Inner City Press Bank Beat Archive 2005-2006

From a generally pro-Citigroup analysis last week, this: "What has been ailing Citigroup, Bove says, is the legacy of former CEO Sandy Weill and 'a board that I would not want to flatter by describing as third-rate.'"

"one of the City's leading fund managers has expressed considerable concern about the fortunes of HSBC and the merits of its chairman, Stephen Green. Michael Taylor, head of equities at Threadneedle Investments... relayed his views based on a recent investor meeting with the HSBC chairman: "We had Stephen Green in here two weeks ago, and, cor, he was asleep on the job is how I would describe it. He's just not up for it.'' Asked if he thought HSBC has tarnished itself through the purchase of Household, its disappointing US sub-prime business, Mr Taylor said: "Yes, yes it has. It's been dreadful.''

Citigroup announced on Dec. 13 a proposal to acquire Grupo Cuscatlan, with operations in El Salvador, Guatemala, Costa Rica, Honduras and Panama, for $1.51 billion. Citigroup bragged that "this transaction will further expand Citigroup's corporate and retail operations in the region and complement its pending acquisition of Grupo Financiero Uno, the largest credit card issuer in Central America." So now there'll be CitiFinancial predatory lending all along the Pan-American highway...

Chase too is selling subprime. Investment bankers, analysts, and others familiar with predatory lending said last week that Ameriquest's parent ACC has hired JPMorgan Chase & Co as adviser to sell the company and is seeking between $1.5bn and $2bn for the franchise...

GE in China: General Electric Corp of the US is looking at the prospects of exploiting opportunities in China's consumer finance market, Xinhua quoted GE's vice-president Steve Bertamini. Bertamini said GE's consumer finance arm GE Money sees strong growth potential in the Chinese market and that it is now conducting a study on the sector. In October, GE Money teamed up with Shenzhen Development Bank and Wal-Mart (China) Investment Co Ltd for the joint issue of a Visa and China UnionPay dual-labeled credit card, the Wal-Mart Changxiang Card.

Deutsche Bank, which has bought two subprime mortgage lenders, Chapel Funding and MortgageIT, now says it plans to buy a subprime servicer next year, and it projects its subprime securitizations to jump 50% this year, to $21 billion.

Meanwhile ACC, the imploding parent of Ameriquest and Argent, last week announced a plan to sell its subprime auto lender Long Beach Acceptance Corp. for $282.5 million to AmeriCredit. What will they sell next?

With all the turmoil in the subprime lending field, worth noting is that on December 5, HSBC's share price fell around 2.7% following the pre-close announcement of earnings and predictions. HSBC's price is down almost 10% on its year high. This fall was attributed to the bank's comments on both the UK unsecured consumer and US secured consumer bad debt. HSBC said that "The trend of rising personal bankruptcies and IVAs seen since the second half of 2005 looks unlikely to abate in the medium term and continues to be the major influence on loan impairment charges in personal loans and credit cards." HSBC added that "challenges continue" in the US second mortgage market: more stringent underwriting in the high risk mortgage market has led to a fall in new business and that this lower level of generation is likely to continue, while the US unsecured consumer market is said to be performing well.

This last would mean, the high-cost personal loans through Household and Beneficial and also tax refund loans. The self-declared world's local bank is a predator...

Also last week, on Wednesday, Royal Bank of Scotland's Sir Fred (the Shred) Goodwin told reporters that RBS' Citizens does not lend to subprime borrowers. "We don't do sub-prime lending which puts us in an advantageous position,'' Goodwin said. But RBS' Greenwich Capital Markets enables other companies which engage in not only subprime, but also predatory lending...

To: Inner City Press
Sent: Wed, 6 Dec 2006 1:29 PM

This is my first time contacting somebody about extremely unfair business practices. Own it Mortgage shut down yesterday. One of my best friends worked there. They were told Merrill Lynch called in their note. Approximately $100+ million. Ownit only had about $50 million in reserve. It seems when Merrill Lynch bought First Franklin they decided to get rid of one of its chief competitors. You guessed it -- Own it Mortgage! ML called due their note last week effectively shutting down their wharehouse line which was close to $250 million. Own it threatened to file bankruptcy and ML said go ahead we'll buy you for pennies on the dollar then... I have also gotten word this same thing is happening to Sebring Financial... I would think Institutions who call in notes of companies competing against one of their newly acquired subsidiaries would be highly unethical and illegal in some way. Even if its in the subprime markets.

Last week, AIG announced a plan to purchase Ocean Finance and Mortgages Ltd., a British finance broker for home loans. American General Finance claimed this acquisition marks the first time the company has operations located outside North America. Maybe the first, technically, for American General -- but it's just that American General is now AIG's vehicle for exporting predatory lending...

Who will try to buy Ameriquest and Argent? Some now say "the French." Word to the wise: c'est toxique....

Here's a story that has it all, at least from our point of view. Last week police found that "a Citigroup executive turned his fancy 38th-floor penthouse apartment overlooking the United Nations into a crystal meth lab... [Named] was Michael Knibb, a vice president for information technology for Citigroup. He was tracked ordering 100 grams of meth's component chemical, court papers allege. When the feds checked his penthouse on E. 39th St., they discovered beakers, solvents and heating elements in his living room and bedroom." And no sale scripts for predatory loans?

"The former chief financial officer of Capital One Financial Corp. will pay $1.8 million and accept a five-year ban on serving as an officer or director of a public company to settle insider trading and fraud charges, the Securities and Exchange Commission said on Monday. David Willey, of Great Falls, Va., had been accused of making about $3 million of profits on inside information that the Federal Reserve Board was considering downgrading the lender in May 2002. His wife, Joy Willey, a former Capital One vice president, also had been named in the SEC's lawsuit."

Might this be part of the explanation for the delay on Capital One - North Fork? While Wachovia's CEO Ken Thompson is getting in line to collect $200,000 a year to be on the board of directors of scandal-plagued Hewlett-Packard, Wachovia is moving to close low-income branches in Philadelphia - click here for more.

So far in the 4th quarter of 2006, Citigroup has announced deals in Turkey, Central America and now China. As DJNS notes, Citigroup "has been pouring money into building its international consumer business, with $530 million slated for this year, compared with $150 million for the U.S. franchise." That is what we mean, about Citi's conscious export of its predatory lending. An example is in India, where CitiFinancial is raising money to expand through non-convertible debentures and short-term debt, raising a total of Rs 5,876 crore. According to a report by rating agency Cresil, "CitiFinancial is engaged in retail financing, primarily to finance the sub-prime segment of retail borrowers in personal and consumer durable loans and home mortgage segments"....

Also in India, GE Money Financial Services Ltd, which is raising Rs 3,225 crore. According to a report by rating agency Cresil, "GE Money Financial Services finances consumer durables, automobiles and two-wheelers"... In Thailand, GE Money Retail Bank will transfer its assets and liabilities including all deposits, home mortgages and home equity loans to Bank of Ayudhya on Jan 3, the Bangkok Post reports. The transfer is part of GE Money's decision to acquire a 25.4% interest in BAY. The asset transfers do not include hire-purchase loans and auto-insurance premiums, which will be maintained at GE Money Thailand.

HSBC will apply for a full banking service license in Thailand once the country's second phase of banking liberalization enters the final stages. "In Thailand, we are restricted to one branch which makes doing a retail bank quite difficult," Michael Smith, chief executive of HSBC's Asian banking unit said in a recent interview at the APEC summit in Vietnam. For now, Bank of Thailand regulations restrict foreign banks to having only one local unit in Thailand. "I would very much welcome the deregulation in Thailand," a move that could allow HSBC to operate the same services as domestic Thai banks, Smith said.

And if the past is any guide, HSBC would provide something not yet in Thailand -- systematically predatory consumer finance lending, which it acquired along with Household International...

Last week Inner City Press sat down for an interview with the president of the Nagorno-Karabakh Republic, Arkady Ghoukasyan, and asked him about the fires, about the United Nations and other matters. Click here for the footage, on Google Video.

Regarding Taiwan, "We are not looking at anything right now," Michael Smith, chief executive of HSBC's Asian banking unit, said last week. "At present we have no plans" to buy any Taiwanese bank, he added. "The prices are too high. No doubt there needs to be further consolidation in the banking sector." This as HSBC's foreign policy...

The spread of subprime lending is exemplified by GE Money, this time in Ireland: "Fresh Start Homeloans, which also trades as The Money Group, is based in Cornwall and is not authorized to do business in the Republic. The company operates a brokerage promoting personal loans, mortgages aimed at those whose marriages have broken up and equity release. It also targets people with poor credit histories, known as sub-prime lending. Its loans are provided by GE Money." Good job, GE -- not only predatory, but also illegal.

For those following the mysterious delay on the Capital One - North Fork deal, Business Week of Nov. 6 explains some of the issues, including that "according to Cap One's regulatory filings, 30% of its credit card loans are subprime. Representatives of 32 credit counseling agencies contacted by BusinessWeek say that Cap One has long stood out for the number of cards it's willing to give to subprime borrowers." As Fair Finance Watch raised in its comments to the Fed, " Last year, West Virginia Attorney General Darrell V. McGraw Jr. filed an action in state court seeking documents from Cap One related to its issuance of multiple cards, as well as other credit practices. Other than that, however, Cap One's practices do not appear to have drawn regulatory scrutiny. A spokesman for the Federal Reserve, Cap One's primary federal overseer, declined to comment about Cap One, but said that in general the regulator doesn't object to multiple cards."

"In Poland, for example, where about 77 per cent of banks are foreign owned, Unicredit is dominant after its acquisition of HVB. Others such as Allied Irish Banks, Citigroup and Commerzbank also have a presence. In the Czech Republic the market is dominated by overseas banks: Societe Generale - which owns Komercni Banka - as well as Erste Bank and KBC and Unicredit. KBC is also present in Hungary. What few acquisition opportunities remain are potentially expensive. For example Erste Bank recently won a state-run auction for Romanian bank BCR, paying Euros 3.75bn (Pounds 2.5bn) for a 61.9 per cent stake - or about five to six times price to book, or asset value, compared with about three times for a continental European bank. Robin Evans, banks analyst at Fox, Pitt Kelton, said in a recent report: "Central and eastern Europe is one of the few regions where HSBC has no material presence... In Poland, HSBC has just one branch in Warsaw for commercial and corporate banking and has no current retail banking license."

