ICP / Fair Finance Watch's Bank of America Watch
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Updated June 30, 2005
Update of June 30, 2005: Earlier today, Bank of America announced a proposal to buy MBNA, for $35 billion. Beyond the prospective loss of competition, higher prices and at least 6,000 job cuts, Bank of America's applications for regulatory approval will be opposed: the consumers’ organization Inner City Press/Fair Finance Watch (ICP) intends to challenge the deal under the Community Reinvestment Act, based on both Bank of America’s and MBNA’s lending disparities, and Bank of America’s enabling of payday lending, and securitizations for problematic subprime lenders including Ameriquest.
For home purchase loans, Bank of America, N.A. in 2004 denied applications from Hispanics 2.104 times more frequently than from whites, and denied applications from non-Hispanic Blacks 2.063 times more frequently than non-Hispanic whites.
MBNA, beyond credit cards, is a not-insubstantial mortgage lender. In 2004, over 48% of its loans to African Americans were higher cost loans over the rate spread, defined as three percentage points over comparable Treasury securities on a first lien, and five percent on a subordinate lien.
At Bank of America, N.A. for home purchase loans in 2004, Hispanics were 1.39 times more likely to receive higher cost “rate spread” loans from Bank of America than non-Hispanic whites; non-Hispanic Blacks were 2.20 times more likely to receive rate spread loans from B of A than non-Hispanics whites. ICP has begun city-by-city studies of Bank of America: previously issued a report on the disparities in Bank of America’s lending. See, e.g., “Several Banks Criticized for High Cost Loans,” Buffalo News of May 9, 2005; Memphis Commercial Appeal of May 13 and Orlando Sentinel of May 29, 2005. ICP will be expanding these to more cities and filing them with the regulators.
Bank of America, despite its sale of Equicredit and reported shuttering of NationsCredit, is still extensively involved in controversial subprime lending. It controls a majority stake in the subprime lender OwnIt Mortgage (f/k/a Oakmont Mortgage), on which ICP will be commenting to the Federal Reserve. Bank of America securitizes high interest rate loans through · Banc of America Securities, LLC, Banc of America Mortgage Capital Corporation and its 100%-owned (but generically-named) subsidiary Asset Backed Funding Corporation; perhaps most tellingly, Bank of America, now purchases loans of subprime lenders, for example from Ameriquest. See, e.g., Fitch's June 9, 2005, press release on Business Wire concerning ABFC Asset-Backed Certificates 2005-AQ1stating that the underlying loans were “by Ameriquest Mortgage Company, they were subsequently purchased at closing by the depositor, Asset Backed Funding Corporation.” Fitch has also specified, April 8, 2005, that “Asset Backed Funding Corporation will deposit the mortgage loans into the trust. The depositor is a Delaware corporation and a wholly owned, indirect subsidiary of Bank of America Corporation. The depositor is an affiliate of Banc of America Securities LLC.” Bank of America’s ABFC buys subprime mortgage loans from Ameriquest, a subprime lender that is by its own admission under investigation by the attorneys generals of at least 25 states. See, e.g., innercitypress.org/ameriquest.html
ICP's ongoing review of Uniform Commercial Code (UCC) filings has found that Bank of America enables payday lenders, including with multiple loans the payday lender Advance America Cash Advance... Bank of America is the main funder of Advance America. For example, in an April 16, 2004 response to ICP comments to the Federal Reserve, National City Bank stated: “National City is also a [REDACTED] senior secured Bank of America agented credit facility for Advance America (HQ in Spartanburg, SC).” This is an issue ICP has raised since last year; in July 2004 in response to ICP's comments, SunTrust announced it will no longer fund payday or car title lenders. See, <www.fairfinancewatch.org/enforce.html>. These are serious matters, one into which ICP will further inquire in regulatory proceedings on Bank of America’s MBNA proposal. For or with more information, contact us.
Update of June 27, 2005: Got milk? An Italian
judge ruled on June 25 that officials from the Italian branches of Bank of America alolng
with Parmalat founder Calisto Tanzi should stand trial for alleged market securities
violations related to the 2003 near-collapse of the Italian dairy giant in a fraud
scandal. A refresher: the Parmalat scandal blew open when it was revealed that an alleged
Bank of America account held by a Cayman Islands-based Parmalat subsidiary, Bonlat, didn't
really contain the $5 billion the company had claimed...
Update of June 20, 2005: Bank of America last week
announced a proposal to buy a 9% stake in China Construction Bank for $2.5 billion, and to
take a 5½-year option to increase its stake to 19.9% at the price of the shares in the
projected IPO. Meanwhile, BofA agreed to pay $1.5 million to settle Securities and
Exchange Commission charges that it failed to keep business-related email messages. Now it’s moving into a country which censors
political commentary on the Internet. Conundrum...
Update of June 6, 2005: The Wall Street Journal of
June 3, under an Isle of Man dateline, reported: “With help from Bank of America
Corp., two Texas entrepreneurs sheltered more than $100 million from U.S. taxes on this
small island between Ireland and England for more than a decade. Now the bank is under
scrutiny in connection with possible securities and money-laundering violations involving
its work with the two, Sam and Charles Wyly, and possibly other wealthy clients seeking to
help shelter their fortunes from taxes... It's not clear how many of those firms and
executives were clients of Bank of America or its predecessor banks, such as NationsBank
Corp., which merged with Bank of America in 1998. SEC records show that at least two firms
besides the Wylys engaged Bank of America in similar stock-option transactions. Shirley
Norton, a spokeswoman for Bank of America, said the bank is cooperating in the
investigations and believes it followed the law. ‘We always cooperate with
investigations, and we can't comment on customer relationships,’ she said. She
declined to comment further.” Developing...
Update of May 23, 2005: ICP on May 20 submitted to the Florida Attorney General’s office an analysis of and demand for action on the disparities in Bank of America’s 2004 mortgage lending in Florida:
Bank of America -- Whites: 71,900 applications, leading to 15,798 denials
(21.97% denied) and 48,174 originations; 123 [or 0.26%]
exceeded rate spread.
African Americans: 7740 applications, leading to 3068 denials (39.64% denied, 1.80
times higher than whites) and 3882 originations; 14 [or
0.36 percent] exceeded rate spread [1.38 times higher / more likely to be over rate spread
than whites].
Latinos: 16,987 applications, leading to 5612 denials (33.04% denied, 1.50 times higher than whites) and 9501 originations; 19 [or 0.2 percent] exceeded rate spread [0.77 times “higher” / more likely to be over rate spread than whites].
Bank of America faces possible eviction from its Manhattan headquarters at 9 West
57th Street under laws enacted in 1990s to evict drug dealers and prostitutes
from apartments if one of their securities brokers, Theodore C. Sihpol, is convicted of
criminal charges, Judge Joan Kenney ruled on May 17. Judge Kenney said ``it is not a leap
in logic to suggest that the crimes Sihpol is accused of, as well as BAS' acquiescence, if
any, to the alleged trading scheme, could trigger the provisions'' of the eviction laws
and cause BAS' lease to be forfeited. The judge said the law, and its related statutes,
have been used to evict, and to recover property and funds from, people engaged in
illegally selling drugs and alcohol, prostitution, gambling, and more recently,
counterfeiting of trademarked goods. And now out-of-control banking...
Update of May 9, 2005: ICP Fair Finance Watch
continues drilling deeper into the 2004 Home Mortgage Disclosure Act data. Following its petitioning last week of state
attorneys general, ICP was asked to produce a study of disparities by gender as well as
race. The results, being forwarded to those who requested them, are not pretty.
Here’s Bank of America:
White men: 270,5012 originations of which 4854 (or 1.79%) were at
rate spread
White women: 110,816 originations of which 2259 (or 2.04%) exceeded
the rate spread (1.14 times higher / more likely to be rate spread than white men)
African American men: 15,843 originations of which 588 (or 3.71%)
exceeded the rate spread (2.07 times higher / more likely to be rate spread than white
men)
African American women: 14,352 originations of which 561 (or 3.91%)
exceeded the rate spread (2.18 times higher / more likely to be rate spread than white
men)
Hispanic men: 49,884 originations of which 1875 (or 3.76%) exceeded
the rate spread (2.10 times higher / more likely to be rate spread than white men)
Hispanic women: 18,598 originations of which 783 (or 4.21%) exceeded
the rate spread (2.35 times higher / more likely to be rate spread than white men)
ICP has provide this and other analysis to the regulators and state attorneys
general, demanding investigation and action.
Update of April 25, 2005: How is this consistent with BofA’s
environmental claims? BofA entered the physical power market last week, complementing its
existing financial natural gas, power and oil products trading, the company said in a
release Wednesday. Physical power trading allows traders to schedule the actual flow of
electricity on the nation's power grid, compared with financial trading, which does not
entail physical transfers, but instead involves a wide range of hedging instruments from
futures and options to derivatives. Eric Nobileau, global head of commodity sales, said
that “Adding physical power trading to our energy capabilities further enhances our
ability to provide our clients with integrated solutions and better access to the
market." Yeah...
Update of April 11, 2005: Bank of America’s response to ICP’s analysis of its 2004 mortgage data was in fact a non-response. “Julie Davis, a spokeswoman for B of A, said she could not comment directly on the study. However, she said, ‘We are looking at the data to make sure we are meeting the needs of borrowers. We're confident that any pricing differences are the result of legitimate risk and credit factors.’” See, American Banker of April 5, 2005. We note that Bank of America, N.A. imposed rate spreads on Hispanics 2.538 times more frequently than on whites, higher than most of its peers.
Update of April 4, 2005: Inner City Press’
ongoing analysis of Bank of America, N.A.’s 2004 lending record (based on the 805,181
applications reported) finds that, for home purchase loans, Hispanics are 1.39 times more
likely to receive rate spread loans than non-Hispanic whites; non-Hispanic Blacks are 2.20
times more likely to receive rate spread loans than non-Hispanics whites at Bank of
America. Additionally, Bank of America in 2004 denied home purchase loan applications from
Hispanics 2.104 times more frequently than from whites, and denied applications from
non-Hispanic Blacks 2.063 times more frequently than non-Hispanic whites. Beyond mortgage
lending, Bank of America is a major funder of payday lenders including Advance America
Cash Advance and others.
Update of March 21, 2005: Jay
Sarles has become the fourth of the five former Fleet executives to leave Bank of America
within a year of the takeover, following Gifford, McQuade and Bradford Warner, who had
been heading small business and premier banking for Bank of America. They were all
over-compensated for selling-off the bank. The Senate’s report last
week on Pinochet’s funds
“from 1993 until 2004, Bank of America
maintained 3 U.S. accounts and as many as 6 CDs at a time for Mr. Pinochet’s
daughter, Ines Lucia Pinochet. At least three of these CDs, in the amount of $100,000 or
more, were purchased in 2002; the other CDs, which ranged in value from $10,000 to
$125,000, were purchased between 1996 and 2002,
So much for “know your customer.” A Bank of America spokesperson declined to comment
on the report. How transparent...
Update of March 14, 2005: While Bank of America’s lay-offs in North
Carolina have now given rise to WARN Act filings, our BofA Watch report this week is on
this irony: while BofA brags about its environmental commitment, with organizations which
(wisely) denounce fossil fuel pollution, on March 9, 2005, the following was announced:
Atlas Pipeline Partners, L.P. to
Acquire ETC Oklahoma Pipeline for $190 Million
Atlas Pipeline Partners L.P. (NYSE:APL) (the
"Partnership") announces that on March 8, 2005, it entered into an agreement
with LG PL, LLC, a Texas limited liability company, and La Grange Acquisition, L.P., a
Texas limited partnership, subsidiaries of Energy Transfer Partners L.P. (NYSE:ETP), to
acquire all of the outstanding equity interests in ETC Oklahoma Pipeline, Ltd., a Texas
limited partnership... ETC Oklahoma Pipeline's principal assets include more than 315
miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma, a
natural gas processing facility in Elk City, Oklahoma with total capacity of 130 million
cubic feet of gas per day ("mmcf/d") and a 100 mmcf/d gas treatment facility in
Prentiss, Oklahoma, collectively referred to as the "Elk City system". Total gas
throughput, including approximately 118 mmcf/d processed at the Elk City plant, is
currently approximately 262 mmcf/d. Total compression horsepower consists of 21,000 hp at
six field stations and 12,000 horsepower within the Elk City facility. The Elk City system
gathers and processes gas from more than 300 receipt points representing more than fifty
producers and delivers that gas into multiple interstate pipeline systems.
The Partnership has received a commitment from Wachovia Bank, National Association and Fleet National Bank, a Bank of America company, to
fully underwrite a new $270 million loan facility. The facility will be comprised
of a $225 million 5-year revolving loan and a $45 million 5-year term loan. The loan
proceeds will be used to refinance the existing $54 million outstanding on our current
$135 million facility and to finance the acquisition of ETC Oklahoma Pipeline.
We’ve
highlighted BofA above, because of its bragging (and because this week’s Wachovia Watch Report
Update of March 7, 2005: on March 3, Bank of America
announced a proposal to settle class-action lawsuits by former shareholders WorldCom for
$460.1 million. In a press release, Bank of America said it settled the matter ``in order
to eliminate the uncertainties, expense and distraction.... Bank of America believes it is
in the best interests of the company to resolve these claims and put this litigation
behind it and focus efforts on creating greater value for the shareholder.” BofA
spokeswoman Shirley Norton said the company would have no additional comment on the
settlement... Here’s a comment: last week at the annual conference of payday
lenders’ trade association CFSA, the break-out sessions included one on
“Decoding the Bank Partnership;” there was a hospital suite sponsored by Bank of
America, according to the event’s program...
From the mail bag --
Subj: Bank of America Layoffs march 2005
Date: 3/5/2005 11:51:31 PM Eastern Standard Time
From: [ ]
To: BofA-Watch [at] innercitypress.org
I believe Bank of America will layoff 100 or more positions at the old Fleet stockholder / trade operations office in Rochester, New York. Therefore disbanding it and shutting it down, due to duplication of its own department in North Carolina. My source is a laid off employee.
For or with more information, contact us.
Update of February 28, 2005: Bank of America has lost computer data tapes
containing personal information including Social Security numbers on 1.2 million federal
employees, including some members of the U.S. Senate. This follows the disclosure that
ChoicePoint, a data warehouser, had learned that as many as 140,000 consumers may have had
their personal information compromised (that is, sold
by ChoicePoint). The missing tapes include information on federal employees who use
Bank of America ``smart pay'' program charge cards for travel and expenses. They might want to re-name that program...
And here now's a BofA sell-off: Societe Generale Group's SG Corporate and
Investment Banking unit last week announced it is buying a hedge fund-related lending
business from Bank of America. Soc Gen did not say how much it would pay, but it did say
it plans to combine the B of A business, which is based in New York, with its own equity
derivatives operations in Paris and New York...
Update of February 7, 2005: Following the
announcement of Riggs Bank’s flawed plea bargain on January 27, Riggs said that it
and PNC would make an announcement about their stalled merger “on or about”
February 4. That day passed with no
announcement. Meanwhile, Chilean Judge Sergio Muñoz, investigating Pinochet’s
finances, is seeking records and additional information from the governments of the United
States, Switzerland, Luxembourg, United Kingdom, Bahamas, Germany, Panama, Spain and
Gibraltar. “Unexplained Pinochet wire transfers through several banks in the United
States and elsewhere have been identified by Muñoz at... Bank of America,” among
others. Meanwhile, beyond settling Fleet's old Advanta claims, BofA has now settled a
class-action of California employers on claims that the bank's check-cashing fee charged
to employees could put the employers in violation of California's labor code. As part of
the settlement, BofA offers a year of direct deposit payroll services at no charge so
employees of small business will be able to avoid check cashing fees. In a press release
Friday, Bank of America said those employees also will have access to other banking
services that previously weren't available to them. Why
not?
