch closing. Developing... ICP has filed preliminary comments and requests, about the GE - Dillard proposal, with the Office of Thrift Supervision and FDIC...

September 13, 2004

  Cocky Banco: Santander vp Juan Rodriguez Inciarte on September 10 opined regaring Abbey: "We expect to obtain the necessary competition clearance from the European Commission on 17 September. We have no retail business or branches in the U.K. and therefore face no competition issues in those regards.”  Meanwhile they’re desperately trying to sell of their stake in RBS...

  In the U.S., Riggs and PNC are policing the press, keeping things quiet, hoping it blows over.  For example, following a report of ICP’s challenge in the National Mortgage News, the NMN ran a demanded correction on September 6:

In the Aug. 30 issue of NMN regarding the Inner City Press/Fair Finance Watch challenge to the proposed acquisition of Riggs National Corp. by PNC Financial Services Group, Riggs was incorrectly described as having been charged with accounting fraud. The company has never been charged with this or any other violation. We regret the error.

This seemed too craven; ICP wrote in:

   Your Sept. 6 retraction, in the face of PNC's complaints, of your August 30 mis-report that Riggs Bank was "not long ago was charged with accounting fraud" should have said more -- it was PNC that was charged with accounting fraud, and paid $115 million to settle the charges.   On Sept. 6, you (cravely) stated, "Riggs was incorrectly described as having been charged with accounting fraud. The company has never been charged with this or any other violation."  That too is incorrect. Riggs has been charged with money laundering, and the investigation remains ongoing, by the U.S. Attorney in the District of Columbia, and in the U.S. Senate, including on the question of whether Riggs' greed assisted in money laundering for terrorism.  See http://govt-aff.senate.gov/_files/071504miniorityreport_moneylaundering.pdf
  We like it when publications are willing to correct themselves -- but you shouldn't give in so easily to large banks' complaints, without pointing out what the basis of the report was. 

 [This subsequently ran, as a letter to the editor, in the Sept. 13 National Mortgage News.]

September 6, 2004

  The Huntington-Unizan fight, which began back in the Spring, has developed. Way back on July 1, ICP contested Huntington's attempt to withhold its response to the FRB's questions about what due diligence it performs in connection with its business dealings with payday lenders, pawnshops and other nontraditional providers of financial services. On September 1, after delay occasioned by Huntington, a portion of "Confidential Exhibit B" was released. The document Huntington was trying to withhold states, in part:

"Huntington does not conduct due diligence concerning [a provider of non-traditional bank products which Huntington construes as] a depositor's compliance with fair lending and consumer protection laws, require representations and warranties in its deposit agreement to that effect, require agreements other than those required to establish cash management services of monitor fair lending and consumer protection compliance."

  That is, Huntington does not even pretend to do any due diligence when providing cash management services to payday lenders and other fringe financiers. Even where Huntington lends to such businesses, it admits (in the long-withheld document) that it "does not typically monitor the borrower for ongoing compliance with law."

As simply one example, Huntington's larger peer SunTrust has recently informed the FRB that it will cease lending to payday lenders and car title lenders, in light of consumer harm and reputational harm. (Click here for more.) Huntington is so blind, or blithe, regarding even reputational harm that it does no due diligence (see supra) and no ongoing monitoring. Huntington's admission militates for the hearings ICP has requested, and for denial of the application (as does the ongoing SEC investigation into Huntington's accounting irregularities, etc.). ICP has put in a supplemental comment to this effect; developing...

   PNC's laughable response, to both the Federal Reserve and OCC, is that "with respect to the investigations that are currently underway at Riggs, these matters will surely be considered by the Federal Reserve in taking into consideration the statutory factors under the Bank Holding Company Act, including the financial and managerial resources of PNC and Riggs, in acting on this application."

   But the Fed and OCC have been asked to, and have agreed to, suspend their investigations into Riggs, pending the DOJ's ongoing money laundering investigation. The Fed and OCC would have a duty to reach conclusions about these matters before even considering an application to acquire Riggs. So why isn't PNC withdrawing or suspending its applications?

   And when will the regulators provide ICP the requested documents about their communications with PNC? The publication Bank Systems & Technology of September 1, 2004 quotes "Brian Goerke, a PNC spokesperson," that "We did a thorough review of Riggs and worked closely with regulators before making the acquisition." If PNC "worked closely with the regulators" before announcing the proposal and submitting its applications, where are the documents? Developing...

   In other deal news, UBS AG last week announced a proposal to buy Charles Schwab Corp.'s capital markets unit for $265 million in cash. At the RNC, UBS' bought ex-Senator Phil Gramm was a guest of banks footing the bill for an evening of food, drink, and live Big Band tunes in the Rainbow Room on the 65th floor of Rockefeller Plaza on August 30. Before a panoramic view of the Big Apple, Gramm bragged that he is enjoying being a banker, that he keeps an apartment in New York and travels the world for UBS. "You can teach an old dog new tricks," Gramm said in the faux-folksy fashion that was and is his trademark. "I've had to learn a lot of new things, such as the practicalities of finance." So why was he legislating, without a grasp of the practicalities?

  We'll have more to say, when timely, about Wells Fargo's proposal to acquire Houston-based First Community Capital Corporation -- despite the opportunity, Wells never responded regarding its funding of payday lenders including those targeting the military... 

August 30, 2004

   Two (relatively) micro-deals announced August 25: WesBanco Inc., with its recent Needs to Improve CRA rating since baselessly upgraded, proposes to acquire Winton Financial Corp. in a stock-and-cash deal valued at $102.5 million; Westamerica Bancorporation proposes to buy Redwood Empire Bancorp in a deal worth an estimated $148 million.

   On the bank beat, this double-dance has become routine: settling lawsuits by lowering the break-up fee, then keeping the date on consummation undefined, to foil the plots, schemes or strategies of arbitrageurs. The latter dance step was exemplified by Citigroup on Golden State; the former, Charter One did, and now NCF-SunTrust (fee dropped from $280 million to $204 million - and what else, undisclosed?) These two are also being vague about when they'd close.

  On BNP, the London Telegraph of August 26 reported, "Congressional committees investigating the allegations have subpoenaed records from several institutions, including French bank BNP Paribas. The bank managed billions of dollars that came from Iraqi oil revenue, though there is no official suggestion that it was involved in wrongdoing. A BNP Paribas spokesman said: 'It is understandable given the publicity surrounding the UN oil-for-food program, that US authorities would wish to understand details about the program. As is customary, BNP Paribas will fully co-operate with the authorities. We are not the target of any investigation.'" We'll see...

It's been confirmed: Kenneth Wainstein, the U.S. Attorney for the District of Columbia, asked the OCC in an Aug. 6 letter to stop work on the review and two other matters relating to Riggs due to the DOJ investigation. "We have agreed to this request and have suspended our work in these areas," Comptroller Hawke wrote in an Aug. 18 letter to Senate Banking Committee Chairman Richard Shelby. This raises an obvious question: how could the OCC and Federal Reserve even consider PNC's Riggs application, if they've suspended their own attempts to get to the bottom of the managerial and other factors which, by law, they'd have to consider on the acquisition proposal? The Pittsburgh Post-Gazette of August 25 reported, "PNC Financial Services Group said yesterday that it was 'premature to speculate' on whether the recent launch of a criminal probe of Riggs Bank by the Justice Department might impact its pending acquisition of Riggs. 'We will monitor the situation as it unfolds,' spokesman Brian Goerke said." So will we. In the interim, this question: if the Senate permanent subcommittee on investigations, and many others, question the OCC's examiner having gone over to Riggs, what exactly is the different with the Federal Reserve's Jack Wixted having gone to PNC, and now writing the bank's responses to the Fed? This will be answered in coming weeks. On TD-BankNorth, too, there'll be things to say... 

August 23, 2004

   On Riggs-PNC, the plot has thickened -- the Washington Post of August 21 reports on the widening criminal investigation of Riggs. CBS MarketWatch, which covered ICP's filing last week, now notes that "a lengthy probe could affect the company's pending acquisition by PNC." Another conflict has been identified, and raised: PNC awarded $50,000 to the Fed chairman's wife in April 2004. With all due respect, click here to view a summary of ICP's second comment, a petition for recusal.

   Late summer M&A like rotting fruit: Citi last week bought servicing of $10 billion of Hibernia's mortgages; eighty jobs will be eliminated.... Deutsche Bank and multi-family: DB on August 16 announced a proposal to acquire "the origination and servicing assets of Berkshire Mortgage Finance LP"... Micro M&A from last week: on August 12, ESB Financial Corp. announced a proposal to acquire PHSB Financial Corp. <PHSB.O>, the parent company of Peoples Home Savings Bank, for about $82.6 million, expanding its operations in western Pennsylvania...

    Regarding Huntington - Unizan, the American Banker newspaper of August 16 reported, "Huntington said it is 'maintaining an active dialogue' bank regulators about the Unizan deal, which was announced in January and had been scheduled to close last month." It's an interesting quote including because, under the Fed's rules against ex parte communications, notice and copies are supposed to be given to ICP - but haven't been.

   Numerous inquiries have been made about BNP and its applications to the Fed. Cryptic: keep a watch on developments in the Iraq/UN [/ BNP] Oil for Food scandal..

August 16, 2004

   In dubious corporate greed news, on August 12 Mitsubishi Tokyo Financial Group confirmed a deal to take over troubled bank UFJ Holdings, to form a $1.7 trillion bank, which would surpass $1.3 trillion Citigroup as the world's largest bank...

  Huntington in desperation on August 9 announced that CFO Michael McMennamin and Controller John Van Fleet both relinquished their posts but will remain with the company. But now Unizan too is being sued for ripping consumers off. The Akron Beacon of August 10 reports

   The Ohio Attorney General's office sued a subsidiary of Unizan Financial Corp. on Wednesday, accusing it of unfair and deceptive lending practices. Unizan Bank, according to the state, had deals with auto dealers to provide loans to customers. But often the dealers didn't finish the transactions, withholding the titles from the buyers. Without the titles, customers paid loans for cars they didn't own. In a few cases, the titleholder repossessed the vehicles. The lawsuit demands Unizan refund customers' money and void the loans. Canton-based Unizan is merging with Huntington Bancshares Inc. under a deal announced in May. www.ohio.com/mld/beaconjournal/business/9379481.htm

  That is, they hope to merge... Tom Hoaglin claimed McMennamin's move was a "voluntary action... We simply thought that it would be (beneficial) to have a CFO signing that (report) who is not in any way involved with the SEC investigation," Hoaglin said, adding a claim that "I accept responsibility for matters that occur on my watch." But why then is it other people, walking the plank?

  Inner City Press' Fair Finance Watch has just filed two 28-page challenges to applications by the PNC Financial Services Group to acquire the scandal-plagued Riggs National Corporation, with the Federal Reserve and OCC. ICP's comments include evidence that PNC funds payday lenders such as Check n’ Go of Washington DC, Inc. and elsewhere; ICP contrasts this with PNC’s peer SunTrust’s July 12, 2004 response to ICP’s comments, that SunTrust will no longer fund payday lenders. See, e.g., "SunTrust pledges to drop ties to payday & title lenders," www.investors.com/breakingnews.asp?journalid=22274151&brk=1   and here.

  ICP’s comments first emphasize that the fast sell-off of Riggs may undermine the ongoing credible investigation that the Administration has promised -- particularly a sell-off to PNC, which beyond relining and funding payday lending was not long ago charged with accounting fraud, and subject to a deferred prosecution agreement with the U.S. Department of Justice.

  Riggs is essentially a crime scene -- it shouldn't be sold so quickly, least of all to an unqualified bank like PNC, which we have now proved funds high cost payday lenders like Check n' Go. Riggs trampled human rights abroad, while PNC supports predatory lending throughout the United States. This is a shotgun marriage made in hell, one that we are speaking up to oppose, showing why these two banks should not be joined together, neither now nor in the future.

   The American Banker newspaper of July 19, 2004, reported that "executives indicated that about 50% of Riggs' 1,400 employees would be cut." Staff cuts of 50% would be inconsistent with consumer service, and make a troubling contrast to the windfall expected by those responsible for Riggs' practices. The Washington Post of August 13, 2004 reports that ""Robert L. Allbritton is slated to received $850,000... Nine other executive officers will receive a total of $4 million." ICP has requesting public hearings on this ground and especially on PNC's funding of problematic payday lenders. As documented by the Uniform Commercial Code filings ICP has obtained and submitted, PNC funds and enables for example:

Check n’ Go of Washington D.C., Inc. (proved by a UCC filing from the District of Columbia Department of Finance and Revenue); Check-N-Go of Illinois; Check n’ Go of Ohio; Check n’ Go of Washington (State); Check n’ Go of Wisconsin; "The 409 Group" care of Check n’ Go’s parent CNG Financial Corp. in Mason, Ohio, etc..

  PNC has presumptively been on notice of predatory lending issues surrounding Check n’ Go, including because Check n’ Go has been under fire in PNC’s headquarters city, Pittsburgh. See, e.g., Pittsburgh Post-Gazette of May 14, 2004, "Zoning for ‘Payday" Loan Shops Opposed" --

"Several community groups are fighting to keep payday loan outlets out of commercial districts on the North Side and in East Liberty, claiming the businesses will have a negative impact on redevelopment efforts and exploit people who can least afford to pay the loans back... The businesses are being proposed by Check 'n Go, an Ohio-based company that currently operates 25 outlets in Pennsylvania. Check 'n Go offers short-term loans, typically in the form of paycheck advances, to customers... [The] director of real estate development for East Liberty Development Inc., decried the ‘exploitative nature’ of the businesses, saying they... tarnish ‘people's financial behavior.’" (Emphasis added).

  This is in PNC's headquarters city, one that it claims to serve under the Community Reinvestment Act. See, e.g., Bergen Record of October 15, 2003, "Group seeks to block PNC deal for N.J. bank," reporting that "Brian Goerke, spokesman for PNC, declined to respond to specific allegations. He said the company is proud of an 'ongoing commitment to improving all the communities in which we do business.' The company 'will respond appropriately with any matters raised' during the acquisition approval process, he added."

   PNC's funding and enabling payday lenders is hardly indicative of an "ongoing commitment to improving all the communities in which we do business." Also, ICP’s own recent research finds for example that Riggs served -- or serves -- as correspondent for, among others, Bank of Sierra Leone, Sierra Leone Commercial Bank Ltd, Energobank of Bishkek, Kyrgyzstan, Banco de Cabo Verde, Banco Internacional SA, and others - evidence has been submitted. ICP has formally requested hearings. Click here for a summary of ICP's PNC - Riggs comments; click here for an update on Wachovia-SouthTrust, and their, uh, misstatements about SouthTrust not funding fringe financiers...

August 9, 2004

  Can you say, "overpaid"? We're not (necessarily) talking about the above, nor about JPM Chase's Bill Harrison, but rather about the 41% premium Fifth Third's prepared to pay for First National Bankshares of Florida. Why so desperate? Well, George Schaefer Jr., mused last week that "two hundred-fifty people a day leave the state of Ohio to take up residence in Florida. That's what we are chasing down there." Fifth Third has been on other chases as well, which we'll get to in due time. And of course it's full circle with JPM Chase's Bill Harrison who, yes, is overpaid...

   Both from Britain (at least for now, in the case of HSBC), Royal Bank of Scotland keeps looking west across the Atlantic, and HSBC keeps looking East. On August 6, HSBC confirmed it: it's agreed to pay 1.75 billion dollars to buy a 19.9 percent stake in China's Bank of Communications... Meanwhile, Royal Bank of Scotland has another proposed acquisition in the U.S., of Lynk Systems, a "merchant acquiring business," for $525 million. The announcement came days after Fred The Shred Goodwin said that RBS' U.S. operation is focusing on completing the $10.5 billion acquisition of Charter One Financial that was signed in May. He said RBS would make no large U.S. deals soon, adding that after buying some of Mellon Financial's U.S. operations, it took the bank about 9 months to start seriously looking for another deal. RBS Chairman George Mathewson -- who's also a director of Santander, at least for now -- whined that barriers to cross-border deals still exist. "Most of the barriers are still there - the unions, political and cultural barriers are all still in place, so we can't kid ourselves that a cross-border deal is around the corner"... Yeah, basic antitrust: what a cultural barrier...

  Still thumbing its nose at the SEC's Regulation Fair Disclosure, JPM Chase on August 4 provided a special "integration update" to Mike Mayo of Prudential Equity Group -- by Wild Bill Harrison himself! This from the bank that, like a banana republic, chooses who can and cannot ask questions on its conference calls, while pretending to have answered all questions...

  On August 4, the Federal Reserve's managing senior counsel Elaine Boutilier wrote to ICP, stating that that in response to ICP's FOIA request "for portions of the July 1, 2004, submission by Huntington Bancshares, Incorporation that were withheld from you by counsel for the applicant," the Fed has given Huntington until August 18 "to provide written objections to disclosure of the information." Since normally the Fed compromises behind the scenes with banks regarding what can be released, without starting up the 12 CFR §261.16(d) "reverse FOIA" process, this appears to mean that Huntington is playing hard ball. Well, good for them. Developing...

  Also on matters FOIA, on August 5 oral argument was held in federal court in Wilmington, Delaware on ICP's ongoing request for the Delaware AG's documents about HSBC Household's predatory lending and settlement, and the Constitutionality of Delaware's FOIA. See, "Federal Judge Weighs Delaware Records Law: Residency Requirement Is Unconstitutional, Complainant Asserts," by Mary Allen, Wilmington (Del.) News-Journal, August 6, 2004.

August 2, 2004

  The bank M&A deal of the week was in Europe: Santander to buy Abbey National. Santander BCH has had some Community Reinvestment Act problems in the U.S.; there are other issues with its Latin American operations. But of why Santander made its move in England and not elsewhere, Dow Jones opined that Santander's bid "shows that acquisitive continental banks would rather duke it out in Europe's most competitive financial services market than face the wrath of European regulators. By all accounts, the U.K. is the most competitive market in Europe. So why would a Spanish bank already active in much faster growing markets in Latin America want to buy a U.K. bank? For the same reason that U.K. banks Royal Bank of Scotland PLC and HSBC Holdings PLC chose to expand in the U.S. rather than in continental Europe. The U.K. is a free market in which the acquirer's nationality isn't part of a regulator's review of a proposed merger....

  A recent report by consultants Mercer Oliver Wyman said domestic players in European countries have an advantage over foreign acquirers because governments may want to keep financial services companies under local control. Countries like Italy, Germany and France deter bids not with obvious regulations forbidding foreign takeovers, but through more subtle measures. The head of Italy's central bank, Antonio Fazio, is seen as being against a foreign takeover of an Italian bank. The Bank of Italy acts as the competition authority overseeing mergers and acquisitions, giving Fazio a strong hand in deciding the fate of consolidation in the Italian sector. An undeclared policy against foreign takeovers was behind the failure of Banco Bilbao Vizcaya Argentaria (BBVA) to increase its stake in Italian bank Banca Nazionale del Lavoro (BNL). Regulatory interference also kept Banco Santander Hispano Americano from increasing its stake in San Paolo IMI, and ABN Amro (ABN) from taking more control of Capitalia SpA (CAP.MI).And France has a tightly managed economy that favors the longevity of national champions such as BNP Paribas SA and Societe General SA. The biggest deal in France involving a foreign buyer was more than four years ago, when HSBC Holding PLC bought Credit Commercial de France for $10.6 billion. Perhaps the most potent deterrent in Germany is the lack of competition in several areas of retail banking, making price competition from a foreign acquirer impossible. Over half of the retail banking market in Germany remains in public ownership. These banks can easily undersell any institution that is trying to make a profit. Onerous labor laws - which would make it hard to fire workers and lower costs - present another challenge for any buyer in continental Europe. Dealing with the already time-consuming labor process would likely be even harder for a foreign buyer, observers say."

  Ah, free trade... And what's with Emilio Botin bragging that Santander could keep a 5.2% stake in RBS, while owning its putative competitor Abbey National? We'll see... Here in the interim is another (not unrelated) quick ICP's news-and-view: on July 29, Charter One and RBS announced a settlement of the shareholders' class-action lawsuits (which they'd previously denounced as meritless). RBS has agreed to waive its rights to any termination fees in excess of $375 million under the merger agreement. This has become a ritualized game: banks setting absurdly high break-up fees to ward off other bidders, then agreeing to drop them (and pay other fees) later in the process, once no other bidder would step forward. The substantive problem -- the target's board of directors dissuading any other bidders by including a crippling break-up fee in their initial proposed sell-off deal (in this case, netting Charter One's executive parachutes that a platinum) -- is not solved. This is not good governance: it's an abuse, and RBS is a main player in it...

  Wall Street Journal Watch: Despite its politics, we don’t deny that the WSJ usually includes in its reported stories facts not elsewhere available. We say "usually," because the Journal’s July 27 front page article about Citigroup "goes downmarket" in Mexico, even "competing with loan sharks," amazingly did not even mention CitiFinancial, which is a major engine in Citigroup’s downmarket aspirations all over the world. (The article also barely mentioned Citi’s interest rates). The article compares today’s Citigroup to the Citibank of previous decades. The comparison ignores that Sandy Weill’s Travelers Group, founded on the subprime lender Commercial Credit now known as CitiFinancial, bought the old Citibank and irrevocably changed it. A shady subprime lender bought the biggest bank, and now goes subprime all over the world. When even the Journal misses this part of the story, it makes you wonder...

   Speaking of Sandy (The Sandman) Weill, the bonus Citi’s board awarded him last year, $29 million, was the largest in the country (and world)... Who was it, again, who was at the helm when Citi ran up its liabilities re WorldCom, Enron and predatory lending? And now (8/1), Citigroup is named as an "iconic" target.   It's certainly not ironic... 

July 26, 2004

  Our news of the week is 45-page challenge filed to Wachovia - SouthTrust, hammering on predatory fringe finance and SouthTrust's (and Wachovia's) misstatements - click here to view.

   Meet the new boss, more arrogant than the old boss: on the JPM Chase conference call on July 21, Jaime Dimon was asked if Chase would be open to working with American Express Co. and Discover Financial Services. Dimon responded, "Yes. Maybe. I wouldn't tell you. We'll (work with whomever) is best for J.P. Morgan Chase." He launched into a criticism of institutions (including the successor to his old subprime-lending employer, Commercial Credit) settling litigation about the corporate scandals centered on WorldCom and Enron. (JPM Chase’s liability in re Enron is even greater than Citigroup’s, mainstream experts were quoted last week). Dimon intoned of the litigation charge: "We looked at our own facts, our own circumstances, our own environment, our own assessments, our own probabilities." And, just because we’re big and we were involved doesn’t make us guilty, Dimon said -- while his spokesman in central Ohio, Jeff Lyttle, says they’ll lend to any business that is not under indictment (see below in this Report). Now SunTrust has said it won’t lend to payday lenders, but JPM Chase / Dimon (who was responsible for Bank One’s links with payday lenders) won’t change any of their policies (or apparently even look at them, unlike the run-on rant quoted above). Meet the new boss... Also on the call, Dina Dublon announced happily that JPM Chase is increasing to 12,000 from 10,000 the total number of jobs expected to be eliminated. "We don't expect that to change much," the new boss said.

   Big picture: Tokyo’s Daily Yomiuri of July 22 reported that "the MTFG-UFJ merger is a part of realignment of the global banking industry. Three megabanks--Bank of America, J.P. Morgan Chase and Citigroup--now dominate the financial business [and] aim to acquire foreign banks. A rumor was rife lately about Citigroup's purchase of Deutsche Bank.

July 19, 2004

  On July 16, ICP / Fair Finance Watch filed timely comments with the Federal Reserve opposing National City’s application to acquire Wayne Bancorp, noting to the Fed that NatCity’s listing of its payday lending connections was incomplete, perhaps intentionally so, and that NatCity also funds and enables pawnshops and rent-to-own stores... On July 19, ICP filed a third timely comment with the Fed opposing SunTrust - NCF, click here to view...

  Received, from Royal Bank of Scotland’s Citizens Bank, is a response to this Federal Reserve question: "With respect to your June 23, 2004 submission... please indicate whether Citizens Mortgage Corporation reports the loans generated in a correspondent capacity under the Home Mortgage Disclosure Act." This is an issue which ICP raised when, after the comment period closed, RBS Citizens off-handedly disclosed convoluted partnerships that it has with a number of questionable subprime lenders. RBS Citizens' July 9 answer -- well, the "public portion" of its answer -- to the above-quoted Fed question runs as follows: "CMC does not report any subprime loans that it originates in a correspondent capacity under the [HMDA]... CMC does not review the application for, or making the credit decision on, any such mortgage loan; rather, these actions are performed exclusively by the unaffiliated investor that underwrites the mortgage loan and to which CMC eventually sells the mortgage loan in the secondary market."

  So let's get this straight: a person is at RBS Citizens for a mortgage, and is shunted to an "unaffiliated" subprime lender, yet somehow RBS Citizens still appears to make the loan, to the extent of later selling it to the same unaffiliated subprime lender, now called an investor. This convoluted structure, ICP contends, does not comply with HMDA or ECOA, and also calls into question many of RBS Citizens' claims about its lending record...

  In other M&A news, last week Mellon announced a proposal to buy Las Vegas-based Paragon Asset Management Co. for "an undisclosed sum."

  From last week's Senate hearings, Simon P. Kareri, who managed Riggs's West African business until he was fired in January, declined to explain why he lugged a 60-pound suitcase stuffed with $3 million in plastic-wrapped cash to Riggs's Dupont Circle branch. Riggs' "consultant" Bruce McColm said, ''Equatorial Guinea was Riggs's most lucrative account and it was a gravy train and they were going to do business there regardless.'' So when Riggs runs onto the rocks, corrupt dealings with dictators in Chile and Equatorial Guinea among others, who’s brought in to buy it? Why, another managerially-troubled bank, PNC. Which was subject to Fed no-acquisition orders throughout 2003. Seems like a bad fit...

  Speaking of bad fits, it’s more than a little ironic that the first cross-industry merger permitted by the Gramm-Leach-Bliley Act, Charles Schwab’s acquisition of U.S. Trust, is now reportedly coming apart.

July 12, 2004

   Better late than never, we suppose: after Inner City Press requested under FOIA the withheld portions of Royal Bank of Scotland’s list of funded subprime lenders, the Fed asked RBS to "reconsider" its withholding. Lo and behold on July 9, a longer version arrived, this time listing the following subprime lenders with which RBS does business:

Saxon Mortgage, Inc.; Aames Capital Corp.; Ameriquest Mortgage Company; Argent Mortgage Company; Asset-Backed Funding Corp; BofA, CDC Mortgage Capital; Centex Home Equity Company; CitiFinancial Mortgage Company; Clearwing Capital LLC; Credit Based Asset Servicing and Securitization, LLC; Delta Financial Corporation; Equifirst; Equity One, Inc.; Finance America, LLC; First Franklin; GMAC; Green Tree Investment Holdings II, LLC; Long Beach Acceptance Corporation; Long Beach Mortgage Company; NovaStar Financial, Inc., Option One Mortgage Corporation; Countrywide Correspondent Lending, Fremont Investment & Loan; Washington Mutual Bank; Residential Funding Corporation, Truman Capital Investment Fund LP, etc...

  We've put in a sixth comment on RBS - Charter One; we'll have more, shortly, on SunTrust, Wachovia, and others... 

July 5, 2004

...That Bill Harrison was willing, as reported, to pay $7 billion to keep his job for two years is sad, laughable, and outrageous. This reaction from our favorite in-Chase correspondent:

Subj: Surfacing again

Date: 7/1/04 8:44:07 AM Eastern Daylight Time

From: [Our favorite in-Chase correspondent]

To: ChaseWatch [at] innercitypress.org

Pip pip from your velvet friend. I noticed the comment on the $7 billion hole in

the JPM piggy-bank... $7 billion to keep Harrison? I mean, $500 million to buy Boisi was bad enough, but even if Bill followed my suggestion of just sitting quietly in the executive washroom all day and flushing $100 bills down the john, I don't think he could get through that much money in two years. Especially since he would probably have to be reminded how a john works, bless his little halfwit heart.

You may not have noticed in all the brouhaha about BancOne, but JPMorgan are

quietly ending their outsourcing arrangements with IBM. There was a great deal of trumpeting about the signing of this pact in January 2003 (and some redundancies, and a great deal of time, effort and consultants' expenses, although there was less trumpeting about those)

Now they've decided to bring it all back in-house. No doubt involving some redundancies, and a great deal of time, effort and consultants' expenses...oh, dear, am I repeating myself? Sorry. Sometimes following JPM's management decisions is like being in Groundhog Day (except without the part about learning from one's past mistakes). Wonder how much investment banking business they'll be getting from the Big Blue in future? Not $7 billion worth, I'd bet. Yee-ha for corporate planning!

   Welcome back... In an interesting twist, subprimer National City -- funder of at least four large payday lenders, owner of nationwide subprime mortgage lender First Franklin -- has directed its just-acquired subsidiary Provident Financial Group to sell its subprime residential mortgage assets. Lehman Brothers, itself a subprime securitizer and originator, has been signed up for the job...  There's an update on Huntington-Unizan in this week's ICP Federal Reserve Report. Until next time, for or with more information, contact us.

June 28, 2004

    Back on May 10, SunTrust announced a proposal to acquire National Commerce Financial, for $7 billion. (Wachovia's $14 billion bid for SouthTrust has, in the view of the financial press at least, made SunTrust's less important). But on May 17, ICP submitted a comment to the Federal Reserve, detailing numerous connections between SunTrust and high-cost lenders like pawnshops and car title lenders. SunTrust claimed, in a number of places, that it would be addressing this issue when it submitted its application to the Federal Reserve. Last week ICP received a copy of the application - and the issue is not addressed. How this helps SunTrust is unclear.  ICP has now submitted additional information at this time, reiterating its request for a hearing, an extension of the comment period, and that SunTrust's applications be denied.

  ICP's first submission showed SunTrust's relationships with a number of fringe finance institutions, including so-called auto title lenders, a/k/a title pawns. Now, given SunTrust's deafening silence on this issue that the FRB has already publicly acknowledged is relevant to review of merger applications under the BHC Act (for example, in the North Fork - GreenPoint proceeding, in which North Fork is represented by the same counsel as SunTrust), ICP is submitting herewith evidence of these further connections:

a Georgia UCC filing, dated November 8, 2002, showing SunTrust's relationship with Instant Cash Loans on Car Titles, Inc., of Jonesboro, Georgia;

a Georgia UCC filing, dated November 4, 2003, showing SunTrust's relationship with Cash Loans of Stone Mountain, Inc., of Stone Mountain, Georgia;

a Georgia UCC filing, dated November 4, 2003, showing SunTrust's relationship with Cash Loans of Marietta, Inc., of Marietta, Georgia;

a Florida UCC filing, dated June 21, 2002, showing SunTrust's relationship with AAA Cash Fast of Sarasota, Florida;

a South Carolina UCC filing, dated November 24, 2003, showing NCF's Central Carolina Banks' relationship with South Carolina Title Loan Company of Greenville, SC;

a North Carolina UCC filing, dated November 24, 2003, showing NCF's Central Carolina Banks' relationship with National Jewelry & Pawn, Inc., of Durham, NC;

a North Carolina UCC filing, dated July 17, 2003, showing NCF's Central Carolina Banks' relationship with North Kerr Pawn, of Wilmington, NC;

a North Carolina UCC filing, dated April 12, 2004, showing NCF's Central Carolina Banks' relationship with Instant Cash Machines, Inc., of Kernersville, NC; and

a North Carolina UCC filing, dated January 2, 2004, showing NCF's Central Carolina Banks' relationship with Ash-Cash, Inc., of Raleigh, NC.

...Mortgage lending ("HMDA") data reported for 2002 show that SunTrust Bank and SunTrust Mortgage, Inc. disproportionately exclude and deny African Americans and, where applicable, Latinos. ICP's review has continued, finding that SunTrust Mortgage, Inc. has a less-than-credible zero percent denial rate in many MSAs (leading to a presumption of HMDA- and ECOA-violation). For example, for conventional home purchase loans in 2002 in the Florence, Alabama Metropolitan Statistical Area (MSA), SunTrust Mortgage reported 100% approval rates for whites and African Americans. Meanwhile, SunTrust Banks denied the applications of African Americans 6.9 times more frequently than whites. (Note that SunTrust Banks received a "Low Satisfactory" rating on the lending test in Alabama, as recited in the Application).

  In the Gainesville, Florida MSA in 2002 for conventional home purchase loans, SunTrust Mortgage reported 100% approval rates for African Americans and whites. Meanwhile, SunTrust Banks denied the applications of Latinos 5.95 times more frequently than whites. SunTrust must explain these disparities, and the less-than-credible 100% approval rates of SunTrust Mortgage, as related to compliance with HMDA (which requires reporting of denials) and ECOA (which requires the provision of notices of adverse action). ICP is requesting a hearing on these issues as well; ICP's hearing request should be granted.

  See also, "North Carolina Lawmakers Take Aim at Payouts for Executives Ousted in Mergers," Durham Herald-Sun, June 16, 2004, reporting that

seven National Commerce Financial executives will share golden parachutes worth $ 17 million in severance pay when the merger becomes effective -- even if they don't lose their jobs. The executives also will receive immediate vesting in stock options potentially worth tens of millions more, as well as unspecified retention bonuses of SunTrust stock.

NCF Chief Executive William R. Reed stands to receive at least $ 2.5 million, while chief operating officer Richard Furr, who's based in Durham, and chief credit officer J. Scott Edwards could receive more than $ 2 million apiece... Federal tax law also penalizes executives and their companies for "excessive golden parachutes." If change-in-control payments are more than three times greater than the executive's average compensation over the past five years, the executive must pay excise taxes and the company loses its federal tax deduction over a certain level.

According to NCF's regulatory filing, the company will reimburse its executives if their golden parachutes incur federal excise taxes.

An NCF spokeswoman declined to discuss the specifics of the bank's golden parachutes. The company doesn't discuss employee contracts, she said...

   Nor at JP Morgan Chase, where it is reported that Wild Bill Harrison burned $7 billion in shareholders' money simply in order to hold onto his job for an extra two years...

June 21, 2004

   BNP Paribas has admitted its business relations with Household, CitiFinancial, and AIG's American General, which was recently subject to an enforcement action by state authorities in New Jersey. BNP is also embroiled in the Iraq Oil-For-Food scandal, as detailed in ICP's Finance Watch / Anti-Money Laundering Report.

   Recently at Pennsylvania Station, it seems that every surface is covered with an annoying ad by Royal Bank of Scotland. "Less talk. More action," and variations thereon. What any of it has to do with banking, we're not sure. A more accurate one, © ICP 2004: "Less cred, more Shred."

June 18, 2004

   On June 16, Huntington Bancshares and Unizan put out a press release announcing "that the closing of their merger will likely be delayed beyond the early July targeted closing date. The Federal Reserve Board has informed Huntington that it is extending its review period to coordinate further with the staff of the Securities and Exchange Commission regarding the SEC's ongoing formal investigation of Huntington and to complete its review of the Community Reinvestment Act aspects of the merger."

   Well that's interesting. Below in this Report are summaries of the four comments that ICP has submitted opposing Huntington's application, and replying to Huntington's purported responses. These responses, by Huntington's outside counsel Richard K. Kim of Wachtell, Lipton, Rosen & Katz, chose to attack ICP rather than respond to the issues raised. These includes mortgage lending disparities, branch closures as much as ten miles away from the "receiving" branch, and Huntington's funding and enabling of high-cost car title lenders, pawnshops and other purveyors of predatory fringe finance. Ironically, the responses called these issues "formulaic" -- and now they've resulted, by the banks' own statement, in delay of the proposed merger. On the other issue, Wachtell's Kim's response said "ICP quotes two newspaper articles from June 2003 regarding an investigation initiated by the SEC. Huntington has fully cooperated with the SEC in connection with the investigation. It is difficult to see what relevance these articles have to the Merger." So -- if the SEC investigations were and are irrelevant, the delay is based entirely on CRA, right? We'll see... Until next time, for or with more information, contact us.

June 16-17, 2004

   After 5 p.m. on June 16, the Federal Reserve announced it had approved the application by Regions Financial to acquire Union Planters. Inner City Press / Fair Finance Watch challenged the deal beginning in March, on grounds of redlining, predatory lending and support of high-cost car title lenders, including one that was, based on public records, credibly connected to organized crime. After substantially more inquiry and delay than Regions and Union Planters expected, the Fed has approved the merger. However, the Fed's order goes out of its way to note disparities in Regions' mortgage lending to African Americans, in the markets ICP commented on, particularly Atlanta. The Fed says it expects Regions to do better, in lending to African Americans, and that it will be tracking the results of Regions, Regions Mortgage Inc. (RMI) and Regions' subprime unit, EquiFirst. ICP will be watchdogging these as well -- and, equally important, the predatory car title lending connections, including the organized crime connections that the Fed sidestepped by claiming the connections date from the 1970s (so does CRA, by the way). Here are quotes from pertinent portions of the Federal Reserve's order, following by ICP's annotations and commentary:

  The Fed states, footnote 36 and accompanying text, that ICP

"compared 2002 HMDA data reported for RMI and EquiFirst in the following MSAs: Atlanta, Birmingham, Montgomery, New Orleans, Memphis, and Nashville. The commenter asserted that RMI originated mortgage loans to white borrowers in greater volume and with greater frequency than to African-American borrowers in each MSA during 2002. The commenter also made the same allegations about Hispanic borrowers in the Orlando MSA. In addition, this commenter stated that EquiFirst originated a larger number of 'higher cost' mortgage loans to minority borrowers than to white borrowers.... HMDA data for 2002 indicate that in most of the MSAs reviewed, the number of HMDA-reportable loans originated by the Regions Prime Lenders to African Americans as a percentage of their total HMDA lending was lower than the percentage for aggregate lenders. These data also show a more pronounced disparity between the proportion of loans originated by the Regions Prime Lenders to African Americans in the Atlanta MSA and the proportion of loans originated by aggregate lenders. African Americans comprise almost 30 percent of the population in the Atlanta MSA, and the percentage of applications received by the Regions Prime Lenders from African Americans was significantly lower than the percentage for aggregate lenders."

