Inner City Press Community Reinvestment Reporter Archive 2005-2006

Inner City Press Community Reinvestment Reporter 2005-2012

Welcome to Inner City Press’ CRA Report. Our other Reporters cover the financial services industry, human rights, the Federal Reserve, and other beats. ICP has published a book about the CRA-relevant topic of predatory lending - click here for sample chapters, a map, and ordering information. CBS MarketWatch of April 23, 2004, says the the novel has "some very funny moments," and that the non-fiction mixes "global statistics and first-person accounts." The Washington Post of March 15, 2004, calls Predatory Bender: America in the Aughts "the first novel about predatory lending;" the London Times of April 15, 2004, "A Novel Approach," said it "has a cast of colorful characters." See also, "City Lit: Roman a Klepto [Review of 'Predatory Bender']," by Matt Pacenza, City Limits, Oct. 2004. The Pittsburgh City Paper says the 100-page afterword makes the "indispensable point that predatory lending is now being aggressively exported to the rest of the globe." Click here for that review; click here to Search This Site

December 31, 2012

HSBC is being sued by three counties in Georgia which say its "predatory lending practices include targeting vulnerable borrowers for mortgage loans with unfavorable terms; directing credit-worthy borrowers to more costly loans; putting unreasonable terms, excessive fees or pre-payment penalties into mortgage loans; basing loan values on inflated or fraudulent appraisals; and refinancing a loan without benefit to the borrower." That's what we said when HSBC bought Household, saying it all the way to Hong Kong and Singapore. Now the chickens come home to roost...

December 24, 2012

It started slow and it is still ongoing. Back in August, Inner City Press / Fair Finance Watch wrote to Customers Bancorp for its mortgage data, expressing some concerns. A month later, at the deadline, some data was provided. It was disparate and Inner City Press comments on Customers' Acacia application. There were questions from the Federal Reserve, some FOIA requests. Now, Customer's has passed back the drop-dead date from December 31 to January 31. But how do they know it will be approved by then?

December 17, 2012

Annals of secrecy and mis-regulation: so HSBC settles for money laundering for drug dealers, but there's no criminal sentence, no jail time, nothing. Meanwhile the Federal Reserve responds thusly to a Freedom of Information Act request from Inner City Press:

To facilitate secure email exchanges with the Federal Reserve, please see the attached file and link that

contain instructions for registering with the Zix e-mail system. The web address is

https:// WITHHELD

For shame... Also, from FirstMerit's submission to the Federal Reserve about Citizens Republic, the entire "Environmental Matters" section is blacked out, in response to Inner City Press' FOIA request...

December 10, 2012

Inner City Press has filed this: a formal request under FOIA for the portions of FirstMerit's November 30 response to FRS questions which were not sent to Inner City Press.

To virtually every FRS question about its proposal to acquire Citizens Republic, which ICP timely challenged and made a still pending FOIA request about, FirstMerit states, See Confidential Exhibit. For example, to FRS Question 1, FirstMerit says only, "See Confidential Exhibit 1."

To FRS Question 2, FirstMerit says only, "See Confidential Exhibit 2."

To FRS Question 3, FirstMerit says, "See Confidential Exhibit 3."

To FRS Question 5, FirstMerit says, "See Confidential Exhibit 4."

To FRS Question 6, FirstMerit says, "See Confidential Exhibit 6."

To FRS Question 7, FirstMerit says only, "See Confidential Exhibit 6."

To FRS Question 8 and 9, FirstMerit says only, "See Confidential Exhibit 7."

To FRS Question 10, FirstMerit says only, "See Confidential Exhibit 8."

To FRS Question 11, FirstMerit says only, "See Confidential Exhibit 9."

To FRS Question 12, FirstMerit says only, "See Confidential Exhibit 10."

To FRS Question 14, FirstMerit says only, "See Confidential Exhibit 11."

This is outrageous, and makes a mockery of the FRS' stated Rules against Ex Parte Communications. This is a timely challenge to all of the withholdings.

December 3, 2012

From the big picture to the "small" but telling: in Knoxville, Tennessee, predatory lending victim Dwight Newton sued Bank of America for $25,000 in small claims court. He's $100,000 upside down on his mortgage and trying to work out a modification, as so many promise.

But when Bank of America didn't show up, rather than winning a default judgment, the judge Tony Stansberry "had his assistant call B of A and they hung up on her. Still he gave them a continuance even though they weren't even there. If the roles were reversed and dwight newton was the defendant instead of the plaintiff he would have awarded them judgment without hesitation." So it goes, Bank of America...

November 26, 2012

Hudson City Savings Bank, which M&T is trying to buy, is in New Jersey but not of it. When ICP / Fair Finance Watch challenged the deal, highlighting disparities in Hudson City's record, Hudson City had no response at all. Now it has been challenged from New Jersey as well, and M&T will run there on December 13.

Meanwhile the Fed has had no response to the absurdity of it providing heavily redacted records of its pre-announcement meetings with M&T, an hour before the comment period was set to expire. This is not transparency. Watch this site.

November 19, 2012

Talk about old school -- when the OCC got a Community Reinvestment Act protest by email on October 26 from Inner City Press to BankUnited's application to open branches only in the most affluent parts of New York, for ten days nothing was heard. Then on November 7it acknowledged receipt, even providing another OCC email address -- and sent the acknowledgment by snail mail, posting it November 8 for arrival days later. Ah, regulation...

And still the OCC has yet to improve its website listing of pending merger subject to public comment, even to bring it up to speed with the Federal Reserve...

November 5, 2012

Royal Bank of Scotland has had to settle in Nevada for securitizing predatory loans -- meanwhile, it may have to sell off Citizens and Charter One in the United States. In Nevada:

RBS Financial Products will pay a $42 million settlement to resolve an investigation into the firm’s role in purchasing and securitizing subprime and payment option adjustable rate mortgages in Nevada. The assurance of discontinuance, filed in Eighth Judicial District Court, requires RBSFP to commit to certain changes in its practices to the extent it securitizes Nevada mortgages and to pay the State $42 million to be used for payments to affected borrowers, mortgage fraud enforcement, and foreclosure prevention, and attorney’s fees and costs.

Nevada Attorney General Catherine Cortez Masto specified it's about "misrepresentations by lenders, including Countrywide and Option One, to Nevada consumers who took out subprime loans and payment option ARMs that were bought and securitized by RBS." For shame...

October 29, 2012

Three weeks ago, Inner City Press / Fair Finance Watch made a first timely submission to the Federal Reserve opposing the applications by M&T to acquire Hudson City Savings Bank, highlighting outrageous disparities in Hudson City's lending including that in the NYC Metropolitan Statistical Area in 2011, Hudson City made 765 conventional home purchase loans to whites and only FIVE to African Americans.

This is one of the worst records seen.

But M&T in its purported response only filed late in the comment period on October 24, by outside counsel who worked in the merger review process at the Fed -- ICP is with all due respect questioning whether this is appropriate -- M&T says hardly anything about Hudson, instead merely repeating claims about M&T's CRA record.

Hudson City is a (much) larger mortgage lending in the NYC MSA than M&T. It's record must be answered for.

But even when asked by the media, Hudson City "did not respond to requests for comment." See, http://www.northjersey.com/news/173838811_Fair_lending_advocate_challenging_Hudson_City-M.html?page=all

While wishing to focus the FRB on Hudson City's outrageous (and larger than M&T) record, we also contest M&T's presentation, on the analysis previously submitted and have submitted more, concerning M&T's actions after a previous acquisition, of Provident. Watch this site.

October 22, 2012

Sleaze fest: "Bank of America says it plans to unveil at least a dozen 'flagship' branches across the country that will offer customers more space, more specialized bankers and financial advisers, and the latest gadgets. The flagship banking centers will include videoconference screens, so customers can talk to their favorite banker or financial adviser — even if they are located elsewhere. In addition, the branches will also feature a 'power bar' where customers can plug in their laptop or tablet to do their banking while digital signs display stock quotes, pictures of branch staff, and the latest product promotions."

Meanwhile the OCC considering the "permissibility" of Capital One / ING's beverage service -- then the advisory letter went offline. Drink up!

October 15, 2012

As M&T Protest Proceeds, Trustmark Delayed and Apple in Denial, Lax Regulators and Media Allow

By Matthew R. Lee

SOUTH BRONX, October 13 -- Since the bank-led predatory lending meltdown in 2008, have banks become more responsive, or more fair in their lending? Has reporting on banks become more critical?

As Inner City Press reported on October 7, Fair Finance Watch challenged the application of Buffalo-based M&T to buy Hudson City Savings Bank, the biggest merger proposal in the US in 2012.

Regulators had allowed Hudson City in 2011, for conventional home purchase loans in the New York City Metropolital Statistical Area, to make 765 such loans to whites and only FIVE to African Americans (and only 14 to Latinos). Meanwhile, Hudson City denied the applications of African Americans 3.21 times more frequently then those of whites.

Picking up on the challenge, the Buffalo News contacted M&T for its comment. M&T spokesman C. Michael Zabel countered that "we support community-based organizations."

But reporting by Inner City Press find this questionable, throughout M&T's footprint down to Virginia. M&T's next move was to reach out to friendlier media and announce that its merger application is proceeding - without mentioning the protest or why it was reaching out.

Similarly, M&T hyped up after the protests it celebration of Hispanic Heritage Month at its Newburg, New York branch, and got it reported without any mention of its lending record, much less the challenge.

But at least on M&T, the word got out in New York and New Jersey, where Hudson is based. The Deep South seems worse, in lending disparities and weak coverage of banks.

On August 11, Inner City Press challenged and reported on Trustmark's application to acquire Banktrust, noting in the most recent mortgage data then available that in the Jackson, Mississippi MSA for conventional home purchase loans TrustMark had a denial rate for African Americans more than SIX TIMES HIGHER than for whites: 44.7% denial rate for African Americans, versus 7.3% for whites. It had a 100% denial rate for these and refinance loans for Latinos.

On October 5, Trustmark wrote to the Federal Reserve and said is was extending the planned closing date of the merger into 2013, because it has rightfully not obtained regulatory approval. Trustmark's lawyers mailed Inner City Press a copy of their email to the Fed -- we'll put it online here -- and then four days after the email, put out a press release about the extension (but not the protest).

Media reported the extension but not the challenge. How hard is this? On October 11, after its press release and uninformed reports of it, Trustmark answered another round of questions from the Federal Reserve. The regulator may be lax, but the media doesn't help.

This laxity makes banks arrogant, and regulators non responsive. A recent example of each is Apple Bank, which is seeking to acquire nearly all the branches of Emigrant Savings Bank in New York. Despite the location, when comments were submitted to the New York State Financial Services Department as well as the FDIC, only the FDIC has so far responded.

The comment noted that in the NYC Metropolitan Statistical Area, Apple in 2011 made 13 conventional home purchase loans to whites, and NONE to either African Americans or Latinos.

Apple collects deposits in, for example, the South Bronx -- but look at its lending record. It should not on this record be allowed to acquire Emigrant's deposits and similarly redline with them.

For refinance loans in the NYC MSA in 2011, Apple made 27 loans to whites, only one to an African American applicant (while denying another), and NONE to Latinos.

Apple's "Chairman, President and CEO" Alan Shamoon, despite his bank's lack of visibility and weak community lending record, submitted a short response under his own signature, calling the mortgage lending analysis "disparagement" and "devoid of substance," to be "dismissed." Takes one to know one.

Amid too little, too late lawsuits against JPMorgan Chase and Wells Fargo, this tale of three mergers shows an industry, a media and regulatory environment ripe for yet another meltdown. What has been learned? Watch this site.

October 8, 2012

Lending Disparities Shown in Protest to M&T - Hudson City, Biggest Merger of 2011

By Matthew R. Lee

SOUTH BRONX, October 7 -- The largest proposed bank merger in the United States in 2011, M&T Bank's application to acquire Hudson City Savings Bank for $3.7 billion, has been challenged to the Federal Reserve based on both banks' lending disparities. It will be a test of the Federal Reserve's seriousness.

Inner City Press' Fair Finance Watch has used 2011 Home Mortgage Disclosure Act data to document that although Hudson City Savings Bank is lesser known than M&T, in for example the New York City Metropolitan Statistical Area Hudson City is a much larger home purchase lender.

But Hudson City disproportionately excludes African Americans and Latinos: for conventional home purchase loans in the NYC MSA in 2011, Hudson City made 765 such loans to whites and only FIVE to African Americans (and only 14 to Latinos).

Meanwhile, Hudson City denied the applications of African Americans 3.21 times more frequently then those of whites.

M&T cannot make up for this: in the NYC MSA in 2001, M&T for conventional home purchase loans made 119 such loans to whites, and only 17 to Latinos. It denied Latinos 1.91 times more frequently than whites.

Hudson City is a much larger home purchase mortgage lender in the NYC MSA than M&T - based on its record, there should be public hearings in New York City under the Community Reinvestment Act and on this record, the merger should not be approved.

In the Nassau-Suffolk (Long Island) MSA in 2011, Hudson City for conventional home purchase loans made 294 such loans to whites and only TWO to African Americans (and only seven to Latinos).

In this same Long Island MSA in 2011, M&T for conventional home purchase loans made 48 such loans to whites, only three to African Americans and NONE to Latinos: denial rate 100%. It denied African Americans 2.92 times more frequently than whites; it denied Latinos infinitely more than whites

Hudson City is a much larger home purchase mortgage lender in the Long Island MSA than M&T - based on its record, there should be public hearings on Long Island and on this record, the merger should not be approved.

In the Bridgeport - Stamford - Norwalk MSA in Connecticut in 2011, Hudson City for conventional home purchase loans made 288 such loans to whites and only ONE to an African American (and only six to Latinos).

Elsewhere in the 2011 HMDA data, not yet taken into account in any CRA performance evaluation, moving north M&T in the Washington DC MSA for conventional home purchase loans made 34 such loans to whites, and only six to African Americans and NONE to Latinos. On this low volume, it denied African Americans 2.92 times more frequently than whites.

In the Baltimore MSA in 2011, M&T for conventional home purchase loans made 88 such loans to whites, only 14 to African Americans and only one to a Latino.

M&T denied African Americans 3.67 times more frequently than whites; it denied Latinos 16.6 times more frequently than whites. It bought AllFirst and Provident in this market; it should not be allowed to buy Hudson City Saving Bank.

In the Philadelphia MSA in 2011, M&T for conventional home purchase loans made 85 such loans to whites, only ONE to a African American and NONE to Latinos. On this record, M&T should not be allowed to buy Hudson City Saving Bank.

ICP Fair Finance Watch will be submitting more comments, including once it receives the records responsive to its pending Freedom of Information Act request. If those timely requested documents are not received ten days before the current expiration of the comment period on October 27, the comment period should be extended on that ground. The public comment period should be extended for public hearings in any event.

The Federal Reserve last granted public hearings on the largest merger of 2011, Capital One - ING. But click here to view the Fed's February 3, 2012 FOIA Denial, and click here to view the heavily redacted 34 page document that the Fed provided to Inner City Press (and Capital One to NCRC and the other protesters from which it had withheld this information). What will happen this time, on M&T - Hudson City? Watch this site.

October 1, 2012

Capital One announces layoffs in Washington State - then says they can re-applying to Capital One's growing fraud unit. Yes, Capital One continues to grow in fraud:

"Capital One said Wednesday that it would cut 217 collections jobs from its Tigard office. It's the second time this year the financial company has announced large-scale layoffs at the former HSBC call center. The cutbacks are set to begin Jan. 2 as Virginia-based Capital One shifts the operations elsewhere, spokeswoman Julie Rakes wrote in an e-mail.

"Capital One earlier this year outlined plans to slash marketing jobs in Tigard after acquiring the site from HSBC. It bought the British banking company's U.S. credit division in a $2.6 billion deal that closed in May. Employees affected by the most recent round of layoffs can interview for jobs in the office's growing fraud division, the company said."

September 24, 2012

The biggest proposed merger of 2012 is M&T's proposal to acquire Hudson City Savings Bank for $3.7 billion. Steps to raise issues on it have begun.

Capital One - ING DIRECT was the biggest merger of 2011 and its problems continue even after the CFPB enforcement action and fine, and on subprime auto lending

Last week Akron, Ohio based FirstMerit announced a proposal to buy Flint, Michigan based Citizens Republic, which is also in Ohio and Wisconsin, for 912 million (or really $1.2 billion, with TARP repayment included) There are doubts about the deal, not only branch closures in Ohio but also whether FirstMerit can handle it. Watch this site.

September 17, 2012

So after the Fed handed out an approval without any mention or consideration of it, now it's reported that BB&T will close 21 branches in South Florida as it swallows BankAtlantic -- nine from BB&T and 12 from BankAtlantic. And, 365 jobs will be cut by Feb. 1, 2013...

Meanwhile Fed Governor Jerome H. Powell, formerly of Deutsche Bank and the Carlyle Group, has belatedly ruled on Inner City Press' June 30 FOIA appeal about Mitsubishi UFJ, largely rubber stamping the withholding but saying that some additional pages mis-withheld under Exemption 8 will be released. But these wrongfully withheld pages weren't included with Powell's letter, and haven't been e-mailed.

The Fed did belatedly send a copy of its August 27 to Trustmark, after it was raised. Better late than never.

September 10, 2012

After Inner City Press / Fair Finance Watch commented on Trustmark's application to acquire BankTrust, its law firm Wachtell Lipton replied, saying that a six to one denial rate disparity was okay. Now the Federal Reserve has asked Trustmark and Wachtell Lipton questions about the reply, including about Somerville Bank & Trust, who reviewed and claimed no discrimination? The responses are not convincing - and one wonders why the Fed didn't send ICP a copy of the questions, when they were asked...

September 3, 2012

In predatory lending news, beyond Advance America and Mexico's Grupo Elektra, there's interest rates over 200% at World Acceptance. There's also this, from Citigroup:

Citi agreed to pay $590 million to settle a lawsuit by shareholders who claims that they took massive losses because the bank failed to take timely writedowns on collaterized debt obligations backed by subprime mortgages. U.S. District Judge Sidney Stein granted the deal preliminary approval last week, and set a Jan. 15, 2013, hearing to consider final approval....

August 27, 2012

So what does Trustmark's law firm Wachtell, Lipton have to say about its lending disparities? That the Office of the Comptroller found them okay. But here they are, as raised on the pending application to acquire BankTrust:

in its headquarters Metropolitan Statistical Area of Jackson, Mississippli in 2010, Trustmark for conventional home purchase loans had a denial rate for African Americans more than SIX TIMES HIGHER than for whites: 44.7% denial rate for African Americans, versus 7.3% for whites. It had a 100% denial rate for these and refinance loans for Latinos.

MEANWHILE, the Federal Reserve in an August 22 FOIA response blacks out even Trustmark's market share of deposits in Jackson -- clearly public information. The Fed has hit a new low.

In the Gulfport - Biloxi MSA in 2010, for conventional home purchase loans Trustmark made 40 loans to whites and only four to African Americans.

In the Memphis MSA in 2010, for conventional home purchase loans Trustmark made 34 loans to whites and only two to African Americans.

In the Houston MSA in 2010, for conventional home purchase loans Trustmark made 35 loans to whites and NONE to African Americans.

This is NOT okay. Watch this site.

August 20, 2012

While the New York State Department of Financial Services quickly filed and settled charges against Standard Chartered Bank for laundering money for Iran to evade sanctions against that country, the same NYSDFS has been remiss in its more local duties.

A major New York bank franchise, Emigrant Bank, is up for sale to Apple Bank for Savings, but the NYSDFS appears asleep at the switch. The NYSDFS is rubbing stamping mergers and branch closings, and not responding to comments from the public.

On August 6, Inner City Press / Fair Finance Watch submitted a timely challenge to the NYSDFS against a pre-merger branch closing by Emigrant. While not responding, the NYSDFS then provided notice of a merger application filed August 8, saying the comment period expired August 6 - click here to view.

The NYSDFS has not explained this either. Can you say Kafka?

August 13, 2012

Inner City Press / Fair Finance Watch has a timely first comment on the applications by Trustmark to acquire troubled BankTrust, highlighting in its headquarters Metropolitan Statistical Area of Jackson, Mississippli in 2010, Trustmark for conventional home purchase loans had a denial rate for African Americans more than SIX TIMES HIGHER than for whites: 44.7% denial rate for African Americans, versus 7.3% for whites. It had a 100% denial rate for these and refinance loans for Latinos.

In the Gulfport - Biloxi MSA in 2010, for conventional home purchase loans Trustmark made 40 loans to whites and only four to African Americans.

In the Memphis MSA in 2010, for conventional home purchase loans Trustmark made 34 loans to whites and only two to African Americans.

In the Houston MSA in 2010, for conventional home purchase loans Trustmark made 35 loans to whites and NONE to African Americans.

On the current record, the merger applications should not be approved.

August 6, 2012

On behalf of Inner City Press / Fair Finance Watch and its members and affiliates (collectively, "ICP"), this is a FOIA request concerning withheld submission related the applications of Mitsubishi UFJ Financial Group, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd and UnionBanCal Corporation to acquire Pacific Capital Bancorp & Santa Barbara Bank & Trust, which ICP timely protested.

Many of the applicants' submissions are being withheld, including directly on issues raised in ICP's timely protest. For example, and this is specifically requesting, a July 31 submission recites an FRB questions about Tax Refund Anticipation Loans (raised by ICP), and says "Please see Confidential Exhibit 1."

ICP is request that and the other withheld exhibits.

Similarly, in a July 24 submission, there is a question about Swiss regulators' inquiring into interest rate manipulation (that is, LIBOR scandal) - and it says "Please see Confidential Exhibit 2."

ICP is request that and the other withheld exhibits.

Still sleazy: Community Bank System Inc. is closing five branches, three of which are former HSBC Bank USA NA branches divested by First Niagara. Among the remaining two, one of the branches is from among the three additional branches that Community Bank is acquiring from First Niagara. Supposedly the consolidation will be effective Sept. 10 and the consolidations will not result in any layoffs.

July 30, 2012

Federal Reserve Seems to Pre-Approve Mergers, BB&T FOIA Release to Inner City Press Shows

By Matthew Russell Lee, Exclusive

SOUTH BRONX, July 29 -- This month the Federal Reserve Board quietly announced a willingness to pre-approve, or to indicate a willingness to approve, bank mergers proposals even before the public is made aware of them.

To some, this shows how little the regulator has learned from the financial meltdown.

Inner City Press has also just learned, via a Freedom of Information Act request and appeal, that the Fed has even this year been entertaining bank merger proposals under code names such as "Project Palm," assigned to BB&T's proposal with BankAtlantic.

Click here for Governer Jerome Powell's response to Inner City Press' FOIA Appeal. Click here for some of the documents released.

The deal is still pending.

When the Fed on July 11 announced the policy by a "Supervisory Letter," its press release provided a telephone number in Washington for media inquiries. Inner City Press called the number and asked among other things how it would impact review under the Community Reinvestment Act, which involves public notice and comment.

Inner City Press will not here report the name of the person answering, because it was insisted that no name could be given.

Rather Inner City Press was directed to the FOIA footnote of the Supervisory Letter, that some records about the pre-approvals will be available, after the fact, under FOIA.

But while the Fed is pre-approving, the public will have no way to know what records to request. This can be called false transparency.

Even on BB&T's "Project Palm," it is only now that the Fed releases records half-showing its response to Inner City Press' February 2012 comment on and against the proposal.

The just-released records show that on February 7, Claudia A. VonPervieux of Fed staff was "working on a draft rejection letter for M.Lee" of Inner City Press when the Fed belatedly realized that the Press was right: public notice had disappeared such that one couldn't know what to comment on.

And so a brief extension of the comment period was granted, but only for Inner City Press, which did not cure the problem of lack of notice to the public at large. See released e-mails, attached. And so it goes at the Fed. Watch this site.

** * *

Two of the vendors that sold the credit card add-ons cited in Capital One's settlement with the CFPB and OCC also do business with Wells Fargo, Citigroup and Bank of America: private equity owned Affinion Group Holdings, and Intersections, for which Bank of America is more than half of the company's income....

July 23, 2012

So the Consumer Financial Protection Bureau finally hauled off and fined a bank, and it couldn't be a more deserving one: Capital One.

The Consumer Financial Protection Bureau and OCC on July 18 initiated action against Capital One Financial Corp. unit Glen Allen, Va.-based Capital One Bank (USA) NA for unfair and deceptive practices relating to payment protection and credit monitoring products and ordered the bank to reimburse $150 million to 2.5 million affected consumers.

The OCC also asked the bank to stop the sales and marketing of any debt suspension product, debt cancellation product, credit and identity monitoring products, or any other similar products and to take other corrective action to ensure compliance with consumer protection laws.

The OCC based its penalty on the bank's failure to develop and implement a comprehensive and effective enterprise risk-management program to detect and prevent unfair and deceptive practices, as well as the duration of and failure to correct those practices

So why did the OCC let Capital One buy the subprime credit card business of HSBC?

So just in the last week there are announcements of a credit union merger proposal in Washington State (Prevail and Harborstone), the buy-up of United Community Bnak in Texas, and of Inland in Ontario, California; there is CRA-challenged WesBanco making a move into Pittsburgh. And there is a proposed deal in New York we will keeping a close, close eye on.

The Fed has done it again: improperly withheld basic information about an application, as admitted even by the pro-bank Governor now in charge of ruling on FOIA appeals. Governor Jay Powell, recently withholding ING - Capital One information, now finds on another application (BB&T) that information was improperly withheld under Exemption 5 and can now be released including records that "describe transaction filings and discuss comment period timings and news articles." The rest -- at least 156 full pages -- he withholds.

Meanwhile one of Governor Powell's ex employers has decided to hold onto its stake in a bank in Taiwan, Ta Chong. How does or will Powell recuse himself? Watch this site.

July 16, 2012

Even without major nationwide news there are a lot of small regional deals, of the type on which CRA could and should be enforced, like

July 2: Montana, 7 branch deal

July 2: Maine deal

July 3: Illinois deal, Heartland and Farmer City

July 5: Kansas deal, Southern Kansas

July 5: Nebraska, Valley Bank

July 6: Texas, LubCo (Lubbock)

July 9: California, Opus Bank buying 10 branches in and around LA

July 10: Maryland, federal savings bank deal

July 10: Texas: Comanche - Texas Savings

And that's just in 10 days. Overseas, HSBC is selling in Monaco and buying in Egypt, GE is selling, so is Santander in Latin America...

Last week, the Federal Reserve put out a letter offering "pre-filing" review of merger applications to banks. Inner City Press decided to call the number on the Fed's press release with a "media inquiry."

At first they said they'd give an on the record answer. Then they offered only "deep background" not attributable to the Fed -- and even then, only directed ICP to the FOIA part of the letter. This... is what lets scandals like LIBOR and predatory lending happen.

July 9, 2012

Guess who the Federal Reserve Board has put in charge of ruling on Freedom of Information Act appeals? It's new Governor (and former official and Deutsche Bank and the Carlyle Group) Jerome Powell. In an 8-page July 3 letter to Inner City Press, Powell upholds multiple withholdings of information about Capital One and ING, while also "determining that certain limited information previously withheld pursuant to exemptions 4, 5, 6 and 8 is releasable."

Limited, indeed. Worst, Powell "affirms the Secretary's decision to withhold certain information as 'Not Responsive' and to refer 212 pages to the OCC for disposition."

This is one of the Fed's new moves, to black out information that is not exempt, but which it claims it "not responsive" to the FOIA request. Why so secretive? We'll have more on this.

July 2, 2012

U.S. consumers paid $2.4 billion in fees for such plans in 2009, according to a March 2011 report from the Government Accountability Office that looked at nine credit-card issuers, including Capital One Discover, American Express, and Bank of America. Fees typically ranged from 85 cents to $1.35 per $100 of outstanding balance each month, the GAO said, noting a "relatively small proportion of the fees consumers pay for debt-protection products is returned to them in tangible financial benefits."

Meanwhile the Federal Reserve's FOIA response to Inner City Press about the applications of Mitsubishi UFJ Financial Group, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd and UnionBanCal Corporation to acquire Pacific Capital Bancorp & Santa Barbara Bank & Trust outright withholds 634 pages, and we have appealed.

But what's provided points to more. For example:

Subject: Unionbancal/Pacific Capital BC transaction - call Wed?
From: Elisa Johnson
To: Kenneth Binning; Cynthia Holbrook; Steven Takizawa Cc: Jose Alonso
Date: 02/21/2012 04:53 PM

Hello everyone -

I just took a call from Mark Gillett of Union Bank wanting to have a preliminary call tomorrow at 11am to discuss the filing requirements for Unionbancal's acquisition of Pacific Capital BC, Santa Barbara. Union is in the midst of conducting their due diligence . This will be an all cash transaction. FYI: the code name for this deal is Pebble Beach. The structure of the deal has "gelled"

But no earlier records are provided. And many records are withheld as "not responsive" -- with "also b(5)" added later in a different font. The Fed continues to abuse FOIA - we have appealed. Watch this site.

June 25, 2012

So after Inner City Press / Fair Finance Watch challenged the applications of Mitsubishi UFJ Financial Group to acquire Pacific Capital Bancorp & Santa Barbara Bank & Trust, the applicants decided to withhold basic information about their Community Reinvestment Act programs.

Then Inner City Press filed Freedom of Information Act requests and appeals. Now, Mitsubishi related some information, while blacking out columns and columns, and most of its response on the CRA.

Still, "Corporate Social Responsibility" chief Julius Robinson decided to turn in a "Supplement to the Convenience and Needs Considerations portion of the Application," while arguing that SBBT put its tax Refund Anticipation Loan rip-offs behind it. But why keep withholding information? Watch this site.

June 18, 2012

Of Occupy and the big banks: In Philadelphia, Occupiers are gearing up to oppose Wells Fargo's move to renew its contract with City Hall on June 21, saying Wells "plundered the Philly school system."

In Detroit, the group Moratorium argues that Michigan "Governor Snyder, trying to bully Detroit and stop the lawsuit against the 'consent decree,' is threatening that '100% of the city’s ongoing revenue sharing payments will be U.S. Bank … with no residual payments transferred to the city until the $80 million bond is paid in full' (Deputy Treasurer Thomas Saxton quoted in The Morning Sun). So the state is planning to give U.S. Bank all our revenue sharing money after years of refusing to pay revenue sharing money already owed to the City – the exact reason for the lawsuit in the first place. Who is U.S. Bank? This is one of the banks that criminally targeted Detroit by selling racist, fraudulent, predatory loans to over 80% of the people taking out mortgages or refinancing. This directly led to the foreclosure crisis that destroyed the tax base of Detroit and drove hundreds of thousands of people from the city."

Meanwhile, TIME says "Today, credit bureau Experian announced the debut of a product it calls an Extended View Score. Intended for people without bank accounts and spotty credit histories, the formula uses alternative data sources like rent payment history and public records data to create a score." Scary?

June 11, 2012

The Federal Reserve has issued a flurry of FOIA denials and extensions of time. Then comes a heavily redacted submission TO the Fed from Sullivan & Cromwell, on Mitsubishi UFJ Financial Group's application to buy Pacific Capital Bancorp and long time RALs rogue Santa Barbara Bank & Trust.

Asked about its due diligence on the RALs rogue, Sullivan & Cromwell say "see Confidential Exhibit 1" -- but do not provide it. Well, we DO want to see it.

Last month of Michigan it was reported by SNL Financial that

"Huntington Bancshares Inc.'s 10-year deal to open branches in Meijer grocery stores in Michigan is the bank's next step to increase its Michigan market share... The bank will open 20 branches in Meijer stores from May until the end of the year and will eventually open a total of more than 80 branches in the next three to five years, said Mary Navarro, Huntington's retail and banking director. Huntington has an opportunity to put a branch in every Meijer store in Michigan, of which there are more than 100, but bank executives could not provide a specific number."

But advocates in Detroit say their neighborhoods don't have these Meijer (or other) supermarkets. And so it seems a PROMISE of redlining. Watch this site.

So the FDIC, even after the subprime meltdown, rules that GE Capital Financial Inc, buying the deposits of MetLife Bank, is NOT responsible for the predatory lending of WMC, because it "was a subsidiary of a different financial institution (GE Capital Retail Bank)." This hairsplitting is shameful -- and dangerous. Watch this site.

June 4, 2012

Three and a half months after Inner City Press / Fair Finance Watch complained to the Office of the Comptroller of the Currency about its secret communications with Capital One and HSBC while approving their deal, a response from the OCC's general counsel Julie L. Williams arrived last week.

She states that "direct communications between the OCC and applicants (or their counsel) seeking approval of an acquisition under the Bank Merger Act are not prohibited ex parte communications" -- unless, she writes, "in the context of hearings."

So if the OCC denies hearings, as it did on Capital One - HSBC, it can do anything it wants?

Williams letter is dated May 9 - but was not put in the mail until May 30. Maybe THIS is one of the reasons the OCC didn't stop the subprime meltdown...

May 29, 2012

Months after the Federal Reserve approved the applications of Capital One and ING DIRECT, now the Fed admits it improperly withheld information in response to Freedom of Information Act requests and appeals by Inner City Press / Fair Finance Watch. A little late, isn't it? We need new regulators.

Last week Inner City Press RSVP-ed for and went to cover a speech by the President of the Federal Reserve Bank of New York William Dudley. But from CFR's overflow run to which the media was confined, ICP was not able to ask any questions, whether about bank accounts for UN member states or why it is appropriate for JPMorgan Chase CEO to be on the Federal Reserve Bank of NY board of directors, given that the FRBNY directly regulated JPMC, which has recently gambled and lost $3 billion and counting. This last question, Inner City Press submitted twice by email, but it was not posed. Nor has it been answered since. Watch this site.

May 21, 2012

While the Office of the Comptroller of the Currency months ago told Inner City Press / Fair Finance Watch it would provide information, including when to comment, about First Niagara's proposal to acquire branches from HSBC and close many of them. But the OCC never provided any information, and on Friday First Niagara announced it had consummated the proposal. There is a problem with that.

Inner City Press / Fair Finance Watch was asked by the NYC Responsible Banking act:

The growing movement to local Community Reinvestment ordinances is a response to the Federal regulators' lack of commitment to enforcing the CRA of 1977. Also, that law is enforced if at all only in connection with bank mergers, of which there have been many fewer since the subprime financial meltdown. So activist have had to look elsewhere.

Whether municipal authorities will ever have enough independence from corporate interests to bar a major bank from business with the city remains to be seen.

Cleveland, for example, has been seeking its own agreements with banks for some years. But one of its two major banks was acquired and moved its headquarters away. As with CRA challenges, there will be a need for activists in different cities to work together.

May 14, 2012

So sleazy Deutsche Bank, AFTER de-certifying with the Fed, now pays out a governmental settlement for predatory loans defrauding FHA. Wouldn't it seem like time for the Fed to reconsider that decertification?

May 7, 2012

As Deutsche Bank Evades Fed, Tarullo Alludes to "Some Private Actors," Blurs FOIA & Volcker Rulemaking

By Matthew Russell Lee

UNITED NATIONS, May 2 -- When the Federal Reserve's Daniel Tarullo spoke Wednesday at the Council on Foreign Relations about regulatory reform, he did not mention a single bank or financial institution.

Inner City Press asked him about Deutsche Bank, which earlier this year split off its investment banking business so as to avoid Fed regulation. Tarullo on March 22 told the Senate the Fed would have to "respond" to this, that it had some impact on this thinking on regulation.

Tarullo replied, "Matthew, what I said was it effected my thinking, not change, that implies a dramatic shift." Then he answered, six minutes in all, without once mentioning Deutsche Bank. He said that "the kind of changes some private actors are engaged in will have to effect the scope of our regulations."

These regulations, he said, will be "under 165... to make sure we can implement Congressional concern."

Inner City Press also asked Tarullo if he claimed the Fed has gotten more transparent since the financial meltdown, noting the Fed's recent denial in full of access to over 2000 pages responses to an Inner City Press FOIA request.

Here now is an online copy of the Fed's FOIA denial

Tarullo, which has previously heard of FOIA problems at the Fed, said he didn't know which FOIA request was referred to, then answered about administrative rule making. He said "for rule making, we get comments" and now distinguish "unique comments -- that is, not form letters."

He said there have been "17,000 Volcker Rule submissions... Absorbing all the comments is a substantial undertaking. If it takes longer to give due respect to comments," so be it.

The FOIA request referred to was about Capital One's compliance, since the Fed's approval order on Capital One - ING DIRECT, including with Capital One's commitments to open branches and lend $180 billion" and about Capital One firing 490 assistant branch managers despite having made representations about increasing service.

Amazingly, the Fed found 2200 pages responsive but provided not a single document, instead saying that "your request is denied in full," including as to each and every record "regarding with the Approval Order" of Capital One - ING DIRECT. ICP commented extensively on that application, as did NCRC, and the Fed's order cites the comments and Capital One's responses and representations. Now the Fed denies access to every record about compliance with the representations.

Inner City Press' request included a specific reference to branch closings, for example, which are not confidential. Additionally, information submitted and reviewed about compliance with Capital One's representations would contain HMDA data, which is public and not withholdable.

Even since the April 10 request, ICP on April 22 submitted to the Fed information about an admission by Capital One of fraud on consumers:

"Earnings power of HSBC card deal to drown out near-term noise, says Capital One CEO," April 19, 2012

Fairbank also reported a $75 million accrual for customer refunds stemming from what he described as 'instances in which phone sales people didn't adhere to our scripts and sales policy when cross-selling products to our credit card customers.' He said it is very important that Capital One ensures customers bought the unspecified products in the manner the company intended."

Just because it SOUNDS like the responsive records might include some withholdable information, it is outrageous to withheld each and every responsive record, citing the catch-all Exemption 8. The Fed is increasingly abusing and evading FOIA. Watch this site.

And this was filed:

this is a timely comment opposing and requesting public hearings on the applications of Mitsubishi UFJ Financial Group, Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd and UnionBanCal Corporation to acquire Pacific Capital Bancorp & Santa Barbara Bank & Trust.

Santa Barbara Bank & Trust has a long and sordid history of high cost tax Refund Anticipation Loans (RALs), see below.

Mitsubishi UFJ, beyond the Union Bank N.A. lending disparities initially sketched below, is under investigation. As reported on February 3 of this year:

"The Swiss Competition Commission said today that it launched an investigation into alleged collusion among derivative traders of various banks to manipulate LIBOR and TIBOR, as well as the market conditions regarding derivative products based on these reference rates. The banks being investigated are: Mitsubishi UFJ Financial Group Inc. unit Bank of Tokyo-Mitsubishi UFJ Ltd., Citigroup Inc," etc

In the Los Angeles MSA in 2010, the most recent year for which data is publicly available, Union Bank made 354 conventional home purchase loans to whites and only EIGHT such loans to African Americans. To Latinos, Union Bank made only 23 such loans, compared to the 354 to whites.

In the Seattle MSA in 2010, Union Bank made 23 conventional home purchase loans to whites, and NO such loans to African Americans or Latinos.

In the Seattle MSA in 2010, Union Bank made 34 refinance loans to whites and NO such loans to African Americans or Latinos -- both applications from Latinos were "withdrawn."

In the Portland, Oregon MSA in 2010, Union Bank made four conventional home purchase loans to whites, and NO such loans to African Americans or Latinos.

In the Portland, Oregon MSA in 2010, Union Bank made eight refinance loans to whites and NO such loans to African Americans or Latinos.

In the Santa Barbara MSA in 2010, Union Bank made nine conventional home purchase loans to whites, and NO such loans to African Americans or Latinos.

In the Oakland MSA in 2010, Union Bank made 31 conventional home purchase loans to whites, and only TWO such loans to African Americans. To Latinos, Union Bank made NO such loans.

Regarding Santa Barbara Bank & Trust:

"On November 21, $180 million in TARP money wound up in the affluent seaside community of Santa Barbara, California. The tarp dollars flowed mostly into the coffers of a beige, Spanish-style building on Carrillo Street, home to the Santa Barbara Bank & Trust... the bank also operates a little-known and controversial program far from the lush enclaves of Santa Barbara... Outside Santa Barbara, S.B.B.&T. peddles what are known as refund-anticipation loans (rals)... The U.S. Department of Justice and state authorities in California, New Jersey, and New York have taken action against tax preparers with whom S.B.B.&T. works, charging them with deceptive advertising and with preparing fraudulent returns. Santa Barbara later took a $22 million hit on its books because of unpaid refund-anticipation loans.... in a conference call with analysts on November 21, Stephen Masterson, the chief financial officer of Pacific Capital Bancorp, admitted that tarp “obviously helps us .… We didn’t take the tarp money to increase our ral program or to build our ral program, but it certainly helps our capital ratios.” Indeed, the infusion from Treasury may well have been a lifeline for Santa Barbara."

The FRS should require answers, extend the comment period and hold public hearings.

April 30, 2012

The Federal Reserve just continues to hit new lows, leading to this FOIA appeal by ICP:

This is an immediate FOIA appeal to the Federal Reserve Board's denial dated April 26, 2012 of my FOIA request of April 10, 2012 for "all records in the possession of the FRS concerning Capital One's compliance, since the FRB's approval order on Capital One - ING DIRECT, including with Capital One's commitments to open branches and lend $180 billion" and about Capital One firing 490 assistant branch managers despite having made representations about increasing service.

Amazingly, the Fed provides not a single document, instead saying that "your request is denied in full," including as to each and every record "regarding with the Approval Order" of Capital One - ING DIRECT. ICP commented extensively on that application, as did NCRC, and the Fed's order cites the comments and Capital One's responses and representations. Now the Fed denies access to every record about compliance with the representations. This is a new low.

Even since the April 10 request, ICP on April 22 submitted to the Fed information about an admission by Capital One of fraud on consumers:

"Earnings power of HSBC card deal to drown out near-term noise, says Capital One CEO," April 19, 2012

Meanwhile, ICP has commented to the FDIC, and NYS DFS:

On behalf of Inner City Press / Fair Finance Watch and its members and affiliates (collectively, "ICP"), this is a comment opposing and requesting public hearings on the application by New York Community Bank to acquire substantially all of the assets, and $2.3 billion of deposits of Aurora Bank FSB.

On the FDIC's web site, the comment period on this application runs through May 5, 2012. This comment is timely.

Aurora is a subprime, some say predatory, lending unit of the scandal wracked Lehman Brothers. For the record:

"Aurora had become one of the largest players in that market, originating $25-billion worth of loans in 2006. It was also the biggest supplier of loans to Lehman for securitization. Lehman had acquired a stake in Aurora in 1998 and had taken control in 2003. By May, 2006, some people inside Lehman were becoming worried about Aurora's lending practices."

NYCB is a bank which has sought to fly under the radar -- for example, a recent search of the FFIEC HMDA data back for "New York Community Bank" reveals only one HMDA reporter, 0000016022-3, reporting geography specific data in only three MSAs.

In these MSA, NYCB is decidedly disparate in its marketing and lending.

In the Phoenix MSA in 2010, the most recent year for which data is publicly available, NYCB made 292 conventional home purchase loans to whites and NO such loans to African Americans. Based on its disparate marketing, NYCB received only four such applications from African Americans, and denied three of them. To Latinos, NYCB more only 14 such loans, compared to the 292 to whites.

In the Fort Lauderdale MSA in 2010, NYCB made 38 conventional home purchase loans to whites, and NO such loans to African Americans.

In the West Palm Beach MSA in 2010, NYCB made 83 refinance loans to whites and only ONE such loan to an African American applicant, and only seven to Latinos.

The FDIC should require answers, extend the comment period and hold public hearings.

April 23, 2012

From the department of unintended consequence -- or not -- comes the fact that principal forgiveness on mortgages might, by year's end, be considered taxable income. That is, if a household earning say $56,000 a year and about to be foreclosed on had $80,000 of its mortgage debt forgiven, suddenly it would be in the top tax bracket, and likely lose the house anyway.

April 19 on Capitol Hill the issue was raised to a range of Congress members. Some were receptive, some were not. But nearly all agreed that nothing will be accomplished between now and the election in November. Is this any way to run a country?

Meanwhile in the course of spinning its first quarter earnings numbers, Capital One's CEO let it slip that $75 million are being set aside to deal with fraudulently sold products. "Oops." This has been raised to the OCC and Federal Reserve; watch this site.

April 16, 2012

General Electric is one of the largest corporations in the world, and played a significant role in the subprime lending meltdown that trashed the global economy. Yet its move to grow in retail banking is being done through an obscure Utah-based "industrial loan company." Ever since in late 2011 GE announced it would seek to buy $7.5 billion of deposits from MetLife -- which seeks to escape Federal Reserve regulation -- Inner City Press has been looking for GE's application. To the Office of the Comptroller of the Currency? No, they finally answered - to Utah. And so this:

Utah Department of Financial Institutions
Darryle Rude, Supervisor of Industrial Banks
P O Box 146800
Salt Lake City UT 84114-6800

Re: Comment opposing and requesting public hearings on application by GE Capital Financial to acquire $7.5 billion in deposits from MetLife

Dear Mr. Rude, Paul Allred, Sonja Long and others in the DFI:

On behalf of Inner City Press / Fair Finance Watch and its members and affiliates (collectively, "ICP"), this is a comment opposing and requesting public hearings on the application by GE Capital Financial to acquire $7.5 billion in deposits from MetLife.

MetLife's motive for trying to off-load these deposits is clear. It is to escape regulation, in particular, to deregister as a financial services holding company with the Federal Reserve System.

But what is GE's motive, and what would the proposed acquisition portend for the public? What public benefit would it offer?

When GE decided to get into the mortgage business, as it now seeks to get into the retail deposit business, it injured consumers, punished whistleblowers and hurt the economy and working Americans.

GE acquired the notorious subprime lender WMC, and demoted and silenced those employees who came forward to say that predatory and fraudulent lending was occurring.

See, for the record on this application, "Feds investigating possible fraud at GE’s former subprime unit," http://www.iwatchnews.org/2012/01/20/7908/feds-investigating-possible-fraud-ge-s-former-subprime-unit and see, http://www.iwatchnews.org/2012/01/06/7802/fraud-and-folly-untold-story-general-electric-s-subprime-debacle

With GE as owner, WMC was identified by to Congress by the Comptroller of the Currency as the fourth worst forecloser in the nation, see http://fcic-static.law.stanford.edu/cdn_media/fcic-testimony/2010-0408-Dugan.pdf

Now, GE seeks to become a retail deposit collector. At an investor meeting December 6, General Electric Capital Corp. CEO Michael Neal said the firm would launch a direct-to-consumer U.S. deposit program in the first half of 2012. General Electric Co. CEO Jeffrey Immelt has stated that the company hopes to increase alternative funding at GE Capital by $15 billion to about $80 billion, Sterne Agee & Leach analyst Ben Elias said in a note December 27. "The acquisition fits with our plans to launch a U.S. deposit platform," Dan Henson, president and CEO of GE Capital-Americas, said in a Dec. 27 press release. "It accelerates our timing, helps us build a stronger and more cost-efficient funding base.

Given GE's track record of harming consumers, and burying malfeasance by punishing whistleblowers, ICP hereby opposes and requests public hearings on GE's application.

April 9, 2012

In the first study of Bank of America's just-released 2011 mortgage lending data, Bronx-based Fair Finance Watch has found that BofA continued with high cost loans, and disparately. 2011 is the eighth year in which the data distinguishes which loans are higher cost, over a federally-defined rate spread of 1.5 percent over Treasury bill yields. The data, late provided by Bank of America, show that BofA confined African Americans to higher-cost loans above this rate spread 2.11 times more frequently than whites in 2011.

For a MarketWatch report on ICP's study last week, see http://articles.marketwatch.com/2012-04-03/commentary/31275917_1_high-cost-loans-liar-loans-cra-banks

April 2, 2012

In the first study of the just-released 2011 mortgage lending data, Inner City Press and Bronx-based Fair Finance Watch have found that banking behemoths Citigroup, JPMorgan Chase and Wells Fargo continued with high cost loans and disparities by race and ethnicity in denials and higher-cost lending.

2011 is the eighth year in which the data distinguishes which loans are higher cost, over a federally-defined rate spread of 1.5 percent over Treasury bill yields.

The just released data show that Citigroup confined African Americans to higher-cost loans above this rate spread 3.38 times more frequently than whites in 2011, worse that its 2.25 disparity in 2009, Fair Finance Watch has found.

Citigroup confined Latinos to higher-cost loans above the rate spread 2.42 times more frequently than whites in 2011, worse that its 1.72 disparity in 2009, the data show.

“Even after the bailouts, lending disparities grew worse and not better," said Fair Finance Watch. "Regulatory laxity, at least on fair lending, has continued despite the financial meltdown caused by predatory lending."

For JPMorgan Chase, the disparity for African Americans in 2011 was 2.21; for the largest of Wells Fargo's many HMDA data reporters, the disparity for African Americans in 2011 was 2.28.

"The Federal Reserve is becoming more and more bank-friendly, including with the recent nomination of former hedge funder and Deutsche Bank official Jay Powell for a seat on the Federal Reserve Board. It is still not clear if the new Consumer Financial Protection Bureau will get to this problem," Fair Finance Watch continued. "The disparities in the 2011 mortgage data of these banks further militate for aggressively watchdogging and breaking up these banks."

Regional bank Keycorp in 2011 confined African Americans to higher-cost loans above the rate spread 1.70 times more frequently than whites -- more than a third of Keycorp's loans to African American were rate spread or high-cost loans.

U.S. Bancorp in 2011 confined African Americans to higher-cost loans above the rate spread 2.13 times more frequently than whites, worse than in 2010.

Regions Financial in 2011 denied applications by African Americans 2.44 times more frequently than whites.

Comerica, not yet including its Texas-based purchase Sterling, in 2011 confined African Americans to higher-cost loans above the rate spread 2.81 times more frequently than whites

Growing Southern bank BB&T, even absent its subprime unit Lendmark, in 2011 confined African Americans to higher-cost loans above the rate spread 2.59 times more frequently than whites

Fair Finance Watch has continued its enforcement project in the South, most recently raising issues under the Community Reinvestment Act on BB&T's proposal to acquire BankAtlantic. In response, the Federal Reserve Board extended the comment period. Much of BB&T's application has been blacked out or withheld in full, which Inner City Press is challenging under the Freedom of Information Act.

Another acquisition, that of MetLife's deposits by General Electric, has proceeded stealthly with the Office of the Comptroller of the Currency belatedly stating that it plays no role in the review since GE is using a Utah-based "non-bank bank." These loopholes, like GE, played a role in the subprime meltdown.

Inner City Press & FFW have also joined others concerned with Deutsche Bank's decertification as a financial services holding company to escape Dodd Frank including its capital adequacy rules -- particularly given Deutsche Bank's role in the subprime scandal, as lender, securitizer and now major forecloser.

The law required that the 2011 data be provided by March 31, following March 1 joint requests by Fair Finance Watch and Inner City Press. Several banks did not provide their data by the deadline, most notably Capital One and Bank of America, despite confirming receipt of the request. Further studies will follow: watch this site.

March 26, 2012

Deutsche Bank was big into subprime, as lender, securitizing and foreclosing trustee. But now that the Dodd-Frank law is coming into effect, Deutsche Bank is restructuring to avoid the law's requirements. We will have more on this.

Republic Bank & Trust signed an agreement in December to allow itself to keep issuing high cost tax refund anticipation loans this Spring...

March 19, 2012

So on March 12, Japanese-owned UnionBanCal agreed to pay $1.5 billion to acquire Pacific Capital Bancorp, which owns Santa Barbara Bank & Trust -- which was one of the Tax Refund Anticipation (RALs) predatory lenders. While the trend is for non-US, mostly European banks to be SELLING OFF their business in the US, like ING sold ING DIRECT to Capital One, and HSBC is selling its upstate NY branches, this one goes the other way. UnionBanCal is owned by Mitsubishi UFJ Financial Group, one of the 29 "globally significant banks." We'll have more on this.

March 12, 2012

So the OCC approved Capital One - HSBC, and what's surprising is how much the OCC relies on the Fed, including for HMDA analysis that the OCC should be able to do itself. Also, the OCC Letter doesn't even address the due process / ex parte issues, for example of at least one meeting by Capital One outside council Patricia Robinson with OCC staff, that commenters including ICP and NCRC never got a summary of. One is left wondering if the OCC even has rules on banks providing commenters with copies or summaries of what they say to the OCC, on issues raised by commenters. We'll see.

Meanwhile at the UN Inner City Press asked the Mexican head of this G20 if it is true that the G20 is against implementation of the US Volcker Rule, not because it is pro deregulation, but only because it would lower the value of non-US goverment bonds. It hadn't been implemented, Magiro agilely answered. But in fact a Mexico based subprime lending owned by Salinas Pliego, the Grupo Elektra, is now in line to buy controversial US payday lending Advance America. We'll have more on this.

March 5, 2012

Even as requests for reconsideration of Capital One - ING DIRECT pend at the Federal Reserve, in Europe, the terms of ING’s bailout by the Dutch government are being questioned by a European Union court in the first case challenging EU conditions on more than $1.3 trillion of bank rescues throughout the region. ING was ordered by the European Commission to sell units to shrink its balance sheet by 45 percent by the end of 2013 and avoid undercutting rivals on prices for some banking products for three years or until it repaid the aid. The EU must approve large state subsidies and can impose conditions on the aid. There have beeen challenges by ING and the Dutch government to the terms of the EU’s approval, which the bank says punished it too harshly for state help in 2008 and 2009. ING said the regulator miscalculated the amount of aid and imposed excessive restructuring demands. We'll see.

Meanwhile, a community group is getting a speech from Arkadi Kuhlmann, CEO of ING DIRECT. Go figure.

February 27, 2012

ICP has now requested reconsideration, following the Federal Reserve Board's February 14 approval of the proposed acquisition by Capital One Financial Corporation (“Capital One”) to acquire ING Bank, FSB and its affiliates (“ING”), to form what would be the fifth largest bank in the country.

One of the FRB's sleights of hand is in footnote 27, where after reciting ICP's objections the FRB says "the Board has determined in a separate action that ING Groep would not control Capital One as a result of this proposal. See Board letter to Mark Menting, Esq. (February 14, 2012)."

So a major contested issue was confined to a side letter on the same day at the approval. Amazingly, the Board has yet to provide even a copy of this letter to ICP, which commented extensively on this part of the proposal, including on ING being under investigation for violating sanctions.

While the Order says the charges are against ING, not ING Direct, in the side letter the Board was addressing ING owning a substantial percentage of Capital One. This segmentation is the type of legal legeredemain by which the FRB allowed the financial meltdown. This Order should be reconsidered, including in light of Capital One's dramatic drop in mortgage lending and did not adequately explain its findings - for example, the FRB asserts that Capital One’s credit card small business lending is minimal in contrast to findings by NCRC and others.

Footnote 10 of the FRB's approval order says

"One commenter expressed concern about ex parte communications and the opportunity for the public to rebut all information that was provided by Capital One. On review, the Board found that the public had a full opportunity to provide the Board with any information related to the factors that the Board must consider in acting on the notice. The information submitted by Capital One, and the release of that information to the public, was in accordance with the Board’s regulations and policies. The Board confirmed that all contacts between Capital One and staff were in accordance with the Board’s rules on ex parte communications."

The FRB should void and reconsider its Order, inter alia following its now appealed under the Freedom of Information Act denial of February 7, 2011 -- emailed to ICP after 5 pm on Feb 7 -- of ICP's FOIA request of October 29, 2011. This document dump was and is beneath the Federal Reserve.

Among the 1040 pages provided (more than 200 have been withheld in full), some show an irregular process tainted by ex parte communications and a disturbingly pervasive resolving door. Some examples, from a single one of the files dumped on ICP on February 7:

Former Federal Reserve legal staffer Andy Navarrete, now Senior Vice President of Capital One, improperly reached out to Scott Alvarez on August 25, 2011;

On November 7, 2011, PARobinson [a] wlrk.com – Patricia A. Robinson, presumably the always cordial Pat Robinson who was in the Federal Reserve Board’s Legal Division working on applications -- wrote to michael.sexton [a] frb.gov and stanlyn.clark [a] frb.gov

"It was great talking to you last week, Mike. Stanlyn, I am sorry that I missed you but hope to catch up very soon (now that my one-year 'cooling off' period has expired).

With all due respect to Ms. Robinson, it is troubling that Capital One could hire and use an attorney who personally knows and worked with all of the Fed attorneys reviewing the application. This led to a November 21, 2011, call about, among other things, the HSBC credit card portfolio, with 3 OCC officials on the call -- tainting that process as well. On November 18, 2011, Ms. Robinson was at the OCC, 8:45 to 10:45 AM. There was another call on December 9, 2011.

As noted in ICP's Feb 7 FOIA appeal, as simply one example, the Fed held ex parte communications with Capital One on November 21, writing a memo ostensibly as a tip of the hat to the rules against ex parte communications. Then the Fed withhold the summary under Exemption 4.

The Fed has even made withholdings from its own August 29, 2011 questions to Capital One. This is an outrage and has been appealed from.

The Fed is increasingly abusing and evading FOIA and this must be not only reversed, but explained and accountability imposed in connection with this request for reconsideration.

February 20, 2012

Fed Approves Capital One - ING After Delay & Data Dump, Reconsideration?

By Matthew R. Lee

SOUTH BRONX, February 14, updated -- Some Valentine: the day after the Federal Reserve for the second time postponed decision on the Capital One - ING bank merger, a Fed legal staffer called Inner City Press at 5:15 pm on Valentine's Day to say the deal was approved, but not in the normal way.

Inner City Press asked for an explanation of the February 8 postponement, and the February 13 deferral of decision, but none was provided. Reconsideration will be requested.

One of the Fed's sleights of hand is in footnote 27, where after reciting Inner City Press' objections the Fed says "the Board has determined in a separate action that ING Groep would not control Capital One as a result of this proposal. See Board letter to Mark Menting, Esq. (February 14, 2012)."

So a major contested issue was confined to a side letter on the same day at the approval. Footnote 10 of the Fed's approval order says

Consider: on the night of February 7, the Fed issued a document dump of some 1040 pages responding to a Freedom of Information Act request Inner City Press filed in October.

Among the 1040 pages provided (more than 200 have been withheld in full, from ICP and other commenters, NCRC and others), some show an irregular process tainted by ex parte communications and a disturbingly pervasive resolving door. Some examples, from a single one of the files dumped on ICP on February 7, and which ICP commented on to the Fed in the run-up to its February 13 meeting:

Former Federal Reserve legal staffer Andy Navarrete, now Senior Vice President of Capital One, improperly reached out to Scott Alvarez on August 25, 2011;

On November 7, 2011, Patricia A. Robinson at Capital One's law firm – presumably the same Pat Robinson who was in the Federal Reserve Board’s Legal Division working on applications -- wrote to Michael Sexton and Stanlyn Clark at the Federal Reserve:

"It was great talking to you last week, Mike. Stanlyn, I am sorry that I missed you but hope to catch up very soon (now that my one-year 'cooling off' period has expired).

As ICP commented, it is troubling that Capital One could hire and use an attorney who personally knows and worked with all of the Fed attorneys reviewing the application. This led to a November 21, 2011, call about, among other things, the HSBC credit card portfolio, with 3 OCC officials on the call -- tainting that process as well. On November 18, 2011, Ms. Robinson was at the OCC, 8:45 to 10:45 AM. There was another call on December 9, 2011.

The Fed is increasingly abusing and evading FOIA and this must be not only reversed, but explained and accountability imposed in response to ICP's pending appeal.

For the reasons of record, and as argued by NCRC, the Federal Reserve should reconsider the ING approval...

And the day after, ICP commented to the OCC:

ICP has just submitted to the OCC a FOIA request, based on information dumped on us by the Federal Reserve just before it ruled on Capital One - ING, which reflects ex parte contacts between the OCC and Capital One regarding Capital One's applications to acquire HSBC's national banks.

According to documents the Federal Reserve gave us under FOIA, on November 7, 2011, Patricia A. Robinson at Capital One's law firm – presumably the same Pat Robinson who was in the Federal Reserve Board’s Legal Division working on applications -- wrote to Michael Sexton and Stanlyn Clark at the Federal Reserve:

"It was great talking to you last week, Mike. Stanlyn, I am sorry that I missed you but hope to catch up very soon (now that my one-year 'cooling off' period has expired).

It is troubling that Capital One could hire and use an attorney who personally knows and worked / coordinated with attorneys reviewing the application. This led to a November 21, 2011, call about, among other things, the HSBC credit card portfolio, with 3 OCC officials on the call -- tainting the OCC process as well, we hereby timely contend.

The OCC officials including Michael DeClue, Wai-Fan Chang and Ancris Randhanie.

On November 18, 2011, Ms. Robinson tells the FRB that she was at the OCC, 8:45 to 10:45 AM.

ICP has submitted to the OCC a request for all records concerning these and other contacts between the OCC and Capital One in this proceeding, under FOIA and due process / rules against ex parte contacts. The records should be released, and comment allowed thereon, prior to any OCC ruling on Capital One's applications.

The comment period must be extending, and as argued by NCRC, public hearings like the Fed held should be scheduled.

February 13, 2012

Why did the Federal Reserve postpone its meeting on Capital One - ING from Wednesday afternoon for five days until Monday, February 13? Capital One's spokeswoman said “The board has informed us that the planned meeting for this afternoon has been rescheduled for Monday, February 13th. We understand that the delay is due to a scheduling conflict, and we look forward to their decision early next week."

But there's a problem with this spin, that scheduling made it impossible. At 3:05 pm on Wednesday, Inner City Press got a voice mail from the Federal Reserve's Legal Division, Michael Waldron, about an application that ICP Fair Finance Watch had commented on some time ago: Hawa - Korea Exchange Bank. The Board had just approved the application, Waldron said (without also stating any right to request reconsideration.)

In that Order Inner City Press / Fair Finance Watch is, yes, "the commenter."

So if the Fed could approve applications on Wednesday afternoon but chose not to do so for Capital One, why not?

One can hope that the outrageous "document dump" of hundreds of pages on the eve of the Fed's scheduled February 8 meeting, which Inner City Press immediately raised to the highest levels of the Fed, combined with calls Wednesday from NCRC members to open the meeting, caught the Fed's attention.

Then this should, too: Inner City Press, reviewing the documents dumped, has now commented to the Fed that

Former Federal Reserve legal staffer Andy Navarrete, now Senior Vice President of Capital One, improperly reached out to Scott Alvarez on August 25, 2011;

"It was great talking to you last week, Mike. Stanlyn, I am sorry that I missed you but hope to catch up very soon (now that my one-year 'cooling off' period has expired).

The Fed is increasingly abusing and evading FOIA and this must be not only reversed, but explained and accountability imposed in response to this appeal.

This information must be reviewed, and released and comment allowed thereon, by ICP, NCRC and others, before the Fed considers approving the Capital One - ING proposals.

February 6, 2012

The fight on Capital One - ING continues, as more and more information is withheld. Inner City Press filed this FOIA appeal on February 4:

This is a timely FOIA appeal to the Federal Reserve Board's denial of February 3, 2012 of my FOIA request of January 6, 2012, for all of Capital One's January 3, 2012 submission to the Fed, etc..

The Fed has provide a document with redactions which ICP is hereby appealing. From Capital One's response to the Fed's December 15, 2011 questions, the Fed has blacked out the entirety of Footnote 1, which seemingly explains Capital One's lending in California.

The Fed has blacked out on the top of Page 6 some Capital One argument about how and why it will improve the fairness of its lending.

On Pages 11 and 12, Capital One makes representations to the Fed about with whom it will partner, representations clearly meant to argue for approval of Capital One's applications - but Capital One, and now the Fed, withheld the names and the argument. ICP is appealing.

The bottom of Page 16 is entirely redacted; there is no way to know what type of information it contains, and ICP appeals from the invocation of Exemption 8 (bank supervision) and Exemption 4, including the many redactions from the Exhibits to Capital One's submission.

The Fed is increasingly abusing and evading FOIA and this must be not only reversed, but explained and accountability imposed in response to this appeal.

This information must be reviewed, and released and comment allowed there, before the Fed considers approving the Capital One - ING proposals, protested by NCRC, ICP and others

January 30, 2012

With Fed Mulling Capital One's ING Deal, 590 Pages Withheld, Blacked Out

By Matthew R. Lee

SOUTH BRONX, January 29 -- Amid questions about the Federal Reserve's transparency as it considers allowing Capital One to buy ING Direct and become the fifth largest bank in the US, the Fed last week responded to a Freedom of Information Act request by Inner City Press by withholding 590 pages in full, and at least half of the single 34 page document it did provide.

Click here to view the Fed's FOIA Denial, from which Inner City Press has already appealed, and click here to view the heavily redacted 34 page document that the Fed provided to Inner City Press (and Capital One to NCRC and the other protesters from which it had withheld this information).

As argued in Inner City Press' FOIA appeal, the Fed should re-open its comment period, inter alia following its now appealed under the Freedom of Information Act denial of January 24, 2012 of ICP's FOIA request of December 4, 2011, for "all withheld portions of Capital One's November 15, 2011 submission to the Fed on the pending ING DIRECT application."

It took 50 days for the Fed to respond. Worse, 590 pages are being withheld in full, and of the single 35 page document subsequently sent to Inner City Press, much has been redacted, including how Capital One would pay for the acquisition,

- weaknesses in ING DIRECT (page 3);

- all information about Capital One's credit card lending to people with FICO scores below 660, and subprime card lending (page 4);

- small business lending (page 5);

- due diligence on HSBC's card platform, previously of the predatory lender Household (page 13);

- forward sale agreements (page 14 - even the Fed's question is withheld, we appeal that);

- mortgage lending (page 16); swaps (page17);

- and the entirety of pages 19 through 34, including the Fed's questions.

The Fed cites Exemption 5, but it how an "intra-agency" exemption could be cited for what Capital One submitted is unclear. ICP opposes the invocation, too, of exemption 8 without explaining in detail the type of information in the 590 pages withheld in full.

It is hard or impossible to argue about this black hole of information: the Governor charged with ruling on this appeal should review all of the information in camera, and release all portions that are not strictly exempt.

The Fed is increasingly abusing and evading FOIA and this must be not only reversed, but explained and accountability imposed in response to this appeal.

This information must be reviewed, and released and comment allowed there, before the Fed considers approving the Capital One - ING proposals.

For the reasons of record, and as argued by NCRC, the Federal Reserve should re-open the comment period to fully consider Capital One's related proposal to buy the ex-Household predatory lending platform from HSBC, and the related stealth ING proposals.

January 23, 2012

Slowly, too slowly, some pigeons come home to roost.

General Electric, which engaged in predatory lending through WMC, is now reportedly under investigation -- just as it proposes to acquire $7.5 billion in deposits from Met Life.

Royal Bank of Scotland's former boss, Sir Fred "the Shred" Goodwin, faces the loss of his knighthood, after he helped enable predatory lending by securitizing and trading in the loans through RBS Greenwich Capital Markets. PM Cameron said, "There’s a forfeiture committee in terms of honors that exists and it will now examine this issue. I think it’s right that it does so."

Meanwhile on Capital One: When in September the Federal Reserve held a public meeting on Cap One - ING in Chicago, Fed legal division official Ms. Thro replied, on camera, to Inner City Press / Fair Finance Watch's comments by saying ICP should submit a Freedom of Information Act request. ICP immediately did.

Among other things, ING is reportedly under investigation for violating sanctions, on Sudan, Iran and other elsewhere - topics which deserve a public airing before ING is considered to be allowed to own 9.9% of what would become the fifth largest US financial institution.

Inner City Press returned a telephone call to another Fed Legal Division staffer and voluntarily narrowed its FOIA request, for specific adverse ING information such as the above. The Fed identified responsive information but forwarded the request to the OCC, they say on December 20.

Now, more than three months later, the information is withheld in full by OCC denial on Friday. The OCC's denial does not provide a speck of information, does not give any idea of what is being withheld, and does not even state how many pages are being withheld.

There is no way to assess the propriety of these withholdings in full, ostensibly under Exemption 4. ICP has immediately appealed the withholding(s).

This information about ING must be reviewed, and released and comment allowed there, before the Fed considers approving the Capital One - ING proposals.

January 16, 2012

Responding to the Federal Reserve to allegations that Capital One violates bankruptcy laws, COF's law firm Wachtell, Lipton, Rosen & Katz in a January 11 submission wroted that it "was unaware of the debtor's bankruptcy because [REDACTION, Pages 3 - 4]." Inner City Press on January 14 challenged this redaction under the Freedom of Information Act, sating that as before and on the still pending requests, all information not clearly entitled to confidential treatment under the narrowest reading of the exemptions should be provided before any decision to approve, even conditionally, COF's applications to acquire ING DIRECT, protected by ICP, NCRC and others.

As Morgan Keegan Sells Out to Raymond James, Recess Appointment for FRB?

By Matthew R. Lee

SOUTH BRONX, January 11 -- As the biggest bank merger of 2012 so far was announced Wednesday, Morgan Keegan for sale to Raymond James for $930 million, Morgan Keegan's recent settlement of subprime related fraud charges was not lost on community activists. Would it be raised to regulator? Why not?

But who will the regulators be? President Barack Obama showed himself willing to use a recess appointment to put Richard Cordray atop the Consumer Financial Protection Bureau, which seems to have no merger review role.

It is argued that Obama "had" to nominate a Deutsche Bank and Carlyle Group hedge fund insider, Jay Powell, to the Federal Reserve as a condition of getting a Democrat also confirmed.

Meanwhile Democratic representatives are urging Obama to offer a recess appointment for a new head of the Federal Housing Finance Agency. Twenty eight congressmembers from California signed a January 10 letter, which argued that Obama should use the same legal justification for appointing a new director at the agency that he applied to Cordray and the CFPB.

"As the fiduciary of government-backed entities, there are steps that the FHFA can take to help prevent foreclosures while also protecting taxpayers," they wrote. "Installing a permanent Director of the FHFA will allow the FHFA to move forward to make key decisions that will help keep families in their homes and improve our economy."

Some wonder why this logic isn't applied to the Federal Reserve Board, where Obama supporters argue that he "had" to nominate a hedge fund insider Jay Powell in order to get any confirmation.

The Fed is reportedly preparing to rubber stamp Capital One's application to acquire ING DIRECT, protested by NCRC, Fair Finance Watch and others, even as Capital One's lawyers try to withhold the most substantial portions of their responses to the Fed, including on Capital One's related application to the Office of the Comptroller of the Currency to buy from HSBC the subprime credit card platform of the former Household International, charged with nationside predatory lending. Why?

January 9, 2012

Capital One put in another submission to the Federal Reserve on its ING DIRECT application -- but then withheld large parts of it as sent to Inner City Press and other commenters. ICP has challenged under the Freedom of Information Act, and submitted the below to the Office of the Comptroller of the Currency on Capital One's HSBC application:

On behalf of Inner City Press / Fair Finance Watch and its members and affiliates (collectively, "ICP"), this is a sixth comment opposing Capital One's applications to acquire HSBC's national banks -- that is, HSBC's at least partially subprime credit card business (some of which HSBC acquired, without review, along with the scandal tainted Household International).

The OCC should hold public hearings on this HSBC proposal, as the Federal Reserve did on the ING (but not HSBC) proposal. The OCC should re-open its comment period inter alia following improper withholdings, now challenged under the Freedom of Information Act, from Capital One's (COF's) submissions to the Federal Reserve System dated January 3, 2012, with those improperly redacted by COF's law firm Wachtell, Lipton, Rosen & Katz. We refer most pressingly to the redacted response to the FRS' December 16 questions, sent to us by email on January 6 by WLRK under cover lever dated January 3, 2012. COF is required to send us their submission under the FRS' ex parte rules, but has sent us significantly redacted versions.

Even as provided, the material make clear that the two proposals -- HSBC and ING DIRECT -- are related, with Capital One make representations to the Fed about the HSBC proposal. HSBC put out a press release bragging about accounts renewed that would to go to Capital One: even regarding this, there are issues...

Under the headings “Mortgage Lending," "Community Development Lending," "Other Lending" and the like, COF makes claims about policies and loans made and then redacts line after line. This also takes place when COF is asked in 1d about its lending geographically: contrary to the spirit and letter of CRA, geographical identifiers are redacted, even footnotes. We challenge each and every one of these absurd redactions, as well as the withholding of purported confidential exhibits 1, 2 and 3.

This was submitted through the FRS' FOIA form on January 6 to gain expedited treatment. All information not clearly entitled to confidential treatment under the narrowest reading of the exemptions should be provided before any decision to approve, even conditionally, COF's applications to acquire HSBC's credit card platform.

ICP submitted a first comment to the OCC on October 18, a second comment on November 6, and a third on November 13. ICP received a copy of (most of) the application, and challenged under FOIA the withholding of Exhibits, particularly but not only "Confidential" Exhibit D. Inner City Press then submitted a timely FOIA appeal for the continued withholding in full of Confidential Exhibit D,which says only that it is "Additional Information Regarding the Acquisition." Nor does the OCC's Denial Letter provide any information about what is being withheld. ICP is appealing the withholding of this and all other information.

The comment period must be extending, and as argued by NCRC, public hearings like the Fed held should be scheduled.

January 2, 2012

Capital One announced its proposal to acquire ING DIRECT back in June, and the deal still hasn't closed or been approved. Over the holiday, Inner City Press / Fair Finance Watch filed additional comments with both the Federal Reserve and the Office of the Comptroller of the Currency, which is considering Capital One's related proposal to acquire the ex-Household predatory credit card lending platform from HSBC. The OCC, despite the issues raised, has yet to schedule a public hearing. Watch this site.

December 26, 2011

As the Federal Reserve (and OCC, which will be a separate story) try to shield the Capital One - ING - HSBC deals, Inner City Press / Fair Finance Watch has submitted to the Fed a FOIA appeal of the Fed's FOIA denial the the FOIA request of September 28, which stated:

This is a request under FOIA for the entirety of ING's request for a non-control determination to own up to 9.9% of Capital One, and all records reflecting any FRS communications regarding the request or ING from January 1, 2011 to the date of your final response to this request.

Background: at yesterday's public meeting in Chicago on Capital One - ING DIRECT, Ms. Thro of the Legal Division commented on Inner City Press' testimony, that ICP "can file a FOIA request" for ING's request. This is that request, and for communications, and response should be expedited before October 12, or Capital One - ING DIRECT comment period should be extended. Thank you.

Despite Ms. Thro's public comment about the ability to file a FOIA request and implication what one would thereby receive the requested documents, on a timely basis, it took two and a half months for the Fed to respond. This constructive denial should be explained and acted on in response to this appeal.

Worse, among the documents subsequently sent to Inner City Press -- this appeal is timely -- nearly everything is redacted.

Of the August 15 submission by Sullivan & Cromwel (S&C), the letter requesting confidential treatment is provide: but the entirety of the referenced "Annex A" is withheld.

The denial letter claimed that "the nature and amount of information being withheld will be evident from the face of the documents being provided." This is not true, and should be reversed, explained and acted on in connection with this appeal.

From the September 29 S&C cover letter, the area under Mark Menting's signature is blacked out, with the notation "N/R." Since ICP requested "all" documents, it is absurd to call this portion of the submission, whatever it is, "non responsive." If it is the people who the letter is cc-ed to, the Fed has hit a new low that must be reversed, explained and acted on in connection with this appeal.

Also, the entirely of the September 29 Annex A, including its footnote, is redacted.

Getting even worse, of the November 18 submissions, even a portion of the request for confidential treatment is redacted, as well as the entire annex.

Of the November 23 submission, two and a half paragraphs of S&C's letter to Ms. Thro are redacted - each and every redaction is hereby being appealed, including again the absurd blacking out of the area under Mr. Menting's signature.

From the November 29 submission, the blacked out "N/R" is on a separate page. It is absurd to a claim, in response to the request -- invited by Ms. Thro -- for information related to the any non-control determination that this material, which S&C's letter says is related to the requested non-control determination, is "not responsive." The Fed is increasingly abusing and evading FOIA and this must be not only reversed, but explained and accountability imposed in response to this appeal.

Watch this site.

December 19, 2011

ICP has submitted a timely FOIA appeal and comment to the OCC on Capital One's applications to acquire HSBC's national banks, the Household International predatory lending platform.

Now, Inner City Press is submitting a timely FOIA appeal for the continued withholding in full of Confidential Exhibit D,which says only that it is "Additional Information Regarding the Acquisition." Nor does the OCC's Denial Letter provide any information about what is being withheld. ICP is appealing the withholding of this and all other information. The comment period must be extending, and as argued by NCRC, public hearings like the Fed held should be scheduled. In the interim, consider that

Capital One Financial Corp. experienced a significant increase in credit card charge-offs during the month of November. The 30-day delinquency rate for the Capital One Master Trust increased by one basis point to 3.46%, according to a Form 10-D filed Dec. 15. The charge-off rate jumped to 3.86% from 3.39%.

Watch this site.

December 12, 2011

Capital One spent $330,000 in the third quarter to lobby the federal government for "issues [including] bank mergers," according to the report the company filed Oct. 20 with the House of Representatives' clerk's office. That's a 74 percent increase from the $190,000 that the bank spent a year earlier but 23 percent less than the $430,000 it spent in the second quarter of 2010...

Bad karma: Bank of New York Mellon moved to evict Occupy Pittsburgh from "its" park. Will there be repercussions?

December 5, 2011

Capital One was required to send a copy of its November 15, 2011 submission to the Federal Reserve to ICP. But under the heading "Community Reinvestment Act," Capital One says "for additional responsive information, please see Capital One's... Confidential Responses enclosure." ICP is challenging the withholding of CRA responses, as well as Capital One's submissions on the key question of how much of its and HSBC's business is subprime, and the connection between ING DIRECT's loans and depositors. Watch this site.

November 28, 2011

With Capital One, the fight continues. This week this came in:

Subject: OCC Press Release: Capital One/HSBC Credit Card Application
From: Lybarger, Stephen @occ.treas.gov
Date: Mon, Nov 21, 2011 at 1:52 PM
To: "Matthew R. Lee" @ innercitypress.org

Matthew, The OCC today reopened the public comment period on the Capital One/HSBC credit card application. We have also made the application available on the OCC website, a link is contained in the press release. http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-138.html

Please forward to others who would have an interest.

Consider it done.

November 21, 2011

The OCC's stumbling processing of Capital One's application to buy the predatory credit card platform of Household International from HSBC had given rise to complaints and requests to improve the OCC's process. Will they? Watch this site.

November 14, 2011

The Office of the Comptroller of the Currency has yet to even extend its comment period on Capital One's applications to acquire HSBC's national banks -- that is, HSBC's at least partially subprime credit card business (some of which HSBC acquired, without review, along with the scandal tainted Household International).

Inner City Press / Fair Finance Watch submitted a first comment to the OCC on October 18, and a second comment on November 6. After that, ICP received a copy of (most of) the application, which we contend should have analyzed subprime credit card lending as a separate product market. We also challenge the withholding of Exhibits, particularly but not only "Confidential" Exhibit D.

In a just filed third comment ICP has formally argued that the OCC should re-open its comment period, as while Capital One would presumptively become a global systemically important bank under Basel III, subject to loss absorbency requirements ranging from 1% to 3.5% of risk-weighted assets, Capital One is publicly said it is assuming this will NOT be the case, and has premised its application to the OCC on this dubious assumption.

Also, according to its Form 10-Q filed November 7, Capital One Financial Corp. increased its mortgage repurchase reserves for uninsured securitizations. The OCC should require answers, extend the comment period and hold public hearings.

November 7, 2011

To the Office of the Comptroller of the Currency, ICP submitted a first comment on October 18, of which the OCC has yet to even acknowledge receipt, much less get a responses from Capital One. (The OCC also did not respond to ICP's October 18 reuqest "please immediately send all portions of the applications for which Capital One has not requested confidential treatment by e-mail.")

The OCC should extend its comment period, and hold public hearings, particularly given the predatory history of the lending platform at issue which raises issues different from those in Capital One - ING DIRECT, in which the Federal Reserve extended the comment period and held public meetings. The OCC must go beyond that, given the issues raised.

October 31, 2011

So the Office of the Comptroller of the Currency has clarified its initial comment period on Capital One's application to buy the former Household International predatory lending business from HSBC -- it runs through November 7. A request has been made to extend it, as even the Fed did, in this case for 60 days. We'll see.

The subprime meltdown of 2008 and the global financial crisis that has followed was made possible by the largest banks' crackdown on internal whistleblowers who could have alerted the public to the predatory nature of the mortgage loans being securitized. Inner City Press was contacted by a number of such whistleblowers, many of them inside Citigroup's CitiFinancial subsidiary. Beyond those whose affidavits Inner City Press published, one in Knoxville, Tennessee was particularly significant. This whistleblower described to Inner City Press in detail how CitiFinancial's compensation schemes operated, including the sale of credit insurance on personal property with absolutely no benefit to the borrowers. Inner City Press submitted this information to the Federal Reserve, which ultimately fined Citigroup $75 million dollars. The whistleblower was not only fired, but sued and harassed. But the whistleblower persisted.

October 24, 2011

Even with the Federal Reserve having closed its comment period on Capital One - ING DIRECT while refusing to process FOIA requests, there is another, related process. On October 18, Inner City Press / Fair Finance Watch filed comments with the Office of the Comptroller of the Currency on Capital One's application to acquire the platform of predatory lender Household International from HSBC -- the OCC says it will accept comments at least through October 31:

Re: Timely Oppositions to, and Requests on, Capital One's applications to Acquire HSBC (Formerly Household Int'l) Banks

Dear Mr. Lybarger and others in the OCC:

On behalf of Inner City Press / Fair Finance Watch and its members and affiliates (collectively, "ICP"), this timely comment opposes Capital One's applications to acquire HSBC's national banks -- that is, HSBC's at least partially subprime credit card business (some of which HSBC acquired, without review, along with the scandal tainted Household International).

When HSBC bought Household International, in order to avoid CRA review Household's Federal Savings Bank was dissolved. CRA was not reviewed.

Capital One, alongside its brick and mortar banking operations, is a nationwide credit card lender surrounded by mounting allegations of abusing consumers. As sampled below, Capital One's mortgage lending is disparate, and threatens to become more so as it limits and reported seeks to end its Federal Housing Administration lending.

As simply one example, in the Washington DC Metropolitan Statistical Area in 2009, the most recent year for which aggregate Home Mortgage Disclosure Act data is available, for conventional home purchase loans Capital One made 102 loans to whites and only 11 to African Americans.

Meanwhile for the FHA and VA loans in Table 4-1, Capital One made 25 loans to African Americans and 74 to whites. These disparities, Capital One's FHA lending policies and reported plan to cease FHA lending would harm protected classes and, disproportionately, low and moderate income families.

In Louisiana in 2010, Capital One denied 68% of applications from African Americans, versus only 44% of applications from whites. Capital One confined 8.1% of its Latinos borrowers to high cost (rate spread) loans, versus 6.3% of its white borrowers.

In the District of Columbia in 2010, Capital One denied 32.4% of applications from African Americans, versus only 11.7% of applications from whites - a denial rate disparity of 2.77.

Also for the record:

Thursday, September 15, 2011 4:24 PM ET

Credit conditions weaken at Capital One in August

Capital One Financial Corp. saw its credit trends reverse in August as delinquencies reported by the Capital One Master Trust inched higher to 3.32% from 3.31% in the prior month.

According to a Form 10-D filed Sept. 15, Capital One's net charge-off rate moved higher to 3.70% from 3.51% in July.

In a Form 8-K filed the same day, Capital One reported that the 30-day delinquency rate for its domestic card segment rose to 3.43% from 3.37% in the previous month. The annualized net charge-off rate for that segment climbed to 4.10% from 3.77%".

From a research report that came out right after that: "Sandler O'Neill & Partners LP analyst Michael Taiano reduced his 2011 and 2012 EPS estimates for McLean, Va.-based Capital One Financial Corp. to $7.25 and $5.46 from $7.51 and $6.00 following the release of the company's August credit performance. The analyst also lowered his price target to $54 from $58..."

You will be hear from other NCRC members about Capital One's disparate lending record, and the systemic risk and lack of public benefit of the Capital One - ING Direct proposal.

Capital One's mortgage lending disparities in 2010,was MORE disparate in New York State than elsewhere.

For example, in New York State in 2010 Capital One denied a whopping 72.7% of applications from Latinos, and 69.2% of application from African Americans, both higher that its nationwide numbers.

ICP is timely raising that the on this record the OCC should schedule a public meeting in New York, where Capital One was allowed to acquire North Fork, see e.g., http://www.highbeam.com/doc/1G1-143359086.html

To be continued.

October 17, 2011

The Federal Reserve closed its comment period on Capital One - ING DIRECT with more than 300 comments in opposition in the record, and while evading and outright ignoring and refusing to respond to FOIA requests. We'll have more on this.

October 10, 2011 --

At Occupy Wall Street, Baldwin Flacks for Capital One, Of Chase & Desperate Housewives

By Matthew Russell Lee

WALL STREET, October 8 -- In Zuccotti Park on Saturday night, there was drumming and tombstones for the Glass-Steagall Act. There were police on all four corners with bullhorns, and busses of tourists rolling past on Broadway snapping pictures.

Earlier at a General Assembly in Washington Square Park, a self-described banker told the crowd to max out their credit cards to get an education, and then not pay it back. The bankers, he said, are living in million dollar condominium and don't need your money.

In the days after the October 5 labor march and late night Wall Street action complete with pepper spray and batons, there's been increasing focus on who supports Occupy Wall Street. Obama, Nancy Pelosi, even Federal Reserve Board chairman Ben Bernanke saying he understands. Is this the death or new stage of the movement?

For Inner City Press at least, the hunger for celebrities at Occupy Wall Street is troubling. Alec Baldwin, for example, tweeted Friday that despite Occupy Wall Street, Capital One is still a good partner. Really? Even the Fed has held three hearing on Capital One's rip-off of consumers, considering its application to buy ING DIRECT and HSBC's subprime credit cards.

In Zuccotti Park Saturday night, a sign lay on the ground about Capital One abusive calling a borrower up to ten times a day. This is what Capital One does, but Alec Baldwin doesn't seem to care. He like Jimmy Fallon, both considered liberals, take Capital One's money to advertise for them.

Some in Zuccotti Park, meanwhile, are happy for visits by celebrities, whether feel-good spiritualists who moonlight with the UN or otherwise.

A close observer likened some of those in Zuccotti Park to the Desparate Housewifes in suburban New Jersey -- they are paid to keep the home fires burning, to "look good." But look good then: much is made online of a protester defecating on an NYPD squad car.

Inner City Press' view, after the arrests of October 1 and the ad hoc moves on Wall Street October 5, is that some keep up residence in the park to keep the momentum going, but the energy comes from outside for real marches, best when challenging the physical symbols of the crisis: JPMorgan Chase, Goldman Sachs, further uptown Citigroup. Desperate Housewives indeed. Watch this site.

October 3, 2011 --

As Capital One Plays Chicago, Fed Plays Hide the (Predators') Ball

By Matthew R. Lee

SOUTH BRONX, September 27 -- At the second of the Federal Reserve Board's three public meetings on Capital One's application to acquire ING DIRECT, Capital One in Chicago Tuesday morning made much of the $180 billion, ten year lending pledge it made on September 20.

But when asked if this would be broken down by region, Capital One's representative said "no," adding "we may change what we have included" in the pledge.

Inner City Press' testimony asserted that some portion of Capital One's pledge may be predatory lending of the type engaged in by the Household International platform Capital One is seeking simultaneously to buy from HSBC.

The Fed has yet to schedule a hearing in New York, where it allowed Capital One to buy North Fork Bank and make further disparate its lending. So ICP's testimony was graceously read into the record by another NCRC member.

Even so, the Federal Reserve decided to "comment" on the testimony, telling Inner City Press to submit a new Freedom of Information Act request for ING's "request for a non-control determination" for its proposal to own 9.8% of Capital One.

Inner City Press has said ING should apply, to allow comment on issues like ING being under investigation for violating sanctions and doing business in Sudan and Syria. Now the Fed says to request a copy of ING's "request for a non-control determination" -- on which no public comment is accepted. And the Fed has delayed responding ICP's pending FOIA requests.

Nevertheless, ICP the next day submitted a new FOIA request, which has yet to even be acknowledged by the Fed. Watch this site.

The next hearing -- ostensibly the last -- is this week in San Francisco, with the Fed's comment period slated to close on October 12. We will continue on this.

September 26, 2011

At the Fed's September 20 public meeting in Washington, Capital One whipped out a $180 billion lending pledge. However, with the still unexamined proposal for Capital One to lend through the subprime lending platform that HSBC acquired along with notorious predatory lender Household International, this pledge could represent new predatory lending.

September 19, 2011

Inner City Press / Fair Finance Watch has put in an eighth comment to the Federal Reserve on Capital One, including

ICP has received an FRB letter of September 12, responding to ICP's August 19 FOIA request by saying "there may be delays." The comment period should, in that case, be extended. In this context it is unreasonable to expect new FOIA requests, for example for the withheld portions of the September 9 response Capital One was supposed to send. The improperly withheld portions from be provided forthwith. And for the additional reasons set forth before a public meeting should be held in New York, where the Fed allowed Capital One to acquire North Fork, and in New Orleans, Louisiana and Texas.

ICP has reviewed the Loan Application Register of Capital One for 2010, during which year Capital One received 1034 applications in the District of Columbia (and 109 in California and 24 in Illinois.)

The 2010 New York and Louisiana disparities of Capital One have already been analyzed for the record. In the District of Columbia in 2010, Capital One denied 32.4% of applications from African Americans, versus only 11.7% of applications from whites - a denial rate disparity of 2.77.

Watch for NCRC testimony in DC - then Chicago.

September 12, 2011

Inner City Press / Fair Finance Watch has submitted to the Federal Reserve a seventh comment opposing the proposed acquisition by Capital One Financial Corporation (“Capital One”) to acquire ING Bank, FSB and its affiliates (“ING”), to form what would be the fifth largest bank in the country.

The Fed has yet to fully respond to ICP's FOIA requests and appeals: this should take place forthwith. And for the additional reasons set forth before a public meeting should be held in New York, where the Fed allowed Capital One to acquire North Fork, and in New Orleans, Louisiana and Texas.

ICP has reviewed theLoan Application Register of Capital One for 2010, during which year Capital One received 2279 applications in New York, 8786 in Louisiana and 4704 in Texas. (By comparison Capital One in 2010 received 1034 applications in the District of Columbia, 109 in California and 24 in Illinois.)

The New York disparities of Capital One have already been analyzed for the record. In Louisiana in 2010, Capital One denied 68% of applications from African Americans, versus only 44% of applications from whites. Capital One confined 8.1% of its Latinos borrowers to high cost (rate spread) loans, versus 6.3% of its white borrowers.

So why isn't the Fed holding a public meeting in Louisiana, and in New York? This should be done.

Also in New York, this transaction has an impact, including in terms of layoffs. According to SNL Financial:

Wednesday, September 07, 2011 1:30 PM ET

Capital One consolidating back-office ops

Capital One Financial Corp. is consolidating its New York back-office operations.

The McLean, Va.-based company is consolidating the majority of work currently done in Mattituck, N.Y., to Melville, N.Y., and Richmond, Va.

The move will affect about 135 jobs currently in Mattituck...

ICP is timely raising that the on this record the FRB should schedule a public meeting in New York, where it allowed Capital One to acquire Mattituck-based North Fork, see e.g., http://www.highbeam.com/doc/1G1-143359086.html

In an abundance of caution, ICP has put in a request to the Federal Reserve Bank of Chicago to testify, but this is entirely without prejudice to this formal request that the FRB hold a hearing in Capital One's major disparate market of New York (including given the NY Fed's questionable role in the systemic issues raised by this proposal.)

September 5, 2011

After the Federal Reserve's belated announcement of three public meetings on Capital One - ING Direct, Inner City Press has commented as follows to the Fed:

This is a sixth comment from Inner City Press / Fair Finance Watch ("ICP") opposing the proposed acquisition by Capital One Financial Corporation (“Capital One”) to acquire ING Bank, FSB and its affiliates (“ING”), to form what would be the fifth largest bank in the country.

The Fed has yet to fully response to ICP's FOIA requests and appeals: this should take place forthwith. And for the reasons set forth before a public meeting should be held in New York, where the Fed allowed Capital One to acquire North Fork.

Given the issues raised, including by Federal Reserve official Thomas Hoenig and NCRC and others, about this proposal, it is imperative that the Fed either finalize these regulations before the public meetings, or further extend the comment period.

While the Fed scheduled three public meeting, two of the three are in communities in which Capital One does not have a branches, while the Fed has avoided Capital One's major market of New York (and New Orleans and elsewhere).

Capital One's mortgage lending disparaties in 2010, the most recent year for year data is available (from Capital One, as ICP obtained it), was MORE disparate in New York State than elsewhere.

For example, in New York State in 2010 Capital One denied a whopping 72.7% of applications from Latinos, and 69.2% of application from African Americans, both higher that its nationwide numbers...

As noted, on August 11, the day after Capital One announced a related proposal to acquire HSBC's largely subprime credit card business (much of which HSBC acquired along with the scandal tainted Household International), ICP asked that the comment periods should be extended specifically to allow comment on the proposals together, to avoid a segmented and illegitimately limited review.

ICP has yet to receive documents or even a confirmation of receipt of its FOIA Appeal of the improperly withheld records concerning Capital One, ING and the FRS. It is also still not clear what the FRS has done in response to ING's request for a ruling -- without any public comment -- that it would not control Capital One while owning up to 9.9% of the company.

August 29, 2011

As Fed Sets 3 Public Hearings on Capital One -ING Direct, ING and HSBC Subprime Card Filings Missing, Info Still Withheld

By Matthew R. Lee

SOUTH BRONX, August 26 -- With the Federal Reserve Board on August 26 belatedly granting over 200 requests for public hearings on Capital One and its application to acquire ING Direct, the question arises why the Fed delayed and why it now said "yes."

On August 25, three days after the Fed allowed the comment period to close on the application, the Fed admitted in writing to improperly withholding under the Freedom of Information Act some of Capital One's many communications with the Fed, writing to Inner City Press that

"subsequent to the Secretary's response of August 3, 2011, Board staff was informed that an employee at the Federal Reserve Bank of Richmond located additional responsive material. The employee had been traveling between the date of your request on July 22, 2011 and the date of the Secretary's response on August 3, 2011. Accordingly, Board staff was not aware that these additional responsive material existed until after the Secretary had responded to your request on August 3, 2011."

With Fed chairman Ben Bernanke out in Jackson Hole, Wyoming, long time Fed official Tom Hoenig became on his way out a whistleblower, saying on camera that he has

"serious doubts about Capital One's proposed purchase of ING Direct. 'I have very grave concerns about allowing these amalgamations of institutions that by their very structure are too big to fail, too interconnected to fail and I think the burden should be very heavily against that,' Hoenig said."

Now at public hearing set in Washington, Chicago and San Francisco, the Fed will have to consider testimony from hundreds, many from NCRC, on this and other points, including Capital One's abuse of credit card consumers, and the predatory lending history of the card platform it seeks to buy from HSBC to deploy the ING Direct deposits.

There is still the question of why ING has not filed an application for its proposal to acquire up to 9.8% of the stock of Capital One, and to control a seat on Capital One's board of directors. And there is still a slew of information improperly withheld by the Fed under FOIA.

The hearings are as follows:

Washington, D.C. – Tuesday, September 20, 2011, beginning at 8:30 a.m. EDT, at a location to be determined.

Chicago – Tuesday, September 27, 2011, beginning at 8:30 a.m. CDT, at the Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, IL.

San Francisco – Wednesday, October 5, 2011, beginning at 8:30 a.m. PDT, at the Federal Reserve Bank of San Francisco, 101 Market Street, San Francisco, CA.

The Fed also re-opened and extended its comment period until October 12. We will continue on this.

With these two acquisitions, Capital One could become a fifth "too big to fail" bank in the US, after JP Morgan Chase, Bank of America, Wells Fargo and Citigroup. The anachronistic gang in Capital One's television ads, along with Alec Baldwin, may be funny, but less so if considered too big to fail, possibly requiring bailouts.

In group's initial comments to the Fed, less has been said about ING, in part because ING's US business had been directed at a more affluent clientele, and because ING was not viewed as the applicant.

But after Inner City Press filed a Freedom of Information Act request with the Federal Reserve Board on July 22, a partial response from the Federal Reserve shows that ING has quietly sought a ruling from Fed General Counsel Scott Alvarez that ING should not have submit any application subject to public comment to own up to 9.9% of Capital One. Click here to view the Fed's (first) FOIA partial denial letter, from which Inner City Press has already appealed.

This would exclude public comment and consideration of ING doing business with the likes of Sudan, Iran, Cuba, Syria and others on the US state sponsors of terrorism list. ING had admitted being under investigation for, and negotiating with the US Department of Justice about, such violations, and there have been expressions of Congressional concern, which the Fed could ignore by granting ING's stealth request.

The documents obtained under FOIA show that ING, represented by the Wall Street law firm of Sullivan & Cromwell, on July 15 wrote to the Fed's Alvarez asking for "written confirmation that [ING] will not be deemed to directly or indirectly 'control' Capital One for purposes of the Bank Holding Company Act upon the consummation of the Bank Sale."

Earlier in ING's 13 page request, on which the Fed has until now not solicited or accepted any public comment, ING says that the shares with which Capital One would pay it for ING Direct would "represent between 9.7% and 9.9% of the outstanding shares of Capital One's Common Stock on the closing date." Click here to view some of the released records, including Sullivan & Cromwell's letter to the Fed for ING.

Under the Bank Holding Company Act, any holding over 4.9% can be considered control. One would think, given the issues raised, that the Fed would solicit comment and hold the requested public hearings on ING's request to own nearly 10% of Capital One. But it has only come about because of the Fed's partial FOIA response.

Amazingly, the Fed mis-read Inner City Press' FOIA request as only asking from Fed communications with ING and Capital One about the proposed acquisitions, when in fact Inner City Press requested all records reflecting Fed communications concerning either of the two companies.

The Fed has provided such records, including internal Fed emails about the Industrial & Commercial Bank of China and Governor Warsh's meeting with its chairman, in previous responses to Inner City Press.

It seems the Fed, ING and Capital One have already had something to hide in this transaction, including seeking to exclude from public comment and consideration ING illegally doing business in and with Syria, Iran, and Sudan. Now they seek to sweep through and under the carpet Capital One's proposed acquisition of the predatory lending platform of Household International from HSBC. But it will continue to be opposed, including at all three belatedly announced Fed hearings. Watch this site.

August 22, 2011

Now, with the Federal Reserve Board having received over 150 comments opposing the proposed acquisition by Capital One to acquire ING Direct to form what would be the fifth largest bank in the country, largely from NCRC members like ICP and also including from the lead co-sponsor of the Dodd Frank bill, it would sees clear that the Fed must extend the comment period.

On August 7, ICP filed a timely comment demanding the ING file an application regarding control of Capital One. On August 11, the day after Capital One announced a related proposal to acquire HSBC's largely subprime credit card business (much of which HSBC acquired along with the scandal tainted Household International), ICP asked that the comment periods should be extended specifically to allow comment on the proposals together, to avoid a segmented and illegitimately limited review.

The proposed combination of Capital On and ING Direct is particularly troubling given that not only Capital One, but also ING, have disparate mortgage lending records. Beyond Capital One's, in the most recent year for which aggregate Home Mortgage Disclosure Act data is available, 2009, in the Wilmington Metropolitan Statistical Area for conventional home purchase loans ING Bank FSB made six loans to whites and none to African Americans -- ING Bank FSB denied all eight applications it received from African Americans.

Meanwhile for refinance loans in Table 4-3, ING Bank FSB in the Wilmington MSA in 2009 made 114 loans to whites but only eight to African Americans and only two to Hispanics.

While the applicants have impermissibly withheld information about ING's "cafes," it now appears that these facilities were cashing checks, and thus should be viewed as branches, but for the institution-friendly mis-regulation of the now defunct OTS. This too should be addressed at the requested hearings. Watch this site.

August 15, 2011

As Capital One Eyes HSBC's Predatory Credit Cards, Federal Reserve Tries to Sweep ING & Violations Under Carpet

By Matthew R. Lee

SOUTH BRONX, August 10 -- Now that Capital One has announced it seeks to buy the US credit card business of HSBC, much of which HSBC bought from predatory lender Household International with very little regulatory review, it becomes clearer that the US Federal Reserve Board must hold public hearings on Capital One.

When Capital One applied to the Fed to acquire ING Direct, the US Internet banking subsidiary of Amsterdam-based ING, community groups like ours around the country and Washington-based NCRC began to file protests, based on Capital One's anti-consumer practices.

But the impending addition to Capital One of the predatory lending platform HSBC bought along with Household International, while Household was being pursued by state Attorneys General around the country, would make matters worse.

Currently, the Federal Reserve says that the public has only until August 22 to comment on Capital One, and only on the ING Direct proposal. This is akin to segmenting a destructive project into separate pieces so the overall impact is never acknowledged or reviewed.

In initial comments to the Fed, prior to today's HSBC announcement, less has been said about ING, in part because ING's US business had been directed at a more affluent clientele, and because ING was not viewed as the applicant.

Inner City Press / Fair Finance Watch immediately submitted a comment to the Fed and its chairman Ben Bernanke formally demanding the ING submit an application, and joining in requests by NCRC and others for public meetings and an extension of the comment periods until at least October 22.

In a FOIA appeal already filed with but not yet even acknowledged by the Fed, Inner City Press has demanded all withheld records about ING's stealth request, as well as the withhold portions of Capital One's application, which range from exhibits about money laundering to ING's mortgage portfolio.

The Fed has also withheld records about an "ex parte" meeting as far back at May 26 between Capital One's Kevin Murray (SVP of Regulatory Relations), John Finneran and Gary Perlin with a range of Fed officials.

August 8, 2011

Beyond opposition to Capital One - ING, which is growing and on which we'll have more in coming weeks, the cynical plan to sell 195 HSBC branches to too-small First Niagara, which would in turn closed 33 of them and sell on 67 of them is an outrage, has no benefits to the public, and should be denied.

HSBC irresponsibly bought, saved and imposed Household International on consumers. Now it seeks to pull back from the US in another irresponsible way. This will be fought.

August 1, 2011

The process on Capital One's applications to acquire ING Direct has begun, with an initial comment period running only to August 22. The proposal would create a fifth Too Big to Fail bank.

Inner City Press asked for the whole application, but sixteen exhibits have been withheld in full, at Capital One's request, including Anti Money Laundering, analysis of mortgage portfolio ("Confidential" Exhibit I) and "Post-Closing operations and integration plans" ("Confidential" Exhibit B). We are pursuing this -- watch this site.

July 25, 2011

As Fed Fines Wells Fargo It's Too Little, Too Late, Focus Turns to Capital One - ING

By Matthew R. Lee

SOUTH BRONX, July 21 -- After being presented with evidence of Wells Fargo's predatory lending for years, but nevertheless approving all of Wells Fargo's merger applications, the Federal Reserve this week belatedly imposed a $85 million fine for abuses by Wells Fargo Financial.

The response by Bronx-based Fair Finance Watch, which provided the Fed with testimony for whistleblowing employees of Wells Fargo Financial, was too little, too late. At Wells, subprime lending has already been shifted into other of the bank's units. In 2010, the sixth year in which the Home Mortgage Disclosure Act data distinguishes which loans are higher cost, over a federally-defined rate spread of 1.5 percent over Treasury bill yields, the data show that the largest of Wells Fargo's many HMDA data reporters confined African Americans to higher-cost loans 2.56 times more frequently than whites.

Predatory lending already triggered the global financial meltdown. The Fed, it seems, is merely saving face.

But what can be learned for the future? Also this week, the Fed published notice of the proposal by another much-maligned lender, Capital One, to acquire the Internet bank ING Direct, stating that the public has only until August 18 to comment on the application. It is the middle of summer; the deal would create the nation's fifth largest bank.

One can imagine the Fed trying to haul off and approve Capital One's application, and then some years later impose some sort of fine. That makes no sense, particularly after the Fed's implicit recognition that it miss the boat for years with Wells Fargo. So let it be different this time.

And now Capital One has applied to the Fed to acquire ING, with an initial comment period to August 18. We'll have (much) more on this - watch this site.

July 18, 2011

As Obama Taps Cordray Over Warren for CFPB, Retreat From Protection on Mergers Like Capital One's?

By Matthew R. Lee

SOUTH BRONX, July 17 -- On July 21 the Consumer Financial Protection Bureau takes responsibility for complaints against the large banks which caused the global financial meltdown with their murky trade in predatory loans.

On July 17 President Obama moved to nominate to head the agency not its founder Elizabeth Warren but former Ohio Attorney General Richard Cordray, who is said to have displayed a lack of commitment to go after large banks, at least when they merge.

Back in April Inner City Press covered, and this author was on an NCRC three person panel with, Cordray on the topic of the CFPB, including how it is make sure that the consumer complaint information is becomes in charge of is considered when banks apply to regulatory approval for mergers, including review under the Community Reinvestment Act.

Cordray dodged the question, finally saying it could be dealt with down the road. By contrast on a conference call Warren answered a question posed by Inner City Press about the relation of the Bureau's complaint data base and CRA review of mergers by the Federal Reserve Board and other regulators by saying this would have to be addressed. Now, will it be?

An upcoming example is the proposal by Capital One, the credit card company with a slew of consumer complaints against it including the credit score floor to its Federal Housing Administration lending, to acquire the Internet bank ING Direct for $9 billion and move into the top five owners of US consumers' deposits, according to SNL Financial.

While Capital One will not be applying to the CFPB for the required approvals, if the CFPB does not make sure the consumer issues are part of the merger review, things will have gotten worse than before the CFPB was created as part of the Dodd Frank Act.

One wonders if these questions will even be raised as Cordray is presented by the White House on July 18, and then for Senate confirmation. Watch this site.

July 11, 2011

During the July 7 conference call by HUD's Shawn Donovan, he spoke of mortgage servicers delivering this new relief: but no one called on ask about the three (or four) big bad servicers identified by Treasury less than a month before: Chase, Wells, BofA and Ocwen...