Update of January 24, 2005: on the January 18 earnings call, after the disclosure that BofA has finished about 75 percent of the announced 12,500 job cuts, CEO Ken Lewis gushed, "Great quarter, great year.” Well, for some.... Notably, the number of net new checking and savings accounts opened in former Fleet branches dropped during the fourth quarter compared with the previous three months. In the third quarter, Bank of America reported the net gain in checking accounts totaled 87,000, but in the fourth quarter that figure dropped to 46,000. Questioned about the drop, Lewis said, "We would expect it to increase, not decrease." (Tip o’ the hat to Projo). Reportedly, total full-time employees increased by about 200 to 175,742 as the company added call-center jobs and bankers who serve wealthy clients. Yep, that’s the CRA sensitive bank, cutting everywhere except in its offerings to upper income consumers...
Update of January 18, 2005: What a weekend for Bank of America. On Friday it emerged that BofA fired one of its stock analysts for approving the distribution, as a joke, of a photograph in which his face appeared superimposed on a woman's body in a report sent to clients. Per Bloomberg, “[t]he 56-page report includes a front-page photograph doctored to make it appear as though Susser, wearing a black dress and high heels, is getting swept over the threshold of a hotel suite by another man.” Then Monday’s WSJ reported that BofA (along with JP Morgan Chase) is trying to settle auto lending discrimination charges. Meanwhile, BofA has given $250,000 to the Presidential Inaugural Committee...
Update of January 3, 2005: In
the Bank of America investigation, as described in the Wall Street Journal last week, the
Manhattan district attorney says that BofA has transferred hundreds of millions of dollars
for a money transmitter in Uruguay called Lespan SA and its affiliates. The prosecutor and
federal officials say they suspect the money has come from Colombian drug trafficking and
other criminal activity.
Update of December 20, 2004: At last week’s House Financial Services hearing in Boston, Bank of America was evasive (and, despite hype in the run-up, Ms. C. Bessant didn’t testify). Meanwhile, BofA is selling off Bank Boston’s operations in Panama, Colombia and Peru. The BKB Panama operation has already been assigned to Banco General; the operations in Colombia and Peru await the formal sale announcement in the near future, BofA said. The move contradicts a speech given at the beginning of this year by then president of Bank of America, Eugene McQuade (now similarly spinning in GSE-land), who said Latin America was one of the biggest opportunities for the group because it will allow the Latin American franchise of FleetBoston to increase its portfolio of corporate clients with new clients from Bank of America. After the sale, the presence of BKB in the region will encompass Argentina, Brazil, Chile and Uruguay...
Update of December 13, 2004: The fall-out from bank mergers will be considered this week, including at the House Financial Services Committee’s field hearing in Boston. ICP / Fair Finance Watch has submitted testimony, which is summarized in this week's ICP CRA Report. Meanwhile, a a co-chairman of the Massachusetts Legislature's banking committee has filed a bill that would require banks to estimate changes in staffing levels as a result of a proposed merger. The bill would require banks to submit one, three- and five-year estimates of how staffing levels would be affected by a big bank merger. Last week, BofA’s Ken Lewis refused to say how Massachusetts jobs compare with levels before the merger, saying the bank will release that data in early 2005. We’ll see.
Update of November 29, 2004: Last week’s Bloomberg News
article about the funding of payday loans and lenders (“JPMorgan, Banks Back Lenders Luring Poor With 780 Percent
Rates,” Nov. 23) reported that “in July
2004... Bank of America Corp., the No. 3 U.S. bank, co-arranged a $265 million syndicated
credit line for Advance America, according to SEC documents... Bank of America spokeswoman Eloise Hale didn't return calls for
comment about payday lending.” How
transparent -- in both senses of the word...
Update of November 15, 2004: Bank
of America is apparently learning from the Citigroup model of employee treatment. Now the
Internal Revenue Service is auditing the 1998 and 1999 tax returns of Bank of America
Corp.'s pension and 401[k] plans, which have been the subject of a class-action employee
lawsuit. This summer, some employees sued the bank over its cash-balance pension plan,
which they say the company used as part of an "arbitrage scheme to enrich itself at
the expense of participants. According to the complaint, Bank of America encouraged
employees to transfer more than $2.7 billion of 401[k] assets into the bank's pension plan
in 1998 and 2000. The lawsuit, filed June 30 in federal court in Illinois, alleges that
those transfers allowed Bank of America to invest the money for higher returns than what
the bank would dole out to employees....
Update
of October 11, 2004: BofA just keeps
slashing -- now it’s 4500 more jobs, in New York, Connecticut, Massachusetts and
elsewhere. Meanwhile, hearings are now slated
for December 14, though not only on BofA...
Update of October 4, 2004: BofA spokeswoman Shirley Norton has said the
bank was not breaking down the layoffs by job type and that over the next two years, as
the bank has previously stated, a total of 12,500 positions will be cut. So it's unclear how many of those 12,500 will come
out of the Fleet ranks, which had 47,000 employees before the merger compared to BofA's
134,000. Many observers -- including ICP -- note that the number of layoffs would be much
higher except for that fact that the bank is reducing the hours of some employees and
taking on part-timers...
Update of September 27, 2004:
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?
Update of 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...
Update of September 13, 2004: From the Sept. 3 letter from BofA’s deputy
general counsel Gerald Hurst -- who also fields CRA protests when applicable -- to Massachusetts Commissioner of Banks Steven
Antonakes: "We appreciate your concern about job losses in Massachusetts and Bank of
America's willingness to fulfill commitments made prior to the merger. However, a number
of reports about business and employment changes at Bank of America that have been
published in the past several weeks are not accurate or complete. The merger transition is
a fluid process that will be phased in over a period of 24 to 30 months. Bank of America
intends to return its employment base in New England to premerger levels. We expect to
complete all aspects of the transition and stabilize employment levels by 2006.”
We’ll see...
Update of September 6, 2004: Still spinning, Ken Lewis now says that Bank of America - which last year pledged to base six units in Boston after its Fleet merger - recently reassessed its corporate structure after a major executive reshuffling caused a firestorm of criticism. Three units originally slated for post-merger Boston no longer have any significant connection here. A fourth such unit - small business - is now based in Los Angeles and answers to an executive in Charlotte, freezing out Boston. Last week, Lewis claimed he wants to set down more ``roots'' in Boston and ``redefine'' what a headquarters means within BofA. "I have not felt good about how Boston was positioned," said Lewis... The Globe: "Lewis declined to name the division, but it is likely to be the bank's wealth-management arm, which currently has its top executive in Boston but several of its key business lines in New York." Great... BofA officials also disclosed last week that the bank laid off more than 800 mostly full-time Northeast branch employees last month, despite pre-merger vows not to cut ``customer-facing'' posts.
Update of August 30, 2004: Bank of America had said when it announced its merger with Fleet that it would keep six divisions headquartered in Boston. With the loss of Latin America and small-business banking, there are just four left. Thus we were glad to see the (Republican) Lt. Governor of Massachusetts cancel her appearance at a Bank of America-sponsored breakfast slated for August 31, in response to BofA's massive (and not fully disclosed) layoffs in the Bay State. The hearings of BofA - Fleet in Congress, slated for November or at latest December, should be interesting...
Update of August 23, 2004: BofA, fresh for dissembling about its major Fleet Bank layoffs, will be the principal sponsor of a so-called salsa party on August 31 at Rockefeller Center, during the Republican National Convention. There’s talk of a protest of the other sponsor, for supporting policies that undermine Latinos well-being the length of the continent. We’ll see. BofA vice chair Jim Hance has bundled more than $200,000 for the Bush campaign, making him like Wachovia’s CEO Ken Thompson a so-called "ranger." (Those bundling over $50,000 are merely "mavericks;" over $100,000 and you’re a "pioneer").
Regarding the layoffs, the Boston Globe reported: "In downtown Boston yesterday, television news crews camped out at bank branches and customers anxiously scanned the tellers looking for familiar faces. One woman visiting the Summer Street Fleet branch asked the teller how many people had been laid off." ICP was contacted by television news shows, asked who in Boston would speak against BofA’s massive layoffs. BofA has bought many friends, but clearly not enough...
Update of August 16, 2004: From the Providence Journal of August 8: "Ken Lewis, the CEO of Bank of America who bought FleetBoston, is a Bush backer, who contributed $2,000 in March to the president's campaign." The same week, a new "partnership," called Borrow Wise...
Update of July 26, 2004: 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." As to BofA, the Brazilian news service Agencia Estado reported: "With backing from its new parent BankBoston Brasil will now kick off an organic growth process that will see it targeting small and medium-sized enterprises and boost client loyalty existing corporate and individual clients. BankBoston will invest 6mn reais (US$2mn) and hire 400 employees during the next 12 months to support the expansion plan that is aiming to double its 1,500 small and 14,000 medium-sized enterprises respectively. We'll be watching...
Update of July 12, 2004: BofA goes bush league -- last week, in announcing that it is buying the rights to call itself "the official bank of baseball," BofA’s Cathy Bessant said that "the pairing of the high-profile Major League Baseball deal with the minor leagues and Little League as consistent with Bank of America's efforts to be active in individual neighborhoods." Hmm -- BofA has twice now tried to drown out the issues of local neighborhoods with unilateral nationwide pledges, of $350 billion (BofA - Nationsbank) and $750 billion (BofA - Fleet). Individual neighborhoods, and even whole states like New Mexico, have become minor league to BofA in Charlotte...
Update of July 5, 2004: Bank of America (BofA), which had left Brazil, decided to return and to operate fully in the country through BankBoston, acquired last year. According to Bertrando Molinari, vice-president of corporate affairs at Boston, the bank was instructed by the owner to get ready to receive an enormous injection of capital, marketing and products. "We will have changes of a profound nature, but not in power," said Molinari. The numbers are not definitive and there still is no specific direction about which segment should be prioritized. But all the areas of the bank's operations will grow, beginning with retailing. At the moment, said the executive, a process of structural changes is underway, which will be the first step toward expanding its market share. Emphasizing the importance of Boston for the new owner, Molinari cited the words of BofA president for Latin America Richie Prager, to whom the bank reports. Said Prager, "The most exciting thing about BankBoston is that at the moment it in Brazil is a kind of microcosm of what BofA is in the United States."
ICP note: Brazilians better hope BofA there is not as it is in the U.S., scandal plagued and tight-lipped...
Update of June 7, 2004: Beyond the 12,500 Fleet-occasioned layoffs, last week BofA announced the canning of 500 mortgage employees: 200 in St. Louis, 90 in Wichita, and smaller numbers at sites in Virginia and California, according to BofA spokeswoman Julie Davis...
Update of June 1, 2004: If Chad Gifford says it, it must be true: "Gene McQuade resigned. He wasn't asked to leave.. I don't think this is indicative of the kind of situation in San Francisco." Wethinks thou dost protest too much..
Update of May 17, 2004: Oh by the way: BofA last week let Massachusetts know it will be eliminating at least 500 jobs there...
Update of May 10, 2004: Something we'll be watching: BofA goes (more) global. B of A also named a new head of its Latin American operations last week, Richie Prager, who had been chief operating officer for debt at Banc of America Securities. He succeeded longtime Fleet executive Terrence Laughlin, who spent just a month in his latest post and "has decided to pursue personal interests," B of A said. Until last July, Mr. Prager had been B of A's head of corporate and investment banking for Latin America, which included operations in Mexico and Brazil. Mr. Prager, who is based in New York, now oversees a larger organization that covers Fleet's corporate and retail banking operations throughout Latin America, including Argentina. About 200 employees at B of A's Charlotte headquarters also have received layoff notices. A BofA spokeswoman "could only confirm the overall estimate of 12,500 job cuts." Could? Or would only?
Update of May 3, 2004: What's in a name? The asset-based financier Fleet Capital Corp. has gotten a new name - Bank of America Business Capital (BofA BC). It has offices in, among other cities, Atlanta; Boston; Chicago; Cranford, N.J.; Dallas; Glastonbury, Conn.; New York; and Pasadena, Calif. Meanwhile, BofA continues to claim that its purchase in December 2003 of a controlling stake in the questionable subprime lender Oakmont does not reflect a lack of anti-predatory lending standards (but rather, BofA sometimes admits, a sort of one-time oversight or slip-up). We'll see. We'll also see what BofA's reaction will be to the environmental protest that will descend on it / Fleet by Grand Central Station this week, for not even doing with its mega-bank peers have, on things environmental (nor on things subprime, despite the spin and hype). Interim mid-week update: the environmental protest was called off nearly as soon as it was called, with vague allusions to BofA giving in, showing either the enviros' naivete, or BofA's cynical valorizing of abstract environmentalism over dealing with concrete predatory lenidng problems -- or both (developing).... The Globe's intrepid Sasha Talcott reported (4/28) that BofA " has quietly eliminated the majority of former FleetBoston Financial Corp. employees on the 12th floor of its Boston headquarters." Ouch!
Update of April 26, 2004: on April 15 -- tax day, and the date of the Federal Reserve's JPM Chase - Bank One hearing, at which BofA's CRA pledge was relegated, hype upon hype, to second place -- a BofA for-exer sued for sex discrimination, in federal court in Manhattan. (That's four blocks from the New York Fed). Kimberley Euston asserts that men were unfairly promoted to managing director ahead of her and that the bank's maternity leave policy is weaker than policies at comparable institutions. And what of "best practices"? BofA spokeswoman Eloise Hale called the lawsuit "totally without merit." But we're heard that before -- and will hear it again. Sayin' it, don’t make it true...
Update of April 12, 2004: That BofA appears to have assisted Parmalat in its scam didn't cause the Fed any pause: ICP has been informed that "no member of the Board has requested that the Order be reconsidered or modified in any manner," based on ICP's request, of the BofA-Fleet approval. The Fed's letter states that while the SEC announced its damning enforcement action against BofA on March 10, "information about the status of the investigation was presented to the Board." Then why did the order claim that BofA is cooperative and transparent, when the SEC was preparing to find precisely the opposite? Well, the Fed's letter states that the Board "retains sufficient supervisory authority to address any adjudicated misconduct that would adversely affect the managerial resources of the combined entity." Hmm... On April 5, less than a month after Federal Reserve approval and just after closing of the deal, Bank of America's CEO disclosed his plan to cut 12,500 jobs. See, e.g., NPR News' report on April 6. While claiming they don’t know where the layoffs will be, it emerged later in the week that BofA for example plans to cut fully 850 of the 1,500 jobs at the former Fleet credit card center near Philadelphia during the next year, saying it has similar operations in Arizona "and elsewhere." BofA is a major job outsourcer, or more precisely, off-shorer... And what about transparency?
Update of April 5, 2004: 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.
Update of March 29, 2004: Reuters in Milan reported last week that BofA employees knew that Italian dairy foods group Parmalat had a huge hole in its accounts a week before the news was made public. Bank of America's representative in Italy learned on December 12 from the U.S. bank's New York office that an account, supposedly held by a Cayman Islands unit of Parmalat and containing 3.95 billion euros, did not exist, said the source, who spoke on condition of anonymity. Parmalat stunned financial markets worldwide when it announced on December 19 that the account was non-existent, wiping out much of the remaining value in its shares and bonds... And the hits just keep on coming. In Rhode Island, the panel that oversees the state pension fund is reviewing its relationship with Fleet's asset management arm in light of poor performance and a settlement of charges of improper mutual-fund trading. The commission has placed Fleet's Columbia on its "watch list" in connection with its management of a $ 412-million fixed-income portfolio for the pension fund.
Update of March 22, 2004: CEO Ken Lewis has claimed, "We have held everybody that we know was involved accountable, and they are no longer with us." And still,the banks plan to cut up 13,000 jobs. Bank of America spokeswoman Eloise Hale said "there will be job cuts" but declined to provide a number. And on subprime securitization reforms? Nada...