What they forget is the ex-Household subprime units... And in Poland just last week, Fortis agreed to buy Dominet, a Polish retail bank specializing in consumer finance. The transaction will be subject to full regulatory approval, in particular the approval of the Polish Bank Supervisory Committee, and customary closing conditions. Dominet is a full-service retail bank with 806 employees and a modern nationwide branch network in Poland. It occupies a strong position in the car finance segment and has a fast-growing portfolio of cash loans."

JPMorgan Chase announced last week that it had hired David Lowman, the head of CitiFinancial International since 2004, to run its mortgage business and "help expand it globally in consumer finance." What better way than with a predatory lender...

Gold worth over $1 million extracted by Chilean dictator Augusto Pinochet has reportedly been found in HSBC, whose spokesman Gareth Hewett said, "Al insistírsele sobre el particular, aseguró: "No puedo confirmar ni desmentir. Sin comentario" (no comment). Later HSBC claimed the Chilean documents are forgeries, but another maintained their authenticity. We'll see. And the mysterious limbo of Capital One - North Fork continues...

Wall Street is going subprime. Bear Stearns is buying Encore / ECC. Merrill Lynch has agreed to buy National City's First Franklin. And in the summer Morgan Stanley signed a deal to buy Saxon Capital of Virginia....

On the money laundering beat, on October 13 the G-8's FATF dropped Myanmar from its money laundering blacklist. On October 17 at the UN, Inner City Press asked U.S. Ambassador John Bolton for his reaction to the FATF's decision. Amb. Bolton had cited Myanmar's money laundering as one of the reasons that Myanmar should be put on the agenda of the UN Security Council, as a threat to international peace and security. Amb. Bolton on Oct. 17 said he hadn't heard of the FAFT decision. His staff gestured to call or email him. Inner City Press emailed the staffer press accounts of the FATF decision and was told that a comment will be forthcoming.

Meanwhile the CEO of long-time money-laundering Citigroup Chuck Prince last week said that "buying a big bank in western Europe is not on my agenda." He added that a big acquisition in the U.S. would "re-weight us very significantly to the US - which is not what I want to do." And so, Turkey -- on Tuesday, Citigroup agreed a $3.1 billion deal to buy 20 per cent of Akbank, Turkey's largest privately owned bank. Prince said it was "a great deal and a perfect example of what we want to do more of." We'll see.

Announced Oct. 13: GE Money proposes acquiring a 98 per cent stake in Latvian Baltic Trust Bank from Russian titan Oleg Boiko. It is planned that the deal could be completed in November this year. One hopes that the Latvian bank regulators will be objective in considering GE's record of predatory lending...

Georgia's foreign minister Gela Bezhuashvili said last week, "Branches of Russian banks are continuing to operate in Abkhazia, unlawfully. Money-laundering is still happening there. Counterfeit money is still being printed in South Ossetia." Meanwhile at the UN, a Georgian representative promised Inner City Press to provide information on this alleged money laundering. Inner City Press asked six questions of Georgia's UN ambassador, click here to view.

In Federal court in Brooklyn, NY, Judge Charles P. Sifton in Brooklyn has in the past two week denied motions to dismiss money laundering for terror charges by RBS' NatWest and Credit Agricole. The latter e suit, filed in February under the Anti-Terrorism Act, portrays Credit Agricole of improperly doing business with a French-based charity that has been designated a terrorist organization.

In court papers, the bank claimed it suspected the charity, CBSP, might be involved in money laundering, but not terrorism. The judge said in his ruling that 'it is reasonable to believe that when the bank noticed 'unusual activity' on CBSP's accounts, the bank would have investigated the organizations receiving the large transfers, "including designations of terrorist organizations made by the government whose country was experiencing the terrorism." Ah, RBS and Credit Agricole...

From the Sunday Telegraph of Sept. 24: HSBC "bought Household International, a US consumer finance group, three years ago and Ken Harvey has been plucked from there to become head of IT for the whole bank. As HSBC transfers the technology acquired with Household to its operations round the world, costs should come down, with a resulting increase in profitability." So now all of HSBC's IT is run by predators....

Bank of America admitted last week that its lax operations allowed South American money launderers to illegally move $3 billion through a single Midtown Manhattan branch. BofA said that it ''takes seriously its anti-money laundering obligations'' and that it ''never knowingly does business with persons, organizations or businesses engaged in illegal activities and did not in this case.'' Most of the funds came from Brazil via a licensed money transmitter in Uruguay and then to the Bank of America branch, which allowed funds to reach unlicensed money transfer firms in the area...

From the Toronto Star of September 25: GE Money, the Canadian consumer-lending business of General Electric Co., is applying to become regulated as a trust company so that it can launch new products like home equity lines of credit. The company has been operating in Canada as an unregulated financial institution for 20 years." And GE has been operating in the U.S. for even longer, as an UNREGULATED financial institution...

From Regions' September 21 response to the Federal Reserve's September 11 questions on AmSouth, sent to Fair Finance Watch as a protester of the deal:

"Regions Mortgage's main secondary market investors [include] some servicing-released investors, such as [REDACTED] and [REDACTED]... Regions has engaged outside counsel, which has in turn engaged [REDACTED] to provide advice on ensuring compliance." After that, an entire sentence is blacked-out. Top secret, apparently, the programs of the Regions...

"Equifirst grants rate exception authority to designated EquiFirst employees. Mortgage Loan Processors and Underwriters may use their discretion to vary rates on a mortgage loan up to [REDACTED] basis points. Managers may use their discretion to vary rates on a mortgage loan up to [REDACTED] basis points."

Hardly a best practice... Similarly, on branch closings, Regions plays hide the ball:

"Please see Confidential Exhibit 3 for information related to the branches that have been identified at this time that may be closed, relocated or consolidated in connection with the application."

"There are 139 areas with overlapping Regions Bank and AmSouth Bank branches where closure or consolidation of branches is being contemplated. Thirty-two of these overlapping branches under consideration (or 23% of the total) are located in L[ow or] M[oderate] I[ncome] census tracts."

"Regions Bank continues to have a limited number of credit relationships with subprime lenders... A description of the identified subprime lending arrangements is included as confidential exhibit 5. Regions also has a limited number of credit relationships with unaffiliated payday and car title lenders. A list of these borrowers is included as Confidential Exhibit 6... Regions Mortgage has in place broker relationships with [REDACTED]."

AmSouth similarly plays hide-the-ball on its acknowledged lending to (unnamed) pawnshops. The application states that "The combined institution currently intends to continue to do business selectively with subprime mortgage lenders and pawn shops."

Heard from the Street: there are those who predict that Royal Bank of Scotland will be sold. There are those predicting Citi will move to buy ABN Amro.

To be celebrated for sleaze. Robert Rubin, who has been directly asked about Citigroup's predatory lending and said it is not in or under his "aegis," now sets up a public policy institute which the NYT (Sept. 8) says will be "addressing issues like the costs to the economy of excessive litigation and regulation." Yes, without excessive regulation CitiFinancial could get even more vicious than even the Federal Reserve found it to be. The Times reports that "Mr. Rubin has kept himself at a distant remove at Citigroup" -- that is, still perceived as progressive even as the company that pays him is engaged in one scandal after another, including scandals like CitiFinancial which directly harm the poor. ''This is not a political undertaking,'' Mr. Rubin claims. If you say so...

From the Times of London of September 9: "Leading figures from the banking, advertising and hospitality industries will back a UK festival celebrating contemporary China, to be held in 2008. Stephen Green, the chairman of HSBC, will chair the committee organizing China Now." Uighurs, anyone?

From The Independent of September 5: "Stuart Gulliver, the chief executive of HSBC's investment bank, has been awarded shares worth pounds 29.5m over the past five years. [HSBC] was forced to disclose details of Mr Gulliver's shareholdings after his appointment to the boards of its four main operating subsidiaries." Ah, transparency...

GE Money on the Pampas: Argentine consumer finance unit GE Money Argentina expects to grow loans 45% next year to $117 million, GE Money Argentina marketing director Georgie Consoli said last week. GE Money offers credit cards and consumer loans and also insurance where it sells personal and credit insurance policies. GE Money operates through 29 branches in Argentina. GE's consumer finance business includes operations in Mexico, Brazil and Central America. It also runs commercial finance ventures in Mexico and Chile...

From The Asian Banker Journal of August 31: "Chuck Prince reportedly pooh-poohed the significance of the U.S. Federal Reserve Bank's unofficial ban on large acquisitions. But 18 months of M&A inactivity has clearly cost the bank in several ways, aside from reputational losses resulting from regulatory mishaps. Some time the world's largest financial services institution by market capitalization, it was for some time also the world's largest by assets, but no longer. HSBC has just surged ahead with $1.7 trillion in assets, leading its rival by $111 billion. If Citigroup's stock continues to stagnate, as it did upon its latest results, it may lose its market capitalization crown to Bank of America, which has a much smaller asset base."

In the shadows and interstices of United Nations Security Council resolutions, the U.S. is at work. 'There is sort of a voluntary coalition of financial institutions saying that they don't want to handle this business anymore and that is causing financial isolation for the government of North Korea,' Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence, told AP last week. 'They don't want to be the banker for someone who's engaged in crime, as the North Korean government is,' he said. Banks in Singapore, Vietnam, China, Hong Kong and Mongolia are opting not to do business with North Korea, Levey said. We'll see.

From Italy mega-merger news at deadline, " If implemented as planned, the tie-up between Milan-based Intesa, Italy's second-biggest bank after UniCredit SpA and Turin-based Sanpaolo, the third-biggest, would create a bank that's just outside the top 10 in Europe by market capitalization. That will give the combined Intesa-Sanpaolo the scale to look for business outside Italy, though its current non-domestic presence is restricted to a few markets in Central and Eastern Europe." Speaking of which, on Citi, HSBC and GE --

In Poland, according to the Gazeta Wyborcza, the "aim of Citibank Handlowy is to extend the number of its CitiFinancial branches to 225"... Kiev-based OJSC Nadra Bank recently placed 7.7% of its stock among foreign investors, including Swedish investment company East Capital. The private placement was organized by HSBC... Hung[a]ry to lend on homes: GE Money Bank's Monika Kubovcova said the growth would be also boosted by households' higher incomes and the character of home ownership. In the Czech Republic, 54 per cent of homes are privately owned, compared to 80 per cent in Italy and Spain, but just 40 per cent in Germany, said Kubovcova. "At present, only about 3 per cent of Czechs have a mortgage, as there are some 198,000 active mortgages," said Kubovcova [drooling].

