Inner City Press Bank Beat Archive #3 2000 (July 5-September 25, 2000)
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September 25, 2000
The echoes from the merger announcements of Citigroup and Associates (challenged this week: click here for more) and Chase - Morgan continue. Last week, Dresdner Bank reached a deal to acquire Wasserstein Perella & Co. for $1.37 billion. Knight Trading, the subject of take-over rumors, confirmed that it has hired investment bankers to muse on its future. Chase pushed forward, buying the U.S. corporate trust business of Fuji Bank, which is merging with two other Japanese banks. In U.S. micro-M&A, Synovus Financial paid $61.4 million to buy Carolina Southern Bank; in Montana, Glacier Bancorp bought the state's biggest thrift, Westerfed Financial Corp. of Missoula; Cincinnati-based Peoples Community Bancorp paid $16.4 million to buy nearby Market Financial Corp. and its two branches. (An aside: a recent visit to Cincinnati found its skyline dominated by Firstar, PNC, and Fifth Third signs. Across the Ohio River in Covington, Kentucky, Firstar has its sign on an old branch, with "Liberty National Bank" carved above its entrance. Huntington had its sign on a building with a stone carving, "Covington Trust and Banking." A moment of silence, please, for these (and other) long-forgotten institutions. Click here for a Cincinnati poem, if that interests you). Click here to view the just-filed challenge to Citi-Associates...
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September 18, 2000
No need to even use the phrase, "deal of the week" -- the Chase-Morgan combo, confirmed on September 13, caught the financial press up in a frenzy of adjectives and purported ruminations, about the "bulge bracket," the new trends in banking, stitched with cute references to the "storied" history of Morgan and, to a lesser degree, Chase. The historian who wrote "House of Morgan," Ron Chernow, was suddenly in much demand, to dole out quotes about the potential culture class between the "middle class" Chase and the "upper-crust" Morgan. Stock analysts fired off pre-packaged quotes, and the New York tabloids tried to "localize" the story by considering possible job loss.
Lost in the punditry was any mention of moderate- or even middle-income communities, that use to be served by the three retail banks that were consolidated into "Chase:" Manufacturers Hanover, Chemical, and the old Chase Manhattan. All three used to be focused, not insubstantially, on retail banking in New York City and elsewhere. The three combined, and now are primarily focused on investment banking: foreign exchange trading (where Morgan Chase would be second in the world, to only Deutsche Bank), underwriting, mergers-and-acquisition advice, and the like. Something's happened here: three previously retail banks combined into one, and now de-emphasize retail service, to middle- as well as low-income communities. Regardless, Chase is given "Outstanding" Community Reinvestment Act ratings every year by the Federal Reserve. And, despite these trends, and the clearly negative impact they have on the "convenience and needs of local communities" (the legal standard the regulators must consider), Chase clearly expects its inflated CRA rating to guaranty relatively fast approval of its applications to buy Morgan. "What does this have to do with low income communities?" is sure to be among Chase's defenses. And, in a sense, that's just the point...
September 14, 2000
The announcement by Chase Manhattan that it will apply for regulatory approval to buy J.P. Morgan & Co. represents Chase (and the three retail banks which combined to form it) turning away from the communities, particularly low- and moderate-income and minorities communities, that it is required to serve under the Community Reinvestment Act. ICP has reviewed Chase's 1999 mortgage lending record, and reviews it below. The mainstream (said otherwise, "corporate") press was silent on this context of the deal: that the Gramm-Leach-Bliley Act of 1999 is now triggering a wave of consolidation, and turning the focus of major U.S. banks away from moderate- and even middle-income consumers, to more speculative businesses like foreign exchange trading and "intermediation" in the Internet bubble economy. Manufacturers Hanover, Chemical -- where have they gone? "This is all about wholesale," Chase CEO Bill Harrison said on September 13.