Update of March 15, 2004: Although the time to request reconsideration of the Federal Reserve's March 8 approval runs through March 23, on March 15 ICP/Fair Finance Watch filed its request, critiquing the entire Order but also, in conformity with 12 CFR §262.3(k) (including "relevant facts that, for good cause shown, were not previously presented to the Board"), noting that a mere two days after the FRB issued an approval order, Reuters reported "Bank of America penalized record $10 million by SEC" --
WASHINGTON/NEW YORK, March 10 (Reuters) - Bank of America Corp. will pay a record $10 million penalty for hindering a federal probe into possible improper trading at the bank's securities unit, the agency said on Wednesday. The U.S. Securities and Exchange Commission said the unit, Banc of America Securities, repeatedly failed to promptly provide requested documents, gave "misinformation" about the documents' availability, and engaged in "dilatory tactics." The agency said it is probing whether Banc of America Securities improperly traded securities before issuing market-moving research about those securities. It said it is probing the personal trading of a former senior employee at the unit. Neither the SEC nor the bank named the employee. The SEC penalty was the largest ever against a company for failing to produce documents, SEC spokesman John Heine said.
Compare (including in terms of the FRB's credibility, and whether the Order is supported by "substantial evidence") -- on March 8, the FRB claims in approving an anticompetitive mega-merger for BofA that BofA "demonstrat[ed] a willingness and ability to take actions to address concerns raised in these investigations" -- then two days later, the SEC (an agency more closely involved in assessing BofA's securities practices) rules that BofA "repeatedly failed to promptly provide requested documents, gave 'misinformation' about the documents' availability, and engaged in 'dilatory tactics.'"
These are the "actions" that BofA takes to " address concerns": providing misinformation and engaging in dilatory tactics -- such as withholding all information about Oakmont Mortgage and its subprime practices.
Three days after the FRB's approval order, Reuters reported that "Bank of America may pay $250 million over mutual funds" --
NEW YORK, March 11 (Reuters) - Bank of America Corp. may pay more than $250 million to settle charges that it hurt ordinary investors by helping favored clients trade mutual funds improperly or illegally, a person familiar with the matter said on Thursday... Bank of America, which promises "higher standards" in its advertising campaign, has been tarnished by various probes. Italian investigators are examining its role in the collapse of food company Parmalat Finanziaria SpA <PRFI.MI>. The bank on Wednesday agreed to a $10 million SEC penalty for failing to produce documents in a separate probe of trading. It also faces allegations of issuing tainted stock research.
It was highly irresponsible for the FRB to approve BofA's applications, on March 8 -- including while the subprime lending information which even the FRB acknowledged was relevant was (and is) still being withheld from the public, including timely commenters like ICP. Then, ICP critiqued the whole Order. Results will be reported in this space...
Update of March 8-9, 2004: Earlier today, the Federal Reserve Board approved Bank of America's $47 billion proposal to acquire FleetBoston Corporation, The Fed issued a 63-page approval order, which runs through a litany of adverse issues without addressing them. On an issue that Inner City Press / Fair Finance Watch has been raising since December 2003 -- BofA's standardless securitization of controversial subprime loans, and BofA's purchase of a controlling stake in the questionably-compliant subprime lender Oakmont -- the Fed's order has a page-long, ill-reasoned footnote (FN 35), which we'll quote and analyze:
Fed FN 35 :"Several commenters maintained that Bank of America purchases subprime loans and securitizes them without performing adequate due diligence to screen for 'predatory' loans, and some commenters urged Bank of America to adopt particular factors or methods for such screening."
ICP note: Since the Federal Reserve has allowed Bank of America to withhold from the public its responses about its standards (or its "policies and procedures," see below), the issue is unresolved. Worse, while the Fed claims that there's no definition of predatory loans (and uses this to claim that no one has shown BofA involved with predatory loans), the Fed has without allowing comment accepted BofA's definition of predatory loans, the loans it purported screens for.
The Fed's footnote 35 continues: "Several commenters also criticized Bank of America for its recent investment in a subprime lending company, Oakmont Mortgage Company, Woodland Hills, California ('Oakmont'), after Bank of America had publicly announced that it would not originate subprime mortgage loans. None of these commenters, however, provided evidence that Bank of America had originated, purchased, or securitized 'predatory' loans or otherwise engaged in abusive lending practices."
ICP Note: it has been shown that Oakmont's most recently publicly available Home Mortgage Disclosure Act data is not credible, having 100% approval ratings, and that Oakmont targets communities of color with its higher-cost loans. ICP commented that
"[e]ven a cursory review of Oakmont Mortgage Co.'s HMDA data shows problems at the company, in which BofA has just blithely acquired an equity stake. For example, in the Detroit MSA, Oakmont in 2002 reported 130 applications for conventional home purchase loans from African Americans, all approved and originated, and 48 applications from whites, all approved and originated. Oakmont targets a protected class with higher-cost credit (whereas BofA redlines, with normal cost credit, having made in this MSA in 2002 fully 38 such loans to whites for every one loan to an African American, while subprime Oakmont made 2.7 times more loans to African Americans than to whites). But even the most cursory pre-acquisition due diligence would have shown that Oakmont presumptively violates HMDA and the Equal Credit Opportunity Act, by claiming to have issued no denials at all in connection with 179 applications. HMDA relies on reporting of denials; ECOA requires notices of adverse action."
So -- what standards does BofA have, to have bought a controlling stake in Oakmont Mortgage, given this record? There's no way to know. Following ICP's comments, the Fed staff on January 29, 2004, posed 12 questions to BofA. Question 3 was about Oakmont. BofA responded, "See Confidential Section, Response 3(a)." Similarly without merit, BofA claimed "Confidential" status for its management interlocks with Oakmont, its business relationships with Oakmont, whether it proposes to securitize or purchase Oakmont loans, etc.. In response to Question 5, about BofA's previous statement that, following comments, it is "reviewing its existing policies," BofA claimed Confidential treatment for its whole response. Inner City Press immediately submitted a FOIA appeal, which the Fed, as of the date it approved BofA's mega-merger, did not rule on. The lack of transparency, the lack of seriousness on predatory lending issues, is outrageous.
The Fed's footnote 35 continues: "Bank of America provides warehouse lines of credit to, and purchases subprime mortgage loans from, subprime lenders through BA Bank, and securitizes pools of subprime mortgage loans. Bank of America has policies and procedures, including sampling loans in the pool, to help ensure that the subprime loans it purchases and securitizes are in compliance with applicable state and Federal consumer protection laws. It also conducts a due diligence review of firms from which it purchases subprime loans, and the loan servicer firms selected for each securitization, to help prevent the purchase and securitization of loans that are not in compliance with applicable state and Federal consumer protection laws."
ICP note: This does not explain, particularly with all of these purported standards and policies withheld, why BofA acquired Oakmont Mortgage despite its record, and why it securitizes for Option One (which withdrew its application for a federal savings bank charter after challenge by ICP and others), Accredited Home Lenders and others. Here is a sampling of the subprime lender Accredited Home Lenders, Inc.'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 Accredited Home Lenders' 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 Home Lenders was 2.72 for African Americans and 1.51 for Latinos.
For refinance loans in the NYC MSA in 2000, Accredited Home Lenders reported 39 loans to African Americans, 17 loans to Latinos, and 40 loans to whites. Among these three groups, 40.6% of Accredited Home Lenders' high-cost loans were to African Americans and 17.7% were to Latinos -- in both cases significantly higher than the industry aggregate, indicating a targeting of protected classes with high-cost loans.
In the Los Angeles MSA in 2002, for conventional home purchase loans, Accredited Home Lenders reported 113 loans to African Americans, 301 loans to Latinos, and 239 loans to whites. Among these three groups, 17.3% of Accredited Home Lenders's high-cost loans were to African Americans and 46.1% were to Latinos. The figures for the aggregate industry in 2002 were 7.4% and 31.6%, respectively. The targeting index for Accredited Home Lenders was 2.33 for African Americans --indicating a targeting of protected classes with high-cost loans.
See also, the Cincinnati Enquirer of August 31, 2003, "Home Schemes, Broken Dreams," reporting among other things that
There are no limits on interest rates and fees in Ohio. Federal law requires lenders who charge fees exceeding 8 percent of a loan's value to warn borrowers about the potential of foreclosure. According to the latest information available, the most active subprime home-purchase lenders in Greater Cincinnati in 2001 were First Franklin Financial Corp., Accredited Home Lenders Inc., NationsCredit Financial Services, The CIT Group and Beneficial Corp. In October 2002, Beneficial Corp.'s parent, Household International, paid $484 million in restitution to home-loan borrowers nationwide following complaints about lending practices. NationsCredit's subprime lending operations were closed in 2001 by its parent, Bank of America, because they weren't profitable enough.
The reality appears to be that Bank of America found it more profitable to continue in subprime lending indirectly, by buying and securitizing loans while publicly claiming to be out of the business. Bank of America is a central player in, and one of the major creators of, the dual credit system...
The Fed's footnote 35 continues: "As the Board previously has noted, subprime lending is a permissible activity and provides needed credit to consumers who have difficulty meeting conventional underwriting criteria. The Board continues to expect all bank holding companies and their affiliates to conduct their subprime-lending-related operations free of any abusive lending practices and in compliance with all applicable law, including fair lending laws. See Royal Bank of Canada, 88 Federal Reserve Bulletin 385, 388 n.18 (2002). The Board notes that the OCC has responsibility for enforcing compliance with fair lending laws by national banks and that the Federal Trade Commission, Department of Housing and Urban Development ('HUD'), and DOJ have responsibility for enforcing such compliance by nondepository institutions."
ICP Note: The Fed closes its "analysis" with four-way buck-passing, to the OCC, FTC, HUD and DOJ -- despite the General Accounting Office's recommendation, earlier this year, that predatory lending could be slowed if the Fed accepted full examination responsibility for bank holding company subsidiaries involved in subprime lending -- like BofA's Asset Back Securities Corp, and, now, Oakmont Mortgage...
The Fed's Order is similar ill-conceived in dodging the 10% deposit cap (purportedly out of concern that BofA might come to dominate Guam and other U.S. territories unless deposits in these territories are included in the denominator, to make BofA's deposit share appear to be a convenient 9.904 percent... The Fed gives BofA, despite the corporate scandals swirling around it, credit for " demonstrat[ing] a willingness and ability to take actions to address concerns raised in these investigations" (page 19) -- while claiming that BofA's lobbying against laws responsive to such concerns (for example anti-predatory lending laws) and unwillingness to address such concerns is "outside the limited statutory factors that the Board is authorized to consider when reviewing an application under the BHC Act." The upshot of the Fed's logic? Whatever favors BofA, and approving this mega-merger, will be considered and given weight; whatever does not favor approval and consolidation will not be considered. ICP finds the Fed and its approval order, and BofA, deeply flawed, and will as a first step be requesting reconsideration, during the 15 day period provided in the Fed's rules.
Update of March 8, 2004: The Federal Reserve put BofA-Fleet on its agenda for March 8, despite the continued withholding of most of BofA's responses to questions about subprime and Oakmont (and despite Fed lawyer Kit Wheatley's "two to three weeks" representation to the federal District Court in Hawaii, well less than two weeks ago... The Order will be reviewed in this space... For or with more information, contact us.
Update of March 1, 2004: Problems in both BofA's and Fleet's business are increasingly coming to light, as their merger applications still pend. On Feb. 24, federal and state regulators filed charges Tuesday against two FleetBoston Financial Corp. fund management units, alleging civil fraud in connection with market timing of fund trades. The next day, a California jury on Wednesday ordered Bank of America to pay at least $75 million in a lawsuit that plaintiffs' lawyers said could eventually bring $1 billion of damages. The suit, filed on behalf of more than one million customers, claimed the Charlotte company illegally used electronically deposited Social Security funds to pay overdraft charges on checking accounts. Still brewing (or steaming, for you cappuccino lovers out there), is Parmalat. Meanwhile, while the Fed has yet to rule on BofA trying to withhold almost all of its response about subprime lending connections, including through its Oakmont stake, Federal Reserve lawyer Katherine Wheatley says the Fed will rule on BofA's applications in two to three weeks. How does she know that? And if that time-frame's true, given recent revelations, how could the Fed do anything but deny BofA's application?
Update of February 23, 2004: On February 19, Inner City Press received a copy of a BofA response, dated Feb. 10, to twelve Federal Reserve Board questions, including about Oakmont (a subprime lender of which BofA owns 82%) and other subprime lenders with which BofA does business. BofA has requested confidential treatment for nearly all of its response on these issues; ICP has appealed:
The FRB staff on January 29, 2004, posed 12 questions, three of which have been omitted from BofA's response (the FRB inexplicable, and contrary to the FRB's own rules, apparently did not transmit a copy of its Additional Information letter to ICP, by fax, mail, or otherwise). Question 3 is about Oakmont, the subprime lender owned and controlled by BofA; BofA responds, "See Confidential Section, Response 3(a)." Similarly without merit, BofA claims "Confidential" status for its management interlocks with Oakmont, its business relationships with Oakmont, whether it proposes to securitize or purchase Oakmont loans, etc.. In response to Question 5, about BofA's previous statement that, following comments, it is "reviewing its existing policies," BofA claims Confidential treatment for its whole response. BofA's delays and withholdings are outrageous...
Update of February 16, 2004: Sleazy Bank of America, withholding then blacking out its answers on subprime: last week, ICP / Fair Finance Watch filed a Freedom of Information Act appeal with the Federal Reserve Board in DC "for all withheld portions of the January 23, 2004 (dated) and December 22, 2003, submissions by Bank of America Corporation ("BofA") regarding CRA and fair lending. BofA's submissions dated January 23, 2004, purporting to respond to issues raised by ICP and other, was regular-mailed to ICP by BofA on February 2, 2004 (see attached copy of envelope, with postmark). A full paragraph about Oakmont Mortgage, HMDA irregularities and predatory lending has been redacted... The 188 full pages (and other redacted information) should be released -- including under 12 CFR §261.22 -- this also applies to the redacted portions of BofA's late-provided January 23, 2004, submission, regarding Oakmont - ICP wants and deserves this prior to the FRB ruling on BofA's Fleet applications, given that ICP timely raised this issue, during the comment period (BofA acquired its stake in Oakmont on Dec. 15, 2003). FOIA exemptions should not be used to withhold information regarding alleged predatory lending and other compliance issues at subprime lenders in which mega-banks like BofA acquire ownership positions. Again, this is a request also under 12 CFR §261.22, and ICP asks for a response, under the rules (from the General Counsel, or a Governor), prior to any ruling other than denial on BofA's Fleet applications. For or with more information, contact us.
Update of February 9, 2004: We're proud to report California Attorney General Bill Lockyer, in a recent letter to the Federal Reserve, said that Bank of America and its subsidiaries are contributing to predatory lending problems in California by packaging subprime loans for sale on Wall Street. We've been saying that for while, and will pursue it until it's cleaned up.
Update of February 2, 2004: Big picture: Crain's NY Business of Jan. 26 reports that BofA
has been ensnared in every major scandal to hit Wall Street in the past six months. The Securities and Exchange Commission and the New York state attorney general's office are investigating the firm for its role in facilitating a Manhattan hedge fund's illegal trading of mutual fund shares. It is being probed for providing loans to other parties alleged to have traded funds improperly. The bank also faces sanctions for failing to properly store records related to another regulatory inquiry and produce them in a timely manner. Overseas, BofA is under scrutiny by Italian authorities for its dealings with Parmalat SpA, the bankrupt dairy group. And in shades of the 2002 scandal that most Wall Street firms are putting behind them, a former BofA stock analyst last month was fined and suspended for issuing research reports contrary to his personal opinions. The National Association of Securities Dealers is investigating the firm's research unit. The multiple investigations... raise questions as to whether BofA cut corners in its push to grow.
