Inner City Press' Bank Beat Reporter


Inner City Press Bank Beat Archive Sept. 2001 onwards

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December 23, 2002

     Beyond the expanding campaign against HSBC's proposal to acquire Household International (click here for updates), we are compelled to devote this week's Bank Beat Report to the investment banking settlement announced on December 20. The largest payment is by Citigroup, some $400 million. But since Citi reports earnings of $65 million a day, this represents barely a week's profits. Citigroup's CEO, who has admitted ordered analyst Jack Grubman to reconsider (and upgrade) his rating for AT&T, escaped unscathed, for now. Grubman's agreed to a $15 million fine -- but he got paid over $32 million upon leaving Citigroup. Little ol' J.P. Morgan Chase escaped with paying a mere $80 million. And all these companies will be seeking tax deductions, arguing that the money is not a fine. Was the "global settlement" a Christmas gift to the companies? Happy holidays. Until next time, for or with more information, contact us.

December 16, 2002

     First, some deals (mostly in Asia and Europe, we'll leave the Mexican action for last), then some updates (for HSBC - Household, click here). On Dec. 10 in Madrid, Cajamar said it's reached a preliminary agreement to buy some branches from the Spanish unit of Citigroup. "The pre-agreement is in line with Cajamar's expansion of recent years and with Citibank Spain's strategy of concentrating its branch network in areas where most medium- and high-income people live" -- rather like Citibank in the U.S., where it targets the high-rate CitiFinancial at moderate- and low-income areas (click here for more). Lehman Brothers announced on Dec. 11 it is considering an investment in the holding company to be formed by Japanese trading houses Nissho Iwai Corp and Nichimen Corp. "UFJ has been a long-standing core client of ours, and we would consider an investment in the holding company," said Jackie Kestenbaum, head of corporate communications for Lehman Brothers in Asia... On Dec. 10, Banco Comercial Portugues announced that ABN Amro has taken a 4.98 percent stake in the bank...

     Following ICP's timely Dec. 9 challenge to M&T's application to acquire Allfirst (and for Allied Irish Banks to acquire a 22% stake in M&T), the spokeswoman for M&T swung back wildly in the Buffalo News of Dec. 11. "Nancy Brock, vice president of corporate communications for M&T, said the Inner City Press data is misleading because it only measures conventional home mortgages, funded by the secondary lenders Fannie Mae and Freddie Mac. Many minority borrowers apply for Federal Housing Administration mortgages, because those loans can be made with lower down payments and more flexible terms."

    But, as Ms. Brock knows or should know, serious issues have been raised about M&T's FHA lending, including in Buffalo. In New York City, problems with the "flipping" of FHA loans are rampant, and consumer attorneys on the front-lines describe M&T as the least flexible lending is trying to resolve such problems. It is reported that M&T owns a slew of flipped loans made through HUD's 203(b) program by Better Homes Depot and the notorious Madison Home Equities; the properties were wildly over-appraised. M&T knows all this, but has reportedly shown no flexibility at all. That is among the reasons that ICP focused its analysis on M&T's "conventional" (that is, non-FHA/VA) loans.

     The Buffalo News had an interesting gloss: "Hitting the Inner City Press radar screen is, in some way, a reflection of M&T's rise in the banking industry. The organization has historically scrutinized the lending records of Citigroup, J.P Morgan Chase, Bank of America and the nation's other top banks." Regarding this last, we note with some interest B of A's Mexican foray announced Dec. 11: to acquire a stake worth $1.6 billion in Santander Central Hispano's Mexican unit Grupo Financiero Santander Serfin. We'll be reporting more on this proposal in coming weeks. Again, for HSBC - Household, click here.

December 9, 2002

     For this week's Bank Beat Report, we focus on the application by M&T to acquire Allfirst, and for Allied Irish Banks to take an unprecedented 22.5% stake in M&T. On December 9, Inner City Press / Fair Finance Watch submitted comments to the Federal Reserve Board and New York Banking Department opposing both applications. ICP also submitted a challenge to the Central Bank of Ireland. ICP's Fed comments are summarized below.

December 9, 2002

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

RE: Timely Comments in Opposition to the Applications of M&T Bank Corp. to acquire Allfirst Financial and its affiliates, and for Allied Irish Banks to acquire an unprecedented 22.5% stake in M&T Bank Corp.

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 timely comment in opposition to the related applications of M&T Bank Corp. and its affiliates ("M&T") to acquire Allfirst Financial and its affiliates ("Allfirst"), and for Allied Irish Banks and its affiliates ("AIB") to acquire an unprecedented and controlling 22.5% stake in M&T (the "Applications").

      While tactfully minimized in the Applications, in the background to this proposal is Allfirst's $691 million loss, "discovered" in February 2002 and blamed, to date, on Allfirst / AIB trader John Rusnak. In June 2002, AIB stated that it would decide whether to sell or continue its banking business in the U.S. by the end of 2002. In late September, this proposal was announced: a form of hedged sale, in which AIB proposes to control 22.5% of M&T's outstanding shares, have four directors on its board, etc.. ICP reminds the FRB of the issues that arose in the mid-to late-90s, when Banco Santander controlled 12% of First Union. This proposal requires even more scrutiny, including in light of the AIB managerial resources issues raised by the blatantly break-down in controls and supervision, resulting in the $691 million loss this year.

    Despite this context, M&T's Application claims that the "Reasons for [the] Merger" are only "to be able to provide banking and financial services to customers from upstate New York to the Commonwealth of Virginia in an efficient and effective manner." M&T App. at 41. Tactful is one word; misleading is another. AIB's Application states that "AIB and Allfirst will use their respective reasonable best efforts to try to have the Written Agreement, dated as of May 15, 2002, by and among AIB, Allfirst, Allfirst Bank, the Federal Reserve Bank of Richmond, the Maryland Commissioner of Financial Regulation and the Central Bank of Ireland terminated in all material respects effective at or prior to the Closing Date." AIB App. at 11.

     Below in this comment, ICP analyzes M&T's disparate record of mortgage lending in the most recent year for which Home Mortgage Disclosure Act ("HMDA") data is available, 2001. But it is important to note M&T's role in a CRA-relevant scandal since its last exam: the so-called 203(k) lending scandal that left many low-income tenants, particularly in Upper Manhattan, without heat or repairs. See, e.g., N.Y. Times of Dec. 10, 2002 ("Tenants Are Losers In Schemes For Loans") and Nov. 26, 2002 ("Inquiries on Mortgage Deals Crimp Harlem's Realty Boom"), which reported that " M & T Bank in Buffalo, has a total of 332 delinquent 203(k) loans, banking sources said. M & T officials said they had no reason to suspect any problems with the loans when they bought them." ICP disputes that M&T "had no reason to suspect any problems;" in many cases, a single visit to the properties would have revealed these problems. As relates to the managerial resources factor of the BHC Act, ICP opposes on the current record allowing M&T to assume primarily responsibility for another recently scandal-plagued financial conglomerate. This is particularly true since the Applications glaringly do not even purport to address these issues, but rather evade them.

      Rusnak pleaded guilty on October 24, 2002. See, e.g., Washington Post of Oct. 25, 2002, reporting that " U.S. Attorney Thomas M. DiBiagio vowed to "continue this investigation" in pursuit of those he described as Rusnak's 'accomplices'... In his recitation of the case to Nickerson, Assistant U.S. Attorney Stephen M. Schenning said Rusnak made the biggest number of his deals with Bank of America, Citibank and Merrill Lynch, but the prosecutor also listed key transactions with Deutsche Bank and Bank of New York." Clearly, the AIB / Allfirst scandal has not fully unwound (as AIB's Application, quoted above regarding the Written Agreement, tacitly admits). Why, then, do the Applications not address the glaring adverse managerial issues that must be addressed in this proceeding? Nor do the Applications address the type of "passivity" commitments and other safeguards that would be required, even more strenuously that the FRB imposed them on the since-broken Santander - First Union control relationship. There are also significant financial and even safety and soundness issues ignored by the Applications: for example, the dangers created by one banking institution controlling nearly a quarter of the stock of another, and being able to sell it off. [FN 1: See also the transcript of M&T's and AIB's conference call with stock analysts on September 26, 2002, available on the Fair Disclosure Wire: M&T's CEO stated that "We have retail and commercial banking operations in over 80 counties. I'm not quite sure what that means, because some counties are much more vibrant than others;" AIB's CGE stated that " Bob had mentioned some other aspects of our partnership agreement, I don't want to go through it in too much detail. But I feel it's a great enhancement to the AIB board that Bob is going to join us. And I will join the M and T board. I join the executive committee of the M and T board, which I think it's [inaudible]. Eugene Sheehee [ph] Who, since the earlier part of this year, has been chairman and CEO of Allfirst, will become chairman and CEO of the enlarged M and T's combined Maryland of Pennsylvania region and will join Bob's executive management committee as well as the board." Consider also this Q&A: Q -- "when I looked at the Federal Reserve reporting for Allfirst, it looks like nonperforming assets have come up pretty substantially over the last year. Unless I'm miscalculating, it looks like they're up to about 127 basis points." M&T's CEO answered, "We realize that the nonperforming loans have gone up and we do have some [inaudible]. " On the current record, these Applications should be denied.] Where are AIB's commitments to be a source of strength to the banking institutions it would (still, and newly) control? On the current record, the Applications should be dismissed.

      On November 19, 2002, ICP submitted a FOIA request to the FRB for "a complete copy of the applications and notices, all records reflecting any FRS personnel’s communications with the above-captioned companies or their affiliates regarding the proposal... and other records in the FRS’ possession related to the proposal... 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." To date, ICP has received only the portions of the Applications for which neither M&T nor AIB requested confidential treatment. Given the FRB's delayed FOIA response, ICP requests an extension of the comment period until the FRB (and the Applicants) comply with FOIA.

     As to M&T's own trading operation, we note the following, from Bloomberg News of December 6, 2002 ("CORPORATE BOND RISK PREMIUMS MAY RISE AS INVESTORS POCKET GAINS") -- "'People don't want to be holding dicey names at the end of the year,' said Bob Truesdell, who helps manage $4 billion of bonds at M&T Capital Advisors Group in Buffalo, New York. 'But over the next three to six months, the corporate market is going to be doing better' as long as the economy improves. Truesdell recently sold his Household Finance Co. bonds, which surged last month after parent Household International Inc. agreed to be acquired by British bank HSBC Holdings." ...

       For now, we provide this analysis of M&T's 2001 HMDA-reported lending. First, because Allfirst is headquartered in Baltimore, consider that in 2001 for conventional home purchase loans, M&T Mortgage Corp. denied applications from African Americans 11.16 times more frequently than applications from whites. The denial rate disparity for other lenders in Baltimore in 2001 was 3.16-to-one. M&T's percentage of loans to African Americans was also lower than other lenders'.

    In Pennsylvania, M&T Mortgage in the Philadelphia MSA in 2001 denied conventional home purchase loan applications from Latinos 5.72 times more frequently than those from whites; in the Harrisburg MSA, it denied conventional home purchase loan applications from African Americans 3.21 times more frequently than those from whites. And see infra, that M&T's Pennsylvania performance has not been examined since M&T bought the troubled Keystone Financial there.

     In its headquarters MSA, Buffalo, M&T Mortgage in 2001 denied the conventional home purchase loan applications of Latinos 3.10 times more frequently than those of whites, and denied the conventional home purchase loan applications of African Americans 2.84 times more frequently than those of whites.

     On Long Island in New York in 2001, M&T Mortgage Corp. denied the conventional home purchase loan applications of Latinos 4.05 times more frequently than those of whites. The aggregates' disparity was 1.58-to-one. While among African Americans, Latinos and whites, the aggregate industry made 5.8% of its conventional home purchase loans to African Americans, and 8.0% Latinos, for M&T Mortgage, the figures were 1.6% of loans to African Americans and 4.3% to Latinos. In the NYC MSA as well, M&T Mortgage's percentages of loans to these protected classes under the fair lending laws were lower than for other lenders.

     As it did in 1999, we anticipate M&T seeking to avoid the consequences of this demonstrable redlining by pointing to certain of its CRA performance evaluations. ICP believes those CRA ratings to be inflated, and points out that the "most recent" exam of M&T Bank, dated April 3, 2000, is substantially out-of-date. Not only is it more than two and a half years old: it does not address M&T's performance in a significantly expanded assessment area after it acquired the troubled [FN 2: See, e.g., the Patriot-News of September 6, 2000: "After recounting the 16-year history of Keystone Financial, including last year's settlement in a financial scandal involving a Keystone subsidiary, Campbell said, "The time is now to pass the torch to someone better to run with it." This raises other adverse issues under the managerial resources factors that the FRB must consider in this proceeding.] Keystone Financial in October, 2000. For these reasons, a new CRA examination of M&T's banks should be performed before these Applications -- which should be dismissed, as set forth above -- are even considered other than for denial.

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

Respectfully submitted,

Matthew Lee, Esq.
Executive Director
Inner City Press/Community on the Move
& Fair Finance Watch

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

* * *

December 2, 2002

     We'll report this better-late-than-never: on November 13, the FDIC wrote to Goldman Sachs' counsel regarding its application "to form an industrial loan corporation 'Goldman Sachs Bank USA.' We have reviewed the [CRA] plan in conjunction with the protest filed by [ICP] and have determined that the CRA plan does not include sufficient information to show how the institution will meet the needs of its community.." The FDIC has requested a new CRA plan from Goldman Sachs, stay tuned.

    From Seoul on Nov. 27, Reuters reported that Newbridge Capital has formed a U.S.-Japan consortium to bid for Chohung Bank, a move that would extend the fund's reach in South Korea's banking sector. Days before Monday's deadline for bids for state-run Chohung Bank, Newbridge has enlisted U.S. investment fund Cerberus and Japan's Shinsei Bank in its attempt to buy South Korea's fourth-largest bank. Chohung was nationalized at the height of the 1997-98 Asian financial crisis. Closer readers may remember our report on Newbridge, during the WaMu-Dime proceeding.

    In subprime sleaze news (and yes, this is a segue to our report, below, on Lehman Brothers and Household), on Nov. 26 E*Trade said on Tuesday its banking division agreed to buy the consumer finance business of Ganis Credit Corp.-- a unit of Deutsche Bank -- in a deal estimated to be worth $101 million. E*Trade said the acquisition gives its bank $1.7 billion in recreational vehicle, marine and motorsport loans..

     Even more similar to Household's and Lehman's subprime business, on Nov. 22 Ace Cash Express announced it's sold 19 of its check cashing / payday lending storefronts in south Florida to CCS Financial Services Inc., for $1.75 million.

      And now, the Lehman - Household scam. On November 18, ICP challenged a stealth application by Lehman Brothers to acquire $4.3 billion in deposits from Household Bank FSB. Household's strategy is to sell its savings bank's deposits before HSBC has to apply to acquire them, an application which would, unlike HSBC's application to the OCC, be subject to the CRA. So Household (and HSBC) want Lehman's application to go through quickly. But the OTS has regulations which mandate an informal meeting in these circumstances.

    But lo and behold, on November 27, ICP received a letter from the OTS Northeast Region (the "OTS/NE") stating that "we deny your request for an informal meeting." Of course, it was ludicrous to rule on the sufficiency of ICP's comments while the comment period was still open. ICP's first comment was submitted before ICP had obtained any of Lehman's application. ICP's second comment, of Nov. 25, noted among other things that only 26 pages of Lehman's near-500 page application had been provided to ICP, that ICP has submitted a FOIA appeal, and that ICP would be submitting further substantive comments. To have issued a denial, in advance, of the sufficiency of these comments was absurd.

    While no reason justifies the violation of regulation, precedent and common sense (except perhaps the immanent failure of an insured depository institution, the loophole that Lehman used to open its thrift in 1999), that the OTS would try to accommodate Household's and HSBC's desire to evade the CRA by violating regulation, precedent and common sense in this proceeding is troubling.

    It is also unavailing: see, e.g., "Group Challenging Purchase by Panhandle: Complaint Seeks Review of Banks' Lending Practices," The Spokesman-Review (Spokane, WA), Nov. 27, 2002. This shows that there is no reason for the OTS to impermissibly circumvent a full and detailed review of Lehman's application to buy $4.3 billion in deposits from Household Bank FSB. And yet we note, on the OTS' Web site, notice of an application filed on November 21, 2002, R2-2002-0644, and currently "delegated" to the OTS/SE, for the "voluntary dissolution" of Household Bank FSB. That application could not legitimately be approved at this time.