Chase will have to seek regulatory approval from the Federal Reserve Board, and certain state regulators. These agencies are required to consider CRA and the "convenience and needs of communities." As to Chase, what will they find? [Click here for ICP's Chase Watch]
September 11, 2000
Deal of the week, clearly, was Citigroup's September 6 announcement that it will buy subprime lender The Associates, for over $30 billion dollars. Most of the financial press slapped together articles praising the deal-making acumen of Citigroup CEO Sandy Weill. Much of the coverage echoed a puff-piece on Weill that appeared in the New York Times Magazine of August 27, which profiled Sandy relaxing in his country home, reflecting on his relentless drive to the top, cutting out one rival after another (John Reed, Jaime Dimon, even, most recently, his own son, Marc Weill, fired earlier this year). The Times piece concluded with Sandy demanding credit for his philanthropy: he rebuilt Carnegie Hall, and has slapped his name on hospital wings (where doctors, not surprisingly, applaud him). To be at once more substantive and more arcane, the deal among other things illuminates the ways in which the (Citigroup instigated, and sponsored) Gramm-Leach-Bliley Act of 1999 reduces scrutiny of, and public input into, mega-acquisitions such as this. Associates owns three banks, but each one under a different loophole, such that the Federal Reserve has not deemed Associates to be a bank holding company under its jurisdiction. Even so, pre-GLB, Citigroup would have had to apply to the Fed for approval of this "non-banking" acquisition. But the GLB allows banks' "non-banking" acquisition to take place without any application to the Fed. So in this case, the only applications will be to the OCC and FDIC, the regulators of Associates ("non-bank") banks. And these applications will not be explicitly covered by the Community Reinvestment Act, only the looser, even more pro-forma "Change in Bank Control Act." Whatever the standard, opponents will be there…
September 5, 200
In Hong Kong, Chase sold its retail banking and credit card business to Standard Chartered, for $1.32 billion. And the beat goes on…
At deadline, word reaches us from Zurich that the Swiss Federal Banking Commission has released a report strongly criticizing six bank (three of them units of the Credit Suisse Group) for been funnels for money from Nigeria's former dictator General Sani Abacha, who ruled from 1993 until his death in 1998. The government of Nigeria is seeking return of these looted oil revenues. Credit Suisse issued a statement saying that it "currently sees no cause to take further action with regard to our private banking operations." How the Swiss FBC report may impact Credit Suisse's proposal to acquire DLJ remains to be seen. It should be noted that Credit Suisse is involved, in the United States, with a number of questionable subprime (high interest rate) mortgage lenders: for example, as an underwriter for Delta Funding, charged by numerous government agencies with racial discrimination in lending, as an adviser to the subprimer Ocwen, and funder of ContiMortgage…
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August 28, 2000
Bank deal of the week was Washington Mutual’s announcement that it will acquire Texas’ Bank United, for $1.5 billion. This had been rumored last week (see below). Hey, sometimes the rumors are true... Of this deal, the Houston Chronicle notes WaMu’s “high community reinvestment ratings” -- but those didn’t include review of WaMu’s high-interest rate, subprime lender, Long Beach Mortgage...
First Union, in the midst of selling off branches and closing the subprime Money Store, reached out to buy an insurance brokerage covering New Jersey, New York and Pennsylvania, The Tribus Companies. First Union’s press release notes that Tribus is “pronounced Trib'-You.” Question: why then retain the (confusing, counter-intuitive) name? Presumably, someone in Charlotte knows what they’re doing. Then again, maybe not...
In a letter to the Federal Reserve dated August 18, Wells general counsel Stanley Stroup among other things acknowledges HUD’s “termination of the origination authority of [Wells Fargo Home Mortgage’s] Orland Park, Illinois office... based on the Orland Park office’s default and claim rate.” Wells’ solution? Wells “as of March 31, 2000 closed the office.” Somehow we don’t think that resolves the issue of Wells’ involvement in questionable subprime lending, the closing of one office...
Further afield, in the Philippines, Citigroup is bidding to become the underwriter for $430 million in bonds to be issued by that country’s National Power Corp., primarily for the construction of a $450 million transmission project traversing the southern islands of Mindanao and Leyte. Meanwhile, business newspapers in Manila on August 22 reported that Citigroup is one of six banks being investigated for violating foreign exchange rules in the Philippines. Another of the six banks is Deutsche Bank, a signatory to U.N. Secretary-General Kofi Annan’s (strictly voluntary) “Global Compact.” Click here for related ICP poem...