The answer to the question is yes...
Update of January 26, 2004: Here's a predictor of BofA's powers of integration, from the Sacramento Bee: in northern California, Bank of America customers with sullen, even angry, faces filed into the Arden-Morse branch in Sacramento over the past week. Some sat with tax papers in hand, recalled one customer who shares an account with his father at the bank, waiting to ask why the document contained someone else's confidential account information and where their own information might have gone. In an interview earlier this week, another customer who spoke on condition of anonymity said she was galled by the blasé response she received from one bank employee who described the misdirected mailing as "no big deal." As it turns out, it was a very big deal not only for the 3,800 Northern California customers who received the misdirected 1099-INT forms but also for Bank of America, which encountered a public relations nightmare. Crisis management experts said the bank's leaders could have chosen a couple of roads: Attempt to keep the crisis out of the media by deploying representatives for intense one-on-one sessions with customers, or collect as much information as possible and use the media to address customer concerns. In San Francisco, BofA spokeswoman Betty Riess said the bank's crisis management team decided to learn the scope of the mailing mishap before acting. Riess declined to divulge the timeline of the bank's discovery and response... Great...
Update of January 20, 2004: the Hartford Courant of Jan. 15 captures (some of) the madness of BofA: " On Tuesday, Bank of America said it had developed a strategic outline for a community reinvestment plan for Massachusetts. But Chief Executive Kenneth Lewis told reporters after his testimony that state-by-state plans were still not on the table." So wait -- which is it?
Interim update of January 14-15, 2004: Bank of America's multiple involvements with standardless subprime lenders -- as a loans purchaser, securitizer, and now as the controlling owner of the subprime lender Oakmont Mortgage Co. -- are for now being obscured by vague mega-pledges and much oiling of squeaky wheels. On the eve of the first of the Federal Reserve's two public meetings on BofA's Fleet applications, "a Bank of America spokeswoman confirmed" to the Boston Herald that BofA "has agreed in principle to a 'strategic plan' for Massachusetts." Which is a certainly a credit to Bay State advocacy. But one has to ask, unless the whole process is just the above-referenced oiling: what about New Hampshire, Rhode Island, New York, Connecticut, and other big Fleet states? To say nothing of the involvements in predatory lending that BofA has refused to address, and is hiding its responses about, having requested "confidential treatment" for its entire response on this important issue.....
Update of January 14, 2004: here is the testimony of Inner City Press / Fair Finance Watch, in opposition to Bank of America's applications to acquire FleetBoston Corporation; for or with more information, contact us.
Good morning. Inner City Press and its Fair Finance Watch have submitted five detailed written comments opposing Bank of America's application. Among other things, these comment have demonstrated that Bank of America is deeply involvement in problematic subprime lending. For example, it purchases and securitizes subprime loans from Option One, New Century, Accredited Home Lenders, and Wells Fargo, whose subprime loans are being criticized, correctly, in many states. Even more directly, Bank of America on December 15, 2003 -- less than a month ago -- bought a controlling equity state in the California-based subprime lender Oakmont Mortgage. Significantly, Bank of America is working with the same management that was at First Franklin, a subprime lender BofA owned from 1996 to 1999, before selling it to National City Corporation. BofA made big claims about getting out of subprime, but the reality is that it is still involved, simply under other names -- the Oakmont purchase was through BofA's subsidiary CIVC, or Continental Illinois Venture Corp. -- and in other ways. Most of BofA's securitizations of subprime loans are done through a BofA subsidiaries with a misleadingly generic-sounding name: " Asset Backed Funding Corporation," or ABFC. Here's a quote from a press release issued by the rating agency Fitch on August 20, 2003, concerning ABFC Asset-Backed Certificates 2003-OPT1: (quote)
"the mortgage loans will be sold to the depositor by Bank of America, NA., an affiliate of the depositor and one of the underwriters, which acquired the mortgage loans from Option One, the originator."
This is significant, particularly in terms of the Comptroller of the Currency's announcement, the same day as BofA's pledge, to which we'll turn in a moment, that it would preempt all states' anti-predatory lending laws, because supposedly no national bank or operating subsidiaries is involved in predatory lending in any way. Well, from Fitch's press release (and the underlying SEC filings), it's clear that Bank of America, N.A. -- the national bank -- buys subprime mortgage loans from Option One. Consider, as to Option One, that this subprime lender applied for a savings bank charter in 2002, but was unable to obtain one due to compliance issues that arose, and ultimately withdrew its application. ICP knows this because it commented to the OTS and FDIC in opposition to Option One's applications, including evidence of predatory lending. Regarding Wells Fargo, for the record, the Prospectus Supplement for ABFC MORTGAGE LOAN ASSET-BACKED CERT, SER 2003-WF1, states that the pool consists of "subprime mortgage loans secured by first liens on residential real properties," 91.42% of which have the consumer trapped in (subprime) loans by means of prepayment penalties. Bank of America, hiding behind its subsidiaries Asset Backed Funding Corporation and CIVC, plays a predatory lending name-game.
So how has BofA responded on these issues? Not at all. Its written answer to ICP's comments was dismissive; when the Federal Reserve asked BofA to describe for the record its relationships with subprime lenders, its due diligence and safeguards against predatory lending, Bank of America requested "confidential treatment" for its entire response. Is this a responsible bank? At least on this issue, no. And predatory lending is a major issue.
BofA's most recent subprime purchase, it's now clear, was made without even the most cursory due diligence review of Oakmont Mortgage Co. and its Home Mortgage Disclosure Act data. Oakmont's 2003 HMDA data show that, in the Detroit MSA, Oakmont reported 130 applications for conventional home purchase loans from African Americans, all approved and originated, and 48 applications from whites, all approved and originated. Oakmont targets a protected class with higher-cost credit -- whereas BofA redlines, with normal cost credit, having made in this MSA in 2002 fully 38 such loans to whites for every one loan to an African American, while subprime Oakmont made 2.7 times more loans to African Americans than to whites. But even this one-minute HMDA review shows that Oakmont presumptively violates HMDA and the Equal Credit Opportunity Act, by claiming to have issued no denials at all in connection with 179 applications. HMDA relies on reporting of denials; ECOA requires notices of adverse action. BofA buys subprime lenders without even looking at their HMDA data. Is BofA a responsible bank? At least on this issue, no. And again, predatory lending is a major issue.
BofA's responses about its relationships with subprime lenders and its supposed due diligence must be released, under the Freedom of Information Act and otherwise, and the comment period must be extended until that is done.
Bank of America would clearly like this process to become a referendum on its $750 billion announcement: "is it a big number or not." Well, it's a big number, but it doesn't mean much. Even the Federal Reserve says that the focus in this process is supposed to be on the banks' actual record, not future projects. As simply one example -- many more are in ICP's written comments -- In 2002 in the Washington, DC, Metropolitan Statistical Area, for example, for conventional home purchase loans, BofA denied the applications of Latinos 3.53 times more frequently than those of whites, and denied the applications of African Americans 3.29 times more frequently than whites. These BofA denial rate disparities is worse than those of the industry aggregate in the Washington DC MSA. For example, for conventional home purchase loans, the aggregate denied Latinos 2.38 times more frequently than whites, and African Americans 3.04 times more frequently than whites -- both significantly lower than BofA's disparities, of 3.53 for Latinos and 3.29 for African Americans.
Bank of America's spin machine, of which the pledge is only the most recent example, allow these disparities to fester and grow worse. On past experience, when BofA and NationsBank made their mega-pledge in 1998, it turned out that they counted toward the pledge loans that have nothing to do with the Community Reinvestment Act, fair lending, or even small businesses. For example, when they say "small business loan," they don't mean "loan to a small business." They mean, "small loan to a business" of any size -- and small means, "below one million dollars." The reality is, a $750,000 loan to a big law firm in midtown Manhattan, they will count toward this pledge. So what does the pledge mean? Not much.
Tellingly, in terms of chicanery with numbers, Bank of America also claims that if allowed to acquire Fleet, it would remain under the applicable 10% of nationwide deposits cap. Using the official numbers from the FDIC, the pro forma institutions would go over 10%. But BofA has another proposed numbers-game -- for reasons set forth in its written comments, ICP formally disagrees. More on Bank of America's fast and loose practices: BofA is also embroiled in not only what's called the mutual fund scandal, but also the unfolding Parmalat matter, the so-called Enron of Europe. On this ground, as well, the Federal Reserve should not approve BofA's applications. ICP will submit further written comments to this effect; for or with more information, contact us.
Update of January 12, 2004: Bank of America's cynicism: it waited until the Fed announced public meetings, then whipping out another number, without explain what counts toward it (rest assured: every loan BofA makes will be called a CRA loan, including any loan below $1 million to a business of any size). More on this (and on BofA's growing subprime connections) to follow. In the run-up to this week's two Federal Reserve public meetings on Bank of America's applications to acquire Fleet, the Financial Times of January 9 reported that Bank of America "brought in two unknown investment groups, Food Holdings and Dairy Holdings, to buy 18 per cent of Parmalat's main Brazilian division. Because the unit was never floated on the Brazilian stock market, the investors exercised an option to sell back their stake for $400 million by mid-December 2003. BofA has repeatedly declined to comment on the transaction and some investigators suspect the two investment groups could be fronts for Mr Tanzi or close associates." BofA also plugged Parmalat to investors just five months before its implosion by staging a four-day road show for Parmalat executives. Sounds like the bank the economy of the Northeast should be handed to, right?
1/7-8/04 Note -- Bank of America's Jan. 7 announcement does nothing to address the predatory lending issues ICP and others have been raising (see below on this page) -- on these issues, BofA is in denial, it seems. Well, it'll be addressed at the public hearings, beginning Jan. 14...
Update of January 5, 2004: in the run-up to the Jan. 14 (and 16) public hearings, ICP on Jan. 5 submitted a fifth timely comment, including on BofA's withholding of its response about subprime lending, and blithe Dec. 15 purchase of a stake in a subprime lender run by the ex-management of First Franklin, which BofA used to own (and the sale of which, to National City Corp., BofA used to argue misleadingly that it was getting out of questionable subprime lending:
January 5, 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: Fifth Timely Comment Opposing and Requesting Hearings on the Applications of Bank of America Corporation to Acquire FleetBoston Financial Corporation
Dear Chairman Greenspan, Governors, Secretary Johnson, 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 is a fifth timely comment opposing, and requesting hearings on, the applications of Bank of America Corporation ("BofA") to acquire FleetBoston Financial Corporation and its subsidiaries (collectively, "Fleet").
BofA has yet to respond, at least in any non-withheld submission, to the subprime lending issues ICP and others have raised. The FRB has asked BofA for additional information, for which BofA has sought confidential treatment, while mentioning that it has acquired an equity interest in yet another subprime lender, Oakmont Mortgage Company ("Oakmont;" see infra). ICP has submitted a FOIA appeal for the erroneously withheld subprime lending (and branch closings) information, and hereinbelow comments on BofA's new acquisition Oakmont, including regarding how it reflects on the (lack of) quality in BofA's due diligence.
The FRB staff on Dec. 11, 2003, posed four questions, the fourth of which asked for subprime lending information beyond that "covered in your December 3, 2003, responses to the comments of [ICP]." BofA is attempting to withhold everything beyond four sentences -- that is, its policies and procedures, the names of subprime lenders (many of which are required to be made available in SEC filings, rendering meritless BofA's and/or the FRB's arguments for confidential treatment), information about its purported due diligence, etc.. ICP has appealed, and should receive the improperly withheld records well before the January 14 public meeting.
Significantly, BofA's December 22 submission states that it "acquired an interest in a nonconforming mortgage lender on December 15, 2003, when CIVC Partners ('CIVC'), a private equity fund affiliated with Bank of America, acquired an equity interest in Oakmont Mortgage Company ('Oakmont'). Oakmont originates mortgage loans that may not qualify for FNMA or FHLMC programs." Then, regarding the "due diligence due practices [sic] utilized by the relevant Bank of America business units," BofA refers to "Confidential Exhibit C." That does not comply with FOIA, and also reflects BofA's lack of confidence in its due diligence -- a justified lack of confidence, in light of the below.
Even a cursory review of Oakmont Mortgage Co.'s HMDA data shows problems at the company, in which BofA has just blithely acquired an equity stake. For example, in the Detroit MSA, Oakmont in 2002 reported 130 applications for conventional home purchase loans from African Americans, all approved and originated, and 48 applications from whites, all approved and originated. Oakmont targets a protected class with higher-cost credit (whereas BofA redlines, with normal cost credit, having made in this MSA in 2002 fully 38 such loans to whites for every one loan to an African American, while subprime Oakmont made 2.7 times more loans to African Americans than to whites). But even the most cursory pre-acquisition due diligence would have shown that Oakmont presumptively violates HMDA and the Equal Credit Opportunity Act, by claiming to have issued no denials at all in connection with 179 applications. HMDA relies on reporting of denials; ECOA requires notices of adverse action.
In the Chicago MSA, Oakmont in 2002 reported 33 applications for conventional home purchase loans from African Americans, all approved and originated, six applications from Latinos, all approved and originated, and seven applications from whites, all approved and originated. Again, comparison to BofA's demographics of lending -- 1346 loans to whites, only 77 to African Americans and 76 to Latinos -- shows that Oakmont targets protected classes with higher-cost credit, and BofA excludes them with normal-cost credit. Also, Oakmont violates HMDA and ECOA, by claiming to have issued no denials at all in connection with 46 applications.
The pattern is slightly more complicated, but no less violative, in the Atlanta MSA, which BofA has CRA duties. In the Atlanta MSA in 2002, Oakmont reported 138 applications for conventional home purchase loans from African Americans, leading to 129 originations, nine "withdrawals" and no denials. Oakmont reported four applications from Latinos, all leading to originations. Oakmont reported 109 applications from whites, leading to 101 originations, eight "withdrawals" and no denials. Again, comparison to BofA's demographics of lending -- 1831 loans to whites, 784 to African Americans and 94 to Latinos -- shows that Oakmont targets protected classes with higher-cost credit. Also, Oakmont violates HMDA and ECOA, by claiming to have issued no denials at all in connection with 234 applications. Apparently, fifteen applications that would have been denied were converted, by whatever means, into withdrawals. But ECOA requires notices of adverse action, and HMDA relies on reporting of denials.
On patterns even less striking, the FRB in 2003 asked Credit Agricole to answer, for Espiritu Santo Bank in Miami (FRB Additional Information Letter in that case incorporated herein by reference). The FRB must now ask BofA about the patterns set forth above, both in light of BofA's equity stake in Oakmont, and because this reflects on BofA's purported due diligence in connection with subprime lending. If BofA doesn't even review the HMDA data of a subprime lender it is buying an equity stake in, it is difficult to imagine that BofA does sufficient -- or ANY -- due diligence on the subprime lenders whose loans it securitizes and helps sell.
This mid-application purchase of an equity stake in Oakmont also reflects just how misleading BofA's purported exit from subprime lending was. Not only does BofA and its ABFC continue to enable questionable subprime lenders all over the country -- here, the senior management of one of the subprime lenders BofA sold (First Franklin) have enlisted BofA funds to purchase another subprime lender, which assistance BofA has provided despite the irregularities in the lender's record that even a cursory review of HMDA data would have uncovered (and now has).
Additionally, beyond BofA's own SEC-related announcement over the New Years holiday, note that SEC associate director of enforcement Lawrence West told the Corriere della Sera that "[t]he responsibilities of Bank of America and of the other investment banks that handled the issuance of Parmalat securities in the United States...depend on the amount of knowledge they had of the company's true financial situation." Reuters, Jan. 3, 2004, also reporting that "Bank of America is believed to have organized private placements of $500 million of Parmalat bonds since 1997 and has been involved in structuring other business for the group." In light also of this fast-developing scandal, on the current record, BofA's applications should be denied.