Even the NYT Magazine of July 10 says that Timothy Geithner wanted to give Wachovia to Citigroup, despite Wells stronger bid. Yet Geithner remains in office...

July 4, 2011

Four weeks after Industrial & Commercial Bank of China and its ultimate parent the Chinese government withheld the fair lending and future products portions of their submissions to the Federal Reserve, and Inner City Press complained, portions have now been released and the comment period on them extended though July 11. We will have more on this -- for now, consider this op-ed in the American Banker: http://www.americanbanker.com/bankthink/china-investment-corporation-bank-holding-company-act-1039482-1.html

June 27, 2011

Consumers and analysis have heaped scorn on Capital One's proposal to buy ING Direct. Even from a purely financial point of view, it's said to only make sense if Capital One intends on another acquisition, for example of HSBC's credit card business, the kind HSBC acquired along with the predatory Household International. But there's a $270 million break-up fee in the Capital One deal, and ING will not want to pay it. Game on.

With the OTS going out of business on July 21, NJ-based Clifton Savings Bancorp has withdrawn its conversion application which was stalled at the OTS due to a rare Needs to Improve CRA rating, and says it will just re-apply with the OCC when it replaces the OTS. We'll be watching...

June 20, 2011

So now it is official, Capital One will be applying for regulatory approval to acquire ING Direct for $9 billion. And we'll be there.

It's also as of this writing on June 19 looking like PNC will be the applicant to buy Royal Bank of Canada's 400 US branches, the old Centura Bank. And the BNP Paribas will be under pressure, due to its exposure to Greece, to sell off its US operations. Watch this site.

June 13, 2011

Industrial and Commercial Bank of China, already asking that the plain language of the Bank Holding Company Act be ignored, is now further thumbing its nose at the public and the Fed's normal process. After a CRA challenge to its application to acquire 80% of Bank of East Asia, the Fed asked ICBC six questions, including one on fair lending and another on CRA.

ICBC is required to send a copy of its answers to those who protested. But what Fair Finance Watch got is a letter that quotes the Fed's questions, then says as to fair lending, “Please see Confidential Exhibit 1 (separately provided).” As to CRA (Question 2), ICBC says “Please see Confidential Exhibit 2 (separately provided).”

ICBC's lawyer Ernest Patrikis used to be the General Counsel of the Federal Reserve Bank of NY. Other banks routinely provide answers to such questions to those who have commented. Watch this site.

June 6, 2011

Another merger has been announced, with Bank United proposing to buy Herald National Bank, with a strange non-compete clause in which CEO John Kanas couldn't manage the bank he'd be buying. This should not be approved.

Also, Cincinnati-based First Financial Bank inked an agreement to acquire all 16 of the retail banking branches of Liberty Savings Bank located in Ohio. And on the seamier side, Gaddafi's favor bank Goldman Sachs Group is close to selling Litton Loan Servicing to Ocwen Financial, with an announcement possible within days.

So the Federal Reserve has a rule against ex parte communication, in which a protested bank is required to send copies of its communications to the Fed to the protester. But when Comerica and its law firm wrote to the Fed on May 25, the copy they sent to Fair Finance Watch by regular mail mostly referred to a separate letter that they did not provide. They wrote, in response to a question about fair lending, that “Comerica Inc has provided detailed information regarding Comerica Bank's fair lending policies, procedures and practices in the April 5, 2001 letter.” So where's that letter?

May 30, 2011

It's been a strange week in CRA, what with Bank of America foreclosing on itself in Florida, and Zion's California Bank & Trust moving to close its branch in East Palo Alto. But strangest to Inner City Press was the response by former Federal Reserve Bank of New York chief counsel Ernest Patrikis to the New York Fed itself, citing as authority that a foreign government need not apply to the Fed to own a bank in the US... a statement by Fed's general counsel Scott Alvarez. Talk about circular. More on this to come.

May 23, 2011

HSBC bought the subprime lender Household, then faced predatory lending charges and moved away from it. Now the buzz is that HSBC aims to sell off its US branches

in more than 26 metropolitan statistical areas nationwide but are heavily concentrated in New York with locations in 15 MSAs across the state. There are 214 branches in the New York City/Long Island/Northern New Jersey MSA and 58 branches in the Buffalo/Niagara Falls MSA.But the bank also has a presence in major cities in California, including 20 in the Los Angeles MSA and nine in the San Francisco MSA. There are also 17 branches in the Miami/Fort Lauderdale MSA in Florida.

Also said to be on the block are HSBC credit card lines, to Discover or Capital One. For the branches, the buyer names circulated include JPMorgan Chase, M&T Bank Corp., First Niagara Financial Group Inc., Toronto-Dominion Bank, PNC Financial Services Group Inc., Fifth Third Bancorp, or for a purely upstate New York deal, Community Bank System Inc., Northwest Bancshares Inc. and Financial Institutions Inc. unit Five Star Bank. We'll be there.

May 16, 2011

After Fair Finance Watch commented to the Federal Reserve and Office of the Comptroller of the Currency in connection with the applications to acquire up to 24.9% of Morgan Stanley by Mitsubishi UFJ Financial Group, it gave rise to a slew of responses and denial, from three separate law firms.

A letter on Morgan Stanley letterhead came in an envelope from the Davis Polk law firm. It downplayed litigation against Morgan Stanley's subprime servicer Saxon, while saying that a Servicemembers Civil Relief Act case was “settled on March 11, 2011 on confidential terms.” Shouldn't the Fed want to know more about this? Shouldn't the public know?

The same spin was provided to the OCC by the Goodwin Procter law firm, on a related application to merge Morgan Stanley Trust Interim National Association into Morgan Stanley Private Bank based in Purchase, New York.

Mitsubishi UFJ Financial Group sent its own letter to the Fed, in an envelope from the Sullivan & Cromwell law firm. Beyond the Saxon cases, it defends against comments of funding of the Nam Theun 2 Dam project in Laos, claiming that it “meet[s] various social and environmental standards.” The argument is that the Fed should ignore the entire issue. We'll see.

May 9, 2011

That Deutsche Bank and the subprime subsidiary it bought, Mortgage IT, have been sued by the Justice Department for $1 billion in mortgage fraud is one thing. But now the Los Angeles District Attorney has sued Deutsche Bank for being a slumlord, for creating blight and engaging in illegal evictions. Deutsche Bank does this all over the country, and the time to take them on is now -- watch this site.

May 2, 2011

Ah, Bank of America. Now they want to jack up the interest rate on future balances on credit cards to 29.9% based on a single late payment...

The Federal Reserve on April 26 approved M&T's application to acquire Wilmington Trust, with largely the same boilerplate about HMDA data not proving anything, and the Fed not requiring (or considering) CRA commitments.

Interestingly, esp. in light of the Fed's new claims of transparency exemplified by Bernanke's first press conference last week, the Fed's April 26 M&T order in footnote 39 says that Governor Sarah Raskin abstained from the vote on the application. http://www.federalreserve.gov/newsevents/press/orders/orders20110426a1.pdf

In a return phone call to the same Federal Reserve staffer who called to announce the approval, Inner City Press has asked the Fed to state the basis for the abstention, but note the report that the Obama administration is considering Raskin (as well as former Michigan governor Jennifer Granholm) to head the Consumer Financial Protection Bureau.

But days later, the Fed has not responded. Watch this site.

April 25, 2011

With Fed chairman Ben Bernanke set to take questions on April 27, it's amazing how limited it is to monetary policy. The Fed had a bank regulation role, negligence in which allowed for the financial meltdown. So how about these questions:

“Why is the Fed limiting its review of financial conglomerates' involvement in subprime lending to their retail lending, even now, and not their investment banking roles that allowed for the financial meltdown?”

This was done by the Fed, on the record in its orders, on recent applications by Japanese banks -- and prospectively, other Asian banks.

“Since the Fed allowed Goldman Sachs and Morgan Stanley in the world of commercial banking on an “emergency” basis with no public comment or review under the Community Reinvestment Act, what have you done since to review their CRA compliance?”

Watch this site.

April 18, 2011

Buzz in Washington last week was the total elimination of HUD housing counseling funds in the $$38 billion cutting Continuing Resolution. Visits to Capitol Hill with NCRC found a variety of Democrats claiming they had “been blindsided,” didn't know, would try to do something about it in the 2012 budget. We'll see.

Sleaziest response we've seen in a while: Bank of Montreal's law firm Sullivan & Cromwell argued to the Federal Reserve, in an April 13 response to Inner City Press / Fair Finance Watch's comments, that “Commenter's challenge to the redactions in the Comment Letter is misplaced and not the proper subject of the public comment process, which is focused on the statutory factors the Board must consider under the BHC Act in evaluating the Application.”

But the information Bank of Montreal has blacked out is fair lending information that the Fed requested after the Application was protested. Bank of Montreal was required to send its response to Inner City Press, but withheld most of it. To argue that it's not related to the Application is ridiculous. But this is why we resist the Fed trying to disconnection FOIA from the Application (and CRA challenge) process...

Also in Washington, the International Monetary Fund's Antonio Borges unqualifiedly promoted bank mergers, like BNP Paribas acquiring Fortis. Inner City Press asked him about criticism that the acquisition of local banks -- and deposits -- by megabanks based far away results in less responsiveness to the community. Borges claimed that the IMF prevents banks from doing this. We haven't see it. See this article:

IMF Promotes Bank Mergers, Says Bigger is Better, Politics & Portugal Dodged

By Matthew Russell Lee

WASHINGTON DC, April 15 -- The International Monetary Fund is unabashedly promoting the takeover of small banks by large ones, claiming that its own work in “Emerging Europe” since the financial meltdown shows that communities are better served by large banks, even if based far away or in other countries.

IMF European Department Director Antonio Borges told reporters on Friday that Belgium was smart to have pushed Fortis to being acquired by BNP Paribas. He urged more such mergers.

Inner City Press asked Borges if the IMF proposed any safeguards at all, given that concerns exist that when a local bank is acquired by one based far away, there will be less reinvestment and accountability.

Borges, while calling this an “interesting question,” bragged that the IMF organized a coordinated effort to get large banks to treat communities, particularly in Emerging Europe, fairly, and that this had worked. See IMF transcript, below.

Inner City Press began to ask about attempts to encourage or require reinvestment, for example in the UK -- but moderator Simonetta Nardin said there was no time for follow up questions.

Meanwhile, Borges took but refused to answer two questions about Portugal, citing an IMF policy against officials working on their own countries, and also claiming that the IMF does not get involved in politics. What -- encouraging bank mergers is not political? Watch this site.

From the IMF's transcript:

Inner City Press: you seem to be saying that bank mergers—small banks being bought by big ones sort of unqualifiedly may be a good thing. In some countries people think that local banks are more accountable, that if you move the assets to a faraway headquarters that there's less responsive. What do you say to that critique and is that something that the IMF takes any account of?

MR. BORGES: you ask a very interesting question, because this is a problem we were faced with over the last few years. In many of the countries of emerging Europe, you find banks that actually are owned by other banks elsewhere and there were concerns that, as there might be problems in the domestic countries of those banks that assets would be pulled out from emerging Europe and they might suffer. And the Fund, the IMF, invested quite a bit of effort to organize a coordinated effort on the part of all these banks to behave in the best possible interests of those economies, and I must say this was quite successful, because as a result, these countries are now recovering very well and their banks are operating well. So, if anything, the experience of emerging Europe demonstrates that having large, solid banks operate in your country may be an important source of stability if things are properly managed.

April 11, 2011

Comerica has submitted a response to Inner City Press/ Fair Finance Watch's comments on its Sterling application, which purports to address the range of consumer complaints ICP put into the record. In one case, Comerica throws its own customer under the bus, seeming to violate privacy laws. Then, they response with platitudes. Will the Federal Reserve put up with it?

Well, the Fed has STILL not ruled on Inner City Press' March 20 Freedom of Information challenge to Bank of Montreal withholding whole chunks of its fair lending response in connection with its CRA challenged M&I application. Meanwhile the Fed let the comment period close.

April 3-4, 2011

In 2010 Subprime Lending Grew More Disparate at Citi, Chase, Wells & BofA

By Matthew R. Lee

BRONX, NEW YORK, April 3 -- In the first study of the just-released 2010 mortgage lending data, Bronx-based Fair Finance Watch has found that the Big Four survivors of the banking meltdown, Citigroup, JPMorgan Chase, Wells Fargo and Bank of America, continued with high cost loans and had even worse disparities by race and ethnicity in denials and higher-cost lending than in 2009.

2010 is the seventh year in which the data distinguishes which loans are higher cost, over a federally-defined rate spread of 1.5 percent over Treasury bill yields.

The just released data show that Citigroup confined African Americans to higher-cost loans above this rate spread 3.67 times more frequently than whites in 2010, worse that its 2.25 disparity in 2009, Fair Finance Watch has found.

Citigroup confined Latinos to higher-cost loans above the rate spread 2.92 times more frequently than whites in 2010, worse that its 1.72 disparity in 2009, the data show.

JPMorgan Chase was even more disparate to Latinos, confined them to higher-cost loans 2.08 times more frequently than whites in 2010, worse than its own 1.98 disparity in 2009 and almost as pronounced as its 2.69 disparity between African-Americans and whites in 2010, worse than its 2.17 disparity in 2009.

For Bank of America NA, the disparity for African Americans in 2010 was 2.59; for the largest of Wells Fargo's many HMDA data reporters, the disparity for African Americans in 2010 was 2.56.

“Regulatory laxity, at least on fair lending, has continued despite the financial meltdown caused by this predatory lending,” said Fair Finance Watch. “When these four banks were allowed to buy up others with very little oversight, the regulators did not put any conditions on the mergers or Troubled Assets Relief Program bailouts. These worsening disparities are the result.

"Now it is not clear if the new Consumer Financial Protection Bureau will get to this problem. As things are going, it will be worse and more disparate in 2011. The disparities in the 2010 mortgage data of the Big Four further militate for aggressively watchdogging and breaking up these banks," Fair Finance Watch concluded.

Regional bank Keycorp in 2010 confined African Americans to higher-cost loans above the rate spread 2.24 times more frequently than whites.

U.S. Bancorp in 2010 confined African Americans to higher-cost loans above the rate spread 2.12 times more frequently than whites, and confined Latinos to higher-cost loans above the rate spread an even worse 2.2 times more frequently than whites.

Huntington in 2010 confined African Americans to higher-cost loans above the rate spread 2.2 times more frequently than whites, and confined Latinos to higher-cost loans above the rate spread an even worse 2.8 times more frequently than whites.

Growing Southern bank Regions in 2010 denied applications by African Americans 2.56 times more frequently than whites. BanCorpSouth in 2010 denied applications by African Americans 2.6 times more frequently than whites.

Fair Finance Watch has begun an enforcement project in the South, most recently raising issues under the Community Reinvestment Act on Hancock of Mississippi's application to acquire Louisiana-based Whitney, see “Flag raised on merger of Hancock, Whitney banks,” New Orleans Times Picayune, March 13, 2011.

Fair Finance Watch has also been active in raising issues concerning Bank of Montreal / Harris and their proposal to buy M&I. In response, while the Federal Reserve Board asked some fair lending questions, the majority of the banks' response has been blacked out, which Inner City Press is challenging under the Freedom of Information Act.

Using the 2010 HMDA data, Fair Finance Watch has commented that Bank of Montreal's Harris confined African Americans to higher cost, rate spread loans 2.35 times more frequently than whites.

M&I Federal Savings Bank confined African Americans to higher cost, rate spread loans 2.1 times more frequently than whites. Bank of Montreal's Harris denied the applications of African Americans 2.35 times, and Latinos two times more frequently than those of whites. The Fed extended the comment period on the merger once, but now seeks to close it with the fair lending information still outstanding.

Fair Finance Watch has submitted another timely comment, that Comerica, which is seeking to acquire Houston-based Sterling, in 2010 confined African Americans 6.26 times more frequently than whites to higher cost, rate spread loans. At Comerica, 11.3 percent of loans to African Americans were over the rate spread, versus only 1.9 percent of loans to whites.

The law required that the 2010 data be provided by April 1, following March 1 joint requests by Fair Finance Watch and Inner City Press. Several banks did not provide their data by the deadline. Trustmark provided its data at the deadline but only in paper format, such that it could not yet be computer-analyzed. Further studies will follow: watch this site.

March 28, 2011

On Bank of Montreal's application to buy M&I, the Federal Reserve on March 24 granted a one week extension of the comment period to Inner City Press / Fair Finance Watch (ICP), which has protested the proposed merger under the Community Reinvestment Act since January 2011, including challenging the withholding of documents under the Freedom of Information Act.

CRA challenges have also been filed by the National Community Reinvestment Coalition and various of its members including the Metropolitan Milwaukee Fair Housing Council, Northwest Indiana Reinvestment Alliance, the St. Louis Equal Housing and Community Reinvestment Alliance and others.

Bank of Montreal, though its law firm Sullivan & Cromwell, has sought to withhold large portions of its submissions to the Fed from ICP and the public. On March 20, Inner City Press challenged the “radical redaction” of information by Bank of Montreal under the Freedom of Information Act, and argued that the comment period, set to close on March 22, could not close while this information was being withheld.

On March 24, Inner City Press received a letter from the Federal Reserve Board, stating in part that the “Secretary of the Board has decided to extend the period of time in which to receive your comments on the proposal to the close of business on Thursday, March 31, 2001.” Click here for the letter.

On CRA ratings, Harris has a “Low Satisfactory” rating in lending, investment and service in Wisconsin, M&I's headquarters, and a Low Satisfactory under the service test in adjacent Indiana.

Fair Finance Watch notes that the official whom Bank of Montreal has assigned to merger integration, Cecily Mistarz, was previously in charge of strategy for “Harris Private Bank, a unit that provides wealth management services to affluent individuals and families” -- giving rise to concerns that if run by Bank of Montreal, the resulting bank would turn away from low and moderate income communities.

Fair Finance Watch also notes that despite M&I not having paid its TARP bail out back, the CEO of M&I stands to get a $18 million payout from the proposed acquisition.

ICP has raised to the Fed, for example, that in the Chicago area “Bank of Montreal's Harris Bank in 2009, the most recent year for which Home Mortgage Disclosure Act data is available, denied the conventional home purchase loan applications of Latinos 2.52 times more frequently than those of whites. An even more extreme disparity exists for African Americans in the Gary Indiana MSA.”

The 2010 HMDA data has just been obtained by Fair Finance Watch, and analysis will be submitted to the Federal Reserve during the extended comment period. Watch this site.

March 21, 2011

As Bank of Montreal Hides Reply to M&I Merger Protest Under CRA, Fair Finance Watch Challenges

by Matthew R. Lee

NEW YORK, March 20 -- Faced with Community Reinvestment Act protests to the proposed acquisition of M&I by Bank of Montreal and its Harris Bank, the Federal Reserve earlier this month asked for a description of the banks' “policies, procedures and practices to ensure compliance with the fair lending laws.”

Inner City Press / Fair Finance Watch had raise to the Fed, for example, that in the Chicago area “Bank of Montreal's Harris Bank in 2009, the most recent year for which Home Mortgage Disclosure Act data is available, denied the conventional home purchase loan applications of Latinos 2.52 times more frequently than those of whites. An even more extreme disparity exists for African Americans in the Gary Indiana MSA.”

But when Bank of Montreal's law firm Sullivan & Cromwell sent its answer to the Fed to Inner City Press, as required, it blacked out more than half of the response, including the entire section entitled “Self-Assessment and Monitoring,” more than a page long. Click here to see banks' response as provided to Inner City Press.

Inner City Press has challenged the “radical redaction” of the fair lending and branch closing response of Bank of Montreal under the Freedom of Information Act, and argues that the comment period, set to close on March 22, cannot close while this information is being withheld.

Applicable banking law requires the Federal Reserve to consider the Community Reinvestment Act (CRA). On CRA ratings, Harris has a “Low Satisfactory” rating in lending, investment and service in Wisconsin, M&I's headquarters, and a Low Satisfactory under the service test in adjacent Indiana.

Harris Bank performed relatively worse than all lenders, as a group, in the Milwaukee MSA in 2009 with respect to lending to African-American borrowers. Harris Bank issued only 0.30 percent of its prime loans to African-American borrowers, compared to 2.69 percent of all lenders' prime loans to the same borrower group. In addition, Harris Bank's market share of loans to African-American borrowers was just 11 percent of its market share to white borrowers. Harris effectively made zero percent (just one loan) of all loans to African-American borrowers and 0.62 percent of all loans to white borrowers in the Milwaukee MSA.

In small business lending, Harris Bank's performance in 2009 was significantly worse compared to all lenders in the Milwaukee MSA as a group, in providing small business loans less than $100,000. Harris Bank issued 65 percent of its small business loans as loans less than $100,000; in contrast, all lenders in Milwaukee, as a group, issued 85 percent of their small business loans as loans less than $100,000.

Fair Finance Watch also notes that despite M&I not having paid its TARP bail out back, the CEO of M&I stands to get a $18 million payout from the proposed acquisition.

The 2010 HMDA data has just been obtained by Fair Finance Watch, and analysis will be submitted to the Federal Reserve and other regulators, in Wisconsin and elsewhere.

Inner City Press is aware of comments being submitted or prepared in Missouri, Indiana, Wisconsin and beyond, and argues that the comment period, set to close on March 22, cannot close while this information is being withheld. Watch this site.

March 14, 2011

The New Orleans Times Picayune of March 13 reports that

The proposed bank merger between Hancock Holding Co. and Whitney Holding Corp. has been challenged on fair lending grounds, with critics saying that Hancock's record for making home loans to African-American borrowers is worse than Whitney's.

A New York watchdog group, Inner City Press/Fair Finance Watch, declared its opposition to the deal in a March 6 letter to the Federal Reserve, which must sign off on bank combinations, citing gaps in how frequently Hancock makes home loans to African-American customers compared with white customers in lending data reported to federal banking regulators.

"It's worse," Fair Finance executive director Matthew Lee said of Hancock's record compared with Whitney's. "It doesn't look like Hancock has put much energy into diversity of lending."

Hancock spokesman Paul Maxwell said in a statement that the data Fair Finance relied upon "provides a very limited view of covered loans or conditions such as factors related to creditworthiness.”

Regulators also need to sign off on the deal, and as part of that process, the public is given a chance to comment. In this case, Fair Finance Watch's complaints were the only ones filed.

In checking out the merger, Lee's group looked at data that Hancock reported under the Home Mortgage Disclosure Act, a 1975 law that requires banks to report loan data so that the Federal Reserve can monitor whether banks are serving their communities' housing needs and whether they're discriminating.

The protest highlights six Gulf Coast markets where there are racial gaps in Hancock's lending.

In Hancock's hometown of Gulfport, Miss., for example, the bank denied conventional home loans to African-American and Hispanic applicants twice as often as those of white applicants, Fair Finance Watch said.

In New Orleans, Whitney's hometown, Hancock made 55 conventional home purchase loans to white applicants in 2009, the most recent year for which data is available, but only three to African-American applicants and none to Hispanic applicants, the group said.

"To impose this record on Whitney's service area, including New Orleans, would have adverse impacts, which militate for public hearings and the denial of Hancock's applications," Fair Finance Watch wrote in its letter.

The group does not list comparable statistics for Whitney in the six markets. Lee said that Hancock's record is worse than Whitney's, but he didn't want to say that Whitney's record was good.

Because Hancock is the company acquiring Whitney, Lee said, its policies will be the surviving ones, so its lending practices are the ones that bear scrutiny.

After the 2008 bank bailouts, Lee said, it's especially important to make sure that lenders are serving diverse communities appropriately. Lee said mergers are really the only opportunity to enforce the Community Reinvestment Act, a 1977 law designed to discourage credit "red-lining" and encourage banks to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.

"Our hope is that the Fed has hearings," Lee said. "Everyone can't be above average."

March 7, 2011

Sleazefest: Chris Dodd, after taking sweetheart mortgages from predatory lender Countrywide, will now take $1.5 million a year to be the chief lobbyist for the Motion Picture Association of America...

Sleazefest II: not only did Gaddafi's Libyan Investment Authority have a stake in HSBC -- now HSBC makes money from this, by not having to pay out any divident on the frozen stake....

Note that the Connecticut Banking Department is holding hearings on First Niagara's application to acquire NewAlliance, on March 8 and 9 -- while the Federal Reserve closed its comment period with many questions unaswered, and hasn't ruled on any bank merger proposal this year, preferring to rubber stamp at the Reserve Bank level...

Attorney Lee –

Banking Commissioner Howard Pitkin has scheduled a hearing on the proposed merger of NewAlliance Bank and First Niagara Bank. For your information, I have attached a copy of the hearing notice.

Kathleen E. Titsworth
Banking Education Coordinator
Connecticut Department of Banking

February 28, 2011

M&I CEO Mark Furlong would not get paid a $18 million "golden parachute" package that he has written into his contract with M&I if the company changes control (aka, he leaves) while it still has to pay back TARP. The same would happen to these M&I executives: Greg Smith, who has a $5.5 million parachute, president Tom Ellis ($4.1 million), wealth management head Ken Krei ($5.5 million), and senior vice president Thomas O’Neill ($5.1 million)....

Here's an example of why the Federal Reserve trying to separate FOIA requests related to applications from the comment period: the Fed had extended its time to respond to Inner City Press / Fair Finance Watch's January 13 FOIA request about M&T / Wilmington Trust -- until long after the comment period. And when WILL we get the documents?

February 21, 2011

Following Bank of Montreal's announcement of its proposal to acquire M&I Banks, Inner City Press / Fair Finance Watch wrote to Canadian regulators OSFI raising issues and requesting public hearings and a copy of the application.

We noted as simply one example, in its Chicago Metropolitan Statistical Area headquarters, Bank of Montreal's Harris Bank in 2009, the most recent year for which US Home Mortgage Disclosure Act data is available, denied the conventional home purchase loan applications of Latinos 2.52 times more frequently than those of whites.

OSFI's “manager of approvals” Robert Mitchell replied that “for acquisitions of this nature, the Bank Act (Canada) does not provide a legal process for the public to formally object to a proposed transaction nor for the Superintendent of Financial Institutions to initiate a public hearing in this regard under the Act. In addition, all applications for regulatory approval are confidential in nature under the OSFI Act.”

We have just on February 18 received a copy of the portion of Bank of Montreal's application to the US Federal Reserve Board for regulatory approval for which Bank of Montreal has not requested confidential treatment. This public portion states that BoM is seeking OSFI approval -- it is difficult to understand in this context your statement that the OSFI process and application are confidential.

Furthermore, as the comprehensive, consolidated home regulator of Bank of Montreal, we contend that OSFI has responsibility for BoM and its performance, and for the foreseeable impacts of this proposal.

By contrast to M&I, Bank of Montreal's Harris Bank has a Low satisfactory rating in lending, investment and service in Wisconsin, M&I's headquarters, and a Low Satisfactory under the service test in adjacent Indiana.

As so we have just made a second submission to OSFI...

The Federal Reserve Board hasn't ruled on a single bank merger proposal so far in 2011. The pace of mergers slowed, sure -- but also the Fed has tried to confine more and more decisions to the Reserve Banks, which can ONLY approve applications. And on the First Niagara - NewAlliance proposal, now the Connecticut regulator, unlike the Fed, has scheduled public hearings. Will the Fed send anyone? And will it grant the requests for public hearings on Bank of Montreal / Harris - M&I?

February 14, 2011

Now it can be said: Bank of Montreal has now submitted its application to the Federal Reserve Bank of Chicago for its proposed acquisition of M&I. On February 11, Tom Naughton of the Chicago Fed left Inner City Press a message that the application had been received, and would be send out Monday. It can be requested via

Federal Reserve Bank of Chicago, Attn: S&R Applications Unit - 14 C, Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604, Fax 312-322-5894

A 30 day comment period is about to begin...

In other CRA news: when New Jersey's Clifton Savings Bank just got a rare Needs to Improve CRA rating, it had an even rarer business impact: Clifton's application to the Office of Thrift Supervision for a “second step conversion and public offering of stock” (essentially, going public) cannot be approved, Clifton had to tell the SEC and the public. Now if only regulators like the Federal Reserve and OCC would enforce CRA against some of the larger banks...

February 7, 2011

“The Subprime Virus” Omits the Activist Cure, and the CRA: Book Review

By Matthew Lee

SOUTH BRONX NY, February 6 -- Given the role of predatory lending in the financial meltdown that still haunts the global economy, the February 10 publication by Oxford University Press of a book on the topic, “The Subprime Virus” by law professors Kathleen Engel and Patricia McCoy seemed likely to counter revisionism and re-focus on the decade long fight against loan sharks.

Alas, the book makes scant mention of community or even consumer activism, much less the Community Reinvestment Act protests to banks' applications which results in some of the Federal Reserve Board's few enforcement orders and fines.

For example, the authors write about HSBC's seminal and fated acquisition of Household International without mentioning all of the community based challenges to Household and to the deal, and to HSBC afterward.

The book is like writing about the civil rights laws without mentioning how and why they were passed. It is a form of mystification.

Instead of political and social explanation, we have yet another narrative of the economic stations of the cross leading to the seizing up of global markets. At this point, such re-telling is no longer what is needed: it is like another book about the moment to moment flight plans of the 9/11/01 hijackers, and views of airport safety experts. That said, this one is told in some detail.

In the book's lengthy index, the Community Reinvestment Act is not mentioned once. Meanwhile, the “Solutions” chapter of the book has a four paragraph section entitled “Ensuring Access to Affordable Credit,” the purpose of the CRA.

Patricia McCoy has recently been appointed to the Consumer Financial Protection Bureau, from which CRA enforcement powers were stripped. If the book is an indication of awareness of, or respect for, the Community Reinvestment Act and the grassroots groups which use it, perhaps the stripping is a blessing in disguise.

The lack of focus not only on past activism that that needed in the future, including the near future, might be attributable to an inordinate faith in the Obama administration and the CFPB. But even with a President like Barack Obama, it is not law professors who are going to protect consumers and communities. Everything is politics: but “The Subprime Virus” seems to miss this.

By contrast, the 2009 book “Busted” by journalist Edmund Andrews does not purport to be an expert account. In fact, much of Edwards' story is about how he fell into foreclosure on a home he bought for his second wife and their blended family, and how that marriage fell apart. The story shoots lower, but ends of higher. We recommend it, and “The Big Short.”

An update on Bank of Montreal (BMO) and M&I: William Downe, BMO's president and CEO, said Feb. 2 that BMO has a bias toward “contiguous acquisitions” and sees a lot of fill-in opportunities in the states where M&I is operational. "We can grow in St. Louis, we can grow in Kansas City, we can grow in Indianapolis," he said. We'll see.

January 31, 2011

Even with tax Refund Anticipation Loans under fire, they continue to be offered, often misleadingly. Take for example a come-on by Liberty Tax Service, stating that its RAL lender Republic Bank & Trust Co. is “part of Bank of America.” This was said to Inner City Press on January 30 while it was testing a Liberty Tax Service storefront at 37-16 Broadway in Astoria, Queens.

Inner City Press asked the Liberty Tax Service person who presented RALs as legitimated by Bank of America for his business card, which said his name was Freddy Alvatorre, running at least three other Liberty Tax Services office in Queens, in Corona and Jackson Heights, one of the most diverse neighborhoods in the United States.

All of this information has now been turned over to the New York Banking Department and other regulators. Watch this site.

January 24, 2011

Bank of Montreal will be applying to buy M&I, the largest bank in Wisconsin, with 374 branches also in Arizona, Indiana, Florida, Kansas and Minnesota. One predictor of how Bank of Montreal would perform is what its Harris Bank has done. Inquiry has begun, and now some outreach. It has been raised to OSFI in Canada that, as simply one example, in its Chicago Metropolitan Statistical Area headquarters, Bank of Montreal's Harris Bank in 2009, the most recent year for which Home Mortgage Disclosure Act data is available, denied the conventional home purchase loan applications of Latinos 2.52 times more frequently than those of whites. The shareholders who've already come out against the deal are arguing not only that Bank of Montreal should be paying more, but also that there would be layoffs and branch closings. One wonders at what stage Bank of Montreal may try to find buyers for the branches in Kansas or Arizona or the branch listed on M&I's website in Las Vegas. Let the games begin.

January 10, 2011

It's a good thing that Massachusetts' highest court has stuck down the type of shadowy transfer of subprime mortgages that Wells Fargo and US Bancorp engaged in here. The underlying loans were made by predatory lender Option One. With the type of transfers that followed, often borrowers don't even know who owns their loans. As this decision is cited in other states' courts, the process could be made more transparent.

The proposal to merge the New York Banking and Insurance Departments, made by new governor Andrew Cuomo, is not only about the alleged convergence of the industries, but about the marginalization of the NY Banking Department. One after one, large New York based banks switches from state to national regulation as the Office of the Comptroller of the Currency offered preemption of all state laws. Citibank NA -- national association -- was followed by JPMorgan Chase and HSBC all switching to national charters. The result was a Banking Department largely concerned with small mortgage companies and even check cashiers. Now comes Andrew Cuomo, proposing to put behemoths like AIG under the NYBD's jurisdiction. We're ready.

January 3, 2011

Following CRA protests, First Niagara put out a press release announced “more than $1 billion” in what it characterized as CRA lending, the vast majority of its “small business” lending that it would be doing anyway. When asked for details, NewAlliance said “we did issue a press release about that.” Not surprisingly, the calls for public hearings are only mounting, including in light of the 230 announced layoffs which would result. An architect of the sell out, Peyton R. Patterson, now plans to resurface as a director of the Connecticut Business & Industry Association...

December 27, 2010

We take issue with the WSJ story on Christmas Eve entitled “Payday Lenders Go Hunting: Operations Encroach on Banks During Loan Crunch.” It implies that payday lenders are competing WITH JPMorgan Chase. But Chase is in fact lending to, enabling and profiting from the payday lenders. You'd think the WSJ would know.

December 20, 2010

We will begin Watching the proposal by Bank of Montreal to acquire M&I, and probably sell off its branches in Arizona, Florida and Kansas...

December 13, 2010

On First Niagara - New Alliance, the challenge Inner City Press / Fair Finance Watch filed last week has now been joined by the Mayor of New Haven and Connecticut AG. First Niagara continues to be dismissive, as they were when they bulled into Pennsylvania. There, groups say First Niagara is a second rate bank with bad systems and a “bad attitude.” Will the Federal regulators - the OCC and the Fed - ask the right questions, and hold the requested hearings?

December 6, 2010

Inner City Press / Fair Finance Watch last week commented to the OCC (and the FRB) against the applications of First Niagara to acquire and merge with NewAlliance. FFW is opposed to this merger, and is requesting a public hearing.

First Niagara's acquisitions have resulted in a decrease in availability of credit, especially to low and moderate income people and communities of color. It has seemingly been allowed to make acquisitions, for example its still undigested entry into Pennsylvania, due to the financial meltdown (and, we assert, the regulatory agencies' concerns about their own role in allowing the business practices that led to the meltdown).

Now, it is imperative that First Niagara's actual record, including on all recent acquisitions, be fully reviewed including at the requested public hearings, before another set of communities is subjected to First Niagara's practices.

Inner City Press raised some of these concerns when First Niagara went into Pennsylvania. At that time, the target bank was so weak it arranged by stealth a loan from First Niagara before any regulatory approval had been granted: gun-jumping. While the exigencies of the financial meltdown and First Niagara's representation by a highly connected white shoe law firm got it over that hump, in the time since First Niagara has not performed anywhere near adequately in the communities which it was allowed to enter.

To the degree that First Niagara may try to emphasize the alleged performance of NewAlliance rather than its own, we note previous issues regarding NewAlliance, including extensive opposition to its formation from New Haven Savings Bank, the “golden parachute” of its top leadership and CRA issues regarding its performance, to be explored and documented at the requested public hearing.

As regards the OCC, we note both that the OCC's Weekly Bulletin is significantly less useful and public friendly than, for example, the Federal Reserve Board's online Form H2A, which in a comprehensive location (nationwide) lists all applications open for public comment, and that the OCC, unlike the FRB, does not make it easy to submit public comments by e-mail. While the FRBNY provides a dedicated e-mail address for public comment, the OCC's online presence appears directed at banks and not the public. Comments to this email address have been accepted in the past; this comment should immediately be acknowledged by email, and the OCC should fix these problems going forward.

November 29, 2010

The Prospect: the “federal government is not tracking foreclosures. The numbers you hear--that one in 75 houses in Las Vegas is in foreclosure, say--likely come from RealtyTrac, 'the leading online marketplace of foreclosure properties.' It's also the country's main source of foreclosure data. Governmental foreclosure-prevention efforts rely on numbers collected by a company whose mission is to help people 'locate, evaluate, buy and sell properties.' Unsurprisingly, that's not working very well. HAMP was projected to save 3 million to 4 million homes, but as of September, it had permanently modified mortgages for just over 468,000 homeowners. The financial-reform bill included a provision creating a foreclosure database, featuring comprehensive stats on distressed mortgages. The bill, however, didn't specify exactly what the database would track or how it would be paid for. Anecdotal evidence suggests evictions, too, are on the rise. NLIHC estimated in 2009 that 40 percent of foreclosed properties had renters, who were often tossed out by banks when they took ownership. President Obama signed a bill giving such renters certain rights, but without any baseline numbers on pre-crisis evictions and no plan for ongoing measurement, assessing the law's impact is nearly impossible.”

November 22, 2010

We note the retirement at 67 of Bill Brennan in Atlanta, and this from an exit interview:

Q: How would you describe the government's response to the foreclosure crisis?

A: Whereas Congress and the Treasury bailed out the banks --- a crisis that evolved directly from the banks making millions of unaffordable mortgage loans --- the public policy response for homeowners has been totally inadequate.

Q: How would you describe it?

A: The response has been to let most of these homeowners lose their homes and further weaken the economy.

Q: You are critical of the Obama administration's loan-modification program. Why?

A: The program has been described as a failure and rightfully so. It is voluntary --- the lenders don't have to do it if they don't want to. Those lenders that participate often refuse to follow the procedures correctly. They erroneously believe they can make more money foreclosing.

We wish him well.

November 15, 2010

Now First Niagara has applied to the Federal Reserve to buy NewAlliance, with a comment period running through December 3. Both in New Haven, NewAlliance's base, and in the communities ostensibly served by First Niagara, there are concerns. First Niagara has until now been allowed to grow quickly, but has barely integrated or served the areas it has move into. Its systems are weak. In terms of a CRA a single officer, based in Buffalo, runs the show. A request has been made for complete copy of the application. Watch this site.

J.P. Morgan and its Washington Mutual Bank and Chase Home Finance LLC divisions are facing suits in Illinois and California that are seeking class-action status. The lawsuits allege "common law fraud and misrepresentation, as well as violations of state consumer fraud statutes."

November 8, 2010

This week we'll be analyzing the November 2 election results -- for example, who will take over from Barney Frank in the House Banking Committee, Bachus or Royce? -- and fraudulent foreclosures by Deutsche Bank, an institution we'd like to hear more readers' experiences with...

November 1, 2010

Focus in the foreclosure scandal has begun to shift to Deutsche Bank. In Colorado's Douglas County for a foreclosure filed last month, the “Post found a certification on behalf of Deutsche Bank National Trust, based in Santa Ana, Calif. But the holder's address on the certification lists the location of Bank of America Home Loans in Simi Valley, California.” According to Germany's Der Spiegel, Deutsche Bank “manages around a million real estate properties in the United States... Besides, the bank packaged collateralized debt obligations (CDOs) worth $25 billion.” We'll have more on this.

Citigroup's Vikram Pandit last week threatened the closure of branches in lower income and rural areas, blaming it on regulation. He said, “As old revenue streams from overdraft fees and debit interchange shrink, retail banks are going to have to reinvent their business models to remain profitable. Banks may respond by not serving less-profitable communities and customers, or by serving them less. We could see the retail branch footprint of some banks shrink--particularly in lower-income and more rural areas." Is this a threat?

October 25, 2010

Advocacy for a foreclosure moratorium was met by opposition not only from banks but also the Obama administration this month. The administration's argument is that a moratorium will “freeze up” the economy, since as their talking points say over 40% of home sales in Nevada are of foreclosed upon homes. The churn is necessary, they say. Other say: disgusting.

October 18, 2010

The six Federal Reserve Board governors were confronted last week with their failure to inquire into the facts of applications for Fed approval which are subject to protest under the Community Reinvestment Act and otherwise.

Inner City Press / Fair Finance Watch has raised the way the Federal Reserve Bank of New York has bottled up protests about Morgan Stanley and now the Middle East by rubber stamping deals at the local level, with no Board review.

Fed chairman Bernanke for the second time said that it's “perverse” that CRA is enforced on merger applications. But it is the law, and the person charged with following the law shouldn't brush it off.

Also raised was the way that, even when protested applications go to the Board, Fed staff omit from their summaries issues they think are not relevant or can be excluded - including for example involvement in predatory lending by a bank's affiliates. Even wonder why the Fed is blind?

October 11, 2010

Even District Judge Ellen Huvelle sees Citigroup's settlement with the SEC as a sell out of consumers. The SEC said in a letter to this U.S. district judge that Citigroup Inc. will be required to have stringent reforms that would ensure the bank's disclosures are adequate for investors. The judge has had expressed concerns about the $75 million proposed settlement between Citigroup and SEC, saying she needed assurance that the bank would maintain improved disclosure practices. Oh that there had been judicial oversight over CitiFinancial's $75 million settlement on the cheap with the Federal Reserve, whcih reformed near to nothing...

October 4, 2010

Even in Japan, predatory lenders are falling. Takefuji like Acom and Aiful made loans at 29% interest, recently cut back to 20% by legislation. Apparently this level of usury didn't work for Takefuji: they have declared bankruptcy. Good riddance. But what about the other loan sharks?

For now celebrated in Buffalo:

“Leisha Gordon, vice president and community reinvestment officer for First Niagara Bank. She is responsible for regulatory reporting of lending, service and investment test activities in seven market centers under the Community Reinvestment Act for a $20 billion, 255-branch regional network.”

Will this love fest continue? Watch this site.

September 27, 2010

From Federal Reserve Governor Elizabeth Duke's September 24 statement on the Home Mortgage Disclosure Act:

“the recent mortgage crisis has highlighted the potential ramifications of a mortgage market that is not functioning well. HMDA data do not create the market or solve all market problems, but they do help us understand what is happening in the market. The time is certainly ripe for reviewing and revising the data elements, standards, and reporting formats.”

But the Fed was presented, repeatedly, with showings based in significant part of HMDA data, of Citigroup's CitiFinancial, Wachovia, New Century, Ameriquest and the like, that predatory and discriminatory lending was taking off. And the Fed did nothing...

Speaking of Citigroup, now they're getting sued by a government - as investor:

“Norway's central bank has sued Citigroup Inc. over alleged misstatements about the company's financial condition during a two-year period leading up to and during the global financial crisis, and which it claims caused it to buy Citi shares at inflated prices. Norges Bank claims that it lost more than $735 million on its investments in Citigroup common stock and more than $100 million on its investments in Citi bonds and preferred shares. The stocks and bonds were purchased between January 2007 and January 2009, according to the lawsuit. The lawsuit, filed in Manhattan federal court Sept. 17, alleges that Citi made a series of misstatements about its financial health, particularly its exposure to subprime mortgages and other toxic assets.”

The word “exposure” makes it sound passive, like Citigroup was a victim. But Citi TOOK ON this exposure, screwing many, many people in the process...

September 20, 2010

On First Niagara's proposal to acquire New Alliance, questions are being raised in at least three states. First Niagara, it emerges, it lower tech than the banks that it buys and seeks to buy. First Niagara is resistant to even trying to increase diversity. And so there will be opposition.

Meanwhile in Washington there is renewed talk, including from unexpected quarters, of safe harbors to make some banks untouchable. We will have more on this.

September 13, 2010

Regarding the too-small $75 million proposed fine of Citigroup, the SEC's now said "The proposed $75 million penalty represents less than 0.3% of Citigroup's revenue for the most recent quarter, and should not cause an undue negative financial impact on the company's business, or significant harm to current Citigroup shareholders," the SEC said. The agency estimates the impact equals less than one-third of one cent per share. This is a defense of the weak settlement?

September 6, 2010

We said we would be covering First Niagara - New Alliance, and we will, starting this coming week. New Alliance has always been trying to get over on New Haven, its putative hometown. First Niagara, when it recently bought its way into Pennsylvania, jumped the gun, then used a white shoe law firm with an inside track to the Fed to cover up its tracks. Now they seek to combine, and others seek to keep them apart. Watch this site.

August 30, 2010

HAMP as scam, JPM Chase and Geithner: J.P. Morgan Chase said last week that the number of mortgage modifications it has offered its customers since the start of 2009 has topped 900,000 as the lending giant looks to stem potential loan losses. One of the nation's largest mortgage servicers, J.P. Morgan has offered modifications on 913,309 mortgages in 19 months ended July 31. But just 270,361 have been approved for permanent modification and 214,529 have completed the process, highlighting the ongoing difficulties in permanently lowering monthly payments for struggling borrowers and taking other steps in efforts to prevent home foreclosures. Nearly one-fourth of J.P. Morgan's modifications have come through the federal government's Home Affordable Modification Program-- regarding which, on a meeting between Geithner et al. an bloggers, see http://www.interfluidity.com/v2/933.html

August 23, 2010

Who knew - the FDIC has continued to extend “final settlement” of JPMorgan Chase's sweetheart deal to buy Washington Mutual, most recently to August 30, 2010, see document here. While those most interested as seeking a higher price from Morgan Chase, could there be CRA and anti-predatory lending possibilities?

August 16, 2010

Unintended consequences? From CJ “ fallout from the Dodd-Frank Act, the financial-overhaul legislation passed this summer. Customers rejected by banks for being unprofitable or risky under the weight of new regulations could migrate to consumer lenders, who have more experience underwriting and pricing subprime risks.On a conference call last month, responding to a question about the viability of CitiFinancial, Citigroup Chief Executive Vikram Pandit said, 'My God, you don't want to shut this down.'”

Oh but some DO want to shut it down...

And on AIG's sale of 80% of American General to Fortress -- will AIG still have to file American General's HMDA data? Or is that subject to some sort of “control” test? We aim to find out.

August 9, 2010

Timothy Geithner, the Treasury Secretary who didn't pay his taxes, is now thumbing his nose at the portions of the Volcker Rule that Sen. Levin and others managed to enact. Hey, if you don't like the laws --- and you don't -- maybe it's time to leave?

August 2, 2010

Wells Fargo was the target of a governmental charge of predatory lending last week, by the Pennsylvania Human Relations Commission, based on 2004 and 2008 Home Mortgage Disclosure Act data. Inner City Press / Fair Finance Watch has analyzed the 2009 data, which it obtained from Wells Fargo, and has found that in 2009, Wells Fargo Bank NA confined African Americans to high cost mortgages 2.40 more frequently than whites. Its disparatiy for Latinos was 2.09. For its subprime affiliate Wells Fargo Funding, the disparities in 2009 were even worse that the bank, and those cited by the Pennsylvania Human Relations Commission: African Americans were confirmed to high cost loans four times more frequently than whites.

July 26, 2010

Now the US Government buys into subprime, in a field left unregulated by the financial reform bill: “Government-owned General Motors is acquiring Fort Worth’s AmeriCredit in a $3.5 billion deal. AmeriCredit gives GM something it sorely lacked: a lender that can reached car buyers of all stripes, including subprime borrowers.”

Through the revolving door, in a move that should be illegal, from regulating Citigroup to getting paid to work for them: Citigroup last week bragged “it has hired Irene Fang, a long-time veteran of the U.S. Treasury's bank regulatory agency, as the New York bank's corporate fair lending director. Fang most recently served as a division head in the Economics Department of the Office of the Comptroller of the Currency. The Economics Department contributes to the fair lending reviews that the OCC conducts in banks of all sizes, Citigroup said in a statement. Fang, who has a doctoral degree in economics, will report to Lloyd Brown, Citi's director of community reinvestment, Citi said.”

Isn't it a conflict of interest, to be in charge of reviewing Citigroup, then getting rewarded with a job at the company?

Goldman Sachs' “Tax Evasion” Hit by Rep. Doggett, Citi's and Transocean's Offshoring

By Matthew R. Lee

SOUTH BRONX, July 20 -- Goldman Sachs, recently let off the hook by the Securities and Exchange Commission with a mere $550 million fine, dropped its tax rate in one recent year from 34% to 1%. On July 20, Inner City Press asked Rep. Lloyd Doggett (D-Tx) what he thought of Goldman's decline in tax rate, and of the SEC deal.

Rep. Doggett replied that this was “outrageous,” that Goldman Sachs' decrease in tax rate “suggests a company among the most profitable on the Street is not paying its fair share” and is using “gimmicks.” But what's going to be done?

Inner City Press asked the question on a media conference call including Senator Carl Levin (D-Mich) and several “responsible investors” including Amy Domini. Ms. Domini recounted how she had to pull funds recently from Chicago-based Shorebank, and that some of her customers then pulled funds from her.

Doggett was asked about Citigroup, with more than 400 offshore subsidiaries. He said this should be investigated, as should Transocean, owner of the leaking Gulf oil platform, which shifted business to the Cayman Islands and then Switzerland to evade U.S. taxes.

Senator Levin spoke out against companies shifting their patents and other intellectual property offshore to evade taxes. The loopholes should be closed -- but will they? Watch this site.

July 19, 2010

While even in the vaunted financial reform bill, U.S. banks are hardly pushed to lend to small businesses, in the UK they are being summoned. Bosses of the U.K.'s biggest banks last week had to push back against government claims they aren't doing their part to grow the economy by lending more to small businesses, at a meeting held between top executives and Treasury officials to discuss lending and coming regulatory reforms. “It was a very constructive meeting that will help inform the Government's Green Paper on business finance which will be published shortly," said Chancellor of the Exchequer George Osborne and Secretary of State for Business Innovation and Skills Vince Cable in a joint statement following the meeting. Also at the meeting were Financial Secretary of the Treasury Mark Hoban, Lloyds Banking Group CEO Eric Daniels, Barclays PLC boss John Varley, Royal Bank of Scotland Group's post-Shred CEO Stephen Hester and HSBC Holdings' still chairman Stephen Green...

July 12, 2010

By Toronto Dominion's own admission, in response to Inner City Press / Fair Finance Watch's comments opposing its South Financial application, TD in 2009 denied 74% of mortgage applications from African Americans, and 65% of applications from Latinos. Despite this, and the subprime loans it admits it makes, it says no issues are raised by its attempts to expand, including by converting fast food restaurants into bank branches serving up... 74% denial rates to African Americans and 65% denial rates to Latinos. TD's worse for you than burgers...

July 5, 2010

On June 30, the Federal Reserve System approved a Morgan Stanley application which Fair Finance Watch had challenged in April, based on Morgan Stanley's subprime Saxon Mortgage subsidiary and Morgan Stanley, among other things, funding makers of cluster bombs.

Amazingly, the day AFTER the Fed sent its conclusory approval letter, it released improperly withheld information to FFW:

Date: Thu, Jul 1, 2010 at 10:08 AM
Subject: Morgan Stanley Application
From: Federal Reserve
To: fairfinancewatch.org

Good morning Mr. Lee:

Previously, you'd requested a copy of Morgan Stanley's Section 3 application. The business plan was not properly redacted by Morgan Stanley. I have attached the application below for you.

Best,

Kimberly Hooks

This information should have been released during the comment period, and certainly prior to approval. In fact, “Mortgage” activities are still improperly redacted. On this basis alone, the approval should be rescinded...

Watch this site.

June 28, 2010

Game on: Inner City Press / Fair Finance Watch has filed a timely challenge with the Federal Reserve to the pending applications of The Toronto-Dominion Bank to acquire The South Financial Group and its Carolina First Bank.

FFW obtained TD's 2009 HMDA-LAR, which has not been reviewed or taken into account in any regulatory review of TD. The data are troubling, showing for example that in 2009 Toronto Dominion denied fully 83% of mortgage loan applications from African Americans, versus only 42% of applications from whites. TD's denial rates for Latinos and Native Americans, both 68%, were also troubling. Public hearings should be held and the applications not approved.

TD in fact makes rate spread or subprime loans, but not in a fair manner. African Americans at TD are 1.93 times more likely to be confined to higher cost loans than whites.

While the FRB, despite the stated purpose of HMDA in helping to identify discrimination, has shifted to a dismissive approach to HMDA, it will be hearing different at its upcoming HMDA hearings, testimony at which should be considered by the FRB in connection with this application.

On a recent investors' conference call, TD bragged about its “FDIC-assisted transactions” -- which , significantly, were not reviewed for CRA, and on which there was no comment period. A public hearing is needed on this one. FFW's request in this letter for a complete copy of the applications includes also any and all information in the possession of the FRS concerning TD's “FDIC assisted transactions.”

Meanwhile, shareholders of South Financial have filed suit against the deal. See, e.g., Greenville (SC) News, June 22, 2010. TD has told its shareholders it will somehow convert fast food restaurants into bank branches. See, e.g., Globe & Mail, June 17, 2010. Before serving up its disparate lending, public hearings should be held. These issues must be explored, under managerial and financial factors, in connection with these applications. FFW has requested public hearings.

June 21, 2010

Under the shadow of the Volcker Rule, Citigroup is trying to raise $3.5 billion for investment funds. Also fighting Volcker are J.P. Morgan Chase, owner of hedge-fund manager Highbridge Capital Management, and Morgan Stanley, owner of Greenwich, Conn., hedge fund FrontPoint Partners.

June 14, 2010

Here's a trend: as troubled loans in communities of color are bulk-sold by Wall Street titans, the neighborhoods are more and more undervalued and local wealth destroyed...

Meanwhile, to take the lead on Community Reinvestment Act modernization, Barney Frank has designed Maxine Waters of Los Angeles. We'll see...

June 7, 2010

Now it's reported that CitiFinancial hopes to expand its subprime lending in at least 45 US states later this year -- while General Electric's GE Money has already picked up subprime lending overseas. We had predicted both. Citigroup claims it only seeks to grow in subprime in order to sell the business off, while GE downplays its subprime growth. Thou dost protest too much?

May 31, 2010

So Morgan Stanley has purported to respond to comments Fair Finance Watch filed with the Federal Reserve, opposing Morgan Stanley applications subject to the Community Reinvestment Act. It is an arrogant response, largely that FFW's points about predatory mortgage servicing and "other predatory practices, including 'land grabs' and the financing of 'cluster bombs.'"

Its vague response on these last two is that "Morgan Stanley and its subsidiaries engage in corporate underwriting and lending activities for various clients, including those involved in national defense related activities. Morgan Stanley also engages in real estate investment activities on a global basis."

It's Morgan Stanley which put "cluster bombs" in quotation marks. To those impacted, air quotes will not help. Same with the victims of the predatory loans services by Morgan Stanley's Saxon, or of loans enabled by Morgan Stanley as an investment bank.

Morgan Stanley admits to a Saxon settlement in Missouri, and to not timely responding to consumer complaints. Yet it argues that none of this is relevant to the Federal Reserve. Like we said, arrogant. And to be continued.

Protests of JPM Chase on Wall St, of Predatory Loans and Mining, Laissez Faire

By Matthew R. Lee

WALL STREET, May 18 -- Of the Big Four American bank, JPMorgan Chase has perhaps benefited more than any other from the financial meltdown. While having securitized many and made some of the most predatory mortgage loans, it was given Bear Stearns, and then Washington Mutual on the cheap. It proceeded to close scores of WaMu branches.

Tuesday in lower Manhattan outside JPMorgan Chase annual shareholders meeting, environmentalists sang songs about the bank's support of mountain top removal mining. As Inner City Press has reported, JPMorgan Chase pays former UK prime minister Tony Blair as an environmental consultant.

The bank's security officers handed out leaflets about less than living wages from Chase's subcontractors Allied Barton and Summit Security. A protest of predatory lending by Chase was right around the corner, including NYRL, CRA-NC and, in from West Coast including wtih wronged borrowers, the California Reinvestment Committee. "What do we want? No redlining! When do we want it? Now!"

Fair Finance Watch got an early copy of JPM Chase's 2009 mortgage lending on disk. Its analysis, the first in the country, found that in 2009 JPMorgan Chase was even more disparate to Latinos, confined them to higher-cost mortgage loans as defined by the Federal Reserve 1.98 times more frequently than whites, almost as pronounced as its disparity between African-Americans and whites, 2.17.

Still Chase and its CEO Jaime Dimon lobby against regulatory reform, and call it unfair that they are tarred with the stigma of the bailout they accepted. Dimon's speech last weekend at Syracuse University was protested, although some spun it as a success, with cheers for his commencement speech about free thinking. Laissez faire is more like it. Private profits, socialized risk.

JPMorgan Chase helped cause the collapse of Lehman Brothers Holding Inc. by demanding more collateral and changing guarantee agreements, the bankruptcy examiner said last week. “The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity pool,” said Anton Valukas, the U.S. Trustee-appointed examiner, in a 2,200-page report filed in federal court, also in lower Manhattan.

Footnote: Simultaneous with the protest and shareholders' meeting, Chase's previous Community Reinvestment Act officer organized a CRA breakfast talk. At least two activists were asked to skip the protest in order to speak, but declined. Willis is known to oppose any legislation to expand CRA to cover, for example, investment banking including the securitization of subprime mortgages.

Rather, he is promoting a more limited regulatory fix to CRA, on such matters as expanding the areas in which banks are assessed. Whether legislators like House Banking Committee chair Barney Frank, who argued CRA should not be under the Consumer Financial Protection Agency, will now move forward with the CRA modernization bill is not yet known. Watch this site.

May 17, 2010

Too little, too late: After demanding last year that Citi fill its board with more financially savvy directors and improve its risk management, Fed officials in Washington pressed the New York Fed to follow up with tough oversight, people familiar with the matter said.

"The supervision program for Citigroup has been less-than-effective," the Fed board said in a draft of a review of the New York Fed's performance last year, according to documents released by the bipartisan Financial Crisis Inquiry Commission. The final review said Mr. Dudley's staff "did not take timely and appropriate action" to follow up on the Fed's demands in a memo of understanding with a big bank. A Citi representative declined to comment.

May 10, 2010

The Federal Reserve is advocating for itself:

"Charles Plosser of the Philadelphia Fed, Thomas Hoenig of the Kansas City Fed, Jeffrey Lacker of the Richmond Fed and Narayana Kocherlakota of the Minneapolis Fed have met with the Joint Economic Committee of Congress opposing the proposal under which the Federal Reserve would oversee banks with more than $100 billion in assets, while smaller institutions would be regulated by other agencies. The Fed banks also oppose a provision that would make the president of the New York Fed a presidential appointee, calling it an attempt to politicize the agency appointee, calling it an attempt to politicize the agency."

What -- so it's better to have banks, which own stock in the Federal Reserve Banks, regulate themselves?

May 3, 2010

As Goldman Sachs is belatedly grilled in Congress, so to at the Federal Reserve. Last week Inner City Press ' Fair Finance Watch put in a comment that began this way:

RE: Timely Opposition and Hearing Request on the Applications The Goldman Sachs Group to acquire, inter alia, up to 24.9 percent of SKBHC Holdings LLC, Corona del Mar, California, which is applying to become a bank holding company, & thereby indirectly acquire Starbuck Bancshares, Inc.& The First National Bank of Starbuck

Dear Chairman Bernanke and others in the FRS:

On behalf of Inner City Press' Fair Finance Watch, this is a timely comment opposing and requesting public hearings on Goldman Sachs' above captioned pending applications, which were re-noticed on the Board's H2A.

As you know, Goldman Sachs was allowed to become a bank holding company without any public comment period or consideration of the Community Reinvestment Act, which would otherwise have been required. Since then, and since 2009, Goldman Sachs has been charged with misrepresentation by the SEC. The emails which recently emerged, about the failure of little subprimes and selling toxic bonds to widows and orphans, militate for public hearings on these Goldman applications. See also, since October, the NY Times' ""Testy Conflict With Goldman Helped Push A.I.G. to Edge."

We are requesting, in connection with this application, a full disclosure of any and all assistance Goldman Sachs received from the Federal Reserve System in the past four years.

On the consumer side, Goldman Sachs has been charged with involvement in predatory lending, including for the acts of its subprime servicing subsidiary, Litton Loan Servicing. Even Goldman's settlement left the public in the dark. See, e.g., Bloomberg News, May 17, 2009, "Deal in Goldman probe leaves public in dark."

April 26, 2010

As financial reform comes to a boil in DC, Inner City Press / Fair Finance Watch filed timely comments with the Federal Reserve Board opposing applications by Morgan Stanley, moving its banking around. The grounds are its subprime affiliate Saxon, as well as general sleaze, from land grabs to financing cluster bombs. Will the Fed care? Watch this site.

April 26, 2010 - click here for BloggingHeads.tv debate on Afghanistan cover up, Bhutto, Iran, Sudan and the UN's Love Boat in Haiti, by Inner City Press

April 19, 2010

So Goldman Sachs has finally been accused by the SEC -- not with enabling predatory lending, for which it should be charged, but for setting up for John Paulson to short a pool of dubious subprime securities and then selling it to others as a legitimate and objective investment. Well, just like Al Capone's Achilles Heel was tax evasion, perhaps misrepresentation is Goldman's. But we doubt the SEC's stomach to follow this fight through. We'll see.

We have reported on the banks which left The Bronx, snooping for example around old Chase Manhattan branches turned into churches. But it's time to mention Melrose Credit Union, which runs radio advertisements during Yankee games. Perhaps you've seen their sign, if you drive to or from JFK airport. The institution says, right on its website, that

"since 1922. Melrose was initially established to provide financial resources for individuals and small business owners from the Bronx, NY. Through the Credit Union, community residents were afforded the means to pursue their American Dreams. The success of Melrose Credit Union has not diminished its original mission statement: Empower the community by offering affordable financial products and services. Today that community commitment has helped transform Melrose into an over $1 billion credit union with over 20,000 members residing across the country and around the world."

Melrose is a neighborhood in the South Bronx, which this "successful" credit union left behind. It has no branch in The Bronx; it left the borough but speaks about empowerment of (presumably other) neighborhoods. What was that again, about there being no need for a Community Reinvestment Act on credit unions?

April 12, 2010

Too Big To Be Fair, Citi, Wells, BofA & JPM Chase Disparate in Subprime Loans in 2009

By Matthew R. Lee, Inner City Press

NEW YORK, April 11 -- In the first study of the just-released 2009 mortgage lending data, Bronx-based Fair Finance Watch has found that the Big Four survivors of the banking meltdown, Citigroup, Wells Fargo, Bank of America and JPMorgan Chase, continued with high cost loans and had worse disparities by race and ethnicity in denials and higher-cost lending than before 2009, Fair Finance Watch concluded.

The just released data show that Citigroup confined African Americans to higher-cost loans above this rate spread 2.25 times more frequently than whites, according to Fair Finance Watch. Citigroup confined Latinos to higher-cost loans above the rate spread 1.72 times more frequently than whites, the data show. 2009 is the sixth year in which the data distinguishes which loans are higher cost, over a federally-defined rate spread.

JPMorgan Chase was even more disparate to Latinos, confined them to higher-cost loans 1.98 times more frequently than whites, almost as pronounced as its disparity between African-Americans and whites, 2.17. HSBC, perhaps due to its shrinking, some say dying, business had disparities of 2.57 for African Americans and 1.61 for Latinos.

For Bank of America's Countrywide Bank FSB, the disparity for African Americans was 2.11 and for Latinos, 1.95.

For Wells Fargo Bank NA, the disparity for African Americans was 2.40 and for Latinos, 2.09. For its subprime affiliate Wells Fargo Funding, the disparities were even worse: African Americans were confirmed to high cost loans four times more frequently than whites.

"Call them 'too big to be fair' -- the banks the regulators have favored, allowing emergency takeovers like JPMorgan Chase's of Washington Mutual, Bank of America's of Countrywide and Merrill Lynch, and Wells Fargo's of Wachovia, were the most racially disparate lenders," said Fair Finance Watch. "The regulators did not put any conditions on the mergers or Troubled Assets Relief Program bailouts. As things are going, it will be worse and more disparate in 2010. Global predatory lending seems unlikely to be discussed at the G-20 finance ministers' meeting in Washington later this month. The disparities in the 2009 mortgage data of the big four militate for breaking up these banks."

The weakness of the Federal Reserve as regulator on this was highlighted by the March 24 settlement by CitiFinancial when non-reporting of loans under HMDA was discovered by Massachusetts authorities - and not the Fed, which is putatively regulating CitiFinancial.

Regional bank BB&T in 2009 confined African Americans to higher-cost loans above the rate spread 1.90 times more frequently than whites, and confined Latinos to higher-cost loans above the rate spread 1.43 times more frequently than whites.

U.S. Bancorp in 2009 confined African Americans to higher-cost loans above the rate spread 1.72 times more frequently than whites, and confined Latinos to higher-cost loans above the rate spread 1.71 times more frequently than whites.

Regions in 2009 confined African Americans to higher-cost loans above the rate spread 1.68 times more frequently than whites, and confined Latinos to higher-cost loans above the rate spread 1.33 times more frequently than whites.

Several lenders, including a large credit union, exhibited disparities denial rate beween African and Latinos compared to whites in 2009. Citigroup, for example, denied applications by African Americans 1.45 times more frequently than whites, while denying Latinos 1.35 times more frequently than whites. JPMorgan Chase denied applications by African Americans 1.54 times more frequently than whites, while denying Latinos 1.41 times more frequently than whites. The Pentagon Federal Credit Union denied applications by African Americans 2.04 times more frequently than whites, while denying Latinos 1.84 times more frequently than whites.

The law required that the 2009 data be provided by April 1, following March 1 requests by Fair Finance Watch and Inner City Press. Several banks did not provide their data by the deadline. Trustmark and Bank of Hawaii provided their data at the deadline but only in paper format, such that it could not yet be computer-analyzed. Further studies will follow.

April 5, 2010

This week the Angelides Commission will hear from Alan Greenspan, Robert Rubin and Chuck Prince. This goes back to the Citicorp - Travelers merger, about which Inner City Press was asked this week:

When Travelers met and swallowed Citicorp in 1998, the Federal Reserve didn't just approve an illegal merger -- it illegally pre-approved an illegal merger. Sandy Weill and John Reed and their lawyers got the green light from the Alan Greenspan Fed before even announcing the merger. The group I worked and work with, Inner City Press/Fair Finance Watch, demanded all records of the meetings, but got only two cryptic letters, talking about the marriage of "Red" and "Blue." The Fed approved, and predatory lending took off. And now in the aftermath, even the Chris Dodd bill would house consumer protection inside the same Federal Reserve, a huge mistake. Red and Blue indeed...

March 29, 2010

The Fed is belatedly concerned -- but not too concerned. Following Inner City Press / Fair Finance Watch's comments, the Fed conducted an after the fact inquiry and in an approval order last week included this footnote:

A comment from the public expressed concern that FNF Group acquired control over Harleysville before obtaining Board approval of the application because of an extension of credit FNF Group made to Harleysville. In December 2009, and after FNF Group filed its application with the Board to acquire Harleysville, FNF Group loaned Harleysville $50 million, secured by the shares of Harleysville Bank. Harleysville invested the loan proceeds in Harleysville Bank to increase the bank's capital.

The Board is concerned when a banking organization seeking to acquire . another banking organization makes a loan to the acquiree in advance of the Board's approval of the acquisition. Those types of loanss raise concern thatthe transactionon would ~e, in substance, the acquisitioof af a controlling interest or would provide the acquirer with the ability to exercise a controlling influence over the management and policiof thethe bank holding company before receiving Board approval. The Board has reviewed carefully the loan to Harleysville, including the circumstances and terms of the loan, the merger agreements, the purpose of the loan, and the relationships of the organizations after the loan transaction. Based on all the facts of recordd, the Board does not believe that the loan resulted in FNF Group acquiring voting securities of, or a controlling equity interest in, Harleysville, or in FNF Group exercising, or having the ability to exercise, a controlling influence 'over Harleysville in this case. The Board continues to believe that loans made by an acquirer to a target organization before agency approval of its acquisition proposal raise important issues, and it will review these arrangements critically and carefully.

But the Fed apparently didn't know about the loan until it was raised in comments, and it let the deal go forward, after reams of arguments by banking insider H. Rodgin Cohen. This is another example of Fed lassitude, another reason that consumer protection should not be put under the Fed....

From the WSJ, we annotate in italics: "CitiFinancial, a consumer lender, has a business model that is similar to CIT Group Inc., which suffered as wholesale funding dried up and sought bankruptcy-court protection last year, exiting in December. CitiFinancial used to be known as Commercial Credit Corp. and was the cornerstone of the empire Sanford Weill built into Travelers Group before merging with Citicorp in 1998 to form Citigroup. As a stand-alone firm, CitiFinancial could have trouble getting access to cheap credit, some analysts said."

It's also a widely known predatory lender. Could that have something to do with the difficulty in selling it?

"Another business up for sale: a credit-card portfolio with an estimated $40 billion in receivables and private-label cards pitched through retailers like Sears Holdings Corp."

And that business repeatedly calls people, even those on the Do Not Call list, just as CitiFinancial does...

March 22, 2010

Wal-Mart plans to open 500 more of its MoneyCenters. Asked for comment, Inner City Press opined

"Wal-Mart's proliferation of check cashing and $4.50 for bill payment (same day) into 500 more stores must be seen in the context of the company's recent gender discrimination settlement, use of tainted cotton from Uzbekistan, and standardless sale of the resources of the Democratic Republic of the Congo. We are still monitoring Wal-Mart, as it become more banklike without any of the regulation. We would suggest that the Consumer Financial Protection Agency, wherever housed, also look at Wal-Mart."

The domestic and CFPA portion of the comment appeared in the Charlotte Observer and elsewhere.

"Wal-Mart adding financial sites," by Christina Rexrode, Charlotte Observer, March 16, 2010

March 15, 2010 -- As Congress Dithers for Payday Lenders, CRA Activists Raise Stakes in St. Louis

By Matthew R. Lee

WASHINGTON, March 10 -- As legislators from both political parties dally on Capitol Hill, considering handing consumer protection to the Federal Reserve like Democratic Senator Chris Dodd or leaving enforcement over payday lenders off to the side like Republican Bob Corker, the real work of protecting consumers is done by grassroots groups.

Inner City Press learned on Wednesday of an all too rare Community Reinvestment Act challenge filed recent in Missouri, which has delayed the recalcitrant bank's application for regulatory approval for several months. The Metropolitan St. Louis Equal Housing Opportunity Council, which filed the protest, says that CRA has been largely moribund in St. Louis for the last 20 to 30 years.

Now, in the face of the economic meltdown, it is back. On the sidelines of the NCRC conference, three EHOC staffers spoke of pouring over list of regulatory approvals, commenting on CRA performance evaluation, reaching out for allies to Kansas and Jefferson City.

The applicant is Central Bancompany, based in Jefferson City, to buy Bank of Belton. It is not the biggest deal, but a fresh CRA protest is a big deal. We'll have more on these.

March 12, 2010 -- As HUD Shut Subprime Taylor Bean, What of Its Larger Financiers? Annals of Impunity

By Matthew R. Lee

WASHINGTON, March 12 -- While Congress continues to resist holding the financial institutions responsible for the meltdown accountable, five blocks from the Capitol on March 12, Federal Housing Administrator David Stevens bragged of having "shut down 356 lenders." He focused on Florida-based Taylor, Bean & Whitaker, the third largest FHA lender in the country until it filed bankruptcy in August 2009. At that time, Inner City Press / Fair Finance Watch noted that TBW had given it the run around to obtain its Home Mortgage Disclosure Act data, perhaps a clue to more fundamental illegality.

What Stevens didn't follow up on was the banks which enabled and did business with Taylor Bean and its ilk. There was, of course, Alabama-based Colonial Bank, which have been intertwined with Taylor Bean was seized by the FDIC, its branches sold to BB&T and many of them shut down.

But there were bigger players at the trough. As Inner City Press reported back in November 2009:

"Deutsche Bank AG and a unit of BNP Paribas SA separately sued Bank of America Corp. on Wednesday, alleging that the bank has failed to repay about $1.7 billion in secured notes issued by a special-purpose entity. The breach-of-contract lawsuits, filed in U.S. District Court in Manhattan, allege that Bank of America has failed to redeem $480.7 million in secured notes held by BNP Paribas and $1.2 billion held by Deutsche Bank. The notes were issued by Ocala Funding LLC, a special-purpose entity that provided short-term liquidity funding to Taylor, Bean & Whitaker Mortgage Corp..."

This a a sample of the chicanery behind the global financial crisis, and players who have not been held accountable.

Footnote: Stevens was preceded in the NCRC conference by another HUD official, John D. Trasvina, head of fair housing and fair lending. He was asked about HMDA data, but noted its time lag, that one can't get study disparities in rates of restructuring of mortgages. This publication has requested more recent data: watch this site.

March 11, 2010 -- Dodd's Bumbling Portends More Watering Down for Fed, of Groucho Marx in Reverse

By Matthew R. Lee

WASHINGTON, March 10 -- After watering down financial reform legislation in weeks of concessions, now Senator Chris Dodd says that while a draft bill will be "unveiled" on Monday, it and he will not have any Republican co-sponsors. Insiders predict then another round of concessions, from a bill that will, they say, place consumer protection in or at the Federal Reserve.

"Sell out city," said one consumer advocate visiting Washington this week, expressing a lack of surprise that Timothy Geithner so quickly gushed with praise for lame duck Dodd. Some consumer advocacy insiders have been defanged into supporting the Federal Reserve by the threat that if not at the Fed, the financial protection unit could be placed in the Office of the Comptroller of the Currency. Thus they resist going public with their dissatisfaction with the Fed's track record, on the "lesser of two evils" theory.

The Fed itself has placed the Consumer Financial Protection Agency issue on the agenda of the next meeting of its own Consumer Advisory Committee, half made up of bankers. Of the other half, some are in the Fed's sway on a reverse Groucho Marx theory.

Groucho said he didn't want to join any club that would accept the likes of him. The insiders won't oppose any club that has issued them an invitation. It would be funny if it weren't so sad, ill-serving consumers. Those who were previously invited but who've now left may have more freedom to speak. We will have more on this.
March 8, 2010

While opposing the proposal to put consumer financial protection under the Federal Reserve, it's worth noting that the Treasury Department's OCC also continues to allow predatory lending, including tax refund anticipation loan (RAL) lending.

The two biggest RAL lenders are national banks of JPM Chase and HSBC (which continues "partnering" with H & R Block). Rather than publicly or even privately urging these big banks to stop RALs -- as even the FDIC has done with smaller institutions like Republic -- the OCC issued a vague policy guidance that provides no penalties, http://www.occ.gov/ftp/bulletin/2010-7a.pdf

While JPM Chase claims its fees are clear -- $32 plus one percent of the loan -- it also has a $10 technology access fee. This is a trillion dollar institution, engaged in usurious lending. And the band played on...

March 1, 2010

Bottom feeding subprime lender World Acceptance, charging interest rates up to 215%, is enabled by credit lines from JPM Chase and Bank of America, among others. It feasts off repeated refinances and roll overs, using the rule of 78s to fleeces its borrowers. Do Chase and BofA have any standards for the subprime lenders they will lend to? JPM Chase was previously exposed by Inner City Press / Fair Finance Watch for extensive lending to pawn shops and high cost check cashers. Even post crisis, the sleaze just continues. Watch this site.

February 22, 2009

Public Comment Period on Merger Only a "Technicality," Bank Law Insider Argues

When is a Federal Reserve public comment period not public? When banking law insider H. Rodgin Cohen says so, he seems to feel. In a February 17 letter copied to the Fed's general counsel Scott Alvarez, H "Can We Call You Rodge" Cohen urges the Fed to disregard a timely comment on lending disparities and other irregularities, arguing that the comment period was only open due to a "technicality."

While some would think this beneath ol' Rodge, perhaps Sullivan & Cromwell markets him as truly full service.

February 15, 2010

Subprimers from Fremont resurface as bottom feeders buying foreclosed home: Impunity

Once subprime, always subprime. Or, subprime never dies -

"Kyle Walker, a former top executive at Fremont Investment & Loan - a once-high-flying subprime lender - has a new firm that is buying distressed homes, some for as little as $1,000... 'We have a pitch book out with Cohen Financial and hope to raise between $6 million and $7 million,' said Mr. Walker. The company he owns and manages is called Home America. His management team includes Bob Clafford, a former executive vice president in charge of wholesale lending at FI&L." NMN

Our first run-in with Fremont was when, despite a timely request for the Home Mortgage Disclosure Act (HMDA) data in electronic format, they refused and gave it in a format that could not be analyzed. Later, Fremont settled predatory lending charges for $10 million with Massachusetts Attorney General Martha "Don't Go There" Coakley.

Now Fremont's Walker and Clafford resurface, buying foreclosed homes and renting or "land contracting" them back to lower income people while holding the note or deed in portfolio.

Some might call this impunity. And they would be correct.

February 8, 2010

So what did and does Hammering Hank Paulson think of the Community Reinvestment Act? He was Secretary of the Treasury, in charge of the Office of the Comptroller of the Currency and Office of Thrift Supervision, which regulate national banks and saving banks, respectively, including for CRA. But on February 2 on the Larry Kudlow show, when Kudlow included CRA among the causes of the economic crash, Paulson said nothing, then agreed, "That's right... you had all of this going on."

Mr. PAULSON: Well, what you need to understand is what had happened before even the middle of '07, which is you'd had these excesses had been building up for some times. You'd had a--we had been overstimulating housing. So if you look at the combined weight of all of our policies in the US government...

KUDLOW: Wait. It's HUD-backed, unaffordable mortgage loans, Fannie and Freddie?

Mr. PAULSON: What you have--yeah, yeah, Fannie and Freddie, the FHA, various state programs.

KUDLOW: Community Reinvestment Act.

Mr. PAULSON: You know, mortgage interest deduction. I'm not saying of them were...

KUDLOW: Zero capital gains tax on home sales.

Mr. PAULSON: That's right. And so you had--so you had all of this going on

Meanwhile, click HERE for an InnerCityPress.com article last week about Paulson's book.

February 1, 2010

Now, Goldman Sachs has blacked out large portions of its supposed response to the protest by Inner City Press Fair Finance Watch to the NY Banking Department, on issues of compliance by and regulatory review of its subprime subsidiary, Litton Loans. Inner City Press has appealed, specifically contesting that in the letter as provided to ICP by Goldman Sachs, under "Litton's Compliance Program," four full paragraphs are redacted. Under "Prior Regulatory Reviews of Litton," two paragraphs are redacted - the entirety of the section.Inner City Press is putting it online here. And so:

Dear FOIL Appeals Officer, Superintendent of Banks and others at NYBD:

On behalf of Inner City Press and its Fair Finance Watch (collectively 'ICP") , this is a timely FOIL appeal of your Department's denial of access to the redacted portions of Goldman Sachs' Response to ICP's Protest of the Applications by Goldman Sachs Bank USA.

Goldman Sachs unilaterally redacted large portions of the copy of its response which it mailed to ICP.

For example -- and ICP is hereby specifically contesting -- in the letter as provided, under "Litton's Compliance Program," four full paragraphs are redacted. Under "Prior Regulatory Reviews of Litton," two paragraphs are redacted - the entirety of the section.

Since it is the NYBD's duty to review the propriety of such withholdings, ICP has awaited a ruling by the NYBD -- anticipating based on the past practices of the NYBD and other regulators, and applicable law that much of the blacked out information would be released. In the interim, ICP appealed the withholding of portions of the Application.

But the NYBD has not ruled yet on Goldman Sachs' extensive and abusive redactions. Particularly given the massive public support Goldman received through TARP and otherwise, to withhold from the public its response to protests of its requests for expedited regulatory approval is inappropriate. Hence, prior to your Department making any decision on Goldman's contested application, this appeal.

Watch this site.

January 25, 2010--

As Obama Proposes Goldman De-Bank and Liability Cap, of Dodd and BofA's Evasions

By Matthew R. Lee

NEW YORK, January 21 -- Two hours before President Barack Obama unveiled additions to his financial reform proposals, limiting the mix of banking and proprietary trading and setting a cap on liabilities and not only deposits, several of his senior officials briefed the press.

They were relentlessly "on message," emphasizing how comprehensive the package is, how they are "working with Senator Dodd" without mentioning that he will not run for re-election.

They repeatedly referred to the proposed Consumer Financial Protection Agency (or "Consumer Protection Agency," as one of them called it), without address that Dodd himself is said to be moving away from the proposal, eager some say to have his name on a bill, any bill.

The new proposals would, by barring a company that owns a bank from forms of proprietary trading or owning, investing in or advising a private equity or hedge fund, seem to require Goldman Sachs and Morgan Stanley to de-bank. Two questions directly raised Goldman, but the senior administration officials dodged both of them. One asked if the timing of the announcement is tied to Goldman's release of earnings. This was denied.

A second proposal, not clearly spelled out in the briefing, would set a cap on liabilities similar to the 10% deposit cap ostensibly in place since 1994. That cap has been evaded. As South Bronx based Fair Finance Watch and Inner City Press have repeatedly shown, Bank of America has been at or over the cap but still allowed to make acquisitions.

B of A simply reduces the visible level of deposits by pricing, and then picked them up afterwards. The regulators helped evade the cap by including deposits outside of the United States in the denominator calculating the 10%. Why would this be any different?

Inner City Press on BloggingHeads.tv about Haiti, Sri Lanka, Afghanistan... and Massachusetts, here.

January 18, 2010

On Goldman Sachs, the New York Banking Department has belatedly provided to Inner City Press portions of Goldman's application. But key sentences are blacked out with magic marker. Inner City Press has submitted an FOI appeal; watch this site.

January 11, 2010

There is a wave of bank branch closings, as yet unacted on by the regulators. Two examples are Regions Financial, closing 121 branches in over a dozen states, and PNC which is closing three dozen branches in Ohio. On the former, HEED in Jackson, Mississippi fought back and kept their branch open. But from Florida to Tennessee, communities have not been so lucky. What will the regulators do?

January 4, 2010

From an SEC Form 8-K filed on New Years Eve: "In February of 2010, Republic Bank & Trust Company (the “Bank”), a subsidiary of Republic Bancorp, Inc., expects to meet with the Federal Deposit Insurance Corporation (the “FDIC”), at their request, to review the future viability of the Bank’s Refund Anticipation Loan program beyond the upcoming tax season."

These tax RALS are so predatory, one wonders how the FDIC considers this tax season's victims: cannon fodder? If the FDIC knows it's wrong, why allow another season of victims?

Meanwhile, beginning this week in Kentucky, payday loans cannot exceed $500, and the service fees are not to be more than $15 per $100 borrowed during a two-week period...

In India, despite public statements that Citigroup and CitiFinancial would be getting out of their subprime lending, now Citi has decided to continue: "Shriram Transport Finance Company (STFC), which has acquired the assets of GE Transportation Financial Services, a part of GE Capital, is looking aggressively for more such acquisitions, R Sridhar, managing director, said. Sridhar added that talks of acquiring assets of Citi Financial have not fructified. 'We have been negotiating with Citi Financial for a while now, but the company is not up for sale anymore as they want to enter the market again.'"

So Citi's predatory lending will continue...

December 28, 2009

Goldman Sachs, which has evaded regulatory scrutiny at every turn, has applied to open a branch of Goldman Sach Bank USA at 200 West Street in New York City. Inner City Press' Fair Finance Watch has just submitted to the New York State Banking Department a timely comment opposing and requesting public hearings on Goldman Sachs' pending application:

We wish to emphasize that Goldman Sachs Bank USA, a New York State chartered bank, is the direct parent of controversial subprime services Litton: "Goldman acquired Litton from C-BASS on Dec. 10, 2007. Litton is headquartered in Houston, Texas and is a wholly owned subsidiary of Goldman Sachs Bank, USA a New York state chartered bank."

As the regulator of Goldman Sach Bank USA, the NYBD has a responsibility, including in response to this timely comment, to closely examine and solicit public comments on Litton's performance.

As you know, Goldman Sachs was allowed to become a bank holding company without any public comment period or consideration of the federal or state Community Reinvestment Act, which would otherwise have been required. Since then, as simply one example, Goldman Sachs has been charged with involvement in predatory lending, including for the acts of its subprime servicing subsidiary, Litton Loan Servicing. Even Goldman's settlement left the public in the dark. See, e.g., Bloomberg News, May 17, 2009, "Deal in Goldman probe leaves public in dark." Watch this site.

December 21, 2009

Of a possible CRA in the UK, "ministers are to 'explore options' with banks on improving the information available on banking services available in disadvantaged areas, the chancellor announced. The Pre-Budget Report said it is 'important to understand how banks are supporting our broader community regeneration work'. The document added: 'The Government will therefore explore options with the banks to improve the information available on services delivered in deprived communities.' Earlier this year, Liam Byrne, the chief secretary to the Treasury, said the Government was 'earnestly exploring' the possibility of US-style legislation that prevents banks from discriminating in their lending practices against individuals and businesses in deprived areas (R&R, 12 October, p4). But last month the Treasury moved to play down reports that it is exploring the idea of introducing a UK version of the US Community Reinvestment Act."

So which is it?

December 14, 2009

The Federal Reserve has written not to Goldman Sachs but to its target Avenue Financial, asking for information necessary to complete the Board's record of information with respect to the filing by The Goldman Sachs Group, Inc., New York, New York, to retain its interest in Avenue Financial Holdings Inc., Nashville, Tennessee.Discuss Avenue Bank's policies and procedures for ensuring that its lending activities comply with applicable consumer protection laws and regulations, in particular, the Equal Credit Opportunity Act, the Fair Housing Act, the Truth-in-Lending Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, and the Home Ownership and Equity Protection Act. Discuss Avenue Bank's activities to serve the credit needs of its low- and moderate-income communities throughout its CRA assessment area, since the reorganization of the bank and the change in its business model."

The response is that one in four of Avenue's branches serves moderate income. What about low income?

December 7, 2009

The FDIC's study of the un- and under-banked, released last week, was heard around the world, via the Financial Times, here.

In repurchases from Fannie Mae and Freddie Mac, Wells Fargo said in the third quarter it set aside an additional $146 million for its repurchase reserve "due to higher defaults, anticipated higher repurchase demands and overall deterioration in the market." But of course it didn't spell out the actual size of the reserve.

Bank of America disclosed in the third quarter that it bought back, through Sept. 30, $922 million of mortgages tied to faulty underwriting. Of course B of A also doesn't break down the size of its repurchase reserve. J.P. Morgan, as of the third quarter, had $1.1 billion set aside to meet repurchase claims from investors, including those from Fannie and Freddie, because of problematic underwriting. The repurchase reserve "won't run at that high level," claimed Michael Cavanagh, J.P. Morgan's chief financial officer, in October during the quarterly earnings conference call, but "looking ahead it will still be something though." Yep...

The Federation of Community Development Credit Unions is canceling its seminar on CRA this week. The seminar, "Credit Union Outreach, Community Reinvestment, and Credit Unions: Facts. Resources. Strategies" was scheduled for Thursday in Alexandria, Va. "A labor dispute at our planned location forced us to cancel," said federation President/CEO Cliff Rosenthal. "It also became apparent to us that urgent legislative priorities were taking the attention of many of our presenters and attendees, so we have decided to postpone this session." Hmm...

November 30, 2009

While in Dublin last week a conference heard a call for the "introduction of a Community Reinvestment Act, similar to the one which operates in the US. It rates banks negatively if they engage in unfair lending or other discriminatory practices. British social justice activist Karen Chouhan said banks with low ratings would not be allowed to expand or develop their businesses until their rating went up," a UK Treasury spokesman in London said CRA is not needed, it was designed for a unique American problem. Really?

Thanksgiving question "what about the 150 workers at the Stella D'Oro cookie factory in the Bronx? They lost their jobs and their healthcare when a company owned in part by Goldman Sachs bought Stella D'Oro and closed the factory down."

Ben Bernanke has written that "the Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation." But what about the Fed's inattention to predatory lending and its role in TRIGGERING the crisis? The Fed's lack of scrutiny of the predatory lending and service issues raised against Goldman Sachs pending applications does not bode well.

November 23, 2009

In the midst of a Community Reinvestment Act challenge, amid protests in the street, Goldman Sachs announces the payment of three percent of what it doles out in bonus to small businesses. Most in the mainstream press offer nothing but praise. What about, for example, Goldman's ownership of subprime servicer Litton Loans?

November 16, 2009

Ah, the arrogance of Goldman Sachs. Nearly a month after ICP Fair Finance Watch filed comments with the Federal Reserve, a response arrived from Goldman. They'd ignored the directions of how to send mail to Inner City Press, and hadn't bother to e-mail. And their response, while claiming that detailed reports of misdeeds, including by subsidiary Litton, by sample target Avenue Bank and in loans bought from Fremont are "replete with egregious mistakes and factual inaccuracies," does not identify a single error. They're just counting on the friendship or subservience of the Fed. Watch this space.

November 9, 2009

Primerica, a consumer complaint challenged business even by Citigroup's standards, is slated to be spun off via an initial public offering. Like CitiFinancial, Primerica targets "lower end consumers," as the WSJ diplomatically puts it. Many of those recruited to pay to work for it also complain, including to the Federal Trade Commission, from which Inner City Press receipt a slew of complaints under the Freedom of Information Act. Now the spin off. But Citi's predatory heart continues to beat...

November 2, 2009

JP Morgan Chase's CEO James Dimon has trashed the proposed Consumer Financial Protection Agency, saying it "would create cumbersome, costly restrictions and the banks will likely pass those costs onto the consumers." Let's see how it work for Chase...

One TARP-er hypes the stock of another, per WSJ: The recent selloff in BofA shares creates a good chance to buy into the bank, say Citigroup analysts. Bank of America shares are down some 17% from their most recent closing peak of $18.59 hit on Oct. 14. "Given the ongoing CEO search, fear of a capital raise only adds to the uncertainty hitting the stock, which creates a very attractive entry point."

October 26, 2009

A week after Inner City Press' Fair Finance Watch filed a formal protest to Goldman Sachs' applications to the Federal Reserve for shares in several bank, and after the Fed has started the clock for Goldman's response, no defense has been offered. Perhaps Goldman is too busy paying bonus and getting paid for doing nothing, as in New Jersey. It was reported last week that the Garden State, run by Jon Corzine formerly of Goldman Sachs, is paying for interest rate protection is no longer needs, and will keep paying until 2019, even as the state engages in other cut-backs. Ah, what a socially responsible institution....

J.P. Morgan Chase & Co. made nearly $50,000 in political donations through its PAC in September, counted by WSJ. The company donated $2,000 to Alabama Sen. Richard Shelby, the senior Republican on the Senate Banking Committee. The company also donated $1,000 to Pennsylvania Rep. Paul Kanjorski, the No. 2 Democrat on the House financial-services panel...

Citigroup canceled a planned $4.5 million renovation of its main office in Brazil that included an area for entertaining clients and a landscaped terrace called a "suspended garden." Can you say, Babylon?

"We need it to compete," a senior executive told the WSJ about about the project last week, describing it as an important way to impress banking clients and use Citigroup's real estate more efficiently. But on Tuesday afternoon, a person familiar with the situation said the renovation had been reviewed by senior executives, who decided to shelve the project. The reversal underscores the sensitivity inside Citigroup about its spending habits, since the bank has gotten $45 billion from the U.S. government, a 34%-owner of the company's common stock. on said the renovation had been reviewed by senior executives, who decided to shelve the project.

October 19, 2009

Inner City Press' Fair Finance Watch has just filed timely comments opposing and requesting public hearings on Goldman Sachs' pending applications to acquire, inter alia, Atlantic Capital Bank, Avenue Bank, Union Federal Savings Bank and Doral Bank.

Goldman Sachs was allowed to become a bank holding company without any public comment period or consideration of the Community Reinvestment Act, which would otherwise have been required. Since then, as simply one example, Goldman Sachs has been charged with involvement in predatory lending, including for the acts of its subprime servicing subsidiary, Litton Loan Servicing. Even Goldman's settlement left the public in the dark.

October 12, 2009

Citifinancial continues with its sleaze. From last week's Charlotte Observer:

"Donna and Ronnie Fruia learned firsthand how difficult it can be to get help modifying a mortgage. The couple from Troutman were in the midst of a series of health crises, and three members of the family - the couple's son, Donna's mother and Ronnie - were in the hospital. That's when Donna got a call that somebody from her mortgage company, CitiFinancial, had shown up in her husband's hospital room, where he was recovering from a stroke. 'At the time, I couldn't even really talk that good," Ronnie said. "But he wanted me to sign a bunch of papers.' The Iredell County couple had been trying to get a mortgage modification from CitiFinancial. The company, however, was pushing them to accept a modification that wouldn't have cut their interest rate, they said. Only after the episode in the hospital room and the involvement of state regulators did CitiFinancial cut the mortgage's interest rate from 11.5 percent to 5 percent, lowering their monthly payment from $985 to $602. The process took from the start of the year until July."

So what are the regulators going to do? Tim Geithner called Citigroup's chairman 17 times in the first half of this yet...

Hitting a new low, it took the Federal Reserve until September 30, 2009 to respond to Inner City Press / Fair Finance Watch's December 8, 2008 Freedom of Information Act request for the applications to become bank holding companies submitted by GMAC and the CIT Group. That's more than nine months, and even then, the Fed says it is withholding 182 pages. We will be appealing...

October 5, 2009

Reports that Citigroup is planning to cut back its retail banking presence to six cities -- New York, Washington, Miami, Chicago, San Francisco and Los Angeles -- and ditch branches in Texas, Boston and Philadelphia has some community activists asking how Citi would comply with the Community Reinvestment Act if it makes these cut backs. But Citi with its Citibank has the worst customer service ratings, while its Citifinancial has long engaged in predatory lending. So others thing cutting Citi back is a step in the right direction. If they collect deposits beyond these six cities, they should have a CRA duty there. But subprime loans, even personal loans, is not the way to comply with CRA. Watch this site.

September 28, 2009

Accused recently of predatory lending are Deutsche Bank -- the unaccountable king of subprime foreclosures -- and SunTrust, on a larger than normal loan.

As the legislation to require auditing of the Federal Reserve gather strength and supporters in Congress, the Fed sent its general council to argue that this type of accountability would just lead to higher rates. This sounds like JPMorgan Chase's argument when Georgia passed anti-predatory lending legislation...

As Citigroup moves to ditch its Portugal credit card business to Barclays -- Pandit deemed it "non core" -- it becomes clearer that Citi's focus is in emerging markets, where it can still get away from unfettered predatory lending.

Meanwhile, HSBC's CEO says he's moving from London to Hong Kong. Same game?

September 21, 2009

Last week the Federal Reserve issued a letter saying it will belated begin examining non-bank subsidiaries like CitiFinancial. The Fed says in footnote one they have the legal authority to do these exams. Then why did they refuse to do them for so long? Iit's like the S&L regulator which stood by as the thrifts wasted taxpayer money -- at least its duty were passed along to the OTS.

On merger applications in the past, when community groups like ICP / Fair Finance Watch put in evidence of violations by bank's subsidiaries, the Fed would drop a footnote that the issues were being referred to the FTC and HUD -- implying that the Fed had no jurisdiction over them, certainly no commitment to do anything about them

The Fed says, "Supervisory activities will be planned based on the issues identified ...through the investigation of consumer complaints." So what has the Fed been doing to date with consumer complaints against non-bank BHC subsidiaries?

Meanwhile, PNC's National City is moving to close its branch on the East Side of Youngstown, Ohio, in the McGuffey Mall. It has no other branch within a mile. What will be done?

September 14, 2009

We note the Malibu partying of Cheronda Guyton, Wells Fargo bank's senior VP for foreclosed properties....

Meanwhile, on another beach, HSBC is banking on the bloodbath on the beach: in Sri Lanka, with people still interned in the camps in Vavuniya, HSBC has bragged it is looking to open branch offices in Jaffna and elsewhere in the North. "HSBC is looking at opening branches in strategic locations in the North and East," its CEO for Sri Lanka and Maldives Nick A Nicolaou said. Some call it "banking on the bloodbath on the beach," and wonder how HSBC has to date escaped the boycott calls that have been directed at Victoria's Secret -- will it be exposed? -- and GAP, including its ironically named Banana Republic brand. We'll see.

September 7, 2009

Despite all the talk about Citigroup moving away from subprime and predatory lending, even in Indonesia its high-cost unit CitiFinancial continues to grow, having just "opened two new branches in Makassar and Palembang. Djamin Nainggolan, consumer finance business head at Citi Indonesia, said: "The expansion of CitiFinancial to Makassar and Palembang reinforces our commitment to growth and development in Indonesia. Within four years, we have grown from 16 branches to a 69-outlet network." Predatory lending in Indonesia...

Having tangled repeatedly with the Federal Reserve about Freedom of Information Act compliance, we note Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595. Chief District Judge Loretta Preska of the SDNY wrote in a 47-page opinion, "The Board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed. Conjecture, without evidence of imminent harm, simply fails to meet the Board's burden." Preska concluded that the Fed "improperly withheld agency records in response to a FOIA request by conducting an inadequate search." Why are we not surprised?

August 31, 2009

President Obama's decision, announced from Martha's Vineyard, to re-nominate Ben Bernanke to chair the Federal Reserve represents even to some of Obama's most fervent supporters a sign that, at least on banks and the economy, his "Change We Can Believe In" may be no change at all. That Obama nominated and then stood behind the New York Fed's Tim Geithner, even after the public disclosure that the man he would put in charge of the Internal Revenue Service had himself neglected to pay his taxes, and even when caught only partially paid up, using the statute of limitations, these supporters excuse as a bittersweet decision made early on, when the economy was in crisis. That is no longer the case, according to Team Obama. So to give another term to the very same Fed chairman who presided over the predatory practices of Citigroup et al., and then bailed them and AIG out, can't be defended on crisis grounds. As we've noted, Bernanke's approach to the Community Reinvestment Act is that it needn't be enforced on mergers -- which is the law's only enforcement mechanism. This defanging of CRA is an idea that appears to be spreading. Watch this site.

As IMF Funds Latvia, It Evades Questions of Conditions and Props Up Swedish Banks

By Matthew Russell Lee

UNITED NATIONS, August 28 -- As the International Monetary Fund, after haggling with the government in Riga, decided to release an additional $280 million to Latvia, the IMF's Dominique Strauss-Kahn offered canned praise that "authorities have made good progress in stabilizing the financial sector. Important measures include strengthened intervention capacity, an enhanced financial supervision and monitoring framework, and steps to contain risks in Parex Bank. Looking ahead, in light of binding fiscal constraints, the authorities should minimize contingent liabilities from domestic banks."

On an IMF press conference call that followed, Inner City Press asked for an explanation of Strauss-Kahn's directive on Latvian banking, whether the IMF expects more bank failures and merger in the country, and whether the measures taken are, at least indirectly, meant to benefit as well Sweden's banks, absolving them of exposure to the Latvian market.

Anne Marie Gulde, Senior advisor in the IMF's European Department, began by saying, "That's a lot of questions." Then she proceeded to dodge most of them. She said, "we are looking at how the budget can be made consistent with the economic realities in the country. This will involve possible further structural reform in spending and possibly revenue measures." The "we" presumably means the IMF.

She went on, "the authorities are working on improving their bank resolution framework, so we are reasonably confident that any problems that will be emerging in this improved framework can be addressed." There was the matter of the Parex Bank; in the U.S., there was the sale by the FDIC of Colonial Bank to BB&T with very little transparency. The IMF opines on Latvia because they need the money. But does the IMF opine on the U.S.?

Mark Griffith, the IMF's Latvia mission chief, added that "a number of banks have taken measures to increase capital to strengthen their position in Latvia." Was this the response to the question of whether the IMF's demand in Latvia benefit Swedish banks?

Footnote: at least in this case the IMF provided notice to the Press of a conference call on the decision. In the more controversial case of Sri Lanka, where at least four countries abstained on human rights and / or war crimes grounds, no such notice was given. Afterwards the IMF told Inner City Press that the Sri Lanka call had been only for journalists in Colombo. Here, priority was given to questioners from Riga, and at the end it was said that the IMF wants to engage more about Latvia with the press, especially in Riga. Does the IMF play politics on how it provides notice of conference calls? Watch this site.

From the IMF's transcript:

Inner City Press: Mr. Strauss-Kahn's statement talked about additional fiscal consolidation. I was wondering if, one, you could explain that, and two, separately whether the IMF expects any further bailouts of banks or mergers of Latvian banks. Also the effect of this program on not only Latvian banks, but let's see the Swedish banks that are exposed there and whether the idea of the government helping consumers pay banks, is it a matter of the banks restructuring the debt of consumers or of funds going to consumers in order to have the banks receive 100 percent of what's owed to them.

MS. GULDE-WOLF: Those are a lot of questions. Let me start maybe on the fiscal consolidation. Clearly, this is a part of the program as we had explained before. The decline in economic output in Latvia following a boom has a severe impact on the way the budget has to be structured and in looking at the next budget we are looking at how the budget can be made consistent with the economic realities in the country. This will involve possible further structural reform in spending and possibly revenue measures.

Clearly the issue of banks and possible further banking problems is critical in the forward-looking strategy of where we are going to go. There has already been significant progress made in stabilizing the financial sector. At this stage, the sector as a whole is well capitalized and liquid. With the continuing economic problem it is very important to keep vigilance in the financial sector. Also it cannot be ruled out that there might be problems emerging. The authorities are working on improving their bank resolution framework, so we are reasonably confident that any problems that will be emerging in this improved framework can be addressed.

MR. GRIFFITHS: I think the financial sector has really stabilized since the end of last year, and a number of banks have taken measures to increase capital to strengthen their position in Latvia, so I think they are making a lot of progress there and I think the authorities have worked very hard there. So I think things are getting better there.

* * *

August 24, 2009

What an outrage-- now the FDIC, when it chooses which bidder to award a bailed out bank to, refuses to release even the names of the rejected bidders, and information about their bids. Why was one chosen over the other? There's no way to know. This change in policy should not be allowed to stand.

August 17, 2009 -- As Colonial Bank is Handed to BB&T, Regulators Ignore Community Reinvestment Act and BB&T's Predatory Lending, G-20 Preview

By Matthew R. Lee

SOUTH BRONX, NY -- Lost in the late Friday coverage of the handover of Colonial BancGroup to BB&T was the way that this acquisition of a $25 billion bank was shielded from any public comment or consideration of the Community Reinvestment Act. The CRA of 1977, which requires that regulators consider public comments on banks' records of serving low and moderate income neighborhoods when they apply for approval for mergers or expansion, has been ignored on a number of large acquisitions, such as JPMorgan Chase's pick-up of Washington Mutual.

At that time, the regulators were in crisis mode, so to some the waiver of applicable law was more understandable. Now under a new administration which says the recovery has begun, the law is again waived, for a bank whose chairman has ridiculed the CRA while engaging in predatory lending through BB&T's Lendmark subsidiary, sure to expand into new markets through this acquisition. There has been no mention of any post consummation consideration of BB&T's record or any CRA plan it might have. If this is the new era of financial regulation, it is worse not better than what came before.

August 10, 2009

Sleazy mortgage lender Taylor, Bean & Whitaker, which gave Inner City Press / Fair Finance Watch the run around about getting its HMDA data, has been raided by law enforcement and finally stopped lending. In March, after the Treasury Department told Colonial to come up with capital before it would get TARP funds, home-loan provider Taylor, Bean, "which had close ties to Colonial, led a group that pledged to provide the troubled bank with a $300 million equity life line. The financing deal fell apart last week, just days before U.S. federal agents on Monday raided the Florida offices of Colonial and Taylor Bean. On Wednesday, Taylor Bean closed its mortgage lending business. Lawyers suspect that the incestuous relationship between Colonial and Taylor Bean attracted the attention of regulators and the Justice Department." The HMDA run around was a clue, too...

August 3, 2009 -- Predatory Lending Persists, Despite Rosy Views from DC and IMF, CitiFinancial's Dark Side in Knoxville

By Matthew R. Lee

SOUTH BRONX, August 1 -- In Washington and New York, there is talk of an uptick in the national housing market and a curtailment of controversial subprime lending by such wounded giants as Citigroup. On July 31, Inner City Press asked the International Monetary Fund about the regulation of subprime lending in the United States, yielding a rosy answer about consumer protection.

But a mortgage broker in Knoxville, Tennessee long known to Inner City Press tells a different story on both fronts. He has in the past been sued for whistleblowing about Citigroup, and so will remain nameless in this article. But he knows Citigroup's subprime business well, having worked for and then against its consumer finance subsidiary CitiFinancial.

Reflecting the collapse of the housing market, he compares 2006, when he closed over 100 home purchase loans, with the year to date 2009, in which he has closed only six such loans.

His income from fees has plummeted, and he faces a car repossession by Wells Fargo (which he calls Hells Fargo). Still he laments others' problems more than his own, describing to Inner City Press a sample CitiFinancial loan in Knoxville.

"They raked her at twelve and a half percent," he said, referring to a 63 year old African American woman who was also charged $7,000 in fees. "This is after they took TARP bailout funds, they won't show any flexibility and she's about to lose her house."

He describes another borrower who has a $1700 personal loan from Citifinancial at 25.5% interest, and a $6,000 loan at 16% from Washington Mutual Finance, which CitiFinancial bought. The loans were consolidated at the higher CitiFinancial rate of 25%. "They're still up to their predatory lending," the maverick broker says. Even with the go-go years over.

On July 31, Inner City Press asked the Western Hemisphere Division Chief of the International Monetary Fund Charles Kramer about U.S. regulation of subprime lending, current and proposed:

Inner City Press: What do you think of the proposal [of] separating prudential regulation of banks from consumer protection? It's pending in the House. I was told that the IMF will have some view on that and you are the guys to ask. What can you say to that?