On Regions - AmSouth, the sleazing has begun. Regions has provided Fair Finance Watch with a copy of a CRA submission, with the names of all groups it funds blacked out. Meanwhile Regions solicits letters of support from such groups. Separately, Regions writes to thank such groups, starting "Thank you for taking the time to write a letter of support for the application by Regions Financial Corporation to merge with AmSouth Bancorporation... We at Regions very much appreciate your positive attitude toward our organization." But the identity of funded groups must be unmasked to weigh their testimony. Developing...

GE's hungry for more predatory loans: Hungary's Budapest Bank, a member of the US-based GE Money Bank group, recorded a 22% year-on-year (y/y) increase in net income to HUF 4.86 bln in the first half of 2006, as the company registered strong growth in interest income thanks to its dynamically-growing lending portfolio, according to figures released by the company on Friday. "Retail lending once again played a key role in the significant expansion of our lending portfolio in the first half of the year," GE wrote in a statement. No word on the interest rates...

A federal appeals court ruled on Wednesday that it was unconstitutional for Delaware to deny public documents to nonresidents under a provision of the state’s Freedom of Information Act. The ruling by the United States Court of Appeals for the Third Circuit, in Philadelphia, affirmed an earlier decision by a Federal District Court in Wilmington.
In 2003, Matthew Lee, a consumer advocate and lawyer who lives in New York, sued the State of Delaware for denying him access to documents related to a nationwide settlement with the consumer lender, Household International, after the company was investigated for deceptive lending practices. "We sought the records to be able to show how widespread the problem of predatory lending was within Household," said Mr. Lee, who is also the publisher of Inner City Press, a nonprofit Bronx newsletter about the practices of banking and financial services companies. M. Jane Brady, then the Delaware attorney general, denied Mr. Lee access to records regarding her handling of the settlement. Ms. Brady cited a provision of the state’s Freedom of Information Act law limiting access to records "to any citizen of the state." Mr. Lee then sued... In the 17-page decision, Judge D. Brooks Smith, writing for the three-judge circuit panel, said, "Delaware’s public records law discriminates on its face between citizens and non-citizens. Although the state has a substantial interest in ‘defining its political community,’ the citizens-only provision” of the law bore no “substantial relationship to that interest,” Judge Smith wrote. Delaware’s current attorney general, Carl C. Danberg, said Wednesday that he would not appeal... While he said the state had been processing other freedom of information requests to comply with the earlier ruling, Mr. Danberg said that Mr. Lee would still not receive the Household documents because they were protected under a separate Delaware law by an "investigative file privilege." Mr. Lee was surprised by the news and called the decision "an outrage." He questioned why he could not receive the documents, particularly, he said, "because other states have given us reams of documents about their settlements on predatory lending with Household"

This week, the spread of predatory lending, in Poland, the Czech Republic and HSBC's hunt in Japan.

From the Polish News Bulletin of August 11, Citigroup's " Bank Handlowy (BH) wants to develop its daughter company CitiFinancial, responsible for retail clients. This means higher margins and higher profits. During the first half of the year, BH earned ZL343m, which is 8 percent more than a year earlier. However, more than a quarter of this result is an effect of a one-off transaction. BH Chairman Slawomir Sikora predicts that the results during the last six months of the year will not be quite as good. However, returning to the retail banking sector should be visible in the results. The market did not react with enthusiasm. BH quotes fell by more than 2 percent to ZL67.3. BH has high hopes in the development of the retail market. Credit cards are supposed to have a substantial effect. So far, this year the bank has issued 613,000 credit cards, 12 percent more than a year earlier. Sikora says that in three years, BH wants 15-18 percent of operational revenue to come from CitiFinancial."

HSBC now in the predatory lending hunt in Japan, per the FT of August 12: "Yasuo Takei, the influential founder and former chairman of Takefuji, the Japanese consumer finance group, died yesterday, the company said. He was 76. The death of Mr Takei, one of Japan's richest men, immediately prompted speculation that Takefuji - already the subject of take-over talk - might become more attractive as a target. Bid speculation has surrounded the lender since Mr Takei was forced to cut his stake in the company from 60 per cent to below 25 per cent after he was convicted in 2004 for wiretapping the home of a journalist who had been critical of Takefuji. Under Japanese law, a convicted criminal cannot hold more than 25 per cent of a listed company...Japan's consumer finance companies have also been hit by a Supreme Court ruling this year that made it easier for borrowers to reclaim a significant part of their interest payments they have already made. Several foreign groups had expressed interested in Takefuji - including HSBC and Newbridge Capital, the private equity group - because of the group's franchise, strong balance sheet and high capital adequacy ratio. GE Capital and Citibank have already invested in Japanese consumer finance companies. "

GE's spin in the Czech Republic, August 11: " US' GE Money Bank's Czech unit generated a profit of CZK 1.6 bln, which means 20% growth year-on- year in the first half of 2006, according the Czech accounting standards, the bank stated Friday. 'The net profit of GE Money Bank increased, year-on-year by nearly 20%, amounting to CZK 1.6 bln as of June 30, 2006,' GE Money bank spokesperson Eva Chaloupkova said. 'The growth of the total assets to more than CZK 69 bln was driven by the increase of personal loans and SME loans, mortgages, GE Money cards and current accounts,' GE Money Bank's CEO and Country Manager for the Czech and Slovak Republics Pieter van Groos is quoted as saying in a press statement.

Intrigue in Ukraine: beyond the sell out by merging of the Orange Revolution, there are other (bank) mergers in the works. Russia’s Standard Bank is to buy 100% in Ukraine’s AIS-Bank, it is reported, and Erste Bank is buying 50.5% in Ukraine’s Prestige Bank for $35.3 million. "Based on a shareholders' equity of $59.2 million this translates into a price/book multiple of 1.18," the banks said, adding that the transaction is expected to be completed in October 2006.

Of all credit card companies doing business in the United States, HSBC is the most active in seeking to buy political influence -- that is, in donations to federal political candidates in the 2006 election cycle, according to Federal Election Commission filings. Number two was Capital One Financial, which gave $456,900 through the end of May...

Meanwhile, HSBC continues exporting Household's predatory lending. In Brazil, HSBC says it plans to sign 20 operating partnerships with retailers through its consumer finance unit Losango by the end of this year. "Ten partnerships are already wrapped up," HSBC Losango CEO Henrique Frayha said. Losango announced a partnership with regional retailer Ricardo Eletro from the state of Minas Gerais...

GE Money has already acquired struggling online banker Superbank, sources say. When asked to confirm whether the global finance company had acquired Superbank, GE's Australasian communications manager, Keith Ritchie, said: "We don't comment on market speculation." When Superbank spokeswoman Pauline Ray was approached about whether the business had already been sold, she said: "We don't comment at all on market speculation. That's our comment." Speculation has been rife that Superbank will be sold or forced to close its virtual doors. But a well-placed source says the purchase has taken place and the buyer was GE. In January, GE regional chief Tom Gentile said a personal banking business was the missing link in the company's Australasian business, as it was a "huge part" of GE's global strategy. It had started the process of applying for an Australian banking licence. "Sometimes we enter markets through acquisition. Other times it's through organic growth," he was quoted as saying. Superbank was founded as a joint venture between Australia's St George bank and Foodstuffs. It is an online-only banking service and was one of the first proponents of high-interest, low-fee savings accounts that could only be accessed through the internet.

So wait -- in New Zealand, there are bank acquisitions without regulatory approval? Or without any pre-consummation notice to the public?

From Citigroup's earnings statement last week: "International consumer revenues and net income grew 12% and 10%, respectively." During the quarterin Japan "85 new automated loan machines (ALMs) were added... Outside of Japan,.. 111 new branches were opened." Yes, the export of CitiFinancial's predatory lending. CitiMortgage, too -- last week, the U.S. Department of Housing and Urban Development fined CitiMortgage $650,000 for violating RESPA in over-charging for captive title insurance. Citigroup as per usually claimed it had done nothing wrong...

JPMorgan Chase last week reported a decline in retail banking profits, largely on weakness in its mortgage servicing. Jamie Dimon spun that rising interest rates and a likely increase in bankruptcy filings -- which were depressed after the bankruptcy law was toughened last fall -- could lead to credit card losses at JPMorgan Chase of 'several hundred million dollars' in the third quarter, and perhaps as much as $500 million before year's end. 'In credit cards, we know it's going to happen. ... We're telling people upfront,' he said....

Bank of America last week reported higher earnings for the April-June period because of its acquisition of credit card company MBNA propped up results. CFO Alvaro de Molina ordained a pause in the Federal Reserve's two-year campaign to raise interest rates -- not because it will make things easier for consumers but because of concern that too much tightening will push the U.S. economy into recession. 'A pause is something that should happen, and I embrace it,' de Molina said. 'But (I) embrace it not so much from a Bank of America short-term earnings perspective. I embrace it because overdoing could cause value destruction.'" How very big-minded...

Wells Fargo last week missed Wall Street earnings expectations by a penny in the second-quarter because it sold off adjustable rate mortgages and debt securities in the quarter at a $250 million loss. In Wells furniture news, this: "La-Z-Boy is a brand name consumers have known and trusted for close to 80 years," said Dan Abbott, president of Wells Fargo Financial Retail Services. 'We look forward to helping them continue to build brand awareness and attract new customers with the La-Z-Boy Furniture Galleries MasterCard credit card program.'" What's next? Water beds?

HSBC and mining -- in investment banking news, look at Phelps Dodge Corp.-Inco Ltd., a 17.6 billion announced in late June, from which HSBC stands to make $12 million (or $20 if Falconbridge Ltd. gets in on the action). But what of HSBC's supposed environmental standards? Ask HSBC Securities Inc.'s George Foussianes and Graham Shuttleworth -- and higher up. We'll have more on this, and on matters Central American, in the near future...

HSBC, exporting the subprime practices it acquired along with Household International, now says it want 8 percent of the Brazilian credit card market by the end of 2007. "Low-income customers are the fastest-growing segment within the consumer credit business - 35% a year for the past five years - while average growth for the whole segment was around 25%," said Henrique Frayha, CEO of Losango, the consumer finance arm of HSBC in Brazil. HSBC Brasil currently holds a 4% market share in the local credit card segment -- it aims with Household's practices to double that...