    ICP's preliminary comment directed the OTS/NE to the Los Angeles Times of January 15, 2002 ("Lehman Bros. Potentially Liable in Lending Case") and April 20, 2002 ("Lawyers File Objections to First Alliance Settlement"); see also, Bloomberg News of February 8, 2002 ("LEHMAN BROTHERS, OTHER LENDERS NAMED IN FIRST ALLIANCE LAWSUIT"), and see infra.

   Despite Lehman's claim in its November 21 Response (the "Resp.") that it "conducts extensive due diligence reviews of its clients that originate residential mortgages," we have directed the OTS to the prospectus supplements for Lehman's "Structured Asset Securities Corporation Mortgage Pass-Through Certificates," Series 2002-HF-1 and 2002-HF-2. The latter was filed on November 1, 2002; Household loans totaling over $574 million were purchased by Lehman -- in fact, by Lehman Brothers Bank FSB. The filing, which states that it is a "Supplement, dated October 31, 2002, To Prospectus Supplement Dated October 30, 2002, to Prospectus Dated October 28, 2002, and which is available to the OTS on the Internet and is hereby incorporated by reference into the record in this proceeding, states that "[t]he Mortgage Loans were acquired by Lehman Brothers Bank, FSB (the 'Bank' or the 'Seller') from various subsidiaries of Household Finance Corporation (collectively, 'Household')."

    Beyond these recent (Nov. 2002) Household connections, Lehman has numerous other post-June 30, 1999, connections with questionable subprime lenders. The American Banker of November 26, 2002, "$136M Lehman Deal Gets WSFS Closer to Its Core,." reported that "[o]n Monday [Nov. 25, 2002] the Wilmington, Del., company announced the latest of those divestitures, a sale of its reverse mortgage portfolio to Lehman Brothers Inc. for $136 million." See also, the April 1, 2002, SEC Form 10-K of Conseco Finance -- the former Green Tree, regarding which the OTS previously granted ICP's hearing request. See the Topoka Capital Journal of February 21, 2002, " Lender required to cut loan rates: Conseco Finance Servicing settles with state" --

Homeowners were being charged as much as 18 percent on their mortgages from Conseco, said Kevin Glendening, deputy banking commissioner and administrator of the Kansas Uniform Consumer Credit Code. The homeowners will have the option of receiving a refund check or having the principal reduced on their loans after they are recalculated to 10 percent from their inception... Glendening said he began investigating Conseco a year ago. He said more than 40 consumers alleged Conseco harassed them in collecting debts; used rude, abusive or profane language; made late-night calls; called employers; and made threats of forcible eviction. Two months ago, the banking commissioner issued a notice of intent to revoke Conseco's license to operate in Kansas....

    So what are Lehman's standards? These have not been resolved or explained in Lehman's Nov. 21 Resp. or in any other document provided to ICP. ICP has made these argument to the OTS, and now, to the Treasury Department. As always, developing. Click here to view ICP's Dec. 2 comments to the OCC on HSBC's Household proposal. Until next time, for or with more information, contact us.

November 25, 2002

     First some news, then some musing. On November 25, ICP opposed Household's proposed sale of another part of Household Bank FSB, Oregon-based Orchard Bank, in comments filed with one federal and two state regulators. As we exposed last week (and see Financial Times of Nov. 20, 2002), Household wants to sell of the contents of its savings bank so that HSBC would not have to submit an application, subject to the Community Reinvestment Act, to acquire it. ICP on November 18 opposed Lehman Brothers' application to acquire $4.3 billion in deposits from Household Bank FSB (now we know the sales price: $372 million, a premium of 8.66%). We've gotten an evasive response letter from Lehman general counsel Lloyd Winans, to which we've replied. Lehman is seeking to withhold 95% of its nearly 500-page application. We have submitted a FOIA appeal. Now, with this timely opposition to Household's stealth attempt to sell the Oregon-based part of its thrift (to Panhandle State Bank of Idaho, as to which certain CRA issues, raised by ICP, exist), it seems clear that HSBC will have to submit an application to the OTS to acquire Household Bank FSB. Unless the market rumors of November 22, reported by Reuters and others, are true:

    On Nov. 22, Reuters reported "talk [that Household's] deal to be bought by British bank HSBC Holdings was falling apart... Household declined to comment on the talk, HSBC was not immediately available, and analysts said the speculation probably was untrue since HSBC, known for being conservative, likely did careful due diligence before announcing the deal." The Guardian newspaper reported on "rumors swirled through the City that [HSBC's] $14 billion acquisition of American lender Household International had fallen through because HSBC had discovered that it might have to put more than $500 million aside to cover the cost of possible litigation."

     Inner City Press fielded calls from all over, asking why Household and HSBC had both taken down all or parts of their Nov. 14 presentations to analysts from their web sites. "The merger agreement is contingent on Household's securitization of a some high percentage of its outstanding loans," said one caller. Other conditions in the still-not disclosed merger agreement that have been suggested to ICP include that the predatory real estate lending settlement with the state attorneys general be approved and finalized by a particular date. Another caller suggested, "They gave a wrong answer in the Q&A."

    If so, it wouldn't be the first time in connection with this proposal. There are two example, one arcane and the other both more ludicrous and troubling. First, HSBC filed a "correction" with the U.S. SEC on November 20, stating that in its Nov. 14 filing, "[a]ll the US dollar figures are correct. However, in respect of the year ended 31 December 2001, the Hong Kong dollar figure in the 'tax on ordinary activities' line should have read '(15,506).' This affects the Hong Kong dollar figures for profit on ordinary activities after tax, profit attributable to shareholders and retained profit in respect of that period." The second involves not Hong Kong dollars but a glance into the breakdown of political translations:

     Business Week Online of November 17 ran an interview with HSBC's chairman in which John Bond stated that "Household has changed its lending practices, improved risk controls, and put in place an oversight committee led by Senator Orrin Hatch and other well-regarded people who have a track record in consumer affairs." Well. As we've now noted to Business Week, beyond our disagreement that Household has sufficiently backed-away from the predatory aspects of its lending, the second part of Sir John Bond's statement is even more ludicrous. Orrin Hatch is not on any oversight committee of the publicly-traded Household International. Household has "collected," as a sort of second-tier Citigroup, a few ex-politicians and ex-regulators. But a sitting U.S. Senator is not, and could not be, among them. We've heard of name-dropping, but this is a bit much. Perhaps HSBC will now file another "correction," with the U.S. SEC and regulators in London and Hong Kong.

   The opposition we've filed to date has raised, among other things, HSBC's lack of due diligence regarding Household's practices, and lack of knowledge of subprime lending. In light of Business Week's Nov. 19 interview with HSBC's chairman, we'll have to add HSBC's lack of knowledge of U.S. politics and corporate governance laws. It doesn't bode well (for HSBC).

     Nor does this: last week, Household blithely announced a new tax Refund Anticipation Loan deal, this time with California-based ITLA Capital Corp., which said it "would then sell a substantial participation interest in the loans to subsidiaries of Household International Inc., retaining a small interest. ITLA has also signed a letter of intent with Household to make loans on private-label commercial credit card transactions." Great timing, Household...

    ICP has recently heard some consumer advocates arguing that if HSBC's deal for Household is blocked or falls though, an "even worse" company might buy Household. The name advanced is Citigroup. While there's been no public reporting on who the other bidders for Household were, knowledgeable sources have given ICP two names: Wells Fargo and AIG. Whether HSBC is better than these, on compliance and other issues, is an open question. In terms of the first argument, it's not clear that HSBC has substantially deeper (U.S.) pockets -- and, in any event, most advocates don't concede that a company like Household can engage in predatory lending for years, and then sell itself at a premium, with its predatory lending management being given cushy jobs and position to adverse affect even more consumers. That, they say, would send the wrong message.

    The knowledgeable sources who named to Inner City Press AIG and Wells also said that both companies would not have retained Household's current senior management, including Wild Bill Aldinger. One theory has it that HSBC was not, in fact, the highest bidder, but that it offered the best perks to the ultimate decision-makers, Aldinger and those close to him. The required "fairness opinions" and other disclosures, and possibly shareholders' litigation, should shine a spotlight on the various offers.

    The Times of London reported that "HSBC traded nervously in the mid-afternoon on rumors that its $14 billion acquisition of Household International of the U.S. had run into difficulties. However, the shares closed just 1p lower at 740 p as dealers heard the offer document should be posted next week." Well, let's see 'em. Inner City Press has been told that HSBC in New York has refused to disclose, even to investors, where it has to apply for regulatory approvals. Can you say, bad faith? Or maybe it's "bad vibes."

   From the trenches: Lehman's general counsel's November 21 letter to the OTS, purporting to response to ICP's comments, claims that Lehman "conducts extensive due diligence reviews of its clients that originate residential mortgages," and, as to timely public comments on the practices of its client Household, that it "has no direct knowledge of" and "cannot comment upon" these Household practices. One of the two statements is false. ICP has now directed the OTS to the prospectus supplements for Lehman's "Structured Asset Securities Corporation Mortgage Pass-Through Certificates," Series 2002-HF-1 and 2002-HF-2. The latter was filed on November 1, 2002; Household loans totaling over $574 million were purchased by Lehman -- in fact, by Lehman Brothers Bank FSB. The filing states that "[t]he Mortgage Loans were acquired by Lehman Brothers Bank, FSB (the 'Bank' or the 'Seller') from various subsidiaries of Household Finance Corporation (collectively, 'Household')." How can it be, then, particularly in light of Lehman's June 1999 commitment to the OTS after ICP first raised the issue of Lehman's enabling of predatory lenders, that Lehman now claims that it "has no direct knowledge of" and "cannot comment upon" Household's practices? Developing...

    The Economist magazine of Nov. 23 (which also reports ICP's HSBC - Household challenge), asks "Should Sandy Go?" It responds, for the most part, in the affirmative: "Mr. Weill is one of the highest-paid executives in the world, with a complex package worth more than $250 million over the past two years... The strongest argument against Mr. Weill is that he is not worth it: that Citi's business, notwithstanding its huge profits, has begun to suffer from a series of poor decisions on his watch." We'll leave the Jack Grubman nursery school scandal for others. Weill's blithe purchase of Associates First Capital Corp, and refusal to meaningfully reform its and CitiFinancial's business, particularly on high-cost non-real estate loans with packed insurance (including insurance on leaf blowers, ladders and fishing rods), are both immoral and call into question this eleven-figure compensation package. That such a large corporation doesn't even have a successor ready is amazing. As is the fact that HSBC is now trying to copy Weill's ill-fated Associates move...

    Some news from earlier in the month that's still under-reported: Conseco Finance Corp. is selling "a piece" of its troubled home equity lending business -- and would transfer up to 326 employees -- to Aegis Mortgage Corp. in Houston. Oh and by the way: Conseco's most recent SEC 10Q states that "Conseco Finance's remaining liquidity sources (excluding its bank subsidiaries) are a warehouse and a residual facility with Lehman Brothers, Inc. and certain affiliates thereof...". We've raised that to the OTS as well, along with initially opposing Household's attempt to dump another part of its thrift on Panhandle State Bank. It's all just starting; it is, as stated above, "developing"...

November 18, 2002

    This is an experiment in a "themed" issue: we will return to broader Bank Beat coverage (and action) in the coming weeks. But on November 14, the London-based banking giant HSBC, chaired by "Sir" John Bond, announced it wants to buy the scandal-plagued predatory lender Household International, for $14.2 billion. Household charges interest rates over 20% on home equity loans, and nearly as high on first mortgage loans. Household mails out misleading "live checks" offering high-rate consumer loans, which it then seeks to convert into liens against the unsuspecting borrowers' homes. For these reasons, ICP is opposing, here, there and everywhere, HSBC's proposal. See, e.g., the Wall Street Journal of Nov. 15, 2002: this "consumer advocate already has issued a warning to Sir John... Inner City Press/Community on the Move and the Fair Finance Watch, a consumer organization based in the Bronx, N.Y., said the group intends to protest the deal."

     But over the weekend of Nov. 16-17, Inner City Press learned that there's a sneaky game afoot. Household owns a national (credit card) bank in Nevada, and a savings bank in Illinois. The latter that would trigger an application from HSBC that would be subject to the Community Reinvestment Act. But here's the trick: quietly, earlier this month, an application was submitted to the Office of Thrift Supervision for Household's savings bank to be sold to Lehman Brothers.

     On Nov. 17-18, ICP and its Fair Finance Watch faxed in comments to the OTS opposing Lehman's application to acquire Household's thrift, and a separate comment to the OTS demanding that they require an application, subject to CRA, from HSBC. (We also filed comment elsewhere, as summarized in our CRA Report, and as sampled on our longstanding HSBC Watch Report.) This edition of Bank Beat focuses on the Lehman - Household Bank FSB game. We didn't make it a game, Household and HSBC did, with the proposed stealth sell-off of the savings bank that would trigger CRA scrutiny. Bloomberg News of 10/25/02 reported that Household had just "sold $3.2 billion of loans and $4.3 billion of deposits to two buyers whose names it wouldn't disclose, said spokesman Craig Streem." We sure didn't see that report at the time; few if any (to our knowledge, no) newspapers reprinted that cryptic Bloomberg report. We only learned of Lehman's application over the weekend. In opposing that, we have separate, Lehman-specific grounds:

     In 1999, ICP opposed the formation of Lehman Brothers Bank, FSB, which was accomplished by means of an "emergency" application, acquiring Delaware Savings Bank. See, e.g., American Banker of May 17, 1999, at Pg. 2; Wilmington News Journal, May 18, 199, at Pg. 7B. In that proceeding, ICP raised to the OTS evidence of Lehman's involvement in allegedly predatory lending, as a securitizer, warehouse lender and otherwise. The OTS then obtained from Lehman a letter commitment (dated June 30, 1999, from Lehman's Karen C. Manson and addressed to Scott Albinson)

1. that the [Lehman Brothers] Bank will not engage in predatory pricing in originating residential mortgage loans

2. that the Bank will adopt policies and procedures for purchasing and financing residential mortgage loans which seek to identify predatory pricing practices by its clients

3. that Lehman Brothers will continue to include, in connection with its underwriting, loan purchases and financing activities, review procedures appropriate to the circumstances involved which seek to identify predatory prices practices by its clients.

    In one of its Nov. 17-18 filings to the OTS, ICP questions the compliance, by Lehman Brothers Bank, FSB and its affiliates, with this previous commitment to the OTS, citing inter alia articles in the Los Angeles Times of January 15, 2002 ("Lehman Bros. Potentially Liable in Lending Case") and April 20, 2002 ("Lawyers File Objections to First Alliance Settlement"); see also, Bloomberg News of February 8, 2002 ("LEHMAN BROTHERS, OTHER LENDERS NAMED IN FIRST ALLIANCE LAWSUIT"). While Lehman is sure to offer a contrary spin to these troubling public reports, even considering just these, there are disputes of material fact that require the informal meeting that ICP has now timely requested.

     We'll leave it to our faithful (and sharp-as-a-tack) Bank Beat readers to figure out the ramifications of all this.

November 11, 2002

    This week: some news, then an action. In New England on November 7, Vermont-based Chittenden Corp. announced a proposal to buy Granite State Bankshares for $247 million, expanding its presence in New Hampshire. Also on Nov. 7, Donald Layton told an analysts' meeting that Morgan Chase is interested in "in-franchise" acquisitions -- that is, in New York, New Jersey, Connecticut and Texas. "We have lots of things in which we can do better," Mr. Layton said That's an understatement...

    Overseas, on November 4, Santander Central Hispano announced it has bought a Polish banking license from Bank of America. "We have bought a banking license from the Bank of America subsidiary in Poland and expect to begin consumer finance business there in 2003," an SCH spokesman said. On November 5, State Street announced an agreement to buy Deutsche Bank AG's global securities servicing business -- a deal that would result in 1,000 layoffs. The $1.5 billion purchase would expand State Street in Europe. In Seoul on November 8, the Chosun Ilbo newspaper reported that the Carlyle Group may sell its 35.7-percent stake in KorAm Bank through public sales or merge it with a local bank. "We are unaware of that and we all were taken aback by the report," a spokesman for KorAm Bank said.

    On November 8, ICP filed comments with the Fed opposing Royal Bank of Canada's application to acquire Admiralty Bancorp. See ICP's RBC Watch.

November 4, 2002

    In Caracas last week, Morgan Chase announced it will close its banking and stock trading operations in Venezuela at the end of the year. The company "is going to close the bank it has had in Venezuela since 1998 and its brokerage house," one official said off-the-record. "It's a global thing and it's also happening in other countries," a second executive said.