MR. KRAMER: There are two observations we'd make on that. First of all, the key principle is that prudential regulation needs to be strengthened and be uniformly strong across the board, and a clear message coming out of the crisis is that prudential regulation needs to be enhanced significantly. Part of your question goes to an organizational issue, and looking around the globe we see financial supervision and regulation organized in a number of different ways. In some places we see it organized along functional lines where you have regulators for insurance companies and securities companies individually and so forth, and in some countries we have regulation along conceptual lines you could say, so you have prudential regulation and consumer and investor protection regulation. We're not of the view that there is any one sort of magic bullet or any one formula for this. Again the key thing is that you need strong and sound prudential regulation across the system.

Inner City Press: To the degree that unregulated subprime lending in some cases by bank affiliates at least triggered or started the rumblings of this. What protection do you think should be in place so that that doesn't happen again?

MR. KRAMER: Again I think the issue is that you need strong prudential regulation across the board. Consumer products are obviously one area, but there are a lot of others. You mentioned nonbanks, for example. We think it's very important that the administration has proposed to bring nonbanks under a stronger regulatory net to the extent that they're systemic, so we think that the proposal in particular to designate certain banks and nonbanks as tier one financial holding companies that would come under stronger regulation is a very good thing.

Whether these moves will help people for example in Knoxville with 12.5% mortgages and 25.5% personal loans from CitiFinancial remains to be seen.

July 27, 2009

"Robert Joss is leaving the board of directors at Wells Fargo to join the board of Citigroup" - WTF? Who is it, that offered him the Citigroup position? How isn't it a conflict of interest, given Citigroup's and Wells' fight for Wachovia? What about the other conflicts of interest on the Citigroup board?

July 20, 2009

After the financial meltdown exposed the Federal Reserve's inattention to predatory lending and credit default swaps, one would expect the Fed to hold off further loosening the rules on CDS. But you'd be wrong. Last week the Fed granted an exemption to CDS dealer ICE Trust, owned by crisis loser Citigroup and predatory Goldman Sachs, among others, giving them an easier 20 percent capital treatment rather than the 100 percent applicable to uninsured banks like ICE Trust.

Bloomberg News, notably, spun the story the other way, claiming that "the Federal Reserve determined that ICE Trust is as risky as any insured bank, according to a letter posted July 14 on the regulator’s Web site. The Fed is requiring that bank members of ICE Trust, such as Goldman Sachs and New York-based Citigroup Inc., set aside the same amount of capital as parties trading as federally-backed lenders."

But this is a story yet again of the Fed making it easy for the dealer community-- the dealers sought 0% so at least the Fed is imposing 20%. Those who don't learn from the past are condemned to repeat it...

JPMorgan Chase has a Community Reinvestment Act duty in West Virginia and Kentucky, for example, and in neighboring states. Meanwhile, Chase is funding 6 out of the top 8 corporate producers of MTR coal in Appalachia. (Massey, International Coal Group, Arch Coal, Consol Energy, TECO and Foundation Coal.), per RAN. Chase was a co-lead arranger and underwriter for more than $1 billion in new financing to Massey Energy less than 12 months ago. Massey Energy is the biggest and most controversial MTR mining company in Appalachia, and is responsible for nearly 20% of all MTR coal mined. Others have stopped funding it -- why not Chase?

July 13, 2009

While the fate of the CRA in the CFSA legislation remains in the air -- or in the hands of Barney Frank -- we recommend this week two articles in the Charlotte Observer, both about Home Mortgage Disclosure Act. Inner City Press / Fair Finance Watch published its analysis of the 2008 data back in early April. But as in previous years, the Observer beat up other daily newspapers with its detailed story. Notably, the Observer story -- and that of ICP / Fair Finance Watch? -- does not include the 2008 loans of Washington Mutual. JPMorgan Chase is claiming that it had no duty to file the data, because of the structure of how the regulators let JPMC buy WaMu. This is a major loophole that should and will be pursued.

The Observer reports that "the HMDA data supplied by banks, for example, doesn't currently include borrowers' credit scores, the down payment amount and other details that would give a clearer picture of a lenders' decisions to make or deny a particular loan" and goes on to note that Inner City Press / Fair Finance Watch "has long argued the public needs more information about the role race plays in lending. Now that many banks are recipients of federal bailout dollars, [ICP] says they should submit to stricter HMDA requirements. 'It's the least they can do,' [ICP] said."

On the West Coast, JPM Chase, Citigroup, Wells Fargo and Bank of America are all refusing to help Californians in their time of need, announcing they will not accept the State's IOUs. As noted by the longtime DC watchdog of the Associated Press, "clearly, the federal government has leverage over these institutions," said [ICP]. Hundreds of banks have received aid from the government as part of its $700 billion rescue plan last fall."

July 6, 2009

Citigroup, with $45 billion in bailout funds, one third publicly owned, has jacked up credit card rates more sharply than other banks, the FT reports. It has also raised salaries by 50%. Ditech continues TV ads for mortgages. And from the WSJ's account of Geithner's domination of the process to name his successor at the New York Fed, "The search to replace Mr. Geithner began immediately after he was tapped in late November to be Treasury secretary...By early January, the list was narrowed to six, including Kevin Warsh, a member of the Federal Reserve Board in Washington; Rodgin Cohen, who specialized in banking law at Sullivan & Cromwell LLC; and Mr. Dudley, who had been head of the New York Fed's markets division since 2007" -- and was at Goldman Sachs before that. Dudley was Geithner's choice. JPM Chase's Jaime Dimon, on the other hand, favored his lawyer Rodgin Cohen....

June 29, 2009

The June 25 hearings on Capitol Hill about the Federal Reserve's role in Bank of America's acquisition of Merrill Lynch don't auger well for Barack Obama to renominate Ben Bernanke as Fed chairman. Bernanke repeatedly said, I don't recollect that conversation. He was asked about statements by top Fed lawyer Scott Alvarez but dodged the repeated question, doesn't he work for you? He took at least some fire from the left as well as right. Even more shameful was the Fed giving away the store to GMAC, and now to PIMCO. Is this the change to be believed in?

The hearings also recounted how little confidence a Fed government had in Bank of America CFO Joe Price, who'd go on to throw the Community Reinvestment Act under the bus during the bank's April earnings call. His statements have yet to be unpacked. But Ken Lewis, and perhaps Bernanke himself, might want to start packing.

June 22, 2009 -- Obama's Proposal By Splitting Community Reinvestment Act from Mergers Could Cut Enforcement, Lost in (Fed) Sauce

Byline: Matthew R. Lee of Inner City Press: News Analysis

MILWAUKEE, June 17 -- The Obama administration's financial regulation proposal, on the issue of the Community Reinvestment Act, bears the fingerprints of the Federal Reserve, not only Tim Geithner but also Ben Bernanke. While quickly praised by, for example, Paul Krugman, since the proposal shifts CRA evaluation away from the regulators who review the mergers on which CRA is actually enforced, bankers will like it, and may be behind it.

CRA is only enforced in connection with banks' applications for regulatory approval for mergers and expansions, as confirmed by the Department of Justice Office of Legal Counsel. Without taking this into account, the Obama administration is proposing that CRA be a core function of the Consumer Financial Protection Agency, which will not be responsible for merger review.

Had this proposal been made under the Bush administration, CRA advocates would have howled that it weakened the CRA. Since it's Obama, the response appears generally to be, let's wait and see.

But not only did Obama appoint and fight for Tim Geithner, who at the Federal Reserve Bank of New York oversaw some of the most predatory moves by Citigroup and others -- Obama also continues to praise Ben Bernanke.

In late 2008 at the Federal Reserve in Washington, Inner City Press asked Ben Bernanke about his decision to waive any CRA public comment period when he allowed Goldman Sachs and Morgan Stanley to become bank holding companies.

Bernanke responded that it makes no sense to limit CRA review to regulatory approval time -- despite that being the only legal enforcement of CRA. Now that thinking seems to have insidiously spread within the Obama administration.

But who will blow the whistle? Krugman for example takes the proposal as a "poke in the eye to right-wingers." To skeptics, it's a perfect post modern move: cheered by ideological but ill-informed liberals, but actually serving big business.

Postscript -- proponents of Obama's plan have noted that the CFSA would, among other things, hold public hearings on (some?) mergers. But if the power to approval or deny the mergers remains with the Federal Reserve, OCC and FDIC, the CFSA could be just a side show. The Bank Holding Company Act and Bank Merger Act would have to be amended -- first.

On the other hand, a portion of Obama's proposal, to declare hedge funds which pose systemic risk to be bank holding companies, could easily be expanded to put just funds under the CRA. Whether this happens, or for now is at least quickly proposed, may be a litmus test. Watch this site.

June 15, 2009 -- Tales from the Subprime Meltdown Resonate from Coast to Coast as Regulators Spins

Byline: Matthew R. Lee of Inner City Press: News Analysis

SOUTH BRONX, NY, June 11 -- As subprime enabler Larry Summers prepares to belatedly propose new regulation in a speech Friday in New York, Thursday in the Midwest one of the beneficiaries of Summers' deregulation and the meltdown, Wells Fargo, was protested by workers and consumers. Employees of Quad City Die Casting employees in Moline, Illinois called on Wells Fargo to restore financing before the plant is closed and their jobs lost on July 11.

The protest was part of a nationwide day of action by NCRC members, from California to New York. Meanwhile, Wells Fargo Bank in 2008 confined African Americans to higher-cost loans above the Federally defined rate spread 2.18 times more frequently than whites, according to this (organization's) study.

In North Hollywood, for example, according to organizers there, "sixty community activists and a horde of media outlets gathered in North Hollywood for a press conference in front of a four unit apartment building from which tenants were being evicted. Lizette Guevara, a ten year resident of the building, who with her children and a blind neighbor are being evicted, spoke about her efforts to stay in her home... Participants included community organizations and neighbors from the nearby dog park."

In North Carolina, numerous groups participated in a "Financial Freedom Fest Day of Action." In the Detroit Council Chambers, it was standing room only. In Indiana, they "talked about the foreclosure mitigation counseling program and had 2 families there to give testimonials about how they were helped by the program."

There were rip-roaring events in Milwaukee, Wisconsin, but we'll have more on that next week after a visit to Beer City.

At an event in Mississippi, a representative of the City Jackson deplored "wrongful eviction of tenants being told by landlords that they do not need to show up in court and being offered to 'work something out' only to be evicted five days later."

And that was a consistent theme from coast to coast: lower income people are bearing the brunt of the financial crisis, and the bailouts are not helping them, despite what Larry Summers says, despite some banks now paying back the TARP. When people feel that their champion's in power, and still they have no justice, what do they do? Watch this site.

June 8, 2009

Questions, questions: Bank of America will be saved by... ex-regulators? Now on the board of directors are former Federal Reserve Governor Susan Bies and former Federal Deposit Insurance Corp. Chairman Donald Powell. That is to say, regulators who failed to stop predatory lending and the meltdown now benefit from it....

So the regulators' idea of change at Citigroup would be to hand the reigns from Pandit to former U.S. Bancorp CEO Jerry Grundhofer, who bought a 25% stake in now-failed predatory lender New Century? Plus ca change, plus c'est la meme chose.

On June 11, there will be Community Reinvestment Act-relevant events by NCRC members across the USA, including New York, Alabama, California, Washington DC, Delaware, Florida, Indiana, Iowa, Maryland, Michigan, Missouri, New Jersey, North Carolina, Ohio, South Carolina, Texas, West Virginia and Wisconsin....

June 1, 2009

In the UK, according to a new study by the New Local Government Network, "There is evidence that the pernicious trend of illegal unsecured lending at extremely high rates of interest, or 'loan sharking,' is making a comeback At least 165,000 people already use loan sharks in the UK and we can expect the number to rise sharply." An additional 35,000 people, or an even higher number, are likely to use loan sharks during the recession, the report predicts.

The race for governor in Florida pits bad banker against worse pro-bank blowhard. Bill McCollum, who while in Congress promoted every form of deregulation and promoted predatory lending, now faces off against Alex Sink, the former CFO of NationsBank now Bank of America, who oversaw the former's purchase of Barnett Banks which set negative fair lending precedents. How to choose between them? We don't envy Floridians on this one...

What a surprise: the Committee on Capital Markets Regulation, including vulture investor Wilbur L. Ross Jr. of WL Ross & Co., is proposing that the Federal Reserve become the super-regulator...

May 25, 2009

Banco Bilbao Vizcaya Argentaria SA is looking to acquire a U.S. bank up to half its size in 2010... So how did the Federal Reserve explain the lack of public notice on its H2A web site for Bank of America's application for a new bank? We don't know yet: we asked the Fed to response by email, but they have not....

May 18, 2009

On May 14, Inner City Press submitted the following to the Federal Reserve:

On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a
petition, challenge and request under the Freedom of Information Act (5 U.S.C. § 552; "FOIA") and Community Reinvestment Act (CRA) regarding the
application by Bank of America to acquire 100 percent of the voting shares and thereby indirectly acquire Bank of America North Carolina, National
Association, and for the Federal Reserve System's (the "FRS's") communications with Bank of America in 2009 and a demand for public notice and comment, and a protest-in-advance.

The FRS has virtually repealed banking laws, including the BHC Act and the CRA, by approving mergers and conversion with no public notice or comment.
Now, on an application by the largest and most troubled US bank, the Fed provided no notice until the last day on its H2A web site. Yesterday, ICP
was asked about a notice seen in the Federal Register. It was not in the H2A. The undersigned called the FRB of Richmond, and noted that it was not in the H2A, requested an extension of the comment period.

Today May 14, suddenly the proposal is in the updated H2A,http://www.federalreserve.gov/releases/h2a/h2a.cfm?view=week with the comment period ending... tomorrow. This is unreasonable, and unwise given the issues surrounding Bank of America. It is widely reported that B of A would have been required to raise more capital, but that it lobbied the Fed to knock $16 billion off what it should raise. The Fed and its governors, and B of A until recently when its CEO was under fire, have said that CRA did not cause the financial crisis. But on B of A's April 20 earnings conference call by Lewis and his Chief Financial Officer
Joe Price told analysts that the company's "Community Reinvestment Act portfolio is seven percent of the residential book, but 24% of the losses."
Yeah -- blame your bad decisions to invest in high falutin asset-backed securities on the CRA... We'll have more on this.The conference call is archived here
http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-eventDetails&EventId=2134324and CFO Price makes his statement at Minute 26:25
ICP is requesting an evidentiary hearing to explore this public claim by B of A.

In its (and the) first study of the just-released 2008 mortgage lending data, Inner City Press / Fair Finance Watch has found that Bank of America
NA confined Latinos to higher-cost loans above the rate spread 1.51 times more frequently than whites. Countrywide Bank, which B of A acquired, had a lower disparity, at 1.22. Bank of America NA denied applications by African Americans 1.44 times more frequently than whites, while denying Latinos fully 1.57 times more frequently than whites.

ICP Fair Finance Watch was interviewed on November 7 about the use of funds by Bank of America --

"Bank of America Corp., largely through its political action committees, gave candidates and parties $3.7 million this election cycle, according to
an analysis of Federal Election Commission reports. Bank of America spent $6.5 million lobbying federal officials over the same period; Wachovia spent $2.7 million and Wells Fargo, $3.6 million."

There is no commitment that the bailout funds will not be put to these uses...

There is more to be said, but first the comment period must be extended.

May 11, 2009

Over 500 tenants a month in New York City alone are served with eviction papers due to their landlords being foreclosed on. The number one evicter? Deutsche Bank... So the Fed even cooked the books on the stress tests, after Wells Fargo threatened to sue. At least $16 billion was knocked off what Bank of America has to raise. Way to regulate... Same to the Fed's use of a Goldman Sachs director, Stephen Friedman, as the president of the New York Fed. No conflict of interest there, right?

May 4, 2009

So at Bank of America's shareholders' meeting last week in Charlotte, Ken Lewis was ousted as chairman. This same a week after he and his CFO Joe Price fingered the bank's “Community Reinvestment Act porfolio” as having much higher delinquency rates than other loans. Cynically, Lewis arranged for some community groups to lobby for him to remain as chairman. He's still the CEO -- shareholders couldn't vote on that. Yet.

Amazingly, CitiFinancial continues to sponsor a Ford car -- NASCAR TARP.

April 27, 2009

Bank of America calls itself a major supporter of the Community Reinvestment Act. But as Ken Lewis comes ever-closer to his termination date, apparently everything must go. On B of A’s April 20 earnings conference call by Lewis and his Chief Financial Officer Joe Price told analysts that the company’s “Community Reinvestment Act portfolio is seven percent of the residential book, but 24% of the losses.” Yeah -- blame your bad decisions to invest in high falutin asset-backed securities on the CRA... We'll have more on this.

The conference call is archived here

http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-eventDetails&EventId=2134324

and CFO Price makes his statement at Minute 26:25

And now, from the mail bag, on Wells Fargo and US Bank

Subj: My Plight with Wells Fargo Auto Financial
From: [Name withheld in this format]
To: Inner City Press
Sent: 4/17/2009 6:59:57 P.M. Eastern Daylight Time
Hello Matthew, I've been referred to you by a family member to contact you about some trouble I've been having with Wells Fargo Auto Financial. I'd like to share my story with you, in hopes that you will promote awareness regarding Predatory and Discriminatory Lending Practices.

I myself, am a young, black female; have always been a part-time worker, and full-time student (until recently as of 4/06/09); and a single mother. At the time I contracted with WF, these same characteristics applied.

December 2007, I was deceived into a contract for an auto loan that did not state the terms that was initially discussed. Based on my good credit history, I was told that Wells Fargo would pay off all of my credit card debt, and buy out my car loan from Bank of America and I would end up paying a low monthly payment each month. Right before it is time to sign the contract, Wells fargo change the terms, and decided it was best to give me a check in the amount of $2000 to pay off my own debt, and buy out my car loan ($18K). This was a little fishy to my then, but I felt pressured to go ahead with the deal because (1) I spent almost 3 hours in this office, and I had to leave quickly; (2) I needed the money to pay off some debt and bills; (3) Wells Fargo offered an additional line of credit (as an incentive) for $1000, and (4) I didn't have to start paying for another month and a half.

The terms were $505.77 per month, which was far less than what I was paying for the bills separately. He told me where to sign, and I left. Things were fine for the first couple of months.

May 2008, I had a life changing event occur. My daughter had chronic bronchitis due to Chicago's weather and I had to move to Arkansas for a better climate environment. Upon my move I had certain job leads that fell through and was out of work for at least 4 months. During the entire time, Well Fargo called everyday, at least 3 or 4 times a day. My credit score dropped tremendously, and no one was willing to help. Once I did find a job, I paid all I could to Wells Fargo to get things back on track, but all the money was going torward the interest and not the principle of the load, which kept me at a standstill with paying it down.

I now landed a job where I currently make $30K. As I discussed to Wells Fargo, I've worked in the $505.77 in my monthly budget; but I know that I don't have the money to pay a past due balance, late charges, the current monthly payment, and rolocation expenses in preparation for this new job. I've kept them up to date with all of the changes, and yet they continue to threaten me with repossession, despite the fact that I paid out over $1500 within the last month and a half.

I've called numerous times to see if my loan can be restructured, and been given countless run arounds. Finally, Wells Fargo Bank explained that neither them nor Wells Fargo Auto Financial work with customers (new or existing) that live in Arkansas.

Bottom line, there was absolutely nothing they could do to help me. All the while, I owe $505.77 for March payment, $272.99 in late charges, $505.77 for April, and the $505.77 in May. My credit score is shot, so no other bank will loan me anything, and no car dealership is willing to take a trade in for a car only worth $8000 but a loan attached to it for $20,000.

I've contact the CEO, John G. Stumpf, who had someone else send me a letter back explaining that since I signed the contracted there was nothing they could do. I'm seeking justice in that, Well Fargo needs to be stopped. They thought it was best for my financial situation to require a full-time student, part-time worker, single parent, young black lady to pay them $33,380.82 on a car worth $8000. Tack on a 19.24% interest rate to a loan, which would have me pay them $13,035.13 outright.

This is ridiculous, and something must be done. I trusted Wells Fargo in that they were charged to help me. They initially told me that there was something they can do to help, and made me believe that this is what was best for my situation. Now that I am a customer of theirs, there is nothing they can do to assist me. I am enraged!

Us too. On US Bank --

And on US Bank --

Subj: Attn: Matthew Lee, Executive Director or appropriate staff
From: [Name withheld in this format]
To: Inner City Press
Sent: 4/17/2009 10:37:28 P.M. Eastern Daylight Time

I'm in a fix with US Bank as they have attempted to keep me in perpetual debt to them by using late fees, or overdraft fees. Lately I've moved my account to a credit union, and closed my account with US Bank. I paid in full the negative amount in doing so, and now they claim I own them $795.50 in a negative balance. Again, "overdraft fees".It has been hard to shake these people off. They almost had me lose my apartment, my electricity was off for a week, my phone was off for 4 months. During that time, I had an auto deposit I could not stop because of a perpetual negative balance they claimed even when the deposit was well over the negative. Is there any law I can use to stop these idiots? I doubt I'm the only one having this problem with there predatory practices. And can't the state pull their charter?

April 20, 2009

When Cash America International has its annual general meeting in Fort Worth on April 22, there will be a long overdue shareholders' resolution to “request that the board of directors of Cash America form an independent committee of outside directors to oversee the amendment of current policies and the development of enforcement mechanisms to prevent employees or affiliates from engaging in predatory lending practices.” The company, engaged in payday lending, needless to say opposes the resolution...

In other predatory lending news, Pacific Capital Bancorp -- TARP funds for tax refund anticipation loans: TARP for RAL.

In the run-up to its annual shareholders' meeting, this time in the Hilton and not Carnegie Hall, Citigroup has been criticized for misleadingly offering $5,000 loans and not disclosing in the advertising the interest rate -- 30%. But CitiFinancial has been doing that for a long time...

Of Chris Dodd, former Congressman John LaFalce said "I would tell him to run as a populist - run on the side of the consumer.” LaFalce, as we've noted, went from Congress to... working for noted predatory lender Household International, bought by HSBC...

April 13, 2009

Following up on ICP / Fair Finance Watch's first study of 2008 HMDA data, a complaint has been filed with the Federal Reserve:

Re: Need for FRB Action on Mockery Made of HMDA, by Regions and others

Dear Ms. Johnson, Mr. Alvarez and others:

This letter concerns attempts to avoid public review of Home Mortgage Disclosure Act information by Regions Financial and, prospectively, other financial institutions. As you know, under 12 CFR § 203.5, institutions are required to provide their HMDA Loan Application Registers to requesters. Virtually all banks provide the HMDA LAR in .dat or other analyable electronic format. In fact, searching the Federal Reserve Bulletin we find notation of only two institutions refusing to provide their data in useful form: AmSouth (now Regions Financial) and New York Community Bank. (Lehman Brothers and AIG also took this approach; significantly, the former went bankrupt and the latter survives only as a ward of the FRB.)

Now, Regions has continued what was AmSouth's stance as a HMDA outlier, by responding to a request for its HMDA LAR in .dat format by providing the data in a PDF file of over one thousand pages, which cannot be analyzed using SPSS or other statistical program. The effect is to make Region's 2008 lending performance unanalyzable until September, unlike nearly all other large banks...

Beyond instructing Regions, NYCB and others to move into the mainstream of HMDA reporting to the public, the FRB is encourages to revises its outmoded staff commentary on 12 CFR Part 203, Section 203.5 (which as is relevant here already encourages "mak[ing] the modified register available in census tract order... in order to enhance its utility to users." It is imperative that the Federal Reserve, given its responsibilities under HMDA, make clear to Regions and other institutions that the HMDA LARs they are required to provide to the public should be provided in analyzable electronic format to enhance its utility, particularly following the financial meltdown and the lack of oversight it has highlighted. We await your response.

April 6, 2009

Subprime Survivors Wells, BofA and JPM Chase Were More Disparate By Race in 2008 than Wachovia or Countrywide, Trends Will Worsen Under Current Regulators

NEW YORK, April 2 -- In the first study of the just-released 2008 mortgage lending data, Inner City Press / Fair Finance Watch has found that the seeming survivors of the banking meltdown, Wells Fargo, Bank of America and JPMorgan Chase, had worse disparities by race and ethnicity in denials and higher-cost lending than the banks they acquired, Wachovia and Countrywide. Mortgage lending in the U.S. will become more and not less disparate because of the emergency mergers and bailouts engineered by the regulators, the study predicts.

Fair Finance Watch notes that JPMorgan Chase's massive closing of branches of Washington Mutual will also make credit harder to come by, especially in poor neighborhoods. 2008 is the fifth year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of 3 percent over the yield on Treasury securities of comparable duration on first lien loans, 5 percent on subordinate liens.

Wells Fargo Bank in 2008 confined African Americans to higher-cost loans above this rate spread 2.18 times more frequently than whites, according to Fair Finance Watch. Wachovia Mortgage FSB, the largest lender of Wachovia which Wells Fargo acquired, had a lower disparity, at 1.46.

Bank of America NA in 2008 confined Latinos to higher-cost loans above the rate spread 1.51 times more frequently than whites, the data show. Countrywide Bank, which B of A acquired, had a lower disparity, at 1.22.

JPMorgan Chase was even more disparate to Latinos, confined them to higher-cost loans 2.10 times more frequently than whites, almost as pronounced as its disparity between African-Americans and whites, 2.26. Citigroup, perhaps due to its shrinking, some say dying, business had disparities of 1.90 for African Americans and 1.23 for Latinos. For US Bancorp, the disparity for African Americans was 1.55 and for Latinos, 1.35.

"The banks the regulators favored in 2008, allowing emergency takeovers like JPMorgan Chase's of Washington Mutual, Bank of America's of Countrywide and Merrill Lynch, and Wells Fargo's of Wachovia, were the most racial disparate lenders," states the Fair Finance Watch report. "The regulators did not put any conditions on the mergers or Troubled Assets Relief Program bailouts, for example allowing Chase to close dozens of Washington Mutual branches. As things are going, it will be worse and more disparate in 2009. The new administration has yet to make any substantive change to this."

Several lenders had worse denial rate disparities in 2008 between Latinos and whites then between African American and whites, a change from previous years. Bank of America NA, for example, denied applications by African Americans 1.44 times more frequently than whites, while denying Latinos fully 1.57 times more frequently than whites. Atlanta-based SunTrust in 2008 denied applications by African Americans 1.37 times more frequently than whites, while denying Latinos fully 1.78 times more frequently than whites.

The law required that the 2008 data be provided by April 1, following March 1 requests by Fair Finance Watch. Some lenders did not provide their data by the deadline. Regions Financial provided its data at the deadline but only in paper format, on over 2000 pages, so that it could not yet be computer-analyzed. Further studies will follow.

March 30, 2009

Geithner Promotes Megabanks' Monopoly, in DC as at Fed, 17 Cut to 7 on Derivatives

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

NEW YORK, March 28 -- Seven megabanks' renewed grab for monopoly power in the over the counter derivatives market shows how little Wall Street's real power has changed in the transition from the Bush to Obama administrations.

The banks, including Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Barclays, Credit Suisse and Deutsche Bank, are paying over $1 million to p.r. firm Prism Public Affairs to "educate" the voters weary of bonus and bailouts that those who caused the crisis should benefit from it.

Already, Congress members hungry for campaign contribution have submitted to closed door briefings by Ed Rosen of the law firm Cleary Gottlieb, who drafted the legislative language for monopoly.

The connector in this story is Timothy Geithner, under Bush the president of the Federal Reserve Bank of New York and now Obama's Treasury Secretary. Geithner in June 2008 convened closed door meetings with 17 banks, essentially allowing them to propose and draft their own rules for the derivatives market.

This led to advocacy by the Fair Finance Watch that Geithner's meetings were in fact rule making that excluded the public in violation of the Administrative Procedure Act, and by Inner City Press, as media, to get the meetings opened to journalists and the public.

The Administrative Procedures Act (5 U.S.C. Section 553) and related laws require that when the government engaged in rule-making, it must provide notice to the public, and allow and weigh public comments. The New York Fed under Geithner tried to rule-make without any involvement by the public, even the public most impacted by the subprime lending that underlies these processes. The New York Fed on June 9, 2008 met with a group of the largest banks to discuss, according to the Geithner himself

"Regulatory policy. These are the incentives and constraints designed to affect the level and concentration of risk-taking across the financial system. You can think of these as a financial analog to imposing speed limits and requiring air bags and antilock brakes in cars, or establishing building codes in earthquake zones. Regulatory structure. This is about who is responsible for setting and enforcing those rules. Crisis management. This is about when and how we intervene and about the expectations we create for official intervention in crises."

Press accounts made clear that the financial instruments and regulatory issues discussed behind closed doors are related to issues of public interest, which in fact are disproportionately impacting low- and moderate- income people and communities of color -- subprime and predatory mortgages.

The financial institutions invited, in mid 2008, were:

Bank of America, N.A. - Barclays Capital - BNP Paribas - Citigroup - Credit Suisse - Deutsche Bank AG - Dresdner Kleinwort - Goldman, Sachs & Co. - HSBC Group - JPMorgan Chase - Lehman Brothers - Merrill Lynch & Co. - Morgan Stanley - The Royal Bank of Scotland Group - Societe Generale - UBS AG - Wachovia Bank, N.A.
Buy-Side Firms: AllianceBernstein - BlueMountain Capital Management LLC - Citadel Investment Group, L.L.C.

Fast forward to March 2009, with Geithner despite tax evasion installed as Obama's Secretary of the Treasury, and with Lehman having failed and Wachovia been swallowed by Wells Fargo. Now he is promoting monopoly powers in the market for an even smaller group of banks, just seven: Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Barclays, Credit Suisse and Deutsche Bank -- which despite European headquarters received billions of dollars in U.S. Troubled Assets Relief Program bailout funds through AIG.

Now the idea is to formalize the monopoly through legislation, not rule making. Industry friendly Congress people like Connecticut's Chris Dodd are supporting the monopoly for the privileged. The fig leaf policy argument is that derivatives should runs through regulated banks. The push is made now, before it is formalized that non-banks, too, are regulated. It is a pure power grab, with Timothy Geithner as the connector. And who is fighting this monopoly of the morally if not financially bankrupt? To be continued.

March 23, 2009

Hate to see "we told you so," but... Inner City Press / Fair Finance Watch was on the record that AIG was among the sleaziest of companies all the way back to the 1990s. When Inner City Press filed comments against AIG's acquisition of American General Insurance, AIG responded with threats. When Inner City Press requested that the Office of Thrift Supervision hold a public hearing, AIG got the OTS to change its own rules. AIG hired Ernest Patrikis, the top lawyer of the Federal Reserve Bank of New York, and got its way from Timothy Geithner when he ran the New York Fed.

Now Geithner is reaching out, for his senior advisor, to the top economist of... Citigroup.

March 16, 2009

In DC, Obama Officials Defend Bailouts of AIG and Citigroup, Summers Speaks of Fear

Byline: Matthew Russell Lee of Inner City Press: News Analysis

WASHINGTON, March 13 -- The ongoing bailout of insurer AIG and its counterparties was apologized for but defended by a range of Obama administration officials this week. Treasury Secretary Timothy Geithner, until recently the president of the Federal Reserve Bank of New York and before that at the IMF, said he hated to have to bailout AIG, but "it's systemic."

His advisor Gene Sperling, a member of President Bill Clinton's economic team, said the Obama administration took office only to find AIG too big to fail, implying that this was entirely attributable to the two terms of George W. Bush. But AIG was allowed to grow without control under Bill Clinton, just as Citigroup was increasingly unsupervised under the tenure at the New York Fed of Timothy Geithner, as CitiFinancial got deeper into predatory lending (click here for Inner City Press reports on that.)

Friday in the White House Barack Obama met and then faced the Press with Paul Volcker, chairman of the Federal Reserve in the time before Bill Clinton. Volcker rarely used his regulatory powers, at least not to protect consumers from predatory lending. And yet now these are the people, along with Clinton's Treasury Secretary Larry Summers, who are defending massive transfers to Citigroup and AIG, all the while laying blame everywhere except upon themselves.

Footnote: For a local study by ICP Fair Finance Watch, see http://www.nydailynews.com/ny_local/bronx/2009/03/09/2009-03-09_the_south_bronx_is_a_banking_wasteland.html

See also the readers' comments on that page. There's a need for work on and under the Community Reinvestment Act...

Click here for an Inner City Press debate last week from Washington, here about AIG's secret bailout beneficiaries...

March 9, 2009

Congress during the debate about bailing out the banks decided that non-US banks should not be getting TARP funds. Now it emerges that of the $50 billion the Feds have given to AIG's counter-parties, Deutsche Bank for example has gotten a full $6 billion. Also receiving hand-outs were HSBC, Royal Bank of Scotland and Societe Generale. Worse, the Federal Reserve is trying to avoid providing a listing of the companies who've gotten the public money, as reiterated by Fed Vice Chair Don Kohn on March 5. This is a new low, to be followed up in DC this week.

March 2, 2009

With Citigroup partially nationalized, who would join the board of directors? According to the WSJ, more of the same: James Hance formerly of Bank of America, Jerry A. Grundhofer the ex-CEO of U.S. Bancorp; and Robert K. Steel, who the Journal describes as "CEO of Wachovia Corp. when it was acquired by Wells Fargo & Co. and now is a director at Wells Fargo." Yeah, and just before that he was with the Treasury Department. This is no change that can be believed it, much less with Citi's argument that re-treads "Robert Ryan and Lawrence Ricciardi, who joined in 2007 and 2008, respectively, count as 'new' and don't necessarily need to be replaced." Oh yes they do...

Eye of the beholder: the Teamsters last week came out against KeyCorp for lending to a company they planned to go on strike against, and cited Key's (mis) use of TARP funds and abuse of consumers, including a consumer advocate's quote. But one report drew, at least initially, entirely negative response, including a comment that the underlying strike had been called off. Still the TARP was mis-used...

The Journal sings HSBC's praises, that "gains from growth in Asia have helped HSBC offset deep losses from HSBC Finance Corp., the bank's largely subprime U.S. lender." According to the strategy, some of that Asia lending was subprime, too...

Rare candor: Fed government Elizabeth Duke last week said, " As a former president of the American Bankers Association, I advocated reductions in the regulatory burden." AdvocateD?

February 23, 2009

In the flurry of non-banking companies rushing to become financial services holding companies or savings and loan holding companies in order to get bailout funds, Inner City Press has put in a number of Freedom of Information Act requests, in response to which some very basic information has been withheld. Examples for this week include even the "Financial Holding Company Declaration" submitted to the Federal Reserve for the CIT Group by its outside law firm, Wachtell Lipton, and fully 156 pages of the application submitted to the Office of Thrift Supervision for Genworth, by its outside firm Sidley & Austin. Both the Fed and OTS mechanically followed these firms requests that information be withheld from the public, even as public bailout funds were being sought and doled out.

On related FOIA shenanigans, see 53 N.Y.L. Sch. L. Rev. 299, Critical Mass: Restricting Advocates' Rights Under the Community Reinvestment Act, Inner City Press v. Board of Governors of the Federal Reserve System, 463 F.3d 239 (2d Cir. 2006). New York Law School Law Review, 2008 / 2009

Citigroup's Pandit last week said, "The future of Citi is in emerging markets, is in Latin America, and is in Mexico with Banamex." While the last is dubious, one thing seems true: the future of Citigroup, if it has one, is not in the United States, although it might be WITH the United States (government)...

February 9, 2009

After Bailout, ING's Kok Blames Regulators, Food Inflation and Social Inclusion Questioned

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, February 4 -- Wim Kok, the chairman of the audit committee of Dutch bank ING, which received a $14 billion bailout, Wednesday at the UN blamed "the institutions entrusted with regulating" for not having "prevented financial speculation." Inner City Press asked Kok how to allocate blame for the crisis between the regulators and the banks and their directors. Did the regulators make ING buy, and Kok to presumably oversee the buying of, subprime mortgage and other derivative securities? Video here, from Minute 19.

Kok acknowledged that he saw the crisis and bailouts "like all of us," but also "from a special position," then blamed not only the U.S. regulators but also the "climate" and the "bonus and compensation culture." Video here, from Minute 20:02.

But what was Kok's own compensation? Kok said that "in all fairness, it is too early to give an accounting of how it happened." But why then did the UN, and its Commission on Social Development, present Kok as the one to read out the blame-the-regulators speech? Yes, Kok served as Dutch prime minister. But a director of a bank receiving a multi-billion dollar bailout should not be surprised to be questioned about it.

"In all fairness," to use Kok's own phrase, Inner City Press asked him about the role of financial speculation in driving up food prices in part of 2008. Kok replied that while prices have declined, they could rise again due to inflation caused by, yes, the bailouts. As to how speculation could be stopped by the UN system, he did not answer. Whether ING itself speculates in food or agribusiness stocks, as with Kok's compensation, is not known at deadline.

As Royal Bank of Scotland, bailed-out by UK taxpayers, tries to pay bonuses to its second layer of executives, the UK's Gordon Brown says the Government would only support any bonus payments to RBS staff through UKFI if they were consistent with the taxpayers’ interest. Business Secretary Lord Mandelson added that RBS risked alienating the public by offering “exorbitant” bonuses to its traders and senior bankers.

But note that in New York, JPMorgan Chase has just awarded bonuses, on the theory that particular units didn't lose money. Your tax dollars at work...

February 2, 2009

Banker Allison of BB&T in Meltdown Misdirection, Subprime Loans Were Shielded from CRA by Federal Reserve

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

SOUTH BRONX, February 1 -- Given the hundreds of billions of dollars being thrown at banks in response to the subprime lending-triggered meltdown, holding accountable those who turned American finance down the subprime path would seem to be important. Conservatives blame the Community Reinvestment Act, saying that this law enacted in 1977 to combat the redlining of and refusal to lend in inner city areas was something of a time bomb, set to explode 30 years later.

But the explosive growth of subprime lending took place in parts of financial holding companies which are not covered by CRA, like Citigroup's CitiFinancial and similar consumer finance subsidiary in Wells Fargo and HSBC, purchased as Household International. The subprime loans were securitized by investment banks not only like the defunct or swallowed Lehman Brothers, Bear Stearns and Merrill Lynch, but also Goldman Sachs and Morgan Stanley, entirely outside of CRA, before they ran to the Federal Reserve to get their bailout money.

One tier down the world of finance, the chairman of regional bank BB&T John Allison gave a speech on January 29 in which he blamed the CRA for the financial crisis. This is more than a little ironic, given BB&T's engagement under Allison in subprime lending. When the Bronx-based Fair Finance Watch documented to the Federal Reserve that BB&T's banks referred turned-down loan applicants to their high-cost subprime affiliate Lendmark Financial Services, during the public comment period on BB&T's application for approval to acquire Georgia's Main Street Banks, the Federal Reserve ignored the issues. Click here for 2006 coverage from Inner City Press, and here in 2009 for Lendmark's own website, still reciting "non-conforming mortgage loans" from "104 branch locations throughout Georgia, Tennessee, Virginia, Maryland, Florida, North Carolina, South Carolina, Kentucky, West Virginia, and Delaware."

Click here for the Federal Reserve approval order, which recited from the comments of Fair Finance Watch

"concern about referrals of loan applicants to Lendmark Financial Services ('LFS'), a nonbank subsidiary of BB&T that makes subprime loans. BB&T has represented that it might refer to LFS applications denied by a BB&T subsidiary bank that do not meet the bank's underwriting guidelines. Before making a referral, however, these applications undergo an internal second-review procedure. In addition, BB&T notes that LFS has a policy to refer applicants who meet the Freddie Mac underwriting guidelines to BB&T's subsidiary banks."

But as Inner City Press noted, BB&T's referrals up and down do not use the same standard. On fringe finance the Federal Reserve said that Fair Finance Watch

"expressed concern about BB&T's relationships with unaffiliated pawn shops and other nontraditional providers of financial services. As a general matter, the activities of the consumer finance businesses identified by the commenter are permissible, and the businesses are licensed by the states where they operate. BB&T has stated that it does not focus on marketing credit services to such nontraditional providers and that it makes loans to those firms under the same terms, circumstances, and due diligence procedures applicable to BB&T's other small business borrowers."

BB&T admitted in its responses into the record before the Federal Reserve relationships with 45 payday and other fringe financiers. BB&T under Allison ran headlong into subprime -- as Fair Finance Watch and then the Fed noted, in its order

"A commenter asserted that the Board should, in the context of the current proposal, review BB&T's recently announced plans to acquire the assets of FSB Financial Ltd. ('FSB'), Arlington, Texas, a nonbanking company that purchases automobile-loan portfolios. The FSB acquisition is not related to the current proposal. Moreover, if the FSB acquisition is consummated under authority of section 4(k) of the BHC Act, the acquisition would not require prior approval of the Federal Reserve System. BB&T would require prior Federal Reserve System approval if the acquisition were proposed under sections 4(c)(8) and 4(j) of the BHC Act, and the transaction would be reviewed in light of the requirements and standards discussed above."

The Gramm-Leach-Bliley Act of 1999 amended the Bank Holding Company Act of 1956 and made it easier for subprime lenders to be acquired with no prior review by the Federal Reserve, no public comment period, no CRA review. BB&T John Allison's fulimations notwithstanding, that deregulatory GLB Act, passed in part to legalize after the fact the merger that created Citigroup, is the statute investigators should be looking at. And the acts of subprime-hungry bankers like John Allison of BB&T. We'll have more on this meltdown misdirection, in the spirit of accountability.

For now, consider this buzz about Lendmark in 1997, this 2006 BB&T investor relations presentation (also of its subprime Liberty Mortgage Corporation), and again, Lendmark's own website, still reciting "non-conforming mortgage loans" from "104 branch locations throughout Georgia, Tennessee, Virginia, Maryland, Florida, North Carolina, South Carolina, Kentucky, West Virginia, and Delaware."

January 26, 2009

Behind Bank of America's Toxic Assets, Subprime Links Obscured But Continued

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

NEW YORK, January 21 -- Bank of America is now headed down a Citigroup-like path. A second serving of TARP bailout funds, government insurance for a widening range of toxic assets, a chief executive on the ropes. While Ken Lewis claimed to have gotten BofA out of the world of subprime, its investment banking arm continued to buy and trade subprime mortgages, and to prop up subprime lenders. Now Lewis implies that the $108 billion in toxic assets being insured by the government came from Merrill Lynch. But a quarter of them come from BofA itself.

As reported by Inner City Press, Bronx-based Fair Finance Watch documented this to the Federal Reserve in Communiuty Reinvestmeent Act comments filed in opposition to Bank of America's applications for regulatory approval to merge and expand. In its responses to FFW's comments, BofA begrudgingly acknowledged that it did business with, among others:

Ameriquest Mortgage Corporation, since defunct; Saxon, through which Morgan Stanley tells FFW it has stopped lending, Option One, Centex, New Century, bankrupt; Metris (a subprime card lender HSBC later acquired), Delta Financial, First Franklin, WMC (subprime lender owned by GE), Fremont Investment & Loan, rogue subprime lender which told FFW it would only give its Home Mortgage Disclosure Act data if one signed a confidentiality agreement), Capital One, CIT, WFS -- and Ownit, regarding which Bank of America blacked-out a column labeled "ABS/MBS Underwriting," after elsewhere publicly admitting it performs those functions for Ownit’s loans.

BofA wrote:

"Bank of America indirectly owns 24.9% of the voting common equity of Ownit... In August 2005, Bank of America, N.A. transferred the Ownit residential mortgage loan portfolio purchased during March 2005 to Asset Backed Funding Corporation (‘ABFC’). ABFC is an affiliate of Bank of America Corporation that is a limited purpose corporation that securitizes residential mortgage loans... ABFC securitized these Ownit loans, along with similar loans from another loan originator, in its approximately $1.2 billion ABFC Asset-Backed Certificates, Series 2005-HE2 transaction. Banc of America Securities LLC served as the underwriter in that transaction....

In two separate transactions on March 9 and March 14, 2005 Bank of America N.A. purchased Ownit residential mortgage loans in an aggregate amount of approximately $265 million. These loans were held for the account of Bank of America, N.A. until they became part of the August 2005 securitization described at Item 2.b above. These loans were purchased in a competitive, arms-length process at fair market terms" -- followed by more than half a page blacked out.

This was the level of secrecy in the time leading up to the subprime lending meltdown. Now Ken Lewis implies that the assets being insured by the government all came from Merrill Lynch, when 25% are from BofA itself. Will Ken Lewis go the way of Citigroup's Chuck Prince and Robert Rubin? Many say that he should.

January 19, 2009

Fed's Geithner Evaded Taxes at IMF, Used Statute of Limitations Later, Mishandled Citigroup

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, January 14 -- While working for the UN-affiliated International Monetary Fund earlier this decade, Treasury Secretary-nominee Timothy Geithner did not pay required taxes to the Treasury Department's Internal Revenue Service. This would seem to be problematize, to be diplomatic, Geithner's ability to gain confirmation by the U.S. Senate to oversee the IRS.

This would seem to be problematize, to be diplomatic, Geithner's ability to gain confirmation by the U.S. Senate to oversee the IRS. But Democratic Senators and Barack Obama himself are calling Geithner's an "innocent mistake" which should not impinge on confirmation. Some ask how a financial whiz, head of the Federal Reserve Bank of New York, would claim ignorance of basic tax law as a defense.

Worse, Geithner initially hid behind the statute of limitations to refuse to pay $25,000 in taxes for 2001 and 2002: "A three-year statute of limitations had precluded the [IRS] from auditing the 2001 and 2002 tax returns." But his supporters argue that Geithner's expertise is needed to confront the global financial crisis.

But what of Geithner's role, as the President of the New York Fed, in mis-regulating Citigroup, an institution which has already swallowed $45 billion in Troubled Assets Relief Program funds, and billions more in guarantees for toxic loans still on its books? Said otherwise, how can those who oversaw -- or turned a blind eye to -- the origins of the financial meltdown be presented as the only ones who can now save the day?

Also on Citigroup, sources say that the Feds are pushing Richard Parsons to take over as the embattled company's chairman. He ran Dime Savings Bank, part of the now-collapsed Washington Mutual franchise. At Citigroup's annual meetings, at Inner City Press asked questions about predatory lending from the floor of Carnegie Hall, Parsons never spoke up. What did he think of the questions, of Citigroup's venture into predatory lending with Commercial Credit, Associates First Capital and CitiFinancial? The questions should be answered.

Leaving the Federal Reserve Board is Randy Kroszner, who had served the Fed's point Governor on community and consumer issues. A new Fed advisor on these issues was recently withheld from the press without explanation by the Fed's public relations office. Fed chairman Ben Bernanke hides behind the Federal Open Markets Committee news blackout requirements in order to skip speaking to non-financial audiences, but disagrees with and ignored the requirement of public notice and comment while granting bank holding company status to Morgan Stanley, CIT, Goldman Sachs and GMAC.

A cavalier approach to the law, by both Bernanke and Geithner -- is this what would help to solve the financial crisis? Let Citigroup fall apart, let it fail without further bailout. For sale: "CitiFinancial, which does real estate lending, personal and auto loans, had 3,799 locations, compared to Citi's 4,057 Citibank branches, as of the third-quarter. Though CitiFinancial does not offer the same range of products as the Citibank branches, it does cross-sell Citi credit cards through most of its locations. " Terminate it - it is rotten.

So JPMorgan Chase has closed its wholesale mortgage business, after virtually promising not to. They claim this way they can better control the terms of loans. But the ones they made through brokers, they made decisions on. Back on Nov. 6, 2007, David Lowman, CEO of JPMorgan Chase's home lending division, and Patrick Sheehy, business-to-business channel
executive at Chase Home Lending, told mortgage brokers of “an unwavering commitment to our wholesale … lending” business. Jamie Dimon made this type of about-face and close-down before. It's just what he does.

BofA is making layoffs, BofA is getting sued. And yet BofA is getting more and more billions of TARP, including the share that would have been Merrill's. For shame. Bank of America Corp. filed a letter with Charlotte, N.C., Mayor Pat McCrory verifying that it is laying off about 139 employees in the city’s Ballantyne neighborhood. The layoffs are expected to be completed by March 10. The bank is also laying off about 85 workers at a Preferred Services site in Dallas. Meanwhile, a group of Washington state homeowners filed a lawsuit against Bank of America Corp. unit Countrywide Financial Corp., alleging that the company illegally manipulated the appraisal process in a plan to increase profits at the expense of homeowners and independent appraisers. The lawsuit, filed in the U.S. District Court in Seattle under the Racketeering Influenced and Corrupt Practices Act, claims that the company forced homeowners to use its unit, LandSafe, for appraisals, while subcontracting the work to independent appraisers and charging homeowners as much as 200% of the actual cost of the appraisal.

HSBC has significant exposure to toxic assets, including U.S. subprime mortgages that aren't marked to market, either because they are held directly on its loan book or because the U.K. regulator absurdly allows unrealized losses on certain assets to be written back for capital purposes. It is estimated that HSBC's true leverage is closer to 50 times and Tier 1 is 4.6%, making it one of the most highly leveraged banks in the world. How's that Household now?

Here are properties in The Bronx, New York on which Wells Fargo has foreclosed:

2096 RYER AVE BRONX 2862 Multi-family $374,900 N

5730 POST ROAD BRONX 1809 Multi-family $599,000 N

605 WALES AVE BRONX 2700 Duplex TBD N

2194 WASHINGTON AVE BRONX 2403 Multi-family $325,000 N

4027 EDSON AVE UNIT 1 & 2 BRONX 1848 Duplex $339,900 N

2782 CRESTON AVE BRONX 2000 Multi-family TBD N

January 12, 2009

The chickens have come home to roost at Citigroup, with Robert Rubin leaving, and regulators encouraging something of a break-up of the illegally formed financial supermarket, brought low by involvement in predatory lending. Good riddance...

A new low -- as of 10:20 p.m. on Sunday, January 11, 2009, the Federal Reserve Board's web site http://www.federalreserve.gov was down, "This link appears broken. DNS error - cannot find server."

More chickens coming home to roost for HSBC -- "European shareholder group Deminor said Friday it may take legal action against ... HSBC Holdings PLC on behalf of investors who bought products from disgraced asset manager Bernard Madoff."

January 5, 2009

Trying to make favoritism appear to be part of a program, the Treasury Department has given named and even post-hoc guidelines for its second bailout of Citigroup. The "Asset Guarantee Program," we're told, might be offered to other bans on a "case-by-case basis." In its required filing with Congress, Treasury pontificates that "the objective of this program is to foster financial market stability and thereby to strengthen the economy and protect American jobs, savings, and retirement security." And we thought it was just to prop up Citigroup. The $20 billion purchase of preferred Citi stock now has the high-sound moniker, "Targeted Investment Program," and Treasury has belated enunciated five principles of the unprincipled program to determine eligibility, beyond just who you know: the extent to which the "destabilization of the institution could threaten the viability of creditors" and whether or not an institution is "sufficiently important to the nation's financial and economic system that a loss of confidence in the firm's financial position could potentially cause major disruptions to the credit markets." That's called, too big to fail. But wasn't Lehman Brothers?

Click here for Inner City Press' review-of-2008 UN Top Ten debate

December 29, 2008

So not only did Citigroup lose out to Wells Fargo to buy Wachovia -- it was beaten to Chevy Chase by Capital One. How low can you go?

So let's get this straight -- the Fed didn't provide any formal public notice or comment period on CIT's application to become a bank holding company, but because Inner City Press wrote in for a copy of the application and initially requesting a hearing, the Fed's approval order was mailed to Inner City Press, with a paragraph denying the hearing and making it appear that there was a fair process. But there was not.... The same applies to GMAC. The Fed has become lawless.

December 22, 2008

A jingo-ist America might ask, so the U.S. bails out Citigroup for $45 billion and untold more in guarantees, then Citigroup turns around the lends $8 billion to Dubai. So the U.S. is direct lending to Dubai? And what of Citigroup's name on the Mets new baseball field, and on "The Pond" skating extravaganza in New York's Bryant Park? Is this the supposed new rigor of examination of Citigroup?

The Fed's PNC - National City approval order is contemptuous of the public, including the local member of Congress. Why favor PNC over NatCity? It's not explained. And the Fed is trying to deny FOIA requests for basic information about who they lend to. Perhaps there needs to be a HMDA law for the Fed...

Click here from Inner City Press' December 12 debate on UN double standards

December 8, 2008

Citi Sleaze with Bail-Out, of Junkets and Spanish Highways, PNC and Ocwen Need Hearings

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

NEW YORK, December 2 -- How has Citigroup used its fresh billions in government bail-out funds? On November 30, it was exposed as sponsoring a Congressional junket to the Caribbean. On December 1, it announced it is spending over seven billion Euros to buy the highway business of Spanish construction firm Sacyr Vallehermoso.

Meanwhile, Robert Rubin who pulled in over $100 million from Citigroup began a counter-offensive, saying none of the collapse was his fault. He had no operational responsibilities, he said. Call him the Stephon Marbury of high finance, motoring down a Spanish highway without a care in the world. More seriously, the public record shows Rubin's role in Citigroup's deal with the predatory lender Ameriquest. Still he keeps on trucking.

At deadline, consumer group Fair Finance Watch has put in comments requesting public hearings on PNC's application to buy National City, in a deal the regulators cooked up and now must be the judge of. National City asked for TARP funds but was denied. PNC was given the funds, to buy National City; the regulators will then buy the troubled assets from PNC. It's called unexplained favoritism: save Citigroup and AIG but let Lehman Brother go under. Turn down National City, then buy its bad loans from PNC. Maybe Tim Geithner will explain.

Meanwhile the subprime bottom-feeder Ocwen is trying to line up for the Troubled Asset Relief Program bail-out funds. Ocwen has applied to buy Kent County State Bank in Jayton, Texas. More on this anon.

Royal Bank of Scotland, following its bail-out by the UK government, has suddenly announced a six month moratorium on foreclosures. It applies only in the UK. In the U.S., where RBS owns Cleveland-based Charter One and Citizens Banks in the Northeast, the government has imposed very few requirements for its funds. There's now a proposal in the Senate, sponsored by Senator Durbin, which would tell TARP-recipients that they cannot pay out more in dividends than in the previous year. Since one would expect dividends to be decreasing, even keeping them at last year's level implies using the bail-out funds to keep dividends up, to the previous year's level.

Reportedly, Suntrust and Regions Bank, along with Morgan Stanley, are eying RBS' Charter One and Citizens, to buy them with TARP funds. Morgan Stanley, which the Fed declared to be a financial holding company with no public notice or comment or Community Reinvestment Act review, has now applied to buy up to 9.9% of something called Heritage Bank. On this one, Fair Finance Watch has commented, requesting public hearing on Morgan Stanley's subprime Saxon and the other issues swept under the carpet so that Morgan Stanley could get TARP. What double-standards and sleaze are being swept under this TARP? Public hearings are needed.

December 1, 2008

Robert Rubin has tried to defend his $115 million in payola from Citigroup since 1999 by minimizing his role, while now saying, "I have told Vikram that I will remain part of this and try to be helpful." So the people who caused the problem just stay on and keep getting paid. Contrary to his claim to be uninvolved, Rubin helped hook up Citigroup's purchase of notorious predatory lender Ameriquest.

Flashback to March 2007, from Deval Patrick, following his $360,000 a year part-time service on the board of directors of the predatory lender Ameriquest / ACC: "As a former board member, I was asked by an officer of ACC Capital to serve as a reference for the company and agreed to do so. I called Robert Rubin, a former colleague from the Clinton administration and an executive at Citigroup, to offer any insight they might want on the character of the current management... I appreciate that I should not have made the call."

A "senior person who has no ax to grind," Rubin calls himself. It's time to face the axe, some say...

From the mail bag --

Subj: Reporting a Wells Fargo Issue

From: [Name withheld in this format]

To: Inner City Press

Date: 11/15/2008 12:39:20 P.M. Eastern Standard Time

Hi, after reading your “Wells Fargo Watch” page I wanted to share a Wells Fargo story with you, in hopes that you will post it. I am most curious to find out if other Wells Fargo employees have suffered the same fate as my husband. I am trying to write this account carefully so as not to reveal my husband’s identity. However, should you need more details to confirm the story, please let me know.

My husband is – or was -- a personal banker with Wells Fargo. Over a month ago, one of his regular customers presented a $4,000 check for deposit to her account. My husband followed Wells Fargo security procedures to deposit the check to the woman’s account, cautioning her that the funds would not be available to her for at least 4 business days. Unfortunately, the check proved fraudulent, part of the widespread and apparently sophisticated “mystery shopper” scam. The customer, who claims to have been duped by the offer she received in the mail, had already sent $3,500 to the scammers’ account.

Despite the fact that Wells Fargo employees all over the U.S. and Canada have accepted these fraudulent checks for deposit, my husband was singled out – as far as we know – by Wells Fargo, and accused of complicity in the mystery shopper scheme. Wells Fargo immediately placed him on “paid administrative leave, pending investigation”. He was instructed not to contact any Wells Fargo team member, but to await a call from a local Wells Fargo Human Resources representative. Twelve days later, Wells Fargo stopped his paycheck. To this day, four weeks later, Wells Fargo has still not contacted us, and the Human Resources representative has not returned any of my husband’s numerous phone calls.

Needless to say, this has been a financial disaster for our family. Not only have we lost my husband’s paycheck, as far as we know he has also lost his job. If he is terminated under these conditions he will be unable to “bond” to work as a banker ever again, so in that case he’s lost his career as well. Worse, without an official termination from Wells Fargo, he cannot apply for unemployment compensation, or request payment for his accrued paid leave, etc. He is essentially in limbo.

We consulted an attorney, only to learn that there is absolutely nothing we can do about this situation, we can’t force Wells Fargo to respond to us. And if Wells Fargo does eventually terminate him, we cannot challenge it: we reside in an “employ at will” state, in which a company may terminate any employee at any time for any reason, or for no reason at all.

I’m writing this because I’d like to know if any other Wells Fargo employees have been terminated for accepting these mystery shopper scam checks.

November 24, 2008

PNC's proxy statement to acquire National City raises the question, why would NCC's regulators rule that TARP funds were unavailable to it, but then turn around and give them to PCC? Some are alleging that the Comptroller's connections to PNC played a role here. Crony capitalism, indeed...

The WSJ of November 18 reported that in February 2007 "to modify loans, HSBC tried a strategy called 're-aging.' If a borrower fell behind on payments by two months or more, HSBC effectively allowed some to catch up by declaring the loan current and adding the delinquent amount to the balance owed." But re-aging began far earlier -- in fact, it was done at Household during the run-up to its sale to HSBC, to make the already dubious predatory business model look better. "Lipstick on the pig," whistleblowers called it them to Inner City Press, who reported it at the time. Plus ca change...

November 17, 2008

LONDON, November 14, global fragments of the predatory lending meltdown -- Even in Brazil, bank mergers are considers emergencies today. Rural banks are being snatched up by their big-city brethren, with regulatory approvals expedited in the name of the global financial crisis.

In Japan, in the face of mounting numbers of suicides by borrowers behind on their loan payments, the maximum allowable interest rate has been reduced to twenty percent. This has led U.S.-based Citigroup to move to leave the country. Citigroup's CFJ subsidiary is selling loans it holds to "illegal companies." General Electric left Japan but did not go far, having re-established a subprime beachhead in Taiwan.

In Israel, "gray lenders" charge interest rates up to two hundred percent. They are allowed to discriminate against Arab Israelis. Entreaties to reign these practices in have been directed to Israeli top regulator, former Citigrouper Stanley Fischer, without results.

Asked at NCRC's Responsible Lending conference in London on November 14: How will the UK run RBS, which owns subprime lenders in the US, and securitizes subprime loans through its subsidiary Greenwich Capital Markets? What oversight will be given to Deutsche Bank and HSBC and BNP Paribas and their involvement in subprime lending?

November 10, 2008

How will the bailout funds be used? For opportunistic mergers, as we noted last week. And now we can say, for political contributions and lobbying. ICP Fair Finance Watch was interviewed on November 7 about the use of funds by Bank of America, Wachovia and Wells Fargo:

"Bank of America Corp., largely through its political action committees, gave candidates and parties $3.7 million this election cycle, according to an analysis of Federal Election Commission reports. Wachovia Corp. PACs gave $1.2 million. Wells Fargo & Co., which announced a deal for Wachovia last month, gave out nearly $1 million through its PAC.... Bank of America spent $6.5 million lobbying federal officials over the same period; Wachovia spent $2.7 million and Wells Fargo, $3.6 million."

There is no commitment that the bailout funds will not be put to these uses. In fact, if Wachovia is any indication, the banks are entirely smug:

“'These are … voluntary, employee funded, nonprofit and nonpartisan committees,' said Wachovia spokeswoman Carrie Ruddy. PACs, she added, give to candidates and groups 'that promote responsible government and support effective financial legislation important to Wachovia and its stockholders.'

Lee sees little difference in money from a bank or its employee PAC. 'It's a fig leaf,' he said Friday. 'When people are through their place of employment giving funds, you'd have to be pretty naive to think that there's not some corporate influence involved.'

More than a little corporate influence...

And see this November 7 debate: http://bloggingheads.tv/diavlogs/15731#

November 3, 2008

At UN, Stiglitz Slams Chase For Misuse of Bailout, Federal Reserve for Predatory Lending

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, October 30 -- The $700 billion bank bailout should not be used for mergers to increase market share, economist Joseph Stiglitz told the Press on Thursday. Following a UN panel discussion about the global financial crisis, Inner City Press asked Stiglitz about predatory lending and, as an aside, if he would consider the post of Secretary of the Treasury. While not directly answering the latter, Stiglitz said that the current Secretary, Henry Paulson, is ignoring the Congressional intent of the bailout and is allowing the funds to be misused by the banks.

Stiglitz specifically cited a conference call by JPMorgan Chase, in which an executive bragged that the $25 billion it is claiming from the bailout will make Chase "more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment." Stiglitz called that an abuse, and also took a jab at the Federal Reserve, which he said had the power to crack down on predatory lending since 1994 but did not. Video here, from Minute 19:31.

Flanking Stiglitz at the press conference were Belgian sociologist Francois Houtart -- who spoke against the "logic of capital accumulation" -- and General Assembly President Miguel d'Escoto Brockmann, to whom Stiglitz and Houtart are two of 15 special senior advisers. The other advisers include Slobodan Miosevic's lawyer Ramsey Clark and Noam Chomsky, who has denounced the UN for, among other things, supporting Indonesia's invasion of East Timor (Failed States, page 87).

Father d'Escoto, a former Sandinista foreign minister of Nicaragua, spoke last and equated the United States' blocking of economic reforms with its "dilatory tactics" against attempts to end apartheid.

Afterwards, Inner City Press asked Stiglitz about the International Monetary Fund's predatory lending. Stiglitz said that the IMF has made its money of late from lending to countries in crisis, and thus has an incentive for their to be crises. He said that countries like Mexico, rather than going to the IMF, may seek capital from China, which has $1.9 trillion available, Stiglitz said, or Japan or India. He didn't mention the scandals surrounding IMF chief Strauss-Kahn. "There'll be a new President on January 20," he said, then was gone.

Footnote: a last minute addition to the panel was economist Calestous Juma, who close Inner City Press readers may remember as declining to characterize Ban Ki-moon's consolidation of the Office of the Special Advisor on Africa with another post, while encouraging Inner City Press to keep reporting on it. We have -- click here for a recent story about conflicts of interest and corporate entree by Microsoft into the UN -- but were glad to see Juma in the Trusteeship Council chamber speaking about economic diplomacy, using a green and white "One Laptop Per Child" computer. We note in closing that Microsoft, among others, problematized the idea of a $100 computer. Oh, intellectual property and corporate abuse.

Heading to the UK, where the War on Want continues: in terms of shareholdings in Britain's largest arms companies, Royal Bank of Scotland has a stake worth £36.4 million. There is a contradiction between RBS's claimed commitment to human rights and sustainable development and its support for the arms industry. HSBC has a stake worth £483.4 million, HSBC invests in companies that produce cluster munitions and depleted uranium. Since 2000, there has been no significant downward trend in HSBC lending to the arms sector. In 2005, there was a major rise in HSBC's lending...

October 27, 2008

From Dow Jones on the Fed's self-approval of Wells Fargo - Wachovia: " The Fed said a commenter had requested a public meeting, but the Bank Holding Company Act does not require the board to grant that request. A Federal Reserve spokeswoman wouldn't disclose the name of the group that had requested the hearing." So now, like North Korea, the Fed tries to cover up even who has commented. For the record, ICP Fair Finance Watch made the request...

The announcement that PNC will use over $7 billion in the U.S. bailout funds to buy National City just proves the point of Inner City Press' October 21 article, below

US Bailout Will Subsidize Bank Monopolies, Chase and Goldman, Excluding CRA and Public Review

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

SOUTH BRONX, October 21 -- Banks now plan to use the Federal bail-out funds to acquire other banks, in a government-subsidized and -protected process of monopolization shielding from public comment or application of the antitrust laws or Community Reinvestment Act.

Executives from such banks as BB&T and Zions have stated that the cheap bail-out funds will help them acquire other banks. JPMorgan Chase, which the Federal Reserve already helped to acquire Bear Stearns and Washington Mutual, is understood to also plan acquisitive use of its bail-out allocation.

The Federal Reserve and other regulators, however, have shielded each of their moves in recent months from any public much less judicial review. Even such non-FDIC proposals as Wells Fargo's proposal to acquire Wachovia are deemed emergencies, and applicable laws of public notice and comment are over-ridden. Now the deals will be government-funded.

Consider that Hank Paulson's Goldman Sachs, deemed a smart institution not in need of a bailout, has veered into subprime via Litton Servicing and now what's called Sendera. Given low-cost funds by the government, it's foreseeable Goldman will snap up additional subprime firepower, to deploy after the shakeout.

The regulators' failure to consider predatory lending and other bank-specific issues on mergers is one for the causes or determinants of the present crisis. Rather than bring about increased scrutiny, the Fed's Ben Bernanke and Treasury's Hank Paulson are increasingly dispensing with any scrutiny at all. And now they'll be using government to subsidize and speed up the mergers.

Footnotes: Better late than never, we suppose, for Alan Greenspan to apologize for ignoring evidence of predatory lending. But pointing the other way, Canada's National Post / Financial Post of October 25 blames "the 1970 U. S. Community Reinvestment Act, forcing banks to lend equally to all geographic areas, regardless of risk." Ever heard of the safety and soundness requirement?

October 20, 2008

It's telling, in terms of how sloppy the corporate giveaways have been, that neither the Fed nor Treasury thought through how buying warrants in the big banks would put them in the position of reducing book value or recording a loss. They plan to pumps a combined $125 billion in Bank of America Corp. (BAC) - including Merrill Lynch & Co. Inc. (MER) - as well as JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C), Wells Fargo Corp. (WFC), Goldman Sachs & Co. (GS), Morgan Stanley (MS), Bank of New York Mellon Corp. (BK) and State Street Corp. (STT).

Meanwhile --

As FDIC Offers Bail-Out, Its Conference Calls Are Full Then Off the Record

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

SOUTH BRONX, October 14 -- If the way the FDIC dealt with the Press on Tuesday is any indication of how they will offer guarantees as part of the bank bail-out process, the corner may not yet be turned. The FDIC emailed the press corps at 9:57 Tuesday morning, announcing a briefing at 10:45 a.m. to "provide details of the FDIC’s plan, what it includes, how it will be funded and who will be eligible to participate." A phone number was provided, but when called the message was that the conference call was full.

Then at 11:22, the same notice of 10:45 press conference was sent out, this time with a new phone number and pass code. But even if one called immediately, the call was ending, with some anonymous participant griping that only JPMorgan Chase, Wells Fargo, Citigroup and Bank of America will benefit.

This was followed at 1:48 on Tuesday afternoon with a notice of a new conference call, at 3:15. Once on, an FDIC official said it would all be not for attribution. Inner City Press asked two questions. First, why are some savings and loan holding companies being excluded from the guarantee program? Because some were grandfathered in and engage in commercial activity was the answer. No list of excluded S&L holding companies was provided.

Inner City Press then asked if the FDIC believes that the proposal to acquire Wachovia by Wells Fargo is an emergency transaction, or that requirements of public notice and comment should be adhered to. The official said the FDIC is "not prepared to comment on particular institutions." Inner City Press asked, Why will you be? But the phone line had been cut off. The masters of the universe moved on, corporate welfare in their wake.

And see this Oct 17 (UN) debate, including Musing of One-Term Limit for Ban by Obama, at http://bloggingheads.tv/diavlogs/15262#

October 13, 2008

Tales for a time of lawless regulators giving rubber stamp bank merger approvals without any public notice or comment, Chase and now Wachovia --

On October 10, the Federal Reserve Board sent Inner City Press a partial response to a Freedom of Information Act request made back in March, about the Fed voting without public notice or comment to bail out JPMorgan Chase's acquisition of Bear Stearns without even following the law requiring the involvement of Fed governors. Six months after the fact, the Fed releases an April letter to Congress saying the Governor Mishkin, who has since left the Board, was in the air on a flight from Finland to the U.S. and therefore couldn't be involved. Click here to view. And now he's gone...

There are other responsive records which Inner City Press is pursuing.

Meanwhile, while Inner City Press / Fair Finance Watch has already commented to the Fed demanding they hold a comment period on Wells Fargo's proposal to buy Wachovia, now Wachovia says it will bypass its own shareholders -- with the NYSE's rubber stamp. Note to Fed: this doesn't make it an emergency to bypass the public too. But the Fed on Friday said, vaguely, that it will begin "immediate consideration" of Wells Fargo's application. But no FDIC involvement = no emergency.

RBS is pleading for a bailout from the UK... When Inner City Press / Fair Finance Watch commented, at length and over years, about RBS' involvement in and exposure to predatory subprime lending, RBS always said it wasn't true...

The WSJ transcribes for Citigroup that "Citi will mainly seek to expand overseas, particular in Asia and Eastern Europe, which has long been a major focus of Citi's growth strategy. Retail banking and consumer lending returns there by far outweigh the returns in the U.S., Citi has long argued. Citi has 'exactly the same strategy as before,' the source said." And that strategy includes predatory lending -- now in Asia and Eastern Europe...

Click here for Inner City Press in Wash Post and Miami on CRA, here in Charlotte on the mergers, and here even praising the FDIC (on other grounds)

In Wachovia War, Wells Fargo Would Require Public Notice and Comment, No Emergency

Byline: Matthew R. Lee of Inner City Press on Wall Street: News Analysis

NEW YORK, October 3, 5 -- With Wells Fargo's announcement that is it outbidding Citigroup for Wachovia, and would consummate its proposal, without FDIC assistance, by the end of the year the question arises: how could the regulators bypass public notice and comment on a transaction that has no FDIC involvement? Since this still hasn't been answered as of October 5, Citigroup's announcement that it's gotten a judge to restrain the deal is much more sizzle than steak.

Citigroup's low-ball $2.16 billion supposed deal, announced Monday, had rubberstamp approval with no public notice or comment, including under the Community Reinvestment Act on CitiFinancial's widespread involvement in controversial subprime lending. Click here for Monday's story by Inner City Press. Now, in the face of Wells Fargo's announced, the regulators have rushed out a strange press release:

Statement by the Board of Governors of the Federal Reserve and the Office of the Comptroller of the Currency

A new proposal to acquire Wachovia has emerged from Wells Fargo. The Citigroup proposal has undergone extensive review by the Federal Reserve and the Office of the Comptroller of the Currency. We have not yet reviewed the new Wells Fargo proposal and the issues that it raises. The regulators will be working with the parties to achieve an outcome that protects all Wachovia creditors, including depositors, insured and uninsured, and promotes market stability.

The scuttlebutt is that the regulators, although having no basis to waive public participation this time, are considering doing it, among other things to equalize the playing field between Citigroup's and Wells Fargo's bid.

It is clear which bid is financial superior -- but Wells Fargo, too, has been involved in predatory lending, through Wells Fargo Financial and overseas. Some advocates are saying they prefer the Wells proposal on the basis that it should finally allow some public process in the spate of supposedly emergency mergers and conversions.

September 29, 2008

Subprime Stoked By Deregulation and Bipartisan Greed, not CRA, Community Reinvestment Act

Byline: Matthew R. Lee of Inner City Press in the South Bronx: News Analysis

SOUTH BRONX, September 28 -- First on the fringes and now on Fox News, the Community Reinvestment Act is being blamed by some for today's financial crisis. The argument is that by encouraging FDIC-insured banks to lend in lower income neighborhoods, the government -- read, Democrats, from Jimmy Carter to Bill Clinton -- created the explosion in high interest rate subprime loans.

There's a major factual problem, though: with a single exception, no bank sought CRA credit for its subprime loans. And the investment banks which were purchasing, bundling and securitizing the loans were not covered by CRA. Bear Stearns was not covered by CRA, but was bailed out by the Federal Reserve Board for $30 billion dollars. AIG, an insurance company, was not covered by CRA, but its subprime activities have led to a $75 billion loan from the Federal Reserve, whose chairman Ben Bernanke nevertheless claimed to Inner City Press that the Fed does not control AIG, despite owning warrants for 79% of its stock, click here for that story.

In fact, community advocates had been telling the Federal Reserve about the dangers of subprime lending since the 1990s. For example, Bronx-based Fair Finance Watch commented to the Federal Reserve about the practices of now-defunct non-bank subprime lender New Century, when U.S. Bancorp bought warrants for 24% of New Century's stock. The Fed, rather than take any action on New Century, merely waited until U.S. Bancorp sold off some of the warrants, and then said the issue was moot.

Likewise, when community groups from all over the country complained to the Office of Thrift Supervision about the subprime practices of Washington Mutual's affiliate Long Beach Mortgage, the OTS responded that is was only concerned with WaMu's savings bank, not its finance company. WaMu never got CRA credit for Long Beach's loans, but now WaMu has failed and been bought at fire sale prices by bottom-feeder JPMorgan Chase.

The list goes on and on. Non-U.S. institutions that now stand to benefit from the bailout bill being quickly considered in Congress are not covered by the CRA: UBS of Switzerland, Nomura of Japan, even some sovereign wealth funds that bought subprime securities.

Deregulation and a lack of business ethics are major causes of the subprime meltdown; these have been bipartisan. Republicans are more closely identified with deregulation, but it was Clinton who oversaw the breakdown of the wall between investment and commercial banking, for example. Several Clinton administration officials went to work or advocate for subprime lenders, defending their cashing-in as in support of the democratization (literally) of credit. While Republican Phil Gramm went to work for UBS as it got more and more into subprime, Democrat Robert Rubin went to work for subprime-heavy Citigroup and did nothing to reform its practices. It is notably that Citigroup has not yet showed up for bailout funds.

Citigroup's grown in subprime had nothing to do with the CRA. Rather, insurer Travelers Group, controlled by Sandy Weill and Chuck Prince (and Robert Willumstad who would later drive AIG into the ground), which already owned subprime lender Commercial Credit, bought Citicorp and then subprime lender Associates. They renamed the operation CitiFinancial, but never sought CRA credit for Citibank for its operations. And when Inner City Press asked Chuck Prince of Ciitgroup's securitization of loans by Ameriquest, Prince said that had nothing to do with the CRA.

There is more than enough blame to discredit both political parties. But it's not the Community Reinvestment Act statute that's to blame. If anything, the CRA provided a venue by which many of the problems were raised, and some were even solved. When Atlanta-based SunTrust, for example, applied to the Federal Reserve for approval of a merger in Memphis, Fair Finance Watch showed the Fed that SunTrust was lending to a slew of predatory lenders. SunTrust ultimately committed to get out of some of these fields, and had its application approved. That was CRA at work, in a way conveniently not mentioned in the sloppy arguments being advanced.

September 22, 2008

So with its $85 billion bailout of AIG, the Federal Reserve will come to run a predatory lending operation. Click here for some Inner City Press / Fair Finance Watch comments. And see here. But it goes beyond that -- shouldn't the Fed have to apply to the Office of Thrift Supervision to come to control AIG's savings bank? We'll be raising this issue this week.

On the rumors of Wachovia looking to buy Morgan Stanley, just as its bigger sibling Bank of America bought Merrill Lynch (click here for Inner City Press' 10% deposit cap analysis), consider that both deals involve Utah-based industrial loans companies, which are covered by the Community Reinvestment Act, but whose acquisition, it is argued, is not subject to CRA scrutiny and public comment. This is something that should be fixed, clearly, in the pending bail-out legislation...

How did Citigroup slip the bit? Now they're listed as a possible bidder for WaMu... HSBC finally ended its pact for Korea Exchange Bank, denied rumors of interest in Morgan Stanley and Halifax...

September 15, 2008

When asked on September 12 if it was making an offer for Lehman Brothers, HSBC through a spokesperson said, " "We have made it clear that our strategy relies on focusing on emerging markets and businesses with a genuine global connectivity." Yeah, like Household International and predatory lending...

Citigroup said last week that it expects a $450 million quarter-to-date pretax impact on revenue from trading losses and write-downs of Fannie Mae and Freddie Mac securities...

Radio piece of the week, on NPR, concerned how little Chris Cox at the SEC has done during the subprime meltdown. His own act? To impose a temporary ban on naked short selling of the stock of 19 financial institutions. Woop Dee Damn Doo.

September 8, 2008

Subcrime Questions As Freddie Mac Handed to Moffett of Carlyle and US Bancorp

Byline: Matthew Russell Lee of Inner City Press: News Analysis

NEW YORK, September 7 -- U.S. Treasury Secretary Hank Paulson's announcement today that he is unilaterally appointing Carlyle Group advisor David Moffett to replace Richard Syron as chief executive of Freddie Mac is more than a little ironic, and troubling. The Carlyle Group invested in and lost on subprime mortgage, it admitted earlier this year. In fact, Carlyle invested in bonds issued by Freddie Mac, as well as Fannie Mae.

In March 2008, the Carlyle Group's mortgage-bond fund, having received more than $400 million in margin calls since earlier in the month, said it couldn't reach an agreement with it lenders, who would "promptly'' take over all of its remaining assets. Through March 12, the company had defaulted on over $16.6 billion of debt. On the news, the dollar fell to the weakest since 1995 against the yen and a record low versus the Euro. How then, sources are asking Inner City Press, can Moffett be put in charge of Freddie Mac?

In fact, Carlyle beyond its investments in military contractors has been accused of other slash and burn tactics, for example by workers at the nursing home chain Manor Care. Its buy-out of Home Depot's contractor supply unit nearly fell apart, as its lenders balked.

Moffett previously served as chief financial officer of U.S. Bancorp, which beyond its own subprime lending was a 25% investor in the now-bankrupt subprime lender New Century. When Inner City Press investigated U.S. Bancorp's stake in New Century, the company argued to the Federal Reserve that despite having two seats on the board of directors it did not control the lender. The word subcrime began to become applicable. The Fed demurred, and eventually the stake was sold off. But Moffett's companies' involvement in the subprime field is hardly a basis for confidence in him to lead at Freddie Mac. In fact, the choice calls into question Paulson's judgment. To be continued. Watch this site, and this (UN) debate.

September 1, 2008

Citigroup, predatory lending and whistleblowers -- saga continues. Citi last week agreed to pay a $3.5 million penalty for sweeping more than $14 million from customers' credit card accounts into the bank's own funds. Citigroup "knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps," the California Attorney General said in a press release. "When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice." Sounds like CitiFinancial.... The whistleblower was subsequently fired and filed a sealed wrongful dismissal law suit. Citi did not cooperate with the Attorney General's investigation...

How to explain Citigroup changing Bob Rubin's title to Senior Counselor? Here's our guess -- as the company has gone downhill, the finger has focused on Rubin. He doesn't like it -- just as he denied having any role in Citigroup's predatory lending, saying it wasn't under his "aegis" -- and so he changes his title. But under whose aegis is it?

GE Money narrowly avoided serious legal action when it agreed to an unprecedented enforceable undertaking with the Australian Securities and Investments Commission in May. As part of the undertaking, the company agreed to a review of how it deals with customers who are behind in their repayments. The first confidential report on the company's practices was handed to ASIC on Friday. GE Money has already agreed to compensate at least 2000 customers for intimidating tactics, which included ensuring debts were paid by urging staff to repeatedly phone or send letters to borrowers. So far no customer has received compensation.

August 25, 2008

This week, more subprime fall-out, at Citigroup and Huntington, and continued predatory servicing by Wells Fargo.

In Iowa, the home mortgage division of Citigroup is closing its operations in Des Moines, eliminating 190 positions, it emerged on August 21. CitiMortgage plans to close the site by the end of November. Of these, 146 workers will only be offered counseling, outplacement services and severance "based on position, length of service and other qualifying considerations," spokesman Mark Rodgers said. CitiMortgage laid off 185 Des Moines employees in March and another 100 in January. The company said it was reorganizing the division and working to reduce expenses by $200 million. Citigroup bought Principal Financial Group's home mortgage operations in July 2004, which then had 800 employees. Citi in Iowa employs about 650 workers throughout the state in its credit card operations and about 120 at CitiFinancial loan operations.

Yes, that's the predatory lending...

Market-watchers note that "Shares of Huntington Bancshares were under pressure Monday after a major commercial client of the bank said Friday that it will take a second-quarter loss on higher credit provisions, and an analyst downgraded its stock. Shares of Huntington Bancshares fell 11% at the open and recently traded 6.4% lower at $7.47. The stock is down almost 60% from the year-ago period when it was trading above $18. Franklin Credit Management Corp -- of which Huntington has lent $1.1 billion -- said Friday it will delay its financial filing and report a second-quarter loss of $280 to $285 million."

From the mailbag -

Subj: Wells Fargo Mortgage Complaint

From: [Name withheld in this format]

To: Inner City Press

Date: 8/15/2008 12:58:48 P.M. Eastern Daylight Time

Hello, I found your website today. My dealings with America's Servicing Company owned by Wells Fargo has been a constant struggle. Today, I am mailing a complaint to the Texas Dept. of Banking and Mortgage Lending as well to Barney Frank, Chairman of the House Committee on Financial services. The committee passed HR 5579 which directed lenders to speed the loan modification process. I made my request to ASC/Wells Fargo in April 2008. I have yet to receive a response. Also, I have been unable to speak to anyone who might be 'working' on the loan modification.

Yep, that's Wells Fargo...

August 18, 2008

Why did Citigroup's two predatory lending settlements escape the belated calls to "gross-up" Citi's proposed $600 million settlement for auction-rate securities improprieties to cancel Citi's ability to just take a tax write-off for misdeeds? "If the SEC decides that Citigroup should pay $600 million in connection with Citigroup's representations regarding auction-rate securities, Citigroup may be allowed to deduct this $600 million payment from its taxable income," Sen Charles Grassley has written to the SEC. "To prevent Citigroup from receiving this potential tax windfall at the expense of American taxpayers, the SEC should consider 'grossing-up' the payment by Citigroup to an amount of $923 million." The grossed-up amount would take into account that Citigroup would save $323 million in taxes if it deducted the full payment, based on a 35% tax rate.

This should have been done on Citigroup's two predatory lending settlements...

August 11, 2008

Subprime chickens continue to come home to roost. Now National City has admitted that the SEC is demanding "certain documents concerning its loan underwriting experience, dividends, bank regulatory matters and the sale of First Franklin Financial Corporation" to Merrill Lynch for $1.3 billion in 2006. And Royal Bank of Scotland Group announced a first-half net loss of $1.56 billion), its first loss since the bank listed in the 1960s and one of the largest losses ever posted by a U.K. bank. Can you say, Greenwich Capital Markets?

August 4, 2008

Talk about a conflict of interest, and regulatory capture -- last week, the regulators and four big banks issued coordinated press releases. "Officials from banking giants Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. issued a joint statement saying, 'We look forward to being leading issuers as the U.S. covered bond market develops.'" And those they issued the statement with and for are supposed to objectively oversee them...

July 28, 2008 -- a week of shenanigans by Citigroup (in London), HSBC (in South Korea) and GE (in Abu Dhabi). And this --

From the mail bag, a story involving JPMorgan Chase and Wachovia's HomEq --

Subj: JP Morgan Chase
From: [Name withheld in this format]
To: Inner City Press
Date: 7/22/2008 9:29:41 P.M. Eastern Daylight Time

Dear Mr. Lee,

I am wondering if there are any other people who have had a similar problem to mine with JP Morgan Chase. I am a 68 year old senior who lost her home to these vultures in an unbelievable manner. In brief this is what happened to me.

Leon D. Black had just purchased WMC Mortgage Corp. when I did a refi with WMC in March 1998.... Loan was equity based. I never received any copies of the loan documents and had statements from WMC saying they were lost or destroyed. Even had inter office communications at WMC as late as July 1998 referencing the loan documents.

The loan was a bait and switch. The reason for the refi was to permanently get rid of a loan I had with, The Money Store. WMC was to be the new first mortgagor AFTER they paid, The Money Store ("TMS"). Loan was to be conventional fixed rate. Instead payments went from 2900.00 a month to 4800.00 a month by September 2000. I had little recourse but to try and save my home of 18 years and its tons of equity and so, I filed Bankruptcy. Big mistake!

I was never told that the loan was sold to Fairbanks four months before I filed BK. WMC fraudulently represented themselves throughout my BK as the first mortgagor when they were not.

I had a Confirmed Plan in Bk that was current yet WMC somehow managed to have the Stay Lifted in January 2005. My home was sold at Trustee Sale by JP Morgan Chase on June 22, 2005.... In June, 2006....I was sent a thank you letter from HomEq on behalf of TMS who unknown to me had closed their doors a month after my loan closed with WMC. Oddly, during my Bk I would get Notices from FirstUnion who could never find any reference to me, not even by my social security number. Turned out WMC used someone else's SS number for my loan, I don't know why but they did. First Union had taken over TMS which was ultimately taken over by HomEq. The HomEq letter also contained the cancelled Note & Deed of trust for TMS. In short, my home was ultimately sold by JP Morgan Chase who knew there was always a question that TMS was never paid and none of these vultures had any standing to sell my home on June 22, 2005 and as noted in the Trustee Guaranty Report which clearly showed the only first mortgage to be TMS for 281,000.00. They paid the TMS mortgage off in full three months after they sold my home at trustee sale, using a company called ALTA which turned out to be another alias of Fairbanks.

So in fairness we can note that the Fed doesn't only do favors for JPMorgan Chase (on Bear Stearns) and Citigroup (on any and everything, including the Group's formation) -- last week the Fed belatedly released a ruling favoring SunTrust in its dealings with its presumptively illegal but "grandfathered" holdings of Coca-Cola story - click here to view.

The Fed justifies its favor as reducing the mixing of banking and commerce. Coke as a mixer?

July 21, 2008

The Wall Street Journal.com reports that the foreclosure-fest at Foxboro's Gillette Stadium will include Countrywide (now B of A) and... IndyMac. From beyond the grave? Or will the FDIC be (Eli) manning the tables?

More annals of financial journalism -- from Iowa last week, we have this: "Having never 'played in' the subprime lending industry, Donohue said U.S. Bank actually stands to benefit somewhat during a time of economic downturn." What? U.S. Bancorp owned 25% of notorious predatory lender New Century, and makes its own subprime loans...

GE Money is still a major forecloser in Ireland, drawing the ire of the Financial Regulator there "on their repossessions policies, to ensure they treat homeowners who fall behind on their repayments fairly."

And in Australia, "at least 2000 customers owed compensation by the nation's biggest consumer credit provider, GE Money, are still awaiting payment for harassment by the company's debt collection department. GE Money agreed to pay them as part of a deal with the Australian Securities and Investments Commission, which found staff had used high-pressure tactics to intimidate customers into making up for missed credit card and car-finance payments. But nearly two months after it signed an unprecedented enforceable undertaking with ASIC, GE Money spokesman Geoff Lynch said he was still unsure when it will be ready to make the first payments to victims, some of whom first complained to ASIC four years ago."

July 14, 2008

Shouldn't it be illegal for Robert Steel to go directly from the Treasury Department, which regulates Wachovia Bank, N.A., to become CEO of Wachovia, complete with $10 million in stock and a $38 million pay package? Wasn't this revolving door supposedly closed in the wake of the Riggs Bank scandal?

More intra-corporate revolving doors: Chuck Prince, whose subprime snafus at Citigroup led to his unceremonious departure, has resurfaced on the board of Xerox, whose CEO Anne Mulcahy is on Citigroup's board...

Another "we told you so" -- Synovus' Columbus Bank and Trust, which Inner City Press has challenged for its weak Community Reinvestment Act record, has now been awarded a rare Needs to Improve CRA rating, which less than three percent of banks get...

July 7, 2008

In a low-point in financial journalism, Business Week's Mara Der Hovanesian in the July 7 edition ladled praise on subprime lender HSBC, quoting as the only semi-critical voice... a mortgage broker. Nary a mention of Knight Vinke's call to sell off the subprime operation, either. We do, however, learned that Brendan McDonagh "favors pin-striped suits with bright ties." That's important information. The piece is sub-headed, "In Depth, the Housing Crisis."

Here is an outrage on which action must be taken, although you will never see it covered, yet, in the mainstream media -- the purportedly "off the record" speeches given to audiences of select investors by Federal Reserve personnel. They are sent out by email to journalists, but not to write about. Hedge fund artists get insider knowledge from the Fed, and trade on it. Doesn't this violate, at least in spirit, Reg FD, Financial Disclosure?

But look for Ben Bernanke to on the record defend the bailouts before Congress on July 10. Who actually questions him will be interesting to see.

So Chuck Schumer trashed IndyMac. In one sense he's to be congratulated, as IndyMac is, to be charitable, an enabler of predators. But Schumer's motives are always in question. Some asked, did he cause a run on the bank only to promote himself? He's already a Senator. When, oh when, does he think he'll run for President? He'll lose, of course. But how many Sunday press conferences will be called before that becomes clear?

June 30, 2008

Weeks late, the Federal Reserve has written to Inner City Press that

This is regarding your FOIA request for documents related to the JP Morgan / Bear Stearns transaction. We have interpreted your request to include the Board meeting minutes from Mar. 14 and 16. The minutes are now available online on the Board's public website:
http://www.federalreserve.gov/newsevents/press/other/20080627a.htm
We will be contacting you shortly about the scope of the remainder of your request.

For now, as even the Dow Jones story on the minutes reports, "four Fed board members were involved in making the decision to come to the rescue of Bear, the Fed's minutes show."

California's Countrywide lawsuit names President David Sambol as well as Angelo Mozilo. The AG of Illinois also filed a lawsuit alleging deceptive practices, Governor Gregoire of Washington said the state will seek to fine the company for predatory lending -- she went easy on Household and then hit the documents, so we'll see -- and Countrywide shareholders approved Bank of America 's pending $3 billion acquisition. But the combination could face legal costs as high as $2 billion, according to a report from CreditSights Inc.. BofA says it will lay off 7,500...

On global issues, click here for hour-long debate...

June 23, 2008

The filing on June 15 by Inner City Press / Fair Finance Watch against the Federal Reserve Bank of New York's closed-door meetings and rule-making with 18 investment banks has given rise to questions about whether or not the Fed is a government agency with any duties to the public. On Daily Kos, for example, various commenters say that the Fed is owned by banks. We note that's the Federal Reserve Banks; the BOARD had governmental duties, including compliance with the Administrative Procedures Act. Expect more comments to the Fed.

HSBC will start banking operations in the republic of Georgia on Monday, from a six-story building on Rustaveli Avenue in Tbilisi. The move means HSBC and concurrently or prospectively its predatory lending operation are now present in 84 countries and territories. In March, HSBC received approval to incorporate a business in Vietnam and announced a $200 million cash injection to fuel expansion in Russia and open three new offices there. In December last year it bought the Chinese Bank in Taiwan and also started operations in central China. In October it established a branch network in Peru and acquired Grupo Banistmo in Panama in July 2006.

The State Bank of Vietnam has announced that it has allowed GE Money, to start operating in the country. "The SBV has issued a license to establish GE Money Vietnam Finance Co. Ltd, or GEMVF, with its office in Ho Chi Minh City," the SBV said in a statement published on its Web site. GEMVF, which has a 50-year license, will have a registered capital of $18.2 million, it said. The company will be permitted to issue bills and bonds, issue credit cards and provide loans in Vietnam, the SBV said. GEMVF will be the fourth foreign financial firm to operate in Vietnam. The other firms are owned by U.K.'s Prudential Insurance, France's Societe Generale and Czech's PPF Group. From GE, watch out for predatory lending...

June 16, 2008

First, we're glad to see that CompuCredit, and First Bank of Delaware, are getting sued by the government for $200 million. Inner City Press / Fair Finance Watch filed comments opposing CompuCredit as a predatory lender.

This week, Inner City Press / Fair Finance Watch filed comments against the applications by Spain's Caja Madrid, funder of biofuel projects and 23% owner of Iberia airlines, to acquire City National Bank of Florida, and against the Federal Reserve's secret process with banks, in essence a rule-making excluding the public even those the topic, credit derivatives, has come up because of the subprime lending crisis. The financial institutions invited -- and now challenged -- are listed below.

The Administrative Procedures Act (5 U.S.C. Section 553) and related laws require that when the government engaged in rule-making, it must provide notice to the public, and allow and weigh public comments. Here, the FRBNY has tried to rule-make without any involvement by the public, even the public most impacted by the subprime lending that underlies this FRBNY process. Rather, for example, the FRBNY on June 9 met with a group of the largest banks to discuss, according to the FRBNY's president,

"Regulatory policy. These are the incentives and constraints designed to affect the level and concentration of risk-taking across the financial system. You can think of these as a financial analog to imposing speed limits and requiring air bags and antilock brakes in cars, or establishing building codes in earthquake zones.
"Regulatory structure. This is about who is responsible for setting and enforcing those rules.
"Crisis management. This is about when and how we intervene and about the expectations we create for official intervention in crises."

But when rules are being set, to use Mr. Geithner's own analogies, for air bags, brakes, speed limits or building codes, the agencies at issue are not allowed to and do not only take input from the industry.

Press accounts make clear that the financial instruments and regulatory issues discussed behind closed doors are related to issues of public interest, which in fact are disproportionately impacting low- and moderate- income people and communities of color -- subprime and predatory mortgages. AFP of June 9 reported that

"those swaps are designed to transfer the credit exposure of fixed income products between parties and often have been linked to US subprime, or high-risk, mortgages... Trading in derivatives, financial securities whose value is derived from other financial securities, was a major factor in the subprime, or high-risk, mortgage crisis that rocked markets last August and has spread through the global markets... Geithner defended the Fed's decision to finance the Bear Stearns - JP Morgan Chase merger in March, saying it was done only with great reluctance and only because there seemed to be no other choice as Bear Stearns reeled from soured mortgage-related investments. 'It was the only feasible option available to avert default,' he said, and 'we did not believe we had the ability to contain the damage that would have been caused by default.' The Fed acted only to 'facilitate an orderly transition,' not 'to preserve the company,' Geithner said."

Here, it appears that the FRBNY is trying to take the closed-door, no public notice Bear Stearns - JPM Chase process several troubling steps further, providing access to 17 mega-banks but still not the public.

This closed-door, industry top-heavy process is unacceptable and, Inner City Press has now timely contended, is contrary to law, under 5 USC 553 and otherwise. Watch this site.

June 9, 2008

In Australia, the Minister for Corporate Law, Nick Sherry, last week released a green paper on the replacement of "disjointed state regulation" by a Federal Government regulator. "The current regulation in these areas is either duplicated, patchy, confusing, very hard to change or even non-existent," Sherry said. The minister has proposed changes that will push the regulation of mortgages towards disclosure and advice regimes similar to other financial products available through financial planners. This is also an option being considered for margin loans. The green paper highlights the situation in which home loan lenders have no requirement to be licensed and there is no Corporations Act regulation of advice about mortgages. It also referred to "predatory lending" by fringe players in the mortgage industry, who target borrowers who are in default on their mortgage repayments. The paper refers to one example in which a "refinancing expert" charged $22,340 to refinance a $220,000 loan on a property valued at $310,000. This charge was more than 22 times higher than the industry average and did not address the borrowers' fundamental problem: the repayments in the refinanced loan were higher than the original loan. The green paper also noted that some fringe players had circumvented state regulation, known as the Uniform Consumer Credit Code, by describing consumer home loans as business loans....

In the U.S., Massachusetts' attorney general Tuesday accused H&R Block and its former Option One Mortgage Corp. subsidiary of discriminating against black and Latino borrowers as it made allegedly predatory loans to them. Massachusetts Attorney General Martha Coakley said the suit filed in Suffolk Superior Court alleges that Option One and Block engaged in unfair and deceptive conduct by offering many Massachusetts borrowers risky subprime loans that the lenders knew or should have known would fail. Last month, Block sold Option One's remaining loan servicing operations to billionaire Wilbur Ross, whose American Home Mortgage Servicing Inc. affiliate in Texas continues servicing old mortgages. American Home Mortgage is also named as a defendant in the Massachusetts lawsuit...

Profiles in spin, in Ad Age, "Citigroup's head of marketing Lisa Caputo... leading the strategy to unify Citigroup 's numerous brands into one master brand: Citi. Citigroup previously used Citi as a prefix in many of the company's businesses-such as Citibank, CitiFinancial, CitiMortgage and Citi Smith Barney-but Citi now refers to the company overall. Leveraging the logo's red arc as a symbol of Citi 's capacity to turn financial dreams into realities, 'we've positioned Citi as a partner in helping you achieve financial success in whatever way you define it,' says Ms. Caputo."

Yeah, getting ripped off by CitiFinancial is how many people define success... Let's remember that Citigroup is the only company to twice settled charges of predatory lending with federal authorities...

June 2, 2008

Hedge funds profit from the subprime meltdown. In Germany, state-owned development bank KfW is looking to sell off its 45.5 percent stake in IKB, which announced big losses from investments in subprime mortgages. Among the bidders? US investment funds Ripplewood, Lonestar and Texas Pacific Group...

At HSBC's annual general meeting last week, the company was urged to consider selling off its "losing" subprime lender in the U.S.. Managers were urged give back their bonuses. CEO Green dissed Knight Vinke accusations that the bank had poured more than $62 billion into HFC and said the business was "funding itself perfectly satisfactorily." That is, blood continues to be sucked from a stone...

More on rats leaving a sinking ship. After much fanfare in putting him in charge of Citi's mortgages, Bill Beckmann, the president of CitiMortgage, is now leaving Citi at the end of this month "to spend more time with his family." In the memo, Citi's Steve Freiberg says he'll work with Mr. Beckmann, meanwhile, "on a new leadership structure." New leadership is certainly needed, all the way to the top...

May 26, 2008

In a motion filed last week, Baltimore says Wells Fargo uses predatory lending practices in Baltimore's predominantly African American neighborhoods "to make a quick profit because it believes it can successfully exploit those communities" by

Charging higher interest rates;
Underwriting certain types of adjustable-rate mortgages without regard for whether the borrower can repay after the initial "teaser" rate expires;
Stripping borrowers' equity through unnecessary refinancings;
Paying rebates to mortgage brokers for inflating interest rates;
Requiring prepayment penalties that prevent borrowers from getting help through refinancing;
Charging excessive points and fees with no corresponding benefits to the borrower.

Yep, that sounds like Wells Fargo...

In the UK, after Citigroup infuriated customers by sending out warnings to customers that it would end their agreements in 35 days because they had a "higher than acceptable risk profile," Citi hit another new low, firing employees by conference call. Staff were told to listen in while the business's UK divisional head John Wiggins told them they were fired. Citi under Vikram Pandit: very classy...

Annals of impunity: Hugh Miller, who ran Delta Funding when it settled charges of predatory lending, is now opening a new mortgage lending firm. Reliance First Capital Llc will be based in Woodbury, Long Island, Miller wrote in a May 8 posting on dfcconnect.com, a Web site for Delta's ex-employees. Reliance has also bought about $40,000 in assets from the defunct subprime lender. "We did sell some assets, equipment and furniture, to Reliance ... computers, office furniture, things like that," said Mark Power, partner in the Manhattan-based Hahn & Hessen law firm, which represents the creditor committee in Delta's bankruptcy case.

May 19, 2008

Attempts to buy time for homeowners facing foreclosures have reached a peak in New York State, where an Assembly-passed a bill with a one-year moratorium on foreclosure is stalling in the state Senate. To the north, Massachusetts Governor Deval Patrick, previously on the board of directors of predatory lender Ameriquest, a part of which has been sold to Citigroup, has spoken of a six-month foreclosure moratorium. New York's one-year proposal is being undercut by new governor Patterson's alternative proposal, which includes only a sixty day notice to borrowers that they are being foreclosed on.

At a hearing last week in Albany, the rate of foreclosures on Long Island was the buzz among legislators and advocates, but surprisingly not of the two-county region's newspaper, Newsday. Could it have been Rupert Mudoch's interest, or Cablevision's seemingly winning bid? Will the Dolans do for journalism watch they've done for basketball with the Knicks?

Broadcasting Citigroup's firm commitment to global predatory lending, the CEO of Citi India Sanjay Nayar said Citi has no plans of exiting its consumer finance business in India. "We have a large portfolio in CitiFinancial which offers finance to low and middle-income consumers. We are not exiting the business but there will be some repositioning, re-segmentation of some consumer base," said Nayar, adding Citigroup had recently infused capital of $250 million into its Indian operations for 2008.

Closer to home base, and in a field where Citigroup is also active, a group of students in California say they were ripped off by KeyBank which teamed up with dubious vocational schools to leave students deep in debt. KeyBank Education Resources and Great Lakes Educational Loan Services allegedly sought to defraud students at sham vocational schools by offering loans, and when the schools' Ponzi schemes collapse, the students are left in debt and have no new job skills, according to a class action lawsuit filed last week in Alameda County Court. The lawsuit, filed on behalf of California students who enrolled in Silver State Helicopters vocational school, accuses Cleveland-based KeyBank of predatory lending and enabling fraud to be perpetrated. The plaintiffs say, "The Bank, in complicity with the sham schools, has preyed on unsuspecting California resident students."The complaint claims that tuition and lending scams at unlicensed and unregulated trade schools have become common in recent years. "Their growth has been fueled by unscrupulous lenders that have willingly and irresponsibly 'partnered' with these sham operations to provide expensive private loans to the high-risk students these schools tend to attract," the complaint says. The lawsuit charges that KeyBank USA partners with the Silver State Helicopters vocational school as the school's preferred lender "and followed its usual script from which it has reaped millions of dollars over the years," the complaint said. "Like KeyBank's previous failed vocation school 'partners', SSH was unregulated and unaccredited and, when its Ponzi scheme collapsed, SSH filed bankruptcy filed bankruptcy, leaving its students with nothing but KayBank's threats to enforce the loans," the complaint reads. The lawsuit claims the defendants deliberately based themselves in Ohio because state laws there "exempt Ohio-domiciled banks from that state's consumer protection laws."

May 12, 2008

This week we reach into the mailbag, from inside Wells Fargo Financial, and about Citigroup's auto lending and JPMorgan Chase --

Subj: Attention Inner City Press

Date: 5/2/2008 2:10:09 P.M. Eastern Daylight Time
From: [Name withheld upon request]
To: Inner City Press

I am currently a Wells Fargo Financial employee. I didn't know if you would be interested or not but I have some interesting information you may want to look into further. I've been with Wells Fargo Financial since [redacted to preserve confidentiality of whistleblower]. I came right out of school and landed what I thought was a great career with a great company. Little did I know that I am actually a consumer lender in the subprime mortgage industry. Our main product is our Real Estate refinance which is subprime. The average rate is about 10.5%. My belief is that wells fargo financial is now downsizing and have found a clever way to lay off a lot of employees without getting into headlines as officially laying people off. We have seen a huge decline over the last six months. I come from a smaller state, last year around march of 2007 we had 50-some full time selling employees. We are now down to 20-some. People are leaving left and right and I am hoping to get out of here by the end of summer. I am an assistant branch manager. I have two points of interest that I would like to let you in on to see what your opinion is about the situation.

Point number 1: New Performance Improvement Plan process (The PIP process as it is referred to here regarding the process of terminating a team member)

The process used to be that if you did not book 100k of new money lent over a 2 month period you were given a month to do at least 50k and over the next three months to book 150k total of new money to get off of the PIP. If you did not reach this, the company could recommend termination. It has only happened to two team members since I have been with the company.

The new pip process is as follows, if you have one month without doing 50k of new money you can be recommended for termination. You have the following month to do 50k and if you do not you are out basically. Another process that has changed recently that leads me to believe that we are currently downsizing is that processor role in our branches. A processor processing all of the payoffs, paid outs, deals with title work, and insurance as well as ordering supplies for the branch and maintaining the current loan pipeline. Every branch had one processor, until this month. There are only 3 main processors in our district now, (there are 7 branches in our district) the other 4 have now been placed into part time, glorified secretary rolls. A processor now has up to 2-3 branches each to process for and did not receive any type of pay increase as a result outside of performance branch based bonuses. Some of the part-timers have already decided to quit and there isn't any rush to replace them.

Point Number 2: Sub-Prime loans and Prime loans or (A-Paper Loans)

Our business model is confused. We are supposed to be subprime lenders, we sell to customers with 620 or below fico scores, that is our target market. Anyone who has been in a sales position knows that sales is about persistence, hard work, and of course leads. Our lead base is mainly retail sales finance accounts (ex: tractor supplies financing, heating and cooling, carpet, furniture stores etc.) Most of these customers usually finance with 12 months same as cash periods or 24 months same as cash periods etc. Lately things are tight you basically have to have at least somewhat decent credit to get approved for this financing. Somewhat decent credit is above 620 fico score. Most of these retail sales accounts are 700 credit score customers and so forth. Our job is to call these customers and service those accounts and cross sell, credit cards, auto loan refinancing to pay off credit cards, and most importantly real estate restructuring. Taking the equity you have in your home to combo other bills to put them into one ultimate loan with a lower payment and hopefully an overall lower total payback (which is rare).

Most of these customers could go to their bank and do the same thing at a much lower interest rate. Our company doesn't want us selling prime loans because we don't make money on these loans. If we book a loan and it ends up going prime we do not receive credit for it as a unit or a loan. We do get paid 175 bucks for each prime loan we book but if you do nothing but prime loans you will show no new money credit for these loans and zero units thus making it look like you didn't do anything. As a result you would be pipped and begin the process of termination. There is a way for us to keep a prime customer from going prime, if we can convince the credit grade A, no matter what the fico score it could be and 850, to take a loan over 91% of the total loan value (example 100k home value, 91k loan amount) it will not go prime.

