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.

In the Reading, PA MSA, for refinance loans in 2004, Sovereign Bank denied the applications of African Americans 2.49 times more frequently than whites, and denied the applications of Latinos a whopping 5.07 times more frequently than whites. For home improvement loans, Sovereign Bank denied the applications of African Americans 3.33 times more frequently than whites, and denied the applications of Latinos 3.55 times more frequently than whites.

In the Camden NJ MSA in 2004, for conventional home purchase loans secured by first liens, Sovereign Bank confined African Americans 5.59 times more frequently than whites to higher cost rate spread loans, and confined Latinos a scandalous 7.64 times more frequently than whites to higher cost rate spread loans.

ICP has cumulated the 2004 data, on pricing, of Sovereign Bank, and has found that systemwide, Sovereign Bank in 2004 confined African Americans 3.14 times more frequently than whites to higher cost loans over the federally defined rate spread. Sovereign Bank’s disparity was even higher between upper income African Americans and upper income whites: 7.35. ICP has demanded public hearings and fair housing referrals and enforcement actions, and the denial of these applications.

Inner City has also presented evidence that Sovereign Bank enables fringe finance: Uniform Commercial Code (UCC) filing showing secured loans from Sovereign Bank to Century Pawnbroker, Inc., of Asbury Park, New Jersey, secured by “all inventory” (of the pawnshop, that is). Likewise, a Nevada UCC filing (attached) shows Sovereign support of Cash Advance Systems of Carson City, Nevada, secured by all “accounts receivable” and “inventory.”

Other UCC filings show Sovereign Bank’s support of Staten Island-based 1 Stop Check Cashing Corp.; of Express Check Cashing, Inc.; and of New York-based G&R Check Cashing Corp. and Mount Vernon Money Center Corp. (by “Network Capital Alliance, a division of Sovereign Bank”). This is an issue ICP has raised since last year; in July 2004 in response to ICP's comments, SunTrust announced it will no longer fund fringe finance lenders. See, <www.fairfinancewatch.org/enforce.html>, <www.investors.com/breakingnews.asp?journalid=22274151&brk=1>. The Federal Reserve has previously included pawn shops and check cashing as alternative financial services. Based on prior Federal Reserve precedents, ICP’s comments argue that at a minimum the following questions must be asked, and publicly answered:

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

These questions must be asked of the parties to these applications, 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”).

Also for the record, ICP’s comments note the U.S. Senate’s July 2004 report, www.senate.gov/~govt-aff/_files/071504miniorityreport_moneylaundering.pdf 55-56

"On February 10, 2004, in an attempt to gather additional information, Riggs sent letters to several banks sponsoring accounts to which questionable wire transfers had been sent from the E.G. oil account. These letters requested information about the accounts under Section 314(b) of the Patriot Act, which allows financial institutions to share client and transaction information to guard against money laundering and terrorist financing. The Riggs letter to Banco Santander, for example, requested information about the identity of the owners or authorized signatories for accounts belonging to Apexside and another company. [FN 197: Letter from Riggs Bank to Banco Santander (2/10/04).] ...

"The New York office of Banco Santander responded with information that the Kalunga account had been opened by its parent bank in Madrid, Spain, but that its parent bank could not disclose the account's beneficial owners due to Spanish statutes barring disclosure of bank information, even in a case of suspected money laundering. In discussions with the Subcommittee, Banco Santander indicated that its parent bank had interpreted Spanish law to mean that it was barred from disclosing this account information not only to any third party, but also to its own subsidiary banks located outside of Spain.

"The position taken by Banco Santander... USA means, in essence, that banks in the United States attempting to do due diligence on large wire transfers to protect against money laundering are unable to find out from their own foreign affiliates key account information. This bar on disclosure across international lines, even within the same financial institution, presents a significant obstacle to U.S. anti-money laundering efforts."

The final sentence quoted above is an understatement. ICP asks: how can Banco Santander be said to be complying with U.S. anti-money laundering laws, if it refuses to disclose any information about the beneficial owners of accounts, to a U.S.-based insured financial institution like Riggs, or even to its own U.S. affiliates?

See also, the London Observer of March 20, 2005, “Deposited by a dictator: bank accounts set up secretly by Augusto Pinochet, including at blue-blooded Coutts,” by Conal Walsh – “Millions of dollars linked to Pinochet passed through accounts held at Coutts's Miami office [in] accounts held at its US office by offshore companies connected with a key Pinochet adviser… Royal Bank of Scotland (RBS), which later sold the American business to Banco Santander.”

There are also Santander-related consumer compliance issues. See, e.g., The London Independent of May 26, 2005, “ABBEY FINED POUNDS 800,000 FOR MISHANDLING COMPLAINTS” --

“Abbey received a pounds 800,000 fine from the Financial Services Authority yesterday for mishandling mortgage endowment complaints, its third fine from the City watchdog. Abbey, which was taken over by Spain's Banco Santander Central Hispano… In a damning verdict, Clive Briault, the FSA's director of retail markets, said: 'By putting its own interests ahead of those of its customers with a mortgage endowment complaint, Abbey has singularly failed to treat its customers fairly. Its failings were made more serious as they occurred at a time when there was a high level of awareness within the industry about mortgage endowments and concerns regarding the fair handling of complaints.' The fine is the largest the FSA has handed out to companies mishandling mortgage endowment complaints.”

For the record, and in furtherance of at least minimal corporate governance and transparency standards, ICP contends that Sovereign should be required to hold a shareholders vote for its Santander / Independence proposals; ICP also urges the OTS to hold off on any decision other than outright denial until after Sovereign’s annual meeting (which heretofore has always been held in April). Given the above record, ICP is requesting public evidentiary hearings, and that, on the current record, these applications be denied. Watch this space.

In other news, at a conference of the Chinese National Audit Office in Beijing between Christmas and New Years in China, it was announced that the “illegal abuse of 290 billion yuan during the first 11months of 2005” has been uncovered, leading to promises by the Audit Office to investigate Bank of China, Bank of Communications and China Merchants Bank. European and US-based banks have been buying up everything not nailed down in China. Beyond Citigroup and Shanghai Pudong and Guangdong Development Banks, Royal Bank of Scotland for example announced in August that it would invest in Bank of China as the leading investor in a deal that saw RBS and its partners take a 10 percent stake in the Chinese bank. Under the deal, RBS’ Sir Fred (“the Shred”) Goodwin is slated take a seat on the board Bank of China, now under double-investigation (including for allegedly money laundering for North Korea). Developing…

Behind ABN Amro’s $80 million money laundering fine announced last week: evidence that ABN Amro's branch in Dubai falsified various payments processed at branches in the United States to erase and obscure the names of Bank Melli Iran ("such that any reference to Bank Melli Iran was removed”) and the Arab Bank for Investment and Foreign Trade, part-owned by the Libyan government, whose letters of credit were "reissued" by the Dubai branch in a manner that "obscured the [Arab Bank] origin of the letters,” according to FINCEN. The Chicago branch of ABN Amro cleared U.S.-dollar checks for ARBIFT that had been submitted by the Dubai branch, "which had arranged for [ARBIFT] to not endorse or stamp the checks." ABN Amro also last week lost millions of consumers’ personal information….

While Synovus applies to the Federal Reserve for two acquisitions, Synovus’ Total System Services losing 46 million consumer card accounts from Bank of America, which has decided to process those accounts in house. The consumer card portfolio represents $140.4 million, or about 11 percent, of TSYS' projected $1.3 billion revenue for 2005. Maybe Synovus’ applications should be supplemented – unless of course to the Fed 11%, and 5% of stock value, is somehow not “material”…

During Citigroup’s acquisition of the subprime lender Washington Mutual Finance Group, Inner City Press asked Citi’s Robert Rubin if he was aware that the unit was subject to a $70 million predatory lending verdict. He responded that subprime lending “is not really [in his] aegis.” Now, in an interview in Business Week of December 19, he states: “We did two [in-depth] reviews [of our businesses] at the end of last year...one in fixed income, the other in the consumer business. I was part of both of those. It was [CEO] Chuck [Prince] and me and a few others. Right now we're looking at a possible acquisition abroad. I have no idea whether we'll do it, but a group of us went over it. It involves complicated questions, so they asked me to think it through.” So: he was part of a review of “the consumer business,” and can no longer disclaim responsibility for CitiFinancial’s still-predatory practices. As to the alluded-to “acquisition abroad,” we’ll see…

Meanwhile, as recounted by Dow Jones of Dec. 16, Prince “plans to add 150 to 200 new bank branches overseas next year, as well as 400 to 500 new consumer-finance branches. Prince said Russia and Turkey are among the countries that will get new bank branches, while Citi plans more consumer-finance offices in Mexico, Brazil and South Korea.” The export of predatory lending continues.

The Federal Reserve last week hauled off and approved Cathay’s application to exercise options on 41% of Great Eastern’s stock. Strangely, the Fed claims that it was okay to constrain over 40% of a target’s stock, even before Cathay had applied to the Fed. Beyond this dubious precedent, the Fed sent a letter to Inner City Press extending its time under the Freedom of Information Act, stating that “we are extending the period of our response until December 21, 2005, in order to consult with another agency or with two or more components of the Board having a substantial interest in the determination of the request.” How can the Fed legitimately extend its time to respond past that required in FOIA, and then approve the application during the extension? The Fed’s reasoning on CRA issues is ludicrous: presumptive mis-reporting of HMDA mortgage data (100% approval rate) doesn’t matter because the mortgage lending is “by accommodation” – and nor does small business lending matter, since no particular product is required by CRA. Then what does the law mean, if neither mortgages nor small business lending matter?

Inner City Press / Fair Finance Watch has filed comments with the Federal Reserve on Bank Hapoalim and the money laundering scandal in which it is embroiled – click here to view.

Meanwhile Cathay General Bancorp answered more Federal Reserve questions, on December 2 and December 5. In the first submission, Cathay states that it “has not acquired Great Eastern stock (CGB currently only holds the Options).” The Fed has also asked, as Inner City Press / Fair Finance Watch has, about the Needs to Improve rating Cathay received on the Community Reinvestment Act’s Service Test. Cathay’s answer includes this statement: “Cathay is currently working on a marketing plan to better reach persons of Latino heritage in the communities Cathay serves.” We’ll see…

Question: now that Sir John Bond has moved over to become chairman of Vodaphone, we wonder what’s next for that company: the purchase of some string of predatory payphones or misleading phone-minutes cards? That’s what Bond did for HSBC, in buying Household International…

ICP also last week received a response to its comments on the Application of Fulton Financial Corporation to acquire Maryland’s Columbia Bancorp. What must first be noted in Fulton’s Response is the glaring disparities shown by Fulton’s own presentation of its data compared to what Fulton calls “All Banks.” In terms of the ratios between the percentage of 2004 loans to African Americans compares to whites that were over the federally defined rate spread (of 3% over comparable Treasury securities on first liens, 5% on subordinate liens), Fulton’s own presentation shows for example that in the Virginia Beach MSA, for refinance loans, while All Banks were 2.86 time more likely to place African Americans than whites in rate spread loans, Fulton’s Resource Bank was much more disparate, being 7.14 times more likely to confine African Americans than whites to rate spread loans. (Resp. at 10). This can be capture with a meta-ratio: Fulton’s Resource Bank is 2.5 times more disparate than All Banks.

While Fulton claims that its disparities are justified by credit scores, Resp. at 3, this claim is dubious given that All Banks and Fulton’s Resource Bank draw from the same pool of applicants (the data do not show that Fulton’s Resource Bank makes any greater outreach to underserved communities, which would have been reflected in high percentages of African Americans among applicants that Fulton’s Resource Bank has, compared to All Banks).

Similarly, on denial rates in this same MSA, Fulton’s Response reflects that Fulton’s Resource Bank, for refinance loans, denied African Americans 12.25 times more frequently than whites. The ratio for All Banks was 1.70. (Resp. at 4). Again, this time measured by denial rate disparities, Fulton’s Resource Bank is 7.21 times more disparate than All Banks.

For conventional home purchase loans in this MSA, Fulton’s Resource Bank denied African Americans 5.84 times more frequently than whites. The ratio for All Banks was 2.19. (Resp. at 4). For conventional home purchase loans in this MSA, Fulton’s Resource Bank is 2.67 times more disparate than All Banks.

This meta-disparities extend to other of Fulton’s affiliates. For example at Fulton’s Delaware National Bank, in the Wilmington DE MSA in 2004, African Americans were denied refinance loans 11.62 times more frequently than whites. The ratio for All Banks was 1.78. In the Wilmington, DE MSA, for conventional home purchase loans, Fulton’s Delaware National Bank is 6.53 times more disparate than All Banks.

Fulton purports to compare its lending to that of All Banks “throughout its franchise.” It is unclear to ICP what Fulton’s methodology / geography for comprising the All Banks numbers for Fulton’s franchise has been. What ICP has done, for now, is to look at Fulton’s Resource Bank, rather that in particular MSAs, by entire states. ICP has found that in the state of Virginia in 2004, for all HMDA-reported loans, Fulton’s rate spread disparities persisted even controlling for income. For example, Fulton’s Resource Bank confined upper income African Americans 4.61 times more frequently than upper income whites to higher cost, rate spread loans; Fulton’s Resource Bank confined low income African Americans 4.51 times more frequently than low income whites to higher cost, rate spread loans. Similarly, and still in Virginia. Fulton’s Resource Bank denied upper income Latinos 3.27 times more frequently than upper income whites; Fulton’s Resource Bank denied low income Latinos 3,18 times more frequently than low income whites. Income does not explain Fulton’s disparities.

Finally, for now, perhaps most pertinently and in further support of ICP’s timely request for hearings, in the state of Maryland in 2004, for all HMDA-reported loans, Fulton’s Resource Bank confined upper income Latinos 2.82 times more frequently than upper income whites to higher cost, rate spread loans; Fulton’s Resource Bank confined low income Latinos six times more frequently than low income whites to higher cost, rate spread loans. Still in Maryland, for all HMDA-reported loans, Fulton’s Resource Bank confined low income African Americans five times more frequently than low income whites to higher cost, rate spread loans. Income does not explain Fulton’s disparities. And while Fulton claims that its disparities are justified by credit scores, Resp. at 3, this claim is dubious given that All Banks and Fulton’s Resource Bank draw from the same pool of applicants (the data do not show that Fulton’s Resource Bank makes any greater outreach to underserved communities, which would have been reflected in high percentages of African Americans among applicants that Fulton’s Resource Bank has, compared to All Banks). ICP reiterates its timely request for evidentiary hearings and that, on the current record, Fulton’s applications be denied.