     Even after last week's sale of 28%, Citigroup still holds a 20% stake in Saudi American Bank (SAMBA), Saudi Arabia's largest listed bank. SAMBA shares fell 5.2 percent in the first four days of last week on the Saudi stock exchange on rumors that Citibank had sold its entire 22.8 percent stake, but then recovered some losses after a Saudi newspaper reported that the U.S. bank only sold 2.8 percent of SAMBA. The Riyadh-based bank became one of the largest banks in the Middle East after it merged with United Saudi Bank in July 1999. The remaining SAMBA shareholders are mainly Saudi government institutions. Note: ICP will be requesting reconsideration of the Federal Reserve's October 28 order approving Citigroup's proposed acquisition of Golden State Bancorp during the permitted timeframe, which runs through November 11.

October 28, 2002

    On October 24, Wells Fargo announced a proposal to buy Minneapolis-based Towle Financial Services/Midwest Inc., a mortgage banking company that originates and services mortgages for life insurance firms, pension funds, real estate investment trusts and others. Towle holds a loan portfolio of $260 million, according to a Wells spokesperson. Wells already has a $30 billion servicing portfolio....

     Also on October 24, California Treasurer Phil Angelides threatened to suspend HSBC Securities Inc. from doing business with the state unless it adopts new stock analyst reforms. Angelidis said HSBC, which has done $8.4 billion in transactions with the state since 1997, has until Nov. 15 to show it is in compliance with new standards of disclosure or it will lose their right to do business with California.

     On October 24 (whew!), jeweler Harry Winston's son said he received court approval to sue Deutsche Bank for $1.3 billion for allegedly mismanaging the trust set up by his father. The son, Bruce Winston, seeks the removal of Deutsche Bank as a trustee. Bruce Winston alleged Deutsche Bank mismanaged the jewelry business that made up the bulk of his father's estate by ignoring financial reports and letting inventory diminish. Bruce Winston states he's received court approval to sue the bank from the surrogate's court in Westchester County...

    Last week, the N.Y. Attorney General informed Sandy Weill that his "interests" could diverge from Citigroup's. The company and its CEO are under active investigation for conflicts of interest in stock recommendations; the Enron and WorldCom matters remains unresolved. At this juncture, how could the Fed even consider approving Citigroup's application to acquire Golden State Bancorp? For shame... Click here to view ICP's October 27 comment to the Federal Reserve and other regulators.  [Note: the Fed's October 28 approval order is analyzed in ICP's Oct. 29 CitiWatch Report - click here to view].

October 21, 2002

    Last week was a frenzy of conference calls announcing earnings; we'll focus on two of them: U.S. Bancorp and Household. In an October 15 conference call with stock analysts, U.S. Bancorp vice chairman David Moffett let slip that "We've already received OCC approval and the Bay View shareholders have also approved. As far as we're concerned, we will close very shortly." Despite the continuing lack of availability of U.S. Bancorp's 2001 Home Mortgage Disclosure Act data on the FFIEC web site, the OCC on October 10 approved U.S. Bancorp's application to acquire Bay View Bank's 57 branches. Much to the consternation of various arbitrageurs, the OCC put out no press release; it sent Inner City Press notice of the approval by regular mail.

    More on the 15-day waiting period: in the currently pending Citigroup - Golden State merger application, arbitrageurs have been in even more of a frenzy, because the Federal Reserve's approval (if it's approved) will not contain any 15 day waiting period. This troubles the arbitrageurs because they cannot know when the five-day "pricing period" (which is calculated off the closing date) will be. It was suggested to several arbs: why don't your companies lobby Congress to re-impose a 15 day waiting period on savings bank acquisitions like Citigroup - Golden State? One arb, at a largest firm, said it wouldn’t be in his interest: he has "better information" than his competitors, so incongruities like this only help him. Another arb, at a smaller firm, said they don't have a trade association; what they do is not popular in Congress. In any event, these arbitrageurs' attention spans don't last longer than a single deal.

    Two interesting squibs from Household's October 16 conference call: Household announced at $525 million "charge-off," higher than the $484 million settlement announced on October 11. Ol' Dave Schoenholz explained the figure: "To get to $525m, we took the maximum settlement fund, assuming all states participate, added to that the reimbursement of state investigation and administrative costs. We put in there an estimate of legal and professional advisory fees and also an estimate of what we think it will take to settle related civil litigation." So Household expects the "related" (and expanding) litigation against it for less then $41 million. Could be aggressive accounting... Also, asked to explain its announced thrift-sale, Schoenholz said, "There really is not an operating platform anymore in terms of branches or anything else. It's a cold nosed financial transaction in terms of assets and liabilities, to the extent that charter has some value we'll look at that, but our thinking right now is it will be more of an asset and liability sale." So, unlike just before passage of the Gramm-Leach-Bliley Act, a stray thrift charter may not have much value, according to Household.

October 14, 2002

    This is the future: on October 8, HSBC announced a proposal to buy a 10 percent stake in the Ping An Insurance Company of China for $600 million. The investment in Ping An, China's second-biggest insurer, is subject to regulatory approvals, HSBC said. An opaque regulatory process, it didn't say... Meanwhile, HSBC has applied to close its branch on Reynolds Road in Broome County, New York...

    And on October 10, Reuters reported that Newbridge Capital has become the first foreign firm to run a Chinese bank by taking effective control of Shenzhen Development Bank. The FT muses: a 1995 State Council notice forbids the transfer of unlisted shares in listed companies to foreign investors. But in the case of Newbridge at least, this prohibition has been overridden. Beijing was willing to approve the Newbridge deal, industry analysts said, because it wanted to create a potential model for the industry - a bank run along purely commercial lines. Citigroup has been in negotiations to buy a stake in the Pudong Development Bank, a listed Shanghai bank...

    Finally, for this week, a chilling convergence: on October 8, Deutsche Bank announced it's taking a 40 percent stake in Germany's biggest publisher, Axel Springer. "Deutsche Bank intends to sell the acquired shares in parts or completely as soon as it receives adequate offers," a spokesman for the bank said after the auction.  Also, on October 14,  ICP submitted a supplement comment to the Federal Reserve, OTS and FDIC opposing Citigroup's Cal Fed applications. Click here for a summary. 

October 7, 2002

     On October 2, ICP submitted a second comment opposing U.S. Bank's application to acquire Bay View Bank's 57 branches. The comment is summarized here. Thereafter, on October 4, U.S. Bancorp submitted a Response to ICP's comments. The Response does not address what consumer protection safeguards, if any, apply to U.S. Bank's high loan-to-value lending, and state without further explanation that despite the June 2002 Origination News report that ICP cited, "U.S. Bank is not currently a participant in New Century's long-term debt." U.S. Bancorp tries to explain the abnormally high percentage of its loans that are reported as "Race Not Available" as being attributable to "the combination of U.S. Bank and Firstar Mortgage operations in California in 2001." U.S. Bank does not address the legitimacy of closing the comment period while its 2001 California HMDA data is not available to the public, as it should be, on the FFIEC Web site. Meanwhile, the Philadelphia Inquirer of October 1 reported on U.S. Bank, N.A. settling charges of its involvement in predatory loans under HUD's Title-1 program in the Philadelphia area. Developing... Also, on October 7,  ICP submitted a supplement comment to the Federal Reserve, OTS and FDIC opposing Citigroup's Cal Fed applications. Click here for a summary. On a lighter note, click here to view ICP's editor's Oct. 3 poem (doggerel) on Citigroup, "Song of Solomon [Brothers]" on the site... 

September 30, 2002

     The deal-of-the-week is easy: M&T's proposal to pay $3.1 billion (sort of) to buy Allied Irish Banks' scandal-plagued U.S. subsidiary, Allfirst. The companies stated that the deal "was first discussed months before a currency trading scandal surfaced at [AllFirst]." We say "sort of" because in reality, AIB has agreed to sell Allfirst to M&T in exchange for a 22.5% stake in M&T and $886 million in cash, along with some board interlocks. We'll see...

September 23, 2002

    Amid the turmoil surrounding Citigroup (and Golden State) and others, there were a few deals announced last week. ABN Amro confirmed on September 19 a proposal to buy "private bank" German Delbrueck & Co... In Washington State, Sterling Financial Corp. announced on September 19 a proposal to buy Empire Federal Bancorp for $29.8 million. In Southern California, First Community Bancorp last week announced a proposal to acquire Bank of Coronado for $11.7 million. Also last week, First Tennessee announced the sale of $207 million in loans in its First Horizon Money Center subprime consumer loan business to American General Finance for $7 million. As part of the deal American General takes over the leases on most of the division's 30 offices. Of the very few press accounts, even fewer mentioned that American General is owned by AIG. We'll add: AIG's American General is still notorious for refusing to accept pay-offs on its subprime mortgage loans, and keeping its liens in place as a way to "retain" customers...

     On September 16, Deutsche Bank announced the sale its U.S. leasing business, Deutsche Financial Services, to GE Commercial Finance for $2.9 billion. ICP has for some time been concerned with Deutsche Bank's stealth involvement in questionable subprime (and apartment building) lending in the U.S.. Most recently, ICP's been asked to look into DB's affiliate "TransAtlantic Capital Co., an affiliate of Deutsche Bank Securities" (that's from a 1998 SEC filing, listing the company's address as 31 W. 52nd St, 10th Floor, NYC). We've found that DB's Transatlantic Capital is the mortgage holder on, for example, 3018 Heath Avenue, Bronx, New York. This five story building, according to the NYC housing agency's data base, in the past twelve month has a whopping 60 housing code violations, including lead paint, mold, problems with access to the building's roof and heating system, mice, roaches, roof leaks, defective flooring, etc.. Transatlantic Capital, and therefore Deutsche Bank, bear some responsibility for this. But they appear to have no standards or safeguards in place for this business.

September 16, 2002

    This week: ICP has just filed a challenge to U.S. Bancorp's application to the Office of the Comptroller of the Currency to acquire Bay View Bank's 57 branches (click here to view). Click here for an update on Citigroup - Golden State Bancorp. Here's a round-up, with commentary:

    On September 9, Wachovia announced a proposal to acquire E-Risk Services, a New Jersey agency that specializes in providing management liability insurance to privately held organizations. Reuters: " The acquisition will allow Wachovia to market specialty insurance products to the private business sector, including directors and officers, employment practices, fiduciary, crime, miscellaneous errors and omissions, and cyber errors and omissions liability coverage, Wachovia said." Yep: let's insure businesses against their own crimes. Post-Enron, that appears to be a booming business...

      In Houston on September 12, prosecutors indicted three British bankers on wire fraud charges in connection with Enron's (and Fastow's) LJM partnership. Gary Mulgrew, David Bermingham and Giles Darby are accused of stealing $7.3 million from the deal with Enron. The indictment closely mirrors allegations first brought in a lawsuit filed in June by Rabobank against Royal Bank of Canada over a $517 million Enron-related deal. Mulgrew, Darby and Bermingham joined RBC from NatWest two years ago.

September 9, 2002

   The fur flew at the Merrill Lynch & Co. banking conference last week. Citigroup's CEO tried to simultaneously pitch and dismiss his companies predatory lending settlement talks with the Federal Trade Commission (click here for ICP's analysis); Morgan Chase's CFO Dina Dublon told the audience to "expect more of the same for the rest of the year." CEO William Harrison compared the current climate to the investigations of Wall Street practices in the 1930s. He invoked the testimony of J.P. "Jack" Morgan Jr., the son of the famous financier, who told Congress in 1933 that his firm was made of humans who make mistakes of judgment, not principle. Mr. Harrison said, "We have made mistakes, but these have been mistakes of judgment." Okay, so that's a denial of crime. But we thought these people got paid to make judgement calls...

* * *

September 3, 2002

     On August 29, Royal Bank of Canada announced a proposal to buy Admiralty Bancorp in Florida for $150 million. We note that on RBC's last U.S. deal, for Tucker Bank in Atlanta, the Federal Reserve said it would "monitor" RBC's appeal of the race discrimination finding against RBC's Liberty Life insurance unit in South Carolina. Well, also last week, South Carolina Chief Administrative Law Judge Marvin upheld the finding, writing that "it is difficult to believe the Legislature intended to allow whites and African-Americans to be divided into separate classes for purposes of setting insurance rates based upon nothing more than their skin color." Liberty Life's black customers paid up to one-third more for burial insurance policies than white people, Insurance Department Director Ernst Csiszar told AP. The AP story did not mention that Liberty Life is owned by RBC...

     On August 27, Washington Mutual announced it's buying HomeSide Lending from the National Australia Bank for $1.3 billion. WaMu CEO Kerry Killinger said-in-a-statement, "This transaction combines attractive financial returns, a favorable stock acquisition structure and low operational risk." HomeSide cost NAB $2 billion in write-downs for 2001... On August 28, UCBH Holdings, described as "a banking company catering to ethnic Chinese," announced a proposal to pay $169 million to buy the rest of Bank of Canton in California.

     This end-of-summer week, two updates, re Conseco's Green Tree and PinnFund: Conseco took yet another hit last week when the South Carolina Supreme Court upheld an arbitrator's order that it pay nearly $27 million for violations of consumer protection laws by its Green Tree unit. The case affects 3,739 South Carolina customers with home improvement or mobile home loans in the mid 1990s from Green Tree. An arbitrator ruled in July 2000 that Green Tree failed to tell consumers they could choose their own lawyers and insurance companies when getting loans. Conseco -- which bought Green Tree in 1998, the beginning of its end -- was ordered to pay over $20 million to the affected customers...

     PinnFund, a stealth California-based subprime lender that ICP took on in 1999 and 2000, has degenerated into guilty pleas. PinnFund's business collapsed amid allegations of a $300 million Ponzi scheme. Now John Garitta, PinnFund's former CFO, has admitted to being one of CEO's Michael Fanghella's co-conspirators in perpetrating this "massive fraud." In his plea, Mr. Garitta acknowledges preparing and disseminating false financial statements and participating in schemes to deceive PinnFund's auditors regarding the company's financial condition. In March 2002, Fanghella pled guilty to six-counts that encompassed his role in operating the Ponzi scheme. Even for the subprime lending field, this was an out-lier. But do other subprimers routinely distort their reporting of delinquency?  They do -- click here for more... 

August 26, 2002

    Deal of the week: on August 21, HSBC announced a proposal to buy Mexico's Grupo Financiero Bital for $1.14 billion. HSBC spokesman Adrian Russell said it was too soon to say whether Bital would keep its name or whether there would be job cuts. He added: ``You can never say never to job losses or restructuring.'' Bital executives estimate that HSBC will have to inject at least $450 million to comply with tougher bank requirements set to be in place next year. Bital has 1,400 branches and 6 million customers; it is Mexico's fifth-largest retail bank. It is also the second-largest locally controlled bank, with BBVA and SCH of Spain and Citigroup controlling three of the other four leading players. If HSBC acquires Bital, conglomerates not based in Mexico would control fully 92% of Mexican deposits...

On August 23, ICP submitted a supplement comment to the Federal Reserve, OTS and FDIC opposing Citigroup's Cal Fed applications. Click here for a summary. 

* * *

August 19, 2002

    Topic of the week: the so-called European invasion. The U.S. bank merger market is slow, so focus shifts to, for example, Royal Bank of Scotland's pending deal to acquire Medford Savings Bank in Massachusetts, and HSBC's recent statement that it has a list of 10 to 15 banks in the U.S. it is "looking at." Lloyds TSB and Barclays are reportedly shopping in North America after struggling to find a deal in Europe. According to the FT, "all four banks will be watching intensely to see if Allied Irish Banks will sell parts of its Allfirst US subsidiary, which was hit this year by losses of almost $700 million from a 'rogue trader'... The most obvious large target in the US is FleetBoston Financial, which held an analyst call this week to fend off speculation it was holding talks on a sale"....

August 12, 2002

     Last week: three U.S. bank deals, all micro: on August 5, United Community Bancorp announced a proposal to buy Community Bancshares Inc. of North Wilkesboro, N.C., for $33 million. On August 6, UnionBanCal announced a proposal to buy Valencia Bank & Trust and its five branches in and around Los Angeles for $62 million. And on August 8, Banknorth announced a proposal buy Warren Bancorp and its six branches on Massachusetts' North Shore. for $122.6 million.