The tricky part is this, we as team members do not know what rate the customer will qualify for, we have a matrix, every customer falls into a certain pricing non-prime grade meaning a 720 credit score can come up and it will show up as a 10% rate but if you go below 91% ltv it will show that it can be recommended for prime pricing.

Let me give you a recent example:

I had a 736 fico customer coming in wanting to do a 124k total loan on a home he just had appraised about 6 months ago for 137k. The appraisal itself was done by a friend of the customers to purposefully bring it down because the loan he was trying to complete was the result of a divorce. I still took the chance and put in the total value as 137k. At a 124k total loan his total interest rate quoted was 9.38%. He had no choice, because of the way he was paid the bank would not cash flow him but we are very conservative as well but we were able to legitamitly cash flow him for the loan. (wells fargo doesn't mess around when it comes to cash flowing loans, we get heavy documentation) We got an appraisal done (wells fargo also doesn't mess around when it comes to appraisals, we have absolutely no contact with the appraisers, we have a separate company that we pay to have the contact) the appraisal came back for 185k. So obviously at this point, it would be tough for me to get this loan up to 91% ltv. For me it was simple, i want to do the right thing but at the same time i have to book loans, they put pressure on you to book it subprime, i tried like hell to sell 91% loan and nearly succeeded. The customer ended up only taking an extra 15k which still kept it below the 91% required to keep it from going prime. Still at this point i am not able to disclose to the customer that all he had to simply do was take any loan under 91% and he would simply sign the final pricing disclosure showing a 9.38% rate but after a final review it will come back and give him a 5.5% -7% loan. I still had to sell with the customer having the intentions he would be getting a 9.38% rate. We sent up the final pricing disclosure it was recognized as prime and the customer ended up with a 5.5% fixed rate for 30 years to his surprise and glee. That turned out great, of course it looks like I never booked a loan. Second scenario would have been if the customer had agreed to take an extra 60k out putting him over the 91% ltv mark and thus keeping the loan at 9.38% for a 720 fico customer. We can never inform them of this until after they agree to a higher rate like that is what they are getting and they get a prime loan. If i would have booked this loan subprime in that particular month i would have received over 1k in total bonus money. Instead, I didn't hit the mark required for bonus money and only received the 175k for booking a prime loan.

This is of course a Cover Your Ass scenario for wells fargo but believe me, it is not a good thing to book a prime loan, i had my district manager yelling at me for not being able to sell the extra 60k because once it is prime it doesn't count for the branches records, or the districts record or the regions record. No one gets credit.

That is my fundamental reason for wanting to leave wells fargo financial. I know we are in business to make money, but not at the expense of humanity.

We aim to have more on this... Now, about Citigroup's little known auto lending --

Re: Your Website

Date: 5/1/2008 4:27:46 P.M. Eastern Daylight Time

From: [Name withheld in this format]

To: webstaff@innercitypress.org

I, too found your website from the Google search, but only after my situation and grown extremely bad. I had a car financed with Arcadia Financial, which was bought out by Citi. I thought things were ok, I am a single mom and have had my problems financially, but always came through. Last year, I had a $530 a month decrease in monthly income. Since my car payments were $518, I asked for help after struggling for several months. I was told, they did not refinance. I would receive letters in the mail stating they would work with you if you had a loss of income. I again phoned and was told I could not do that. I bought this car at the end of 2003 and it was financed for 5 years. At this time, my balance is 12,297. Can you believe this? Furthermore...when I phoned and asked for the payoff on the vehicle, I was told it was $13,320. I told them I was paying the vehicle off and should not have to pay for the remaining time, which God only knows how long that is. Forever it seems. They told me they would receive all the interest and also that I had to pay interest for each day I was late on the payment, even though I had already paid late charges. I informed this lady that this was insane and they were screwing people. She hung up on me. I have been constantly berated, talked to like I was nothing and they act as though I am scum of the earth. I have explained the loss of income and that I was having trouble making the payments as they were. All they could say is, why are you late now? I have spoken with person after person at Citi about this situation and I'm at the end of my rope. If I had another vehicle, they could have this one, because I could buy a NEW car for what they are charging me. Thank you for your insightful website.

Finally, for this week, on Chase's "mortgage fraud" --

Subj: Fwd: Chase mortgage fraud

Date: 5/2/2008 3:08:29 P.M. Eastern Daylight Time

From: [Name withheld in this format]

To: Inner City Press

I have been with Chase for years. This is my 3rd mortgage through them. When I applied for the mortgage, they told me I needed to take a 2nd out so I did not have to pay the PMI. They told me this 2nd loan would be at 9.6% but could easily be paid off at anytime by me. They told me I had to do this b/c the house I was buying appraised for $170,000 (we were buying it for 159,000) I never received any other good faith estimates in the mail beside the 1st one at 9.6% for a loan of $8000. I called them weeks before closing stating I wanted to take out $18000. (John Priesta from Chase). The loan was then given to woman named Heather at Chase. I asked Heather if there were any problems with the loan and if I would be getting anything in the mail stating the new APR..she said no. A week before closing she called and said the loan apr would be 11%. Since it was so close to closing I said that was fine since I was told I could pay it off early. Closing was on Feb 28th and 5 pm. when arriving at Conrad Law firm in WV they as well as the seller's of the house (Bank of Charlestown) were shocked that they had closing papers there with an interest rate of 12.4% and that if we paid the loan off early we would receive a penalty! We were never notified of this, and b/c it was so late at night..nothing could be done about it..we were forced to sign the papers or lose the house. When I phoned Chase a supervisor told me he couldn't do anything b/c I signed the papers. I then phoned my loan officer John Priestas who refused to take my calls, he would only e-mail me and avoided my ?..why wasn't I notified of this rate hike?? I then turned to Susquehanna bank to take over my loan..they told me that my credit was almost 700 and that the rate shouldn't have ever been that high..I was also told (less than 2 months after Chase appraised my home) that my house appraised for $220,000 and I shouldn't even had to pay a PMI!! Why is Chase practicing Mortgage Fraud..I have phoned John Priestas supervisor several times and they will not return my call. I was also told that a credit check revealed that Chase check my credit score several unnecessary times..affecting my score. In the summer of 2007 I received several papers stating my and my husbands credit scores (that time they were 723)..John assured me that the printer just spitted them out..that it would not affect my credit score...

We aim to have more on all this....

May 5, 2008

From the field, Inner City Press' Tennessee sources tell of fast layoffs with no notice at Countrywide Financial's operations in Knoxville. Maybe they should shut the whole thing down...

While announced in today's American Banker in decidedly minimalist fashion, the deal between TIGRA and Dallas' Virtual Money sounds interesting, we'd like to know more about it....

In what may or may not be a sign of leaving a sinking ship, former Citi-banker Jeff Jaffe was resurfaced as a fellow at Chicago's Center for Financial Services Innovation, which previously nabbed Ellen Seidman from the OTS. Fine fellow that he is, we are hoping for some whistle-blowing...

Speaking of Citigroup, from the Washington Post of May 2 we have the story of the owner of the Shark Club of Bethesda, John A. Tsiaoushis, in league with a gaggle of predatory lenders including CitiFinancial. For a house on Pennycress Lane, in January 2005, while Tsiaoushis owed more than $588,000 on the mortgage, he sold the house without repaying it. Court records show he created documents purportedly from the mortgage company, opened a post office box in Beltsville and had the settlement company send checks totaling $586,000 to the "mortgage company's" post office box, which Tsiaoushis then deposited. Using friends and associates, Tsiaoushis helped refinance the house for subsequent buyers. In each case, checks settling the transactions were sent to post office boxes opened by Tsiaoushis, court records show, after he presented phony documents indicating that all liens had been resolved. Court records show that CitiFinancial of Falls Church paid more than $670,000 in a refinancing scam; Accredited Home Lenders of San Diego paid $891,000 to "buy" the house; and Wells Fargo in Alexandria lent $585,000 in a refinancing scheme. First Franklin Financial of San Jose, which made the original, legitimate mortgage on the house, is owed $588,000, court records show."

When sleazy lender First Franklin is the "legitimate" lender in a story, and CitiFinancial and Wells Fargo come in later without any due diligence, you get a picture of the corporate role in the current crisis....

April 28, 2008

Today in Los Angeles before the Federal Reserve, Inner City Press / Fair Finance Watch and others opposes the proposal by Bank of America to acquire Countrywide. See, Chicago Tribune of April 23, "Countrywide ripped at hearing; Bank of America told changes needed," reporting that Jesse "Jackson also called on BofA to respond to Fair Finance Watch data showing that it puts blacks into higher-cost loans nearly twice as frequently than whites."

Meanwhile, in the past week Bank of America has announced a 77 percent drop in earnings, calling into question even the safety and soundness rationale for allowing the second largest U.S. bank to buy a troubled subprime mortgage lender. The impunity factor has risen, with the news that Countrywide's Angelo Mozillo made $121 million in 2007 alone, exercising Countrywide stock options, while promoting predatory lending and foreclosures all over the country.

While the grounds include not only lending disparities but also predatory credit card practices, enabling of payday lenders, presumptive violation of the 10% deposit cap and money laundering, since this is in California, consider that in the first study of the just-released 2007 mortgage lending data, Inner City Press / Fair Finance Watch has identified worsening disparities by race and ethnicity in the higher-cost lending of Countrywide and Bank of America. Combining these two would only make things worse.

In the state of California in 2007, Countrywide confined African Americans to higher-cost loans 1.43 times more frequently than whites. If combined with Bank of America, N.A., the disparity for African Americans grows to 1.54. Watch this site -- and, on international issues, this streaming video http://www.bloggingheads.tv/diavlogs/10560#

April 21, 2008

In the run-up to the April 22 public hearing on Bank of America's application to acquire Countrywide, Inner City Press / Fair Finance Watch has identified worsening disparities by race and ethnicity if the higher-cost lending of Countrywide and Bank of America were allowed to be combined. The large and troubled Countrywide Financial, which Bank of America has applied to buy, confined African Americans to higher-cost loans 1.95 times more frequently than whites, and denied the applications of Latinos 1.53 times more frequently than whites.

Combining Countrywide and Bank of America would only make things worse. In the state of California in 2007, Countrywide confined African Americans to higher-cost loans 1.43 times more frequently than whites. If combined with Bank of America, N.A., the disparity for African Americans grows to 1.54.

Similarly, in the state of Delaware in 2007, Countrywide confined African Americans to higher-cost loans 1.84 times more frequently than whites. If combined with Bank of America, N.A., the disparity for African Americans grows to 1.94. The disparities for Latinos would also increase, from 1.29 to 1.32.

April 14, 2008

As lenders claimed to cut back on subprime lending in 2007, a new ICP Fair Finance Watch study has found that HSBC and Wells Fargo continued making super high cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities. Using 2007 Home Mortgage Disclosure Act data that was required to be released on March 31, ICP Fair Finance Watch has found 3396 such loans by HSBC, at interest rates up to a whopping 19.75% over comparable Treasury bond rates. Fully three-quarters of HSBC's loans to African Americans in 2007 were subprime loans, as these are defined by the U.S. Federal Reserve Board.

The HMDA data for 2007 is the fourth year in which the data distinguishes which loans are over the FRB-defined "rate spread," of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens.

Wells Fargo, while making 381 HOEPA loans in 2007, placed African Americans in subprime loans 2.43 times more frequently than whites, and denied the applications of Hispanics 1.56 times more frequently than whites.

GMAC, including its subsidies DiTech, HFN and Residential Funding, while making 80 HOEPA loans in 2007, placed African Americans in subprime loans 2.03 times more frequently than whites, and placed Hispanics in subprime loans 1.66 times more frequently than whites.

Milwaukee-based M&I, a stealth subprime lender, in 2007 placed African Americans in subprime loans 2.45 times more frequently than whites. 63.35% of its loans to African Americans were subprime, versus only 25.89% of its loans to whites.

April 7, 2008

In the first study of the just-released 2007 mortgage lending data, Inner City Press / Fair Finance Watch has identified worsening disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. The findings call into question the use of JPMorgan Chase to bail-out Bear Stearns, and Bank of America's proposal to acquire Countrywide Financial. 2007 is the fourth year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of 3 percent over the yield on Treasury securities of comparable duration on first lien loans, 5 percent on subordinate liens.

JPMorgan Chase in 2007 confined African Americans to higher-cost loans above this rate spread 2.44 times more frequently than whites, according to Fair Finance Watch. Chase's disparity to Latinos was 1.60. The percentage of Chase's loans which were over the rate spread actually went up from 2006 (19.28%) to 2007 (20.96).

In its headquarters Metropolitan Statistical Area (MSA) of New York City, Chase confined African Americans to higher-cost loans above the rate spread 2.92 times more frequently than whites. Chase's disparity to Latinos was 2.50.

In the New Orleans MSA Chase confined African Americans to higher-cost loans above the rate spread 2.25 times more frequently than whites. It denied over 50% of mortgage applications from African Americans. Meanwhile the Federal Reserve is bending if not breaking applicable law to allow Chase to acquire Bear Stearns and bail it out from its speculative involvement in predatory lending.

"These disparities in Chase's lending must be considered and acted on," says Inner City Press. "Particularly in New Orleans in the wake of Hurricane Katrina, Chase's denying of 50% of applications from African Americans requires an investigation, including Chase and other large banks on the Gulf Coast."

Bank of America in 2007 confined African Americans to higher-cost loans 1.88 times more frequently than whites, and denied the applications of Latinos 1.62 times more frequently than whites. Meanwhile, the large and troubled Countrywide Financial, which Bank of America has applied to buy, confined African Americans to higher-cost loans 1.95 times more frequently than whites, and denied the applications of Latinos 1.53 times more frequently than whites.

The U.S. Federal Reserve Board, while still trying to avoid any public comments on or review of the controversial Bear Stearns - JPMorgan Chase bail-out, has agreed to hold public hearings on Bank of America's Countrywide application, in Los Angeles on April 22 and in Chicago on April 29. Inner City Press and Fair Finance Watch had requested the public hearings, and in preparation are submitting to the Federal Reserve that Countrywide in the Los Angeles MSA in 2007 confined 18.91% of its African American borrowers to higher cost loans over the rate spread. Countrywide in the Chicago MSA in 2007 confined African Americans to higher-cost loans 1.93 times more frequently than whites, while confining Latinos to higher-cost loans 1.35 times more frequently than whites.

"Given Countrywide's disparities and its ongoing foreclosure practices, the Federal Reserve should not allow Bank of America to acquire it has proposed," Fair Finance Watch says. "The golden parachutes are just a form of impunity."

Citigroup in 2007 confined African Americans to higher-cost loans above this rate spread 2.33 times more frequently than whites. Fully 109,511 of Citigroup's 448,542 mortgages in 2007, or 24.41%, were high cost loans over the rate spread.

In its headquarters Metropolitan Statistical Area of New York City, Citigroup was even more disparate, confining African Americans to higher-cost loans above the rate spread 2.61 times more frequently than whites. Citigroup's disparity to Latinos was 1.90.

Citigroup was most disparate in home purchase loans, confining African Americans to higher-cost home purchase loans above the rate spread 3.41 times more frequently than whites. Citigroup's disparity to Latinos was 1.76. Citigroup has acquired Argent, an affiliate of Ameriquest which, like Citigroup, has settled governmental charges of predatory lending.

"How the 2007 data of defunct lenders like Ameriquest, New Century, American Home Mortgage and others is being reported is not clear," Fair Finance Watch notes. "The regulators have a duty to make sure those loans are reported, particularly by those still buying predatory lenders, such as Citigroup, HSBC, Merrill Lynch and Deutsche Bank."

At Wachovia, Latinos in 2007 were confined to high cost loans 1.71 times more frequently than whites.

Washington Mutual in 2007 confined African Americans to higher-cost loans above this rate spread 2.05 times more frequently than whites. Fully of 54,914 WaMu's 261,476 mortgages in 2007, or 21%, were high cost loans over the rate spread.

Royal Bank of Scotland, one of the largest banks in the world, through its U.S. subsidiaries in 2007 confined African Americans to higher-cost loans above the rate spread 1.76 times more frequently than whites. It denied over 66% of mortgage applications from African Americans, and over 62% of applications from Latinos.

National City in 2007 confined African Americans to higher-cost loans above the rate spread 1.77 times more frequently than whites. National City's disparity to Latinos was 1.73. Fully 25,012 of National City's 246,138 mortgages in 2007, or 10.16%, were high cost loans over the rate spread.

Keycorp in 2007 confined African Americans to higher-cost loans above the rate spread fully 2.2 times more frequently than whites.

Suntrust in 2007 confined African Americans to higher-cost loans 2.51 times more frequently than whites, and denied the applications of African Americans 2.34 times more frequently than whites. Fully 15,435 of Suntrust's 2007 loans were high cost loans over the rate spread.

U.S. Bancorp continued to make super high-cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities.

Regions Financial, in a new low, provided its data at the deadline but only in paper format, on over 2000 pages, so that it could not yet be computer-analyzed. Lehman Brothers provided only a PDF file of over 6000 pages, to avoid any analysis of disparities.

Where the rubber will meet the road will be in how the Federal Reserve and other agencies act on specific disparities at specific lenders, including as these are formally raised to them in timely comments on merger applications, such as that of Bank of America to acquire Countrywide, and the needed review of JPM Chase - Bear Stearns.

Methodology and scope of review: ICP Fair Finance Watch reviewed, using the SPSS program [Statistical Package for the Social Sciences], Countrywide Financial's 3,517,321 loan mortgage application records for 2007, 912,814 of which were originated loans, 157,409 (or 17.24%) of these over the rate spread. JPM Chase reported 989,683 loan mortgage application records for 2007. Citigroup in 2007 reported 1,540,325 loan application records; Wachovia reported 737,875 records. US Bancorp reported 313,908 records, including 19,206 high cost loans over the rate spread. Suntrust reported 395,188 records, including 15,435 high cost loans over the rate spread. Washington Mutual in 2007 reported 643,765 mortgage records, including 54,014 high cost loans over the rate spread.

March 31, 2008

While the Federal Reserve at least agreed to hold two public hearings on Bank of America's application to buy Countrywide Financial, it has remained silent on its highly-questionable bail-out of Bear Stearns via JPM Chase. ICP Fair Finance Watch has submitted a second comment:

March 30, 2008

Board of Governors of the Federal Reserve System
Attn: Chairman Ben Bernanke, and Secretary & FOIA Officer
20th St and Constitution Ave, N.W. Washington, DC 20551 c/o FRBNY

Re: Second Comment and Freedom of Information Request Regarding the FRS' Communications with, Consideration and Authorization of JPMorgan Chase (with its affiliates, "Applicants") to lend to and acquire Bear Stearns (with its affiliates, "Target")

Dear Chairman Bernanke and others in the FRS:

On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a second comment and request under the Freedom of Information Act (5 U.S.C. § 552; "FOIA") regarding the Federal Reserve System's (the "FRS'") communications with, consideration and authorization of JPMorgan Chase (with its affiliates, "Applicants") to lend to and prospectively acquire Bear Stearns (with its affiliates, "Target").

While JPM Chase is claiming that it somehow has the necessary regulatory approvals, it is imperative that the FRB conduct a public review of this unprecedented proposal, including in light of the material hereby formally submitted to the FRS. ICP hereby contends that regulatory approval is needed, that public input must be allowed, and that the FRB is conflicted in reviewing this transaction and these requests, as it has become a participant in the deal and underlying predatory loans.

Bear Stearns' involvement in questionable subprime lending led to its problems. Now it has emerged, with documentary proof, that JPM Chase has been involved systemically in the worst forms of predatory lending, fraudulently inflating borrowers' income in order to make loans they can't afford. See, now in the public record, Chase's memo about how to "game" its ZiPPY system:

ZiPPY Cheats & Tricks...

If you get a "refer" or if you DO NOT get Stated Income / Stated Asset findings.... Never Fear!! ZiPPY can be adjusted (just ever so slightly)

Try these steps next time you use Zippy! You just might get the findings you need!!

* Always select "ALTERNATE DOCS" in the documentation drop down.

* Borrower(s) MUST have a mid credit score of 700.

* First time homebuyers require a 720 credit score.

* NO! BK's OR Foreclosures, EVER!! Regardless of time!

* Salaried borrowers must have 2 years time on job with current employer .

* Self employed must be in existence for 2 years. (verified with biz license)

* NO non-occupant co borrowers.

* Max LTV/CLTV is 100%

Try these handy steps to get SISA findings . . .
1) In the income section of your 1003, make sure you input all income in base income. DO NOT break it down by overtime, commissions or bonus.

2) NO GIFT FUNDS! If your borrower is getting a gift, add it to a bank account along with the rest of the assets. Be sure to remove any mention of gift funds on the rest of your 1003.

3) If you do not get Stated/Stated, try resubmitting with slightly higher income. Inch it up $500 to see if you can get the findings you want. Do the same for assets.

It's super easy! Give it a try! If you get stuck, call me . . . I am happy to help!

See also,

Subj: Chase Home Finance LLC
Date: 3/27/2008 11:31:14 P.M. Eastern Daylight Time
From: [Name withheld in this format]
To: Inner City Press

Please take a look at what Chase Home Finance LLC is doing.

If it weren't happening to me, I would think this was a scam.

They haven't to my knowledge started any foreclosure proceedings yet, but although I am current on both my mortgages, they are sending letters/statements that I am 2 months behind.

Here in Georgia (a non-judicial state for foreclosures) one only has to be 3 months behind.

I have emailed Chase, written to them, to no avail. I refuse to answer their calls as I find them to be harassing and the one time I did call them, I was assured that all was well. Yet I still receive incorrect statements.

Something needs to be done on behalf of those who have already fallen prey and those who may become victims.

Not only due to the highly-questionable FRB assistance to the bail-out of a bottom-feeding investment bank by an above-confirmed predatory lender, but also the above consumer fraud issues, the FRB must hold public hearings.

March 24, 2008

The Ohio Civil Rights Commission has ruled there is evidence that Argent Mortgage, which Citigroup has bought and now owns, discriminated against African Americans by targeting them with predatory home loans. The sample case is that of Elizabeth Redrick, a 77-year-old Cleveland resident who was promised by a mortgage broker that her Argent refinance loan would result in lower payments and much-needed cash to pay bills. Redrick's monthly payments on the Argent loan were higher than originally promised and that the new mortgage did not pay off a personal-finance loan as she had hoped. Redrick received only $651 in cash from her refinanced mortgage. Loan documents show that the broker submitted two applications on Redrick's behalf. One application noted that she was white and had a monthly income of $2,630. The other application correctly said that she is black and earns $1,871 a month. The broker who submitted the mortgage to Argent made more than $5,000 from the deal. And Citigroup bought Argent...

Since the Federal Reserve is essentially a participant in the JPM Chase-Bear Stearns deal, how can it purport to regulate it? And since the Fed is now an interested party in how Bears' portfolio of subprime loans performs, how can it be objective?

GE Money announced it has an agreement with tire manufacturer Michelin to provide consumer financing to buy the tires. GE Money will provide the financing through Car-CareOne, a private-label credit program managed by GE Money's sales finance unit. Car owners can choose from 90-day, six month or 12-month no-interest programs for buying Michelin products. Watch out for the balloon payments after that, if GE's other predatory lending is any guide (Michelin guide, in this case)...

"HSBC being a global local bank, aims to become the main bank in Russia," said Stuart Lawson, acting chairman of the board in Russia of HSBC Bank, said on March 12. HSBC announced its intention to appoint Lawson chairman of HSBC in Russia after last year he resigned from Soyuz Bank. "The appointment of Stuart Lawson to the position of HSBC Russia Chairman of the Board will have a considerable effect on business development," Stephen Green, chairman of HSBC, was quoted as saying. The first three representative office of HSBC in Russian regions were opened in 2007 in St. Petersburg, Yekaterinburg, and Novosibirsk. According to Lawson, the bank will set up offices in two or three more regions, including Rostov. "It complies with HSBC intention to become a regional bank in all the business dimensions, including retail financial services," he said. Look out for HSBC's predatory lending...

March 17, 2008 WashPost - Guardian (UK)

The day after news of the Federal Reserve's murky bailout of Bear Stearns through JPMorgan Chase, Inner City Press / Fair Finance Watch filed with the Federal Reserve Board in Washington, and the Federal Reserve Bank of New York, a petition, complaint and series of requests, portions of which are available by clicking here. ICP has now made a similar filing with the Securities and Exchange Commission.

As exotic consumer loans are discredited in the United States, General Electric takes them overseas. In Singapore, GE Money brags of introducing a loan product called James, "with last installment waiver; pay interest only; payment holiday; step up or step down interest rate," according to Alok Kumar, chief marketing officer at GE Money Singapore. Ah, GE's export of predatory lending...

From testimony on Capitol Hill on March 13 --

"I came today to testify about my husband's credit card. It was CitiFinancial. He had been a customer for at least 10 years, no late payments, no over the limit. Twice last year, we were over the -- not over the limit, but we made the payment late, and only by a matter of one -- it was like an hour past 5 o'clock, so it was considered the next day. And the other one, we were on vacation. By the time we got back, it was maybe four days late. My interest went from 12.99 percent to 31.40 percent. So when I got the bill in the mail, I was happy to see that I had to pay an extra $400 to $500 every month on my payment. And the interest that was being paid on the card was -- we used to pay maybe $205. It was over $600 in interest.

We tried to work with the card company. They said they'd refer it in six months if we had a good standing. I just felt that's very unfair. Nowadays, who can afford to pay an extra $400 or $500? I understand we were late, don't dispute that. I just wish they'd be more fair in the rates that they're choosing, whether -- even though we were a customer for so many years, there's other people out there that just have situations nowadays. I mean, it's hard out there. Just listen to people, taking consideration before you double and triple their payment. It's just crazy to me...I went on the Web site, just jotted this story down. And, you know, my husband always says things just don't get done in government. That's why he's not here; he has a bad attitude.

But, I mean, something's happening now. They contacted me. Things are being done. And from the hearing today, I really don't believe that -- their argument is, "Oh, it's only a small percentage of people that this happens to." So I urge everyone out there with this kind of story to just send it in..."

Yep.

March 10, 2008

Foreclosure tales from New York, by a charter-bus driver in the East Bronx who has a mortgage payment that went from $2,482 to $3,500 a month. I had a two-year teaser rate, now going up every six months to a maximum of 13.2 percent, "I spoke to Wells Fargo. I tried to get them to keep the rate at the teaser rate, 6.8 percent... I'm in a home that cost us $35,000 in the sixties. We refinanced three times, and we owe $400,000."

The ACJ notes that in September, Citigroup bought the assets of the mortgage servicing company owned by Ameriquest's parent, ACC Capital Holdings. It also bought the assets of Argent Mortgage. That deal gave Citigroup the servicing rights for the Andronicas' mortgage and $45 billion in other loans... A Citigroup spokeswoman said Friday that the lender was awaiting information from the Andronicas to "determine their eligibility for a modification." Kelly and David Andronica think Citigroup should make things right, especially since the problems with Ameriquest loans were well known when Citigroup decided to buy the Ameriquest servicing company.

And see, on Inner City Press and free speech, www.bloggingheads.tv/diavlogs/9329#

March 3, 2008

Now Citigroup, HSBC, JPMorgan Chase, Bank of America, Wells Fargo, U.S. Bancorp, First Horizon National Corp and National City must file reports on their mortgage delinquencies and foreclosures with the Office of the Comptroller of the Currency. Information from October 2007 through February is due by March 31. Better late than never.

Also on Citigroup, a stock analyst chimes in that, "I do not believe that Mr. Pandit has a strong commitment to this business in the US. He is more oriented to overseas expansion." The same article quotes "Edward B. Kramer, executive vice president for regulatory programs at PCi Corp. in Waltham and a former banking regulator in New York state... whose firm does consulting work for Citi, that 'Sometimes the branch itself doesn't have to be in a low- or moderate-income tract to serve people who live in adjacent and surrounding low- and moderate-income areas.'" But then why don't the regulators act on branch closings in middle income tracts which impact customers in "adjacent and surrounding low- and moderate-income areas"?

Die Welt reports that GE "aims to take advantage of the financial crisis to acquire businesses, especially financial service providers, in Germany, commenting that some companies will be urgently seeking buyers. Financial services represent one of the main activities of GE, which, in Germany, is active on niche markets through specialized subsidiaries such as Disko Leasing, which provides financing for vehicles and aircraft, among other objects, and GE Money Bank, active in private customer business, which counts 500,000 customers in Germany." So GE helps trigger the subprime crisis, through WMC and otherwise, then seeks to profit on it by buying impacted companies in Germany and elsewhere...

In Russia, GE Money Bank in October-December 2007 put advertisements on the 1st Channel, Russia and STS TV channels, urging to borrow up to 300 thousand rubles at the interest rate starting from 15% annual on their terms. "The minimum interest rate on credits and the indication of a change in the interest rate were announced in the advertisement, while the other conditions determining the value of the credit were given in a small and illegible print at the last second of the commercial. That did not allow the consumer to perceive the information indicated," the regulator FAS says in a statement. According to FAS, the form of presenting the information on the credit "wasn't perceived by the consumers". Yep, that's GE, always illuminating, until darkness suits them better.

February 25, 2008

Again, the export of predatory lending. In Russia, GE Money has reportedly by fined by the Federal Antimonopoly Service for " improper and deceptive loan advertisement"-- that is, for predatory lending. In Australia, furniture seller on credit "Gerry Harvey didn't become a billionaire by letting you drop potato chips on a couch interest-free for 24 months. He sells the debt on to GE Money. It in turn sticks you with ultra-high interest loans at the end of the term. One report had a bloke buy a $600 fridge on an interest-free deal. Perhaps sensing he needed money for groceries, GE sent him a $10,000 line of credit -- where any extra spending attracted a rate of 27.99 per cent. Flexi-renting can be confusing, so let's give an example from the Consumer Credit files. One consumer decided to flexi-rent a notebook computer worth about $2000, which worked out at $4.94 a day. After 36 months the rental paid was $4982.04, at which time they had an option to buy the computer for an unspecified "market value." Scamming around the world...

So Citigroup's Global Transaction Services unit was handed a 10-year contract from the U.S. Department of Defense to provide 1.2 million travel cards to the Army, Navy, Marine Corps, Air Force and about 20 other independent agencies. The new travel cards will activate on Nov. 30-- but how was Citigroup selected? Did the DoD take into account not only Citi's predatory lending, but its new ownership structure? What safeguards are in place? Let's see...

February 18, 2008

As CRA was testified about in the House of Representatives last week, at the UN in New York, analogy was made between the subprime mortgage meltdown and the undisclosed risk of climate change.

The world of high finance tipped its hat to the environment Thursday in the UN. During an Investor Summit on Climate Risk, the heads of the pension funds of several states came out to brief the press. John Chiang, the Controller of California who claimed that his state's pension fund has only "de minimus" involvement in subprime mortgage securities, said the world must turn away from coal and find new energy sources. Moderator Mindy Lubber said that global warming risk, like the subprime mortgage market, constitutes an "uncalculated risk" which could harm communities and investors. She spoke of an 80-page petition filed with the Securities and Exchange Commission lobbying for greater environmental disclosure in annual Form 10-Ks.

Inner City Press asked if similar pressure is being brought to bear on the Federal Reserve and, globally, on the Basel Committee on Banking Supervision. Video here, from Minute 42:21. Ms. Lubber said no, that large banks are also regulated by the SEC. So next stop, Federal Reserve...

From GE Money in Australia, this: "We have people sitting in stores with calculators working out that it's cheaper to take in-store finance on goods they need, while making better use of their funds to pay off the mortgage,'' GE Money retailer solutions managing director Skander Malcolm said. "With big-ticket items, they are even more attracted to the product. For the segment under stress, we've noticed that the rising price of petrol, as much as interest rates, is causing the weekly challenges,'' Malcolm says. In-store finance can be cheaper than relying on credit cards or personal loans, but many finance schemes become more expensive if the buyer does not pay off the debt in full within the interest-free period. Neat trick...

February 11, 2008

As an indicator that savvy predatory lenders for now look beyond the United States, GE Money announced last week that it will move its headquarters out of the U.S., to London. While U.S. consumers continue to suffer from the bender that GE's WMC unit went on -- last week, a GE / WMC loan on Staten Island in New York was deemed unenforceable by a court, as predatory -- GE Money India is seeking a partner for its personal loans and mortgage business. Elsewhere, the company has formed a joint venture with Wizard Home Loans of Australia for its home loans business.

Meanwhile CitiFinancial has its arbitration clause stuck down in a case in North Carolina, where the court found that CitiFi "had initiated 3,700 actions in civil court -- 2,000 collections and 1,700 foreclosures. In that same span, there had been neither a civil action nor an arbitration launched by a borrower," because of obstacles in the arbitration clause, a contract of adhesion...

In subprime fall-out from the U.S. across the Atlantic, Merrill Lynch is reportedly set to pull out of its 300 million subprime joint venture with Irish Life & Permanent (IL&P). This comes barely a year after Merrill Lynch and IL&P launched Springboard Mortgages, which offers high cost subprime loans. In the U.S., Merrill has announced losses of almost $10 billion in the last three months of 2007, forcing the sale pieces of the company to foreign investors.

This hasn't stopped Merrill from promoting itself with a page on the program of the mis-conceived Gucci / Madonna event held February 6 on the North Lawn of the UN, the over-commercialization of which was reported as far away as Australia, click here to view (cites Inner City Press, and see this, which links in Deutsche Bank). And so it goes...

February 4, 2008

For those who think subprime sleaze is a lesson that's been learned, think again. Citigroup last week opened the 2500th storefront of its subprime unit CitiFinancial, which has twice settled governmental charges of predatory lending. It is Citi's growth unit, offering higher priced credit in strip malls nationwide. Few reforms have been implemented on real estate-backed loans, fewer still on Citi's personal loan portfolio. Meanwhile CitiFinancial's CEO Mary McDowell told the American Banker last week, in an article referencing obliquely ICP and this critique, "'We spend a lot of time with community groups to understand what their issues with us were... There is a reason you don't hear about us' from those groups, she said." But time is not all the Citi's spent...

Predator caught... in Australia. A finance company investigated for lending money to indigenous people unable to make repayments has paid almost $100,000 to an Aboriginal support group in far north Queensland. The Australian Securities and Investments Commission investigated about 200 loans from United Financial Services Queensland to indigenous borrowers between 2003 and 2005. ASIC acting executive director of consumer protection, Delia Rickard, said most of the loans were arranged through banks to buy second-hand cars. Many borrowers accepted loans of about $20,000 from the Commonwealth Bank and other lenders despite having incomes of as little as $200 per week. Sounds like CitiFinancial in such places as Tennessee...

Japan's Mizuho Financial Group said its subprime-related loss for the nine months ended Dec. 31 more than doubled from its forecast two months ago to 345 billion yen ($3.24 billion). It warned that the damage could grow to 395 billion yen for the year ending March 31. Mizuho's net profit for the April-December period tumbled 32% from a year earlier to 393 billion yen. For the full fiscal year, it now forecasts a group net profit of 480 billion yen, down 23% from the previous year. Hate to say it, but we told ya so...

At the UN, George Clooney Says that in Lockheed Martin's Sole Source Darfur Deal, Mistakes Were Made; click here for video debate.

January 28, 2008

Royal Bank of Canada is seeking to conceal information about not only its merger plans but also its purported fair lending plans, in a response to the U.S. Federal Reserve Board a heavily redacted copy of which is now online. At the end of 2007, Fair Finance Watch challenged RBC's application to acquire Alabama National BanCorporation, based on racial disparities in RBC's lending and announcements of deal-related layoffs before any regulatory approval had been obtained. RBC denied the charges, through a spokesperson. Then in a filing with the Federal Reserve which RBC was required to send to Fair Finance Watch, RBC blacked-out almost all of its response on the layoffs and fair lending issues. Whether the Federal Reserve will, as would seem to be required by the Freedom of Information Act, release the withheld information remains to be seen.

According to the most recent data Royal Bank of Canada has filed as required by the Home Mortgage Disclosure Act, RBC in 2006 disproportionately excluded and denied the applications of African Americans and Latinos. In the Charlotte, North Carolina Metropolitan Statistical Area (MSA), RBC Centura denied the mortgage refinance applications of African Americans 4.44 times more frequently than those of whites....While demonstrably excluding people of color from its offers of normally-priced, prime credit, RBC and RBC Centura have continued funding and enabling predatory / fringe financiers such as high-cost pawnshops. Fair Finance Watch submitted evidence to the Federal Reserve of RBC loans to E Z Cash Pawn in Clayton County, Georgia and Pawn Outlet of Skyland, Inc., of Skyland, North Carolina. Based on that showing, the Federal Reserve Board on January 11 asked for description of RBC's "business relationships with any unaffiliated alternative financial services provides."

In response, RBC admitted that it "maintains relationships with some clients who are alternative service providers. These clients include check cashing business and pawn shops." The Federal Reserve also asked, based on the challenge filed by Fair Finance Watch, about a report of deal-related layoffs, and about RBC's "consumer compliance and fair lending policies and procedures." In its response, RBC blacks out more than half the page, including an entire paragraph purportedly about fair lending. What is RBC so embarrassed about?

January 21, 2008

Try this on for irony -- Paulson & Co., the New York-based hedge fund which made massive money off the foreclosure frenzy in which predatory lender culminated, has put Alan Greenspan, who at the Fed allowed it all to happen, on its advisory board...

Chuck Prince, whose predatory frenzy at Citigroup resulted in firing with a $31 million golden parachute, has received an invitation to testify from the House Oversight and Government Reform Committee: "According to press reports, you collected tens of millions of dollars in payments and other compensation upon your departure from Citigroup... You should plan to address how it aligns with the interests of Citigroup's shareholders and whether this level of compensation is justified in light of your company's recent performance and its role in the national mortgage crisis." Countrywide's Mozilo, too, should be in that mix, prior to any windfall from Bank of America...

On Toronto Dominion's application to buy Commerce Bank, despite an evasive purported response from TD's law firm Simpson Thatcher, TD has had to re-apply to the Federal Reserve, opening up a new comment period...

January 14, 2008

There's been a story that Washington Mutual had exploratory merger talks with JP Morgan Chase, since WaMu's subprime lending has gotten it into such financial straits. A follow-up article said that JPM Chase-WaMu would still be below the 10% nationwide deposit cap. Meanwhile Bank of America is arguing that the 10% deposit cap will not prevent its proposed acquisition of Countrywide, since Countrywide holds its deposits in a savings & loan. But then the
10% deposit cap means nothing -- an institution could just shift deposits into a savings and loan and keep on buying up other institutions. We'll see. Countrywide's Angelo R. Mozilo has pocketed $410 million in salary, bonuses and stock-option gains since 1999, according to the executive compensation company Equilar. Now he stands to collect an additional $112 million in severance if Bank of America buys Countrywide. Predatory profits..

GE has repaid some but not all of the corporate welfare it received in New York State. The Empire State Development Corp. has recovered only 60 percent of $800,000 it doled out to GE's WMC subprime mortgage unit to create jobs that never materialized. Now the WMC office at 1 Ramland Road in Orangeburg, NY is closed. GE has said it would hire 300 workers within three years and keep them in place through 2010. The Rockland County Industrial Development Agency also provided WMC with a break on sales tax on the purchase of up to $3.5 million in equipment and related expenses, a benefit that was valued a $97,000 through the end of 2006. IDA Executive Director Ronald Hicks has said the agency will seek reimbursement plus penalties. Watch GE try to wriggle out of that one, too...

Wells Fargo was sued last week by the City of Baltimore for predatory and discriminatory lending. The U.S. Conference of Mayors projected that 361 metropolitan areas would take an economic hit of $166 billion in 2008 because of the foreclosure crisis. The Baltimore area was expected to lose more than $1.6 billion in economic output, according to the Conference of Mayors...

There's a hole in Citigroup's January 8 memo announcing a consolidated "end-to-end U.S. residential mortgage business" including origination, servicing, and securitization operations, with Bill Beckmann reporting to Carl Levinson and Jamie Forese -- CitiFinancial, Citibank, and Smith Barney would continue to originate mortgages separately. CitiFinancial is a subprime unit, one with most risk, for some reason not included. Meanwhile, the consolidated unit will, according to Citi's Jeff Perlowitz, "be a nonconforming shop." Great...

January 7, 2008

Because of the subprime meltdown, there have been very few bank mergers of late. The largest at present is TD Banknorth seeking to scoop up Commerce, which has been opposed not only by Inner City Press / Fair Finance Watch, but also now by DCRAC. Whether opposition will ultimately come from New Jersey as well is not yet known, see, e.g., "Activist fights TD-Commerce Bancorp deal, citing racial gap," by Richard Newman, Bergen Record, Jan. 1, 2008, Pg. L7.

Meanwhile, even the stock analysts are now saying National City (and Fifth Third and KeyCorp) erred in rushing to snap up banks in the south, now hit by real estate lending losses. So what about Royal Bank of Canada's push for Alabama National BanCorporation? And what about irregularities in trading of the latter's stock? More to follow, for now see "Consumer group protests RBC Centura Bank's pending buyout of Alabama National Bancorporation," Orlando Sentinel, Jan. 3, 2008

A November 5 lawsuit, which is seeking class-action status, against Citigroup asserts that Citi issued false statements in its November 4 announcement that it would write off $8 billion to $11 billion in the fourth quarter for assets linked to subprime mortgages, losses that spurred the resignation of Chuck Prince. A participant in Citi's retirement plan, of which 32 percent plan is comprised of Citi shares, alleges that the stock is “an imprudent investment” for the program and that risky mismanagement caused the plan to lose well over $1.3 billion in retirement savings. Another shareholder lawsuit followed on November 7, stating Citi officials “recklessly spent billions of dollars of subprime loans leading to losses.” Yep. This is called the chickens coming home to roost...

December 31, 2007

It never stops. Inner City Press / Fair Finance Watch (ICP) has just filed a challenge to the application by Toronto Dominion Banknorth (TD) to acquire Commerce Bancorp, based on worsening lending disparities at TD Banknorth, on TD's continuing funding of fringe financiers such a pawnshops, its settlement, with a gag order no less, of discrimination charges, abuse of consumers on exchange rates and even on withdrawing their own funds, TD Banknorth's previous branch closings and other issues (see, e.g., "New problems beset TD Banknorth," Toronto Star, July 21, 2007), public hearings should be held, and on the current record, TD's proposals should not be approved. The proposed merger would also be anti-competitive, in the Camden, New Jersey market (where the combined company would control over 40% of deposits) and elsewhere.

Mortgage lending (HMDA) data reported for 2006 show that TD Banknorth disproportionately excludes and denies African Americans and Latinos. In 2006 TD Banknorth in the Newark, New Jersey Metropolitan Statistical Area (MSA) denied the mortgage refinance applications of African Americans 4.44 times more frequently than those of whites. In the Wilmington, Delaware MSA, TD Banknorth in 2006 denied the home improvement mortgage applications of African Americans 2.85 times more frequently than those of whites. In the Boston MSA, TD Banknorth in 2006 denied the mortgage refinance applications of African Americans 2.3 times more frequently than those of whites.

In the New York City MSA, TD Banknorth strikingly excluded African Americans from its marketing, outreach and lending. For home improvement loans, of which TD Banknorth made 126 loans to whites based on 266 applications of which it denied 115 (43.2%), TD Banknorth processed only 46 applications from African Americans, denied 35 of them (76.1%). For refinance loans, of which TD Banknorth made 10 loans to whites, TD Banknorth received nine applications from African Americans, and denied ALL of them.

While strikingly excluding people of color from its offers of normally-priced, prime credit, TD's Banknorth has continued funding and enabling predatory / fringe financiers such as high-cost pawnshops. As simply one example:

MAINE SECRETARY OF STATE, UCC RECORD

Debtors: LEWISTON PAWN SHOP, INC.

Debtor Address: LEWISTON PAWN SHOP, INC.
379 LISBON STREET
LEWISTON, ME 04240

Secured Parties: TD BANKNORTH, N.A.

Secured Party Address: TD BANKNORTH, N.A.
ONE PORTLAND SQUARE
PORTLAND, ME 04101

Filing Type: INITIAL FILING

Filing Date: 10/4/2007

Expiration Date: 10/4/2012

Filing Number: 2070001882881

Filing Office: SECRETARY OF STATE/UCC DIVISION
STATE HOUSE
AUGUSTA, ME 04330

TD's previous acquisitions in the U.S. have been followed by charges of discrimination, which TD has settled apparently in exchange for gag orders. See, e.g., " Banknorth settles ageism lawsuit," Burlington Free Press (Vermont), February 8, 2007 --

"Banking firm TD Banknorth has settled an age-discrimination lawsuit filed by a former executive who accused the company of firing her without cause and replacing her with two younger employees. Anita Petroziello of Colchester alleged in a federal lawsuit that Maine-based Banknorth fired her in 2004 because she was in her 60s and had complained about mistreatment as she grew older.

"The company denied wrongdoing, according to court papers filed in U.S. District Court in Burlington. Terms of the settlement, which was announced in a one-page court filing dated Jan. 31, were not disclosed. Petroziello had sought an unspecified amount of damages, interest and legal fees. The settlement document said Petroziello and her attorney, John Franco Jr. of Burlington, met with lawyers for Banknorth during a 4-hour session in Arlington in late January.

"Franco said neither he nor his client could discuss the case. 'We have no option but to say no comment,' he said."

That's called a gag order, and one the Federal Reserve should not accept / should inquire behind. There are numerous negative managerial factors at Toronto Dominion. See, e.g., " Court allows currency charge class-action suit against TD," Globe and Mail, November 16, 2007--

"Ontario's Court of Appeal has given the go-ahead for what could be a huge class-action lawsuit against Toronto-Dominion Bank that claims credit card holders were overcharged on foreign currency conversions. The ruling, written by Ontario Chief Justice Warren Winkler, overturns lower court decisions that had blocked class-action status for the suit. If the claimants are successful, it could potentially cost the bank hundreds of million of dollars.

"The lower court judges had said it would be too complex to determine damages if the case were won, and that was reason enough to refuse certification. Chief Justice Winkler disagreed, and his ruling allows the suit to proceed.

"The suit was initiated by Windsor, Ont., university administrator Paul Cassano, a TD Visa card holder. After a 1994 trip to New York City he discovered the foreign-exchange conversion costs on U.S. dollar purchases included a 'conversion fee' and an 'issuer fee.' He claimed these were undisclosed in the cardholder agreement... In his ruling, [Chief Justice Winkler] was scathing about TD's argument it would be enormously expensive and time-consuming to figure out how much each cardholder was charged on individual foreign-exchange transactions."

Toronto Dominion is also being sued for improperly withholding its own depositors' funds, see, e.g., The Toronto Star of March 29, 2007 --

"A Toronto business law firm has started a class-action lawsuit against Toronto Dominion Bank over delays in depositor access to their money. The action by Juroviesky and Ricci follows similar litigation filed last week by the same firm against the Bank of Montreal, and partner Henry Juroviesky said yesterday the other banks also may be in line for lawsuits. 'We are investigating other suits against the remaining large banks,' Juroviesky said in an interview. The actions against TD and BMO are on behalf of bank clients who in the past six years have made deposits but been unable to access their money quickly because the banks held the funds. The claims allege the banks wrongfully withheld the proceeds of cheques, wire transfers or other deposits after they had received payment."

As stated, the proposed merger would also be anti-competitive, in the Camden, New Jersey market (where the combined company would control over 40% of deposits) and elsewhere. There are overlaps in Connecticut (2 counties), New Jersey (10), New York (3), and Pennsylvania (4). FFW timely requested public hearings, on competitive effects and the other issues raised.

In its preliminary proxy, as summarized by the American Banker newspaper of Nov. 13, 2007 --

"Commerce disclosed that its board considered selling itself immediately after it said June 29 that it had signed a consent order with regulators, and that Vernon W. Hill 2nd was forced to resign as its chairman and chief executive. On July 2 the board met for the first time with Goldman and with Sullivan & Cromwell LLP, which Commerce had hired only weeks before as its legal adviser, to discuss a sale...Thirteen of the companies contacted by Goldman "indicated either that their business models were not compatible with Commerce's ... or that they would not be willing to pay a premium to Commerce's then-current market price," the filing said. Two others backed off after receiving more information about Commerce; they also cited the largely organic retail banking focus. One company made a no-premium bid. Only Toronto-Dominion, through its Portland, Maine, subsidiary, TD Banknorth Inc., offered a premium - 6% when the deal was announced."

TD's past acquisitiveness has bred litigation, and negative financial results, see, e.g., "New problems beset TD Banknorth after judge rejects shareholder deal; Merger price cash hike 'insufficient,' court rules," Toronto Star, July 21, 2007 --

"Toronto Dominion Bank's newly privatized U.S. subsidiary could be facing more legal woes now that a Delaware judge has tossed out its settlement of a shareholder lawsuit relating to its $3.2 billion (U.S.) buyout. The decision raises the spectre of a potential trial in the case and is the latest in a string of problems for TD Banknorth, which slashed jobs and closed a slew of branches after being swallowed whole by its Toronto-based parent earlier this year.

"TD Banknorth had struck a $4 million settlement with a group of investors who launched a lawsuit over the going-private transaction. That deal included a sum of $3 million, or about three cents a share, and an additional $1 million to cover legal fees, according to court documents. Some shareholders, however, were unhappy with that amount and the court ultimately rejected the agreement citing 'inadequacies in the settlement notice.'

"'Based on the record submitted ... the court concludes that the plaintiffs unreasonably failed to press legitimate legal claims against the defendants before consenting to the settlement," wrote Judge Stephen Lamb of Delaware Chancery Court in Wilmington in a decision earlier this week. 'As a result, the class members appear to have received insufficient consideration in the form of a token cash increase in the merger price, a virtually meaningless change in the calculation of the vote, and several proxy disclosures for which the plaintiffs cannot even wholly claim credit'... Last November, Toronto Dominion Bank announced plans to buy the 43 per cent of TD Banknorth that it didn't already own for $3.2 billion, or $32.33 per share.

"The transaction concluded this spring after the Portland, Maine-based bank replaced its top executive and announced plans to mothball up to 24 branches and eliminate about 400 jobs to cut operating expenses. With 27 mergers in 12 years, Banknorth has been a major acquisition vehicle for its Canadian parent, but its sub par earnings have been a drag on its bottom line."

For the protection of consumers and communities, as well it seems of TD Banknorth, Commerce and their shareholders, public hearings should be held, and on the current record TD's proposals should not be approved.

Be aware -- it is Citifinancial's and HSBC's Household's position that it can access credit reports even of a person who has not applied to it for credit. In Enoch v. Dahle/Meyer Imports, L.L.C., et al., No. 2:05-CV-409 TC (D. Utah 11/16/07, a consumer tried to hold her car dealer, two lenders, and a credit reporting agency liable after she was denied credit. Rosaline Enoch went to Dahle Mazda to buy a vehicle. Enoch chose a car and signed a note for a down payment. Enoch also signed a contract of sale, which stated that the dealership agreed to seek financing for the car loan. Allegedly, the dealership led Enoch to believe that it already had arranged financing. CitiFinancial Auto Corp. and Household Auto Finance Corp. denied Enoch credit, and the dealership was unable to arrange other financing. Dahle demanded that Enoch pay for the car or agree to rescind the deal, in which case Dahle would return the money Enoch had paid. Enoch surrendered the car and subsequently sued... The court concluded that when Enoch signed the contract with Dahle, she authorized the dealership to seek credit on her behalf. "Consequently - even though Ms. Enoch did not request credit directly from CitiFinancial and Household - there is no question that Ms. Enoch participated in the request for credit," the court wrote. Be afraid - be very afraid...

December 24, 2007

As the subprime foreclosure wave continues to gather strength, a major Wall Street (and Frankfurt) player, Deutsche Bank National Trust Company, has issued a memorandum purporting to urge its servicers to exercise restraint or at least discretion in evicting tenants from rental properties, and, apparently most important to it, to never include the name Deutsche Bank on any foreclosure or eviction filing without emphasizing that DB is only the trustee. Of course, it's an enabling role that Deutsche Bank chose and profits from. But Deutsche Bank wants it both ways. At least the memo has Deutsche Bank National Trust Company's contract numbers, which desperate consumers often call Inner City Press to request. They are, in Santa Ana, California, Tel 714 247-6000, Fax 714 247-6009. Inner City Press is putting the DB memo online, here.

Citi's real advocacy -- The American Financial Services Association, one of the hardest-nosed subprime trade groups, said Thursday that it has named Elvis Goddard of Citifinancial as the chairman of the advisory board of its mortgage lending division. Goddard oversees more than 550 high-cost CitiFinancial branches across eight states in the South. He began his subprime career there at Aristar Inc., later bought by Washington Mutual Finance Group, then by Citi...

December 17, 2007

With Citigroup giving its CEO and chairman jobs to investment banker, now pundits speculate that the branch bank may be sold, saying Citi's "share in New York is way down from five years ago, when it had nearly 21% market share and 375 branches, because it moved a large amount of deposits from New York City to Nevada." Is that why Citi has felt comfortable doing less and less under the Community Reinvestment Act?

Too little, too late -- nearly two years after the Ameriquest settlement was announced with fanfare by state attorneys general, now the relatively small payments are being made. This is for loans from 1999 to 2005: that is, up to seven years ago. In New Jersey, 9,132 borrowers will receive a total of $12.2 million, according to Lee Moore of the New Jersey Office of the Attorney General. The total awarded in Pennsylvania was $10.8 million to 12,401 borrowers. You do the math...

UBS has (does the math) -- last Monday it announced it is writing off $10 billion of sub-prime mortgage paper...

December 10, 2007

What is happening in this subprime shakeout is that the non-Wall Street firms, like New Century and most recently Delta Funding, are going under, while players like Citigroup (which bought most of Ameriquest) and Goldman Sachs (which is buying bottom-feeding servicer Litton) move to clean up and consolidate the industry. Of Goldman, now there's interest in that the company pushed subprime mortgages while shorting CMOs. Hey, Goldman also owns an originator, Senderra Funding, and Avelo Mortgage LLC... HSBC reported in mid-November that it was setting aside $3.4 billion for bad debts in its consumer lending business -- which, as not noted by Business Week, including not only credit cards but also high-rate personal loans...

The WSJ of Dec. 6 reporting on a "loan application, which the lawyer had obtained from [GE's] lender WMC Mortgage Corp., included bogus claims and documents intended to qualify the housekeeper for a loan that was far beyond her means to pay. In sworn testimony, Ms. Costa said she had no knowledge of the fake documents and hadn't seen all the completed forms. The loan application falsely stated that Ms. Costa was a 'U.S. person' and earned $12,500 a month -- six times her actual wages." GE - a partner in fraud...

December 3, 2007

Story of the week, capturing the decade, is the Charlotte Observer's Sunday overview, "Banks fail to escape sting of subprime." The subtitle is "They pulled back from scrutinized loans, but investment arms didn't," and the two main banks covered are the Charlotte twins, Bank of America and Wachovia. Both claimed to have gotten out of subprime, BofA all the way back in 2001. Then this quarter they have announced subprime-related write-downs of $3 billion and $1.1 billion, respectively. Clearly, they were not out of subprime. And what of the Federal Reserve, which repeatedly ignored detailed comments on mergers and accepted the banks' statements, now shown to have been incorrect, about their business?

November 26, 2007

Where does responsibility lie, for the subprime meltdown? The WSJ of November 24, after blaming borrowers, estimates that "$85 billion in subprime mortgages are resetting during the current quarter, and the same amount will reset in the first quarter of 2008. That will rise to a peak of $101 billion in the second quarter. The estimates include loans packaged into securities and held in bank portfolios. Larry Litton Jr., chief executive of Litton Loan Servicing, says resetting of adjustable-rate mortgages, or ARMs, has recently emerged as a bigger driver of defaults. 'The initial wave was largely driven by a higher frequency of fraudulent loans... and loose underwriting,' says Mr. Litton, whose company services 340,000 loans nationwide. 'A much larger percentage of the defaults we're seeing right now are the result of ARM resets.'"

Bottom-feeder Litton is, counter-intuitively, now being praised by some community groups. What about the roles of Fitch Ratings, Moody's Investors Services, and Standard & Poor's? Moody's, for example, is said to have a profit margin of 50%, despite it's massive screw up... Could they form partnerships and get praise too?

Goldman Sachs recommended last week that investors sell their stock in Citigroup, saying that Citi faces more write-downs of mortgage-related exposures and may have to cut its dividend to shore up its eroded capital ratios. Citigroup shares had fallen 39% so far this year, after the bank allowed its exposure to mortgage-linked securities to balloon, producing big trading losses and ultimately forcing the resignation of CEO Chuck Prince. According to Goldman's analysts, Citigroup's earnings could be hurt into 2009 by charges related to those exposures and a reluctance to take risks, especially while the bank continues to look for a permanent CEO. "The lack of leadership at this point in Citi's storied history could not have come at a worse time," Goldman wrote.
You call what came before "leadership"?

HSBC chairman Stephen Green has announced, "We will invest primarily in the fast growing emerging markets going forward as we reshape our business," Green said. "If there are areas of business where we think capital is not earning a return and there's nothing we can do to restructure the business, then we will follow through the logic of that." However, he stressed that there are no plans to exit the U.S. or the bank's U.S. consumer finance business, where HSBC had taken hefty impairment charges on bad mortgages this year, saying that "just because consumer finance is cyclical isn't a reason not to be in it." How 'bout the unethical nature of HSBC's still-predatory lending?

November 18, 2007

Let's recap: In the third quarter, Citigroup recorded mortgage-related write-downs of $1.8 billion, and now says that it expects to take write-downs of $8 billion to $11 billion in the fourth quarter. Earlier this month, Citigroup disclosed for the first time that it had $43 billion in CDO exposure. This accounted for the bulk of $55 billion in exposure by Citi to subprime-backed securities. Citigroup appears to have written down its CDO holdings by about 20%, compared to write-downs of 30% by Merrill Lynch and Morgan Stanley, Sanford C. Bernstein analysis has it. WSJ: "Investors have fretted about Citigroup's exposure to structured investment vehicles that have recently run into trouble. Analysts say it is unlikely the bank could be forced to take full responsibility for losses within those vehicles." Yeah -- Citi rarely takes responsibility, especially when it comes it predatory lending...

"News analysis" -- The run-up to Thursday's vote on H.R. 3915 was surreal. As the bill got weakened, some consumer groups geared up to oppose it. Press releases were issued, language of letters to Congress was vetted, to aim at unity. But other groups, sensing the bill would be passed and by all or nearly all Democrats, decided to support it, or not oppose it, as the case may be. Calls were made, unity was not achieved. And on Thursday itself, when even Maxine Waters (D-Cal) spoke in favor of the bill, the accommodators felt vindicated. They are practical, they said, they keep relations with their pols. But if you praise a bill that lets Wall Street off the hook, is the community being served? Time will tell.

November 12, 2007

At Citigroup, it happened. "Given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive officer is to step down," Chuck Prince said-in-a-statement. Honorable or now, he walks away with an estimated $99 million in vested stock holdings and a pension, according to an analysis by New York-based compensation consultant James Reda. Prince had already pocketed $53.1 million in salary and bonuses over the last four years, Reda said. And of the new chairman? "Since joining Citigroup, Mr. Rubin's performance has vacillated between disappointing to terrible," Richard Bove, an analyst at Punk Ziegel & Co., wrote in a note to investors. Punks...

Fed Governor Randall Kroszner has focused on an molehill while the mountain of subprime sleaze collapses around him. To the Consumer Bankers Association Kroszner boldly took on lenders' failure to escrow for taxes and insurance, saying these can lead to a situation "akin to payment shock for borrowers. It is a common practice for these payments to be escrowed in the prime markets, and I see no reason that escrows should not be standard practice in the subprime markets too," he said. His Fed-chosen boosters cheered, You go, Randy! "Given the substantial number of resets from now through the end of 2008, however, I believe it would behoove the industry to join together and explore collaborative, creative efforts to develop prudent loan modification programs and other assistance to help large groups of borrower systematically," he said. A bit better...

As H.R. 3915 moves toward the House floor, the language on assignee liability remains weak, whether or not "and" or "or" is included... We'll have more on this.

November 5, 2007

At the Nov. 6 mark-up in the House of predatory lending legislation, it's said that Kanjorski's bill will be folded in, and a weakened version of assignee liability will be attempted, by a manager's amendment.

There are other problems to be fixed. BizWeek says Troy Norton, 84, a retired prison guard who lives in Bismarck, Ark., claims in a lawsuit filed in June in U.S. Bankruptcy Court in Hot Springs that he was a victim of improper collection attempts by Bank of America Corp. and two collection agencies. He obtained a discharge of certain debts in June, 2006, after medical bills prompted him to seek Chapter 7 protection. Court documents show that he received eight collection letters from the bank on credit-card debt of $4,218 that a judge had canceled...

Rita Childers, 76, thought she had left behind an $855 bill owed to GE Money Bank, when the account was discharged in a Chapter 7 bankruptcy she filed in 2005. The former real estate agent in Klamath Falls, Ore., had quit her $30,000-a-year job to care for her husband, who suffers from Alzheimer's. Social Security and his veteran's pension didn't cover their bills. After the Chapter 7 case, Childers fell behind again and filed under Chapter 13, which allows debtors to repay creditors over time. GE Money had transferred the account to a debt collector that filed new claims in the Chapter 13 to recoup the canceled $855 debt. In April, Childers sued GE Money, which then withdrew the claim, citing a paperwork mistake. In an e-mail, GE Money said it tries "to avoid these errors and fixes them if they occur."

Meanwhile at Citigroup Chuck Prince, who defended Sandy Weill's purchase of Associates First Capital Corporation and lastly engineered Citigroup's takeover of Ameriquest's Argent, is slated to resign, subprime fallout...

Blast from the past: in the mail last week came a letter from the Office of Texas Attorney General Greg Abbott:

"As you may recall, in January 2003, you made a public information request... for certain documents regarding Household International... Subsequently, Household filed suit against the OAG for declaratory judgment to prevent the release of those documents. Recently, Household's [that is, HSBC's] suit was dismissed by the Court... Therefore the OAG is providing you with the enclosed documents."

Yeah -- more than three years late!

October 29, 2007

Global predatory lending: Hungary's Office of Economic Competition (GVH) has fined GE's Budapest Bank and Citigroup HUF 12 million, saying they misled their customers in advertisements regarding the interest-free usage of credit cards. The banks failed to note in its ads that the interest- free usage was only valid when the cards were used for purchases but not for cash withdrawals. The ads also failed to inform customers that the entire debt had to be paid by the given deadline for interest-free usage.

The Fed through Kroszner last week defended sleazy securitizers: "The securitization market is critical to increasing the resources available to fund home purchases and great care should be taken to ensure that investors in the securitization market can quickly and accurately assess and mitigate the risks, including the compliance risks, of mortgages sold in this market. Such laws should be very clearly delineated to ensure that they do not have a detrimental impact on the ability of lenders to securitize loans." Kroszner echoes the ABA's criticism that the bill "would increase costs and decrease choices for consumers."

October 22, 2007

What is the purpose of the Master Liquidity Enhancement Conduit being set up by Citigroup, Bank of America, JPM Chase and a few other banks? Not to help consumers, that's for sure. Rather, it's a way to cook their own books, and avoid reporting losses. That non-banks like PIMCO are not participating, despite the U.S. Treasury Department's Paulson's closed-door claims to the contrary to Italian central banker Mario Draghi, is telling. This is all about banks helping themselves. And taking advantage of each other: Inner City Press has learned that JPM Chase's Jaime Dimon has called the conduit an opportunity to make money from his old nemesis Citigroup. "Make it worthwhile," Dimon told Paulson. "Gouge them," Dimon in essence ordered his staff. Just as these banks said of consumers...

Subprime's hit pop culture, at least on National Public Radio's Prairie Home Companion, on which this week detective Guy Noir traveled to Charlotte to dispute a credit card bill with the "Bank of North America," whose president lives in a 400 mansion with a trophy wife but admits that while he made subprime loans, he doesn't understand them. Yes, that's Bank of (North?) America...

October 15, 2007

Fifteen million dollars is a lot, for hedge fund Paulson & Co. to be giving, and there's been very little debate. Money is fungible, it is noted. And now it appears a proxy war is being fought.

The other Paulson, head of the Treasury Department, is trying to help Citigroup and others to conspire to bail-out the structured investment vehicles (SIVs) which speculated in predatory loans. One wonders about the views of this collaboration by John Paulson, who already once accused his ex-employer Bears Stearns of market manipulation. What led to the $15 million grant, after a summer of shorting subprime stocks? Maybe non-profit investors in the fund, like that Ascension Health and Wisconsin Alumni Research Foundation? Developing.

October 8, 2007

As the subprime meltdown hurts more and more people, the focus has shifted to spin. Lenders like HSBC prime groups to speak in their favor. Regarding HSBC, the LA Times last week also quoted HSBC's Tom Detelich gushing that "on a few occasions, HSBC has cut the interest to 0%" -- which, has said, "was possible because the company didn't sell the loans it serviced." Then, "Other housing advocates said HSBC's workout program usually resulted in only short-term modifications. 'It is not our experience that HSBC is better or more flexible than other lenders,' said Matthew Lee, executive director of Fair Finance Watch in New York." That's right...

October's Mortgage Servicing News reports that "Citigroup has acquired the $45 billion subprime servicing portfolio of Ameriquest Mortgage, a transaction that will help it challenge Countrywide Financial Corp. for the No. 1 spot among B&C servicers... Citigroup also purchased Argent Mortgage, a nonprime wholesale lender that is a sister company to Ameriquest... By purchasing the Ameriquest receivables, Citigroup will grow its subprime servicing portfolio to about $110 billion. At the end of June, CFC serviced $125.6 billion in subprime, ranking first in that niche... 'Exercising our option to acquire the assets from ACH's wholesale origination and servicing business allows Citi to secure valuable and scalable platforms in a market undergoing significant change,' said Jeffrey Perlowitz, head of global securitized markets for Citi's fixed income, currencies and commodities division, where the assets will reside."

But why would Argent's origination capacity "reside" in Citigroup's investment bank? We'll have more on this. For now, in the 12 months to June 2007, Citigroup in Mexico opened 207 retail bank and consumer finance / Citifinancial branches, spreading predatory lending without standards... Also south of the border approval has been procured for Banco Wal-Mart de Mexico Adelante, which, yes, Citigroup says will open 10 to 12 branches in the next year...

October 1, 2007

Beyond predatory mortgages, GE Money lends for cosmetic surgery. How do you think they foreclose? From the Detroit News: "Jawana Edwards, a Redford Township mother of two, contemplated surgery to flatten her tummy for two years, but it was out of her financial reach until this summer, when she learned about medical loans available through her plastic surgeon's office. Edwards, 36, borrowed $6,000 from CareCredit, a unit of GE Money that contracts with doctors to provide medical loans for patients. She had the surgery in July, and convinced her friend and sister to finance their own tummy tucks this summer through the same lender... CareCredit won't disclose the dollar increase in its loan volume, but President Mike Testa said the 20-year-old company has grown 50 percent a year for the past five years. CareCredit... considered the largest lender of its type in the country -- growth it has achieved in large part through winning endorsements of state and national medical and dental associations."

The two other top-three cosmetic surgery lenders listed by the Detroit News of Sept. 28 are Capital One -- whose Larry Klane is slated to join the august (?) Federal Reserve Board -- and Citigroup, which given its track record is not necessarily surprising. Someone should ask Citi's Chuck Prince, Robert Rubin et al. -- is this the democratization of credit? Or is it predatory lending?

Or how about this, from USAT -- Citigroup is issuing 3.5 million credit cards to department store customers who didn't request them... This month, Citi is sending general-purpose MasterCards to Macy's customers with credit card accounts that have been inactive for two to four years. Citi bought those credit card accounts last year.... It's not just Citi. This year, GE Money reissued J.C. Penney store cards as general-purpose MasterCards that can be used anywhere, not just at the department store. GE declined to disclose the number of cards affected."

And this just as the industry is said to be reconsidering its predatory lending practices, the two largest, Citi and GE, send out unsolicited credit cards...

September 24, 2007

This month has seen the spectacle of Alan Greenspan claiming he wasn't told what was happening with predatory lending. But community groups, in ceremonial (or window-dressing) meetings with Greenspan raised the issues in detail, about securitization of toxic loans and who was buying them. Greenspan nodded and did nothing. And now he sells his book, and defends his right to sell advice and access. Shameful...

So HSBC is closing its Decision One unit. Meanwhile, McDonagh tells the American Banker that HSBC "continues to feel comfortable originating subprime mortgages through its HFC and Beneficial consumer lending branches." Why?

A Citigroup employee has leaked thousands of consumers' Social Security numbers and mortgage information over Lime Wire... Meanwhile, Geovic Mining Corp. announced that its 60%-owned subsidiary, Geovic Cameroon, PLC, has named Citigroup as its exclusive financial advisor for the development and construction of its Nkamouna cobalt-nickel project in Cameroon. Ah, resource exploitation...

September 17, 2007 - As Fed Releases Mortgage Study, Subprime Disparities Worsen at Citigroup, HSBC, Wells

In the same week that Bank of America set a record, jacking up its surcharge for the use of ATMs to three dollars, the Federal Reserve hauled off and delivered an approval, of BofA's takeover of LaSalle. The Fed seems to have ignored most of the issues raised. For example, the Fed states that ICP and Fair Finance Watch

"expressed concerns about Bank of America’s relations with unaffiliated third parties engaged in subprime lending. The commenters provided no evidence that Bank of America has originated, purchased, or securitized 'predatory' loans or otherwise engaged in abusive lending practices."

Did the Fed even consider BofA's re-entry into originating subprime, with its propping up of Countrywide, which has settled charges of racial discrimination in its subprime lending? The Fed also makes light of BofA's mounting compliance violations:

"A commenter opposing the proposal expressed concern about Bank of America’s connection to investigations and lawsuits related to the bankruptcy of Parmalat SpA, Parma, Italy. The commenter also expressed unsubstantiated concerns about Bank of America’s student loan policies [and] the handling of certain money transfers through the New York branch of Bank of America, National Association."

To be continued. And on the Citigroup regulatory evasion beat,

Subj: CitiMortgage Realignment May Reduce Oversight for Predatory Lending

From: [Name withheld - anonymity granted]
To: Matthew Lee [at] innercitypress.org
Date: 9/5/2007 10:36:15 AM Eastern Standard Time

Dear Mr. Lee,

Please protect my anonymity, as I will be subjected to retaliation if it becomes known that I have communicated with you. Thank you in advance.

Last year, Citi convinced Federal and state regulators to allow it to merge its non-prime lending unit, CitiFinancial Mortgage, into CitiMortgage, Inc., its ostensibly prime lending unit. The reasons given for the merger were the usual: gaining economies of scale and presenting a single face to the marketplace. Along with the approvals for that merger, Citi received relief from many of the restrictions designed to prevent predatory lending, which were conditions of its acquisition of Associates First Capital in 2000 and subsequent settlements with regulators. Due to the tight controls it operated under, CitiFinancial Mortgage was only participating in an estimated 40% of the sub-prime mortgage market - for example, "stated income loans" were only a minuscule percentage of its volume, while other lenders were seeing 60% and more of their volume in "stated income loans". "Stated income loans", especially to people living on fixed income, have a higher propensity to be predatory, since the borrower's ability to repay is not determined.

CitiFinancial Mortgage also examined each loan it originated, or purchased in the secondary market, for real benefits to the borrower, going well beyond the "tangible benefits tests" touted to regulators and consumer protection activists by not only Citi but by many other lenders, as well. These "tangible benefits tests in fact give credit for largely illusory benefits. Carefully scrutinizing applications for real benefits is a practice which Citi's prime lending unit does not follow. Regardless of the reasons for the merger, by burying its sub-prime unit inside its prime unit, Citi has opened up the business to originate and purchase loans that formerly would not have met CitiFinancial Mortgage's standards for benefit to the borrower, or restrictions on predatory lending, and has made it more difficult for regulators and consumer protection activists to see what is happening with sub-prime lending at Citi.

Yesterday, hot on the heels of the announcement that Citi would acquire what is left of former number one sub-prime lender Ameriquest, Citi executives Al Tappe, Fred Bader, and Daniel Wu announced the that mortgage underwriters will no longer report to the Credit Risk Management department, but instead report to the Operations department. This "realignment" was billed as a way to become more efficient and more customer friendly. Such a move is puzzling during a time when mortgage default rates are rising across the entire industry, and, industry-wide, foreclosures are increasing at alarming rates. However, sources within Citi revealed a possible explanation: despite the 2006 merger of CitiFinancial Mortgage into CitiMortgage, Credit Risk Management has continued to resist the pressure from Citi executive management to relax controls on customer qualifications and predatory lending. By moving underwriters to Operations, Credit Risk Management will no longer be performing: daily supervision of underwriters, conducting underwriter performance evaluations, determining underwriter merit increases, and will no longer be in a position to influence their day-to-day decisions. So resistance will be reduced or eliminated to the pressure to approve loans without adequate assurance that the loan benefits the customer and the customer has the ability to repay.

It is important to note that the CitiFinancial branch network of consumer finance offices, which also makes mortgage loans, operates completely independent of the centralized CitiMortgage business, and isn't affected by either the Ameriquest acquisition or this realignment of underwriting within CitiMortgage.

Developing...

September 9, 2007

As the chickens come up to roost at Countrywide for its disparate lending, the company says it is laying off 12,000 workers and shifting most of its lending to its bank unit. Why would the banking regulators allow this toxin into the world of FDIC insurance? Meanwhile, Bank of America steps in to buck Countrywide up, to the tune of $2 billion. Is this foray back into subprime lending relevant to BofA's proposal to acquire LaSalle? You bet it is...

In Budapest on September 5, 2007, the investment chief of GE Money's Budapest Bank Peter Duronelly predicted that the crisis on the US subprime mortgage market is limited to the US. He added that it is "more a social crisis than a capital market crisis." We'll see.

At Oklahoma City's Remington Park, there's a horse running named "Predatory Lender"...

Another Citigroup connection to the depths of subprime -- its "mortgage warehouse lending unit has stopped accepting new customers, according to a person familiar with the matter. The unit, First Collateral Services Inc., offers mortgage companies credit lines of up to $250 million, which allow the firms to fund their purchases and refinancings of mortgages. Amid this year's mortgage meltdown, some warehouse lenders have pulled credit lines from existing customers, essentially pushing them out of business. As of March 31, First Collateral was the nation's No. 5 warehouse lender, with $4 billion in outstanding commitments." First Collateral, based in Concord, Calif., is continuing to finance its existing customers" -- and why haven't the identities these Citi-enabled lenders been disclosed?

September 3, 2007 -- With Subprime Hot Air in DC, Cold-Blooded Citigroup Buys Ameriquest Byline: Matthew R. Lee of Inner City Press

As President George W. Bush and Federal Reserve chairman Ben Bernanke Friday wrung their hands in Washington about the subprime mortgage meltdown, New York-based Citigroup announced it was buying a chunk of admitted predatory lender Ameriquest. Citigroup is a meta-predator, taking advantage of the foreclosure boom to scoop up one of the most abusive lenders at a temporarily reduced price. The head of Citigroup's "global securitized markets" unit, Jeffrey Perlowitz, said the takeover "allows Citigroup to secure valuable and scalable platforms in a market undergoing significant change." Some thought predatory lending was a market being discredited and shrinking. To Citigroup, it's just change that can be scaled up.

The founder of Ameriquest, Roland Arnall, who has made billions from predatory lending, was nominated by President Bush as Ambassador to the Netherlands. While a few U.S. Senators delayed his confirmation until Ameriquest finalized a settlement with state attorneys general, now Arnall will profit again, selling the remainder of the company to Citigroup. The losers in the deal are the borrowers from whom Citigroup will even more ruthlessly squeeze payments on loans that were misleading and abusive from the start, and future borrowers whom Citigroup will target with the ex-Ameriquest "scalable platform."

Citigroup's own existing platform has made it the only lender to have twice settled predatory lending charges with Federal agencies, for $240 million with the Federal Trade Commission, and another $70 million in 2004 with the Federal Reserve. Since then Citigroup's high-cost lending has gotten even more racial disparate.

2006 was the third 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 2006, in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread 4.41 times more frequently than whites, according to Fair Finance Watch. Citi's disparity to Latinos was 2.38. Meanwhile Citigroup is now buying a unit of Ameriquest, 91.65% of whose loans in 2006 were subprime.

Citigroup loves subprime, and has no scruples in this field. Its corporate DNA goes back to a Baltimore-based predatory lender called Commercial Credit, which Sandy Weill and Charles "Chuck" Prince took over in the 1980s. After their company, by then called Travelers, acquired Citicorp in 1998, the next big deal was to scale up subprime lending, by taking over Associates First Capital Corporation, which was being sued for fraud all over the country.

Now Citigroup buys Ameriquest, another well-known predatory. Citigroup's subprime regrets, if they exist, include losing out on Household International, which settled predatory lending charges for $486 million, to HSBC in 2002. Now Citigroup is back in the game, and big deal. Borrowers, be afraid, be very afraid. Even the downturn, Citigroup just re-loads for the next hunting season...

At Citigroup's annual shareholders' meeting on April 17, 2007, Chuck Prince stood alone on the stage of Carnegie Hall, as Sandy Weill used to do, and took questions. Inner City Press asked about Citigroup's 2006 lending record -- confining African Americans in New York to higher cost loans 4.4 times more frequently than whites -- and about Citigroup's then just announced proposal for "propping up and taking an option in Argent," an affiliate of Ameriquest.

"Good question," Prince began. Argent "is a company that has restructured itself. This is a company that has settled with regulators." He said it is a situation of "good bank, bad bank" and claimed that Citigroup is only thinking of buying the good part.

But it was Ameriquest that announced reforms, none of which have been implemented at Argent. Prince cut in. "We're not going to buy anything unless it's cleaned up." So in the turbulent five months since, have Ameriquest and Argent really been cleaned up? Or have prices hit bottom, leading Citigroup to pounce? Prince said, "we've had reputation issues in the distant past, we're not going down that road." And now, while other wring their hands to come off as concerned, Citigroup is rushing headlong with Ameriquest further down the road of predatory lending.

August 27, 2007

With Bank of America's proposal to invest in Countrywide, consider this, from Fox News of August 23

CAVUTO: Let's step back for a minute. As you know, the press has come up, Angelo, well, you know, when times are good, you were a savior. Now, when times are bad, you're a predatory lender, and you pounced on unsuspecting people. What do you think of that?

MOZILO: I think it's nonsense. I think it's absolute nonsense.

But Countrywide's high-cost "Full Spectrum" unit was being called a predator even when "times were good." See, e.g., Buffalo News of June 5, 2007, reporting of ICP Fair Finance Watch's study finding that "at Countrywide Financial, even upper-income black borrowers got high-cost loans 1.92 times more frequently than white borrowers." And Countrywide settled charges of its racial disparities, in a case in which the NY Attorney General's office is still trying to withhold and, even if provided, overcharge for documents requested well more than year ago...

Talk about double-speak -- from Dodd's press conference after meeting with Bernanke:

Q You helped during the predatory lending -- (off mike) -- legislation. But why has the Senate failed to act of any of the -- (off mike)?

SEN. DODD: Well, again, look, the Fed is moving on this. We have HOEPA legislation, which passed in 1994, which mandated that the Fed assume responsibility of dealing with deceptive and fraudulent practices. I have been critical of the Fed for not acting, particularly when we're -- we know that three and a half years ago, Fed staff was becoming aware of this emerging problem. They tell me they're going to have these regulations in place by this fall. If that's the case and they're moving, then I'm satisfied that that's going to be done. But I'm also simultaneously going to be looking at the possibility of legislating this area. But I don't want it made more confusing by taking that action prematurely.

Q Why hasn't the Senate considered this legislation sooner?

SEN. DODD: Well, again, I think because of existing laws here, you could deal with it here, and it seems to me the regulatory body has the responsibility of developing the regulations in this area. So we've established the law 13 years ago. The Fed was charged 13 years ago with adopting regulations. It wasn't a request of them; it was a mandate of them to do so. And so, in a sense, the power exists there for them to do what we'd be doing with legislation, I assume, anyway.

So, according to Dodd, the Fed is "moving on this," and no new legislation is needed. As they say, follow the money...

In non-U.S. predatory lending news, GE is considering leaving Japan now that consumer protections are in place, cutting interest rates from 29 to 20 percent. Among the reported potential bidders are UBS and Deutsche Bank -- advised by Alan Greenspan...

August 20, 2007

While it's good to see the American Banker describe Chris Dodd as "in the crosshairs," there's this quote: "As a committee chairman, Sen. Dodd is about results, and results can be achieved in many ways," a spokesman for the senator said. "Legislation is one of those ways, but not the only way." Question -- why not name the spokesman? Guess -- could it be... Shawn Maher? And even further inside baseball, the same Banker article quotes Jaret Seiberg as "a senior vice president of financial services policy for Stanford Washington Research Group" without noting that he previously was a reporter on just this beat for... the American Banker.

Classic Dodd, to the Sun: on willingness to meet with foreign dictators: "Three of them I've already met [Hugo Chavez, Fidel Castro, Hafez al-Assad]. ... I'd never meet with Ahmadinejad, he's a thug." But what about Kim Jong-il of North Korea?

In response to the July 24 comments of Fair Finance Watch opposing Royal Bank of Scotland's application to the Federal Reserve to acquire ABN Amro, including due to the fact that "RBS supports predatory lenders," RBS' outside counsel at Shearman & Sterling, Bradley K. Sabel, has told the Fed that

"When New Century filed for bankruptcy, RBS Greenwich Capital agreed to provide debtor-in-possession (DIP) financing to assist New Century in its efforts to reorganize... RBS Greenwich Capital also agreed to provide an initial bid on certain mortgage assets of New Century that were being sold... In exchange for providing that bid, RBS Greenwich Capital received a Bankruptcy Court-approved break up fee of $954,000."

It's reminiscent of Royal Bank of Scotland's Greenwich Capital's predatory enabling of the predatory lender ABFI in Philadelphia, and is indicative of those still profiting even from the chaos in the subprime lending market...

From the august (15) Argus Leader in South Dakota:

The court of public opinion already appears polarized on what critics call predatory lending practices - companies charging exorbitant interest rates and penalty fees. "'It's not illegal, but it's very unethical,' said Richard Cook, a former federal government analyst and author who lives in College Park, Md. 'It's legalized loan-sharking. It was one of the specialties of the Mafia. But that's one organized crime doesn't have to do now because it's legalized.' Sioux Falls Mayor Dave Munson, who worked 18 years for Citibank, calls that criticism unfair."

So, from Citibank to mayor in the city Citi ran to, to export high rate, which are called "unethical" by an ex-Federal Reserve consultant...

August 13, 2007

In second week in August, BNP Paribas froze three subprime funds and Countrywide gave warnings about the Great Depression, the Senate Banking chairman sputtered out two press releases about predatory lending: one from his teetering campaign for the Democrats' nomination, the other as chairman, both quite similar. Dodd's chief of staff dodges meetings with skeptical advocates.

In other DC staffer news, ex-House staffer Dean Sager, at CUNA for only 16 months, now quits. The trade press claims he broke the one-year revolving door rules, and was never trusted by the industry. Then again, he may move on to better things...

The UK Financial Advisor of August 9 reported that the UK "FSA is also understood to be investigating mortgage firm GE Money Home Lending, one of the biggest movers in the increasingly troubled sub-prime market. Experts fear a repeat of the experience in the US sub-prime market where poor standards have led to the market collapsing."

August 6, 2007

Ah, subprime. On August 3, American Home Mortgage shut most of its operations and said it likely will file for bankruptcy. Earlier in the week Accredited Home Lenders let it be known that it may be in danger of going under, too.

The Federal Reserve asked Bank of America six questions, in connection with its application to acquire LaSalle Bank. BofA's answers are vague, and in places the arrogance leaks through. The first question was about fair lending; BofA answers that its reviews are conducted "under attorney-client privilege." The remainder of the response is more vague that the Fed has previously accepted from applicants. Even on questions about how BofA would "integrate" LaSalle, and which products it would keep, BofA says "no decisions have been made at this time." Unfair and deceptive credit card practices? We're still waiting to see a credible answer...

July 30, 2007

Last week deputy assistant attorney general Grace Chung Becker said the U.S. Department of Justice has opened "several" discriminatory lending investigations, including based on referrals from banking regulators. Since last fall, the Federal Reserve has made three referrals, she said. The Federal Deposit Insurance Corp. has made two.

But wait -- the American Banker newspaper reports that From Jan. 1, 2004, to June 30, 2007, bank regulators referred 134 potential discrimination cases to the Justice Department - 118 from the Federal Deposit Insurance Corp., 15 from the Fed, one from the Office of Thrift Supervision, and none from the Office of Comptroller of the Currency. Great job, OCC.....

July 23, 2007

The president of the Federal Reserve Bank of St Louis, William Poole, last week said that poor decisions led to the losses and, separately, that the funds that have suffered losses got what they deserved. A number of hedge funds have suffered significant losses, including not only Bear Stearns but also, for global example, Australian fund Basis Capital. Ben Bernanke, chair of the Federal Reserve Board, warned that sub-prime losses could increase to as much as $100 billion.
Bernanke also said the Fed is "conducting a top-to-bottom review of possible actions we might take to help prevent recurrence of these problems."

An independent review, Volker-style, as they say, should be conducted into how and why the Fed was so hands-off as this happened....

July 16, 2007

The letters and notices of the state attorneys general's $325 million settlement with Ameriquest have started going out. The possible range of settlements? $123 to $2,418. Of what use is $123 to someone who's losing their home?

GE on July 13 announced plans to sell subprime WMC Mortgage after suffering more than half a billion dollars in losses from the business in the first half of 2007. GE may sell other financial-services businesses during the third quarter, too, CEO Jeff Immelt said. GE was the fifth-largest subprime mortgage originator last year, offering more than $33 billion worth of the low-end home loans to poorer borrowers with blemished credit records, according to IMF. Its WMC unit accounted for 5.5% of the $600 billion business last year. "We've got good opportunities to review assets right now," Immelt said. "We're going to go through the strategic review and you'll hear about it as we make our final decisions." Can you say, ex-Conseco?

On July 12, shares of Nomura Holdings Inc., Japan's biggest brokerage by market capitalization, fell 4.8% as investors worried about the size of its exposure to the U.S. mortgage market. The selloff in Nomura shares drove the company's stock price to its lowest level in seven months, $18.04...

HSBC, sued last week in the U.S. for racial discrimination in mortgage lending, simultaneously bragged it had gained the right, from the Vietnamese government, to buy 15% of a bank there. Spreading predatory lending?

July 9, 2007

Opposition has been filed to Bank of America's application to the Federal Reserve to gain control over more than 10% of deposits in the U.S. by acquire LaSalle Bank. Below is a summary of timely comments filed with the Federal Reserve Bank of Richmond and Federal Reserve Board in DC. The comments also raise issues of Bank of Ameica's lending disparities in 2006 and 2005, its enabling of high-cost payday lender(s) and subprime mortgage lenders, settlement of money laundering charges, etc.. Public hearings have also been requested on any application to acquire LaSalle which may be filed by the Royal Bank of Scotland / Santander / Fortis counter-bidders. The comment is below. But first, some other items --

This week, an ex-Fed regulator who monetize his expertise and access, first at Citi and now GE: "If it's now 2007 and the control failure occurred in 2005, 2004 ... is there going to be any value to law enforcement, any value to the government in finding things that happened two or three years ago and reporting it now?" The speaker of these words was identified by the American Banker newspaper as "Richard Small, the global anti-money-laundering leader at GE Money, the consumer and small-business financial services division of General Electric Co., and a former top anti-laundering official at Citigroup Inc. and the Federal Reserve Board, where he was a deputy associate director in the division of banking supervision."

Then again, the American Banker newspaper also has a revolving door. From North Carolina, Citi's live checks: "a 78-year-old resident of Carolina Spring Apartments received a notice in the mail... appeared to be a real check from CitiFinancial Auto Corporation in Irving, Texas, a company that lends money for car loans over the Internet. Rob Julavits, spokesman for CitiFinancial Auto, saw a copy of the check that the Carolina Spring resident received, and said it was a fake. 'It is not a legitimate CitiFinancial Auto check,' he said. 'We are looking into the matter.'" Whether the check was authentic or not does not answer whether CitiFinancial continuing to send live checks to senior citizens is legitimate. And Julavitz... used to report on Citigroup for the American Banker, until Citigroup hired him...

On the fortieth anniversary of FOIA implementation, a bill to restore some vitality to the law has been subject to a secret block -- by Arizona's Senator Kyle, media watcher can now report. For shame... And now, the Bank of America comment:

July 3, 2007

Federal Reserve Board - DC (by fax)

Federal Reserve Bank of Richmond
Attn: A. Linwood Gill, III, Asst Vice Pres., Gaile Clark
and Wayne P. Cox, Senior Financial Analyst
701 East Byrd Street, Richmond, VA 23261-4528

Re: TIMELY COMMENT IN OPPOSITION TO BANK OF AMERICA’S PROPOSAL TO ACQUIRE LASALLE BANK OF ABN AMRO N.A. INCLUDING REQUEST FOR HEARINGS

Dear Messrs. Gill and Cox, Ms. Clark and others in the FRS:

On behalf of the Fair Finance Watch and its affiliates, including Inner City Press (collectively, "FFW"), this is a timely comment opposing and requesting public hearing on, and complete copy of, the applications by Bank of America ("BofA") and affiliates to acquire ABN Amro North America and LaSalle Bank. Even as the proposal faces legal challenges in Europe, and would violate the 10% deposit cap in the U.S., the Federal Reserve Board's web site lists the initial comment period as running through July 3. This comment is timely. In light not only of the lending disparities set forth below, but also the antitrust and legal issues raised by Bank of America's gaming of the 10% deposit cap, its admission of money laundering and its engagement with predatory lenders, and legal and other questions about the deal, public hearings should be held.

Bank of America, with the Federal Reserve's complicity, has been making a mockery of the 10% deposit cap which is one of the few consumer protections enacted along with Interstate Banking Act of 1994. It is imperative that the FRB schedule and hold public hearings on this issue.

Meanwhile, in this case ABN Amro is trying to sell off LaSalle as a way to foil a proposal by RBS, Santander and Fortis to acquire it. FFW understands that litigation and appeals continue in Europe; the FRB should extend the comment period until the reality or hypothetical natures of this proposal is clear. For the record, FFW is also requesting, in advance, public hearings on any application by RBS, Santander and Fortis.

Bank of America continues supporting payday lender Advance America Cash Advance. See, e.g., South Carolina State of June 8, 2007: "In July 2004... Bank of America Corp. arranged a $265 million credit line for Advance America. Documents Advance America filed with the Securities and Exchange Commission indicate Bank of America administered the credit line. Not long after, Advance America announced an IPO that raised $195 million In a 2004 filing to the SEC, Advance America, which is headquartered in Spartanburg and is the nation's largest payday lender, essentially said it wouldn't be as big or as successful at corralling borrowers without banks. 'We depend on loans from banks to operate our business. If banks decide to stop making loans to companies in the payday cash advance services industry, it could have a material adverse affect on our business, results of operations and financial condition,' the company states in the SEC document."

In the most recent year for which HMDA data is available from the FRS, 2005, Bank of America was strikingly disparate to Latinos, denying their applications 2.38 times more frequently than whites, and denying African Americans 2.27 times more frequently than whites.

BofA's MBNA unit had a 4.23 disparity between pricing to African Americans and whites on conventional first lien home purchase loans: BofA's MBNA confined African Americans to rate spread loans 4.23 times more frequently than whites. The Federal Reserve has defined higher-cost loans as those loans with annual percentage rates above the rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens.

Bank of America in the New York City MSA in 2005 denied 17.4% of white applicants for conventional home purchase loans, while denying 27.5% of African American applicants, and 26.7% of Latino applicants.

In the Chicago MSA, Bank of America denied 9.0% of white applicants for conventional home purchase loans, while denying 18.5% of African American applicants, and 17.9% of Latino applicants.

In the Los Angeles MSA, Bank of America denied 15.7% of white applicants for conventional home purchase loans, while denying 30.1% of African American applicants, and 26.0% of Latino applicants.

In the Houston MSA, Bank of America denied 15.1% of white applicants for conventional home purchase loans, while denying 22.9% of African American applicants, and 24.7% of Latino applicants.

According to 2006 data provided by Bank of America, in 2006 BofA made 1655 loans over the rate cap to African Americans, 9748 to whites, and 2221 to Latinos. FFW will present further testimony on this regard at the requested public hearings.

Bank of America continues not only supporting payday lender Advance America Cash Advance, and underwriting for problematic subprime mortgage lenders. FFW is requesting public hearings on these grounds.

In late September 2006, Bank of America acknowledged 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.

Bank of America is being sued for its role in the bankruptcy of Parmalat. FFW is requesting public hearings on these grounds as well as on Bank of America's student loans policies.

Very Truly Yours,

Matthew Lee, Esq., Executive Director
Fair Finance Watch and affiliates

July 2, 2007

Even during the subprime meltdown, the big boys kept right on lending --

    Rk Organization Name                          Q1 07    Q1 06 Change Share
    1 Countrywide Financial Corp.                $7,881   $9,205 -14% 8.87%
    2 HSBC Finance                               $7,573 $14,477 -48% 8.52%
    3 Option One Mortgage Corp. (1)              $6,200   $7,690 -19% 6.98%
    4 First Franklin Financial (2)               $5,955   $5,539    8% 6.70%
    5 Wells Fargo Home Mortgage                  $5,652   $5,596    1% 6.36%
    6 Washington Mutual (E) (3)                  $4,100   $6,422 -36% 4.61%
    7 CitiFinancial (E) (4)                      $4,000   $5,900 -32% 4.50%
    8 EMC Mortgage (5)                           $3,847   $2,022   90% 4.33%
    9 Fremont Investment & Loan (6)              $3,727   $8,539 -56% 4.19%
    10 WMC Mortgage Corp. (7)                     $3,400   $6,736 -50% 3.83%
    11 Chase Home Finance                         $3,015   $2,717   11% 3.39%
    12 Ameriquest/Argent Mortgage Corp. (E) (8)   $2,000   $8,378 -76% 2.25%

(1) Option One is being sold to Cerberus. (2) FFF is owned by Merrill Lynch. (3) WaMu no longer discloses its subprime production. Figure here is an estimate. Its B&C business is called Long Beach Mortgage. (4) This is the subprime arm of CitiMortgage. Citi stopped disclosing this data point last year. (5) EMC is owned by Bear Stearns. (6) Fremont is selling its subprime business. (7) WMC is owned by GE and has suffered major layoffs. (8) Citigroup has an option to buy certain assets of Argent/Ameriquest.

Overall, subprime originations rose from $160 billion in 2001 to $600 billion in 2006, according to Inside Mortgage Finance. Subprime loans are mortgages and refinancings typically offered to borrowers with weak credit. Roughly 75% of the subprime adjustable-rate mortgages offered last year were known as 2/28s or 3/27s - loans with a flat introductory rate for the first two or three years and then a higher, floating rate for the life of the 30-year mortgage. Close to 2 million of these loans are expected to reset by the end of 2008...

From Fed Governor Randall Kroszner: "The guidance on adjustable-rate mortgages underscores that the Federal Reserve and other banking regulators expect lenders to make sure subprime borrowers not only can afford their monthly payments while the introductory rate is in effect but also after the interest rate resets." We note that at the latest Fed Consumer Advisory Council, Bernanke skipped, while Kroszner attended. Meanwhile, Bernanke is slated for an "off the record" lunch at a wire service this coming week. Priorities, priorities...

Just after the Federal Reserve's rubber stamp approval, Mellon Bank has agreed to pay $16.5 million to the federal government to settle claims that it allowed overwhelmed employees to destroy thousands of federal tax returns and payments in 2001. Mellon had a contract with the Internal Revenue Service to process income tax returns and tax-payment checks. Mellon employees, feeling overworked and unable to meet deadlines imposed by the contract, destroyed more than 77,000 returns and checks totaling $1.3 billion ....

June 25, 2007 - See also, Subprime in Seattle, Spin on Capitol Hill and Bailouts on Wall Street Leave Consumers Sleepless

As the subprime crisis worsens, the spin from all sides accelerates. Mortgage Bankers of America economist Jay Brinkmann last week laid the blame on, what else, the economy. "The problem is the greatest in Michigan, Ohio and Indiana. We've seen very large job loses, particularly in the manufacturing sector in those three states," he said. The "situation in Ohio right now is worst than what we saw in Texas in the oil bust of the 1980s."

So according to the Mortgage Bankers, the problem is not the mortgage bankers. The problem is the Rust Belt and secondarily, the blame is on the victims, for succumbing to illusions that "you can pay off the car loan and you can take care of the credit card bills, that is too good to be true."

Here in Seattle, however, the Rust Belt argument does not hold. There were 832 foreclosure filings in May in King and Snohomish counties - up 9.5 percent from April and 76.6 percent from May 2006. Across the United States, May's foreclosure filings were up 19 percent from April and up nearly 90 percent from May 2006. Brinkmann's own Mortgage Bankers Association has reported that 2.31 percent of Washington State mortgage payments were at least 30 days late during the first three months of this year, up from a year earlier. According to the MBA, six percent of Washington mortgages are subprime adjustable-rate loans, and 8.75 percent of those in the state were delinquent in the first quarter.

June 18, 2007

The Federal Reserve on June 14 hauled off and approved BONY - Mellon, saying in footnote 19 that ICP / Fair Finance Watch as

A commenter expressed concern about BONY’s relationships with unaffiliated third parties engaged in subprime lending. BONY has represented that it provides corporate trust and custody services relating to some issuances backed by subprime loans or involving issuers who originate or securitize subprime loans. BONY also indicated that it provides commercial credit to some originators of subprime mortgages. In addition, BONY noted that it acts as a swap counterparty in connection with some subprime loan securitization transactions and that its proprietary treasury portfolio, and some funds for which BONY acts as investment manager, include securities that may be partially backed by subprime assets. BONY has represented that it does not play any role in the lending practices or credit review processes of its customers who engage in subprime lending.

So banks can enable predatory lenders, as long as at the last minute they look the other way...

And even the NY Attorney General's Office, when asked for documents about their subprime lending disparity investigations, on which *they* called around for help, now wants at least $1,250 to see the documents...

June 11, 2007

As the subprime meltdown worsens, and even the industry's most staunch defenders acknowledge that it needs more oversight, federal regulators like the Office of Thrift Supervision are giving major subprime lenders... less scrutiny.

This week our example is the OTS' stealth switching and limitation of comment periods on the proposed acquisition of Republic Bank by Merrill Lynch, which was allowed to acquire First Franklin without any comment period or review. This is Merrill Lynch's first bank application since, and as Fair Finance Watch put it

On behalf of the Fair Finance Watch and its affiliates (collectively, 'FFW'), this is a timely comment opposing and requesting public hearing on, and complete copy of, the applications by Merrill Lynch Bank & Trust Co., FSB, affiliate to a large and disparate subprime lender First Franklin, to acquire First Republic Bank, R1-2007-0134.

This application was on the OTS' web site as set forth below with a filing date of May 11, 2007 --

14460 * NON-DELEGATED NORTHEAST R1-2007-0134 First Republic Bank
Merrill Lynch Bank & Trust Co., FSB MERGER 05/11/2007
4 World Financial Ctr., 250 Vesey St. VOLUNTARY 08/09/2007 Las Vegas, NV
New York, NY 10080 ACQ A NON-OTS NOT AN S&L R0-0000-0000 IN PROCESS

FFW is puzzled to see, and hereby requests a detailed explanation of, the fact that the OTS at some subsequent time changed the filing date for the application, thusly

14460       NON-DELEGATED NORTHEAST   R1-2007-0135
Merrill Lynch Bank & Trust Co., FSB   OPERATIONS   04/05/2007
4 World Financial Ctr., 250 Vesey St. BUSINESS PLAN MODIFICATION 08/20/2007
New York, NY 10080 NO SIGNIFICANT CHANGE R1-2007-0134      IN PROCESS

The result of this unexplained and presumptively unsavory change is to try to exclude public comment on this acquisition by a major subprime lender and securitizer. In any event, this comment must be considered timely.

The 2006 HMDA data including First Franklin, filed by National City Corporation and obtained by FFW, reflect fully 66.74% of loans to African Americans and 64.75% of loans to Latinos being over the Federally-defined rate spread (of 300 basis points over Treasuries on first liens, 500 basis points on subordinate liens), compared to only 43.26% of loans to whites. 19.65% of applications from African Americans, and 16.42% of applications from Latinos, were denied, compared to only 12.9% of applications from whites. FFW is requesting public hearings on these disparities.

It is particularly important that First Franklin's data be extracted and subject to public scrutiny in that Merrill Lynch has previously sought to make its own HMDA data unanalyzable. See, American Banker of April 11, 2005

'Inner City Press in New York said that Merrill Lynch Credit Corp., a unit of the New York investment bank, responded to a data request with a file in PDF format....Merrill is reviewing Mr. Lee's request that it send data in a different format.'

This should not be that difficult, and the OTS should not be switching filed-dates on applications of this magnitude. There is more to say, but FFW is filing this as soon as it saw the changed filing date, and within the comment period of the initial, accurate filing-date. FFW requests an explanation as quickly as possible...

OTS staffer says "the person who makes the entries on the system changed the file date to May 11, 2007, but a decision was then made that the file date should be changed back to April 5, 2007." Hmm...

Monday's American Banker contains an absurd story about HSBC's subprime business, styled as an analysis of "the first 100 days of Brendan McDonagh," which reads as if HSBC wrote it. As a matter of media critique, note to the American Banker: a piece like this requires at least one outside quote, one other-side-of-the-story. Heck, Crain's Chicago Business did it. As political analysis, it contains this quote from Mr. McDonagh: "at the end of the day the views of the key political public officials and the key regulators are pretty much aligned with the key financial players." And so predatory lending goes on...

June 4, 2007

Who, you ask, are the 12 biggest contributors to Dodd for President 2008, as the candidate continues saying that no new laws to counter predatory lending are needed? Here they are:

CHRISTOPHER J. DODD (D)
Top Contributors

SAC Capital Advisors $207,300
Citigroup Inc $139,950 -- Citifinancial, settled predatory lending charges
United Technologies $135,250
Bear Stearns $112,350 - subprime
St Paul Travelers Companies $88,300
The Hartford $85,650
Royal Bank of Scotland $72,250 - Greenwich Capital Markets / subprime enabler
AIG Financial Products $69,300 - American General / Subprime
Merrill Lynch $64,350 - First Franklin - subprime
Goldman Sachs $55,100 - securitizes subprime
Credit Suisse Securities $52,000 - securitizes subprime
Morgan Stanley $49,700 - makes and securitizes subprime loans (Saxon) (--CRP)

Quote of the week, from the WSJ, about who's been buying subprime mortgage-backed securities: "You have no time to look really deeply at every single borrower," says Michael Thiemann, chief investment officer at Collineo Asset Management GmbH, a Dortmund, Germany-based firm that invests on behalf of European banks and insurance companies. "You're looking at statistical distributions."

And now, we're looking at you...

Massachusetts' governor, beyond reporting another $150,000 in income from Ameriquest / Argent in 2006, now reports stock holdings in... Rent-A-Center.

May 28, 2007

Last week in Cleveland, the Federal Reserve's Sandra Braunstein was asked whether the Fed had power it wasn't using to address the predatory lending crisis. "These are things we are looking at," Ms. Braunstein said. A little late, isn't it?

Ms. Braunstein said defensively that the Fed holds hearings or public meetings on a topic such as a bank merger only if it doesn't have enough information to make a decision.

No, the Fed almost never holds merger hearings any more -- and then pretends it had no way to know what New Century -- long controlled by U.S. Bancorp -- and Ameriquest, being bought into by Citigroup, have been up to.

Ms. Braunstein claimed that the Fed can do only so much about high-rate loans, she said, because 60 percent of subprime mortgages are originated by lenders that aren't regulated directly by the Fed. "We can write rules . . . but we are not the enforcement agency for
most of these," she said.

But why didn't the Fed do anything, for example, about Deutsche Bank's links with Delta Funding? Citigroup's underwriting and lending to a range of predatory firms? HSBC Household's high cost person loans?

Along with its Cleveland claims, the Federal Reserve appears to have in essence repealed or much limited the Community Reinvestment Act, most recently with regard to FDIC-insured institutions on Guam. Issues were timely raised to the Federal Reserve Bank of New York, on ANZ's application to a bank on Guam. In any other previous case, the comments would have been referred to the Board in Washington, which would have asked ANZ to answer questions and then weighed the answers. But in a break with precedent, another diss to CRA and consumer protection, now the FRBNY takes it on itself to approve such applications without even asking any questions.

Here's a sampling of what the Fed ignored:

Note that in New Zealand, ANZ and its subsidiary National Bank have when added together received the most consumer ombudsman complaints (259), see, New Zealand Press Association of November 29, 2006 --

"Commission chair Sir Ian Barker noted a recent review showed a ``worryingly high'' number of bank staff knew little or nothing about their own bank's complaints procedures. And more than half of bank branches in a recent survey did not display the Banking Ombudsman leaflet. He endorsed a key recommendation on accessibility by a former ombudsman, now Governor-General, Anand Satyanand, in his review of the 14-year-old scheme this year. Ms Brown said an increasing number of complaints were about consumer finance and Internet fraud or Internet banking."

See also, "Lenders warned on limits, "The Australian Financial Review, November 14, 2006. ANZ's record in New Zealand, Australia, American Samoa, Cook Islands, Fiji, Kiribati, New Caledonia, Papua New Guinea, Samoa, Solomon Islands, Vanuatu, Tonga and Timor Leste should be reviewed, including at a public hearing, as a predictor of the impacts ANZ would have on Guam if allowed to acquire CSB.

There are other questions, and not only related to the environment and weapons, see also, "Your loss not our problem, bank tells duped investor; ANZ Bank won't discuss 'personal matter,'" The National Business Review (New Zealand), September 16, 2005.