Last week Wachovia bragged that it has signed a seven-year deal with Genpact to outsource the regional banking giant's business-process work in India. Genpact is a joint venture between General Electric and “private equity” firms General Atlantic and Oak Hill Capital Partners. Wachovia’s director of corporate development, Peter Sidebottom, said-in-a-statement: “Over the past year, Wachovia has made several decisions to outsource work to domestic and global partners…We believe that establishing a presence in India with Genpact will improve productivity for our company and enable us to explore overseas growth opportunities.'' What was that sucking sound?

The GAO report on deficiencies in stopping money laundering for terrorism, as reported in the NY Times (which bragged in its article of having been “provided” an “advance copy”)

“More than four years after the Sept. 11 attacks, '’the U.S. government lacks an integrated strategy'’ to train foreign countries and provide them with technical assistance to shore up their financial and law enforcement systems against terrorist financing… The government has identified 26 'priority' countries that it considered particularly vulnerable to exploitation by terrorist financiers, who may take advantage of lax financial controls and loosely regulated or nonexistent laws to launder money in support of terrorist attacks, officials said. But officials at the State and Treasury Departments cannot even agree on who is supposed to be in charge of the effort to shore up defenses in vulnerable countries, the accountability office report concluded.”

How about identifying “priority” banks? As shown in ICP’s Finance Watch Report, these include big names, and not just money transmittal placed, “hawala” or otherwise…

Military personnel on active duty are being overcharged on high interest loans by bank holding companies including MBNA and Bank of America, a new investigation of compliance with the Servicemembers’ Civil Relief Act (SCRA) by Inner City Press / Fair Finance Watch has uncovered. Through documents just obtained under the Freedom of Information Act, ICP had documented widespread violations of the SCRA, defrauding and overcharging of those in active military service, and regulatory inertia in dealing with the abuses. ICP has immediately written to the Federal Reserve, demanding inquiry into and action on these newly unearthed documents, prior to any ruling but denial on BofA’s application to acquire MBNA. We'll see.

Subject: Royal Bank of Scotland/Citizens Bank
Sent: Sat, 3 Dec 2005 12:55:07 -0500 From: Name withheld [see below]
To: RBS-Watch [at] innercitypress.org

Thought you might be interested in recent developments at Citizens Bank/Charter One, the US arm of Royal Bank of Scotland. It's been kept very quiet, except for the Providence, Boston and Buffalo newspapers, but Citizens /Charter One has been laying off "colleagues" for the past week - to the tune of 250 to 300 people in Cleveland alone. I should know, because after 16+ years, I'm one of the affected "colleagues". I'm curious as to why nothing has been in the news here in Cleveland, since they promised a year ago to keep jobs in the Cleveland area when Citizens acquired Charter One. Articles have been in the Providence (RI) Journal the Wednesday before Thanksgiving… You have my email address, but I would prefer not to give my name, since I have to work there for another 2 weeks. My exit date, along with most of the other "Notified Colleagues" is December 16th...merry Christmas to us...

Like the RBS ads put it, “Less talk, more action” – in this case, lay-offs / shredding...

Dutch-based ABN Amro, which claims to eschew high-cost subprime lending in the United States, has bought into a subprime lender in Australia. On November 22, ABN Amro Capital Australia agreed to buy a 39.2% stake in Australian “non-conforming lending specialist” Bluestone Group for an undisclosed sum. Its spokesman JP Kaumeyer bragged that “Bluestone is very well-positioned to benefit from the forecasted ongoing growth in the issuance of nonconforming mortgages as well as the expected growth in equity release mortgages.” Great…

And now you know: the fall-out since WaMu bought Providian includes cutting as many as 371 jobs by closing a Providian call center in El Paso, Texas. The layoffs were tersely described in a November 17 letter to the Texas Workforce Commission under the Workers Adjustment and Retraining Notification Act. Of course, neither these layoffs nor other impacts were disclosed while WaMu’s application was before the Office of Thrift Supervision…

HSBC, which refused to tell even its affiliated banks who owned the accounts that showed up in Senate’s Riggs investigation, is moving to open up in the Dubai International Financial Center. Let’s see what, of HSBC’s non-disclosures, the Dubai Financial Services Authority says. HSBC’s commitment to secrecy certainly posed no problem in getting a license last week in Saudi Arabia. The Saudi Arabian capital market authority gave its rubber stamp to HSBC and its 40%-owned subsidiary Saudi British Bank (SABB) to establish an investment bank, HSBC Saudi Arabia Limited, in “the Kingdom.” HSBC CEO Stephen Green bragged, "We are optimistic about the long-term prospects for growth in the Saudi Arabian economy and look forward to providing investment banking and asset management expertise and products to the local market." And other, more confidential, services as well…

Previous scams settled, more to come: Fifth Third Bancorp announced on November 18 that a U.S. District Court has approved the settlement of class-action claims over the company's disclosures regarding its integration of Old Kent Financial Corp. In March, Fifth Third said it agreed to pay $17 million to settle the claims filed by some buyers of its stock, but said the settlement was subject to court approval. Okay - what’s the next scam?

Deutsche Bank again: A French judge reportedly wants to scrutinize bank accounts of Osama bin Laden's brother for possible money-laundering. According to a report in Le Journal du Dimanche, French Judge Renaud van Ruymbeke apparently made the demand to Berne public prosecutor Claude Nicati in Switzerland. Van Ruymbeke heads a money-laundering inquiry targeting the financial operations of Yeslam bin Laden, brother of al-Qaida's head. Yeslam bin Laden has been living in Switzerland since 1973 and has Swiss citizenship. “At issue is a suspicious financial transfer of $300 million to Pakistan via the Deutsche Bank in Geneva.” Ah, Deutsche Bank...

They’re baaaack, and so is Inner City Press / Fair Finance Watch. ICP has just filed comments opposing Huntington - Unizan, the proposed deal that’s been on ice since 2004, due to Huntington’s and its CEO’s accounting scandals. Beyond its serious accounting violations, Huntington in 2004 engaged in extremely disparate mortgage lending. For example, even upper income non-Latino African Americans were confined by Huntington more frequently than moderate income non-Latino whites to higher cost loans over the federally-defined rate spread of 3% over comparable Treasury securities on a first lien. Upper income African Americans were confined 2.84 times more frequently than upper income whites to rate spread loans by Huntington. And, as simply one more example, lower middle income Latinos were confined 3.53 times more frequently than lower middle income non-Latino whites to higher cost, rate spread loans.

By denials, even upper income non-Latino African Americans were denied by Huntington more frequently than moderate income non-Latino whites. Upper income African Americans were denied 2.92 times more frequently than upper income whites by Huntington. And, as simply one more example, upper income Latinos were denied 2.12 times more frequently than upper income non-Latino whites by Huntington National Bank in 2004.

ICP timely challenged Huntington’s first attempt to acquire Unizan, back in 2004. The Columbus Dispatch of October 8, 2005, reported that “A written agreement remains in effect with the Federal Reserve, but Huntington decided after discussions with the agency to proceed with filing the merger application. Huntington said the Fed ‘verbally advised’ the bank that it complied with federal requirements for management and capitalization.” Huntington’s CEO on the company’s third quarter earnings conference call (Fair Disclosure Wire of October 19, 2005) stated that “after consultation with the Federal Reserve, we also announced our intention to proceed with the filing of the application to acquire Unizan Financial Corp later this month.” Obviously, all records regarding such “consultations,” and write-ups of the above-referenced “verbal advice” (going back to when this proposal was announced, on January 27, 2005) are relevant to the application, and are responsive to ICP’s FOIA request. Developing...

On Cathay-Great Eastern, while the Fed has still not provided the balance of Cathay’s November 3 submission, ICP has obtained the rest through another source. While Cathay’s answers to Questions 2 and 3 simply refers to a purportedly Confidential Exhibit, it turns out that Question 4 was entirely about Cathay’s below satisfactory rating on the CRA Service Test -- an issue explicitly raised by ICP. There was absolutely no basis for Cathay not sending this to ICP. Next should be an FRB ruling on this.

Cathay General Bancorp, responding on November 3 to Federal Reserve questions posed on October 27, has chosen to send to Inner City Press / Fair Finance Watch only one of its answers, to a softball question concerning what CRA changes Cathay would implement at Great Eastern “if Cathay General were to acquire majority control of the bank.” The wording of the question (which the Fed never mailed to ICP) is interesting. 25% means control; here the Fed lets Cathay off the hook by using the phrase “majority control,” to which Cathay answers: “If CGB is only able to acquire the shares for which it currently holds Options (representing approximately 41% of the outstanding shares of Great Eastern), it is unlikely that CBG would be in a position to implement CRA changes at Great Eastern in the near future.” ICP is requesting the rest of Cathay’s responses, which should have been send, under FOIA.

The M&A grapevine tolls for Fifth Third, with publications from New York, Minneapolis and Cincinnati all predicted last week 5/3’s imminent take-over by U.S. Bancorp or more probably Wells Fargo. We note: among the ways that Fifth Third’s been mis-run was its refusal, earlier in 2005, to provide its mortgage lending data in computer analyzable form. Hearing now how badly run the whole place is, maybe they couldn’t provide the data in analyzable form, maybe they’ve stopped analyzing it themselves. We'll see. Last week Inner City Press / Fair Finance Watch submitted a second comment and reply regarding Cathay’s hostile moves on Great Eastern:

ICP submitted a timely comment on October 10, 2005. Two weeks later, on October 24, Cathay’s counsel submitted a purported response. ICP’s timely comment stated among other things that “in terms of the earlier released CRA / small business lending data, Cathay in New York County (Manhattan) made only one loans below $100,000 -- and this in an upper income census tract. In Kings County (Brooklyn), Cathay made no loans below $100,000: all of its business loans were above $250,000. In Middlesex County, Massachusetts, Cathay’s business loan(s) were exclusively in upper income census tract(s).”

Cathay’s purported Resp. does not mention much less address this issue. Instead it refers to a “Satisfactory” (overall) CRA rating, from February 2004. But the Performance Evaluation itself, beyond the Needs to Improve sub-rating, states for example that “Cathay Bank provides few, if any, community development services in the New York Assessment Area” (PE at 74). The PE also for example notes a decrease in lending in low income census tracks (PE at 71). These are only two examples; Cathay’s failure to even mention the 2004 CRA/Small Business lending issues makes Cathay’s purported Resp. entirely inadequate, and militates for hearings and denial of Cathay’s applications.

The slapdash nature of Cathay’s Resp. is also evidenced by the claim that no CRA changes, or antitrust impacts, could happen because Cathay is not proposing to merge Great Eastern into Cathay Bank. That is besides the point: acquisition of an unaffiliated bank by a holding company raised both antitrust and CRA issues, not addressed by Cathay’s Resp. Cathay’s purported Resp. entirely inadequate, and militates for hearings and denial of Cathay’s applications. Reuters of October 25, 2005 reported:

LOS ANGELES, Oct 25 (Reuters) - Cathay General Bancorp (CATY.O) on Tuesday said it had exercised options to buy a minority stake in Great Eastern Bank as it tries to prevent UCBH Holdings Inc. (UCBH.O) from buying the bank. Cathay General, which operates Cathay Bank, exercised options to buy 41 percent of Great Eastern. Cathay, Great Eastern, and UCBH each specialize in serving Chinese Americans. Great Eastern needs the approval of two-thirds of shareholders to sell itself to UCBH, which earlier this month agreed to buy Great Eastern for $103.6 million.

This is more than a little surprising, given that to ICP’s knowledge Cathay does not have required regulatory approval to exercise those options. While Great Eastern has since issued a press release also pointing this out, ICP asks the FRB to inquire into Cathay’s actions and public statements in this regard. ICP’s FOIA request for the entire application, including the presentation on USA Patriot Act compliance, remains pending, and ICP will comment on the documents that should be provided under FOIA once they are released. Developing...

As Cathay and UCBH Holdings duke it out in a bidding war for Great Eastern, Inner City Press / Community on the Move has filed timely comments opposing Cathay’s application to the Federal Reserve. Until last month, Cathay has been subject to a Memorandum of Understanding regarding breakdowns in its anti-money laundering systems. While, conveniently, the MOU was ended simultaneous with the announcement of Cathay’s proposed acquisition in New York, there are issues which should be closely considered in this proceeding, including in connection with the evidentiary hearing ICP is requesting. ICP has reviewed Great Eastern’s mortgage data, and notes that Great Eastern has only reported approved and originated loans: no denials, no withdrawns, no approved but not accepted. In terms of the earlier released CRA / small business lending data, Cathay in New York County (Manhattan) made only one loans below $100,000 -- and this in an upper income census tract. In Kings County (Brooklyn), Cathay made no loans below $100,000: all of its business loans were above $250,000. In Middlesex County, Massachusetts, Cathay’s business loan(s) were exclusively in upper income census tract(s). Developing...

On the Gulf Coast, Hibernia last week admitted a large third-quarter loss after incurring nearly $200 million of costs related to Hurricanes Katrina and Rita. One-third of Hibernia's 326 branches were affected by Katrina, and one-fifth suffered major damage. Thirty-seven of Hibernia’s branches remain closed. The bank was "severely impacted by the evacuation of large portions of the population, widespread property damage and the disruption caused by these factors on the operations and revenue-generating capacity of local businesses and government," CEO Herb Boydstun said-in-a-statement. Pre-judging Hibernia’s shareholders’ / owners’ views, Boydstun still expects on Nov. 16 to close the twice-delayed (and price-reduced) $5 billion takeover by Capital One. Hibernia has set a Nov. 14 shareholder vote for the merger, originally expected to close September 1. We’ll see...