Capital One and North Fork shareholders are slated to vote on the proposed merger on August 22. Meanwhile, the New York Banking Department's comment period on the merger remains open through July 24...

Synovus' Columbus Bank & Trust along with CompuCredit were forced to pay $11 million in restitution to residents of New York State for failing to disclose activation fees of up to $179 on Aspire Visa cards. Inner City Press has raised Synovus' consumer abuse to the Federal Reserve a number of times in recent years. Now what will the Fed do?

In Latvia last week, GE Money announced its entry into new car leasing, so with the acquisition of the portfolio of Stars Lizings, a subsidiary of local car dealer Domenikss. "GE Money expects to develop car leasing services in Latvia and become the market leader in the sector," said Dmitrijs Cimbers, GE Money board chairman. Latvia GE Money had been present only on the used car leasing market since it entered the Latvian market in May 2004. GE Money analysts estimated that at present the company is the market leader in used car leasing sector, taking about 30% of the market.

Given the disparities in Citigroup's 2005 HMDA data, the Federal Reserve's wordless lifting of its 2004 cease-and-desist predatory lending order against CitiFinancial is shameful. So too was Citigroup's meeting with the Office of Management and Budget in June, to lobby about Basel II...

As reported last week by SNL Financial, "Countrywide Financial Corp. is again trying to become even more bank-like by creating a new online savings account aimed at improving its funding base and attracting new bank customers as mortgage volumes continue to face headwinds... The rate offered by Countrywide is fairly similar to popular online savings accounts like HSBC and ING Direct, which require no minimum balance to receive interest and pay rates of 4.25% and 4.80% APY, respectively."

Meanwhile, Inner City Press has been informed that the Federal Reserve's long-time fair lending guru Robert Cook now works at and for Countrywide, which has the subprime unit Full Spectrum. When Inner City Press asked about anti-revolving door provisions, noting that even the OCC prohibits a bank's examiner from going to work for the bank for a year after leaving the OCC, it was noted that Mr. Cook recently attended a Federal Reserve meeting with and for Countrywide. That is to say, he appeared, quite literally, for Countrywide, which was and is a bank holding company regulated by the Fed...

On Friday June 16, Inner City Press / Fair Finance Watch filed a timely challenge to Capital One's application to acquire North Fork Bancorporation - it is summarized below. But first, this breaking computer glitch news: Inner City Press received a call on the afternoon of June 17 from a Bank of America customer, that her deposits weren't being credited and that BofA told her there was a computer glitch, that supposedly only impacted customers in Maryland and DC. But the caller was (and is) in Florida...

Home Mortgage Disclosure Act (“HDMA”) data for 2005, which are not taken into account by any existing CRA exam and which identify loans which are over the rate spread of 3% over Treasury securities on first lien loans, 5% on subordinate liens, show that North Fork's large mortgage company, Greenpoint, made 11.58% of its loans to African Americans over the rate spread, versus only 6.62% of its loans to whites. Even combined with North Fork, in the New York City MSA, Greenpoint-plus-North-Fork made 9.14% of their loans to African Americans over the rate spread, versus only 5.5% of their loans to whites. Meanwhile North Fork, with its prime loans, blatantly excluded people of color from its 1-4 family home mortgage lending. In 2005, North Fork Bank made 333 such loans to whites, and only 14 such loans to African Americans, and only 29 to Latinos, entirely out of keeping with the demographics of North Fork Bank's footprint, from which it draws deposits.

The 2005 data which ICP requested from Capital One is now fraught with uncertainty. Capital One first provided ICP with relatively extensive data on a CD-ROM, then sent another CD, with much less data, claiming that this second, skeletal data set is all they have to report. Even this thinned-down data, "without COHL," fully 41.03% of the loans to African Americans were over the rate spread. The FRB should inquire into this, including analyzing the data which Capital One collected but now claims it is not required to file. In any event, given the size of Greenpoint, that disparate operation would become a main engine of disparity in the proposed combined Capital One. Public hearing should be held on this application, and on the current recent, these proposals should be denied.

Additionally, as demonstrated in the exhibits hereto, North Fork is an extensive funder and enabler not only of check cashers (including The Bronx' Subway Check Cashing and affiliate(s) of a highly controversial New York firm that failed to pay out to utilities and others money that consumers paid into it), but also of such predatory fringe financiers as rent-to-own locations. For example, North Fork Bank in mid-2005 made a loan to RENT TO OWN INC. of 146 WEST MAIN STREET, BAYSHORE, NY 11706, running through 2010.

Capital One's Hibernia does the same -- for example, lending to T L C RENT-TO-OWN, L.L.C., 1700 WESTBANK EXPRESSWAY, HARVEY, LA 70059. Public hearing should be held on this application, and on the current recent, these proposals should be denied.

More needs to be (and will be) said, but ICP will await copies of the FRB's correspondence with and about Capital One and/or North Fork, and the banks' responses. These questions must be answered, and the responses should be made public, pursuant to Inner City Press v. Federal Reserve Board, 380 F. Supp. 2d 211, and the subsequent denial of the Federal Reserve’s motion for reconsideration, at 2005 U.S. Dist. LEXIS 23376 and in New York Law Journal of October 21, 2005, “Reconsideration Denied as to Federal Reserve's FOIA Disclosure of Bank Merger Documents”).

Recently the FRB has stopped asking applicants for the names of the subprime lenders they lend to -- the only explanation for this FRB change is the above-referenced court decision, which would require the FRB to release some or all of this information. (See, in the pending appeal in the above-cited case, A-23, Para 6, cited in ICP's reply Brief at n.3 -- the Fed has acknowledged that having the names is "necessary" to "assess the level of risk." The FRB should not limit or change its consumer protection inquiries for such reasons. The questions -- the naming of names -- should resume, on this application.

As Citigroup grows and exports its practices, this is the type inquiry Inner City Press / Fair Finance Watch receives:

I have a complaint against Citibank of Bangalore, India. The staff of both the local and Chennai office have dismissed my complaint giving lame excuses. I would like lay bare the fact to Citibank Chief Charles Prince himself. I don't want to deal with the Chennai office. They don't understand the damage they have caused me.

Fact of impossibility- My husband and I were recently approved for financing by Prosperity Mortgage (brokers affiliated with Wells Fargo) at 58% debt to income ratio. Our current annual salary puts us at the 28% federal income tax bracket. It is obvious that we do not have the means to make the payments of these expenses. How is it possible that we were approved if the payments are impossible to make? Aren’t mortgage companies in the business of making money- not reselling properties that have been foreclosed upon?

Rushing into Russia, whatever the costs: Deutsche Bank is planning to open 20 branches in Russia over the next two years, according to German newspaper Handelsblatt. Deutsche Bank already has a presence in Russia via its ownership of Russian investment bank UFG and its Moscow-based subsidiary.

Thwarted in its attempt to buy Russian Standard Bank in 2004, BNP Paribas announced plans to spend $700 million between 2006 and 2012 developing a network of 150 branches in Russia's major cities and the all-important Moscow region. Meanwhile, Citi's CEO has said that Citigroup will add 40 branches to the 27 it has already opened in Russia.

Meanwhile, Central Bank First Deputy Chairman Andrei Kozlov suggested Washington would eventually retract its demand - which would make Russia the first country to join the WTO without agreeing to let foreign banks open branches covered not by the Russian Central Bank, but their own home-country regulators...

(Non) compliance watch -- Citigroup's brokerage unit has agreed to pay $98 million to settle claims on behalf of thousands of current and former brokers that they are owed overtime pay. Way to treat even brokerage employees...

Much was made last week of Citibank's plan to open four branches in Boston. Thrown in as an aside were CitiFinancial's 22 high-cost lending offices in Massachusetts. It's subprime that drives Citigroup, at home and increasingly abroad...

A non-bank deal we see as significant was last week's announcement by Deutsche Bank that it intends to acquire California-based subprime mortgage lender Chapel Funding LLC. The idea is to cut out the middle man. The head of Deutsche Bank's Global Markets Americas unit, Phil Weingord, said that "the integration of a mortgage originator will provide significant competitive advantages, such as access to a steady source of product." Deutsche Bank is not only a trustee on subprime loans, it is also a securitizer. It has begun subprime lending in the United Kingdom, and last December bought a mortgage lender in Mexico, to securitize.

Questioning this strategy is HSBC, whose financial group chief Doug Flint, flaunter of Reg FD during HSBC-Household, said last week in New York "We find it intriguing at the moment to see so many of the Wall Street firms seeking to find mortgage origination capacity to feed their asset-backed securities businesses at a time when mortgage origination volumes may fall." Flint also implicitly acknowledged that HSBC is no expert in securitization, despite being knee deep in subprime with its Household units...

A deafening no-comment -- following the Wall Street Journal's May 11 article on the continuing investigation into the money laundering of the billions looted from Nigeria by ex-dictator Sani Abacha, which named as a conduit for Abacha's Transnational Bank's nostro accounts only Citigroup and Deutsche Bank, nothing said by either institution...

In Brazil, CitiFinancial is on record as planning to increase its number of subprime lending offices from 74 to 144. Meanwhile, Citi's proxy statement discloses that Robert Rubin, who could barely be bothered to stand up and wave at the annual general meeting, spent shareholders' $330,392 on personal travel in 2005. That's beyond what's spent spreading predatory lending around the globe -- about that, there's nothing personal, just business. Speaking of which, a headline in the International Herald Tribune of May 11, "Citigroup pulls back on Guangdong bank bid - Ownership law can't be circumvented" makes an interesting contrast to the United States in 1998. Then, Citigroup not only circumvented but broke the U.S. ownership law, the Glass Steagall Act prohibiting the mixing of banking and securities / insurance underwriting. Can it be that China has more "rule of law" than the U.S.? Or just that Citigroup doesn't have enough juice in China to allow it to circumvent the law?