ANZ enables and finances Rimbunan Hijau, the Malaysian logging company implicated in the widespread destruction of tropical forests in Papua New Guinea and elsewhere. See, e.g., " ANZ linked to illegal logging," ABC Premium News (Australia), April 12, 2007.

That is, the Fed ignored consumer protection as well as environmental / managerial issues. The regular-mailed May 18 letter of the FRBNY's Ivan J. Hurwitz says by rote that the Fed is not required to consider consumer protection or other issues outside of the United States. As one of the common sense rebuttals, what if an applicants consumer protection record where it does business, outside the U.S., is the only predictor of how it would run a bank in the U.S.? By this Fed logic, it would approve an application by an international loan shark to buy a bank in the U.S.. It is a new low for the Fed -- if the Board does nothing, the rot has re-spread to the top.

HUD Bryan Greene has bragged that, "We do have secretary-initiated investigations in the fair lending area. Particularly, we are looking into the subprime lending pricing
disparities, also some plain old discrimination," he said. Greene did not indicate how close HUD is to filing charges. However, he noted that HUD has hired consultants - economists and legal assistants - who are working right now on one of the secretary-initiated investigations.

That's funny -- HUD has gone out its way to NOT pursue detailed complaints filed about now-failing subprime lender People's Choice, and American Home Mortgage. We'll see.

May 21, 2007 -- Banker Described As Predatory May Join Federal Reserve, a Test for Senators, (c) Inner City Press

NEW YORK, May 20 -- The newest nominee to the U.S. Federal Reserve Board, recently under fire for inaction leading to the subprime lending and foreclosure crisis, comes from a notorious subprime lender, Capital One.

Larry Allan Klane, whose nomination was announced on May 15, before that worked at Deutsche Bank, whose involvement with lenders sued for predatory lending such as New York's Delta Funding has like Capital One's record been an issue considered but not acted on by the Fed.

With Fed chairman Ben Bernanke alternately promising greater scrutiny of and calling for restraint in restricting the subprime lending field, there are serious questions raised by the nomination of a longtime subprime lender to the Board. Whether these questions will arise in or even derail Klane's consideration by the U.S. Senate remains to be seen.

The May 15 personnel announcement stated that "Mr. Klane currently serves as President of Global Financial Services of Capital One Financial Corporation. Prior to this, he served as Managing Director of Corporate Trust and Agency Services at Deutsche Bank / Bankers Trust."

The connection to Capital One, but not Deutsche Bank, was reported without comment in the Washington Post and financial news wire services. Even casual television watchers associate Capital One with advertisements featuring Nordic or medieval rampaging hordes along with the promise of no- to low-fee loans from Capital One, regardless of one's credit history.

Capital One has been sued for these ads, and for the underlying business practices, by the state attorneys general in at least West Virginia and Minnesota. According to staff involved in these cases, Capital One has managed to get records of other enforcement actions against it sealed, as if the cases had never existed.

Sometimes the traces of Capital One's cover-ups are still available. A filing obtained by Inner City Press from the West Virginia Supreme Court of Appeals, for example, recites that "on June 8, 2005, Capital One Bank filed an action... to seal all records, pleadings and matters in Civil Action Nos. 05-C-71 and 05-C-72 and to enjoin the Attorney General from issuing press releases or public disclosures regarding any matter relating to its litigation against Capital One Bank."

In fact, in March 2005 when Capital One announced a proposal to buy Hibernia National Bank in (pre-Katrina) New Orleans, public records of state anti-predatory lending enforcement actions against Capital One were raised, regarding West Virginia and elsewhere. Associated Press on March 10, 2005 reported that

"Capital One's troubling practices were reflected most recently in Minnesota Attorney General Mike Hatch's lawsuit against the company. In the suit, filed in December, Hatch said Capital One's ads indicate that interest rates on its 'No Hassle' credit cards would remain at 4.99 percent. However, he says many consumers wind up paying higher rates, and those who miss payments or exceed credit limits could see rates in excess of 25 percent. Capital One said it continues to work with Hatch's office."

A Louisiana business publication noted Capital One's same-day public relations action:

"Spokeswoman Tatiana Stead emailed an additional statement this afternoon in response to the Minnesota lawsuit against the company: 'Capital One has cooperated fully with the Attorney General’s investigation, and believes it has acted properly and in full compliance with the law. Capital One regrets that the Attorney General has chosen to proceed with this lawsuit, but intends to continue to work with the Attorney General’s office to address the issues raised.'"

Whether because of this "work with Hatch's office" or not, comment has not been able to be obtained from office since Klane's nomination. The West Virginia attorney general's office, however, has indicated shock that an executive vice president from Capital One would be nominated to a seat on the Federal Reserve Board, which along with setting interest rates is charged with consumer protection. From another state, a regulator explicitly concerned about retaliation called this a nomination of a fox to serve as a hen-house's overseer.

Mr. Klane involvement with Capital One has extended beyond high-rate credit cards. He was a point-name when Capital One in 2005 bought the subprime mortgage lender eSmartloan. See, e.g., Card Line of Dec. 17, 2004.

A review of the last publicly-available Home Mortgage Disclosure Act (HMDA) data including eSmart;oan's information found 144 super high cost loans subject to the Fed-implemented Home Ownership and Equity Protection Act -- loans at rates more than eight percent higher than prime -- and 2193 loans over the Fed-defined subprime rate spread, of three percent over prime. While a purpose of HMDA is to allow for fair lending assessment by including racial and ethnic data, these eSmart (now Capital One) subprime loans were all were reported, as to race, "Information Not Provided."

The same might be said of the announcement and reporting of Mr. Klane's nomination: relThe seriousness of Senators' and the financial press' recently claimed concern about the subprime lending crisis will be tested during the consideration of Mr. Klane's qualifications for serving on the Federal Reserve Board.

* * *

The Bank of New York, enabler of predatory lenders, has been asked by the Federal Reserve about the scope of its subprime support, in response to ICP Fair Finance Watch's challenge the BONY - Mellon merger application. BONY responded, a month after the request -- and redacted even the number of subprime lenders it helps. Inner City Press has contested the redactions. We'll see.

The Fed's chairman Ben Bernanke, in some places described as finally taking predatory lending seriously, was in fact dismissive in his May 17 Chicago Fed speech. ''We must be careful not to inadvertently suppress responsible lending or eliminate refinancing opportunities for subprime borrowers,'' he said, adding that the Fed -- or he -- sees ''no serious broader spillover.''

As we predicted on May 14, and will cover going forward, the predatory lending industry is spilling over into the Federal Reserve Board...

May 14, 2007

AIG, one of the sleaziest yet under-the-radar of the subprime lenders, is this week in the news, taking a charge of $128 million for over-charging borrowers. Ever since AIG bought American General, it has been fleecing borrowers. Now even the Office of Thrift Supervision, which enabled much of it, is requiring that something be done. AIG says that "talks are at an advanced stage."

What about Lehman Brothers, which also does much questionable subprime, right under the OTS' nose?

Last Tuesday Citigroup made a greenwash announcement in the FT's pink pages. On Wednesday, under the headline "Citi's Green Push Underwhelms Environmentalists," the WSJ walked through the pledge, then quoted one of group's Citigroup in its annual reports and elsewhere characterizes as its partner...

May 7, 2007

Past 4 p.m. on Friday, May 4, the office of Senator (and nomination wannabe) Chris Dodd bragged to selected media that "Wells Fargo will join the other organizations and companies that have agreed to the Homeownership Preservation Summit Statement of Principles that he helped forge over the past two weeks." The statement calls these the "Dodd Principles." The other partners (in subcrime) include Citigroup (with two federal predatory lending settlements under its belt, now propping up and seeking to buy another predator, Argent), JPMorgan Chase, Litton Loan Servicing (a bottom feeder long known for predatory end-game servicing, Bear Stearns, Countrywide (which settled lending discrimination charges in New York), and HSBC, the successor the predator Household International, without reforming Decision One unit. Meanwhile Dodd is saying that no new legislation is needed. Principles? What principles?

Sources who sat with Dodd's sister at the South Carolina debate note that mortgage lending isn't the only issue on which Dodd's talk differ from his actions (and his funders). Incredibly, Dodd is using "his" Committee's resources for this blatant campaign (contribution raising) initiates: States News Service of May 2 reported that "Senator Dodd has invited other organizations interested in agreeing to the principles to contact Banking Committee staff." Loan sharks, give Dodd a call...

April 30, 2007

Citigroup analysts last week said GE should spin off NBC Universal, the real estate division and GE Money, including its subprime lending unit. "GE's size and complexity is working against investor interest in the stock and has contributed to further valuation erosion," the Citi analysts wrote. Talk about the pot calling the kettle black...

Now as the industry implodes, a smaller sub-industry grows of subprime lending pundits, even among those who allowed the scandal to grow. Look who's jumping in -- Edward Gramlich, Federal Reserve governor from 1997 to 2005 now identifies himself as author of the forthcoming book "Subprime Mortgages: America's Latest Boom and Bust." This in a Knight Ridder article that reports that "at least 21 non-bank lenders have filed for bankruptcy protection or shut down since early last year. And the stocks of investment banks with large subprime holdings, such as Merrill Lynch and HSBC, are taking a hit as mortgage defaults and foreclosures climb." Uh, HSBC is hardly an "investment" bank. And HSBC was the largest subprime lender in the U.S. in 2006. The article also ran as a correction: "A story on problems in the subprime mortgage market suggested that First Franklin Financial Corp. was not subject to federal regulation. Before its recent sale to Merrill Lynch, it belonged to National City, which as a nationally chartered bank was regulated by the Office of the Comptroller of the Currency." Who would have an interest in pointing this error out?

The Case of Wells Fargo and the Squishy Bed, Abusive Calls

From: [Name withheld in this format]
Date: 4/26/2007 10:37:42 AM
To: Inner City Press

Subject: Wells Fargo
Hello, In April 2006 I purchased a set of mattresses from a local furniture company, Banner Mattress. Their finance service is with Wells Fargo. The terms were no interest until 2010. I was never told there were to be minimum payments or when/if they were due.
Years ago I purchased new appliances from Home Depot and had the same terms. I chose to pay them off in full on the date it was due. I did so with no problem. Well immediately I started receiving phone calls from Wells Fargo telling me I was late and would be charged a $35.00 late charge. I told them that's impossible I have a no interest loan until 2010. Needless to say I paid them through my online banking account the $35.00 plus $35.00 late charge=$70.00. There was no date given as to what would be a PAYMENT DATE. Another time I spoke with the caller and
when I asked why they kept calling me after I paid them he shouted at me and said they never received the payment. While talking to him I went to the bank's web page and pulled the payment history for Wells Fargo. Not only had they received payment it told me the day and each month thereafter a payment for $35.00 He told me he would call me non-stop if he had to. They continued to call/harass me NINE times a day SEVEN days a week. I stopped answering the phone when I saw it was them.
The pillow top mattress slowly became defective four months after I got it. I thought I was imagining it as the salesman specifically told me it would "bounce back immediately". After stopping into the store I was told to give it some time. I did to the point I was waking up each night and the next morning with a terrible backache. I then sent an e mail to Simmons explaining the problem which they never responded to. I again went to the store and insisted he make a formal complaint. With that he sent someone out to measure the depth of the permanent
depression=1 3/4".
The store contacted me a week later and told me their representative from Simmons said they would replace it. At this point with all the hassle from Wells Fargo and now a defective mattress, I said no, I wanted my money back. The store called back and said their Simmons contact refuses to return the mattress. I then called Simmons myself and was rudely told the same thing by someone there. At this point I called the store back and told them the same thing I did Simmons, fine I would write a letter to the Attorney General's office and to the BBB. Debbie at the store told me to hold off as I wasn't the only one having problems with Simmons and she would see what she could do. A week later she called back and said they would return it and repay me what I had paid Wells Fargo.
Herein lies the problem. I paid Wells Fargo $245.00 in 2006 and $105.00 in 2007(online bank statements as proof). They told Banner I would only receive $280.00 back as I had 8 late charges of $25.00 each. The store and I both do not understand how they can say this as that is not what the salesman presented as the contract when purchasing the mattresses. Before I call Wells Fargo I would like to know what I can tell them to get my full refund? How do you fight a company who treats their customers as badly as they do by harassing phone calls each and every day to an obsessive amount of nine times?

April 23, 2007 --At Citigroup, Prince Eyes Predatory Argent, Standing Where Sandy Weill Once Stood

At Citigroup's annual shareholders' meeting on April 17, Chuck Prince stood alone on the stage of Carnegie Hall, as Sandy Weill used to do. Prince propped up his presentation with PowerPoint slides and two videos. The first was of Citigroup's volunteer day in 100 countries, from Guam to Pakistan. The second was of the new "Citi" brand, which Prince described as "representing everything our company stands for."

Inner City Press asked how these state principles are consistent with Citigroup's 2006 lending record -- confining African Americans in New York to higher cost loans 4.4 times more frequently than whites -- and with "propping up and taking an option in Argent," an affiliate of admitted predatory lender Ameriquest.

But it was Ameriquest that announced reforms, none of which have been implemented at Argent. Prince cut in. "We're not going to buy anything unless it's cleaned up." Prince and Citigroup appear to be in denial. Prince said, "we've had reputation issues in the distant past, we're not going down that road." We'll see.

The question arose during discussion of those re-nominated to Citigroup's board of directors, including former Treasury Secretary Robert Rubin. During another Citigroup subprime purchase in the past, Inner City Press asked Mr. Rubin to comment on the fair lending record of the target, Washington Mutual's finance company. "That's not really under my aegis," Mr. Rubin answered.

Among the shareholder-speakers on Tuesday, much invective was directed at Robert Rubin, for being primarily concerned with his own compensation. In 2006 Rubin's compensation was over $15 million; Prince's was $24 million. Rubin would qualify for more if terminated, which his employment agreement defines as including any "diminution of Mr. Rubin's position." Nice work if you can get it.

Citigroup will be participating Wednesday in Washington in a mortgage "summit" convened by Sen. Chris Dodd -- a summit that was closed to the press, although a press release about it was sent out. Citi has been a good friend (read, donor) to Sen. Dodd, and at the summit, Citi's counter-parties would largely consist of groups that it has funded. Afterwards, Dodd announced that he sees legislation as unnecessary. On Tuesday in Carnegie Hall, Prince showed a slide of laudatory quotes from Sen. Dodd and Rep.'s Bachus and Frank. It's nice to have friends. It might allow you to buy another predator.

Other board members also tasted fire. Kenneth T. Derr, listed in the proxy statement as the long retired chairman of Chevron Oil, was fingered as more recently involved in the bankrupt Calpine Corp. It was pointed out how much better AT&T did after Michael Armstrong left it. Andrew Liveris of Dow Chemical has faced shareholders' action and protests on environmental grounds. The U.S. CIA's John M. Deutsch would, the proxy says, "retire from Schlumbeger Limited's Board of Directors on April 11, 2007." Chuck Prince was asked why, instead of moonlighting on Johnson & Johnson's board, he doesn't "stay home" and focus on Citigroup. Prince turned that into a joke, as he did two references to Mad Money's predication that Citi's shares would rise five dollars if Prince quit. "I guess I should watch more TV," Prince deadpanned.

Prince propounded his business model, to open branches, to build consumer lending. He showed a photograph of a branch surrounded by well-water lawns. "That," he said, "is in Bangalore, India." He added that Citi's 1200 new branches in 2006 constitutes the fastest branching "in recorded history." And before history was recorded, how many branches were being opened?

Citigroup has and opens more subprime finance offices than prime-lending bank branches. Citi stands for subprime, a model it takes global. "We're the only ones who can do it," Citigroup-ers said on film about their 100 countries reach. That's the problem....

From the mailbag --

Subj: Wells Fargo Auto Finance

Date: 3/27/2007

From: [Name withheld in this format]

To: Inner City Press

Come to find out, Wells Fargo received my November payment, but claims to have reversed that payment and sent it back. Unfortunately, that money was never received by me or my bank. So I faxed my bank statements showing the payment being deducted from my account and a confirmation number showing it going to Wells Fargo.

I get 4 to 5 calls from collections everyday, unless I ask to be removed from the call pool. Then I only get calls every 5th day. They claim that I am behind. They are assessing $10 late fees all over the place and reporting my payment history to the credit bureaus. All because they cannot see that they made a simple mistake and correct it.

Do you think that anyone has actually taken the time to apologize for all of this? One person named Wayne was very apologetic...and I felt he was sincere. I have talked to approximately 100 people...and only one had the guts to say that Wells Fargo should not be taking this long to correct the issue. As others have stated, I will never again do business with Wells Fargo.

April 16, 2007 -- Predatory Lending in NY Compared to S&L Crisis, As Subcrime Disparities Worsen

Investment banks on Wall Street have been facilitators of the shady loans that have the subprime lending industry in crisis. This message was delivered on Wednesday April 11 by Richard Neiman, the ex- Wall Street banker nominated as Superintendent of Banking in New York, the headquarters of the largest conglomerate engaged in subprime lending, Citigroup.

Delivering his first speech in that capacity, Mr. Neiman had comparisons to the savings and loan crisis in the 1980s, and harkened back to the 1970s for the lending discrimination called redlining, which he implied was a thing of the past. Now, he said, there is reserve redlining, in which African Americans and Latinos are targeted for high cost loans.

Eliot Spitzer, now hitting his 100th day as New York's governor, picked as his Banking Superintendent a long-time bank lawyer with Citigroup and more recently part of the Toronto Dominion conglomerate. Some community representatives who spoke to Inner City Press on condition of anonymity, because they have to deal with the Banking Department, expressed concern that despite the speech Mr. Neiman may based on his resume be too close to industry, or unwilling to consider that his previous employers have engaged in abusive lending practices. Citigroup, for example, is noteworthy for having twice settled predatory lending charges, with the Federal Trade Commission for $240 million and with the Federal Reserve Board for $75 million in 2004.

More recently, just-released 2006 data distinguishing which loans are over a 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 show that Citigroup in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread 4.41 times more frequently than whites. Toronto Dominion's U.S. mortgage data in 2006, while generally not subprime, reflect that African Americans were confined to higher cost loans over the rate spread 16 times more frequently than whites, and Latinos 12 times more frequently than whites.

Perhaps because of his background, or also because his nomination still awaits action by the State Senate, Mr. Neiman on Wednesday thanked the many industry representatives in NYU's Lubin Auditorium, as well as other regulators. Federal Reserve chairman Ben Bernanke also spoke Wednesday at NYU, intoning that "market-based regulation has proven an effective supplement to (or substitute for) conventional command-and-control approaches." Consumer advocates expressed concerns that Mr. Neiman may share this distaste for "command-and-control" (that is, for active regulation) and rather may seek to rely on the "invisible hand" to solve these predatory lending problems.

Mr. Neiman's speech on Wednesday, however, used all of the appropriate buzzwords, from loan suitability to reverse redlining to concerns about the contagion impact of foreclosures on neighborhoods' home prices. Particularly noteworthy was his reference to Wall Street investment banks as "facilitators" who bear some responsibility for the loans they enable. But even with the flight to preemption of Citibank and JPMorgan, what about facilitator Bank of New York and major securitizer and trustee Deutsche Bank, which, a Department staffer acknowledged Wednesday to Inner City Press, remains under Department's jurisdiction? Mr. Neiman said that Eliot Spitzer had convened a working group including the state's mortgage and human rights agencies as well as the Secretary of State and the Banking Department.

Not surprisingly, Mr. Neiman decried Federal preemption of his Department and state and local laws. Eliot Spitzer, as state attorney general, chafed as such preemption when courts ruled that only the Office of the Comptroller of the Currency had jurisdiction over the national banks owned by Citigroup, JPMorgan Chase, HSBC and Wells Fargo. Spitzer ended up acting on lending disparities only at Countrywide Financial, which had yet to shift its lending under the umbrella of Federal law.

For purposes of comparison, Countrywide in 2006 in New York State confined African Americans to higher-cost loans above this rate spread 1.7 times more frequently than whites. Citigroup was more disparate than Countrywide, while denying 35.5% applications of African Americans, and 33% of applications from Latinos, versus only 21.5% of application from whites.

Other banks with Community Reinvestment Act responsibilities in New York were also more disparate than Countrywide. In New York State in 2006, Countrywide confined Latinos to higher-cost loans above this rate spread 1.38 times more frequently than whites. JP Morgan Chase was more disparate, confining Latinos to higher cost loans 1.63 times more frequently than whites. Washington Mutual was even more disparate, confining Latinos to higher cost loans 1.99 times more frequently than whites. Wells Fargo was slightly less disparate to Latinos, with a disparity of 1.3, similar to HSBCs, while being more disparate to African Americans, disparity of 2.43. Over 35% of HSBC's mortgages to African Americans in New York State in 2006 were subprime, over the rate spread. Nationwide in 2006, HSBC made 6295 super high-cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities -- more than HSBC made in 2005.

Looking even more locally, Citigroup was most disparate in the lowest-income borough its headquarters city. Citigroup in 2006 confined borrowers in Bronx County to higher cost loans 19.6 times more frequently than borrowers in Manhattan. The disparity between Manhattan and Brooklyn at Citigroup in 2006 was 14.77.

Bank of America, which like New Century, bankrupt and now under criminal investigation for the business Inner City Press is calling subcrime, has thus far in response to requests refused to provide its 2006 data despite a requirement that it be available on March 31, also assists other subprime lenders in 2006, the report says, by securitizing loans for Ameriquest, which last year settled predatory lending charges with state attorneys general including in New York for $325 million. The settlement only required reforms at Ameriquest Mortgage and two affiliates, but not its largest affiliate, Argent Mortgage, which Citigroup now has an option to buy. The 2006 data show that Argent made 117,328 mortgages, of which 107,530 or 91.65% were higher cost loans over the rate spread.

Several other large lenders, some directly under the NY Banking Department, have sought to avoid being scrutinized by refusing to provide their data in computer analyzable form. Institutions insisting on providing their data in paper or PDF form have included Delta Funding, Lehman Brothers, AIG, Fremont Investment & Loan and other large subprime lenders, as well as banks such as Whitney Bank and Fifth Third Bank and New York Community Bancorp. Mr. Neiman on Wednesday called for transparency and action. He will be judged, activists say, not on what he says, but what he does.

April 9, 2007 - Subprime Disparities in 2006 at Citigroup, HSBC and Other Large Banks

In a study of the just-obtained 2006 mortgage lending data, ICP & Fair Finance Watch have identified disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. 2006 is the third 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 2006, in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread 4.41 times more frequently than whites, according to Fair Finance Watch. Citi's disparity to Latinos was 2.38. Meanwhile Citigroup has propped up and taken an option to buy Argent Mortgage, 91.65% of whose loans in 2006 were subprime. At HSBC, over 63% of 2006 mortgages were subprime, including 6295 super high-cost loans subject to the Home Ownership and Equity Protection Act (HOEPA) -- that is, at least eight percent over comparable Treasury securities -- more than HSBC made in 2005.

"Alongside the chaos in the subprime industry, predatory lending has grown and not diminished at Citigroup, HSBC and other companies," Fair Finance Watch opines. "The disparities in this new data call out more than ever for immediate action by the public and private sectors, from governmental enforcement agencies and private attorneys general to grassroots consumers and community groups. Despite corporate claims of best practices, predatory lending is getting worse, and is now being exported overseas."

Redlining and continued disproportional denials to people of color are also identified by FFW's first study the new 2006 data. Nationwide for home purchase loans, Citigroup denied the applications of African Americans 2.10 times more frequently than those of whites, and denied the applications of Latinos 1.84 times more frequently than whites. Wells Fargo, 19.23% of whose 2006 mortgage were subprime, denied the applications of African Americans 1.72 times more frequently than whites, while denying those of Latinos 1.57 times more frequently than whites. Wells Fargo in 2006 made 889 super high-cost HOEPA loans.

JP Morgan Chase, 19.28% of whose 2006 mortgages were subprime, was particularly disparate in the New Orleans MSA, where Chase confined African Americans to higher-cost loans 2.74 times more frequently than whites.

Nationwide and Citigroup in 2006, 59.24% of African American borrowers were confined to higher cost loans over the rate spread, versus only 31.62% of whites. At HSBC, half of white borrowers were confined to rate spread loans, versus 68.97% of African Americans and 63.27% of Latinos.

HSBC, which bought Household International in 2002 just after its predatory lending settlement with state attorneys general for $484 million, in 2005 made some five thousand super high-cost loans subject to HOEPA. This rose to 6295 HOEPA loans by HSBC in 2006, even as HSBC gave earnings warnings.

Fair Finance Watch has found that nationwide at Royal Bank of Scotland's Charter One Bank unit, African Americans were confined to higher cost loans over the rate spread 1.49 times more frequently than whites. And at Countrywide and its higher-cost Full Spectrum, upper income African Americans were confined to higher cost loans over the rate spread 1.92 times more frequently than whites. In 2006, 24.70% of Countrywide's total mortgages were subprime. Combining General Electric's two mortgage units, GE Money Bank and WMC Mortgage, fully 86.89% of 2006 GE mortgages were subprime.

Bank of America, which thus far like just-bankrupt New Century has not provided its 2006 data despite a requirement that it be available on March 31, also assists other subprime lenders in 2006, by securitizing loans for Ameriquest, which last 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, which Citigroup now has an option to buy. The 2006 data show that Argent made 117,328 mortgages, of which 107,530 or 91.65% were higher cost loans over the rate spread.

Several large lenders have sought to avoid being scrutinized by refusing to provide their data in computer analyzable form. Institutions insisting on providing their data in paper or PDF form have included Lehman Brothers, AIG, Delta Funding, Fremont Investment & Loan and other large subprime lenders, as well as banks such as Whitney Bank, Fifth Third Bank, New York Community Bancorp, Regions Financial and EquiFirst, the subprime lender which Barclays just bought. Fair Finance Watch says it will be pursuing those issues as well, with each lender's regulator.

"Even with the downturn, predatory lending is a still-growing problem, impacting not only homebuyers but also consumers who take out payday, car title and tax refund anticipation loans," Fair Finance Watch states. "We will be redoubling our efforts to reign in the predatory lenders, using this data as a road map."

Citigroup was disparate in Metropolitan Statistical Areas all over the country in 2006. In Los Angeles in 2006, Citigroup confined African Americans to higher cost rate spread loans 1.70 times more frequently than whites; its disparity for Latinos was worse, at 1.90. Citigroup's African American to white disparity in the Chicago MSA in 2006 was 2.44.

The Federal Reserve has said that

”black and Hispanic borrowers taken together are much more likely than non-Hispanic white borrowers to obtain credit from institutions that report a higher incidence of higher-priced loans. On the one hand, this pattern may be benign and reflect a sorting of individuals into different market segments by their credit characteristics. On the other hand, it may be symptomatic of a more serious issue. Lenders that report a lower incidence of higher-priced products may be either less willing or less able to serve minority neighborhoods. More troubling, these patterns may stem, at least in part, from borrowers being steered to lenders or to loans that offer higher prices than the credit characteristics of these borrowers warrant. Reaching accurate determinations among these alternative possible outcomes is one goal of the supervision system."

What the Federal Reserve, which missed the foreseeable crisis in the subprime lending industry, hasn't yet disclosed is that these disparities are most stark at the largest conglomerate in the country, Citigroup, including in its headquarters city's lowest-income borough.

"Where the rubber will meet the road will be in how the Federal Reserve and other agencies act on specific disparities at specific lenders, including as these are formally raised to them in timely comments on merger applications," Fair Finance Watch concluded.

4/4/07-- "Banks Prone to Sell Minorities Pricy Loans," Reuters / Washington Post

Meanwhile, the award for the most smug and ill-informed article to date on the subprime crisis goes to The New Yorker and its business columnist, who blames borrowers and apparently did no research....

April 2, 2007

Ben Bernanke and the CRA: Narrow views. Last week the Fed chairman said, "Some observers have suggested extending the CRA to nonbank providers, but this proposal neglects a fundamental premise of the CRA legislation - that banks incur special obligations in exchange for the advantages conferred by their charters, such as deposit insurance." He also said, "To date, defining 'local community' for the purposes of CRA assessment has been manageable as most banks still lend in local communities where they have deposit-taking facilities or branches. However, if these trends continue, defining a 'local community' may become increasingly difficult, and the concept eventually may require reconsideration by regulators or even the Congress."

So in Bernanke's view, the CRA must remain limited to its initial "premises," but to help the banks, the regulators or Congress should reconsider its initial focus. If it's Congress that considers it, they'd be free to change the premise too, and extend CRA to the non-bank providers...

And here's abuse by a bank affiliate:

Subj: Wells Fargo Auto Finance
Date: 3/27/2007 10:29:50 AM Eastern Standard Time
From: [Name withheld in this format]
To: Inner City Press

I purchased a vehicle in February of 2006. It was financed through Wells Fargo Auto Finance. From February to November everything was fine. Then everything started to unravel. We made our November and December payments. Then on December 28th, we got a phone call from collections saying that we were 9 days late on our December payment. I assured them that we were not. I told them the payment
was made on December 19th. They informed me that payment was to cover Novembers payment. I went back to check my bank statements. The November payment cleared on the 21st of November. The December payment cleared on the 22nd.
Come to find out, Wells Fargo received my November payment, but claims to have reversed that payment and sent it back. Unfortunately, that money was never received by me or my bank. So I faxed my bank statements showing the payment being deducted from my account and a confirmation number showing it going to Wells Fargo.
I get 4 to 5 calls from collections everyday, unless I ask to be removed from the call pool. Then I only get calls every 5th day. They claim that I am behind. They are assessing $10 late fees all over the place and reporting my payment history to the credit bureaus. All because they cannot see that they made a simple mistake and correct it.
Do you think that anyone has actually taken the time to apologize for all of this? One person named Wayne was very apologetic...and I felt he was sincere. I have talked to approximately 100 people...and only one had the guts to say that Wells Fargo should not be taking this long to correct the issue.
I am getting ready to turn this over to the Better Business Bureau. Hopefully the can help me out. Because as we all know, Wells Fargo is not doing it. As others have stated, I will never again do business with Wells Fargo.

March 26, 2007 - In DC, Sen. Dodd Focuses on Brokers, HSBC Blames Its Victims, Citigroup Escapes, Complaints Lost

Executives from four embattled subprime mortgage lenders bobbed and weaved on March 22 at a Senate hearing which frequently mentioned, but mostly let off the hook, predatory lending. HSBC, for example, which purchased Household International and its $486 million settlement for abuse of consumers, sent executive Brendan McDonagh, who in essence blamed his company's victims, saying they need more "financial literacy." [March 27 it's-nice-to-be-nice update: It has been pointed out, and we in fairness run, that Mr. McDonagh also said that "we believe that uniform legislation could benefit the industry and consumers. There are numerous versions of Federal anti-predatory lending legislation that contain many of the key best practices our retail branch network has employed for several years. HSBC supports guidelines that put everyone in the industry on an even playing field."]

New Century, the shares of which have been delisted from the New York Stock Exchange, declined the invitation to testify from Senate Banking Committee chairman Chris Dodd, Democrat of Connecticut. Sen. Dodd did not summon, even as a fill-in for New Century, Citigroup, which is the fourth largest subprime lender and the only lender with predatory lending settlements with two separate federal agencies. WMC Mortgage, a company that few have heard of, despite being owned by General Electric, was present, as was First Franklin, whose ownership by Merrill Lynch was not noted on Senator Dodd's committee webpage.

Senator Dodd, who is running for the Democratic nomination for the presidency in 2008, began the hearing by saying that "the purpose is not to point fingers." Republican Senators Shelby and Crapo both said they would favor "market-based solutions." Idaho Senator Crapo went further, questioning whether the Community Reinvestment Act's encouragement to banks to lend in low- and moderate-income neighborhoods might have led to the current market turmoil. Republican Senator Bunning blamed the crisis on former Federal Reserve chairman Alan Greenspan.

The Federal Reserve sent regulator Roger T. Cole, who finally acknowledged that "we could have done more sooner," while making much of the less than a handful of actions the Fed has taken, including its $70 million fine of Citigroup in 2004. But again, why was Citigroup not invited by Senator Dodd? Why did North Carolina banking commissioner Joe Smith feel a need to say that "HSBC has been terrific"?

Senator Dodd returned again and again to speaking about a mortgage brokers' trade association web site's characterization of brokers as mentors. It seems this statement had already been taken down from the web site, but it allowed Sen. Dodd to ask Countrywide's representative if his company made such representations. Of course not, Countrywide said.

Apparently, while there are predatory practices, there are no predators, even among companies like HSBC and Citigroup which have paid hundreds of millions of dollars to settle charges of predatory lending. Those payments were only made in order to move forward, the companies said. And move forward they will: both are exporting the same predatory lending models to the developing world, and Citigroup recently scooped up an option to be a piece of another predatory lender settling company, ACC / Ameriquest. On Capitol Hill as elsewhere, Senator Dodd is focused on brokers, and the lenders blame their own victims. And so it goes.

In the process of seeking under the Freedom of Information Act copies of mortgage borrowers' companies, Inner City Press has seen many examples of the breakdown in regulation of subprime lenders. As far back as December 2003, Inner City Press asked the Kentucky Department of Financial Institutions for copies of complaints against Washington Mutual Finance, a WaMu subsidiary that Citigroup was buying. The Kentucky DFI wrote back:

"We have received numerous complaints against Washington Mutual, most concerning their failure to properly credit customers' accounts but, unfortunately, the Department does not have copies of those complaints. The lady who handles consumer complaints was under the mistaken impression that anything having to do with Washington Mutual was not to be handled by our Department but was to be forwarded to the Office of Thrift Supervision. She thought, since the banking business of Washington Mutual was federally regulated, that the consumer loan business of Washington Mutual was also federally regulated. She has no record of the number or content of such complaints registered over the past three years."

Subsequent request and appeal to the Office of Thrift Supervision under the Freedom of Information Act did not turn up the mis-forwarded complaints. The complaints were simply lost. Now we'll see where Thursday's hearing's testimony leads.

March 19, 2007

In the midst of the subprime meltdown, Inner City Press checked in with its most jocular mortgage broker source, who said that 2007 so far is his least lucrative year in the five that he's been in the independent game. In January he made only $5,000, on three loans. "I've had slow months before," he said, "but now even the fees are lower." He recounted the various failures, starting with OwnIt and then Mortgage Lenders Network. "Now New Century hasn't taken an application in a while," he said. "They used to pay great yield spread." Five years ago, New Century wouldn't go beyond 90% LTV. Toward the end, they did 100% even to low FICO scores. Of the three loans he made in January, none could be made now, two months later. "They'll be back," he said. Citigroup and HSBC are among the sleaziest, and they'll be back, for sure.

More notes from the subprime underground --

Subj: Ameriquest

Date: 3/17/2007 5:02:16 PM Eastern Standard Time

From: Name Withheld in this Format

To: Inner City Press

All of Ameriquest's retail lending division was shut down this past Thursday (the "New Business Model"), and there were additional mass layoffs across the remaining ACC business lines, including Argent, of which their NY Operations located in White Plains was closed that day as well.

The Orange County Register website has some information, but it’s pretty candy coated. Just talks about how relieved employees that they interviewed were that it's finally over. Also, the Register mentions their "severance packages," they did not receive severance packages, they are on the payroll for 60 days only so the company compliant with the Fed & State WARN Acts, beyond that, they just received the standard pay out of vacation & sick time accrued -- no severance.

The key line from the L.A. Times' story on the mass layoffs at ACC / Argent / Ameriquest: " By drastically cutting costs, the company could be making itself a more viable candidate for a sale." Our take? This way Citigroup gets the layoffs done before it acquires the company...

Meanwhile, H&R Block's Mark Ernst continues to claim that subprime subsidiary Option One can be sold for a price as high as $1.3 billion. Yeah, right...

March 12, 2007

Talk about callous: according to media reports Tuesday, Barclays has a $1 billion line of credit to the beleaguered U.S. lender to high-risk borrowers, which last week revealed that it is the subject of a criminal inquiry into its accounting and trading in its stock.

The Barclays spokesman confirmed late Tuesday that the bank has extended a line of credit to New Century as revealed in a filing with the Securities and Exchange Commission, but declined to confirm the amount, citing client confidentiality. "The vast majority of our exposure to all U.S. subprime lenders is fully collateralized," Barclays said in statement, without elaborating on the quality of the collateral. "We do not anticipate material losses to arise from our exposure to the sector," the bank added.

Yeah, Barclays is cold-blooded about predatory lending, a field in which it is growing...

From Deval Patrick, following his $360,000 a year part-time service on the board of directors of the predatory lender Ameriquest / ACC: "As a former board member, I was asked by an officer of ACC Capital to serve as a reference for the company and agreed to do so. I called Robert Rubin, a former colleague from the Clinton administration and an executive at Citigroup, to offer any insight they might want on the character of the current management... I appreciate that I should not have made the call."

And they said that Citigroup's subprime lending is not under Robert Rubin's "aegis"... CitiFinancial is a named defendant in a class action lawsuit for violating the Fair Credit Reporting Act by buy people's credit histories to target them with high-cost loans...

North Carolina's state pension fund is " reviewing an investment in Atlanta-based CompuCredit Corp., which has a unit that makes payday loans. That holding was worth $7.7 million as of March 31, 2006."

CU news: "NCUA Board Vice Chairman Rodney Hood promised to fight imposing Community Reinvestment Act provisions on credit unions." We'll see...

March 5, 2007

Citigroup is the bottom feeder of the subprime lending world. Its 2000 acquisition of Associates First Capital, a lender which had just been profiled on nationwide television as a predator, is now echoed in 2007 with the propping up of Ameriquest, fresh from settling charges of abusive lending with state attorneys general. In between, Citigroup had to settle predatory lending cases with the Federal Trade Commission and the Federal Reserve Board. Those who blamed Citi's lack of standards on Sandy Weill must now acknowledge that Chuck Prince shares Sandy's predatory predilections.

"ACC Capital also said it has secured fresh working capital from Citigroup's Markets and Banking Division and from ACC's majority shareholder, who is Roland E. Arnall, the U.S. ambassador to the Netherlands." Inner City Press: But wasn't Arnall supposed to be out of business with Ameriquest while serving as (bought) Ambassador?

From the mail bag:

Subj: Wells Fargo And ASC

From: [Name withheld in this format at] malmstrom.af.mil

To: Inner City Press

I have been with Wells Fargo for a number of years. Not been a stellar client as far as my checking account goes I am ashamed to admit. But I am admitting it because it helps make sense of what recently happened. Christmas time I happened upon a secret shopping opportunity through what I thought was a trusted internet site. I proceeded to deposit the check assuming that Wells Fargo verifies funding. They held the check and released the money to me. As I turns out I was frauded and the cashier’s check was stolen. When I asked Wells Fargo what happened to the verification, they stated that, “We only verify checks that are suspicious.” I told them that I had not been a stellar client and didn’t they think that a deposit of $4700 to an account that has NEVER had $4700 in it before would be suspicious? I mentioned to them that they at one time held a check for $300 from my father for three days. They are still holding me responsible for the money!

And they also sold my mortgage to ASC where I have had many problems with billing. Lost checks, late payments, etc. I had no idea that this info existed. Suppose I will be refinancing now!

And from the NYT's pre-obituary of New Century, this: " Morgan Stanley, Goldman Sachs, Barclays Capital and Deutsche Bank own about 16 percent of the company, according to securities filings. Citigroup recently bought a 5.1 percent stake in the company and Greenlight Capital, a prominent hedge fund, owns 6.3 percent. Its president and co-founder, David Einhorn, sits on the board of New Century." Ah, Citigroup and Deutsche Bank, et al... And there's an investigation into Robert Cole, who threw up smoke screens when Inner City Press previously inquired into U.S. Bank's stake in New Century...

February 26, 2007

So now HSBC has fired the ex-Household executives Bobby Mehta and Sandy Derickson, saying they did not reign in risky -- and , we say, predatory -- lending. But how can HSBC claim to be surprised? They bought a troubled lender in the midst of a predatory lending settlement...

Ex-journalist now defends CitiFinancial's fraudulent 21% loans. From the Milwaukee Journal-Sentinel of Feb. 24:

For 37-year-old Christopher Wiberg, being a friend means helping out, no questions asked. So when a friendly woman persuaded him last fall to take out a high-interest loan at CitiFinancial on her behalf -- and promised she would pay him back -- Wiberg believed her. But she wasn't really his friend. And she never paid him back. She disappeared. Wiberg is diagnosed with mild mental retardation. He has no bank accounts, no credit card and an annual income of $15,800. Yet he got stuck with a bill of $8,117. After a call from a Journal Sentinel reporter Thursday, Citibank corporate spokesman Rob Julavits said Friday that Wiberg's loans had been forgiven... In Wiberg's case, he said he was working at a Pick 'n Save on Milwaukee's northwest side last fall when he met this woman. They exchanged phone numbers. The Journal Sentinel is not naming her because no criminal charges have been filed and she could not be reached. The woman persuaded Wiberg to go with her on Oct. 9 to CitiFinancial at 7600 W. Capitol Drive. They sat together and filled out a loan application. Hers was denied. His was approved. His credit history: a paid membership at Bally's Total Fitness and regular payments of his We Energies bill. The woman promised Wiberg she would make the payments if he took out the loan. "She just seemed so dang nice," Wiberg said. Wiberg said he told the loan officer that he was developmentally disabled before he signed and initialed on the dotted lines. Wiberg got a check for $3,500, cashed it, and gave the money to the woman. Later that month, he withdrew another $1,500. After two months of phone calls from CitiFinancial demanding payment, Wiberg finally told his sister, who told his mother. Julavits wouldn't comment on the specifics of Wiberg's case, citing privacy issues. "The loan was appropriate and it met all of our underwriting guidelines, but given the circumstances we decided to forgive the loan," Julavits said. Loan documents show that Wiberg was paying 21% interest.

From the department of chickens-come-home-to-roost, on Feb. 23 Citigroup acknowledged that the Securities and Exchange Commission is probing its treatment of tax issues related to its $26.7 billion acquisition of Associates First Capital in 2000. The investigation focuses on the treatment of certain ''tax reserves and releases'' from 2000 to 2004, the bank said Friday in its annual financial filing. The S.E.C. has subpoenaed witness testimony and certain information related to accounting and internal controls for the years 1997 to 2004, Citigroup said. The company said it is cooperating with the investigation. A Citigroup spokeswoman declined to comment. The bank completed its acquisition of Associates First, the biggest American consumer finance company at the time, in November 2000. Yes, we of Inner City Press told you so -- click here for previous reports.

February 19, 2007

This week, three items: predatory lending domestic and into Russia, and Philadelphia fight-back, on Wachovia.

HSBC in October submitted a still-pending application for a Russian retail banking license, to target personal borrowers. So as its subprime business in the U.S. blows up in its face, HSBC wants to export the practices to Russia...

Who had been propping up the subprime lender Fieldstone, sold last week to C-BASS? The enablers were JPMorgan Chase, Credit Suisse and Lehman Brothers...

In Philadelphia, a bill providing that all banks in the City must provide prior notice to the City of all planned branch closings passed City Council unanimously last Thursday, Feb. 8, 2007. Another bill, set for further hearing on Feb. 20th, would strike Wachovia from the City's approved list of depositories for City funds, based on disparities in Wachovia's home mortgage and small business lending...

February 12, 2007

Last week HSBC issued a profit warning heard 'round the world. Its purchase of the predatory lender Household International is now bringing the whole company down. The Times of London called Inner City Press to say, "Guess you guys were right, when you wrote to the HSBC board of director that Household was unsafe and unsound." Yep... See, e.g., "Sub-prime lenders fear defaults after costly HSBC fallout," Times of London, Feb. 10, 2007.

Another item taking off from media quote concerns the Office of the Comptroller of the Currency and questions about its protection of consumers. The American Banker of Feb. 9 assessed the controversy, and quoted Inner City Press saying of OCC officials, "'They know they look bad because they' have preempted state laws. 'They are undertaking a public relations campaign to appear to look better. I'm resisting saying I don't take them seriously as a consumer protection agency. There are good people there ... but it's an agency whose mission is in conflict.'"

To explain, one way to frame the conflict is as between the OCC's duty to investigate and clean up national bank, and its desire to make itself an attractively lax regulator so that the national bank charter is "attractive." But the OCC has yet to fix even simple things that would not burden banks, for example by fixing its Internet presentation of pending applications to permit the type of nationwide search that is possible on the web sites of the Federal Reserve, FDIC and Office of Thrift Supervision, and by sending commenters copies of its question-letter to banks. These have been raised directly to the Comptroller; we'll see if and when they are implemented.

From the mailbag:

Subject: Citi

From: [Name withheld in this format]

To: Inner City Press

Sent: Sat, 10 Feb 2007 1:45 PM

Thank you for all you do to expose Citi for what they are: Predators! I filed bankruptcy less than two years ago. I was foolish with credit, and my situation only got worse when interest rates went to loan shark numbers. I plodded along for years sending minimum payments or whatever I could, but could never get ahead. With such high interest, it wasn't long before I was getting over the limit fees, even when I wasn't buying anything!

I actually paid the original amount on all the CC cards I had plus a great deal of interest, but it was never enough. I was being held hostage by these companies. There may not be debtors prisons in the USA, but these companies have a prison without walls!

Citibank sold my debt which at that point was all interest and fees to a collection agency which scared me so bad I agreed to monthly payments. After many months sending them a total of $1700.00 I found out they were charging me interest on top of what Citi had already charged me. They had kept me in the dark and all those months I was believing I was reducing the Citibank amount. My debt was actually increasing! I was in such despair, it was shortly after that I filed bankruptcy. My only regret is not filing sooner. I was eligible since my business was failing.

It is not surprising that I get many offers for credit since filing bankruptcy. Capital One was sending me offers almost from the day I filed. I read an article by one of their vice presidents which said the newly bankrupt were itching to get their mitts on plastic and would pay high interest to get it. I think Capital One is the one who is itching to get their mitts on anyone's money, no matter what. Washington Mutual has also flooded my mailbox with offers along with Orchard, First Premier, Aspire, and many others.

Today I received an offer of credit from CitiFinancial. I haven't read your book yet, but I plan to. Thank you for reading my note.

No, thank you. Keep those cards and letters (well, emails) coming.

February 5, 2007

If last week's media speculation, that Citigroup's in line to buy the damaged predatory Ameriquest, is true, it will again reveal rifts in the community and consumer advocacy movements. Citigroup has bought many friends, from the time of its Associates First Capital Corp. purchase during which now-CEO Chuck Prince flew around the country telling groups they could send their complaints to his "personal fax number" (which some just call a garbage can). Even now, Citi-shills are singing, "But wouldn't it be better, if Citi ran the show?" Well, no. Ameriquest is near death, due to predatory lending. Just as HSBC's (14) billions re-inflated Household to harm more and more consumers, so too would Citigroup's opportunism reinvigorate the Ameriquest network of sleaze. That said, in fairness to some of Citigroup's defenders, it may be that the company saw it made sense to help the few consumers that these advocates referred. But what percentage of Citi's victims have been helped? Very few.

Sleazy GE in Britain: under the name GE Money, GE has long been named as the highest-cost credit card lender in the UK. Last week, the UK's Financial Services Authority fined GE Capital Bank, the company's store card operation, more than 600,000 pounds. The FSA said GE had "failed to ensure it had proper controls for the selling of insurance, and that it had failed to treat customers fairly." And in the USA?

January 29, 2007

Subprime lawsuits, subprime surge. The lawsuit by Wayne A. Lee against Ameriquest and Roland Arnall sets forth how Arnall and others did not want to clean up Ameriquest, and that the company is now up for sale. But who in their right mind would buy it?

Last week Barclays said, "All the loans originated by EquiFirst are expected to be securitized or sold on an ongoing basis after an average hold period of approximately two to three months.'' The bank already buys and securitizes US mortgages in bulk to sell into the investment market, having moved into the business in 2004. Great... We'll have more on this.

And now the payday lenders' trade association heaps praise on the Federal Reserve for lending its perceived legitimacy to the fringe financial industry, most recently in a report called "Defining and Detecting Predatory Lending," by Federal Reserve Bank of New York Research Officer Donald P. Morgan. CFSA quotes the Fed report that "the problem of high prices may reflect too few payday lenders, rather than too many." Just what we need -- MORE payday lenders. The Fed has hit a new low.

January 22, 2007

While many subprime lenders fail, the British bank Barclays on January 19 announced a plan to buy Regions Bank's large subprime unit, Equifirst, for $225 million dollars. ICP Fair Finance Watch and others have long criticized Equifirst for predatory and discriminatory lending, most recently in the Regions - AmSouth proceeding. Why would Barclays want to buy it?

Earlier in the week, Barclays announced a deal to plaster its name on the Nets' basketball arena being built in Brooklyn. So that's the plan: pay over $100 million to make your name known to the U.S. public, then jam a subprime lender down their throats. We'll see.

From the mailbag this week, we have an intriguing message about AIG's American General unit spying on its borrowers through their credit reports, to pay to prevent payoffs:

Subject: Abuses at American General from an Insider

To: Inner City Press

From: [Name withheld]

Sent: Sat, 20 Jan 2007 12:31 PM

Are you aware that American General tracks the shopping patterns of its customers thru the credit bureau Experian?

AG submits its customer info to Experian. Experian then sends a notification to AG when a customer is shopping for loans elsewhere. AG then calls the customer. This is a violation of FCRA issues. One customer in Maryland has already filed suit.

That sure sounds like AIG... Click here for a recent BBC piece on Inner City Press' reporting from the United Nations.

January 14, 2007

Charging 20% interest on consumer loans is not enough for Citigroup. That is the message from last week's announcement that CitiFinancial will close 80% of its business in Japan, now that the country is moving to limit the maximum interest rate from 29% down to 20%. This will involve Citi's "closing of approximately 270 branches and 100 automated loan machines" in Japan. It is also reported from Ireland that CitiFinancial, identified in an hour-long television expose as the highest-cost lender in that country, and still imposing single premium credit insurance on mortgage loans there, may cut operations in that country as well. Some Citi-defenders blame all this on winds of populism. First, the spread of consumer protection was and is entirely foreseeable. Second, CitiFinancial by not even taking the minimal steps of not being the highest cost lender, and not so blatantly engaging in predatory lending, plays into this dynamic. These markets are better off without CitiFinancial, they clearly have determined. Five point ethics plan, indeed...

From HSBC's embattled chief Stephen Green's FT interview last week:

Green: Household was a strategically important acquisition for the group... We bought it for a US business but it also gives us a platform of expertise that we can take around the group. As of now we have something like 100 Household executives on secondment. Amongst those 2,000 people I mentioned, something like 100 of them are people, as it were, taking consumer finance expertise round other parts of our group. As an aside, by the way, that's not all a one-way street too, we also bought a consumer finance business in Brazil, a very different sort of market, and a lot of cross-learning between the two of them has taken place; and you've seen rapid development about consumer finance business in a whole range countries... Do I think we were wrong to be in mortgage business in the sub-prime sector? Absolutely not, it's a perfectly legitimate financial service to be offering that part of the customer base... It meets the needs of the kinds of customers, particularly ones where we have a real competitive advantage, the demography of emerging markets. The emerging markets-type customer bases in some of the G7 markets. You have the Hispanic market in the US, being an obvious example, 20 plus percent of the client base of Household, by the way, is Hispanic, and that component of the US market is growing faster than the overall US market as I think you'd recognize... We brought together the different parts of mortgages under one single mortgage supremo, but that's all the Household management doing that, so absolutely I'm confident in the management.

ICP note: HSBC is openly spreading Household's predatory practices around the globe and has put Household in charge of all mortgage lending, even the previously prime. More going forward on these 100 spreaders of predatory lending...

And on HSBC's sleaze in Mexico:

Mexico's Public Administration Department said Tuesday it will look into complaints of conflict of interest against a former treasury secretary, who was appointed this month as an independent director on the board of U.K.-based banking group HSBC Holdings PLC.

Francisco Gil Diaz, who was treasury secretary from 2000 to 2006 under former President Vicente Fox, was appointed Jan. 2 to the HSBC board as a non-executive director... Lawmakers have said the appointment shows Gil Diaz gave preferential treatment to the company. Gil Diaz denied that in a statement e-mailed to media outlets. He said his board appointment is independent and that he will not be an employee of HSBC. Gil Diaz added that his offer came from the HSBC holding company, which is not regulated in Mexico, and the banking group's Mexican unit was not involved.

Yeah, right...

Last week the Gates Foundation was exposed as investing in Ameriquest / ACC, while it was being sued for widespread predatory lending. In response, Gates Foundation Chief Operating Officer Cheryl Scott told the Seattle Times, "It's very, very complex. Let's say I don't invest in oil companies but I do go and buy gas with my car. Let's say I don't buy gas for my car, but I use rubber tires. Where do you draw the line?" Well, an credible line would militate against investing in subprime lenders widely charged with predatory lending. No?

January 8, 2007

The bankruptcy proceeding surrounding the failed subprime lender OwnIt contains a rogue's gallery of OwnIt's enablers. The top five claimants include the enforcer (and now subprime lender through First Franklin) Merrill Lynch for $93 million, Terwin Advisors for $19.03 million followed by Credit Suisse Group's DLJ Mortgage Capital Inc. for $12.70 million. When Credit Suisse bought DLJ, regulators did not allow any review of the subprime aspect of the deal, despite Inner City Press raising them early in the process.

The ambiguously named, JPM Chase-affiliate J.P. Mortgage Acquisition Corp. submitted an $11.29 million claim and Countrywide Home Loans made a $11.16 million claim. On Countrywide, which is trying to switch to a thrift charter, while some are asking for conditions, unions are asking for hearings and outright denial.

Other bottom feeders on OwnIt include C-Bass LLC with $8.6 million of claims; Residential Capital LLC, a unit of General Motors Acceptance Corp. LLC, $5 million; and Nomura Credit and Capital Inc., a unit of Nomura Holdings Inc. in Tokyo, $3.9 million. Ah, predatory profits to Tokyo...

Another subprimer bites the dust: in Connecticut, Middletown-based Mortgage Lenders Network USA laid off at least some of its employees last week, said James Heckman, spokesman for the state Department of Banking. Investigators are looking into the company to see 'that they're still able to conduct their business,' he said. And MLN had been in line for a state grant to create yet more subprime jobs. No tears...

We rarely do this, but here goes: last week the FDIC named as its new general counsel Ms. Sara Kelsey of the New York Banking Department. Despite sometimes disagreeing with Ms. Kelsey, we've found her usually to be fair, and definitely hard-working -- a definite benefit to the FDIC. Now, on ILCs and improving the FDIC's moribund FOIA operation....

January 1, 2007

The Federal Reserve set December 26 as the expiration of its comment period of the $6 billion proposed acquisition of Baltimore-based Mercantile by Riggs-heir PNC. As Fair Finance Watch has had concerns about both institutions, a comment was quickly prepared. When submitted by email, auto-responders came back: "out of office." But if the past is any guide, if the absurd deadline had been missed, the Fed would stand on "principle" and deem the comment untimely and not to be considered. In this case, it's timely, including that in the most recent year for which HMDA data is publicly available, 2005, PNC Bank in the Washington DC MSA, where it bought Riggs, denied the conventional home purchase mortgage applications of African Americans 3.78 times more frequently than whites. In Pittsburgh, PNC's headquarters, PNC Bank in 2005 denied the conventional home purchase mortgage applications of African Americans twice as frequently than whites. We're waiting for PNC's response.

In Ireland, even the lending industry is calling for a face-savings clean-up, noting that in 2005 only two licensed moneylenders were inspected by regulators. The scrutiny follows a recent 'Prime Time Investigates' program on RTE which showed how moneylenders charge up to 188 percent in interest. And if, like CitiFinancial, they are headquarters elsewhere, they escape regulation - for now...

December 25, 2006

We note that last week's Inner City Press exclusive, concerning Merrill Lynch driving subprime lender Own It out of business, was picked up without attribution by other papers last week. One of them reported a new fact, that JPMorgan Chase was also an enabler of OwnIt: "JPMorgan Chase & Co., the disbursement agent for Ownit's "wet line." (This was a small warehouse line Ownit used to finance loans temporarily before transferring them to its main warehouser, Merrill)."

And now for more on Chase, this: an Inner City Press source in Ohio informs us, of the Ohio Bureau of Motor Vehicles, about "a mailing I got from the agency today. Enclosed with vehicle registration renewal is coupon from Chase Bank worth $75 upon opening a Chase bank account. Cute. This is nothing more than state agency acting as 'bird-dog' for a major bank that finances automobile loans. As you know, this bank has a blemished history here in Cleveland and Ohio." Predatory...

December 18, 2006

The battle in Philadelphia against Wachovia's branch closings and under-performance has continued. Last week the Office of the Comptroller of the Currency agreed to hold public hearings about the branch closings. Wachovia has told locals that it will not, and does not, commit to anything in writing. Was this the experience of West Coast advocates in connection with Wachovia's acquisition of Golden West / World Savings? Or does it just prove that without the leverage provided by a merger deal important to the bank, the mind wanders and the community's ill-served?

In subprime fall-out, HSBC has seen a deterioration across its American mortgage operations. Combined third-quarter profits for the country's nine largest mortgage lenders were $991m, less than half the level for the same period last year. So says The Economist.

Meanwhile Royal Bank of Scotland now says it might get directly into subprime. An RBS spokeswoman last week said: "Currently, we do not participate in the sub- prime mortgage market. Like all areas of the market, the strategy is reviewed on a regular basis to determine whether the current offering meets our customers' needs." Of course, RBS is already indirectly profiting from standardless subprime lending through RBS Greenwich Capital Markets, which lends to and securitizes for other subprime lenders...

December 11, 2006

From Singapore, consider the recent case of helpless car buyers caught between dealers and financiers. A company repossessed five cars from people who did not buy the vehicles from the company and had not defaulted on repayments. GE Money financed two car buyers, who found - to their horror - that their cars had been towed away by Kenso Leasing in October. These buyers thought they had no relationship with Kenso. But as elsewhere with GE Money, the consumer is left in the dark until they get foreclosed on...

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...

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?

From the mailbag (and yes, please keep it coming)

Subject: Own it Mortgage crippled by Merrill Lynch

From: [Name withheld]

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.

Predator of predators...

December 4, 2006

HSBC continues to grow in predatory lending. On December 1 it announced a plan to acquire 30,000 customers from KeyCorp's Champion Mortgage division. Some may remember that Champion kept making super high-cost HOEPA loans even after Key said it would stop. This is the type of business that HSBC is looking for -- including to take overseas.

A scandal is growing in Ireland, leading to the introduction of legislation to close off a loophole in Irish law that allows subprime financial service companies to operate without being regulated by the Irish the Consumer Protection Code. Unregulated firms can avoid supervision for solvency purposes and are not subject to 'conduct of business' checks by the regulator. Among the companies named as not regulated is Citigroup's CitiFinancial, which makes "personal loans at rates as high as 26 percent, according to a recent survey from the Financial Regulator." GE's subprime motor loan provider GE Capital Woodchester Ltd has admitted it was not regulated, saying in a statement that "The company is supportive of regulation and consumer protection and has chosen to comply with the Consumer Protection Code, although it's not obliged to do so for its loan products."

Meanwhile, AIG's subprime lender American General Finance is expanding overseas. 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...

November 27, 2006

With a whimper, not a bang --

"In the fall of 2005, the FDIC targeted special examinations of 47 banks with HMDA data that showed the largest loan pricing disparities, according to April Breslaw, FDIC acting associate director in the Supervision and Consumer Protection division. So far, the agency has completed 33 examinations of HMDA "outliers" and two other institutions face possible referrals to the DOJ. A DOJ official recently told a fair lending conference that the Civil Rights division has received HMDA-related referrals from federal banking regulators. But he declined to say how many or what agencies made the referrals... The Office of Thrift Supervision has examined 20 HMDA outliers and the pricing practices of one thrift raised serious questions. On future examination, OTS concluded the disparities were based on underwriting criteria, mainly credit scores. OTS did not make a referral, a spokesman said. The Federal Reserve Board made one fair lending referral in 2005, but it is unclear if it was related to the HMDA pricing data. The Office of the Comptroller of the Currency did not respond to an inquiry about its HMDA referrals."

So let's get this straight -- the OTS explained away the problem, while the OCC refused to answer. So Treasury Department, oh-for-twenty-plus. FDIC, two for 47. And the Fed, one (at most) for unknowable. It's pretty pathetic...

Last week we said we'd have move on Wachovia's Philly abuse. When Corestates was bought by First Union, many promises were made. Now, as Inner City Press foreshadowed, the Philly Inquirer now reports that Wachovia

"expects to shut its Coatesville, Clifton Heights, Five Points (Levittown), Lower Chichester, and Township Line (Drexel Hill) branches Dec. 6. It has previously said it planned to close two Philadelphia branches, at Front Street and Allegheny Avenue and at Germantown and Lehigh Avenues, that day; two branches in Allentown will also be shut. The protesters say... Wachovia failed to consult community groups in advance of the closures, or to develop specialized loan programs targeting neighborhood residents, as the bank's predecessor, First Union, promised in 1998 agreements with the groups. The Coatesville branch is more than three miles from the nearest surviving Wachovia branch, making it tough on lower-income customers."

So where now is the Federal Reserve, which recited the Corestates merger pledge? Where is the OCC, Wachovia Bank's main regulator? We forgot - the OCC is too busy taking no action on HMDA disparities...

November 20, 2006

From the November 18 Cleveland Plain Dealer: "National City is the only bank that didn't sign a formal agreement with the city laying out specific lending goals by loan type. The report ranked National City Bank next to last, and said the bank made no consumer loans in Cleveland in 2004. But National City's profit from holding city deposits and charging fees was the second-highest of the nine banks in recent years, an analysis of city records obtained by The Plain Dealer shows.

For its part, JP Morgan Chase "has removed all of its loan officers from the city and region," the report notes. "The bank has also significantly reduced its office presence in the city." It ranked JP Morgan Chase third from the bottom. However, it profited more than most of the other banks in recent years from its business with the city. And JP Morgan Chase held more than $13 million of Cleveland's money, according to the city's bank statements." This is the kind of detailed reinvestment reporting of which we want to see more...

More on Chase: In auto finance, three years ago, Chase Auto Finance was nearly neck and neck with DaimlerChrysler Financial Services, which was then the No. 3 lender behind General Motors Acceptance Corp. and Ford Credit. "We were booking $2 billion to $2.3 billion a month,'' says Joseph Scimone, president of Chase Auto Finance. "We had the best rate in town.'' According to Crain's, "as interest rates climbed, Chase shifted its strategy. It increased its loan rates to boost profitability and it reached out to a broader spectrum of customers. Chase used to target only superprime and prime customers. Now it also goes after near prime and subprime customers." Chase goes more and more subprime all the time, including by putting a predatory CitiFinancial official in charge of all of Chase's mortgages.

Wells Fargo Auto Finance brags that its "Full Spectrum Pricing'' program enables the bank to serve prime and nonprime customers -- more predatory lending...

On the subprime tip, Wachovia now brags that its merger this year with WFS Financial enables it to serve nonprime vehicle customers. Wachovia also pitches financing for used vehicles, which don't qualify for captives' promotional rates, gushes Tom Wolfe, who heads dealer services for the merged company.

In Philadelphia, Wachovia branch closings, and community fight-back, are brewing. We'll have more on this as more next comes in.

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.

November 13, 2006

In Washington, the (CRA) talk is of oversight hearings, more likely in the House than Senate, on the agencies' non-enforcement of the Community Reinvestment Act and consumer protections. Examples given include last week's Federal Reserve approval of Capital One buying North Fork, in which the Fed's order ignores the Cap One predatory lending issues including not only in timely comments to the Fed, but even Business Week, in its November 6 expose. The Fed's rubber-stamp approval of the Regions - AmSouth merger, despite the banks' records in the Katrina Zone, is exhibit number two.

The FDIC, as has now been noted to the highest level of the agency, doesn't even issue orders explain its approvals. Supposedly the FDIC will increase its grassroots outreach. But why aren't the large Industrial Loan Companies reviewed for CRA and fair lending in more than just Salt Lake City? Especially with many of their parents now owning subprime lenders?

For the OCC, hearing-fodder includes the agency's recent blessing of JPMorgan Chase buying more than 300 branches from Bank of New York, and closing an untold number of them. On the OTS, things might be more forward-looking: why is Countrywide interested in a thrift charter? And what are conglomerates' thrifts, like AIG FSB, being allowed to get away with?

There is also the question of Dodd, Chris Dodd, and where he stands on consumer protection. He has spoken of credit cards, but less of insurance. In anti-predatory lending he has largest been unseen. Will Capital One, and the Fed's velvet glove treatment of Cap One's gouging of consumers, trigger some Dodd deeds? We'll see.

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.

November 6, 2006

This week, the spread of predatory lending by GE and Citigroup. Is GE angering the wrong people? In the UK, "Jack Straw last week pledged to report GE Money's CEO Brad Cooper to trade and industry secretary Alistair Darling after a fellow MP claimed the company had taken advantage of one couple with an astonishing 21.9% interest loan. Siobhain McDonagh, Labour MP for Mitcham and Morden in London, complained to Straw that two of her constituents, Mr and Mrs Webster, face the prospect of being evicted from their home because they have fallen behind on a loan provided by GE.... Straw told MPs that he would seek to open up a debate on the issue and would pass on his concerns to Darling. And he told McDonagh: 'My honorable friend might wish to invite the company's chief executive to the House to explain its policies because GE claims to be a company of high status and high standing.' GE has since arranged a meeting with McDonagh on November 9 to discuss the Websters' case."

As they do in the U.S., maybe GE will try to buy silence, without changing its practices...

Citigroup, which was blocked for more than a year from making any big U.S. acquisitions, now seeks to buy the largest credit card issuer in Central America, Grupo Financiero Uno, which has 1.1 card customers and over 100 branches throughout Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama. The proposal will require at least some regulatory review in each of these countries. In the United States, while Citigroup will file a "notice," it appears there will be no public notice or comment period. In announcing the deal, Citigroup bragged of its " more than 1,600 retail bank branches and 500 consumer finance branches in Mexico and Latin America."

The consumer finance offices are CitiFinancial, which in 2004 settled predatory lending charges with the U.S. Federal Reserve Board.

It was also reported last week that Citigroup has won the right to buy a stake in China's Guangdong Development Bank after a competition with French bank Societe Generale and China's second largest insurer Ping An Group. Citigroup and GDB are expected to sign an agreement to finalize the acquisition, which has been approved by the China Banking Regulatory Commission. On December 28, Citigroup submitted an offer of 24.1 billion yuan (US$3.01 US), while Societe Generale bid 23.5 billion yuan and and Ping An 22.6 billion yuan for an 85-percent stake in GDB. But they had to revise their bids after banking rules issued in May imposed the foreign ownership restrictions. Citigroup, "together with its wholly-owned subsidiary Associates First Capital," would secure a share of no more than 25 percent in GDB.

Who knew that Citigroup continued with the brand and corporate identity of Associates First Capital, sued for predatory lending by the Federal Trade Commission...

October 30, 2006

Citigroup has "opened 574 bank and consumer-finance branches so far this year, mostly in faster-growing places like India" -- and mostly subprime finance offices, not bank branches...

From last week's Philly News: "Weill said Citigroup had improved its lending practices after criticism by regulators and consumer advocates. And, after all, he asks, didn't Bangladesh's Grameen Bank win a Nobel Peace Prize for lending money to poor people -- albeit at lower rates of interest?"

So now CitiFinancial drapes itself in the flag in micro-finance...

From a press release last week: "Cash Now, a public company engaged in the design, manufacturing, marketing and distribution of customized payday loan and check cashing software and systems, internet based payday loans, and other sub prime financial utility tools, today announced that its Chief Executive Officer Kevin Price will begin a three-week trip to Australia and South East Asia early next week, in support of the company's planned expansion into the Asian region." Just what they need there...

" In the past two years, GE Money Asia has spent about $3bn on a string of small and medium-sized acquisitions in Taiwan, China, the Philippines and South Korea, including the $1.7bn purchase of minority stakes in two South Korean companies: leading car-financing group Hyundai Capital Services, and Hyundai Cards, the country's third biggest credit card issuer. GE Money's latest deal a $600m investment in the Bank of Ayudhya, Thailand's sixth largest lender has been delayed because of the uncertainty surrounding the recent military coup." FT. Yeah, a military coup will temporarily slow down the expansion of predatory lending by purchase...

October 23, 2006

This week, predatory lending in Japan, by Citigroup and GE Money, and in Hungary by Provident. The Japanese Financial Services Agency has told GE that it is considering penalties against the group for violating Japan's money lending law by calling a borrower at his workplace, even after the borrower had asked GE not to contact him there. GE has admitted the violation, issuing a statement last Wednesday that "We apologize deeply for the trouble we have caused." The company faces penalties ranging from a few days' suspension of business at the offending branch office to a wider suspension involving offices throughout Japan. In April, Aiful, one of Japan's leading moneylenders, was ordered to suspend all lending operations for up to 25 days after a borrower complained it had allegedly used illegal debt collection tactics. FT.

This might be a lesson to U.S. regulators, that rather than set monetary fines (which mean little to companies the size of GE), stopping all business for a period of time is a fairer punishment...

More generally, in Japan consumer finance companies are allowed to charge annual rates of up to 29.2 per cent. Now, the government plans to reduce that rate to 20 per cent. CitiFinancial has lobbied against the lowering of the country's interest rate cap, saying it would lead to a credit crunch and force weak borrowers to use loan sharks. Not unlike Citi's lobbying against anti-predatory lending laws in the U.S....

Meanwhile 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.

In Hungary, Provident Financial said it is temporarily suspending operations while it introduces new procedures requested by local regulators. Hungarian financial market regulator PSZAF said it had prohibited Provident's Hungarian unit, Provident Penzugyi, from signing new loan contracts until it restores appropriate operations. PSZAF said it would carry out an on-site audit of the company. It also levied a fine of HUF 2m on Provident Penzugyi, the maximum amount for financial businesses. PSZAF said it had found in an investigation that Provident Penzugyi had seriously breached regulations regarding accounting and registration, outsourcing and the use of agents, among others. The regulator will allow Provident Penzugyi to make new loan contracts again if it finds that the credit provider fully conforms with measures prescribed to it by PSZAF. Another precedent the U.S. regulators could learn from...

In the U.S., 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....

October 16, 2006

Telling news from Investor's Business Daily of Oct. 16: "Ezcorp broke out of a double bottom Friday with a buy point of 41.85 after the subprime lender upped its fourth-quarter earnings guidance by about 40%... After Thursday's close, the Austin, Texas-based operator of pawn-shops and payday loan centers announced its sharply revised outlook. Ezcorp's earnings were already on the upswing. Gains of 23%, 52%, 93% and 150% were put up the last four quarters. Sales rose in the last five periods, from 8% to 31%." Big growth in payday and pawnshop and other high-cost loans... Perhaps that's why Bear Stearns on Oct. 10 announced that it had agreed to buy the subprime mortgage origination assets of ECC Capital Corp. and its Encore Credit Corp for $26 million. Or this rumored deal, in the subprime auto field:

Commerce Group has acquired an 8.2 percent stake in National Atlantic Holdings Corp. (NAH), a "sub-prime auto insurance company. NAH shares shot up more than $1 to $11.48 on the news of the 13D and closed at $11.33 at press time. NAH has hired Citigroup to advise it on the situation."

Ah, Citigroup and subprime. Consider this, from the New York Banking Department's Weekly Bulletin:

"September 27, 2006 (LL-LFS)
CITIFINANCIAL, INC.
300 St. Paul Place, Baltimore, MD 21202

Notification requesting authorization to solicit credit card application on behalf of a bank from licensed location, received."

So now, beyond the move to use the predatory lending outlets of CitiFinancial to collect deposits (without, it seems, being covered by the Community Reinvestment Act, a matter on which Citigroup has provided closed-door briefings to the Office of the Comptroller of the Currency without sufficient public disclosure), CitFinancial would be "soliciting credit card application" too -- at a low interest rate, we're sure...

Finally, for this week, from the mailbag, on the impunity front:

Subject: ameriquest question

From: [ ]

To: Ameriquest-Watch [at] innercitypress.org

Sent: Mon, 9 Oct 2006 2:08 PM

I have a question regarding the upper level management of Ameriquest and this large penalty they paid. Will any of them do time in prison? How about civil law suits against them to take all their assets and give it to the people who were defrauded. My neighbor is Mary Jo Shelton and I know she was the National VP of Sales. Will she be doing any time? We have not seen her at this house here in Eagan for 5 years (they own several properties in MN), now all of a sudden she’s home every day and volunteering at school. So I did a little research on the internet and “discovered” her involvement with Ameriquest. I knew she worked with them, but I didn’t realize her position, etc. Well she looks great driving around town in her brand new Land Rover...

October 9, 2006

Becoming evermore perfunctory, the Federal Reserve on September 19 asked Wachovia to "discuss the extent of any subprime loans in the World Savings Bank loan portfolio." Wachovia's Courtney D. Allison's misleading answer, dated September 25 but mailed only days later to Inner City Press, was received after the Fed had approved the merger, and it had been consummated...

Similarly, in an email of September 26 to National City that was not cc-ed to Fair Finance Watch, the Fed has apparently asked questions about Harbor Florida Bankshares' appraisal company, with an eye toward allowing National City to continue in the business. Since the Fed in violation of its own rules on ex parte communications didn't send Inner City Press a copy of the questions it posed to National City, and Nat City's curt answer didn't repeat the questions, there's no way to know...

From the mailbag:

Subject: AIG's American General Financial

From ;[ ]
To: MLee [at] InnerCityPress.org
Sent: Fri, 6 Oct 2006 8:40 PM
My name is Dr. Randal Christensen, I reside in the state of Utah. I would like to relay an experience I am currently having with AIG's American General Financial. The Office I am referring to is located in the city of Riverdale, Utah. I have a loan through that office. I had to declare bankruptcy back in 2003 due to a accident I had which put me nearly $500,000.00 in debt with medical bills. I was not able to return to my work for over a year. Needless to say it has been a struggle to pay my bills. American General to the rescue NOT Another victim of this companies predatory lending practices. They provided a loan, "To catch-up my past due bills," as they called it however they needed collateral for the loan. Now after chapter 7 bankruptcy, losing my house, plus everything else I owned, except for a 1994 Pickup which I had the title to. I used that as collateral. pretty scary because that was my only transportation. I had no choice, so I signed the contract with the unbelievable interest rate of 32% this made the payment $372.00 per month. They again tied insurance premiums to the loan with no disclosure. Which I thought was outrageous, I had fallen one payment behind on that loan and they called and left a message they were going to repo my truck. I found a financial advisor who has help me get my bills in order and paying them off. Now the fun begins, during the 6-7 months that I was behind 1 payment. I have been told by the front desk receptionist of the Riverdale Branch office I Quote " I'm a dead beat, a liar, I don't deserve a chance, just about everything you can imagine. I have been left phone messages with the same language on them. Now I was able to get $3000.00 saved up so I went down to their office to pay on the loan. I called and made arrangements with the manager to get my truck title released. He said " for a payment of $3000.00 he would release the title. I did take the money to him on Oct. 2, 2006 and he released my title. Now today Oct 6 2006 I get a call from them saying I am a month behind on my payment. That the $3000 I paid them was just to release the title of the truck and did not count as a payment. I said no I paid you a payment on 2 Oct and the manager said no that wasn't a payment. and that it was company policy to not record it as a payment but a release of collateral. He said "it was his branch and he would run it how he wanted, so I was still a payment behind " I still owe $2700.00 on the original loan. I have reported the Manager of the Branch and the front desk receptionist to the district manager who is Bill Kishton of South Jordan Utah, he did nothing then I reported the events to Russell Barrett of Westminster Colorado the Division Manager he does no thing so now I am going on up the food chain to a Matt Mitchel of Tempe Arizona who is Western region Manager. I am sure I will get the same results. NOTHING, NADA, just more B S. Just another example of how this company does business and treats people. They need to be stopped. I think the work y'all are doing is great. You have my permission to print all or any of this.

When AIG bought American General, they said it wasn't predatory... And re GE Money Bank, not overseas but in Texas:

Subject: FW: GE Money Bank and Potential Fraud

From: [ ]
To: MLee [at] innercitypress.org
Sent: Sat, 7 Oct 2006 6:14 PM
Dear Mr. Lee, I am writing to you after reading several online postings about the deceptive business practices of GE Money Bank. Below is a record of discussions that the Cash Office of IKEA Frisco, Texas has had with GE Money Bank (Kate and Dennis in the emails below). We were offered and granted by IKEA a "24 month no interest no payment" purchase plan when we purchased a kitchen from IKEA in July 2006. Since then, GE Money Bank has sent us bills for finance charges, late fees, and minimum payments due on our account in total disregard for the terms of our purchase agreement with IKEA. The IKEA sales rep on the floor of the kitchens department and the after-sales department told us numerous times that we made this purchase on a 24 month no interest no payment plan, and we would not have made this purchase under any other terms. The only way they were able to sell this bill of goods was by their promotional offer. I can tell below that IKEA has contacted GE Money Bank numerous times to tell them to fix the terms of our plan to the "No Interest" plan, and GE Money Bank still has us on a fixed payment plan at 13% interest. Kate below writes that she has taken care of everything, but what she writes is that she put us on a deferred interest plan, which is very different from the No interest plan. Also, I got a call from a GE Money Bank debt collector early this Saturday morning, and she says that there is no evidence that IKEA ever placed us on a promotional plan, and she has no evidence that IKEA has ever contacted GE Money Bank to change our plan! GE Money Bank is either intentionally misapplying these promotions or their data processors are absolutely incompetent. Furthermore, GE Money Bank has entered my wife's name incorrectly on our account: This is alarming because my wife's name will now be reported to credit bureaus incorrectly, and it will be a hassle to correct, and GE Money Bank can use this identity error to its advantage in multiple ways. In addition, I also recently opened a credit card with The GAP, and GE Money Bank apparently owns Gap credit card accounts as well. The disturbing fact about this is that my name was incorrectly entered on my Gap credit card with GE Money Bank as well. I am deeply skeptical that these multiple identity errors are innocent. They appear to be a calculated policy by GE Money Bank. Please consider my experience as you become aware of more complaints about the business practices of GE Money Bank.

Meanwhile, GE Money plans to enter the Colombian financial market, the newspaper Portafolio reported on October 5, 2006. A number of articles in the Colombian press have recently opined that GE Money is interested in the privatization of the public bank Bancafe... In India, GE Money has over 170 offices of its high-cost consumer finance, non-banking finance company. Citigroup in India, as in the U.S., is more focused on high-cost consumer finance (non-banking finance companies, NBFC) than on banking. Citigroup's NBFC has a branch network of over 400 compared to a bank network of 39.

Shameless Citi-spin of the week, from Brownsville, Texas: "CitiFinancial announced it will host an identity theft prevention seminar from 6 to 7 p.m. Oct. 19. The seminar is open to the general public and will be at CitiFinancial's 2921 Boca Chica Blvd. location. The seminar is part of the bank's financial education program. 'We'll give them (attendees) examples of how ID theft occurs and what to do if your ID has been stolen, like contacting the fraud departments of the three major credit bureaus,' said Joseph Babineaux, CitiFinancial's branch manager."

Given that CitiFinancial has released millions of customers private information, the seminar is more than a little ironic...

October 2, 2006

Predators into predatory lending: the private equity company Lone Star is moving to buy a high-cost lender in Japan, Korakuen Finance, for $430 million. Japan is moving to limit the maximum interest rate to 15%, and to cap the amount of debt that borrowers can take on. Lone Star is embroiled in a scandal in South Korea for its buying and selling of a bank there...

Also, AIG has applied to the Bank of Thailand for a banking licence by the end of this year, after it sent the central bank the information it requested regarding allegations of accounting fraud by AIG. "Last week, we turned in the required information to the central bank. I think at this time we have submitted all [requested] information," AIG Consumer Finance Group country manager Chaiwat Utaiwan told reporters. Sure, let a fraudster into banking...

In terms of stealing consumers' personal information, Florida is suing a "Tampa-area company called Global Information Group Inc., claiming it made thousands of calls impersonating customers of companies including Verizon Communications Inc., tricking them into providing private call records. Earlier this year the company's principals agreed to pay $250,000 to settle the case, and to cease any pretexting activities." Global Information's customers include Wachovia's subprime auto lending WFS, two Citigroup units, Chase Bank and Wells Fargo...

The Federal Reserve's approval on Sept. 25 of Wachovia - Golden West reaches new loans. The Fed writes for example that ICP Fair Finance Watch

"also alleged that World Savings directs customers to low- or no-documentation loan products as a means to exaggerate the customer’s income and places the customers in loan products that exceed their ability to repay, which ultimately results in foreclosures. According to information provided by Wachovia and Golden West, World Savings requires low- or no-documentation on 90 percent of the loan applications it processes and uses the same underwriting standards for all applications."

But ICP Fair Finance Watch pointed out that this absurd level of no- and low-doc lending results in forced sales of homes, not foreclosures. The Fed recites that ICP Fair Finance Watch

"expressed concern about Wachovia’s relationships with unaffiliated pawn shops and other nontraditional providers of financial services. As a general matter, the activities of the consumer finance businesses identified by the commenter are permissible, and the businesses are licensed by the states in which they operate when so required. Wachovia stated that it makes loans to these types of nontraditional providers under terms, circumstances, and due-diligence procedures that are more stringent than those it applies to other borrowers."

But again the information was withheld. The Fed gives weight to

"more than 200 comments supporting the proposed transaction. These commenters stated that Wachovia and Golden West have been responsive to the needs of their communities through innovative mortgage products designed for LMI borrowers and have provided significant financial, technical, and personnel support for community development projects."

None of these were sent to Inner City Press, despite its timely challenge to the deal....

And we're back: former Treasury Secretary John Snow will serve on the board of directors of Marathon Oil Corp., officials with the company announced last week...

September 25, 2006

This week, OCC punts on JPM Chase's branch closings, and a voice with inside -- or, just leaving -- the industry:

Subject: Justice

To: MLee [at] innercitypress.org

From: [Name withheld]

Sent: Thu, 21 Sep 2006 1:23 AM

Dear Mr. Lee: I was previously employed by Argent Mortgage for two and a half years and managed, among other areas, the corporation's fraud investigation, borrower complaints and repurchase departments. There are currently over 568 open fraud investigations involving hundreds of brokers and hundreds of millions of dollars in fraudulent loans that are being covered up by top executives in the company. If a broker sustains a certain monthly volume, Argent management looks the other way and, not only does not suspend the bad brokers, but knowingly sells these fraudulent loans on the secondary market to unwitting investors.

I was terminated today and left with just my purse in tow, but I have names of individuals in the company who need to be served with subpoenas to enable them to turn over their spreadsheets and boxes full of documentation and evidence of all the fraud they have found that is being covered up by Argent Mortgage's executive management. The state regulators need to know the truth about the blind eye Argent turns to the fraud perpetrated on innocent consumers by high volume brokers. They also need to be aware that Argent knowingly bundles these fraudulent loans and sells them as mortgage-backed securities on Wall Street, thereby compromising the SEC, as well as our country's economic stability.

At a recent fraud seminar attended by hundreds of mortgage lenders in Washington D.C. a week ago, an attorney who works for Argent's retained law firm, Buchalter Nemer, stood up and told the seminar attendees that the wholesale lenders in the audience had better beware, unless their name is Argent. Argent is safe from investigation because the government got their $325 million settlement from Ameriquest and won't be looking into Argent, per the settlement agreement. I hope this isn't true because Argent Mortgage funded over $50 billion in 2005 and is gearing up to fund well over $80 billion dollars of fraudulent loans in 2007.

Gearing up, indeed. On another front, the closure of bank branches offering normally priced loans, here's from the Office of the Comptroller of the Currency's craven September 15 approval of JPM Chase's application to acquire branches of Bank of New York: Fair Finance Watch

"expressed concerns about the potential closure of certain branches. JPMCB... expects that it may close approximately 50 branches. JPMCB has represented that in NYC, some of the branches under review are located in L[ow or] M[oderate] I[ncome] census tracts. [Footnote: In most cases, the branches being considered for closing or consolidation are less than one-fifth of a mile apart, and none is more than about one-third of a mile apart.]"

First, in New York City "about" a third of a mile can be further than it sounds, particularly with obstructions which must be walked around. The OCC should have required JPM Chase to disclose its branch closing plans, as even the Federal Reserve did in connection with Chase - Chemical. JPM Chase is going backwards here....

September 18, 2006

A trend is for investment banks to buy up subprime lenders, to have high-cost loans to pack into pools and sell off. Deutsche Bank's being doing it, and last month Morgan Stanley announced a deal to buy the subprime Saxon. Now Merrill Lynch as well. Merrill agreed to buy the San Jose, Calif.-based First Franklin from National City for $1.3 billion. The sale includes National City's loan processor National City Home Loan Services Inc. and online lender NationPoint. Now rumored to be on the block is New Century.

This week we return to the intra-Citigroup mailbag:

Subj: Employment Practice Abuse: The Travelers, Citigroup Connection
Date: 9/12/2006 10:33:43 PM Eastern Standard Time
From: [Name withheld]

To: CitiWatch [at] innercitypress.org

I came across your excellent publication while searching the web. Want to include a story relating to my own experience as an Asset Manager in Commercial Real Estate. After nearly two years appraising commercial properties, I was terminated while recuperating and on paid medical leave resulting from an injury I sustained while inspecting one of their income properties. I missed six weeks of work, and asked to be accommodated through the flex-work initiative propounded by the corporate offices. The HR department told me that my request had been denied due to some late reviews and that I would have to return to the office to complete a conference call. When I came in I was called into a manager's office with my immediate supervisor, and his manager and told that my request was denied, there would be no further discussion and if I wanted to continue working there I had better sign the forms being presented to me. Although I was, and am still under a doctor's care, the forms basically stated that I felt ready to return to work and that a new work-plan was being devised to "accommodate" me. No copies were provided. I was also informed that my previous work load would increase by 100%, that nobody has completed any work of mine during my six week absence and the appraisals had been traded for others in different territories that I was unfamiliar with. Additionally, many of the projects were unusual types such as self-storage, mixed use, and industrial properties that require far more research than a typical apartment building.
Although I made a grand attempt at this Herculean task, and worked late into the evening, and over the memorial day weekend, I was still short of the goal (and working on painkillers, and a heavy dose of Ibuprofen)..Despite hiring a part-time data entry person using my personal funds, the project simply could not be finished in the allotted time. Five weeks after I returned, I was terminated and escorted from the building by 4 vice presidents and the head of building security. I told then that this seemed unnecessary, and was certainly humiliating since it would appear that I was some terrorist being escorted out of the Citigroup tower.
I would not have thought much more of the situation except for the fact the other employees told me of similar occurrences with "mature" workers over the age of fifty. Just one month before me a 20 year veteran returned from hip-replacement surgery and was terminated exactly 4 weeks later.
Interestingly, while I was on leave I applied for a home equity loan, since my disability payments were "administratively" delayed by Met Life, their short term disability carrier. According to Citibank, they were unable to verify my employment and my loan application was denied...but not until the refinance of my current mortgage had already been approved! It seems they were willing to take on a $250,000 loan at 8%, but had no interest in the variable rate, lesser borrowing relating to the equity line. This leads me to think that the management had already determined that my employment would not continue after my medical leave ended. In addition, they did not provide the required Worker's Comp forms, did not respond to verification requests from the disability insurance provider (Met Life) and Travelers (a former fully owned subsidiary) denied my workers comp claim based on the fact that the forms were not filed until after the expiration of the short term disability claim. They also had a myriad of other defenses based on the fact that the medical reports were not received (although the HNO has proof that they were sent on two different occasions)
In summary, for many years Citigroup was providing what looked like a generous employee benefits program, when in fact the employees disability coverage (1/2 paid by the employee) was being provided by their owned subsidiary, and the long term care (Travelers) an optional coverage was entirely paid by the employees. With over 300,000 employees...that's not chump change! Why are the financial back office worker's not organized as under a labor union? Thank you for your in depth reporting.

Click here to read Alyssa Katz' MoJo story on the predators in Cleveland, which includes information on, among others, HSBC, JPMorgan Chase, and Ameriquest's Argent.

September 11, 2006 -- Targeting of African Americans For High Cost Mortgages Grew Worse in 2005, While Fed Downplays Its Own Findings

NEW YORK, September 8 -- The targeting of African Americans for higher cost mortgage loans grew more pronounced from 2004 to 2005, data released Friday by the Federal Reserve show.

The disparities between the mortgage industry pricing for African Americans and whites worsened, even controlling as the industry argues for the change in overall interest rate environment. However, given that the Federal Reserve has yet to take any enforcement action on disparities in lenders' 2004 lending, it is unclear if this new even more disparate data set for 2005 will end what many consumer advocates view as the Federal Reserve's laxity in regulation.

The report issued by the Federal Reserve on Friday waits until its 39th page to disclose, in the intentionally opaque style of former Fed chairman Alan Greenspan, that "the fact that both spread-adjusted gaps are lower than the comparable unadjusted figures suggests that to the extent that the yield curve changes affected the measurement of racial and ethnic pricing differences, they widen gaps rather than narrow them." Translation: even using the industry's main defense, the yield curve, the disparities grew worse.

The non-governmental organization Fair Finance Watch, which has raised lending discrimination as a human rights issues, including to United Nations Habitat director Anna Tibaijuka (video of Q&A on U.S. Community Reinvestment Act and discrimination here). Where a nation does not act on known discrimination within its borders, FFW argues, it violates treaties it has signed.

Mortgage lenders were required to release their raw Home Mortgage Disclosure Act data for 2005 on April 1 of this year. 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. While the Federal Reserve waited six months to compile and analyze the data, a study by Inner City Press of the largest U.S. banks, beginning with Citigroup reached the following findings:

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. 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.

Fair Finance Watch designed a 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.

National City Corporation's First Franklin made 177,526 higher cost loans over the rate spread in 2005. Merrill Lynch has recently announced a proposal to acquire First Franklin, in order to be able to pool and sell its higher cost loans on Wall Street.

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. 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.

The nation's largest bank, Citigroup, was disparate in Metropolitan Statistical Areas all over the country in 2005. In Los Angeles, Citigroup confined African Americans to higher cost rate spread loans 2.13 times more frequently than whites; its disparity for Latinos was 2.02. Citigroup's African American to white disparity was 2.27 in the Washington DC MSA, and 2.72 in Chicago. In Philadelphia, Citigroup confined African Americans to higher cost rate spread loans 3.43 times more frequently than whites; its disparity for Latinos was 2.50.

Another of the top four banks which enables predatory lenders is North Carolina-based Wachovia, whose pending application to merge with Golden West has been protested on mortgage discrimination and other grounds. 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."

On January 5 Inner City Press made a request under the Freedom of Information Act request to determine what the Federal Reserve had done on the previous year's data. More than six months later, the Federal Reserve issued a letter stating that is was withholding five linear feet of documents, and would only provide a garbled portion of a single document, described as "a description of the methodology used in generating the HMDA lenders list." The document states:

"The purpose of the Federal Reserve's matched-pair analysis is to compute lender-specific racial or gender disparities in denial rates, high rate pricing incidences and average APR spreads for loans above the threshold controlling for other factors including, market, income and loan amount. Each minority (or female) is matched to as many non-minority (or male) applicants (or borrowers) as meet the matching criteria. The outcomes of the minority (female) is compared with the average outcome of the non-minority (males) matched to it. The difference is the individual minority's (female's) 'matched pair disparity.' The disparities of all matches minorities (females) are averaged by product area or for sub areas such as MSAs...

"Optionally, the matched pair procedures can be used to test for 'steering' within an organization such as a holding company. The outcome variable is the selection of a particular subsidiary of an organization (say a subprime lender) over another (say a prime lender) and the analysis tests whether this choice is related to the race of gender controlling for other factors including, market, income and loan amount. The user needs to specify how to classify lenders into the 'subprime' and 'prime' groups."

While Inner City Press will have more once it receives the required mailed version of this document, we now we note Citigroup's recent announcement that it will merge its subprime CitiFinancial into its mostly-prime CitiMortgage, thereby evading this "optional" steering analysis.

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.

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 (still 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.

Fair Finance Watch responded, "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. The time for enforcement actions to combat this discriminatory and predatory lending is now."

Beyond its substantive, industry-wide whitewash, the Fed last week spun HMDA for Espiritu Santo Bank, an affiliate of France's Credit Agricole. In an approval order the Fed recited in footnote 30 that ICP Fair Finance Watch

" questioned the veracity of ES Bank’s reporting of no denials of home mortgage applications in 2001 and 2002 and generally alleged that the bank prescreened its home mortgage applications. Specifically, the commenter contended that ES Bank violated HMDA by not accurately reporting its home mortgage applications and violated the Equal Credit Opportunity Act (“ECOA”) (15 U.S.C. § 1691 et seq.) by not providing adverse action notices when required. ES Bank has represented that it reported no denials because it is a wholesale bank engaged primarily in international private banking and that its residential mortgages are generally extended as an accommodation to private banking customers where a mortgage loan approval would be expected. The commenter also questioned ES Bank’s characterization of loans generated by brokers as accommodation loans. Applicants represented that ES Bank began using two licensed mortgage brokers in 2001 in an effort to increase its loan portfolio during a period when internal referrals had slowed. Applicants also represented that ES Bank’s brokers referred a small number of mortgage loans to the bank in 2005."

In footnote 16, the Fed doesn't even bother spelling correctly, writing that FFW

"alleged Credit Agricole and Credit Lyonnais are signatories to international human rights and environmental agreements and that the organizations have exhibited a lack of envirnonmental and human rights standards."

Much care went into this Order, it's clear...

September 4, 2006

This week, predatory lending domestic and overseas. Regulators in Australia have caught GE Money in a lie. While charging a $25 fee, GE advertised that ''There is no annual fee for your GO MasterCard. That means it costs you nothing to have it - pay nothing and make it your card of choice year after year.'' Australian Securities and Investments Commission charged that the statement was likely to mislead customers. Ya don't say... This follows an ASIC finding in March 2006 that GE Money had advised clients to take out life insurance when they already had coverage. As we've reported, GE is taking predatory lending global.

Ameriquest was hit with a class action lawsuit last week in Baltimore City Circuit Court. According to the complaint, Ameriquest instructed its affiliated title settlement companies to charge borrowers an illegal notary fee, and engaged in a scheme to receive kickbacks on that fee. The real estate settlement statements given to borrowers at closing identified a $250 fee payable to Baltimore-based JM Closing Services Inc. as a notary fee, the suit alleges. JM Closing was "formed solely to facilitate illegal payments and kickbacks to Ameriquest" and, in most cases, "did not actually provide any notary services to Ameriquest mortgage clients who paid for such services," the complaint says. It just goes on and on...

August 28, 2006

In the run-up to the Federal Reserve's spin of the 2005 Home Mortgage Disclosure Act data, Inner City Press can this week report on the Fed's partial Freedom of Information Act response to its request for all records concerning the Fed's list of lenders with disparate 2004 HMDA data. The Fed withheld "five linear feet of documents," and has so far sent only a fax of parts of a single document, a mailed copy of which Inner City Press is awaiting in order to file its FOIA appeal. This fax, which the Fed's cover letter describes as "a description of the methodology used in generating the HMDA lenders list," is in fact a manual directed at the Fed's examination staff. It states that

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...

August 21, 2006

ICP Fair Finance Watch has just filed a 15-page challenge to the proposed announced on May 24 by Regions Financial Corporation to acquire AmSouth for over $10 billion. Regions' mortgage lending is mostly subprime -- nationwide, over 77% of its 2005 loans to African Americans were higher cost loans over the rate spread (of 3% over Treasuries on first liens, 5% on subordinate liens). Therefore Regions supposed Community Reinvestment Act plan would only produce more high cost lending. In comments filed with the Federal Reserve Board in Washington, Fair Finance Watch demands public hearings on the proposal's potential to raise prices, on AmSouth's and Regions' continuing enabling of title lenders and pawnshops, and on the disparities in Regions' 2005 Home Mortgage Disclosure Act data, including disproportionately confining people of color to higher cost loans. AmSouth refused to provide its HMDA-LAR in computer analyzable form, another ground for hearings

Fair Finance Watch presents in its August 21 challenge an analysis of the 2005 data of Regions' HMDA data-reporting affiliates (referred to as "Regions") and calculating the distribution of loans over the Federally-defined rate spread of 3% over comparable Treasury securities on first lien loans, 5% on subordinate liens (referred to as "high cost loans").

In its home state of Alabama in 2005, Regions confined 51.66% of its African American borrowers to higher cost loans over the rate spread, versus only 23.15% of its white borrowers. That is, Regions confined African Americans to high cost loans 2.23 times more frequently than whites, while denying 30.69% African Americans' applications for loans, versus only 21.29% of whites' applications.

In neighboring Mississippi, Regions in 2005 confined 38% of its African American borrowers to higher cost loans over the rate spread, versus only 18.38% of its white borrowers. That is, Regions confined African Americans to high cost loans 2.07 times more frequently than whites, while denying 35.87% African Americans' applications for loans, versus only 24.68% of whites' applications.

In Louisiana in 2005, Regions confined 54.92% of its African American borrowers to higher cost loans over the rate spread, versus only 27.88% of its white borrowers. That is, Regions confined African Americans to high cost loans 1.97 times more frequently than whites, while denying 30.71% African Americans' applications for loans, versus only 22.27% of whites' applications.

While FFW directs the regulators most specifically to these three Katrina Zone states, note that nationwide in 2005, Regions confined fully 73.55% of its African American borrowers to higher cost loans over the rate spread, versus only 51.78% of its white borrowers. In Florida in 2005, Regions confined fully 66.97% of its African American borrowers to higher cost loans over the rate spread, versus only 45.98% of its white borrowers. And in North Carolina, headquarters of Regions' subprime unit Equifirst, Regions ion 2005 confined a whopping 88.76% of its African American borrowers to higher cost loans over the rate spread, versus 71.66% of its white borrowers. Regions is presumptively a predatory lender. FFW requesting public hearings, and that Regions' applications be denied.

Regions and AmSouth have continued supporting other subprime lenders. The UCC filings attached hereto are evidence of that, to be further explored at the requested public hearings. For example, Regions on July 18, 2005, made a loan secured by all "accounts and proceeds" to Eagle Title Loans, Inc. of Athens, Alabama. Also in Alabama, Regions lends to Twin States Pawn of Butler, AL and Sand Mountain Pawn of Boaz, AL. In Louisiana, Regions lends to LA Pawn Shop of West Monroe, Louisiana. In Arkansas, Regions lends to A-1 Pawn of Russellville, Arkansas. In Florida, Regions lends to Deerfield Pawn Brokers of Deerfield, FL.

AmSouth, which has refused to provide FFW with its HMDA-LAR in computer analyzable form, lends to Rent to Own Pasco of Pasco, FL, and Pasco Jewelry and Pawn in the same city. AmSouth cynically insistence on providing its HMDA-LAR only in paper form, and in refusing to answer questions about its lending to fringe financiers, despite its recent violation of anti-money laundering laws, further militates for the public hearings FFW is requesting. FFW's comments state that while the merger should be denied on all of thee above grounds, FFW is requesting public hearings because any merger of this size in the still-unrepaired and underbanked zone impacted by last year's hurricanes militates for a required Katrina Zone CRA Lending Plan, and for public hearings. Developing...

From the NY Times of August 17:

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"

-- which is now owned by HSBC...

August 14, 2006

Fair Finance Watch (FFW) has just filed a challenge to the applications by National City Corporation to acquire Florida's Harbor Federal Savings Bank and Fidelity Bankshares. ICP's timely comments, filed under the Community Reinvestment Act with the Federal Reserve Bank in Washington, and with the Federal Reserve Bank of Cleveland, are based on worsening lending disparities at National City. Mortgage (HMDA) data reported for 2005 show that National City disproportionately charges African Americans and Latinos higher prices than whites. ICP also documents National City enabling fringe financial institutions such as pawn shops (sample listed below).

FFW's comments analyze National City's 2005 Home Mortgage Disclosure Act ("HMDA") data which no CRA or fair lending exam has taken into account, considering the distribution of loans over the Federally-defined rate spread of 3% over comparable Treasury securities on first lien loans, 5% on subordinate liens ("high cost loans").

Nationwide in 2005, National City confined fully 60.83% of African American borrowers and 58.74% of Latino borrowers to high cost loans, versus only 37.13% of white borrowers.

In Florida in 2005, National City confined fully 67.36% of African American borrowers and even higher percentage of Latino borrowers, 68.25%, to high cost loans, versus 54.38% of white borrowers.

In its home state of Ohio in 2005, National City confined fully 60.07% of African American borrowers and 44.76% of Latino borrowers to high cost loans, versus only 34.66% of white borrowers.

In New York State in 2005, National City confined fully 73.92% of African American borrowers and 72.11% of Latino borrowers to high cost loans, versus only 60.96% of white borrowers.

National City is systemically predatory. In a previous response to ICP comments, National City Bank acknowledged inter alia its lending to "Advance America (HQ in Spartanburg, SC)." National City also enables such fringe financiers as pawnshops. Attached hereto are sample Uniform Commercial Code filings. Here are some more:

National City Bank lending, 3/4/2005, to Evans Coin and Pawnshop

Mr. Pawnshop, Inc.; Ace East Jewelry and Pawnshop, Inc.; Quick Cash Advance, Inc.

National City Bank lending, 12/12/2005, to Express Cash Advance of Erie PA

Harbor's market is already anticompetitive and becoming more so what with Wachovia-Golden West (the counsel for which cite National City, in a July 14 letter to the FRB only just provided to FFW). Given this record, FFW is requesting public evidentiary hearings, and that, on the current record, National City's applications be denied.

From the mail bag --

Subject: Ameriquest
Sent: Thu, 10 Aug 2006 3:14 PM
From: [Name withheld in this format]
To: Ameriquest-Watch [at] innercitypress.org

Just found your website on Ameriquest. I guess that explains how they appraised our house at $72,000, and when we contacted another lender to refinance, their appraiser gave an estimate of $46,000.

August 7, 2006

This hot week, the expansion of subprime -- CitiFinancial in Hong Kong, GE Money in Singapore, and Chase's subprime auto in the suburbs of Atlanta.

Citigroup exports predatory lending, and brags about it. Last week in Hong Kong it issued a press release: "CitiFinancial has opened two branches at Aberdeen and Sheung Shui which offer convenient, speedy and tailor-made products and services to customers in two key hubs in Southern and Northern Hong Kong. This development underscores CitiFinancial's commitment to expand its reach in the territory. The opening of these two new branches together with two others previously opened at Wanchai and Sham Shui Po are important milestones in CitiFinancial's strategic expansion plan to have a total of 20 branches in Hong Kong by the end of 2006." Watch out...

Subprime Singapore -- GE Money runs ezyCash, an unsecured loan scheme for lower-income borrowers through Singapore Post branches...

Chase in a press release last week said it "will expand its presence in the Atlanta area this month by opening a Prime/Near Prime business center to focus even more attention on area auto dealers looking to provide their customers with auto loan solutions. The new office will occupy space with Chase's existing Custom Finance Business Center at 500 Town Park Lane, Suite 100 in Kennesaw." Just what Georgia needs - more subprime lending. It should be noted that when Georgia sought to control subprime mortgage lending, Chase threatened to leave the state...

July 31, 2006

A recent employee of World Savings has contacted Inner City Press, describing in detail what he calls World Savings' predatory lending. He states that over time, World Savings' no- and low-documentation loan program, initially designed for small business owners who might have difficulty fully documenting their income, grew to account for a larger and larger portion of World Savings' business. He states that applicants' incomes were routinely overstated, on forms the applicants did not themselves fill out. He states that these applicants, whose incomes were overstated, were put in loans that they could not afford, on which they would foreseeably fall into delinquency -- an indicator of predatory lending used by the FRB itself. This does not show up in World Savings' "default" or foreclosure rate, the individual states, because the borrowers sell their homes to avoid losing them.

The individual states that many of these abuses take place under World Savings' "Q Q" or "Quick Qualifying" program. The FRB should forthwith ask World Savings to submit an answer, into the record and to FFW while the comment period is open, information concerning what percentage of World Savings' loans are QQ, Quick Qualifying or otherwise no- or low-documentation. World Savings should be required to explain, into the record with a copy to FFW, why it would accept and encourage no- and low-documentation applications by salaried employees with IRS Form W-2s. World Savings should be required to respond to the two pages attached hereto, supplied to FFW by the recent World Savings employee, who states that they reflect illegal targeting of protected classes. The individual states to FFW that he is willing to speak with regulators (as for example were FFW's similarly proffered CitiFinancial witnesses, leading to an FRB enforcement action) -- but he is concerned with further retaliation. He was already fired, he states, for having pointed out the above-described abuses, and having stated that he would inform Wachovia, during due diligence, of them. Therefore protection against retaliation should be arranged, as a first step.

Additionally regarding Wachovia, see the Philadelphia Inquirer of July 28, 2006, by the ever-intrepid Joe DiStefano:

"Wachovia and PNC Bank, which together handle the majority of city deposits, sharply reduced their mortgage lending in what the government calls low- and moderate-income neighborhoods from 1999 to 2004, while mortgages from other lenders in those same neighborhoods rose, according to federal loan records. That includes census tracts where families typically make less than $40,000 a year. Most of those tracts in Philadelphia and its four surrounding Pennsylvania counties are in the city: North, West and South Philadelphia, Germantown, Frankford, Kensington and Olney, including many African American and immigrant communities, as well as some of the city's oldest predominantly white neighborhoods... What happened to Wachovia? Spokeswoman Barbara Nate blamed a shift in the bank's small-business-lending tactics, from specialized business lenders to branch-based lending, along with changes in the way Wachovia reports business loans.... For this year, the banks have set conservative loan targets for lower-income Philadelphia neighborhoods. For example, Wachovia hopes to make 1,770 home mortgages in low- and moderate-income neighborhoods this year. But Nate, the spokeswoman, pointed out that that included refinancing and home-improvement loans as well as home-purchase loans -- and the total is slightly below what the bank did in 2005. "

See also, the analysis of systemic disparities in Wachovia's 2005 lending submitted as part of FFW's first comment.