From last week’s Omaha World-Herald: “John Stafford, a spokesman for Bank of the West, said Wednesday that the companies are still finalizing plans for post-merger functions that would be located in Omaha, where Commercial Federal has more than 1,000 employees.... Last month, Bank of the West increased its pledge of community financial support from $30 billion to $75 billion through 2015. Community financial service, such as home mortgages, small-business loans, farm loans and charitable contributions, is one factor the FDIC considers in proposed mergers. ‘Once they increased that pledge, I'm not surprised that it's been approved,’ ICP said. ‘We're somewhat dubious (about Bank of the West's community lending), but we're not entirely negative.’ [ICP] still has questions about the conduct of Bank of the West's parent company, BNP Paribas of Paris, in the United Nations' oil-for-food program in Iraq. Bank of the West's Stafford said the FDIC reported that it had found ‘no inconsistencies’ with the banks' community financial services and, in approving the sale, also took into consideration the effectiveness of the banks' anti-money-laundering policies at domestic and overseas offices. He said the FDIC's report on the approval did not specifically mention the oil-for-food program.” In fact, the FDIC so far has refused to release any of its reasoning. Meanwhile, BNP Paribas is trying to buy a stake in Nanjing City Commercial Bank in China. Developing...

This week we look global(ly). ICP/Fair Finance Watch has filed comments with the Central Bank of Iraq Governor Dr. Sinan Al-Shibibi on HSBC’s proposal to acquire a 70% stake in Dar Es Salaam Investment Bank there. The proposal was commented on publicly by HSBC last week: “’We are very close to concluding an agreement,’ David Hodgkinson, the chief executive officer of HSBC Bank Middle East, told a news conference.. Hodgkinson later told Reuters that HSBC was looking to buy 70%, not just the 51% previously mentioned... the Iraqi central bank said it has received a request to approve HSBC's purchase of a 51% stake from the Khudairy family.” Beyond predatory lending, HSBC’s lack of anti-money laundering standards seem particularly relevant. We’ll see.

Meanwhile in Brazil last week the administration of President Luiz Inacio Lula da authorized the sale of a minority stake in the country's No. 3 government-owned bank Nossa Caixa to foreigners, opening the way to a planned public offering. The bank wants to raise $300 million) for Sao Paulo State. From Reuters: “The offer, coordinated by UBS, aims to protect the bank against political interference, bank officials have said.” UBS? Where ex-US Senator Phil Gramm works? Great...

Arrogance and impatience: now Capital One and Hibernia plan to hold the required shareholders’ vote on Cap One’s 9-percent post-Katrina cut in deal price on November 14 -- then “consummate” the deal two days later...

The global game: Societe Generale is preparing to acquire Ukraine's fifth largest bank, Ukrsibbank, the daily La Tribune reported last week. It also said SocGen plans to acquire Montenegro's third largest bank, Podgoricka Banka... Meanwhile, BNP Paribas' CEO Baudouin Prot told Le Figaro that BNP is not considering any deal with Soc Gen. "I would consider such an operation to have many considerable risks. It is excluded from my field of thoughts," he said. We’ll see.

Like lemmings they continue: BNP Paribas on September 23 confirmed it is in talks aimed at securing a roughly 18.5% stake in China's Nanjing City Commercial Bank. China's Morning Post had reported the two banks are slated to sign a nearly $100 million purchase agreement by mid-October...

A deal from LaLaLand: First Community Bancorp announced on September 13 a proposal to buy Cedars Bank and its six branches for $120 million. First Community said it planned to merge the acquired bank into Pacific Western National Bank, its Los Angeles-based subsidiary.

Upstate New York action: First Niagara Financial Group on September 12 announced the purchase of Burke Group Inc., a benefits consulting firm with offices in Rochester and Syracuse. Initially, Burke Group will operate as a subsidiary of First Niagara bragged that since entering the Rochester market in 1999 with a loan production office, First Niagara now has 250 employees in Monroe County and its surrounding markets and operates 16 branches.

Global jump cut to the Bosporus: on September 13, Bank Hapoalim announced a proposal to acquire a controlling interest in Turkey's C Kredi ve Kalkinma Bankasi AS for $113 million...

Deal-making in the disaster zone: last week Capital One cut the price it would pay for Hibernia by $350 million. Some had predicted Capital One would hold off, concerned about bad press. But Cap One is already being sued for defrauding consumers nationwide, with fake no-interest offers. To them, what’s short-selling a three state region? Also involved in this post-hurricane card game: “Credit Suisse First Boston is advising Capital One, which is receiving legal advice from Cleary Gottlieb Steen & Hamilton LLP. Hibernia's financial advisers are J.P. Morgan and Bear, Stearns & Co. and law firm Wachtell, Lipton, Rosen & Katz.” Any of the fees being donated for disaster relief?

The mega-banks of the West, salivating to enter the Chinese market, are now studying a bad omen. Royal Bank of Scotland was in full denial mode last week after reports that its target the Bank of China is under investigation for laundering money from North Korea's counterfeiting, drugs and weapons deals. RBS last month proposed to acquire a 5% stake in Bank of China, “in spite of concerns over human rights and corporate governance policies in the Far East giant,” at the Scottish press put it. The Herald quoted an RBS spokesman that “it certainly doesn't change our position there at all. It is yet to be understood what the scale of it is, and to establish the level of concern." The report emerged in the Asian Wall Street Journal, which said that US authorities were investigating three Chinese banks - Bank of China, as well as Banco Delta Asia and Seng Heng Bank, both of which are based in the former Portuguese enclave of Macau. The report claimed that the banks were under scrutiny for possible connections to North Korea's illegal fund-raising network, which many believe finances Pyongyang's nuclear program. RBS CEO Fred the Shred Goodwin is slated to take a seat on the board of China's second largest bank...

Annals of globalization: on September 6, private equity firm Advent International announced a proposal to acquire Nuevo Banco Comercial S.A., Uruguay's largest commercial bank, from the Uruguayan government for $167 million. They said that the acquisition is expected to close in December 2005....

Oh the analysts. "People are becoming quite concerned that the Capital One-Hibernia transaction, if not delayed, could be postponed … with Capital One trying to exercise the material-adverse-change provision within the merger agreement, given the hurricane and preliminary damage assessment," said an analyst at Swiss Re's Fox-Pitt, Kelton. Shares of Whitney, Hancock, and Hibernia were in a free fall on August’s last day. Whitney, after dropping 7.5%, recovered in the afternoon to close down 4.4%. Hancock failed to regain ground; it closed down 6.9%. Hibernia was off 5.8%, but Capital One rose 1.1%. Seems like the market knows just how predatory Cap One is... Click here for more of ICP’s Gulf Coast Watch.

North Fork Bancorp announced on August 31 that it must improve anti-money-laundering systems and procedures under a memorandum of understanding with the Federal Deposit Insurance Corp. and the New York State Banking Department. North Fork said the memorandum may affect its "timing or ability … to engage in or obtain regulatory approval for certain expansionary activities." Which would those be? Buying another subprime lender like Greenpoint?

They’re at it again -- General Electric last week announced a proposal to acquire a 25.5% stake in Turkey's Garanti Bank for $1.56 billion, from the Dogus Group. “GE said Turkey's expanding banking sector provided growth opportunities.” Yeah -- for GE’s predatory lending...

Further annals of globlization: HSBC is eyeing a doubling of its stake in China's Bank of Communications to about 40 percent provided it can negotiate state
restrictions limiting foreign investment. HSBC aims to raise its 19.9 percent stake to a "more rational figure" of about 40 percent if the current limits of 20 percent on individual foreign ownership were to change, the China Daily quoted HSBC executive director Wang Dongsheng as saying. HSBC also owns eight percent in the Bank of Shanghai -- making a mockery of antitrust in China...

Buy like an Egyptian -- Societe Generale has bought 69.7% of shares in Misr International Bank, giving it overall control of one of Egypt's big four banks. SocGen BNP Paribas in a deal valuing MIBank at $420 million... Two of Citigroup’s far flung purchases last week -- a move on oil company, Inchon Oil Refinery Co., in South Korea (how’s that for environmental standards?) and, a department store with a subsidiary called Parasito.com. Yes, parasite -- that’s Citigroup.

Online brokers play musical chairs: on August 8, E*Trade Financial announced a proposed to buy HarrisDirect from the Bank of Montreal for $700 million. Previously, E*Trade's overtures for Ameritrade were rebuffed; then Ameritrade announced it would buy TD Waterhouse USA from the always CRA adverse (but Hubco-interested) Toronto-Dominion Bank....

In a wacky global Asian deal, ANZ now proposes to buy 10% of Vietnamese Sacombank for $27 million, according to Sacombank chairman Dang Van Thanh. Sacombank's two existing foreign shareholders are International Financial Corporation, which holds an 8% stake, and Dragon Capital Group with 9%...

In other wacky global action, Texas-based Stanford Financial Group has begun operating a bank in Venezuela with 10 branches across the country, a local newspaper reported on August 9. The group, based in Houston, began offering banking services after acquiring the Banco Galicia de Venezuela a few months ago, according to El Nacional newspaper. The bank has reportedly invested $70 million in hopes of capturing 5% of the local market by 2010. We’ll see...

HSBC not only likes subprime, but the worst of the kind -- predators. Having acquired Household International, HSBC now proposes buying Metris, already subject to a consumer protection consent decree with the Office of the Comptroller of the Currency, and hit with an investigation by the Securities and Exchange Commission only last month. The dirtier, the best, says HSBC. We’ll see...

While Capital One’s application to acquire Hibernia is pending at the Fed, and Capital One’s answers to FRB questions are being improperly withheld and are in any event clearly insufficient, the two banks have announced they (still) anticipate “consummating” their deal on September 1. Which either means that they’ve heard from the Fed they’ll get approve on or before August 15, or that they’re arrogant. Or, of course, both....

Buying while getting indicted General Electric on August 2 announced a proposal to buy a 43 percent stake in the credit card arm of South Korea's Hyundai Motor Co. for $390 million. Meanwhile in Peru, 23 current and former GE employees, including Jack Welch, have been indicted....

For this one week, a step back from banks to look at telecom (and compare it). On July 26, Inner City Press attended the NYS Public Service Commission’s public hearing on the proposed mergers of Verizon and MCI, and SBC and AT&T. ICP came with testimony (which is below). But what was surprising was that those testifying were singing Verizon’s praises for grants it has given, to the Brooklyn Academy of Music and other programs. Very little was said about the impact on consumers or competition of these telecommunications mega-mergers. It was similar, in this way, to public hearings on bank mergers, held by the Federal Reserve and, here, the New York Banking Department. But even at these, some of the testimony is about the merger, or the companies’ record. At least for the portion attended by ICP, it was sing-for-supper from Verizon. Then again, the multi-state review will take three or four times longer than the review of any bank merger (except for example Huntington - Unizan, still pending)...

German prosecutors’ investigation of money laundering for Russian privatizations have zeroed in on Commerzbank. Last week, Frankfurt authorities searched 10 locations in Germany while their Swiss counterparts raided offices in Zurich and Zug, all looking for evidence that German bankers, among them five current or former employees of Commerzbank. Earlier in the month, Commerzbank Chief Executive Klaus-Dieter Mueller expressed interest in buying Germany’s second biggest mortgage lender BHW." We are interested in principle," Mueller was quoted by Reuters on the fringes of a conference in Frankfurt. Mueller called for an end to the "protection fence" that stops takeovers of German state-owned savings firms and state lenders. Mueller said that regulation of hedge funds, a subject of hot debate following the toppling of management at German stock exchange operator Deutsche Boerse, should not be left to banks. "Banks have all too often been enlisted by politicians to help," he said, citing money laundering supervision, where he said the costs of regulation had been left to banks themselves.

Turkish intrigue: Societe Generale is considering making an offer for Turkish bank Garanti which is valued around $6 billion, Les Echos reported on July 21. SocGen faces competition for Garanti from banks ABN AMRO, Deutsche Bank and General Electric, the paper said...

Citigroup’s predatory lending is global. A recent example, from AFX News of July 21: “South Korea's financial watchdog said it had launched a probe into allegations that Citibank Korea Inc, the local unit of US banking giant Citibank, has cheated customers out of millions of dollars while selling mortgage loans. 'The Financial Supervisory Service (FSS) is investigating the allegation and it will take proper measures in accordance with the outcome of the probe,' the FSS said in a statement. The FSS said it told Citibank Korea yesterday to submit documents including the protocols for the loans in question” following a complaint that “the bank had skimmed off 7.4 bln won from customers by applying fixed rates to floating-rate mortgage loans between the end of 2001 and early this year. Citibank Korea allegedly failed to lower interest rate on the loans when rates began to fall from late 2002.”

Re HSBC, musing has started about who will replace John Bond as chairman. Reuters predicts the evangelist Steve Green. An insider as chairman? They’ll be some ‘splaining to do... Also re HSBC’s lending in Hong Kong, see this article reporting on a High Court judge shaming HSBC for a ''total lack of morality or legality.''

On Capital One - Hibernia, the process continues. Last week Inner City Press received a copy of Capital One’s July 15 response to questions the Federal Reserve posed on July 7, about Capital One’s procedures regarding unfair or deceptive acts or practices (half of the response is withheld), how consumer protection matters are addressed, and regarding Capital One’s Fair Lending Policy (that too is withheld). The Federal Reserve has a duty to review (and in this case, overturn) Capital One’s unilateral withholding of this information.

Call it gassy -- last week GE announced it will buy a gas pipeline from AIG. It’s the Southern Star pipeline system, through Kansas, Oklahoma, Missouri, Wyoming, Nebraska, Colorado and Texas; it is being sold for $362 million, by AIG Highstar...

Bank of America on July 13 settled charges that its customers, particularly the elderly, were hard-sold inappropriate annuities. Bank of America claims it will now change its annuity sales, training and management policies throughout the U.S. As reported by the Wall Street Journal’s Valerie Bauerlein, “as part of the agreement, Bank of America will allow customers who were at least 78 years old in 2003 and 2004 and purchased variable annuities during that period to liquidate their investments without surrender charges that can be several percentage points of the annuity's value. In almost all cases, customers would still face hefty tax penalties. The settlement covers about 800 people in Massachusetts and several thousand in the rest of U.S., although the bank wouldn't specify exactly how many.” How’s that for transparent? More light should be shed on the issue in the BofA-MBNA proceeding -- click here for ICP’s comments, and for updates.