   ICP note: ICP's analysis was substantially upheld by the Fed, which found that "in most of the MSAs reviewed, the number of HMDA-reportable loans originated by the Regions Prime Lenders to African Americans as a percentage of their total HMDA lending was lower than the percentage for aggregate lenders." So what's the remedy? The Fed's Order says:

"The Board expects that Regions Bank, including RMI, will continue to take steps to improve its mortgage lending performance to African-American borrowers, particularly in the Atlanta MSA. The Federal Reserve System will monitor and evaluate the performance of Regions Bank as part of the supervisory process, including assessments of this performance in subsequent consumer compliance examinations."

  Regarding Regions' subprime lender EquiFirst, the Fed says, in footnote 35 that Regions

"represented that the brokers in the EquiFirst network offer their clients a variety of prime and subprime mortgage loan products from EquiFirst and other mortgage lenders. In addition, Regions noted that the independent mortgage brokers generally provide their customers with options on available mortgage loan products, including the type of products (prime or subprime)and the provider (EquiFirst or another lender).In particular, Regions represented that EquiFirst does not require its brokers to offer EquiFirst products exclusively."

   There's a problem with this analysis: just because the brokers EquiFirst does business with are not exclusive to EquiFirst does NOT mean that EquiFirst is not involved in violations of the Fair Housing Act and Equal Credit Opportunity Act. The Department of Justice's fair lending enforcement action against Long Beach is directly on point. Apparently, the Fed lags years behind other law enforcers in its acceptance of disparate treatment and disparate impact fair lending legal theory.

  On payday and car title lending, which ICP raised in detail, the Fed in footnote 24 says:

"This commenter also expressed concern about Regions Bank and a UPB-NA subsidiary allegedly financing payday and car-title lending companies. Regions responded that Regions Bank and Union Planters have depository relationships with, and provide warehouse credit facilities to, entities engaged in payday and car-title lending. These payday and car-title lenders are licensed by the states where they operate and are subject to applicable state law. Regions stated that neither it nor Union Planters plays any role in the lending practices or credit review processes of their payday and car-title lender customers. The record in this case does not indicate that Regions, Union Planters, or any direct or indirect subsidiary of either organization engages in payday or car-title lending activities directly or through agency arrangements."

ICP note: it's immaterial, whether Regions or Union Planters is MAKING the car title loans, or lending to the car title lender: either way, the bank bears responsibility. Particularly laughable (and troubling) is the Fed's footnote 20, reciting that ICP

"asserted that a UPB-NA subsidiary has originated loans to a company that is controlled by an individual with alleged connections to organized crime. This assertion was based on allegations in press reports from 1999 and 2000 that cite determinations in 1980 and 1992 by the New Jersey Casino Control Commission. The allegations appear to involve the individual ’s business transactions and activities during the 1960s and 1970s. The Board has carefully reviewed these allegations in light of all facts of record, including relevant reports of examination by federal regulators, and has consulted the OCC concerning the relationship between the UPB-NA subsidiary and the company involved."

  So as long as Mob connections were (or began) in the 1970s, it's okay? What did the OCC say? Developing... The Fed's Order is available in PDF Adobe format, here. Until next time, for or with more information, contact us.

June 14, 2004

   In the Regions - Union Planters proceeding, Regions' counsel Sullivan & Cromwell on June 9 answered another round of questions from the Federal Reserve. The questions concerned Regions' subprime unit EquiFirst: "provide criteria EquiFirst uses to select brokers in its wholesale mortgage broker channel;" "[d]escribe efforts by EquiFirst to ensure that prospective borrowers, including minority individuals, are not disproportionately or inappropriately targeted for subprime loans [including] any efforts in developing broker channels to obtain a geographic mix or any other type of mix or any other efforts to obtain a 'balanced market' through these broker channels." Regions' answer to the discriminatory targeting question is particularly weak, and does not address the "balanced market" portion of the question at all...

   From the Department of Timing-is-everything: it's almost sad, how New York Community Bancorp, which has resisted making 1-4 family home loans in communities of color, all the way back to its days as Queens County Savings, now pleads to find a buyer and can't find one. It's rumored Ficalora will try to sell it for less than its market value, perhaps to trigger a golden parachute. Roslyn's ex-CEO Mancino, it's said, loves nothing more than playing golf (while shareholders' value burns).  And so it goes, on the Bank Beat... Until next time, for or with more information, contact us.

June 7, 2004

   ICP has submitted supplemental comments on RBS - Charter One (and see, "RBS 'Excludes and Denies' Black Americans," by Conal Walsh, The Observer (London), June 6, 2004), on BNP - Community First, and on Huntington-Unizan:

June 7, 2004

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: Fourth Comment -- demanding consistency among FRS Regions regarding Huntington National Bank's support of pawnshops and other high-cost fringe financiers -- in Opposition to the pending applications by Huntington Bancshares, Inc. and its affiliates to acquire Unizan Financial Corp. and Unizan Bank, N.A

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is ICP's fourth comment, in extraordinary circumstances, opposing the applications by Huntington Bancshares, Inc. and its affiliates ("Huntington") to acquire Unizan Financial Corp. and Unizan Bank, N.A..

   A major purpose of this submission is to put into the record before the FRB, in extraordinary circumstances, the pertinent portion of a recent (June 2) submission by an applicant in the FRS' Second District, North Fork Bancorporation, to which following an ICP submission of a UCC filing regarding a pawnshop, the FRS asked on May 20:

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that North Fork or GreenPoint or any of their affiliates have with any subprime lenders (including providers of non-traditional banking products, such as check cashers, title lenders, pawn shops, or rent-to-own businesses): (i) identify the relevant business parties and (ii) describe the nature of the business relationships... Additionally, to the extend not already covered in your May 10, 2004 response to the comments of the Inner City Press Community on the Move & Fair Finance Watch ('the May 10 response'), describe any due diligence that North Fork or GreenPoint typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to North Fork or GreenPoint entering into these business relationships, including... (c ) any monitoring or other ongoing procedures North Fork or GreenPoint has adopted to access compliance with these laws. Provide a copy of such procedures that are used to determine whether third party originators are engaged in, or facilitating, abusive and/or predatory lending practices."

  Nearly a month ago, ICP submitted to the Federal Reserve Bank of Cleveland, to the Board and to Huntington's counsel, documentation of, for example, an Ohio UCC filing showing Huntington National Bank's relationship with Uncle Sam's Pawn Shop, Inc. of Columbus, Ohio; an Ohio UCC filing showing Huntington National Bank's relationship with AA Pawn Shop, LCC of Lancaster, Ohio; a West Virginia UCC filing dated October 7, 2002 showing Huntington National Bank's relationship with Carl's Pawn Shop, Inc. of Parkersburg, West Virginia; a Florida UCC filing showing Huntington National Bank's relationship with Paradise Pawn, Inc. of Melbourne, Florida; a Florida UCC filing showing Huntington National Bank's relationship withQuick - Cash Pawn Shop East, Inc. of Tampa, Florida; a New Jersey UCC filing dated October 7, 2002 showing Huntington National Bank's relationship with Express Check Cashing, Inc.; etc.

  It seems clear that a similar question must be posed to Huntington, including for the FRS' own consistency between regions. Specifically, this question:

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that Huntington or Unizan or any of their affiliates have with any subprime lenders (including providers of non-traditional banking products, such as check cashers, title lenders, pawn shops, or rent-to-own businesses): (i) identify the relevant business parties and (ii) describe the nature of the business relationships... Additionally, to the extend not already covered in your responses to the comments of the Inner City Press Community on the Move & Fair Finance Watch, describe any due diligence that Huntington or Unizan typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to North Fork or GreenPoint entering into these business relationships, including... (c ) any monitoring or other ongoing procedures Huntington or Unizan has adopted to access compliance with these laws. Provide a copy of such procedures that are used to determine whether third party originators are engaged in, or facilitating, abusive and/or predatory lending practices."

  ICP timely submitted documents and descriptions concerning two particularly egregious (and relevant) situations that were brought to ICP's attention on April 27. Huntington's outside counsel's May 10 letter purported to address these exhibits, including sworn deposition testimony, with a single sentence, that since Huntington is foreclosing, there must be nothing in the matter (or exhibits) relevant to Huntington's CRA, fair lending and consumer compliance record. (This is not true; ICP directed your agency to the previously-submitted sworn deposition of Huntington's Trish Westbrook, page 44, lines 8-11). Last week, ICP received word from both of the complainants that they are being retalitiated against, for having their issues put before Huntington's and Unizan's regulators. This is troubling, and your agency should inquire into this, based on the information including contact information ICP has already submitted.

  Huntington's counsel's May 27 submission, listing nine prospective branch closures that would result if these applications were approved, states that "none of the branches are located in low- or moderate-income areas." What must be considered here are prospective effects on the convenience and needs of the communities to be served; one of these branch closings is over 10 miles from the "receiving" branch, another is 6.2 miles, another 5.3 miles, etc.. The "10 mile" branch, 8 N. Main Street, Utica, OH, is in a census tract (7547.00) with median income of $46,000; the "six mile" branch, 401 Main Street, Duncan Falls, OH, is in a census tract (9826.00) with median income of $40,000, below 100% of area median (the type of area that other applicants, including with regard to Ohio, are claiming is CRA relevant, including at the FRS public meetings held April 15 and April 23, 2004). ICP reiterates its request for a hearing on Huntington.

   If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director, Inner City Press / Fair Finance Watch

cc: Huntington Bancshares, c/o Richard K. Kim, Esq., Wachtel, Lipton, Rosen & Katz

    Until next time, for or with more information, contact us.

June 1, 2004

   ICP has filed a second round of comments on RBS Citizens - Charter One, including numerous consumer complaints against Citizens Bank and its subprime partners, from Massachusetts and Michigan, click here to view. And now, long after Huntington said it would have its Fed approval, here's the list of nine branches it proposes to close (seven are Unizan's, Alexandria and Centerville are HNB's):

8 North Main Street, Utica, Ohio 43088 (nearest other branch is 10.8 miles away)); 401 Main Street, Duncan Falls, OH 43734 (nearest other branches is 6.2 miles away); 4 West Main Street, Alexandria, OH 43001 (nearest other branch is 5.3 miles away); 5665 North Hamilton Road, Columbus, OH 43215 (nearest other branch is 1.7 miles away); 1035 Miamisburg-Centerville Road, Centerville, OH; 4311 N. High Street, Columbus OH; 66 S. 3rd Street, Columbus, OH; 973 N. 21st Street, Newark, Ohio; 415 W. National Road, Englewood, OH, 45322 (nearest other branch 1.3 miles away). Not pretty; ICP will be commenting in more detail.

   Will the Fed not act on Union Planters' funding of car title lender affiliated with organized crime? With the issues timely raised about North Fork's CEO, John "Pawn Shop" Kanas? Stay tuned... ICP has also filed a second comment on BNP Paribas - Community First, including showing BNP Paribas Securities' enabling of subprime lenders including New Century, click here to view.  For or with more information, contact us.

May 24, 2004

  As we go to press, rumor swirl around WaMu, predicting its acquisition, as a ready-made almost-nationwide franchise, by Wachovia or Citigroup or HSBC (following RBS-Charter One). Developing...

   A rumor in the UK has Barclay's taking over Standard Chartered, whose 13% shareholder Tan Sri Khoo Puat died in February, putting in play the "developing world" bank StanChart... Some in the British press are now warming up to Bill Aldinger, it's hard to see why (except to note that the Mr. Smithers character on The Simpsons™ is popular, too)... For example, The Times of London last week wrote: " The 57-year-old chief also defended Household's interest rates. One of its businesses makes short-term loans to consumers who are expecting a tax rebate. The loans, which are usually only for a couple of months, attract an interest rate of up to 100 per cent. Mr. Aldinger said that the company provided a service to those who could not get loans from anywhere else. Of the criticisms, he said: "My parents were frequent Household customers. They did not have a bank account, they did not ever visit a bank branch."

  This "it was good enough for my pa" line is also the one taken by Citigroup's Chuck Prince. Somewhere a media relations firm is cooking all this stuff up...

  The FT quoted Aldinger that "When I meet customers they are invariably grateful for the availability of credit when they couldn't get it anywhere else." So who were and are those customers who've sued Household for predatory lending? Or does Aldo have a different definition for "invariably"? Look out before you ask: HSBC's Household has recently sued two of its employees for whistleblowing.   And it wants WaMu?

  The smoke and mirrors won't stop: fresh of buying William Daley to polish its Chicago face, JP Morgan Chase made noise last week that it'll sponsor the "opening of Millennium Park in downtown Chicago July 16-18." There will be tents for JPM-funded payday lenders, and pawn and gun shops, maybe even car title loans -- all courtesy of JPMorgan Chase...

  AIG, the company that clung to an insider-heavy board of directors, and tried most recently to get a shareholders' resolution about its predatory lending knocked off the proxy (apparently using the argument that predatory lending is a part of AIG's "ordinary business") - anyway, now AIG's mausoleum king, Hammered Hank Greenberg, is speechifying against corporate transparency. Of the bipartisan Sarbanes-Oxley bill, Greenberg complained last week that "Some of us have two jobs - the regulatory burden during the day and running the company at night." He also promised (or threatened) that "We're on the hunt," Greenberg said at the company's annual shareholder meeting. "There will be continued consolidation in our industry, both domestic and foreign. We will not overlook that opportunity." Those deals must be done at midnight, since the entire day is spent complying with Sarbanes-Oxley...

  Insider annals, from last week's correspondent:

Subj: Re: citifinancial [Second dispatch]

To: CitiWatch [at] innercitypress.org

... Marge Magner was integral in training sessions, manager orientations, etc. And yes, there'd be plenty of times when she would facilitate the meeting as well. If not with the actual training materials, but with the evangelical punctuations that she, KC Mead, Bill Clements and Bill Starkey are famous for! I was there for 14 years., so I was in just as Marge was gaining a foothold to her status.. Believe me, every utterance in "rote" training programs were cleared by Marge... Willumstadt was very visible at annual meetings, "kick off meetings" of various kinds....However, he was never as outwardly, warmly endearing for the masses as was the outward facade of Marge, so he was not quite the PR figure that she was...

   For or with more information, contact us.

May 17, 2004

    On May 14, ICP filed comments with the Federal Reserve Bank of San Francisco -- BNP Paribas, as it turns out, funds such fringe finance players as pawnshops and check cashiers, even gun repair shops, through its Bank of the West unit, which is applying to buy Community First National Bank and expand into ten new states. Click here for ICP's new BNP Paribas Watch. On May 17, ICP commented to the Federal Reserve on SunTrust's week-old proposal to acquire National Commerce Financial Corp.. SunTrust, it emerges, is a major funder of high-cost auto title lenders, along with pawn and gun shops, in Alabama, Georgia, Virginia, Maryland and Tennessee. ICP has compiled a list, several dozen long -- click here for ICP's new SunTrust Watch.

   An update:  Huntington National Bank, represented mechanically by Wachtell Lipton, has responded with bombast to comments about Huntington's lending, including troubling sworn testimony about bait and switch at Huntington's mortgage company, and now, evidence that Huntington supports high-cost fringe finance, within and outside of its CRA assessment area. From ICP's most recent submission, putting into the record before the FRB evidence of Huntington National Bank's support of pawnshops, check cashiers and other providers of high-cost fringe finance. The FRB has been asking applicants questions about such matters, and the applicants have been providing, including to the public, some responsive information -- no less should be demanded of Huntington, particularly in light of its non-responsive submission of May 5 and 10, 2004. ICP has received Huntington's outside counsel's two purported responses, dated May 5 and May 10, as well as Huntington's May 10 responses to the FRB's (first) set of questions.

ICP has now submitted:

--an Ohio UCC filing showing Huntington National Bank's relationship with Uncle Sam's Pawn Shop, Inc. of Columbus, Ohio -- note that the relationship runs at least through October 8, 2007;

--an Ohio UCC filing showing Huntington National Bank's relationship with AA Pawn Shop, LCC of Lancaster, Ohio -- note that the relationship runs at least through June 5, 2005;

--a West Virginia UCC filing dated October 7, 2002 showing Huntington National Bank's relationship with Carl's Pawn Shop, Inc. of Parkersburg, West Virginia;

--a Florida UCC filing showing Huntington National Bank's relationship with Paradise Pawn, Inc. of Melbourne, Florida;

--a Florida UCC filing showing Huntington National Bank's relationship with Quick - Cash Pawn Shop East, Inc. of Tampa, Florida; --a New Jersey UCC filing dated October 7, 2002 showing Huntington National Bank's relationship with Express Check Cashing, Inc.; etc. {FN: Also, an Ohio UCC filing dated May 22, 2002 showing Unizan Bank, National Association's relationship with Gregg's Pawnshop, Inc. of Canton, Ohio -- note that the relationship runs at least through May 22, 2007; --a Michigan UCC filing dated December 5, 2003 showing Huntington National Bank's relationship with Gary's Guns, Inc. of Muskegon, Michigan; --a West Virginia UCC filing showing Huntington National Bank's relationship with M&M Gun and Tackle of West Union, West Virginia; --a Florida UCC filing showing Huntington National Bank's relationship with Addison's Gun Shop, Inc. of Maitland, Florida; --an Ohio UCC filing showing Huntington National Bank's relationship with Peterson's Gun Shop of Sharonville, Ohio.]

Given Huntington's disproportionate exclusion of lower income neighborhoods and communities of color from its offers of normal interest rate credit, Huntington's funding of pawn shops, check cashiers and other providers of high-cost fringe finance is particularly troubling, and predatory.

As to Huntington's outside counsel's non-responsive May 5 submission, it is ironic that while the Resp. argues, at 2, that "the identification of specific potential branch closures in this case would be extremely premature as the merger has not yet received the necessary regulatory and shareholder approvals," the Associated Press of April 26 quoted Huntington spokeswoman Jeri Grier-Ball that "Huntington plans to announce which branches would close by the end of May." Emphasis added. Again, this make it even clearer that Huntington's goal it is avoid any public comment, including to your agency, on the foreseeable impacts of these branch closings that would result from this proposed merger. Huntington has already stated it would close eight Unizan, and two Huntington, branches -- to have this figure, it knows which branches. But it wants to withhold the information from the public until the end of May. This is only acceptable if your agency extends the comment period until the end of May.

Huntington's outside counsel is being disingenuous in stating, Resp. at 2, that "the Federal Reserve has previously recognized that an application filed under the BHC Act is not the appropriate forum to consider branch closings." As you know, Shawn McNulty of FRB staff on April 29 -- that is, before the above-quoted Resp. by Huntington's outside counsel) specifically asked Huntington, in the context of this BHC Act application, for information about, including the locations of, the projected branch closures. Huntington has demanded confidential treatment for its response, which should not be granted... The exhibits ICP has submitted show Huntington funding pawnshops and other providers of high cost fringe finance. It's time for the FRB to act, first by asking questions, then by holding the timely requested hearing, then by, on the current record, denying Huntington's applications, and initiating appropriate enforcement actions or referrals.

    The same is true re North Fork - Greenpoint, which is updated in this week's ICP Bronx Report.

May 10, 2004

   Over the weekend, SunTrust announced a proposal to buy National Commerce Financial Corp., for $7 billion. Just because bank executives have become desperate to merge doesn't mean it's good for consumers and communities, nor that the regulators should approve it. Mortgage lending (HMDA) data reported for 2002 show that SunTrust Bank and SunTrust Mortgage, Inc. disproportionately exclude and deny African Americans and, where applicable, Latinos. For example, for conventional home purchase loans in 2002 in the Nashville Metropolitan Statistical Area (MSA), SunTrust Mortgage denied African Americans' applications 4.82 times more frequently than those of whites. Even combined with SunTrust Bank (this cumulation will be referred to hereinbelow as "SunTrust"), SunTrust denied African Americans' applications 3.20 times more frequently than those of whites.

  In the Norfolk, Virginia MSA in 2002, SunTrust denied African Americans' applications 3.92 times more frequently than those of whites. In the Orlando, Florida MSA in 2002, SunTrust denied Latinos' applications 2.95 times more frequently than those of whites. In the Jacksonville, Florida MSA in 2002, SunTrust denied African Americans' applications 2.54 times more frequently than those of whites  In the Knoxville, Tennessee MSA in 2002, SunTrust denied African Americans' applications 5.7 times more frequently than those of whites.

  These are serious matters, which, along with the foreseeable branch closings and reductions in service and competition, must be inquired into...,

* * *

   On May 4, it was leaked then announced that Royal Bank of Scotland proposes to acquire Charter One Financial, for $10.5 billion. The spinning was interesting, including Fred the Shred projecting a "gross" 1000 lay-offs, Larry Fish bragging in a 12th story conference room that Providence will do well (nothing was said of Cleveland). It was opined that the supposed new era in corporate governance "forced" to Koch family to sell, since they wouldn't want a non-family member as chairman or CEO (unless, apparently, it's Fred the Shred calling the shots).

  Unbeknownst to many, RBS' Citizens Mortgage Corporation has loan origination partnerships with subprime lenders, including Option One, Fremont Investment and Loan, and the KeyCorp unit known as Champion ("when you bank says no, Champion says.. yes," as the TV ads have it). Additionally, RBS owns the investment bank Greenwich Capital Markets, which securitizes subprime loans for such lenders as Aames, Accredited, and Delta (including while it was being sued for predatory lending). RBS has been defensive and arrogant about these connections with questionable subprime lenders; now RBS wants to more than double its size in the U.S..

  ICP / Fair Finance Watch sprung into action, preparing a detailed filing and submitting it, on May 10, to federal and state regulators, and to RBS' "home country" regulator, the FSA in London. Click here to view.

In a letter to the Federal Reserve dated April 30, received by ICP last week, JPM Chase and Bank One purport to respond to testimony given at the public meetings. Amazingly, they entirely avoid the payday lending, pawnshop, check cashier and other fringe finance issues. It's both pathetic and arrogant, particularly when contrasted to CEO Harrison's recent letter to environmental groups. He "no commented" payday lending, and what the two banks actually do, to residents of low and moderate income areas, including in their two headquarters cities. For shame...

May 3, 2004

   ICP has submitted supplemental comments on National City - Provident and Regions - Union Planters, based on new information sent to ICP last week (see this week's CRA Report for more). ICP also submitted a second comment, timely to the OCC, about Huntington - Unizan:

   ICP submitted its first timely comment on April 23, as acknowledged by the Cleveland Fed's Banking Supervisor Cindy C. West's letter dated April 23, faxed to ICP by Mark Dobbins on April 26. On April 27, ICP was contacted by a number of individuals with first-hand, adverse information relevant to Huntington's Unizan proposal; some of this information is annexed hereto for inclusion in the record, and for further inquiry by the FRS. Also on April 27, the OCC informed ICP that its comment period on the Bank Merger Act proposal was still open -- thus, the FRB accepting into the record this information would represent consistency with its sister-agency the OCC, regulatory streamlining, and would not prejudice the banks. Even if it did, that would be outweighed by the relevance of the just-arising information, and by Huntington's spokeswoman Jeri Grier-Ball's statement, quoted in the Associated Press of April 26, that "Huntington plans to announce which branches would close by the end of May." This make it even clearer that Huntington's goal it is avoid any public comment, including to the FRB, on the foreseeable impacts of these branch closings that would result from this proposed merger. Huntington has already stated it would close eight Unizan, and two Huntington, branches -- to have this figure, it knows which branches. But it wants to withhold the information from the public until the end of May. This is only acceptable if the FRB extends the comment period until the end of May. Huntington simply cannot claim to not yet know where the ten branches are; it has listed a date by which the information would be released, but tries to put the date after the comment period, and after it thinks it will have obtained action by the FRB on the proposal. This CANNOT be countenance - the list must be released, and ICP will comment thereon.

   In the interim, ICP is annexing hereto documents and descriptions concerning two particularly egregious (and relevant) situations that were brought to ICP's attention on April 27. ICP wishes to emphasize that these situations and exhibits are NOT being submission as individual consumer complaints, but rather as they reflect on the banks' managerial resources, and systemic maltreatment of customers.

   The first situation involves mortgage lending at Huntington, and an asserted bait-and-switch practice whereby loan application documents are retyped by Huntington staff and re-presented, for the first time, at closing, with for example PMI added, and interest rate higher. The documents make reference to an internal memorandum by Huntington's Barrie Christman, directing staff "to use our absolutely best effort on obtaining Private Mortgage Insurance and if we could not to charge the customer 3/8 increase in rate" -- the reference is to the sworn deposition of Huntington's Trish Westbrook, page 44, lines 8-11. The FRB claims to look into and crack down on indications of predatory lending and other consumer abuses. Well, the attached reflects bait-and-switch, changes of interest rate, forced PMI, etc.. Regarding of the location of the property, or the income of the application, bait and switch is a red flag of possible predatory lending, including conducted against other, lower-income (and less financially sophisticated) consumers. Based on the attached, the FRS should obtain additional information; the attached documents make it clear how to obtain such documents. Our hearing request is based on these documents as well; the documents also show a willingness to present relevant, first-hand testimony.

   The second situation involves not residential mortgages by business loans, in the first instance by Unizan Bank, N.A., but assertedly at the direction, impermissibly, of Huntington. It involves the mistreatment of a business that has been in Columbus for 48 years. It is indicative not only of managerial resources problems at the banks', but of the negative impacts on the convenience and needs of the communities to be served.

  ICP remains concerned with disparities in Huntington's lending, managerial issues raised by Huntington's auto lending and leasing and the accounting therefor, and also by the ten branches Huntington would close, and with the information contained herein and in the exhibits hereto.

   On all of these grounds,the requested hearing should be held, and Huntington's applications to acquire Unizan should not be approved. 

April 26, 2004

    Simultaneous with a second volley of exhibits submitted to the Fed on April 23, in connection with its Chicago hearing on JPM Chase - Bank One, ICP/Fair Finance Watch filed a timely challenge to applications by Huntington Bancshares to acquire Unizan Financial Corp.. (See below). Click here for ICP's report on the Citigroup annual shareholders' meeting held on April 20, and upcoming meetings re Wells and AIG. This week's CRA Report covers North Fork - GreenPoint, the FedWatch report contains, among other things, an update on Regions - Union Planters.  And,  for a CBS MarketWatch article on these (predatory lending) issues, click here.

   ICP's Huntington - Unizan comments use 2002 mortgage lending data to demonstrate that Huntington's bank and mortgage company disproportionately exclude African American and Latino applicants from their normal interest rate loans. ICP also requests an evidentiary hearing and extension of the comment period in light of Huntington's statement that it would close ten branches -- eight of Unizan's and two of its own -- while refusing to disclose which branches these are. ICP notes that the bank's chairman admits he would close eight Unizan branches, and two of Huntington's, but refuses to say which branches these are, simply so no one can comment on the foreseeable effect of the branch closures. Given the disparities in Huntington's lending, this is particularly troubling. The Fed should require the branch closing list to be disclosed.

   ICP has analyzed Huntington's mortgage lending in the most recent year for which Home Mortgage Disclosure Act is available: 2002. ICP has analyzed both Huntington Bank and Humtington Mortgage, together and separately, beginning in Cincinnati. In the Cincinnati Metropolitan Statistical Area (MSA) for conventional home purchase loans in 2002, Huntington (Bank and Mortgage added together) denied African Americans' applications 2.26 times more frequently than whites. Huntington's denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos. In the Cincinnati MSA in 2002, Huntington made 533 conventional home purchase loans to whites, and only four to Latinos and only 23 to African Americans. Within these three groups, 4.1% of Huntington's loans were to African Americans (and 0.7% were to Latinos). All lenders made 1306 such loans to African Americans, 146 to Latinos, and 18,572 to whites in this MSA in 2002. For these three groups, the industry aggregate made 6.5% of its loans to African Americans, and o.73% to Latinos. For Huntington, with its denial rate disparities, the figures were much lower: only 4.1% of loans to African Americans, and 0.7% to Latinos.

   Nor are Huntington's disparities with conventional home purchase loans made up for by its VA/FHA home purchase lending: for these loans, Huntington in 2002 in Cincinnati denied African Americans' applications a whopping 5.81 times more frequently than whites.

   This presumptively discriminatory pattern exists in Huntington's refinance and home improvement lending as well. Still in Cincinnati, Huntington in 2002 for refinance loans denied African Americans' applications 2.17 times more frequently than whites. For home improvement loans -- offered only by Huntington Bank and not Huntington Mortgage Company -- Huntington Bank denied African Americans' applications 2.61 times more frequently than whites.

   These presumptively discriminatory patterns exists in other communities "served" by Huntington. In the Cleveland MSA in 2002, Huntington denied the refinance applications of African-Americans 3.5 times more frequently than whites, and denied the VA/FHA home purchase loan applications of African Americans a whopping 9.27 times more frequently than whites. In the Detroit MSA in 2002, Huntington denied the refinance applications of African-Americans 3.48 times more frequently than whites. In the Columbus OH MSA in 2002, Huntington denied the refinance applications of Latinos 2.56 times more frequently than whites (while, using the methodology set forth above, making only 4.6% of its refinance loans to African Americans, a lower penetration than the aggregate's 5.4%). In the Dayton, Ohio, MSA, for conventional home purchase loans in 2002, Huntington denied African Americans' applications 3.31 times more frequently than whites. Huntington made no conventional home purchase loans to Latinos in Dayton in 2002 -- while other lenders made 87 such loans. Huntington is not a leader: it trails the pack.

    The same appears to be true in accounting and corporate governance. The Charleston (W.VA) Gazette of June 27, 2003, reported

The Securities and Exchange Commission launched a formal investigation in April, shortly after the Columbus-based bank company said it was restating its 2002 annual report and first-quarter 2003 financial statement.
The company said on April 16 that it was reclassifying its accounting for automobile leases. That change reduced its 2002 earnings by $ 24.6 million.
The SEC is also checking claims by a former employee about auto loan and lease origination fees and costs and some year-end reserves

   The American Banker of June 30, 2003, was more specific:

The probe began in April, after Huntington lowered its earnings for last year by $24.6 million. At the time it linked the move to a decision to start using the operating accounting method, instead of the direct financing one, for its $3.2 billion auto lease portfolio.
A month later it shifted about $900 million of the portfolio back to direct financing accounting. That decision was based on a change made by the Financial Accounting Standards Board Emerging Issues Task Force in the accounting rules for leases. The second reclassification resulted in another restatement, with Huntington increasing the 2002 earnings hit to $30 million but saying that first-quarter profits per share had come out a penny higher than previously stated.
On Thursday, Huntington disclosed that its board's risks and audit committee is conducting its own investigation. The panel has hired an outside counsel, who has hired independent accountants, the company said.

   These questions -- like the prospective of branch closing, and the presumptive discriminatory marketing and lending sketched above -- have not been resolved.

  ICP is also concerned with the adverse managerial issues raised by Huntington's auto lending and leasing and the accounting therefor, and also by the ten branches Huntington would close, the bank's refusal to disclose which branches these are (while counting on the comment period closing, and consummating the proposal "in July"), and the negative precedent set thereby. The Columbus Dispatch of April 16 reported that

Hoaglin also yesterday offered more details about Huntington's $587 million acquisition of Canton-based Unizan Financial Corp. Hoaglin said the deal, announced in January, is on track to close in July.

He told analysts that eight Unizan offices and two of Huntington's will close as part of the integration of the two banks. Huntington also plans to close a Unizan operations center in Zanesville and eliminate 290 of 770 jobs there, he said.
Huntington spokeswoman Jeri Grier-Ball said some of the affected Unizan employees might find new positions at Huntington. She declined to say which offices will close.

   This is unacceptable. While some banks try to say that they don't know their branch closing plans, Huntington's CEO has specifically stated, eight Unizan branches and two Huntington branches. The bank KNOWS which branches -- it simply "declines to say which offices" publicly, including so that no comment thereon is possible. The FRB must demand the branch closing list, and must release it to allow comment thereon. The comment period should be extended, explicitly for this reason. On the current record, the applications could not legitimately be approved, ICP's comments conclude.

  Again, click here for ICP's report on the Citigroup annual shareholders' meeting held on April 20, and upcoming meetings re Wells and AIG. This week's CRA Report covers North Fork - GreenPoint, the FedWatch report contains, among other things, an update on Regions - Union Planters.  And,  for a CBS MarketWatch article on these (predatory lending) issues, click here.

April 19, 2004

   It's the season for earnings and annual meetings. Pension funds are seeking to bounce some prominent insiders from off corporate boards. Smug dinosaurs like Sandy "Low-Tech" Weill, who pontificating April 14 at a love-fest at Cornell, said "I don't do e-mail and I think that turned out to be a good idea." Power corrupts -- and makes blind. Weill also said, of Citi's many scandals and fines, "I don't know what I did wrong." Then he hasn't been paying attention; he hasn't been listening. Further efforts in that regard will be made this week; we'll see.

   A non-Citi (but still predatory lending) related aside, about The World's Second (Class) Local Bank: last week HSBC announced that the Householder who has supervised HFC's controversial and much-sued tax Refund Anticipation Loans, Patrick Cozza, "will add responsibility for sharing best practices with HSBC Mexico" -- buenos dias, señor predator!

  The earnings of Union Planters were widely described as collapsing (the AP called it "plunging," down 45%). An update, then, on Regions - Union Planters: last week ICP received a partial copy of Regions' April 9 response to Federal Reserve questions of April 1, including about the two banks' relationships with payday and car title lenders. The banks responded that they've made a "good faith effort" to list all such connections -- but then ask the Fed to withhold the entirety of the list, which includes names that ICP has already identified, from publicly-available UCC filings. For shame...  ICP is pursuing the lists under FOIA and otherwise. 

April 12, 2004

   We follow up because we must. ICP/Fair Finance Watch has just submitted a supplemental comment on Regions - Union Planters, and to the CEO's of the banks, to make sure they're aware of the issues raised regarding UP's support to a reportedly Mafia-connection payday / car title lender. (The subtext here is, how low can you go?). A portion of the letter:

...ICP has received a copy of the banks' putative response, dated April 7: it is all of eight sentences, and does not mention, much less address, relevant issues timely raised by ICP, including Union Planters' support of payday and car title lenders, including one which is reportedly Mafia-connection (Alvin Malnik's Community Loans of America). It is amazing that Regions and Union Planters believe that response is not required on these issues. In order to make clear that the payday lending issues apply to Regions as acquirer, as well as to Union Planters as target, ICP is annexing hereto another sample UCC filing, from Georgia: Regions Bank supporting "Payday Rentals of Rinngold, Inc.". ICP has been assembling additional evidence, but wishes at this time, in the interest of the record being developed on this important issue, to highlight that Regions, like Union Planters, standardlessly supports payday / rental businesses. The reported Mafia connections of UP-supported Community Loans of America (see ICP's April 5 comments and exhibits) clearly militate for a second FRB Additional Information request, and for the requested hearing(s).

To be sure that the banks' senior management is aware of the issues raised, ICP [serves this on them and] again points to its previously submitted exhibits, and to, for example, The Oregonian of JUNE 24, 2000, "FIRM LINKED TO REPUTED MOB FIGURE GOT LOANS"

"Alvin Malnik, a Boca Raton, Fla., lawyer and investor, is the beneficiary of two trusts that hold 100 percent of the stock of Title Loans of America, the nation's largest title-lending chain, according to Don Tucker, a Title Loans lobbyist in Florida. The company is part of a burgeoning car-pawning business that has drawn fire nationally from consumer groups for charging interest rates as high as 300 percent.
"The New Jersey Casino Control Commission denied Malnik a casino license in 1980, citing, among other things, his long association with mob financier Meyer Lansky. The commission ruled that Malnik was "a person of unsuitable character and unsuitable reputation." And in 1993 the commission disciplined two Atlantic City casinos for allowing Malnik to set foot in them.... the New Jersey Casino Control Commission denied a license to two Malnik business associates in substantial part because of their association with Malnik. In doing so, the commission noted 'the evidence establishes that Mr. Malnik associated with persons in organized criminal activities, and that he himself participated in transactions that were clearly illegitimate and illegal.'"

See also, The Atlanta Journal and Constitution of October 5, 2000

Based in Dunwoody, Title Loans of America is one of the giants in auto title lending --- and its owner has been linked by the government to associations with the mob. The company's ownership came into question during a Fulton County civil suit. The action was brought by a woman whose husband borrowed $ 150 against the title of his 1979 Toyota Celica. He struggled with a repo man and was shot to death. According to 1997 court documents, Title Loans of America --- which owns hundreds of offices throughout the Southeast --- is owned by Alvin I. Malnik, a South Florida attorney. Malnik, 67, was a longtime associate of organized crime boss Meyer Lansky and other reputed mob members, according to the New Jersey Casino Control Commission. In 1980, the commission denied a casino permit to a company because of its association with Malnik. In 1993, New Jersey gaming authorities filed a complaint when Malnik and his guests stayed free at an Atlantic City casino hotel. It reiterated the 1980 conclusions.
"This commission," chairman Steve P. Perskie wrote in 1993, "finds Alvin I. Malnik to be a person of unsuitable character and unsuitable reputation. As to his character, the evidence establishes that Mr. Malnik associated with persons engaged in organized criminal activities, and that he himself participated in transactions that were clearly illegitimate and illegal."