As reviewed in Section III of ICP's First Comment, and in ICP's comments since, while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from -- and now acquired equity stakes in -- some of the most problematic subprime lenders, which target people of color for high interest rate loans. On the current record, BofA's application could not legally be approved.
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... For or with more information, contact us.
Update of December 29, 2003: 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. For or with more information, contact us.
Update of December 22-23, 2003: Well, on the afternoon of Dec. 22, seventy hours after letting the comment period on BofA-Fleet expire, the Fed announced two public meetings on the application: We'll be gearing up...
Update of December 22, 2003: on December 19, the Fed let expire the comment period on the Bank of America - Fleet application, a $47 billion proposal to create a bank at / over the 10% nationwide deposit cap, without granting the many requests for a public meeting. What -- the Fed staff is too busy to hold a public meeting? The Fed has gotten worse and worse over the years -- for example, on a much smaller deal, Fleet - Shawmut, the Fed held three public meetings, in Boston, Hartford and Albany. In 1998, the Fed held public meetings on four of that year's mega-merger proposal. And since then? Nothing.
New (since then) Federal Reserve Governor Susan Bies sent Inner City Press a Dec. 19 Freedom of Information Act appeal response regarding the more then 100 pages of BofA-Fleet documents the Fed is withholding. Gov. Bies "upholds" all of the withholdings, but states that "[t]he withheld material includes an item, consisting of seven pages, that was voluntarily submitted by Bank of America before the application and notice were filed that was commercial and financial in nature. I have confirmed that this information is not customarily disclosed to the public by the submitter.... Bank of America recently withdrew its request for confidential treatment of a portion of this item. Accordingly, you will be provided with four full pages and one page that has been redacted to remove descriptions of information that remains confidential."
How convenient -- the Fed is never wrong, rather, the submitter withdraws its request for confidential treatment. The scam is that if one doesn't submit a FOIA appeal (which too few requesters do), you're not told that the previously withheld information is now "public." (And so, it's not public). The Fed's manipulation of FOIA, including in its annual reports, continues and grows worse.
The four-and-a-half page released, right at the comment period deadline, included e-mails concerning a November 10, 2003, conference call with BofA -- e-mails from BofA's Scott Cammarn to the Fed's Scott Alvarez and others, entitled "Fleet Deposit Cap Talking Points." The attachment, only partially released, states that if the FDIC's June 30, 2003 Summary of Deposits -- the data set the Fed used in 1998 on BofA-NationsBank -- is used, a combined BofA-Fleet would hold 10.02% of nationwide deposits. But then, BofA's "Talking Points" tell the Fed, "This Calculation is Wrong." There follows an argument about thrift escrow funds, which is repeated in BofA's application. But why run this argument by the Fed before applying, except to get pre-approval? This rather outrageous irregularity, we are inquiring into. Developing... For or with more information, contact us.
Update of December 15, 2003: 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... Here's ICP's fourth comment, continuing with the alphabetically review of BofA:
December 15, 2003
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 Timely Comment Opposing and Requesting Hearings on the Applications of Bank of America Corporation to Acquire FleetBoston Financial Corporation
Dear Chairman Greenspan, Governors, Secretary Johnson, 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 is a fourth timely comment opposing, and requesting hearings on, the applications of Bank of America Corporation ("BofA") to acquire FleetBoston Financial Corporation and its subsidiaries (collectively, "Fleet").
Now that numerous members of Congress have added their voices to the demands for public hearings on this proposal, it would seem clear that the Fed must holding public meetings. The precedent, ICP contents, is Fleet - Shawmut, on which the Fed held three public meetings: in Boston, Hartford and Albany. This BofA proposal is substantially larger and even, ICP contends, violates the 10% deposit cap that Congress included in the 1994 Interstate Banking Bill. At LEAST three meetings should be held.
ICP continues to await the FRB's response to ICP's December 8 FOIA appeal, and some response from BofA which, unlike BofA's Dec. 3 submission, is at least somewhat substantive, particularly on its lead bank's standardless purchase of subprime loans from Option One and Accredited Home Lenders, Inc., and its securitization for a wide range of questionable subprime lenders. In the interim, ICP has continued with its alphabetical review of BofA's 2002 lending.
K is (also) for Kansas City. In the Kansas City Metropolitan Statistical Area ("MSA") in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 2.46 times more frequently than those of whites, and denied the applications of Latinos 3.33 times more frequently than whites. For refinance loans in the Kansas City MSA, BofA in 2002 denied the applications of African Americans 3.5 times more frequently than whites, and denied the applications of Latinos 3.67 times more frequently than whites: both disparities higher than for the HMDA-reporting industry as a whole (the "aggregate").
L is (also) for Las Cruces, New Mexico -- in this MSA for conventional home purchase loans in 2002, BofA denied the applications of Latinos a whopping 4.49 times more frequently than whites. This disparity is much worse that the aggregate -- and than the past record of the Boatmen's Bancshares subsidiary through which BofA entered this market. As elsewhere, BofA's entry results in a deterioration of performance.
M is (also) for Myrtle Beach, South Carolina. In this MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 4.25 times more frequently than those of whites, and denied the applications of Latinos 4.82 times more frequently than whites. For refinance loans in the Myrtle Beach MSA, BofA in 2002 denied the applications of African Americans 3.11 times more frequently than whites, and denied the applications of Latinos 4.67 times more frequently than whites: both disparities higher than for the aggregate.
N is (also) for Norfolk, VA -- in this MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 2.85 times more frequently than those of whites; for refinance loans, BofA denied the applications of African Americans 3.21 times more frequently than whites, and denied the applications of Latinos 2.62 times more frequently than those of whites.
O is (also) for Orlando, Florida. In this MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 2.85 times more frequently than those of whites, and denied the applications of Latinos 2.54 times more frequently than whites.
BofA's disparities are systemic; they are nationwide: upon analysis, the record of each bank acquired from the command center in Charlotte deteriorates after it is acquired. As reviewed in Section III of ICP's First Comment, and hereinabove,, while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from some of the most problematic subprime lender, which target people of color for high interest rate loans. The requested public hearings -- at least three of them -- should be scheduled, and, on the current record, BofA's application could not legally be approved.
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... For or with more information, contact us.
* * *
Update of December 8, 2003: of Bank of America we must say: power corrupts. Having taken more than two weeks to prepare a response to the 30-page comment submitted by ICP/Fair Finance Watch, BofA has come back with a slew of vague assurances and arrogant claims that the Federal Reserve Board should not even consider these issues, including Bank of America, N.A.'s purchase of subprime loans from New Century, Option One, and other problematic subprime lenders. But the Office of the Comptroller of the Currency's CRA performance evaluations of BofA, NA do not even mention these subprime loan purchases. Strange bank, strange agencies -- and time for a hearing. Here's a summary of ICP's December 8, 2003, Third Comment to the Federal Reserve:
December 8, 2003
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: Third Timely Comment Opposing and Requesting Hearings on the Applications of Bank of America Corporation to Acquire FleetBoston Financial Corporation
Dear Chairman Greenspan, Governors, Secretary Johnson, 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 is a third timely comment opposing, and requesting hearings on, the applications of Bank of America Corporation ("BofA") to acquire FleetBoston Financial Corporation and its subsidiaries (collectively, "Fleet").
ICP has received BofA's purported response to ICP's first two comments, and contends that, given BofA's evasions, intentional vagueness, and willful mischaracterization of its record and of ICP's comments, public hearings are even more necessary. BofA claims, without any detail, that it "conducts due diligence in connection with its securitization transactions," of which it disingenuously states "some loans bay be considered subprime." ICP has directed the Board to loans purchased by Bank of America, N.A. -- that is, by the bank -- and to specific transactions, specific subprime lenders (Accredited Home Lenders, New Century, Option One, and others). ICP has stated that Option One, after detailed critique by group including ICP, withdrew its application for a federal thrift charter -- did BofA's purported due diligence turn up this, and the OTS file on it? See also, e.g., "INCREASE IN 'PREDATORY' LENDING RISK FOR HUB MINORITIES, STUDY SUGGESTS," Boston Globe of January 21, 2003, at F1, stating, after review of the report, that "[f]our mortgage company lenders made most of the subprime loans in Boston: Option One, Greenpoint Mortgage Funding, New Century Mortgage Corp., and Ameriquest Mortgage Co." BofA enables at least two of these Boston top-four: but what ARE BofA's standards? We repeat: apparently, none. And none of the Community Reinvestment Act ("CRA") performance evaluations to which BofA's Resp. points even MENTION these purchase of subprime loans by the bank. As such, the performance evaluations, and ratings, are either out-of-date or misleading and incomplete.
BofA goes so far as to argue that ICP's "claims and issues do not warrant consideration by the Board," allegedly because they have been "previously considered by the Board." Resp. at 2. When? Not only has the Board not considered Bank of America's extensive (and increasing) involvements with subprime lenders such as Option One and New Century -- even more clearly, BofA's own Resp. acknowledges as it must "the inquiry into its mutual fund operation." BofA lists this as among the issues ICP has timely raised, and then claims that it is an old issue that does "not warrant consideration by the Board." Such disingenuous arrogance by an institution that proposes to come to control over 10% of the deposits in the United States, and acquire major franchises in New York and New England, is troubling -- the requested public hearings should be scheduled forthwith.
In the interim, ICP has continued with its alphabetical review of BofA's 2002 lending.
E is (also) for El Paso -- In 2002 in the EL Paso, Texas, Metropolitan Statistical Area ("MSA"), for example, for conventional home purchase loans, BofA denied the applications of Latinos 2.5 times more frequently than those of whites.
F is (also) for Fayetteville NC. In the Fayetteville MSA in 2002, for conventional home purchase loans, BofA denied the applications of African Americans 5.24 times more frequently than those of whites. For home improvement loans in the Fayetteville MSA, BofA in 2002 denied the applications of African Americans 4.69 times more frequently than whites, while having a 100% denial rate for applications from Latinos.
G is (also) for Greenville, South Carolina -- in this MSA for conventional home purchase loans in 2002, BofA denied the applications of African Americans 2.61 times more frequently than whites, and denied the applications of Latinos 3.47 times more frequently than whites. For home improvement loans, BofA denied African Americans 2.3 times more frequently than whites -- while having a 100% denial rate for applications from Latinos.
H is (also) for Hickory, NC -- in this MSA in 2002, for refinance loans, BofA denied the applications of African Americans 3.23 times more frequently than whites, and denied the applications of Latinos 4.03 times more frequently than those of whites.
BofA's disparities are systemic; they are nationwide: upon analysis, the record of each bank acquired from the command center in Charlotte deteriorates after it is acquired. As reviewed in ICP's First Comment [to reiterate: we expect the FRB to adhere to the plain language of the federal banking statutes as the application is reviewed], while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from some of the most problematic subprime lender, which target people of color for high interest rate loans. The requested public hearings should be scheduled -- in 2004 -- and, on the current record, BofA's application could not legally be approved.
The comment period on the proposal is currently slated to expire on December 19. Thirty-five days before that deadline, ICP requested inter alia
related records including those reflecting communications between Federal Reserve System ("FRS") personnel and representatives of the named companies, regarding the presumptive breech of the ten percent deposit cap contained in the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act and otherwise, including compliance, managerial and financial factors concerning both companies' involvement in the mutual fund / market timing and other current widely-reported investigations.... We understand that representatives of the companies discussed this proposed merger with the FRS prior to it being publicly announced on October 27, 2003; we are explicit request all records reflecting any such contacts, and, separately, a full disclosure of the substance of all such communications -- at a minimum similar to discloses made by the FRS in 1998 concerning its pre-announcement communications with Citicorp and Travelers."
In a purported Response dated Dec. 3, 2003, Bank of America has claimed that the BofA and Fleet mutual fund scandals, the 10% deposit cap issue, and other issues raised have all been "previously considered by the Board." BofA Resp. at 2. On Dec. 5, 2003, the FRB faxed ICP five pages purporting to respond to the above-quoted request, consisting of letters from the FRB of Richmond to the FRB of Boston, DOJ and the OCC, and two e-mails (Nov. 7 from Adam Drimer to various, regarding newspaper notice, and from Pam Nardolilli to various, suggesting a meeting; Nov. 10 from Susan K. Stawick to Pam Nardolilli, regarding a press inquiry). None of the other requested documents and responses have been provided. Accordingly, less than two weeks before the slated expiration of the comment period, ICP has submitted a FOIA appeal demanding the requested documents and responses as quickly as possible; if not three days before the expiration of the comment period, the comment period should be extended to three days after the (required) release. Again, the requested public hearings should be scheduled -- in 2004 -- and, on the current record, BofA's application could not legally be approved.
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... For or with more information, contact us.
* * *
Update of December 1, 2003: while the Federal Reserve Bank of Richmond has acknowledged receipt of both of ICP's comments to date, and has forwarded each of them to Bank of America's legal department, BofA has yet to respond. Meanwhile, the American Banker of Dec. 1, 2003, says that ICP-published novel Predatory Bender "blend[s] the images of companies such as Citigroup Inc. and Bank of America Corp. One section reads: 'While ostensibly the fruit of three decades of community struggle, the land beneath the mall was owned by Anguilla-based EmpiBank. The anchor tenant, too, was a part of Empi's empire: a storefront office in the high-rate lender EmpiFinancial. Jack Bender had worked for EmpiBank on the outskirts of Charlotte, North Carolina, the so-called Queen City.'" -- yep... Click here for more on Predatory Bender; we'll be chiming in more on BofA soon -- according to the Richmond Federal Reserve Bank, the comment period extends at least through December 19, 2003... Until next time, for or with more information, contact us.
Update of November 24, 2003: In response to reporters' questions about Inner City Press / Fair Finance Watch's challenge last week, Bank of America's spokesperson prattled about CRA ratings and claimed against that, despite the numbers, the proposed merger would somehow comply with the ten percent deposit cap. Well it just ain't so -- on November 23-24, ICP submitted its second comment, summarized below (for or with more information, contact us)
November 24, 2003
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: Second Timely Comment Opposing and Requesting Hearings on the Applications of Bank of America Corporation to Acquire FleetBoston Financial Corporation
Dear Chairman Greenspan, Governors, Secretary Johnson, 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 is a second timely comment opposing, and requesting hearings on, the applications of Bank of America Corporation ("BofA") to acquire FleetBoston Financial Corporation and its subsidiaries (collectively, "Fleet").
First, given Bank of America's continuing vague public statements that, despite the June 30, 2003, FDIC data and applicable statutes, it would be under the ten percent deposit cap, ICP will further spell out the argument set forth in Section IV of its initial comment.
To the FDIC's June 30, 2003, count of deposits, BofA proposes adding some $43 billion of thrift escrow funds, arguing that "deposits" for purposes of the ten percent deposit cap is defined in 12 USC 1813(l). But as ICP has pointed out, §1831(l)(5)(A) explicitly EXCLUDES from the definition, "for any purposes of this Act... any obligation of a depository institution which is carried on the books and records of an office of such bank or savings association located outside of any State" [with certain exceptions which do not apply here]. This would exclude Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam -- as well as Palau, the Marshall Islands, Micronesia and the Northern Mariana Islands. The deposits of each are as follows, according to the FDIC's deposit data base:
American Samoa $135 million; Micronesia $119 million; Guam $1,748 million; Marshall Islands $30 million; Northern Mariana Islands $504 million; Palau $83 million; Virgin Islands $1,343; and Puerto Rico $40,263 million.