Lone star state dealing: on July 6, Houston-based Amegy Bancorporation proposed to sell itself for $ 1.7 billion to Zions Bancorporation of Salt Lake City, Utah. Pundits say that the next Texas targets could be Dallas-based Texas Regional Bank, or Houston's Prosperity Bank or Sterling Bank -- which on July 8 announced a proposal to buy, for $34.4 million, Prestonwood Bancshares and its subsidiary, Oaks Bank & Trust Company...

Inner City Press / Fair Finance Watch has just filed a 30-page challenge to the application by Bank of America to acquire MBNA. ICP's comments, filed with the Federal Reserve Bank of Richmond and with the Federal Reserve Board in Washington, demand public hearings on the proposals potential to raise prices and undermine consumer privacy, and on striking lending disparities in B of A’s 2004 mortgage data. ICP will be submitting further comments once the banks submits their response(s). For more, see ICP’s BofA Watch, which will be updated.

Last week, Bank of America announced a proposal to buy MBNA, for $35 billion. Bank of America's applications for regulatory approval will be opposed, by ICP and others, based not only on antitrust but also on both Bank of America’s and MBNA’s lending disparities, and Bank of America’s enabling of payday lending, and securitizations for problematic subprime lenders including Ameriquest.

For home purchase loans, Bank of America, N.A. in 2004 denied applications from Hispanics 2.104 times more frequently than from whites, and denied applications from non-Hispanic Blacks 2.063 times more frequently than non-Hispanic whites.

MBNA, beyond credit cards, is a not-insubstantial mortgage lender. In 2004, over 48% of its loans to African Americans were higher cost loans over the rate spread, defined as three percentage points over comparable Treasury securities on a first lien, and five percent on a subordinate lien.

At Bank of America, N.A. for home purchase loans in 2004, Hispanics were 1.39 times more likely to receive higher cost “rate spread” loans from Bank of America than non-Hispanic whites; non-Hispanic Blacks were 2.20 times more likely to receive rate spread loans from B of A than non-Hispanics whites. ICP has begun city-by-city studies of Bank of America: previously issued a report on the disparities in Bank of America’s lending. See, e.g., “Several Banks Criticized for High Cost Loans,” Buffalo News of May 9, 2005; Memphis Commercial Appeal of May 13 and Orlando Sentinel of May 29, 2005. ICP will be expanding these to more cities and filing them with the regulators.

Bank of America, despite its sale of Equicredit and reported shuttering of NationsCredit, is still extensively involved in controversial subprime lending. It controls a majority stake in the subprime lender OwnIt Mortgage (f/k/a Oakmont Mortgage), on which ICP will be commenting to the Federal Reserve. Bank of America securitizes high interest rate loans through · Banc of America Securities, LLC, Banc of America Mortgage Capital Corporation and its 100%-owned (but generically-named) subsidiary Asset Backed Funding Corporation; perhaps most tellingly, Bank of America, now purchases loans of subprime lenders, for example from Ameriquest. See, e.g., Fitch's June 9, 2005, press release on Business Wire concerning ABFC Asset-Backed Certificates 2005-AQ1stating that the underlying loans were “by Ameriquest Mortgage Company, they were subsequently purchased at closing by the depositor, Asset Backed Funding Corporation.” Fitch has also specified, April 8, 2005, that “Asset Backed Funding Corporation will deposit the mortgage loans into the trust. The depositor is a Delaware corporation and a wholly owned, indirect subsidiary of Bank of America Corporation. The depositor is an affiliate of Banc of America Securities LLC.” Bank of America’s ABFC buys subprime mortgage loans from Ameriquest, a subprime lender that is by its own admission under investigation by the attorneys generals of at least 25 states. See, e.g., innercitypress.org/ameriquest.html

ICP's ongoing review of Uniform Commercial Code (UCC) filings has found that Bank of America enables payday lenders, including with multiple loans the payday lender Advance America Cash Advance... Bank of America is the main funder of Advance America. For example, in an April 16, 2004 response to ICP comments to the Federal Reserve, National City Bank stated: “National City is also a [REDACTED] senior secured Bank of America agented credit facility for Advance America (HQ in Spartanburg, SC).” This is an issue ICP has raised since last year; in July 2004 in response to ICP's comments, SunTrust announced it will no longer fund payday or car title lenders. See, <www.fairfinancewatch.org/enforce.html>. These are serious matters, one into which ICP will further inquire in regulatory proceedings on Bank of America’s MBNA proposal. Developing...

Last week Toronto Dominion announced a proposal to sell off TD Waterhouse USA to Ameritrade, for $2.9 billion. When Toronto Dominion bought Waterhouse, it claimed to comply with the Community Reinvestment Act by buying bonds backed by luxury housing at NYC’s Battery Park City. Now that bank and its CRA duties are slated to be sold off...

A June 15 research note by Goldman Sachs Group says that the Federal Reserve will conduct a two-week examination of AmSouth this month. The American Banker of June 23 reported that the note was issued “after a meeting with AmSouth's management,” and that the note says it "is likely a final resolution could be reached" and that the company could make an announcement when it releases its second-quarter results.

Should AmSouth be telling stock analysts, in an exclusive setting, about upcoming Federal Reserve exams? What about Regulation FD? And let the Federal Reserve note: AmSouth is one of the banks that has refused to provide its 2004 HMDA data in computer analyzable form. Oh but that’s Reg FU...

ICP/Fair Finance Watch has continued to oppose Capital One’s application to acquire Hibernia. Most recently, ICP has reviewed the 2004 Home Mortgage Disclosure Act data of the subprime home equity lender Capital One acquired, eSmartLoan. On June 16, having already commented on disparities in Hibernia’s data, ICP finally received data in response to its March 21 request for the 2004 HMDA-LAR of Capital One’s eSmartloan. ICP was told that “this HMDA-LAR will be for all activity of National Bank Of Kansas City, not exclusively eSmartloan.com activity for the year. eSmart’s loan numbers will begin with 2004.” While questions ICP raised about this statement have not been answered, from the above ICP infers that the file it received on June 16 includes eSmartLoan’s 2004 originations. This file includes 144 super high cost “HOEPA” loans (loans subject to the Home Equity and Ownership Protection Act, in essence costing at least eight hundred basis points over comparable Treasury securities). The file includes 2193 higher cost, rate spread loans (loans three hundred basis points or more over Treasuries on a first lien, five hundred on a subordinate lien). All of these high cost loans were reported, as to race, “Information Not Provided.” The originations in the file for which race was reported are predominantly in Missouri and Kansas. ICP takes these to be the retail loans of National Bank of Kansas City, from which Capital One acquired eSmartLoan, which is a subprime lender directed at many more states. Of the over 6000 race-not-reported loans, one-third of them rate spread, only four were in Kansas, and only four in Missouri. The rest are all over the country -- high cost and race not reported. ICP has reiterated its request for hearings.

Bank of America last week announced a proposal to buy a 9% stake in China Construction Bank for $2.5 billion, and to take a 5½-year option to increase its stake to 19.9% at the price of the shares in the projected IPO. Meanwhile, BofA agreed to pay $1.5 million to settle Securities and Exchange Commission charges that it failed to keep business-related email messages. Now it’s moving into a country which censors political commentary on the Internet. Conundrum...

On June 14, BNP’s Bank of the West unveiled a proposal to buy Commercial Federal Corp. for $1.36 billion. "It's a logical extension of Bank of the West's expansion into the Midwest which began with last year's acquisition of Community First Bankshares," BancWest’s Don McGrath said-in-a-statement. "We'll add dramatically to our market share in Denver -- we'll have nearly 100 Colorado branches. We will also become one of the leading banks in Omaha and Des Moines," McGrath bragged. We’ll have more on this...

On June 20, ICP filed a challenge to the application by Washington Mutual to acquire Providian Financial Corporation, based on the striking lending disparities in the 2004 mortgage data of Washington Mutual and its higher-cost subprime lender, Long Beach, and on Providian’s history of problematic credit card lending. ICP has also submitted sample consumer complaints against Washington Mutual obtained from state Attorneys General. Click here for more.

So it was true all the time -- over the weekend, Italy’s Unicredito confirmed it is bidding $18.7 billion for Germany’s HVB. The combined bank, if allowed to formed, would be present in 19 countries with more than 28 million customers, 7,000 branches and 733 billion euros in assets. From Munich, Reuters opined that the deal could herald more bank mergers in the region, especially in Germany, involving Commerzbank or Deutsche Bank...

Meanwhile, Citigroup proposes to pay out $2 billion for its role in the Enron fraud. Citigroup says it has already accounted for this. It’s called, “A cost of the business model.” In further lay-off news, CitiFinancial will close an Owings Mills, Maryland center that handles loan defaults and has about 110 employees. The layoffs - scheduled for the last two weeks of July, according to Maryland Department of Labor, Licensing and Regulation - follow the closing last year of a back-office support center with 116 workers in Hanover, Maryland. The jobs were consolidated at centers in Charlotte, N.C., Dallas and Phoenix. But where’s the customers’ data? Although the Ohio AG's office does not have as much enforcement power with financial institutions as it does retailers, Ohio AG Petro said, "We'll be rattling the cage of Citigroup in the same way" it did DSW (a store in Ohio that sells, among other things, shoes). We’ll see. Petro’s office has received 116 complaints against Citigroup, most of them against CitiFinancial, since 2000...

In U.S. micro M&A in North Carolina, Citizens South Banking Corp. in Gastonia, N.C., is proposing to buy the $150 million-asset Trinity Bank in Monroe, N.C., for $35.5 million. It is reported that “Trinity, founded in 1999, caters to churches and churchgoers.” A wing and a prayer...

In other intrigue, Fortis NV is moving to bid for Romania's largest bank, Banca Comerciala Romana, according to a June 3 report in the daily newspaper Bursa, which speculated that Fortis might compete for BCR against Italian banks Unicredito Italiano SpA and Banca Intesa SpA and/or Germany's Deutsche Bank AG. Meanwhile Deutsche Bank is considering buying a majority stake in Russia's Impexbank and is carrying out due diligence, according to Reuters of May 31. Deutsche Bank’s response to issues ICP raised to the United Nations Global Compact, including Deutsche Bank’s unseemly role as the main banker for the dictator of Turkmenistan (who had renamed the months in that country for his mother, and forces all resident to read his book Ruhnama), consists of a half-page about “sustainability criterias” [sic], ISO 14001 and the repetition of Breuer’s statements about DB’s business in Kazakhstan and Turkmenistan. We can only ask -- why not Belarus?

Also on the bank (and human rights) beat, HSBC’s standardless business in rogue nations was profiled last week by Bloomberg News’ Vernon Silver, including these sample squibs:

“From their offices atop Tehran's 15-story Sayeh Tower, HSBC Holdings Plc bankers have helped lend more than $825 million to the Iranian government... HSBC, Europe's biggest bank by market value, says it isn't breaking the law and is merely trying to make money. ``The job of HSBC Bank Middle East is to take advantage of business opportunities in the region,'' says Steve Martin, a spokesman in Dubai for HSBC's Middle Eastern unit... HSBC does additional Syrian business through London-based British Arab Commercial Bank Ltd. HSBC owns 46.5 percent of the bank, whose chief executive officer is an HSBC employee on loan. HSBC holds five of the 11 board seats.
     Other shareholders of British Arab Commercial Bank, known as BACB, are the Libyan government's Libyan Arab Foreign Bank, with 25 percent, and Iraq's state-owned Rafidain Bank, with 4.91 percent. Libyan and Iraqi representatives sit on BACB's board alongside HSBC bankers. During Saddam Hussein's rule, an Iraqi representative traveled from Baghdad to London for some board meetings, according to BACB.
     BACB is a corner of the HSBC empire that specializes in doing business legally with countries that have been marginalized by sanctions, BACB General Manager and Deputy Chief Executive Mohamed Fezzani says... BACB's Web site calls these ``niche markets,'' listing Iran, Libya, Sudan and Syria along with other countries that aren't on the U.S. terror list, such as Algeria and Morocco.
     Leaflets promoting BACB's activities in Syria and Libya are displayed in the lobby of its London headquarters on Mansion House Place, a six-story modern cement building decorated with stripes of brick, nestled behind the 250-year-old official residence of the lord mayor of London. HSBC does its Sudan business through BACB, Martin says.

And the article didn’t even mention HSBC refusing to tell money laundering Riggs Bank who owned the account(s) into which the Equatorial Guinea funds were funneled...

The hottest story on the bank beat this week is in Germany, where HVB Bank is reportedly in merger talks with Italy’s UniCredito and an unnamed Spanish bank. Regarding the former, there has been some speculation that UniCredito could sell HVB's German business and focus on the new European market through its Bank Austria Creditanstalt unit (BA-CA). "The only driver for the merger is Bank Austria, which would help Unicredito consolidate its leadership in eastern Europe," said a Milan-based analyst. But others say that the talks are over the whole of HVB, including Germany, where UniCredito in 2001 held takeover talks with Commerzbank. Meanwhile Die Welt am Sonntag weekly reported that HVB Chief Executive Dieter Rampl held discussions with managers of a large Spanish bank this week in South Korea together with supervisory board chief Albrecht Schmidt; it speculated on either Santander or BBVA...

In U.S. M&A, Georgia-based Flag Financial Corp. announced on May 27 a proposal to acquire First Capital Bancorp, the holding company for First Capital Bank, for about $134.8 million...

In continuing analysis of the 2004 Home Mortgage Disclosure Act data, Inner City Press / Fair Finance Watch has come upon a striking disparity in Citigroup’s credit offerings by state and region. Among ICP’s findings: while 12.06% of Citigroup’s 8797 loans in Massachusetts in 2004 were are or over the rate spread, fully 71.61% of Citigroup’s 1909 loans in Mississippi were rate spread / higher cost. In Tennessee, 65.50% of Citigroup’s 5548 loans were rate spread / higher cost. Other impacted states, (reverse) redlined by Citigroup, include Alabama, West Virginia, Kentucky, Oklahoma, Louisiana, North and South Carolina, Ohio, Georgia, Michigan, Iowa, Texas and others. ICP has filed complaints with the attorneys general in these states and others.