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August 21, 2000
In 1999, President Clinton said that globalization is not a theory, not a proposal, but a FACT. This was said before the anti-World Trade Organizations in Seattle at year’s-end made unabashedly pro-corporate globalization something of a political hot potato. But globalization remains, and entrenches itself ever more, as a fact. Consider, in the just the past week:
Chase Manhattan bought an Australian stock brokerage, Ord Minnett Ltd; the U.K.’s Schroder outsourced $112 billion in securities custody business, and 200 employees, to Chase.
General Electric is reportedly among the final bidders for the U.K’s Equitable.
Prudential bought Taiwanese asset management firm, MasterLink Securities Investment Trust Enterprise, and, along with Allstate, applied for an insurance license in India.
Credit Suisse First Boston (itself already the product of globalization) is only trial in Japan.
And Citigroup bought AST StockPlan; its Salomon Smith Barney unit said it’s exploring a brokerage joint venture in China.
What else did Citigroup buy? Well, how about both the Republican and the Democratic parties in the United States? Citi wined and dined lawmakers at both conventions. Since January 1, 1999, Citi has given $574,000 to the Republican Congressional and Presidential candidates, and $705,000 to Democrats. Lionel Johnson, Citigroup's vice president and director of international government relations says that the “New Democrats” understand what’s needed, globally: “They have demonstrated that there is a strong element of the Democratic party that is pro-growth and committed to a new centrist direction for the party,'' Johnson said. Rep. Cal Dooley, D-Ca., one of three co- chairs of the so-called New Democrat Coalition, proudly told Bloomberg that he and other House New Democrats have met twice with Sandy Weill, Citigroup's chairman and CEO, at the company's headquarters.
Citigroup has been aiding several House Democrats who supported normal trading relations with China this year. Citigroup’s Johnson said that the company in May held a fundraiser in its Washington lobbying office to help one such lawmaker, Rep. Baron Hill, D-Indiana. And so it goes...
We’d promised a brief report on the anti-Citigroup actions in Los Angeles during the Democratic convention. It's on ICP’s Citigroup page.
August 14, 2000
U.S. bank-on-bank deals were much smaller, exemplified by California’s First Community Bancorp’s August 7 agreement to acquire Los Angeles’ Professional Bancorp Inc. for about $16.2 million. Professional Bancorp is a micro-bank, trading on the American Stock Exchange, where its shares doubled on news of the take-over.
Speaking of Los Angeles, there will be a “Citigroup Accountability” action there, on August 17. This from the emerging coalition of community, environmental and human rights groups that came together outside San Francisco last month. This multi-issue approach should and will be brought to bear on other global mega-banks. See, for example, Chase Manhattan, which has been functioning as the trustee for the holders of Ecuador’s bonds, and whose analyst most recently opined that Ecuador’s new (planned) oil pipeline will be “crucial for the long-term success of the country's debt rescheduling plan,” and that only “if the pipeline is completed by its target date” will Ecuador “honor the terms of its rescheduled external debt in the next years.” Which, from an environmental (and not only human rights) perspective, is reminiscent of Chase’s 1994 report calling on the Mexican government to “liquidate” the insurgent movements in Chiapas, in the name of investor confidence... There are many ways to look at the Bank Beat -- including the “super-micro) perspective. For example: the most recent “Weekly Bulletin” of the New York State Banking Department (unintentionally) provides an accurate snapshot of the trends in financial services in low and moderate income communities. M&T Bank has given notice of its intent to close its bank branch at 5930 Main Street, Williamsville, Erie County, New York 14221; Citigroup’s high interest rate lender, Citifinancial, has applied to open an office at 5110 Main Street, Williamsville, Erie County, New York 14221. The bank branches (with normal interest rate credit) close; the high interest rate finance companies open up. By the way, M&T has now applied to acquire Premier National Bank of Poughkeepsie, NY; the comment period on that merger, and on M&T’s branch closing, runs until September 11, 2000...