  Again, as relates to the managerial resources factors that the FRB must consider, under the Bank Holding Company Act, this information has been published and made available in Union Planters' home state. See, e.g., The Tennessean of April 18, 1999:

a Miami-area man with ties to organized crime was interested enough in a similar type of small-loan business in Tennessee to open 20 stores here. Alvin Malnik of Boca Raton, Fla., a business associate of the late mobster Samuel Cohen, was getting half the profits from a string of auto title loan companies here, court documents show. Title loan lenders make small, short-term loans of up to $2,500 to customers who put up their car titles as collateral. The 30-day loans carry a maximum effective annual interest rate up to 264%.

  The banks' "response" refers to their April 2 submission -- but, as ICP has received this, most of that submission is being withheld. (ICP is contesting these withholdings under FOIA, today). The claim in the April 2 submission that Regions does not know about branch closings is not credible, given the public report (with the number 70) which ICP has already timely cited. The redaction of names in the exhibits that have been provided do no comport with FOIA, in that those names are and must be already publicly available (for example, the same of four branches, and in real estate records and other public filings).

  This letter has been filed, along with the Fed, with Regions's Carl E. Jones, Jr., and Union Planters' Jackson W. Moore, and the banking commissioners in Tennessee and Alabama. They sure can't say they weren't informed. Developing...

    Who benefits from the lack of follow-up? Citigroup, of course. Two examples from last week: on April 7, Chuck Prince, Marge Magner and their successor as high-cost lending wizard Ajay Banga led a team of Citigroupers who filled, nearly entirely, the Jackie Robinson Youth Center in Harlem, all for the purpose of blowing Citi's trumpet regarding the funding of "financial literacy." Many of the journalists present -- or who didn’t' bother to go to Harlem, but only conduct phone interviews -- ran the story without qualification, not even mentioning that Citigroup has settled charges of predatory lending, and also of misleading investors. One reporter who did make this connection disclaimed ICP's congratulations, explaining that it's simply that he has a memory that runs more than a few days backwards. Or maybe the suck-up to Citigroup, by not only regulators but some reporters, has a more sinister explanation...

  A second example: after being praised in some quarters for embracing pro-environment policies (allegedly, Sandy Weill decided he didn't want his grandson to hear he was destroying the planet), Citigroup appeared last week on a last of banks who are undercutting even their "Equator Principles" -- and was chided by organizations including Friends of the Earth, and IPS, calling Citigroupers "wolves in sheep’s clothing." But given their history, why would anyone believe these Citigroupers?

April 5, 2004

   This week, six quick updates: on the big insurance deal, Manulife and John Hancock, the Delaware Insurance Department at its second day of hearingson March 30 revealed that Manulife directors neglected to disclose, in required NAIC biographical affidavits, corporate governance-related litigation against them. The Delaware regulator, and Manulife, said this was no reason to extend the comment period; ICP Fair Finance Watch has asked for an extension from the Federal Reserve Board, to while Manulife is applying to become a U.S. bank holding company.

  On Regions-Union Planters, on April 1, ICP appeared on Birmingham radio station WAPI, ready to debate Regions' officials. But Regions' Amy Minchin declined to appear, asking host Frank Matthews to instead read a statement from the bank. Ms. Minchin was quoted in the Birmingham Post Herald that "We have a long-standing record of providing a full range of credit products and services on a nondiscriminatory basis to all individuals." The Memphis Commercial Appeal of March 30, 2004, quotes Union Planters' spokesman that "Regions will be responding in the context of the Federal Reserve approval process" -- ICP awaits that response. For now, see this week's ICP CRA Report, which shows that Union Planters' funded Community Loans of America is owned by an individual who has been barred by gambling commissions in such states as New Jersey and Nevada for having organized crime connections.

  Also before the Federal Reserve, National City has solicited (but failed to provide copies) of letters of support of its proposed take-over of Provident. In JPM Chase - Bank One, where lists of subprime lenders are being withheld in the run-up to the Fed's public meetings. Meanwhile, on Capital One, the Fed waited until 5:30 p.m. on the day the comment period expired in order to fax ICP the documents responsive to its FOIA request about Capital One. See this week's ICP FedWatch Report for more on FOIA and the Fed.

  Finally, for this report, Bank of America is floating trial balloons about lifting the 10% deposit cap, in the first instance by including credit unions in the calculations. See the April 3 Boston Globe for BofA's Ken Lewis' (and ICP's) statements on this gambit. 

March 29, 2004

   Inner City Press / Fair Finance Watch has just filed comments opposing the applications by Regions Financial Corporation to acquire Union Planters. See also, "Hearing Sought on Regions-Union Planters," by David Boraks, American Banker, March 30, 2003, Pg. 18; "Regions Purchase of Union Planters Opposed; N.Y. Community Group Urges Fed to Reject Deal," by David Flaum, Memphis Commercial Appeal, March 30, 2004; "Consumer Group Protests Ala. Bank Merger," by Jay Reeves, Associated Press, March 29, 2004. The American Banker reported that Regions did not respond to the reporter's phone inquiries, but that Union Planters "strongly denied" the assertions in ICP's comments (which include UCC filings showing UP support for car title lender Community Loans of America); AP said UP "referred questions to Regions."  To the Commercial Appeal reported that Regions was still reviewing the filing and that "'[i]t was a timely filed comment and the board will consider the comment when looking at the application for acquisition,' said Andrew Williams, a Fed spokesman in Washington."

    Regions announced the $6 billion proposal on January 23; since then, it has estimated it would close up to 70 branches. Regions received rare "Needs to Improve" CRA ratings under the investment test in two of its markets, as did Union Planters in two entire states. Regions' bank and mortgage company disproportionately exclude African American and Latino applicants from their normal interest rate loans, while Regions' subprime lending unit, Equifirst, targets these same groups for higher-cost loans. Also, Union Planters supports high-cost payday lenders. This proposal would reduce access to normally-priced credit, while the banks profit, with predatory lending:

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: First Timely Comment in Opposition to the pending applications / notices of New Regions Financial Corporation to acquire (old) Regions Financial Corp., and Union Planters Corp and its affiliates

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely public comment opposing the applications by (New) Regions Financial Corporation and its affiliates, including the subprime lenders d/b/a Equifirst (collectively, "Regions") to acquire Union Planters Corp and its affiliates ("UP").

  This proposal was announced on January 23, 2004; a week later, Regions estimated that Regions would close up to 70 branches. See, e.g., Birmingham News of February 3, 2004, quoting "Regions Financial Corp. Chief Executive Carl Jones Jr." that "'We're beginning to look at that now'... Jones said the primary markets where overlap might be an issue are Mobile, Decatur, Memphis, Nashville and parts of Louisiana. Branches under consideration for closure and consolidation are typically within a 2-to-3-mile range of each other." Three miles, depending on the community, can adversely impact access to credit -- particularly prime-priced credit. Regions should disclose its branch closing plans so that the public can comment thereon, including at the evidentiary hearing (and during the extension of the comment period) that ICP is requesting. Along with the predatory lending issues raised below, the FRB should inquire into the projected cuts: branch closings, normal-rate programs replaced by subprime lending, etc..

  We note that Regions received rare "Needs to Improve" CRA ratings under the investment test in two of its markets, as did Union Planters in two entire states. Additionally, UP supports and enables payday lenders, and the car title / payday lender, Community Loans of America -- another predatory connection. ICP is requesting an evidentiary hearing, and that Regions' applications be denied.

  Regions owns Equifirst, a top subprime lender in the United States. An April 18, 2001 press release on PR Newswire states, "About Equifirst Corporation" --"Equifirst Corporation, a wholly owned subsidiary of Regions Bank based in Birmingham, Ala., has its corporate headquarters in Charlotte, N.C. and has lending licenses in 39 states. Equifirst was founded in 1989 as a wholesale lender to serve the non-conforming lending market." Equifirst's web site, at <www.equifirst.com/corporateprofile.aspx>, states, "Founded in 1989, we have continued to expand and are currently licensed in more than 45 states, with local EquiFirst account executives in 80 markets. As a wholly owned subsidiary of Regions Financial Corp., we enjoy a stable and inventive partner in business."

  ICP has analyzed, using 2002 Home Mortgage Disclosure Act data, the demographics of Equifirst's high-cost lending -- disproportionately targeted at African Americans and Latinos -- compared to those of its parent / "partner," Regions' bank's, and its mortgage company's, normal cost lending, which disproportionately denies and excludes African Americans and Latinos.

  In the Montgomery, Alabama Metropolitan Statistical Area (MSA) for conventional home purchase loans in 2002, Regions Mortgage Inc. denied African Americans' applications 4.65 times more frequently than whites. Significantly, Regions Mortgage made 355 conventional home purchase loans to whites, and only 44 to African Americans -- over eight loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this MSA, Regions' subprime lender Equifirst made FOURTEEN higher-cost loans to African Americans for every loan to a white household. Regions targets its high-cost loans 112 times more frequently at African Americans than whites. ICP contends that this is predatory lending, in violation of the fair lending laws.

  This presumptively discriminatory pattern exists in all other states "served" by Regions -- which is a basis for denying Regions' application to impose its practices on more states, including Illinois, Indiana, Iowa, Kentucky, Missouri and Mississippi. In the New Orleans, Louisiana MSA, again for conventional home purchase loans in 2002, Regions Mortgage denied African Americans' applications 5.88 times more frequently than whites. Significantly, Regions Mortgage made 184 conventional home purchase loans to whites, and only 16 to African Americans -- 11.5 loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this MSA, Regions' subprime lender Equifirst made only 1.67 loans to whites for each loan to an African American. In the New Orleans MSA, Regions targets its high-cost loans 6.89 times more frequently at African Americans than whites (henceforth, the "targeting index").

  Regions' targeting of African Americans with higher-cost subprime loans from Equifirst is systemwide. In the Atlanta MSA in 2002, for conventional home purchase loans, Regions (Regions Mortgage plus Regions Financial Corp.) made 445 loans to whites, and only 18 to African Americans -- 24.7 loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this Atlanta MSA, Regions' subprime lender Equifirst made 98 higher-cost conventional home purchase loans to African Americans, and 53 to whites -- 1.85 loans to African Americans for each loans to a white household. Regions targets its high-cost conventional home purchase loans in Atlanta 45.8 times more frequently at African Americans than whites.

  Regions' targeting of African Americans also takes place with refinance loans. In the Atlanta MSA in 2002, for refinance loans, Regions (Regions Mortgage plus Regions Financial Corp.) made 1813 loans to whites, and only 103 to African Americans -- 17.6 loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this Atlanta MSA, Regions' subprime lender Equifirst made 197 higher-cost refinance loans to African Americans, and 95 to whites -- 1.13 loans to African Americans for each loans to a white household. Regions targets its high-cost refinance loans in Atlanta 19.89 times more frequently at African Americans than whites. ICP contends that this is predatory lending, in violation of the fair lending laws.

  In the Birmingham, Alabama MSA in 2002, for conventional home purchase loans, Regions (Regions Mortgage plus Regions Financial Corp.) made 319 loans to whites, and only 33 to African Americans -- 9.67 loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this Birmingham MSA, Regions' subprime lender Equifirst made nine higher-cost conventional home purchase loans to African Americans, and 15 to whites -- 0.6 loans to African Americans for each loans to a white household. Regions targets its high-cost conventional home purchase loans in Birmingham 5.8 times more frequently at African Americans than whites.

  For refinance loans in the Birmingham MSA, Regions (Regions Mortgage plus Regions Financial Corp.) made 535 loans to whites, and only 49 to African Americans -- 10.9 loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this Birmingham MSA, Regions' subprime lender Equifirst made 33 higher-cost refinance loans to African Americans, and 39 to whites -- 0.84 loans to African Americans for each loans to a white household. Regions targets its high-cost refinance loans in Birmingham 9.13 times more frequently at African Americans than whites. ICP contends that this is predatory lending, in violation of the fair lending laws.

  In the Memphis, Tennessee Metropolitan Statistical Area (MSA) for refinance loans in 2002, Regions Mortgage Inc. denied African Americans' applications 3.83 times more frequently than whites. In the Nashville MSA, Regions Mortgage made 146 refinance loans to whites, and only four to African Americans -- 36.5 loans to whites for each loan to an African American, for Region's prime-rate lender. Meanwhile in this Nashville MSA, Regions' subprime lender Equifirst made 17 higher-cost refinance loans to African Americans, and 65 to whites -- 0.26 loans to African Americans for each loans to a white household. Regions targets its high-cost refinance loans in Nashville 37 times more frequently at African Americans than whites. ICP contends that this is predatory lending, in violation of the fair lending laws.

  These discriminatory patterns within Regions exists not only for African Americans, but also for Latinos. In the Orlando, Florida MSA, for conventional home purchase loans in 2002, Regions Financial Corp. received 74 applications from Latinos, and denied 15 of them (a 20.3% denial rate). Meanwhile, Regions Financial Corp. denied NONE of the 63 applications it received from whites.

  Equifirst is a nationwide subprime lending which, as demonstrated above, targets people of color with its higher cost loans. In markets where Regions does not have bank branches, ICP has compared the demographics of Equifirst's lending to that of Union Planters -- the prospective discriminatory pattern is another basis for the requested hearing, and to deny these applications. In the Jackson, Mississippi MSA in 2002, Union Planters made 647 refinance loans to whites, and 123 to African Americans -- 5.26 loans to whites for each loan to an African American. Meanwhile in this Jackson MSA, Regions' subprime lender Equifirst made 15 higher-cost refinance loans to African Americans, and 10 to whites -- 1.5 loans to African Americans for each loans to a white household. Regions' Equifirst targets its high-cost refinance loans 7.89 times more frequently at African Americans than does Union Planters, with its normally-priced loans, in Jackson, Mississippi.

  In the St. Louis, Missouri MSA in 2002, Union Planters made 1474 refinance loans to whites, and only 56 to African Americans -- 26.3 loans to whites for each loan to an African American. Meanwhile in this St. Louis MSA, Regions' subprime lender Equifirst made 25 higher-cost refinance loans to African Americans, and 115 to whites -- 0.22 loans to African Americans for each loans to a white household. Regions' Equifirst targets its high-cost refinance loans 5.79 times more frequently at African Americans than does Union Planters, with its normally-priced loans, in St. Louis, Missouri.

   In the Louisville, Kentucky MSA in 2002, Union Planters made 400 refinance loans to whites, and only 12 to African Americans -- 33.3 loans to whites for each loan to an African American. Meanwhile in this Louisville MSA, Regions' subprime lender Equifirst made seven higher-cost refinance loans to African Americans, and 52 to whites -- 0.13 loans to African Americans for each loans to a white household. Regions' Equifirst targets its high-cost refinance loans 4.33 times more frequently at African Americans than does Union Planters, with its normally-priced loans, in Louisville, Kentucky.

  In the Indianapolis MSA in 2002, Union Planters made 900 refinance loans to whites, and only 35 to African Americans -- 25.7 loans to whites for each loan to an African American. Meanwhile in this Indianapolis MSA, Regions' subprime lender Equifirst made 23 higher-cost refinance loans to African Americans, and 91 to whites -- 0.25 loans to African Americans for each loans to a white household. Regions' Equifirst targets its high-cost refinance loans 6.41 times more frequently at African Americans than does Union Planters, with its normally-priced loans, in Indianapolis. Meanwhile, Union Planters denied 15.1% of refinance applications from African Americans, while denying only 3.1% of applications from whites -- Union Planters denied refinance applications from African Americans 4.87 times more frequently than applications from whites.

  Also, Union Planters' subsidiary Capital Factors (see App. at Exh. 15, Slide 5) is a major funder / enabler of the controversial payday and title loan company, Community Loans of America. Florida Secretary of State UCC records show: [some tablular material deleted]

FLORIDA SECRETARY OF STATE, UCC RECORD

Debtors: COMMUNITY LOANS OF AMERICA, INC.
Debtor Address: COMMUNITY LOANS OF AMERICA, INC.
Secured Parties: CAPITAL FACTORS, INC.
Secured Party Address: CAPITAL FACTORS, INC.. 1799 WEST OAKLAND PARK BLVD,. FT LAUDERDALE, FL 33311
Filing Type: AMENDMENT
Filing Date: 1/30/2002
Filing Number: 200200228305

   While, from Georgia UCC records:

GEORGIA FULTON COUNTY SUPERIOR COURT CLERKS OFFICE, UCC RECORD

Debtors: COMMUNITY LOANS OF AMERICA, INC
Debtor Address: COMMUNITY LOANS OF AMERICA, INC
Secured Parties: CAPITAL FACTORS, INC
Secured Party Address: CAPITAL FACTORS, INC
Filing Type: AMENDMENT
Filing Date: 2/4/2002
Filing Number: 06002001773
Original Filing Number: 06094818654

  Regarding Community Loans of America, consider that the Milwaukee Journal Sentinel of July 14, 2002 "Car-title loan company takes borrowers for a ride," reported that

Legal Aid, a non-profit agency that often takes on causes for the poor, is trying to create a class-action lawsuit by intervening in a collection action brought against borrower Kenneth M. Jones, a north side Milwaukee resident. Jones, 61, was out of work last December when he visited the company's office at N. 35th St. and W. Capitol Drive.
Wisconsin Auto Title Loans is a subsidiary of Community Loans of America in Atlanta, formerly Title Loans of America, which does car title lending nationally, said Heiser. Wisconsin Auto Title has 22 offices in Wisconsin, including six in Milwaukee County.
According to Legal Aid's court papers, Jones wanted $800 to help make ends meet, but was required to borrow $954: the $800 plus $150 for a year's membership in the Continental Car Club and $4 for a title filing fee. Filing the loan information with the state gave the company the right to go to court and seize Jones' 1992 Infiniti, with 103,000 miles on it, if he defaulted. He also had to turn over his spare car key.
The deal called for Jones to repay $1,197 last January, one month after getting the loan. But by April Jones had defaulted, and the company demanded a total payment of $1,627. When Jones didn't pay, it filed a small claims action seeking a judge's permission to seize his car -- one of more than 2,000 such actions it has filed in Wisconsin, according to Legal Aid's court papers.
Legal Aid alleges that, although the 300% annual percentage rate was stated in Jones' loan papers, the rate actually is higher because of understated finance charges and the auto club fee. Moreover, the suit alleges, the company didn't give Jones proper notice before going to court for repossession and violated other provisions of state consumer law...

UP-enabled Community Loans of America lobbies against consumer protection laws directed at title and payday loans. The Atlanta Journal-Constitution of February 5, 2004, "Felony penalties added to bill targeting illegal 'payday loans'; Racketeering charges also could be brought" reported that

A House committee on Wednesday toughened a bill with felony penalties and possible racketeering charges to regulate the "payday loan" industry.
The changes could push such loans out of the state and wipe out one of the few ways for the working poor to meet expenses between paychecks.
"Oh, no," said Carolyn Lipscomb. The Decatur nurse said she would have to find other ways of getting cash for emergencies if these businesses are run out of the state.
Robert Reich, president and chief executive officer of a Florida-based payday-lending company, left the committee meeting disgusted with the current version. "Under the law that passed out of the banking committee today, Community Loans of America will not be coming to Georgia to do business in the payday loan business," Reich said.
But opponents of the already-illegal practice were pleased. "They were too easy to obtain and that should have been a warning," said Sidney Hughes, a College Park single father of two whose initial loan for $375 eventually cost him $9,000. "It preys on honest people. It was one of the worst experiences of my life."

  Further on UP-enabled Community Loans of America, South Dakota's Argus Leader of March 25, 2002 "Quick loans carry hefty price in state; Interest rates of 200% and up raise concern for consumers") reported that

South Dakota Title Loans Inc., which has offices in Sioux Falls and Rapid City, states on its loan agreements that customers should borrow elsewhere if they have the ability to get money at a rate of less than 25 percent per month or 300 percent per year.
Company outlets hold automobile titles as security short-term loans. But the title loan company rarely repossesses vehicles, said Robert Reich, president of Georgia-based Community Loans of America, the parent company.
The repossession rate runs about 5 percent of loans made, Reich said. The biggest reason customers stop paying off loans is that their vehicles are no longer worth maintaining.

  Union Planters, without standards, funds and enables predatory payday and car title lending. Regions' subprime lender Equifirst targets protected classes with higher cost loans. The two companies want to merge, and close up to 70 branches. This is not in the public interest: ICP requests evidentiary hearings, and that the applications be denied.

   ICP is requesting an evidentiary hearing and that Regions' applications be denied.  If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

  This will be updated; for or with more information, contact us.

March 22, 2004

  On March 22, ICP / Fair Finance Watch filed comments opposing the applications by National City Corporation to acquire Provident Financial Group, Provident Bank and its subprime lenders.  See, e.g., "Group Tries to Block Provident Purchase," by Jeff McKinney, Cincinnati Enquirer, March 23, 2004.  NatCity announced the $2.1 billion proposal on February 17; on March 18, Provident management let slip that job cuts would be severe, up to 800 in Cincinnati alone. Meanwhile, there are golden parachutes, and predatory lending:

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: First Timely Comment in Opposition to the pending applications by National City Corporation and its affiliates, including First Franklin Financial Corp., to acquire Provident Financial Group, Provident Bank, & the subprime lender(s) PCFS Mortgage Services, etc.

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely public comment opposing the applications by National City Corporation and its affiliates, including First Franklin Financial Corporation and other subprime lenders (collectively, "NatCity") to acquire Provident Financial Group and its affiliates, including The Provident Bank and its subprime doppelgangers, including PCFS Mortgage Resources, PCFS Financial Services, Inc., Provident Consumer Financial Services, and PCFS (collectively, "Provident").

   This proposal was announced on February 17, 2004; NatCity has projected cutting 25% of Provident's costs, via layoffs and presumably service reductions. Along with the predatory lending -- including Provident, and NatCity / payday -- issues raised below, the FRB should inquire into the projected cuts: branch closings, normal-rate programs replaced by subprime lending, etc..

   NatCity owns First Franklin Financial Corporation, one of the top ten subprime lenders in the United States. Below, the demographics of First Franklin's high-cost lending -- disproportionately targeted at African Americans and Latinos -- are compared to those of Provident Bank, in the MSAs of Cincinnati, Columbus and Dayton. It is worth noting at the outset the NatCity has begrudgingly acknowledged that its subprime lender First Franklin still pays controversial Yield Spread Premiums to brokers on subprime loans, and has no referral-up mechanism whereby applicants without prime credit histories are offered normal / prime - priced loans. Now NatCity seeks to buy a bank (and radically cut costs) and the bank's affiliated subprime lenders, still without any referral-up, paying YSPs, and, as shown below and in the exhibits hereto, funding and enabling payday lenders its CRA-defined communities. On all of these grounds, NatCity's applications should be denied as contrary to the public interest.

   Before getting to HMDA analysis, ICP wishes to make part of the record National City's funding and enabling of high-cost payday lenders. UCC filings show National City's links with Quick Cash Advance, Inc., Instant Cash Advance Corp., Indy Cash Cash Advance, and Great American Cash Advance. ICP annexes hereto documentation of:

--an Ohio Secretary of State UCC record showing National City Bank's relationship with Great American Cash Advance, c/o CNG Financial Corporation of Mason, Ohio -- on information and belief, Check n' Go, whose multiply-protested application to acquire Brickyard Bank the FRS has refused to approve;

--a Michigan Secretary of State UCC record showing National City Bank's relationship with Instant Cash Advance Corp., of Reynoldsburg, Ohio -- note that the relationship runs at least through October 15, 2004;

--another Ohio UCC filing showing National City Bank's relationship with Quick Cash Advance Inc. of Reynoldsburg, Ohio -- note that the relationship runs at least through October 15, 2004;

-- an Indiana UCC filing showing National City Bank's relationship with Indy Cash Cash Advance Inc., secured by "all assets;" and

--an Illinois UCC filing showing National City Bank's relationship with Great American Cash Advance, also of Mason, Ohio -- note that the relationship runs at least through July 29, 2008.

  Given National City's disproportionate exclusion of lower income neighborhoods and communities of color from its offers of normal interest rate credit, National City's funding of payday lenders is particularly troubling, and predatory.

   Also, to document for the record Provident's involvement in subprime lending, note that the National Mortgage News of February 23, 2004, reported that "National City, which is buying Provident and its subprime affiliate, PCFS Financial Services, is already a major player in prime and subprime lending. National City Mortgage, Miamsburg, Ohio, is the ninth large prime lender, and the bank's First Franklin Financial of San Jose, Calif., affiliate is the fourth largest subprime funder. National City also owns the 12th largest subprime servicer, National City Home Mortgage of Pittsburgh. PCFS is the 14th largest subprime servicer. (Combined, the new unit will rank eighth among B&C servicers)... Both banks have warehouse lending divisions that provide credit to non-depository mortgage bankers."

   As evidence of Provident's role in warehouse funding other problematic subprime lenders, annexed hereto is a portion of an SEC filing showing Provident Bank's "$15 million revolving warehouse line of credit" to the discredited and bankrupt subprime lender Homegold -- the relation, which calls Provident's due diligence into question, is a complex one:

"HGI has a $ 15 million revolving warehouse line of credit with The Provident Bank ('Provident'). Interest on the line varies on a loan by loan basis and ranges from the prime rate plus 1.5% to the prime rate plus 3.5%, depending on the grade and age of the mortgage funded. The agreement allows for a rate reduction from the base rates if certain monthly funded volume targets are met. The agreement requires a $ 2 million collateral deposit. Provident holds a security interest in the Company's Reed Avenue property, formerly occupied by HGI, in Lexington, South Carolina. "

   Also annexed hereto are certain rating agencies' reports on Provident's PCFS's subprime servicing activities. Origination News of March 2004 named PCFS as the 12th largest correspondent subprime lender in the United States. But a search of the FFIEC web site reveals no HMDA data filed by "PCFS." Its web site, www.888yes2you.com, states that

"PCFS Mortgage Resources is a doing business as (dba) name for The Provident Bank, an Ohio corporation, a subsidiary of Provident Financial Group, Inc., with its corporate headquarters located in Cincinnati, Ohio. Member FDIC. The Provident Bank also does business as The Provident Bank, Inc., PCFS Mortgage Resources, PCFS Financial Services, Inc., Provident Consumer Financial Services, and PCFS."

  Note that www.pcfs.com/Business/about.asp states that "Our growing number of satisfied customers has helped us generate over six billion dollars in lending relationships each year through operations in almost 50 states. PCFS is a division of Provident Bank, a multi-billion dollar subsidiary of Provident Financial Group, Inc. " Note also that www.pcfs.com/Business/Contact_us.asp states that " PCFS is able to offer lending relationships to businesses in 48 states."

  It is unclear to ICP if PCFS' subprime loans are mixed in with the HMDA data filed by Provident Bank -- ICP is preparing a LAR request in this regard; the FRB should extend the comment period, and should conduct its own inquiry, including via the evidentiary hearing that ICP is hereby requesting.

  ICP has analyzed NatCity's, First Franklin's and Provident Bank's mortgage lending in the most recent year for which Home Mortgage Disclosure Act is available: 2002. In the Columbus, Ohio Metropolitan Statistical Area (MSA) for home refinance loans in 2002, NatCity Bank (OH) denied African Americans' applications 3.61 times more frequently than whites, and denied Latinos' applications 4.03 times more frequently than whites. Significantly, NatCity Bank (OH) made 1465 refinance loans to whites, and only 11 to Latinos and only 69 to African Americans. Within these three groups, 4.5% of NatCity Bank's loans were to African Americans. NatCity's First Franklin, with its higher-cost loans, made 41 loans to African Americans, one to a Latino household, and 174 to whites. Among these three groups, 19% of NatCity's First Franklin's higher-cost loans were to African Americans -- while only 4.5% of NatCity Bank's normal-cost loans were to African Americans (a targeting index of 4.22). NatCity, through First Franklin, targets protected classes with higher-cost credit: ICP contends that this is predatory lending, in violation of the fair lending laws. Note that "Provident's presence in Columbus includes a network of 68 ATMs in Sam's Club, United Dairy Farmers and Wal-Mart stores," Columbus Dispatch of February 18, 2004, at Pg. 1C.

  This presumptively discriminatory pattern exists in all other MSA "served" by Provident -- which is a basis for denying NatCity's application to further impose its practices these communities. In the Cincinnati MSA, NatCity Bank (OH) in 2002 made 109 conventional home purchase loans to whites, and NONE to African Americans (and one to a Latinos household). NatCity's First Franklin, with its higher-cost loans, made 111 loans to African Americans, nine to Latinos and 605 to whites. The primary way National City Corp. makes home purchase loans to African Americans in Cincinnati is through its high-cost subprime subsidiary First Franklin. Provident Bank's volume is much lower: in 2002, 86 conventional home purchase loans to whites, and 14 to African Americans.

  In the Dayton, Ohio MSA, where for home refinance loans in 2002, NatCity Bank (OH) denied African Americans' applications 2.98 times more frequently than whites. Significantly, NatCity Bank (OH) made 584 refinance loans to whites, and only seven to Latinos and only 33 to African Americans. Within these three groups, 5.3% of NatCity Bank's loans were to African Americans. NatCity's First Franklin, with its higher-cost loans, made 10.7% of its loans to African Americans -- more than double the percentage at National City Bank, a targeting index over two. NatCity, through First Franklin, targets protected classes with higher-cost credit: ICP contends that this is predatory lending, in violation of the fair lending laws.

  To ICP's knowledge, NatCity has not represented, to the Fed or elsewhere, any allegedly expanded services to Cincinnati (though branch closures, including in Cleveland, are foreseeable); meanwhile, despite the potential for up to 800 jobs lost in Cincinnati, "Provident severance runs into millions" (Cincinnati Enquirer, March 17, 2004) -- "The details of what they might reap came from agreements signed Feb. 15, two days before Provident's sale to Cleveland-based National City Corp. was announced. The agreements basically will allow Robert Hoverson, Provident's president and chief executive officer; Chris Carey, executive vice president and chief financial officer; and James Whitaker, Provident's general counsel, to get three times their annual salaries and bonuses, health insurance and other perks. James Gertie, a Provident executive vice president and chief risk officer, and Anthony Stollings, controller and chief accounting officer, also were presented lucrative packages." As a further adverse managerial / financial issue, note that in May 2003, Provident admitted it "overstated profit by $70 million in the past five years because of improper accounting of auto-lease transactions. Its shares plunged as much as 29 percent." The Atlanta Journal-Constitution, March 6, 2003.

   ICP is requesting an evidentiary hearing and that NatCity's applications be denied.  If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

  This will be updated; for or with more information, contact us.

* * *

  On March 16, ICP / Fair Finance Watch testified to the Delaware Insurance Department in opposition to Manulife - John Hancock. On the phone were more than a dozen officials of Manulife and Hancock -- so many, in fact, that members of the public couldn't get on the line. But no matter! Manulife's counsel forgot to mention that the proposal still needed (and needs) Federal Reserve board approval; it was portrayed as all systems go. Now, the Delaware Insurance Regulator must hold a second day of hearings, which will be reported in this space... 

March 15, 2004

   Ah, deals: on March 9, Sovereign announced a proposal to pay $980 million to acquire Waypoint Financial and its 65 bank branches in south-central Pennsylvania and northern Maryland.... On Citi, we step back this week from the nitty-gritty of Citigroup's sleaze to two takes at the big picture. Dueling articles in Barron's and the March 15 WSJ tout Citi's global push. The Barron's "analysis" is a puff piece, blatantly seeking buyers for Citigroup's stock. It quotes Citi's CFO Todd Thomson that "[t]his isn't a financial supermarket," Thomson said Friday. "We have no interest in becoming a financial supermarket. What we are trying to do is focus on high-growth and high-return areas of financial services" -- yeah, like predatory lending. The WSJ article is somewhat more informative, quoting the head of Citigroup's international operations Deryck Maughan that Citigroup has targeted 14 countries where it will try to triple its credit-card business in the next seven years, says Mr. Maughan, who declines to name them. He has set similar goals for consumer finance, and aims to build retail branches as quickly as possible in 20 countries. The article continues (speculating about which country) -- "In less than 40 years, the combined economies of Brazil, Russia, India and China -- the BRICs economies -- could become larger than the combined economies of the U.S., Japan, U.K., Germany, France and Italy"... We'll see you there...

   "Predatory Bender," and some hard-sell sales in DC, are covered in the Washington Post of March 15, 2004, on page E1, "A Novel Approach to Predatory Lending"....

March 8, 2004

   In the run-up to a week of (ICP) Washington watching, we're compelled to mention a sneaky financial move by MONY, which to try to save its deal with AXA has put off its shareholders' vote, hoping that through time only the arbitrageurs will have voting rights, and they'll be convinced to vote for the deal because they'll profit from the tracking stock that AXA issued, to make its offer cash-like if not cash. The whole imbroglio goes to show that the canard about shareholders' controlling the company, and reigning in management, is no longer true: management can influence who the shareholders are, and how they'll vote (by offering inducement beyond or outside of the deal). Something's wrong with this picture...

   What's that line, about "the wages of sin"? Last week HSBC announced an increase in profits to $12.8 billion, attributing this to its acquisition of Household International, the notorious predatory lender. The Mirror, correctly, noted that "consumer groups have slated the bank and accused it of profiteering.. 'It indicates to us that there is widespread profiteering at the customers' expense.'" That's certainly the case with Household, which despite its settlements-on-the-cheap, continues to run its Decision One unit without any reforms whatsoever, and continues to deceive and defraud borrowers -- and to cover its tracks. On that, it took a while -- too long -- but finally Inner City Press has begun receiving from the Maryland Office of Financial Regulation documents responsive to ICP's Freedom of Information request regarding Household's required reports to this regulator. The Maryland Office of Financial Regulation documents have numerous redactions -- that is, whole paragraphs obscured with magic marker -- which we'll be pursuing.

  As reviewed in this week's CRA Report, the Federal Reserve is now faced with mounting evidence of Bank One's enabling of payday lenders. Also regarding JPM Chase, ICP has submitted a representative review of recent foreclosure filings in Philadelphia, highlighting JPM Chase's many foreclosure, including as trustee on subprime loans serviced by the much-sued Fairbanks. ICP has reiterated its call for multiple public hearings, including in Ohio and Texas. On March 5, the Illinois Lt. Governor's Office called for hearings in Chicago and New York, including on issues of employment outsourcing. Here's an ICP/Fair Finance Watch summary of that, which ICP also submitted to the New York Banking Department as a timely comment opposing a JPM Chase application seeking to shift "unit investment trust" business to Bank of New York:

--In 2001, fresh off the Chase Manhattan - JP Morgan merger, JPMC moved 3,000 jobs to India. See, e.g., " Outsourcing: Time to act?" Lafferty's Cards International, January 15, 2004, Pg. 2
--In 2003, JP Morgan Chase went public with plans to move financial analyst jobs to India. See, e.g., "City Losing High-Paying Bank Jobs," The New York Sun, August 21, 2003, Pg. 9, reporting that JP Morgan Chase "expects to employ at least 40 stock analysts based in Mumbai, India, by the end of this year. Communications are so good that it is as good as having them in New York"

--In October 2003, it was leaked (by impacted employees) that JP Morgan Chase would be eliminating 1000 jobs in New York. See, e.g., "Chase Cutting 1,000 Jobs," New York Newsday , October 28, 2003, Pg. A3

--JP Morgan Chase's largest outsourcing, however, is the $5 billion, seven year contract it signed with IMB, to outsource 4000 jobs. See, e.g., "IBM Takes JP Morgan Jobs Under Umbrella," New York Newsday, April 21, 2003, Pg. A25. Reflecting JP Morgan Chase's thinking, Bank Technology News of February, 2003, reported: "There are immediate, significant economic benefits" to the outsourcing agreement, says John Schmidlin, CTO of JP Morgan Chase's enterprise technology services group and lead negotiator in the $5 billion outsourcing deal the company struck with IBM in December. Maintaining an independent function creates a high cost base that is not competitive, he says. "Whether the market increases or decreases that volatility needs to be managed in a way that will help our lines of business and our shareholders. ...For us it's a very compelling model, and I'd suggest it will be for others as well. You get to pay for what you use and when you use it, rather than pay for a build up of fixed costs."

--As relates specifically to JP Morgan Chase's Bank One proposal, the American Banker newspaper of January 28, 2004, "Parsing the IT Implications of JPM-Bank One," speculated on "whether the combined Bank One Corp. and J.P. Morgan Chase & Co. will emphasize in-house IT services and transaction processing -- which Bank One prefers -- or their outsourced equivalents, which are more common at J.P. Morgan Chase."

March 1, 2004

   Click here for an update on challenges to the JP Morgan Chase - Bank One proposal. Here's a question that the Federal Reserve ought to more often ask: following ICP's comments about National City's subprime lender First Franklin, in connection with NatCity-Allegiant, the Fed asked for "a listing of material civil and/or administrative actions relating to the consumer lending activities of National City and its affiliates. Include in that discuss the case cited by ICP in its comment letter. 'Material' has been defined as in excess of $1 million."

  National City withheld most of its response, though it did leave it that it settled the case ICP cited (Ora Sims v. First Franklin Financial Corporation).   NatCity told reporters, in January, that the Fed was just about to approve its Allegiant proposal; these issues will continue to be pursued. .

February 23, 2004

    Merger Monday, a (half) world away: on February 23 in Seoul, Citigroup announced it will pay the Carlyle Group and others $2.7 billion for a controlling stake in Koram Bank. The (figure-) head of Citigroup International, Deryck Maughan, threatened, " What we have accomplished in Mexico with Banamex or Poland with Handlowy, we feel we can accomplish in a number of Asian countries." Including the start-up of predatory lending in these markets...