ICP’s inquiry into Ameriquest continues. In Texas, where access to 41 boxes of documents from and/or about Ameriquest is being blocked, notice has been given to Ameriquest’s general counsel and the company’s outside counsel at Kirkpatrick & Lockhart and another firm. Sample complaints have been received from Kentucky: copies of letters to the complaining consumers, stating for example that “regrettably we have referred this matter to our foreclosure department for further handling.” That recent advertisements, including on Indy 500 car(s), have been for “Argent Mortgage” is interesting. Preparing for a spin-off? Developing...

Balkans banking: on May 18, Erste Bank AG announced it has won the tender to buy Serbian Novosadska banka a.d. from the Serbian privatization agency. Erste Bank offered EUR73.167 million for a 83.3% stake in the bank, which is 3.3 times the book value at Dec. 31, 2004. "Serbia is an important milestone in our growth strategy in central and eastern Europe," Chief Executive Andreas Treichl said; the transaction is still pending approval of regulatory authorities... Meanwhile, Bank Austria Creditanstalt and the Bank of Greece are interested in a stake in Serbia's fourth biggest bank, Vojvodjanska Banka, Serbia's finance minister was quoted as saying on May 21. Austrian news agency APA quoted Finance Minister Mladjan Dinkic as saying the two banks were among those that had expressed an interest in Vojvodjanska, which ranked fourth biggest in the country by assets at the end of March. Serbia is offering for sale a controlling stake in the bank. "Alongside Bank Austria and (its parent) HVB Bank, some other banks, such as the Bank of Greece, have expressed their interest in Vojvodjanska Banka," APA quoted Dinkic as saying. Bank Austria is the central and eastern European arm of Germany's HVB Group. APA said Dinkic was speaking after a meeting with HVB representatives on the sidelines of the European Bank for Reconstruction and Development's annual meeting in Belgrade...

Florida sleaze: Fifth Third Bank is reportedly scouting downtown Orlando to find a location with a ritzier profile than its current branch on North Orange Avenue near Robinson Street. That site was the former downtown branch of Southern Community Bank, which Fifth Third acquired, after protests, late last year, along with First National Bank of Florida. So far, Fifth Third has not put its name on the downtown building façade, which seems to indicate it is looking for more prominent digs. Some have suggested the former SouthTrust building next to Interstate 4, but that's unlikely. Fifth Third is apparently thinking skyscraper. All the best to exclude the public from: Fifth Third has maintained its position that providing its mortgage data in a form in which it cannot be analyzed is the way to go. We’ll see.

In other Florida news, ICP has submitted a study of nine large lenders in Florida to that state’s Attorney General’s office, demanding action. Click here to view ICP’s Florida study.

This week we step back, temporarily, from drilling ever-deeper into the 2004 Home Mortgage Disclosure Act data. In another part of HSBC’s subprime scheme, the company last week announced the proposed settlement, for $360 million ($250 million of this in “coupons” of dubious value) of a class action for its high-cost tax Refunds Anticipation Loan business with H&R Block. The coupons would require the customers to go right back to H&R Block. Meanwhile, ICP’s inquires into HSBC’s predatory mortgage lending settlement have resulted, among other things, in the Texas Attorney General’s Office telling ICP that HSBC’s attempt to block release of documents about the settlement remain still pending in court. And at press time, word reached our newsroom of a court win for openness in Inner City Press’ case challenging the Delaware Attorney General’s withholding of HSBC / Household-related documents - more on this next week. For now, on the bank beat, Michigan micro: Firstbank Corp. of Alma, Mich., announced on May 12 a proposal to buy Keystone Financial Corp. of Kalamazoo for $26.6 million... And a bit smaller, even, in North Carolina: FNB Corp. of Asheboro, N.C. last week agreed to buy $151 million-asset Alamance Bank in Graham, N.C., for $24.6 million...

In U.S. micro-deal news, Peoples Community Bancorp Inc. of Cincinnati is continuing its expansion into Indiana by proposing on May 4 to acquire the $134 million-asset PFS Bancorp Inc. of Aurora for $33.8 million.

Further south and for more money, the banking regulator in El Salvador, the Superintendencia del Sistema Financiero, has rubber-stamped Bank of Nova Scotia's $178 million acquisition of Banco de Comercio. In a news release, the Canadian chartered bank said it's now the majority shareholder of El Salvador's fourth-largest bank, with nearly $1.6 billion in assets and a consolidated market share of more than 17%. Banco de Comercio branches are being rebranded Scotiabank El Salvador.

In related global M&A, further south still, several groups are interested in buying Peru's No. 3 bank, the Italian-controlled Banco Wiese Sudameris, Economy Minister Pedro Pablo Kuczynski said on May 5. "There are, I understand, several bidders. They have all come to see me, but it will be the vendor who'll decide," Kuczynski told CPN radio, offering no further details. Banco Wiese, a unit of Italy's Banca Intesa and third in Peru's 14-bank system, has denied recent media reports of a sale. The newspaper Correo reported that Grupo Wong, the owner of Peru's largest chain of supermarkets, and Bank of Nova Scotia / Scotiabank, were among those interested.

ICP Fair Finance Watch continues drilling deeper into the 2004 Home Mortgage Disclosure Act data. Following its petitioning last week of state attorneys general, ICP was asked to produce a study of disparities by gender as well as race. The results, being forwarded to those who requested them, are not pretty. See, www.innercitypress.org/2004hmda6.html.

Things fall apart. Reported Friday from Toronto: Bank of Nova Scotia won't conclude its agreement to acquire an 80% interest in a Mexican mortgage finance company. In a press release, ScotiaBank said the two sides were unable to agree on mutually acceptable terms "on a number of issues." It didn't elaborate. Cold-blooded, eh?

Better late than ever, for admissions. On April 28, BNP Paribas admitted that payments it approved under the U.N. oil-for-food program may have violated its own guidelines. While recognizing some "avoidable errors," bank officials told a congressional panel that BNP had followed standard financial practices. In a report to the committee, the bank said its own review so far has identified 403 payments that were made to parties other than a contractor or the contractor's bank. Everett Schenk, chief executive of BNP Paribas-North America, claimed that the agreement was ambiguous about whether these transactions were permitted. But he said some of those payments shouldn't have been allowed under BNP's own procedures. He said in processing transactions "some mistakes were made." BNP still has not been able to explain 80 transactions, including three payments for a company called Al-Riyadh International Flowers were made instead to another called East Star Trading. The subcommittee has since learned that Al-Riyadh International Flowers is owned by Prince Bandar bin Mohammed, a member of the Saudi royal family, and that a 2003 Defense Contract Audit Agency review found it may have overcharged by more than $8 million for oil-for-food transactions.

In the wake of the Federal Reserve’s rubber-stamp approval of PNC-Riggs (see midweek ICP Finance Watch Report), FFW received by regular mail the 17-page approval of the Office of the Comptroller of the Currency. Here’s a paragraph of interest:

“The commenter raised concerns with Riggs Bank’s service as a correspondent baqnk with, among others, Bank of Sierra Leone, Sierra Leone Commercial Bank Ltd; Energobank of Bishkek, Kyrgyzstan; Banco de Cabo Verde; and Banco International SA... Riggs maintained correspondent relationships with each of these banks, except Banco de Cabo Verde; however, two of these four correspondent relationships closed two years ago, and the remaining two closed recently.”

The vague reference to “recently” closed correspondent relationships is why FFW maintains that Riggs is a crime scene, that shouldn’t be sold off and swept under the carpet... We also wonder: since the FDIC by letter dated April 25 informs ICP that “the material you have forwarded to this office will allow the FDIC to perform a thorough review and in-depth analysis to address you concerns” on the FDIC piece of the PNC-Riggs proposal, how could the deal close on May 13? Will the FDIC’s review be thorough and in-depth -- and accomodate the 15 day waiting period? We’ll see...

On April 19, Boston Private Financial Holdings announced a proposal to buy Gibraltar Financial Corp. in Florida for $245 million. On April 20, Cullen/Frost Bankers Inc. announced a proposal to buy Horizon Capital Bank for $107.1 million to expand in the Houston area. Lehman Brothers bought a 20 percent stake in Ospraie, a U.S. hedge fund that manages about $2 billion of assets. Meanwhile Lehman is trying to withhold its 2004 Home Mortgage Disclosure Act, using an argument requiring a confidentiality agreement whose other proponent, the also-subprime lender New Century, last week backed off from. Not Lehman: rogues to the end. Click here to view ICP’s study of major lenders in the New York City MSA, and here for a report from Citigroup’s April 19 shareholders’ meeting.

A global deal we’ll be watching is the April 14 proposal by Fortis to buy Disbank in Turkey, for $1.2 billion. ICP follows up, too, on commitments made during mergers. Meanwhile, our review of the just-released 2004 mortgage data continues. From our third study -- Atlanta-based SunTrust, when cumulated with the Memphis-based bank it acquired in 2004, imposed higher-cost rate spread loans 1.92 times more frequently on African Americans than on whites, while denying African Americans’ applications 2.55 times more frequently than those of whites, and denying Hispanics’ applications 1.55 times more frequently than those of whites. There are other issues are SunTrust. In response to ICP’s comments on its Memphis acquisition, showing that SunTrust was funding dozens of payday lenders and car title lenders, SunTrust sent a letter to the Federal Reserve, copied to ICP, stating that "[a]fter consider the potential reputational risks and consumer harm that could result from lending to such a company, STI is revising its credit policies to prohibit future loans to all businesses that engage in payday or title lending." See, e.g., the July 28, 2004 Memphis Commercial Appeal, “NCF, SunTrust Ditch Payday Lenders - Answer Activists’ Challenge Ahead of Bank Merger,” and Orlando Sentinel, “Bank Shuns Payday - SunTrust Halts Loans to Fast-Cash Industry.”

In monitoring SunTrust’s compliance with this commitment, ICP has come upon evidence of a January 2005 loan from SunTrust secured by “all proceeds” of Cash Advance, Inc. of Jacksonville, Florida. ICP raised this to SunTrust last week, in connection with obtaining the 2004 mortgage data, and SunTrust refused to address the seeming violation of the commitment it made, citing its “confidentiality obligations” but stating that this was a “banking relationship that pre-dated our representations to the Fed last July.” But the loan to Cash Advance was filed as an “initial” Uniform Commercial Code lien on January 25, 2005, more than six months after SunTrust’s commitment to cease such lending. Another defense being offered is that while the loan is secured by all proceeds of Cash Advance, Inc., it is somehow not a business loan. ICP has now raised this SunTrust issue to federal and state regulators (in Georgia and Tennessee) for their action; ICP is committed to independent verification and monitoring of commitments.

In further monitoring, ICP has raised to the federal Office of the Comptroller of the Currency the fact that the mortgage lending data filed by HSBC for its ex-Household units HFC, Beneficial and Decision One, all point to the OCC as the regulator of these companies. Each has been state-regulated; HFC and Beneficial are subject to a $486 million predatory lending settlement with attorneys general and regulators in 46 states. When HSBC applied to convert its New York State-charter bank to a national charter with the OCC in mid-2004, ICP submitted timely comment opposing any shift of HFC and Beneficial from regulation by the states, at which level HFC and Beneficial are still subject to the predatory lending settlement. The OCC’s June 23, 2004 ruling, still on the agency’s web site as Community Reinvestment Act Decision #122, at http://www.occ.treas.gov/interp/jul04/crad122.doc, noted ICP’s concern that

"HSBC’s intermediate parent company, will try to move its subprime operations from Household International, Inc. (HII), to HUNA in order to preempt the application of state consumer protection laws. Many of the concerns raised by the commenter related to HII and its non-bank subsidiaries... The applicant has represented that HII’s branch-based consumer lending business, conducted through Household Finance Company (HFC) and Beneficial Corporation, will continue to be operated as a state-regulated business."

See also, Buffalo News of June 13, 2004, “HSBC Hit on Downstate Lending Patterns,” reporting that ICP “says the move could let Household avoid state scrutiny if it became a subsidiary of the new national bank. A national investigation by multiple state attorneys general led to a settlement in September 2002 with all 50 states. Household agreed to pay $484 million in refunds to customers and to make dramatic changes in its practices. HSBC officials insist that the bank and Household are separate and there are no plans to reorganize Household under HSBC Bank USA. They say the lending offices and practices of subsidiaries Household Finance and Beneficial Finance will remain under state purview.” But that is not what is reflected in the 2004 HMDA data filed by HSBC – there, the ex-Household units are portrayed as regulated by the OCC. ICP notes, however, that neither company is named or disclosed in the OCC’s online listing of national bank operating subsidiaries, at <www.occ.treas.gov/OpSublist.pdf>. This issue of stealth preemption on state consumer protection laws, implicating both HSBC and the OCC, is being raised to Congress and state officials.

In a new low, Citigroup on April 13 informed ICP that the data Citigroup had given it on March 31 was incomplete and incorrect. Based on that data, provided by Citigroup the full month after ICP’s request, ICP conducted an analysis and found for example that for home purchase loans at Citigroup in 2004, African Americans were 4.34 times more likely to receive higher-cost rate spread loans than whites. Citigroup’s spokesman, asked to respond by the Associated Press and the American Banker newspaper, called ICP’s findings, and its director, “reckless,” and claimed that the data showed otherwise. See, e.g., “U.S. community group alleges Citigroup, Bank of America discriminate in mortgage lending,” by Eileen Alt Powell, Associated Press, April 4, 2005; “First HMDA Fallout - Activists Hit Citi, B of A,” by Hannah Bergman, American Banker, April 5, 2005, Pg. 1; and "Groups Make Hay of HMDA Data," National Mortgage News, April 11, 2005, Pg. 2.

On April 14, ICP received from Citigroup new compact disks and repeated its analysis. The number of the loans that are higher-cost rate spread loans has increased from 11,000 in the first, incorrect CD, to fully 93,103 rate spread loans in the second set of data. That is to say, the data Citigroup provided on March 31 underreported its 2004 higher-cost loans by 82,103 rate spread loans. Based on the new data, fully 26.46 percent of Citigroup’s originated loans in 2004 were higher-cost rate spread loans.