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Update August 7-8, 2000: Fed Rules that Fleet Must Submit Another Application, To Acquire a Stake in Dime Savings
On August 7, the Federal Reserve Board’s general counsel rejected Fleet Boston Corporation’s argument that it does not need to submit an application to the Fed to acquire a stake in Dime Bancorp and Dime Savings Bank, as part of Fleet’s investment in North Fork Bancorporation.
North Fork’s ongoing hostile bid for Dime is premised on Fleet’s investment in North Fork. The Fed’s ruling means that North Fork would not be ready to acquire Dime until Fleet submits the new application, and, after a comment period, the Fed approves it. While North Fork’s bid has in some sense been delayed until the next election of Dime board members, the Fed’s ruling is significant in that ongoing takeover bid, and as a matter of precedent. In fact, the Fed’s letter cites to a prior North Fork applications proceeding for the proposition that “[t]he Board has long and consistently required the filing of a notice under Section 4 of the [Bank Holding Company] Act prior to the acquisition of more than 5 percent of a company that owns and operates a nonbanking company such as a savings association.”
The Fed’s letter continues: “Accordingly, consistent with this practice and the terms of the BHC Act, the General Counsel has determined that a notice under section 4 of the BHC Act is required prior to the acquisition by Fleet of more than 5 percent of the shares of North Fork in connection with North Fork’s proposed acquisition of Dime and Dime Savings.” There will be a comment period on Fleet’s new notice...
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August 7, 2000
The Federal Reserve on August 4 held the second of its four hearings on the Home Ownership and Equity Protection Act, this time in Boston. Governor Gramlich’s comments to reporters before the hearing again claimed that the Fed can do very little about predatory lending: “[o]ur authority in the overall scheme of things is a bit limited... We certainly can't do it all,” Gramlich said. But how about doing SOMETHING? Bank holding companies involved in questionable subprime lending, like Wells Fargo, continue to be able to take Fed approval of their mergers for granted. Commenting on Wells Fargo’s application to the Fed to acquire First Security has begun (click here to view ICP’s comment, filed August 7). With more and more groups expressing concerns about Wells Fargo’s (and Citigroup’s) subprime lending, one might expect the Fed to finally begin using the “authority” that it has (and that was expanded by the Gramm-Leach-Bliley Act of 1999). But one might be wrong...
Until next time, for or with more information, contact us.
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July 31, 2000
ICP’s ongoing review of the just-released 1999 mortgage lending data has found continuing, even increasing, redlining of people of color by Citigroup’s normal interest rate lenders: Citicorp Mortgage and Citibank, N.A.. An analysis of Citigroup high-interest rate, subprime lenders, Citifinancial, will follow in the coming weeks. But consider:
In 1999, in the New York City Metropolitan Statistical Area (MSA), Citicorp Mortgage for 1236 conventional home purchase loans to whites, and only 56 such loans to African Americans, and only 58 to Latinos. Meanwhile, Citicorp Mortgage denied 14.9% of applications from African Americans, versus a 4.5% denial rate for whites. Citicorp Mortgage denies African Americans 3.31 times more frequently than whites (other lenders in New York deny African Americans 2.0 times more frequently than whites).
In the interest of fairness, ICP has also analyzed the 1999 lending of Citibank, N.A.. Adding Citicorp Mortgage and Citibank, N.A. together, Citigroup is still worse than other lenders in the market. The industry aggregate in the NYC MSA in 1999 made 5385 conventional home purchase loans to African Americans, 4841 to Latinos, and 36,467 to whites. Among these three groups, 11.5% of the industry aggregates loans were to African Americans, and 10.4% to Latinos. The figures for Citicorp Mortgage added with Citibank, N.A. are only 7.0% percent of loans to African Americans, 8.0% to Latinos: both less than the industry aggregate. Meanwhile Citigroup denied African Americans three times more frequently than whites, versus the industry aggregates two-to-one disparity. Whatever its hoopla, Citigroup is a redliner. This is confirmed in other markets:
In the Chicago MSA in 1999, Citicorp Mortgage denied 29.2% of applications from African Americans for conventional home purchase loans, versus only 5.0% of applications from whites, meaning that Citicorp Mortgage denies African Americans 5.84 times more frequently than whites (below, this is be termed the “denial rate disparity).