  Click here for ICP's Report on the Bank One-JPM Chase proposed mega-merger. In gamesmanship news, it is reported that Chase's Community Reinvestment Act hatchet men have responded to community groups' questions about the proposed Bank One mega-merger by asking the groups to conduct their own "surveys" of what Chase could be doing better. But here's a better question: beyond its standardless subprime mortgages, does Chase now plan, like Bank One, to fund payday lenders, and engage in high-cost tax Refund Anticipation Lending? The answer, it would seem, is yes... And so we say "No."

February 16, 2004

  The action and intrigue, this week, has been in Asia. ABN Amro is reportedly looking to dump its controlling stake in Thailand's Bank of Asia; Citigroup, it's reported, is stalking a $1 billion stake in KorAm bank in Seoul...

  Meanwhile, last week Inner City Press submitted Freedom of Information Act appeals to the Federal Reserve on two pending applications: BofA-Fleet, and New Haven Savings Bank; click here to view.

February 9, 2004

  RBC sleaze: Canadian regulator OSC announced on Feb. 4 they have charged a former executive at Royal Bank of Canada with 10 counts of insider trading, saying he passed confidential information to a friend who then profited from the news. Rankin was managing director at the mergers and acquisitions unit of the bank's RBC Dominion Securities subsidiary. A spokeswoman for Royal claimed that the incidents did not arise from a problem of process or compliance at the bank. "We are being much more vigilant about the people we hire, but it's not the case of a process breaking down," argued RBC spokeswoman Beja Rodeck. Yeah, right...

  On a still-pending deal, AP of Feb. 2 reported that "New Haven Mayor John DeStefano, an outspoken opponent of a contentious New Haven Savings Bank deal, has signed a deal requiring him not to criticize the bank for five years. If the mayor breaks the agreement, which requires all public statements be cleared by the bank, New Haven Savings Bank could revoke its $25 million pledge to create a community lending institution.... Th[e] pledge, reported Monday by the Register, prohibits the mayor from making any critical statements of the bank and requires him 'use his best efforts' to convince other bank opponents to back down." In the past, the Fed would inquire into the scope and ramifications of such gag orders (for example, during First Union - CoreStates). Will they now? We'll see...

February 2, 2004

   This week: in the run-up to JP Morgan Chase submitting its Bank One applications, Columbus Business First of Jan. 30 reports that "since Bank One moved its headquarters from Columbus to Chicago in 1998, community development lending in Columbus has suffered... Bank One closed its Community Development Corp... As for the closing of Bank One Community Development Corp. [Jeff Lyttle, a Bank One spokesman] said, it coincidentally occurred as the bank moved its headquarters." Some coincidence...

  In two pending deals: Manulife tells the Fed that it "anticipates" the Massachusetts Department of Insurance holding its regulatory hearings into Manulife-John Hancock in "March 2004" and that the Delaware Department of Insurance "will be relying on Massachusetts examination results and the timing is expected to be consistent with Massachusetts' DOI." Note: Delaware can't just "rely" -- a public hearing is required, when a Delaware-domicile insurer is proposed to be acquired...

  In another contested, long-pending deal, the outside counsel to New Haven Savings Bank wrote to the Fed on January 29, stating that NHSB "agreed to increase from $30 million to $40 million the contribution it will make" to its own foundation and "$25 million in contributions over time to a new, independent community charitable foundation," as well as a $6 million break-out from its "previously announced $27.5 million." Hmm...

January 26, 2004

   From the "who knew?" department -- in a much-delayed Freedom of Information Act response, the OTS has provided ICP with a copy of an "operating subsidiary" application by Sovereign Bank. The application, Docket Number 04410, is for Sovereign to set up "Sovereign Trade Services, Ltd. Hong Kong... which will facilitate the issuance of commercial letters of credit by the Bank at lower net fees and costs than the Bank can obtain currently." After that, much information is redacted...

   Also who knew -- Hank against hawala. AIG announced last week that it will offer policies of $10,000 of accidental death and dismemberment coverage to U.S.-based remittance customers of the National Bank of Pakistan. Those who remit funds for distribution overseas through the National Bank of Pakistan will automatically get the insurance at no additional cost; the bank is to pay the premiums. The coverage is available to anyone using the bank's branches in New York or Washington... ICP has submitted comments to the OTS West Region, on AXA - MONY...

January 20, 2004

   To mark Martin Luther King Day, Inner City Press / Fair Finance Watch prepared the filed its initial comments on the proposed mega-merger of JP Morgan Chase and Bank One, filing them with the Federal Reserve, New York Banking Department, Illinois Insurance Department, and regulators in a dozen other states. Click here to view. It is important, ICP believes, that action begin at the earliest time on this mega-merger proposal: already posturing has begun, including propping up Trojan horse "opponents" who will, invariably, end up praising the companies and their merger. We've seen it before; live and learn.

  Meanwhile, punditry that caught our eye was a quote, in the Daily Deal of Jan. 16, by a Ryan Beck analyst that, "what the Morgan deal says is that the theme of this year is going to be: Pull out the driver and leave the sand wedge in the bag." There were many other fields of endeavor this could have been analogized to... Named in the article as deal-hungry are Wells Fargo, Wachovia, and U.S. Bancorp...

  On a deal that's by no means "mega," but is certainly contested, Inner City Press received last week from the Federal Reserve a copy of a memo, dated Jan. 13, reciting in a paragraph a Jan. 8 conference call between Fed staff and lawyers representing New Haven Savings Bank. NHSB said it intends "to submit an amendment to its application" because it "continue[s] to engage in dialogue with certain commenters in an effort to address the commenters' concerns. In addition, NewAlliance confirmed that it would send a copy of the amendment to each of the commenters on its application." We'll report it here; watch this space. 

January 12, 2004

   A follow-up, then a new action (Manulife-Hancock, see below). A Jan. 11 column in the St. Louis Post-Dispatch quotes Inner City Press that "National City avoids minority neighborhoods with its regular lending programs, while targeting them for higher-cost loans from First Franklin. In Cleveland, for instance, African-Americans received 43 percent of First Franklin's loans in 2002 but only 2.9 percent of National City's conventional mortgages." ICP raised this to the Federal Reserve on NatCity's application to acquire St. Louis-based Allegiant Bank. NatCity's chairman, David Daberko, has written his own response to ICP's comments -- but it's a response that doesn't say anything. It's a two page letter, that provides no explanation of the lending patterns at First Franklin, or of anti-predatory lending safeguards, referral-up, nothing -- all things that the Fed has asked other subprime lenders about. So the Fed will, if it follows its own precedents, ask NatCity some questions. Will Mr. Daberko be the one responding? We'll see...

   ICP's new action this week involves the insurance merger announced in late September 2003, between Manulife and John Hancock. ICP has commented to the Federal Reserve Board, and insurance regulators in several states, as follows:

January 12, 2004

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: Timely Comment Opposing and Requesting a Hearing and Extension of the Comment Period on, the applications / notices of Manulife Financial Corporation to acquire John Hancock Financial Services, Inc., and First Signature Bank & Trust Co, and become a BHC

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely comment opposing and requesting a hearing and extension of the comment period on the Applications / notices of Manulife Financial Corporation to acquire John Hancock Financial Services, Inc., and First Signature Bank & Trust Co, and become bank holding companies ("BHCs").

  From the portions of the application that have been provided, it appears that Hancock is quietly seeking to expand the scope and powers of First Signature Bank, without providing any of the Community Reinvestment Act ("CRA") information that the Board has previously required in such circumstances. The Application (App.), at 13, states that "[i]n order that First Signature Bank will no longer be subject to the restrictions of Section 4(f) of the BHC Act, JHFS hereby requests... to become a bank holding company." Then, at page 53, the App. discloses that if the FRB grants approval, "First Signature well be permitted to offer commercial loans for the first time." But none of the type of information that the FRB and its peer agencies have required in connection with such applications is provided. On the current record, this application cannot legitimately be approved.

   For the Board's information, in 1997 John Hancock sought to convert First Signature Bank from a limited purpose ("wholesale") CEBA bank into a federal thrift. Based on a total lack of Community Reinvestment Act specificity, and other CRA issues, ICP opposed the proposal; John Hancock subsequently withdrew its application. See, e.g., " Bank withdraws charter bid," Boston Globe, March 7, 1998, Pg. F1: "First Signature Bank & Trust has withdrawn its application for a new charter that would convert it into a federal savings bank. First Signature, a New Hampshire trust company owned by John Hancock Mutual Life Insurance Co., had also planned to change its name to John Hancock Bank & Trust. The application had been opposed by community reinvestment advocates."

  John Hancock never came forward with additional CRA information or plans -- rather, it withdrew its application. Now, from the portions of the Manulife - Hancock application that have been provided, it appears that Hancock is again seeking to expand the scope and powers of First Signature Bank -- but again, without even attempting to put forward the type of CRA specificity that is required - that WAS required by the OTS in 1998 (and not met by Hancock), and as has been required, as a precedent, by the Federal Reserve, for example in connection with Waterhouse National Bank. That proceeding is a precedent that the FRB must follow here, given the similarities: a non-U.S. applicant with no record of CRA performance, a target bank (here, proposing to convert from wholesale CEBA status to full service). The application is so lacking in CRA information that it should be dismissed, and the comment period restarted.

   There are other, non-CRA problems with the Application. At 15, it off-handedly discloses that "[i]t is not clear whether part Section 211.2(o)(2) includes companies that have any 'foreign bank' as a subsidiary or only those that have as a subsidiary a 'foreign bank' that comes within Section 211.2(o(1). In the latter case, Manulife technically would not be a 'foreign banking organization' because Manulife Bank does not currently have a branch, agency or commercial lending company in the United States and First Signature Bank will be a subsidiary of Manulife, not of Manulife Bank." Then the App. argues that "[i]t would exalt form over substance for the Board to subject the non-U.S. activities of Manulife to additional U.S. regulation merely because Manulife Bank does not engage in banking activities in the United States."

   ICP hereby timely disagrees, and reiterates its request for the portions of the application in which Manulife makes its showing / argument regarding Qualified Foreign Banking Organization status. (See, App. footnote 9, "QFBO calculations for Manulife are provided in Confidential Exhibit 1" -- ICP is re-requesting access to this exhibits). Even pending the releases of this improperly withheld information, issues exist as to Manulife's "non-U.S. activities" (see supra). For example, Manulife's Indonesian subsidiary was declared bankrupt in 2002 -- while there is another side to this story, Manulife's App. does not even mention the bankruptcy, while arguing for the law to be bent for less regulation of its non-U.S. activities. See, for the record, " Hospitals reject Manulife policies," Jakarta Post of June 25, 2002:

Hospitals have decided to reject PT Asuransi Jiwa Manulife Indonesia (AJMI) health insurance policies following the bankruptcy ruling on the company, leaving some 200,000 policyholders in uncertainty. Hospitals fear that the ongoing fiasco faced by the local unit of Canada's giant insurer Manulife Financial Corp. could render the company unable to pay medical bills. The head of admissions at St. Carolus private hospital in Jakarta said that as of Monday the hospital had decided not to admit patients who relied on Manulife health insurance policies.

"We have turned down patients who have produced a Manulife insurance card. We are asking them to pay with their own money," the official, Aurelia, told The Jakarta Post. Another private hospital, RS Pondok Indah in South Jakarta, also adopted the same approach last week. Duty nurse Irin told the Post that as of last week, the hospital had decided to cancel its business cooperation with Manulife. "The hospital issued a written announcement a week ago to reject the Manulife health insurance card for an indefinite period. Thus, policyholders of the insurance firm have to pay their own bills, just like any other patient who did not have an insurance policy," said Irin. AJMI was declared bankrupt by the Commercial Court on June 13, after a receiver of the now-defunct PT Dharmala Sakti Sejahtera, the former local partner of Manulife via AJMI, filed a bankruptcy petition over unpaid dividends in 1999.

   Even if, as Manulife would presumably argue -- if it had even bothered to address in its Application to become a BHC this non-U.S. subsidiary's recent bankruptcy -- the bankruptcy raises more issues about the Indonesian judiciary than about Manulife, either way it militates against the FRB bending (or, ICP contends, breaking) the definition of Qualified Foreign Banking Organization and giving even less scrutiny to Manulife's non-U.S. activities.

   As another example, see the Vietnam Investment Review of February 24, 2003, "Court still to pass verdict on Manulife lawsuit case" --

A lawsuit against Canadian insurance giant Manulife, formerly Chinfon- Manulife, in the Ho Chi Minh City People's Supreme Court for rejecting a client's claim has been suspended pending further investigation... The suit began in 2001 when the insurer refused to pay out on a life insurance policy worth VND100 million ($6,500) taken by Cao Van Duoc for 20 years in 2000. The company rejected the claim saying Duoc had provided false information in the contract under the health status declaration. He had ticked "no" when asked whether he had been in hospital or sought medical assistance for any health problems previously. In fact, said Manulife, he had been in Ho Chi Minh City's Thong Nhat, Nguyen Trai and Cho Ray hospitals months before, for liver cancer - the chief reason for his death in August 2001. Based on the non-disclosure of a health condition which would have precluded insurance cover, Manulife voided the contract under Article 19.2 of the Law on Insurance business. It also refunded the entire premium of VND5.84 million ($381) to the client. However, the insurer paid out VND60 million ($3,921) on two enclosed riders. "Legally, we have the right to reject the claim, but we paid out of good will," said Manulife marketing manager Luu Thi Thu Hang. Le Thi Ngoc Yen, the client's wife, sued the insurer for rejection of her husband's claim. In August 2002, the city People Supreme Court's Primary Court rejected Yen's petition and awarded the case to Manulife. Yen approached the Appeal Court. On February 13, the court asked Manulife for the original copies of her husband's medical documentation. Asked how the company could be so careless as to miss such a mistake in the contract, Hang claimed it was impossible for any insurer to check all the details provided by a client.

   This last-quoted statement / position does not bode well for the anti-money laundering safeguards required of a BHC, which Manulife (and Hancock) would become, under this Application.

We also note, from BestWire of October 02, 2002, "Canadian Judge OKs Manulife Class Action"

A Canadian judge has certified a class-action lawsuit against Manulife Financial Corp. on behalf of four plaintiffs from Barbados--three of whom claim they were denied rightful compensation when the insurer demutualized in 1999. The lawsuit, seeking C$150 million in restitution, was filed in Ontario Superior Court on behalf of participating life insurance policyholders whose policies were issued or assumed by the Barbados branch of Manufacturers Life Insurance Co. The four plaintiffs include Wismar Greaves, the former supervisor of insurance for Barbados. The plaintiffs' attorney, Sutts Strosberg LLP of Windsor, Ontario, said one of its key arguments is that Manulife got approval for the sale of its Barbados interests by both providing misleading information to the Barbados regulator, and by withholding pertinent information... In his ruling granting class-action status, Justice Ian Nordheimer said "a court might conclude that the statements made in the proceedings before the supervisor did not constitute full, fair and frank disclosure by Manulife of its plans."

  This judicial finding regarding Manulife's lack of candor in a previous regulatory applications proceeding is directly relevant to this proceeding, and to the standards the FRB must consider under the BHC Act, with regard to a non-U.S. applicant, under FBSEA -- particularly one that is arguing for the law to be bent or broken to allow less scrutiny of its non-U.S. activities.

  Another issue that must be addressed (and in light of which the comment period should be extended) is the surprisingly high exposure to the Parmalat scandal. See, e.g., "Manulife hit by Parmalat scandal," Kitchener-Waterloo, Ontario Record of December 31, 2003, at E3:

Manulife Financial Corp. may be buying itself a chunk of exposure to scandal-plagued Parmalat Finanzaria SpA as part of its $15-billion acquisition of U.S. life insurer John Hancock Financial Services Inc. Boston-based Hancock says it holds $152 million US in public and private bonds issued by Parmalat, a multinational dairy products giant... The Hancock figure is nearly $35 million more than an estimate published last week by Moody's Investors Service. Moody's pegged Hancock's holdings of Parmalat bonds at $117.2 million at the end of 2002, giving it the third-highest exposure to the imploding Italian company among North American life insurers.

  In the U.S., see, e.g., "Manulife: Subpoena Probes Fund Trading," American Banker of December 29, 2003, at 9:

Manulife Financial Corp. said Wednesday that it had received a subpoena from New York Attorney General Eliot Spitzer seeking information about mutual fund trading practices. The Toronto financial company said in a regulatory filing that it had gotten requests for information from Canadian and United States regulators, including the Securities and Exchange Commission. Mr. Spitzer's subpoena sought information about market timing and late trading of mutual funds.

   There are also John Hancock issues that must be considered and addressed -- including because, under this proposal, Hancock's non-U.S. activities would benefit from the same law-bending that Manulife is requesting, see supra. For example, environmental watchdogs in Australia and elsewhere have raised concerns about John Hancock Hancock Financial Services as well as its subsidiary Hancock Timber Resources Group, stating that it operates Hancock Victorian Plantations in Australia and is currently logging what little remains of native vegetation in the Strzelecki Ranges, located two hours drive of Melbourne.In August 2002, Australian activists learned that Hancock took over Australian Paper Plantations, and now own up to 800 land titles, including areas supposedly protected under a 1997 conservation agreement March 1997. They began selling this property at a profit of over $A300 million...

  On November 23 2000, the LaTrobe Shire city council launched legal action against Hancock Victorian Plantations, for an enforcement order under Sections 114 - 120 of the Planning and Environment Act of 1987  -- ICP's point here is that Manulife and Hancock merit at least as much scrutiny for their non-U.S. operations as the law requires -- not less, as Manulife is stealthily arguing. On the current record, these applications could not legitimately be approved.

  On December 14, 2003, ICP submitted a Freedom of Information Act ("FOIA") request for a complete copy of this application, and other related records. So far, only the Reserve Bank has responded, noting that it "is not an agency of the federal government and is not subject to [FOIA]."

  ICP continues to await an appealable FOIA response to its FOIA request for this Manulife / John Hancock / First Signature Bank application. ICP's initial December 14, 2003, FOIA request stated inter alia that "we ask for the responsive records (including from the Board) as soon as possible, to allow FOIA appeal (if necessary) and analysis, during the current comment period. We are sending this request to both the Reserve Bank and to the Board, so that the Reserve Bank can send all documents in its possession as quickly as possible, while the Board acts on the balance of the FOIA request." Despite the passage of a month, the Board has yet to respond. ICP hereby timely contests the withholding of information containing Manulife's arguments, and the requested records reflecting the companies' communications with the FRS. (ICP explicitly requested inter alia "a complete copy of the applications, all records reflecting any FRS personnel’s communications with the above-captioned companies or their affiliates regarding the proposal [and all] other records in the FRS’ possession related to the proposal.") In that light, ICP requests that the comment period be extended, until at least five days after the long-ago requested information is provided.

  If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

    To be continued...

January 5, 2004

   Inner City Press / Fair Finance Watch has now filed a seven-page protest to the applications by National City Corp. to acquire Allegiant Bancorp. ICP's timely comments, summarized below, use 2002 mortgage lending data to demonstrate that National City's banks disproportionately excludes African American and Latino applicants from their normal interest rate lending, while NatCity's subprime unit First Franklin targets these same groups with higher-cost loans:

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: First Timely Comment in Opposition to the pending applications by National City Corporation and its affiliates, including First Franklin Financial Corp., to acquire Allegiant Bancorp, Inc., & Allegiant Bank

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely public comment opposing the applications by National City Corporation and its affiliates, including First Franklin Financial Corporation and other subprime lenders (collectively, "NatCity") to acquire Allegiant Bancorp, Inc. and its subsidiaries, including Allegiant Bank ("Allegiant").

   This proposal was announced on November 20, 2003, at which time NatCity projected cutting 25% of Allegiant's costs (see, e.g., St. Louis Post-Dispatch of Nov. 21, 2003, at C1), via layoffs and presumably service reductions. Along with the predatory lending issues raised below, the FRB should inquire into the projected cuts: branch closings, normal-rate programs replaced by subprime lending, etc..

   NatCity owns First Franklin Financial Corporation, one of the top ten subprime lenders in the United States. Below, the demographics of First Franklin's high-cost lending -- disproportionately targeted at African Americans and Latinos -- are compared to those of NatCity's banks' normal cost lending, which disproportionately denies and excludes African Americans and Latinos. It is worth noting at the outset the NatCity is a major lobbyist against consumer protection laws intended to clean up the scourge of predatory lending. See, e.g., Crain's Cleveland Business of July 15, 2002, "Nat City subprime unit halts Cleveland business," among other things quoting a mortgage broker complain that "'in a free America, they want to tell you how much to charge and how much to make... National City just took the step and said it didn't want any part of this.... Was it premature? Yes. Was I surprised? Yes.'" Also in Ohio, see The Blade of Toledo, Ohio, of March 9, 2003: "National City Mortgage, a sister company to National City Bank, said in a February bulletin that it would stop making home loans in Toledo because of the law." Nationwide, see, e.g. the Winston-Salem Journal of February 28, 2003, "Lending Law Change Worries N.C. Official," noting as many others have that "the proposed OCC regulation was prompted by a request from National City Corp. of Cleveland and its subsidiaries, National City Mortgage Co. and First Franklin Financial Co. The bank said that Georgia's Fair Lending Act, which went into effect Oct. 1, restricts its ability to offer mortgage loans in that state." Returning full circle, see the Cleveland Plain Dealer of September 24, 2003, "Churches to protest at National City," quoting NatCity spokeswoman Amber Garwood that NatCity declined to give anti-predatory lending assurances that "nearly all other major local banks have... because federal regulators have concluded evidence is 'virtually non-existent' that national banks are guilty of abusive lending." We disagree, and note that First Franklin Financial Corp. is a national bank operating subsidiary of the type seeking preemption from all state and local anti-predatory lending standards and safeguards. But as set forth below, a review of its targeted lending shows presumptive violations of the fair lending laws.

   ICP has analyzed NatCity's and First Franklin's mortgage lending in the most recent year for which Home Mortgage Disclosure Act is available: 2002.

   In the Cleveland Metropolitan Statistical Area (MSA) for conventional home purchase loans in 2002, NatCity Bank (OH) denied African Americans' applications 3.77 times more frequently than whites. Significantly, NatCity Bank (OH) made 679 conventional home purchase loans to whites, and only nine to Latinos and only 40 to African Americans. Within these three groups, 5.5% of NatCity Bank's loans were to African Americans (and 1.2% were to Latinos). NatCity's First Franklin, with its higher-cost loans, made 80 loans to African Americans, five to Latinos and 252 to whites. Among these three groups, 23.7% of NatCity's First Franklin's higher-cost loans were to African Americans -- while only 5.5% of NatCity Bank's normal-cost loans were to African Americans. NatCity, through First Franklin, targets protected classes with higher-cost credit: ICP contends that this is predatory lending, in violation of the fair lending laws.

   This presumptively discriminatory pattern exists in all other states "served" by NatCity -- which is a basis for denying NatCity's application to impose its practices on Missouri, etc.. In the Chicago, Illinois MSA, for conventional home purchase loans in 2002, NatCity Bank (OH) denied Latinos' applications three times more frequently than whites. Significantly, NatCity Bank (OH) made 473 conventional home purchase loans to whites, and only 33 to Latinos and only 15 to African Americans. Among these three groups, 2.9% of NatCity Bank's loans were to African Americans, and 6.3% were to Latinos). NatCity's First Franklin, with its higher-cost loans, made 463 loans to African Americans, 180 to Latinos and 434 to whites. Among these three groups, fully 43.0% of NatCity's First Franklin's higher-cost loans were to African Americans -- while only 2.9% of NatCity Bank's normal-cost loans were to African Americans -- and 16.7% of NatCity's First Franklin's higher-cost loans were to Latinos, while only 6.3% of NatCity Bank's normal-cost loans were to Latinos. NatCity's banks, with normal rate credit, disproportionately excludes African Americans and Latinos, while NatCity's First Franklin targets these same groups for higher-cost credit. The National City Corporation "family" systemically violates fair lending laws, and its applications should be denied.

   In the Detroit, Michigan MSA, for conventional home purchase loans in 2002, NatCity Bank (OH) denied Latinos' applications 2.75 times more frequently than whites. Significantly, NatCity Bank (OH) made 467 conventional home purchase loans to whites, and only four to Latinos and only 21 to African Americans. Among these three groups, 4.3% of NatCity Bank's loans were to African Americans, and 0.8% were to Latinos). NatCity's First Franklin, with its higher-cost loans, made 390 loans to African Americans, 23 to Latinos and 692 to whites. Among these three groups, fully 35.3% of NatCity's First Franklin's higher-cost loans were to African Americans -- while only 4.3% of NatCity Bank's normal-cost loans were to African Americans -- and 2.1% of NatCity's First Franklin's higher-cost loans were to Latinos, while only 0.8% of NatCity Bank's normal-cost loans were to Latinos. Again, NatCity, through First Franklin, targets protected classes with higher-cost credit: ICP contends that this is predatory lending, in violation of the fair lending laws.

   In the Louisville, Kentucky MSA for conventional home purchase loans in 2002, NatCity Bank (KY) denied African Americans' applications 2.41 times more frequently than whites. Significantly, NatCity Bank (OH) made 360 conventional home purchase loans to whites, and only five to Latinos and only 15 to African Americans. Among these three groups, 3.9% of NatCity Bank's loans were to African Americans (and 1.3% were to Latinos). NatCity's First Franklin, with its higher-cost loans, made 29 loans to African Americans, two to Latinos and 117 to whites. Among these three groups, 20% of NatCity's First Franklin's higher-cost loans were to African Americans -- while only 3.9% of NatCity Bank's normal-cost loans were to African Americans. This presumptively discriminatory pattern exists in all other states "served" by NatCity, a basis for denying NatCity's application to impose its practices on Missouri: simply for example, using the methodology set forth above, in the Indianapolis IN MSA in 2002 16.7% of First Franklin's higher-cost conventional home purchase loans were to African-Americans, while only 4.3% of the normal-cost loans of NatCity Bank (IN) were to African Americans; in the Pittsburgh MSA it was 4.4% to African Americans by First Franklin versus 3.6% to African Americans by NatCity Bank (PA); in the New York City MSA in 2002, 37.7% of First Franklin's higher-cost conventional home purchase loans were to African-Americans, while only 5.3% of NatCity Mortgage Co.'s conventional home purchase loans were to African Americans, and, at a predictor of the targeting of protected classes with higher-cost credit in St. Louis, in 2002 in the St. Louis MSA, First Franklin made 105 higher-cost conventional home purchase loans to African Americans and 188 to whites, a ratio of 55.9 loans to African Americans for ever 100 loans to whites; the aggregate industry made 2698 such loans to African Americans and 29,502 to whites, a ratio of 9.1 loans to African Americans for every 100 loans to whites. NatCity's First Franklin targets African Americans with its higher-cost loans more the six times more frequently than the industry as a whole. ICP is requesting an evidentiary hearing [In advance of which, or otherwise, the FRS should inquire [into] litigation against National City's Altegra subprime unit, a/k/a National City Services [citations omitted] and, as reported in the MBAA's Predatory Lending Watch, Class-action Lawsuit Filed in Illinois Court:

"A class-action complaint has been filed in a federal court in Illinois against San Jose-based nonprime lender First Franklin Financial Corp. and Illinois Mortgage Consultants Inc., a mortgage broker. The central allegation of the action was that the two companies did not clearly disclose yield spread premiums as required by HUD regulations. The class action constitutes a RESPA claim against both companies, a breach of fiduciary duty claim against Illinois Mortgage Consultants and a TILA claim against First Franklin Financial alleging misrepresentation in its disclosure statement. The allegation that a RESPA violation, by itself, amounts to predatory lending is a novel legal theory and confirms that there continues to be an absence of concise definitions under federal law. Plaintiff’s claims add to current trends of attempting to define all compliance and disclosure errors as abusive behavior"] [We also note, in support of the requests made herein, that in the expanding mutual fund scandal / probe, National City Corp.'s Armada Funds has been directed to turn over information to the SEC, according to a written statement by NatCity spokeswoman Anne Rapacz Kimmins in Crain's Cleveland Business of November 17, 2003. See also, the Indianapolis Business Journal of June 30, 2003, "Beneficiaries of Lilly trusts take National City to court" for mismanagement.]

   ICP is requesting an evidentiary hearing and that NatCity's applications be denied.  If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

    To be continued; developing... Two side notes:  in the run-up to Christmas, Wells Fargo Home Mortgage announced that it would lay off 170 people who process, underwrite and close home loans and refinancings, from its operations center in Riverside, California...  And in the U.K., reflective of GE's commitment to communities, GE Capital Equipment Finance in the United Kingdom has announced it is fleeing from center-city Bristol. GE Capital spokeswoman Stephanie Rennie said the firm believed it had a "moral responsibility" -- to look after staff. She said she would not disclose percentages but staff revealed a "significant concern" which led to the management deciding to start looking for an out-of-town site. She said: "We take very seriously the issue of safety among our employees. We felt we had a moral duty to ask them about the problem and take the appropriate action." Ah, commitment to communities... For or with more information, contact us.

* * *

December 29, 2003

   Deals of the season: on Dec. 22, Jersey City-based Provident Financial Services announced a proposal to acquire First Sentinel Bancorp, owner of First Savings Bank, for $642 million deal that would create New Jersey's eighth largest bank In upstate / western New York, Utica-based Partners Trust Financial Group announced on Dec. 24 a proposal to buy BSB Bancorp (that'd be, Binghamton Savings Bank) for $347 million: we'll see.

   On Citigroup - Washington Mutual Finance: Inner City Press last week received from the North Carolina Commissioner of Banks a letter claiming that his Office "does not have jurisdiction over" the proposed sale of 37 WaMu Finance offices in North Carolina to CitiFinancial. We disagree, and have replied to that effect. (South Carolina, for example, states that licenses can be transferred if the acquirer, even if already licensed, can past character and fitness tests and show advantage and convenience to the community -- all dubious, for a predatory lender). The NC letter also claims that most consumer complaint information is confidential under NC law -- which contradicts detailed information ICP was provided with by the NC AG's Office. But Banking Commissioner Smith provides a break-down of complaints in NC -- there are more complaints over the past three years against CitiFinancial than WaMu Finance, particularly with regard to consumer (non-mortgage) loans. We have asked for the underlying complaint files. Meanwhile, the Louisiana Office of Financial Institutions' general counsel Gary Newport writes that "to date no application for acquisition has been filed with this office on behalf of Citi, therefore any investigation by the commissioner of such a proposed acquisition is premature." Okay then -- developing... CRA 2004 (and the anti-predatory lending fight, which BofA keeps dodging and refusing to address) will heat up with public hearings on Bank of America's Fleet acquisition proposal, Jan. 14 in Boston and Jan. 16 in San Francisco... Happy holidays. Until next time, for or with more information, contact us. 

December 22, 2003

   In this cold season, Inner City Press has just received hot documents on Chase Manhattan, and has redirected them to the Federal Reserve, in a timely comment opposing Chase's application to the Fed to set up Chase FSB to preempt state consumer protection laws. The comment includes documents obtained from the Oregon Department of Justice (OR-DOJ). Among the documents in the ORDOJ's first FOIA response to ICP is correspondence concerning Chase Manhattan Mortgage Corp. ("CMMC") and false social security numbers -- an issue that the state regulator received complaints about, and then, for whatever reason, allowed Chase itself to investigate. According to Chase Associate General Counsel Laura O'Hara's June 5, 2003, letter to ORDOJ:

"Chase conducted an investigation with respect to the allegations set forth in your Letter. We related the results of that investigation upon your agreement that it would not constitute a waiver of the attorney client privilege. As part of that investigation, Mr. Hernandez was asked to come to our New Jersey headquarters and was interviewed by two attorneys and a senior investigator from our Fraud Prevention and Investigation Department ('FP&I'). After a thorough and intensive questioning, we found no evidence that Mr. Hernandez had 'condoned the use of bad social security numbers'... When Chase was notified by HUD that there were possible invalid SSNs on the Cortez and Alejandro Sierra loans in 2001, these files were immediately referred to our Quality Assurance Department. That department determined that the SSNs were invalid and determined that the borrowers had supplied falsified documents to Chase... If he were applying for a loan today... we would have found material misrepresentation in connection with the SSN submitted and would have declined the loan. This would be reported as a borrower misrepresentation in the Suspicious Activity Report ('SAR') that we file with FINCEN."

Even the ORDOJ, in responding to the above, noted that

"It appears there were Social Security number problems in all three consumer files including Gonzalez which apparently you had not yet discovered... we have persons claiming different things... Chase is very quick or possibly too quick to act once a person in possession is shown to have a bad social security number... You indicate Mr. Hernandez himself investigated after an alert and found two numbers incorrect; but while he found the third one correct it looks like that is now called into question as well... Whether Mr. Hernandez ever in fact winked at the use of a bad number we'll never know though I know you believe the evidence is he did not. Still, three transactions is a lot."

   And it's more than three -- we hear this not only from OR-DOJ, but also with regard to Chase's mass-purchase of loans in the Poconos with inflated appraisals. Something's wrong at Chase Manhattan, and putting it under an agency, the Office of Thrift Supervision, that's just desperate for assessment fees is sure not the answer...

  In a deal that may well die, New Haven Savings Bank's December 13 response to Federal Reserve questions tries to withhold from ICP each and every exhibit. ICP has appealed: "the withheld exhibits, for example, provide descriptions of loan programs NHSB purports to have, including small business and mortgage loans, information about community development loans, etc. Contrary to NHSB's boilerplate request for confidential treatment, this type of information is routinely not withheld in similar responses by other banks, NHSB's peers. NHSB and its counsel would be expected to know this -- any delay occasioned by NHSB's meritless requests for confidential treatment should not be allowed to prejudice the public, including timely commenter such as ICP. All improperly withheld information should be released forthwith, prior to the FRB rendering any decision on NHSB' applications other than denial"...

December 15, 2003

   One merger, not surprisingly, begets another: on Dec. 9, BankNorth Group announced a proposal to buy Cape Cod Bank and Trust, for about $300 million... On the instigator BofA - Fleet, the plot thickened last week, with the Massachusetts congressional delegation calling, in their nuanced way, for public hearing(s) on BofA's proposal. Even without that joint letter, it seems clear that the Fed would have to hold a public meeting on a $47 billion bank mega-merger which would go over the 10% deposit cap included in the 1994 interstate banking law. But this should nail it down. We call the letter "nuanced" in comparison, for example, to Pennsylvania elected officials' advocacy when First Union (now Wachovia) was applying to buy Philadelphia-based CoreStates. As the process proceeds, we can compare results, as well...

    ICP / Fair Finance Watch has now filed timely comments with the New York Banking Department opposition HSBC's applications to the NYBD to acquire Bank of Bermuda:

Dear Superintendent Taylor, Mr. Kramer, Ms. Kent, NYBD:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this timely submission opposes, and requests a hearing and an extension of the comment period on the applications of HSBC Holdings PLC (along with its affiliates, including Household International, "HSBC") to become a bank holding company through the proposed acquisition of The Bank of Bermuda Limited, and Bank of Bermuda (New York), Limited, New York, New York (the "Applications").

   While the focus of this first ICP comment is on HSBC's and Household's presumptive violations of state and federal fair lending laws, you should be aware that substantial outcry against this HSBC proposal exists, in Bermuda. ICP has been contacted, and now enters into the record --

Subj: HSBC / Bank of Bermuda

Date: 12/13/03 7:47:44 PM Eastern Standard Time

From: [Address withheld, but available at public web site, below]

To: Lee [at] FairFinanceWatch.org

...To encapsulate a lengthy tale, it seems that while the negotiations were going on with HSBC, at least two trust officers at the Bank of Bermuda were encouraging their accounts to sell their stock in the Bank. At whose prompting this occurred is still unclear, but it has made all sorts of headlines down here. At least in terms of the opinion of the man in the street, it would seem that, just perhaps, a corner has been turned. Take a look at what's been published recently... at .http://users.rcn.com/wlipman/page2.htm

(--which is incorporated herein by reference). Also please note: ICP formally objects to this application being considered by written vote, including because this would evade the requirements of the Open Meetings Law.

   ICP is and has been concerned both about the Community Reinvestment Act ("CRA") and fair lending performance of HSBC Bank USA, and about what ICP views as ongoing and expanding predatory lending by HSBC's Household International unit(s), including but not limited to (a) the Decision One unit and other brokered real estate loans, and (b) in Household's non-real estate subprime lending. Neither (a) nor (b) was addressed or reformed in any way by the NYBD's October and December 2002 Settlement with Household. When ICP asked why not, ICP was told because the NYBD had purportedly received fewer complaints about those parts of Household's business. ICP requested, under FOIL, records that would confirm or disprove those statements, but was never provided with such records. ICP has submitted another FOIL request, for those records and a copy of this application, explicitly asking for expedited treatment during this proceeding. ICP is hereby timely requesting that the NYBB/NYBD deny HSBC's applications on the current record, an evidentiary hearing, and an extension of the comment period.

  In the interim, ICP has analyzed HSBC's and Household's mortgage lending in the most recent year for which Home Mortgage Disclosure Act is available: 2002. Since Household hardly reports home purchase loans, ICP has focused on Household's refinance and home improvement lending, and comparing it to HSBC's normal-interest rate offerings. The pattern make out a presumptive violation of the state and federal fair lending laws.

  In the New York City Metropolitan Statistical Area, HSBC (cumulating HSBC Bank and HSBC Mortgage Corporation) in 2002 made 1513 refinance loans to whites, 183 such loans to African Americans, and 138 to Latinos. Among these three group, 10.0% of HSBC's loans were to African Americans, and 7.5% were to Latinos.