Based on the new data, for home purchase loans at Citigroup in 2004, African Americans were 3.88 times more likely to receive higher-cost rate spread loans than whites. While this is slightly lower than the disparity, 4.34 to one, in ICP’s first study based on the data Citigroup provided, it is still much higher than for example the lenders reviewed above. Strangely, the Wall Street Journal’s April 11 report, based on Citigroup’s self-generated percentages, had Citigroup appearing less disparate than nearly all other lenders. (HSBC was not included in the Wall Street Journal’s report, despite making more rate spread loans in 2004 than either Citigroup or Wells Fargo).

While ICP’s analysis of Citigroup’s second, ostensibly correct batch of data is continuing, ICP stands by its finding, that the disparities by race in high-cost lending at Citigroup are worse than at its peers. Citigroup had more than a month to prepare, but released data that undercounted its high cost loans by a power of seven. The new data makes Citigroup look even worse and more disparate, and makes it all the more important that the Federal Reserve stick to and firm up its March 2004 ruling that Citigroup should not significantly expand until it fixes its compliance woes. Citigroup’s problems include systemic racial disparities and predatory lending. ICP’s studies continue -- watch this space.

We look this week at the world’s local bank, so-called. After first providing its 2004 Loan Application Register mortgage data in a format that made analysis difficult, HSBC last week after complaints decided to provide it in the standard format in which it was requested. The results are not pretty:

Within HSBC, African Americans are 5.42 times more likely than whites to be processed through HSBC’s higher cost subprime units. While HSBC’s higher-cost subprime units (the former Household International) make 4.3 loans to whites for each loan to an African American, HSBC’s prime units make over 23 loans to whites to each loan to an African American.

Of the higher cost rate spread loans made by HSBC Bank USA, African Americans are 6.46 times more likely to get such loans than whites; Hispanics are 6.5 times more likely to get rate spread loans from HSBC Bank than are whites. Meanwhile, HSBC Mortgage denies the applications of African Americans 2.53 times more frequently than whites.

Combining HSBC’s prime and subprime units, over 32 percent of HSBC’s mortgage are higher cost, subject to a rate spread. This is inconsistent with HSBC’s claims, at the time it acquired Household International and since, that only a small part of its mortgage loans are subprime. Sir John Bond said that 63% of Household’s loans were prime, at HSBC’s shareholders’ meeting on March 28, 2003, at which the Household acquisition was voted on. Of the problems at HSBC, ICP has written and received confirmation from the United Nations, to which HSBC has said it will respond. Additionally, if the market rumors of HSBC’s interest in Morgan Stanley / Discover are true, these stark disparities will be raised, and hearings and remedies sought.

ICP also filed its findings about Wells Fargo with the Federal Reserve Board, as a supplemental comment opposing Wells’ still-pending application to acquire First Community in Texas, and submitted a FOIA request / appeal about PNC’s and Riggs’ outrageous withholdings about the ramification of felony pleas to money laundering...

On March 29, BBVA made a 6.4-billion-euro ($8.31 billion) all-share bid for Italy's BNL, challenging the Bank of Italy to scrap restrictions on foreign investors. The Federal Reserve’s BBVA order last week recited ICP’s “allegations about BBVA’s ability to comply with U.S. anti-money laundering laws. In addition, the commenter expressed concern, citing media reports in 2002, that BBVA might be under investigation in Mexico, Columbia, and Peru in connection with its acquisitions of financial institutions in those countries.” The Fed then said that “BBVA has provided information to the Board, the Bank of Spain, and other appropriate governmental authorities relating to these allegations.” We’ll see -- and about Laredo’s (not Lavoro’s) subprime unit Homeowners Loan Corp., the 2004 lending data of which FFW has requested. On March 30, ABN AMRO launched a 6.3 billion euro ($8.2 billion) bid for Banca Antonveneta. Lemmings?

On March 29, U.S. District Judge Ricardo Urbina accepted the plea agreement between the Justice Department and Riggs; he ordered Riggs to pay the $16 million penalty immediately. "There is no way of measuring the amount of harm and atrocities and human rights violations perpetrated by Pinochet and Equatorial Guinea as a result of the enabling criminal activity by Riggs Bank," Urbina said. But then how do you know that $16 million is enough? Particularly after the Senate’s Second Riggs-Pinochet report released in mid-March (after the DOJ-Riggs plea agreement), and in light of Riggs total impunity for harms it aided and abetted in Equatorial Guinea?

PNC’s lawyers from Wachtell Lipton last week wrote to the Federal Reserve, providing a requested update on “Riggs’ material litigation.” These include cases overseen by Judge Garzon in Spain, the Allison Vadhan / 9-11 case, and a RICO case about Riggs’ “allegedly deficient anti-money laundering program.” Allegedly?

Inner City Press has now reviewed the 2004 lending of controversy-plagued Riggs Bank, N.A., and has now commented to the three regulatory agencies considering PNC’s take-over proposal that Riggs in 2004 denied the applications of African Americans 7.52 times more frequently than those of whites (while denying the applications of Hispanics 4.81 times more frequently than whites). Beyond its money-laundering for Augusto Pinochet and the dictator of Equatorial Guinea, this striking under-service to communities of color in and around the District of Columbia militates for the public hearings Fair Finance Watch has requested on PNC-Riggs.

The Bank of Italy, in discouraging BBVA from its plan to takeover BNL, has criticized BBVA’s management, including of its current 15% stake in BNL. Why then should the Federal Reserve be blithely considering allowing BBVA to buy already-troubled Laredo National Bancshares in Texas?

On March 25, ING announced a proposal to buy a 19.9 percent stake in Bank of Beijing for $215 million. In more humdrum Wisconsin merger action, Associated Banc-Corp announced on March 21 a proposal to acquire Milwaukee-based State Financial Services Corp. for $278 million... Call option volume on BB&T swelled last week and takeover speculation grows...

Another story-inside-Citigroup, following up on the ongoing whistleblower’s story in our Citi-Watch Report:

“The new thing at Citigroup: going forward, if a unit fails an internal audit, the "responsible" unit managers have to meet personally with Prince and Willumstad. So what? Willumstad, by the way, was so anxious to use the bank's money to buy good press and goodwill that he authorized a wire transfer a couple of years ago in excess of one million US dollars thinking he was contributing to [a non-profit]. Turned out the money went to some trailer in a park in California, then it was forwarded to a destination in Europe. The Feds were called and an arrest was made of a man in the trailer, but the money wasn't recovered. How does a bank, of all places, fall for such a scam? This story came straight from the lips of the Senior Manager at Corporate Headquarters assigned to "plumb" the transaction. And wasn't Willumstad (along with Magner, among others) "on watch" and repeatedly promoted while Citigroup's reputation went down the drain amid increasing scandals? So how credible is it to have such an executive sit in judgment of anybody?”

The bank merger heat last week was in Italy. BBVA, already the biggest shareholder in Banca Nazionale del Lavoro , and ABN AMRO, the biggest shareholder in Banca Antonveneta both notified the Bank of Italy that they might make buyout bids. BofI’s Antonio Fazio gave “the nod” to BBVA to launch a bid for BNL, El Pais reported on March 19. Unreported is that BBVA’s attempt to buy Laredo National Bank in Texas has long been pending before the U.S. Federal Reserve, since November 2004 (ICP commented on the application on December 5, 2004). In other ABN related Bank Beat news, Amro on March 14 proposed to buy Bank Corluy in Belgium....

In Brazil, the Lula administration is reopening the privatization process for the Banco do Estado de Ceara state bank. The central bank announced March 17 that it will accept documentation from "pre-qualifying" bidders through April 22. Brazil's last bank privatization took place in 2004, when Bradesco bought the Banco do Estado de Maranhao...

The Senate’s report last week on Pinochet’s funds identifies accounts at Citigroup, Bank of America, Banco de Chile-United States, Ocean Bank, PineBank, Banco Atlantico (now Banco de Sabadell), Espirito Santo Bank in Miami (which has a Credit Agricole connection), and Coutts & Co. (USA) International while it was owned by the Royal Bank of Scotland (it’s now owned by Santander). The report refers at note 132 to HSBC’s and Santander’s refusal to identify who owned the accounts into which Riggs Bank wired money. Also, casting Riggs’ restitution and pleas to date in a different light, subcommittee investigators have shown that the “relationship between Riggs Bank and Augusto Pinochet was more extensive than previously disclosed, encompassing 28 accounts instead of nine, spanning 25 years instead of eight, including secret accounts opened under misleading names, and involving more personal, high-level contact between Riggs officials and Pinochet than previously described” (that’s from the subcommittee’s own press release). Chilean judge Sergio Munoz continues his probe into Pinochet's secret accounts abroad, including at Riggs. So should Riggs’ guilty plea on the cheap (and PNC’s sweep-it-under-the-rugs takeover bid) be accepted? Click http://www.innercitypress.org/citi.htmlhere for ICP's analysis of the Fed's Citigroup - First American Bank order.

Too little, too late? The ouster of Maurice “Hank” Greenberg, confirmed on a conference call today, does not resolve the numerous issues which swirl around AIG, which also include questionable subprime lending practices at AIG’s American General units, and standardless international business. As simply one example, which ICP's Human Rights Enforcement project / Rights Force has raised directly to AIG, it continues its business in Zimbabwe, see, e.g., www.aig.com/gateway/country/1/70/0/0/79/Zimbabwe.htm. We’ll have more on all this going forward. For or with more information, contact us.

Now, an update on the challenge to Capital One - Hibernia. Then, a whistleblower's story of fraud inside Citigroup.

Midweek, ICP/Fair Finance Watch filed inital comments with the Federal Reserve on Capital One's proposal to buy Hibernia, noting that Capital One was sued earlier this year by the Minnesota Attorney General for false and misleading advertisements, and that both banks lend to fringe financiers: Hibernia to payday lenders, both to rent-to-own stores and other fringe financiers.

As reported by Stephanie Stoughton of the Associated Press, ICP asserts that "both Hibernia and Capital One provide credit to payday lenders, pawnshops and other 'high-cost fringe financial institutions.' Capital One did not respond to the allegation, saying it had not yet seen the consumer group's letter. Jim Lestelle, a spokesman for Hibernia, said the company was trying to find out whether it did provide loans to payday lenders. If it did, it would be an 'extremely small' percentage of the bank's small business loans, he said." Well, the Uniform Commercial Code filings that ICP has compiled and submitted don't lie. Click here for a tale of enforcement, and see this week's Fed Watch Report for a campaign under the Freedom of Information Act to spotlight such bank - fringe connections.

As reported in the March 11 New Orleans Times Picayune, "Inner City Press/ Fair Finance Watch... is concerned by the rate at which Hibernia has denied loans to minority applicants and the bank’s practice of lending money to firms that charge high interest rates to poor people, such as pawn shops and "pay-day" lendors, which make high-interest loans to people who sign their paychecks over to them. The group is also concerned by allegations, including those made by the Minnesota Attorney General in a lawsuit, that Capital One promises low interest rates on credit cards but unfairly raises the rates substantially if customers miss deadlines. [ICP] said the filing marks the beginning of a public dialogue, and added, 'We’ve raised the questions.'"

But what are the banks' answers? To BizNewOrleans.com, "Hibernia Executive Vice President Willie Spears, who was out of town this morning, said in a telephone interview that the company has conducted 'aggressive outreach' programs aimed at boosting Hibernia’s home purchase financing among minority and low- and moderate-income buyers.He said a result of the bank’s outreach programs is an increased number of mortgage applications coming from lower-income and minority prospective buyers. 'You get more applications coming in, and more people are going to be declined,' he said." But the data doesn't bear that out. A smaller percentage of Hibernia's loans are to African Americans (and Latinos) than is true of other lenders. For example in Dallas in 2003, for conventional purchase loans, Hibernia denied African Americans 5.96 times more frequently than whites (much higher than the industry's 2.17 denial rate disparity). Hibernia denied Latinos 4.75 times more frequently than whites (much worse than the industry's 1.95 denial rate disparity).

Before going on, it's worth noting that in 2002, when asked to comment on denial rate disparities of "nearly three to one," Hibernia's Willie Spears told the New Orleans Times Picayune that "The (race) gap is pretty wide.. No one's happy with that number," Spears said." (N.O. Times Picayune of Oct. 2, 2002). If three-to-one is "pretty wide," how wide is Hibernia's nearly six-to-one disparity between African Americans and whites in Dallas in 2003?

Hibernia's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos. In 2003 in this Dallas MSA, among African Americans, Latinos and whites, 4% of Hibernia's conventional home purchase loans were to African Americans and 5.2% of Hibernia's loans were to Latinos. For these three groups, the aggregate made 8.2% of its loans to African Americans, and 12.3% to Latinos. For Hibernia, the figures were much lower: only 4% of loans to African Americans, and 5.2% to Latinos. Hibernia is disparate in refinance lending too. In the Dallas, Texas MSA in 2003, for refinance loans, Hibernia denied African Americans 4.78 times more frequently than whites (much higher than the industry's 2.05 denial rate disparity). Hibernia denied Latinos 2.47 times more frequently than whites (higher than the industry's 1.97 denial rate disparity).

Again, Hibernia's higher-than-aggregate denial rate disparities are not explained by any greater-than-normal outreach with normal-priced credit to African Americans or Latinos. In 2003 in this Dallas MSA, among African Americans, Latinos and whites, 2.2% of Hibernia's refinance loans were to African Americans and 1.7% of Hibernia's loans were to Latinos. For these three groups, the aggregate made 7.6% of its loans to African Americans, and 9.6% to Latinos. For Hibernia, the figures were much lower: only 2.2% of loans to African Americans, and only 1.7% to Latinos. Hibernia is more disparate than the industry in market after market. More will follow.

In new deal news, on March 7 First Citizens Bancorp. of South Carolina announced a proposal to buy Summit Financial Corp. of Greenville for $99 million. Less than a hundred million? Must be a good deal, like in the discount stores...

This week’s Citi-Watch story, recounted here and to the Federal Reserve, involves a breakdown, seemingly intentional, in Citibank’s auditing and safeguards, followed by a cover-up and retaliation against a whistleblower.