    A reflection of the Federal Reserve's less than transparent policies, even on the terrorism-related money laundering that Congress sought to address in the USA Patriot Act: in a July 30 letter to ICP, Fed Deputy Secretary Robert deV. Frierson rejects ICP's request that "Royal Bank [of Canada] and its affiliates should be compelled to disclose information required under the USA PATRIOT Act... [T]he United States operations of Royal Bank and the operations of RBC and Bank are subject to examination for compliance with applicable provisions of the USA PATRIOT Act. The Board took into account available supervisory information, including confidential findings related to compliance when it considered the application." And on Enron: "You submitted a new allegation in light of reports that Royal Bank is involved in a cross-suit with [Rabobank] over a swap transaction entered into by Rabobank for an affiliate of the Enron Corporation. The lawsuits involving Royal Bank and Rabobank are pending... The Board has reviewed available supervisory information related to this matter and has considered this information in light of the overall financial and managerial resources of Royal Bank. Your request has been presented to the members of the Board... no member of the Board has requested that the Order by reconsidered or modified in any manner. Accordingly, your request for reconsideration is hereby denied."

    Meanwhile, last week Rep. Michael Capuano, D.-Mass., issued "an early opinion'' opposing a possible acquisition of Fleet by a "large New York bank'' (that'd be Citigroup), stating that he is concerned such a deal would shift decision-making power out of New England. You got that right... Another possible buyer much mentioned by the financial press is HSBC. From the Daily Deal of August 1: "At the current valuations, HSBC could even afford to buy J.P. Morgan Chase & Co., whose market cap has fallen to $50 billion after a 40% fall in the past year"...

July 29, 2002

    This week: deals first, scandals second. On July 22, U.S. Bancorp announced a proposed deal to buy 57 branches and $376 million in consumer and small business loans from Bay View Capital for $429 million. AP reported that the list of cities where Bay View branches overlap with U.S. Bank includes Concord, Fremont, Walnut Creek, Lafayette, San Leandro, Pleasanton and Danville.... Also on July 22, First Niagara Financial Group announced a proposed deal to buy Finger Lakes Bancorp and its seven branches in upstate New York for $67 million. On July 24 Fifth Third announced a proposal to buy Franklin Financial Corp. in the Nashville TN market for about $240 million in stock...According to the AB, Fifth Third has said it wants to expand into "rim" cities -- like St. Louis, Pittsburgh, and Milwaukee -- outside of its core markets. It has dispatched commercial loan officers, investment advisers, and processing employees to those cities to scope them out.
According to the U.K.'s Sunday Times of July 28, HSBC is ready to make a $1 billion investment in Mexico's Grupo Financiero Bital, citing an unnamed "senior HSBC source". HSBC said on July 18 it was undertaking due diligence with a view to possibly making an offer for a controlling stake in Bital.

   In Frankfurt on July 23, German prosecutors said they are still deciding whether to file charges against Deutsche Bank head Josef Ackermann for approving huge management bonuses after the Mannesmann takeover battle in 2000. In the U.S., on July 24 the Massachusetts congressional delegation asked Deutsche Bank on Wednesday to clarify whether it is seriously considering trying to reopen the bidding for bankrupt camera and film company Polaroid....

   From CNNfn of July 26: Q: "We had the CEO, Mr. Harrison, coming out this week and saying, we didn't do anything wrong, and furthermore, I'd do everything we did again. Bold, brazen." A: "Our friends at J.P. Morgan are going to regret that comment for quite a long time." Yep. And when the going gets oily, the oily... buy auto parts. On July 26, Morgan Chase announced it has reached an agreement to buy a Japanese auto parts subsidiary of Nissan Motor Co for around $86 million.

Self-serving analysis: J.P. Morgan analyst Catherine Murray upgraded the stock on July 24 stating, "We find it hard to believe that Citigroup knowingly participated in fraudulent activity." Morgan Chase neither, of course...

July 22, 2002

     Click here for an update on Citigroup - Golden State Bancorp.

     In other news, Mexico's Bital is up for sale. Reuters of July 16 reported that of Bital's "suitors Spanish bank group Santander Central Hispano is a better match than British-based bank HSBC." The courtship analogy continued: "'Bital is the last pretty girl at the dance. After her, there is no one left to dance with,' said Phil Guarco, Latin America banking expert at Moody's. 'From the point of view of Bital, it is always good to have more than one beau. It's better because she will get a better price,' he added."

   The next day Bital issued a statement that HSBC has started due diligence with plans to acquire a controlling stake in it. "HSBC's review is in process and is expected to conclude in the coming days," Bital said. If these are, in fact, "suitors," we expect a final showdown...

    In a U.S. micro-deal last week, Gold Banc Corp. announced on July 18 an agreement to buy four branches in Kansas City, Mo., from Houston-based Encore Bancshares. Encore!

July 15, 2002 

   The banking news of the week may well be Fleet's decision to shutter rather than sell its Robertson Stephens investment banking division. The unit was bought in 1998 for $800 million; like Tyco-CIT, it didn't work out... In April, Fleetannounced it would scale back its Principal Investing venture capital arm and discount brokerage Quick & Reilly, in addition to looking for a buyer for Robertson Stephens. Combined, the three units earned $700 million for FleetBoston in 2000, but lost nearly $800 million in 2001. The Boston Globe recently puffed up Fleet as "no longer a take-over target" but we're not so sure...

    Korean media reports last week said J.P. Morgan Chase, investment fund Lone Star and South Korea's Hana Bank have been chosen as the preferred bidders for a 50% stake in Seoul Bank, which is wholly owned by the state-run Korea Deposit Insurance Corp.... Click here for Chase news, including a question...

July 8, 2002

    Musical chairs: the Carlyle Group's banking unit in South Korea, Koram Bank, is a target of the country's third-largest financial institution, Shinhan Financial Group. In Ho Lee, Shinhan's CEO, said on July 2 that the lender was in talks with major shareholders of Koram Bank, including a consortium led by the Carlyle Group, to merge the two banks. Lee told reporters that a combined entity would be better able to compete with South Korea's largest lender, Kookmin Bank, dubbed a "superbank" because of its $142 billion in assets. As we covered at the time, including employee sit-ins, Kookmin merged with Housing & Commercial Bank last November under pressure from their two respective foreign shareholders, Goldman Sachs and ING Groep. Since then other South Korean banks have been looking to merge to compete with the top lender. Shinhan Financial Group's largest shareholder is BNP Paribas, which acquired its 4% stake in December in a $121 million deal. The Carlyle Group-led consortium, which includes J.P. Morgan Partners Asia, acquired its 40.5% stake in Koram in 2000 in a $450 million deal. Call it corporate globalization in action.
Goin' hedge fund: on July 2, State Street said it had entered into a definitive agreement to acquire International Fund Services, a New York and Dublin, Ireland, "provider of alternative investment services;" terms were not disclosed.

July 1, 2002

    WorldCom's acknowledgment last week that it hid $3.8 billion in expenses raises questions -- to put it mildly -- about the thoroughness of the due diligence that Citigroup's Salomon unit conducted before arranging and underwriting a $12 billion bond offering in 2001. On June 27, Salomon's Jack Grubman was subpoenaed to testify before a Congressional committee to explain why he downgraded WorldCom stock on June 24, a day before the company disclosed its accounting irregularities. Citigroup has put its direct exposure to WorldCom at about $ 375 million. Also, "Morgan Chase could have the most exposure to WorldCom, with $133 million of outstanding loans and $268 million of undrawn commitments" (AB 6/27/02). Dutch insurer Aegon admits to a $ 200 million exposure to WorldCom's debts, held through some of the firm's corporate bonds. ABN Amro warned of a 100 million write-off should WorldCom collapse. German insurer Allianz insisted its exposure was below $ 200 million, while Italian bank Generali revealed that it holds 40 million in WorldCom bonds. Barclays is thought to have lent WorldCom between $ 100 million and $ 150 million.

    At Royal Bank of Scotland, CEO Fred Goodwin declined to reveal the full extent of the bank's exposure to the 3.8 billion dollars scandal, which has been estimated to stand at around $ 100 million. Despite this lack of transparency, paradoxically Mr. Goodwin said: "The steer we're giving today is hopefully extremely clear - there are no surprises on the credit front or the provisioning front, nothing that anyone should be getting concerned about." Hmm...

    It emerged last week that Dutch lender Rabobank has balked at honoring a commitment to pay Royal Bank of Canada $517 million that was due on June 21. That sum originated as an RBC loan in November, 2000, to one of the notorious offshore trusts of Enron Corp., the now collapsed Houston energy trader. Hedging its bet, RBC had promptly traded it in a so-called swap transaction with Rabobank. Rabobank has claimed that it should not have to pay the money because RBC failed to disclose to the Dutch its knowledge that Enron's management was "corrupt" and was "looting Enron for personal benefit and that Enron's reported financial results were a house of cards waiting to collapse."

    Click here for updates on the campaign against Citigroup's applications for regulatory approval to acquire Golden State Bancorp.

June 24, 2002

     On June 19, Japan's FSA ordered Mizuho to improve its operations following computer problems that affected millions of transactions in April. Mizuho Holdings President Terunobu Maeda denied a local media report that the bank had obstructed the agency's investigation. Financial Services Minister Hakuo Yanagisawa has expressed concern that the problem could affect Mizuho's profitability...

    The Daily Deal of June 21 mused that "buyers such as HSBC Holdings plc, Royal Bank of Scotland plc, Royal Bank of Canada, Toronto-Dominion and the ubiquitous Citigroup Inc. would have much to gain by buying Sovereign," the Pennsylvania-based banks which went into hock to buy the Fleet - BankBoston divestiture branches... In the U.K., another takeover target: Abbey National, whose CEO Ian Harley told the Sunday Times newspaper that Abbey has been holding talks with a number of European banks. "Yes, we are talking about partnership agreements that could move towards 1/8a merger 3/8," the Sunday Times quoted him as saying. "We are a much better target than most. Nobody sees independence as a strategy -- it's a word."

    Ah, Tyco - CIT: last week Tyco filed suit against its board member Frank Walsh for a $20 million "finder's fee" Walsh was paid the Tyco - CIT deal. "This is clearly an overreaction to the recent and well-reported problems and management changes at Tyco," Walsh said-in-a-statement. The San Diego Union-Tribune of June 20 reported on a junk-bond fund that screened-out Tyco from its investments because Tyco's CIT "may have been involved in predatory lending."

     On the "cultural" side, Bloomberg News of June 21 reports that "Virginia Gambale, a partner in the DB Capital partners unit of Europe's largest bank, claims she was passed over for a promotion because of her gender. Gambale, who also sued Deutsche Bank's Bankers Trust Co. unit, said the company's overall work environment is hostile to women. Her suit cited a September 1999 meeting in Cannes, France, attended by 100 male and five female executives, as well as a Marilyn Monroe look- alike who fondled several men."

    And, the executive dining suites at the top of Morgan Chase's midtown Manhattan headquarters now contain two pool tables as well as ping pong, pinball, and foosball tables. Rather than referring to Nero, press accounts state that "it's all to entertain executives going through the company's management training course, Leadership Morgan Chase. Groups of about 100 mid- to senior-level executives attend the two-day course each month. They sit through intensive sessions, including motivational speeches by former and current business leaders" -- whether Jack Welch is now worth what Morgan Chase paid him is a question we have -- "and at the end of the day the doors are unlocked, and the session attendees are let loose in the makeshift arcade. Bill Harrison, Morgan Chase's chairman and CEO, says that he stays late and shoots pool with the gang, and that he is 'pretty good.'" We've heard the deck chairs on the Titanic were comfortable -- and the management buzzwords hypnotizing.

June 17, 2002

    The (U.S.) deal of the week was Royal Bank of Scotland's June 13 announcement that it proposes to buy Medford Bancorp, for $273 million. "We have monitored this company for more than 10 years," said Brad Kopp, executive vice president for corporate development at RBS' Citizens. "We're really into market share and density." RSB into community reinvestment and fair lending? Not so much... National Bank of Canada announced on June 11 a proposal to buy fund manager Altamira for $331 million...

June 10, 2002

      On June 5, Morgan Chase announced a deal to sell Chase Trust Bank, one of two trust banks it owns in Tokyo, to Societe Generale. They waited to announce the deal until Japan's Financial Services Agency approved the transfer of the banking license, on June 4. Stealth... Soc Gen acquired U.K. merchant bank Hambros in 1998 and went on to buy Ruegg Bank in Switzerland, Coutts in the Bahamas and Bank de Maertelaere in Belgium. In Japan, SG owns the former asset management subsidiary of the defunct Yamaichi Securities Company... In other "private banking" news, in Switzerland on June 3 Lombard Odier and Darier Hentsch announced they will merge.

     HSBC on June 5 announced it is buying the Australian corporate banking and trade finance units of State Street. HSBC is also closing its branches in New York State at 19 East Central Avenue in Pearl River in Rockland County, N.Y., and at 961 Kings Highway in Brooklyn...

    For ICP's second comment on Citigroup - Golden State Bancorp, click here. For ICP's second comment on Royal Bank of Canada (and its application to acquire Tucker Federal Bank in Atlanta, which has a rare Needs to Improve CRA rating), click here...

June 3, 2002

    Some deals, and some advocacy work: on May 28, Alabama-based Colonial BancGroup announced a proposal to buy privately held Palm Beach National Holding Co. in Florida for $106 million. On May 30, N.C.-based MountainBank announced it has agreed to acquire Virginia's Cardinal Bankshares Corp. for $36.9 million. In Zurich on May 28, CSFB's Winterthur announced a plan to buy the life insurance business of Premier in Luxembourg and the portfolio of Premier's business in Bermuda for $27.80 million. In London on May 29 HSBC announced it will invest $750 million in New York private equity firm AEA...

   On June 3, ICP filed a 25-page challenge to Citigroup's applications to acquire Golden State Bancorp, with 34 pages of documentation of predatory practices.

May 27, 2002

    Ah, chaos: according to the WSJ, Lehman Brothers Holdings Inc. offered $5 billion for Tyco International's finance arm, CIT Group, but the investment bank withdrew its offer later. News of the Lehman offer -- notably, half of what Tyco paid for CIT a year ago -- was first reported by business television network CNBC and later confirmed by a Reuters source close to the situation. The news initially pushed up Tyco's stock 6 percent, but the shares sagged after the WSJ report, trading at $23.94, down 43 cents, on the NYSE. Like we said, chaos. Great deal that was, Tyco's purchase of CIT...

      For more chase, see this week's ICP Morgan Chase Watch report.

     An (obscure) update: a subprime-lending bank whose applications to the Office of Thrift Supervision ICP opposed, Life Financial Corp. (the applications were subsequently withdrawn) recently decided to change its name, to Pacific Premier Bancorp.." It's also moving its headquarters from Riverside to Costa Mesa, California. What's in a name? We'll keep our eyes on 'em...

    Less obscure, click here for ICP's new, ongoing Royal Bank of Canada Watch, and first filing in connection therewith...

May 20, 2002

     Some of the week's micro-deals: in metro New York/NJ, NSB Holding Corp. announced on May 16 a proposal to buy Liberty Bancorp Inc. for $34.5 million... On May 16, Bank of Ireland plc announced a plan to buy Iridian Asset Management LLC of Westport, Conn., for up to $198 million...

    In Brazil, Itau on May 13 announced it's buying the Brazilian private banking unit of Canadian conglomerate Brascan Corp, representing deposits of 250 million reais ($100 million)... The Czech unit of Citigroup announced on May 14 that Citi sees Czech bank Zivnostenska Banka as a potential takeover target. An 85.16 percent stake in Zivnostenska has been put up for sale by its majority shareholder, Germany's Bankgesellschaft. According to Reuters, Zivnostenska "focuses on wealthier private clients." In India, Citicorp Finance (India) Ltd, is buying 24.84 per cent stakes each in the Chennai-based Sriram Investments Ltd and Sriram Transport Finance Ltd for Rs 17.25 crore.... In the U.S., rumors swirled last week that Citigroup was near buying California Federal Bank . We'll be watching....

May 13, 2002

    On May 7, Ohio-based Sky Financial Group announced a deal to buy Three Rivers Bancorp in Pittsburgh for $156.5 million. Also on May 7, Wells Fargo announced a proposal to buy J.P. Morgan Chase's Fleming Asset Management's corporate trust and custody businesses in Rochester, Dallas and Houston, adding about 700 customers...

     Irony: HSBC, which is telling analysts it wants to buy a bank in California, is proposing to close its branch at 201 North Main Street in Jamestown, N.Y....

      From the rumor mill: last week the Frankfurter Allgemeine reported that Nomura is considering bidding for Bankgesellschaft Berlin AG...

     Lobby and buy: Citigroup's "country officer" for Singapore has told the press there that Citi would "have loved" to have bid on Keppel Capital Holdings or Overseas Union Bank last year; now the Monetary Authority of Singapore says it is reviewing its policy against allowing foreign banks to take controlling stakes in local lenders.