Random (banking) thoughts, between Philadelphia and New York. In the Philly subway system, there are billboards for TD Banknorth, with a strange headline about its and HUBCO's small ATM network. If there's a bigger point intended, it's lost on most viewers. Also lost -- that this city, beyond brotherly love, was the locale in which the Supreme Court fixed in precedential stone the local nature of banking (and bank antitrust analysis), in the Girard National Bank case. There's a Girard stop on the Philly transit system... There are Citizens Bank's green ATMs, with nary a mention of the affiliation with RBS and Greenwich Capital Markets. On the way back (on the $12 Chinatown-to-Chinatown bus), there's a Hudson City branch in Cherry Hill, then PNC's big mid-Jersey building, and a JPM Chase back office just before the Holland Tunnel.

In all the talk of Wachovia's Golden West deal last week, the Charlotte Observer noted that it makes any "link up" between Wells Fargo and Wachovia less likely. So where might Wells go? Fifth Third? Damaged goods...

May 8, 2006 - Click here for Wachovia's disparities and fringe finance, to be raised on Golden West.

The other Charlotte titan, Bank of America, likes to hide behind others. On May 2, BofA announced a proposal to acquire a $2.2 billion stake in Banco Itau through an asset-swap, which would involve Itau taking control of BofA's BankBoston unit in Brazil, which has about 140 offices and $9 billion of assets under management. Itau has also been given exclusive rights to buy subsidiaries of BankBoston in Chile and Uruguay. BofA's strategy is hard to fathom...

If Royal Bank of Scotland has Fred the Shred, at HSBC is it Mean Steve Green? Layoffs and office closings post-Metris in three states: " HSBC Finance Corp. will close its south Orlando call center by October, eliminating nearly 300 jobs, the credit-card company acknowledged on May 2 to the Sentinel's intrepid Rich Burnett, who reported that HSBC "will also close similar telephone-service operations in Duluth, Minn., and Scottsdale, Ariz... All three centers are part of Minnesota-based Metris... The Orlando call center employed nearly 400 people at its peak three years ago, as Metris' main telemarketing arm for the Hispanic market. Metris had acquired the operation from Banco Popular, the Puerto Rico-based bank, in mid-2000... When it acquired Metris -- the 11th-largest card company -- HSBC said the addition would complement its existing businesses because Metris focused on low- and middle-income clientele, many with blemished credit files. Metris also had a series of legal, financial and regulatory problems prior to the acquisition." Which is also consonant with HSBC's ex-Household units, with their past (and present) "legal, financial and regulatory problems."

Close observers of Sovereign - Santander - Independence notice that Independence has put off reporting its earnings, hoping that if Sovereign gets approvals it will never have to (report). We'll see...

Report from the field: retail banker in Belgium include such titans as Dexia, AXA, Citibank, ING, Delta Lloyd and BBVA. Their branches are small; a sample Citibank for example has a Plexiglass door between the waiting area and the back. This Citibank branch refused to exchange currency into Euros except for Citigroup customers; a Citi credit card was not enough to qualify, highly ironic in light of CEO Charles Prince's statements at Citi's annual shareholders' meeting, that the company has unified its customer bases instead of viewing each product or business line separately. Perhaps the message hasn't crossed the cold Atlantic? When asked, a Citigroup rep called this part of Citi's anti-money laundering policies. Apparently a different policy is applied to such Citi customers as Omar Bongo of Gabon...

In a third-floor room in the European Parliament on April 27, Green party delegate Heide Ruhle listened while nodding to consumer advocates despairing of non-bank input into the pending Consumer Credit Directive. When asked, with an administrative colleague, about merger review in the Euro zone, the Green response was that review by particular nations is outmoded. Will Brussels' review consider predatory lending? That remains unclear.

On Tuesday at Carnegie Hall Sandy Weill, presided over his last annual shareholders meeting at Citigroup, handing the reigns to his understudy Chuck Prince. As reported by AP, questions were raised about predatory lending, money laundering and tax evasion. But the ritual rolled on, replete with videos of tributes to Sandy, from a craven Dan Rather to a gushing Robert Rubin, who called Sandy the "most knowledgeable" business leader he'd ever "engaged with." $45 million a year will buy these kind of plugs. During the meeting, one of the speakers asked to see Robert Rubin, who barely deigned to stand up, wave his hand once and then sat back down. Chuck Prince intoned that Citigroup will open over a thousand branches or consumer finance outlets in the coming year -- "three a day," he bragged. When asked by Inner City Press if Citigroup's stated "reforms" in the U.S. apply to its global consumer finance business, Prince said yes, it's a global platform, they do apply. We'll see...

Speaking of global, last week the hedge fund Lone Star had to set aside $100 million to try to buy its way out of problems it created in Korea, buying and selling Korea Exchange Bank. The workers and customers protested, calling Lone Star a vulture and tax evader. Now the payoff, to try to make it go away....

We have an April 13 response from Santander (and Sovereign, apparently) to questions posed by the Federal Reserve. The first question is about Sovereign's connections with "alternative financial providers" such as "pawn shops, check cashers, or money service businesses." Santander admits that Sovereign has such connections, specifically confirming exhibits submitted by ICP about Century Pawnbroker and Cash Advance System, and implying there are more but leaving these unnamed. The Fed, of course, is striving not to ask for names, since a Federal court has said these can't be withheld.

Click here to view Inner City Press / Fair Finance Watch's challenge to JPMorgan Chase's proposal to buy 338 branches from Bank of New York (and to close at least 50 of the branches).... In other merger fall-out news, Bank of America is closing three card-services call centers and laying off 900 workers in Colorado Springs, Horsham, PA, and Dover, Delaware. The Dover plant employs 630. BofA also reported that it is planning to sell MBNA's headquarters in downtown Wilmington, Delaware. Then they'll lease it back, they say. How innovative... Until next time, for or with more information, contact us.

On Wal-Mart, the FDIC waited until the business day before its Washington, DC public hearing to make available the Community Reinvestment Act plan -- such as it is -- submitted by Wal-Mart on March 31. The below will be delivered, though not necessarily as expected:

Good morning. Inner City Press / Fair Finance Watch has remained opposed to Wal-Mart's cynically shifting attempts to enter the field of banking since 1999, when Wal-Mart applied to the Office of Thrift Supervision to buy a savings bank. At that time, Wal-Mart admitted it wanted to be a full service bank. Now it aims lower, or claims to. But given its record of destabilizing communities, of mistreating its employees including in sub-contracted sweatshops, and of taking money out of rather than reinvesting in neighborhoods, this application should not be approved. Each of these elements of Wal-Mart's record is detailed in the written submissions of Inner City Press and other opponents. For purposes of today's hearing, Inner City Press wishes to emphasize flaws and unfairness in the FDIC's review.

While initially heartened that the FDIC agreed to hold hearings, Inner City Press asked to testify from the FDIC's office in New York, as the OTS allows. The FDIC said no, stating in a March 17 letter to Inner City Press that "the FDIC does not believe it likely that allowing public participation by videoconferencing with FDIC regional offices would result in our obtaining significant viewpoints that would not be adequately represented by the presentations at the Kansas City, Missouri, and Washington, D.C. locations." This position is contemptuous of the views of grassroots groups not based in Washington (or Kansas City)...

More substantively, while Wal-Mart said it would submit a CRA plan -- this in a March 1 letter that the only released later in the month -- the Plan only went up on the FDIC's web site on Friday, April 7, the business day before today's hearing. While ICP had only now begun to review it, page 5 states that Wal-Mart seeks to limit its CRA assessment area to Salt Lake County, Utah. This is laughable, for a corporation of the size and scope of Wal-Mart. Inner City Press formally requests the dismissal and denial of Wal-Mart's application, for the reasons in each of its written submissions (see ICP's ongoing report).

Ten days after the deadline for lenders to provide the 2005 mortgage lending data that Inner City Press / Fair Finance Watch requested on March 1, ICP has released a study of the data, finding worsening disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. 2005 is the second year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens.

Citigroup in 2005, in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread over seven times more frequently than whites, worse than in 2004.

Redlining and continued disproportional denials to people of color are also evidenced by the new 2005 data. Nationwide for conventional, first-lien home purchase loans, Citigroup denied the applications of African Americans 2.69 times more frequently than those of whites, and denied the applications of Latinos 2.02 times more frequently than whites, both disparities worse even than in 2004. Bank of America in 2005 was more disparate to Latinos, denying their applications 2.38 times more frequently than whites, and denying African Americans 2.27 times more frequently than whites.

While comprehensive income comparisons will not be possible until the aggregate data is released in September, ICP / Fair Finance Watch has designed an innovative way to consider income correlations, by calculating upper and lower income tranches based on each lenders own customers. Nationwide at Citigroup for conventional first-lien loans, 37.73% of upper income African Americans were confined to higher cost loans over the rate spread, versus only 11.46% of upper income whites. Income does not explain the disparities at Citigroup. Nor at HSBC, where less than half of upper income white borrowers were confined to rate spread loans, versus 61.87% of upper income African Americans and an even higher percentage of Latinos, 62.82%. HSBC, which bought Household International in 2002 just after its predatory lending settlement, has increased the interest rates changed by its former Household units. Over eighty percent of HSBC's home purchase loans to African Americans and Latinos were higher-cost loans over the rate spread, much higher than in 2004 at these ex-Household units. In Buffalo, HSBC's long-time headquarters, HSBC in 2005 confined African Americans to higher cost rate spread loans 2.15 times more frequently than whites.

In 2005, HSBC made over five thousand super high-cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities. Wells Fargo made 795 HOEPA loans in 2005. Keycorp, which has said it had discontinued HOEPA loans, made 755 such loans in 2005.

Considering all conventional first-lien loans, among the most disparate was Washington Mutual and its higher-cost affiliate, Long Beach Mortgage -- together they confined African Americans to rate spread loans 3.70 times more frequently than whites. Wells Fargo was nearly as disparate, confining African Americans to rate spread loans 3.31 times more frequently than whites. Royal Bank of Scotland and its Citizens Bank units came in at 3.11, and JP Morgan Chase at 2.98. The disparity at Wachovia was 2.58, and at Atlanta-based SunTrust it was 2.40. The disparity at GMAC, a stake in which Citigroup and others are seeking to buy, was 2.92, while at Countrywide it was 2.86.

Countrywide’s disparity between pricing to African Americans and whites was even worse when considering conventional first lien home purchase loans: Countrywide confined African Americans to rate spread loans 3.53 times more frequently than whites. Countrywide was topped, however, by Milwaukee-based M&I, with a disparity of 3.78, and by Bank of America's MBNA unit, with a disparity of 4.23.