Three senior credit officers were fired in April 2004. The whistleblower who brought the fraud to light (and reported it upwards in the company) was let go as well, but remains concerned about Citigroup’s ability to retaliate more broadly throughout the industry. Therefore this is as much detail as can for now be given:

The underlying loan was to business in Suffolk County, New York. The loan was initially originated by European American Bank; Citibank took over the loan along with EAB. The soon-to-be whistleblower, an individual entrusted by Citibank with teaching in the bank’s credit training program, became aware of problems with the loan. The audit department had ostensibly reviewed the loan but had done nothing. Later the loan was referred from a line lending unit to the work-out / collections department, and yet more credit was extended.

The whistleblower, having pointed out the irregularities, began suffering retaliation, and complained as high as possible, including to “Global Compliance.” Nothing was done (except to prepare the ouster of the whistleblower). The underlying borrower released financial statements suddenly showing a large loss, resulting in a December 2004 write-off by Citibank of the loan to the tune of $8,000,000. Additionally, the whistleblower showed senior management how Citigroup's computer systems are seriously compromised, demonstrated how Citigroup employees with basic systems clearance can log on and view customer deposit accounts -- consumer checking and savings accounts and balances -- as well as the accounts of fellow Citigroup employees. The individuals implicated are precisely those involved in the attempt to acquire First American Bank. Citigroup executives aware of the retaliation include Ajay Banga, and, it is reported, Marge Magner. The Federal Reserve and OCC, and others, have a duty to inquire. ICP’s Citi-Watch will stay on this...

At press time for this inital report [see Update, above], it was confirmed that Capital One proposes to acquire Hibernia. We note that Capital One in 2002 acknowledged that fully 40% of its business was subprime; see also, The Virginian-Pilot, October 7, 2001, " HOW CAPITAL ONE CHANGED STATE LAW THE BANKING GIANT REQUESTED, WROTE AND INFLUENCED THE PASSAGE OF LEGISLATION THAT ALLOWS IT TO EXPAND INTO THE PROFITABLE SMALL-LOAN BUSINESS. CRITICS SAY THE CHANGE COULD LEAD TO EXPLOITATION OF THE STATE'S MOST-CASH-STRAPPED CITIZENS.” Hibernia National Bank in 2003 for conventional home purchase loans denied African Americans 3.75 times more frequently than whites in New Orleans (higher than the industry’s 2.3 denial rate disparity), while Hibernia made 10 loans to whites for every loan to an African American (versus the industry’s 5-to-1 ratio). In Baton Rouge, Hibernia denied African Americans 2.4 times more frequently than whites (higher than the industry’s 2.16 denial rate disparity), while Hibernia made 12.2 loans to whites for every loan to an African American (versus the industry’s 6-to-1 ratio).

On March 1, Huntington Bancshares vaguely announced settlements with federal regulators to improve its corporate governance and audit controls and withdrew its application with the Federal Reserve to buy Unizan Financial Corp. The agreements with the Federal Reserve Bank of Cleveland and Office of the Comptroller of the Currency call for third-party review, written plans and progress reports going forward. These actions will not result in any fines or monetary penalties, Huntington bragged. But what does the Unizan announcement mean? A research note from Sandler O'Neill & Partners rosily predicts that "the fact that the written agreement is now officially in place represents... a further step toward completing the transaction with Unizan.” We’ll see. Last month, Unizan said it found deficiencies in its own internal controls...

Subj: Bank of America Layoffs march 2005
Date: 3/5/2005 11:51:31 PM Eastern Standard Time
From: [ ]
To: BofA-Watch [at] innercitypress.org

I believe Bank of America will layoff 100 or more positions at the old Fleet stockholder / trade operations office in Rochester, New York. Therefore disbanding it and shutting it down, due to duplication of its own department in North Carolina. My source is a laid off employee.

On March 4 Regions Financial announced the sale of its “conforming wholesale mortgage operations” to M&T. It was not immediately clear how this relates to the Federal Reserve Board’s criticism of Regions’ mortgage lending in its Union Planters order...

Again some Balkans action: last week Banca Intesa SpA announced a proposal to buy Bosnian bank ABS Banka. The offer is conditional on gaining 50% of the shares by June...Intesa on Feb. 14 announced its proposed acquisition of Delta Banka, Serbia and Montenegro's second-largest bank...

Also on the Beat: French financier Edouard Stern, murdered this week in Geneva, was found shot three times on his bedroom floor dressed in a latex rubber suit, Swiss newspapers reported on March 4. "Colleagues discovered his body clothed completely in latex rubber," according to Geneva daily Le Temps. Investigators think it likely that Stern opened the door to his attacker. To Bank Beat, it somehow recalls the Safra - HSBC affair... Until next time, for or with more information, contact us.

Mega-bank, the road show: UFJ Holdings has reportedly begun an international road show to try to convince major shareholders to vote for its proposed merger with Mitsubishi Tokyo Financial Group to form a $1.8 trillion behemoth. The tour will include London, New York, Boston and the west coast of the United States. Will the constituent banks’ enabling of predatory lending be on the agenda? [We’re just glad we didn’t cheaply use the word “Godzilla” in this paragraph -- oops.]

Also on the road is Scotiabank, which last week announced acquisition of 4.99% of India’s Bank of Punjab. Why just under five percent, you ask? That’s the cap for foreign banks already present in India, which Scotia has branches in Mumbai, New Delhi, Coimbatore, Bangalore and Hyderabad. The group also has a presence in India through ScotiaMocatta, which has nothing to do with coffee but rather engages in metals trading. Overall, Scotia has over 2000 branches in 50 countries, including, as simply one example, being the biggest bank in Jamaica.

Semi-roosting chickens: France's treasury gave Citigroup a ranking of sixth out of nine financial institutions in its overall 2004 league table list, a lower ranking due to the Citi’s $16 billion “Doctor Evil” bond trade in August. The treasury's list is used to award government business and helps determine which banks are awarded bond syndication and derivatives trading mandates or lead roles in state privatizations. The treasury said that Citi's ranking would have been higher were it not for the August trade. So there are some ramifications - but with a trillion-dollar bank, internally they figure they make more from rogue behavior than they lose.

Speaking of France (and of roosting poulets), Bank Beat can’t help but note the apartment scandal-induced resignation of Finance Minister Hervé Gaymard. He played the class card to try to explain the $18,500 a month apartment he charged to the government -- then it turned out he owns another apartment in Paris, and property in Brittany and the Savoie. Score one (more) for Le Canard Enchaine. Now if only they’d get to (better) work on BNP Paribas...

...note the very sudden and unexpected Citigroup's axing of all their Technical Research Department (last week). Oddly enough it was only their technical research led by Louise Yamada (widely renowned and acclaimed) that was worth any salt at all. Many of the retail Smith Barney Portfolio Manager consultants that run portfolios themselves (similar to mutual fund managers) followed Louise's group very closely and are very displeased. With the understanding of how much revenues these brokers bring in, I am curious to see what the shakedown will be -- who leaves? In any case, Citigroup is basically reiterating the fact that investment banking alone paid for research in the past.

Last word for this week on Citigroup: it’s now subject to a continent-wide investigation for having manipulated the market when hedging on August 2 with futures contracts on the Eurex trading platform. Eurex is owned by Deutsche Boerse AG -- regarding which, more anon...

Bank of America has lost computer data tapes containing personal information including Social Security numbers on 1.2 million federal employees, including some members of the U.S. Senate. This follows the disclosure that ChoicePoint, a data warehouser, had learned that as many as 140,000 consumers may have had their personal information compromised (that is, sold by ChoicePoint). The missing tapes include information on federal employees who use Bank of America ``smart pay'' program charge cards for travel and expenses. They might want to re-name that program...

We’ll close with a deal, a BofA sell-off: Societe Generale Group's SG Corporate and Investment Banking unit last week announced it is buying a hedge fund-related lending business from Bank of America. Soc Gen did not say how much it would pay, but it did say it plans to combine the B of A business, which is based in New York, with its own equity derivatives operations in Paris and New York...

The bank merger hotspot last week (the warmed-over announcement by Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings doesn’t count) was, believe it or not, Serbia. On Feb. 14, Italy’s Intesa announced a deal to buy 75% of the Serbian bank Delta for $356.9 million. Press accounts noted that the largest foreign plays in Belgrade are Austrian and Greek. On Feb. 18, Greece’s Piraeus, already active in Bulgaria, Romania and Albania, announced a proposal to acquire 80% of Serbia’s Atlas Bank...

In U.S. merger news, BB&T on Feb. 16 announced a proposal to acquire a 70 percent stake in privately-held Sterling Capital Management LLC of Charlotte. from the Associated Press of Feb. 18: “Progress Energy Inc., which provides electricity to about 2.9 million customers in North and South Carolina and in Florida, Friday said it agreed to sell its rail-services unit to J.P. Morgan Chase & Co.'s private equity arm for $405 million. ..J.P. Morgan Chase, the nation's second-biggest financial-services company, will handle the deal through its One Equity Partners LLC equity investment unit.” Yes, that’s the Equity One which beyond Polaroid has bought breweries and submarine plants (great combo, that)...

Last week’s Citigroup ethics news -- don’t laugh! -- was the announcement that “Citigroup staff will be able to dial in to an ‘ethics hotline’ and give anonymous feedback on managers as part of a plan aimed at preventing further regulatory and legal problems.” Sounds great -- except that CitiFinancial, for example, has long had an Ethics Hotline, yet whistleblowers’ calls never resulted in any reforms, and not infrequently resulted in retaliation against those who blew the whistle. Citigroup’s biggest shareholder, Saudi Prince Alwaleed bin Talal, has characterized the current scandals as “events here and there, such as the one in Japan in private banking and the bond market in Europe.” Meanwhile, a 25-minute video entitled “The Story of Citigroup” is being prepared for (required) viewing by employees in March. If it’s anything like the video shown at least April’s shareholders’ meeting, caffeine or Clockwork Orange eye-wear will also be required...

Justice-watch, this week from Madrid, next month from DC: Santander chairman Emilio Botin is currently on trial for misappropriation of funds and mismanagement. Under Spanish law, a person convicted of financial crimes wouldn't be considered "suitable" to serve on a bank's board of directors. Spain's National Court is trying Botin, along with former Santander Co-Chairman Jose Maria Amusategui and former chief executive Angel Corcostegui, on charges stemming from multimillion euro payments made to Amusategui and Corcostegui -- illicit parachutes de oro... More appropriately, Santander could be tried for refusing to make requested disclosures about Riggs Bank’s Equatorial Guinea wire transfers, to Spain and elsewhere -- click here for ICP’s reporting on Riggs and PNC. Immediately following Riggs Bank’s and PNC’s revival of their merger deal on February 10, ICP/Fair Finance Watch wrote to the Federal Reserve, demanding a re-starting of the comment period, in light of the PNC-acknowledged Material (Adverse) Effect, and public hearings. It now appears that application will have to be made to the Office of the Comptroller of the Currency as well. Among the most cynical parts of this process is the following statement, in the banks’ Feb. 10 press release:

“Under the restated terms of the merger agreement... Riggs National Corporation will merge into The PNC Financial Services Group, Inc. and PNC Bank N.A. will acquire the assets of Riggs Bank N.A. This change in structure was effected to mitigate the potential business impact of Riggs Bank's plea agreement with the Department of Justice.”

The Pittsburgh Post-Gazette of Feb. 11 noted that the “language of the agreement was changed so that PNC will not inherit Riggs' guilty plea for violating the Bank Secrecy Act. A judge still has to approve the plea agreement. A sentencing hearing is scheduled for March 29.” Developing..

Oil for fools, fired for food: the state of Missouri on Feb. 7 confirmed it had fired Paribas Capital as an approved broker-dealer for its $2.9 billion pension fund because of its French parent's role in the Iraq oil-for-food scandal. Missouri's state treasurer investment committee on Feb. 4 voted 5-0 to remove Paribas Capital as one of nine primary dealers through which the state placed short-term investments. BNP’s unit was the state's largest broker-dealer for short-term investments, with $185 million in open accounts in December. Edwina Frawley, a New York-based spokeswoman for BNP Paribas, declined to comment... BNP did, however, brag on Feb. 11 that it has consummated its acquisition of 50% of the holding company that controls Turkish bank Turk Ekonomi Bankasi. The deal, for $217 million, was first announced last November. Fast closing -- too fast for appropriate review, it might seem...

Following its Feb. 8 conference call, executives of subprime lender NovaStar stayed on the line. CFO Greg Metz complimented head of investor relations Jeffrey Gentle on his ability to screen callers. "He's the man," Mr. Metz said. "He doesn't let anybody get on that we don't want to take questions from." As Inner City Press has previously reported, JP Morgan Chase does this as well -- based on the name given when calling in, questions may or may not be permit. Violation of Reg FD, anyone?

The deal of last week broke on Monday: Met Life to buy Citigroup’s Travelers Insurance for $11.5 billion. The corporate business press pegged this as the death-knell of the ideas of conglomerates and cross-selling. But the companies’ press release said, “In connection with the transaction, Citigroup and MetLife have entered into ten-year agreements under which MetLife will greatly expand its distribution by making products available through certain Citigroup distribution channels, subject to appropriate suitability and other standards. These channels include Smith Barney, Citibank branches, and Primerica in the U.S., as well as a number of international businesses.” Interestingly, CitiFinancial was not listed. It sells insurance, including credit insurance. Meanwhile, investigations of Citigroup’s predatory bond trading -- which Citi’s employees called their “Doctor Evil” plan -- last week spread from Germany to Italy, Spain and Portugal. The European Central Bank president urges a "thorough and deep" investigation. Citigroup’s application to buy First American of Texas, on which ICP filed opposition in October, is still pending. It’s hard to imagine Citigroup, embroiled in scandal, being a buyer not a seller. Stock analysts said the cash could be used to buy a credit card unit, or to “accelerate its plans to open 300 to 500 consumer finance offices.” Yes, that’s CitiFinancial...