    In and out: Buenos Aires newspaper La Nacion reported last week that Citigroup has decided to move its Argentine operations to Chile, similar to Spanish bank Banco Santander Central Hispano's decision to transfer it private banking operations from Argentina to Uruguay. The same sources said that "it is possible" that FleetBoston Corp   may move to the Montevideo free zone. When the going gets tough, the tough head for the exits, apparently....

May 6, 2002

   Rhetorical hardball: in Berlin last week, Citigroup's Sandy Weill said that "[w]e do a lot of things in common with Deutsche Bank. We have not yet had talks about a merger." The key word is "yet"...

* * *

April 29, 2002

    World's worst merger -- will they or won't they? The N.Y. Times of April 24 reported that in February of this year, Citigroup approached Deutsche Bank "to gauge whether the German bank would be open to a takeover offer... according to several people close to the companies... Executives from Deutsche Bank and Citigroup declined to comment on the discussions."  The following day, outgoing Deutsche Bank CEO Rolf Breuer told the Boersen-Zeitung that "we have never received an offer from Citigroup, let alone refused one." He dismissed the possibility of an offer as improbable and indicated both he and chairman designate Josef Ackermann would not approve such a move. Time will tell...

April 22, 2002

    On April 18, Polaroid announced an agreement to sell most of its assets to One Equity Partners, which manages $3.5 billion in investments for Bank One... In California, First Community Bancorp announced on April 18 a plan to buy Upland Bank for $18.4 million....

     In retrenchment: Credit Suisse First Boston ran an ad last week in the Egyptian newspaper Al Ahram stating that it is closing its Cairo branch. ``On 15 August, 2002, Credit Suisse First Boston Cairo Branch shall submit all necessary documents to the Banks' Supervisory Department to obtain the Central Bank of Egypt's acceptance regarding ceasing the activities of its Cairo branch in Egypt,'' CSFB's notice stated... And in Canada, HSBC Securities closed its Toronto institutional equity desk and scaled back its corporate finance department, with a total of 65 individuals losing their jobs....

     At Japan's Mizuho, extensive computer glitches this month are leading to plans to postpone by more than a year the full linkage of two computer systems for individual accounts. Mizuho said it believed problems in a system that linked two host computers -- that of Fuji Bank and DKB -- caused the glitches. "Our top priority at the moment is to repair these system failures," a Mizuho spokesman said...

     Fleet on April 16 announced that it plans to sell its investment bank, Robertson Stephens, slash its business in Latin America and scale back its venture capital portfolio. A stock analyst opined that Fleet "is getting rid of the things that Citigroup does not want and it is emphasizing the businesses that Citigroup does want." Other possible Fleet-buyers include HSBC and Wachovia...

      The Office of Thrift Supervision is considering a thrift holding company application by Oregon-based "entrepreneur" Andrew Wiederhorn and his Fog Cutter Capital Group. Mr. Wiederhorn's Wilshire Capital Group declared bankruptcy in 1998, and he was forced out. Now he is applying under HOLA to increase involvement and control in the insured depository institution First Bank of Beverly Hills. ICP has opposed the application... 

April 15, 2002

     There were deals, but few bank-on-bank. Florida-based BankAtlantic Bancorp announced on April 11 it's bought a 40 percent stake in Bluegreen Corp., which develops and markets resorts and land, for $57 million. On April 8, Ameritrade announced a deal to buy Datek Online for $1.3 billion. Also on April 8, Bank of New York said it will buy privately held money management firm Beacon Fiduciary Advisors, which manages more than $700 million for over 350 "high-net-worth individuals." J.P. Morgan Chase announced it's opening a new office in Denver. Santander Central Hispano announced it's buying Citigroup's investment and pension unit in Spain...

April 8, 2002

    On April 5, investment bank-ette Ladenburg Thalmann & Co. announced that it has agreed to acquire Gruntal Financial LLC for $20 million in cash and five million shares; the companies said they expect the sale to be completed by May 1... Also last week, Jacksonville, Fla-based Intrepid Capital Corp. announced a plan to buy $10 million-asset First Bank of Jacksonville.

     On April 2, the Spanish press reported that Santander Central Hispano is negotiating with Banco Comercial Portugues to buy BCP's 15 percent stake in Mexican bank Bital... Over the weekend, the U.K. newspaper The Observer reported that Morgan Chase is considering a $2.9 billion bid for the British investment bank Cazenove & Company... China's only privately owned bank is reportedly being courted by Citigroup. Last week the China Daily quoted Minsheng Bank vice president Wei Shenghong as saying the bank is having "wider talks with foreign investors, and Citibank and HSBC are among those we are considering."

* * *

April 1, 2002

     On March 27 in Frankfurt, newspapers reported that BNP Paribas is emerging as the favorite to buy out German online brokerage Consors and is willing to offer at least 650 million euros. And it is reported that Citigroup is bidding on the credit card business of South Korea's Chohung Bank...

* * *

March 25, 2002

    In subprime news, last week Morgan Chase priced about $428 million in asset-backed securities, supported by subprime home equity loans it bought in the open market. They call it "CFLAT 2002-C1"... In further down-market moves, J.P. Morgan Partners is reportedly bidding to acquire Fingerhut, the Minneapolis-based "retail catalog chain" owned by Federated Department Stores which sells housewares and other merchandise. The company also has potentially more valuable units, including Arizona Mail Order, an apparel business; Figi's, a food and gift catalog business; and Popular Club Plan, a membership-based general merchandise catalog....

* * *

March 18, 2002

     As goes Citigroup, so go the others like lemmings. Prudential bought Mexico's IXE'S 50 percent stake in the Afore XXI pension fund, the ninth largest in Mexico, IXE announced on March 15. "The final price for the transfer of shares of Afore XXI, S.A. de C.V., before corresponding taxes, was a total of de 1.173 billion pesos ($129.2 million)," IXE said in a news release... ING is taking a 17.5% stake in Mexico's No. 5 bank, Grupo Financiero Bital.

    A group including Morgan Chase and Barclays may take control of Argentina's Banco de Galicia. The two companies, along with Dresdner Bank AG and the World Bank's International Finance Corp., signed letters of intent to convert as much as $400 million of loans to y Buenos Aires SA into shares, said Jose Jaime, who heads Seguro de Depositos SA... Meanwhile in Buenos Aires, judge Mariano Berges questioned Alan Macdonald, general manager of Bank of Nova Scotia's ScotiabankQuilmes for six hours on March 12. The judge is investigating allegations that banks, mostly foreign-owned, engaged in "economic subversion" by secretly transferring millions of dollars abroad to escape a freeze on bank accounts by the government to stop a run on banks last December....

      Allied Irish Banks last week fired David Cronin, sent by AIB to Baltimore in 1989 to oversee Allfirst's treasury operations; Robert Ray, the treasury funds manager and Rusnak's immediate superior; Jan Palmer, senior administrator of treasury operations; financial analyst Lawrence Smith; and internal audit leaders Michael Husich and Lou Slifker. Unscathed by the Rusnak trading loss are CEO Michael Buckley and Allfirst's chief executive, Susan Keating. ``They are not sacrificial lambs,'' Buckley said. We' re not so sure about that... As to Ms.Keating, British and Irish Sunday newspapers said she's set to bow to investor pressure and resign. The Sunday Times reported the chief executive would be gone by September... Citigroup announced on March 15 that it has suspended two foreign exchange salesmen during a probe into the AIB trading. "Two foreign exchange sales persons were suspended in early March for reasons unrelated to trading activity," a Citigroup spokesman confirmed. The two men, Richard Marra in New York and Joseph Craven in Singapore, had dealings with John Rusnak, a former trader at AIB's Allirst arm in Baltimore, but the suspensions related to their "entertainment habits," Reuters reported...

March 11, 2002

    Deals and trends: on March 7, Deutsche Bank announced a plan to buy U.S. property fund manager RREEF for a total of $490 million. RREEF operates from Chicago, San Francisco and New York and employs some 1,000 staff. "This completes our asset management acquisitions in the U.S.," Rolf Breuer told reporters in Frankfurt... ABN Amro announced on March 7 a plan to sell its consumer banking business in the Philippines to BPI Family Bank and Robinsons Savings Bank, a subsidiary of JG Summit Holdings. The company's spin: "the divestment is part of ABN Amro's strategy to shed non-core assets and focus on core client segments around the world." On March 8, ABN Amro's spokesman would not say on Friday whether it was shutting down its loss-making U.S. equities business, but denied talk that its traders there were on strike. ABN Amro's Martin Winn said, "Rumors have been flying around about this for a month now and as we have always said we do not comment on this kind of speculation. As for reports our U.S. equities business is on strike, it is not on strike. Our traders are still trading."

   Providian on March 7 announced a deal to sell its Argentine operations to a local investor group in Buenos Aires for a modest gain. Providian is selling off its international operations piece by piece. It sold its British card operations to Barclays Plc last month for $650 million...Notice a pattern here?

* * *

March 4, 2002

    In Argentina, HSBC and Banco Hipotecario are competing for a controlling stake in Banco Galicia. The winner will be announced on March 6, according to sources...

    ...A further example is the slow fundraising of J.P. Morgan Partners' global private equity fund. It has lowered it fundraising goal from $9 billion to $6.25 billion; it has yet to reach it. Morgan Chase CEO Harrison, in an intra-company e-mail, stated that "In hindsight, we have had too much capital committed to [JPMP], and we have been reducing that by third-party fund-raising." Well, sort of... Undeterred, JPMP and its oftentimes co-investor the Carlyle Group on February 27 signed a memorandum of understanding to acquire an 80% stake in South Korea's second-largest tire producer, Kumho Tire. Burning rubber...

February 25, 2002

     In response to ICP's previously-reported filings regarding Chohung and Chinatrust, both institutions have purported to respond. The law firm of Morrison & Foerster responded for Chinatrust on February 20. Chinatrust begins by arguing that the business plans of its banks outside the United States are not relevant. ICP disagrees. If an institution decides to meet a broader range of credit needs in some markets rather than in others, that is CRA-relevant. In fact, such disparities in product offerings in different geographies is a major focus of the CRA. ICP is unconvinced by Chinatrust's response on the CRA Assessment Area issue that ICP has raised: the inclusion in the Assessment Area of Richmond County (where Chinatrust has no branches) but the exclusion of the lower income, more predominantly minority Bronx County. Only on page 5 of its Response does Chinatrust acknowledge that it is "aware" of its rare CRA Needs to Improve rating in Maryland. The Response refers to an "Action Plan," but does not submit a copy of the Plan. A copy should have been included with the application, given the rare Needs to Improve CRA rating. ICP has now requested a copy of the "Action Plan." Chinatrust's response alludes to a "commitment for future action." ICP has requested a hearing.

   In an FDIC proceeding, Chohung Bank of New York's CEO Keun Taek Han's response. does little but quote from an NYBD's CRA exam. But that Exam states that none of Chohung's HMDA-reportable loans "was originated in an LMI geography" in its CRA assessment area. Under the heading "Lending to Various Protected Classes," Chohung simply re-quotes from its application. ICP reiterates: in the New York City Metropolitan Statistical Area ("MSA") in 2000, Chohung made eight conventional home purchase loans, none of which were to African Americans or Latinos. ICP's reply notes a recent report that "South Korea may sell about one third of Chohung Bank, more than double the amount first targeted... Korea Deposit Insurance Corp., the state-run agency which holds the government's bank assets, may sell 35 percent of Chohung as early as March." In a recent speech, Chohung President Wee Sung-bok said that a "government plan to privatize [Chohung] will proceed smoothly unless stock-market conditions make a sharp downturn." ICP has reiterated its hearing request; this will be updated.

* * *

February 18, 2002

     CIT, before being bought by Tyco, was always able to access the commercial paper markets. Not so, now. The rating agencies have downgraded CIT's debt on concerns about Tyco's finances. Hence, Tyco's new desperation to sell CIT. O a conference call on Feb. 13, Tyco's Dennis Kozlowski reiterated the company's desire to sell or spin off CIT. Rumored bidders include GE Capital, Citigroup and even Fleet. David Hendler of CreditSights said, "To be sold to a parent and then sold back by the parent within a year is ridiculous." We at ICP well remember Tyco's loud claims of the benefits to CIT of being acquired by Tyco, since we opposed the deal...

    Report from inside Wachovia: as the company continues with the lay-offs that were the rationale of the First Union - Wachovia merger, Wachovia has included in the pay envelopes of employees, including departing employees, a solicitation to refer "your friends for employment through the RAVE! program" in exchange for $1,000. That is to say, we may be laying you off, but why not refer your friend to work here? Then again, why?

    Another message on Wachovia's "" intranet asks all Wachovia Tier One, Two and Three leaders to "join me in welcoming" John Silva as Wachovia's new chief economist, replacing David Orr, who retired on February 15. The e-mail, from Steve Kohlhagen, head of Fixed Income, brags that Mr. Silva served on the advisory committees of the Federal Reserve Banks of Chicago and Cleveland, and more recently as chief economist of the Senate Banking Committee. Welcome, John! Click here for a recent ICP travelogue re Charlotte, N.C.... We have another report on CitiFinancial's practices in this week's CitiWatch Report.

February 11, 2002

   On February 11, ICP filed comments with the Federal Reserve opposing an application by Taiwan-based Chinatrust. Beyond its operations in Taiwan, Indonesia, Hong Kong, India, Paraguay and the Philippines, Chinatrust owns 17 bank branches in the United States, including five in New York. Chinatrust excludes Bronx County, the lowest-income county in New York, from its CRA assessment area. In its most recent CRA performance evaluation by the FDIC, for its Maryland assessment area Chinatrust was rated Needs to Improve.

     Finally, for those interested, the hearing on ICP's comments regarding AIG's / American General's practices has been set for February 20 by the Office of Thrift Supervision. But AIG is still seeking to withhold basic information about even its CRA plans...

February 4, 2002

     Banks and woods: on January 28, Wachovia Timberland Investment Management Group, a unit of Wachovia, announced it paid Bowater Inc. $124.5 million for 147,000 acres of timberlands in the Southeastern United States. Wachovia Timberland said it completed the deal "of behalf of an affiliate and certain other investment clients."

     An SEC filing made public on January 28 disclosed that Wells Fargo has dropped its stake in Willamette Industries Inc. three percentage points to 9.4 percent. After a 14-month takeover battle, last week Willamette tentatively accepted a $6.1 billion acquisition offer from its larger rival Weyerhaeuser Co....

     Another SEC filing confirmed that Tyco paid a $20 million to Frank E. Walsh, one of its outside directors, and a charity Walsh controls in exchange for his help in arranging the $10-billion purchase of CIT Group last year. Tyco's filing says it paid Walsh the fee because he was "instrumental in bringing about the acquisition" of CIT Group, according to the filing. Will Mr. Walsh pay any of it back, when Tyco sells CIT at a loss? Just asking.

January 28, 2002

   Star-crossed subprime conglomerate: on January 22, Tyco International Ltd announced a plan to break-up into four companies. ICP opposed Tyco's acquisition of CIT and its subprime lending operation last year; Tyco's response emphasized the benefits of this operation being in a conglomerate. Apparently, not... "Tyco will spin off CIT, a lending company that it bought last year. CIT, which manages about $50 billion in assets, had revenue of $5.4 billion and pretax profit of $1.2 billion last year, Tyco said."

    On Seoul on January 22, Kookmin Bank announced a plan to sell its investment trust unit to Morgan Stanley for $33.88 million. Meanwhile, Citigroup is reportedly interested in acquiring Thailand's Bank of Asia, majority owned by ABN Amro. The Bangkok Post reported that ABN Amro officials in Amsterdam did not rule out a sale. ABN Amro, which bought 75 pct in Bank of Asia for 7.5 bln baht in 1998, announced last year it would exit several markets to focus on the Netherlands, the US and Brazil...

   Here's an update on the Federal Trade Commission's predatory lending lawsuit against Citigroup. Citi's motion to dismiss was denied on December 27, 2001. On January 9, a scheduling conference was held before Judge Jack Camp, where he ruled that the discovery phase will end by September 9, 2002. Citi has since filed its own "Proposed Supplemental Scheduling Order." What will come out in discovery, particularly as to pre-Associates CitiFinancial, just be interesting...

    In Scotland, the merger of Halifax and Bank of Scotland will result in the closing of at least 60 branches across Scotland. ICP has just filed comments with the FDIC opposing an application by Chohung Bank of New York; will be updated as proceeds.