Bank of America also enabled other subprime lenders in 2005 by securitizing loans through its generically-named Asset-Backed Funding Corporation unit for, among others, Ameriquest, which earlier this year settled predatory lending charges with state attorneys general for $325 million. The settlement only required reforms at Ameriquest Mortgage and two affiliates, but not its largest affiliate, Argent Mortgage. The 2005 data show that Argent made 220,069 higher cost loans over the rate spread, while Ameriquest Mortgage made 122,868 such loans. The reforms announced in support of the predatory lending settlement with the attorneys general cover barely 35% of ACC's high-cost lending.

Like ACC / Ameriquest, Citigroup and HSBC, other large subprime lenders also increased the percentage of their loans that were over the rate spread, from 2004 to 2005. At New Century in 2005, fully 215,579 of the company's 268,101 loans were over the rate spread. National City / First Franklin made 177,526 higher cost loans over the rate spread in 2005. Countrywide in 2005 made 190,621 loans over the rate spread. 199,249 of 237,700 loans were over the rate spread at H&R Block, which also in this season offers problematic high-cost tax refund anticipation loans. Further on fringe finance, the study notes that Citigroup helped Dollar Financial to go public, and since continued to lend to and assist this pawn and payday lender.

Another of the top four banks which enables predatory lenders is North Carolina-based Wachovia. Most recently, the U.S. District Court for the Southern District of New York denied a motion by the Federal Reserve Board to get reconsideration of a decision won by Inner City Press, requiring the disclosure of Wachovia's connections with a range of subprime lenders, including payday as well as mortgage lenders. Inner City Press v. Federal Reserve Board, 380 F. Supp. 2d 211. On the Federal Reserve Board's motion, the Court ruled that:

"The Board made absolutely no showing in its summary judgment submissions, however, that the disclosure of data regarding Wachovia’s aggregate exposure and loan outstandings to the [subprime lending] clients listed in Exhibit 3 would cause competitive harm to Wachovia or that the public disclosure of this information would make it difficult for the Board to elicit similar information in the future... The Board points to portions of a document entitled 'Subprime Lending and Related Activities' that Wachovia submitted in the public portion of the Merger Application as a ‘glimpse into the conclusory statements [regarding due diligence practices] defendant can expect in future filings’ if merger applicants know such information is to be released to the public. This argument was not made in the Board’s original submission. In any event, without more specific testimony from Wachovia’s representative regarding why Wachovia would not wish its due diligence practices with regard to its subprime lending clients to be made public, it cannot be said that this document represents the limits of what Wachovia would willingly reveal at the Board’s request." (This week's ICP Federal Reserve report has an update.)

There is a need for more information, including the credit score information that the lending industry opposed being included in Home Mortgage Disclosure Act data. In fact, some lenders resist providing even the data required by law, at least in an analyzable form.

Inner City Press / Fair Finance Watch is demanding action on all of these issues from the relevant regulatory agencies, including the Office of Thrift Supervision (responsible for AIG and Lehman Brothers Bank, among others), the FDIC (considering giving a bank charter to Wal-Mart), the Office of the Comptroller of the Currency (which since suing to New York last year to block fair lending enforcement has done little to none of its own) and also the Federal Reserve Board.

While the Federal Reserve will wait, as it did last year, until September to release its own study, it has had the 2005 data since March 1, 2006. "Now that a second year of data is out, with worsening disparities at the largest bank in the nation and many of its peers, there is no more time for the Federal Reserve and other regulatory agencies to equivocate," concludes the Inner City Press report. "The time for enforcement actions to combat this discriminatory and predatory lending is now."

Finally, from our sources low-down in the subprime field, news that California-based subprimer Mandalay Mortgage has laid off half of its employees. In 1999, Mandalay's president, fresh from WMC, was quoted that "For the last 15 years I have built good relationships with people who have built relationships with good people." Yeah, right...

In the Sovereign, Santander and Independence scheme, regardless of Relational's decision to submit letters withdrawing its comments, the adverse issues raised still stand. Since Inner City Press / Fair Finance Watch’s last comment, ICP has received the 2005 HMDA-LAR of Sovereign.
In 2005, Sovereign was 3.10 times more likely to confine Latinos than whites to higher cost loans over the rate spread (of 3% over comparable Treasury securities on a first lien, 5% on a second lien). Also, Sovereign denied 26.96% of applications from Latinos, versus only 10.39% of applications from whites, a denial rate disparity of 2.59.

Sovereign was 2.76 times more likely to confine African Americans than whites to higher cost loans over the rate spread. Sovereign denied 28.21% of applications from African Americans, versus only 10.39% of applications from whites, a denial rate disparity of 2.76.
Given the above, which ICP has submitted in supplemental comments to the Federal Reserve and OTS, ICP is requesting public evidentiary hearings, and that the scheme and applications be denied.

Even as Relational and its high-priced counsel now back off, questions remain about Santander - Sovereign - Independence. Beyond those raised (and not withdrawable) by Relational, the Federal Reserve has now asked about Santander's acquisition of the subprime lender Island Finance from Wells Fargo, seeking confirmation that Santander "intends to file a post-transaction notice under section 225.87 of Regulation Y" and asking for detail on Santander's due diligence on Island. Santander responds that it will file by March 29, and that it considered much about Island Finance, including Home Mortgage Disclosure Act compliance. We'll see...

Meanwhile, in response to Federal Reserve questions, BB&T has disclosed that it has made at least 45 loans to subprime lenders, including to pawn shops, rent to own businesses and even to a "pay day loan provider"... Also at BB&T, Susan Swan, the company's former controller, last week settled the wrongful termination suit she filed against the bank. Swan alleged that she was fired after reporting accounting irregularities to her superiors, the Observer said. In her complaint, Swan stated that she had regularly protested certain company practices...

A recycled executive: in interim follow-up to the scandal of M&I's Gold Bank's fraudulent CRA investment (in Missouri housing bonds with a 30% return), last week the KC Star reported that former Gold Bank president Roger Arwood, who resigned from Gold Bank on March 3, is now CEO of Chillicothe, Mo.-based Citizens Bancshares... Accountability, anyone?

Last week, after InnerCityPress.com repeatedly contacted Georgia's mission to the United Nations, Inner City Press / Fair Finance Watch finally obtained a copy of the National Bank of Georgia's letter to FATF, asking for action on what it calls the "illegitimate banking system in Abkhazia [which] provides broad possibilities for legalizing the income generated as a result of the above-noted crimes... smuggling (including arms), illegal circulation of drugs, kidnapping, etc.". The attachment to the letter lists, among the institutions which provide services to the unlicensed bank in Abkhazia, "Citibank (Moscow, Russian Federation)." Meanwhile, Citigroup has gotten itself appointed to advise on the privatization of Greece's fourth-largest lender, Emporiki Bank

Question on the bank beat: why didn't the Fed include Santander in its March 17 cease-and-desist orders against three (other) Puerto Rico banks which had to restate their earnings? Could it be because Santander has a contested application pending, and a cease-and-desist order would only add fuel to the fire?

Update of March 13, 2006 -- This morning saw news of Capital One’s proposal to acquire North Fork Bancorporation, for $14.6 billion. Inner City Press / Fair Finance Watch has run the numbers, and will be opposing Capital One's applications for regulatory approval, on lending disparities, consumer abuse in Capital One's credit card marketing and lending, and both banks' enabling of high cost fringe finance. Mortgage lending (HMDA) data reported for 2004 show that of Capital One's 2004 loans with interest rates over the federally-defined rate spread (of 3% over comparable Treasury securities on a first lien, 5% on subordinate liens), African Americans were over 19 times more likely to receive higher cost loans than whites; Latinos were over 14 times more likely to receive higher cost loans that whites. ICP has just obtained Capital One's 2005 data, and finds therein that over 43% of Capital One's mortgages in 2005 to African Americans were high cost loans over the rate spread. ICP has requested the 2005 data of North Fork and its "non-prime" affiliate, Greenpoint Mortgage, and will be further analyzing all this data for protest submissions to the Federal Reserve, New York State Banking Department and other agencies.

North Fork has increased its focus on lending to fringe financiers and check cashers, actively hiring staff for this line of business (as recently reported by Inner City Press, North Fork for example Carol Ann Killian, who previously sought out this business for EAB/Citibank). Capital One, when ICP previously raised the issue of the bank's support of high cost fringe finance lendiners, merely stated that the banks “do not seek out the[se] type of businesses.” On the key question of what standards the two banks have -- a question the FRB has asked a number of applicants, including SunTrust which then committed to no longer lend to fringe financiers -- Capital One referred vaguely to screening “for a variety of factors with emphasis on credit-worthiness.” These issues will be explored, including at the public hearings that ICP will be requesting.

Capital One has also been accused of fraud in its credit card lending and marketing, by state attorneys general. See, for example, the West Virginia Attorney General's announcement at http://www.wvago.us/consumernews/viewtopic.php?t=30 . As simply one more example, the Minnesota Attorney General has sued Capital One for false and misleading advertising. See, e.g., the publication Card Line of January 7, 2005:

“Minnesota Attorney General Mike Hatch has filed a civil complaint against Capital One Financial Corp. subsidiaries Capital One Bank and Capital One F.S.B., charging that Capital One lies in its television advertising and its direct-mail solicitations when it says that interest rates on its cards never change. Hatch said they do even if the cardholder is a day late with a payment. In the 20-page lawsuit filed Thursday in Minnesota's Ramsey County District Court, Hatch said that Capital One said that its rates start low and remain low. But Hatch alleges that cardholders with the lowest fixed rate of 4.99% may be repriced to a "rate up to 19.8% while those with higher initial rates will be repriced to a rate of up to 25.9%." The lawsuit also alleges, "In some instances, Capital One applies a two-tiered repricing scheme under which a cardholder's first default may trigger repricing to an intermediate penalty rate of either 9.8% or 19.8%, while a subsequent default may trigger repricing to either 19.8% or a 25.9% penalty rate." Hatch also says that Capital One's customer-service representatives are trained to be evasive in their answers when credit card applicants ask them a direct question about what a fixed rate means. The lawsuit further alleges that Capital One's marketing practices violate Minnesota's laws prohibiting false advertising, consumer fraud and deceptive trade practices. The lawsuit seeks injunctive relief prohibiting Capital One's alleged "false, deceptive and misleading conduct." It also seeks civil penalties.”