Given this record, Fair Finance Watch is requesting public evidentiary hearings, and that, on the current record, Wachovia's applications be denied.

Last week the Wall Street Journal covered Citibank trying to collect deposits through CitiFinancial, but mentioned neither the Community Reinvestment Act (which requires reinvestment in communities in which deposits are taken) much less CitiFinancial's two predatory lending settlements. Or check out the below sample email chain, cc-ed to Inner City Press:

Subject: Tired of being ignored by CitiFinancial

From: [Name withheld in this format]

To: LangJ@CitiFinancial.com; CitiWatch [at] innercitypress.org

Sent: Sat, 29 Jul 2006 10:33 AM

Ms. Lang, I am writing in response to your letter dated 6/29/06. It states you are in receipt of my e-mail and will respond no later than 7/10/06. I assumed since this was put in writing and it was from the Office of the General Counsel, I had finally reached the correct party at CitiFinancial to respond to my request. Unfortunately, this is not the case since it is now almost three weeks after I was supposed to receive a reply and I have heard nothing. Attached are all of my correspondence regarding this matter. Please note this communication began in MAY. It is now almost three months later and my frustration level is at its maximum. Please refer to the last communication to Mr. Schrom. Dated 6/29, I requested the automatic deduction be stopped effective immediately. Since the July payment was deducted anyway, I decided to give you the benefit of the doubt and assumed my request was made too close to the deduction date. There will be no "benefit of the doubt" if the August payment is deducted.

-----Original Message-----

From:

Sent: Tuesday, June 20, 2006 7:39 PM

To: SchromR@CitiFinancial.com

Subject: FW: CitiFinancial Contact Us Form

Mr. Schrom,Please let me list several facts for you to ponder: My first email was on 5/5, where I requested the response be via e-mail or regular mail but also included my cell phone number. The response was that my e-mail was FORWARDED to Sharon Ocasio on 5/8 and included her phone number. After receiving NO response, I resent the e-mail on 5/27 and reiterated that I wanted all correspondence in writing. On 5/30 I was advised the e-mail was forwarded to you. Lo and behold, the notification I received about the change in payment was dated 6/1. On 6/12, I resent the e-mail and copied you advising the effective date was incorrect and the new payment amount was not as I calculated it. You asked Toni to "get" the information I requested so we could resolve this issue. Her response was a phone number for ME to call to fix CitiFinancial's error! To add insult

to injury, I received a letter from Sharon Ocasio dated 6/14 asking me to call her as the number she has is disconnected and she has no way to communicate via e-mail. How can an e-mail be forwarded to someone who has no way to communicate via e-mail?

From: Lawrence, Toni [mailto:LawrenceT@CitiFinancial.com]

Sent: Tuesday, June 13, 2006 12:59 PM

Subject: FW: CitiFinancial Contact Us Form

Thank you. You need to contact the MOST Department @ 1-800-662-3787.

-----Original Message-----

From: Schrom, Ron

Sent: Tuesday, June 13, 2006 10:30 AM

To: Lawrence, Toni

Subject: FW: CitiFinancial Contact Us Form

toni, if what the customer states is true we need to adjust her rate for 2 months effective

5/1/06. also, she is requesting an explanation as to new payment calculation. can you help get the information she is requesting so we can resolve this issue? thanks for your help. ron schrom.

-----Original Message-----

From: Sent: Monday, June 12, 2006 7:30 PM

To: Lawrence, Toni

Subject: RE: CitiFinancial Contact Us Form

Ms. Lawrence, I wanted to let you know that I received a "Notice of Change in Payment

Amount and Interest Rate" form that was dated 6/1/06. However, there is an error in the effective date. My contract states after 24 consecutive payments, the rate would lower. Our first payment was 5/1/04, which means the 24th payment would have been 4/1/06. The lower interest rate should have been effective with the 5/1/06 payment, yet the form indicates it will not be effective until the 7/1/06 payment. It clearly states the current rate is in effect for 26 months and it should be 24 months. Also, I cannot seem to verify the new payment amount and would like an explanation as to how it was calculated.

Just give us your deposits, Citibank is saying...

July 24, 2006

ICP Fair Finance Watch has just filed a 15-page challenge to the proposed announced on May 8 by Wachovia to acquire Golden West Financial Corp. for $25.5 billion. In comments filed with the Federal Reserve Board in Washington, Fair Finance Watch demands public hearings on the proposal's potential to raise prices, on Wachovia's continuing enabling of payday lenders and pawnshops, and on the disparities in Wachovia's 2005 mortgage data, including disproportionately confining people of color to higher cost loans.

Fair Finance Watch presents in its July 24 challenge an analysis of the 2005 data of Wachovia four HMDA data-reporting affiliates, cumulating these four lenders (referred to as "Wachovia") and calculating the distribution of loans over the Federally-defined rate spread of 3% over comparable Treasury securities on first lien loans, 5% on subordinate liens (referred to as "high cost loans").

In its home state of North Carolina in 2005, Wachovia confined African Americans to high cost loans 2.93 times more frequently than whites, while denying African Americans' applications for loans more than twice as frequently as whites. Specifically, Wachovia confined 12.38% of its African American borrowers to higher cost loans over the rate spread, versus only 4.22% of its white borrowers. Also in North Carolina, Wachovia in 2005 denied the applications of Latinos 1.8 times more often than whites.

In 2005 in Texas, a state in which Wachovia wants to further expand, Wachovia confined African Americans to high cost loans 2.36 times more frequently than whites, while denying African Americans' applications for loans 1.75 times more frequently than whites. Also in Texas, Wachovia in 2005 confined Latinos to high cost loans 1.86 times more frequently than whites, and denied the applications of Latinos 1.54 times more frequently than whites.

In Pennsylvania, a state whose consumers were injured by Wachovia under its previous name First Union, through massive branch closings and otherwise, Wachovia in 2005 confined 14.76% of its African American borrowers to higher cost loans over the rate spread, versus only 3.61% of its white borrowers. That is, Wachovia confined African Americans to high cost loans a whopping 4.09 times more frequently than whites, while denying African Americans' applications for loans 1.54 times more frequently than whites. Also in Pennsylvania, Wachovia in 2005 confined Latinos to high cost loans 1.99 times more frequently than whites, and denied the applications of Latinos fully 2.03 times more frequently than whites.

In California, a state it which Wachovia wants to further expand after buying a subprime auto lender and exotic mortgage originator based in the state, Wachovia in 2005 denied African Americans' applications for mortgages 2.11 times more frequently than whites. In Delaware in 2005, Wachovia denied African Americans' applications for mortgages 2.02 times more frequently than whites. In New Jersey in 2005, Wachovia confined African Americans to high cost loans 2.32 times more often than whites, while denying African Americans' applications for loans 1.85 times more often than whites.

Wachovia's disparities are not limited to African Americans and Latinos. Note for further example that in New York State in 2005, Wachovia denied fully 72.82% of the applications it received from American Indians, 3.79 times its denial rate for whites in NYS in 2005. Also in New York State, Wachovia denied the applications of African Americans 2.03 times more frequently than whites.

While FFW is formally asking the Federal Reserve to investigate and act on these regional disparities, overall in 2005 Wachovia confined African Americans to higher cost loans 2.54 times more frequently that whites. FFW requesting public hearings, and that Wachovia's applications be denied.

Wachovia has continued supporting subprime lenders, after previously misinforming the FRB about support of subprime lenders, then demanding secrecy, giving rise to FOIA litigation, a partial chiding of the FRB by District Court Judge Cote, and the recently-heard appeal in the Second Circuit. An August 6, 2004, letter from Wachovia to the Federal Reserve admitted active credit relationships with ten pawnshops "or related entities," and tried to explain why this is not inconsistent with its earlier claim, in its merger application, about a "policy not to lend to pawn shops, pay day lenders, check cashing companies or other MSBs" [Money Service Businesses]. That statement was made without equivocation, in Exhibit 6 of the merger application, filed July 12, 2004. When that merger was announced, Fair Finance Watch issued a report showing that both SouthTrust and Wachovia fund pawnshops, payday and car title lenders. The banks said they would respond, and included the above-quoted, about SouthTrust's "policy," in their application. FFW submitted to the FRB 45 Uniform Commercial Code filings showing SouthTrust's loans secured by pawnshops, including all of their proceeds.

Wachovia's August 6, 2004, response stated: "Of the 15 SouthTrust relationships cited by FFW, four loans have been paid out and a loan relationship no longer exists. Two other UCC filings reflect loans to parties for which the businesses in question served solely as collateral. Four other entities cited are not pawnshops or money service busineses or provide MSB services only as an incidental service. Five such relationships do exist with pawnshops and were made as exceptions to SouthTrust's policy. In addition to those five relationships, we have identified five other credit relationships with pawnshops or related entities, some of which were acquired through mergers with other institutions. However, the total loan outstandings of these 10 credit totals just $755,056... Moreover, it is standard industry practice to allow exceptions to credit policies based on legitimate reason."
But what are those reasons? Wachovia told the Fed that "It is SouthTrust's policy not to lend to pawn shops, pay day lenders, check cashing companies or other MSBs." There was no footnote, no statement "except for ten pawnshops." The statement was false, and militates for public hearings in this case.
Wachovia itself stated that it "has commercial lending relationships with select check cashing companies, pawnshops and payday lenders. In recognition of the higher risk these businesses present, the Credit Risk policy on lending to them is very restrictive. Any new credit, or the renewal or modification of such a credit, requires the approval of one of the top found Chief Risk Offices of Wachovia... Please see Confidential Exhibit 3 for information concerning these customers." FFW filed a FOIA appeal, and later sued.

FFW's comment also include sample UCC filings. For example, on January 4, 2006, after the above-described, Wachovia made a new loan to Value Pawn Holdings, Inc. of 101 Sunnytown Road, Casselberry, Florida;

--in November 2004, Wachovia made a new loan, secured by "all inventory," to Alvarado Pawn, Inc. of Alvarado, Texas;

--in June 2005, Wachovia formally continued a loan to A 1 Pawn Shop of Goldsboro, North Carolina;

--in March 2005, after the above-described, Wachovia formally continued a loan to Garden State Check Cashing Services, Inc.; and

--on April 10, 2006, Wachovia made a new loan to Atlanta Check Cashers, Inc. of 1000 Hurricane Shoals Road, Lawrenceville, Georgia.

As yet another adverse managerial issue, see Associated Press of July 6, 2006, "Wachovia pays nine states $25M in settlement" --

(AP) - The nation's fourth-largest bank, Wachovia Corp., has agreed to pay nine states, including Utah, $25 million to settle allegations that its stock analysts issued biased research to win investment-banking business. The Charlotte, N.C.-based company agreed Wednesday to pay $20 million for failing to supervise its employees, $1.65 million for not retaining required e-mail records, and $350,000 for costs of the investigation. Investigators said Wachovia employees had conflicts of interest between equity research and investment banking. They said the company did not comply with state securities laws by failing to keep certain electronic records. The probe was led by securities regulators in Nebraska, Virginia and North Carolina, according to the Washington, D.C.-based North American Securities Administrators Association. Alabama, Georgia, Maine, Connecticut and New Jersey were also involved."

FFW is requesting public hearings, including on managerial issues, and that Wachovia's applications be denied. The hearing and denial-request are also on competition and higher-pricing grounds. Even Wachovia's application admits that at least three markets are outside of the antitrust guidelines:

--West Palm Beach, where Wachovia already has an anticompetitive 25% market share (and Golden West has 5.9% -- the application blacks out the percentage of Golden West's deposits in certificates of deposits, which FFW contests);

--the Punta Gorda market, where Wachovia already has a25.2% market share; and

--the Indian River market, where Wachovia already has an anticompetitive 28% market share, and Golden West has 5% -- the application blacks out the percentage of Golden West's deposits in certificates of deposits, and the entire last paragraph of the argument, which Fair Finance Watch has now contested to the Federal Reserve. So much for transparency.

FFW has formally requested such public hearings on Wachovia's applications, and contends that on the current record, these applications could not legitimately be approved.

July 17, 2006

With all the hoopla around the FDIC's consideration of applications to get into banking by Wal-Mart and Home Depot, the Office of Thrift Supervision is more quietly reviewing a proposal by the Paris-based investment bank Societe Generale to form a savings bank. The purpose of the proposed savings bank is to "engage in purchasing residential mortgage loans in the secondary market from other financial institutions and licensed mortgage bankers... SG sees the Bank's involvement in this market as a natural extension of its current securitization activities." Given those activities, Inner City Press / Fair Finance Watch submitted a timely challenge to SocGen's application, citing along with troubling reports of money transmission for terrorism other lacks of standards, including environmental. Soc Gen has been identified as having "loaned funds to Transneft in the past and can be expected to be approached for financing on the ESPO project" -- a highly controversial oil pipeline project in Siberia which would destroy habitats including around Lake Baikal.

Other of Soc Gen's oil loans include the $2.8bn Qatargas 3 deal and as Olefins II advisory in Kuwait. See also, Project Finance of March 1, 2006, " Inca cooler: the Peruvian capital markets have become essential sources of funding for mines, pipelines, roads, and even LNG terminals. But can the country's financial sector continue to ignore political instability?" --

"According to Alejandro Valencia, a director in the project financegroup at Societe Generale, adviser to the consortium of Hunt Oil (50%), SK Corp (30%) and Repsol YPF (20%), 'Peru LNG, a Peruvian entity, will be the borrower and we expect the project to be financed at a minimum debt-to-equity ratio of 60/40.'"

Another question about the safety and soundness of Societe Generale's global lending is raised by the $1 billion loan to the Russian energy company Yukos in September 2003. See, e.g., " Russian court upholds ruling to void Yukos' loan guarantee," Tass Newswire, May 16, 2006.

Societe Generale submitted a response to the OTS, bragging among other things that "Societe Generale is one of a limited number of corporations that has signed The Global Compact of the United Nations (July 2000), which encourages the private sector to advance responsible corporate citizenship and universal social and environmental principles to meet the challenges of globalization, the United Nations Environment Program Statement by Financial Institutions on the Environment and Sustainable Development."

But reporting from the United Nations, Inner City Press has uncovered Societe General misusing the United Nations logo, specifically the UNHCR "visibility logo," and improperly presenting itself to the public as having "teamed up" with the UN, in a way that brought rebuke from legal staff in UN Headquarters. Click here for that Inner City Press UN Report. And so in reply: Societe Generale should be asked to make full public disclosure of all communications to it from UNHCR regarding its use of the logo(s) and of such phrases as "teaming up with" the UN. Also, it has emerged that in the program at issue SocGen demonstrated its lack of compliance standards by investing in a fund controlled by an individual on the UN Investment Committee, Ivan Pictet. SocGen should be required to make full public disclosure on this matter as well.

So Soc Gen's defense to the OTS is problematic, as its proposal to start a federal savings bank, with which it could preempt all states laws. Developing...

In predatory lending news from the UK, Royal Bank of Scotland is under investigation after an expose of one of its customers who committed suicide, heavily in debt. Richard Cullen, a 65-year-old mechanic from Wiltshire, killed himself after building up debts of 130,000 pounds on credit cards. Cullen owed the Royal Bank of Scotland (RBS) more than 35,000 pounds through four different cards, despite having an annual income of just 15,000 pounds. In November 2004, two weeks after he was chased for arrears on his Mint card, which is operated by RBS, the credit limit on his Tesco Personal Finance card, also run by RBS, was increased by 1,000 pounds to 7,700 pounds. In January last year he was found dead in his garage after inhaling exhaust fumes...

July 10, 2006

Seven months ago, Inner City Press submitted to the Federal Reserve Board a Freedom of Information Act request, for records "regarding the Federal Reserve System having compiled a list of lenders with disparate 2004 Home Mortgage Disclosure Act data and transmitting such lists beyond the FRS."

Under the Freedom of Information Act, the Fed is supposed to provide records within twenty business day. But with a single letter six months ago, the Fed unilaterally extended its time to respond. Now, as it prepares its required annual FOIA report to the Department of Justice, the Fed begrudgingly sends a second letter, which states that "approximately five linear feet of documents will be withheld from you... no reasonably segregable nonexempt information was found."

An appeal will follow... Also last week, 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?

From reading the fine print of regulatory notices: the New York Banking Department on June 14 quietly "authorized" CitiFinancial to "solicit deposits on behalf of a bank" -- Citibank. So, a confessed predatory lender now solicits deposits?

July 3, 2006

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... And what do others agencies do? According to an audit of the FDIC:

"For the period January 1, 2003 through November 7, 2005, CRC identified 23 possible predatory lending complaints and inquiries. In response, CRC investigated or referred complaints to the responsible federal banking regulator as deemed appropriate, or otherwise disposed of the complaints. More specifically:
* eight complaints were investigated by the FDIC, and no evidence was found that the financial institution violated a consumer protection law or regulation;
* seven complaints were referred to other agencies because those circumstances did not involve FDIC-supervised institutions;
* four inquiries were information requests from consumers about payday or predatory lending;
* two complaints were investigated by the FDIC, and the Corporation did not intervene due to litigation between the consumer and the financial institution; and
* two complaints were not investigated by the FDIC because the consumer did not provide enough information about the nature of the complaint."

So the answer, including on Mercantile, is that the FDIC does very very little...

June 26, 2006

This week we raise a programmatic point, infinitely domestic: whatever happened to the nexus between CRA and the communities hit by Katrina? There are of course larger questions, of Federal funding and what's become known as the Brownie factor, the good ol' boy's network. But other than a bit of forbearance, what have the banks with CRA duties done?

We called this programmatic and it will remain. Since Hurricane Katrina we've reported on the HMDA data, mortgage lending patterns and the deep Deep South disparities. But this is a proposal, or a journalistic prediction: in the recently-announced merger of the largest Birmingham-based banks, Regions and AmSouth, a post-Katrina plan should be required. If smart, the banks will include it in their application. If not, it should come at the demand of community groups and regulators. But it should be produced, commented on and improved. And then it should be implemented, and demanded of other lenders.

There's been CRA slippage. Just as the focus of "Low Income Housing Tax Credits" has been shifted from the poor to anyone at all, so too CRA credit has been given without regard to those most hurt, and those most in need of assistance. The historical redlining in these areas Inner City Press / Fair Finance Watch has documented on applications as far back as Bank One - Baton Rouge in 1995. In AmSouth - First American, ICP was contacted by activists in Louisiana and Mississippi, with proof of First American's predecessor Deposit Guaranty selling out NAACP youth to a local racist sheriff. Of these charges, the Federal Reserve said they were too old to count. But a month later, DOJ announced the settlement of discrimination charges by AmSouth. In SunTrust - NCB, ICP showed SunTrust's extensive enabling of payday and car title lenders. SunTrust responded with a commitment to stop all such loans, due to consumer and reputational harm. That the loan may not have entirely stopped is another matter to follow.

On Regions - Union Planters, the disparities of the subprime EquiFirst were combined with the banks' support of a payday lender with explicit Mafia connections. Of this the Fed said the organized crime links were from the 1980s, too old to act upon. While the Federal Reserve will consider the main application, the issues must be raised beyond. And then on other banks.

June 19, 2006

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 in this week's Inner City Press Bank Beat report. This space, we devote to the global state of cities, a matter to be discussed this week at a forum in Vancouver, as previewed June 16 at the United Nations. But first, these three updates: HSBC months ago categorically denied the contents of ICP's report on its violations of the Servicemembers Civil Relief Act, by limiting the required interest rate reductions to those in "hostile zones" rather those on active duty. Now, in a response to ICP's initial comments on HSBC's applications to put its high-cost tax refund loan operation into a previously-trust bank in Delaware, HSBC finally admits: "a situation did exist where a few employees of Household Credit Card Services, a division of what is now HSBC Bank Nevada, N.A. (an affiliate of HSBC Trust Company (Delaware), National Association) did not follow this bank's SSCRA policy and erroneously restricted benefits under SSCRA to only those military personnel deployed in hostile or combat zones." So what happens now?

From "The Oregonian" newspaper of June 15:

"Federal Home Mortgage Disclosure Act statistics analyzed by Wells Fargo Home Mortgage, for example, show that single women took out 13,246 home mortgages in the Portland area in 2005, about 20 percent of all loans for purchases. That's roughly in line with the Realtor association's national average. The numbers crunched by Wells Fargo also suggest, however, that single males made 16,389 purchases in the Portland area during the same period, or 25 percent. That's significantly higher than the association's numbers. The problem is that the two sets of numbers don't allow for apples-to-apples comparisons. Walter Molony, spokesman for the National Association of Realtors, said the federal HMDA numbers don't include cash purchases and mortgages from small lenders. So they show only part of the picture, he concludes."

So now Wells Fargo is "crunching" HMDA data for newspapers? But Wells Fargo elsewhere says that HMDA data don't prove anything....

In a June 16 letter to the OCC, JPMorgan Chase's outside counsel at Wachtel Lipton argues that the bank doesn't have to disclose the locations of the (at least) 50 branches to be closed, because as to some of the closings, they'll be later public notice. But this ignores that Chase made exactly these disclosures when it merged with Chemical. So what's the difference, other than that Chase has gotten more and more disdainful of the public, particularly in low income neighborhoods, as it has done each merger since Chemical?

UNITED NATIONS, June 16 (InnerCityPress.com) -- The world is a ghetto. Behind a lengthy PointPoint presentation and thick glossy report of which there were not enough copies, that was the message the UN-Habitat brought Friday to United Nations Headquarters, en route to a World Urban Forum on the topic next week in Vancouver. One billion people now live in slums, as defined by Habitat. This figure is growing globally at 2.2 percent a year, and at a higher rate in the developing world. The report takes on what it calls the Urban Penalty from a number of angles: health and environmental justice, poor education, vulnerability to conflict and natural disaster.

At the UN press conference (available here, in Real Player format), Inner City Press inquired into whether Habitat considers the private sector's financing, or lack thereof, of housing and small business in low-income areas, and if Habitat works with the UN Global Compact on the issue of banks' inclusion or exclusion of urban slums from their lending, along the lines of the U.S. Community Reinvestment Act. Agency director Anna Tibaijuka acknowledged that the issue of private finance "is not covered adequately in this report." As to the Global Compact, at first no answer was given. When the issue was raised a second time, the response by rote was that all UN agencies work with the Global Compact, but that such collaboration has yet to take place on these issues. Here's hoping.

New Orleans and the disparate impacts of Hurricane Katrina are addressed in one of Habitat's case studies. Analogy is made to Kobe, Japan: "when that city was destroyed by an earthquake in 1995, many residents lived in temporary housing for eight years, and areas of the city that had been affordable for families were rebuilt with housing beyond their financial reach." While Ms. Tibaijuka jibed that mass evictions "used to happen even here, in the past," the reality is that in many cities in the developed world, the mass evictions continue in slow motion. Neighborhoods are gentrified and housing costs soar. Even the conversion of informal settlements to "security of tenure" is viewed skeptically, unless the de facto cost of the housing stays low.

Inner City Press also asked about Habitat's view of the role of discrimination. Ms. Tibaijuka noted that many cities in the developing world are "colonial cities" and that the nationalist governments that took over and "not all in partnership with their own people." There is discrimination by race and ethnic group, by gender and by religion, she said. The report's case study on immigrants in Paris states that in France, employers are "known to discriminate against those who lived in stigmatized suburbs" and "a similar study in Rio de Janeiro found that living in a favela appeared to be a bigger barrier to gaining employment that being dark skinned or female." Call it the Urban Penalty, or more precisely the Ghetto Penalty.

Asked to crystallize the dangers of not acting on these issues, Ms. Tibaijuka said that "if the poor are not empowered, they are sure going to empower themselves." She mentioned crime and terrorism and even, if reporters heard her right, revolution. The World Is a Ghetto, indeed...

The Federal Reserve hits new lows daily. Last week we reported that the Fed has for months stopped responding to Freedom of Information Act requests, including a request Inner City Press filed months ago about the Fed's actions (or inaction) on disparities in the 2004 Home Mortgage Disclosure Act data.

Now the Fed is turning a blind eye to glaring disparities in the 2005 data. For example, in its BB&T Order last week, the Fed ignores the issues raised about BB&T's refers-down to its subprime unit Lendmark. BB&T's response to Inner City Press / Fair Finance Watch's comments included the volume of loans referred up in 2005, but no such figure for referrals-down. Nor did the Fed request it. Despite the speechmaking about HMDA data, the Fed is hitting new lows daily.

And this coming week, on June 22, the Fed will be in the Second Circuit Court of Appeals in New York, on the cross-appeals concerning the Fed's withholding of the names of subprime lenders assisted by Wachovia and SouthTrust. While the case has been pending, the Fed has stopped responding to ICP's FOIA requests, and has stopped asking application for the names of the subprime lenders they assist. Like we said, the Fed is hitting new lows daily...

June 12, 2006

Inner City Press / Fair Finance Watch has just learned that a stealth application by HSBC, filed with the Federal Reserve and FDIC, to convert a trust bank, actually involves creating a national platform for HSBC's high-cost tax Refund Anticipation Loans (RALs). On May 19, ICP submitted an initial comment to the FDIC and asked for a copy of the application, since the public notice did not explain what the conversion was about. ICP has just received the application, which states

"RALs are the primary business driver... Notable business relationships include: H&R Block," Jackson Hewitt, Drake, UTS, Petz and Orrtax. "HTCD is seeking regulatory approval to expand its limited purpose trust charter into a full service national bank. With an expanded charter, HTCD will originate all refund lending business under the Block agreement and for all other refund lending business tax preparers in states outside HBUS's current footprint. Servicing for the products continue to be per formed [sic] by HSBC Taxpayer Financial Services (TFS) through its Bridgewater, New Jersey administration center as well as operational sites in New Castle, Delaware and India."

HSBC did not disclose in the applications the interest rates at which its RALs are made (often well over 100% interest), nor the controversies including but not limited to class actions that have followed this line of business, from Household/Beneficial to HSBC. ICP's initial comment to the FDIC, even before it could know what this application was about, noted that earlier this year, a federal judge denied even preliminary approval to HSBC’s and H&R Block’s attempt to settle-on-the-cheap a class action for high-cost tax Refund Anticipation Loans. Judge Elaine Bucklo of the U.S. District Court in Chicago said the proposed settlement did not offer enough value to those ripped-off by HSBC’s loans (not unlike HSBC-Household’s 2002 predatory mortgage lending settlement with state attorneys general). This rejected settlement would have divided among 28 million customers a $110 million cash payment and $250 million in coupons, each with a $6 face value, redeemable for... H&R Block tax services. Judge Bucklo said the coupons offered little value. "It seems likely that the $6 coupon fee would simply be lost in higher fees and it is at any rate too little to be meaningful," she wrote. "The coupons here appear to be the classic free advertising, which Block is free to provide, but which cannot be given value in considering the reasonableness of a settlement... At the very least, counsel for plaintiffs, who should not need reminding that they owe a fiduciary duty to every member of the plaintiff class, need to obtain and present the best possible proposal for giving reasonable and adequate notice to the class, and to provide the court with a reasoned analysis of how many claims are likely to be made," Bucklo wrote. The Seventh Circuit Court of Appeals rejected an earlier settlement.

Just last week, the American Banker newspaper reported that HSBC is now making "pay stub" loans, a new low (and a new high, in terms of interest rates).

It was and is disingenuous to not include information about RALs in the application and especially the notice thereof -- the FDIC and Federal Reserve comment periods must be reopened and credible notice given. ICP is contesting the withholding of the Business Plan, "Confidential" Exhibit 1, and board information (Exhibits 2-5), loan policies (Exhibit 11), and insider transactions, etc. (Exhibit 6).

HSBC is a regulatory "player" -- in its acquisition of Household International, for example, Household's savings bank was extinguished and some operations sold to Panhandle Bank, for the sole purpose of avoiding an applications process. Since then, HSBC has played arbitrage and shifted its charter from (New York) state to national, and its bank headquarters from Buffalo to Delaware. In Delaware, HSBC has gotten the state Attorney General to use specious grounds to withhold information about complaints against its subprime lending, specious grounds rejected by the federal district court and debated, on the state's appeal, in Federal appeals court in Philadelphia last month (see, e.g., Dow Jones and AP of May 11, 2006, NY Times and Wilmington News-Journal of May 12, 2006).

Now HSBC has quietly applied to convert its previously limited purpose trust bank to a full service bank, to do its RALs. ICP has opposed it; developing.

June 5, 2006

In the FDIC proceeding, Wal-Mart's main defense has been that other retailers have banks, and no one opposed them. So with Home Depot trying to acquire a Utah bank, it was time for opponents to make their voices heard. Inner City Press / Fair Finance Watch filed comments, summarized below.

Re: Initial comment opposing the proposal by The Home Depot, Inc. to acquire control of EnerBank USA

Dear Director Gruenberg, others:

On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is an initial comment opposing, and requesting public hearings on and a complete and supplemented copy of, the applications by The Home Depot, Inc. to acquire control of EnerBank USA.

Many adverse issues surround Home Depot Inc. at this time, militating for public hearings on this proposal. These issues include findings of employment discrimination, detailed allegations of accounting fraud, and dramatic over-compensation of management and contempt for shareholders. As was not done in Wal-Mart, the CRA Strategic Plan alluded to in Home Depot's application should be made available well before the public hearing, so that it can be testified about. The comment period must be formally extended until the CRA plan is filed.

Most recently with Home Depot, its over-compensation of its executives, the failure of its outside directors to even show up for the annual meeting, and a demonstrated contempt for the public, all militate for hearings and the denial of this application. As reported in the Atlanta Journal-Constitution of May 25, 2006,

"At issue are the steadily rising pay packages awarded to Home Depot Chairman and Chief Executive Bob Nardelli, despite an overall drop in the company's stock price in his five years at the helm. Nardelli last year got about $29.7 million in salary, bonus and restricted stock awards, a 4.3 percent boost. During his entire tenure, he's gotten packages worth $154.3 million --- not counting the value of stock options. His package is well over double that of Wal-Mart's CEO and dwarfs that of the CEO at archrival Lowe's, which has posted stock gains of more than 170 percent this decade."

Home Depot is also being sued for customer abuse. See, e.g., Atlanta Journal-Constitution of May 24, 2006, "Home Depot named in grout sealer suit," by Patti Bond:

"Home Depot has been named in a $111 million personal injury lawsuit involving a defective grout sealer product that was recalled last summer. Lilburn resident James Flynn claims he suffered respiratory problems and permanent lung damage after exposure to the fumes in a product known as 'Tile Perfect Stand 'n Seal 'Spray On' Grout Sealer,' according to a lawsuit recently filed in Cobb County State Court."

Home Depot is also being sued for accounting fraud. See, e.g., NY Post of May 18, 2006, "DEPOT-SITION - CLASS-ACTION SUIT ALLEGES FRAUD AT HOME RETAILER" --

"Home Depot is the subject of a class-action securities lawsuit that alleges the company falsified financial results by improperly inflating the amount of money it charged vendors to cover the cost of damaged or defective merchandise. The complaint, filed by John Mizzaro, who purchased Home Depot shares from May 29, 2001, to Feb. 22, 2005, also names members of Home Depot senior management as defendants, including Chief Executive Robert Nardelli, Chief Financial Officer Carol Tomé and co-founder Kenneth Langone, among others. During fiscal 2001 to 2004, Home Depot "was engaged in a scheme to inflate the company's earnings through fraudulent RTV practices," according to the complaint, filed in United States District Court for the Northern District of Georgia. The complaint also states that Home Depot derived a "material portion of its revenues and profits" from this so-called return-to-vendor practice, and that the company had deficient internal controls."

It is particularly in this light that ICP is timely demanding access to all improperly withheld portions of the application, including the business plan and all (now contested) financials.

On an application to acquire control of a bank or industrial loan company, the Federal Deposit Insurance Corporation must consider a range of factors, including managerial integrity, compliance with law and regulation, such as anti-discrimination provisions, including as a predictor of Community Reinvestment Act performance.

Significantly, including as a predictor of (weak) Community Reinvestment Act and fair lending performance, Home Depot has recently been found guilty of employment discrimination by a federal appeals court. See, e.g., Business Insurance of May 1, 2006 , "Sunday work rule constitutes bias" --

"According to the opinion, Mr. Baker was initially permitted to take Sundays off by supervisors at the Henrietta, N.Y., Home Depot store in which he worked. A new store manager objected, though, and offered him the option of a later shift on Sundays, which Mr. Baker refused. He also refused to work part time, which would have permitted him to take Sundays off, explaining he needed to work full time. The supervisor said Mr. Baker also rejected a suggestion that he find another sales associate to swap shifts with him. Mr. Baker was subsequently terminated for unexcused absences. He sued the Atlanta-based Home Depot, charging religious discrimination. The shift change "offered to Baker was no accommodation at all because, although it would allow him to attend morning church services, it would not permit him to observe his religious requirement to abstain from work totally on Sundays,'' says the unanimous opinion by the three-judge panel. Simply put, "the offered accommodation cannot be considered reasonable...because it does not eliminate the conflict between the employment requirement and the religious practice,'' said the court, in quoting a 1996 opinion. The opinion adds, "Although we are constrained to vacate the judgment of the district court because of the inadequacy of the offer of shift change on Sundays as an accommodation, we express here no opinion as to whether Home Depot's offer of part-time employment or its allowance of the exchange of shifts with other employees would constitute reasonable accommodations. We leave the consideration of those matters to the district court.'' The opinion notes also that the Home Depot says giving Mr. Baker Sundays off would place an undue burden upon it. "It contends that Baker's request for Sundays off would require his `co-workers to shoulder a larger workload of undesirable shifts, which, in turn, fosters lower morale and decreased productivity, while at the same time increasing the likelihood that the employer would have to pay overtime premiums,''' says the opinion. ``We leave this defense also for consideration by the district court in the first instance.'' Briefs in support of Mr. Baker were filed by the U.S. Equal Employment Opportunity Commission and the U.S. Dept. of Justice, Civil Rights Division, in Washington and by the American Jewish Congress in New York. Bradley Baker, plaintiff-appellant, vs. The Home Depot, defendant-appellee, United States Court of Appeals for the 2nd Circuit, No. 05-1069-cv.

As simply another example of findings of employment discrimination at Home Depot, see the Bangor (Maine) Daily News, January 24, 2006, "Rights panel rules against Topsham Home Depot" --

"The Home Depot store in Topsham discriminated against a man who had broken his back earlier in life, but The Home Depot in Rockland did not discriminate on the basis of age against two employees of that store, the Maine Human Rights Commission ruled Monday... In the complaint by Patrick Farris, who now lives in Georgia, against The Home Depot store in Topsham, his attorney told the commission a supervisor taunted him over his broken back injury, throwing a pencil on the floor and demanding that he pick it up. When Farris was in pain from the injury, store officials argued in a written submission to the panel, he grimaced as he helped customers. One day, when Farris was in particular pain, he was told not to "punch in" at work because his pain was obvious. The panel ruled this action on the part of The Home Depot equated to a "constructive discharge," which means he was effectively put out of work. The commission voted that reasonable grounds existed for Farris' claim. Complaints that win reasonable grounds rulings from the panel proceed to conciliation. If no settlement is reached, the complainant may proceed to Superior Court, where a financial award may be granted. Peter Sullivan of South China and Karen Claywell of Friendship also filed claims against The Home Depot for their experiences in the Rockland store. The attorney representing the two, Tracy Adamson, argued that Sullivan's peers at the store taunted him about his age, and were aware that he was under a program of improvement on the job. Claywell refused to cooperate with the systematic discrimination, Adamson argued, and suffered on the job because of it....Commission investigator Brenda Haskell told commissioners that while she believed the Rockland branch of the home improvement chain was "a store that went amok," no violations of the Maine Human Rights Act could be demonstrated.

But Home Depot run "amok" must be inquired into by the FDIC, now that Home Depot proposes to acquire control of an insured depository institution.
See also, for the record, NYT of May 27, 2006, "The Board Wore Chicken Suits" ... This is not a company, not a management, that should be allowed to acquire control of an insured depository institutions. ICP asks for hearings, and that Home Depot's applications be denied.

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

Respectfully submitted,
Matthew Lee, Esq., Executive Director
Inner City Press / Fair Finance Watch

In other news, it now emerges that ACC Capital Holdings last year paid $360,070 to board member Deval Patrick, whose staffer says this was for having attended about four or five board of directors meetings and acting as ACC's liaison in the settlement discussions with 49 attorneys general over predatory lending which required "four or five special briefings" for the board. That's over $36,000 per meeting... Among the slipperier arguments in the Federal Reserve reply brief in the ICP v. FRB Second Circuit FOIA case is that Wachovia's provision of a list of the subprime lenders it assists was "voluntary" because Wachovia submitted it early in the process. The Fed acknowledges that in cases "prior to Wachovia" SouthTrust, it asked for the names of subprime lenders assisted, but that Wachovia include this in its application, making it voluntary. How this will play out in Wachovia - Golden West is anyone's guess.

May 29, 2006

Concerned with these disparities in Trustmark's 2004 Home Mortgage Disclosure Act ("HMDA") data, ICP in early 2006 wrote to Trustmark requesting a copy of its 2005 HMDA-LAR, in the .dat format in which such data is filed with regulators and in which virtually all of Trustmark's peers have provided their data to ICP. Trustmark responded with data in anachronistic paper print-out form. ICP wrote and asked Trustmark to explain why it would not provide the data in the format in which it had already filed the data with regulators; ICP stated that it could see no other reason that an attempt by Trustmark to avoid analysis of its 2005 lending record. No explanation has been offered.

In 2004 in its headquarters MSA of Jackson, MS, Trustmark denied the conventional home purchase loan applications of African Americans 3.12 times more frequently than whites. For refinance loans, Trustmark's denial rate disparity was even worse: it denied the applications of African Americans 3.84 times more frequently than whites.

Considering loans over the federally-defined rate spread (of 3% over the yield of comparable Treasury securities on first lien loans), in the Jackson MSA in 2004 for conventional home purchase loans Trustmark confined African Americans to loans over the rate spread 3.83 times more frequently than whites. For first-lien refinance loans, Trustmark confined African Americans to loans over the rate spread 3.23 times more frequently than whites.

In the Memphis MSA in 2004, Trustmark denied the conventional home purchase loan applications of African Americans 2.03 times more frequently than whites, and denied the applications of Latinos 2.81 times more frequently than whites. For refinance loans, Trustmark's denial rate disparity was even worse: it denied the applications of African Americans 4.20 times more frequently than whites.

Additionally, Trustmark supports higher cost fringe financial services, for example,

-- A DOLLAR CASH ADVANCE, INC. of Ridgeland, MS (relationship running through at least 2010;

-- A-1 CHECK CASHING, INC. of Pearl, MS;

-- CENTREVILLE RENT TO OWN INC of Centreville, MS; and

-- NEWMAN'S PAWN SHOP, INC. of Hazelhurst, MA (relationship secured by all “inventory,” that is, the contents of the pawn shop).

Based on prior Federal Reserve precedents, 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.

Inner City Press / Fair Finance Watch was asked to review JPMorgan Chase's lending in Brooklyn, and has done so: In 2005 in Brooklyn, JPM Chase confined African Americans 3.32 times more frequently than whites to higher cost loans over the federally-defined rate spread of 3% over Treasury securities on a first lien, 5% on subordinate liens. JPM Chase confined Latinos 2.84 times more frequently than whites to loans over the rate spread.

Also in Brooklyn in 2005, JPMorgan Chase denied 42.14% of mortgage applications of African Americans, and 36.78% of applications from Latinos, compared to only 29% of applications from whites.

Simultaneously JPM Chase seeks to buy 338 branches from Bank of New York and close 50 of them, including at least four in low- or moderate-income census tracts in NYC, without even disclosing at this stage the locations of the branches.

Finally, for this week, from the mailbag, to Inner City Press / Fair Finance Watch from Gatlinburg, TN ---

... I have Power Of Attorney for my father who is 68 years old and resides in Gatlinburg, Tn. He and my mother who at the time was dying of cancer and Ameriquest knew this refinanced their home in July of 05 because they were convinced by a mortgage specialist that because they were one month behind on their current mortgage they were going to lose their home. Ameriquest falsified income documents and showed rental income where there was none. My mother passed away in January of this year and now this loan is 4 months behind because my father who's total income even when my mom was alive was maybe 2000.00 per month cannot make the payment of 1500.00 per month. I have all of the documents from Ameriquest that they sent to him and am now talking with an attorney because he will have to file Chapter 13 in order to stop the foreclosure and give me time to sell his home. [All told,]my parents received 3,500. and Ameriquest paid some of their smaller bills. Ameriquest made over 15,000 on this loan....

Meanwhile, from NMN -- Ameriquest Mortgage, which three weeks ago closed all of its 229 retail branches, is planning for a substantial decline in production over the next few months, company executives told National Mortgage News. The lender anticipates that its origination volume will fall dramatically for three to six months as it re-engineers its direct-to-consumer channel toward four regional call centers in Arizona, California, Connecticut and Illinois...The Orange, Calif.-based company said its predictions on originations affect only Ameriquest and not its wholesale affiliate, Argent Mortgage. 'Argent is unaffected by this,' said Adam Bass, senior executive vice president and vice chairman of ACC Capital Holdings, the parent of both units." Convenient, isn't it, that the one channel of ACC that is covered by the reforms in the AGs settlement now reduces its volume, with the uncovered and unreformed broker channel doesn't slow down at all...

May 22, 2006

This week, a battle begun around Washington D.C., in which a Virginia bank wants to sell-out to a Baltimore-based holding company which plays fast and loose with consumers' information, while disproportionately excluding African Americans and Latinos. Inner City Press / Fair Finance Watch has just filed a challenge to the application by Mercantile Bankshares Corporation to acquire James Monroe Bank, based on two main issues: systemic lending disparities in Mercantile's 2005 mortgage data in Maryland, Virginia and Delaware, and Mercantile's negligent treatment of consumers' information, losing 48,000 customers' names and Social Security numbers earlier this month.

Mortgage (HMDA) data for 2005, which ICP obtained directly from Mercantile, show that Mercantile disproportionately excludes and denies African Americans and Latinos. Concerned by disparities in the 2004 lending record of the subsidiaries of Mercantile Bankshares Corporation, ICP requested Mercantile's 2005 HMDA Loan Application Register. Twelve separate LARs were provided, and ICP cumulated them. Overall, Mercantile in 2005 denied the applications of African Americans 2.28 times more frequently than those of whites. This disparity was worse in Maryland (2.42 to 1) and even worse in Virginia (2.91), where Mercantile also denied the applications of Latinos 2.02 times more frequently than those of whites.

Worse is Mercantile's striking failure to lend to communities of color. In Maryland, for example, in full-year 2005 Mercantile made 1199 mortgage loans to whites, and a mere 76 to African Americans, only ten loans to Latinos. This is out of keeping with the demographics of Maryland, and with other lenders' data in the state. In Virginia in full-year 2005 Mercantile made 498 mortgage loans to whites, and a mere 54 to African Americans -- and only 16 loans to Latinos. This is out of keeping with the demographics of Virginia, and with other lenders' data in the state. And, on lower volume, in Delaware in 2005 Mercantile made 105 loans to whites and only four loans to African Americans and only two loans to Latinos. This is out of keeping with the demographics of Delaware, and with other lenders' data in the state, which ICP knows well (see, e.g., Wilmington News-Journal of May 12, 2006, "FOIA filing only puzzles U.S. judges," regarding Delaware-related arguments in the 3d Circuit Court of Appeals).

As timely put before the FDIC by ICP's comments, a scandal had emerged about Mercantile's negligent treatment of over 48,000 consumers' private information, including Social Security numbers. See, e.g., "Mercantile says laptop theft could put customers at risk," Baltimore Business Journal of May 12, 2006 --

"Mercantile Bankshares Corp. said late Friday that a laptop computer containing personal information for more than 48,000 customers was stolen from an employee of subsidiary Mercantile Potomac Bank. Mercantile Potomac Bank, which serves Fairfax and Loudoun counties in Northern Virginia, said it is notifying customers about the incident. The bank said the theft appears to have been random. The stolen computer contained confidential information about some customers, including Social Security numbers and account numbers."

That the Mercantile unit engaged in this anti-consumer negligent action "serves" Northern Virginia, the site of James Monroe Bank, only makes the need for public hearings more clear. The Associated Press' story quoted a privacy expert asking, ""What is the purpose of having the laptop that has the account numbers and Social Security numbers of 50,000 (people) on it? I don't understand." Who can understand negligence like Mercantile's? Given this record, ICP is requesting public evidentiary hearings, and that, on the current record, Mercantile’s applications be denied.

A real rogues' gallery: on March 24, 2006, subprime lender NovaStar simultaneously announced the purchase of a $940 million pool of payment option adjustable rate mortgages, and plans to structure its first securitization of the year as an on-balance sheet transaction. The $1.35 billion on-balance sheet deal closed April 28, led by RBS Greenwich Capital, Deutsche Bank Securities and Wachovia Securities -- three enablers of predatory lending...

May 15, 2006

On May 11, 2006 in the Third Circuit Court of Appeals in Philadelphia, argument were heard in Inner City Press' ongoing case seeking documents from the Delaware Attorney General about the predatory lending settlement of Household International, now HSBC. Delaware refused to provide any records, saying the Inner City Press request came from out of state. Subsequently the Federal district court in Wilmington declared Delaware's "citizens-only" Freedom of Information Act to be unconstitutional; Delaware appealed, and three judges heard it on May 11.

As recounted in the next day's New York Times, "At the hearing Thursday, a state deputy attorney general, W. Michael Tupman, argued that Delaware had the right to set limits to its records to 'help define the political community and strengthen the bond between citizens and their government.' Judge D. Brooks Smith asked, 'How does restricting a noncitizen strengthen that bond?'" To that, there was no answer. Delaware pressed a narrow definition of journalism, despite (as recounted by Dow Jones), acknowledging that ICP and its requester's "'achievements are truly remarkable on a national level,' Tupman told the court [adding] Delaware fears being deluged with requests for public records if the state's FOIA law is held unconstitutional.'" Too much open government is hardly our problem...

What is a problem, in the fair lending field as in others, is the sometimes lack of follow-up and persistence. On that note, ICP has recently obtained BB&T's 2005 HMDA-LAR, and is comparing it to BB&T's record in 2004. Focusing on BB&T's home state of North Carolina, BB&T appears to have become even more disparate in 2005 than in 2004. BB&T’s Lendmark Financial Services is a largely subprime lender – as noted, in 2004, over 94% of its loans to African Americans were higher cost loans over the federally defined rate spread (of 3% over comparable Treasury securities on first liens, 5% on subordinate liens). This is the 2005 lending record in North Carolina of BB&T's seven HMDA reporters, cumulated (BB&T).

At BB&T for conventional first-lien loans in North Carolina in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 2.98 times more frequently than non-Latino whites. BB&T's Latino to white disparity in North Carolina in 2005 was 2.64.

For home purchase loans in North Carolina, BB&T was even more disparate: non-Latino African Americans were confined to higher cost loans over the rate spread 4.04 times more frequently than non-Latino whites; BB&T's disparity between Latinos and whites was even higher, at 4.56.

ICP has designed an innovative way to consider income correlations, by calculating upper and lower income tranches based on lenders' own customers. In North Carolina at BB&T for home purchase loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 5.84 times, and Latinos 6.48 times more frequently than upper income non-Latino whites. Income does not explain the disparities at BB&T. Public hearings should be held, on BB&T pending applications.

Half truths on Capitol Hill: from the May 11 testimony of the Office of Thrift Supervision's Scott Polakoff, this claim:

"OTS Community Reinvestment Act regulations provide that an applicant for a federal thrift charter must submit with its application a description of how it will meet its CRA objectives. OTS must take the CRA description into account when considering the application. and may deny or condition the application on CRA grounds. Applications by credit unions to convert to federal savings associations are also subject to publication and public comment requirements."

Mr. Polakoff fails to mention that it is now the OTS' position, stated in letters from him, that the OTS has no duty to provide the public with even a copy of the application before closing the comment period and approving the application. Nor does the OTS explain in writing why it approves applications. And the OTS has turned 180 degrees from its previously practice of holding informal meetings on protested applications. This must change.

Footnote: we're tempted to just ignore it, but here goes -- in a May 12 letter purporting to respond to ICP's May 5 Viewpoint in the American Banker newspaper (somewhat similar to the Report of April 24, 2006, below), an individual from something called "Intrepid Ventures" tries to drum up business by advising that lenders, across the board, aggressively defend their fair lending records. The article ignores the simple point: why did disparities by race get worse from 2004 to 2005? And how can it be said that the flattened yield curve explains this year-to-year worsening? So we visited IntrepidVentures.net and found testimonials from GE Consumer Finance, a headshot like Mr. Burns on The Simpsons, and an empty page entitled "Affiliated Networks." Like we said, a reply is hardly merited...

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

Here this week, Ameriquest's shut-down of its retail offices, evading its predatory lending settlement; Citigroup goes stealth with its subprime lending, and JPMorgan Chase's 2005 lending disparities, state-by-state.

Citi's stealth subprime sleaze -- Citigroup will no longer break out the subprime production volume of its CitiFinancial mortgage business, a spokesman for the financial services giant confirmed to NMN, May 1. In reporting to the public, all of Citigroup's residential production will be disclosed as an item under real estate lending. The change became effective in the first quarter. "It's all been consolidated into one reporting line," said the spokesman, adding that "CitiFinancial has opened 200 new branches in the U.S. this year. Overall, CitiFinancial operates 1,000 retail branches in the U.S. and 1,200 overseas." So -- CitiFinancial now has more offices outside the U.S. than within...

Regarding Ameriquest's shutdown of its retail offices (thus dodging reforms in its predatory lending settlement with the state AGs), all we can say is "we told you so" -- including being the first to report the impending layoffs, based on emails we received from (ex) employees...

On JPM Chase-Bank One, ICP submitted a detailed first comment on April 17, which analyzed JPM Chase nationwide and in New York.ICP has continued its review of the worsening pricing disparities in JPM Chase's 2005 lending record, looking at JPM Chase's (and the nation's) major states, beginning with the states in which JPM Chase seeks to buy branches, then in the states impacted by Hurricane Katrina, then in other states.

Connecticut --At JPM Chase for conventional first-lien loans in Connecticut in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 3.71 times more frequently than non-Latino whites (again worse even that JPM Chase's nationwide disparity of 2.98, set forth in ICP's April 16 comment). JPM Chase's Latino to white disparity in Connecticut in 2005 was 2.76. For home purchase loans in Connecticut, JPM Chase was even more disparate: non-Latino African Americans were confined to higher cost loans over the rate spread 4.69 times more frequently than non-Latino whites. ICP has designed an innovative way to consider income correlations, by calculating upper and lower income tranches based on lenders' own customers. At JPM Chase for conventional first-lien loans in Connecticut in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.94 times, and Latinos 4.73 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held, including in Connecticut.

New Jersey -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 2.98 times more frequently than non-Latino whites. JPM Chase's Latino to white disparity in New Jersey in 2005 was 2.64. For home purchase loans in New Jersey, JPM Chase was even more disparate: non-Latino African Americans were confined to higher cost loans over the rate spread 4.69 times more frequently than non-Latino whites; JPM Chase's disparity between Latinos and whites was even higher, at 4.56. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.16 times, and Latinos 3.62 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held, also in New Jersey.

Louisiana -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 2.90 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 2.70 times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.30 times. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Alabama -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 4.33 times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 5.54 times. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Mississippi -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 2.74 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 2.29 times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.17 times. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Delaware -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 2.94 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 2.54 times more frequently than non-Latino whites; JPM Chase's disparity between Latinos and whites was even higher, at 4.27. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 2.51 times, and Latinos 2.54 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Arizona -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread tw0 times more frequently than non-Latino whites. JPM Chase's Latino to white disparity in 2005 was 2.25. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 2.08 times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 2.35 times, and Latinos 3.42 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Illinois -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 3.85 times more frequently than non-Latino whites. JPM Chase's Latino to white disparity in 2005 was 1.81. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 3.86 times more frequently than non-Latino whites; JPM Chase's disparity between Latinos and whites was 1.95. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.84 times, and Latinos 3.37 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Florida -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 3.01 times more frequently than non-Latino whites. JPM Chase's Latino to white disparity in 2005 was 1.97. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 2.82 times more frequently than non-Latino whites; JPM Chase's disparity between Latinos and whites was 2.59. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.49 times, and Latinos 2.54 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

California -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 3.89 times more frequently than non-Latino whites. JPM Chase's Latino to white disparity in 2005 was a whopping 5.16. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 3.72 times more frequently than non-Latino whites; JPM Chase's disparity between Latinos and whites was 2.49. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 5.43 times, and Latinos 8.55 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

North Carolina -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 4.04 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 4.33 times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 4.86 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Michigan -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 3.19 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread four times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.73 times, and Latinos 1.60 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

Massachusetts -- At JPM Chase for conventional first-lien loans in 2005, non-Latino African Americans were confined to higher cost loans over the rate spread 2.71 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 3.09 times more frequently than non-Latino whites; JPM Chase's disparity between Latinos and whites was 4.79. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 2.88 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase. Public hearings should be held.

And finally (for now), in Georgia, a state JPM Chase heavy-handedly threatened to pull out of in light of anti-predatory lending controls passed by the state legislature, in 2005 at JPM Chase for conventional first-lien loans, non-Latino African Americans were confined to higher cost loans over the rate spread 3.44 times more frequently than non-Latino whites. For home purchase loans, non-Latino African Americans were confined to higher cost loans over the rate spread 4.98 times more frequently than non-Latino whites. Comparing in the same income tranches, JPM Chase for conventional first-lien loans in 2005, upper income non-Latino African Americans were confined to higher cost loans over the rate spread 3.66 times, and Latinos 2.02 times more frequently than upper income non-Latino whites. Income does not explain the disparities at JPM Chase, including in Georgia. Public hearings should be held.

May 1, 2006

In a public forum in Brussels last week, marking the formation by NCRC and others of a transnational community reinvestment coalition, Citigroup's Jeff Jaffe spoke of Citigroup's endeavor to re-enter the mortgage market in Europe, due to changes in the Basel capital accords, and singled out Ireland as the type of economy, with limited regulation of financial services, which others in Europe might want to emulate. An Irish advocate quickly begged to disagree. Elsewhere in the forum, advocates from Germany spoke of litigation about Citigroup for high-cost loans and payment protection insurance. Germany-based Deutsche Bank's Jeorg Hohling said among other things that there is not gap in credit availability in the former East Germany, nor elsewhere in Europe or the rest of the "First World." He also stated that while Deutsche Bank wants to hear from its customers (or clients, as translated into French), it has less interest in hearing from organized groups. When asked about credit availability in U.S. inner cities, and Deutsche Bank's role as foreclosing trustee for many high-cost subprime lenders, Mr. Hohling did not respond, at least not only the platform. Whether DB's usury by stealth (as one workshop at the forum put it, with Deutsche Bank diplomatically referred to as "Bank Number 8") gets reformed remains to be seen...

Stateside, National City was sued on April 26 in the Eastern District of Michigan for lending discrimination -- specifically, for denying loans in areas "not desirable based upon National City criteria." In terse a statement, National City disputed the allegation. "We have not been served with the suit, and generally do not comment on pending litigation," according to a statement, issued by spokesman William Eiler. "However, we understand that there is an allegation of discrimination. Our strong record of fair lending certainly disputes that." NatCity's (and its First Franklin's) 2005 HMDA data? Not so much...

April 24, 2006

Inner City Press / Fair Finance Watch has released a study of the 2005 mortgage lending data in New York City, finding worsening disparities by race and ethnicity in the higher-cost lending of some of the largest banks operations in NYC. 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 confined its borrowers in The Bronx to higher-cost loans above this rate spread over 35 times more frequently than in Manhattan, worse than Citigroup's record in 2004. The Bronx is the lowest income and most predominantly African American and Latino county in New York State. In Brooklyn, Citigroup was almost as disparate as in The Bronx, confining its borrowers in Brooklyn to higher-cost loans above the rate spread 23 times more frequently than in Manhattan. For the entire New York City Metropolitan Statistical Area in 2005 Citigroup confined African Americans to higher-cost loans above this rate spread over seven times more frequently than whites, also worse than Citigroup's record in 2004.

JPMorgan Chase was nearly as disparate in New York City. In 2005, JPM Chase confined its borrowers in Queens to higher-cost loans above the rate spread 8.64 times more frequently than in Manhattan. Chase's disparities were also intra-borough: in 2005 at JPMorgan Chase African Americans in Manhattan were confined to higher cost loans over the rate spread 11.42 times more frequently than whites in Manhattan.

Redlining and continued disproportional denials to people of color are also evidenced by the new 2005 data. Citigroup denied applications from The Bronx 4.62 times more frequently than applications from Manhattan; the disparity at Wells Fargo was nearby as bad, at three-to-one. While the disparities are nationwide, they are more pronounced in New York City. 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.

Last April, Inner City Press / Fair Finance Watch found similar but less extreme disparities; ICP's studies were reported on in the English and Spanish-language press. El Diario reported for example that "at Citigroup, Latinos borrowers were 3.92 times more likely to receive the higher interest rate loans than were white borrowers." Soon thereafter, the NYS Attorney General (NYAG) requested information behind the data from four large national banks: Citigroup, JPMorgan Chase, HSBC and Wells Fargo. Less than a week later, the Office of the Comptroller of the Currency and the New York Clearinghouse trade association both sued to block this inquiry.

Now the 2005 data has become available, with a few exceptions, allowing a comparison to the previous year and that degree, identification of trends. Focused initially on the NYAG-targeted banks, a review by Inner City Press / Fair Finance Watch of the New York City data of these four shows that not only did a higher percentage of borrowers overall receive loans over the rate spread, but also the disparities between races grew more stark. The banks have tried to blur the two issues, in strikingly similar cover letters they sent along with the data.

Citigroup's senior vice president Eric Eve, for example, wrote in a March 30 letter to Inner City Press that "Citigroup, as we expect will be the case with most other lenders, will show a greater percentage of loans above the threshold for 2005 than 2004... The issue is the narrowing gap between short- and long-term interest rates, a phenomenon known as the 'flattening yield curve.' This is not an indication that borrowers were treated differently in 2005."

Based on Citigroup's 2004 disparities reported, for example, by El Diario, merely denying that practices in 2005 were different that in 2004 might seem to be a strangely limp defense. In fact, Citigroup's 2005 data show worsening disparities. In the state's poorest and least white county, The Bronx, for example, Citigroup confined 7.39% of its borrowers to higher cost loans over the rate spread -- 35.19 times more frequently than in more affluent and less minority Manhattan, where only 0.21% of Citigroup's borrowers were confined to rate spread loans. While of the five boroughs, The Bronx had the highest percentage of loans from Citigroup over the rate spread, Citigroup's percentage of higher cost loans in each of the four outer boroughs was higher than in more suburban, and less diverse, Westchester.

Citigroup's CEO Charles Price and chairman emeritus Sandy Weill were each questioned by Inner City Press about these patterns on April 18 at the company's annual shareholders' meeting at Carnegie Hall. Mr. Weill referred the question to Mr. Prince, who said that the issues are "too complex to be addressed in this forum," adding that the disparities were clearly not so bad that the Federal Reserve would continue to block Citigroup from large mergers. His reference, repeated throughout the shareholders' meeting, was to the Federal Reserve's recent lifting of its year-old ban on significant expansion, which took place before Citigroup's 2005 mortgage data was released.

Mr. Prince's claim that the Federal Reserve has implicitly condoned the disparities in Citigroup's 2005 mortgage data is dubious. In any event, federal regulatory laxity is one of the problem that allows the disparities, from most grassroots communities' perspectives. In Brooklyn, New York, JPMorgan Chase in 2005 confined 6.64% of its borrowers to higher cost loans over the rate spread -- 9.1 times more frequently than in more affluent and less minority Manhattan, where only 0.73% of JPM Chase's borrowers were confined to rate spread loans. Bank of New York, from which Chase is applying to buy 338 branches in the New York metro area, confined its Bronx borrowers in 2005 to higher cost loans over the rate spread 7.87 times more frequently than in more affluent and less minority Manhattan. Bank of New York's disparity-ratio between borrowers in Brooklyn and Manhattan, at 6.5, was almost as pronounced.

While comprehensive income comparisons will not be possible until the aggregate data is released in September, ICP and its academic support team have designed an innovative way to consider income correlations, by calculating upper and lower income tranches based on each lenders own customers. At JP Morgan Chase for conventional first-lien loans nationwide, upper income African Americans were confined to higher cost loans over the rate spread 3.34 times more frequently than whites. At Citigroup for conventional first-lien loans nationwide, 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 or JPMorgan Chase. 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.

Back in The Bronx, HSBC was the largest subprime lender of the NYAG Four. HSBC's March 29 letter to Inner City Press accompanying its data is nearly identical to Citigroup's, concluding that "had the yield spread between short term and long term interest rates stayed at the 2004 levels, far fewer longer maturity loans would have exceeded the thresholds in 2005. Consequently, a meaningful comparison of the rates at which loans exceeded the rate spread between 2004 and 2005 cannot be made."

While it may be true that a comparison of the raw percentages of a lender's 2004 and 2005 loans that exceeded the rate spread should also take into account "the effect of monetary policy" (as Citigroup's March 30 letter puts it), there is no reason that the disparities between white and African Americans and Latinos cannot be compared year to year. In this comparison, the NYAG Four were more disparate in 2005 than in 2004.

And the 2005 disparities extended beyond this quartet. Strikingly the largest lender, both prime and subprime, to African Americans in NYC in 2005 was Ameriquest and its affiliates including Argent, which made 6394 loans in NYC in 2005, 4656 (or 72.8%) of them over the rate spread. Ameriquest recently settled charges of predatory lending for $325 million, while leaving its Argent affiliate entirely unreformed. In NYC in 2005 Washington Mutual and its higher-cost affiliate, Long Beach Mortgage, together confined their borrowers in The Bronx to higher-cost loans above this rate spread over 35 times more frequently than whites, worse than their record in 2004. ICP's analysis of other NYC lenders continues. Some lenders are trying to avoid such comparisons by only providing data to the public in unanalyzable form, an evasion it's proved surprisingly difficult to get regulatory guidance on. Evaders for now include New York Community Bank, North Fork / Greenpoint, Lehman Brothers and AIG, down through the NYAG-sued subprime lender Delta Funding Corporation. Each federal regulator has an evader in its midst; none of the agencies has yet acted on this issue.

In New York, the NYAG is now focused on running to become state governor; in any event his inquiry has been blocked for now by the courts. So who will take action, on the disparities in the 2005 data? Given preemption and inertia at the federal bank supervisory agencies, it must be regulation from below. As to JPMorgan Chase, the issues can be raised to the Office of the Comptroller of the Currency, on Chase's proposal to buy 338 branches from the Bank of New York. Inner City Press / Fair Finance Watch filed such comments on April 10, as reported on Associated Press and elsewhere. Now that Citigroup is no longer explicitly blocked from large acquisitions by the Federal Reserve, its pent-up M&A hunger may soon trigger the Community Reinvestment Act lending reviews that accompany merger reviews. Wells Fargo is embroiled in fights about its environmental record, with no reforms in sight. HSBC is buying, but in Mexico for now. Everything is growing, including the disparities in the data. And what of 2006, the loans being made today? More scrutiny and enforcement actions are needed, to cut through the fogs of the banks' excuses.

April 17, 2006

Inner City Press / Fair Finance Watch has just filed a challenge to JPMorgan Chase's proposal to buy 338 branches from Bank of New York, and to close at least 50 of the branches. announced last week by JPMorgan Chase to acquire 338 branches from the Bank of New York, and to close at least fifty of the branches. ICP's comments demand public hearings on the proposal's potential to raise prices and close at least fifty branches, on JPMorgan Chase's continuing enabling of payday lenders and pawnshops, and on the disparities in JP Morgan Chase's just-released 2005 mortgage data, including disproportionately confining people of color to higher cost loans over the federally-defined rate spread of three percent over Treasury securities on first lien loans, five percent on subordinate liens.

Nationwide, JPMorgan Chase in 2005 for conventional first-lien loans confined African Americans to higher cost loans over the rate spread 2.98 times more frequently than non-Hispanic whites. JPM Chase denied 46.03% of applications from African Americans, versus only 24.46% of applications from non-Hispanic whites, a disparity of 1.88. In Bronx County, the lowest income (and most predominantly minority) county in New York State, JPM Chase in 2005 confined 10.78% of its borrowers to higher cost loans over the rate spread -- 14.77 times more frequently than in more affluent and less minority Manhattan, where only 0.73% of JPM Chase's borrowers were confined to rate spread loans. This is significantly more disparate than JPMorgan Chase's peers. ICP has also submitted sample consumer complaints against JPMorgan Chase, including under the Servicemembers Civil Relief Act.

"Since the Office of the Comptroller of the Currency last year sued to block inquiry into New York lending disparities at Chase and three others, it is imperative that the Comptroller hold public hearings about the stark 2005 lending disparities at JPMorgan Chase," ICP's comments to the OCC state.

The grounds on which ICP has requested public hearings include:

--JPMorgan has succeed Bank One as a lender to pawnshops and other fringe financiers like payday lenders. On compliance with the Servicemembers' Civil Relief Act, there are questions of JPMorgan Chase's compliance, as demonstrated by the sample exhibits referred to herein. Additionally, JPMorgan Chase's investment bank continues to securitize for other subprime lenders, including Ameriquest, and is in fact growing in this standardless business. Chase not only engages in, but also enables, predatory lending.

ICP has previously shown that JPM Chase funds and enables payday lenders and pawnshops. JPM Chase has continued funding and enable high cost lenders, including in the communities impacted by Hurricane Katrina. ICP has submitted to the regulators recent Uniform Commercial Code filings such as:

a Feb. 14, 2006 loan from JPM Chase/Bank One to Big Easy Pawn Shop of 4050 Chef Menteur Highway, New Orleans, Louisiana;

a Sept. 22, 2005 loan from JPM Chase "as successor in interest to Bank One" to LaPlace Pawn Shop of 105 West Airline Highway, LaPlace, Louisiana;

a November 2, 2004 loan from JPM Chase/Bank One to Sunset Cash Advance Corp. of Marion, Ohio;

a March 9, 2006 loan from JPM Chase "as successor in interest to Bank One" to JB Pawn, Inc. of Arlington, Texas;

a June 25, 2004 loan from JPM Chase/Bank One to Hilltop Pawn Shop, Inc. of Columbus, Ohio;

an October 26, 2005 continuation of a loan from JPM Chase "as successor in interest to Bank One" to National Pawn and Jewelry Sales, Inc. of Flint, Michigan;

an April 20, 2004 continuation of a loan from JPM Chase "as successor in interest to Bank One" to Great American Sales & Rent to Own, Inc. of Phoenix, Arizona;

an October 4, 2004 loan from JPM Chase/Bank One to Cliff's Check Cashing Stores, Inc. of Carrollton Texas;

a September 19, 2005 filing by JPM Chase concerning Claremont Check Cashing Co, of 510 Claremont Parkway, Bronx, NY;

a March 4, 2004 loan from JPM Chase to Grand at Lincoln Check Cashing Corp. of 153 E. 149th Street, Bronx, NY;

a September 27, 2005 filing by JPM Chase concerning Raythom Check Cashing Co, of 2430 Creston Ave, Bronx, NY;

a September 27, 2005 filing by JPM Chase concerning Money Express Check Cashing Co, of 84 West Fordham Road, Bronx, NY;

an August 18, 2005 filing by JPM Chase concerning P R Check Cashing, Inc. of 2495 Third Avenue, Bronx, NY;

a Bank of New York filing of April 8, 2004 also concerning P R Check Cashing Corp;

a Sept. 16, 2005 filing concerning Freeport Check Cashing Service of Freeport, New York, by both JPM Chase and Bank of New York; and

a December 22, 2004 loan by Bank of New York to Paradise Pawnbrokers, Inc. of 2384 Grand Concourse, The Bronx, New York.

That is, Bank of New York also funds pawnshops, including in The Bronx.

In the first three months of 2006, JP Morgan Chase was among the top ten securitizers of subprime loans, according to the trade publication Inside B&C Lending of April 14, 2006 -- its volume of subprime loans securitized in the quarter jumped to $6.8 billion from just $1.8 billion in the first quarter of 2005. These have included Chase Funding Loan Acquisition Trust, series 2004-AQ1, the loans in which were, according to Fitch (March 13, 2006), "originated by Argent Mortgage Company, LLC and Olympus Mortgage Company." Ameriquest recently settled charges of predatory lending for $325 million. Chase not only engages in, but also enables, predatory lending.

Another sample transaction: on August 9, 2005, much-sued tax refund anticipation lender H&R Block announced that two of its subprime subsidiaries, Option One Mortgage Corp. and Option One Loan Warehouse Corp., have amended their note purchase agreement with JPMorgan Chase Bank N.A.. The amended agreement is to extend the term of Option One Mortgage's off-balance sheet financing arrangement with JPMorgan to fund daily non-prime originations through Oct. 4, according to the filing. Under the arrangement with JPMorgan, non-prime loans originated by Option One Mortgage are sold daily to H&R's Option One Owner Trust 2003-4, which uses the JPMorgan facility to purchase the loans. ICP is requesting public hearings and that on this record, JPMorgan Chase's application be denied.

JPM Chase's Questionable SCRA Compliance, and Other Consumer Complaints

Military personnel on active duty are being overcharged on high interest loans by JP Morgan Chase, ICP's ongoing investigation of compliance with the Servicemembers’ Civil Relief Act (SCRA) has uncovered. The Servicemembers’ Civil Relief Act, at 50 USCS Appendix Section 527(1)(a) provides that “An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember's spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent per year during the period of military service.”

JP Morgan Chase’s practices, and their impact on front-line military personnel, are reflected in the complaint online at www.innercitypress.org/jpmcscra47a.jpg and www.innercitypress.org/jpmcscra47b.jpg Here are other sample consumer complaints, including from the Katrina Zone:

Subject: Chase Home Finance
Date: 12/6/2005 3:03:58 PM Eastern Standard Time
From: [Name withheld]
To: JPMChaseWatch [at] innercitypress.org
My home is located in Hancock County Mississippi.   Hurricane Katrina devastated southern Hancock County causing over 90% of homes and businesses catastrophic damage. My home was one with catastrophic damage.
Shortly after the hurricane I contacted Chase to inquire about payment options. I was told that based on the damage and my federally declared zip code that I would not have to make payments for three months. In December I was to assume payments and the months of September, October and November 2005 would be added to the loan without penalty. On September 29 I received a bill from chase detailing my missed payment as past due. I called and spoke to a representative named Andrew who assured me the bill was automatically computer generated but that the system did not identify my loan as late. I again called in October and November when I received my bills. I was told the same thing. On November 22 I received a letter from chase requesting information about intent to rebuild. Again I called, again I was reassured that my credit would not be affected and I would owe but one payment in December.
Today, December 5, I called to make my scheduled payment and was told that not only do I owe four months of payments but that I would be reported to the credit borough starting January if not paid. I asked to speak to a supervisor who told me that Chase made the decision not to honor full deferrals on November 1, 2005 and anyone I spoke to after that misinformed me.  Between November 1 and November 29 I had no less than six conversations with Chase Representatives; all of them assured me I was fine. The supervisor advised me that payment plans were being set up to bring people current with their mortgages but I do not qualify for such since I am unemployed (Katrina destroyed my place of employment as well). She told me to make my December payment and call back in January. She could offer no assurance that my credit then would not be affected if I am unable to come up with the almost $4000 it would take to make me current.
I have four children, my home is destroyed, my insurance company is not paying for damages, I am unemployed and I feel I have been deliberately misled by Chase.   I was told one thing and at the last moment everything regarding my loan changed.

Then --

Subject: Chase Home Finance
Date: 1/11/2006 3:12:40 PM Eastern Standard Time
From: [Name withheld]
To: JPMChase-Watch [at] innercitypress.org
I wrote in on Dec 5 detailing some of my "Chase Story". Just a quick update. Chase has begun the foreclosure procedures on my home. They are threatening to take what is no longer there.
I have received letters stating that my home has been inspected and appears to be unoccupied; that they will secure the property, change the locks and winterize at my expense if I do not contact them immediately.
First: Since Katrina, I have spoken with a Chase representative at least once a week.
Second: From August 30, I was repeatedly assured my loan was deferred and in good standing, that payments would resume in December. (They neglected to inform me of their change of policy on November 1 despite several phone calls from November 1 to December 1.) Third: I have, again, repeatedly, informed Chase of the structural status of the property. Each time I speak with them I have to tell them that NO the home is not habitable. Fourth: Whomever inspected the property should not be on the payroll. There are no walls! There are no doors! There was no roof until a week ago! What exactly are they going to winterize? 2x4s??
I have managed to hold the foreclosure process off for another month by paying, in addition to my monthly mortgage, a large sum of money. Friends in the area tell me that mine is not the only loan Chase has taken this approach with. They have us. The options are, follow the original payment plan agreed to shortly after the storm and have your credit ruined because they will report you for non payment and/or foreclose on the loan; or do it their way and put out funds that could and should be directed toward rebuilding the very properties they threaten to take. The people in this area have lost everything. Everything. If your good credit is all you have left, holding on to it is going to be paramount to your future. How is it that Chase has the power to take what is left? They did not inform of their change in policy, will answer to no one about this, and in the end will profit from the loss of those most affected by the largest natural disaster in US history.

This too is indicative of the JPM Chase practices on which ICP is timely requesting hearings.

In mid-2005, JP Morgan Chase put out a press release purporting to report on its performance under its Bank One-merger related lending pledge. The press release referred to “loans to families and businesses located primarily in low- and moderate-income communities.” But how can a family or business be “primarily” located in an LMI census tract? The answer is that the pledge include all mortgages made to people at or below the median income - hardly “low and moderate income.” The press release apparently refers to everyone at or below the median income as “lower income.” So much for transparency. It is imperative that this be clarified, in connection with this proposal, along with specifics of the branches to be closed, and the issues above. It is also imperative, since the Office of the Comptroller of the Currency last year sued to block inquiry into New York lending disparities at JPM Chase and three others, that the OCC hold public hearings on the issue of JPM Chase's 2005 lending record. ICP has formally requested such public hearings on JP Morgan Chase's applications, and contends that on the current record, these applications could not legitimately be approved. For or with more information, contact us.

April 10, 2006

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.

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.

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.

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:

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."

* * *

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).

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...

April 3, 2006 (including a requested update / edit to last week's Report)

HSBC continues drilling deeper south into subprime. Last week HSBC announced a proposal to pay $65 million to buy a 19.9% stake in what it called a " player in the sub-prime consumer loans market," Financiera Independencia and its affiliate Serfincor. HSBC's press release said that Financiera Independencia "opened its first branch in Toluca, west of Mexico City, and at the end of December 2005 had 120 offices in 69 cities throughout Mexico. Sandy Flockhart, chief executive officer of Grupo Financiero HSBC, said: 'This investment aligns us with one of the country's leading companies in the consumer loans market. It will enable us to pool our experience in developing new products, and better serve our customers in this sector. Strategically it positions both organizations to work together in developing this important economic segment.'

Just as HSBC exported Sandy Flockhart from Buffalo to Mexico, HSBC is exporting Household International's predatory lending model...

Inner City Press / Fair Finance Watch last week commented to the FDIC:

We note that on March 1, 2006, Wal-Mart tersely informed the FDIC (without sending copies to timely commenters such as ICP) that
“Wal-mart will withdraw its original request for a ‘Special Purpose’ designation replacing it with a request for a ‘Wholesale’ designation for CRA purposes. A CRA Plan consistent with this request will be provided.”

See, http://www.fdic.gov/regulations/laws/walmart/letterofintent.pdf

But now four weeks after Wal-Mart's letter, and on the FDIC's deadline for written comments, ICP does not have any copy of any CRA Plan from Wal-Mart. (Wal-Mart made a clearly frivolous request for confidential treatment for the above-quoted letter, and is perhaps doing the same for the referenced CRA Plan -- note that such a Community Reinvestment Act plan cannot be withheld under FOIA, and that no other federal bank regulatory agency has withheld CRA Plans, or, as Wal-Mart frivolously requested in this case, even letters projecting the subsequent submission of a CRA Plan).

Perhaps the idea is for Wal-Mart Financial Services' President to suddenly describe a CRA Plan in the twenty-five minutes you have accorded her on April 10 (less than two hours before ICP's five minutes to respond have been scheduled). At a minimum, the period for written comments must be extended. It is also imperative that Wal-Mart provide the referenced CRA Plan as far in advance of April 10 as possible -- or that further public hearings (including by videoconference from the FDIC's other regional offices, see below) be scheduled.The FDIC wrote in its March 17, 2006, letter to ICP 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 and/or in comments or written testimony."

ICP continues to disagree that all "significant" viewpoints are those held by groups who can afford to travel to either Washington or Kansas City...

March 27, 2006 [Updated February 21, 2008]

Washington medley -- even with Congress out of session, there was action in DC last week. Following the Office of Thrift Supervision's approval of H&R Block's application for a savings bank charter, Inner City Press spoke to OTS director John Reich (and his counsel Robert Russell) in the hallway of the Rayburn House Office Building on March 23. Director Reich defended his agency's H&R Block approval, and asked to be send material on ICP's other beef, the OTS' worsening public information policies. Asked about moves to exempt yet more lenders from reporting Home Mortgage Disclosure Act data, Mr. Reich reeled off statistics about small banks and thrifts being unprofitable, or selling out due to compliance burden. ICP/Fair Finance Watch has followed up with a letter stating among other things that

this letter follows up on our conversation last Thursday in the Rayburn House Office Building. On the first above-captioned matter, we urge you to stay and reconsider the OTS' grant of a thrift charter to H&R Block, just two weeks after the California Attorney General sued H&R Block for its high-rate tax refund anticipation loans (RALs) and just as the New York Attorney General sued H&R Block for $250 million for fraudulent marketing of its Express IRA products. While last Thursday you said that you understand that the suit concerns practices in 2002, we contend that the managerial and financial issues raised by the $250 million governmental lawsuit constitutes a material adverse change within the meaning of the OTS approval's Condition #3 and/or militates for the requested stay and reconsideration. This is particularly the case in light of the following public report, from the National Mortgage News of March 20, 2006 --

"In granting approval to H&R Block to open a savings and loan, the Office of Thrift Supervision did not check with the New York State attorney general about a pending fraud probe of the tax giant, an agency spokesman told National Mortgage News. OTS spokesman Chris Smith said, "We had communication with H&R Block but not the attorney general. The company told us there was an investigation going on." Another agency spokesman added, 'Based on the information provided to us, we were not under the impression that a lawsuit was imminent.'"

This last leaves the public believing that H&R Block led the OTS to believe that no lawsuit was imminent -- and then, contemporaneous with the OTS approval, the $250 million lawsuit was announced. It is important that the OTS stay its approval and address these matters. The article also noted that

"In granting approval to H&R Block, OTS noted that it had received "numerous" comment letters on the application, most of them opposed. 'Commenters expressed concerns about the ability of the mortgage companies' borrowers to receive the best loan product for which they qualify,' the agency said."

ICP's timely comments noted, and ICP raised directly to H&R Block and Option One, the disparities in their 2004 HMDA-LAR, including specifically in Missouri (of obvious CRA relevance in this proceeding, by H&R Block’s own admission and presentation). For the record, fully 71.11% of H&R Block’s (that is, Option One’s and H&R Block Mortgage’s) loans to African Americans in Missouri in 2004 were over the federal defined rate spread (of three percent over comparable Treasury securities on a first lien, five percent on subordinate liens). Over 61% of H&R Block’s loans to Latinos in Missouri in 2004 were over the rate spread. ICP raised that H&R Block’s percentages in other, less CRA-relevant states is substantially lower; H&R Block has still not made any substantive response. Again, It is important that the OTS stay its approval and address these matters.

On another matter we discussed (and on which you invited me to submit further information), attached hereto is the Feb. 10, 2006 letter to ICP by OTS Deputy Director Polakoff, stating that “while OTS often arranges to send ICP copies of applications during the public comment period, we are not required to do so… OTS responded to your FOIA request by letter dated January 27, 2006.”

But that was after the OTS approved the applications. We are troubled, and ask you to reconsider, that the OTS would say it is not required to provide timely requested copies of merger applications prior to approving the mergers. Even the Federal Reserve requires itself to provide copies of applications within three days of a request. The OCC has a policy of extending comment periods if it has not timely provided requested applications. While the OTS remains weaker on CRA than the other agencies -- a matter you've said you'll consider -- there has not even been any public notice that the OTS is weaker than the other agencies on public involvement in pending application -- here, in saying that it alone can refuse to provide a copy of an application until after it is approved.

As also reflected in the attached, OTS’ ombudsman Randy W. Thomas tersely wrote, on February 15, that “The Ombudsman’s Office does not serve as a duplicate channel when members of the public choose to communicate with the Director or other OTS official. I note that Deputy Director Polakoff responded to your concerns on behalf of the Director.”

As noted above, we are deeply unsatisfied by Deputy Director Polakoff's attached response, and ask that it (and the H&R Block approval) be reconsidered.

We'll see. [Editor's note: a paragraph was on February 21, 2008 excised here at the repeated request of an individual who was quoted in the paragraph but later complained that the comments were off-the-record, apparently based on a statement, never answered, "There's no press in the room?" Even recast as a blind (to most) item, it was apparently still of concern to the individual. The paragraph's news purpose having been served, it was ultimately excised for, in the CRA movement, the greater good.]

We can, however, report that long-time House Democrat staff Dean Sager is on the move, to become a lobbying for credit unions. His explanation is children in college. He will advise lobbyists, and not lobby himself at least for one year -- "or more, depending on how the Abramoff lobbying scandal reforms shake out."

Members from NCRC's annual conference marched from the FDIC to in front of the White House, to the chant of "Wal-Bank?" "Hell no!" That same day, Wal-Mart announced it is no longer seeking exemption from CRA. Other issues exist - on to the April 10 hearings.

From the department of Justice-delayed-is-Justice-denied -- it's been reported that even those victims of Ameriquest (but not Argent) Mortgage who are entitled to the attorneys general's restitution wouldn't receive a dime until at earliest 2007, since "the funds won't be distributed until the entire amount is collected in quarterly installments over the course of a year, said Thomas Papageorge, head of consumer protection for the Los Angeles County district attorney's office." (LA Times, March 22).

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"...

Finally, for this week, from the (HSBC - Household) mailbag:

Subject: Household Finance
Date: 3/23/2006 1:13:00 PM Eastern Standard Time
From: [Name withheld]
To: HSBC-Watch [at] innercitypress.org

I found your website after doing a search on Household finance. HFC has deceived us over and over again and reading your website made me realize I wasn't alone. We refinanced with them in 2003 because they were the only ones who would give us the loan at the time. We would have been better off without it. They charged us $7,800 in points and origination fees but we had no idea that was so high at the time. We learned 5 months ago that we owed $10,000 in deferred interest. We had no idea what deferred interest meant. HFC had changed their billing to reflect this deferred interest when they never had before. I was floored to learn I owed ten grand more than I thought. We now owe more than we borrowed 3 years ago. It took 4 months of calling them and finally going in and confronting them, for them to tell us we have a simple interest loan where interest accrues daily. We were never told this before. We have never made payments on an exact 30 day schedule to avoid more interest. We didn't know we had to. We have been lied to over and over when we call them. My husband became unemployed a couple years ago and we applied for 3 hardships and were denied each time for the same reason. The reason: we need more paper work. We would give them what they wanted, re-file and then it would happen again. Our very first payment was late because we didn't receive the payment booklet in time to make the payment. That right there racked up over $1,000 in deferred interest and we had no idea it was even happening. We currently cannot refinance because we owe more than our house is worth. I am trapped in a mortgage that will only grow as I make payments instead of decrease. I can't see how this can be legal or just.

Neither can we...

March 20, 2006

Wal-Mart's attempts to get into banking, which Inner City Press / Fair Finance Watch began opposing in 1999 (when Wal-Mart tried to buy a savings bank in Oklahoma) through 2005 (when Wal-Mart applied to the FDIC for deposit insurance) will finally be the subject of public hearings, next month in Washington and Kansas City. On March 8, ICP formally asked the FDIC to allow community groups to present testimony through any of the FDIC's regional offices, by video conferencing. Even the Office of Thrift Supervision allows this option -- ICP has participated, from the New York area, in OTS hearings in Dallas (on Greentree / Conseco) and San Francisco (on Citigroup and Washington Mutual, among others). If the FDIC views Wal-Mart's application as important enough to hold a hearing on, shouldn't it do at least what the OTS does, to allow testimony?

On March 17, the FDIC faxed ICP a response, stating that

"With regard to the first request, 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 and/or in comments or written testimony."

The FDIC is saying that all "significant" viewpoints are those held by groups who can afford to travel to either Washington or Kansas City -- truly extraordinary. We'll have more on this.

An update on BB&T and its shadowy subprime affiliate, Lendmark: following ICP's comments, the Federal Reserve on March 8 asked BB&T to confirm (or deny) "that BB&T's fair lending compliance program, as described on pages 7 and 8 of BB&T's February 23, 2006 submission, applies to Lendmark Financial Services." To this, BB&T replied that "Lendmark has adopted its own separate fair lending compliance policies." This out of out the norm, particularly for conglomerates the size of BB&T, most of which have corporate-wide compliance policies. This also makes clear that BB&T's Feb. 23 response, on issues ICP raised including the subprime Lendmark, described a fair lending program that doesn't even apply to Lendmark. We'll have more on this, as well.

Meanwhile, Wachovia plans to close 65 branches on May 24...

March 13, 2006

Last week the subprime lending industry claimed victory over the anti-discrimination law of Montgomery County, Maryland. The law was blocked by Circuit Judge Michael D. Mason, at least until July. The Office of Thrift Supervision issued an opinion exempting federal savings banks from the law's fair lending provisions. Already there is talk about the law being repealed before ever having effect.

Inner City Press / Fair Finance Watch has conducted a study of lenders in Montgomery County in the most recent year for which data is available: 2004. Lehman Brothers Bank, a thrift benefited by the OTS' preemption order, in 2004 confined African Americans in Montgomery County 2.8 times more frequently than whites to higher cost loans over the federally-defined rate spread (of three percent over comparable Treasury securities on first lien loans, five percent on subordinate liens. National City, which also threatened to pull out of the county, through its main subprime unit confined African Americans to higher cost loans over the rate spread 5.3 times more frequently than whites. Other lenders with high volumes of high cost loans to African Americans in Montgomery County include Fremont, Ameriquest / Argent, WaMu's Long Beach, New Century, Countrywide, Citigroup and GE's WMC. Among those with high disparities between African Americans and whites were HSBC Mortgage (at which African Americans were 5.7 times more likely than whites to be confined to rate spread loans); Chase Manhattan Bank (5.6 times more likely); Wells Fargo (3.1 times more likely) and at least two non-banks which ICP is looking into further.

Elsewhere o n fair lending, the Federal Reserve last week approved an application by Whitney to buy 1st National, reciting that Inner City Press / Fair Finance Watch

"alleged, based on 2004 HMDA data, that Whitney Bank and 1st Bank disproportionately denied applications for HMDA-reportable loans by minority applicants in several Metropolitan Statistical Areas... Although the HMDA data might reflect certain disparities in the rates of loan applications, originations, denials, or pricing among members of different racial or ethnic groups in certain local areas, they provide an insufficient basis by themselves on which to conclude whether or not
Whitney Bank or 1st Bank is excluding or imposing higher credit costs on any racial or ethnic group on a prohibited basis."

The "certain disparities" alluded to by the Fed includes these, identified to the Fed by ICP: In the New Orleans MSA in 2004, Whitney National Bank denied the conventional home purchase applications of African Americans fully 3.53 times more frequently than whites. These disparities at Whitney extend into each of its other footprint states: In Mississippi, in the Gulfport - Biloxi MSA, Whitney National Bank in 2004 denied the refinance loan applications of African Americans 5.48 times more frequently than whites. In Alabama, in the Mobile MSA, Whitney National Bank in 2004 denied the conventional home purchase applications of African Americans 3.22 times more frequently than whites. The Fed's approval order also notes that ICP

"expressed concern about Whitney Bank's relationship with a rent-to-own company, which is an unaffiliated, nontraditional provider of financial services. As a general matter, the activities of this type of business are permissible, and such businesses are licensed by the states where they operate. Whitney Bank has implemented a policy for its commercial credit facilities to finance companies or other consumer lenders to fund consumer loans. This policy provides for an evaluation of the practices of such borrowers to identify any potentially predatory lending practices and for ongoing monitoring and management of relationships with such borrowers."

But it's not at all clear in the record what practices or safeguards Whitney has -- and in previous cases, the Fed has tried to withhold such information -- leading to a brief ICP filed last week in the Second Circuit Court of Appeals in the ongoing ICP v. FRB Freedom of Information Act case about Wachovia's enabling of predatory lenders.

March 6, 2006

Ask and you'll find out -- this week it's the response of North Carolina-based BB&T, submitted by its outside law firm Arnold & Porter. BB&T's subprime finance company Lendmark was a focus of the comments of Inner City Press / Fair Finance Watch. The response admits for example that "in the Charlotte MSA, it is true that 100% of the loans to African Americans borrowers were high cost loans over the rate spread." It continues that ICP's

"Comment Letter also raises a question regarding the fact that BB&T's banks refer mortgage applications to Lendmark. BB&T does refer clients to Lendmark if their request for credit at the bank is denied, but they must follow a strict bank policy on the referral process. This policy lists certain loans types or scenarios where loan applications must not be referred to Lendmark, including real estate loans in amounts under $20,000, lines of credit, loans to applicants with FICO scores below 500, and denied loans due to suspicious loan activity."

This response among other things implies that nearly every applicant denied a loan by BB&T banks who was lent to by Lendmark in 2004 was given a loan over the rate spread (of 3% over comparable Treasury securities on a first lien, 5% on a subordinate lien) -- when even the big subprime lenders made only half of their loans over the rate spread. Those who fall prey to BB&T's referral down policy are ill-served. The response continues on to "note that Lendmark has a 'referral up' policy where every application they receive directly is 'referred up' to the BB&T banks if it meet the Freddie Mac guidelines." But this is not an equal two-way street: the referral up is limited to those fitting GSE criteria, and vaguely to those who apply "directly" to Lendmark. It is unclear if the latter limitation is meant to distinguish between Lendmark's "referral down from BB&T's banks" channel and its other applications, or between these and a broker channel. Despite BB&T's bristling response, there much to inquiry into with this bank -- and we will.

BB&T also claims that the questions even the Federal Reserve has asked other banks about due diligence conducted before lending to pawn shops and payday lenders are "unreasonable and overbroad." But the Fed has asked NC-based Wachovia exactly these questions, and Wachovia answered. BB&T's response is essentially ideological -- not surprising, perhaps, given the bank's CEO's recent fulminations on the AP that his favorite writer is Ayn Rand. Then again, ex-chairman Greenspan was also once a fan…

Also down in North Carolina, last week the payday lenders Check Into Cash, Check 'n Go and First American Cash Advance all signed agreements to stop making loans in the state. Advance America Cash Advance is still appealing the underlying ban. Meanwhile, ACE Cash Express last week put out a press release bragging that that it has "amended its existing bank credit facility to extend the maturity date, increase the facility size …Wells Fargo Bank is the Administrative Agent and Co-Lead Arranger, JPMorgan Chase Bank is the Syndication Agent and Co-Lead Arranger, and KeyBank, Union Bank of California and U.S. Bank are the Co-Documentation Agents. Other lenders in the facility include Amegy Bank, The Bank of Nova Scotia, National City Bank, RZB Finance, LLC, Texas Capital Bank, Allied Irish Banks, p.l.c., LegacyTexas Bank, and North Fork Bank."

The last of these, we've heard, has hired staff with experience at Citigroup / EAB in lending to check cashers and other fringe financial business. And so it goes…

From the mail bag:

Subject: CitiFinancial
From: [Name withheld]
To: CitiWatch [at] innercitypress.org
Sent: Sun, 26 Feb 2006 09:27:32 +0000 (GMT)
Have just found your site on CitiFinancial. It just the ammunition I need in my fight against this despicable company. They have destroyed our lives since June 2003 when we stepped into their office in Northampton here in England. Reading your page it seems that the methods they use there in America are also practiced here, delaying tactics, hiding documents so you don't see the contents (in our case a fraudulent credit agreement we didn't know existed for over a year), lying, slamming the phone down if you catch them out in a lie and financially ruining us with their selling methods. Keep up the good work. Hopefully one day I will have my retribution from this predator.

That's Citigroup, all right…

February 27, 2006

Ask and you’ll get an answer. Last week we recently reported on a Community Reinvestment Act scam, in which Gold Bank, which M&I is trying to buy, was given CRA credit by the Federal Reserve for buying bonds which in fact never resulted in a single unit of housing, low- or moderate-income or otherwise. In response, M&I and Gold Bank filed letters specifying at least the names and dates of the bonds, while admitting that no housing was built, and that the CRA credit has never been withdrawn or corrected --

“On July 19, 2001, Gold Bank purchased the City of Lee’s Summit, Missouri, Multifamily Housing Revenue Bonds, Series 2001C, for $4,600,000 (the ‘Missouri Bonds’). On February 28, 2002, Gold Bank purchased the Oklahoma Housing Development Authority, Multifamily Housing Revenue Bonds, 2002 Series C, for $5,000,000 (the ‘Oklahoma Bonds’). On August 15, 2002, Gold Bank purchased the Community Development Authority of the City of Manitowoc, Wisconsin Multifamily Housing Revenue Bonds, 2002 Series C, for $4,600,000 (the ‘Wisconsin Bonds’)… In August and September 2005, in large part because no housing projects were funded with the proceeds of the Bonds, the [IRS] notified Gold Bank that it had made preliminary determinations that the interest which the Issuers previously paid Gold Bank on the Bonds was not excludable from the gross income of Gold Bank for tax purposes. On October 17, 2005, Gold Bank paid approximately $3.5 million to settle the IRS claim…

“Gold Bank purchased the Bonds based upon representations from the Issuers that the proceeds of the Bonds would be used by the Issuers to make loans for low and moderate income multifamily housing projects… Notwithstanding such Issuer representations, the Issuers subsequently did not fund any low and moderate income multifamily housing projects with the proceeds of the Bonds… In fact, prior to the CRA examination, Gold Bank had disclosed to the Kansas City Federal Reserve… the impairment in the value of the Bonds and the reasons for such impairment.”

CRA credit given (and not retracted) for a fraudulent investment which never resulted in a single unit of housing. Is this what we’ve come to?

Confusion about the limited scope of Ameriquest's / ACC Holdings’ predatory lending settlement extends to and/or is caused by those involved in the settlement. In a Feb. 23 conference call, Iowa Attorney General Tom Miller called it a good settlement, while speaking about a report which described the settlement as being by ACC Holdings “and its subsidiaries including Ameriquest” – no mention of the exclusion of ACC’s large Argent Mortgage unit. While the call included a question-and-answer, this question was not able to be asked. The eleven who were allowed to ask questions included trade publications, two reporters who blurred mortgages into payday lender, and a radio reporter who said she couldn’t find the report on the website. When asked why more questions weren’t allowed, the public relations firm listed as the contact said that “there were two other reporters we couldn’t fit in,” then claimed that there were 27 who had wanted to ask questions. But since only 11 were allowed, that would leave 16 out in the cold. When asked to explain, the p.r. flack said haughtily that he wasn’t in charge of the queue. Who was, then? When asked how to ask Iowa AG Miller a question (about the exclusion of Ameriquest), the p.r. flack said AG Miller has his own press people. Quite an operation…

Speaking of payday lending, while it’s certain a good step that last week First Bank of Delaware disclosed the end to its rent-a-charter payday lending (hats off to DCRAC and others), given that the company had only thirteen employees, in context the large banks which lend to and fund payday lenders, like JPM Chase, BofA, National City, Wachovia and others, should be banks that should be scrutinized… Shame about First Bank of Delaware, though: its Alonzo Primus was slated to speak about its business model at CFSA’s ho-down at the La Quinta Resort in Cali, March 1-4…

The issue of ACC Holdings / Ameriquest having doled out Rolling Stones concert tickets to politicians and other involved in the January 2006 predatory lending settlement has spread in mainstream media from Nevada to Massachusetts to Maryland.

And speaking of Maryland, in the spirit of the payday lending footnote above, the subprime lenders saying they’ll pull out of Montgomery County, Maryland, because of the anti-predatory lending law there include Lehman Brothers / Aurora Loan Services, National City Mortgage Corp. / First Franklin Corp. and Bear, Stearns (whose EMC subsidiary is already under investigation by the Federal Trade Commission). A real rogues' gallery...

Most needing of watch-dogging is Citigroup’s export of its subprime lending model. In Europe in 2000 CitiFinancial 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…

February 20, 2006

Our focus this week is on scams of CRA. Kansas City-based Gold Bank, which M&I is trying to buy, got CRA credit from the Federal Reserve for buying a supposed housing bond with a 30% rate of return, which never resulted in a single unit of housing. But the CRA credit was never withdrawn. The Office of Thrift Supervision, meanwhile, has now defended granting merger approvals before the public can even see the (amended) applications. The OTS’ ombudsman refuses to consider complaints if they are also sent to the agency’s director. These are scams of CRA, and they need to be brought to an end.

In this space two weeks ago, we described the OTS’ shenanigans in granting fast approval to General Electric, involving HSBC. Inner City Press / Fair Finance Watch raised its complaint to the OTS director and also ombudsman. Last week two responses arrived. OTS Deputy Director Scott M. Polakoff writes that “while OTS often arranges to send ICP copies of applications during the public comment period, we are not required to do so… OTS responded to your FOIA request by letter dated January 27, 2006.”

That was after the OTS approved the applications. Amazing, that an agency would say it is not required to provide timely requested copies of merger applications prior to approving the mergers. Even the Federal Reserve requires itself to provide copies of applications within three days of a request. The OCC has a policy of extending comment periods if it has not timely provided requested applications. The OTS? It says it is not required to do anything.

Mr.Polakoff goes on to say that the amendment that the OTS allowed, without any opportunity for review by the public, made such review unnecessary: “after the amendment of the application, it was no longer subject to public comment nor was it subject to CRA review.” Sneaky, sneaky. Mr. Polakoff concludes: “We strongly disagree that OTS’ practices lack transparency and credibility… OTS staff is available to discuss applications and procedures with the public… I understand you have communicated by phone, letter, email and in person numerous times with OTS staff about applications.”

That doesn’t make this agency any more transparent, much less credible… It stands along in weakening CRA, and now, in doling out approvals before even allowing the public to see the applications…

And the OTS’ ombudsman Randy W. Thomas then tersely wrote, on February 15, that “The Ombudsman’s Office does not serve as a duplicate channel when members of the public choose to communicate with the Director or other OTS official. I note that Deputy Director Polakoff responded to your concerns on behalf of the Director.”

So what’s the point of having an ombudsman? Wouldn’t it be about some “communicat[ion with an] OTS official” that one would complaint to the Ombudsman? But the underlying communication allows the Ombudsman to avoid any substantive response – or review…Meanwhile, last week ICP received this:

Subject: GE Money Bank Unfair Consumer Practices
From: [Name withheld]
To: GE-Watch [at] innercitypress.org
Sent: Tue, 14 Feb 2006 19:31:04 -0500

I have the nearly exact problem as another consumer who wrote to you on 18 January 2006.[Click here for ICP's ongoing GE Watch.] I had opened an account with GE Money Bank in January 2005 with a deferred interest plan, (CareCredit, for dental treatment for my daughter), and had been paying my account as required, with the understanding that I would this would keep my account interest free until I completed my payments. I was not told that I had 1-year to complete the payments or the deferred interest would be added to my account at that point. I too was paying my account, and thought that by paying the required amount by 1 Feb 2006, I was okay. Just as with the other consumer who had purchased the television, in the body of the bill in small print lower on the page GE Money Bank had indicated that my "Promotional Purchase Due Date" was 02/06/2006, and that the "promotional balance" was $492.00. I noticed this but did not know that this meant that I had to pay that amount by that date to avoid the deferred interest being added to my account, and I paid $100 thinking that I was exceeding the required amount due of $19 for the month. Yesterday, I received a bill indicating that I now owe $643.59 because of the deferred interest of $237.97 being added to my account. I immediately called GE Money Bank, spoke to a customer service rep, who told me that I should have called before the due date and they could have explained to me that the full amount was due to avoid the charges. When I asked to speak with a manager, she put on her supervisor, Brock, who was very rude, told me that I should have read the notices every month in the "Promotional Purchase Summary" on my bill, and I would have known that this would happen. He indicated that there was nothing that they could do, that he could not direct me to anyone else, as he was in charge, that he is a Customer Service Supervisor, and that the Customer Service Manager does not take calls from customers. He told me that I have no recourse except to pay the amount owed now, and that it will not be adjusted in any way….Also, what is the possibility of [action] by consumers against GE Money Bank? They are making a lot of money, unjustly, on unsuspecting consumers who trust them.

Yep… Last week the California AG’s office sued H&R Block about tax refund anticipation loans, leaving H&R Block’s opponents wondering if H&R told the OTS that the case was soon to be filed, and whether the OTS will just haul off and give H&R Block a thrift charter anyway. We’ll see.

The Federal Reserve is the primary supervisor, including for CRA, of Kansas-City based Gold Bank. The FRB’s most recent CRA exam of Gold Bank states that

“Examples of the bank’s investment activity included: $4.6 million multifamily housing revenue bonds issued by a local municipality for the purpose of constructing or rehabilitating multifamily housing projects located in Missouri and targeting 50 percent to low-income and 40 percent to moderate-income purchasers.”

But this investment has given rise to a settlement with the Internal Revenue Service – and ICP has recently been informed that no housing was even constructed or rehabilitated with these funds, for which the FRB has given Gold Bank CRA credit, never retracted or acted on. The rate of return to Gold Bank was suspicious on its face. For the record, see The Bond Buyer of November 19, 2005, GOLD BANC SUBSIDIARY, IRS SETTLE OVER $ 14.2 MILLION HOUSING DEAL”

A Kansas-based subsidiary of Gold Banc Corp. has reached a settlement with the Internal Revenue Service in an examination of a $ 14.2 million multifamily housing bond deal that involved artificial inflation of aggregate bond yields and a diversion of arbitrage to transaction participants.Gold Bank Kansas purchased three groups of Series C bonds issued by the Oklahoma Housing Development Agency, the Manitowoc, Wis., Community Development Authority, and the city of Lee's Summit, Mo., in 2001 and 2002, according to a Form 8-K filed yesterday with the Securities and Exchange Commission.

The bonds were part of larger transactions of $ 145.4 million of Series A and Series B multifamily mortgage revenue bonds sold by each issuer. The Oklahoma agency issued $ 5 million of Series C bonds, while the Manitowoc agency and Lee's Summit each sold $ 4.6 million of Series C bonds. All were privately placed and remain outstanding. Stinson, Mag, & Fizzell PC of Kansas City, Mo., the bank's corporate counsel, acted as bond counsel on all three deals, according to official statements.

The IRS ruled earlier this year that interest paid on the Series C Manitowoc bonds was not deductible for federal tax purposes because it believed that the bonds were part of a series of abusive transactions promoted by the same undisclosed individual. The bonds, which had a 30% interest rate, artificially inflated the aggregate bond yield and thereby diverted arbitrage, which was used to provide fees to the promoter, the promoter's law firm, and other individuals, according to a material event notice posted by the Manitowoc authority in January. At that time, the IRS also indicated it suspected the individual of promoting similar deals to other issuers, the notice said.

IRS officials became concerned several years ago about identical blind-pool multifamily housing transactions and so-called telephone book deals, in which hundreds of potential projects are listed but bonds proceeds are never loaned out. As part of the three Series C bond investments, bank subsidiary Gold Capital Management Inc. received an aggregate payment of $ 450,000 in fees paid out of bond proceeds, the bank said in its 8-K filing….Rick J. Tremblay, the bank's chief financial officer, said he had no comment yesterday.

But not a single housing project was funded. The Fed gave CRA credit, and has yet to take it back, or act on this. ICP has raised it on M&I’s pending application(s), noting that in Missouri in 2004, M&I Bank FSB confined Latinos 2.83 times more frequently than whites to higher cost loans over the rate spread (of 3% over comparable Treasury securities on a first lien, 5% on subordinate liens). Missouri State Bank and Trust in the St. Louis MSA in 2004 made 52 conventional home purchase loans to whites – and NONE to African Americans or Latinos. It denied 100% of the applications it received from African Americans for refinance loans. M&I Mortgage in the St. Louis MSA in 2004 made 60 conventional home purchase loans to whites – and none to African Americans. ICP has timely requested action; we’ll see.

February 13, 2006 - See, “Group challenges BB&T's proposed takeover of Main Street banks,” by Paul Nowell, AP, February 9, 2006, and below in this Report

Looking more closely into what the attorneys general’s settlement excluded, Inner City Press/Fair Finance Watch has examined the sample state of Connecticut. Ameriquest had its license suspended in the state for a time; Connecticut’s attorney general appeared on ABC Nightline the day of the settlement, talking tough. Well, in Connecticut in 2004, Argent was a larger lender to both African Americans and Latinos than was Ameriquest.

Ameriquest made 286 loans to African Americans, 168 of them over the rate spread.

Argent made 485 loans to African Americans, 286 of them over the rate spread.

Ameriquest made 242 loans to Latinos, 133 of them over the rate spread.

Argent made 631 loans to Latinos, 334 of them over the rate spread.

The government’s numbers reflect that ACC Capital Holdings’ largest lender to people of color in Connecticut was left uncovered and unreformed by the settlement.

Meanwhile, more on the Argent layoffs: ACC refused to confirm to journalists the locations of the cuts, but it’s known that many are in White Plains, where ACC had been growing like gangbusters (or a boiler room operation). ACC bought in the driver Danica Patrick, to quasi-bless (or cover for) the operation. And now the cut-backs. And what’s Danica Patrick’s view? We’ll see.