January 22, 2002

   At the world's largest fast-moving bank, Citigroup, the centrality of high-interest rate subprime lending to its business strategy was confirmed last week, when CEO Sandy Weill named as president and presumed successor Robert Willumstad, the head of CitiFinancial (and of Commercial Credit before that). In Seoul, South Korea on Jan. 14, Hong Suk-joo of Chohung Bank announced that Citigroup is interested in taking over Chohung's credit card operations. Chohung Bank was nationalized and recapitalized with state funds following the 1997-98 Asian financial crisis. According to Reuters, Chohung has benefited from slew of incentives including tax breaks. Citigroup, just after 9/11/01, pulled out of talks on buying Korea Exchange Bank's credit card unit. At deadline, Citigroup announced it's buying the Mexican insurance and pensiuon fund unit of Aegon for $1.24 billion... An update: in response to ICP's December 7, 2001 comment to the FDIC on Citigroup's two applications to shift non-insured overseas deposits to Citibank FSB, the FDIC wrote ICP on January 15 stating that "the FDIC has decided not to grant your request for a hearing... We feel that the material you have forwarded to this office will allow the FDIC to perform a thorough review and in-depth analysis to address your concerns." That would seem to imply that the FDIC has not (yet?) approved Citigroup's application, which Citigroup wanted approval for by January 6, 2002. Then again, with the FDIC, one never knows.

     On January 18, Lehman Brothers announced it bought investment bank Cohane Rafferty Securities, HQ-ed in White Plains with offices in Massachusetts, Michigan and New Jersey. Lehman's motion to get released from the FTC's predatory lending lawsuit against First Alliance was denied last week, as reported in more detail in this week's ICP CRA Report . An update on ICP's challenge to NetBank's applications to acquire RBMG and its subprime unit, Meritage. The Florida Times-Union of January 15 reported on the challenge, and quoted "Meritage spokeswoman Jerri Franz" that "because Meritage doesn't sell or generate any loans, Franz said, the company is essentially colorblind in the process. It buys the loans in bulk and never knows how many homeowners are white and how many aren't." This is a laughable response. First, Meritage reports HMDA data, by race. Second, it's worth noting that Jerri Franz was the longtime spokeswoman for EquiCredit, when that company was coming under fire for predatory lending. At that time, Ms. Franz never advanced the argument that EquiCredit was exempt or beyond the reach of the fair lending laws. The same newspaper quoted her on 8/31/00, in an article entitled " EquiCredit Corp. Knows 'Predatory' Line a Fine One." For what it's worth, Ms. Franz used to flack for First Union, all the way back to 1987.... The OTS has confirmed receipt of ICP's protest, and indicates that the "expedited" time-frame for considering the applications that is listed on the OTS' Web site is simply NetBank's request, not necessarily the OTS' position.

January 14, 2002

    This week: squibs on global mergers; Citigroup news; and ICP comments on NetBank's applications to merge with Resource Bancshares Mortgage Group (RBMG). In reverse order:

     Well, the holidays are over, and the action's heating up again. Remember EquiCredit? The subprime lender that NationsBank bought along with Barnett in 1997, which was increasingly criticized both before and after NationsBank merged with Bank of America -- until Bank of America announced in 2001 it was selling the business. One of the buyers was Resource Bancshares Mortgage Group (RBMG). Then, on November 2001, NetBank announced a plan to merge with RBMG. It's an interesting business plan: collecting deposits nationwide via the Internet, and investing them in, among other things, nationwide subprime mortgages. ICP, as you might imagine, is interested in the proposal, and kept an eye out for what would be the required application to NetBank's regulator, the Office of Thrift Supervision.

    Last week, ICP came across two squib-notices on the OTS's Web site. Neither mentions a merger; both are deemed "expedited," and delegated for decision to the OTS' Southeast Office in Atlanta. A stealth application for a proposal raising important policy issues. We got to work, and on January 13-14, filed comments with the OTS, including a review of the 2000 lending of RBMG and its subprime affiliate, Meritage. It's not pretty.

For example, In the Chicago MSA in 2000, for conventional home purchase loans, the prime-rate RBMG made 240 loans to whites, 16 loans to African Americans, and 12 loans to Latinos. Among these three groups, 6.0% of WMB's conventional home purchase loans were to African Americans and 4.5% were to Latinos. Meanwhile, RBMG's higher-cost lender Meritage made 93 conventional home purchase loans to African Americans, 34 to Latinos, and 46 to whites. Among these three groups, 53.8% of Meritage's high-cost conventional home purchase loans were to African Americans and 19.7% were to Latinos. Meritage strikingly targets people of color with its high-cost loans.

In the Atlanta MSA -- NetBank's headquarters -- for conventional home purchase loans in 2000, the prime-rate RBMG made 80 loans to whites, 35 loans to African Americans, and 3 loans to Latinos. Among these three groups, 29.7% of WMB's conventional home purchase loans were to African Americans and 2.5% were to Latinos. Meanwhile, RBMG's higher-cost lender Meritage made 23 conventional home purchase loans to African Americans, 13 to Latinos, and 13 to whites. Among these three groups, 60.5% of Meritage's high-cost conventional home purchase loans were to African Americans and 5.3% were to Latinos. Meritage strikingly targets people of color with its high-cost loans.

Separately, Meritage presumptively violates HMDA and/or the Equal Credit Opportunity Act. ECOA requires lenders to provide notice of adverse actions (denials) to applicants. But Meritage chooses to report non-approved loan applications as having been "withdrawn," rather than denied. For example, for conventional home purchase loans in Atlanta in 2000, Meritage on 55 applications from African Americans reports 16 applications as "withdrawn," and only 10 denials. The prime-rate RBMG does not report anywhere near this percentage of "withdrawn" applications. Applicants to Meritage, disproportionately protected classes, are being denied their rights under the Equal Credit Opportunity Act, and Meritage is filing HMDA data that is not credible.

ICP puts into the record the many complaints against EquiCredit, and some policy arguments: where a thrift is buying a major subprime lender, the applications should not be expedited. There is a second aspect of this proposal which also militates against expedited processing and delegation. The applicant, NetBank, is a non-traditional thrift: an Internet bank. As you know, the Treasury Department Office of Inspector General ("OIG") recently released an audit chiding the OTS for inconsistencies in applying CRA to non-traditional thrifts. The Audit stated, inter alia, that the "OTS approach to non-traditional thrifts... may not be clearly conveyed to, or consistently applied by OTS Examiners." Id. at 29.... ICP in on record concerning EquiCredit's practices. See, e.g., the Post and Courier (Charleston, S.C.) of May 7, 1998; Bloomberg Business News of October 22, 1997; etc..

We wish to point out for the record that the OTS should look at the essence, not the styling, of this proposal. RBMG's CEO, previously active in EquiCredit's subprime lending, would become the CEO of the combined entity. Some analysts have called this a merger of equals. If RBMG were applying to buy NetBank, it would trigger an application under the Bank Merger Act and HOLA. This proposal should be treated that way... We are aware of various NetBank press releases concerning CRA Plans (although none since this proposal to acquire a major and controversial subprime lender was announced). Unquestionably, this proposal must change -- and renders moot - NetBank's previous CRA plans. ICP wishes to express, from this its first comment on this proposal, that it would be illegitimate to defer consider of CRA outside of the application process. It is illegitimate as a matter of law; see also, the above-cited OIG Audit of the OTS on CRA.

     So we'll see. The Treasury Department's Inspector General's audit of the OTS' enforcement of CRA makes some well-directed critiques of the agency, its lack of standards, its lack of outreach, etc.. And if they'd only considered the OTS' shenanigans on AIG's and WaMu's 2001 application (on AIG, the OTS arbitrarily "waived" its formal meeting regulations; on WaMu-Dime, the OTS acted without giving any reasons, click here to review). The GAO has repeatedly criticized the Federal Reserve's (non-) enforcement of the CRA; but the Fed's own Inspector General has been silent on the matter. That should change, in 2002.

     At deadline, we've learned that in the Federal Trade Commission's predatory lending lawsuit against Citigroup, Judge Jack T. Camp has denied Citigroup's motion to dismiss, and has granted the FTC's motion to begin the discovery process. We'll have more on this next week. There's a lot... to discover.

    In global news, on January 7, Citigroup's Banamex announced that it has agreed to sell its controlling 59.58 percent state in Argentina's Banco Bansud. Banamex said it signed a contract with Argentina's Banco Macro SA on Dec. 19; no further details were given.

    On January 9, Brazil's Bradesco announced it is buying Deutsche Bank's local asset-management arm, Deutsche Bank Investimentos DTVM S.A.. The deal will raise Bradesco's assets under management to more than 51 billion ($21.5 billion); Bradesco said it would close the deal within 60 days.

January 7, 2002

    The numbers are in, and confirm just how slow 2001 was for bank and thrift M&A in the United States: 227 deals were announced, worth $40.05 billion. (Fourteen of those $40 billion was Wachovia). That compares to 278 deals worth $94.48 billion in 2000, and 504 deals worth $289 billion in 1998. SNL Securities' Marcey Dodd says she expects in 2002 "probably a similar number or lower" than 2001's 227 announced deals. "We're on sort of a downward consolidations trend. The number of banks that are eligible targets is not as large as it was," she said. Also, in 1998 buyers were paying 255 percent of book value on average; in 2001, they paid 180 percent. Most of the action, it seems clear, will be beyond the U.S....

    For example, Standard Chartered. Under now deposed CEO Rana Talwar, StanChart grew to employ 30,000 people in more than 50 countries. In 2001, it acquired ANZ Grindlays Bank in India and the Middle East; in 1999, it acquired a majority stake in Thailand's Nakornthorn Bank. With operations in Dubai and the Gulf and in Jordan and Lebanon via its subsidiary Grindlays Bank, Egypt was seen as the next logical step (but see last week's Report). The game in Egypt is developing fast: last year HSBC took control of the Egyptian British Bank and has been expanding like cancer in the region, with affiliates in Saudi Arabia and subsidiaries in Qatar, the United Arab Emirates, Oman, Jordan, Lebanon and the Palestinian territories. StanChart, meanwhile, remains one of nine short-listed bidders seeking control of Bank Central Asia, the third-largest in Indonesia. Standard Chartered said its announced freeze on expansion into new countries did not affect its plans for Indonesia, where it already has a stake in Bank Bali. As they say, developing...

    In U.S. deals, Bank of New York announced on January 2 a deal to buy Credit Suisse First Boston's trading and research services unit Autranet Inc. for "an undisclosed sum." In Ohio, Peoples Bancorp announced on January 4 a deal to acquire First Colony Bancshares for $18 million in cash and assume $2 million of the closely held company's debt. And in U.S. scuttlebutt, at a holiday party in Brooklyn attended by too many Citigroupies to count, Citigroup CEO Sanford Weill was repeatedly referred to as "Sandy Vile" -- that's with a "V," as in villainous. This moniker, widely used within Citigroup, has not yet appeared in Citigroup's promotional materials...

December 31, 2001

    The weeks of Christmas and New Years are something of a lull on the M&A beat. Nevertheless, on December 28, HSBC announced that it plans to acquire an eight percent stake in China's Bank of Shanghai for $62.6 million. It's the first time that a foreign commercial bank would take a stake in a Chinese bank. The World Bank's private sector arm, the International Finance Corp., took a 5 percent stake in the Bank of Shanghai in Sept. 1999 for $22 million....

     Also on December 28, Deutsche Bank announced it will layoff an additional 2,100 employees, on top of 7,100 job cuts the bank has previously announced...

    In enforcement news, Royal Bank of Canada's Liberty Life Insurance unit is facing a one-year suspension of its license in South Carolina for charging higher premiums to African-American customers. According to the Canadian National Post of December 28, "Liberty does not dispute that some African-American customers were charged more for their premiums." RBC and Liberty are nonetheless appealing. The Post also notes that "[a] U.S. civil rights organization unsuccessfully tried to have that [RBC-Centura] deal blocked, accusing Centura of exploiting visible minorities with predatory lending." The Toronto Star of December 28 reports that RBC "purchased Liberty for $1 billion last year as part of an effort to expand the bank's American operations. They include Centura Banks Inc., which was accused earlier this year by a New York-based public-interest group of discriminating against African-American customers by charging loan rates above the national average. At the time, the Royal Bank said it was studying the allegations by the group, called Fair Finance Watch." Eighty-two percent of Liberty's customers are located in three southern states -- North Carolina, South Carolina and Louisiana. Developing....

* * *

December 24, 2001

    The intrigue: Egyptian American Bank is now supposedly off the market. In Cairo on December 19, this announcement was made by American Express Bank which has a 40 percent stake in this EAB, and state-owned Bank of Alexandria, which holds about 32 percent. Standard Chartered said it did not want to invest in the Middle East because of "the current uncertain climate" -- an explicit reference to the effects of the 9/11 attacks on the M&A market, at least in the Middle East. From Reuters, more intrigue: "EAB's Managing Director James Vaughn said in the statement, which was dated Tuesday and released by the stock exchange on Wednesday, that Standard Chartered 'has decided not to pursue the acquisition of Egyptian American Bank.' A bank spokesman said Vaughn collapsed at a Cairo hotel and died of 'natural causes' on Tuesday evening after sending the statement."

    Jump-cut to Minnesota, where on December 19 the state attorney general sued Countrywide Home Loans, alleging failure to properly notify borrowers' of their right to drop private mortgage insurance when their equity reaches 20 percent of the home's value. Also, the state contends, the company illegally requires that PMI-cancellation appraisals be done by affiliate LandSafe Appraisal Services. The three-count suit seeks an injunction stopping the practices, restitution and penalties.

     The Federal Reserve's action on SunTrust - Huntington is recapped in this week's ICP Community Reinvestment Report (and here, as to the 9/11 money transfer issues). Click here re WaMu - Dime; click here re Wells Fargo - Marquette; and click here for some analysis of banks' exposure to the ongoing crisis in Argentina. Happy holidays.

December 17, 2001

    There was news last week, sure. But we'll begin this week with a question. Why weren't Citigroup, Dime and certain other institutions named in the United States' indictment last week of Zacarias Moussaoui as the "20th hijacker"?

      As relates to finance, the 31-page indictment names only two financial institutions, but names each of them repeatedly. SunTrust Bank in Florida first appears in paragraph 22 of the indictment, in connection with a $9,985 wire transfer from the United Arab Emirates; thereafter, SunTrust is named in paragraphs 24, 25, 26, 52 and 91. ICP has raised these issues to the Fed, in connection with SunTrust's application to acquire Huntington's Florida branches (and to close 77 of them; see below). Standard Charter's Dubai branch first appears in paragraph 57 (Mustafa Ahmad opening an account, in June 2001); thereafter, StanChart appears in paragraphs 76, 91, 97, 98 and 99.

      Our question: why were no other financial institutions named in the indictment? For example, the (London) Independent of November 20, 2001, reported that Ramzi Muhammad Abdullah bin al-Shibh, one of the "flatmate" at 54 Marienstrasse in Hamburg (and the prospective hijacker that Moussaoui allegedly replaced), "transferred $2,200 (pounds 1,500) from his account at Citibank in Hamburg to a Florida bank on 15 August," 2001. This would seem to be one of the key wire transfers. And it has been widely reported that other transfers were routed through Citi in New York, as a correspondent bank (which also happens to be the largest single user of the global SWIFT money transfer system). So why was Citibank not named in the indictment?

       Similarly, presumably credible sources from the Wall Street Journal to Time Magazine have reported the hijackers' use of credit cards from Dime Savings Bank of New York. But the indictment, while it mentions "VISA cards," does not name Dime. (Click here for an update on the Washington Mutual - Dime proceeding).

    Hypothesis: is it just a matter of Citigroup's (and, to a lesser degree, Dime's) lobbying strength? Who at the Department of Justice (or elsewhere) decided on the specifics of the indictment -- including which banks to name -- prior to its filing and release? We note, as simply another example of Citigroup's "access," that on December 13 Treasury Secretary Paul O'Neill met with seven "industry representatives," including Citigroup senior vice president (and lobbyist) Roger Levy. Any reader with more insight or information is encouraged to chime in.

    On the more mundane topic of branch closings, beyond the 45 already-announced branch closures in connection with buying Huntington's brick-and-mortar branches, now SunTrust proposes to buy the deposits and assets of Huntington's 40-some supermarket branches, but not the branches themselves. The branches would be closed, but by Huntington, not SunTrust.

     In our November 12 letter to the Fed, we commented on (that is, against) SunTrust's plans "to close at least 45 of these branches." It now appears that SunTrust would close at least 77 branches. SunTrust's counsel's December 12 letter to Fed staffer Daniel Meade states that SunTrust "will not be acquiring from Huntington its Albertson food store branch locations," but that it "will be acquiring from Huntington the deposits book at Huntington's Albertson food store branches." Emphasis in original.