These add up to over $44 billion -- more even that the thrift escrow funds that Bank of American proposes to include. Thus, even if arguendo one included the thrift escrow funds in the amount specified by BofA, the proposed combined companies would control 10.02542% of nationwide deposits of $5,129,370,000,000. For the reasons specified, ICP contends that the thrift escrow funds should not be included, leaving the proposed combined companies with 10.1118% of nationwide deposits of $5,085,548,000,000. Under 12 U.S.C. 1842(d), the Federal Reserve Board "may not approve an application for an interstate merger transaction if the resulting bank upon consummation of the transaction, would control more than 10% of the total amount of deposits of insured depository institutions in the United States." BofA's application must be denied.
Second, ICP wishes to supplement its presentation of Bank of America's -- and Bank of America, N.A.'s -- standardless involvements in subprime lending. Beyond the list of questionable subprime lenders in ICP's November 19, 2003, comment (the "First Comment"), additionally BofA's Asset Backed Funding Corporation enables the subprime lender WMC Mortgage Corp. -- for example, a mere three days after BofA announced its Fleet proposal, BofA sold $209 of subprime home equity loans it had purchased from WMC Mortgage Corp, see Reuters of October 30, 2003.
Bank of America, N.A -- the bank, subject to CRA -- buys subprime loans, not only from Option One, but also from Accredited Home Lenders, Inc.. See, e.g., the May 6, 2003, Underwriting Agreement related to ASSET BK FDG CORP ABFC CER SER 03 AHL1, and other public documents regarding that AHL (Accredited Home Lenders) issuance. For the record, here is an SEC list of issuances by Bank of America's Asset Backed Funding Corporation:
CIK
Company
State
0001178714 ABFC ASSET BACKED CERTIFICATES SERIES 2002-NC1 NC
SIC: 6189 -Asset-Backed Securities
0001173466 ABFC ASSET BACKED CERTIFICATES SERIES 2002-SB1 NC
SIC: 6189 - Asset-Backed Securities
0001173467 ABFC ASSET BACKED CERTIFICATES SERIES 2002-SB1 NC
SIC: 6189 - Asset-Backed Securities
0001173474 ABFC ASSET BACKED CERTIFICATES SERIES 2002-SB1 NC
SIC: 6189 - Asset-Backed Securities
0001231442 ABFC ASSET BACKED CERTIFICATES SERIES 2003-AHL1 NC
SIC: 6189 - Asset-Backed Securities
0001224458 ABFC MORTGAGE LOAN ASSET BACKED CERT SERIES 2003-WF1 MD
SIC: 6189 - Asset-Backed Securities
0001201861 ABFC MORTGAGE LOAN ASSET BACKED CERTIFICATES SERIES 2002 WF2 NC
SIC: 6189 - Asset-Backed Securities
0001169498 ABFC MORTGAGE LOAN ASSET-BACKED CERTIFICATES SERIES 2002-WF1 NC
0001170159 ABFC MORTGAGE LOAN ASSET-BACKED CERTIFICATES SERIES 2002-WF1 NC
AHL is the subprime lender Accredited Home Lenders; NC is the subprime lending New Century; SB is the failed Superior Bank FSB; WF is Wells Fargo -- specifically, subprime loans by Wells Fargo (see, e.g., the Prospectus Supplement for ABFC MORTGAGE LOAN ASSET-BACKED CERT, SER 2003-WF1, stating that the pool consists of "subprime mortgage loans secured by first liens on residential real properties," 91.42% of which have the consumer trapped in (subprime) loans by means of prepayment penalties.
Third, and last for this submission, ICP's alphabetical review of Bank of America's 2002 lending has continued, starting again at the top (this time, A-D):
A is (also) for Austin -- In 2002 in the Austin, Texas, Metropolitan Statistical Area ("MSA"), for example, for conventional home purchase loans, BofA denied the applications of Latinos 3.02 times more frequently than those of whites. In Austin and in most other MSAs, BofA's disparities for refinance loans were also high, for both Latinos and African Americans. In 2002 in this MSA, BofA denied the refinance applications of Latinos 2.78 times more frequently than those of whites, and denied the refinance applications of African Americans 2.89 times more frequently than whites.
B is (also) for Boston. In the Boston MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 2.86 times more frequently than those of whites. For refinance loans in the Boston MSA, BofA in 2002 denied the refinance applications of African Americans 3.54 times more frequently than whites.
C is (also) for Charleston, South Carolina -- in this MSA for conventional home purchase loans in 2002, BofA denied the applications of African Americans a whopping 5.19 times more frequently than whites. For refinance loans, BofA denied African Americans 4.45 times more frequently than whites -- and denied Latinos fully 5.88 times more frequently than whites.
D is (also) for Dallas -- in this MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 2.46 times more frequently than those of whites, and denied the applications of African Americans 2.28 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.44 times more frequently than those of whites, and denied the applications of African Americans 2.54 times more frequently than whites
BofA's disparities are systemic; they are nationwide: upon analysis, the record of each bank acquired from the command center in Charlotte deteriorates after it is acquired. As reviewed in Section III of ICP's First Comment, and hereinabove,, while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from some of the most problematic subprime lender, which target people of color for high interest rate loans. The requested public hearings should be scheduled -- in 2004 -- and, on the current record, BofA's application could not legally be approved.
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... For or with more information, contact us.
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PETITION TO DENY AND HEARING REQUEST BY INNER CITY PRESS / COMMUNITY ON THE MOVE AND THE FAIR FINANCE WATCH IN OPPOSITION TO THE APPLICATIONS OF BANK OF AMERICA CORPORATION TO ACQUIRE FLEETBOSTON FINANCIAL CORPORATION
NOVEMBER 19, 2003
1. Preliminary Statement
On behalf of Inner City Press / Community on the Move and its members and affiliates, and the Fair Finance Watch (together, "ICP"), this a timely petition to deny, and hearing request on, the applications of Bank of America Corporation ("BofA") to acquire FleetBoston Financial Corporation and its subsidiaries (collectively, "Fleet"). As set forth below in Section II, the disparities in the 2002 lending record of BofA (and where applicable, Fleet), including as reflected by Home Mortgage Disclosure Act ("HMDA") data, militate for the requested hearings, and for the denial of BofA's applications. Section III demonstrates that BofA is still actively involved in predatory lending, not only securitizing but also directly purchasing pools of standardless subprime loans. Section IV contends that the proposed merger runs afoul of, and would be illegal under, the ten percent deposit cap contained in the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act, and argues against the inclusion of thrift escrow funds, and of deposits in institutions were are not "in the United States" for the purposes of the statute and its legislative history. Section V reviews the adverse impacts Bank of America's previous acquisitions have had on the convenience and needs of communities, through branch closings and otherwise. Section VI makes part of the record a number of negative managerial and financial factors, including both BofA's and Fleet's involvement in the mutual fund, market timing and other unresolved financial scandals; Section VII contains ICP's requests for public hearings and for documents, including all of the FRS' communications with the applicants, and the improperly withheld portions of the applications. For all of these reasons, public hearings should be scheduled forthwith on this troubling proposal, and, ICP respectfully requests that BofA's applications be denied.
II. SYSTEMIC DISPARITIES IN BANK OF AMERICA'S LENDING TO LATINOS AND AFRICAN AMERICANS MILITATE FOR THE REQUESTED HEARING, AND FOR THE DENIAL OF THESE APPLICATIONS
The 2002 Home Mortgage Disclosure Act (HMDA) data reported by Bank of America, N.A. (BofA) show that BofA disproportionately excludes African Americans and particularly Latinos from its lending. In 2002 in the Washington, DC, Metropolitan Statistical Area ("MSA"), for example, for conventional home purchase loans, BofA denied the applications of Latinos 3.53 times more frequently than those of whites, and denied the applications of African Americans 3.29 times more frequently than whites. These BofA denial rate disparities is worse than those of the industry aggregate in the Washington DC MSA. For example, for conventional home purchase loans, the aggregate denied Latinos 2.38 times more frequently than whites, and African Americans 3.04 times more frequently than whites -- both significantly lower than BofA's disparities, of 3.53 for Latinos and 3.29 for African Americans.
In Washington DC and in most other MSAs, BofA's disparities for refinance loans were even worse. In 2002 in this MSA, BofA denied the refinance applications of Latinos 5.15 times more frequently than those of whites, and denied the refinance applications of African Americans 4.72 times more frequently than whites. The aggregate, less disparate, denied Latinos 2.62 times more frequently than whites (compared to BofA's 5.15), and denied African Americans 3.06 times more frequently than whites (significantly lower than BofA's disparity of 4.72).
In the Chicago MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.67 times more frequently than those of whites, and denied the applications of African Americans 2.12 times more frequently than whites. For refinance loans, BofA's record is even worse: BofA in 2002 denied the refinance applications of Latinos 3.80 times more frequently than those of whites, and denied the applications of African Americans 3.45 times more frequently than whites - both higher than the industry's.
As an indicator of what BofA does in the communities in which it acquires banks, in the Los Angeles MSA in 2002, In the Los Angeles MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.13 times more frequently than those of whites, and denied the applications of African Americans 2.81 times more frequently than whites. BofA's denial rate disparities are much higher than the industry's (1.62 for Latinos and 1.95 for African Americans). Again, for refinance loans, BofA's record is even worse: BofA in 2002 denied the refinance applications of Latinos 3.90 times more frequently than those of whites, and denied the applications of African Americans 4.23 times more frequently than whites - both disparities much higher than the industry's (1.81 for Latinos and 2.18 for African Americans).
Given BofA's nationwide (and anticompetitive and otherwise illegal, see Section IV) ambitions, ICP has conducted a coast-to-coast, state-by-state analysis of BofA's 2002 lending. The results are not pretty; here are some stops along the way, alphabetized by state:
A is for Arizona (and also for Arkansas) -- in the Phoenix, Arizona MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.49 times more frequently than those of whites, and denied the applications of African Americans 2.46 times more frequently than whites.
In the Little Rock, Arkansas MSA (where BofA acquired a major franchise along with Boatmen's Bancshares), BofA for conventional home purchase loans in 2002 denied the applications of African Americans 3.29 times more frequently than whites, and denied the applications of Latinos 4.03 times more frequently than whites.
In California (where NationsBank acquire the old BofA), beyond the Los Angeles data set forth above, in the San Francisco MSA for refinance loans in 2002, BofA denied the applications of Latinos 2.45 times more frequently than those of whites -- and denied the applications of African Americans a whopping 4.48 times more frequently than whites.
C is for Colorado - in the Denver, Colorado MSA for refinance loans in 2002, BofA denied the applications of Latinos 2.32 times more frequently than those of whites -- and denied the applications of African Americans a whopping 3.41 times more frequently than whites.
BofA did not in 2002 report MSA-specific HMDA data in Connecticut or Delaware, since it does not (yet) own banks there. ICP is analyzing the lending in these and other states of subprime lenders assisted and enabled by Bank of America, including Accredited Home Lenders, Inc., New Century and Option One.
G is for Georgia - in the Atlanta, Georgia MSA, BofA for refinance loans in 2002 denied the applications of African Americans 2.66 times more frequently than whites, and denied the applications of Latinos 3.45 times more frequently than whites.
I is for Idaho and Iowa (Chicago, above, is in Illinois) -- in the Boise, Idaho MSA in 2002 for refinance loans, BofA denied the applications of Latinos 2.36 times more frequently than whites (refinance loans to African Americans are not analyzed, since BofA did not make any such loans to African Americans in this MSA). In the Des Moines, Iowa MSA in 2002 for refinance loans, BofA denied the applications of Latinos 2.70 times more frequently than whites. In the Topeka, Kansas MSA in 2002, BofA denied the conventional home purchase loans of African Americans 7.89 times more frequently than whites.
M is for Maryland - in the Baltimore, Maryland MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.12 times more frequently than those of whites, and denied the applications of African Americans 2.54 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.23 times more frequently than those of whites, and denied the applications of African Americans 3.02 times more frequently than whites
M is also for Missouri - in the St. Louis, Missouri MSA (where BofA acquired a major franchise along with Boatmen's Bancshares), BofA for conventional home purchase loans in 2002 denied the applications of African Americans 2.23 times more frequently than whites, and denied the applications of Latinos 3.06 times more frequently than whites.
N is for Nevada - in the Las Vegas, Nevada MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 2.23 times more frequently than those of whites, and those of African Americans 2.22 times more frequently than whites.
N is also for New York, New Mexico, and North Carolina: for Latinos, in the Long Island, New York MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos a whopping 4.66 times more frequently than those of whites; in the Santa Fe NM MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos a whopping 4.94 times more frequently than those of whites.
In the Greensboro NC MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 4.03 times more frequently than those of whites, and denied the applications of African Americans 2.62 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.56 times more frequently than those of whites, and denied the applications of African Americans 2.49 times more frequently than whites.
In the Raleigh-Durham NC MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.32 times more frequently than those of whites, and those of African Americans 2.15 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 4.32 times more frequently than those of whites, and denied the applications of African Americans 3.50 times more frequently than whites. For refinance loans in the Charlotte NC MSA, BofA in 2002 denied the applications of Latinos 3.37 times more frequently than those of whites, and denied the applications of African Americans 2.43 times more frequently than whites.
O of for Oklahoma, another state where Boatmen's was bought: in the Oklahoma City MSA for conventional home purchase loans, BofA in 2002 denied the applications of Latinos 3.73 times more frequently than those of whites, and denied the applications of African Americans 4.27 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.82 times more frequently than those of whites, and denied the applications of African Americans 2.98 times more frequently than whites. For refinance loans in the Portland, Oregon MSA, BofA in 2002 denied the applications of Latinos 3.22 times more frequently than those of whites, and denied the applications of African Americans 2.23 times more frequently than whites.
BofA did not in 2002 report MSA-specific HMDA data in Pennsylvania or Rhode Island, since it does not (yet) own banks there. ICP is analyzing the lending in these and other states of subprime lenders assisted and enabled by Bank of America, including Accredited Home Lenders, Inc., New Century and Option One.
S is for South Carolina - in the Columbia SC MSA, for conventional home purchase loans, BofA in 2002 denied the applications of Latinos 3.26 times more frequently than those of whites, and denied the applications of African Americans 2.29 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.88 times more frequently than those of whites -- and denied the applications of African Americans a whopping 3.55 times more frequently than whites.
T is for Tennessee and Texas - in the Nashville TN MSA, for conventional home purchase loans, BofA in 2002 denied the applications of Latinos 5.22 times more frequently than those of whites, and denied the applications of African Americans 4.64 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.47 times more frequently than those of whites, and denied the applications of African Americans 3.02 times more frequently than whites. For refinance loans in the Houston TX MSA, BofA in 2002 denied the applications of Latinos 2.24 times more frequently than those of whites, and denied the applications of African Americans 2.40 times more frequently than whites.
V is for Virginia - in the Richmond VA MSA, BofA for refinance loans in 2002 denied the applications of African Americans 3.19 times more frequently than whites, and denied the applications of Latinos 3.51 times more frequently than whites.
W is for Washington State - in the Seattle WA MSA, for conventional home purchase loans, BofA in 2002 denied the applications of Latinos 2.82 times more frequently than those of whites, and denied the applications of African Americans 2.53 times more frequently than whites. For refinance loans, BofA in 2002 denied the applications of Latinos 2.82 times more frequently than those of whites, and denied the applications of African Americans 2.79 times more frequently than whites.
BofA's disparities are systemic; they are nationwide: upon analysis, the record of each bank acquired from the command center in Charlotte deteriorates after it is acquired. Meanwhile, as reviewed in Section III below, while BofA disproportionately denies protected classes its normal interest rate credit, BofA assists, enables and purchases from some of the most problematic subprime lender, which target people of color for high interest rate loans.