  By comparison in the NYC MSA in 2002, 45.5% of the higher-cost refinance loans of Household (combining Household Finance Co. and Beneficial Corp.) were to African Americans (versus 10% for HSBC, and 17.42% for the aggregate); 40.9% of Household's refinance loans were to Latinos (versus 7.5% for HSBC, and 9.91% for the aggregate).

  HSBC, with normal rate credit, disproportionately excludes African Americans and Latinos (despite and in seeming contravention of its earlier required pledges to the NYBD, when it expanded into Pennsylvania), while Household targets these same groups for higher-cost credit. The HSBC Group systemically violates fair lending laws, and its applications should be denied.

  Consider also HSBC's and Household's record of home improvement lending. HSBC Bank in 2002 in the NYC MSA made 51 home improvement loans to whites, 18 such loans to African Americans, and 13 to Latinos. Among these three group, 22.0% of HSBC's loans were to African Americans, and 15.9% were to Latinos.

  By comparison in the NYC MSA in 2002, 48.8% of the higher-cost home improvement loans of Household (combining Household Finance Co. and Beneficial Corp.) were to African Americans (versus 22% for HSBC Bank); 29.4% of Household's refinance loans were to Latinos (versus 15.9% for HSBC Bank).

   Consider also HSBC's and Household's records in HSBC's USA headquarters MSA of Buffalo. HSBC Bank in 2002 in the Buffalo MSA made 373 home improvement loans to whites, and 13 such loans to African Americans: a ratio of 28.7 loans to whites for every loan to an African American.

   By comparison in the Buffalo MSA in 2002, Household (combining Household Finance Co. and Beneficial Corp.) made 2.5 home improvement loans to whites for every such loan to an African American. HSBC, with normal rate credit, disproportionately excludes African Americans and Latinos (despite and in seeming contravention of its earlier required pledges to the NYBD), while Household targets these same groups for higher-cost credit. The HSBC Group systemically violates fair lending laws, and its applications should be denied....

   Household claims to have adopted "best practices;" HSBC has alluded to these Household "best practices," arguing that they militated for the approval of its applications to acquire Household. But HSBC continues to litigate to keep information about Household's lending practices confidential, despite freedom of information requests, and administrative victories, by ICP. See, e.g., <http://www.oag.state.tx.us/opinopen/opinions/orl50abbott/orl2003/or032162.htm> -- despite the Texas AG's ruling, ICP STILL does not have the documents, as Household uses the court system to delay their release, and <http://www.in.gov/pac/advisory/2003/2003fc17.html>.

  We urge the NYBD to also ask HSBC to what, if any, degree its supposed "best practices" would apply to its operations there, in connection with HSBC's instant proposal to acquire (and impose Household's practices on) Bank of Bermuda, including its community banking operations in Bermuda. [rest of comment omitted in this format].

December 8, 2003

    Alongside our coverage of Bank of America - Fleet and Citigroup - WaMu Finance, the developing furor around New Haven Savings Bank's proposal to demutualize and buy two banks is particularly interesting. ICP has commented, to Connecticut, the FDIC and Federal Reserve -- and on December 4, the Connecticut Banking Commissioner held a hearing, which could not even accommodate all those who signed up to speak for three minutes. There'll be a second hearing; ICP has asked the Federal Reserve Board to extend it comment period, and to hold its own hearing.

    And now, a plug and a link: Commonweal magazine of Dec. 5, 2003, under the heading "Critics' Choices for Christmas," says this of Predatory Bender: "as vivid an account of life in the Bronx as you are likely to read; more than that, it is a brilliant act of subversion, for within the thriller plot is found a dramatic account of the ways corporations prey on the poor while the rest of us aren't looking."

   Speaking of looking, ICP's Constitutional challenge to the Delaware Freedom of Information Act's "citizens-only" provision is proceeding, having been assigned to Judge Joseph Farnan, is now described on FirstAmendmentCenter.org (click here to view); a editorial in the Wilmington News-Journal of December 4, 2003, "Our View: Change the State's Open Records Statute So It Applies to All," recounts ICP's "federal lawsuit asserting Delaware's open-records law is unconstitutional because it refuses access to non-residents," then opines that the "exclusion is silly and probably unconstitutional. The General Assembly should attend to this when it returns to session next month." We'll see.

December 1, 2003

    Our main action this week is opposing Citigroup's most recent Predatory Bender, its Nov. 24 proposal to acquire over 400 subprime lending offices in 25 states from Washington Mutual, for $1.25 billion. A bit of Bank Beat color: reporters were told of the deal by Citigroup's press flacks at 7 p.m., while some of them were fawning around Citigroup's prized show dog, Robert Rubin. No one, apparently, dared ask the ex-Treasury Secretary: why are you the front-man for a predatory lender? Soon Mr. Rubin jetted west to San Francisco. Twenty-eight of the WaMu Finance offices at issue are in California; on the other hand, sixty are in Tennessee. Press accounts described WaMu Finance as serving small town America; Citigroup emphasized the "footprint" in Florida and Texas, shamelessly equating Latino with subprime. Thirty-six of the offices are in Louisiana, and 37 in North Carolina. The reality is, there are more WaMu Finance offices in Tennessee than in Texas, and more in North Carolina than in Florida. This is CitiFinancial targeting Subprime Central -- we are Inner City Press have a name for this: Predatory Bender, it's what Citi's on. On that front, the American Banker of Dec. 1, 2003, says that the novel "draws from years of challenging bank mergers and lending practices, and appears to blend the images of companies such as Citigroup Inc. and Bank of America Corp... [ICP will] fight Citigroup's deal, announced last week, to buy Washington Mutual Inc.'s consumer lending unit." Well, yeah -- Inner City Press has now filed comments and exhibits opposing Citigroup's WaMu Finance proposal, and asking for investigations of CitiFinancial, with regulators in 25 states; each is viewable by clicking the name of the state: Alabama, California, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia.

    But here's something on the Bank Beat that shouldn't be missed, in the pre- and post-Thanksgiving hoopla: in Staten Island Bancorp's sell-off proposal, its nationwide mortgage company SIB Mortgage Corp. would go to... Lehman Brothers. Lehman's more and more involved, and directly, in predatory lending: their strategy seems to be, cut out the middleman. They'll originate their own mortgages to fuel the securitization pipeline, through Lehman Brothers Bank FSB and otherwise. Something to watch... over Thanksgiving, in Korea and France, GE Capital continued its hunting of consumer finance: a ranking GE Korea official essentially confirmed a local daily's report that GE is considering an acquisition of debt-ridden LG Card, the nation's largest credit issuer. The Chosun Ilbo reported Friday that the local arm of the global electric giant was consulting with its parent company on the acquisition of LG Card. About the report, Lee Hyun-seung, a GE Korea executive director, said to Yonhap News Agency, "What we can tell you is we've never made contact with LG Card creditors, but it's true we have long been interested in the Korean credit card market." (Asia Pulse). Meanwhile, Abbey National said on Nov. 28 it is in advanced talks with GE to sell part of its French business, mortgage lender Royal St Georges Banque...

November 24, 2003

   Last week, Inner City Press / Fair Finance Watch filed a 30-page challenge to Bank of America's applications to acquire Fleet, click here to view. That does not, however, mean that there's not other work to be done. For example, having successfully opposed Royal Bank of Scotland's request to the Federal Reserve for a waiver from the need to apply to acquire Thistle and Roxborough Manayunk Bank in Philly, ICP's comments on RBS' application were due on November 24. The deadline was yet, thusly:

Dear Chairman Greenspan, Governors, President Minehan, Directors, Mr. Fine, et al.:

   On behalf of Inner City Press / Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP") this letter (1) is a third comments in opposition to Royal Bank of Scotland / Citizens Financial Group's ("RBS's") proposal to acquire Thistle Group Holdings Co. and Roxborough Manayunk Bank ("Roxborough"); and (2) further amplifies, including in light of the Federal Reserve Board's October 17, 2003, partial response, the waiver and other issues raised in ICP's October 2, 13 and 20 submissions.

   Because this RBS Citizens' proposal is primarily in Pennsylvania (ICP's previous comments have analyzed Delaware data as well), ICP has reviewed Citizens Bank of Pennsylvania's lending in several Pennsylvania Metropolitan Statistical Areas ("MSAs"), including York and Erie. ICP has previously analyzed Philadelphia and Pittsburgh; as there, Citizens' record is disparate. RBS has attempted to defend the high denial rates of its banks, for conventional home purchase loans, by shifting the focus to its mortgage company, CMC. But ICP has pointed out that some still undefined portion of CMC's lending relates to subprime loans, under agreements RBS / Citizens has with Option One, Fremont Investment & Loan, and the Keycorp unit formerly known as Champion Mortgage. Until those issues are addressed -- below ICP provide more timely evidence for the record concerning RBS' partners Option One, and also Accredited Home Lenders, Inc., see infra -- ICP focuses on Citizens Banks' refinance and home improvement lending.

  In the York, Pennsylvania MSA in 2002, Citizens Bank of Pennsylvania had a 100% denial rate for home improvement loan applications from African Americans, and a 100% denial rate for home improvement loan applications from Latinos. Its denial rate for whites was 27.9%. In this same MSA, Citizens Bank of Pennsylvania had a 100% denial rate for refinance applications from Latinos.

  In the Erie PA MSA in 2002, Citizens Bank of Pennsylvania had a 80% denial rate for home improvement loan applications from African Americans, and made no home improvement loans to Latinos. Its denial rate for whites was 34.3%. In this same MSA, Citizens Bank of Pennsylvania had a 75% denial rate for refinance applications from Latinos.

  RBS Citizens might attempt to explain these glaring disparities by stressing that there are relatively few members of protected classes (for fair lending purposes)in these two MSAs. ICP would point out that there are certainly not none, and that this in fact make fairness by large institutions like RBS Citizens all the more important. Especially, as discussed below, when the same large institutions, RBS, is enabling questionable subprime lenders who target these same groups.

  RBS has admitted that CMC does business with Option One -- ICP has previously submitted into the record a copy of the agreement and contract. Here is an indication of Option One's updated record, in 2002: [omitted in this format; ICP has previously made part of the record that Option One applied for a thrift charter, but then was multiply-opposed and withdrew its application, etc.].

  RBS' Greenwich Capital Markets has become a central player in opposing consumer protection laws regarding predatory lending. See, e.g., Asset Securitization Report of November 17, 2003, "Greenwich says no to N.J. mortgages:" [omitted] Royal Bank of Scotland attempting to affect and undermine consumer protection legislation enacted by duly elected legislatures is, to put it diplomatically, distasteful. RBS is a major player in, and one of the major creators of, the dual credit system. -- not only via CMC's agreements with at least three subprime lenders, but also via RBS' Greenwich Capital Market's enabling of questionable subprime lenders. Beyond what ICP has previously presented (and which RBS has not, the record will show, addressed), see e.g., the May 6, 2003, Underwriting Agreement related to the Greenwich Capital Markets (and Asset Backed Funding Corp.) - underwritten and sold ASSET BK FDG CORP ABFC CER SER 03 AHL1, and other public documents regarding AHL (Accredited Home Lenders). Here is a sampling of Accredited's 2002 record: in the New York City MSA in 2002, for conventional home purchase loans, Accredited Home Lenders reported 37 loans to African Americans, 20 loans to Latinos, and 41 loans to whites. Among these three groups, 37.8% of Option One's high-cost loans were to African Americans and 20.4% were to Latinos. The figures for the aggregate industry in 2000 were 13.87% and 13.47%, respectively. The "targeting index" for Accredited was 2.72 for African Americans and 1.51 for Latinos. This is to say: while Citizens disproportionately denies and excludes African Americans and Latinos from normal interest rate credit, its mortgage company does business with, and its investment bank GCM enables and underwrites for, questionable subprime lenders who target these same groups with high-cost, often abusive credit. RBS's applications should be denied.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

   A stray Federal Reserve / pop culture question: given the Fed's growing lack of follow-up (see this week's ICP Fed Watch Report for a recent litany), we're curious to see what action will be taken on reports that U.S. Trust, long coddled by the Fed, even before the Board let Schwab buy it, helped Rush Limbaugh smurf his way around the $10,000 anti-money laundering threshhold. U.S. Trust delivered $9,900 to El Rushbo -- helping a client in need, apparently.  "To get his business, Limbaugh said, U.S. Trust told him that 'if I needed cash, they would bring it to me.' They also suggested he take out less than $10,000 at a time to help cut down their paperwork, he said." Great... Will the enforcement hammer further fall, on this the first spawn of the Gramm-Leach-Bliley Act? We'll see.

November 17, 2003

    This week, we have an update on the pending PNC merger applications. We also note, as one of the more interesting bank rumors out there, the UK reports that Barclays is in discussions with North Fork, Greenpoint or Sovereign -- supportedly, Barclays' CEO-elect John Varley is stalking the Northeast, advised by CSFB.... On November 10 and 12, we received responses by PNC, this time by their Chief Regulatory Officer, Jack Wixted (who until recently worked in the Federal Reserve System). Actually, that's of concern -- where are the "revolving door" safeguards which, at most government agencies, prohibit a recent official from representing private interests before the agency he or she just left. We've raised the issue:

Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:

On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a supplemental comment opposing, and requesting an extension of the comment period and an evidentiary hearing on, the Applications of PNC Financial Services Group, Inc., PNC Bancorp, Inc. and their affiliates (on- and off-balance sheet, collectively "PNC") to acquire United National Bancorp & United Trust Bank ("United").

Having received, on November 10, a copy of Mr. Wixted's purported response to ICP's timely comments, as well as a binder with half of the exhibits missing, responding to a FRB Additional Information letter we have not yet seen, ICP is compelled to comment at this time.

First, ICP is surprised and troubled that an individual so recently with the Federal Reserve System, Mr. Wixted, is representing and appearing for PNC in this contested matter. Many agencies explicitly prohibit this, under the rubric of "revolving door" prohibitions or ethics / conflicts of interest more generally. See, e.g., the rules obtaining to the N.Y. Banking Department, and others. The issue of improper ex parte communications / prejudgment is already raised in this proceeding, including in light of Mr. Rohr's statements that the proposal has already been presented to and/or vetted by the FRS. To now have an individual so recently an official of the FRS step in for PNC's in-house (previously Fleet) legal counsel, and denounced ICP's comments as "without merit," using arguments that are either only for the initiated or otherwise unintelligible -- compounds the problem. ICP reiterates its request for an evidentiary hearing, including to clear the (now even less clean / clear) air.

Mr. Wixted's letter's first point appears to relate to the discrepancies between the data in PNC's first response and that publicly available on FFIEC.gov. Apparently, PNC did not use the data it turned in to the FFIEC, but rather data "for CRA Wiz, a proprietary database widely used by banks as well as the Federal bank regulators." As noted above, these "insider" arguments, and the attempt to exclude the public by relying on "proprietary" databases rather than the data that is open to the public by statute -- militate for the timely requested hearing. Mr. Wixted then states, as his explanation, that "PNC does not use the 'Joint Race' filter... the Joint Race filter excludes loan applications where the primary applicant and any co-applicants are of different races - even if they are both minorities."

But neither did ICP use any "Joint Race" filter - ICP used the publicly available HMDA data on FFIEC.gov. Mr. Wixted's explanation is no explanation at all. The requested hearing, including on the discrepancies between the public data and PNC's "proprietary" and unexplained data, should be held forthwith.

Mr. Wixted's second point refers to "voluminous data" which PNC submitted to the FRB on November 6. ICP received this bind on November 10 -- but found that at least half of the material is missing. Nor, in what it send, has PNC even set forth the FRB questions it is responding to. The material that has not been redacted -- the propriety of PNC's withholdings should be reviewed forthwith, and all non-exempt material should be provided to ICP -- show that in the OCC exam on which PNC asks the FRB to rely, numerous communities and MSAs were subject only to "limited scope" review, including, in New Jersey: Trenton, Jersey City, Atlantic City, Middlesex, Monmouth, Vineland; in Pennsylvania, Allentown, Erie, Harrisburg, Johnstown, Lancaster, State College, Williamsport, York, and all 999 (as in Kentucky and Florida).

Then, withheld in their entirety, are

Tab 1.a: description of loan products and programs (portions)

Tab 1.b: small business program

Tab 1.c: Description of Community Development Lending (and Investment, 1-d).

Also withheld: "Discussion of branch closures and consolidations;" fair lending policy, etc..

The (im)propriety of PNC's withholdings should be reviewed forthwith, and all non-exempt material should be provided to ICP. Since PNC was to send a copy of this material to ICP, ICP should not have to submit a new FOIA request, and start a new time-clock. ICP is STILL waiting for the records reflecting PNC's communication with the FRB about this proposal, referred to by Mr. Rohr and long-ago requested by ICP. All records should be provided forthwith.

Mr. Wixted's third -- and apparently final -- point consists of a two-sentence paragraph essentially saying, "take our word for it" -- "PNC has reviewed the personnel records... PNC believes that these employees were treated in a fair and appropriate manner." Compare to their statements in ICP's Oct. 29 comment.

That's all Mr. Wixted says -- he even says, at page 1, that "PNC does not intend to respond to any subsequent comments filed by ICP." Note that PNC's counsel delayed until November 12 to provide ICP with a copy of PNC's CRA-relevant submission to the OCC in late October -- and that, in that CRA-relevant response, PNC simply refused to provide an analysis of its lending by race, as the OCC had requested. PNC is free, legally, to not respond -- but the FRB should either hold the requested hearing, or simply denied PNC's applications, without holding the requested hearing. The FRB should, in any event, make clear its "revolving door" policies, or lack thereof. On the current record, PNC's applications could not legitimately be approved.

   State-by-state action, on predatory lending, bank mergers and redlining, is addressed in this new ICP map, which may be of use during the BofA-Fleet process -- click here to view and use.

November 10, 2003

   This week -- general then self-serving publishing news. In that order:   Provident Bankshares Corp. on Nov. 3 announced a proposal to acquire Southern Financial Bancorp for $330 million to expand its presence in the Washington, D.C. and Virginia areas. Wackier, Deutsche Bank on Nov. 3 disclosed a plan to buy a 40 percent stake in the Russian investment bank United Financial Group. The companies, DB said, will also form a "strategic partnership for the sale and trade of Russian equities, Russian equity research and Russian corporate finance."

   We usually try not to be self-serving, much less crassly commercial -- but if we didn't use this space to announce the availability of Inner City Press' new book, "Predatory Bender," it'd mean we didn't believe in the book, right? And we do. So click here for more information, including sample chapters. It is also available for direct credit card order here (this is the fastest way), through Amazon.com, Powells.com, Barnes and Noble.com, etc.. Freedom of the press...

November 3, 2003

   Of Bank of America and Fleet, we'll have much to say in coming weeks. For now, we've started our B of A Watch, click here to view. While B of A prepares its applications for regulatory approval, ICP's has commented on pending transactions, from RBS/Citizens' Philadelphia proposal (Federal Reserve comment period runs through Nov. 24), and others. PNC finally submitted a response, to the Federal Reserve and OCC. But, as set forth below, PNC used inaccurate data.

  Having received, on the afternoon of October 28, PNC's purported response to ICP's First Comment, ICP quickly noticed that the data used in PNC's Response does not appear consistent with that publicly available on <FFIEC.gov>. PNC chooses four markets in which to present its refinancing lending, by denial rate disparity (which it defines as "DDR"). The first of these markets is PNC's headquarters, Pittsburgh. PNC states that its "DDR for Hispanic applicants was 1.66 versus an industry average of 1.47."

   According to FFIEC.gov, for refinance lending activity in the Pittsburgh MSA in 2002, PNC Bank, N.A. denied 24.2% of applications from whites, and 60% of applications from Hispanics. PNC Bank N.A.'s denial rate disparity, then, is 2.47 -- substantially higher than the 1.66 claimed in PNC's Response, at the top of page 5.

  As simply another example, PNC claims that in Louisville, its "DDR for Hispanic applicants was 2.71 versus an industry average of 1.55." (Note that even as under-reported by PNC, its denial rate disparity for Latinos was much higher than the aggregate's). But it's worse: according to the government / official web site FFIEC.gov, for refinance lending activity in the Louisville MSA in 2002, PNC Bank, N.A. denied 21.0% of applications from whites, and 66.7% of applications from Hispanics. PNC Bank N.A.'s denial rate disparity, then, is 3.14 -- substantially higher than the 2.71 claimed in PNC's Response, and even more disparate that the aggregate industry.

   Beyond the disparities, PNC's use in its purported response of data that is inconsistent with what it reported to the government, and which is publicly available, is troubling, to say the least. PNC's Response characterizes ICP's arguments as "formulaic," but then PNC uses apparently inaccurate data, and inapplicable defenses such as that high denial rates "can be the results of successfully recruiting minorities" - not the case here, especially where PNC has chosen to de-emphasize home purchase and home improvement loans, major credit needs it now underserves. It should be clarified, explained or corrected as quickly as possible, and the comment period should be extended until this is done. ICP also reiterates its request for an evidentiary hearing. Clearly, there are disputes of fact.

   Still on CRA issues, ICP wishes to highlight, and for the Board to address and act on, PNC's Response's argument that the disparities in its home purchase and home improvement lending can be ignored, since following a sale to Washington Mutual, "home improvement loans are not a major PNC product line," and "since that time [the sale to WaMu], the bulk of PNC's mortgage lending has consisted of refinancing." PNC Resp. at 4.

   ICP is aware of the Board's standard footnote explanation, that the CRA does not require that particular products be offered. However, among retail, deposit-gathering banks, PNC is number one in Pennsylvania, and number three (and trying to become more dominant) in New Jersey. When a bank with such market share decides to drop or de-emphasize, in its deposit-taking footprint, the crucial credit product of homes for home ownership, or for home improvement, this has a negative effect which should be addressed. That PNC cynically tries to explain away the disparities in its remaining home purchase and home improvement lending by saying that it focuses on only refinancing now -- and then uses refinance loan data that is inconsistent with what is on FFIEC.gov, is troubling, militates for the public hearing and extension of the comment period that ICP has requested, and that PNC's applications be denied.

   Following submission of its first comment, ICP was contacted by individuals who until recently worked for PNC, and no longer do for reasons they assert relate to racial discrimination. ICP has forwarded their accounts of "good times at PNC" to the Fed, demanding that action be taken thereon... PNC's claim that ICP's statement that what took place was accounting fraud "demonstrates a fundamental misunderstanding of recent event" does not jibe with its claimed "willingness to acknowledge responsibility for its actions in connection with the PAGIC transactions" (Resp. at 3). ICP continues to await the records, responsive to its FOIA request of September 19 (more than a month ago), regarding PNC's communications with the Federal Reserve System about this proposal. The FRB Deputy Secretary's October 23 letter to ICP extended the comment period through October 29, noting ICP's September 19 request and the provision of the application on October 10 -- however, ICP's September 19 request was for more than the application. The requested "communications" become more central to this proceeding following PNC's Response's reiteration that PNC CEO Rohr "reviewed this transaction" -- apparently, before it was publicly announced -- with unnamed officials in the Federal Reserve System. PNC's Response refers to "seek[ing] the central bank's approval for most major business transactions." Resp. at 3. ICP contends that, in this case, issues are raised concerning the appearance of prejudgment. For example, while in Citicorp-Travelers in 1998, the Board explained that the pre-announcement contacts were not preapproval since they involved only a request for, and response with, the FRB General Counsel's view of the two- or five-year retention period under the BHC Act, here it appears that the pre-announcement contact -- presumably with staff of a Reserve Bank, which claims not to be subject to FOIA -- involved "approv[ing a] major business decision." If the green light given was not on a generic matter of legal interpretation, but went to the merits of the "business decision," then the air must be cleared, first by release of the requested records, and second by holding the requested evidentiary hearing. Note that in Citicorp-Travelers, even while the Board claimed that notes taken at the meeting(s) were personal documents and not "records of the Board," the Board nevertheless issued a letter detailing the contacts, and the companies' counsel's written communications to the FRS. Here, NO records related to the communications have been released, nor has any explanation been given, even in the form of the Board Secretary's letter concerning the Citicorp-Travelers contacts. On the current record, PNC's applications should not be approved. We'll see...  

October 27, 2003 Click here for ICP's Oct. 27, 2003, statement on Bank of America - Fleet

This week a Royal Bank of Scotland update, and extended comment periods on PNC - United, Credit Agricole and others. Last Monday's report included portions of ICP's comments to the Swiss regulatory agency, opposing RBS' Coutts Bank's proposal to acquire HVB's Bank von Ernst. When, the Swiss regulators responded on October 23, and now we've replied, as follows:

Dear Messrs. Franchetti and Robert-Nicoud and others the SFBC:

    On behalf of the non-governmental organization Inner City Press / Fair Finance Watch (collectively, "ICP") this responds to your letter of October 23-24, 2003, and is in further opposition to the proposal by Coutts Bank (Switzerland) to acquire Bank von Ernst. Your letter, which we appreciated, asserts among other things that ICP's October 20 comment "target various entities associated with the Royal Bank of Scotland" but do not "directly concern[] Coutts Bank - a duly authorized and supervised Swiss Bank - and as such is not relevant to its acquisition of Bank von Ernst."

   This letter provides relevant information about Coutts Bank (Switzerland). Your letter acknowledges that the SFBC is required to investigate complaints that allege possible violations or unauthorized activities, and "regulates the ownership of Swiss banks." ICP and its Fair Finance Watch contend that these two duties are related: that before allowing, affirmatively or by inaction, a bank - in this case RBS' Coutts Bank (Switzerland) - to acquire a Swiss bank, the SFBC must review relevant adverse information, particularly but not only concerning lax anti-money laundering procedures - about the banks. We believe that such is implicit in the discourse of the Basel Committee on Banking Supervision and other relevant bodies and treaties (including those cited in our Oct. 20 Comment).

   The RBS material we have provided is relevant to RBS' direct, 100% owned subsidiary Coutts Bank (Switzerland). But, directly as to Coutts Bank (Switzerland), note that the Philippine Daily Inquirer of September 5, 2003, "Senate to Re-Open Probe of $2 Million Extort Case," reported that

"On Dec. 12, 2002, the Money Laundering Reporting Office Switzerland of the Federal Police Office passed information to the Prosecution of the Swiss Confederation concerning Perez and the others... On March 27, 2001, EFG Private Bank SA, Geneva branch, opened Account No. 338'128 in the name of Ernest de Leon Escaler. The bank opened another account, No. 338'372, at the request of Escaler but in the name of Lucky Clover Enterprises Ltd. Someone authorized by Capcept Ltd. signed the documents for the opening of this account while the company EFG Financial Advisory Pie Ltd. tied up the banking transaction.
"Documents relative to the opening of Account No. 338'118 of Rosario Perez and Arceo said Escaler was the 'center of influence of EFG Financial Advisory in the Philippines.' Accounts were opened in the name of the same holders at EFG Private Bank SA, Guernsey branch.
"Pointing out Philippine news stories that these people were involved in the bribe scandal, it was confirmed that Account No. 338'118 received $ 1 million from the account of Escaler at the Coutts (Schweiz) AG Hong Kong." (emphasis added).

    Your letter chided ICP for not having commented directly on RBS' Coutts Bank subsidiary (which the above addresses); your letter also sought to limit your jurisdiction to violations of Swiss (rather than international law, or the applicable laws of countries in which Coutts Bank (Switzerland) and RBS do business). As to Swiss law, see, e.g., the Manila Standard of September 5, 2003, reporting that Mark Jiminez

"accused Perez of extorting $ 2 million from him, forcing him to transmit $ 2 million from his account in the Trade and Commerce Bank of Uruguay to the account of Escaler at Coutts Bank in Hong Kong.
"Osmena said the details provided by Jimenez jibed with the details provided by the Swiss government... If the paper trail is established, Perez will be facing not only money laundering charges in Switzerland but also plunder charges under Philippine laws." Emphasis added.

   The transfers involving Coutts Bank (Schweiz) AG are related to alleged corruption and environmental and social harm. As summarized by the Manila Bulletin of September 4, 2003, authorities

"accused Perez of accepting $ 2 million in exchange for his approval of the controversial power contract with Argentina firm Industries Metalurgicas Pescarmona C.A. (IMPSA) involving an amount of $ 470 million. Perez, after giving out a legal opinion in favor of the Impsa - Caliraya-BotocanKalayaan hydroelectric plant, allegedly deposited $ 2-million in Coutts Bank in Hong Kong in the name of his brother in law and business associate Ernest Escaler."

   Note that "Escaler is a former consultant of Coutts Bank for the Philippines," Philippine Daily Inquirer of August 19, 2003, "OPLE CONFIRMS SWISS GOV'T PROBING PEREZ." We assert that the lack of standards -- lack of human rights standards, lack of anti-money laundering safeguards, enabling of predatory lending -- that we have sketched at Royal Bank of Scotland is also evidenced at the RBS subsidiary before you, Coutts Bank (Switzerland). We reiterate our request for a hearing and appropriate inquiry, and that RBS / Coutts Bank's applications and proposal be denied, stopped and/or enjoined.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

     Strange and silent partial break in the weather -- since September 29, Inner City Press has expressed to the Federal Reserve its opposition to the Fed granting Royal Bank of Scotland any waiver from the need to apply, in light of redlining, predatory lending and money laundering issues ICP is raising (and exist) about RBS. The lack of transparency regarding such waiver requests led ICP, in early October, to request from each of the Reserve Banks, and from the Board, notice of pending waiver requests. The Fed has yet to substantively respond. However, the Federal Reserve Bank of Boston, to its credit, informed ICP of a waiver request by RBS, and on October 21 send ICP a copy of the waiver request (which ICP opposed, in two comments). Then, the Fed's October 24 "Form H2A" listed an application as having now been filed by RBS, with a comment period running through November 24. It shouldn't have had to be this difficult, but we're appreciative at least of the Federal Reserve Bank of Boston's attempts to be less opaque. But the other Reserve Banks? And the Board? So far, nothing. (Although the Board did extend some comment periods last week, which although only logical we've come to appreciate, because it's not always done, even when documents are being improperly withheld). Here, the Board has granted ICP until October 29 to comment on PNC - United -- by then, we should have PNC's response, such as it will be -- , and until November 3 to comment on the more-than-a-little-strange applications by Credit Agricole, regarding the already-acquired (and scandal-plagued) Credit Lyonnais. Also last week, we received a copy of the OCC's letter to JPMorgan Chase, stating the applications for the Morgan Chase - Bank One corporate trust proposal were "removed from expedited processing to allow for sufficient time to review CRA-related public comments received for this filing. Please do not proceed with your proposal until you have been notified by the [OCC] that the application has been decided." Developing... 

October 20, 2003

   With Royal Bank of Scotland, public interest advocacy (and private interest stealth maneuvers) continue. RBS has tried to petition the Federal Reserve Bank of Boston, using a Massachusetts response on an unrelated transaction, to give it a waiver from the need to apply to buy Philadelphia-area bank Roxborough-Manayunk (how it got that name is unclear). Meanwhile RBS in Europe is trying to buy Bank von Ernst in Switzerland -- ICP filed comments with the Swiss regulators on October 20, including on RBS' well-documented break-downs in anti-money laundering safeguards (FSA last year; Al Barakaat - Al Qaeda before that).

Swiss Federal Banking Commission, CH-3001 Berne

Re: Formal opposition to Royal Bank of Scotland's proposal, announced October 9, to acquire through Coutts Bank (Switzerland) HVB's Bank Von Ernst

To Whom it May Concern at the Swiss Federal Banking Commission:

On behalf of the non-governmental organization Inner City Press / Fair Finance Watch (collectively, "ICP") this letter is a formal Comment opposing the proposal, announced on October 9, 2003, by Royal Bank of Scotland and its subsidiary Coutts Bank (Switzerland) (together, "RBS"), to acquire HVB's Bank von Ernst. As set for the below, RBS has lax anti-money laundering procedures, and is also engaged in apparent discrimination which your agency has a duty, more legal and moral, to act on. ICP is requesting a public hearing on this matter, and that you deny RBS' applications.

In December 2002, RBS was hit with an unprecedented fine for lack of anti-money laundering safeguards. See, e.g., Financial Times of December 18, 2002, "RBS Fined over Anti-Laundering Controls," by Jane Croft... The FSA's own December 17, 2002, press release stated that [quotation omitted] Note in this regard the nexus to post-9/11 issues, see, e.g., the Wall Street Journal of November 9, 2001 (Network Suspected of Funding Terrorists Used Major Banks for Money Transfers), reporting that Al-Barakaat (which was raided by the FBI on November 7) opened an account with RBS' Citizens Bank in March 2000, and subsequently wired nearly $600,000 to the United Arab Emirates (UAE). "Between July 5 and Sept. 26 of this year, $595,373 was sent from Citizens to... Emirates International Bank in Dubai." Id. The WSJ article also reports that "[a]ccording to regulators and bank officials, neither Citizens Bank nor Key Bank made any effort to ascertain whether Barakaat was legally permitted to be wiring such huge sums back and forth to Dubai. Both banks said they complied with all regulations. 'We saw no suspicious activity,' Citizens spokeswoman Barbara Cottam said."

RBS' public position, still, is that the wiring of nearly $600,000 by an institution which had been denied a license by the Massachusetts regulators was not, in RBS' Citizens' view, any "suspicious activity." RBS has referred misleading to "a wire sent by Al-Barakaat (an entity that appears to have provided funds to Al-Qaeda) through Citizens Bank of Massachusetts to a bank in the United Arab Emirates (the 'UAE'). The UAE was not at the time of the wire (or today) in the high-risk for anti-money laundering category as determined by either FinCEN or the FATF." RBS apparently does not dispute being used as a conduit of money for terrorism, nor to, since then, having been subject to a major fine for lack of anti-money laundering policies and procedures. This calls into question the compliance practices of RBS, and militates against approval of RBS' applications.
The U.K.'s Financial News of July 16, 2001 reported that "Royal Bank of Scotland does not have a human rights policy for its operation in Indonesia." The Herald of Glasgow (July 11, 2001, Royal Bank Fails to Make Ethics List) reported that RBS "failed to develop a policy towards human rights in Indonesia, where it is a significant lender."

Still there has been no disclosure of any human rights related standards at RBS. RBS continues to be invested in Indonesia. In a U.S. response, after dismissively referring to ICP's presentation of the "business practices of Asia Pulp & Paper Co. Ltd ('APP')," RBS baldly stated that "RBSG is aware of contradictory press reports asserting that APP complies with international environmental conservation standards and has an established reforestation program." None of these "contradictory press reports" were provided or even cited to, raising "reputational harm" issues that are relevant to, and must be inquired into and considered, under applicable banking statutes, in connection with, RBS' applications.

As analyzed below based on recently-released 2002 U.S. Home Mortgage Disclosure Act ("HMDA") data -- and see human rights / legal analysis at the end of this Comment -- RBS' Citizens disproportionately excludes and denies African Americans and Latinos from its mortgage lending -- and these disparities are growing worse. Also, RBS' Greenwich Capital Markets ("GCM") continues to act as an enabler of troubling subprime lenders... See also, the allegations of race discrimination at Citizens that were reported in the Boston Globe of October 3, 2003.

    To be continued.  This week's ICP CRA Report covers comments ICP Fair Finance Watch has just filed on a controversial proposal by New Haven Savings Bank to convert from mutual to stock ownership and to acquire two other banks. The mayor of New Haven and numerous state legislators have opposed it, but the banks have seemed to batten down the hatches, take out paid advertisements and try to weather the storm. But NHSB's lending record is strikingly disparate. So Inner City Press / Fair Finance Watch on October 20 filed comments with the FDIC, Federal Reserve and the Connecticut Banking Department.... Following last week's PNC filing, an Associated Press report in the Bergen (NJ) Record and elsewhere quoted PNC spokesman Brian Goerke that PNC "will respond appropriately with any matters raised" during the acquisition approval process. We'll see...

October 13, 2003

  This week's ICP CRA Report covers comments ICP Fair Finance Watch has just filed, opposing PNC's applications to acquire United National Bancorp. In this space, we aim to focus on JPMorgan Chase's pending applications to acquire Bank One's corporate trust business. While Morgan Chase is claiming that it will take off this Bank One business by the end of October (see, for example, the American Banker newspaper of September 30, 2003), the deal has not yet been approved. In fact, on October 6 Morgan Chase purported to significantly alter the deal and its structure. ICP has commented to the Fed and OCC that such a modification triggers a need for new public notice, and a new comment period. ICP has also put before these agencies (and three others consider Chase's preemption proposal, including to OTS) samples of complaints against Chase that have been flowing in:

"She bought a new house... Within the first month, the mortgage was to Chase. They immediately increased her payment, due to an escrow shortage..."

"Her husband died... For the past two months she has attempted unsuccessfully to pet a pay-off statement from Chase Manhattan Mortgage Corp. on a mortgage for her house in San Antonio. The loan has a life insurance policy and will be paid in full upon receipt of certain documents, including a payoff statement... The only number that they give to contact someone is a general customer service number (800-848-9136), it takes about 30 minutes to get through to someone to put her through to other numbers for help and then there is no answer or the number is busy."

"He has a mortgage loan with Chase Manhattan and he has credit life insurance. When he turned 60, three months ago," etc..

"Consumer states that his loan was not credited appropriately and now ha has a lot of late fees. States that this is not fair. He has been overcharged for the last time when it is their error" [Chase Automotive Finance]

"He received a call from an employee of Chase Automotive Finance tell[ing] him he was overdue on a loan... he asked someone named Cynthia for a copy of the history of the payments for the lease, she got rude and told him he was changing the story about his payment history. He says his credit is impeccable. He just wants proof the bill is due. He did not appreciate in the manner he has been treated during this whole ordeal."