    ICP's new (Dec. 14) comment: for 77 branches to be faced with closure in a deal of this much smaller size militates for an reopening of the comment period... It is also imperative that the FRB address, when it finally rules on this proposal, the issue of responsibility for the proposed branch closures. SunTrust might argue that it would be Huntington that would be closing the branches. ICP disagrees -- SunTrust's cynical proposal to acquire all of the deposits, while leaving Huntington to close the empty shells, threatens to create an ongoing anti-consumer precedent...

      On December 12, Washington Mutual announced a plan to buy most of HomeSide Lending from National Bank of Australia, for $1.9 billion. ICP has raised this deal in connection with WaMu's still pending application to acquire Dime Bancorp.  An update: in a December 11 letter to ICP, related to the ongoing WaMu-Dime proceeding, the Office of Thrift Supervision claimed that decisions of its Presiding Officers cannot be appealed. But at the November 15 formal meeting on WaMu's application, the President Officer said that "there are other people who are higher up the chain than I am and people can make phone calls and appeal this decision...". On November 29, WaMu appealed the extension of the comment period until FOIA issues were decided, and on November 30 the Presiding Officer essentially granted the appeal, and triggered the end of the comment period. ICP then appealed, and on December 11 the OTS claimed that no appeals are possible. Hmm.. ICP has filed an additional comment, available here.

December 10, 2001

    A few new deals; a few updates. On December 4, Marshall & Ilsley announced yet another Minneapolis-area deal, this time to buy Eden Prairie-based Century Bancshares for $66 million. Given DOJ's recent capitulation on Wells-Marquette, expect this one to fly though as well. The overconcentration of market power in this area grows worse monthly...

    On December 4, ABN Amro announced it is selling its banking business in Bahrain, which employs 57 people, to BankMuscat. This follows ABN Amro's recently accounts sales of its business in Kenya (to Citigroup) and in Chile (to Fleet). ICP learned last week that the Federal Reserve Board will not be requiring any application for regulatory approval for either deal -- which, as a matter of policy, seems unwise, particularly in the aftermath of the September 11 plane bombings in the U.S, and the attendant money laundering issues.. By this logic, a U.S. bank already operating in the Sudan could for example acquire Al Shamal Bank, with no prior approval or review. This is a loophole that needs to be closed.

     Click here for an update on Washington Mutual - Dime; click here for an update on Wells Fargo - Marquette; and see this week's ICP CRA Report for a description of a proposal by Citigroup to shift yet $2 billion more to Citibank FSB, obtaining FDIC insurance for it with no increase in FDIC insurance premiums, and no expanded or improved CRA program...

December 3, 2001

     The banking story of the week is clearly the implosion of Enron, to which the two largest U.S. banks, Citigroup and J.P. Morgan Chase, have reported exposures of $800 and $500 million, respectively. Even the mainstream financial press, which usually calls for and lauds deregulatory moves like the Gramm-Leach-Bliley Act of 1999, has stepped back and begun to ask questions. In the Wall Street Journal of November 30, Chase's faux-folksy EVP Marc Shapiro quipped "that using Enron to indict looser restrictions on U.S. financial institutions 'is like saying that because Mariano Rivera gave up a run in the last inning of the World Series that you shouldn't have relief pitchers anymore. The danger to banks is when they are restricted to only the traditional lending business. That's when banks have problems.'" Oh, really? Wasn't it the deregulation of the savings & loans in the 1980s that ended up costing tax payers billions of dollars?

     Nonetheless, the deals went on. On November 29, Mellon announced a deal to buy a unit of PriceWaterhouseCoopers, Unifi, for $275 million in a deal that would "expand Mellon's reach into the human resources consulting industry." Mellon might need its own human resources consultant, based on its jettisoning of branch employees to Citizens / Royal Bank of Scotland...

     Another update: in an SEC filing on November 27, Goldman Sachs reported that it holds a 9.8 stake in South Korea's Kookmin Bank, whose acquisition of H&CB was consummated on November 1. Goldman's wholesale in the U.S., but eminently retail in Korea... Also pulling back from retail is CSFB, which is selling DLJ's online brokerage to Bank of Montreal for $520 million. TD Waterhouse is buying the U.K. division of the brokerage.. HSBC is moving to formalize its stake in China, announcing last week that it is "in talks" to buy a minority stake in Bank of Shanghai; HSBC would become first foreign commercial bank to own a stake in a Chinese lender. AIG, of course, is running wild in the Chinese insurance field. And in Japan -- shares in Fuji Fire & Marine Insurance Company rose nearly 16 percent on November 29 after the Asahi Shimbun newspaper reported that AIG is considering raising its stake in the casualty insurer.

     Finally, for this week, an update on Washington Mutual's near-insane withholding of basic information about its proposal to acquire Dime Bancorp, including factual information about its and Dime's loan products. November 30 was an up-and-down day in ICP's campaign for necessary scrutiny for this deal, and for WaMu's subprime lending. The "up" was the Office of Thrift Supervision's decision to release, in full, the list of companies owned or controlled by WaMu board members and officers. The controlled company that WaMu general counsel Fay Chapman was seeking to withhold is called, ironically, "Scrutiny, Inc." Texas-based financier (and WaMu board member) David Bonderman's disclosure runs a full 38 pages, with ten companies listed on each page. ICP is still analyzing this list.

     The "down" was a decision by the OTS Regional Counsel, after business hours on November 30, to grant ICP only until December 14 to make additional comments. The decision, quoted below in ICP's December 3 appeal, implies that WaMu has now provided all documents not exempt from the Freedom of Information Act, or, in a looser standard, all documents that ICP would need to make its final comments. ICP disagrees, and has appealed; click here to view the appeal.

November 26, 2001

    In a Minneapolis deal announced on November 19, Marshall & Ilsley Corp. says it will apply to acquire Richfield Bank & Trust for $150 million in cash and stock. Richfield has branches in Bloomington, Burnsville, Edina, Chanhassen, Richfield, Minneapolis and St. Paul -- markets that already threaten to be overconcentrated by Wells Fargo's proposed purchase of Carl Pohlad's banks and branches...

     The Turkish newspaper Finansal Forum last week predicted that Citigroup will buy a majority stake in Turk Ekonomi Bankasi AS, a midsize Turkish bank, as early as December. A bigger rumor has Citigroup looking to acquire Standard Chartered, with branches throughout Asia, Africa and the Middle East. Other rumored acquirors include Lloyd's TBS and Barclays...

      From high-tech to subprime: On November 19, Netbank announced a plan to buy Resource Bankshares Mortgage Group for $148.3 million. RBMG most recently bought the wholesale subprime lending offices of Bank of America's EquiCredit. In fact, under the proposal, the combined company would be run by RBMG's Doug Freeman, who used to head EquiCredit. Subprime on the 'Net. The idea seems to be to use Internet-generated deposits to fund subprime loans. "Each of us goes through a middleman — NetBank to generate the assets and us to get the liquidity — and this middleman has extracted some nice profits," Freeman told reporters. "We’re both able to eliminate the middleman this way, so it’s very, very attractive." We'll look forward to seeing NetBank's CRA plan updated for this proposed deal...

    Palace intrigue in Deutsche Bank: Ol' Rolf Breuer is reportedly under growing pressure to quit early to make way for his anointed successor, Josef Ackermann. At a meeting of senior executives in Kronberg outside Frankfurt earlier this month, the campaign to oust Breuer gathered force. One banker who attended the gathering was quoted by the FT as saying the meeting was "a fairly tense affair. People were very forthright." Over the weekend, the British press speculated that with Breuer weakened, Lloyds TBS and its CEO Peter Ellwood are trying to rekindle merger talks with Deutsche Bank...

    In terms of documents that are still being withheld, click here for an update on the Washington Mutual - Dime proceeding.

November 19, 2001

     This week: a slew of micro-deals, updates on WaMu-Dime and SunTrust, and Wells Fargo - Marquette (Pohlad) challenge.

    An update on SunTrust: the Sarasota Herald-Tribune of November 14 reported among other things that "Inner City also cites the fact that some of the Sept. 11 hijackers opened checking accounts at SunTrust offices, including one in Venice that was used to pay for flight lessons last year. The group said the bank failed to comply with proper money laundering and 'know your customer' practices by not noticing large international wire transfers into the accounts. The bank has said that none of those transactions were more than $10,000, the amount that triggers a report to the federal government." But regulators in the United Arab Emirates have acknowledged wire transfers as large as $70,000, to a bank in Florida they wouldn't name, but which is known to be SunTrust...

    Click here for an update on WaMu- Dime, including a description of the "formal meeting" that the Office of Thrift Supervision held on November 15. Among other things, the OTS' presiding officer ruled that the comment period for ICP remains open until 14 days after the Freedom of Information Act issues occasioned by WaMu's withholding of large parts of the application are resolved.

    Finally, for this week, click here for comments on Wells Fargo's proposal to acquire the banking interests in seven states of Carl Pohlad. Beyond antitrust and branch closures, we've found that Wells' mortgage lending disparities were worse in 2000 than in 1999, and have presented the Fed with evidence of Wells Fargo Financial loans at interest rates up to 39%, and of Wells' connections with the check cashing empire of Dollar Financial Group, and the payday lender Ace Cash Express. Not pretty...

November 12, 2001

    On November 12, ICP filed comments opposing SunTrust's application to the Fed to acquire Huntington's Florida branches (and to close 45 of them). See also, "Huntington Deal Runs Into Protest," Columbus Dispatch, November 13, 2001, and "Public Interest Group Challenges SunTrust," Atlanta Journal and Constitution, November 13, 2001.  Here's a portion of the comments:

Dear Secretary Johnson, Chairman Greenspan, Governors:

On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this is a timely comment opposing the Application of SunTrust to acquire Huntington's Florida branches, and to close at least 45 of these branches.

As you know, serious concerns were raised by ICP and others regarding SunTrust's Community Reinvestment Act ("CRA") and fair lending record were raised earlier this year, in connection with SunTrust's application to acquire Wachovia. Since SunTrust withdrew its Wachovia application, those concerns were never formally acted on by the Board (but should be now; additionally, ICP's review of SunTrust's 2000 Home Mortgage Disclosure Act ("HDMA") data raises additional, ongoing concerns).

We wish to begin, however, with the public reports that SunTrust in Florida opened accounts for up to nine of the September 11 hijackers, reportedly cashed hijackers' checks in Virginia, and processed at least $70,000 in wire transfers to the hijackers. These matters raise serious questions about compliance practices at SunTrust, which must be acted on in this proceeding.

That SunTrust opened accounts for September 11 hijackers, including Mohamed Atta, has been widely reported. For example, the Sarasota Herald-Tribune of October 29, 2001, reported:

Hijackers Mohamed Atta and Marwan al-Shehhi opened a checking account at a Venice branch of SunTrust Bank in summer 2000. They used the account to pay for instruction at Huffman Aviation, a Venice flight school where they took 200 lessons that cost some $20,000. The checking account was one of four opened at SunTrust offices in Florida by some of the men authorities believe hijacked two jets on Sept. 11 and crashed them into the World Trade Center. Bank officials have said none of the transactions raised suspicions or were reported to regulators. No transaction was greater than $10,000, the level that requires a report to the Internal Revenue Service.

From the Richmond Times-Dispatch, September 28, 2001:

A Norfolk TV station has reported that two men suspected in the Sept. 11 terrorist attacks had cashed checks for a total of $18,000 at a Virginia Beach bank. Spokesmen for the bank and the FBI refused yesterday to confirm or deny the story. WVEC-TV reported that Mohamed Atta - believed to have been one of the masterminds of the jetliner hijackings - and Marwan al-Shehhi cashed checks for $10,000 and $8,000 at a SunTrust Bank branch in the Hilltop section of Virginia Beach. The station cited a source close to the investigation...The FBI said earlier this week that it had "credible evidence" that Atta and al-Shehhi "were in the Virginia Beach area at certain times during the time period of February and May of this year." FBI agents have been contacting motels and other businesses in the area in an attempt to retrace the men's activities. An FBI spokesman in Norfolk refused yesterday to discuss the TV report about the checks, and a spokesman for SunTrust Bank would not, either.

Money magazine of November 2001 reported that the hijackers "paid tuition with checks drawn on the Venice branch of SunTrust bank, where they were directed after first trying to pay their Huffman bills in cash. SunTrust first vice president Barry Koling won't say how much the men used to open their accounts--'We're telling the FBI,' he says--but it must have been less than $ 10,000 (under federal law, banks have to report all cash transactions of that much or more)."

But the Washington Post of October 25, 2001, reported that "Federal officials believe one of Osama bin Laden's top financial aides, Mustafa Muhammad Ahmad, walked into a bustling money exchange in the United Arab Emirates last year and plunked down $70,000 in cash to be wired to the SunTrust Bank account of Mohamed Atta in Florida." Emphasis added.

This higher figure is repeated in the New York Times of November 4, 2001: "The money for the operation began arriving at branches of the SunTrust Bank and Century Bank in Florida, in the summer of 2000. Mr. Atta received slightly more than $100,000, Mr. Shehhi just less than that amount. About half of the $500,000 used to pay for the operation, senior Federal Bureau of Investigation officials say, was wired by an important bin Laden operative, Mustafa Ahmad, from the United Arab Emirates, and much of the rest from Germany." Emphasis added.

In response to a (non-SunTrust-specific) FOIA request that ICP filed on September 24, 2001, the FRB on November 2 released a copy of an e-mail concerning SunTrust, stating that "SunTrust reports that they have been working directly with the FBI since last week to provide information on several of the names on the FBI's list who banked with SunTrust. They are in the process of scrubbing their system for the additional names, and will let us and the FBI know of any additional hits." No follow-up to this initial message was provided in response to ICP's October 3 / 22 FOIA request; ICP has now appealed (and would appreciate an explanation why no such documents were provided in connection with the Secretary's November 2 determination, in the documents faxed to ICP on November 7, 2001. See infra).

In the public record, SunTrust has repeatedly said that nothing about the accounts triggered, or even could have triggered, their suspicions. Press accounts have speculated, or simply reported, that there were no transactions over $10,000. But more recent reports specify large ($70,000) wire transfers into the hijackers' accounts at SunTrust's Florida branches. Now SunTrust applies to acquire yet more Florida branches. This matter must be inquired into and acted on, in a public way, in connection with this application.

SunTrust Would Close 45 or More Branches

Beyond imposing SunTrust's questionable money laundering (see supra) and CRA / fair lending (see infra) compliance on the Huntington branches, the proposed acquisition would have direct negative effects. SunTrust's goal is to eliminate 36% of Huntington's "expenses" -- including by closing at least 45 branches. See, e.g., Sarasota Herald-Tribune of September 27, 2001, "SunTrust Buys Fla. Assets of Huntington; The company expects to close at least 45 overlapping branches." Note that SunTrust has a history of closing branches in low- and moderate-income communities: in the Wachovia proceeding, SunTrust acknowledged it had recently closed branches in low-income census tracts in Fort Belvoir and Petersburg, Virginia, and branches in moderate income census tracts in Melbourne and Brooksville, Florida (SunTrust Wachovia Response at Exh. 12).

Beyond the 45 branches that SunTrust would close in connection with this Huntington proposal, in announcing the deal on September 27 SunTrust stated that it would announce a decision about Huntington's 35 in-store branches in a month's time. As of November 10, 2001 (40 days), no such announcement has apparently been made. This information should have been released well before the expiration of the comment period; the comment period should be extended, and SunTrust should be directed to disclose all projected branch closures.

This Proposal is Anticompetitive; Withheld Documents Must be Released

Additionally, it appears clear that the proposed acquisition would have anti-competitive effects and otherwise harm consumers. For example, in the Lake North / Sumter market, SunTrust and Huntington are currently the numbers one and two banks, with deposit shares of 18.5% and 17.2%, by the Applicant's own calculation (Antitrust Memo at 43). None of the nearest competitors have even a 15% market share. Id. SunTrust apparently proposes to divest only $20 million in deposits -- which would still leave the HHI rising by 580 points. Id. at 46. ICP directs the Board back to the concurring statement to its NationsBank - Barnett Order, purporting to announce a new seriousness in FRB antitrust enforcement. That Order, 84 Fed. Res. Bull. ___ (Dec. 1997) (slip op. at 19) explicitly stated that "in future cases, increased importance should be placed on a number of factors where the proposal involves a combination that exceeds the DOJ guidelines in a large number of local markets," including "increased attention to the size of the charge in market concentration as measured by the HHI in highly concentrated markets, the resulting market share of the acquirer and the pro forma HHIs in these markets, the strength and nature of competitors that remain in the market, and the strength of additional positive and negative factors that may affect competition for financial services in each market." If the FRB meant what it said in its NationsBank-Barnett Order, SunTrust's proposed divestitures are insufficient, and this proposal should not be approved, on this and the other cited grounds.