Citicorp Mortgage’s denial rate disparity between African Americans and whites in the Oakland MSA in 1999 was 4.04. In the Washington, D.C. MSA, it was 3.11. On New York’s Long Island, it was 6.26. Again, whatever its hoopla, Citigroup is a redliner.
ICP’s review of Citigroup’s 1999 lending is continuing, for other cities, and for its higher-interest rate, questionable subprime lenders, Citifinancial. Results will be reported on this site , and elsewhere. Those concerned about Citigroup's ongoing redlining and questionable subprime lending in their communities will have to find ways beyond the Community Reinvestment Act to raise these issues. After the passage of the financial deregulation law in November 1999 (the "Gramm-Leach-Bliley Act" -- the name's getting unweildy, Leach is term-limited, Bliley's leaving -- why not call it the Gramm-Citigroup Act?) Citigroup is able to do most of its acquisitions without applying for any regulatory approvals. In early 2000, Citi bought an investment bank in the U.K. without any application subject to public comment. On July 25, 2000, the U.S. Office of the Comptroller of the Currency informed ICP that Citibank, N.A. has submitted only three applications thus far in 2000, the largest being to acquire the retail deposits of a New York branch of the Bank of Tokyo-Mitsubishi Trust. Citigroup, after the financial deregulation law, is flying below any regulatory radar...
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July 24, 2000
In U.S. bank regulatory news, the Federal Reserve has yet to place the Mizuho application on its agenda; it did, however, correct its public notice of Wells Fargo’s application to acquire First Security, and move back the expiration of the comment period to August 14. Wells COO Les Biller traveled to Nevada (where Wells-First Security would create an anti-competitive colossus), and said that Wells will only know the specifics of which branches it would sell off “by mid-August” -- that is, right AFTER the Fed’s comment period would close...
While the official results won’t be released until July 28, it appears clear that Dime’s shareholders on July 14 voted to withhold authority from the five Dime directors up for election. Whether this will push Dime into North Fork’s (cost-cutting, community-ignoring) embrace is not yet clear. Ryan Beck Southeast Research’s analyst minimized the importance of Warburg Pincus’ investment in Dime, and the appointment of Tony Terracciano as chairman, saying that since Terracciano is in a “non-executive” role, “nothing changes.” Putnam, Lovell & Thorton’s analyst, said that the moves are “simply more noise from Dime's management to avoid the North Fork offer" which "would offer much more of a long-term upside than leaving Dime independent." Ouch...
July 17, 2000
Deal of the week must be Switzerland’s UBS’s $10.8 bid for PaineWebber and its 385 offices across the United States. One notes various Congress members’ concern that Deutsche Telekom might buy Sprint (whose merger with WorldCom was finally called off last week). For some reasons, similar concerns are not raised (in Congress at least) about financial service industry mergers (Deutsche Bank-Bankers Trust; HSBC-Republic, Aegon-TransAmerica, ING-ReliaStar (see CRA Report), and maybe Aetna, etc.). While this might be explained by the total lack of unionization in the financial sector in the United States (telecom industry unions like CWA can at least get a hearing in Washington), the incongruity remains...
July 5, 2000
In this holiday-shortened week, a quick wrap-up of bank acquisition news:
On June 27, Queens County Bancorp announced that it will buy Haven Bancorp, for $196 million -- a mere four percent premium. Seems that Haven’s supermarket branch concept didn’t work out too well...
On June 27, North Fork extended its tender offer for Dime’s shares until July 31, from June 30. North Fork’s CEO, in a June 27 conference call with investors and analysts, said that “the rumor du jour, today and yesterday, is that MetLife is in there and MetLife is a possible buyer. We have no idea whether that's true.” Both Dime and MetLife declined to comment on the rumor. Reuters quoted an anonymous “source close to the situation” as denying MetLife’s interest in Dime.
As a follow-up to last week’s ING-ReliaStar report, the Office of Thrift Supervision has agreed to hold the requested “informal meeting” on the protest to the application, on July 11. Developing...
Until next time, for or with more information, contact us.
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Click here for ICP's current Bank Beat Reporter
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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