Inner City Press / Fair Finance Watch (ICP) on February 9 filed a challenge to the application by BB&T to acquire Main Street Banks, Inc. and Main Street Bank, a proposal announced on December 15, 2005. Mortgage (HMDA) data reported for 2004 show that BB&T disproportionately excludes and denies African Americans and Latinos and, when loans are made, disproportionately charge African Americans higher prices, primarily through BB&T’s mostly-subprime subsidiary Lendmark Financial Services, which in 2004 made over 94% of its loans to African Americans over the federally defined rate spread (of 3% over comparable Treasury securities on first liens, 5% on subordinate liens). ICP also documents BB&T enabling fringe financial institutions such as pawn shops (sample listed below).

BB&T’s lead bank Branch Banking & Trust Co. a disparate pattern of mortgage lending, for example in its headquarters MSA of Winston-Salem NC in 2004 having denied the conventional home purchase applications of African Americans 4.18 times more frequently than whites, and denying Latinos 3.2 times more frequently than whites. For home improvement loans, Branch Banking & Trust denied the applications of African Americans 4.31 times more frequently than whites. For refinance loans, Branch Banking & Trust denied the applications of African Americans 2.59 times more frequently than whites, and denied Latinos 2.76 times more frequently than whites.

These disparities at BB&T are pervasive throughout its franchise. In the Durham NC MSA in 2004, 2004 Branch Banking & Trust denied the conventional home purchase applications of African Americans 2.17 times more frequently than whites, and denied Latinos fully six times more frequently than whites.

In the Raleigh-Cary NC MSA in 2004, 2004 Branch Banking & Trust denied the conventional home purchase applications of African Americans 2.34 times more frequently than whites, and denied Latinos 2.86 times more frequently than whites.

In the Washington DC MSA in 2004, 2004 Branch Banking & Trust denied the conventional home purchase applications of African Americans 2.49 times more frequently than whites, and denied Latinos 2.30 times more frequently than whites.

Most pertinently for this application, BB&T’s disparities extend into the Atlanta MSA, where in 2004 Branch Banking & Trust denied the conventional home purchase applications of African Americans 3.33 times more frequently than whites, and denied Latinos 2.36 times more frequently than whites. For home improvement loans, Branch Banking & Trust denied the applications of Latinos 4.49 times more frequently than whites. For refinance loans, Branch Banking & Trust denied the applications of African Americans 2.35 times more frequently than whites, and denied Latinos 2.53 times more frequently than whites.

Branch Banking & Trust also exhibits disparities in the higher cost rate spread loans that it makes. In this Atlanta MSA in 2004, for conventional home purchase loans, Branch Banking & Trust confined African Americans 4.51 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), while confining Latinos 4.01 times more frequently than whites to such higher-cost rate spread loans.

For home improvement loans, Branch Banking & Trust confined African Americans 6.30 times more frequently than whites to higher cost rate spread loans.

For refinance loans, Branch Banking & Trust confined African Americans 3.74 times more frequently than whites to higher cost rate spread loans, while confining Latinos fully 6.79 times more frequently than whites to such higher cost loans.

ICP has cumulated BB&T’s six HMDA reporters and has submitted to the Federal Reserve an Excel table showing that this cumulation, referred to as “BB&T,” cannot use income as a defense. In fact, BB&T’s disparity between upper income African Americans and whites is worse that its overall disparity. Lendmark is described by BB&T as offering “subprime consumer and mortgage loans through a network of branches and account executives in Georgia, Tennessee, Virginia, Maryland, Florida, and North Carolina. Additionally, the company provides alternative mortgage and consumer loan products to clients unable to meet BB&T’s normal consumer or mortgage loan guidelines.” See, www.bbandt.com/about/companyinformation/subsidiaries.asp

BB&T supports higher cost fringe financial services, such as pawn shops. See attached sample Uniform Commercial Code filing, documenting for the record BB&T’s relationships with, for example,

--Cumberland Pawn & Loan of Fayetteville, North Carolina (relationship running through at least 2007;

--Jerry’s Pawn Shop of Spring Lake, North Carolina (relationship running through at least 2008); and

--Greer Gun & Pawn Shop, Inc. of Greer, South Carolina (relationship secured by all “inventory,” that is, the contents of the pawn shop.

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 BB&T or Main Street Bank 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 BB&T or Main Street Bank typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to BB&T or Main Street Bank entering into these business relationships, including... (c ) any monitoring or other ongoing procedures BB&T or Main Street Bank 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."

ICP’s comments state: 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”).

Given this record, ICP is requesting public evidentiary hearings, and that, on the current record, BB&T’s applications be denied. And see, “Group challenges BB&T's proposed takeover of Main Street banks,” by Paul Nowell, Associated Press, February 9, 2006.

February 6, 2006 --Predatory Super Bowl: Ameriquest and the Big Banks in Detroit

The national media’s Super Bowl week in Detroit has given rise to contradictory stories praising and critiquing the city, calling it rebuilt or still in decline. "Some of the people kind of had those written before they got here," said Mayor Kwame Kilpatrick (fresh from cutting back the city’s fire department). Detroit’s population has declined from two million in 1954 to under a million today. It’s been noted that 1000 residents still leave every month, but now there’s a ubiquitous Hard Rock Café. Wanting to look at the lending that’s under this surface, Inner City Press / Fair Finance Watch has analyzed mortgage lending patterns in the Detroit Metropolitan Statistical Area in the most recent year for which data is available, 2004. Comparing the rate at which African Americans and whites were confined to higher cost mortgages over the federally-defined rate spread (of 3% over comparable Treasury securities on first lien loans, 5% on subordinate liens), some of the biggest names in finance, including Super Bowl advertisers, are among the most disparate.

At Bank of America, N.A., American Americans were over 26 times more likely to be confined to higher cost loans than whites;

At Citigroup's mortgage company, CitiMortgage Inc., American Americans were over 8.6 times more likely to be confined to higher cost loans than whites;

At Wells Fargo Bank, N.A., American Americans were over 7.2 times more likely to be confined to higher cost loans than whites, and Hispanics were over 2.8 times more likely to be confined to higher cost loans than non-Hispanic whites;

At Chase Manhattan Mortgage Corp., American Americans were over 6.7 times more likely to be confined to higher cost loans than whites, and Hispanics were over 2.9 times more likely to be confined to higher cost loans than non-Hispanic whites;

At Wachovia Mortgage, American Americans were over 3.1 times more likely to be confined to higher cost loans than whites.

Several major regional banks were also among the most disparate:

At ABN Amro Mortgage Group, American Americans were over 13.2 times more likely to be confined to higher cost loans than whites, and Hispanics were over 7.8 times more likely to be confined to higher cost loans than non-Hispanic whites;

At Fifth Third Mortgage, American Americans were over 10.3 times more likely to be confined to higher cost loans than whites, and Hispanics were over 6.3 times more likely to be confined to higher cost loans than non-Hispanic whites;

At National City Mortgage, American Americans were over 7.9 times more likely to be confined to higher cost loans than whites, and Hispanics were over 4.2 times more likely to be confined to higher cost loans than non-Hispanic whites; and

At The Huntington National Bank, American Americans were over 4.1 times more likely to be confined to higher cost loans than whites, and Hispanics were a whopping 29 times more likely to be confined to higher cost loans than non-Hispanic whites.

Significantly, in light of the $325 million predatory lending settlement announced Jan. 23, major Super Bowl advertiser Ameriquest Mortgage in 2004 made 381 loans to African Americans in the Detroit MSA, 315 of them over the rate spread. Meanwhile, Ameriquest’s affiliate Argent Mortgage, which the state attorneys general left out of the settlement and reforms, made 2673 loans to African Americans in the Detroit MSA in 2004, 2142 of them over the rate spread. So the settlement covers less than 12.5% of ACC Capital Holdings’ loans to African Americans, and an even smaller percentage of ACC’s higher cost loans over the rate spread.

A rare lender with an even higher percentage of rate spread loans in Detroit in 2004 was BBVA’s “Homeowners Loan Corporation,” which in November 2005, after petitioning by Fair Finance Watch, settled predatory lending charges with the Office of the Comptroller of the Currency. Last week, insiders at HLC’s Atlanta headquarters told Inner City Press that Homeowners Loan Corporation has just engaged in wholesale layoffs. Not unlike the Big Three auto firms in Detroit. We’re rooting for Detroit – but the predatory lenders must be rooted out…

January 30, 2006

Inner City Press / Fair Finance Watch has just filed a challenge to the application by National City Corporation to acquire Forbes First National Corporation’s Pioneer Bank & Trust Company and its eight branches, a proposal announced on December 22, 2005. The 2004 HMDA data show that National City disproportionately excludes and denies African Americans and Latinos and, when loans are made, disproportionately charges African Americans higher prices. ICP also documents National City enabling fringe financial institutions such as pawn shops.

National City Corporation’s cumulated 2004 Home Mortgage Disclosure Act data reveals that nationwide, for home purchase loans, NCC confined African Americans 2.10 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). Specifically, NCC confined to higher cost rate spread loans 28.66% of African American borrowers, versus only 13.64% of white borrowers.

In the target market of this proposal, the St. Louis MSA, National City confined African Americans 2.66 times more frequently than whites to higher cost loans over the rate spread. Specifically, NCC confined to higher cost rate spread loans 47.57% of African American borrowers, versus only 18.64% of white borrowers. Note that these are disparities after NCC acquired Allegiant in this market.

In its headquarters MSA, Cleveland, National City Corporation in 2004 confined African Americans 2.08 times more frequently than whites to higher cost loans over the rate spread. Specifically, NCC confined to higher cost rate spread loans 26.42% of African American borrowers, versus only 12.68% of white borrowers. Additionally, NCC denied the applications of African Americans 2.85 times more frequently than those of whites. (NCC’s lead bank here, National City Bank, Ohio, had an even worse record in the Cleveland MSA in 2004, having denied the conventional home purchase loan applications of African Americans 2.90 times more frequently whites, and denying Latinos a whopping 4.87 times more frequently than whites).

In the New Orleans MSA in 2004, National City Bank of Indiana confined African Americans 3.7 times more frequently than whites to higher cost loans over the rate spread, and confined Latinos 1.7 times more frequently than whites to higher cost loans over the rate spread.

Statewide in Louisiana in 2004, National City Bank of Indiana confined African Americans 3.72 times more frequently than whites to higher cost loans over the rate spread, and confined Latinos 2.48 times more frequently than whites to higher cost loans over the rate spread.

In the state of Mississippi in 2004, National City Bank of Indiana confined African Americans NINE times more frequently than whites to higher cost loans over the rate spread.

Beyond disparate high-cost lending, now Gulf Coast area residents using settlements to pay off mortgages are being hit with pre-payment penalties, including reportedly by National City. St. Bernard Parish resident Melissa Sass told New Orleans CityBusiness that National City “told me that I could use the money from my insurance to pay on the mortgage but there will be a penalty of 30 percent of the interest they will lose out on. They told me that the only way I can pay off my mortgage in full without the penalty is to wait for that 10-year period."
Given the change to explain, National City’s spokesman said: "We have relatively few loans that have prepayment penalties in the first place. For hurricane victims, we are pretty much waiving prepayment penalties across the board." Note the “pretty much” qualifier; see (and inquire into) “Some New Orleans-area borrowers discover early pay penalty,” New Orleans CityBusiness, November 21, 2005.

In an April 16, 2004 response to ICP comments, 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).” Beyond the payday lenders it enables – note that its defenses must now be questioned, given recent developments including in North Carolina, with the deeming of National City-enabled business to be illegal – National City also enables such fringe financiers as pawnshops. Attached hereto are sample Uniform Commercial Code filings. Here are some more:

Debtors: E-Z MONEY PAWN INCORPORATED, Secured Parties: NATIONAL
CITY BANK OF KENTUCKY, INITIAL FILING, 3/1/2005, 2005207217995, KYUCC
Debtors: EVANS COIN & PAWNSHOP, INC, Secured Parties: NATIONAL
CITY BANK; RIVER VALLEY STATE BANK (ASSIGNEE), ASSIGNMENT, 3/4/2005, 2:31PM, 2005040833-5, D634321, MIUCC
Debtors: EXPRESS CASH ADVANCE, INC., Secured Parties: NATIONAL
CITY BANK OF PENNSYLVANIA, INITIAL FILING, 12/12/2005, 09:00AM,
OH00096589292, OHUCC
Debtors: INDY CASH CASH ADVANCE, INC., Secured Parties: NATIONAL
CITY BANK OF INDIANA, SMALL BUSINESS BANKING 700E, CONTINUATION, 10/6/2004, 0400009331991, 2310759, 3/10/2000, INUCC

Debtors: A-1 JEWELRY & PAWN, LLC, Secured Parties: NATIONAL CITY
BANK OF KENTUCKY, INITIAL FILING, 3/10/2004, 2004199324266, KYUCC
Debtors: ACE EAST JEWELRY AND PAWN BROKER INC; ACE EAST JEWELRY AND PAWNBROKER, INC., Secured Parties: NATIONAL CITY BANK; NATIONAL CITY BANK NORTHEAST, AMENDMENT, 5/31/2005, 12:15PM, 20051510384, AM28709, 11/13/1995, OHUCC
Debtors: BUCKEYE CHECK CASHING OF ARIZONA INC; BUCKEYE CHECK
CASHING OF ARIZONA INC, Secured Parties: NATIONAL CITY BANK, SUCCESSOR BY MERGER TO THE PROVIDENT BANK; THE PROVIDENT BANK, CONTINUATION, 9/9/2005, 3:14PM, 20052520414, AP320952, 1/24/2001, OHUCC
Debtors: CLELAND'S GUN SHOP, INC., Secured Parties: NATIONAL
CITY BANK, INITIAL FILING, 5/31/2005, 11:34AM, OH00089890040, OHUCC
Debtors: COUTURE ENTERPRISES, INC.; JAY'S PAWN SHOP, Secured
Parties: NATIONAL CITY COMMERCIAL CAPITAL CORPORATION (ASSIGNEE), ASSIGNMENT, 3/7/2005, 2:05PM, 05000235882, 04000202629, 9/10/2004, NDUCC

Debtors: GOLDFISH PAWN COMPANY, INC., Secured Parties: NATIONAL
CITY BANK OF INDIANA, SMALL BUSINESS BANKING 700E, CONTINUATION, 7/28/2004, 0400007026344, 2302591, 1/27/2000, INUCC

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that National City or Pioneer 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 National City or Pioneer typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to National City or Pioneer entering into these business relationships, including... (c ) any monitoring or other ongoing procedures National City or Pioneer 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."

Given this record, ICP is requesting public evidentiary hearings, and that, on the current record, National City’s applications be denied. Note that these are also safety and soundness issues. See, e.g., New York Times of August 28, 2005, “Good News, Bad News: Your Loan's Approved” --

“First Franklin, a unit of the National City Corporation in Cleveland [is] selling interest-only mortgages that it promotes as a way to ‘reduce monthly payments, reduce debt-to-income ratios and boost loan amounts.' Today, such loans are more than half of its new mortgages, up from 27 percent two years ago. First Franklin offers 100 percent financing that its Web site suggests is 'ideal for first-time and low-cash buyers,' and even 103 percent financing for buyers 'to shrink their out-of-pocket expenses or to maximize purchase power.' John Gellhausen, vice president for consumer finance at National City, who is in charge of the First Franklin unit, said customers using interest-only loans were not necessarily financially troubled. They just have better things to do with their money, he said, than make a down payment on a home or pay the principal on the mortgage. Maybe so. But many First Franklin customers also use interest-only mortgages to push their borrowing and buying power as far as it will go. On average, they borrow 94 percent of the value of their homes, mostly through a second fixed-rate loan for the down payment. Even though they are paying only interest, they devote a whopping 45 percent, on average, of their income to debt service.”

Given this record, ICP is requesting public evidentiary hearings, and that, on the current record, National City’s applications be denied.

General Electric / OTS update: at 5:25 p.m. on Friday, January 27, the OTS faxed to ICP Fair Finance Watch a Freedom of Information Act determination letter about GE’s Belk application. While surely the released documents will arrive in the mail next week, this does not explain how it’s legitimate for the OTS to approve applications before providing any copies to the public. And still no work from the Director or ombudsman, either…

M&I has responded that “based on a review of the NAICS codes in the databases of M&I, Gold Banc, and their respective subsidiaries, Gold Banc identified two (2) loan customers classified as alternative financial service providers, and M&I identified ten (10) loan customers classified as alternative financial service providers.” Nothing is said of the size of the loans / relationships. But M&I would lay off 190 people at Gold Bank…

From the mailbag

Subject: predatory lending practices
Date: 1/24/2006 6:56:43 PM Eastern Standard Time
From: [Name withheld]
To: Inner City Press / Fair Finance Watch
Is the definition of predatory loans and the emerging case law therein limited to home loans? I believe that I was misled into a predatory car loan. I have already paid over $10, 000 for a used 2000 Kia Sophia and I still owe $4300. My car is financed by CNAC which is supposed to be a separated and financial leg of JDByrider- however, I have learned that there is no separate entity called CNAC it is one and the same with JDByrider. Car loan payments are made every other week in the amount of $169.97. At the time I took the loan, I needed a car for transportation to work. After spending over five hours at their location attempting to finalize the "deal", I am sure that I was not thinking clearly when they quoted $169.97 as a bi monthly amount, I am sure that I heard it as the monthly payment...this company and franchise have been sued in some states. although they seem to still be under the radar screen here in New York.

And elsewhere, too. Developing... For or with more information, contact us.

Update of January 23, 2006, 8:30 a.m. EST: Both the Los Angeles Times and Washington Post have reported that now comes the Ameriquest settlement, the LA Times reporting that it covers Ameriquest Mortgage, Town & Country and the ex-Bedford, AMC (ACC's smallest unit) – that is, that it does not cover Argent, which is ACC’s largest subprime lending unit. Specifiically, from the 2004 Home Mortgage Disclosure Act data:

2004 loans by Ameriquest Mortgage = 185,833

2004 loans by Argent = 215,403

2004 loans by Town & Country Credit Corp. = 10,462

We will continue to update this story on Inner City Press' months-ago launched Ameriquest Watch - click here to view.

January 23, 2006

The Office of Thrift Supervision has hit a new low. On December 17, Inner City Press / Fair Finance Watch filed two letters with the OTS, on applications by General Electric to acquire the credit card accounts and deposits of Belk’s department stores, some of which were held by HSBC Bank Nevada, NA (f/k/a Household International, notorious settler of predatory lending charges). One letter commented on the application, including with detailed consumer complaints submitted to Inner City Press’ GE Watch. The second letter asked for all related GE applications – Belk’s, HSBC and others – under the Freedom of Information Act.

On January 9, Inner City Press got a call from the OTS’ Northeast Region, asking for confirmation that ICP was both commenting on and requesting copies of the applications. Confirmation was given.

On January 17, still not having received any of the requested records, Inner City Press emailed an OTS staffer, asking about the GE-HSBC applications. ICP was told that the GE-HSBC applications had been “very recently” amended, to no longer be Bank Merger Act applications. The following day, ICP was faxed copies of two terse approval letters by the OTS’ Northeast Region: a January 12 approval of GE-Belk, and a January 17 approval of the GE-HSBC applications. Copies were never given to ICP, in response to its month-old FOIA request. Worse, the OTS allowed the amended of the GE-HSBC applications just prior to approving them, so that no one in the public could even conceivably have seen the amended applications and commented on them. Like we said, a new low at the OTS.

As while this all went on, here’s another sample complaint against GE received by ICP:

Subject: Re: GE Money Bank
Date: 1/18/2006 8:40:52 PM Eastern Standard Time
From: [Name withheld]
To: GE-Watch [at] innercitypress.org

If the Bank could nail me, they could get most anyone. I had a deferred payment loan from GE Bank. I had used it to buy a TV. The deadline for the payment was early January, 2006. Just before Christmas, 2005, a bill arrived, demanding the usual $94 payment. I paid it without noticing that in tiny print, well down the bill, was a message saying that the entire balance was due somewhere around the 7th of January. I inadvertently paid the minimum again and after the promotional purchase due date, I received a new bill saying I now owed almost $1,000 in deferred interest. The customer service person, and her boss told me that it was too late to change the result, even if I agreed to pay the remaining principle in full. I wonder how many people miss the deadline and are saddled with big interest payments.

This has now been raised to the OTS Director and the agency’s ombudsman; we’ll see. Also from the mailbag:

Subject: Wells Fargo Financial - Unfair and miss leading Business Practices
Date: 1/18/2006 12:20:37 PM Eastern Standard Time
From: [Name withheld]
To: WellsWatch [at] innercitypress.org

I like to share this with your readers so to warn them of this injustice. I took a loan for $7,500 in July of 2002 for home improvement from Wells Fargo Financial. The loan was broken down to 60 installments of $182.38 totaling to 1,0942.80 from which $3,442.80 was the interests for 60 months. I paid off the loan after I got my first statement in July of 2002. As of December of 2005, I have been receiving statements for the amount of $182.38. I am told that although I paid off $7,500 I paid it towards my payments ahead of time and not paid off the loan. So after 3 years, I still owe Wells Fargo the interest on the original $7,500, which amounts to $3,442.80. I spoke to the Customer service on the phone and he kept saying the same thing and was unwilling to get that I cannot owe any finance charges if I paid of the original loan. I am surprised how a large financial institution will not understand basic mathematics and is playing such tricks on their customers. After having a saving account with this organization for over 20 years, I plan to close my accounts and move on with a more reliable and honest organization with some integrity.

From the department of good questions in a Kafkaesque world:

Subject: MERS Inc Fees
Date: 1/18/2006 1:50:21 PM Eastern Standard Time
From: [Name withheld]
To: MERS-Watch [at] innercitypress.org

I have some issues about MERS Ind., and the fees that they charge to borrowers. My husband and I closed on a mortgage refinance a couple of months ago, and found that we were charged a MERS fee of $3.95 at our closing. We asked the closing agent why we were being charged this fee, and how it would benefit us with our loan. The reason for our question is this...We paid a Recording Fee of $100.00. How does MERS INC., benefit the borrower other than charging the borrower a registration fee? We brought this question up to our closing agent, and our closing agent basically told us that ALL loans will be registered under MERS, and that if we wanted to fight her over a $3.95 fee, she wouldn't close our loan. We did not fight her, and we closed on our refinance. Further research on this subject... MERS Inc., has registered over 35 million loans at $3.95 a pop, this fee charged to the borrower. Correct me if I am wrong here. Registered MERS loans do not have to go through any further recording at the county recorder's office, i.e., chain of assignments when a mortgage servicer changes hands. Wouldn't the county recorder's office be losing money, (recording chains of assignments) due to MERS Inc., registered loans? Borrowers get charged to register loans under MERS INC., and still get charged for recording fees.

And who owns the loans is concealed... Until next time, for or with more information, contact us.

January 17, 2006

This week we turn to the mailbag: HSBC foreclosure threats and JP Morgan Chase on the Gulf Coast. But first some predatory lobbying news from Utah: disclosure forms filed January 10 reveal Ameriquest giving Rolling Stones concert tickets valued (with a dinner) at $200 to nine legislators -- and Utah Attorney General Mark Shurtleff. Since Ameriquest is on record as negotiating a predatory lending settlement with the state attorneys general, might this not be a conflict? And now from the Gulf Coast:

Subject: Chase Home Finance
Date: 1/11/2006 3:12:40 PM Eastern Standard Time
From: [Name withheld]
To: JPMChase-Watch [at] innercitypress.org

I wrote in on Dec. 5 detailing some of my "Chase Story" (excerpted in the Dec. 12 Inner City Press Gulf Coast Report). Just a quick update. Chase has begun the foreclosure procedures on my home. They are threatening to take what is no longer there.
I have received letters stating that my home has been inspected and appears to be unoccupied; that they will secure the property, change the locks and winterize at my expense if I do not contact them immediately.
First: Since Katrina, I have spoken with a Chase representative at least once a week.
Second: From August 30, I was repeatedly assured my loan was deferred and in good standing, that payments would resume in December. (They neglected to inform me of their change of policy on November 1 despite several phone calls from November 1 to December 1.)
Third: I have, again, repeatedly, informed Chase of the structural status of the property. Each time I speak with them I have to tell them that NO the home is not habitable.
Fourth: Whomever inspected the property should not be on the payroll. There are no walls! There are no doors! There was no roof until a week ago! What exactly are they going to winterize? 2x4s??
I have managed to hold the foreclosure process off for another month by paying, in addition to my monthly mortgage, a large sum of money.
Friends in the area tell me that mine is not the only loan Chase has taken this approach with. They have us. The options are, follow the original payment plan agreed to shortly after the storm and have your credit ruined because they will report you for non payment and/or foreclose on the loan; or do it their way and put out funds that could and should be directed toward rebuilding the very properties they threaten to take. The people in this area have lost everything. Everything. If your good credit is all you have left, holding on to it is going to be paramount to your future. How is it that Chase has the power to take what is left? They did not inform of their change in policy, will answer to no one about this, and in the end will profit from the loss of those most affected by the largest natural disaster in US history.

Developing… And here’s the so-called world’s local bank, HSBC:

Subject: Foreclosure By HSBC
Date: 1/12/2006 11:48:54 AM Eastern Standard Time
From: [Name withheld]
To: HSBC-watch [at] innercitypress.org

I am a senior citizen and recently became 4 payments behind on my house payment. I called HSBC on 12-5-05 and was told that they would defer payments until February 2006. All during the time previous and since throughout December they called me every day and harassed me regarding these payments. Sometimes being very nasty and rude. I finally unhooked my phone, and just used my cell. I recently called them 3 days ago and told them that I would be able to make the February pmt and make up the back payments within three months. They told me it was too late and that I would have to send the entire amount due plus past due fees immediately! They refuse to let me speak to a senior loan officer, and after 15 minutes of asking very politely I was transferred to a voice mail that has never returned my call.

For those who follow these things, HSBC has wrangled a series of tax breaks and benefits to move the headquarters of its subprime ex-Household International units fifteen miles north from Prospect Heights, to Mettawa, Illinois…

January 9, 2006

This week: a new Inner City Press report, some updates (Huntington and Compass), Bear Stearns’ EMC for-the-record and from the mailbag (Ameriquest).

From Appalachia to Wall Street: Behind the Mining Tragedy, UBS and Lehman Brothers

Financial records, from Delaware and Washington DC, show the financing behind International Coal Group, the owner of the Sago Mine where twelve miners have been confirmed dead. Wilbur Ross’ main coal financier, both as a secured lender and then joint book runner on ICG’s public offering in December 2005, was the Swiss-based bank UBS AG. Beginning in 2004, when Ross bought the bankrupt Anker Coal Group, UBS filed security interests in “all assets” of Ashland, Kentucky-based International Coal Group. The lending agreement was twice amended. Then, less than a month before the twelve miners’ death, UBS among with Lehman Brothers managed the initial public offering by which ICG went public, assisted also by General Electric Capital Corporation.

While ICG’s stock price fell more than $4 on January 4, and numerous stock analysts are predicting further scrutiny and turmoil, other analysts are beginning to question, albeit more quietly, what sort of due diligence UBS, and later Lehman Brothers, conducted of ICG and its Sago mine. As the now-promised investigations into the background of the mining tragedy begin, the disclosures made in the Securities and Exchange Commission filings that accompanied ICG’s sale of stock last month are likely to be closely considered, among with the environmental and risk review UBS performed before taking the security interests in ICG it took in 2004. UBS also served as advisor to ICG in connection with its acquisition of Anker Coal Group and the Sago Mine.

In terms of risk, ICG’s November 9,2005 filing with the SEC (Registration No. 333-124393), listing UBS and Lehman Brothers as underwriters, disclosed that “The level of our production is subject to operating conditions and events beyond our control that could disrupt operations and affect production [including] unexpected mine safety accidents, including fires and explosions from methane.”

A question that will be reviewed is whether this explosion was “beyond [the companies’] control.” The Sago Mine was cited for 208 federal safety violations last year, and before UBS and Lehman Brothers signed off on ICG’s initial public offering.

The corporate website of UBS states that “we believe that being transparent about our environmental initiatives is the best way to give our shareholders and other stakeholders a full and complete picture of our efforts in that area… The Investment Bank intends to complete its environmental risk training program in the Americas and Europe in 2005 and then roll out a similar program to the Asia Pacific region.”

UBS’ “Head of Ecology Americas” Anna-Marie Rothkopf signed up for the United Nations Environment Program’s conference in New York in October 2005, at which socially responsible bank practices, particularly with respect to extractive industries like coal mining, were discussed. UBS has in the past resisted becoming a signatory to the environmental “Equator Principles,” stating that it is not involved in project finance.

A November 14, 2005 SEC filing refers to the “Restated Credit Agreement dated as of November 5, 2004 among ICG, LLC, as Borrower, International Coal Group Inc. and UBS Securities LLC, as Arranger, Bookmanager and Syndication Agent, General Electric Capital Corporation, as Documentation Agent, UBS AG, Stamford Branch, as Issuing Bank, Administrative Agent and Collateral Agent, and UBS Loan Finance, LLC, as Swingline Lender.”

These various roles played by UBS, and Lehman Brothers and GE, will be subject to scrutiny as the now-promised investigations into the West Virginia mining disaster proceed.

As Ameriquest tries to finalize a too-narrow settlement with state attorneys general, a sample from this week’s mailbag:

Subject: Ameriquest refinancing
Sent: Thu, 05 Jan 2006 14:54:30 -0500
From: [Name withheld]
To: Ameriquest-Watch [at] innercitypress.org

I refinanced my home in 2004 approximately October with Ameriquest Mortgage through their local office. At the time my job hours had been cut in half and I needed to refi to consolidate debts and needed cash out to hold me until my situation changed.
My loan officer was Kathleen Lewis and she approved me over the phone, within 10 minutes actually, did an on-line appraisal on my property and said she could close in 10 days. I was thrilled. The only thing about the loan that was not perfect was that I was told I would be on a fixed interest loan for two years and then it would become variable. Kathleen said in two years come back to them and they would put me on a fixed 30 yr loan. In the meantime, I was to clear an erroneous item on my credit report in the amount of $3500. This was my mother's nursing home bill by Ensign. After a year of trying to deal with them I decided to forgo that for the moment and get my home refi-ed while the interest rates were even lower.
While looking for lenders I was told by one of the loan officers when she heard my loan was with Ameriquest that they had class action lawsuits going on. I checked to see the reason for the suits and found that everything that happened to these other Ameriquest customers happened to me.
I was told two year fixed changing to variable for the balance of the mortgage, that when I came back to them in two years they would refi AT NO ADDITIONAL CHARGE FOR CLOSING COSTS and get me on a 30 yr fixed. I was told my existing loan would be at 5.6% and when I went to sign papers it was 5.9%. I was told there was no pre-payoff penalty and there was to the tune of $4120. I found out later that the loan was for 3 yr fixed not two years, my closing costs were astronomical, around $11,000 or more. For instance the notary charge was $250.00.
To top it off, I called them about redoing the loan and they flat out said they don't do my type of loan anymore (manufactured home on my property) and were very rude and at that time they told me there was a penalty for early payoff. I couldn't believe it. I do feel they lied and pushed me through the loan process…

Some other updates: the Federal Reserve has asked Compass about its relations with subprime lenders, payday lenders and other “alternative financial services providers,” based on ICP’s comment. Compass’ response includes this enigma:

“Mortgage Financial Services, a division of Compass Bank, has a referral relationship with an unaffiliated mortgage company for mortgage loan applicants who do not qualify for Compass’ standard mortgage products. Compass has a similar referral relationship with another unaffiliated mortgage company for Home Equity Line of Credit referrals.”

But neither of these subprime partners is named in Compass’ response. Meanwhile, on January 3 Compass Bancshares said it will restate annual earnings for 2002 through 2004, as well as results for the first three quarters of 2005. The holding company for Compass Bank said some of its interest rate swap transactions cannot qualify for hedge accounting due to lack of documentation, and will need to be accounted for in a “long haul'' method. Given Compass’ pending (and challenged) application pending before the Fed, will the comment period be re-opened? We’ll see.

The Fed has asked Huntington how its “fair lending analysis is able to detect possible redlining.” Huntington answered vaguely that it compares performance to “deposit market share.” But redlining is not only related to low loan-to-deposit ratios…

Finally for this week, from the prospectus supplement of Bear Stearns Asset Backed Securities Trust, Series 2005-4, LEGAL AND REGULATORY MATTERS:

“EMC Mortgage Corporation, a wholly-owned subsidiary of The Bear Stearns Companies Inc. and an affiliate of the Depositor and the underwriter, has received a civil investigative demand (CID), from the Federal Trade Commission (FTC), seeking documents and data relating to EMC Mortgage Corporation's business and servicing practices. The CID was issued pursuant to a December 8, 2005 resolution of the FTC authorizing non-public investigations of various unnamed subprime lenders, loan servicers and loan brokers to determine whether there have been violations of certain consumer protections laws. EMC Mortgage Corporation is cooperating with the FTC's inquiry.”

We’ll see…

January 3, 2006

Inner City Press & Fair Finance Watch have filed comments on the convoluted Sovereign – Santander – Independence proposal, summarized below. But first this fair lending news:

While various news services reported Bear Stearns SEC filings in the week before New Years disclosing that its subprime subsidiary EMC has received a subpoena from the Federal Trade Commission, few followed up to describe what EMC does, or what other companies may have received subpoenas. Citigroup was asked; CitiFinancial’s spokesman Rob Julavitz issued a “no comment.” As to EMC, this is not even the first time it’s been in trouble in 2005. Earlier in the year, EMC Mortgage Corp. was sanctioned $10,000 for making a false allegation in a motion for stay relief. In re Brown, No. 01 B 37744 (Bankr. N.D. Ill. 01/24/05). In imposing the fine, Judge Jack B. Schmetterer wrote that he hopes the penalty will "deter EMC and other secured creditors from careless record-keeping and giving of false information to their counsel when seeking modification of stay so they can foreclose on homes or seize family autos or other property related to family life…. EMC is a major financial company, and is clearly able to pay a $10,000 sanction. Therefore, should it disobey the court's order and fail to pay within the time fixed, jurisdiction is being retained to add a sanction for such disobedience to cover further legal work necessary to collect the $10,000," the court concluded. EMC is a major subprime servicer, for example on the $583.64 million Bear Stearns SACO I Trust 2005-10 pool.

* * *

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 for $3.6 billion Independence Community Bank Corp. based in New York. The 2004 HMDA data show that in the New York City Metropolitan Statistical Area, 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).

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, see, e.g., <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 and must now ask questions and release the answers thereto, 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”).

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.” Also for the record, ICP’s comments note the Santander money laundering issues in the U.S. Senate’s July 2004 report, www.senate.gov/~govt-aff/_files/071504miniorityreport_moneylaundering.pdf 55-56 -- for more, see ICP’s Bank Beat report, which will continue following this story.

December 26, 2005

This week, a secret subprimer: M&I Bank FSB. Inner City Press / Fair Finance Watch has filed comments on the application by M&I Marshall & Ilsley to acquire Gold Bank, focusing on M&I’s subprime unit. M&I’s subsidiaries, particularly but not only M&I Bank FSB, are disparate mortgage lenders. Set forth below are some of the disparities of M&I’s most-prime lenders in Milwaukee, its headquarters MSA. M&I Bank FSB is a largely subprime lender, which reports MSA-specific data in very few of the MSAs in which it does business, even those included in its CRA assessment area / superficial CRA plan. ICP has cumulated the 2004 data, on pricing, of M&I Bank FSB with M&I Mortgage and M&I Marshall & Ilsley Bank, and finds that this cumulation, referred to hereinbelow as “M&I,” confined African Americans 2.47 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). M&I’s disparity was even higher between upper income African Americans and upper income whites: 2.98.

In the Milwaukee MSA in 2004, M&I Marshall & Ilsley Bank denied the conventional home purchase loans of African Americans 4.81 times more frequently than whites. The disparity at M&I Mortgage was scarcely better, at 3.36. For refinance loans, M&I Mortgage denied the applications of Latinos 3.19 times more frequently than whites, and denied African Americans 3.54 times more frequently than whites. The disparities at M&I Marshall & Ilsley Bank were 2.73 for Latinos and 2.33 for African Americans.

In 2004 in the Milwaukee MSA – one of only four MSAs in which M&I Bank FSB reported race/ethnicity-specific data – M&I Bank FSB for refinance loans, first lien, confined 75% of African Americans to higher cost, rate spread loans, versus only 58% of whites. As stated above (and in the attached Excel table), nationwide in 2004 the cumulated M&I confined African Americans 2.47 times more frequently than whites to higher cost loans over the federally defined rate spread.

Note that Gold Bank in 2004 in the Kansas City MSA for conventional home purchase loans denied the applications of African Americans an amazing 15.69 times more frequently than whites, and denied the applications of Latinos 4.9 times more frequently than whites. ICP has also submitted a sample Uniform Commercial Code filing showing Gold Bank enabling pawnshop / fringe finance…

In other subprime news, three days before Christmas, the Office of Thrift Supervision finally granted access to information about lawsuits against tax-refund anticipation lender H&R Block that Inner City Press had requested under the Freedom of Information Act in May 2005. After seven months of secrecy, all that the OTS has released to ICP and the other groups together challenging H&R Block’s application to start a savings bank are the names of cases pending against H&R Block. The company’s analysis of each case is whited-out. The cases, the states of New York, Ohio, Illinois, Maryland, Pennsylvania, Alabama, West Virginia, Tennessee and Texas, include:

Lynn Becker, et al. v. H&R Block, et al., Case No. CV-2004-03-1680 in the Court of Common Pleas, Summit County, Ohio, filed 4/2004;

Lynne A. Carnegie, et al. v. Household International, Inc., H&R Block, Inc., et al. (formerly Joel E. Zawikoski, et al. v. Beneficial National Bank, H&R Block, Inc. Block Financial Corporation, et al.), Case No. 98 C 2178, United States District Court of the Northern District of Illinois, Eastern Division (Carnegie II), filed 4/8/98;

Joyce A. Green, et al. v. H&R Block, Inc., Block Financial Corporation, et al., Case No. 97195023, Circuit Court for Baltimore City, Maryland, filed 7/14/97;

Sandra J. Bastile, et al. v. H&R Block, Inc. et al., April Term 1993 Civil Action no. 3246, Court of Common Pleas, First Judicial District of Pennsylvania, Philadelphia County, filed 4/23/93;

Levon and Gerald Mitchell, et al. v. H&R Block and Ruth R. Wren, Case No. CV-95-2067, in the Circuit Court of Mobile County, Alabama;

Deadra D. Cummins, et al. v. H&R Block, Inc., et al., Coase No. 03-C-134 in the Circuit Court of Kanawha County, West Virginia, filed 1/22/03;

Tamkea Johnson, et al. v. H&R Block, Inc., et al., Case No. 04-2417-II, in the Chancery Court for the State of Tennessee, filed 9/2004;

Lorie J. Marshall, et al. v. H&R Block Tax Services, Inc., et al, Civil Action 2002L000004, in the Circuit Court of Madison County, Illinois, filed 1/18/02;

Ronnie and Nancy Haese, et al., v. H&R Block Inc, et al, Case No. CV96-4213, District Court of Kleberg County, Texas, filed July 20, 1996;

Desiri Soliz, et al., v. H&R Block, et al, Kleberg County, Texas, filed 1/03;

New York City Department of Consumer Affairs litigation, Supreme Court of New York, Index No. 02401201), filed March 2002, amended July 2002 –

After this, three pages are redacted…

Regarding Compass Bank, a letter it submitted on December 23 states, among other things, that while Inner City Press named nine fringe financiers funded by Compass, “in fact, the bank has relationships with only three of the customers cited.” Compass does not state which three, nor any standards it might have to as funding and enabling subprime lenders. Compass’ responses resolves no issues. And see, ”Community group objects to Compass-TexasBanc deal,” MarketWatch, December 12, 2005, by David Weidner.

December 19, 2005

We must start by noting the passing last week of William Proxmire, the sponsor in the 1970s of both the Community Reinvestment Act and the Home Mortgage Disclosure Act. While most obituaries mentioned his “Golden Fleece” awards for government waste, his effect through CRA is ongoing.

And efforts to enforce (and oppose evasions of) the CRA and HMDA are ongoing. Inner City Press / Fair Finance Watch has just filed comments with the Office of Thrift Supervision opposing applications by General Electric’s GE Money Bank, including to acquire the credit card bank of Charlotte, NC-based department store Belk. From ICP’s comments:

GE has been getting deeper and deeper into higher cost subprime lending without, ICP contends, sufficient regulatory scrutiny. In fact, quite the opposite: GE “disappears” the subprime lending operations it acquires, removing them the scrutiny that comes along with the public reporting of Home Mortgage Disclosure Act (HMDA) data, which now includes pricing information. In June 2004, GE acquired the major subprime lender WMC Mortgage Corp. (Respondent ID 0458600405-7). This is a lender which in 2004 (including the half of the year it was owned by GE) confined over 65% of African Americans and Latino borrowers to higher cost loans over the federally-defined rate spread (of three percentage points over comparable Treasury Securities on first liens, 5% on subordinate liens. To non-Hispanic whites, the percentage was below 53%. This compares unfavorably with GE WMC’s peers, and militates for further scrutiny. But if the past is any guide, GE will try to take this unit beyond any scrutiny by the public, as it did with the previously HMDA-reporting unit(s) it acquired from Conseco. ICP is requesting public hearings, including on this additional specific data of GE’s WMC Mortgage:

In the New York City MD in 2004, GE’s WMC for conventional home purchase loans confined 55% of African Americans to higher cost rate spread loans, compared to 39.5% of whites. For refinance loans (secured by first liens) in this NYC MD, GE’s WMC confined 36.9% of African Americans and 34.7% of Latinos to higher cost rate spread loans, compared to only 22.1% of whites (African American to white disparity 1.67; Latinos to white disparity 1.57%).

In the Charlotte, NC MSA (Belk’s headquarters) in 2004, GE’s WMC for conventional home purchase loans confined 57.9% of African Americans to higher cost rate spread loans, compared to 40.3% of whites. This compares unfavorably with GE WMC’s peers; ICP is requesting public hearings.

Consider also this sample consumer complaint received by ICP only last week:

-----Original Message-----
Subject: GE Money Bank - Unfair/Predatory Lending Practices
From: [Name withheld but available to OTS on request]
To: GE-Watch [at] innercitypress.org
Sent: Wed, 14 Dec 2005 16:27:53 -0800

...I opened a $14k account with them in March of this year through the Honda Card program at a special promotional rate of 6.9% for the first 24 months and payments of $69 for the first 24 months. My contract also reads, "If you do not make your required Minimum Payment within 1 month after the Payment Due Date, the Delinquency Rate will apply to all existing balances..." I have consistently paid my bill well within these guidelines. I learned today that they changed the due date from the 10th of each month to the 5th back in July and claim to have included a notice in all billings. My statement reads, "If you received no additional notice, your account is not effected". I keep everything and have no additional notice. They also included a new stipulation that your payment is now considered "late" if it is not received by the Payment Due Date. Under these new terms, if you are "late" 2 times your account automatically converts to the Delinquency Rate, which is at 28.9%...a 418% increase of my original rate. I spoke to 2 separate Customer Service Reps and one Supervisor (I have the first names, dates and times I spoke to them) and all claim they can do nothing.

GE’s predatory lending is not limited to the United States. See, e.g., “Office of Fair Trading Delivers Damning Verdict on Store Cards,” Cards International, April 2, 2004. GE is under fire not only for high cost credit cards, but also mortgages. See, e.g., “Mortgage Giants Faces Court Over ‘Unfair’ Loans,” Sunday Express, May 12, 2002:

“A support group set up by an ex-teacher is taking one of the world's largest financial companies to court in a case that could save millions for thousands of mortgage borrowers. The National Association of Mortgage Victims (NAMV) will next month ask a court to set a date to hear test cases against US firm Ocwen and international giant GE Capital... the terms of its loans are unfair. Its mortgage interest rates can be doubled if borrowers are late with payments, for whatever reason. High early redemption penalties are also payable.”

Note that GE continues acquiring consumer finance capability, including higher cost / subprime capability, around the globe, from Central America (BAC) through Turkey (Garanti) to the Philippines (Keppel Bank) – and now China and elsewhere. ICP has also requesting any and all information the OTS has its in its possession or control concerning consumer compliance at GE not only in the United States but also overseas. We’ll see.

Meanwhile HSBC, trying to defend its below-described violations of the Servicemembers' Civil Relief Act to the UK newspaper The Observer, argued that "Household's credit card business had once offered reductions only to those serving in combat zones, but had updated this policy in line with legal changes in 2003." See, “HSBC 'overcharging' US troops,” by Conal Walsh, The Observer (UK), December 18, 2005. But this defense doesn't fly: even prior to the 2003 amendments, the interest rate reduction was required for those on active duty, with no reference to combat zones. So HSBC's mis-speaking, to put it diplomatically....

Finally for this week, speaking of regulation and inside the Beltway, Inner City Press / Fair Finance Watch commented last week to the FDIC, opposing the agency’s proposal to like the OCC preempt state consumer laws. ICP used three examples of problematic FDIC-supervised lenders, all inter-state:

Synovus Mortgage Corp (which in Alabama in 2004, for all HMDA-reported first lien loans, confined African Americans 6.77 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);

RBS’ Citizens Bank(s), and Citizens Mortgage Corp. (which in Pennsylvania in 2004 confined African Americans four 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);

Fulton Bank (which also in Pennsylvania in 2004 on lower volume confined African Americans 3.84 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), and regarding which, see Baltimore Sun, November 22, 2005, ”Group challenges Howard bank buyer: Fulton accused of bias against minorities” -- in honor of William Proxmire.

December 12, 2005

Inner City Press / Fair Finance Watch (ICP) has just filed a challenge to the application by Compass Bancshares, Inc. to acquire TexasBanc Holdings Co. and TexasBank, a $464 million proposal announced on September 19, 2005. ICP's timely comment, filed under the Community Reinvestment Act with the Federal Reserve Bank in Washington, and with the Federal Reserve Bank of Atlanta, is based on mortgage lending disparities at Compass Bank Mortgage lending (HMDA) data reported for 2004 show that Compass Bank disproportionately excludes and denies African Americans and Latinos and, when loans are made, disproportionately charge African Americans higher prices. ICP also documents Compass Bank enabling fringe financial institutions such as pawn shops and check cashers.

Compass Bank, in 2004 in the Houston Metropolitan Statistical Area (MSA), denied the conventional home purchase applications of Latinos 6.53 times more frequently than whites. In terms of pricing disparities, Compass Bank in Houston in 2004 for refinance loans confined African Americans 8.5 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. In its headquarters MSA of Birmingham Alabama, Compass Bank in 2004 denied the conventional home purchase loan applications of African Americans 2.93 times more frequently than whites, and denied the applications of Latinos 6.81 times more frequently than whites. In the Dallas MSA, Compass Bank in 2004 denied the refinance loan applications of African Americans 3.22 times more frequently than whites.

ICP’s comments include as exhibits a sampling of Uniform Commercial Code filings, documenting Compass Bank’s enabling relationships with among others:

Kingwood Pawn of Kingwood, Texas (relationship continued in July 2005, running through at least 2010);

Bingle Pawn of Houston Texas (relationship running through at least 2007);

Western Pawn Systems of Houston, Texas;

Big Cash Pawn of Orange Park, Florida (relationship continued in 2004, running through at least 2009);

People’s Pawn Shop, of Houston, Texas;

Royal Convenience and Check Cashing of Dallas, Texas;

Quintard Jewelry and Pawn of Anniston, Alabama (Compass Bank has a collateral interest in “products”);

Rapid / Rapido Check Cashing Co. of Houston, Texas; and

B&K Family Pawn of Oxford, Alabama (relationship continued in 2004, running through at least 2009).

"For any business relationship (e.g. commercial lender, warehouse lender, purchaser, custodian, etc.) that Compass or TexasBank 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 Compass or TexasBank typically conducts concerning any such subprime lender's compliance with applicable fair lending and consumer protection laws prior to Compass or TexasBank entering into these business relationships, including... (c ) any monitoring or other ongoing procedures Compass or TexasBank 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 and 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”).

Beyond the disparities in Birmingham, Dallas and Houston set forth above, ICP’s ongoing analysis of Compass Bank’s 2004 HMDA data finds similar patterns in other Compass states. For example, in the Phoenix, Arizona MSA for refinance loans in 2004, Compass Bank denied African Americans’ applications 2.73 times more frequently than whites. In the Denver, Colorado MSA, for refinance loans, Compass Bank denied the applications of Latinos 1.94 times more frequently than those of non-Hispanics. And in the Tampa, Florida MSA for refinance loans, Compass Bank denied the applications of Latinos 2.3 times more frequently than those of non-Hispanics. Again, given this record, ICP is requesting public evidentiary hearings, and that, on the current record, Compass Bank’s applications be denied. See also, ”Community group objects to Compass-TexasBanc deal,” by David Weidner, MarketWatch, December 12, 2005.

December 5, 2005

Military personnel on active duty are being overcharged on high interest loans by some of the largest banks in the United States, a new investigation of compliance with the Servicemembers’ Civil Relief Act (SCRA) by Inner City Press / Fair Finance Watch has uncovered. Through documents 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. See, e.g, US soldiers’ families allege loan discrimination by HSBC," by Karl West, The Herald (Glasgow, Scotland), December 5, 2005.

The nation’s largest bank, Citigroup, is described in consumers’ complaints as demanding original copies of initial deployment orders, of refusing to deal by telephone with servicemembers’ immediate relatives, and of reporting adversely to credit agencies. HSBC / Household is described as seeking to narrow SCRA’s interest rate reductions to only those “in a hostile zone,” leaving that term undefined. Other banks most complained-of include JP Morgan Chase, Wells Fargo, MBNA and Bank of America. Regarding these last two, ICP has asked the Federal Reserve to collect and consider the evidence of SCRA violations before ruling on the Bank of America – MBNA merger application.

The Servicemembers’ Civil Relief Act, at 50 USCS Appendix Section 527(1)(a) provides that “An obligation or liability bearing interest at a rate in excess of 6 percent per year that is incurred by a servicemember, or the servicemember and the servicemember's spouse jointly, before the servicemember enters military service shall not bear interest at a rate in excess of 6 percent per year during the period of military service.”

The purpose of the SCRA, formerly known as the Soldiers’ and Sailors’ Civil Relief Act, is to provide interest rate relief and other protections “to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the Nation.” Section 502. The above-named banks, however, routinely seek to deny the SCRA protections to servicemembers. Citigroup, for example, beyond deployment orders has demanded original enlistment papers, as reflected in this complaint to Citigroup’s AT&T Universal credit card unit in Jacksonville, Florida, now placed online at www.innercitypress.org/citiscra4.jpg

“We received your letter telling us that you could not process [REDACTED]’s request to reduce the Annual Percentage Rate (APR) under the Soldiers and Sailors Civil Relief Act of 1940. We understand that you need another document to show when exactly she enlisted in the Army. We, her husband and children, regretfully inform you that we do not have access to any of her documents that pertain to her military career. As she is already in Kuwait, there is no way that she can send these documents to you until her return home. She is not expected to return for six months to a year.”

Using prior military service as an excuse to maintain high interest rates despite the SCRA appears to the strategy as other Citibank units as well, as reflected by the complaint to Citibank’s regulator, the Office of the Comptroller of the Currency (OCC), now online at www.innercitypress.org/citiscra4.jpg

“I am writing in regards to a dispute with The Associates credit card company of Citicorp Credit Services, Inc. (USA). The dispute pertains to my eligibility to receive the interest credit from the Sailors’ and Soldiers’ Relief Act (SSCRA) (50 U.S. App. Sec. 526).

“I first contacted The Associates in May of 2002. At that time I was denied enrollment. I was told that because I originally entered the military in 1989, I was ineligible. However, my tour of duty was over in 1993. I opened my account with The Associates in 2000. At that time, I was a civilian and had no intentions of signing back up with the military. Yet, in March of 2002, I entered into the US Army on full-time, active military duty. As the law states, the SSCRA regulates the amount of interest I am to be charged for any credit accounts I opened before entry into military service.

"I have disputed this matter with The Associates to no avail. I have sent them copies of my original orders showing my current enlistment date, as well as a copy of the law. Still I was denied. I was then forced to go to my JAG office on base to seek legal counsel. From there I was directed to the Attorney General’s office in Irving, TX, the headquarters for the aforementioned party. The Attorney General’s office then put me in touch with the legal representatives of the [REDACTED] County, where I received contact information for the OCC Customer Assistance Group.

"The Associates have repeatedly denied my claims based on prior service. Yet, I have found nowhere in the law where it states this as a deciding factor. So I write to you now, to examine the law and enforce the necessary actions. I have enclosed all pertinent documents in regard to this matter. I have been enrolled in a debt consolidation company, and have made payments to The Associates monthly for the last year.”

The attachment, on Department of the Army stationary, reflects Citigroup’s Associates charging 12.99% interest. In April 2005, a mother wrote to the OCC, in a letter now online now online at www.innercitypress.org/citiscra12.jpg

“Enclosed is a copy of my son’s military orders calling him to active duty, a copy of the affidavit designating me as his authorized representative, and a copy of my letter to Citibank, Sioux Falls, SD, dated 8 December, 2004. Citibank has given me all kinds of excuses for not acting on this matter. First they wanted an affidavit specifically addressed to them. They desisted on their request once I explained to them that the military do not have the time and manpower to prepare affidavits in the manner Citibank wanted. Then they told me that my son’s active duty orders were not with the correspondence I had mailed them. Then they said I needed to prepare a document which they were going to mail to me; I have never received such document. Last time I called I was told that they were still investigating!”

Another mother complained:

…”His unit was deployed to the Middle East. In February 2003 his fiancé and I applied to Citibank to have his finance charges reduced under the Soldier’s and Sailor’s Relief Act of 1940. (Account # [REDACTED]). We have supplied Citibank with several letters of proof of my son’s service (copy of one enclosed) with no satisfaction. We recently received a letter requesting a “Proof of Service Letter” from Citibank. While the people at Citibank that I have spoken with are polite and helpful, nothing has been accomplished. Telephone calls to the customer service number are no help as the group that handles Soldier’s and Sailor’s Act requests are in Jacksonville, FL and can’t be reached by telephone, only by mail. I think the enclosed letter (which Citibank already has) from the Headquarters of II MEF should be sufficient proof of my son’s service and that Citibank’s foot dragging is nothing more than an attempt on their part to make the process so long and drawn out so that we will give up as they do not want to lose the 24.24% interest that is being paid on the account.”

Even when compliance is belatedly obtained from Citigroup, accounts are still turned over to collection agencies, and credit ratings impacted, as reflected in this complaint to the FDIC, placed online at www.innercitypress.org/citiscra5.jpg

“My husband enlisted in the United States Marine Corps during the recent war in Iraq. Upon the advice of his recruiter, I requested relief from our creditors in accordance with the Soldiers’ and Sailors’ Civil Relief Act of 1940. Citibank finally responded and complied with the Act. However, they ALSO have turned this account over to TWO COLLECTION AGENCIES (copy of letter enclosed).

“I am filing a complaint against Citibank because they are ruining our credit rating by ignoring my requests regarding relief and selling this account to collection agencies.”

The attached notice – even the name of the collection agency has been redacted by the Office of the Comptroller of the Currency – reflects a balance of $1,937.13. It begins: “This is to advise you that Citibank (South Dakota) Na (P) has transferred your delinquent account to our office for pre-legal collection.”

HSBC’s subprime consumer finance units, operating under names including Household, HFC, Beneficial and Orchard Bank, also stretch to find excuses to maintain high interest rates contrary to the SCRA, as reflected by this sample complaint now online at www.innercitypress.org/hsbcscra15a.jpg and www.innercitypress.org/hsbcscra15b.jpg

“My husband reenlisted into the US Navy on 12/[ ]/02. I have placed all of our pre-existing financial obligations under the Sailors and Soldiers Civil Relief Act which sets the maximum finance charge of 6% on all of our debts. Every one of our creditors have placed our accounts under this Act and lowered our interest rate, except for Household Bank. Household Bank told me that my husband’s reenlistment was only a ‘formality’ and that they are not going to honor the Act or my request to have our account placed at 6%. They continue to charge us 15.90%.”

Contrary to the above-quoted language of the SCRA (applying to “the period of military service”), HSBC’s Household came up with the novel argument, reflected in the complaint now online at www.innercitypress.org/hsbcscra18.jpg that the interest rate must only be reduced if the soldier is in a “hostile zone” –

“All phone calls and faxes from 2-26-2004 have been ignored, misplaced and denied by Household Credit Services. One customer service rep stated that Buper orders could not be used in accordance to the SSCRA and unless the ‘soldier was in a hostile zone, the lowering of the APR would not be enforced.’”

Even to those in “hostile zones,” HSBC sends bill collection notices over the Internet, as reflected in the May 2005 complaint now online at www.innercitypress.org/hsbcscra22.jpg

“I am currently deployed for operation Iraqi freedom serving FOB [REDACTED]. I am having a problem with one of my creditors and am requesting assistance. I was mobilized on October 16, 2004 and have since paid off an account with Household Bank / Orchard Bank (same company) I had 2 accounts with them. I have sent in my TCS orders, my mobilization orders, a letter from my commander, my promotion orders to 1LT, and a personal memo from my explaining my situation and specific requests according to the SSCRA. Since then, I have sent this information 4 times to the company and they continue to harass me via internet for payment. They tell me that I owe $30 and form October they have charged me an inflated interest rate and given me late fees. They actually owe me money from the 2 accounts since they had not ever reduced my interest rates nor stopped the fees. I do not have regular phone lines however I have a DNVT line [REDACTED] or via email…. Your soldier in arms.”

Wells Fargo’s practices are reflected in the complaint to the OCC now online at www.innercitypress.org/wellsscra54.jpg

“On [ ] January 2003, my Army Reserve Unit, the [REDACTED] received notification of mobilization and deployment to the Persian Gulf area. Within days I received my individual mobilization order, which specifically stated I was mobilized in accordance with Title 10, a Presidential call up, in support of Operation Enduring Freedom. I contacted Wells Fargo whom I had 2 home equity accounts with, and advised of my mobilization and the fact that I was eligible to receive a reduced interest rate of 6% on my two outstanding home equity accounts per the Soldiers and Sailors Civil Relief Act of 194[0]… In mid July 2003 I returned to my residence from the Persian Gulf at which time I learned from my wife that Wells Fargo never reduced our interest rate to 6% as is required by Federal law…”

JP Morgan Chase’s practices, and their impact on front-line military personnel, are reflected in the complaint now online at www.innercitypress.org/jpmcscra47a.jpg and www.innercitypress.org/jpmcscra47b.jpg

“I am writing you from Baghdad, Iraq asking, once again, for Bank One to drop my interest rate on these three cards to 6%. I have phoned in and spoken with your customer service on two previous occasions, once in May 2004 when my deployment began, and again in September 2004, before I actually deployed to Iraq. Both times I was instructed by the customer service that because the three accounts in question were for Overdraft Protection, they did not qualify under the Soldiers and Sailors Relief Act. This makes no sense to me, considering the accounts are clearly operated like a credit card. I have used these accounts to complete balance transfers, operate as a Visa credit card, and for overdraft protection. It is clear that even though the account functions as a credit card, Bank One is using the technicality of it being classified as an Overdraft Protection to ensure that soldiers like me cannot benefit from the Soldiers and Sailors Relief Act on these type of accounts. I am asking you to please reconsider. The following three accounts in question are as follows:

Account 1 [REDACTED] 13.99% interest

Account 2 [REDACTED] 28.99% interest

Account 3 [REDACTED] 13.99% interest

…In November 2004 my wife, pregnant with twins, had a miscarriage due to increased stress from the deployment and current financial burdens. She has also had to sell my car to help meet current financial responsibilities. Right now, in Baghdad, I am responsible for the well being of 117 soldiers. Everyday we are facing multiple threats every time we leave the gate. In 60 days my soldiers and I have been hit by 31 roadside bombs. I, personally, do not have the time to get involved, nor do I need to be worrying about the bills back home.”

The purpose of the Servicemembers’ Civil Relief Act is to provide interest rate relief and other protections “to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the Nation.” 50 USCS Appendix Section 502. Given the lack of compliance with the SCRA by the above-named largest banks and bank holding companies, Inner City Press / Fair Finance Watch has formally petitioned for action from both the Office of the Comptroller of the Currency and the Federal Reserve, including by submitted copies of complaints of SCRA violations by Bank of America and MBNA, and demanding that they be pursued prior to any ruling other than denial on Bank of America’s application to acquire MBNA. ICP will be pursuing these issues further.

November 28, 2005

Inner City Press / Fair Finance Watch is analyzing Gulf Coast mortgage lenders in the Katrina-zone, identifying those which in 2004 had the worst disparities between the percentage of African American and white borrowers who were charged higher costs, over the Federally-defined rate spread of 3% over comparable Treasury securities on a first lien loan, 5% on subordinate liens. Some interim results, one lender per state (and more in New Orleans);

In Mississippi, Citigroup’s CitiMortgage was 5.4 times more likely to confine African Americans to higher cost rates spread loans than whites.

In Alabama, Synovus Mortgage Corporation was 6.8 times more likely to confine African Americans to higher cost rates spread loans than whites.

In Louisiana, Union Planters Bank (now owned by Regions) was 5.2 times more likely to confine African Americans to higher cost rates spread loans than whites.

And (a trifecta), in the New Orleans Metropolitan Statistical Area, AmSouth Bank was 11 times more likely to confine African Americans to higher cost rates spread loans than whites. Chase Manhattan Mortgage Corporation was 5.7 times more likely to confine African Americans to higher cost rates spread loans than whites. And (see below), National City Bank Indiana was 3.7 times more likely to confine African Americans to higher cost rates spread loans than whites.

Beyond disparate high-cost lending, now Gulf Coast area residents using settlements to pay off mortgages are being hit with pre-payment penalties. For example at National City, owner of the subprime lender First Franklin: St. Bernard Parish resident Melissa Sass told New Orleans CityBusiness that National City “told me that I could use the money from my insurance to pay on the mortgage but there will be a penalty of 30 percent of the interest they will lose out on. They told me that the only way I can pay off my mortgage in full without the penalty is to wait for that 10-year period."

Given the change to explain, National City’s spokesman said: "We have relatively few loans that have prepayment penalties in the first place. For hurricane victims, we are pretty much waiving prepayment penalties across the board." Note the “pretty much” qualifier. More justification was given by their trade association "These guys are required to pay the bondholders the return on the bond investment," said Bruce Coffman, president of the Louisiana Mortgage Lenders Association. "They couldn't begin to consider not meeting their obligation to the bondholders or they would be out of business. They have to pay the bondholders so they are funding that shortfall out-of-pocket. If you are talking about $100 million worth of bonds, the shortfall that has to be made up by the mortgage company can run into millions of dollars. They can get coldhearted real quick." Yep… Louisiana’s AG office says that residents have paid penalties as high as $14,000 for paying off mortgage loans in the wake of Hurricane Katrina.

Meanwhile, 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…

November 21, 2005

This week, in further review of the 2004 Home Mortgage Disclosure Act data (particularly of those lenders who refused or neglected to provide their data when first requested), Inner City Press / Fair Finance Watch has filed commented on Fulton Financial Corp.’s application to acquire Maryland’s Columbia Bancorp.

Fulton Financial has been expanding by purchases of relatively small banks with, ICP contends, insufficient scrutiny by the Federal Reserve Board, including on Community Reinvestment Act and fair lending issues. ICP has reviewed Fulton Financial’s and its affiliates’ Home Mortgage Disclosure Act- 2004 modified HMDA Loan Application Registers (LARs) and has found, for example, that at Fulton Financial Corporation’s Resource Bank in 2004, in its headquarters Metropolitan Statistical Area (MSA) of Virginia Beach - Norfolk, for conventional home purchase loans, African Americans were confined 4.83 times more frequently than whites to higher cost loans over the defined rate spread of 3% over comparable Treasury securities on first liens, 5% on subordinate liens. For refinance loans, Fulton’s Resource Bank confined African Americans to higher cost, rate spread loans 7.56 times more frequently than whites. By denials, African Americans were denied conventional home purchase loans six times more frequently than whites by Resource Bank. For refinance loans, Fulton’s Resource Bank denied African Americans 12.25 times more frequently than whites in the Virginia Beach - Norfolk MSA.

In the Richmond MSA, for conventional home purchase loans, Fulton Financial Corporation’s Resource Bank in 2004 denied African Americans 4.12 times more frequently than whites.

In the Washington DC MSA, for conventional home purchase loans, Fulton Financial Corporation’s Resource Bank in 2004 confined African Americans to higher cost, rate spread loans 3.91 times more frequently than whites.

Others of Fulton Financial Corporation’s banks blatantly exclude protected class from their lending. Fulton’s People’s Bank of Elkton, in the Wilmington MSA in 2004, made 81 home purchase and refinance loans to whites, and none to African Americans or Latinos. (Its denial rate for African Americans was 100%). Also in the Wilmington MSA, Fulton’s Delaware National Bank denied the refinance applications of African Americans 11.6 times more frequently than whites. Fulton’s Somerset Valley Bank, in the Edison NJ MSA in 2004, made 14 home purchase and refinance loans to whites, and none to African Americans or Latinos.

Fulton Bank, throughout its franchise, denied the applications of African Americans 3.72 times more frequently than whites, and denied Latinos 4.13 times more frequently than whites. In its headquarters MSA of Lancaster, for conventional home purchase loans, Fulton Bank denied the applications of African Americans 8.76 times more frequently than whites. This is an outrageously disparate record. Fulton’s application to acquire Columbia Bancorp should be denied.

Expanding its global subprime lending presence, CitiFinancial is reportedly opening at least one new office every week in India. This according to Citi’s William Rhodes, bragging at the APEC conference last week in South Korea. Rhodes said of India, “’There are pretty significant restrictions with acquisitions, so until that changes it will be quite hard to expand inorganically. But we are looking to grow our organic business quite strongly.’ The group is already opening outlets of CitiFinancial, its non-banking arm, at a rate of one a week, taking advantage of regulations that do not consider the mortgage and personal loan provider a bank. Mr. Rhodes said Citibank's acquisition of South Korea's KorAm bank was proceeding well and would serve as a template for other purchases in the region.” Of course, as reported, Citigroup's Koram has already been charged with predatory lending, by its own employees...

November 14, 2005

In the news last week were a variety of Ameriquest scandals, County Bank pulling back from payday lending, and a Chicago Tribute series on mortgage fraud, including involving Citigroup. CitiFinancial spokeman Rob Julavitz blames it all on Associates; even the Tribune notes that “the Federal Reserve Board fined Citigroup an additional $70 million--another record payout--for alleged subprime mortgage abuses from 2000 and 2001, after Citigroup took over Associates.” We’ll add that the Fed’s fine was not limited to actions stopping in 2001, and that Citigroup’s spin that it put the issues behind it by stopping making super high cost HOEPA loans was disproved by Citi’s 2004 mortgage data. Continuing with its lack of standards, Citigroup is underwriting $2.57 billion home equity deal by Ameriquest, even as Ameriquest is investigated for predatory lending in over thirty states. For more CitiFinancial analysis, click here (BankRate.com article).

Inner City Press / Fair Finance Watch has drilled deeper yet into the 2004 Home Mortgage Disclosure Act data, for example conducting a review by income as well as race and ethnicity of the data of Toronto Dominion’s Banknorth, which is applying to buy Hudson United (a bank half of whose 2004 mortgage loans were higher cost loans over the rate spread, of 3% over comparable Treasury securities on first liens, 5% on junior liens). As reported by the AP, ICP challenged TD Banknorth’s application on October 18. TD Banknorth’s first and only substantive response stated that ICP’s figures did not agree with the bank’s; it has been made clear that TD Banknorth was downplaying its disparities by for example comparing Latinos to all non-Latinos (including African Americans), etc. ICP has now more precisely analyzed the data, by non-Latinos whites, non-Latino African Americans, and Latinos, and by income tranches within each group.

This new analysis reveals for example that moderate income non-Latino African Americans were denied by TD Banknorth 2.86 times more frequently than moderate income non-Latino whites in 2004; upper income Latinos were denied by TD Banknorth 2.57 times more frequently than upper income non-Latino whites. Furthermore, TD Banknorth’s denial rate for upper income Latinos (14.29%) was higher than its denial for moderate income non-Latino whites (8.94). This is highly problematic.

TD Banknorth’s first and only substantive response to date acknowledged deficiencies, stating:

“Banknorth recognizes that the number of applications of African Americans and Latinos is low and this is of concern to us... since the markets questioned by ICP are fairly new markets that TD Banknorth entered through acquisition, it will take some time for us to further penetrate them effectively.” [TD Banknorth’s October 27, 2005 submission at 2, 5].

Question: how long? Why should TD Banknorth be allowed to acquire another (troubled) institution, while these deficiencies / shortfalls in already-entered markets admittedly exists? TD Banknorth’s terse second response (which claims that litigation against Toronto Dominion which goes to managerial resources is somehow not “relevant to the statutory factors” on an application by TD and Banknorth) admits, in its exhibit, that TD Banknorth’s self-reported denial rate disparity for Latinos, 2.35, is higher than each and everyone of its self-identified peers’ -- up to three times higher.

TD Banknorth’s deficiencies may be explained by the strategy or preference stated by its CEO at a conference of the BancAnalysts Association of Boston on November 3, 2005:

“Again, kind of like you remember my Boston strategy several years ago. Didn't really want to go to Boston, I really don't want to go to New York City. I'm really happy being in the suburbs.” Fair Disclosure Wire, November 3, 2005.

Question: combining this statement and the disparities now of record, how is this different in kind that the pattern for which Chevy Chase was sued by and settled with the US DOJ for fair lending violations in 1994?

Perhaps most troublingly, given the lack of regulatory approval, TD Banknorth’s CEO stated:

“I sent the top retail person at our company, a woman by the name of Wendy Suehrstedt down to Hudson United. She is going to be the CEO of that company and she is there three days a week now getting involved in running that company.”

Question: how is it permissible for the applicant, without regulatory approval, to be “getting involved in running” the target, prior to regulatory approval, including antitrust regulatory approval?

TD Banknorth’s CEO at this conference also stated: “I'll share with you a comment my friends in Canada said, ‘How come you're not in northern Maine? You know, you've got a void there.’ I said, ‘No, there's not a void. There's just no towns in northern Maine for us to be’” -- the irony of this is that the Maine bank superintendent, the grandly named Lloyd P. LaFountain, III, recently ruled that he only has to consider on this proposal Banknorth’s impacts on Maine and not, as he states ICP has analyzed, “large metropolitan areas” not “located in Maine.” Maybe other large and disparate banks should set up in less urban, less diverse states as a way having their increasing disparities elsewhere go unacted on. This will be raised to the Conference of State Banking Regulators; ICP is also working on other state-level enforcement projects, which will be reported soon in this space. For now, click here for details on not only denial rate disparities but also pricing, by income and race / ethnicity, by Huntington National Bank.

November 7, 2005

The fair lending news of last week was the enforcement action announced November 4 by the OCC against Laredo National Bank and its the subprime affiliate Homeowners Loan Corporation. When Banco Bilbao Vizcaya Argentaria applied to acquire both companies, Inner City Press / Fair Finance Watch submitted comments, demonstrating disparities at Homeowners Loan Corporation (and reported in the December 14, 2004, American Banker and December 13, 2004 MarketWatch). The regulators in March 2005 approved BBVA’s applications, but the story continued, leading to the OCC’s $14 million fine.

While some may say that the OCC announcement shows that the OCC, having sued to block state attorney general investigations of national banks and its subsidiaries, is finally taking its own enforcement actions, this one was brewing since before the 2004 mortgage data was submitted. ICP in comments to the regulators identified disparities in the 2003 data. BBVA withheld from ICP most of its answers to regulators, and, tellingly, tried to give ICP its 2004 HMDA data in paper form, making further analysis difficult. ICP finally got the information and filed more comments. So the November 4, 2005, enforcement action still leaves the OCC with a glaring deficit in its own investigatory and enforcement actions, now that it claims sole jurisdiction over national banks and their subsidiaries...

As to BBVA / Homeowners Loan Corporation, ICP has now raised the issue to others of BBVA’s regulators, including in Colombia and Spain...

Better late than never? It took the Federal Reserve five weeks to ask Bank of America to retract or justify its September 8 demand that basic fair lending information be withheld. Then BofA took a full two weeks to answer the Fed’s questions. Finally the following disclosures:

“Bank of America indirectly owns 24.9% of the voting common equity of Ownit... In August 2005, Bank of America, N.A. transferred the Ownit residential mortgage loan portfolio purchased during March 2005 to Asset Backed Funding Corporation (‘ABFC’). ABFC is an affiliate of Bank of America Corporation that is a limited purpose corporation that securitizes residential mortgage loans... ABFC securitized these Ownit loans, along with similar loans from another loan originator, in its approximately $1.2 billion ABFC Asset-Backed Certificates, Series 2005-HE2 transaction. Banc of America Securities LLC served as the underwriter in that transaction.... In two separate transactions on March 9 and March 14, 2005 Bank of America N.A. purchased Ownit residential mortgage loans in an aggregate amount of approximately $265 million. These loans were held for the account of Bank of America, N.A. until they became part of the August 2005 securitization described at Item 2.b above. These loans were purchased in a competitive, arms-length process at fair market terms” -- followed by more than half a page blacked out.

Bank of America’s attempt to hide its argument may be understandable -- it is simply not credible that BofA bought “in an arms-length process” subprime loans from a subprime lender of which it owns 24.9% (to fall just below 25%). Similarly, Bank of America still blacks-out its answer about servicing for subprime lenders, and the terms of its dealings with the subprime lenders it now publicly admits it does business with, including: Ameriquest Mortgage Corporation (including “whole loan trading”); Option One, Centex, New Century, Saxon, Metris (the subprime card lender HSBC is trying to acquire), Delta Financial, First Franklin, WMC (subprime lender now owned by GE), Fremont Investment & Loan (rogue subprime lender which claimed it would only give its HMDA data if one signed a confidentiality agreement), Capital One, CIT, WFS -- and Ownit, regarding which BofA black-out the column labeled “ABS/MBS Underwriting,” after elsewhere publicly admitting it performs those functions for Ownit’s loans. ICP is challenging these continued withholdings, and raising the deposit-reduction scam described in the American Banker newspaper of November 3...

October 31, 2005

When Inner City Press / Fair Finance Watch first expressed opposition to Toronto Dominion Banknorth’s proposal to buy Hudson United Bank, TD Banknorth’s Bill “Ryan told the Star he did not expect the Inner City Press objection to be a problem.” Now in a response to ICP’s October 18 comment, TD Banknorth’s general counsel writes, among other things, that “TD Banknorth recognizes that the number of applications from African Americans and Latinos is low and this is of concern to us.” Well that’s a start. But TD Banknorth goes on: “However, since the markets questioned by ICP are fairly new markets that TD Banknorth entered through acquisition, it will take some time for us to further penetrate them effectively.” Why then should TD Banknorth be allowed to acquire another bank, particularly one that not only has a recent history of money laundering, but which, as reflected by 2004 HMDA data, is essentially a subprime lender? Over 50% of Hudson United 2004 origination to African Americans and Latinos were over the rate spread (of 3% over Treasuries on a first lien, 5% on a subordinate lien). That is to say, Hudson United is, or has become, a subprime lender. In a previous proceeding, Hudson United told ICP and the FRB) that it had a program for offering some subprime loans and selling them to unnamed investors. But the 2004 data, laden with rate spread loans, does not list any purchasers. Overall, what is most striking about TD Banknorth’s response is the degree to which it ignores and sidesteps the issues raised about the ultimate applicant here, Toronto Dominion. The purported response does not even mention, much less address, such issues: not only TD’s settlement for its enabling of Enron, but also the October 5, 2005, article ICP put into the record, “TD Bank being sued in Illinois for US$250M.” ICP has submitted a second comment and reply; developing.

And now, in the Halloween spirit, from the mailbag:

Subject: Chase Horror story
From: [Name withheld]
To: JPMChase-Watch [at] innercitypress.org
Sent: Fri, 28 Oct 2005 14:40:27 -0500

I have found your site and find it interesting that Chase Manhattan Mortgage Company (CMMC) has treated other customers with such disdain. Our story starts in the fall of 2002 after my retirement from the Air Force (the house was purchased in 1999) I was having a hard time finding a new job, and my income had been cut by 2/3rd''s. We contacted Chase to let them know what was going on in October, and to find out what we would need to do for assistance - we were told that until we were 60 days late on payments they could not assist - this was a situation we were trying to avoid for obvious reasons.

             In December 02 I found work in Oklahoma City, and put our house in San Antonio up for sale or rent - we were able to make both payments through April 03 even though the house was sitting vacant. I the mean time we contacted Chase on several occasions letting them know we had moved and that finances were getting worse and unless we sold or rented the house we would have problems soon. After the April payment we could not continue the dual rent/mortgage and let Chase know and again we were told that until the 60 day point we could not receive help, what we were trying to do was save our credit and either refinance or restructure the note, or pay just interest on the house for a few months placing the payments at the end of the note.
             In May the house was rented for $800 per month, but due to work that had to be done we did not receive any monies until July and then it was only a partial payment - we told Chase what had transpired and that if they would work with us we would put all of the rent monies toward the mortgage (it was $100 a month less than the mortgage) and pay the difference if we could work out something with the missed payments. We put this in a written request as directed by Chase; we were turned down the first time because they did not include my current salary it only took a few days.
             We re-requested as we were told since the first request had been closed and a new process had to be opened; they told us to collect the monies from the rent and save it until the request was approved and we did just that - placed the monies back to pay Chase when the request was answered. The second request took from June until August to be denied - it was denied due to us being behind in the mortgage more than 60 days.

             When we contacted them we were told that we needed to re-submit again and continue to save the monies from the rent - again we complied.
             In August we asked the renter is they would like to buy the house - and we would let them take over payments of our VA note (they had VA eligibility). We contacted Chase and told them what we were trying to do - Chase in turn called the renters and told them they would have to pay the past due payments as well as penalties before they could assume the note (almost $10K - 4 months @ $900) - Chase had not told us that would be required nor had they asked us for the past payments since we had a request in with them for assistance. The sale fell through after Chase contacted the renters.
             In September/October we went to the realtor and we had brokered a deal to have the house sold outright for the payoff of the note ($69K on a $79K house). This time Chase called the buyers and told them we were filling bankruptcy and the house would be tied up for years - you might wonder how we know this: When Chase called in October to let us know that our request had been denied for the third time they told my wife they had called the buyers and informed them we were filling bankruptcy (this is not a he said she said - we were by that time recording all our calls from Chase and have the tape to back it up). This caused the sale to fall through and this was the second sale Chase purposefully caused to fall through.

We continued to try working with them until January 2004 - at that time the renters moved out due to the harassment from Chase (they had gone out to inspect the property and force their way in telling the occupants that the police would be called if they were not allowed in at that time) they had called them for payments - this is hearsay because our realtor told us what happened; just a note we at no time saw or spoke to the renters all communication was through the realtor.
With the loss of the renters and with Chase's determination to prevent a sale of the house we filled for bankruptcy on January 12, 2004 - Chase continued to try to collect from us through June 2004 even though the bankruptcy was finalized on 4 April 2004. We would receive certified letters from Chase which we would turn copies over to our attorney for future use. Our lawyer would not file against Chase as he was too small and the house was in Texas not Oklahoma.
In the end we lost the house and had to file bankruptcy over just a few months worth of mortgage payments - even the VA was in disbelief of how Chase was operating but they did not have the authority to force co-operation. The VA approved our request for reworking the loan and Chase would not work with us at all. Yes I can believe any of the items I read about Chase...And this story does not include their credit card, I have on tape where they admit calling me ten minutes apart and disclosing my account information to my brother.

In Washington last week, a vote confirming ambassadors did not, as it turned out, include Ameriquest’s Roland Arnall. His written submissions to the Senate have stated, of the investigations by thirty or more state attorneys general: "The precise timetable is difficult to predict, but we anticipate a final resolution by the end of this year.” We repeat: the mere payment of a fine is not resolution. There’s a need for binding (and monitored) injunctive relief...

October 24, 2005

Last week Inner City Press / Fair Finance Watch filed timely comments opposing Toronto Dominion / Banknorth’s applications to acquire Hudson United, a bank recent subject to a money laundering cease-and-desist order. See, e.g., “TD Banknorth plan protested; Inner City tries to block acquisition, criticizes treatment of minorities, poor,” by Jerry Harkavy, Associated Press / Canadian Press October 18-19, 2005 and, e.g., Boston Globe, Ottawa Citizen, Montreal Gazette, etc

ICP reviewed TD Banknorth’s data on FFIEC.gov and found, for example, that in the New Haven MSA, for conventional home purchase loans, TD Banknorth denied the applications of African Americans over 13 times more frequently than those of whites, and denied the applications of Latinos five times more frequently than whites. This represents a deterioration from Banknorth’s 2003 record (in New Haven in 2003, Banknorth denied the conventional home purchase loan applications of African Americans 3.76 times more frequently then whites).

In the Boston MSA in 2004, for conventional home purchase loans, TD Banknorth denied the applications of African Americans 6.73 times more frequently than whites. In the Springfield, Massachusetts MSA in 2004, for conventional home purchase loans, TD Banknorth denied the applications of African Americans 3.55 times more frequently than those of whites, and denied the applications of Latinos 1.89 times more frequently than whites.

In the Hartford MSA in 2004, for refinance loans, TD Banknorth denied the applications of African Americans 2.47 times more frequently than those of whites, and denied the applications of Latinos 3.09 times more frequently than whites. TD has stated that it wants to grow in Connecticut -- but its disparate record does not merit it, under the CRA and fair lending laws.

Overall, TD Banknorth denied the applications of Latinos fully 2.35 times more frequently than those of whites -- higher than industry aggregate disparities, in TD Banknorth’s footprint. Additionally, in the conference call announcing this proposal, reference was made to six to eight branches “overlapping” -- hearings are needed on possible branch closings as well as TD Banknorth’s worsening lending disparities.

As noted above, Hudson United has a recent history of money laundering, militating for public evidentiary hearings in this proceeding. Hearings are also needed on adverse issues at Toronto Dominion, including managerial issues. There’s Toronto Dominion’s enabling of Enron’s fraud, regarding which TD has paid a major settlement, impacting its earnings. See, e.g., The Toronto Star of August 26, 2005, “Enron effect takes toll on TD earnings,” by Stuart Laidlaw: “TD blamed a commitment to set aside $300 million to cover potential lawsuits by Enron Corp. shareholders for its third quarter profit falling 27 per cent to $411 million, or 58 cents a share, from $565 million, or 86 cents, a year ago.” See, previously, the Houston Chronicle of December 03, 2003, “THE FALL OF ENRON: Banks added to shareholder suit;” note that evidence submitted to the Senate Permanent Subcommittee on Investigations’ hearings identified Toronto Dominion as actively engaged in illegitimate trades with Enron to disguise loans received by the company, allowing Enron to hide this debt from credit rating agencies and investors, inflating profits substantially.

Inquiry (following FRB precedents) and hearings are also needed on TD Banknorth’s enabling of fringe financiers such as pawn shops -- see, attached, UCC filing between Banknorth and LEWISTON PAWN SHOP, Inc., as simply one example. The FRB should ask its now-standard questions, should make the responses public (in light with ICP v. FRB, 380 F. Supp. 2d 211, including last week’s denial of the FRB’s motion for reconsideration), should hold public hearings and should, on the current record, deny TD Banknorth’s applications.

As reported by the LA Times, at last week’s hearing on the nomination of Roland Arnall to be the United States ambassador to the Netherlands, “Arnall attributed the delays in concluding the settlement to the difficulties of dealing with so many regulators and to the many details involved. But he said ‘the most important aspect’ had been resolved with Ameriquest's decision to set aside $325 million.” We disagree -- the most important aspect would be binding injunctive relief, to cease and desist from what have been Ameriquest’s practices (interestingly described here. Also, reported in last week’s Cleveland Scene: “The FBI began investigating predatory-lending cases involving Argent, according to Dennis Ginty of the Ohio Department of Commerce.” Will this put Arnall on ice?

Finally, for this week, from the mailbag:

Subject: CitiFinancial Automotive-repo for CPI

From: [name withheld]

Sent: Thursday, October 20, 2005 2:25 AM

To: CitiWatch [at] innercitypress.org

My daughter has just experienced a repossession of her car by Citibank. Lo and behold, she wasn’t really in default for her car payments, but because of Creditor placed insurance. She had a collision policy in place, but for some reason, Citi decided she didn’t and placed CPI, without notifying her. They admitted that they (oops!) made a mistake, but they still want the balance of the loan (which is now $2000.00 more than the original loan). We went today to retrieve the personal possessions (Citibank sent a letter stating that the repo company would hold the personal items for 30 days after Sept. 19, 2005) only to discover, “they’re gone”…”we donated them”. After badgering the repo man, he gave me a fictitious church charity’s name. I, of course, notified the mission board of that denomination that the repo company was taking their name in vain…. I guess the big question is, when, ooh when will the feds squash these predators??? Or will they??? It just goes on and on…it shifts shape from one type of loan to another and continues…What will it take? I’ve followed the stories on your site, got a few questions answered…like why we never got any response to a request for a statement of account showing how payments were applied… How could they if we requested it in July, and they lost their account records in June??!! At any rate, thanks for being a forum for sharing the info so that other victims of Citi realize that they’re not alone.

October 17, 2005

This week, some quotes from last week’s decision in the Southern District of New York, denying the Federal Reserve’s request that the FOIA decision (about Wachovia's engagements with subprime lenders) in Inner City Press v. FRB, 380 F. Supp. 2d 211, be reconsidered:

“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.”

The scam here is that the Fed is arguing that unless it gets the FOIA decision reconsidered or reversed, it will not be able to get banks to submit information about their practices with regard to subprime lending -- even when banks are applying for mergers that can only be consummated with Federal Reserve approval. Here’s a hint for the Fed: if a bank doesn’t answer your questions, don’t approve their merger application. How about that?

Even more troublingly, the Fed argues that even if subprime connections are public in SEC filings, since a member of the public would have to perform repeated searches of the Edgar system, or have access to for-pay databases, the Fed should be able to withholding information that is elsewhere public. For shame...

We must of course note the U.S. District Court’s decisions in the cases by the OCC and the Clearing House banks -- including Citi and Wells and JPM Chase and HSBC --against the NY Attorney General, to avoid providing the credit score information they say would justify the racial disparities in their lending. Why should the public believe a defense that they go to court to conceal? Whether or not an appeal is taken, and whether or not it’s successful, the public must demand that the OCC bring enforcement action(s) on the disparities, and must separately pursue them, far and wide and ceaseless...

October 10, 2005

We'll say it again: as predatory lenders go global, so too must advocates. In the past week, Inner City Press / Fair Finance Watch has filed comments with regulators in Turkey and the Philippines opposing bank acquisition proposals by General Electric Consumer Finance. This stealth player, which owns subprime lender WMC in the United States, confines its highest-rate lending to overseas (and to protected classes, particularly Latinos, here in the Americas).

In Manila, ICP has commented GE’s proposal to acquire a controlling stake in Keppel Bank Philippines, reported in the Washington Post of October 3, 2005: “GE Consumer Finance, based in Stamford, will acquire a majority interest in Keppel Bank Philippines for $25.8 million.”

Beyond environmental and other matters, ICP cites the 2004 U.S. mortgage lending data of GE’s subprime / high cost mortgage lender, WMC. The National Mortgage News of April 26, 2004, reported that GE “has agreed to buy WMC Mortgage... the nation's 12th largest subprime funder... According to figures compiled by NMN, WMC originated $8.1 billion last year.” In 2004 to borrowers identified as Hispanic and African-American, over 65% of GE’s WMC’s loans were high cost / “rate spread,” defined by the U.S. Federal Reserve Board as over three percentage points over comparable Treasury Securities on first liens, 5% on subordinate liens. To non-Hispanic whites, the percentage was below 53%. This compares unfavorably with GE WMC’s peers, and is indicative of GE Consumer Finance’s targeting of protected classes for higher than normal interest rate credit.

GE’s predatory lending is not limited to the United States. See, e.g., “Office of Fair Trading Delivers Damning Verdict on Store Cards,” Cards International, April 2, 2004. These are the type of predatory practices that GE has exported to various markets, and now seeks to export to the Philippines and soon China - more on that anon.

Another global move: ICP/Fair Finance Watch has filed comments with the Central Bank of Iraq 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, which even though noted by the U.S. Senate, HSBC has refused to explain, to the United Nations or other elsewhere, seem particularly relevant. We’ll see.

As ICP predicted, the Federal Reserve’s spin of the 2004 HMDA data is providing comfort to predatory lenders. At a recent industry conference, Ameriquest’s new vice president for regulatory affairs Rodrigo Alba bragged that the Federal Reserve's findings that only 2% of the 8,853 HMDA reporting lenders need further scrutiny will go a long way toward blunting criticism that the industry is biased towards minorities. "I honestly believe that the language in the report will serve to neutralize the heated rhetoric," Alba predicted. "It has already caused consumer groups to back off," he said. This from a company admittedly under investigation for predatory lending in thirty states...

October 3, 2005

Major subprime lender HSBC makes the same hair-splitting arguments to defend its lending disparities and involvement in money laundering. Finally, an answer from HSBC, and a telling one. ICP/Fair Finance Watch has filed comments opposing HSBC’s application to acquire the subprime lender Metris, as reported in the UK press (Observer). Last week HSBC purported to respond, but dodged most of the issues raised. HSBC resists any review of its consolidated mortgage lending. Rather, HSBC argues that each of its subsidiaries “has a distinct distribution network, product offering, and customer base.” Tellingly, HSBC states that “HSBC Consumer Lending, Decision One and HSBC Mortgage have each extensively analyzed their 2004 HMDA data” -- each separately, it’s clear. HSBC Mortgage is a national bank subsidiary. The OCC has sued the New York Attorney General to block review of HSBC’s national banks and their subsidiaries, including HSBC Mortgage -- making fair lending review and action nearly impossible, IF the OCC accepts HSBC’s arguments that Decision One, HFC and Beneficial are “irrelevant” to the OCC.

HSBC characterizes its December 2002 Consent Decrees /Orders with state attorneys general for predatory lending as “establish[ing] HSBC Finance Corporation as the industry leader.” No -- it was a predatory lending enforcement action. And it did not cover Decision One, of which HSBC writes: “While Decision One makes the final credit decision on these loans, the mortgages are sourced by a network of independent brokers, rather than retail branches open to consumers.” HSBC goes on to make a final distinction: “The lending model of HSBC Mortgage follows a substantially different business model, and offers a different product mix, than HSBC Consumer Lending or Decision One.” Yes -- unlike HSBC Consumer Lending, HSBC Mortgage offers normal / prime interest rate loans. Which is why the racial disparities between the two (or three) channels is so troubling, and unaddressed by HSBC.

Similarly, under the heading “International Operations and Ethical Business Practices,” HSBC spouts generalities that dodge the issues raised in ICP’s comment. HSBC writes that “HSBC Group members are expected to follow all relevant local, international and industry standards in addition to our internal standards.” But in the only example given, HSBC used local (Luxembourg) “standards” to refuse to provide information about its wiring of money related to Riggs Bank / Equatorial Guinea’s dictator. HSBC writes:

“ICP references an investigation into certain wire transfers made through Riggs National Bank... HBUS did receive from Riggs a request under section 314(b) of the USA Patriot Act, which authorizes financial institutions in the United States to exchange account information that may be related to money-laundering offenses or terrorist financing. Such information-sharing authority is in stark contrast to federal and state privacy protections provided in the United States that generally prohibit banks from publicly releasing account-level information, except under limited circumstances. Upon receiving the request for Riggs, HBUS confirmed that the account in question had been opened by an HSBC Group affiliate in Luxembourg, and that HBUS had forwarded the funds to a United States correspondent account in the United States for its Luxembourg affiliate. HBUS also informed Riggs, pursuant to the 314(b) request, that HBUS had sent funds for another mentioned company to an HSBC Group affiliate in Cyprus. Like the United States and many other sovereign countries where HSBC Group companies operate, both Luxembourg and Cyprus maintain privacy laws that prohibit the sharing of account information with other companies, even between companies related by ownership. In this case, HSBC affiliates in Luxembourg and Cyprus -- and are neither branches nor subsidiaries of a US institution (i.e., they are not branches or subsidiaries of HBUS but share a common, foreign parent), operate under laws which forbid such sharing of customer information. Thus, if those institutions had provided information to HBUS, to any other US bank, or directly to the US Government, they would have been in violation of the laws of Luxembourg and Cyprus respectively and could have been subject to criminal and/or civil sanctions in their host countries. Section 314(b) [of] the USA Patriot Act does not override these local laws applicable to banks operating in Luxembourg and Cyprus.”

The irony is, HSBC lobbies for laws to override local anti-predatory lending protections -- but to further its private banking, cites local laws as trumping anti-money laundering prohibitions. A global rogue is HSBC...

And Citigroup as well. CitiFinancial is the highest cost lender in Ireland, as well. The Irish Times of September 28 reports: “Consumers can save EUR 80-EUR 1,200 by shopping around for personal loans, the Irish Financial Services Regulatory Authority said yesterday. The financial regulator repeated its warnings about payment protection insurance, which it stressed was an optional and expensive type of insurance sold in conjunction with personal loans. The survey shows that the best value personal loans are available to members of EBS Building Society, who are charged an annual percentage rate of interest (APR) of 7.45 per cent. The total cost of credit for an EBS member on a loan of EUR 7,000 repaid over three years is EUR 805, compared to EUR 1,180 for someone who arranges a fixed-rate personal loan through a Bank of Ireland branch. The cost of credit at CitiFinancial... was a massive EUR 2,799.” That’s 2.4 times higher than at the Bank of Ireland, and 3.5 times higher than the building society. And this is how Citigroup builds up its profits, without standards, outside of the U.S....

September 26, 2005

And now, because we can, here is a annotated / hyperlinked version of Inner City Press’ op-ed in the American Banker newspaper of September 23:

HEADLINE: 'Benign'? The Fed's Effort to Spin the 2004 Data

Last week the Federal Reserve released aggregate 2004 Home Mortgage Disclosure Act data and used a 51-page report to put its spin on the fact that minorities are much more likely than white borrowers to end up with a high-priced loan. Here's an indicative conclusion that the Fed staffers reach at the end of their report:

"On the one hand, this pattern may be benign and reflect a sorting of individuals into different market segments by their credit characteristics. On the other hand, it may be symptomatic of a more serious issue."

What the Fed doesn't say in this is that these disparities are most stark among some of the largest conglomerates in the country, including in their headquarters cities (where they have Community Reinvestment Act duties):

--In the New York City metropolitan statistical area, Citigroup confined African-Americans seven times more frequently than whites to higher-cost rate-spread loans in 2004.

--Nationwide, Washington Mutual, the largest savings bank in the country, confined African-American couples to high-cost loans 4.5 times more frequently than white couples.

--In the New Orleans metropolitan statistical area, the industry confined African-Americans over four times as frequently as whites to high-cost loans for conventional home-purchase loans.

How could such patterns be plausibly described as "benign" or as reflecting "a sorting of individuals into different market segments"? Where the rubber will meet the road will be in how the Federal Reserve and other agencies act on specific disparities at specific lenders.The Sept. 19 American Banker article "200 Facing Scrutiny on HMDA Data" reported that the Fed has contacted 25 state member banks, or one eighth of the targeted institutions. The Fed also regulates holding companies and ought not limit its review to parts of these conglomerates.

Since many of the worst disparities are found with bank holding company conglomerates like Citigroup (Citibank NA, CitiMortgage, and CitiFinancial), Wells Fargo, and HSBC, such a limited approach would let the sources of many of the aggregate disparities off the hook. The article quotes an HSBC spokeswoman as saying that "the OCC had not sought to follow up on its HMDA filing." That's not surprising, not least because that conglomerates' higher-cost loans are by the ex-Household International units - HFC, Beneficial, and Decision One - which are regulated by the Fed, not by the OCC.

But not only the Fed and the OCC are to blame. The article reports that Washington Mutual "said it had not been contacted by its primary regulator, the OTS." As a thrift holding company, WaMu and its subprime unit Long Beach are both under OTS jurisdiction. Given the high percentage of the OTS budget that comes from WaMu, a hands-off approach to WaMu by the OTS, while inappropriate given the disparities, is not unexpected.

Okay, now some annotations: Inner City Press / Fair Finance Watch has reviewed the mortgage records, in the New Orleans Metropolitan Statistical Area, of Citigroup, including not only denial rates but also the new information concerning which loans are subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien) --

Whites: 1461 applications, leading to 484 denials (33.13% denied) and 605 originations; 179 [or 29.59%] exceeded rate spread.

African Americans: 1492 applications, leading to 747 denials (50.07% denied, 1.51 times higher than whites) and 406 originations; 285 [or 70.2 percent] exceeded rate spread [2.37 times higher / more likely to be over rate spread than whites].

Latinos: 129 applications, leading to 59 denials (45.74% denied, 1.38 times higher than whites) and 35 originations; 22 [or 62.86 percent] exceeded rate spread [2.12 times higher / more likely to be over rate spread than whites].

ICP has also reviewed the mortgage records in this New Orleans MSA of Washington Mutual:

Whites: 992 applications, leading to 189 denials (19.05% denied) and 669 originations; 84 [or 12.56%] exceeded rate spread.

African Americans: 476 applications, leading to 155 denials (32.56% denied, 1.71 times higher than whites) and 243 originations; 81 [or 33.33 percent] exceeded rate spread [2.65 times higher / more likely to be over rate spread than whites].

Latinos: 121 applications, leading to 25 denials (20.66% denied, 1.08 times higher than whites) and 81 originations; 14 [or 17.28 percent] exceeded rate spread [1.38 times higher / more likely to be over rate spread than whites].

Note that over 70% of Citigroup’s loans to African Americans in the New Orleans area were higher cost, rate spread loans... We’ve looked closer at Wells Fargo's 2004 lending record, this time in the Nashville MSA, considering which loans are subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien) -- Wells Fargo in the Nashville Metropolitan Statistical Area in 2004

Whites: 2009 originations, 187 over the rate spread (11.81% of loans over the rate spread)

African Americans: 198 origination, 59 (38.02%) over the rate spread -- 3.20 times higher than for whites...

Meanwhile, HUD last week announced a $48,000 settlement with Prudential Locations, LLC for violations of the Real Estate Settlement Procedures Act. HUD found that Prudential's Honolulu real estate brokerage office leased a luxury car, offered vacations and provided other gifts to reward sales agents that referred business to an affiliated mortgage company. Prudential is affiliated with and has a financial interest in Wells Fargo Home Mortgage Hawaii, LLC. HUD's investigation found that Prudential hosted a ‘First Annual Wells Fargo Friends Party’ and invited only those sales agents that referred over $1 million in business to Wells Fargo. Great...

September 19, 2005

Payday lenders in the news: Advance America Cash Advance suspended operations in North Carolina (better late than never). In Henderson, Nevada, the city council last week denounced Fastbucks Holding Corp., applying to for a payday lending location there. Meanwhile FastBucks trumpeted its matching donations for the victims of Hurricane Katrina -- but made no mention of forbearance on any loans. Dollar Financial Corp. announced on September 16 that the hurricane will reduce first quarter income before taxes by $500,000 to $700,000, citing higher loan losses and reduced revenues from its five New Orleans stores, two of which were severely damaged.

Last week, the Federal Reserve finally released aggregate mortgage lending data for 2004, including for the New Orleans metro area. The picture is not pretty, considering percentages of conventional home purchase and refinance first-lien loans over the federally-defined rate spread (3% over comparable Treasury securities on first lien loans) --

Conventional Home Purchase Loans Secured by First Liens in the New Orleans Metropolitan Statistical Area in 2004

Whites: 9.17% of loans were over the rate spread

African Americans: 37.48% of loans over the rate spread -- 4.09 times higher than for whites

Hispanics: 16.4% of loans over the rate spread -- 1.79 times higher than for whites

Conventional Refinance Loans Secured by First Liens in the New Orleans Metropolitan Statistical Area in 2004

Whites: 18.26% of loans were over the rate spread

African Americans: 48.68% of loans over the rate spread -- 2.67 times higher than for whites

Hispanics: 27.1% of loans over the rate spread -- 1.48 times higher than for whites.

This compares unfavorably to the nationwide aggregate... Also in Katrina’s wake we’re compelled to note the Congressional testimony on September 14 of a problematic thee-fer: ex-OCC examiner (of HSBC) David Gibbons, now at HSBC / Household, speaking for the trade association American Financial Services Association, which has sued to block local anti-predatory lending laws all over the country. The mind reels; the stomach turns. Click here for ICP's ongoing Gulf Coast Watch report.

September 12, 2005

In the run-up to the Federal Reserve’s release and spin of the aggregate 2004 Home Mortgage Disclosure Act data, Lehman Brothers’ subprime lender BNC was challenged for discrimination. Not (yet) in lending, but rather in employment. And not only by race, but by gender. The female complainants allege retaliation for raising questions about what they described as falsified bank statements and inflated pay stubs used to secure loan approvals. Coleen Colombo said she was offered money to keep quiet about what she said were questionable lending practices. What’s the connection, you ask? Well, Lehman Brothers is one of the lenders which refused to provide its 2004 mortgage data in analyzable form (after first trying to require a confidentiality agreement in order to see the data in any form). This white shoe firm is a rogue....

From the Ameriquest files, another complaint (naming names) -- “I responded to a pop-up ad on the Internet. John Van Der Graf then called and we discussed a cash-out refinance to reduce our debt. Mr. Van Der Graf suggested a 9.25% adjustable rate mortgage. Our current mortgage was at 7.5% so we hesitated to do this. The supervisor, Terrell Richard I believe, got on and we talked. He assured me that if we refinanced the home with this loan, we could, in 12 months, refinance back to the mid-5’s if we were not late on any payments... We did refinance, paying numerous fees (loan discount fee $3450.49; appraisal fee $350; tax-related service fee $70, flood search fee $16, lender’s processing fee $629, Admin to Ameriquest Mortgage $239, application fee $360) and when we called back to refinance [a year later], Ameriquest told me neither employee remained with their company and they did not know of any program where we could do what their employee had said. Leaving me stuck with a 9.35% ARM that is 4% points over the current market.”

That’s how they do it... Heard in The Loop: the origins of Illinois’ predatory lending database law are tellingly concrete. The district of House Speaker Madigan, father of the state attorney general, consist of two zip codes, which in a single year saw 900 foreclosure cases filed. And so, in another episode of all-politics-is-local, he passed the database law. Now the question is: can researchers get access to the credit scores that are part of the reports? Developing...

September 5, 2005

On August 29, 2005, Hurricane Katrina hit the Gulf Coast. Damage caused by the hurricane itself is one thing; disparate treatment by government and corporations is something else. The Gulf Coast region is for example one of the most redlined by banks. The nation's largest bank, Citigroup, virtually withholds its normally-priced mortgages from the region. In 2004, over 70% of Citigroup's mortgages in Mississippi were over the Federal high-cost rate spread (3% over Treasury securities on a first lien, 5% on subordinate liens). Meanwhile, less than 10% of Citigroup's 2004 mortgage in Massachusetts were higher-cost. By race, over 75% of Citigroup's loans to African Americans in Louisiana were higher-cost, compared to under 40% of Citigroup's loans to whites.

Beyond banking, an insurance problem looms. Of those who were insured, the policies that many have are flood damage, with an exclusion for hurricane damage. If the past is any guide, some insurers were argue the damage was due to winds, not water. Other insurers will offer fast but under-valued payouts in exchange for release of claims. And home repair scams are sure to follow, accompanied with predatory loans, if the past is any guide. We’ll be watching...

Earlier in 2005, the sell-out of New Orleans-headquartered Hibernia National Bank to Capital One was challenged by Inner City Press / Fair Finance Watch. ICP had found that in the New Orleans area in 2003 for conventional home purchase loans, Hibernia National Bank denied African Americans 3.75 times more frequently than whites (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 the first of its two articles on ICP's filing, BizNewOrleans.com reported that

"Neither Capital One CEO Richard Fairbank nor Hibernia CEO Herb Boydstun could be immediately reached for comment on ICP’s filing. A Hibernia spokesman said that Boydstun was out of town and had not yet seen or been advised of ICP’s challenge... A Hibernia official responded today to allegations made by ICP in regard to the company's home mortgage lending practices. 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.

"Spears said Hibernia has conducted workshops to educate first-time home buyers and worked to get home ownership grants for families of moderate means. He said the bank’s community development corporation 'has developed a number of houses and in some cases subdivisions' for such buyers. 'Not only do we provide financing and grants, but in a lot of cases we go out and build the homes,' he said."

We'll see. In Alabama, AmSouth Bank's weak record on anti-money laundering and fair lending have plagued the bank (and the area). AmSouth refused to provide ICP its 2004 mortgage data in analyzable form. Over 54% of Washington Mutual's loans to African Americans in Alabama in 2004 were higher-cost, compared to 20.5% of WaMu's loans to whites: a disparity of 2.63.

In Mississippi -- a state which Washington Mutual Finance Group abandoned, after losing a $73 million predatory lending verdict -- impacted counties include Hancock, Harrison and Jackson (in which BancorpSouth closed all its branches). Over 85% of Citigroup's loans to African Americans in Mississippi in 2004 were higher-cost.

On the environmental justice front, are, or were, 140 petrochemical plants along the 80 miles of the Mississippi river between New Orleans and Baton Rouge. Post-Katrina, with rainbows on the river, the damage has yet to be assessed. Beyond hydrocarbons, the run-off of pesticides and fertilizers starves the water of oxygen and creates the world's largest "dead zone" off the Louisiana coast. This year, even prior to Katrina, it expanded to an estimated 8,000 square miles.... Click here for more of ICP’s Gulf Coast Watch Reporter.