In the Highland County Market, Huntington and SunTrust are the numbers three and four banks, respectively, with deposit shares of 18.3% and 11.9%. The proposal would result in a three-way oligopoly (Bank of America has 29.8%, and Wachovia has approximately 20% market share). Again, the proposed divestiture is insufficient. ICP continues to contest the withholding of portions of SunTrust's Antitrust Memo / proposed divestiture, and of the attachments to SunTrust's October 22, 2001, letter to the Department of Justice; ICP is submitting a FOIA appeal today. The comment period should be extended, and all improperly withheld information (including branch closing list, plans for supermarket branches, and divestiture proposal) should be released.

In the Polk County Market, SunTrust and Huntington are the numbers three and four banks, with deposit shares of 17.7% and 9.6%. The proposal would result in a three-way oligopoly (Bank of America has 24.3%, and Wachovia has a 19.1% market share). Again, the proposed divestiture is insufficient. The FRB has been allowing an anticompetitive overconcentration in Florida: it did not require sufficient divestitures in connection with NationsBank (now Bank of America's) acquisition of Barnett); Huntington bought some of these divestiture branches, which would now be sold again, to SunTrust, for further concentration. This proposal, on all the grounds cited, should not be approved.

SunTrust Bank's and SunTrust Mortgage's Lending Records Are Disparate

ICP and others strenuously critiqued SunTrust's CRA and fair lending record earlier this year. Those comments -- ICP's and others -- were never ruled on by the FRB, and are therefore incorporated herein by reference, for consideration and action in this proceeding.

ICP had previously critiqued SunTrust's 1999 lending; ICP has now reviewed SunTrust's 2000 record, with a particular focus on Florida, and contends that this more recent data militates for the denial of this application.

SunTrust has two HMDA reporters, SunTrust Bank and SunTrust Mortgage. The majority of SunTrust's conventional home purchase lending, in the communities where SunTrust Bank is present, is done through SunTrust Bank.

In Jacksonville, Florida MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of African Americans 13.75 times more frequently than those of whites. SunTrust Mortgage, on lower volume, was scarcely better in this MSA: it denied the conventional home purchase loan applications of African Americans 6.78 times more frequently than those of whites.

In Tallahassee MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of African Americans 8.7 times more frequently than those of whites. In the Sarasota MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of African Americans 4.77 times more frequently than those of whites.

SunTrust's lending is also disparate to Latinos / Hispanics. In the Naples, Florida MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of Latinos 8.32 times more frequently than those of whites. In the Lakeland, Florida MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of Latinos 5.63 times more frequently than those of whites. In the Ocala, Florida MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of Latinos 4.09 times more frequently than those of whites. In the Fort Myers, Florida MSA in 2000, SunTrust Bank denied the conventional home purchase loan applications of Latinos 3.95 times more frequently than those of whites. SunTrust Mortgage, on lower volume, was even worse in this MSA: it denied the conventional home purchase loan applications of Latinos 7.71 times more frequently than those of whites.

SunTrust has yet to explain why it has denial rate disparities for protected classes so much worse than the rest of the industry. (In 1999, for conventional home purchase loans, in the Albany, Georgia MSA SunTrust Bank denied African Americans a whopping 5.14 times more frequently than whites. In the Athens, Georgia MSA, SunTrust Bank denied African Americans a whopping 13.89 times more frequently than whites. In the Chattanooga, Tennessee MSA, SunTrust Bank denied African Americans 6.0 times more frequently than whites. In the Gainesville, Florida MSA, SunTrust Bank denied African Americans 16 times more frequently than whites). Given SunTrust's recently lobbying against anti-predatory lending legislation, and a statement quoted below, it is unclear whether and to what degree SunTrust engages in subprime lending, directly or for "investors." At the Mortgage Bankers of America conference held in Toronto this Fall, "Susan Huber, the senior vice president of investor relations, noted that many of the legislative initiatives in this area have thresholds that impinge on the prime lending business. When the issue first flared up, SunTrust came out with a policy that it would not do any predatory loans. These initiatives are making it difficult to keep that policy, she said. The company looked at its own practices and even though it did not believe that its practices were in any form predatory, it still made some changes. But these new laws, such as the one passed in Washington, are forcing its investors to pull out of areas that the company has a strong presence in. See, Origination News, B&C News, November 2001. SunTrust hired former D.C. councilman John Ray to lobby against the D.C. anti-predatory lending ordinance. See, e.g. Washington Post, November 3, 2001. "Council Chairman Linda W. Cropp... pointed to letters from Chevy Chase, First Union, BB&T and SunTrust banks pleading for more time. 'The law, as we have it now, will not enable them to continue [making] mortgages in the city,' she said." Washington Post, November 7, 2001. The FRB should inquire into whether and to what extent SunTrust is engaged in subprime lending, directly or for investors.

The above-cited 2000 disparities are in the very state in which SunTrust now proposes to substantially expand, and impose its practices on 200,000 more customers -- not only its disparate lending and branch closing practices, but also its apparently lax Know Your Customer / money laundering practices. The FRB should convene an evidentiary hearing on these issues, and, on the current record, the FRB could not legitimately approve this proposal.

If you have any questions, please telephone the undersigned, at (718) 716-3540. Thank you for your attention.

Respectfully submitted,

Matthew R. Lee, Esq.
Executive Director

     And here's a WaMu - Dime update.

November 5, 2001

     On November 1, National Bank of Greece and Alpha Bank announced that they proposed to merge and form that nation's largest bank. Both NBG and Alpha are required to submit the merger proposals to their respective general assemblies within the next 20 days. In addition, the merger is subject to the appropriate clearance from both domestic and EU authorities.

    Speaking of required regulatory approval, ICP on November 2 received a copy of Washington Mutual's purported response to ICP's comments against the WaMu- Dime application, primarily regarding WaMu's subprime lending. One major problem -- WaMu states that it has been unable to respond to the Home Mortgage Disclosure Act analysis that ICP submitted, due to a computer virus. ICP is certainly sympathetic to computer-breakdown problems. But at a bank of this size? In three weeks, they can't present a HMDA analysis? Click here to view portions of ICP's response to WaMu's November 1 letter.

October 29, 2001

     With few new deals being announced, even those in-process are now being changed. Longtime play of hardball AIG is now pressing for yet more concessions for its announced purchase of South Korea's Hyundai Securities. Despite the deal announced in September (with a November closing-date), AIG last week pulled out. "It seems AIG is driving a tougher deal after the U.S. attacks," said Kim Jin-sang, a finance analyst at SG Securities Asia in Seoul. "They know the Korean government has no choice but to sell the companies overseas, otherwise the government's bailout costs would be too burdensome." AIG now wants Hyundai to pay higher dividends on preferred shares and allow them to be converted into common shares in a year, a Hyundai executive said on Monday, describing the new condition and three other issues raised by AIG as "nonsense." The playing of hardball, especially at AIG, never ceases...

October 22, 2001

     New deal announcements remain slow. And so, this week, updates on Royal Bank of Scotland's and its Citizens Bank's applications to the Federal Reserve Board to acquire Mellon's branches, and on Washington Mutual's proposal to acquire Dime Bancorp.

      There's been a lull in the RBS/Citizens - Mellon proceeding. In late September, Citizens spokeswoman was quoted in the Harrisburg, PA newspaper that Citizens would be submitting an amended response based on its 2000 lending. That has not been submitted. Citizens' earlier responses (which focused on lending data going back from 1999 all the way to 1995) had sought "confidential treatment" for its presentation about subprime lending. Now some (but not all) of that information has been released. Interestingly, the subprime connection is not limited to Greenwich Capital Markets. Citizens Mortgage Corporation -- the affiliate whose lending Citizens claimed makes up for Citizens Banks' disparities -- has a subprime lending program. The newly-released response vaguely described CMC's so-called "Credit Builder" division, which takes applicants and forwards their applications "to either an unrelated investor or unrelated lender where an origination decision is made... For details of this procedures please see the attached [still] Confidential Exhibit 3." The irony is that CMC reports these loans in its own name (that is, in its Home Mortgage Disclosure Act data). The response describes a scenario in which "the loan closes in CMC's name and subsequently is purchased by the investor." The response does not name the investors, nor make any disclosures about the investors' underwriting standards (or consumer protections). This casts all the more doubt on Citizens' initial defense to ICP's challenge: that CMC's lending record is better than Citizens Banks' record. Yeah -- by including subprime loans decided on by unnamed investors...

October 15, 2001

    After holding off in light of September 11 and its (continuing) aftermath, ICP on October 15 filed its comments on Washington Mutual's application to acquire Dime Bancorp. ICP has focused on Washington Mutual's standardless subprime lending, through Long Beach and Washington Mutual Finance Group, which do not have in place basic safeguards (such as referring-up credit-worthy applicants), and which have never been examined by the Office of Thrift Supervision. Click here to view ICP's comments.

     New U.S. bank M&A is still sluggish. On October 9, BB&T Corp. announced an agreement to acquire Horizon Mortgage and Investment Co. of Atlanta. In another non-banking deal announced October 9, Bank of New York said it's buying Westminster Research Associates Inc., a broker-dealer and "research provider." Also, MONY's Advest Group is buying municipal bond firm Lebenthal & Co., reportedly for around $25 million.

     A deal we neglected to mention in our last Report: Wells Fargo proposes to acquire 117 branches, with $5.6 billion in assets, from Carl Pohlad and his family (owners of the Minnesota Twins baseball team). The proposal includes 36 Marquette Bank and Marquette Capital Bank locations in Minnesota; 43 First State Bank of Texas and First National Bank of Texas locations in Texas; 19 Marquette Banks in South Dakota; five Marquette Banks in Illinois; four Marquette Banks in Cedar Rapids, Iowa; three Meridian Capital Banks and one First National Bank & Trust in Wisconsin; and four locations of The Bank of Santa Fe in New Mexico.

October 8, 2001

    In the aftermath of the plane-bombings in New York, Washington and Pennsylvania, and, now, the bombing of Afghanistan begun on October 7, bank M&A activity gets slower and slower. In the U.S., a few micro-deals:

    On October 5 in Vermont, Chittenden Corp. announced a deal to acquire Ocean National Corp., with nine branches in southern Maine and two in New Hampshire, for $53.25 million.

     In Bangkok on October 3, J.P. Morgan Chase and Thailand's largest commercial bank Bangkok Bank PCL agreed to form a Thai retail brokerage and private fund management joint venture to be named Bualuang Securities. Morgan Chase will be folding in most of the 300 employees of JF Thanakom Securities, which it recently acquired. Morgan Chase will directly own 15% of the new venture with management of the companies, including JP Morgan "Senior Country Officer" Korn Chatikavanij owning a 20% stake. Korn said in the statement that JP Morgan Chase will, following the deal, "concentrate its efforts in Thailand on wholesale activities which include institutional brokerage, investment and corporate banking as well as mutual funds," an area where it operates under its Ayudhya Jardine Fleming joint venture. Yes, Chase is pulling back from retail everywhere... In other Morgan Chase news, the company on October 3 announced it will be laying off 200 employees in Texas.

    Hal Ritch, co-head of global M&A at Citigroup's SSB, said his "clients are going ahead with their M&A projects... 'My clients are more steely than the market place.'" But in Seoul on October 4, Korea Exchange Bank announced that Citigroup had withdrawn from talks to buy its credit card unit because of the September 11 attacks. "Citibank said fallout of the September 11 aerial attacks on the U.S. led the American bank to stop new investment," said Hong Young-hwan, a KEB spokesman. Reuters, 10/4/01. So we'll see.   Click here to view ICP's third special report on banks' money laundering and correspondent relationships with terror-related deposits.

October 1, 2001

    U.S. merger and acquisition activity, already slow in 2001, is at a virtual standstill following the Sept. 11 plane-bombings. In the largest U.S. bank deal since September 11, on September 26, SunTrust announced it will apply to buy the Florida branches of Huntington Bancshares, for $705 million. This is the same SunTrust whose Community Reinvestment Act record was blasted by two dozen Congress members a few months ago, and which held accounts for many of the September 11 hijackers...

    In Mexico, Banorte on September 24 announced its purchase of the failed Bancrecer, for $175 million. Consolidation continues: Banorte will now have around 12 percent of Mexican banking assets, compared with Santander-Serfin's estimated 14 percent and the 25 percent share each held by BBVA-Bancomer and Citigroup's Banamex unit. Yes, that's an 80% market share for the top four banks...

      Other companies took to the airwaves to point out how the September 11 plane-bombing will help their business. Dennis Kozlowski, the CEO of Tyco (which recently acquired the subprime lender CIT, renaming it Tyco Capital) went on CNBC to brag that "we do everything from airports to commercial businesses to--to home securities, especially on the electronics and video surveillance side... We had a number of proposals to a number of airports that were held up by funding over the last few years. But I think now a lot of that funding is going to be lifted, funds will be made available, and we'll be installing in airports all over the world... We're also going to generate over $4 billion of free cash this year and $5 1/2 billion to $6 billion of free cash next year, the year beginning October 1st. So we're going to have plenty of resources available to do acquisitions when and where they do present themselves." Great...

     In the aftermath of the September 11 plane-bombings of the World Trade Center and the U.S. Pentagon, Inner City / Finance Watch has prepared a report on bank links to Al Qaeda and other state- and non-state terrorist groups -- and on what the Federal Reserve and U.S. Treasury Department have done, and not done, in the recent past on this issue. While initial press accounts centered around Barclays Bank in London, there are many more connections: ABN Amro (owner of LaSalle Bank in the U.S. Midwest) held deposits of Al Qaeda conspirators in India; Deutsche Bank (which bought New York's Bankers Trust in 1999) held millions for a now-incarcerated Pakistani intelligence chief); Fleet is reported to channel money to the Chechen jihad. We have submitted a Freedom of Information Act (FOIA) request to the Fed and Office of the Comptroller of the Currency, for documents reflecting any Fed inquiry into these issues. No inquiry was apparent, as these agencies approved each of these institutions' merger and expansion applications. The bank regulators will have to take these issues more seriously. Click here to view the whole report.

* * *

September 17, 2001

    Following the September 11 plane-bombing of the World Trade Center and the U.S. Pentagon, there has been and will foreseeably be a slow-down in M&A and other activity. A post-September 11 task that is being under-reported is the need to inquire into how attacks like these are financed, how the money is moved. Banks with notably lax money laundering policies will be examined particularly closely. Sometimes, it's been a matter of direct solicitation: the London Observer of December 13, 1998, reported the visit to Afghanistan of Mark Warner, a director with Barclays Private Bank Ltd., to drum up business... In testimony in federal court in Manhattan in February 2001, Osama bin Laden's paymaster Jamal Ahmed Al-Fadl testified that al-Qaeda had various bank accounts, including with Barclays Bank. While Barclays now tells reporters that it is "fully aware of [its] legal obligations," the reports become more specific: the account was at the Barclays branch in Notting Hill, west on London. Re various U.S. banks, the Minority Staff of the U.S. Senate Permanent Subcommittee on Investigations, the Report on Correspondent Banking: A Gateway to Money Laundering, February 2001.

    Consumer advocates have shown, and undoubtedly will continue to show, restraint -- that they take the events of September 11 seriously. We suggest that financial institutions do the same. In Inner City Press' daily coverage of the plane-bombing's aftermath from September 12 - 14 (to view, click here and scroll down), we noted several self-serving announcements by financial institutions. Here's simply one example: New York Community Bancorp blithely announced that its CEO would make a presentation at an investors' conference on Martha's Vineyard on September 20 -- no mention of the tragedy in the community that NYCB purportedly serves. Another New York-based bank, HSBC, told a reporter that it would be waiving fees -- then, the next day, called the reporter to explain that the fee-waived would be extremely limited, and to request that a clarification be published. We are compelled to note these things...

    Similarly, we noted that Rhode Island-based Citizens Bank, the afternoon after the bombing, chose to "spin" a local business reporter about a minor approval it received for one of its CRA-challenged applications to acquire Mellon's branches. The spinning, given the timing, was distasteful. The world can't, won't and shouldn't stop. Applications for regulatory approval, particularly for mergers proposed prior to September 11 (like Washington Mutual - Dime) will continue to be filed. Issues will be raised, but all with restraint, with an eye on larger issues. There is work to be done, and assistance to be rendered.  Rest in peace.

* * *

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

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

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

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

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

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

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

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

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

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

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