Following the announcement of its flawed plea bargain on January 27, Riggs Bank said that it and PNC would make an announcement about their stalled merger “on or about” February 4. That day passed with no announcement. Earlier in the week, the Federal Reserve and OCC announced cease-and-desist orders with Banco de Chile, for holding and concealing accounts for Augusto Pinochet. Also reported to have been holding Pinochet accounts are Royal Bank of Scotland’s Coutts unit, and Espirito Santo, regarding which an application by Credit Agricole, on which ICP/Fair Finance Watch commented to the Federal Reserve back in 2003, is still pending... Chilean Judge Sergio Muñoz, investigating Pinochet’s finances, is seeking records and additional information from the governments of the United States, Switzerland, Luxembourg, United Kingdom, Bahamas, Germany, Panama, Spain and Gibraltar. “Unexplained Pinochet wire transfers through several banks in the United States and elsewhere have been identified by Muñoz at Banco Atlántico in New York, Gibraltar and Zurich; Citibank; Bank of Bahamas; Sun Bank; Swiss Bank Corp.; Bank of America; American Express; Lehman Brothers; and Barclays Bank...

Meanwhile, ICP last week filed with the Federal Reserve a timely request for reconsideration of the Fed’s Toronto Dominion - Banknorth approval; the Fed’s response will be reported in this space.

Last week Riggs Bank announced a plea bargain agreement, to pay a $16 million fine for its it money laundering for Augusto Pinochet and the dictator of Equatorial Guinea. ICP is opposing the proposed plea, and Riggs’ attempt to sell itself to PNC -- click here for more.

On the Bank Beat, last week began with a report in the Wall Street Journal of JPM Chase eying a stake in emerging markets bank Standard Charter. Then, from the NY Post of Jan. 28: “J.P. Morgan Chase & Co. President James Dimon said it is unlikely it will buy an Asian bank until it is further along in extracting costs from its July merger with Bank One Corp.” So the extraction will continue...

On January 24, the Germany regulatory agency Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) made a referral to criminal prosecutors of Citigroup’s bond manipulation of August 2004. Citigroup Global Markets sold some $15.7 billion US in European government bonds on 13 different trading platforms in 11 different markets, causing prices to fall across the board; Citi then bought back roughly $5.3 billion in bonds at lower prices an hour later. Citigroup has been claiming this is a much smaller scandal than its loose anti-money laundering practices in Japan; we’ll see. On January 25, ICP filed supplemental comments with the Federal Reserve opposing Citigroup’s pending application to buy First America Bank in Texas...

In the U.S., it was earnings-reporting week, with few to no mergers. Late week, this news from Europe: Barclays PLC moving to buy ING Groep NV's French private-banking operations, with 2.7 billion euros in combined assets under management, 30,000 clients and 13 branches. The cost is put at 100 million euros. From earnings week in Charlotte:

-On Wachovia’s January 19 earnings call, after the disclosure that the bank has so far made 700 of the 4000 planned lay-off, CEO Ken Thompson bragged, "The company has the capability to do all these things and expand through acquisition if we find the right acquisition.” Outsourcing is also on the agenda. CFA Bob Kelly told the Charlotte Observer’s intrepid Rick Rothacker that Wachovia is “undertaking a methodical review of outsourcing options. ‘If it can be done better and cheaper, we will look at it,’ Kelly said.” Of the additional job cuts, Reuters quoted a stock analyst that "It's a little worrisome that they seem to be trying to achieve their earnings goals through job cuts rather than through revenue growth. You can only cut so much before you start to cripple growth opportunities." And cut off communities, it might be added.

-On Bank of America’s January 18 earnings call, after the disclosure that BofA has finished about 75 percent of the announced 12,500 job cuts, CEO Ken Lewis gushed, "Great quarter, great year.” Well, for some.... Notably, the number of net new checking and savings accounts opened in former Fleet branches dropped during the fourth quarter compared with the previous three months. In the third quarter, Bank of America reported the net gain in checking accounts totaled 87,000, but in the fourth quarter that figure dropped to 46,000. Questioned about the drop, Lewis said, "We would expect it to increase, not decrease." (Tip o’ the hat to Projo). Reportedly, total full-time employees increased by about 200 to 175,742 as the company added call-center jobs and bankers who serve wealthy clients. Yep, that’s the CRA sensitive bank, cutting everywhere except in its offerings to upper income consumers...

Meanwhile, Deutsche Bank plans to expand in Russia and wants to acquire a 10 percent stake in Vneshtorgbank (VTB), Germany's Handelsblatt newspaper reported on January 21. Deutsche Bank also plans to submit an offer in the coming week for KMB Bank, the newspaper said, quoting financial sources in Moscow. And there was one micro M&A deal in the US: Willow Grove Bancorp announced on Jan. 20 a deal to buy Chester Valley Bancorp for $27.90 a share...

The inquiry into the Pinochet accounts has spread to accounts at Banco de Chile's New York and Miami branches. Banco de Chile said Jan. 21 in a statement to Chile's Securities and Insurance Superintendency that the Federal Reserve Bank in Atlanta is looking into accounts at its Miami branch while the Office of the Comptroller of the Currency is handling the New York investigation. On the Riggs turns: the Washington Post’s January 17 review of Riggs board of directors meetings is replete with jokes about money laundering and no objections to business with human rights abuser Pinochet. (See this week’s ICP Human Rights Report for more on the current human rights issues in and surrounding Darfur in the Sudan).

Hitting a new low, the Federal Reserve on January 18 released a 22-page order approving its part of Toronto Dominion’s proposal to acquire 51% of Banknorth. The Order is a full of buck-passing, including on issues as important as TD’s role in Enron -- on that, the Fed will defer to unnamed “self-regulatory organizations.” Lack of environmental and other standards? Not the Fed’s problem, per its footnote 14. Even the Fed had to acknowledge disparities in Banknorth’s lending record. Page 16 of the Order -- available here in PDF format -- states, in the Fed’s trademarked convoluted language:

“The 2002 and 2003 HMDA data reported by BankNorth Bank indicate that its denial disparity ratios35 for African-American and Hispanic applicants for total HMDA-reportable loans in Maine, Massachusetts, and New Hampshire, which together accounted for 80 percent of the bank’s HMDA-reportable loans in 2002 and 2003, were not as favorable as those ratios for the aggregate lenders in those states.”

In response to evidence ICP has submitted about the enabling of high-cost fringe financiers, the Fed relies on TD’s empty assurances, reciting that ICP

“also expressed concern about Banknorth Bank’s relationships with unaffiliated retail check cashers, pawn shops, and other unaffiliated nontraditional providers of financial services. TD has indicated that Banknorth had reviewed its relationships with these types of businesses and has opted to continue relationships with those firms willing to meet certain conditions. These conditions include provisions in each loan agreement with Banknorth Bank of representations and warranties that the firm will comply with all applicable laws, including any applicable fair lending and consumer protections laws, and follow the bank’s program requirements to ensure compliance with anti-money laundering laws and regulations. TD has represented that either Banknorth Bank nor any of its affiliates play any role in the lending practices, credit review, or other business practices of these firms, nor does the bank or any of its affiliates purchase any loans originated by these firms.”

Not only are Banknorth’s and TD’s fair lending safeguards empty -- a mere warranty to follow the law, with no monitoring -- as noted below (Report posted January 17), TD also was unable in its last January 7 response to answer the Fed’s questions about anti-money laundering. TD stated that “[t]he response to this question is being prepared and will be submitted as soon as it is completed.” ICP has not as of January 18 received any supplemental submission by TD. But the Fed hauled off and approved TD’s application, passing the buck on issue after issue to other agencies -- the SEC, self-regulatory organizations, and presumably environmental and other regulators. ICP/Fair Finance Watch will be following the bucks the Fed has passed, while redoubling its watchdog activities in light of the Fed’s irresponsibility.

Also on the Bank Beat: what a weekend for Bank of America. On Friday it emerged that BofA fired one of its stock analysts for approving the distribution, as a joke, of a photograph in which his face appeared superimposed on a woman's body in a report sent to clients. Per Bloomberg, “[t]he 56-page report includes a front-page photograph doctored to make it appear as though Susser, wearing a black dress and high heels, is getting swept over the threshold of a hotel suite by another man.” Then Monday’s WSJ reported that BofA (along with JP Morgan Chase) is trying to settle auto lending discrimination charges. Meanwhile, BofA and Wachovia have each given $250,000 (and Morgan Chase $100,000) to the Presidential Inaugural Committee...

Wells Fargo announced on January 10 its stake in Charlotte NC-based Viewpointe LLC, which archives more than 25 billion electronic check images a year. Given Wells Fargo's record in leaking (or having stolen) customers' private information, it’s questionable how good a fit this is... In micro M&A news, on January 11 Pennsylvania’s Fulton Financial Corp. announced a proposal to buy SVB Financial Services, the parent of New Jersey’s Somerset Valley Bank, for $89 million... And look who’s going subprime -- Friedman, Billings, Ramsey Group, which used to just enable subprime lenders with investment banking services, last week announced a proposal to buy a subprime lender, First NLC Financial Services LLC, from Sun Capital Partners for $88 million....

[Report posted January 17, 2005] Toronto-Dominion has submitted another letter to the Federal Reserve, answering questions posed to it on December 22 and January 4. TD begrudgingly withdraws some, but not all, of its specious requests for confidential treatment (for example for information about Banknorth’s Community Reinvestment Act-relevant lending, which it now released only by state, and not by Metropolitan Statistical Area). The Federal Reserve has also asked: for “a more complete... discussion of Banknorth’s review program for money services businesses (‘MSBs’). Your response should specifically address due diligence typically conducted to ascertain a MSB’s compliance with fair lending and nay other consumer protection laws prior to entering into these business relationships, and any controls in place to ensure ongoing compliance with consumer protection laws.”

To this, all TD answers is that Banknorth requires is a (boiler-plate) warranty that “their business operations comply with federal and state law and have all appropriate licenses.” But what payday lender or other fringe finance institution will openly state that it breaks the law? Based on its response, Banknorth conducts no due diligence beyond the warranty. For shame...

TD has also been asked for information about “bank secrecy laws in countries where TD has material operations.” TD’s January 7 response, the most recent that ICP has, is that “[t]he response to this question is being prepared and will be submitted as soon as it is completed.” Well, we’re still waiting...

Finally, for this week, CCF has announced that it will recruit additional staff as it imposes the HSBC (and Household?) brand onto its CCF, UBP and Banque de Picardie network and Banque Hervet branches in the Paris region. How do you say predatory lending in the language of love? Until next time, for or with more information, contact us.

Rumors of two global mega-mergers were swirling last week. Royal Bank of Scotland is reportedly eyed ABN-Amro, mostly for its operations in the U.S. Midwest (which could lead to massive cost-cutting for Fred the Shred, folding in the ex-Charter One). The second, more surprising, has Wells Fargo eying Barclays (which is more publicly making moves on South Africa’s Absa Group Ltd). In purely U.S. news, Dow Jones of January 6 reported that “some brokerage reports suggested that JP Morgan Chase may be interested in buying a bank in the Southeast, with BB&T among the potential targets mentioned.” While the Bank One signs are still up? In real deal news, Morgan Chase announced on January 7 a proposal to buy for $129 million Vastera Inc., which “automates cross-border trade paperwork, notably goods manifests on cargo ships required by customs agents.” Paul Simpson, trade and emerging payments business executive at J.P. Morgan said: "What we are doing is actually extending our value chain for existing clients. [This proposed acquisition] expands our product offerings as well as expands our pool of clients. Changes in the security environment require the need for faster notice of what is being imported.” Strange business to be in...

Wachovia has boosted the number of layoffs as a result of its SouthTrust Corp. merger to at least 1,180 in Birmingham. The layoff numbers were updated earlier this week by Wachovia, according to Larry Childers, spokesman for the Alabama Department of Economic and Community Affairs. The state received notification of the latest cuts in late December, but technical problems prevented the state from updating its Web site before this week, Childers said. Robert Holmes, dean of UAB's business school, said it will be difficult for the local economy to absorb all of the displaced workers. ``It will take a long time for this to settle out,'' he said. Great merger...

In the Bank of America investigation, as described in the Wall Street Journal last week, the Manhattan district attorney says that BofA has transferred hundreds of millions of dollars for a money transmitter in Uruguay called Lespan SA and its affiliates. The prosecutor and federal officials say they suspect the money has come from Colombian drug trafficking and other criminal activity. Also being looked at: Wachovia, Citigroup and JP Morgan Chase. As to this last, as the year closed, the SEC was examining whether JPMC should have known that the Canary Capital Partners LLC hedge fund was making improper trades. Regulators could -- and should! -- contend that the bank "should have known" Canary and its principal executive Edward Stern were "at least engaged" in short-term trading that violated rules of many funds. So far, here’s JPM Chase’s response: "At the time that we were doing business, JPMorgan didn't know and had no reason to believe that Canary, its related entities or Eddie Stern were engaged in any illegal activity." They said the same of Enron..

And speaking of Enron, the report by Neil Batson, the examiner appointed by the Bankruptcy Court, has concluded that Royal Bank of Scotland was fully aware of Enron's accountancy juggling concerning the Teesside plant. Batson’s report to the court - which also singles out Credit Suisse First Boston and the Toronto-Dominion Bank for condemnation - concluded that "RBS aided and abetted certain Enron officers in breaching their fiduciary duties". The report names four RBS executives: Iain Robertson, currently chairman of corporate banking and financial markets (CBFM) and a board member of RBS; Johnny Cameron, chief executive of CBFM; Tom Hardy, head of project and export finance; and Iain Houston, director of structured finance, stating that they were among those involved in the deal. Developing...

In micro M&A news from West Virginia last week, City Holding Co. announced a proposal to acquire Kentucky-based Classic Bancshares for $77.4 million...

Copyright 1999 - 2007 Inner City Press/Community on the Move, Inc.. All rights reserved. As should be clear, but in an excess of caution: under no circumstances does the information in this column (or web site) represent a recommendation to buy or sell securities. For further information, or to request reprint or other permission, contact: Permissions Coordinator, Legal Administration, Inner City Press, P.O. Box 580188, Mount Carmel Station, Bronx, NY 10458. Phone: (718) 716-3540. E-mail: BankBeat [at] innercitypress [dot] org