   There are also a number of adverse managerial issues concerning Chase which have arisen: J.P. Morgan settles SEC IPO probe for $25 million (Oct. 1); ING sues J.P. Morgan, Deloitte in "Ponzi" case (Sept. 22):

The case comes one month after a former executive of Dublin, Ohio-based National Century pleaded guilty to securities-fraud charges involving the scheme, which cost investors more than $1 billion. The company's collapse also helped drive hundreds of health-care providers into bankruptcy. Federal authorities have said National Century, once one of the nation's largest health-care financing companies, bilked investors by moving hundreds of millions of dollars among subsidiaries to hide account deficits. The company filed for bankruptcy last November, shortly after federal and Ohio state law enforcement agents searched its offices, seizing computer files and documents. They said the company hid massive shortfalls by providing false offering documents, monthly reports and accounting records. Federal authorities have said National Century took these steps to mislead investors, trustees and auditors.

   In fact, Morgan Chase and its senior executives have a greater role in National Century than as trustee. The Columbus Dispatch of May 30, 2003, "Founders Try to Gain Control of Dublin, Ohio-Based Health-Care Financing Firm," reported on those who "question the motives of Poulsen and Ayers, who both resigned from the National Century board in November as the Dublin-based health-care-financing company was collapsing. 'It's like letting the foxes back in the henhouse,' said one attorney involved in the case who asked not to be identified... Lance and Barbara Poulsen and Ayers resumed their previous roles as directors, along with two existing directors, Hal Pote and Thomas Mendell. Pote and Mendell are executives with J.P. Morgan Chase, a banking company that served as trustee for one of National Century's bond funds. Pote, Mendell and J.P. Morgan have been named in several lawsuits involving National Century." Emphasis added.

   ICP continues to directly receive troubling complaints about Chase's practices, relevant to these Chase applications. Here's are sample complaints [omitted in this format]. ICP is asking the agencies to take action on Chase's inappropriate gun-jumping on this contested proposal. The American Banker of September 30, 2003, quotes JMPC's Michael K. Clark that "J.P. Morgan Chase would begin transferring major trades and transactions from Bank One customers to its own system on Nov. 1... In the meantime, bankers in the group are busy talking to clients about the changes, he said." This is inappropriate: the applications have not been approved (and, under the Bank Merger Act, would have at least a 15 day waiting period). Chase's gun-jumping is made worse by the fact that it is also trying to change the proposal. On October 8, Morgan Chase's outside counsel faxed ICP a copy of Morgan Chase's October 6 letter to the FRBNY, which purports to change Chase's application, without the required new public notice and new comment period. Morgan Chase's letter stated that "upon further review of the CTS business, JPMorgan Chase had determined that it would be more appropriate, as a business matter, for JPMCB, instead of JPMTC, to acquire certain of the CTS' lines of business, specifically, that portion of CTS conducted in the United Kingdom, the structured finance business, and that portion of CTS that involves Housing and Urban Development sponsored issues." ICP formally contends that these proposed modifications of the applications require new public notice, and a new comment period.

October 6, 2003

   There are other, recently-announced deal to which we'll be turning shortly -- for example, last week's Canada - Boston hook up -- but this we must report, about New York Community Bancorp's sleazy stealth spinning: On October 1, the day before the New York Banking Board vote, Inner City Press received in-hand a copy of a presentation NYCB had been allowed to make, claiming among other things that since it is eliminating small business lending, its disparities in that product no longer matter, and since it structures its mortgage lending so as to rarely report race, its stark exclusion of African Americans is not actionable. So ICP wrote to the NYBD on October 1, stating for example

The document, estimated at 75 pages, is headed "New York Community Bancorp;" it states at 1 that "[t]he information presented by the Banking Department in their September 16, 2003 draft-working memo was based upon data, which by its very nature, resulted in a inaccurate [sic] representation of the Bank's lending activities." NYCB then trots out its argument that since it has arranged its 1-4 family mortgage lending such as to minimize the race-specific reporting which is HMDA's goal, it is immune from critique, even of geocoded data. We disagree. And it is imperative that the NYBB members be told, prior to their vote, that the NYBD staff disagreed as well. The NYBD memo reflects that the NYBD has found, as ICP commented, that NYCB's record of lending to African Americans and in predominantly African American census tracts has been a "continu[ing] weakness" at NYCB. For example, the Memo states that "[i]n light of the institution's continued weakness in this area, how will you increase applications from minorities, with special emphasis on blacks, going forward? Please submit a detailed action plan addressing those concerns." The memo states that NYCB "is expected to respond in a written letter to the Deputy Superintendent no later than...September 24, 2003," with a "detailed action plan." But no lending action plan was ever submitted, only this evasive, late-provided NYCB memo.

NYCB also argues that the NYBD's (and ICP's) critique of its small business fall-off is inapplicable, because it has entirely eliminated the business line. By NYCB's logic, the way to evade CRA is to set up mortgage lending so as to not report race, and to cut small business lending, rendering any critique of it "inapplicable." But banks should not be rewarded, or given a free pass, for these evasions and/or service eliminations. And yet that is, in context, what's happened here: unlike Citigroup, HSBC, Independence and North Fork, each of which was required to make specific LENDING commitments, here the NYBD, on a bank with in many cases an even more disparate record, lets it slide with a weak, procedural commitment to market more. It is a retreat by the Banking Department -- in the big picture, troubling, and specifically as to NYCB, a boondoggle for this under-performing bank.

ICP has found in the document no discussion of NYCB's rare "Needs to Improve" CRA sub-rating (which ICP's previous comment have highlighted); rather, NYCB makes much of its CEO receiving an award that, just by coincidence, Roslyn's CEO received the previous year. Question: how much does this mean? How as it selected? NYCB's demonstrable exclusion of African Americans, we contend, is more probative, and carries more weight, militating for denial.

The exhibits to NYCB's document list participation in Rotary Clubs, specious comparisons, random press releases -- anything under the sun except a meaningful addressing of the bank's demonstrable exclusion of African Americans.

Then, after the NYBB's fait-accompli vote (and NYCB's fast press release), Inner City Press late on October 3 received a copy of the NYBD's memorandum, which states among other things that:

"NYCB's LMI area penetration for 1-4 family loans was well behind that of its peers. For example, in 2001 the bank originated only 8% of its number of 1-4 family loans in LMI census tracts, compared to 12.9% for the aggregate....

"NYCB's penetration among minority persons tails the aggregate, particularly with regard to Black applicants. In 2001... only 4.5% of NYCB's applications came from Black individuals, compared with 14.8% for the aggregate... The bank also took few applications from Hispanic and Asian/Pacific Islander applicants, falling similarly behind its peers in 2001 and 2002....

"Given the bank's plans to phase out its small business program, NYCB's poor distribution of such loans is not at issue...

"On September 17 and 22, Department staff met with NYCB's CEO, Joseph Ficalora and other senior managers of the institution, to discuss concerns regarding the bank's weak minority application penetration, particularly with Blacks... The bank's response to those concerns is summarized in a letter to the Department, dated September 25, 2003, from Mr. Ficalora... ICP submitted timely written comments in opposition to the Application... In response, it is noted that the CSD's analysis revealed similar findings. When presented to the applicant for consideration, NYCB's CEO committed in writing to take appropriate steps to improve minority penetration..."

   But as noted, the commitment is purely procedural, significantly weaker even than previous commitments obtained in similar circumstances by the NYBD. For shame...

September 29, 2003

   Various proposed mergers have been announced; among other campaigns, ICP / Fair Finance Watch's comments on JP Morgan Chase's applications to acquire Bank One's corporate trust business have yielded a response from Chase which points to this web site, as proving ICP's awareness of proposed transactions of which Chase subsequently gave ineffective public notice (for example, of its proposal to preempt consumer protection laws in 32 states, click here for more). So please note: we report the news, without thereby waiving any arguments.

   That said, the New York Community Bancorp - Roslyn proceeding at the New York Banking Department has heated up. Some may have noticed NYCB's strange September 23 press release, trumpeting its "understand[ing]" that its application has been put on the NYBB's agenda. Since in the past the NYBD has always said, at least to us, that the meeting agendas are not public until the meetings begin, we immediately wrote to the Department and inquired. An explanation was quickly (and kindly) proffered; it's been superceded by documents the NYBD faxed us on September 26. Essentially, the NYBD required a commitment to improve from NYCB and its CEO Joe Ficalora, explicitly in exchange for allowing them to put out a press release announcing their "understand[ing]" about the agenda. The NYBD acknowledges, as it must, that NYCB's lending record, particularly to African Americans, is weak. Now, the commitment the (new?) NYBD obtained from NYCB is different than that obtained from, for example, HSBC, Citigroup, and others, following ICP's comments. What these differences mean is subject to analysis, in this space and elsewhere. For now, here's portions of ICP's September 27 letter to the NYBD:

Dear Superintendent Taylor, and others at the NYBD:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is a supplement to ICP's first four submissions opposing, and requesting a hearing on the applications of New York Community Bank to acquire Roslyn Savings Bank, under §601, and to create New York Community Bancorp by acquiring Roslyn Bancorp, under §142 of the Banking Law (the "Applications")...Late on September 26, we received over 40 pages of documents, on which we are commenting as quickly as possible. We wish to highlight:

The NYBD memo of its meeting with NYCB, the second item listed in the NYBD's September 26 FOIL determination letter, reflects that the NYBD has found, as ICP commented, that NYCB's record of lending to African Americans and in predominantly African American census tracts has been a "continu[ing] weakness" at NYCB. For example, the Memo states that "[i]n light of the institution's continued weakness in this area, how will you increase applications from minorities, with special emphasis on blacks, going forward? Please submit a detailed action plan addressing those concerns." The memo states that NYCB "is expected to respond in a written letter to the Deputy Superintendent no later than close of business on Wednesday, September 24, 2003," with a "detailed action plan."

NYCB's general counsel Mark Ricca's e-mail to the NYBD, at 5 p.m. on September 23, asks "if all is okay" with a revised draft [commitment] letter and proposed press release; if so, "please advise... and we will send you an original signed letter from Joe Ficalora and proceed with the press release."

This shows that the specifics of NYCB's "commitment" letter was directly related with NYCB being permitted, by the NYBD, to announce its "understand[ing]" that its application was on the Oct. 2 NYBB agenda. NYCB's Mark Ricca wrote to the NYBD at 4 p.m. on September 23, stating that "we expect to state in the release something along the lines of: 'we are on the [NYBB's] October 2, 2003, agenda for approval. We are not aware of any reason approval should not be granted.'" The New York Banking Board members are supposed to deliberate independently, but here, the fix is in, so to speak.

But there's a problem, though, a departure even from past NYBD practice... [Analysis to be further elaborated, "stress-tested," then included on this site.]

The NYBD memo also stated that "in order to monitor the bank's progress in implementing its action plan, the letter due by September 24, 2003 should indicate NYCB's commitment to improving it performance... The following detailed terms should be included in the letter... The bank will improve its penetration of applications from blacks and predominantly black census tracts... for the next three years" ... There is a memo of the CSD's "collective thoughts," that it "considered the protest received from ICP and the results of the Department's current discussions with [NYCB's] senior management... In their response, senior management committed to take appropriate steps to address the Department's concerns and to communication with the Department concerning the bank's efforts and progress."

A more detailed explanation was provided in a September 26 e-mail:

"based on the material and discussions from the September 17 and September 22 meetings with NYCB senior management, along with the bank's commitment letter of September 24 in which bank senior management committed to take the appropriate steps to address the Department's concerns and to communicate with the Department concerning the bank's efforts and progress, CSD will interpose no objection to the approval of this application. The primary reasons for this are:

1. Management advised us that as a strategic decision, they have basically exited the small business lending business which was part of the Richmond County operation;

2. Because 75 to 80% of their loan applications contain no race data (as a result of the Cendant program), it is very difficult to draw conclusions based on the limited information; and

3. NYBC pointed out that many of their branches in LMI areas were de novo branches that have only been open for a few years. This would put them at a disadvantage in a strong refi market...

First, NYCB stated publicly when it bought Richmond County that it would continue small business lending. Now it has "basically" stopped this business -- this apparently being the first the NYBD heard of it -- calling into question which of Roslyn's programs it would eliminate.

Second, it is troubling that a bank could try to evade accountability for its demonstrably weak lending to African Americans and in predominantly African American neighborhoods by pointing to a program with another mortgage lending which results in "race not available" HMDA entries. NYCB's disparities are clear when its lending, by demographics of census tract, is considered.

And of the third advanced reason, even the NYBD CSD staff writes, in more detail, "I wasn't saying that I thought they were significant; it was more like 'there might be something to it'... Given the low rates that we've seen over the past 28 months or so, I would think that many are refinancing loans that they took out just a few years ago. Frankly, I really don't know how much credence to give their theory."

The above-quote skepticism is from NYBD CSD staff; ICP gives little to no credence to NYCB's "theories." Anything, it may seem, to avoid actually acting on its ongoing disparate lending excluding African Americans. For shame...

Meanwhile, NYCB which didn't comply with statements made in previous mergers (e.g., Richmond County, re small business lending etc.) brags about past and future acquisitions. See, Securities Data Publishing's Mergers and Acquisitions Report of September 22, 2003:

Joseph Ficalora, the chief executive officer of NYB, soon to buy Roslyn Bancorp Inc. for $1.6 billion, spoke over the phone with Mergers & Acquisitions Report last week.... A press report a few weeks ago said Staten and Hudson were both working to find a buyer with the advisors that took them public, Keefe Bruyette & Woods and Sandler O'Neill Partners, respectively. But Ficalora said he was on the golf course with both bankers the weekend before the press report came out and there was no talk of a sale.... Ficalora happily noted he knew the officers of those other banks for a long time. In the case of Haven, NYB had done due diligence three times before the purchase, having signed three separate confidentiality agreements. With Richmond, NYB conducted due diligence on it even before it went public in 1998 and tracked the bank its whole public life, he said.... Doing deals, "We fully understand the attributes of integrating the two companies before we go off on this journey," he said. Ficalora did not want to discuss his next M&A move. He said vaguely, "We may do a deal in six months or not for six years." But he boasted that after the acquisition of Roslyn, "We will be the most viable buyer for any company that becomes available in our market." (Emphasis added.)

And yet, even the NYBD's documents show that NYCB's record of lending particularly to African Americans remains weak. If NYCB is such a planner, why did it mis-speak about Richmond's small business lending, before ending it? Was it proper to be talking M&A with a bank before its IPO? Beyond and without question, NYCB has a history now of violating law and regulation: for example, the e-mail from the FDIC's Alice E. Beshara to the NYBD, dated August 27, 2003, reflects that NYCB is will have CMPs" -- on information and belief, Civil Monetary Penalties -- "imposed" due to its "HMDA (MECA) filing problem." Another NYBD e-mail opines that the NYCB "has a tough counter-argument since they were previously specifically told NOT to include them but continued to do so." And, "I’m not quite sure why this has been such a problem for NY Community -- I guess keeping them off their loan register was too big a problem to handle."

Also note: while some information for page 10 of NYCB's FDIC application was unredacted on September 25, ICP maintains that by the same logic, the Roslyn CRA-relevant information on page 11 MUST be unredacted (and should be provided before October 2). Also, it was outrageous that NYCB requested, and the NYBD allowed, confidential treatment for the objective statement that NYCB would be requesting from the Federal Reserve a waiver of the need to apply. The information, misleading characterized by NYCB as reflecting the structure of a non-public entity, was withheld until NYCB obtained the waiver, with no public comment received (or receivable) on it. On this procedural / FOIL / transparency and public interest issue, as with substantive lending issues, NYCB is evasive.

ICP strenuously objects to the redaction of information about the fair lending exams of NYCB and Roslyn, and asks for a ruling on (and reversal) of this, prior to October 2. In context, this should be considered a FOIL appeal -- ICP is not yet submitting a separate, formal appeal, in part because of a statement late on September 26 that information (attachments to NYCB's September 23 e-submission to the NYBD) were not being withheld, there was simply no way to print that at that time, given the weekend / holidays. ICP wishes to appeal these withholdings; all non-exempt responsive information should be provided to ICP forthwith...

Like they (and we) say, "developing." As are some other stories, including an appearance Monday that we'll report on this site next week. 

September 22, 2003

   While we've expanded the fight against JP Morgan Chase's proposals to preempt all state laws for its consumer lending, and to acquire three banks and corporate trust business from Bank One, our focus here remains the New York Community Bancorp - Roslyn proposal. Last week, we finally received -- from the NYBD, not the banks -- a copy of NYCB's "response." ICP quickly prepared and submitted this reply:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this is... a reply to NYCB's Response dated September 12, which we received by fax from the Department earlier today. We are replying as quickly as possible so that NYCB can be asked about the issues we are raising.

[NYCB COO] Mr. Burke's September 12, 2003, letter (the "Response") makes claims regarding Community Reinvestment Act ratings (without mentioning, for example, its Needs to Improve sub-rating under the Service Test in Connecticut, nor that the Department's 2000 exam was almost three years ago, and "off-site"), regarding "current" intentions about branch closing, pricing, and the like. Each is replied to below. But ICP wishes to first address, and emphasize, the disparities it has found in NYCB's 2002 Home Mortgage Disclosure Act ("HMDA") data.

It is NYCB's claim that because it has directed applicant to a telephone channel, no analysis of fairness by race of NYCB's lending is possible. Response at 4, first full ¶. We disagree -- since the loan data is reported by county, and the demographics of each county is known, a disproportionate exclusion of the residents of a county with many protected classes, such as The Bronx or Kings County, can (and does here) make out a fair lending problem. The data reflect that NYCB is disproportionately not serving the homeownership credit needs of protected classes in New York City.

Mr. Burke states that NYCB "has historically focused upon the most critical credit need facing New Yorkers, i.e. affordable multi-family rental housing." Whether the reference is to residents of New York City, or New York State, is not made clear. We have re-reviewed the 2002 data and have found that in the Nassau-Suffolk MSA, of NYCB's 264 HMDA items in 2002, fully 259 were for 1-4 family (and not "multi-family" properties. See Exhibit A hereto. Thus, on Long Island Mr. Burke's above-quoted statement is not the case.

Rather, as we are asserted, while 98% of NYCB's HMDA items in suburban Long Island are for homeownership, NYCB has chosen to underserve, or only lackadaisically serve, the homeownership credit needs of more diverse communities in New York City. Compare ICP Exhibits B and C, annexed hereto, to Exhibit A. Even so, with 178 multi-family items in the NYC MSA, NYCB's volume of 1-4 family loans is still sufficient to reach certain conclusions. Indicatively, Exhibit D reflects the skewing on lines of protected class in NYCB's lending in Brooklyn / Kings County (Exhibit C is Bronx County).

ICP's comments use full year 2002 HMDA data, which was not considered in either of the two CRA Performance Evaluations ("PE's") to which Mr. Burke refers. It is significant that the more recent of the two exams -- the FDIC's, dated March 25, 2002 -- rates NYCB as merely "Satisfactory." One could surmise that NYCB's CRA performance has deteriorated between 2000 and 2002; for the record, over 98% of institutions are rated Satisfactory or Outstanding (our 2nd comment reviewed the apparent grade inflation in CRA ratings; note also that the 2000 exam as "Off-Site"). Also for the record, the FDIC's 2002 PE rated NYCB Low Satisfactory under the Service Test. The 2002 FDIC PE states, for example, that NYCB's "community development activities are primarily limited to board and committee membership and are geographically limited with regard to the bank's entire assessment area." (As aside: NYCB AND Roslyn pay short shrift in this regard to, for example, Bronx County and Brooklyn -- and Connecticut, see infra). Later, the PE states that "The areas served were somewhat limited given the size of NYCB's assessment area." PE at 19.

Also, as recited in the 2002 FDIC exam, while 9.4% of the census tracts, and 7.8% of households, in NYCB's assessment area are low income, this is true of only 1.6% of NYCB's branches.

Totally unaddressed in Mr. Burke's purported response, and in the Application, is the fact that in NYCB's most recent CRA PE, the 2002 FDIC examination, NYCB was awarded a rare Needs to Improve sub-rating under the Service Test in Connecticut. This was a problem that had previously been identified, and which NYCB apparently did nothing to correct. Following up on the New York issues supra, the FDIC 2002 PE states that "the institution provides no community development services in this state." PE at 63. Whatever NYCB's response might be, one has to ask: is this what would happen to communities affected by this proposal? A Needs to Improve rating, even sub-rating, is a serious matter, and militates for the hearing ICP has timely requested on this Application.

Mr. Burke's lead argument, such as it is, is that the FRBNY "stated that it has no objection to the merger" and that the FDIC approved it, after "careful deliberation." Response at ¶1. For the record, the FDIC acted on NYCB's application less than a week after its comment period closed, and before it received or reviewed ICP's comments; the FRBNY's determination was an exemption from the need to apply under the BHC Act (including because of this application to the NYCB), and the FRBNY's decision was reached without any public notice or comment (in part due to NYCB playing hide the ball by redacting all information about the exemption request, see ICP's 2nd Comment). ICP does not understand why NYCB did not transmit a copy of its purported Response TO ICP on September 12. ICP received the response on the afternoon of September 16, from the Department, and is submitting this reply as quickly as possible, so that NYCB and its CEO can be asked about these lending, CRA, and other issues.

It remains imperative that information being withheld -- identified in ICP's 2nd Comment and in ICP's pending FOIL appeal -- be released, that the comment period be extended, and an evidentiary hearing of the type ICP has timely requested be held. On the current record, ICP contends that this Application should not, and could not legitimately, be approved.

   A footnote: last week's Comment / Report noted with concern a quote by the New York Superintendent of Banks in the American Banker newspaper of September 15, an article which also noted that ICP was "troubled." We are pleased to report that the views of the Superintendent were subsequently clarified, to ICP and in a letter to the editor in the September 19 American Banker. The proof, however, is always in the pudding.

September 15, 2003

  After deadline for last Monday's Bank Beat Report, Inner City Press learned that J.P. Morgan Chase is attempting to place its nationwide consumer lending, which includes a top-ten subprime lending operation, into a new federal savings bank, in order to preempt (and evade) all state anti-predatory lending laws. So, on September 9 we commented in opposition to that proposal, as well as on Morgan Chase's proposal to acquire corporate trust business (and deposits) from Bank One. That convoluted transaction, further reviewed in our Morgan Chase Watch, involved institutions known as Bank One Zeta Trust Company, Bank One Delta Trust Company and Bank One Epsilon Trust Company. Beyond Chase's disparate lending record, the transaction's structure (and Chase's stealth) are also of concern... As is AIG, which on Sept. 12 pleaded guilty to fraud charges, click here for more.

   We've promised a New York Community Bancorp - Roslyn update, so here goes (this is from ICP's September 15 comments to the New York Banking Department):

..ICP's first submission reviewed 2002 Home Mortgage Disclosure Act ("HMDA") data and other reasons ICP is concerned about the Community Reinvestment Act ("CRA") and fair lending performance of NYCB and Roslyn; the first submission also asserted that this proposed combination would harm consumers, by branch closing, price raising and otherwise, and pointed out that large portions of the Applications had been withheld. Subsequently, some but not all of the withheld portions were provided, and ICP was granted until September 15 to comment thereon. The problem is, information that NYCB has submitted about possible future branch closings that would result from this proposal, about it and Roslyn's lending record and CRA programs, etc., is still being improperly withheld. ICP has submitted a timely Freedom of Information Law ("FOIL") appeal, and requests that the comment period be extended, including based on the Applicants' gamesmanship with regard to FOIL, their withholding CRA and branch closure related information, etc..

This request is also made in light of the Applicants' failure (or decision not) to submit any response to the issues ICP raised in writing two weeks ago. The only response to date is in Newsday of September 9, 2003, Pg. A61, and that's far from illuminating.

[As aside, for Bank Beat: ICP has read, in the American Banker of 9/15/03, that the NYBD Superintendent "is not fond of [consumer groups'] attempts to delay bank mergers. She will 'not bring them into the fold' during deliberations on merger approvals, she said." ICP has been told that the Superintendent has told reporters that she opposes "holding mergers hostage to community development issues." While the word "hostage" recalls attacks on the CRA by a named sponsor of the Financial Services Modernization Act of 1999, the federal and NYS CRA both REQUIRE that banks' records in "community development" be considered and ruled on IN CONNECTION WITH MERGERS...]

On August 11, ICP requested "all records related to the applications of New York Community Bank to acquire Roslyn Savings Bank, under §601 of the Banking Law, and to create New York Community Bancorp by acquiring Roslyn Bancorp, under Section 142 of the Banking Law," including "a complete copy of the applications, all records reflecting any NYBD personnel’s communications with New York Community Bank or Roslyn or their affiliates regarding the proposal, all comments received on the proposal, and other records in the NYBD possession related to the proposal." On August 29, the NYBD sent ICP portions of the application (on which ICP submitted comments on September 1); on September 4, the NYBD sent ICP some additional records, while denying access to others.

The NYBD's Record Access Officer's September 4 cover letter (the "Denial") states for example that, from NYCB's August 22 submission, a list of NYCB and Roslyn branches that are in close proximity and are being considered for closure is being withheld, allegedly because its release "would result in substantial injury to the competitive position of the Applicants." But the locations of NYCB's and Roslyn's branches are already public. The public has a right to comment on the prospective effects of this proposed merger, including any prospective diminishment in service due to branch closings. The Applicants have publicly projected that their combination would result in cost savings, but now wish, using alleged competitive injury as ground-cover, to withhold from the public, which has a right to comment thereon, information they have submitted to the Department about the prospective effects of the proposed merger. Similarly, the Applicants have made public claims about their lending, including in 2003, but now seek to withhold information about its lending volume within and outside of low- and moderate-income ("LMI") communities. We disagree with these withholdings and appeal; the same logic applies to the current withholding of the Applicants' presentation about their Community Reinvestment Act programs (about which they have also made public claims), and their submission{s} "regarding community outreach" (Denial at 2).

Additionally, it is strange (and troubling) that the Applicants would request, and the NYBD would seek to grant, confidential treatment to such information as who would be on the Board of Directors of the (proposed) resultant institution (Denial at 2), and, as a separate example, of the "shares held by the directors and executive officers" of the Applicants (Denial at 3). Since the integrity and track-record of a bank's directors is a matter of public concern, of the type on which the Department solicits and reviews public comment, to withheld such information is untenable; ICP hereby appeals. We also note that information about share ownership (insider holdings) by directors and executive officers is in many cases public by statute, and, even where it currently is not, it should not be withheld under FOIL in a proceeding such as this, particularly given the troubling and roiled status of corporate governance issues in New York and elsewhere.

Nor should NYCB's request for confidential treatment of the "proposed structure of a non-public entity" have been granted (so far) by the Department. The information being withheld concerned, apparently, NYCB's attempt to gain an exemption from the need to apply to the Federal Reserve System (that is what the subparagraph g, referenced in NYCB's request, is about). Now, after having inappropriately played hide-the-ball about a request for a regulatory ruling that was subject to public comment, NYCB's CEO tells reporters that the overall merger "has been approved by the Federal Deposit Insurance Crop. and the Federal Reserve" (see Newsday of September 9, 2003, Pg. A61). In fact, the NYBD constructively granted NYCB's meritless request for confidential treatment of the entirety of its FDIC application -- even the existence of the application -- until after the comment period closed (and after the FDIC had, without benefit of any public comments, ruled on NYCB's application). The NYBD should take steps to avoid any future repetition of such FOIL gamesmanship by Applicants; in this case, what has happened should be remediated, and all improperly withheld records -- including the information about the Federal Reserve / subparagraph g, should be released forthwith... It is imperative that NYCB be required to meaningfully respond to the issues that have been raised, that its attempts to withholding information about its lending and CRA record, and branch closing plans, be curtailed, and that the comment period be extended to permit comment on the withheld information [etc.]

We'll see. 

September 8, 2003  (Sept. 9 update: ICP has just challenged two Chase applications)

   New York Community Bancorp - Roslyn update: following ICP's first submission, at the September 1 expiration of the N.Y. Banking Department's comment period   (see below, Report of Sept. 1), the NYBD finally provided ICP with hundreds of pages of documents for which NYCB had improperly requested confidential treatment. While ICP is still reviewing these documents (the NYBD has extended the comment period to September 15 for this purpose), ICP has raised to the Federal Reserve the fact that NYCB and its counsel are still trying to withhold all information about their request to the Fed for an exemption from the need to apply. Perhaps CEO Joe Ficalora will be asked about NYCB's "hide the ball," during or after his scheduled Sept. 9 presentation at Lehman Brothers' 2003 Financial Services Conference. Another question could be to justify the over $20 million in fees for this NYCB-Roslyn proposal: Goldman Sachs (gs) and Sandler O'Neill & Partners raking $15.5 million from Roslyn, and NYCB paying Citigroup fully $6.5 million... The questions should be asked, there or at the Sheraton LaGuardia East Hotel, at the shareholders' meeting...

   Also last week, NYCB announced a proposal to sell to Sun National Bank eight branches in New Jersey which were bought in 2000 and 2001 by NYCB's Richmond County Savings Bank unit. Good planning there: buy 'em then sell 'em. Who got the fees for those misguided purchases? And for the sales?

September 1, 2003

    Our focus this week is on the proposed merger of New York Community Bancorp with Roslyn Bancorp. Given NYCB's disparate lending practices (see below), the merger would ill-serve communities and consumers. ICP has filed comments opposing the proposal with the New York Banking Department and federal regulators; a summary follows (see also, e.g., "Objections to Bank Merger," New York Times, September 7, 2003, Sec. 14, Pg. 6,  "Group Files objection to New York Community-Roslyn Deal," by David Weidner, CBS Market Watch, September 2, 2003).

Dear Superintendent Taylor, and others at the NYBD:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Fair Finance Watch (collectively, "ICP"), this timely submission opposes, and requests a hearing and an extension of the comment period on the applications of New York Community Bank to acquire Roslyn Savings Bank, under §601 of the Banking Law, and to create New York Community Bancorp by acquiring Roslyn Bancorp, under Section 142 of the Banking Law (the "Applications").

ICP is and has been concerned about the Community Reinvestment Act ("CRA") and fair lending performance of NYCB and, separately, Roslyn; this proposed combination would harm consumers, by branch closing, price raising and otherwise. On August 11, ICP requested copies of the applications and related records, under the Freedom of Information Law ("FOIL"). The NYBD's Legal Division acknowledged receipt of ICP's request -- but, for the three weeks that followed, did not provide ICP with any portion of the applications. On Friday, August 29 the NYBD mailed ICP some of the responsive records, for delivery August 30: less than one business day before the expiration of the initial comment period. ICP has not had an opportunity to review the over 800 pages provided, and notes that the other related records which ICP requested have neither been provided nor access explicitly denied. What ICP has noted is that the NYBD has withheld portions of the application that are not even arguably exempt from FOIL. The comment period should clearly be extended on this ground alone, as the NYBD has done in the past, when this has occurred.

In the interim, ICP has been reviewing NYCB's and Roslyn's recently-released 2002 Home Mortgage Disclosure Act and CRA records. In one-to-four family home mortgage lending, NYBD dramatically under-serves protected classes. In 2002 in the New York City Metropolitan Statistical Area ("MSA"), for conventional home purchase loans, NYCB made 53 loans to whites, six to Latinos, and only three to African Americans. For these three groups, the aggregate made 13.87% of its loans to African Americans, and 13.47% to Latinos. For NYCB, the figures were much lower: only 4.8% of loans to African Americans, and only 9.7% to Latinos.

For refinance loans in the NYC MSA in 2002, NYCB was even more disparate: NYCB made 101 such loans to whites, only six to Latinos, and only seven to African Americans. Among these three groups, only 6.1% of NYCB's refinance loans were to African Americans (versus 17.42% for the aggregate); only 5.3% of NYCB's loans were to Latinos (versus 9.9% for the aggregate).

Looking county by county, NYCB's record is even more troubling. NYCB has six branches, for example, in Kings County (Brooklyn); in 2002 it made only one mortgage loans to an African American in Brooklyn, and none to Latinos. In The Bronx, it made only one mortgage loan to an African American, and only one to a Latino. While NYCB might attempt to explain these disparities by claiming to be primarily a multi-family lender, the 2002 data reflect that, for example, NYCB made over sixty one-to-four family mortgage loans in Nassau County, and over 80 one-to-four family mortgage loans in Suffolk County. It is not legitimately, under the fair lending laws, the CRA and otherwise, for NYCB to provide homeownership lending only in more affluent, less diverse suburbs, but to essentially refuse to provide such homeownership financing in lower income, more diverse urban counties like The Bronx and Brooklyn (and to provide only renter-related financing in such counties).

Nor can NYCB's defense (and answer to the question, "where do the deposits collected in lower-income NYC go?" -- ICP has reviewed the slideshow made public (under Reg FD) when the proposal was announced; this characterizes one of the parties as a "deposit gatherer," and shows, pro forma, 11.2 billion of deposits and barely half that in loans) relate to it small business lending. ICP has reviewed NYCB's 2002 CRA data, and finds for example that NYCB made only one small business loan in Brooklyn (where it has six branches), while it made five small business loans in Manhattan -- four of these loans were in census tracts whose median income was over 120% of area median.

While ICP has focused its analysis, and these comments, on the applicant NYCB, we note that Roslyn Savings Bank would not improve NYCB's records -- for example, in Brooklyn in 2002, while Roslyn made ten mortgage loans to whites, it made none to Latinos or African Americans; of five mortgage applications from African Americans, Roslyn denied four applications. Overall in the NYS MSA in 2002 for refinance loans, Roslyn denied 70% of applications from African Americans, while denying 13.5% of applications from whites. Roslyn made 33 such loans to whites, only two to Latinos, and only two to African Americans, which compares unfavorably to the industry aggregates set forth above.

NYCB is also disparate in its two other states, New Jersey and Connecticut. In the Newark NJ MSA in 2002, NYCB did not make a single reported mortgage loans to an African American or Latino (while making loans to whites and "Race Not Available"); the same is true in the Bridgeport and New Haven MSAs in Connecticut.

While ICP's analysis of NYCB's and Roslyn's recently-released 2002 HMDA and CRA data continues, it seems clear that given the NYBD three week-delayed, 11th-hour partial response to ICP's FOIL request, the comment period must be extended. ICP is requesting an administrative hearing on NYCB's application, and contends that on the current record, NYCB's application could not legitimately be approved.

Again, while on Saturday, August 30 ICP received from the NYBD some of the records responsive to ICP's FOIL request of three weeks previous, ICP has not had an opportunity to review the over 800 pages provided, and notes that the other related records which ICP requested have neither been provided nor access explicitly denied. For example, ICP requested "all records that relate to meetings and other communications the NYBD may have had with the applicants. If the NYBD... did not meet or communicate with the applicants, ICP is requesting confirmation in this regard."

What ICP has noted is that the NYBD has withheld portions of the application that are not even arguably exempt from FOIL -- simply as examples from what NYCB's July 25 letter mis-characterizes as "confidential" exhibits, the merger agreement, service area information, economic characteristics, schedule of fees and services, loans information, information about directors, resolutions, certification of compliance with Banking Law [Section] 601, and even NYCB's FDIC application. Such records are not exempt under FOIL and have, in fact, been released in the past by the NYBD and other agencies. The comment period should clearly be extended on these grounds...

On the current record, public hearings should be held, and, NYCB's applications should be denied. If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

Matthew Lee, Esq.

Executive Director

     This will be updated. Until next time, for or with more information, contact us

August 25, 2003

   From Pittsburgh to Jersey: PNC on August 21 announced a proposal to buy United National Bancorp for about $638 million. Reuters quoted an analyst from Putnam Lovell. -- yes, they who helped predatory lender Household International ditch its savings bank, to avoid community reinvestment review of HSBC's acquisition of Household -- that PNC is "a company that is making a play to remain independent." Yeah, we'll see...

    Question: which is the bank that pays fines virtually every week? Answer: it's Citigroup, of course. There's predatory lending for $240 million; there's bogus stock analysts' advice (last week's development that Jack Grubman is still on the payroll, paid to stay quiet); there's Enron and, last week, there's Smith Barney unit being (under-) fined $1 million by the New York Stock Exchange for failing to supervise brokers who encouraged WorldCom Inc. employees to borrow money to buy stock in the now-bankrupt telecom firm when it was flying high. Also, August 21, a former executive of Citigroup Global Markets, Irving David, was indicted on charges he embezzled more than $70,000 US from two mutual funds he controlled. What a company! On Citi-Sears, the two do not even agree on what loans would be sold, or what the premium would be (see American Banker of August 21, at 5) -- and the Office of the Comptroller of the Currency either doesn't have, or hasn't released, this information. Nor has Citigroup submitted any substantive response yet. So ICP has requested an extension of the comment period from the OCC...

August 18, 2003

   Our action-of-the-week is a comment opposing AIG's $2.15 billion proposal to buy insurance companies, in Japan and Pennsylvania, from GE. Click here to view. In other news, from what would later in the week become blackout-land, on August 11 First Niagara Financial announced a proposal to acquire Troy Financial for about $356.6 million... Texas-based Jacksonville Bancorp announced on August 12 a proposal to be bought by in-state rival Franklin Bank Corp. for about $72.5 million. Also August 12, Humboldt Bancorp announced a proposal to buy California Independent Bancorp for about $80 million. North o' the border on August 15, Toronto-Dominion Bank announced a proposal to buy 57 Laurentian Bank branches in Ontario and Western Canada

   On Citi-Sears, while we continue to await Citigroup's response to our August 4 comments, Citigroup's argument to the Illinois Insurance Department that no application should be required, to acquire Sears Life Insurance Company, because insurance is "an insignificant part," we've responded, to the IL Ins. Dep't, that "in this age of Enron -- charges regarding which Citigroup has just recently agreed to pay hundreds of millions of dollars to pay -- discretionarily waiving applications requirements would be both foolhardy and outrageous."  Yowdza!  