These issues will be explored, including at the public hearings that ICP will be requesting. Until next time, for or with more information, contact us.

In France the rumors are swirling, that Citigroup wants to take over Societe Generale, or maybe Barclay's Bank. The latter would require bank merger approval from the Federal Reserve, given Barclay's Juniper transaction. And the Fed has said (and not retracted) that Citigroup should stop merging, and reform its managerial mess-ups (which has yet to happen). So we'll see...

At a lower level, NewAlliance Bancshares last week dropping out of the KBW conference; rumors are swirling that despite the controversy around its last two transactions, it's looking south at Flushing Financial Corp. ($2.4 billion) and Provident New York Bancorp Inc. ($2.6 billion). And controversy follows...

Amid the press coverage of last week's London press conference by HSBC on its earnings was a glowing story in the Brazilian publication Gazeta Mercantil, gushing the HSBC's profits " were buoyed again by strong expansion of consumer finance, principally in the emergent countries and the United States, where HSBC bought the finance company Household Finance three years ago." Neither predatory lending nor Household's still-record $484 million predatory lending settlement were mentioned. But at the bottom of the article, this: " Lea De Luca, Gazeta Mercantil - The reporter traveled at the invitation of HSBC." Invitation? Or in the pay of?

An update: the individual alluded to in last week's report, who went from Citi/EAB to North Fork to focus on check cashers, is Carol Ann Killian, who shows up in FISCA's "Check Cashers Invite Bankers to Discuss Account Cancellations." Until next time, for or with more information, contact us.

March 6, 2006

This gun for hire: last week it emerged that Banco Santander has hired the law firm of ex-New York mayor Guiliani to try to help procure regulatory approvals with regards to Sovereign and Independence. The WSJ reported that "Santander executives 'probably have been involved with more controversy than they thought they'd be involved in,' Mr. Giuliani said in an interview. 'I think the substance of this [report] will help' win over regulators." Interesting side note: Banco Santander shows up in the U.S. Senate's report on Riggs Bank and money laundering, as refusing to tell even its own U.S. affiliates who owned the accounts into which funds for Equatorial Guinea's dictator were wired. Money laundering and "America's Mayor"™?

This week, global subprime. Fortune’s March 6 puff piece on Chuck Prince quotes him that "the only way [Citigroup] could do a transformational acquisition would be to buy Canada." But why buy when you can just suck them dry? CitiFinancial has taken global its predatory model. In Europe in 2004 it was only in four countries. It is now in a dozen: the UK, Spain, Ireland, Italy, Poland, Slovakia, Romania, Russia, Finland, Denmark, Norway and Sweden. In the first two, mortgages are offered. Everywhere else, it’s high-cost personal loans, which is CitiFinancial’s unreformed focus in the United States as well… The Fortune piece makes only a one-line mention that Citigroup was built “from the bit parts of a low-rent consumer-finance outfit called Commercial Credit” – that is, CitiFinancial. The article doesn’t mention the Federal Reserve’s freeze-order, or its 2004 fine of CitiFinancial for predatory lending…

HSBC’s Corporate, Investment Banking and Markets (CIBM) operation is being split into three businesses: “global banking, global markets and global transaction banking.” The terms are copies of Citigroup’s – again, HSBC as Avis, the number two that (say it) tries harder, including following Citigroup into predatory lending and its export (in which HSBC is also behind). Citi-Associates in 2000; HSBC-Household in 2002. From that acquisition came the lowered earnings that HSBC USA Inc. announced on Feb. 16, from selling its consumer card unit to HSBC Finance and buying HSBC Finance's private-label credit card unit in December 2004. It paid out $451 million but got back $99 million. Sounds like what happens to HSBC’s subprime customers / prey…

In fact, HSBC might be number three. In Europe GE Money now has operations in Austria, Belgium, the Czech Republic, Denmark, Finland, Germany, Hungary, Ireland, Italy, Latvia, Norway, Poland, Portugal, Russia, Slovakia, Spain, Sweden, Switzerland and the UK (where its high-cost credit cards have made it the subject of parliamentary debate)…

An update: Great Eastern Bank cancelled its deal with UCBH Holdings, paid a break-up fee of $5 million, and agreed to Cathay General Bancorp’s $101 million bid. 101 Dalmatians? This deal’s a dog. As noted in SNL's Bank & Thrift Daily, UCBH's stock went up more than Cathay's, despite analysts' spin that the acquisition "establishes a platform for moving into neighboring states." We'll see about that.

Getting ever-more subprime: last week Toronto-Dominion Bank agreed Thursday to buy subprime auto finance company VFC Inc. for C$326 million ($281 million), a large part of it to Manulife…

New Orleans-based Whitey has responded, to the comments of Inner City Press / Fair Finance Watch and to follow-up questions of the Federal Reserve. Whitney’s response to ICP didn’t convince even the Fed, which notes that Whitney “indicates that the bank implemented a policy with respect to loans to finance companies or other consumer lenders to fund consumer loans,” and asks Whitney to explain this “policy.” In reply, Whitney acknowledges that it considers “consumer loans either as collateral or a source of repayment for our customer’s commercial loan.” That’s what we mean by enabling – and we note, as the Fed should, that Whitney’s descriptions of its so-called policies have no substance…

Lubricant: on Feb. 10 it was announced that Citigroup CEO Prince with also be a director of Johnson & Johnson (making of hand creams among other products). Particularly given the conflicts created (and fines results) from Sandy Weill’s place on AT&T’s board, of what possible benefit to Citigroup can Prince’s J&J foray be? Ann Dibble Jordan is already on both companies’ boards…

And still they keep on buying: Dow Jones of February 17 reported from Taipei that American International Group Inc. proposes to acquire Taiwan's Central Insurance Co., “AIG plans to complete the transaction within 30 days after shareholders of Central Insurance approve the deal.” There was no mention of (the) required regulatory approval…

Sleazing for Sovereign: To pass the law within 24 hours, both the House and Senate apparently bent their internal rules, the Patriot-News reported last week. State senators cast votes for absent colleagues without proper approval when the chamber passed the legislation last week. Also, the legislation passed the House of Representatives without a procedural vote that normally would be required for such a bill to come up for consideration. Of the 45 senators whose votes counted on the measure, 33 were absent.

Relational dropped its case, but says it will challenge Pennsylvania’s fast-passed suck-up-to-Sovereign law. We’ll see.

Bank of America, fresh from strong-arming a new law in Delaware, tells Arizona that moving its charter to Delaware won’t have any impact. "Location of the charter does not impact our corporate tax obligations to Arizona or any other state," BofA’s Alex Liftman spun. "The decision to select Delaware has no bearing on decisions regarding jobs or facility locations." We’ll see…

RBS’ Fred the Shred strikes again. Last week RBS disclosed it has closed three of its Charter One bank branches in Ohio and plans to close eight more of them there by the end of March. There was no overlap in the underlying deal, so this is pure shredding…

On the afternoon of Feb. 6, Inner City Press received a copy of Judge Hellerstein's Jan. 31 order in the litigation against Sovereign - Santander. As previously reported, the judge grants discovery and commits to rule by March 31. The order also recites that Sovereign and Santander "commit not to close before April 4, 2006." So the Federal Reserve (and the New York Banking Department, to which ICP/Fair Finance Watch submitted a timely comment today) have at least that time to inquire into the issues, including now not only Santander's surge into subprime but also Sovereign's (at least) five proposed branch closures...

Amid the news stories about the U.S. Financial Crimes Enforcement Network’s Bill Fox cashing out with an anti-money laundering job at Bank of America, there’s not been questioning of how or if this is different from the Office of the Comptroller of the Currency’s examiner of Riggs Bank going to work for the bank. The OCC – Riggs move resulted in anti-revolving door provisions applicable to bank regulators. But why shouldn’t they cover FinCEN officials? In an interview on January 30, Fox said that “an attractive job offer from Bank of America… contributed to his decision to leave government service for the private sector.” This means that while Fox was head of FinCEN, charged with enforcing money laundering laws at BofA and elsewhere, BofA made him “an attractive offer.” And thus the regulatory process is corrupted.

Update: regarding the challenge by ICP/Fair Finance Watch to Whitney National Bank, see “Consumer group protests First National sale,” Sarasota Herald Tribune, January 31, 2006.

February 1, 2006 midweek update: Today staff of the Federal Reserve Board released the following "file memo" --

February 1, 2006
TO: Files
SUBJECT: Telephone conversations with Counsel for Banco Santander Central Hispano, S.A. (“Santander”) re: pending notice by Santander to acquire shares of Sovereign Bancorp, Inc. (“Sovereign”).

On Monday, January 30, at approximately 1 p.m., and then at approximately 10:15 a.m. on Tuesday, January 31, staff from the Board of Governors and the Federal Reserve Bank of New York spoke via telephone with Arthur Long, Esq., of Davis Polk & Wardwell, counsel for Santander.

Staff’s purpose in calling was to clarify its understanding of the dollar amounts that could or would be invested in or loaned to Sovereign by Santander pursuant to sections §§ 2.01, 2.03, and 6.04 of the Investment Agreement between Santander and Sovereign. Mr. Long responded to staff’s questions, and each call lasted less than 10 minutes.

We usually conclude these updates with "until next time, for or with more information, contact us" - but in this case, we only know what we read...