III. BANK OF AMERICA IS STILL INVOLVED IN PROBLEMATIC SUBPRIME LENDING -- NOT ONLY AS SECURITIZER, BUT BY ITS NATIONAL BANK PURCHASING CONTROVERSIAL SUBPRIME LOANS
Bank of America, despite its sale of Equicredit and reported shuttering of NationsCredit, is still extensively involved in controversial subprime lending. It securitizes high interest rate loans through · Banc of America Securities, LLC, Banc of America Mortgage Capital Corporation and its 100%-owned (but generically-named) subsidiary Asset Backed Funding Corporation; perhaps most tellingly, Bank of America, N.A., now purchases loans of subprime loans, for example from Option One. See, e.g., Fitch's August 20, 2003, press release on Business Wire concerning ABFC Asset-Backed Certificates 2003-OPT1, stating that "the mortgage loans will be sold to the depositor by Bank of America, NA., an affiliate of the depositor and one of the underwriters, which acquired the mortgage loans from Option One, the originator. " Bank of America, N.A., buys subprime mortgage loans from Option One -- consider, as to Option One, that this subprime lender applied for a savings bank charter in 2002, but was unable to obtain one due to compliance issues that arose, and ultimately withdrew its application. ICP knows this because it commented to the OTS and FDIC in opposition to Option One's applications, setting forth among other things the following HMDA analysis:
In the New York City MSA in 2000, for conventional home purchase loans, Option One reported 43 loans to African Americans, 25 loans to Latinos, and 60 loans to whites. Among these three groups, 33.6% of Option One's high-cost loans were to African Americans and 19.5% were to Latinos. The figures for the aggregate industry in 2000 were 12.3% and 10.8%, respectively. The "targeting index" for Option One was 2.8 for African Americans and 1.81 for Latinos.
For refinance loans in the NYC MSA in 2000, Option One reported 108 loans to African Americans, 40 loans to Latinos, and 149 loans to whites. Among these three groups, 36.4% of Option One's high-cost loans were to African Americans and 13.5% were to Latinos -- in both cases significantly higher than the industry aggregate, indicating a targeting of protected classes with high-cost loans.
In the Nassau-Suffolk, New York MSA in 2000, for conventional home purchase loans, Option One reports 17 loans to African Americans, 15 loans to Latinos, and 100 loans to whites. Among these three groups, 12.9% of Option One's high-cost loans were to African Americans and 11.4% were to Latinos. The figures for the aggregate industry in 2000 were 5.3% and 7.4%, respectively. The "targeting index" for Option One was 2.43 for African Americans and 1.54 for Latinos.
For refinance loans in the Nassau-Suffolk MSA in 2000, Option One reports 54 loans to African Americans, 23 loans to Latinos, and 297 loans to whites. Among these three groups, 14.4% of Option One's high-cost loans were to African Americans and 6.1% were to Latinos -- in both cases significantly higher than the industry aggregate, indicating a targeting of protected classes with high-cost loans.
In the Los Angeles MSA in 2000, for conventional home purchase loans, Option One reported 49 loans to African Americans, 52 loans to Latinos, and 72 loans to whites. Among these three groups, 28.3% of Option One's high-cost loans were to African Americans and 30.1% were to Latinos. The figures for the aggregate industry in 2000 were 6.9% and 24.0%, respectively. The "targeting index" for Option One was 4.10 for African Americans --indicating a targeting of protected classes with high-cost loans.
Compare these demographics of Option One's lending, clearly targeting African Americans and Latinos, to Bank of America's above-analyzed lending, under-serving same groups with normal interest rate credit. ICP has updated this analysis, with 2002 data for New York and Los Angeles:
In the New York City MSA in 2002, for conventional home purchase loans, Option One reported 120 loans to African Americans, 154 loans to Latinos, and 188 loans to whites. Among these three groups, 26.0% of Option One's high-cost loans were to African Americans and 33.3% were to Latinos. The figures for the aggregate industry in 2000 were 13.87% and 13.47%, respectively. The "targeting index" for Option One was 1.87 for African Americans and 2.47 for Latinos.
For refinance loans in the NYC MSA in 2000, Option One reported 409 loans to African Americans, 217 loans to Latinos, and 556 loans to whites. Among these three groups, 34.6% of Option One's high-cost loans were to African Americans and 18.4% were to Latinos -- in both cases significantly higher than the industry aggregate, indicating a targeting of protected classes with high-cost loans.
In the Los Angeles MSA in 2002, for conventional home purchase loans, Option One reported 91 loans to African Americans, 185 loans to Latinos, and 139 loans to whites. Among these three groups, 21.9% of Option One's high-cost loans were to African Americans and 44.6% were to Latinos. The figures for the aggregate industry in 2002 were 7.4% and 31.6%, respectively. The "targeting index" for Option One was 2.95 for African Americans --indicating a targeting of protected classes with high-cost loans.
And this is a lender from which Bank of America, N.A. buys subprime loans. Bank of America is a central player in, and one of the major creators of, the dual credit system. ICP is adamantly opposed to BofA acquiring yet another bank, Fleet, and growing up to and over the 10% deposit cap of nationwide deposits (see Section V, below).
Option One is by no means the only controversial subprime lender which Bank of America enables. See, for example, Fitch's May 15, 2002, press release on Business Wire concerning ABFC Asset-Backed Certificates Series 2002-SB1, stating that "[a]ll of the mortgage loans were purchased by Asset Backed Funding Corporation, the depositor, from Banc of America Mortgage Capital Corporation, who previously acquired the mortgage loans from Superior Federal Bank, FSB (the originator). The originator was formed in 2001 to assume the operations of Superior Bank, FSB, an insolvent federal savings bank that was taken over by the Federal Deposit Insurance Corporation." Note that this BofA pool contains loans subject to the Homeownership and Equity Protection Act of 1994 ("HOEPA"), approximately 17% balloon loans, approximately 80% of the loans carry prepayment penalties (some up to 5 years), and interest rates up to 16%. What standards does BofA have for this business? None, apparently. See also, the May 3, 2002, SEC Form 8-K of : UNITED PANAM MTG LN ASST BK CERT SE 99 2,, and Fitch's July 30, 2002, press release on Business Wire concerning ABFC A-B Certificates Series 2002-NC1, stating that "[a]ll of the mortgage loans were purchased by an affiliate of the depositor from New Century Capital Corporation, which in turn were acquired from New Century Mortgage Corporation. New Century Mortgage Corporation, a wholly-owned subsidiary of New Century Financial Corporation, is a consumer finance and mortgage banking company that originates, sells and services first and second mortgage loans and other consumer loans. New Century emphasizes the origination of mortgage loans that are commonly referred to as non-conforming 'B&C' loans
Regarding New Century, ICP has previously commented to the FRB (and OCC), for example that:
In the Nashville MSA, here was the aggregate industry's lending in 1999: 15,661 refinance loans to whites, and 1.822 to African Americans, a ratio of 8.6 to one. New Century made 34 refinance loans to whites, and 15 to African Americans, a ratio of 2.27-to-one... in Milwaukee in 1999, New Century made 38 refinance loans to whites, and 24 to African Americans, a ratio of 1.58-to-one... In Minneapolis in 1999, the aggregate industry made 50,624 refinance loans to whites, and 1,058 to African Americans, a ratio of 47.85-to-one. New Century, in the Minneapolis MSA in 1999, made 420 refinance loans to whites, and 64 to African Americans, a ratio of 6.56-to-one. New Century is much more likely to target African Americans that other lenders are. This constitutes predatory lending, by most accepted definitions of that term...
ICP has updated this analysis, with 2002 data:
In the Nashville MSA in 2002, New Century made 108 refinance loans to whites, and 36 to African Americans, a ratio of three-to-one... in Milwaukee in 2002, New Century made 167 refinance loans to whites, and 77 to African Americans, a ratio of 2.17-to-one... New Century, in the Minneapolis MSA in 2002, made 881 refinance loans to whites, and 126 to African Americans, a ratio of 6.99-to-one. New Century, as it has grown, remains much more likely to target African Americans that other lenders are.
In 2000, after ICP expressed concerns about U.S. Bancorp's ties with New Century, using the 1999 data, see, e.g.,: "Protesters Vindicated as U.S. Bancorp Dumps New Century Stake," by Eileen Canning, Bridge News, January 29, 2001. But Bank of America continues to enable New Century.
Finally (for now), see Fitch's May 8, 2003, press release on Business Wire concerning ABFC Asset-Backed Ctfs Series 2003-AHL1, stating that "[t]he mortgage loans were originated or acquired by Accredited Home Lenders, Inc. (Accredited), a nationwide mortgage banking company that originates, finances, sells, securitizes and services nonconforming and subprime mortgage loans."
Here is a sampling of the subprime lender Accredited Home Lenders, Inc.'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 Accredited Home Lenders' 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 Home Lenders was 2.72 for African Americans and 1.51 for Latinos.
For refinance loans in the NYC MSA in 2000, Accredited Home Lenders reported 39 loans to African Americans, 17 loans to Latinos, and 40 loans to whites. Among these three groups, 40.6% of Accredited Home Lenders' high-cost loans were to African Americans and 17.7% were to Latinos -- in both cases significantly higher than the industry aggregate, indicating a targeting of protected classes with high-cost loans.
In the Los Angeles MSA in 2002, for conventional home purchase loans, Accredited Home Lenders reported 113 loans to African Americans, 301 loans to Latinos, and 239 loans to whites. Among these three groups, 17.3% of Accredited Home Lenders's high-cost loans were to African Americans and 46.1% were to Latinos. The figures for the aggregate industry in 2002 were 7.4% and 31.6%, respectively. The "targeting index" for Accredited Home Lenders was 2.33 for African Americans --indicating a targeting of protected classes with high-cost loans.
See also, the Cincinnati Enquirer of August 31, 2003, "Home Schemes, Broken Dreams," reporting among other things that
There are no limits on interest rates and fees in Ohio. Federal law requires lenders who charge fees exceeding 8 percent of a loan's value to warn borrowers about the potential of foreclosure. According to the latest information available, the most active subprime home-purchase lenders in Greater Cincinnati in 2001 were First Franklin Financial Corp., Accredited Home Lenders Inc., NationsCredit Financial Services, The CIT Group and Beneficial Corp. In October 2002, Beneficial Corp.'s parent, Household International, paid $484 million in restitution to home-loan borrowers nationwide following complaints about lending practices. NationsCredit's subprime lending operations were closed in 2001 by its parent, Bank of America, because they weren't profitable enough.
The reality appears to be that Bank of America found it more profitable to continue in subprime lending indirectly, by buying and securitizing loans while publicly claiming to be out of the business. Bank of America is a central player in, and one of the major creators of, the dual credit system. ICP is adamantly opposed to BofA acquiring yet another bank, Fleet, and growing up to and over the 10% deposit cap of nationwide deposits (see Section IV, below).
IV. THIS PROPOSED COMBINATION VIOLATES THE TEN PERCENT DEPOSIT CAP OF THE 1994 INTERSTATE BANKING LAW AND MUST BE DENIED
While the FRB must consider the convenience and needs of communities, and the applicant's Community Reinvestment Act and fair lending records, the legal standard in that regard is not, ICP has long contended including in court, clear and strong enough. What is crystal clear, however, is that the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, Pub. L. 103-328, 108 Stat. 2338, amended the Bank Holding Company Act at 12 U.S.C. 1842(d) to specify that the Federal Reserve Board "may not approve an application for an interstate merger transaction if the resulting bank upon consummation of the transaction, would control more than 10% of the total amount of deposits of insured depository institutions in the United States."
This is a straight-forward prohibition: the FRB "may not approve" such an application. As such, ICP requests that Bank of America's application be dismissed and/or denied forthwith.
While ICP believes that the recently-released FDIC figures, reporting $5.129 trillion of deposits as of June 30, 2003, overstate the deposits that are to be considered under 12 USC 1842(d)(2)(A) -- for example by including wholesale-type deposits, and deposits of institutions not legally "in the United States," using this new FDIC data, a combined BofA-Fleet would control over 10% of deposits. BofA's application argues for the inclusion of thrift escow funds, which ICP contends Congress did not intend to be included in the denominator of the calculation.
But, following BofA's argument that "deposits" for purposes of this analysis is defined in 12 USC 1813(l), we note that §1831(l)(5)(A) explicitly EXCLUDES from the definition, "for any purposes of this Act... any obligation of a depository institution which is carried on the books and records of an office of such bank or savings association located outside of any State" [with certain exceptions which do not apply here.] This would appear to exclude Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, etc.. It also appears that BofA proposes including certain funds which only the FDIC "Board of Directors, after consultation with the Comptroller of the Currency, Director of the Office of Thrift Supervision, and the Board of Governors of the Federal Reserve System, shall find and prescribe by regulation to be deposit liabilities by general usage" -- to ICP's knowledge, this "consultation" has not taken place, much less any notice and comment rulemaking to prescribe regulations.
Contrary to BofA's implication that the inclusion of thrift escrow funds is "clear," we note that the Supreme Court, in FDIC v. Philadelphia Gear Corp., 476 U.S. 426 (1986) positions this definition within a " complex statutory scheme," and held, for example, "that the term 'deposit' does not include a standby letter of credit backed by a contingent promissory note." Id. at 431-32, emphasis added.
Bank of America wants to use the part of the §1831(l) definition which serve its purposes, but not the other parts of the definition. This type of legal chicanery cannot be countenanced -- if the FRB is even going to consider adopting a counter-intuitive definition of "the total amount of deposits of insured depository institutions in the United States," it is imperative that an evidentiary hearing and oral argument, of the type hereby timely requested by ICP, be held. ICP contends that under the terms of the applicable statutes, BofA's applications must be dismissed or denied forthwith.
V. BANK OF AMERICA DOES NOT SERVE THE CONVENIENCE AND NEEDS OF COMMUNITIES, PARTICULARLY LOW AND MODERATE INCOME COMMUNITIES, IN WHICH IT HAS ACQUIRED BANKS
Under this proposal, Bank of America would come to own the major banking franchise in New England, a major consumer bank in New York and New Jersey (and numerous banks in Latin America, including Colombia, BofA's Regulation K application for which ICP is also hereby opposing). The prospective convenience and needs of communities must be considered; to do that, beyond the requested hearing, it is worth considering the effects of Bank of America's predecessor NationsBank's acquisitions of Boatmen's Bancshares, Barnett Banks, and then (the old) Bank of America itself.
In August 1996, NationsBank announced a plan to acquire Boatmen’s Bancshares and its subsidiaries, including Sunwest Banks, the largest bank franchise in New Mexico. Among with New Mexico and Texas groups, ICP commented to the FRB, see, e.g., Wall St. J., October 10, 1996, at A8: Inner City Press Challenges Merger of Banking Concerns. NationsBank responded that its acquisition of Boatmen’s would result in few, if any, branch closings, and opposed ICP’s hearing request, emphasizing that it was an "out-of-market" merger -- just as Bank of America's application in this Fleet case states.
The FRB conditionally approved that merger, requiring NationsBank inter alia to divest a mere two branches in the El Paso-Dona Ana County TX-NM market, and to report on its branch closings quarterly to the Federal Reserve Bank of Richmond (the "FRBR"). ICP and NMA sought judicial review of the FRB’s approval (New Mexico Alliance and Inner City Press/Community on the Move v. Board of Governors of the Fed. Reserve Sys. and NationsBank Corporation, No. 98-1049); and see, e.g., Albuquerque Tribune of January 2, 1997, Groups Fight Bank Merger.
Significantly, after acquiring Boatmen’s and Sunwest, NationsBank closed more than eight branches in New Mexico. Note that none of those branch closings were even arguably attributable to any overlap between NationsBank and Sunwest. See, e.g., Sunwest to Close Eight Locations, Albuquerque Journal, May 21, 1998, at D4: "Sunwest Bank will close four branch office in Albuquerque and four others throughout the state -- changes brought about because of the bank’s merger with NationsBank of Charlotte, N.C.... NationsBank bought out Sunwest’s parent company, Boatmen’s Bancshares of St. Louis, in July. Shortly after that, a team of analysts was sent to Albuquerque to review Sunwest’s operations, [NationsBank spokeswoman Betsy] Hall said. The review was conducted to see if any of Sunwest’s operations here could be streamlined, she said."