August 11, 2003

   Everything's for sale! Everything must go! In the rumor mill last week, Hudson United appeared up for sale. Among those listed as interested, at least by Reuters, were Citigroup, WaMu, and Morgan Chase... Scotiabank came out with a denial; just as, from across the pond, Royal Bank of Scotland again denied being "in talks" in Sovereign. Fred-the-Shred Goodwin told reporters, "We've always got the radar screen on and we look for anyone that might be for sale in our area of the U.S. and Sovereign sits right in the middle of it."

   Also in RBS' self-perceived "turf," in Connecticut, a rare merger-of-mutuals announced last week: seven-branch Fairfield County Savings Bank and similarly-sized Ridgefield Bank. Fairfield president Charles Bassos said that no cash would be changing hands and that the combined company would remain a mutual thrift, with the pair retaining their current names...

    On Citi-Sears, while we await Citigroup's response to our August 4 comments, we've learned that Citi has been arguing to the Illinois Insurance Department that no application should be required, to acquire Sears Life Insurance Company, because insurance is "an insignificant part" -- the full language of the statute is "its insurance business either directly or through its affiliates is an insignificant portion of its total business." This seems strange, that the larger a conglomerate (and therefore the smaller a part its insurance business is), the less scrutiny would be given. We've requested all documents from the Illinois Insurance Department; also click here for a Crain's article.  

August 4, 2003

  Will the sleaze and branch-closing let up? On July 30, Royal Bank of Scotland announced a proposal to buy Community Bancorp Inc, a holding company for Community National Bank, for $116 million. Community Bancorp has $348 million of deposits and 10 branch locations -- for now.... Also last week, Southern Community Financial Corp. announced a proposal to acquire Community Bank of Pilot Mountain NC for $77.294 million... In Hong Kong, Mizuho on August 1 announced a proposal sell Chekiang First Bank to Wing Hang Bank for 4.8 billion Hong Kong dollars (U.S. $ 615.5 million)....  For this week, our focus is on Citigroup - Sears, click here.  

   Ah, it's summer -- and so, why not a banking-related Page Six-like blind item? This one has New York written all over it: which recently-confirmed bank's Number Two has sewn oats cooing with a passed-over candidate for the Federal Reserve Board, and also with the head of retail at his current shop? While he was surprisingly dissed in the succession announcement, many report to him: including the more recent of the two referenced paramours... 

July 28, 2003

   Big deal of the week was Lehman Brothers' July 22 announcement of a proposal to buy Neuberger Berman Inc., for $2.6 billion. "The high-net-worth business is characterized by favorable demographics, growing demand for services ... and consistently high and sustained margins," Lehman Chairman and Chief Executive Richard Fuld said in a conference call. On Lehman's other side, we've recent reported on Lehman's involvements in questionable subprime lending. The connection between the two sides of Lehman's business should and will be explored... Bit smaller: on July 24, BancTrust Financial Group announced a proposal to buy CommerceSouth Inc. for $75 million, to expand in Alabama and Florida...Click here for ICP's just-filed Wells Fargo protest. 

July 21, 2003

    First some deals, then the rumor mill. Deal of the week, on which we'll have more, was Citigroup's selection as the winner -- and we use that term loosely -- of Sears' credit card business. It was interesting to see how, just after the announcement, Citigroup's other reported target, State Street, said it will remain independent for now. "I believe right now to be an independent enterprise is the best way to maximize that value" for shareholders, was how State Street CEO David Spina put it. There were other deals, too: in the Pacific Northwest, Sterling Financial Corp. announced on July 15 a proposal to acquire Oregon's Klamath First Bancorp for $147 million; on July 16, New Haven Savings Bank announced proposals to buy Connecticut Bancshares for $605 million, and Alliance Bancorp of New England, the holding company for Tolland Bank, for $72 million.

    Surprising honesty -- especially from Greenpoint: the American Banker of July 21 has an article extensively quoting Greenpoint CEO Tom Johnson. A sampling: Greenpoint has been opening branches (none in The Bronx) "'not only for the usual reasons -- to be more profitable -- but also to be a more attractive player, adding to our value as a potential takeover target,' Mr. Johnson said. 'I'm not naive enough to think we're going to be a permanent independent.'" Nevertheless, to lead up to such a sale, he says, "If I had my druthers, it would be very nice if our retail depository business was twice the size it is." An analyst is quoted listing likely targets: Dime Community Bancshares Inc. of Brooklyn, Flushing Financial Corp. of Queens, and Independence Community Bank of Brooklyn. Two of these three ICP knows quite well. Greenpoint's now-announced strategy, of buy in order to sell out, has been the one we've long ascribed to North Fork. The American Banker named North Fork as possibly Greenpoint's acquirer. If so, even that would only be an interim move. Developing...

  Fleet Street rumor mill: London's Sunday Times of July 20 reports that Royal Bank of Scotland is preparing a bid for Sovereign. Could it have something to do with RBS being beaten out for Sears' credit card business? Either way, we stand ready... Another reason why:

Subj: [RBS] Citizens Bank's Predatory Banking Practices

Date: 7/16/03 8:42:48 AM Eastern Daylight Time

From: [Name withheld]

To: feedback [at] fairfinancewatch.org

On May 30, 2003, my father died. On June 16, 2003 I sold his house and deposited the check in Citizen's Bank. I began to pay bill and make distribution of the funds. On July 3, 2003 Citizen's Bank put a freeze on the remaining funds. After getting the branch run around and the telephone transfer journey, I contacted the appropriate department. I forwarded the bank an original copy of the death certificate and a copy of the short form from the register of wills appointing me administrix of my fathers estate. The investigator refused to except these legal documents and continued the hold on the funds. I contacted my attorney and he drew up an affidavit confirming the same information I provided. Still no release of the funds. After the fact, I am saddened to say I began to research Citizen's Banks practices. While they have an extensive history of dealing with African Americans unfairly in lending practices, they also treat African Americans criminally as depositors. I am aware of depositors accounts spiraling out of control and closing due to check fees. I continue to get calls and complaints from the water department, cable company, and individuals as their checks are returned for funds unavailable... It is not my fault that their practices in the past (Al Barakaat) require such safeguards that makes the little person suspect to suspicious activity. Their practices are a violation of my rights...

July 14, 2003

   From Canada to Santo Domingo: on July 8, Bank of Nova Scotia announced a proposal to acquire up to 35 branches and hire 460 employees of Banco Intercontinental. Baninter collapsed earlier this year and the Dominican Republic government took control in April. The government then sought international aid -- and last month announced a tentative deal with the International Monetary Fund that would give the D.R. access to $1 billion in financing, with strings attached, to help it deal with the collapse of Baninter. To help ScotiaBank too, it seems... Drink up: on July 8, Bourbon Bancshares announced a proposal to buy Kentucky First Bancorp for $21 million...

   Credit Agricole is reminiscent of BCCI -- taking ownership of a bank in the U.S. before / without getting Federal Reserve Board approval. The Fed has asked Credit Agricole (well, its DC lawyers) the following:

"The application states that Boetie was established as a holding company in 2001 in connection with the sale to the public of shares of the predecessor company to Credit Agricole S.A.. Please explain why an application for Boetie to become a bank holding company was not submitted prior to the establishment of Boetie. Also, address what actions Boetie and its subsidiaries will take in order to ensure that filing requirements pursuant to the BHC Act, the International Banking Act, and any other statutes enforced by the Board will be complied with in the future."

It's clear, including from Credit Agricole's counsel's response, that Credit Agricole broke the law. But what will the Fed do about it? Meanwhile, Credit Agricole -- and SAS Rue la Boetie, it would appear -- on July 7 announced a proposal to acquire the Lanbouwkrediet Group, mostly from Dexia.

July 7, 2003

   On June 30, Societe Generale announced a proposal to buy Constellation Financial Management, whose technology allows fund companies to hedge their brokerage commission fee risk, for an undisclosed sum.... Speaking of Soc Gen (and stealth), on July 1 PG&E Corp.'s National Energy Group announced that the transfer of four power plants to a group of lenders led by Societe Generale has been postponed to Aug. 29.... In Hong Kong on July 4, Wing Hang Bank Ltd announced it has has submitted a bid to acquire Chekiang First Bank from Japan's Mizuho Corporate Bank... For an RBS update, see this week's ICP Fed Report; for issues surrounding Crédit Agricole, see this week's ICP CRA Report...

   In the U.S., in sleazy deal news, on July 1 Cash America announced a proposal to acquire Cashland an estimated $53 million; on July 2, Aaron Rents Inc said it has acquired Rosey Rentals LP-Stores(31), an operator of rent-to-own stores....

June 30, 2003

   Proposed bank merger of weak lenders: New York Community Bancorp on June 27 announced an agreement to acquire Roslyn Bancorp for $1.6 billion. Even the AP reported that "[t]he combined company, with expected loans of about $9 billion and securities of about $11.8 billion, plans to implement a restructuring plan, including a $3.5 billion reduction in the securities portfolio." Note the low current, and even pro forma, loan to deposit ratio -- and that, when you look closer, the lend-back ratio to low and moderate income neighborhoods and communities of color is even worse.....

  GE on June 26 announced a proposal to acquire around 700 million euros ($809.8 million) of leveraged loans from UK bank Abbey National (whose subprime lending unit GE bought earlier this year). GE said the deal with Abbey National Treasury Services -- the single biggest transaction by GE's leveraged finance team -- comprised 34 senior and mezzanine leveraged business loans spread throughout Europe. As to GE's proposed sale of insurance companies in the U.S. and Japan to AIG, we will have more in coming weeks...

June 23, 2003

   We maintain our focus on Royal Bank of Scotland: its proposed acquisitions of Port Financial in the U.S., of Churchill in the UK, and the standardless enabling of predatory lending by investment banking unit, Greenwich Capital Markets ("GCM"). On June 11, the U.S. Federal Reserve asked RBS five questions, among them questions about branch closures and about the business RBS or its affiliates do with subprime lenders. Surprisingly (or not), RBS' June 19 response refused to answer the Fed's questions, with regard to GCM: "We have not discussed Greenwich in response to this item because Greenwich is not engaged in subprime lending." But the Fed asked about subprime lenders that RBS' affiliates do business with. Whether the Fed will back down is not yet known.... [For more, see this week's ICP CRA Report.]

   On money laundering, RBS tries to "spin" the heavy FSA fine of December 2002, and refers misleading to "a wire sent by Al-Barakaat (an entity that appears to have provided funds to Al-Qaeda) through Citizens Bank of Massachusetts to a bank in the United Arab Emirates (the 'UAE'). The UAE was not at the time of the wire (or today) in the high-risk for anti-money laundering category as determined by either FinCEN or the FATF." RBS apparently does not dispute being used as a conduit of money for terrorism, nor to, since then, having been subject to a major fine for lack of anti-money laundering policies and procedures.

   Also worth noting is RBS' response on the human rights and environmental issues that ICP's Fair Finance Watch raised. While stating that RBS and its affiliates "are pleased to respond to ICP's human rights allegation" (Resp. at 21), RBS thereafter dodges the issues. For example, after dismissively referring to ICP's presentation of the "business practices of Asia Pulp & Paper Co. Ltd ('APP')," RBS then states that "RBSG is aware of contradictory press reports asserting that APP complies with international environmental conservation standards and has an established reforestation program." None of these "contradictory press reports" are provided or even cited to. RBS brags that it was listed (at the last minute, ICP might add) among the signers of the so-called Equator Principles. Resp. at 24. RBS's actual practices are what concern ICP -- and dodgy answers, and refusal to answer basic questions such as which subprime lenders GCM does business with, lead ICP to redouble its efforts on this campaign.

June 16, 2003

     On June 11, Royal Bank of Scotland announced an anticompetitive proposal to acquire insurance company Churchill from Credit Suisse, for $1.83 billion. If consummated, the proposal would give RBS a 13% market share of the U.K. home insurance market, and a 16% share in market insurance. Also as set forth before, ICP believes that RBS is both a redliner and an enabler of predatory lending, and does insufficient safeguards with regard to human rights, the environment, and money laundering. By June 12, RBS had already notified the U.K. Office of Fair Trading, setting in motion a comment period that ran (or runs) only through June 25. ICP filed comments, with the OFT and the FSA, which has acknowledged receipt of ICP's preliminary RBS filing on June 2.

June 9, 2003

    An interim update on Royal Bank of Scotland's Port Financial proposal -- RBS no-commented to the London Guardian of June 3, "Royal Bank of Scotland would not comment yesterday." The Providence Journal reported that ICP "also charges that a subsidiary of Citizens' parent, [RBS' Greenwich Capital Markets], underwrites high-rate subprime loans in the United States. Citizens spokeswoman Barbara Cottam pointed to Citizens' 'outstanding' Community Reinvestment Act rating in the states in which operates." That rating did not consider RBS' Greenwich Capital Markets, nor recent branch closings; the ratings in any event are inflated. On June 4, Royal Bank of Scotland and nine other banks announced reforms to their project finance lending, adopting a vague set of "Equator Principles" -- the World Bank offered praise; environmental organizations put forth a mix of praise and critique. They almost didn't sign (they were not included in a list of signers on the eve of the June 4 announced), then did. But RBS denies any responsibility over the social effects of loans RBS' Greenwich Capital Markets makes to questionable subprime consumer finance lenders. The Federal Reserve's Robert Brady has given RBS (well, RBS Citizen's Larry Fish) until June 13 to respond to the issues raised. Meanwhile, RBS has taken to running television ads, in the New York market, using Jack Nicklaus, a Scotsman voiceover (strange, when Fred the Shred said he was dropping that connotation), and ending with the slogans "make it happen" and "less talk." RBS' total lack of substantive response to the issues raised -- less talk, indeed...

   Ah, globalization. On June 4, Goldman Sachs issued a press release bragging that it has signed a deal with Industrial and Commercial Bank of China to "dispose" of up to $1.2 billion in bad loans, the first such direct agreement with a Chinese bank. Goldman's CEO Henry Paulson said, "We hope this is the beginning of a long-term relationship between our two firms."   And localism (hot-linked footnote in standard blog style):  from tabloid-land, there's this report of Chase-conflicted judicial rulings. Unreported (or unconnected) there is this judge's recent recusal from a case regarding NYC's anti-predatory lending ordinance. Now it makes sense (to some), given Morgan Chase's involvement in subprime, through Advanta and otherwise...

June 2, 2003

     Our focus this week is on Royal Bank of Scotland, which is simultaneously trying to buy Port Financial, while doing deals with Santander Central Hispano and a Scandinavian realty company called Nordisk -- and, according to the FT, bidding on Norisbank, the consumer credit business of German bank HypoVereinsbank. On June 2, ICP / Fair Finance Watch filed a series of 15 page comments with regulators, opposing RBS' applications. A summary follows (see also, e.g., "Royal Bank [of Scotland]'s U.S. Arm Faces Allegations of Race Discrimination," by Jill Treanor, The Guardian (London), June 3, 2003; "Group Nails Citizens' Moves: Loans, Closings Cited in Effort to Snuff Deal," by Jon Chesto, Boston Herald, June 3, 2003, Pg. 30; "Citizens Deal Opposed," Providence Journal-Bulletin, June 3, 2003, Pg. F2; "RBS Citizens Financial Is Accused Over Lending Practices," by Karl West, The Herald (Glasgow), June 3, 2003, Pg. 19).

COMMENTS OF THE ICP/FAIR FINANCE WATCH OPPOSING ROYAL BANK OF SCOTLAND / CITIZENS BANK(S) AND THEIR ACQUISITION PROPOSALS, INCLUDING PORT FINANCIAL CORP.

   On behalf of Inner City Press / Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP") this is a comment regarding Royal Bank of Scotland and its Citizens Bank(s) and their acquisition proposals, including Port Financial Corp., Cambridge Bank, Cambridge Bancorp and Cambridge Trust Co. ("Cambridge").

  As set forth below, in the most recent year for which data is available, 2001, RBS' Citizens disproportionately excluded and denied African Americans and Latinos from its mortgage lending. See Section I.

   Among RBS / Citizens' other harms to consumer are branch closings. Section II reviews Citizens' recent branch closing spree, including over 30% of branches acquired in Massachusetts -- and notes that as to Port / Cambridge, RBS / Citizens' regulatory applications do not provide branch closure information that should now be provided (and the comment periods extended).

   Also, Citizens' affiliate Greenwich Capital Markets ("GCM") continues to act as an enabler of troubling subprime lenders, such as Aames (which for example is settling a predatory lending-related class action), E-Loan and others. See infra Section III. Other adverse managerial resources and reputational harm issues are reviewed infra in Section IV -- including RBS' troubling lack of anti-money laundering safeguards, its continuing lack of human rights-related standards, etc.

   Accordingly, ICP / FFW hereby opposes RBS' applications for regulatory approval, request a hearing and an extension of the comment period, and contends that, on this record, RBS / Citizens' application could not legitimately be approved.

  I.   Using the most recent publicly-available data filed under the U.S. Home Mortgage Disclosure Act, for 2001, by Citizens Bank(s) of Massachusetts ("CBMA"), Rhode Island ("CBRI") and Connecticut ("CBCT"), and Citizens Mortgage Corp. ("CMC"), FFW's comment demonstrates that:

  In Citizens' headquarters, the Providence RI-MA Metropolitan Statistical Area ("MSA"), Citizens Bank of Rhode Island in 2001 received 94 applications for conventional home purchase loans from whites, resulting in 68 loans made to whites. Meanwhile, CBRI made only one such loan to a Hispanic family, while denying three of four applications from Hispanics. CBRI didn't made any conventional home purchase loans in this MSA to African Americans.

[Footnote: Even cumulated with CMC (hereinbelow, "Citizens"), Citizens denied the conventional home purchase and the refinance applications of African Americans at a higher rate that other lenders (the "Aggregate"). The Aggregates denial rate disparity between African Americans and whites in this MSA for conventional home purchase loans in 2001 was 2.57; Citizens' was higher, at 2.83. The Aggregate's denial rate disparity between African Americans and whites in this MSA for refinance loans in 2001 was 2.24; Citizens' was higher, at 2.36. Between whites, African Americans and Latinos, Citizens' percentage of refinance loans -- and home improvement loans -- to African Americans was lower than the Aggregates'.]

   Providence is RBS' Citizens' headquarters MSA, in which Citizens has a near 30% market share of race-specified home improvement loans. For this product in which Citizens has an anti-competitive market share, Citizens denied 73.5% of applications from African Americans, and 84.3% of applications from Latinos (both higher rates than the Aggregate).

   In the Boston MSA in 2001, CBMA received nine applications from African Americans for conventional home purchase loans, and denied eight of them. Other lenders' denial rate for African Americans in this MSA in 2001 was 18.7%; for CBMA it was 88.9%, more than four times higher. Meanwhile, CBMA received 120 such applications from whites in this MSA, resulting in 67 originated loans.

   In this MSA, Citizens has over 20% market share of race-specified home improvement loans. For this product in which Citizens has an anti-competitive -- and growing -- market share, Citizens denied 66.9% of applications from African Americans, and 74.4% of applications from Latinos (both higher rates than the Aggregate).

   A similarly disparate pattern -- of much high denial rates for African Americans and Latinos than for whites -- exists as to CBCT's lending. In the New Haven MSA in 2001, CBCT received 11 applications from Latinos for refinance loans, and denied nine of them. It received 12 such applications from African Americans, and denied six of them. Meanwhile, CBCT received 362 such applications from whites in this MSA, resulting in 193 originated loans. CBRI didn't made any conventional home purchase loans in this MSA to African Americans or Latinos. Even cumulated with CMC, Citizens denied the conventional home purchase applications of African Americans at a rate 4.36 times higher rate than it denied the applications of whites.

   RBS / Citizens' disparities have grown worse in small business lending as well. In Norfolk County in the Boston MSA, for example, in 2001 for loans under $100,000 (hereinbelow, "small business loans"), Citizens Bank of Massachusetts made 158 such loans in upper income census tracts, 282 in middle income tracts, only nine in moderate income tracts, and NONE in low income census tracts. The skewing of Citizens' lending away from low and moderate income areas became worse, from 2000 to 2001.

II. RBS' CITIZENS BANKS HAVE A HISTORY OF BRANCH CLOSINGS, HAVE STATED THEY WOULD CLOSE BRANCHES AS A RESULT OF THIS PROPOSAL -- BUT HAVE NOT MADE NECESSARY DISCLOSURES

    Along with these troubling disparities, RBS' Citizens has a record of closing bank branches and reducing services. In announcing this proposal, RBS and Citizens saw it as in their interest to state that branches would be closed as part of cost-cutting. See, e.g., the Boston Globe of April 18, 2003, at C1 ("Fish said the deal will lead to the closure of some Citizens and Cambridgeport offices"); see also, American Banker of April 21, 2003:

The deal would include some cost savings, because of branch overlap and back-office consolidation, Mr. Fish said. It is too soon to say if Citizens would hire all of Port Financial's more than 200 employees, he said. The number of branch closings is also unclear, but there will be a split between closings of Port Financial and Citizens branches, he said.

    From Scotland, RBS CEO Fred ("the Shred") Goodwin characterized the proposal as a "tactical acquisition that will be fully absorbed into the Citizens Group. It is forecast to be accretive for our shareholders, and usefully deepens the Citizens' franchise in a prosperous part of the Boston area." First, given the lending disparities demonstrated infra in Section III, RBS' open focus on non-LMI areas should be explored, including at the requested hearing. Second, given RBS' lack of disclosure to date on regarding which branches it would close, it is important to review RBS / Citizens' recent (and accelerating) history of branch closings:

   In 2002, in a transaction that apparently did not required Federal Reserve Board approval (and on which ICP did not comment), RBS' Citizens Bank of Massachusetts acquired Medford Savings Bank and its 19 branches. Amazingly, of these 19 branches, RBS / Citizens subsequently closed over 30 percent. See, e.g., the Boston Herald of February 7, 2003, "Citizens pruning"

Citizens Bank of Massachusetts will close six suburban Boston branches next week as it consolidates its retail outlets after buying Medford Savings Bank operations last year. Branches to be closed are two in Malden, and one each in Arlington, Burlington, Somerville and Waltham.

   In this light, it is imperative that RBS / Citizen disclose at this time its branch closings plans, and that the comment period be extended. RBS / Citizens has a strategy of seeking to withhold such information. See, e.g., the (Harrisburg, PA) Patriot-News of October 1, 2002, regarding Citizens' post-Mellon in-market acquisition of Commonwealth (another proposal apparently not requiring FRB review, and on which ICP did not comment)

There will be some branch closings because of overlap with Citizens offices, though it was too soon to determine how many layoffs would take place, said Stephen D. Steinour, chairman and chief executive officer of Citizens Bank of Pennsylvania. "We're not in a position to share with our very early thinking," Steinour said.

  But RBS / Citizens knew it would close branches, and, it seems, which ones -- by early January, it announced five (four) closings. See, e.g., the Reading (PA) Eagle of January 3, 2003, quoting Citizens Bank first vice president Sylvia Bronner that "[t]he bank will close a total of five branches."

   On May 10, 2003, ICP submitted a Freedom of Information Act ("FOIA") request to the Federal Reserve for a copy of the Applications. On May 12, John S. Jordon of the Federal Reserve Bank of Boston (the "FRBB") wrote to ICP, stating that "[y]ou should be aware that the [FRBB] is not an agency of the federal government and is not subject to [FOIA], but has adopted its own policy on disclosure of information which, for the most part, complies with the spirit of the [FOIA]." There were significant redactions in the FRBB's production, and ICP to date has not received a FOIA response from the Board. The comment period should be extended on this basis, and in light of the issues set forth below.

III. CITIZENS' BANKS' AFFILIATE, GREENWICH CAPITAL MARKETS, APPEARS TO HAVE NO STANDARDS FOR THE BUSINESS IT DOES WITH SUBPRIME LENDERS: RBS ENABLES PREDATORY LENDING

   In the United States, RBS owns not only Citizens Bank(s), but also Greenwich Capital Markets ("GCM"), which inter alia provides warehouse loans, mortgage-backed securities underwriting and other services to subprime (high interest rate) lenders throughout the United States. The controversy surrounding certain subprime lenders has been growing, in Congress and various state houses. RBS and GCM, however, continue blithely along with no standards for this business. See, e.g., Business Wire of May 14, 2003, in which controversial subprime lender Aames Financial Corporation announces that "on April 25, 2003, the Company executed a commitment letter with Greenwich Capital Financial Products, Inc. ('Greenwich'), pursuant to which Greenwich agreed to provide the Company with a financing facility of up to $82.9 million secured by certain of the Company's residual interests and servicing advances..." (emphasis added).

   Beyond warehouse lending, GCM's past securitizations have included Aames Mortgage Trust 2001-1 ($150 million); Delta Funding 2001-1 ($141 million); First Franklin Mortgage Loan Trust 2001-1 ($246 million); Long Beach Mortgage Loan Trust 2001-1 ($725 million); Soundview Home Equity Loan Trust 2001-1 ($105 million -- this was a pool of Delta Funding Loans sold to Saxon Mortgage by Delta; significantly, in connection with the Delta pools a subsidiary of GCM, Financial Asset Securities Corporation, took ownership of the loans before depositing them into the trust). GCM continues working with the much-sued Delta -- see, e.g., Asset Securitization Report of February 17, 2003, reporting that Delta "is planning its next deal within a month, likely with... Greenwich Capital."

   What standards does GCM (and RBS / Citizens) have for this type of activity? As to Aames, and simply as one example, consider...the Washington Times, July 10, 2000, at D10, "Officials aim to curb loan sharks."

   Currently, notices have been mailed out informing Aames customers / victims of a brief ability to opt-out of a class action settlement. So what standards does GCM (and RBS / Citizens) have for this type of activity? Apparently none.

IV. MANAGERIAL RESOURCES AND OTHER RELEVANT ISSUES AT CITIZENS' PARENT, ROYAL BANK OF SCOTLAND: LACK OF MONEY LAUNDERING AND HUMAN RIGHTS STANDARDS, MILITATING FOR THE REQUESTED PUBLIC HEARINGS

   Such lack of standards goes beyond GCM to its and Citizens' parent, Royal Bank of Scotland. In December 2002, RBS was hit with an unprecedented fine for lack of anti-money laundering safeguards. See, e.g., Financial Times of December 18, 2002, "RBS Fined over Anti-Laundering Controls," by Jane Croft:

A probe by the Financial Services Authority found RBS staff failed to obtain or keep documentation to establish customer identity in an "unacceptable" number of accounts opened in early 2002. In some cases the bank had not taken copies of basic proof of identity or address, such as a driving licence or recent utility bill, to verify new customers were who they said they were.

   Since this break-down in anti-money laundering safeguards became public not only after the last FRB review of RBS, but after ANY U.S. acquisition review, it is imperative that it be inquired in to at this time. It is extremely surprising that RBS did not address this important issue in its application, as has been provided to ICP -- note in this regard the nexus to post-9/11 issues, see, e.g., the Wall Street Journal of November 9, 2001 (Network Suspected of Funding Terrorists Used Major Banks for Money Transfers), reporting that Al-Barakaat (which was raided by the FBI on November 7) opened an account with RBS' Citizens in March 2000, and subsequently wired nearly $600,000 to the United Arab Emirates ("UAE"). "Between July 5 and Sept. 26 of this year, $595,373 was sent from Citizens to... Emirates International Bank in Dubai." Id. The WSJ article also reports that "[a]ccording to regulators and bank officials, neither Citizens Bank nor Key Bank made any effort to ascertain whether Barakaat was legally permitted to be wiring such huge sums back and forth to Dubai. Both banks said they complied with all regulations. 'We saw no suspicious activity,' Citizens spokeswoman Barbara Cottam said."

   RBS' Citizens public position, still, is that the wiring of nearly $600,000 by an institution which had been denied a license by the Massachusetts regulators was not, in RBS' Citizens' view, any "suspicious activity." This calls into question the compliance practices of RBS and Citizens, and militates for the public hearing ICP / FFW is requesting.
In July 2001, FTSE International, jointly owned by the Financial Times and the London Stock Exchange, created a "FTSE4Good Index" -- which listed Royal Bank of Scotland as an unethical investment. See, e.g., Belfast News Letter of July 17, 2001. The U.K.'s Financial News of July 16, 2001 reported that "Royal Bank of Scotland does not have a human rights policy for its operation in Indonesia, so it has been excluded." The Herald of Glasgow (July 11, 2001, Royal Bank Fails to Make Ethics List) reports that RBS "has been excluded from the new FTSE4Good ethical investment index because it failed to develop a policy towards human rights in Indonesia, where it is a significant lender."

   RBS lobbied hard, and got included in the index in September 2001. But there has been no disclosure -- certainly there is none in the application -- of any human rights related standards at RBS. RBS continues to be invested in Indonesia (having, as simply only example, a 90 percent stake in Indonesia's Multicor Bank, at least as of March 2003). [For the record, last week the Indonesian human rights organization Kontras (Commission for the Disappeared and Victims of Violence) was attacked, and not protected by authorities, reportedly due to Kontras' monitoring of the situation in Aceh.] Note also that RBS' Natwest is embroiled in a human rights-related controversy over its sponsorship of a cricket tour that is going forward in Zimbabwe -- the imbroglio again shows that RBS does not have human rights related standards.

    Nor does it have environmental standards: environmentalists have "launched campaigns against Natwest -- owned by Royal Bank of Scotland Group.. for financing de-foresting in Indonesia." AFX European Focus, July 10, 2001. The Guardian (London) of July 26, 2001 (Rainforests Hit by Paper Trail to UK) reports that "Cheap paper made from cutting down Indonesian rainforest, an industry which is endangering some of the world's rarest animals, is flooding into Britain... APP [Asia Pulp and Paper], Indonesia's biggest pulp and paper producer, and some of its subsidiaries have received considerable financial backing from British banks, including NatWest. Conservationists say Indonesia is heading for an environmental disaster. It is estimated the country has lost more than 70% of its forests. A report by the World Bank has warned that 2m hectares - an area the size of Belgium - is being cut down every year and there are fears that by 2020 all of Indonesia's forests could have been destroyed."

    For the reasons set forth above, ICP and FFW have requested hearings and an extension of the comment period; this will be updated.

May 26, 2003

    This week, some deals then Wells, Citi and what we really wanna talk about. On May 21, MAF Bancorp announced a proposal to buy Milwaukee-centered St. Francis Capital Corp. for $264 million... Also on May 21, CSFB buy investment strategy firm Volaris Advisors for an undisclosed sum.

    Well(s) here we go: on May 20, Wells Fargo announced a proposal to buy Pacific Northwest Bancorp for $591 million. Then on May 22, Wells announced a smaller deal for Colorado's Two Rivers Corp., which owns the Bank of Grand Junction. It operates three branches around Grand Junction, which is in western Colorado, roughly halfway between Denver and Salt Lake City. Wells Fargo has three branches in Grand Junction: so, antitrust (and see below).

     The battle for Sears' portfolio heats up. CBS has reported the two companies which "have reviewed the unit's financial information and are expected to make bids for all of the business." are GE Capital and Citigroup. In the May 26 edition of "Inside B&C Lending," Citigroup offers an update on its supposed anti-predatory lending safeguard, the "referral-up" of creditworthy applicants to normally priced. loans. In 2002, of the over twelve thousand applicants "referred up," less than a thousand actually applied and less than 300 loans were made. Citigroup calls this a "warm" referral process -- ostensibly somewhere between cold (a mere 1-800 number) and "hot," which would involve the obvious step of offering normally-priced loans to those entitled to them, in the CitiFinancial storefront or elsewhere. The same "Inside B&C Lending" article questions CitiFinancial's most recent "partnering" announcement, stating that it "appears to contain little new," and that work on the "affordable mortgage" product "is still in the very early stages."

    A view: Community Reinvestment Act-style "partnerships" are not necessarily the way to address nationwide predatory lending. This applies to Wells Fargo as well... 

May 19, 2003

    On May 9, HBOS announced a proposal to spend 417 million pounds to buy up the part of Australia's BankWest that it doesn't already own... On May 14, the South Financial Group announced a proposal to buy MountainBank Financial Corp. for $137 million in stock, a 13-percent premium... The following day, CNB Holdings, which MoutainBank had said it was acquiring, announced that this acquisition proposal would be "delayed."

   On May 16, UBS announced a plan to buy the French wealth management business of Lloyds TSB, which has $1.14 billion in assets under management...

   Note: the insurance company AIG is still, according to its web site, doing business in Zimbabwe. In fact, AIG is offering "political risk" insurance there...

May 12, 2003

   Deals big and small. On May 8, Barclays announced a proposal by its Spanish subsidiary to buy Banco Zaragozano for $1.3 billion... On May 7 in California, Cathay Bancorp announced a proposal to buy GBC Bancorp for $450 million. Cathay, which operates 24 branches, proposes to pay $37.95 for each share of GBC, which operates 18 branches under the name General Bank. Dunson Cheng, Cathay's CEO, projects that "after the acquisition, Cathay would probably start a private banking unit, and it might open branches in Texas, Boston, and New York, along with expanding into the District of Columbia... It also plans to open a branch in Taiwan, to increase its trade-financing business." (American Banker, May 8). We'll see... 

May 5, 2003

   We coulda told ya: when Toronto-Dominion acquired Waterhouse in 1996, ICP opposed it, finding TD to be trying to evade the Community Reinvestment Act among other things. Well, now TD Bank is "exploring" selling off the TD Waterhouse discount brokerage arm, according to no less than the Wall Street Journal. Citing people familiar with the matter, the newspaper said TD Bank has hired Goldman Sachs to explore several alternatives, including a possible sale, but has not made a final decision. A sale of TD Waterhouse's U.S. accounts could draw interest from rivals such as E*Trade and Charles Schwab -- we'll be there...

   On the road again, with Morgan Chase -- the Telegraph of India reports on Chase's "plans to open an offshore research department in Mumbai, where Indian professionals will chew on numbers, prepare reports and, if things go right, track shares on New York Stock Exchange and Nasdaq. More than 1,000 jobs could come to Mumbai." On this, we've received the following commentary, from our favorite in-house correspondent:

Subj: JPM takes a trip to Mumbai

Date: 5/1/03 7:18:40 AM Eastern Daylight Time

From: [ ]

To: ChaseWatch@innercitypress.org

In the wake of the recent $1.4 billion settlement from various investment banks, including good ol' JPM, what messages would you expect these institutions to take away with them? Would you expect them to carry on with the "star system" whereby a big-name analyst is expected to be a "rainmaker", whose job is to be on the phone all day promoting stocks to clients and to provide soundbites for the media - not burdened with such tedious inconsequentialities as a realistic, working financial model and a deep hands-on knowledge of industry statistics? (this was the existing system that brought us Blodget and Grubman)

Or would you expect them to provide insightful, informed comment based on a close understanding of the industry coupled with an ability to understand, analyze and accurately interpret financial statements? Well, I know what a reasonable person might expect, but unfortunately we are talking about JPM here. They have recently announced that they are setting up a unit in Mumbai, India, which could probably best be described as the financial industry's version of a sweatshop. Here they believe they can get MBAs and chartered accountants, at a quarter of the price they would

normally pay, to sit and gather data and produce generic models. They envisage a headcount of 40 out of a total 400 across research globally. (This after having recently cut their European headcount alone by 60 people). I quote from a recent memo from the global head of research:

"Hiring top grade MBA candidates to work in specific sectors. These analysts would do industry specific research and analysis - both regional and global work - offering support to analysts in that sector in all locations. Work could include maintenance of proprietary data, data collation and analysis for client requests, special projects, presentation preparation and periodical production. Initially we to start with 6 - 8

sectors and assign two headcount to each sector. Financial Modeling - Hiring MBAs or Chartered Accountants with strong Excel skills to build new models or maintain models and newsflow relating to covered companies. Having a team of financial modelers could decrease the time required to initiate coverage, as they could build

the model based on a standard cross-sector JPMorgan model and provide an option to analysts who would prefer to use their existing time and resources for other activities.."

Come again? "WHO WOULD PREFER TO USE THEIR EXISTING TIME AND RESOURCES FOR OTHER ACTIVITIES"?

I am intrigued as to what could be more important for an analyst than being able to build a meaningful financial model from which to base an opinion. Does "a standard cross-sector JPMorgan model" - where a telecoms stock would be bolted into the same framework as a drinks retailer - sound to you like something on which you would want to base your 401K investing? Especially since it has the phrase "JPMorgan" in it? We will leave aside the question of whether a truly "top grade" MBA is going to want to stay in Mumbai earning 25% of MBAs elsewhere. We will leave aside the question of how it will be humanly possible to understand US and  European industries at such a remove (assuming industry understanding is on the agenda at all).

Star analysts tend to leave after a few years and get replaced by the junior analysts, who have been learning from them by listening to them, building and maintaining the models, attending client meetings, writing some of their analysis etc. The question bubbling up is this: Where, in three years' time, are they going to find the analysts who have better things to do with their time than analysis? Will they perhaps ship them in from Mumbai....or will they have to spend fabulous amounts of shareholders' money to recruit them from another less moronic organization? (By the way, I used to sit next to a "star analyst" at JPM. A week after she was promoted to senior analyst, she had to ask me what ex-dividend meant..........)