Uncertainty has continued to swirl around Sovereign, and the applicant Santander has announced a proposal to acquire the problematic subprime lender Island Finance (on which ICP has previously commented to the Federal Reserve) from Wells Fargo. ICP has now urged the FRB to inquire in this proceeding into Santander’s mid-application proposal to acquire standardless subprime business. ICP first became aware of Wells Fargo's subprime lender Island Finance in 1997, when the company (1) opened an office at 2866 Third Avenue in the South Bronx which charged 25% interest rates to all customers, without regard to credit history, then (2) closed the office and required the customers they'd lured to travel to a Wells Fargo Financial office in Queens or have "lates" imposed on their credit history (see Village Voice of July 15, 1997). Wells' Island Finance is (sub-) headquartered in San Juan, Puerto Rico, and has branches in Panama, Aruba, the U.S. Virgin Islands, and the Netherlands Antilles. It is a high-rate lender, and is also embroiled in litigation with its employees. See, e.g., Jagroop v. Island Fin. V.I., Inc., (U.S. District Court for the District of the Virgin Island, Division of St. Croix), 240 F. Supp. 2d 370; 2002 U.S. Dist. LEXIS 25153. Tellingly, Wells CEO lobbied in person in May 2002 against a proposal in the Puerto Rican legislature, House Bill 1288, to impose a usury cap of 19.75%. See, Caribbean Business, May 16, 2002, quoting 27% interest rates and Kovacevich that, with the proposed rate cap, " I feel I’m being told Wells Fargo is not welcome in Puerto Rico... I don’t want to be threatening, just factual," and characterizing Wells as the U.S.'s "number one 'NAFTA bank,' with more banking stores and assets than any competitor within 60 miles of Mexico and Canada." As this Island Finance showed in The Bronx, they charge rates right up to any applicable usury cap, without regard for the borrowers credit history profile -- that is, NOT pricing by risk. This is what Santander proposes to acquire. In acquiring Island Finance, Kovacevich said that it portended further "expansion into other Latin American markets." (PR Newswire of May 4, 1995.) At the time, Wells stated that it had recently also "acquired Reliable Financial Services, Inc., an auto finance company headquartered in Rio Piedras, Puerto Rico, which manages $200 million in receivables." (PR Newswire of January 12, 1998.) Wells also lists "Island Finance" subsidiaries in the Cayman Islands, British West Indies, and in Trinidad and Tobago (these are apparently not proposed to be acquired by Santander, although the precise scope of Santander’s proposal needs to be inquired into, publicly, by the FRB).

That Puerto Rico-based Island Finance, which the applicant here Santander now mid-application proposes to acquire, has even less consumer protection safeguards than even problematic mainland-U.S. subprime operations is significant -- and, ICP contends, much be inquired into and acted on in connection with this application by Santander, to acquire a controlling stake in the also problematic Sovereign. Note that the supposed response to ICP’s initial comments did not include even any HMDA analysis, or sufficient response on Santander’s practice of not informing even its own U.S. subsidiaries of the identity of the owner in interest of accounts into which Santander wires money. Directly on this proposal, last week’s ruling by Judge Hellerstein in U.S. District Court for the Southern District of New York, clearing the way for the cases to move into the discovery process, militate for an extension of the comment period, and public hearings. Until next time, for or with more information, contact us.

In announcing Citigroup’s earnings last week, CEO Chuck Prince acknowledged some problems at CitiFinancial. "It's obvious that our U.S. consumer franchises continue to face a challenging" environment, he said during a conference call with analysts. Dow Jones reported that “the network of CitiFinancial consumer-finance branches - the expansion of which is a cornerstone of the company's turnaround plan - struggled in the fourth quarter.” Where are things headed, when the largest bank says its subprime lending subsidiary, which has settled predatory lending charges, is the “cornerstone” of its turnaround plans?

AIG has named to its board of director ex-Citigrouper Bob Willumstad, who falsely claimed at the April 2005 Citigroup shareholders meeting that Citigroup had not made super-high-cost HOEPA loans. AIG’s press release states that “Mr. Willumstad, 60… joined CitiFinancial (then Commercial Credit, a predecessor company) in 1987.” Yep – he was in subprime consumer finance for a long time – and now still is. AIG also does subprime lending through its ex-American General units…. Another Prince-chased Citigrouper, Marge Magner, who used to train CitiFinancial branch managers, begins on the board of directors of Gannett on Feb. 1. Will the Gannett newspapers disclose this connection and/or conflict when they report on Citigroup or predatory lending? We’ll see.

While there’ve been more defensive moves by Sovereign to report, first we’ll address the supposed response submitted by Santander’s outside law firm, Davis Polk & Wardwell, on January 13. Rather than submit any counter-analysis of Sovereign’s 2004 mortgage lending, the response cites to out-of-date CRA Performance Evaluation conducted by the Office of Thrift Supervision. But the OTS’ exam did not even mention those of Sovereign’s loans which are higher-cost, over the rate spread (of 3% on first liens, 5% on subordinate liens). The loans the OTS was counting were these higher cost loans, throwing into question (to say the least) the OTS’ analysis. A bank’s response to comments usually includes some of the bank’s own data analysis. This response however provides no counter-analysis just quotes from CRA exams and from the Fed’s September 2005 report on the industry-wide HMDA data. Maybe the applicants are too busy suing their shareholders (and pushing back the date of their annual meeting) to make a credible CRA response…

RBS Greenwich Capital Markets now supports and enables subprime lending not only in the United States, but also the United Kingdom: it has just helped the UK subprime lender U.K.-based financial services firm Cattles plc to raise funds via a $118 million private placement. Cattles’ Shopacheck unit pitches high-cost loans and then collects on them weekly over the doorstep. And what standards does Royal Bank of Scotland's RBSGreenwich Capital Markets use to review the subprime lenders it enables? Few in the U.S., and none in the U.K., apparently…

Hitting a new low, Sovereign last week announced it will try to put-off its annual meeting for months from the slated April time, so that it can avoid any shareholder discussion of its deals with Santander and Independence. ICP/FFW’s challenge to the deals (summarized in last week's report, below) was reported by Associated Press of January 3, and in the American Banker newspaper of January 4. That newspaper was the venue for a now-controversial op-ed, which lacked even half-full disclosure. Also last week, Sovereign took to writing to other banks asking for their help. Who if anyone takes them up on it will be interesting to see.

Also in annals of corporate governance, From HSBC’s board, leaving is the non-responsive Sir John Kemp-Welch, formerly of both Cazenove and the LSE. He’s to be replaced by Simon Robertson, who’s described as an outside director. Robertson advised HSBC on its acquisition of CCF in France. Robertson is also a director at The Economist – which should lead to some interesting “full disclosures” or recusals…

Inner City Press / Fair Finance Watch (ICP) has just filed two challenges to the proposals by Sovereign Bancorp to sell a 19.8% stake to Banco Santander Central Hispano for $2.4 billion and to acquire Independence Community Bank Corp. for $3.6 billion. ICP’s Community Reinvestment Act protests were filed with the Federal Reserve Board, requesting public hearings on Banco Santander’s applications to acquire stakes in Sovereign and Independence Community Bank Corp, and with the Office of Thrift Supervision (OTS), opposing Sovereign’s application to acquire Independence Community Bank Corp. ICP has also urged the OTS to require an application from Banco Santander.

Mortgage (HMDA) data reported for 2004 show that Sovereign disproportionately excludes and denies African Americans and Latinos and, when loans are made, disproportionately charge African Americans higher prices. ICP’s challenges also document Sovereign Bank enabling fringe financial institutions such as pawn shops (samples listed below).

In the New York City Metropolitan Statistical Area (MSA) in 2004, Sovereign Bank denied the conventional home purchase loan applications of African Americans 5.85 times more frequently than whites, and denied the applications of Latinos 2.54 times more frequently than whites. For conventional home purchase loans secured by first liens, Sovereign Bank confined Latinos 3.87 times more frequently than whites to higher cost loans over the federally defined rate spread (of 3% over comparable Treasury securities on first liens, 5% on subordinate liens).

“Sovereign Bank is a disparate mortgage lender, excluding and overcharging African Americans and Latinos,” ICP states.. “Now Sovereign Bank has proposed a convoluted scheme to further insulate and expand itself, selling a controlling stake to Banco Santander and using the proceeds to further impose its disparate lending on markets like New York City. Our organization has now filed opposition to these proposals with the Federal Reserve Board and Office of Thrift Supervision and has requested public hearings, under the Community Reinvestment Act. Just because Sovereign Bancorp wants to insulate itself and expand doesn't mean it's good for consumers and communities, nor that the regulators should approve it.”

ICP’s comments also raise material questions that the regulators must consider exist as to Banco Santander’s and its subsidiaries’ compliance with anti-money laundering laws (see, e.g., the U.S. Senate’s July 2004 report, www.senate.gov/~govt-aff/_files/071504miniorityreport_moneylaundering.pdf 55-56), and concerning Sovereign Bank’s documentable support of fringe finance: for example, Century Pawnbrokers of Asbury Park, NJ, Cash Advance of Carson City, Nevada, and various check cashers and money service business, including in New York and by “Network Capital Alliance, a division of Sovereign Bank” (see below). Here are disparities in Sovereign Bank’s lending in 2004:

In the Newark, New Jersey MSA in 2004, Sovereign Bank denied the conventional home purchase loan applications of African Americans 3.18 times more frequently than whites, and denied the applications of Latinos 3.51 times more frequently than whites. For conventional home purchase loans secured by first liens, Sovereign Bank confined African Americans 4.02 times more frequently than whites to higher cost rate spread loans, and confined Latinos 4.65 times more frequently than whites to higher cost rate spread loans. This is a market, like New York City, in which Sovereign (and Banco Santander) propose to acquire Independence Savings Bank.

In the Philadelphia MSA in 2004, Sovereign Bank denied the conventional home purchase loans of African Americans 2.78 times more frequently than whites, and denied the applications of Latinos 3.56 times more frequently than whites. For refinance loans, Sovereign Bank denied the applications of African Americans 2.57 times more frequently than whites, and denied the applications of Latinos a whopping 4.73 times more frequently than whites. For refinance loans secured by first liens, Sovereign Bank confined African Americans 4.08 times more frequently than whites to higher cost rate spread loans, and confined Latinos a scandalous 25.5 times more frequently than whites to higher cost rate spread loans.

In the Boston MSA in 2004, Sovereign Bank denied the conventional home purchase loan applications of African Americans 3.23 times more frequently than whites, and denied the applications of Latinos 3.48 times more frequently than whites. For conventional home purchase loans secured by first liens, Sovereign Bank confined Latinos 2.87 times more frequently than whites to higher cost rate spread loans.

In the Providence, RI MSA in 2004, Sovereign Bank denied the conventional home purchase loan applications of African Americans 2.55 times more frequently than whites, and denied the applications of Latinos 2.56 times more frequently than whites. For conventional home purchase loans secured by first liens, Sovereign Bank confined Latinos a whopping 6.78 times more frequently than whites to higher cost rate spread loans.

In the Hartford MSA in 2004, Sovereign Bank denied the conventional home purchase loan applications of African Americans 4.55 times more frequently than whites, and denied the applications of Latinos 2.31 times more frequently than whites.