See also, Albuquerque Journal of May 2, 1997, at A1: "Since arriving in New Mexico in January, NationsBank, headquartered in Charlotte, N.C., has -- Closed branch drive-up teller windows to non-Sunwest customers trying to cash checks drawn on Sunwest accounts [and --] Assigned values to callers on the company’s customer service telephone bank, whereby customers with bigger accounts are handled more quickly than those with smaller accounts."
While NationsBank downplayed the effects of it branch closings, the manager of the Espanola (N.M.) Main Street Program stated that downtown Espanola "lost some of its bustle when NationsBank, which purchased Sunwest Bank, closed the Sunwest Bank branch in the Main Street area." L. Pugh, Espanola Wants to Restore Main Street, Albuquerque Journal, February 23, 1998.
After New Mexico State Senator Roman Maes in late July 1997 publicly asked the state government to stop doing business with, and to withdraw deposits from, NationsBank, after NationsBank moved to lay off fully 25% of Sunwest’s employees, NationsBank’s response was essentially that such a governmental decision would be counter-productive -- NationsBank would just lay off more people. See, Anti-Bank Movement Picks Up Steam, Albuquerque Journal, July 29, 1997, at 1: NationsBank spokeswoman Betsy Hall stating that the State Senate "is exacerbating the problem, because if we have customers leave, we will have fewer associates."
This arrogance in New Mexico is predictive for lower income communities and states, and of one of the dangers posed by this unprecedented mega-bank. The problem? "[T]he state [New Mexico] doesn’t have much business to take away from NationsBank. And NationsBank’s New Mexico operation represents a drop in the bucket for a company that earned $2.5 billion last year." Customers Leave After Job Cuts, Tulsa World, August 15, 1997, at E2.
The New Mexico experience makes clear that Bank of America respects neither consumers nor elected officials in more far-flung states. As Bank of America gets larger, particular communities and even states cannot get any accountability from it -- the impact on the mega-bank’s bottom line of even a withdraw of all state business from it would be minimal. Significantly, even after NationsBank’s August 7, 1997, "Day One" announcement in New Mexico, elected officials such as the Mayor of Albuquerque continued to press for withdrawal of state and city funds from NationsBank. See, e.g., D. Vukelich, City to Pull Cash From NationsBank, Albuquerque Tribune, August 18, 1997, at A1: "The mayor’s announcement came minutes after he had returned from a celebration at the bank to mark its changeover from the Sunwest Bank name to the NationsBank name... The financial impact on NationsBank will be small. NationsBank operates in sixteen states and the District of Columbia and has assets of $240 billion." Seeking NationsBank’s response to these local protests, a reported "called NationsBank in Albuquerque and received a call back... from Dallas in the person of Pam McQuitty, head of Southwest public relations. She said she wasn’t in a position to comment...". Albuquerque Journal, August 21, 1997. See also Albuquerque Journal of August 28, 1997, at D4, Local NationsBank Chief Quits, and Albuquerque Tribune of December 29, 1997: "‘When you call them, you’re not dealing with someone in NationsBank in Albuquerque, but someone in Pennsylvania or Buffalo or somewhere else...’ [T]he NationsBank takeover was different. The loss of local branches and jobs around New Mexico loomed large enough that state legislators condemned NationsBank...".
In late 1997, NationsBank acquired Barnett Banks in Florida. ICP and a Florida-based civil rights group commented to the FRB on both antitrust and fair lending / CRA (including branch closing) concerns, and stated that public meetings should be held in Florida. See, e.g., Activists Protest Barnett Deal, Business Journal-Jacksonville, October 31, 1997. NationsBank opposed ICP’s hearing request, emphasizing that "only" 200 comments opposing the proposal had been received by the FRB. The FRB denied the public meeting requests, and approved the merger, without even attaching the branch closing report condition it had imposed on NationsBank’s "out of market" acquisition of Boatmen’s and Sunwest. See generally, Barnett-Florida Deal Gives Idea of What Louisiana Can Expect in Bank Merger, Gannett News Service, January 30, 1998. Thereafter, NationsBank announced the closing of fully 205 bank branches in Florida. NationsBank had downplayed this aspect of its takeover of Barnett (see, e.g., Area Branches Won’t Close, Port St. Lucie (FL) News, December 10, 1997, at B6, and see Bank Rebuts Merger Concerns, Sun-Sentinel, November 26, 1997), but, during a February 18, 1998, visit to Florida, NationsBank's CEO disclosed to a reporter that "a little more than 200" branches faced the prospect of being eliminated.
The adverse effects of NationsBank’s acquisitions have by no means been limited to New Mexico. See, e.g., Kansas City Star, July 3, 1997, at B2: "NationsBank is in the midst of selling, closing or moving 18 banking locations in Kansas and Missouri... NationsBank explained that it is pulling out of some small towns in Kansas...". St. Louis Post-Dispatch, April 12, 1997: "Losers will include people who get free checking by keeping $1,500 in a Boatmen’s savings account. The required amount will rise to $5,000... [NationsBank is] closing six stand-alone offices... NationsBank charges $7 a month for a personal checking account, up from $6 for Boatmen’s." And see, "Redlined: L.A.'s big banks promised millions to help abate the city's slums," New Times Los Angeles, November 25, 1999; "Bank lending questioned: El Paso bankers contend they seek out businesses for loans," El Paso Times, October 31, 1999; and Virginia Business of September 1, 2001, "Do Banks Mergers Mean Worse Service?" which starts: "Bert Dodson Jr. watched helplessly as the fees he pays to the new Bank of America increased 10 percent after its $57.7 billion merger with Nations Bank Corp. three years ago. The Lynchburg-based exterminator could have saved $20,000 of the $45,000 he was charged by BoA for deposits, a credit line and employee paycheck cashing if he took his business to another bank."
Soon after the New Mexico branch closing announcement (see above, and note again that none of those branch closings were even arguably attributable to any overlap between NationsBank and Sunwest), other adverse effects of acquisition by NationsBank became clear. See, e.g., NationsBank to Raise Bank Service Fees, Albuquerque Tribune, June 24, 1997, at B5: "NationsBank will raise fees on several former Sunwest accounts once the banks’ merger is complete... Also Monday, the bank said its decision not to continue the old Sunwest policy of having policy-making boards in New Mexico community where it has banks should ultimately mean better service for customers."
Fort Lauderdale Sun-Sentinel, February 19, 1998, at 1D. Even after its CEO’s disclosure, NationsBank sought to keep information about the massive closures away from the affected public ("it won’t yet tell the public which offices will be shut, spokesman Jerri Franz said Tuesday." Orlando Sentinel Tribune, April 1, 1998).
It is imperative that the FRB get this information from Bank of America while the comment period is open, and that the FRB hold a public hearing thereon.
VI. OTHER ADVERSE MANAGERIAL ISSUES MILITATING FOR A HEARING AND FOR DENIAL OF THE APPLICATIONS
Both Bank of America and Fleet are embroiled in the mutual fund / market timing and other current widely-reported investigations. As simple one of many Bank of America examples, see, e.g., MAR/Hedge of November 2003, "Bank of America's NationsFunds -- allowed certain customers to trade shares on the basis of orders submitted after the official 4 pm Eastern closing time... a rule that says orders must be in the funds' hands by 4 p.m. Eastern, to 'effectively eliminate the potential for late trading through intermediaries that sell fund shares.'" See also, the Boston Globe of October 29, 2003 ("INSIDER TRADING BY EX-FLEET OFFICIAL ALLEGED"). See also:
FleetBoston Discloses Subpoenas in Probe (Associated Press, Nov. 13, 2003) - FleetBoston Financial Corp. disclosed Thursday that its subsidiaries have been subpoenaed by state and federal regulators investigating market timing abuses in mutual funds. In a quarterly financial statement filed with the Securities and Exchange Commission, FleetBoston said it had received subpoenas and requests for information from the New York attorney general's office, the Massachusetts secretary of state, the SEC and the National Association of Securities Dealers. Fleet provided few details..
Finally, for now, see also the Boston Globe of November 14, 2003 at D1, reporting that Fleet has "been subpoenaed by the Securities and Exchange Commission and New York's attorney general for information about trading activity," and by the NASD. On this record, either Bank of America's applications should be dismissed / denied immediately, or the FRB should forthwith schedule public evidentiary hearings before even considering allowing so much risk to become concentrated in an illegal-large deposit collector, both of whose proposed components have tattered records of regulatory compliance.
VII. Hearing Request / Reiterated Document Demand
For the reasons set forth above, ICP is requesting both the denial of Bank of America's applications, and public evidentiary hearings thereon. The FRB has been remiss, since 1998, in not holding public hearing (or "meetings") on major mergers, including, for example, J.P. Morgan - Chase (which subsequently put at risk not only the bank, but to some degree the economy, and numerous consumer and employees, of JPM Chase and customers of JPM Chase, such as Enron). But that was not a "retail" merger, and it did not portend a resultant bank at and over the 10% deposit cap. Public meetings are absolutely need in this case....On November 14, 2003, ICP submitted a Freedom of Information Act ("FOIA") request for the entire application, and other records including reflecting all communications between the FRS and the applicants. ICP awaits the FRS' formal response -- on November 17, ICP telephoned the FRBR; seven pages were faxed, and more were mailed. We note, and oppose, BofA's request for confidential treatment for the disclosure schedules to the merger agreement, and for materials regarding risk based capital. As stated above, the FRB is being asked, and the public has a right to fully comment on this proposal too, allow unprecedented risk to become concentrated in an illegal-large deposit collector, both of whose proposed components have tattered records of regulatory compliance.
For the reasons set forth above, the FRB should forthwith schedule the requested evidentiary hearings. On the current record, the FRB must deny this proposal.
Respectfully submitted,
Matthew Lee, Esq., Executive Director
To be continued; developing... For or with more information, contact us.
Update of November 17, 2003: on Friday, November 14, Bank of America reportedly submitted to the Federal Reserve its applications to acquire FleetBoston Corporation. Inner City Press / Fair Finance Watch immediately submitted a Freedom of Information Act request (a portion of which is below); we say "reportedly," because we h haven't seen it yet. But the Fed did post notice of the application, saying that the (initial) comment period runs through December 15. In the run-up to the proceeding, this week's ICP Fed Watch Report considers the Federal Reserve's recent actions on applications. Here, for now, is the FOIA request ICP has put in:
Dear Secretary Johnson, Mr. Gill and others in the FRS:
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 request, including under the Freedom of Information Act ("FOIA") for copies of the below-captioned applications and notices, and for related records including those reflecting communications between Federal Reserve System ("FRS") personnel and representatives of the named companies, regarding the presumptive breech of the ten percent deposit cap contained in the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act and otherwise, including compliance, managerial and financial factors concerning both companies' involvement in the mutual fund / market timing and other current widely-reported investigations. For example, to help you identify responsive records, see
FleetBoston Discloses Subpoenas in Probe (Associated Press, Nov. 13, 2003) - FleetBoston Financial Corp. disclosed Thursday that its subsidiaries have been subpoenaed by state and federal regulators investigating market timing abuses in mutual funds.
In a quarterly financial statement filed with the Securities and Exchange Commission, FleetBoston said it had received subpoenas and requests for information from the New York attorney general's office, the Massachusetts secretary of state, the SEC and the National Association of Securities Dealers. Fleet provided few details..
And, as simple one of many Bank of America examples, see, e.g., MAR/Hedge of November 2003, "Bank of America's NationsFunds -- allowed certain customers to trade shares on the basis of orders submitted after the official 4 pm Eastern closing time... a rule that says orders must be in the funds' hands by 4 p.m. Eastern, to 'effectively eliminate the potential for late trading through intermediaries that sell fund shares.'"
We understand that representatives of the companies discussed this proposed merger with the FRS prior to it being publicly announced on October 27, 2003; we are explicit request all records reflecting any such contacts, and, separately, a full disclosure of the substance of all such communications -- at a minimum similar to discloses made by the FRS in 1998 concerning its pre-announcement communications with Citicorp and Travelers.
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.
ICP is requesting, under FOIA and the FRB's statements when it promulgated the current Regulation Y (including the reference to a maximum of three days), 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, all comments received on the proposal (on an ongoing basis), and other records in the FRS’ possession related to the proposal.
To be continued; developing... For or with more information, contact us.
Update of November 10, 2003: pack journalism is the order of the day -- after the tsunami of coverage of the Bank of America - Fleet proposal, last week a total of three articles mentioned community reinvestment and the two banks. This will change, as soon as Bank of America submits its applications, to the Federal Reserve and elsewhere. But among the three articles was one, in The Daily Deal, which predicts that this proposal will be the end of the CRA. That, we doubt.... Another mentioned B of A already meeting with groups to schmooze them. Let us predict: the issue of B of A's enabling of predatory lenders will become more prominent during this process... We're not entirely comfortable with these vague weekly reports for now -- rest assured, things will both heat up and become more concrete, as soon as the banks apply. For or with more information, contact us.
Update of November 3, 2003: Of Bank of America and Fleet, we'll have much to say in coming weeks. News of the deal broken early on the morning of October 27 -- before the markets opened, ICP had up some analysis of Bank of America's 2002 mortgage lending, finding disparities in city after city. Some in the media seem eager to find splits in the consumer activist community. The focus should be on the merger, on affected neighborhoods. The data (preliminarily reviewed below) speaks for itself, to a large degree. Tales of partnership too, of course, have their place. But they don't tell the whole story. For that, public hearings will be needed. More on that in coming weeks.
Bank of America will require various regulatory approvals for such a mega-merger; the Community Reinvestment Act (and Bank of America's fair lending record) would have to be considered. Here is the initial analysis of the consumers’ organization Inner City Press/Community on the Move and the Fair Finance Watch (together, "ICP"), and ICP's reason it will be opposing Bank of America's applications:
The 2002 Home Mortgage Disclosure Act (HMDA) data reported by Bank of America, N.A. (BofA) show that BofA disproportionately excludes African Americans and particularly Latinos from its lending. In 2002 in the Washington, DC, Metropolitan Statistical Area ("MSA"), for example, for conventional home purchase loans, BofA denied the applications of Latinos 3.53 times more frequently than those of whites, and denied the applications of African Americans 3.29 times more frequently than whites. These BofA denial rate disparities is worse than those of the industry aggregate in the Washington DC MSA. For example, for conventional home purchase loans, the aggregate denied Latinos 2.38 times more frequently than whites, and African Americans 3.04 times more frequently than whites (significantly lower than BofA's disparities of 3.53 for Latinos and 3.29 for African Americans).
In the Baltimore MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.12 times more frequently than those of whites, and denied the applications of African Americans 2.54 times more frequently than whites.
In the Los Angeles MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.13 times more frequently than those of whites, and denied the applications of African Americans 2.81 times more frequently than whites.
In the Chicago MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.67 times more frequently than those of whites, and denied the applications of African Americans 2.12 times more frequently than whites.
In the Greensboro NC MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 4.03 times more frequently than those of whites, and denied the applications of African Americans 2.62 times more frequently than whites.
In the Raleigh-Durham NC MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.32 times more frequently than those of whites, and those of African Americans 2.15 times more frequently than whites.
In the Phoenix AZ MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 3.49 times more frequently than those of whites, and denied the applications of African Americans 2.46 times more frequently than whites.
In the San Francisco MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos 2.34 times more frequently than those of whites -- and those of African Americans a whopping 4.85 times more frequently than whites.
For Latinos, in the Long Island, New York MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos a whopping 4.66 times more frequently than those of whites; in the Santa Fe NM MSA in 2002, for conventional home purchase loans, BofA denied the applications of Latinos a whopping 4.94 times more frequently than those of whites.
This will be updated. For or with more information, contact us.
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