     Also on the Global Beat, Morgan Chase on April 29 announced a plan to buy a 33 percent stake in a fund management joint venture in China for $5.98 million. Shanghai International Trust and Investment Corp would own the remainder of the 150 million yuan venture, JP Morgan said in a statement, adding it intended to raise its stake to 49 percent when regulations allow... 

April 28, 2003

    Reuters of April 24, from London, reported that Dutch insurer Aegon NV is close to hiring a bank to advise it on the sale of its U.S subsidiary Transamerica Finance Corporation, citing "a source familiar with the situation." Aegon CFO Joseph Streppel told a shareholders meeting last week that the company was willing to sell TFC "but not just at any price." The source said U.S. investment bank Morgan Stanley had not been awarded a formal mandate yet but has been "lined up for the last two months." Aegon bought Transamerica Corp for around $10 billion in 1999...

   On April 25, Citigroup announced a deal allowing it to buy additional shares in Pudong Development Bank and its 272-branch network. Citibank paid $72.5 million for a five percent stake in Pudong bank; the new deal allows additions thereto every April, up to 25%, Citi spokeswoman Grace Guo said in Shanghai. "We'd make a decision when the time comes, whether to go ahead if regulations permit. We'll take it step by step," she said. Hey, if the past is any guide, Citigroup makes the regulations (for example, the repeal of the Glass Steagall Act in 1999). Then when things turn bad, they're nowhere to be seen (but watch for Sandy in the SEC settlement: according to some, he'll be barred from speaking to stock analysts without a compliance officer / handler). 

April 21, 2003

    Deal of the week was in Brazil: ABN Amro announced on April 16 a proposal buy Banco Sudameris and its 293 branches from Italy's Banca Intesa for $740 million. Most had expected Banco Bradesco to grab Sudameris... Also on April 16, CPB Inc. made an unsolicited proposal to buy cross-town Honolulu rival CB Bancshares Inc. for about $269 million, hinting it could go hostile if friendly negotiations failed. On April 17, Royal Bank of Scotland Plc announced a proposal by its U.S. unit Citizens Financial Group to buy Port Financial Corp, the holding firm for savings bank Cambridgeport, for $285 million. RBS/Citizen's Larry Fish said that the number of branch closings is also unclear, but there will be a split between closings of Port Financial and Citizens branches. We'll see.. 

April 14, 2003

Nothin' but deals: on April 7, United Bankshares announced a proposal to buy Sequoia Bancshares Inc. in a stock and cash merger valued at about $109 million... On April 8, Bank of Tokyo-Mitsubishi's UnionBanCal Corp. announced a proposal to buy Monterey Bay Bancorp and its eight branches for $96.5 million... In Mexico City on April 8, Bank of Nova Scotia (Scotiabank) announced that it expects in the next two months to complete the process of acquiring the Mexican government's 36 percent stake in Mexican bank Scotiabank-Inverlat... In Chicago on April 10, First Federal Capital Corp. announced a proposal to acquire Liberty Bancshares for $78 million...

April 7, 2003

   The quasi-bank deal of the week was the April 2 announcement by First Data Corp. of a proposal to acquire Concord EFS for nearly $7 billion. There'll be antitrust concerns -- the proposed combined company would control more than two-thirds of the market for processing ATM transactions for retailers -- as well as outstanding concerns regarding the practices of First Data-owned Western Union. First Data CEO Charlie Fote said on a conference call he was confident the deal would clear those hurdles. "We feel pretty good about the antitrust issue," Fote said. No mention was made of Western Union, nor issues concerning ATM fees...

   The "sage of Omaha" goes subprime: Buffett's Hathaway on April 1 announced a play to buy Clayton Homes for $1.7 billion... Cross-border micro: on April 4, Bank of Montreal announced a proposal to buy New-York based investment bank Gerard Klauer Mattison for $30 million.... New Jersey micro-deal: Lakeland Bancorp on March 31 announced a proposal to purchase CSB Financial Corp. of Teaneck for $34 million...

  Talk about a sweetheart deal: South Korea will inject 800 billion won ($640 million) into Korea First Bank this year, under a deal to cover losses after the bank's sale to U.S. fund Newbridge Capital, the Chosun Ilbo newspaper reported last week. The funds to be provided by the Korea Deposit Insurance Corp, a state-run restructuring agency, will be on top of 17.1 trillion won of taxpayers' money injected so far into Korea First Bank, the newspaper said, citing an official at the state-run agency... 

March 31, 2003

   Sears' move to sell its credit card operations -- now accounting for over half of its business -- bears watching. The rumored bidders including Citigroup, GE -- and Household / HSBC. Under MasterCard's rules, ol' Morgan Stanley, which owns the Discover card, would have a problem bidding. But we'll see...

   Goldman Sachs, which is "shopping" Sears' portfolio, itself made an acquisition last week. a proposal to buy a 45 percent stake in Australia's largest independent brokerage, JBWere Ltd. JBWere's chairman, Terry Campbell, declined to disclose the acquisition price -- which local media reported was $48 million in cash...

   Insurance trading: Prudential Financial Inc. announced on March 28 a proposal to sell its specialty car insurance business to Nationwide Mutual Insurance Co. for $138 million in cash. Smaller insurance deal: First Financial Holdings Inc. said Monday that it has bought Woodruff and Co. Inc., an insurance agency in Columbia, S.C...   Far from micro: following its annual meeting March 25 in Halifax, Bank of Nova Scotia bragged that it has $2 billion on hand, ready to be used for acquisitions in the United States and elsewhere. "We can afford to pay cash in the $2 billion range without missing a beat," said CEO Peter Godsoe. "We do not view a U.S. acquisition as an end result of a long-term strategy. We view it as a beginning where we would like to be a competitive personal and commercial bank in the U.S." We'll see.. Click here for HSBC - Household wrap-up (for now). 

March 24, 2003

   Good riddance: also on March 21, Conseco's consumer finance unit decided to shut its home equity lending business after it failed attract a buyer. "We were not able to find a buyer for the home equity platform. It was losing money," said Mary Beth Schwartz, Conseco Finance's spokeswoman. And so, goodbye to Green Tree (at least part of it). Also, Fitch last week announced that M&T would "be materially [adversely] impacted by the acquisition of Allfirst" -- M&T's credit rating stands to be cut. The Federal Reserve's approval order, of course, neither mentioned nor considered this...

   A Virginia deal: on March 21, FNB Corp. announced a proposal to buy Bedford Bancshares for $49.9 million. 

March 17, 2003

    Micro-deals.. and a joke. On March 12, Northwest Bancorp announced a proposal to acquire PA-based First Bell Bancorp for $120 million... On March. 13, Mercantile Bankshares Corp. announced a proposal to buy Maryland's F&M Bancorp for $500 million. Smaller but funnier: Sierra tu Madre, on March 13 California-based Western Sierra Bancorp announced a deal to snap up Central Sierra Bank for $21.5 million...

    Less funny is the Fed's total sell-out. Last week, the Fed approved an application by Friedman Billings Ramsey to acquire, among other things, stakes in First Bell Bancorp (see above), and in Imperial Capital Bank, which makes tax Refund Anticipation Loans for Household International, at rates over 100%. The Fed's summary, in footnote 9 of its FBR approval order, is that "[t]he commenter also objected to one institution's participation in a loan program based on anticipated tax refunds. The Board notes that neither FBRG nor its subsidiaries or affiliates make this type of loan." No, it's that FBRG has applied to acquire a 5.2% stake in Imperial Capital Bank, Household's RAL partner. Increasingly, things at the Fed seem to ride on which staffers are assigned to particular applications. On M&T-Allfirst, the Fed' (staff-written) order didn't even mention M&T's involvement in scandal-plagued FHA / HUD loans, a matter that's been reported in the New York Times, in articles that were raised to the Fed in timely comments. 2003 seems to be the year of inconsistency, at the Fed: it didn't ask Wakashio / Sumitomo Mitsui even the questions it had asked Mizuho earlier in the month. So what's going on?  

March 10, 2003

    The action's been in Mexico: on March 4, Laredo National Bancshares bought a 15 million share stake in Banorte. Back on Feb. 28, Bank of Nova Scotia made an offer to buy yet more shares in Scotiabank Inverlat's Mexican operation...

    Beyond some heating-up on the HSBC - Household beat (click here for that), here's Sumitomo Mitsui, round two:

Dear Secretary Johnson, Governors:

On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a near-immediately reply to the March 6, 2003, purported Response to ICP's timely March 2-3, 2003, comment opposing the applications of The Wakashio Bank, Ltd. (to become a bank holding company by acquiring) Sumitomo Mitsui Banking Corporation and Manufacturers Bank (the "Applications").

The Response cites four Federal Reserve Board ("FRB") orders -- each of them more than twenty years old -- and argues that ICP's comments are "unsubstantiated" (Resp. at n.1). The Response merely recites the Community Reinvestment Act ("CRA") Performance Evaluation (on which ICP commented), and states that "[t]he Bank's CRA loan data for 2002 was [not] filed with the Federal Reserve until February 28, 2003... The 2002 loan data for all banks usually is not publicly available until later in the year."

We direct the FRB to a precedent not twenty years old, but from last month: on Feb. 10, 2003, FRB Associate Director Shawn McNulty, in response to a timely comment, asked another applicant for CRA and small business lending data "during calendar year 2002." In a February 18, 2003, response (at 2), this applicant provided 2002 small business lending data, without any request for confidential treatment. Perhaps this was not the FRB's practice in 1973 through 1981 (the time-frame of the precedents Wakashio's Response relies on) -- but it is the FRB's (and the other federal bank regulatory agencies') practice in the present. Rather than characterize ICP's timely comment as "unsubstantiated, "without merit" and "moot" (Resp. at 1, 4), it would be better for Wakashio to actually respond to the issues timely raised, including with reference to CRA and other data that is less than 14 months old.

ICP is puzzled by the statement, Resp. at 2, that "[t]he reorganization is expected to occur on March 17, but Wakashio will not acquire ownership of the Bank from Sumitomo Mutsui Financial Group (the direct parent of SMBC and the ultimate parent of Wakashio), unless and until the Board approves the current Application and the waiting period expires." Given the structure set forth in the portions of the application that have been provided to ICP, it is unclear how the proposed reorganization could "occur" without Wakashio acquiring ownership of the Bank, and becoming a bank holding company. Upon receipt of the Response, ICP returned a telephone call to the office of Wakashio's outside counsel, reached voice mail, and poses just this question. Thus far, no explanation has been provided.

As to Goldman Sachs' transaction with Sumitomo Mitsui, Resp. at 4, Wakashio's counsel states tersely only that it was "conducted in accordance with all applicable law and was disclosed to all relevant regulators and the public," and states that it "has no relevance to the pending Application." As ICP noted, the transaction is "disclosed" in the instant Application, at 2, n.3. Since ICP's first submission, Asia Pulse of March 7, 2003 ("SUMITOMO MITSUI CHIEF DEFENDS PLANNED SHARE ISSUE TO GOLDMAN"), has reported that

The decision by Sumitomo Mitsui Financial Group Inc. (TSE:8316) to ask Goldman Sachs Group Inc. to buy its new shares is based on "economic rationality," president Yoshifumi Nishikawa told a news conference Thursday. Responding to news that some financial institutions offered better terms than Goldman, Nishikawa acknowledged that the banking group received offers from several firms. But Goldman's terms were "in no way unfavorable compared with other offers," he said. They were evaluated objectively by the bank as well as third parties, including an auditing company, Nishikawa added. The banking group saw its stock price decline after it announced plans to issue shares to overseas investors in addition to Goldman. "It is regrettable that (the share issuance) will turn out to be far larger than expected," Nishikawa said, with shareholders in mind. "We want to defy the market's evaluation by bolstering our profits."

    Emphasis added (as to the issue of Goldman' "control" over Sumitomo Mitsui)

     Also since ICP's first submission, the Japan Weekly Monitor of March 3, 2003, has reported that "the bank group said it will issue an additional 100,000 shares worth 300 billion yen by the end of March to bolster its capital base. The capital increase, apparently designed to accelerate the disposal of bad loans, follows the issuance earlier this month of 150 billion yen worth of shares to U.S. investment bank Goldman Sachs Group Inc. Sumitomo Mitsui said payments for the new preferred shares will fall due March 11, which will be followed by the issuance on March 12."

   In terms of the context of this Application, the Daily Deal of March 5, 2003, reported that

Sumitomo Mitsui Financial Group, the owner of Japan's second-largest bank, has formalized an offer to buy Softbank Corp.'s 48.8% stake in Aozora Bank Ltd., according to Tokyo banking sources. Sumitomo declined to reveal terms, but Japanese media reports said the offer is worth [yen] 102 billion ($864 million). .. Sumitomo is believed to be planning to buy just more than 50% of Aozora, including the Softbank stake and purchases from other Aozora shareholders. A controlling interest in the bank would allow Sumitomo to include Aozora in its consolidated business results and would result in a 0.5% rise in Sumitomo's capital-asset ratio. The bank's ratio stood at 10.37% in September 2002, when Sumitomo published business results for the first half of its current business term. But that figure has almost certainly fallen since because of a sharp decline in the value of the group's Japanese equity portfolio. The Bank for International Settlements, the central bank for central banks in charge of global bank regulatory standards, requires banks involved in cross-border transactions to maintain an equity-asset ratio of at least 8%.  Emphasis added.

As if it rebutted ICP's comment, the Response states that "the reorganization is being done for accounting purposes" (Resp. at 2). But to buy a bank simply to be able to include it in "consolidated business results" and thereby raise (or "cook") Sumitomo's capital-asset ratio militates, rather, for closely scrutiny of this Application.

We will await receipt either of a more substantive response from Wakashio, or of the type of question-letter that the FRB sent out, in the other above-referenced 2003 proceeding, requesting 2002 CRA and other data. Wakashio's statement that the reorganization will occur on March 17, despite the pendency of this Application, should be explained, as should the compliance of the BHC Act of the Goldman Sachs - Sumitomo Mitsui transaction -- documents including any representations to the FRB by Sumitomo Mitsui regarding the Goldman Sachs transaction should be provided...

March 3, 2003

    Beyond HSBC - Household (click here for an update), our main focus this week is... Sumitomo Mitsui! We've submitted a timely comment opposing Sumitomo's applications to the Federal Reserve Board; it's summarized below. Noting a micro-deal: FirstBank NW Corp. announced on Feb. 24 a proposal to acquire Oregon Trail Financial Corp. for $74 million. Noting a rumored sleazy proposal: Goldman Sachs, ever the bottom feeder, is reportedly interested in gettin' a piece of Conseco's predatory Green Tree. Meanwhile, Goldman shows up in comments ICP filed with the Federal Reserve on March. 3, regarding Sumitomo Mitsui:

Dear Secretary Johnson, Chairman Greenspan, Governors:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely comment opposing the applications of The Wakashio Bank, Ltd. (to become a bank holding company by acquiring) Sumitomo Mitsui Banking Corporation and Manufacturers Bank (the "Applications").

   This comment is timely. First, we find it extraordinary that Wakashio's inquiry / notification to the FRB about this proposal, a letter dated Jan. 10, 2003, Wakashio asked to be withheld under the Freedom of Information Act ("FOIA"), while at the same time requesting the waiver of informational requirements and a fast approval. The request for confidential treatment of the Jan. 10, 2003, letter was ludicrous; this applicant, on an equitable basis, should not be allowed to request both secrecy and a curtailed / truncated review. Second, this is particularly inappropriate in that an existing company not under FRS supervision (Wakashio Bank) wants to become a bank holding company. And yet, after a mere paragraph, the Application at 21 states that "[a]dditional information regarding Wakashio is provided at Confidential Exhibit E," the withholding of which ICP contests, including in light of its timely FOIA request. Third, we question why the FRB has not required any application in connection with Goldman Sachs transaction with Sumitomo, which owns a bank in the United States (see infra).

   Since Sumitomo announced its Wakashio proposal in Dec. 2002, why did it request confidential treatment for its Jan. 10, 2003, letter to the FRB? The Japan Weekly Monitor of January 28, 2003, reported that

"Sumitomo Mitsui Banking Corp. under Sumitomo Mitsui Financial Group Inc. signed a merger pact Tuesday with its second-tier regional banking subsidiary Wakashio Bank... In the merger, Wakashio Bank will be the surviving entity... The merger will take place March 17 and the merged entity will have a capital of 500 billion yen. Sumitomo Mitsui Financial Group said last December Sumitomo Mitsui Banking and Wakashio Bank will merge March 17 but details such as the equity swap ratio were not released at that time. The merger is designed to generate a surplus in consolidation, which is produced when a smaller company survives in merging with a bigger firm. The surplus -- net assets held by a company to be liquidated in excess of shares to be issued to shareholders in the firm -- can be used to cover the disposal of latent losses on shares or real estate holdings. (Emphasis added.)

   On timing (and, relatedly, arrogance): while the FRB comment period runs through March 3, 2003, and while Sumitomo has made outrageous requests for confidential treatment, Sumitomo states that the proposed merger "will take place" on March 17, 2003. Given that there is a 15 day waiting period, Sumitomo apparently expects the FRB to approve its application on the day the comment period closes -- actually, BEFORE the comment period closes (since the Board meets in the mornings). All of this to facilitate an accounting gimmick (see supra).

    This is not the only irregularity. The Asahi Shimbun of January 16, 2003 ("SMFG GETS SET FOR MARCH RECKONING") reported that:

Under the agreement between SMFG and Goldman Sachs, the latter will be entitled to convert the preferred shares into common shares two years after their issuance for a 23-year period
If Goldman Sachs chooses to do so at current common SMFG share prices, the U.S. company will have about a 7 percent voting stake, which would make it the leading shareholder in the Japanese bank

   To reach a binding agreement to acquire over 5% in a bank holding company (like Sumitomo, which owns a bank in the United States), should trigger an application to the FRB, under the BHC Act. The Goldman Sachs - Sumitomo proposal is mentioned in the Applications, at 2, n.3. But despite the issues raised, Goldman Sachs on Feb. 7, 2003, issued a press release stating that "it has closed a series of related transactions with the Sumitomo Mitsui Financial Group, Inc. These transactions were originally announced on January 15, 2003."

    Then, Reuters of Feb. 27, 2003, reported that Italian bank Capitalia said on Thursday it had set up a joint venture with U.S. investment bank Goldman Sachs to recover six billion euros worth of Capitalia's bad loans. Rome-based Capitalia said in a statement it and Archon Group Italia, a fully owned Goldman Sach's unit, had signed a letter of intent to create a joint venture aimed at 'improving and speeding up the recovery of Capitalia's bad loans and credits.' The joint venture will take over the management of three billion euros worth of Capitalia's bad loans and a further three billion euros worth of bad loans that have been securitized by Capitalia."

  Again, ICP formally questions why the FRB has not required any application in connection with Goldman Sachs transaction with Sumitomo, which owns a bank in the United States.

   Regarding Wakashio, which is applying to become a bank holding company, after a mere paragraph, the Application at 21 states that "[a]dditional information regarding Wakashio is provided at Confidential Exhibit E," the withholding of which ICP contests, including in light of its timely FOIA request. ICP also notes, App. at 16-17, CBDA-II (responsible for "non-Japanese corporate credits," with employees in L.A. and New York); and SDAD (responsible for "various specialized areas including loans restructuring, project finance, public finance and loan syndications," located in New York).

   Manufacturers Bank is described, App. at 18, as offering "commercial and consumer loans, including asset-backed and commercial real estate lending, trade finance and cash management services."

   The CRA performance evaluation annexed to the Application states, at 5, that "The distribution of small business loans reflects poor dispersion among businesses with gross annual revenue (GAR) of $1 million or less;" at 22, it states the "MB has not made any additional debt or equity investments since the prior examination dated August 2, 1999." This statement is repeated for a number of MSAs.

    Sumitomo claims that Manufacturers Bank "has an exemplary record of meeting the credit needs of the communities where it operates" -- then acknowledges, as it must, that it was awarded a "low satisfactory" rating under the CRA investment test. Hardly "exemplary." Then the App. provides some data -- but only for 2001. But it is March 2003: where is the 2002 data? We anticipate a question-letter such as the FRB sent to Mizuho on Feb. 10, 2003, subsequent to ICP's Feb. 5, 2003, timely comment. On the current record, Sumitomo's applications should not be approved.

  Developing.... Click here for HSBC updates... Until next time, for or with more information, contact us.

February 24, 2003

    Deal news of the week was wacky Wachovia, going into a joint venture of a kind with Prudential Securities. Under the agreement announced Feb. 19, Wachovia and Prudential would combine their retail securities brokerage and clearing operations. Wachovia would have a 62 percent ownership interest in the new firm, and Prudential would own the remaining 38 percent. "The merger is expected to close in the third quarter, the companies said." There just might be some antitrust issues there, no?

     Meanwhile, on Feb. 21 the Nihon Keizai Shimbun reported that Merrill Lynch plans to "inject" $186 million into a Japanese corporate rehabilitation fund it will run with Mizuho. Mizuho, by the way, last week released some but not all of its CRA-related response; it continues to withhold its organizational chart and even the list of the "principals" (or would that be, "principles"?) of its banks in the United States. Mizuho's counsel states that the CRA information was withheld because it would "reveal the strategy" of Mizuho's banks. Among the matters finally unredacted? That Mizuho made "donations of surplus office furniture;" that Mizuho paid for a "Gala" at which, not coincidentally, Mr. Tanaka of (the old) Fuhi and Mr. Noguchi of the old IBJ were honored -- wait, pay-to-play is one of Mizuho's strategies...

    The ICP Bank Beat is "on the road" -- see our Global Inner Cities report for comments we've just filed in a dozen African nations, opposing HSBC's proposals there, including the "export" of Household's practices, and an acquisition of 40% of the shares of Equator Bank. 

February 17, 2003

    One wonders -- well, at least we do -- what's up with the Allied Irish Bank / Allfirst - M&T applications. ICP protested the applications on December 9, 2002; only on Jan. 28 did M&T deign to submit a response (to delayed Federal Reserve questions about Community Reinvestment Act issues). ICP has submitted a reply, to the Fed and to the New York Banking Department. The NYBD has said that ICP's reply will be considering on M&T's pending application. So it's still pending. The N.Y. Banking Board, which cancelled its February meeting, next convenes on March 6, 2003 -- the day after the Delaware Insurance Department's second day of hearing on HSBC - Household. Which is also pending...

February 10, 2003

     Some micro-deals -- then news on a challenge to the world's largest bank by assets, Mizuho. In Florida action, F.N.B. Corp. announced on Feb. 3 a proposal to acquire Charter Banking Corp., the holding company for Southern Exchange Bank, for $150.3 million... Prosperity Bancshares announced on Feb. 3 a proposal to buy Abrams Centre National Bank from Chicago-based MB Financial for $16.3 million... And on Feb. 7, Standard Bancshares announced a proposal to acquire Indiana bank Security Financial Bancorp Inc. for $45.9 million, as it seeks to expand its network of banks around Chicago.

    While ICP has focused to date primarily on the mega-banks based in the U.S. and Europe, on Feb. 5, 2003, ICP filed comments on Mizuho's applications to the Federal Reserve Board:

    As set forth below, even in its home country, and even after receiving massive public subsidy, Mizuho has "slashed lending to small and medium-size[d] business by $42 billion in the half-year to September 30 [2002], by far the biggest cut among Japan's top seven banking groups." See, Reuters of Jan. 14, 2003, further addressed infra. If this is Mizuho's performance -- criticized by its home country supervisor even in the absence of a CRA-like statute -- closely scrutiny of and action on Mizuho's performance in the U.S., under the CRA, is needed, in connection with these applications.

    Take, for instance, the record of IBJ Whitehall Bank & Trust. Subsequent to the Mizuho merger, this institution's CRA rating was downgraded. The post-Mizuho performance evaluation, conducted by the FRS, states at BB5 that "only one loan was originated during the examination period... Total loans at this examination represent a 32 percent decrease since the previous examination...". The Exam notes "few new initiatives," and that "[d]uring the examination period, the loans originated by the bank's SBIC were outside IBJ Whitehall's assessment area," which consists of the five boroughs of New York City. Further on in the Exam, it is stated that "IBJ Whitehall capitalized a bank subsidiary, IBJ Whitehall Capital Corporation, an SBIC that invests in small business operations in an area that includes the bank's assessment area." But since none of IBJ Whitehall's SBIC's loans were IN the assessment area (where there is no lack of credit needs), it is entirely unclear why the capitalization of this subsidiary is given positive weight in the Performance Evaluation. The Exam re-emphasizes that "most of its activities were outstanding loans and investments originated during the previous examination period." Id. at BB7. Since it has been part of Mizuho, its performance has deteriorated.

   The FDIC's more detailed performance evaluation, post-Mizuho, of Dai-Ichi Kangyo Bank of California notes inter alia that "the distribution of small business loans and letters of credit reflects poor penetration among business customers with Gross Annual Revenues of $1 million or less;" the bank is awarded a Low Satisfactory on the CRA Lending Test. The Exam states that "during the reorganization, the bank's lending activity slowed... The drop in volume impacted the lending in low-income census tracts." Id. at 8, 22.

    Surprisingly, the CRA-relevant data that is presented in Mizuho's Applications, for which it is requesting expedited approval, covers a time-frame ending in 2001 -- more than 13 months ago. See App. at 30-33. Extremely troubling to ICP is the statement, which Mizuho confines to a footnote, that "MTBC (USA) suspended its CRA activities for parts of 1999 and 2000 in conjunction with a plan to convert its status to that of a limited purpose trust company. Upon withdrawal of that plan, MTBC (USA) resumed its CRA activities." App. at n.4, running from page 33 to 35. ICP is not aware of any authority for an insured depository institution to "suspend[] its CRA activities" while it contemplates converting to another status. We also note -- and contest the "segmentation" of this proposal implied by the statement that "MHAT plans to close its New York representative office as part of the Reorganization. MHAT will submit appropriate notices at a later date." App. at n.2, p. 12. ICP contends that the "appropriate" notices for this proposed office closure should be filed at this time, particularly since the proposed office closure is explicitly planned "as part of th[is] Reorganization."

    Despite ICP's FOIA request, we have not been provided with the many exhibits for which Mizuho has requested confidential treatment. ICP hereby contests Mizuho's attempt to withhold even the "list of principals of the U.S. Subsidiary Banks ("Confidential" Exhibit 14), "information on the principals of MHHD ("Confidential" Exhibit 13), the "organizational chart for MHFG ("Confidential" Exhibit 15) and the "list of companies engaged in nonbanking activities in the United States in which MHFG [would] own or control more than 5 percent of the voting shares ("Confidential" Exhibit 20). Given the centrality of an assessment of Mizuho's widely-reported "asset quality" problems, see supra, ICP also specifically contests inter alia the withholding of "Confidential" exhibits 3 ("Information related to MHCB's asset quality"), 7 ("Information related to MHAT's asset quality"), and 9 ("Information related to MHTB's asset quality"). ICP contests Mizuho's attempt to confine the entirety of its response to (required) Question 1, regarding Consent to Jurisdiction and other (FBSEA-relevant) commitments, to "Confidential" Exhibit 21... ICP is opposed to Mizuho's applications, and requests an evidentiary hearing.

     Again, click here for updates on the campaign opposing HSBC - Household.

February 3, 2003

     Couple of deals; click here for updates on the campaign opposing HSBC - Household.

    Alabama National Bancorp. announced on Jan. 29 a proposal to acquire Millennium Bank in Gainesville, Fla., for about $24 million

     The race to control loss-making German bank Bankgesellschaft Berlin AG was thrown open on Jan. 30 when, with minutes to go to a deadline for offers set by the city of Berlin, U.S.-based private equity firm Lone Star Fund said it was prepared to pitch against a rival offer from consortium BGB Capital Partners. "We have decided to put in an offer," said Roger Orf, Lone Star Fund's European manager.

     From a London source: Morgan Chase "is holding an 'EMEA MDs' Leadership Forum.'  At the SAVOY HOTEL, one of the most expensive in London. JPMorgan Chase has more than enough space to accommodate the MDs in its own premises, but we wouldn't want them slumming it, would we? Cost cutting only applies when it comes to wrecking people's careers and lives, not to corporate jollies for the MDs. Glad to see that the money they saved by screwing me out of 10 months' work, at 70 hours per week, before sacking me without a bonus, is being spent wisely." This is a correspondent from whom we'll be hearing more. 

January 27, 2003

    The deals are back -- and so are the proposed branch closings. On Jan. 21, BB&T announced a proposal to buy First Virginia Bank for $3.38 billion. In a conference call with analysts, BB&T CEO John Allison said that about 120 bank branches would be closed, separate and apart from another 16 to 20 branches BB&T will propose to sell in purported compliance with antitrust laws. Oh, he also said some jobs will be cut after the merger, but refused to provide an estimate....

     Another of ICP's favorites, SunTrust, announced on Jan. 22 a proposal to acquire Lighthouse Financial Services for $130 million, bolstering (one of Reuters' action-verbs) its footprint in Beaufort County, South Carolina...

January 21, 2003

    On the Bank Beat front, ICP has become aware of a planned meeting, in violation of the SEC's Regulation Fair Disclosure, between senior Household management (including CEO William Aldinger) and select "sell-side" analysts and large HSBC shareholders, slated for Jan. 21-22. ICP has raised this to the SEC, both in opposition to a pending HSBC-related application to the SEC, and in a separate complaint letter. HSBC (and the planned attendees) plan cavalierly to violate Reg FD; we'll see.

    And now it can be told -- or can it? Since Nov. 25, 2002, ICP has filed comments with the FDIC opposing the application to acquire the Orchard Bank division of Household Bank FSB. The CEO of the proposed acquirer, the eight-branch Panhandle State Bank, wrote ICP on Dec. 6, saying that he would respond once he had reviewed ICP's comments. He never did respond, and the irregularities of the deal mounted. Household was giving Orchard away, on a "break-even" basis. Panhandle was acquiring the deposits that Household had demanded to secure subprime credit cards -- without acquiring the credit card accounts. Panhandle said that U.S. Bank has "approved" them for financing, which U.S. Bank has denied, at least to ICP. No matter -- on Jan. 16, ICP was told by a stock market arbitrageur who shall remain nameless that the FDIC had approved Panhandle's application.

   Now the real fun begins: ICP telephoned the FDIC, asking for confirmation that the application had been approved, and for a copy of the approval order. First there was no answer. Then the FDIC's regional office called back and said they that do not have "delegated authority" to release approval orders. Only to issue them, apparently.

   At least the FDIC called back. The Office of Thrift Supervision has hit a new low. Since Dec. 23, ICP has been asking the OTS about certain remaining Household Bank FSB applications. ICP telephoned the OTS' Atlanta office, then the remains of its mostly-shuttered Chicago office. No response. So ICP contacted, in writing, the OTS' ombudsman, who called back to say he'd received the letter, but has not called back since. The OTS' goal, it appears, is to provide no information at all, until they've definitively let Household off the hook, so that HSBC does not have to apply anywhere under the CRA to acquire Household Bank FSB. Every once in a while we're reminded that these federal employees' salary are paid by... the taxpayers. But it seems we must have missed some announcement over the holidays, that the OTS has been spun-off by the government, and is now owned by the savings banks, particularly those engaged in predatory lending, which the OTS purports to regulate...

January 13, 2003

    On Jan. 8, Bank of New York announced a proposal to buy Credit Suisse First Boston's
U.S. clearing unit for $2 billion in cash, which would make BONY the world's largest player in the securities-processing business as measured by number of clients. Reuters quotes a U.S. Bancorp analyst that "Everybody's afraid of deals right now. Any kind of unanticipated transaction is going to cause pricing pressure on stocks these days."

   In Conseco's bankruptcy case, the judge has approved plans for an auction to sell off Conseco Inc.'s money-losing finance unit, the old Green Tree. Lehman Brothers, where are you?

      Where we are is opposing HSBC - Household. HSBC's refusal to answer the most basic questions about its proposal to acquire Household International has led ICP to formulate a series of twenty questions, which have now been put to HSBC is a variety of forums. A version of the questions that is relevant to Household's national bank is contained in ICP's HSBC Watch Report, in ICP's Jan. 13 Comment to the Office of the Comptroller of the Currency, along with a newly-arising issue concerning Household's attempt to give-away the "Orchard Bank division of Household Bank FSB" so that HSBC doesn't have to apply anywhere under the Community Reinvestment Act. It turns out that the so-called Orchard Bank secured credit cards are issued by Household's national bank. Household is trying to sell off the deposits it required as security for these cards, to Panhandle State Bank in Idaho, while presumably trying to keep the credit card accounts. ICP has raised this to the OCC, NYBD and Federal Reserve. Also last week, the NYBD finally asked HSBC some questions; they are quoted in ICP's comment to the OCC.

January 6, 2003

    On the merger beat, it was relatively quiet over the holiday. ICP took the opportunity to petition both HSBC's non-executive directors (as reported in the Jan. 4 Guardian and Times of London, and the Mail on Sunday) and the members of the New York Banking Department, concerning HSBC's ill-conceived attempt to acquire Household International. In order to try to avoid applying to the Federal Reserve Board under the Community Reinvestment Act, Household is trying to give the Orchard Bank division of its savings bank away, to Idaho-based Panhandle State Bank. This one gets wackier on the time: under cover letter dated December 30, 2002, ICP has received from the Idaho Department of Finance a copy of Panhandle's "Update" (that is, correction) to its already late-filed antirust HHI analysis. Panhandle's December 24 letter to the FDIC Regional Director states that, of the deposits that Panhandle is applying to acquire, "approximately $14 million consists of secured credit card deposits," and that these deposits were omitted from the deposit chart Panhandle previously provided as Item 15(I)(a) of its application.

    This contradicts Panhandle CEO Curt Hecker's previously public statement that Panhandle is "only interested in the community aspects of (Orchard) bank." Spokane Spokesman-Review of Nov. 27, 2002.

     Panhandle's Dec. 24 letter distinguished between "'local' deposits, which were the only deposits reflected in the deposit chart in Item15(I)(a) of the Application," and these "secured credit card deposits." So: Panhandle is seeking to acquire money that Household Bank f.s.b. customers have been required to deposit as security for subprime credit cards. Orchard has been described in the publication Credit Card Management as "a secured card specialist;" the same publication noted a direct-marketing strategy "being followed by Orchard Bank, which has access to the database of Los Angeles-based Lexicon School of Languages, which primarily serves Hispanics." Targeting high-rate, high-fee credit at protected classes, by ethnicity or national origin, violates the fair lending laws...

   Further wackiness: Panhandle's Dec. 24 letter admits that its late-submitted Dec. 12 HHI analysis "was inadvertently based on market information for Washington County, Oregon, rather than Washington County, Idaho." Oops. Panhandle admits that "the Updated HHI results in an increase in Panhandle's deposits in the market area." But, magically, Household Bank f.s.b.'s deposits are also reduced in the Updated HHI Analysis. Panhandle states that Household Bank f.s.b. has transferred $183 million of "out-of-area brokered deposits that Household held while managing deposits related to credit card portfolios (the 'Out of Market Deposits')... the Out of Market Deposits are being sold to a third-party in a transaction unrelated to Panhandle's acquisition of the Branch." Panhandle states that the "Out of Market Deposits" were transferred "to Household's main office in Illinois."

    This transfer, not disclosed or accounted for in Panhandle's Dec. 12 HHI Analysis, but suddenly appearing in the Dec. 24 "Update," is certainly convenient. But there are unanswered questions: for example, the "brokered deposits" have elsewhere been described as "arising from [Household Bank f.s.b.'s] corporate treasury function," in an application submitted to the Office of Thrift Supervision by Lehman Brothers Bank FSB. ICP has sought information concerning these deposits -- the purported transfer of which is so late-disclosed, and so convenient, in this application proceeding -- from the OTS under FOIA; by letter dated Dec. 23, 2002, the OTS' Special Counsel / FOIA Appeals Officer stated that ICP would be granted access to information about these brokered deposits that will be forwarded to ICP "during the week of January 6th." Developing.. On January 6, ICP submitted comments to a number of regulators; ICP's comment to the OCC is summarized below. ICP also petitioned the members of the New York Banking Board, a summary of which is available here.  ICP has filed comments opposing HSBC's proposal to acquire Keppel Insurance in Singapore, and a strange proposal, first by "a British bank," then by Household International Europe, to acquire Polski Kredyt Bank in Warsaw (ICP's reportorial efforts are recounted in ICP's Jan. 6 comment to the OCC, summarized here).  

On a lighter note, click here to view ICP's editor's Oct. 3 poem (doggerel) on Citigroup, "Song of Solomon [Brothers]" on the WallStreetPoet.com site... 

* * *

Click here for ICP's Bank Beat Archive 2002 (9/11/01-12/31/02)

Click here for ICP's Bank Beat Archive #2 2001 (April 1 - Sept. 10, 2001)

Click here for ICP's Bank Beat Archive #1 2001 (Jan. 1 - March 31, 2001)

Click here for ICP's Bank Beat Archive #4 2000 (Sept. 25-Dec. 26, 2000)

Click here for ICP's Bank Beat Archive #3 2000 (July 17 - Sept. 25, 2000)

Click here for ICP's Bank Beat Archive #2 2000 (April - July 17, 2000)

Click here for ICP's Bank Beat Archive 2000 #1 (Jan.-March 27, 2000)

Click here for ICP's Bank Beat Archive #4 (Oct.-Dec. 31, 1999)

Click here for ICP's Bank Beat Archive #3 (Aug.-Sept., 1999)

Click here for ICP's Bank Beat Archive #2 (July, 1999)

     Click here to view ICP's Bank Beat Archive #1 (April - June, 1999).

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