Elsewhere, on August 30 Wells Fargo announced what it called improvements to its lending practices. Many of the reforms are less meaningful than claimed. For example, any fanfare about dropping mandatory arbitration now that anti-consumer class action reforms have been passed, and the GSEs no longer buy loans with arbitration clauses, is misplaced. From last week’s Charlotte Observer:

Bank of America in 2003 acquired a stake in a California-based high-rate lender now known as OwnIt Mortgage. The bank is an investor in a private equity fund that bought out the company, previously known as Oakmont Mortgage. In 2004, OwnIt made about 56 percent of its 1,640 loans to African Americans at a high rate, according to an analysis by New York-based consumer advocate group Inner City Press/Fair Finance Watch. Bank spokeswoman Julie Davis said the company has an investment in OwnIt, but doesn't run the business. Bank of America packages high-rate loans for sale to investors. In the first quarter, the company was No. 18 among issuers of these securities, according to Inside Mortgage Finance. "We do feel there is a place for subprime lenders," Davis, the bank spokeswoman, said. "They help provide credit to those who otherwise would not have access to credit." Bank of America, however, does not condone "discriminatory, predatory or illegal practices" by mortgage lenders and has procedures to ensure mortgage loans with these characteristics are not securitized, she said.

Then why does BofA continue to securitize for Ameriquest, which has stated its under investigation by over 30 states’ attorneys general for predatory lending?

Finally, for this week, a recent book we at Inner City Press must review is "Frames of Protest: Social Movements and the Framing Perspective," edited by Hank Johnston and John A. Nokes (Rowman & Littlefield, 2005). We note it because of its discussion of the Young Lords and other groups in the Mott Haven neighborhood of the South Bronx - and an entire chapter on the exploits of Superbarrio in Mexico City, by Jorge Candena-Roa. Of Mott Haven, Cathy Schneider, author previously of "Shantytown Protest in Pinochet's Chile" (Temple University Press, 1995), writes:

"in the 1950s Mott Haven became predominantly Puerto Rican and black. It also became one of the poorest communities in the country. In 1969, the Young Lords challenged the machine, using an antisystem frame. On July 14, 1970, for instance, the Young Lords occupied Lincoln Hospital by driving a truck up an emergency ramp. For twenty-four hours they occupied the hospital, demanding a new hospital, a raise in the minimum wage of health care workers, and working control.. But this radical coality of activists in hospitals, drug clinics, and the local church was unable to pose a viable alternative."

This last is not well-enough explained. Schneider jumps to 1992, writing that at an Episcopal church (which she leaves unnamed, but is clearly St. Ann's) a "gang leader was show by another gang member and buried at the church he had served. Shortly after, the diocese removed the priest and despite weeks of parishioner protest, the priest and his supporters were unable to win the support of established social service agencies or politicians."
Schneider concludes with the "sentiment of cynicism and distrust, during the focus group [she] conducted: 'Everyone sells out here.'"

We beg to disagree -- click here for Inner City Press’ Bronx Report.

August 29, 2005

The FDIC has, following ICP/Fair Finance Watch’s comment and request, provided a copy of Wal-Mart’s application. Therein, Wal-Mart states:

“Subject to regulatory approval, the Bank will be a special purpose bank... Consequently, the Bank is exempt from CRA regulations, and a CRA Plan is not included with this application. A copy of a letter to the FDIC requesting designation for the Bank as a special purpose bank under CRA regulations is included with the Business Plan as Attachment 14.”

While much of Wal-Mart's application has been withheld, this letter (from the law firm of Ballard Spahr) argues that “Wal-Mart Bank’s proposed activities are limited and do not include granting credit to the general public.” Then it refers to confidential attachments.

As editorialized by the Salt Lake Tribune, this is entirely unacceptable...

ICP/Fair Finance Watch has also filed a timely supplemental comment on B of A - MBNA, expressing support for other protests filed requesting an extension of the comment period, and putting into the record further adverse issues. ICP submitted its first comment on July 11, 2005, and more than three weeks later, Bank of America submitted a vague and evasive response. Since then, ICP has awaited both the Delaware-focused CRA plan that BofA said it would be releasing, and the clearly-necessary details on how BofA would comply with the 10% deposit cap. Neither has been forthcoming, and ICP has now written to demand that the comment period be extended, and, on this record, that BofA’s application be dismissed or denied.

BofA’s vague claim to have standards are not credible. As shown, BofA is the main lender to payday lender Advance America Cash Advance, which is being sued by the North Carolina Banking Commissioner, and B of A's role as securitizer of subprime mortgage backed securities including those of Ameriquest, under investigation by its own admission in 30 states for predatory lending. Even since ICP’s first comment, BofA has been named as a lead underwriter on yet another Ameriquest issuance (under the name “Park Place,” see Reuters of August 18, 2005). BofA is clearly on notice, and must explain how this is consistent with its claims of standards, and with necessary due diligence and safeguards.

BofA’s arrogant Response claims, at 4-5, that BofA “does not condone... predatory... practices” and has written guidelines (not provided) to this effect. But how then can BofA be continuing to underwrite for Ameriquest, right after Ameriquest said it is setting aside $325 million to settle predatory lending investigations by at least 30 state attorneys general?

The insufficiency of BofA’s response is exemplified also by the treatment of 100 branch closings. Beyond generalities, BofA says “with respect to Washington state closings, the data cited by ICP is incorrect: only two of the banking centers will be closing, and these closings were made only after taking into consideration the community impact as required by our branch closing policy.” While BofA calls ICP’s “data” incorrect, here is what ICP said, of Washington State:

While Bank of America claims its closing cause no consumer harm, see for the record the Seattle Times of June 17, 2005, “Bad news from ‘down below’: Town's only bank will close” --

“Bank of America plans to shut low-volume branches in several Washington towns. Darrington wonders how its business will go on if the nearest bank is 30 miles away. Can a community exist without a bank? That's what the residents of Darrington, an old logging and mill community of roughly 3,000, are wondering in light of the news that their only bank, a Bank of America branch, is closing Sept. 9. The next-closest bank of any kind is in Arlington, a 30-mile drive...Though a Bank of America spokeswoman wouldn't say how many accounts there were at the local branch, business owners, from looking at the checks they receive, estimate about half the community's residents have personal accounts in town... The Washington towns of Okanogan, Republic, Sumas and Sultan will also lose their Bank of America branches, said Diane Wagner, a company spokeswoman based in Chicago... Republic also will be hit hard - the next-closest branch is nearly 40 miles away in Colville, Stevens County... "I think they're very concerned with how they're going to bank with us," Wagner said, suggesting that Darrington residents could bank over the Internet or by mail. "People choose how they want to bank with us." But residents say that after the branch is gone, most won't want to use Bank of America at all. "We didn't hear much of anything until they announced they were leaving," said Jones, who is upset with the lack of warning given by the bank (letters to customers dated June 10 were sent out over the past week).”

So -- is BofA saying that this newspaper article was wrong? Did BofA write to this newspaper to correct the public record? And regardless, of what significance of BofA’s branch closing policy and “consideration” if the above, publicly reported, is the result? It is not enough, just to allude to standards.

For now, on BofA’s 2004 mortgage lending record, ICP has now analyzed BofA’s first lien loans. Since BofA has publicly claimed not to understand the methodology, it’s simple: ICP has cumulated the three LARs that BofA provided in response to ICP’s request for BofA’s 2004 LARS: BofA, NA, Fleet and OwnIt, the subprime lender that BofA controlled in 2004 (notwithstanding BofA’s obtuse footnote 3 in its purported Response). For first liens in 2004, within this BofA, African Americans were 2.27 times more likely than whites to be confined to higher cost, rate spread loans. African Americans were denied by BofA 1.91 times more frequently than whites. Latinos were 1.93 times more likely than whites to be confined to higher cost, rate spread loans. Latinos were denied by BofA 1.87 times more frequently than whites.

BofA’s lack of standards is pervasive. Also, the US Senate’s report in March 2005 on Pinochet’s funds stated that

“from 1993 until 2004, Bank of America maintained 3 U.S. accounts and as many as 6 CDs at a time for Mr. Pinochet’s daughter, Ines Lucia Pinochet. At least three of these CDs, in the amount of $100,000 or more, were purchased in 2002; the other CDs, which ranged in value from $10,000 to $125,000, were purchased between 1996 and 2002, and some were held in trust for one or more of her sons. The maximum amount of funds in Ms. Pinochet’s Bank of America accounts at one time totaled about $420,000, in December 2002. One source for the funds in the accounts was a $300,000 Riggs cashiers check issued in September 2002, which withdrew funds from Ms. Pinochet’s account at Riggs in London. The cashiers check was deposited into Ms. Pinochet’s Bank of America account on September 30, 2002. Nine days later, on October 9, Ms. Pinochet purchased three $35,000 Bank of America cashiers checks and later deposited two of them into an account she held at PineBank in Miami.... On January 3, 2001, BankBoston cashed a Riggs cashiers check dated August 18, 2000, for $50,000, made payable to ‘Augusto Pinochet.’”

So much for “know your customer.” What sets BofA apart from most other of the banks exposed in the Pinochet reports is BofA’s arrogance. The cavalier approach to the 10% deposit cap is only one example. Continuing, without explanation, underwriting for Ameriquest, and lending to the payday lender Advance America Cash Advance, are two examples, that particularly injure low and moderate income communities. Bank of America's applications should be denied. [For more on Pinochet, and banks' money laundering, see ICP's Finance Watch Report.]

August 22, 2005

On August 16 -- right on schedule, to allow a September 1 consummation -- the Federal Reserve issued a 16-page order approval Capital One’s application to acquire Hibernia. In the Order, the Fed says some extraordinary things. For example, in footnote 10 on page 5, the Fed recites that ICP

“criticized Capital One’s and Hibernia’s relationships with unaffiliated subprime lenders, payday lenders, car-title lending companies, and other nontraditional providers of financial services. As a general matter, these businesses are licensed by the states where they operate and are subject to applicable state law. Capital One stated that its business relationships with such providers are limited to business credit-card loans or loans extended under Small Business Administration (‘SBA’) programs. Any such extensions of credit would be in the ordinary course of Capital One’s small business credit-card lending activities or in accordance with SBA requirements.”

So let’s get this straight -- the U.S. Small Business Administration is providing guarantees for payday lenders and car-title lenders? In its next footnote, the Fed says that ICP

“also opposed the proposal based on news reports of lawsuits and investigations undertaken by the Attorneys General of Minnesota and West Virginia in their respective states relating to Capital One’s marketing of its credit cards. These investigations and lawsuits are pending and have not yet reached conclusion, and there has been no determination of liability, damage, or wrongdoing in these cases. The Board has consulted with the relevant state authorities about these matters and will continue to monitor these matters in the supervisory process. Board action under the BHC Act would not interfere with the ability of the courts to resolve any litigation pertaining to these matters.”

But is that the standard? If so, the Fed could approve applications by BCCI, the Bank of Credit and Commerce International. Oh, we forgot -- the Fed did approve BCCI’s applications... Showing the Fed’s lack of interest in using the freshest facts, it again refuses to consider 2004 HMDA data (even though in previous years it has requested and considered non-final HMDA data). The result is an order in the second half of 2005 that relies on 2003 data. Or, in the case of Hibernia, on 2002 data. The order says of Hibernia’s “most recent” CRA exam that the “evaluation period was from October 18, 1999, through January 12, 2004, except for the lending test, which was evaluated from January 1, 2000, through December 31, 2002.” So it’s a CRA exam labeled 2004, which didn’t even use 2003 HMDA data?

Meanwhile, an email last week to the FFIEC (asking when the “final” 2004 HMDA data will be available) resulted in two “out-of-office” email replies from the Federal Reserve. We always knew who ran the FFIEC. But how can it be that no one at the FFIEC (or Federal Reserve) can answer a simply question, in an entire week, even in August? We’ll see.

* * *

As Robert Rubin defends -- without fixing -- Citigroup's predatory lending, now ex-Clintonista Lanny Davis serves as outside counsel to subprimer Fog Cutter Capital Management, defending in a letter in the August 20 N.Y. Times Fog's board's decision to pay ex-CEO Andrew Wiederhorn while he was in jail. For shame...

From Inner City Press' mailbag:

Subj: American General Finance Company/Predatory Lenders!

Date: 8/20/2005 5:17:44 AM Eastern Standard Time

From: [ ]

To: AIG-watch [at] innercitypress.org

How much longer will it be, before American General Finance Company is put to a stop on predatory lending? This has been my nightmare with them.

My husband and I are victims of predatory lending. American General Finance Company encouraged us to refinance our home through them. They assured us that this was the right thing for us to do, and the best thing that we could do. They promised us that our interest rate would remain about the same, about 9-10% at the most, and the payments would stay around the same, around $450-500 at the most. They did not tell us that the loan was a revolving credit loan, like a credit card, so that we’d never pay the house off. Everything happened so fast, at the closing. After signing the papers, we found out that we had singed to a 14.50% interest rate and almost $750 monthly payment. They also did not inform us that we had three days to look at the contract. This loan has caused us to almost lose our home of 25 years. They foreclosed on us and I immediately filed for bankruptcy. The original loan amount was $56,000. With all the interests, fines, fees, and costs for their lawyer fees and whatever else they charged us for, we now owe them $72,000 for our home! So even though we have filed for bankruptcy, we are still threatened by the possibility of being foreclosed on again. From month to month, it’s almost impossible for us to make our house payment, now being $750 and if we’re late almost $800. I know for a fact that they are just waiting on us to default so that they could take our home away from us! In the last three years we have paid them over $35,000, and we now owe them $72,000, there’s a serious problem with this! This is robbery!!! I personally know someone else who has experienced a similar problem with them, and they too were forced to file for bankruptcy. On the day my house went up for sale at the courthouse, there were two other families that AG foreclosed on. One day, while I was making a payment at the office, another customer was there making a mortgage payment too. They were there to make a payment so that they could get ahead on a payment. They told him that was impossible for him to do, because the computer would not allow them to do that. Well, I had the same experience with them. I made two payments in one month, thinking that I was going to be a payment ahead. The next month it was as though I had never made an extra payment, it went towards the interests. You can imagine how I felt, furious!!! Several times they tried to get me to redo the loan with them so that they could catch me up, but I refused. Instead I tried to redo the loan with other finance companies, and when I did, they made it hard for me to accomplish that. I then found out that there was a prepayment fine or penalty fee of $4,000, along with other fines and fees they were charging me, making it impossible for me to get out from underneath them. They have me trapped!!! If it continues like this, sooner or later they will have my home. And they know it too!!! And others too!!! American General Finance Company preys on minorities and the low- income people. They must be put to a STOP!!! PLEASE DO AN INVESTIAGATION ON THEM.

Okay... Click here for ICP's AIG Watch.

August 15, 2005

Earlier this month, the small business lending and Community Reinvestment Act data for 2004 was released. For the first time, this was done separately from year’s the Home Mortgage Disclosure Act data (the aggregate of which, for 2004, is now slated to come out in September). The regulators, through the Federal Financial Institutions Examination Council, bragged that the “total number of reported community development loans is higher than in 2003.” But when one focuses on “intermediate small banks” -- those with assets between $250 million and $1 billion, which the regulators “freed” from the duty to report this data from September 1, 2005, onward -- one finds that community development lending decreased from 2003 to 2004, both by number of loans and by amount. So why are institutions of this size being exempted from reporting this data? It sure isn’t because their performance was improving, from 2003 to 2004...

After months of Ameriquest-caused delay, Inner City Press / Fair Finance Watch has received a four-page ruling from the Texas AG’s Open Records Division, stating among other things that

“the OAG states that the Consumer Protection and Public Health Division is currently investigating Ameriquest... for potential violations of the Texas Deceptive Practices - Consumer Protection Act... Generally, however, once information has been obtained by all parties to the litigation through discovery or otherwise, not section 552.103(a) interest exists with respect to that information. Thus, information that has either been obtained from or provided to the opposing parties in the anticipated litigation is not excepted from disclosure under section 552.103(a) and it must be disclosed.”

We’ll see... This, we hadn’t seen until last week -- the publication Euromoney of July 2005 reported that ICP

“has a question. How come the firm, which undertook in January 2003 on its corporate citizenship website to stop making so-called HOEPA loans, has, according to its own home mortgage data for 2004, made a further 837 such loans? The reference is to high-cost loans charging 800 basis points or more above treasuries that are usually extended to borrowers with poor credit histories in poor neighborhoods and now covered by the Home Ownership and Equity Protection Act. Into the breach steps Robert Willumstad, president and chief operating officer of Citigroup. He tells Lee that the bank doesn't make such loans and that Lee must have misinterpreted the data. That's odd, Lee replies, as he is looking at a spreadsheet of loan figures provided by Citigroup that has a HOEPA status column with 837 loans marked yes. Home Mortgage Disclosure Act data is as familiar ground to Lee as negative operating leverage ratios are to the average bank analyst. Citigroup later pleads that although it instituted the policy of not originating Hoepa loans in January 2003, various divisions that it had acquired through the purchases of Associates and parts of Washington Mutual only phased in this new approach to lending over time. It's a messy fudge of an explanation.”

Emphasis on “fudge”.... Meanwhile, ICP on August 13 filed timely comments opposing the application to the FDIC by BNP Paribas / Bank of the West to acquire Commercial Federal -- click here to view.

August 8, 2005

Here’s a new one -- in its second response to Inner City Press / Fair Finance Watch’s comments, Washington Mutual has this to say: “since minorities make up a larger percentage of the subprime lending pool, it is statistically inevitable that combining the threshold loan rates of a prime lender and a subprime lender will result in a higher threshold loan rate for minorities than for white borrowers. While this is a socially troubling result that Applicant continues to attempt to address through innovative lending programs, the OTS should not allow ICP to use the pending application as a forum for protesting broader social issues.”

But the disparities ICP has identified (see last week's report, below) are not “societal,” but at Washington Mutual and its subprime unit Long Beach. And if regulators were to agree with WaMu’s argument, that each affiliates’ lending must be considered separately, conglomerates could run rings around the fair lending laws by simply confining most people of color into separate subsidiaries (not unlike what happens at Washington Mutual / Long Beach)...

August 1, 2005

Washington Mutual last week submitted to the Office of Thrift Supervision a purported response to Inner City Press / Fair Finance Watch’s two timely comments opposing WaMu’s applications to acquire Providian. Washington Mutual’s response tries to obscure the striking disparities in its lending -- in which African Americans and Latinos are subjected to higher cost “rate spread” loans significantly more than whites, and more than at WaMu’s peers -- by arguing that the OTS should only consider the records of WaMu’s thrift(s) and “Bank Affiliates.” But this is a ludicrous argument. Simply as one example, even the Federal Reserve considers (and has fined) Citigroup’s non-bank subprime lending units, because they are bank holding company subsidiaries, just as WaMu’s subprime unit Long Beach is a thrift holding company subsidiary.

WaMu also chides ICP for “aggregat[ing] loans with 1^st and 2^nd lien reportable spreads” -- that is, for not separately considering First Liens and Subordinated Liens. Well, ICP has reviewed WaMu’s 2004 data, and for the important category of first liens finds WaMu’s record is even more disparate:

Washington Mutual, for First Liens in 2004

Whites: 399,515 originations; 14,459 [or 3.62 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 36,375 originations; 5,795 [or 15.93 percent] exceeded rate spread, fully 4.4 times higher / more likely to be over rate spread than whites.

Latinos: 74,371 originations; 4,079 [or 5.48 percent] exceeded rate spread [1.51 times higher / more likely to be over rate spread than whites]

Rather than substantively respond to what ICP has raised, WaMu seeks to evade the issues by calling the 2004 data it provided to ICP “preliminary.” WaMu sent ICP (and presumably others) a correction, restating the number of HOEPA loans, and said that was the only correction. So why call the data “preliminary”? Why not respond in some fashion to the consumer complaints ICP has submitted including a detailed complaint from a deeply dissatisfied WaMu customer over 85 years old? ICP has now submitted additional sample complaints, including for example one that begins “I am writing this letter concerning a fraud I believe is being perpetrated by Washington Mutual Bank against my family,” and a letter from the Kentucky Attorney General’s Office telling a consumer that “this office has contacted Washington Mutual on several occasions in an attempt to resolve your complaint. As of this date, they have sent correspondence indicating their intent to respond, but no response has been received” -- rather like in this proposed merger proceeding. ICP has reiterated its request for public hearings and denial of WaMu’s applications. Meanwhile--

Ameriquest Jumps AGs’ Gun, Offers $325 Million in Predatory Settlement

On the afternoon of July 28, Ameriquest disclosed that it is setting aside $325 million, saying this is “is based on extensive discussions with the states and represents the company's best estimate of its maximum financial liability for a comprehensive resolution of this matter."

The immediate question was: why did Ameriquest jump the gun and announce a settlement before the AGs did? A cynic inferred that Ameriquest was still negotiating, making this figure public to put pressure on (some) AGs to accept it. But from Des Moines, the Iowa Attorney General issued this statement: "We understand that Ameriquest has announced that related to our discussions it has recorded a provision of $325 million in its financial statements. The states do not disagree with Ameriquest's actions in this regard."

Ameriquest claims it was required to make the disclosure, even though it is not a publicly-traded company, in connection with a bond prospectus. Perhaps. Another cynic noted that on the same afternoon, the White House formally nominated Ameriquest’s owner to become U.S. ambassador to The Netherlands. Low lands indeed... Meanwhile, also on this same afternoon, the Texas Attorney General’s Office’s letter extending its time to rule on the Freedom of Information / Public Information Act request for the 41 boxes of documents about Ameriquest being withheld by that office was received by the requested, Inner City Press. (No cynics here -- just stoics).

The more substantive question is how meaningful the reforms / consent decree might be, and how they would be enforced. Also, it’s worth nothing that while this figure is below the $484 million paid by Household International, Ameriquest’s volume of subprime mortgage loans is higher (highest, in 2004). There are doubts and questions about this settlement, that will be answered and/or addressed (even, attacked) once despite this lurching process it become public.

While Ameriquest seeks to settle on the cheap with state attorneys general, Inner City Press received last week additional complaints against Ameriquest, including by consumers who had purportedly been made whole by Ameriquest. The consumer wrote to Ameriquest’s Lori A. Maimone on Town & Country Road: “Please note that I am totally dissatisfied with the settlement...I really had no choice but to accept your offer as my attorney wanted most of the loan proceeds as retainer to pursue this... We will be looking to refinance as soon as possible again as we do not want to do business with Ameriquest for any length of time. Had I known this would turn into such a mess, I would have pursued any of several other offers I had received.”

Ameriquest responds with respect to this “purported dissatisfaction with the settlement, Ameriquest has no comment.” Proud sponsor of the American Dream...

July 25, 2005

On July 25, Inner City Press / Fair Finance Watch filed comments with the FDIC and Utah regulators opposing the applications to form Wal-Mart Bank. Back in 1999, ICP blocked Wal-Mart’s attempt to by a one-branch savings bank in Oklahoma. Now they’re back. From ICP’s comments:

This application represents the stealth attempted entry of this country’s largest and most destabilizing and dis-investing retailer into banking. While cynically styled as no more than a proposal to “enable it to recapture fees that it pays third-party institutions to process the 140 million debit, credit and electronic check transactions at its stores each month,” Wal-Mart’s financial services director answered the Chicago Tribune’s question, whether shoppers could someday shop for mortgages at Wal-Mart, with this phrase: "We continue to look for what makes sense to the customer." (Chicago Tribune, July 2, 2005, “Wal-Mart Seeks Permission to Operate a Bank”). We at ICP continue to look at what make sense to consumers and the public interest, and for this reason request hearings on, and the denial of, Wal-Mart’s applications.

On an application to charter and insure a bank, including an industrial loan company, the Federal Deposit Insurance Corporation must consider a range of factors, including managerial integrity, compliance with law and regulation, such as anti-discrimination provisions, including as a predictor of Community Reinvestment Act performance. Wal-Mart has a history of violating the law, and of destabilizing and disinvesting in communities, as set forth below.

Wal-Mart is subject to the largest anti-discrimination in employment class action lawsuit in U.S. history. “The lawsuit, Dukes v. Wal-Mart, alleges that the world's biggest retailer discriminates against its female employees in terms of pay and promotion. Six female employees filed the suit in California in 2001, claiming they were passed over for promotion by men. In June 2004, a California federal judge ruled that the suit could be certified as a class action.” Arkansas Democrat-Gazette, June 22, 2005, “Hearing set in suit against Wal-Mart.” This is “the largest class-action suit in American history, consisting of 1.6 million current and former Wal-Mart employees. Between 1996 and 2001, women working at Wal-Mart made approximately five per cent less than men doing similar jobs.” Canadian Dimension, May 1, 2005. Documents made public in this lawsuit reflect not only discrimination but also other managerial issues that must be considered by the FDIC. See, e.g., “Wal-Mart Ignored Own Report,” by Karen Gullo, Bloomberg News, July 16, 2005: “Wal-Mart Stores Inc. took no action on internal warnings seven years ago that it was falling short in promoting women, documents in a federal sex-discrimination lawsuit show. The world's largest retailer didn't carry out the 1998 recommendations of a diversity task force and disbanded the panel, according to company memos, reports and depositions filed in the case. Two years later, Wal-Mart had a reduced percentage of female managers.”

Wal-Mart has been charged with discrimination not only by gender, but also by race. See, e.g., New York Times of July 14, 2005: “Two black truck drivers have filed federal lawsuits against Wal-Mart Stores in Arkansas, arguing that the company discriminated against them by denying them jobs because of their race. Lawyers who filed the suits are seeking class-action status.” The asserted discrimination is not only against employees, but also consumers. See, e.g., Boston Globe of July 13, 2005: “Customers Sue Wal-Mart Over Alleged Bias, Suit Claims Cases of Racial Profiling” -- “In a lawsuit filed in US District Court in Boston yesterday, the consumers alleged they were followed, searched, humiliated, and in some cases, detained by greeters at the store after entering the retail center in 2002 or 2003.... The lawsuit, brought by one white consumer and nine minorities, including three African-Americans, several West Indians, and a Mexican shopper, alleges that Wal-Mart employees illegally detained the minorities until police arrived and searched bags or stopped them as they were leaving.”

Beyond that, as further examples of Wal-Mart’s substantive violations, Wal-Mart “reached an out-of-court settlement in a child labor case in which teen clerks in three states were allowed to use heavy equipment in violation of safety laws. The company's vice chairman was fired a few months before his scheduled retirement after an accounting scandal became the subject of a criminal investigation.” St. Petersburg Times, June 4, 2005.

This pattern of law-violation has given rise to shareholder resolutions, including by elected officials in New York. As reported in the N.Y. Post of June 2, 2005, “Wal-Mart Blasted for Rule-Breaking,” the “shareholder group, co-headed by New York City Comptroller William Thompson Jr., called on Wal-Mart's board to set up a special committee to monitor Wal-Mart's future compliance with laws and regulations. The shareholders said they also were concerned about Wal-Mart's 24 violations of child labor laws in three states. Thompson said the board's laxity on compliance ‘could be indicative of inadequate internal controls and a lack of board oversight and accountability.’" This is a standard that the FDIC must consider on this application, including at the public hearings ICP is hereby timely requesting.

While Wal-Mart is segmenting its actual proposal into pieces, seeking to charter this institution and then later expand it, the FDIC must consider in this proceeding all of the dangers raised by allowing this large, destabilizing, disinvesting and, ICP contends, presumptively disqualified company from entering the business of banking. ICP contends that this pattern of export of capital is relevant to, and must be considered on, Wal-Mart’s application to get into banking, as a Community Reinvestment Act matter and otherwise. ICP also formally contends that several of Wal-Mart’s documented business practices -- including predatory pricing, mislabeling of products, sale of merchandise made with child labor, etc. -- are adverse factors under the FDIC’s regulations and under the CRA.

The record should reflect that this is by no means Wal-Mart’s first attempt to slip into the banking industry. In 1999, ICP opposed the applications of Wal-Mart Stores, Inc., Walton Enterprises, L.P., Broadleaf Investments, Inc., et al. (collectively hereinbelow, “Wal-Mart”) to become savings & loan holding companies by acquiring Federal BankCentre, a one-branch thrift in Oklahoma. See, e.g., Reuters, “Group Tries to Block Wal-Mart Bank Effort, Advocates for Low-Income Groups Filed a Protest against the Retailer’s Applications to Buy a Savings and Loan,” e.g. in the Orlando Sentinel of July 24, 1999, and the Associated Press, “Wal-Mart plan to open thrift draws fire,” (e.g. in Boston Globe of July 24, 1999). That application was filed by Wal-Mart in an attempt to beat the Gramm-Leach-Bliley Act deadline. After that application failed, Wal-Mart tried to partner with Toronto Dominion Bank, and to buy an industrial loan company in California. Both forays failed. Now Wal-Mart tries the FDIC -- ICP urges the FDIC to hold hearings, and to deny, Wal-Mart’s applications, including on CRA grounds.

Below in this comment, ICP presents for the record on this application a thumb-nail sketch of Wal-Mart’s track record of destabilizing communities, including driving locally-controlled merchants out of business by predatory pricing, then siphoning off the assets and insured deposits that these local businesses used to deposit in local banks, and shifting the assets to Bentonville, Arkansas and the various Walton heirs’ stock portfolios. This pattern has resulted in increasing opposition to Wal-Mart’s proposals. See, as four examples just last month, the Denver Post of The Denver Post of June 28, 2005, “Wal-Mart foes pack hearing;” Charlotte (NC) Observer of June 5, 2005, “Wal-Mart battle goes to public;” Philadelphia Inquirer of June 3, 2005, “Wal-Mart plan brings out challengers;” the Madison, Wisc. Capital Times of June 2, 2005, “Rally Rips Wal-Mart on Health Care.” See also, NBC Dateline of June 17, 2005, linking Wal-Mart to sweatshops in Bangladesh. Click here for more of ICP’s comments.

* * *

Beyond its subprime Long Beach, WaMu buys subprime loans by others. From among the complaints against Ameriquest that Inner City Press has received, this statement by Ameriquest itself: “Ameriquest is affiliated with the originating lender, Town and Country Credit Corporation. Ameriquest also serviced the loan from origination to August 23, 2002, when the loan was sold, servicing request, to Washington Mutual. Accordingly, Ameriquest filed the response regarding the origination issued on behalf of our affiliate and the investor.” So Washington Mutual buy (“invests in”) Ameriquest loans...

Talk about out of it -- the Office of the Comptroller of the Currency, to which one of ICP’s comments on Capital One - Hibernia was forwarded, has responded to ICP with a letter referring to ICP’s comments “complain[ing] about the merger of Hibernia National Bank and Regions Bank,” promising to closely review these (mis-identified) comments. The OCC’s letter to ICP, signed by Patrick C. Lewis of the OCC’s Customer Assistance Group, has right behind it ICP’s letter, which is on Hibernia - Capital One, not Regions. Someone’s asleep (or worse) at the switch at the OCC...

July 18, 2005

This week: Washington Mutual’s disparities, and Freedom of Information Act news about predatory lenders. On July 18, Inner City Press / Fair Finance Watch filed a second comment with the Office of Thrift Supervision on Washington Mutual’s proposal to acquire Providian. Since ICP’s first comment, submitted on June 20, more consumer complaints have come in, and ICP has analyzed Washington Mutual’s lending state-by-state. ICP’s second comment shows, for example, that in the state of New York in 2004, Washington Mutual confined African Americans to higher cost rate spread loans 3.20 times more frequently than whites, and confined Latinos to higher cost rate spread loans 2.76 times more frequently than whites. Also analyzed in ICP’s comment (and below) are WaMu’s disparities in the states of Washington, California, Delaware, New Jersey, North Carolina, Illinois, Pennsylvania, Texas, Connecticut, Ohio and Tennessee. WaMu’s disparities in these states militate for the nationwide public hearings ICP has timely requested.

ICP submitted a first comment on June 20, 2005, to which WaMu has yet to respond. (The OTS has asked WaMu to submitted a response, and to copy ICP; it will be reported on this site). In response to ICP’s request under the Freedom of Information Act for the application, the OTS has provided ICP only with the portions of the application for which WaMu has not requested confidential treatment. While the comment period is slated to close on August 1, the OTS has withheld such presumptively non-exempt portions of the Application as “Subsidiaries of PNBank” (Exhibit 5), and even “List of Directors of Officers” (Exhibit 9). As set forth in ICP’s FOIA appeal, the list of and information about the directors and officers of WaMu must be made public, both so that ICP and others can comment on managerial issues under HOLA, and because this information is, in most cases, already publicly available. In fact, information about WaMu’s directors, including their other holdings, was released by the OTS during the WaMu - Dime Savings proceeding in 2001, as was information about the subsidiaries of the target (in that case, Dime Savings). So to now withhold it in full ignores not only FOIA precedents generally, but also the OTS’ own precedents.

ICP’s initial submission focused nationwide on the glaring disparities in Washington Mutual’s mortgage lending record in 2004, based on HMDA data ICP was given by Washington Mutual. Particularly troubling is the degree to which Washington Mutual disproportionately confines African Americans and Latinos to higher cost, “rate spread” mortgages. For example, Washington Mutual nationwide in 2004 imposed higher-cost rate spread loans 3.26 times more frequently on African Americans than on whites. This is significantly more disparate than Washington Mutual’s peers.

Below, ICP submits for the record, and in support of its request for public hearings, state-by state analysis of Washington Mutual’s lending in 2004, by race and ethnicity:

NEW YORK: Washington Mutual's lending in the state of NY in 2004

Whites: 30,081 applications, leading to 7553 denials (25.11% denied) and 19183 originations; 504 [or 2.63 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 5962 applications, leading to 2265 denials (37.99% denied, 1.51 times higher than whites) and 2980 originations; 251 [or 8.42 percent] exceeded rate spread, fully 3.20 times higher / more likely to be over rate spread than whites.

Latinos: 5053 applications, leading to 1738 denials (34.40% denied, 1.37 times higher than whites) 2684 originations; 195 [or 7.27 percent] exceeded rate spread [2.76 times higher / more likely to be over rate spread than whites]

NEW JERSEY: disparities in WaMu's lending in New Jersey in 2004

Whites: 21,663 applications, leading to 4681 denials (21.61% denied) and 14,519 originations; 426 [or 2.93 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 2702 applications, leading to 893 denials (33.05% denied, 1.53 times higher than whites) and 1491 originations; 180 [or 12.07 percent] exceeded rate spread [a whopping 4.12 times higher / more likely to be over rate spread than whites]

Latinos: 3750 applications, leading to 1122 denials (29.92% denied, 1.38 times higher than whites) 2167 originations; 160 [or 7.38 percent] exceeded rate spread [2.52 times higher / more likely to be over rate spread than whites]

North Carolina: Washington Mutual's lending in the state of NC in 2004

Whites: 6573 applications, leading to 1593 denials (24.24% denied) and 4464 originations; 469 [or 6.40 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 1995 applications, leading to 699 denials (35.04% denied, 1.45 times higher than whites) and 1153 originations; 487 [or 42.24 percent] exceeded rate spread [a whopping 4.02 times higher / more likely to be over rate spread than whites]

Latinos: 353 applications, leading to 116 denials (32.86% denied, 1.36 times higher than whites) 20 originations; 44 [or 21.15 percent] exceeded rate spread [2.01 times higher / more likely to be over rate spread than whites]

California: Washington Mutual's lending in CA in 2004, by race and ethnicity

Whites: 184,107 applications, leading to 32,820 denials (17,83% denied) and 130,593 originations; 5932 [or 4.54 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 12,307 applications, leading to 3533 denials (28.71% denied, 1.61 times higher than whites) and 7639 originations; 821 [or 10.75 percent] exceeded rate spread [2.37 times higher / more likely to be over rate spread than whites]

Latinos: 72,320 applications, leading to 18,227 denials (25.20% denied, 1.41 times higher than whites); 47,043 originations; 4629 [or 9,84 percent] exceeded rate spread [2.17 times higher / more likely to be over rate spread than whites]

Illinois: Washington Mutual's lending in IL in 2004, by race and ethnicity

Whites: 33,424 applications, leading to 6066 denials (18.15% denied) and 22,793 originations; 1423 [or 6.24 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 6009 applications, leading to 1829 denials (30.44% denied, 1.68 times higher than whites) and 3470 originations; 949 [or 27.35 percent] exceeded rate spread [a whopping 4.38 times higher / more likely to be over rate spread than whites]

Latinos: 7594 applications, leading to 1781 denials (23.45% denied, 1.29 times higher than whites); 4495 originations; 680 [or 15.13 percent] exceeded rate spread [2.42 times higher / more likely to be over rate spread than whites]

Pennsylvania: Washington Mutual's lending in PA in 2004, by race and ethnicity

Whites: 13,493 applications, leading to 2663 denials (19.74% denied) and 9114 originations; 538 [or 5.90 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 1381 applications, leading to 404 denials (29.25% denied, 1.48 times higher than whites) and 799 originations; 147 [or 18.40 percent] exceeded rate spread [fully 3.12 times higher / more likely to be over rate spread than whites]

Latinos: 621 applications, leading to 182 denials (29.31% denied, 1.48 times higher than whites); 359 originations; 48 [or 13.37 percent] exceeded rate spread [2.27 times higher / more likely to be over rate spread than whites]

Texas: Washington Mutual's lending in TX in 2004, by race and ethnicity

Whites: 38,578 applications, leading to 11,751 denials (30.46% denied) and 22,036 originations; 3049 [or 13.84 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 5952 applications, leading to 2566 denials (43.11% denied, 1.42 times higher than whites) and 2802 originations; 798 [or 28.48 percent] exceeded rate spread [2.06 times higher / more likely to be over rate spread than whites]

Latinos: 13,583 applications, leading to 5598 denials (41.21% denied, 1.35 times higher than whites) and 6376 originations; 1631 [or 25.58 percent] exceeded rate spread [1.85 times higher / more likely to be over rate spread than whites]

Washington: Washington Mutual's lending in the state of WA in 2004

Whites: 33,325 applications, leading to 5686 denials (17.06% denied) and 24,468 originations; 1290 [or 5.27 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 933 applications, leading to 250 denials (26.80% denied, 1.57 times higher than whites) and 609 originations; 100 [or 16.42 percent] exceeded rate spread [fully 3.12 times higher / more likely to be over rate spread than whites]

Latinos: 1677 applications, leading to 433 denials (25.82% denied, 1.51 times higher than whites) and 1111 originations; 164 [or 14.76 percent] exceeded rate spread [fully 2.80 times higher / more likely to be over rate spread than whites]

Connecticut: Washington Mutual's lending in CT in 2004, by race and ethnicity

Whites: 10,137 applications, leading to 1849 denials (18.24% denied) and 7143 originations; 236 [or 3.30 percent] exceeded rate spread (of 3% on a first lien, 5% on a subordinate lien)

African Americans: 815 applications, leading to 266 denials (32.64% denied, 1.79 times higher than whites) and 447 originations; 64 [or 14.32 percent] exceeded rate spread [a whopping 4.34 times higher / more likely to be over rate spread than whites]

Latinos: 932 applications, leading to 283 denials (30.36% denied, 1.66 times higher than whites) and 560 originations; 63 [or 11.25 percent] exceeded rate spread [fully 3.41 times higher / more likely to be over rate spread than whites]

In the state of Delaware in 2004, Washington Mutual confined African Americans to higher cost rate spread loans 3.99 times more frequently than whites, and confined Latinos to higher cost rate spread loans 3.27 times more frequently than whites.

In Ohio in 2004, Washington Mutual confined African Americans to higher cost rate spread loans 3.18 times more frequently than whites. In Tennessee in 2004, Washington Mutual confined African Americans to higher cost rate spread loans 3.05 times more frequently than whites. These disparities militate for the public hearings ICP has timely requested.

The OTS has also received into the record, as exhibits to ICP’s initial comment, sample consumer complaints against Washington Mutual Home Loans and Washington Mutual Bank. ICP is annexing hereto some complaints that have been directed to ICP since ICP filed its initial comment on June 20, 2005. For example, ICP has received, and herewith submits, a letter dated June 22, 2005, providing a detailed complaint and documentation about a mishandled joint annuity account for a senior citizen, who writes that in WaMu’s annexed response, “Paragraph II is false... Paragraph III is false... Compliance specialists have been of no help. I am a World War II veteran and I’m 86 years old, was married and had two children. I didn’t serve my country for the disrespect I’ve had from Washington Mutual, in its deliberate changing and cover up of legal documents.”

Also annexed is a July 2, 2005, complaint to ICP (and an AG) that “in two years, Washington Mutual, who had bought my mortgage from Great Western, ruined my credit, mis-applied my payments and made my life a living hell while they at WM totally ignored every phone call, letter (360 of them) and visits to their loan center.” This consumer, 76 years old, asserts that the OTS protects Washington Mutual. The issues raised into the record in this proceeding should be fully and publicly addressed, including at the public hearings ICP has timely requested.

More needs to be (and will be) said, but ICP will await the applications (as soon as they are filed), along with copies of the OTS's correspondence with and about Washington Mutual and/or Providian, and the banks' responses, all to be reported on this site.

In further FOIA news, on July 14, 2005, US District Judge Joseph Farnan issued a three page order denying the Delaware Attorney General’s motion for a stay of the judge’s previous order requiring the AG’s office to finally release the long-ago requested documents about HSBC - Household’s predatory lending settlement. The order notes that “the public has no interest in the enforcement of a statute presently found to be unconstitutional.” The AG had asked for permission to not release the HSBC Household-related record pending an appeal to the US Court of Appeals for the Third Circuit....

Ameriquest last week settled for $8 million the Connecticut Banking Department charges that it violated its previous anti-flipping “commitment.” This does not resolve the ongoing state attorneys general investigation. On that, Inner City Press last week received a copy of Ameriquest’s second brief against the release of documents that ICP has requested from the Texas AG’s Office. The Ameriquest brief is crudely smeared with magic marker. Ameriquest makes a claim for exemption “in conjunction with constitutional and common law rights of privacy.” A sentence begins, “Additionally, it includes” -- followed by magic marker. This “brief” is by Ameriquest Senior Counsel Diane E. Tiberend, who appeared with Tom Noto and John P. Grazer in a Louisiana incorporation filing in 2002, for Ameriquest Newco, Inc., and in this letter in which the Connecticut Department of Banking stated that it was “unable to find that the financial responsibility, character, reputation, integrity and general fitness of [Ameriquest] and of its officers, directors and principal employees are such as to warrant belief that the Applicant's business will be operated soundly and efficiently, in the public interest.” Not in the public interest -- that’s Ameriquest...

At deadline, ICP received yet another letter from Ameriquest, this one adding that “evidence of conduct or statements made in compromise negotiations is likewise not admissible.” But this is not about the admissibility in court of evidence -- it is about whether the records came be withheld under Texas’s Public Information Act. We say no...

July 11, 2005

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.

Bank of America NA in 2004 denied the applications of African Americans and Latinos 1.9 times more frequently than those of whites. While most of B of A’s subprime loans, over the federally-defined rate spread of three percent over Treasury securities on first lien loans, were through OwnIt Mortgage, in 2004 at Bank of America NA, Latinos were 2.55 times more likely than whites to receive these higher cost loans. This is significantly more disparate than Bank of America’s peers. ICP has also submitted sample consumer complaints against Bank of America obtained from state Attorneys General.

Other grounds on which ICP has requested public hearings include:

-if approved, all of MBNA’s customers’ information could and would be shared with Bank of America’s more than 1,000 affiliates. Given the Bank of America has repeatedly lost and compromised the private information of consumers, including even members of Congress (see Roll Call of March 2, 2005) granting it access to MBNA’s roster of customer information (which includes information MBNA has purchased, for example from universities like Ohio State) militates for hearings on other negative impacts on consumers that would flow from this proposed combination.

-the proposed merger’s compliance with the letter and spirit of the 10% deposit cap, given MBNA’s deposits of (at least) $31.2 billion in deposits. The Boston Globe of April 4, 2004, quoted ICP on this issue and noting that “With the Fleet merger, Bank of America holds 9.9 percent of the nation's approximately $5.3 trillion in deposits. In determining that the banks fit under the 10 percent cap, the Federal Reserve Board included deposits from territories outside the 50 states, including Puerto Rico and Guam. Even so, the banks barely squeaked under the wire.”

--according to a U.S. Senate report earlier this year, Bank of America aided Chile’s dictator Pinochet to gain access to the American banking system (see Knight Ridder News of March 16, 2005: “The report says Bank of America had three U.S. accounts for Pinochet and six certificates of deposit between 1993 and 2004.”) BofA is under investigation for its questionable activities in connection with the Parmalat scandal. Domestically, it has just announced it plans to close at least 100 branches. ICP’s comment shows that some of the closures would leave the nearest branch 30 or more miles away. In this proposed merger, Bank of America would cut at least 6,000 jobs, affecting a number of local economies. MBNA is the largest private employer in Delaware, a major player in Maine and elsewhere.

--beyond conventional antitrust (but within Jeffersonian antitrust grounds), that "the combined companies and their employees have given federal candidates and parties nearly $ 22 million over the past 15 years, making the combined company America's top corporate contributor." (Charlotte Observer, July 7, 2005). Such concentrations of power need to be scrutinized, including at the public hearings ICP is requesting on grounds including not only antitrust but also fair lending.

ICP’s filing documents glaring disparities in Bank of America’s mortgage lending record in 2004, based on the new Home Mortgage Disclosure Act data. ICP has analyzed Bank of America’s lending by originations, denial and which loans are subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien) and has found the following:

-In Delaware, which would be negatively impacted by this proposed merger, Bank of America NA in 2004 denied the applications of African Americans 2.99 times more frequently than whites, and denied the applications of Hispanics 3.31 times more frequently than whites.

-In its home state of North Carolina, Bank of America NA in 2004 denied the applications of African Americans 2.11 times more frequently than whites, while being 3.19 times more likely to confine African Americans to higher cost / rate spread loans than whites.

-In South Carolina, Bank of America NA in 2004 denied the applications of African Americans 2.68 times more frequently than whites, while being 3.80 times more likely to confine African Americans to higher cost / rate spread loans than whites.

-In Tennessee, Bank of America NA in 2004 denied the applications of African Americans 1.96 times more frequently than whites, and denied those of Hispanics 2.06 times more frequently than whites.

-In New York State, Bank of America NA in 2004 denied the applications of African Americans two times more frequently than whites, and denied those of Hispanics 1.84 times more frequently than whites.

-In Illinois, Bank of America NA in 2004 denied the applications of African Americans 2.64 times more frequently than whites.

-In California, Bank of America NA in 2004 denied the applications of Hispanics 1.91 times more frequently than whites, while being 2.58 times more likely to confine Hispanics to higher cost / rate spread loans than whites.

ICP has analyzed Bank of America in a number of cities. See, e.g., Buffalo News of May 9, 2005 and Memphis Commercial Appeal of May 13, 2005. In the Washington DC MSA, Bank of America NA in 2004 denied the applications of African Americans 1.99 times more frequently than whites, and denied those of Hispanics 2.05 times more frequently than whites.

Fleet, which Bank of America acquired last year, made only 3024 mortgage loans of any kind to African Americans in 2004. Fleet’s low level of lending, particularly to protected classes, is incongruous in light of the commitments Fleet made in connection with acquisitions include of Bank of Boston. In Connecticut in 2004, BofA combined with Fleet denied the applications of Hispanics 2.74 times more frequently than whites, while being 2.12 times more likely to confine Hispanics to higher cost / rate spread loans than 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.

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), which in 2004 made 56.77% of its 1640 loans to African Americans at higher costs. Bank of America securitizes high interest rate loans through Banc of America Securities, LLC, Banc of America Mortgage Capital Corporation and its 100%-owned subsidiary Asset Backed Funding Corporation; perhaps most tellingly, Bank of America now purchases loans of subprime lenders, for example from Ameriquest. The rating agency Fitch's June 9, 2005, press release about ABFC Asset-Backed Certificates 2005-AQ1 stated that the underlying loans were “by Ameriquest Mortgage Company, they were subsequently purchased at closing by the depositor, Asset Backed Funding Corporation.” The referenced SEC filing specifies that “on the closing date, the mortgage loans will be sold to the depositor by Bank of America, National Association, an affiliate of the depositor and the underwriter, which acquired the mortgage loans from the originator.”

Bank of America NA, which is subject to the Community Reinvestment Act, 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., www.innercitypress.org/ameriquest.html and the Los Angeles Times of March 15, 2004, in which ICP “called Ameriquest a ‘serial settler’ whose ‘best practices,’ adopted over the last five years, have not changed the way it does business... Fair-lending advocates will be watching what happens to ensure this isn't a case of ‘sweeping the Ameriquest problem under the rug and allowing them to harm more people.’”

ICP’s filing also documents Bank of America’s enabling of fringe finance, for example as the major lender to the major payday lender Advance America Cash Advance. ICP has submitted sample Uniform Commercial Code records showing Bank of America’s support to payday lenders in dozens of states. 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).” Given Bank of America’s demonstrable (through the most recent HMDA data) disproportionate exclusion of communities of color and lower income neighborhoods from its offers of normal interest rate credit, its funding of payday lenders and other providers of high-cost fringe finance is particularly troubling, and predatory.

ICP will be submitting further comments once the banks submits their response(s). For more, see ICP’s BofA Watch, which will be updated.

July 5, 2005

Beyond filing comments with regulators in Central America on General Electric’s proposal to buy control of BAC International Bank and export its (subprime) consumer finance to six more countries -- click here to view the comments filed by ICP Fair Finance Watch -- on July 5, ICP commented to the Office of the Comptroller of the Currency on Citibank’s application to acquire the credit card operations of Federated Department Stores. Just after announcing this proposal, Citigroup admitted having lost the Social Security numbers of 3.9 million consumers. Why impose Citigroup’s lax (and predatory) practices on yet more consumers?

A policy issue raised in ICP’s comments to the OCC is that, while the OCC by suing the New York State Attorney General is trying to block an investigation of Citibank and its operating subsidiaries, the OCC until now has taken the position that it is not required to, or even that it cannot, review the record of CitiFinancial. This is what the OCC has told ICP in response to ICP’s comments to the OCC about Citigroup’s super high cost HOEPA loans in 2004. But since any legitimate fair lending review of Citigroup must cumulate and compare the subprime CitiFinancial with the predominantly prime Citibank and operating subsidiaries, it currently appears that the OCC is in effect blocking any comprehensive, consolidated fair lending review of Citigroup / Citibank. From ICP’s comments to the OCC:

This is problematic: for example, in the New York City MSA, in which Citibank N.A. has CRA duties, Citigroup (Citibank and CitiFinancial, et al.) confines African Americans seven times more frequently than whites to higher cost, rate spread loans. Also, Citigroup (including Citibank and its operating subsidiaries) in essence redlines whole states, profiling them and limiting its credit offers in these state to higher cost, rate spread loans (see below for more analysis). The OCC must act (and allow action) on these outrageous disparities -- in this proceeding, by explicitly considering the record of CitiFinancial as well as Citibank, and, ICP requests, by changing its position on action on Citigroup’s (including Citibank’s) records, in New York State and elsewhere.

ICP has submitted to the OCC (and Federal Reserve and FDIC) the pattern by which Citigroup redlines whole states, profiling them and limiting its credit offers in these state to higher cost, rate spread loans.

Note: less than a month after losing 3.9 million consumers’ Social Security numbers and loan files, Citigroup is running its “identify theft solutions” advertisement on television, at least in New York. It claims that the solution is offered with every Citi-card and Citibank account. Not offered at the subprime CitiFinancial, apparently...

In other predatory (lender) marketing news, while under investigation in at least 25 states for predatory lending, Ameriquest is paying $4 million to sponsor the tour of aging rockers the Rolling Stones beginning in August. The cost was specified by the CEO of Marketing & Communications International, who said: "It has advertising, event marketing, and you'll see different PR, promotion and direct mail components. This has a lot of touchpoints with the consumer, and each one of these cross-pollinates very well." Direct mail from a predatory lender?

We are compelled to note a quote in the American Banker newspaper’s June 30 article on Ameriquest. The context: “To counter the allegations, the company's normally reticent executives - many of whom had never spoken to the press - agreed to give American Banker a glimpse of its procedures.” The quote: “Tom Noto, Ameriquest's general counsel, said it prefers to settle cases where it identifies loan problems it has committed, and sometimes it is the first to identify the problems. ‘We prefer informal resolutions,’ he said. ‘Basically, if you see a problem, what's the point of going to the mat in court? You try to reach a reasonable resolution.’ His company's approach is ‘to look at the merits of the case and, if things didn't go according to our procedure, step up to the plate and address it,’ Mr. Noto said.”

This is the same Tom Noto who filed a heavily redacted 20-page brief demanding that 41 boxes of Ameriquest-related documents be withheld from ICP by the Texas Attorney General’s office, including because the material is copyrighted...

Judge Carol L. Middlesteadt of San Mateo County Superior Court granted approval to Ameriquest’s predatory lending settlement in four states, brushing aside such concerns as whether Spanish-speaking victims received any meaningful notice. Some say that the political sway of the plaintiff-side attorneys, who’ll be getting $10 million, played a role in this substantive language / civil rights issue being given short shrift. In Re another foreign language, the L.A. Times of June 25 got a quote from the company on Dutch reports that Roland Arnall is angling to be named U.S. ambassador to The Netherlands: "Mr. Arnall would be willing and honored to serve his country in any way he might be asked," said Charles Sipkins, a spokesman for the company. "But, such decisions are up to the president of the United States." One wag quipped: maybe it’s the Supreme Court, that needs a predatory lender... Until next time, for or with more information, contact us.

June 27, 2005

The plot continues to thicken around the 837 super high cost HOEPA loans Citigroup reported in 2004 (after claiming to have stopped such loans in January 2003). ICP raised the issue to Citigroup (leading to a knee jerk denial by CFO Bob Willumstad, which he has yet to retract), then to the regulators. The Office of the Comptroller of the Currency wrote back saying that none of the HOEPA loans were by a national bank or its operating subsidiaries. But for a number of the loans, Citigroup reported the OCC as the “Agency ID.” A second letter to the OCC raised this, and by letter to ICP dated June 21, 2005, the OCC’s head of large bank supervision Douglas W. Roeder writes:

“In response to your May 23, 2005 letter, we have determined after discussions with Citibank, NA, that Citigroup’s originally submitted HMDA Loan Application Registers (LARS) did not accurately reflect the correct agency code in all cases. This error has been corrected and Citigroup should be sending you an updated LAR reflecting the correct agency code for each loan reported on the LAR.”

ICP has yet to receive the corrected data from Citigroup (which as noted below has already corrected its data once, having under-reported its high cost / rate spread loans by over 80,000 loans). Will Citigroup be providing corrected data to, for example, the New York Attorney General’s Office (whose investigation of Citigroup, The Clearing House’s lawsuit on behalf of Citigroup is seeking to block)? Yet again: rather than send time and money schmoozing (for example the Georgia Attorney General’s office, as reflected in documents obtained by ICP under the Freedom of Information laws), how about improving?

While awaiting the documents that Ameriquest is trying to withhold, we perused last week Ameriquest’s proposed settlement of predatory lending claims in four states (California, Texas, Alabama and Alaska). The proposed settlement, available on this website www.pierceallsettlement.com, listed Ameriquest’s Adam J. Bass as now being with the company’s outside counsel, Buchalter, Nemer, Fields & Younger. Amazingly, the proposed settlement would force some of those injured to further arbitrate their claims. And whatever part of the $15 million is not claimed will be given to groups chosen by Ameriquest. Our question for now is whether Ameriquest would get a tax write-off...

It is reported that one of the objectors has raised the issue of ineffective (or nonexistent) notice to Spanish-speakers. Here are the number of Ameriquest loans in each of the four states in 2004 that were reported as to “Hispanics” --

California: 28,563 loans to Hispanics by Ameriquest in 2004 (11,206 of the loans, or 39.23%, at or over the rate spread of 3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien)

Texas: 5059 loans to Hispanics by Ameriquest in 2004 -- 3889 of the loans, or 76.87%, at or over the rate spread

Alabama: 120 loans to Hispanics by Ameriquest in 2004 -- 92 of the loans, or 76.67%, at or over the rate spread

Alaska: 45 loans to Hispanics by Ameriquest in 2004 -- 24 of the loans, or 53.33%, at or over the rate spread. And also perhaps (should be) relevant to objection about language / notice, in Alaska in 2004 Ameriquest made 43 loans to Alaskan Natives, 33 of 76.74% at or over the rate spread...

But now it’s reported that this objection might be withdrawn, or settled. Without effective notice? Developing...

Last week Governor Olson presented to the Senate the list of regulatory relief supported by the Fed, including “10. Shorten the post-approval waiting period for bank mergers and acquisitions where the relevant banking agency and the Attorney General agree the transaction will not have adverse competitive effects -- Amendment allows the responsible federal banking agency, with the concurrence of the Attorney General, to reduce the post-approval waiting periods under the Bank Merger Act and BHC Act from fifteen days to as few as five days. The amendment would not alter the time period that a private party has to challenge a banking agency's approval of a transaction for reasons related to the Community Reinvestment Act.” The Fed’s above-quoted commentary is misleading: while technically an opponent would still have thirty days (under the Bank Holding Company Act) to seek judicial review of a Federal Reserve merger approval, if the deal were consummated in a mere five days, the time in which to seek an injunction would be reduced (and the Fed and banks would be sure to argue that the merged banks’ egg couldn’t be unscrambled). So why be misleading?

June 20, 2005

On June 16, both the Office of the Comptroller of the Currency and the Clearing House, a trade association of large banks, sued the New York Attorney General, seeking an injunction against investigation of disparities in the subprime lending of HSBC, Wells Fargo, JP Morgan Chase and others. We say “and others” because, despite reports that Citigroup is not part of this, the Clearing House’s Order to Show Cause (available here in PDF) seeks to block investigation of Citibank, N.A., by name. This trade association would not include its largest member’s name without consent. So those reporting that Citigroup is not seeking to block fair lending enforcement are doing Citi a favor, as well as being inaccurate. So too with the reports of the members / owners of the Clearing House. Among others, these include Deutsche Bank (which owns a national bank that is active as trustee for and forecloser on subprime loans), PNC, and National City...

The dates of the exchanges of letters recited in the lawsuits are also worth noting. According to the OCC, the New York AG’s office wrote to Citigroup on April 6, to HSBC and Wells Fargo on April 19, and to JP Morgan Chase on April 20. The companies responded as follows: Citigroup on April 19, and HSBC on April 26. Note that the WSJ’s report was writing on April 27, and HSBC confirmed receiving an inquiry from the AG’s Office. Some ask: was HSBC the leaker? Wells Fargo responded on May 2, though has yet to give information about its national bank subsidiaries...

While Washington Mutual has confirmed receiving requests for information from the New York AG, it’s worth noting that the Office of the Comptroller of the Currency’s and the Clearing House’s lawsuits last week against the NY AG would not block any scrutiny of Washington Mutual. 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.

On the non-bank front, Inner City Press received from Ameriquest last week a heavily redacted copy of Ameriquest’s twenty page filing to the Texas Attorney General’s office, urging that all documents responsive to ICP’s freedom of information request should be withheld. Ameriquest argues that documents should be withheld because they are copyrighted. Great argument...

June 13, 2005

On June 8, Ameriquest said its CEO (and president of Argent) is leaving to pursue unspecified “opportunities.” Now Aseem Mital, president of Ameriquest Capital Corp., is to replace him. Nobody at Ameriquest was available for interviews Wednesday, a company spokesman told the Los Angeles Times. All we can say is, “Get it together.”

CitiFinancial on June 6 admitted that it has lost nearly four million consumers’ files -- all customers of CitiFinancial’s branch system. The files lost include Social Security numbers. While the company expressed shock and predicted that no harm will come of it, it’s worth noting (as much of the other press didn’t) that CitiFinancial has had this problem before. For example, in Florida in 2002 -- as reported by the local NBC TV affiliate there,

“Citifinancial even left its files in convenient boxes, making it easy for anyone who wanted to cart them away. NBC2 decided to find out what kinds of records were there.

What was found surprised even seasoned investigators: drivers license information, credit reports, social security numbers, even bank account numbers — for more than 1,000 people. ‘This would be a treasure trove of information for an identity thief. People’s names, social security numbers, banking information,’ said David White of the Collier County Sheriff’s Office Economic Crimes Unit. White said there was enough personal information in the company’s trash for an identity thief to bankrupt anyone. He said a thief could easily take over someone’s bank accounts with the data contained in the trashed documents... A spokesperson for Citigroup in New York admits wrongdoing in a written statement. It reads: ‘Keeping customer information secure is a top priority for Citifinancial. In an isolated incident at one of our offices, some files for inactive loan accounts that should have been destroyed according to our normal procedures were disposed of improperly.’” -- click here to view

Citigroup’s June 6, 2005, statement included this quote: "’Customer security is of paramount importance to Citigroup,’ said Debby Hopkins, Chief Operations and Technology Officer of Citigroup. ‘While this incident affects the customers of only one of our businesses’” -- a business through which, even before losing the data, Citigroup was harming consumers. And employees -- 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... And now 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.”

This week, a quick book review: we note the publication of a new tome / textbook on CRA, by New York Law School professor Rick Marsico. It’s called “Democratizing Capital” and its published by Carolina Academic Press. As he has in a series of law review articles since the 1990s, Prof. Marsico proposes a quantifiable method of evaluating banks’ CRA performance. His method is updated to include downgrading for reverse redlining with subprime loans [in full disclosure, on page 262 Prof. Marsico credits ICP for this new approach, comparing the subprime lender’s loans to those of the aggregate, rather than only considering the lender’s own market shares to different groups.] He proposes that a bank with overall CRA ratings below average “should have its application for a deposit facility denied absent mitigating factors,” and lists as one of four examples of such mitigating factors “whether a bank improved its performance since it received its CRA rating.” A practitioner might note that even at present, the Federal Reserve and the other agencies try to recite just such mitigating factors when they approve applications. But Prof. Marsico means that the improvement would have to be quantifiable, under the detailed system he sets forth. Another practitioner’s concerns is that it implies that banks awarded better-than-average ratings should have a safe harbor to get their applications approved. The rating system, though detailed, does not take into account such bank activities as lending to payday lenders and other fringe financiers. The issues that have arisen and been addressed under CRA have been in evolution, making it unwise, in ICP’s view, to adopt any form of safe harbor. But Prof. Marsico’s book moves the debate forward, and is a should-read for those active or interested in the field.

As an aside, it’s reported that retiring Fed governor Gramlich wants to write a book about subprime lending. We heard the same thing about Eugene Ludwig, who apparently had a change of heart when he saw how lucrative his consulting businesses (which has since hired former New York Superintendent of Banks McCaul) could be. Ned, here’s hoping.

June 6, 2005

The (reverse) redlining of whole regions of the United States by the nation’s large bank, Citigroup, is the subject of an ongoing investigation by Inner City Press / Fair Finance Watch. Here now is a state-by-state presentation, by percentage of loans made in each state that are higher-cost “rate spread” loans, of Citigroup’s lending, compared in all but seven instances (coming soon) to the similar percentage in the state for an aggregate comprised of the three largest mortgage lenders in the country. For this aggregate, the percentage varies from six to twenty four percent. For Citigroup, the spread is from nine percent to a high of 71.61 percent, in Mississippi. In West Virginia, ninety-one percent of Citigroup’s loans to African Americans were higher-cost rate spread loans. But the disparate pattern goes beyond race. Here’s above-described presentation, by state abbreviation, then percentage of Citigroup’s loans in the state in 2004 that were higher cost, rate spread loans, then the percentage for the aggregate, for all but seven states:

MS - Citi: 71.61% / Agg.: 24.72%; AL - Citi: 65.50% / Agg.: 18.13%; TN - Citi: 65.0% / Agg.: 14.25%; WV - Citi: 61.13% / Agg.: 20.76%; ID - Citi: 50.58% / Agg.: 8.81%; KY - Citi: 50.18%; OK - Citi: 49.35% / Agg.: 20.75%; LA - Citi: 48.54%; SC - Citi: 47.02% / Agg.: 14.29%; VT - Citi: 45.56%; ND - Citi: 45.41% / Agg.: 13.18%; NC - Citi: 45.20% / Agg.: 10.26%; OH - Citi: 44.35% / Agg.: 11.1%; PR - Citi: 41.56%; TX - Citi: 41.09% / Agg.: 13.60%; WI - Citi: 40.14% / Agg.: 11.28%; NM - Citi: 39.62% / Agg.: 14.27%; IN - Citi: 37.97% / 12.67%; AR - Citi: 36.64%; PA - Citi: 36.42% / Agg.: 9.58%; KS - Citi: 36.23% / Agg.: 11.68%; GA - Citi: 36.09%; MI - Citi: 33.79% / Agg.: 12.09%; HI - Citi: 33.73% / Agg: 5.22%; ME - Citi: 32.06% / Agg.: 9.96%; WY - Citi: 31.56% / Agg.: 13.54%; VA - Citi: 31.21% / Agg.: 8.11%; WA - Citi: 30.49% / Agg: 6.38%; IA - Citi: 29.59% / Agg: 13.08%; MT - Citi: 29.39%; NE - Citi: 29.07% / Agg: 13.83%; DE - Citi: 26.89% / Agg: 7.17%; UT - Citi: 25.63% / Agg: 10.70%; RI - Citi: 24.48% / Agg: 10.41%; AZ - Citi: 23.94%; SD - Citi: 23.44% / Agg: 9.39%; FL - Citi: 23.28% / Agg: 9.29%; MD - Citi: 22.10%; AK - Citi: 21.19% / Agg: 12.19%; NV - Citi: 20.66% / Agg: 8.01%; NH - Citi: 20.66% / Agg: 10.18%; MO - Citi: 20.43% / Agg: 17.94%; OR - Citi: 20.41% / Agg: 7.25%; IL - Citi:18.76% / Agg: 12.67%; MN - Citi: 17.68% / Agg: 6.71%; CO - Citi:16.05% / Agg: 8.13%; CT - Citi: 15.92% / Agg: 9.10%; NJ - Citi: 15.73% / Agg: 7.28%; MA - Citi: 12.06% / Agg: 7.63%; NY - Citi: 11.90% / Agg: 7.26%; CA - Citi: 9.21% / Agg: 6.08%

There is a major problem here, one that ICP is raising, state by state, to attorneys general and beyond. Meanwhile, on the secondary market, Citigroup Mortgage Loan Trust Inc.'s asset-backed pass-through certificates, series 2005-HE1, which closed on May 10, 2005, included loans from Argent Mortgage Company, LLC, and Olympus Mortgage Company -- both units of Ameriquest, which is under investigation in 25 states. While we continue to move forward, including with Freedom of Information requests, in identifying which states these are, here are two that can be scratched: the 2004 HMDA data shows that Ameriquest doesn’t lend in Virginia or West Virginia, and made only two loans in the District of Columbia. Thus Ameriquest tries to stay off the radar of the regulators...

Federal Reserve Governor Gramlich’s speech about HMDA data last week acknowledge that the data can help identify problem lenders, and concluded that “one of the most effective ways of ensuring competition is to make data available.” True -- but why then is the Fed letting lenders, including even the “state member banks” it directly supervises, like Fifth Third, get away with making their data available only in unanalyzable PDF format? We've raised it, and we'll see.

May 31, 2005

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, South Carolina, North Carolina, Ohio, Georgia, Michigan, Iowa, Texas and others. ICP has filed complaints with the attorneys general in these states and others.

Confessed predatory lenders are on the move: on May 24, HSBC’s Stephen Green bragged or threatened that "we intend to carry (the Household model) into other markets, such as China, India, Mexico and Turkey." Green said two senior executives from the former Household business, now called HSBC Finance, had been moved from Chicago to Hong Kong to oversee the Asian expansion...

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...

Finally, for this week, last and decidedly least, this PDF study by an industry lawyer purports to rebut the disparities in large lenders’ 2004 mortgage data. But the study does not even address the degree to which African Americans and Latinos are more likely than whites to be put into higher cost (rate spread) loans -- analysis under which Inner City Press / Fair Finance Watch has shown significant disparities at a number of the largest institutions, for example Citigroup’s seven-to-one disparity between African Americans and whites in the NYC MSA.

Rather, this study looks only at those already in rate spread loans, and compares within this subgroup what interest rate is listed. This approach has a number of major flaws. For example, if (some) lenders are more likely to push African Americans and Latinos who are at the borderline of prime into subprime loans, and to push borderline whites into prime loans, it follows that those whites who get rate spread loans would have lower FICO scores than the people of color with such loans. That would explain this study’s supposedly surprising finding, that once you limit the analysis to those who get rate spread loans, some disparities “disappear.” It appears that the goal of the study was to rebut or hide the disparities.

By analogy, this is like a report purporting to study the phenomenon of racial profiling in traffic stops -- “driving while black” - NOT by studying what percentage of African American versus white drivers are stopped by police, but instead studying only the length-of-stop for those already stopped. Since racial profiling (acknowledged by many in law enforcement) means the stopping of people of color fitting a profile, results like those in this mortgage study would not be surprising: the whites stopped would disproportionately be “for cause,” and therefore take longer; since a disproportionate number of the stops of people of color would be for no other reason than profile -- that is, not even a burned-out light, etc. -- it stands to reason that the average length-of-stop for people of color would not be higher than those of the (for cause) whites....

Also, if the (limited) purpose of this (limited) study is to portray how rate spread / “subprime” borrower are treated (and not, it should be noted, how all borrowers) are treated, it makes no sense to have excluded from the analysis the large “specialty” lenders, Ameriquest, New Century, Option One. Since the non-bank PHH is included, there appears to be no legitimate rationale for this exclusion. Finally, while Citigroup for example tried to critique ICP’s first study as limited, because it looked only at home purchase loans, this study considered only 1400 of Citigroup’s over 93,000 rate spread loans. Will Citigroup critique it?

May 23, 2005

This week Inner City Press launches a new Ameriquest Watch. ICP has received numerous complaint from consumers about Ameriquest; as Inner City Press / Fair Finance Watch has sought to assess Ameriquest’s record, the company has sought to stymie the inquire at every turn. On May 17, ICP was informed by the office of the Texas Attorney General that while that Office has forty-one boxes of documents from or about Ameriquest, the information will not for now be released in response to ICP’s May 2 Freedom of Information request, because Ameriquest wants to block release of any of the information.

What would the supposed sponsor of the American Dream have to be so defensive about? That is a question that ICP will endeavor to answer in this, its new Ameriquest Watch. Because Ameriquest is not affiliated with a bank, in the course of ICP’s Community Reinvestment Act enforcement work we’ve put off focusing closely on Ameriquest. We’ve expressed concern (for example to the Federal Reserve Board in 2000, see 86 Fed. Res. Bull. 751, n.23, and see, e.g., Los Angeles Times of March 15 and May 22, 2005); we requested from Ameriquest its 2004 mortgage lending data. When the data wasn’t provided on time, we noted Ameriquest’s lapses, along with that of a number of institutions. The next day, one of Ameriquest’s apparently many public relations flacks left ICP a vitriolic voice mail message, demanding the retracting of ICP’s “false and misleading” statements. But there was nothing misleading, much less false, about noting that more than a month had gone by since ICP’s request to Ameriquest’s headquarters without the provision of the data. More recently, another flack has called ICP, to discuss a forthcoming article. Again: what would the supposed sponsor of the American Dream have to be so defensive about?

Some surmise that the defensiveness, the reflexive attacking of critics and its inverse, are explained by Ameriquest’s reported plan to go public, in whole or in part. Some predict the spin-off, via initial public offering, of Ameriquest’s wholesale mortgage unit, Argent. In this scenario, Ameriquest wants a quick multi-state settlement, not unlike Household International’s settlement in late 2002, in order to put the scandals behind it and focus on future profits. Reportedly, Ameriquest wants to pay less than Household’s fine of $486 million, despite the fact that Ameriquest in 2004 made many more subprime loans that Household in 2001, or 2002, or 2004. ICP has reviewed Ameriquest’s 2004 data, nationwide and in selected states, in connection with ICP’s petition to state attorneys general to take enforcement action against Ameriquest. The results are not pretty:

Ameriquest nationwide in 2004 -- Whites: 1,267,121 applications, leading to 281,808 denials (22.24% denied) and 338,800 originations; 179,665 [or 53.03 percent] exceeded rate spread.

African Americans: 246,568 applications, leading to 64,566 denials (26.19% denied, 1.18 times higher than whites) and 67,586 originations; 43,847 [or 64.88 percent] were at rate spread [1.22 times higher / more likely to be over rate spread than whites].

Latinos: 237,824 applications, leading to 43,971 denials (18.43% denied, 0.83 times “higher” than whites) and 83,405 originations; 43,625 [or 52,31 percent] at rate spread [0.99 times higher / more likely to be over rate spread than whites].

ICP has also just completed an analysis of the Florida record of Ameriquest and other lenders, for a follow-up submission to the Florida Attorney General’s Office:

Ameriquest in Florida, 2004 -- Whites: 120,873 applications, leading to 24,907 denials (20.61% denied) and 38,042 originations; 21,800 [or 57.31%] exceeded rate spread.

African Americans: 25,502 applications, leading to 5334 denials (20.92% denied, 1.02 times higher than whites) and 9028 originations; 5858 [or 64.89 percent] exceeded rate spread [1.13 times higher / more likely to be over rate spread than whites].

Latinos: 35,807 applications, leading to 6967 denials (19.46% denied, 0.94 times “higher” than whites) and 13,713 originations; 7869 [or 57.38 percent] exceeded rate spread [1.02 times higher / more likely to be over rate spread than whites].

Click here to view ICP’s complete Florida study.

Also not pretty is Ameriquest’s marketing. For example, last month in San Francisco a federal judge granted a petition filed by the Federal Trade Commission and the California attorney general, which sought a temporary restraining order and asset freeze against Optin Global Inc., its related companies and owners. According to the FTC, the company’s spam messages directed consumers to Web sites run by the defendants, with consumer data eventually being sold through intermediaries to mortgage lenders and brokers such as Ameriquest Mortgage Co.. So that’s how Ameriquest buys consumers’ information...

Of course, you wouldn’t know any of this from Ameriquest’s 30-minute infomercial featuring ex-gameshow host Chuck Woolery. The classic line from the show: “Something is wrong with these people, it’s not a normal company.” No, it’s not... Click here for ICP's ongoing Ameriquest Watch report.

On May 17, two days before issuing a misleading press release about dropping arbitration on real estate loans, Citigroup added an “editor’s note” to its corporate citizenship web site, on the matter of the HOEPA loans in its 2004 mortgage data. The editor’s note states:

“It is CitiFinancial’s policy not to originate loans covered by the Home Ownership and Equity Protection Act (HOEPA)... Yet some confusion has arisen because we implemented this policy over time. Our CitiFinancial branch network in the U.S. adopted the policy in January 2003, Citicorp Trust Bank adopted it in April 2004, and Associates Financial Services of Puerto Rico did so in July 2004. If we purchase a lender that makes HOEPA loans – as we did in 2004 with Washington Mutual Finance Corp. – as soon as we integrate the business it no longer makes them. And in the event that a HOEPA loan is inadvertently made, it is our policy to work with the borrower to lower the interest rate.”

First, we note that the “confusion,” if any exists, starts with Citigroup chief operating officer Robert Willumstad, who on April 19 from the stage at Carnegie Hall directly denied that there were any HOEPA loans reported in Citigroup’s 2004 HMDA data. That statement was false and has yet to be retracted.

Second, even the statement itself shows the gaping loopholes to Citigroup’s supposed commitment. Citigroup acquired Associates in late 2000 -- but “Associated Financial Services” continued making HOEPA loans until at least July 2004. According to Citigroup, it can take more than three and a half years to “integrate” an acquired business. Given the number of acquisitions it makes (at least up until the Federal Reserve’s March 2004 “acquire-no-more” order), Citigroup always has an acquired-but-not-integrated business through which to violate its commitments.

Given the duplicity of Citigroup’s handling of this whole matter, for example beyond Mr. Willumstad’s uncorrected misstatement having found the HOEPA loans and trying to cover them up, including by filing a separate 2004 Loan Application Register for Washington Mutual Finance Group, the acquisition of which Citigroup consummated on the ninth day of the year, and now the quiet footnote two days before making another supposed commitment, one presumes that Citigroup uses similar loopholes to its other commitments, on money laundering, five point ethics, etc.. Again the suggestion: less schmoozing, focus on improving.

Click here to read NCRC’s timely study recommending the application of CRA to credit unions. Until next time, for or with more information, contact us.

May 16, 2005

This week we step back, temporarily, from drilling ever-deeper into the 2004 Home Mortgage Disclosure Act data. In sickeningly cynical news, Ameriquest on May 9 announced with a straight face that its wholesale unit Argent has now adopted so-called “best practices.” This while Ameriquest is under investigation in twenty five (or more) states, and is seeking to block the release of documents about its practices. We’ll have more on this in coming weeks. For now we simply note the irony of the statement, in Ameriquest’s Chuck Woolery-narrated infomercial, of the claim that Ameriquest “is not a normal company.” No, it’s not...

In other misleading news, HSBC 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 now a sample from the mailbag, which has been on hold during all this data:

Subj: Citigroup Watch
Date: 4/13/2005 3:48:18 AM Eastern Standard Time
From: []
To: CitiWatch [at] innercitypress.org

My partner has been looking for a job recently, and got an unplanned call from Primerica offering her an interview for a "management" position. She's been studying to be an actuary and so has a financial and operations management background (although not much experience), so figured it was a good opportunity. She went to the interview and started to be concerned when they mentioned "sales", but they downplayed how much of the job was sales. They told her to go to a "benefits" meeting, and to bring me with; so, she did.
Right away, we knew something was wrong. The whole meeting was set up like an infomercial; they were trying hard to *sell* the company, *sell* the position, and even sell Weill as some sort of genius. The first 20 minutes or so of the presentation, plus any time that you got there early, was spent showing rave reviews of Citigroup and Weill from various publications. They avoided talking about what the position was for most of the meeting. My partner and I started exchanging notes, wondering what was going on. The more they got into it, the worse it became: they set up their system for employees as a pyramid scheme, with up-front costs, and pay on commission.
They even had a drawing displayed that was pretty much a pyramid, showing how you profit from those under you, and those under them. The guy speaking tried to sell it as a "get rich scheme" - by the end, he was talking about meeting with Pres. Bush, vacationing in the tropics, boasting about his various new cars (after pointing to his new Humvee, asking the audience, "How would you like to get a new hummer for your birthday like I did?"), showing off his mansion, and talking about how he plans to buy a private jet. I've never seen such unbridled greed and manipulation of jobseekers in my life; I hardly can even scratch the surface of what it was like; even the sword on the wall, right next to the presenter, was creepy.
I tried to get my partner to walk out in the middle of it, but she was embarrassed to make a scene. We both vented as soon as we got out, furious that they lied to her to get her to listen to an hour and a half sales pitch. The more I read about them, now, the madder I get about the whole ordeal.

And from a non-whistleblower:

Date: 5/11/2005 10:58:45 PM Eastern Standard Time

From: [ ]

To: HMDAwatch [at] innercitypress.org

Thanks for responding. My concern is that legislators will hop on the HMDA bandwagon and up the heat on sub-prime lenders, who of course will pass the pain directly to the loan officers and originators. Being in the business, and already dealing with increased scrutiny, more knowledgeable borrowers, and heavy competition, the golden goose of being a loan officer is on its last legs. Despite that, my major concern is heavy regulation wiping out the smaller players in the sub prime market. We can't all work for Countrywide. Still, I do feel that there is a absolute need for stronger guidelines with regard to sub-prime lending...On another note, let me say that i've found your site incredibly informative.

Well thanks. Until next time, for or with more information, contact us.

May 9, 2005

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

At Citigroup, for home purchase loans, African American women were confined to high cost loans 4.06 times more frequently than white men. Hispanic men were confined to high cost loans 2.15 times more frequently than white men; at Wells Fargo, the disparity between Hispanic and white men was 1.78.

At Washington Mutual, African American men were confined to high cost loans 3.34 times more frequently than white men -- the largest disparity for this comparison.

At Royal Bank of Canada / Centura, African American women were confined to high cost loans 4.52 times more frequently than white men -- the largest disparity. Wells Fargo was second most disparate to African American women, confining them to high cost loans 4.31 times more frequently than white men.

At Bank of America, Hispanic men were confined to high cost loans 2.10 times more frequently than white men. White women were confined to high cost loans 2.04 times more frequently than white men -- the largest disparity for this comparison.

Again at Washington Mutual, Hispanic women were confined to high cost loans 2.53 times more frequently than white men -- the largest disparity for this comparison.

More is available at www.innercitypress.org/2004hmda6.html

ICP has provide this and other analysis to the regulators and state attorneys general, demanding investigation and action. ICP has also requested action, from federal regulators and now state attorneys general, on lenders who have refused to provide data, and who otherwise enable predatory lenders: Royal Bank of Scotland and other subprime facilitators and securitizers (as reported in the London Sunday Times of May 1), Lehman Brothers, Fifth Third, Delta Funding and AIG / American General (these four and others have refused to provide their data in analyzable form), as well as Fremont Investment and Loan, which is trying to require ICP to sign a confidentiality agreement to view its public data. ICP has refused, and has filed complaints.

Another update: the New York Times of May 4, 2005, reported that “Citigroup lenders made hundreds of high-cost home loans to customers with poor credit histories in 2004, even though the company had adopted a policy a year earlier to no longer issue such loans, the bank acknowledged yesterday.” ICP has now submitted the specifics of Citigroup’s 837 HOEPA loans to the attorneys general in the states in which these super high cost loans were made. Citigroup’s deceptions and/or cover-up were in fact even worse than reported in the New York Times. Fully 180 of the 837 HOEPA loans were reported in Citigroup’s HMDA data has having been made by “Washington Mutual Finance Group.” At first after ICP raised it, Citigroup claimed that these loans were made by Washington Mutual Finance Group prior to its acquisition by Citigroup. But as it turns out, that deal was consummated on January 9, 2004. So were the 180 loans all made in the first nine days of the year? It is striking that Citigroup chose to separately report some of its 2004 data as “Washington Mutual Finance Group,” a company it acquiring in the year’s first month. Another subprime acquisition of Citigroup’s, Easy Money, bought half-way through the year, didn’t report its own data. It appears that the only reason for Citigroup’s separate reporting for Washington Mutual Finance Group was an attempt to distance itself from the HOEPA loans, which were made AFTER Citigroup acquired the company. It just gets worse and worse....

The grapevine has it that CitiFinancial, just after having to acknowledge violating its previous “best practices” commitment, may make a *new* commitment: to drop mandatory arbitration from some loan contracts. The same grapevine -- of Citigroup’s chosen “partners,” mind you -- says that Citigroup has admitted that such an announcement would be less than meaningful at this point, after passage of the federal class action legislation and since arbitrators have shown a willingness to hear cases as a class. “Free public relations,” is how one Citigroup lawyer has characterized an announcement dropping arbitration. We’ll see.

Another indicative development: a recent fraud lawsuit by the attorney general of New Mexico against Furniture World Inc. for “delivering used, broken or damaged furniture to customers who had paid for new merchandise” also alleges that as the sale financier, CitiFinancial “continued to charge customers who had canceled contracts, which led to delinquent accounts.” (Albuquerque Journal, May 6). This is CitiFinancial’s Sale Finance program, one goal of which is to pitch high-cost home-secured loans to those who buy furniture. Employees are tracked on what percentage of such “Sales Finance Conversions” they can get the customers to undertake. A pointed question: why does CitiFinancial work with merchants like this whose defense is that they don’t provide refunds and that all merchandise is sold ‘as-is.’?

Finally, for this week, a note on the data of the other New York titan, JP Morgan Chase. After the deadline, Chase provided ICP with a bank-chosen “Super LAR” file and, only in “zipped” (and un-openable) form, the actual loan application registers of JPM Chase’s three HMDA reporters. JPM Chase’s cover letter stated that the Super LAR “combined data for all JPMorgan Chase HMDA reporting entities but excludes loans that may be reported twice as a result of interaffiliate loan purchases and sales.”

JPM Chase was asked for the real data of these three reporters; this request was rejected, based on the argument that the Chase-selected Super LAR was the most accurate dataset to review. ICP persisted, and was provided with non-zipped LARs for the three reporters. Based on the above-quoted statement from JPM Chase’s cover letter, ICP assumed that the additional loans in the actual LARs would list, as “Type of Purchase,” affiliates of JPM Chase. (That’s what “interaffiliate” means, right?)

Upon opening and cumulating JPM Chase’s three actual LARs, the additional 29,620 loans, in the type of purchaser column, broke down as follows:

12,159 of the “new” loans in the actual LARs were listed as sold to Freddie Mac; 2683 were sold to Fannie Mae, 605 were sold to Ginnie Mae, 300 were sold to insurance companies, 4796 sold to banks, 8491 were not sold during 2004, and only 586 were sold to affiliates.

And so what did and does it mean, when JPM Chase claimed that its Super LAR (which nearly all studies are using) varies from the real data only in this it “excludes loans that may be reported twice as a result of interaffiliate loan purchases and sales”?

The Long Island Business News of May 6 reported that “Chase's rejection level was even greater in Suffolk, where 27 percent of 6,257 applications were not accepted... ‘We make loans that people can comfortably handle,’ said Thomas Kelly, a Chase spokesman. ‘If someone puts down 5 percent on a house, makes payments for a year and then doesn't make payments and turn over the keys, we lose money on it and they've lost their house.’ Kelly added that the statistics could be misleading because ‘many of the people we rejected might have also been rejected by more than one bank.’” And? This is one of the most convoluted attempted rebuttals of HMDA data we’ve yet heard. Is Chase proposing an expansion of HMDA data to include a “previously-denied” column? And since what Chase points at is also true in the data of its peers, where’s the beef?

May 2, 2005

The twelve largest lenders are to varying degrees disparate by race in distributing their high cost loans, a comprehensive nationwide analysis by Inner City Press / Fair Finance Watch shows. ICP has submitted this evidence and demands for action to federal regulators as well as to attorneys general in more than thirty states.

ICP’s position: The problem of predatory lending, as reflected by the glaring disparities in the top twelve lenders’ 2004 mortgage data, is nationwide in scope. Now in more than thirty states, the attorney general has formally been asked to investigate these lenders. We’ve made the same request to the federal regulators -- whoever addresses this scandal of discrimination in pricing first deserve jurisdiction going forward.

ICP has also provided evidence of Citigroup’s violation of its commitment to have stopped, from January 2003 onward, making loans covered by the Home Ownership and Equity Protection Act of 1994 (eight full percent over Treasuries on a first lien mortgage, ten percent over Treasuries on a subordinate lien). In the 2004 data, ICP has found that Citigroup reported fully 837 HOEPA loans. ICP raised this to Citigroup’s senior management at the April 19 shareholders’ meeting at Carnegie Hall in Manhattan. Neither Citigroup chairman Sandy Weill nor CEO Charles Prince would directly answer the question. Citigroup chief operating officer Robert Willumstad directly denied that Citigroup had reported HOEPA loans in its 2004 data. ICP has now submitted the specifics of Citigroup’s 837 HOEPA loans to the attorneys general in the states in which these super high cost loans were made. See, www.innercitypress.org/citi.html

HSBC’s response to its disparities has most recently been to claim, to the London Sunday Times of May 1, that “anybody who knew the bank would ‘know that we are entirely color-blind and the only criterion we use for lending around the world is affordability.’” See, www.timesonline.co.uk/article/0,,2095-1592396,00.html

ICP has received more and more complaints about Wells Fargo, including about Wells’ stealth America’s Servicing Company unit. Wells Fargo is also a major funder of payday lenders, including targeters of military personnel like Armed Forces Loans.” ICP has raised this directly to Wells Fargo, and to the Federal Reserve on Wells’ proposal to acquire First Community Capital Corp., which was announced back on September 2, was challenged by ICP on November 1, and which still remains pending, six months later.

J.P. Morgan Chase is also a major funder of payday and car title lenders, as ICP has previously documented. See, e.g., the Columbus Dispatch of April 15, 2004, “Group Opposes Bank One Sale: Business with Predatory Lenders a Concern,” in which the bank’s spokesman confirmed his “aware[ness] of concerns about the type of businesses that Inner City Press cited.” No changes, however, have been announced by the bank from last April to this. J.P. Morgan Chase is, like HSBC, a major purveyor of tax Refund Anticipation Loans and other high-cost fringe financial services products.

Another (newer) ICP finding and position: That Ameriquest, the increasingly discredited subprime lender admittedly under investigation by twenty five states, in 2004 made the most loans to African Africans, both over the high cost rate spread and overall, is a reflection of a two-tier financial system, one which is separate and unequal, including as to interest rate. We have asked for more than twenty five states to take action on Ameriquest. Click here for ICP’s new study.

ICP’s study of lending in the boroughs gave rise, among other things, to an editorial in El Diario last week, “Pagando más por hipoteca” -- click here to view it (it's also in English, as are all of El Diario's editorials). And for a little (anti-) politics, see New York Newsday of April 29, reporting that

“A recent analysis by the advocacy group Inner City Press-Fair Finance Watch shows that black borrowers at Citigroup were more than seven times more likely and Hispanics nearly four times more likely to receive sub-prime loans than white borrowers. At Wells Fargo, black borrowers were more than six times more likely and Hispanics more than twice as likely to receive the high-rate loans. To really address the predatory lending problem, Spitzer has to get more than just a fine or a promise that the banks will commit to ‘best practices,’ said Inner City Press' executive director... The banks must be made to submit to reviews to show they reduce disparities in future lending.” We’ll see...

In the wake of the Federal Reserve’s rubber-stamp approval of PNC-Riggs (see midweek Finance Watch Report), FFW received by regular mail the 17-page approval of the Office of the Comptroller of the Currency. Elsewhere we cover money laundering; but here’s a footnote of CRA interest: the OCC’s footnote 20 says specifically that “in response to the commenter’s concern with one particular payday lender, PNC Bank represented that it ceased making loans to the company and its affiliates in 2002.” The Federal Reserve’s order, by contrast, recited these same facts in such a way to make it look like the comment had been off-base, and PNC never lent to payday lenders. Then again, this is the same Fed which has still done nothing about SunTrust breaking the commitment it made to the Fed in mid-2004 not to make loans to businesses engaged in payday lending. Click here for details; ICP has given the Fed even more details, and still yet nothing as happened. This is another reason we applaud state-level inquiries and enforcements.

Speaking of which, last Tuesday saw the North Carolina Banking Commissioner’s hearing on the loophole’s used by Advance America. The Commissioner deferred to a higher power: "This proceeding is not about whether payday lending is good, bad or predatory," he said. "Those matters are for the General Assembly, and not me." We’ll see. Spotted, more than a month late, was the FDIC’s quiet March 11 cease-and-desist, 90 days to cure order against payday lending County Bank. Then again this is the same FDIC which, responding to a detailed comment against PNC-Riggs, informed ICP by letter dated April 25 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 as now scheduled on May 13? Will the FDIC’s review be thorough and in-depth? We’ll see.

April 25, 2005 -- Click here to view ICP Fair Finance Watch’s study of major lenders in the New York City MSA.

It emerged last week, in the just-released 2004 Home Mortgage Disclosure Act, that Citigroup violates its public “best practices” commitments. In May 2004, Citigroup was fined $70 million by the Federal Reserve, including for violations involving Regulation Z, which implements the Home Ownership and Equity Protection Act of 1994 (HOEPA), which applies to very high cost mortgage loans (eight percentage points over comparable Treasuries on first liens, for example). Citigroup’s response including a statement that it had stopped making loans covered by HOEPA in January 2003. This statement appears, among other places, on Citigroup’s web site -- in a May 27, 2004 Memo and a list of what Citi doesn’t do.

When the 2004 Home Mortgage Disclosure Act data was released, ICP Fair Finance Watch found in Citigroup’s data at least 837 loans that Citigroup itself had reported as covered by HOEPA.

On April 19, ICP’s executive director attended Citigroup’s annual shareholders’ meeting and asked for an explanation of this seeming violation of Citigroup’s public statement of its “best practices.” Citigroup chairman Sanford Weill said that CEO Chuck Prince would answer the question, but he did not. Rather, Mr. Prince referred the question to Citigroup chief operating officer Robert Willumstad, who stated that ICP must be misreading the mortgage data, and incorrectly inferring from the interest rates at which Citigroup’s loans are made that some are covered by HOEPA. But in the data, there is a column with a simply yes or no answer: covered by HOEPA or not. And 837 loans in the data Citigroup provided to ICP (and to it regulators) are covered by HOEPA.

After Mr. Willumstad’s denial from the stage of Carnegie Hall, where the meeting was held, two Citigroup staffers summoned ICP’s director out into the lobby. They acknowledged that hundreds of loans in Citigroup’s 2004 data are covered by HOEPA. They put the number at 797, and broke that figure down as follows:

180 HOEPA loans attributable, they said, to the acquired Washington Mutual Finance Group pipelines or to unexplained "errors;”

29 HOEPA loans by CTB, Citicorp Trust Bank;

582 HOEPA loans by "Associates Puerto Rico;" and

six HOEPA loans by CitiFinancial Puerto Rico.

Because the meeting was nearly over, ICP’s director went back in and asked a third question: "There seems to be a disconnect between senior directors and the staff at CitiFinancial, because they've just acknowledged that Citigroup did make and report HOEPA loans in 2004, contrary to the statement on Citigroup's web site, and contrary to what Bob Willumstad just said. You should correct the statement on your web site, and all regulators you've made that representation to, forthwith."

There was no response from Citigroup. Further inquiry by ICP has found this breakdown:

611 HOEPA loans by “Associates International Holding Company;”

29 HOEPA loans by Citicorp Trust Bank fsb (fka Travelers Bank & Trust);

180 HOEPA loans by Washington Mutual Finance (now CitiFinancial); and

17 HOEPA loans by CitiFinancial Services of Puerto Rico.

This violates both the letter and spirit of Citigroup’s “commitment.” There are HOEPA loans reported as CitiFinancial, in 29 states as well as Puerto Rico, and it is not at all clear that these were all acquired among with the subprime lender “Easy Money,” which Citigroup acquired in 2004. Latin Finance magazine of July 2002 reported that “Willumstad will now have an oversight role in Citigroup's operations both in Mexico and Puerto Rico. Willumstad, president of Citigroup and Chairman and CEO of the company's global consumer group, will run credit cards, consumer finance and retail branch banking.” The American Banker newspaper of June 12, 2004, was even clearer: “Mr. Willumstad, 56, also assumes full responsibility for Citi's activities in Mexico and Puerto Rico.” Given Citigroup’s many statements that it was integrating and reforming Associates First Capital Corporation, that its defense now is that it could continue making HOEPA loans as long as it kept subsidiaries with the old Associates name is disingenuous and troubling. So too are Citigroup’s spin to journalists.

Simply put, Citigroup has violated and evaded its supposed “best practices” commitments; even when this is raised with Citigroup’s own data, Citigroup denies it, from the stage of Carnegie Hall no less, and keeps on denying.

For example, Citigroup has claimed that the distinction is that its operations on Puerto Rico only came under Harry Goff’s jurisdiction in mid-2004. But the commitment was not by, or about, one person, but rather the company. Citigroup has said that “Associates Puerto Rico” was run out of Dallas and not Baltimore. And? Citigroup is in denial.

Regarding the resignation of James Gilleran as director of the Office of Thrift Supervision, we’re trying to be kind: Gilleran might well still find a way to contribute to a better society. It’s just that his stint at the OTS had the opposite effect. And the first move by his replacement should be to roll back Gilleran’s one-man attacks on the CRA. Gilleran should return to his Bohemian Grove and think about this next step.

On April 22, ICP received from HSBC a letter stating in pertinent part:

“This letter is in reference to the Beneficial, HFC and Decision One 2004 HMDA LARs we went you on April 4, 2005. In complying with you request to provide you the LARs in .dat format, the Agency Code inadvertently defaulted to “1-OCC”... Please be assured that Beneficial, HFC and Decision One each separate filed their respective HMDA Lars with the Federal Reserve Board in February 2005... We enclose the corrected CDs in .dat format showing “7-HUD” as the regulatory agency for HFC, Beneficial and Decision One.”

There are two problems: first, the enclosed CD has been shattered during (DHL) shipping, so ICP cannot check the new data. Second, lenders which are bank holding company subsidiaries are supposed to list “2-FRB” as their agency code. At least that’s what CitiFinancial and Wells Fargo Financial did. ICP has now raised this to the regulators.

We’ve also received an April 22 letter from New Century, specifically from its compliance officer Jeffrey McFadden, acknowledging that “few, if any, other lenders have required a confidentiality agreement... You may disregard our earlier request for a signed confidentiality affirmation.” Thanks. Now what about Lehman Brothers? And what about MBNA, which has provided its data only in paper form? With Fifth Third, which has provided it only in PDF and now dodges phone calls and letters? Synovus and New York Community Bancorp? We’ll have more on all of these. For now, click here to view ICP’s study of major lenders in the New York City MSA.

April 18, 2005

Analysis of the 2004 mortgage data continues. Inner City Press and Fair Finance Watch have now reviewed the 2004 Home Mortgage Disclosure Act data of three more of the largest subprime mortgage lenders in the nation – Washington Mutual, AIG / American General, and Ameriquest – and a similar number of regional banks, including KeyCorp, SunTrust, Royal Bank of Canada / Centura and ABN Amro, comparing them to corrected data that Citigroup has released, including the new information concerning which loans are subject to a rate spread (3% higher than comparable Treasuries on a first lien, and 5% on a subordinated lien), and have found the following:

Royal Bank of Canada, which in the U.S. owns Centura bank and an Illinois-based mortgage loans, imposes higher-cost rate spread loans nearly four times more frequently on African Americans than on whites. ABN Amro, which owns a mortgage company as well as Standard Federal and LaSalle Bank, imposes higher-cost rate spread loans 4.19 times more frequently on African Americans than on whites, while denying African Americans’ applications 3.54 times more frequently than those of whites, and denying Hispanics’ applications 1.84 times more frequently than those of whites.

Among the banks, KeyCorp in 2004 made 972 HOEPA loans, at costs much higher than the new rate spread threshold. In fact, 456 of these loans were at rates more than 10% over the Treasury bill rate baseline – that is, home-secured loans at interest rates of 12% and up, in a low interest rate environment. ICP is now studying the demographics of these high cost HOEPA loans.

The large non-bank subprime lender Ameriquest made more than 45,000 loans at rates 5% or more over Treasuries, and over 270,000 rate spread loans overall. Washington Mutual made 71 HOEPA loans, and imposed higher-cost rate spread loans 3.26 times more frequently on African Americans than on whites. AIG FSB, the savings bank owned by the insurance company American International Group, imposed higher-cost rate spread loans 2.27 times more frequently on African Americans than on whites in its home state of Delaware in 2004.

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 (click here to see this week’s ICP Bank Beat report, which also reports on what appears to be HSBC’s stealth move of its HFC, Beneficial and Decision One units to its national bank HSBC Bank USA, in order to preempt state laws, contrary to HSBC’s and the OCC’s statements. 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.

Some lenders continue to throw up obstructions to access to their mortgage and rate spread rate. Lehman Brothers, which like AIG owns a savings bank in Delaware as well as two large subprime lenders, is attempting to require ICP to sign a confidentiality / privacy agreement (as has another large subprime lender, which now states it is reconsidering its position -- we’ll see). ICP has written to Lehman Brothers, and to the Office of Thrift Supervision and other regulators, reminding them that under the Home Mortgage Disclosure Act this data must be released, without conditions. There are other obfuscations: Fifth Third Bank has provided its data in PDF format, which can be viewed (as printed pages) but not analyzed; Countrywide is claimed to not be able to provide the data in the format it was submitted to the regulators, despite ICP working for a week providing Countrywide with information about free software and formatting options.

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 and others received from Citigroup new compact disks and repeated its analysis. The number of originated loans and mortgage records have remained the same – 351, 811 loans and 1,218,402 records. But 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.

This is still lower than at HSBC, where 32.7% of 2004 loans were higher-cost rate spread loans – but it is much lower than at Wells Fargo, where 9.13% of 2004 loans were higher-cost rate spread loans. For home purchase loans, Wells Fargo denied the applications of African Americans 2.28 times more frequently than those of whites, and those of Latinos 2.02 times more frequently than whites. At Citigroup, the disparity for African Americans is higher (a denial rate for African Americans 2.54 times higher than for whites), while for Latinos it is slightly lower (a denial rate for Latinos 1.93 times more frequently than whites). These comparisons are for the holding companies as a whole, cumulating all of their HMDA-reporting affiliates.

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.

April 11, 2005

Our focus remains on the 2004 HMDA data - in this week’s study, we compare HSBC, Wells Fargo and J.P. Morgan Chase, click here to view. The summary findings include the following:

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.

At Wells Fargo for home purchase loans, African Americans borrowers are 3.9 times more like to receive a rate spread loan that white borrowers. This is only slightly less disparate that Citigroup, at which African Americans borrowers are 4.34 times more like to receive a higher-cost rate spread home purchase loan that white borrowers. Meanwhile, Wells Fargo denies the applications of African Americans for home purchase loans 2.3 times more frequently than those of whites, nearly as disparate as Citigroup’s 2.6 to one denial rate ratio between African Americans and whites.

At Wells Fargo for all types of mortgage loans, African Americans are 3.19 times more like to receive a rate spread loan than white borrowers. As we’ve noted, Wells Fargo is also a major funder of payday lenders, including targeters of military personnel such as Armed Forces Loans, Inc.. ICP has raised this directly to Wells Fargo, and to the Federal Reserve on Wells’ proposal to acquire First Community Capital Corp., which was announced back on September 2, was challenged by ICP on November 1, and which still remains pending, more than five months later.

Inner City Press’ analysis of J.P. Morgan Chase’s 2004 lending record (based on the 1,083,774 applications reported) finds similar rate spread disparities at Morgan Chase. For loans secured by a first lien, African Americans are 2.68 times more likely to receive rate spread loans than whites at J.P. Morgan Chase. This is more disparate than for example National City Corporation’s 2.21 disparity reported in the Wall Street Journal of March 30, 2005. See, “Blacks Are Found to Pay High Rates for Home Loans,” WSJ of 3/30/05, D2; compare to the 4/4/05 Associated Press report on ICP’s first study, “U.S. Community Group Alleges Citigroup, Bank of America Discriminate in Mortgage Lending.”

Citigroup’s response to ICP’s analysis of its mortgage data, in which ICP as Citigroup had suggested looked at particular mortgage lending products, beginning with home purchase loans, was to call the conclusion “reckless.” This ad hominem response was delivered by CitiFinancial’s ex-journalist spokesman, to the publication he used to work for; then it was repeated to the Associated Press. See, “Group Alleges Bank Discrimination,” AP of April 4, 2004. For a bank which has been subject to prosecution and de-licensing for both predatory lending and money laundering to characterize as “reckless” the analysis of data, using methods the bank itself suggested, is laughable.

Citigroup's March 2005 memo about its then-still-withheld data said, in the second paragraph, "As a result of these efforts, the homeownership rate in the United States hit a stunning 69% last year... efforts to expand credit, particularly through the use of risk-based pricing, have contributed to these incredible gains in homeownership."
That's why it's more than legitimate (and not "reckless") to look specifically at risk based pricing for homeownership loans. A separate methodological issue it that we'd resist including home improvement loans in the analysis since Citigroup's home improvement loans include a slew of non-secured loans for which they don't report whether the loans are rate spread or not -- including these would skew any analysis.

Substantively, even as ICP analyzes other banks’ data as it arrives, Citigroup continues to stand out. For example while at Wells Fargo for home purchase loans, African Americans borrowers are 3.9 times more like to receive a rate spread loan that white borrowers, this is still less disparate than Citigroup, at which African Americans borrowers are 4.34 times more like to receive a higher-cost rate spread home purchase loan that white borrowers. Meanwhile, Wells Fargo denies the applications of African Americans for home purchase loans 2.3 times more frequently than those of whites, nearly as disparate as Citigroup’s 2.6 to one denial rate ratio between African Americans and whites.

Perhaps rather than spend its staff time on spin, and then insults, Citigroup ought to focus on improving its performance, including fair lending performance. Paraphrasing “Don’t move, improve,” the message / lesson to Citigroup is “Don’t schmooze, improve.” We’ll see.

Studies remain ongoing. ICP Fair Finance Watch timely requested data from over one hundred lenders. Numerous large lenders continue flouting the March 31 deadline, including U.S. Bancorp, H&R Block’s Option One, and Toronto Dominion / Banknorth. HMDA-reporter Merrill Lynch Credit Corporation has provided its data only in PDF format, in which it can be seen but not cumulated and analyzed. Ameriquest has still not provided data, despite last week calling and asking to speak with ICP about its findings. Countrywide provided, a week late, a three-page preamble to its data, which then came in unanalyzable format. The same remains true of AIG and its federal savings bank and American General units. Lehman Brothers, which owns two major subprime lenders, has yet to respond.

It was only after ICP’s complaints that Wells Fargo provided the data in other than PDF format. The Bank of New York called ICP on Friday April 8 to say that, having heard from the Federal Reserve of ICP’s complaint about its lateness, the data will now be forthcoming. But which agency will ensure compliance by other institutions like AIG, Merrill Lynch and Lehman Brothers? On paper, this is the Office of Thrift Supervision’s job, which each of them owns thrifts. But the OTS and its director James Gilleran have been weakening and attacking the Community Reinvestment Act. The above-named thrift holding companies appear to be emboldened.” ICP has raised these matters to the other regulatory agencies, calling for action from each of them. The results will be reported here - watch this space.

April 4, 2005

The 2004 Home Mortgage Disclosure Act data is in the processing of coming out, lender by lender, not unlike pulling teeth. Inner City Press has done an analysis of a half-dozen banks, the largest (and most disparate) among them being Citigroup -- click here to view. Among the new variables in the data is which loans are subject to a rate spread. ICP’s top line finding so far with the 2004 data is that at Citigroup for home purchase loans, African Americans borrowers are more than four times more likely to receive a rate spread loan than white borrowers. Meanwhile, Citigroup denied the applications of African Americans for home purchase loans 2.6 times more frequently than those of whites.

Citigroup’s rate spread disparity for Hispanics was even worse: for home purchase loans, Hispanic borrowers are 6.48 more than six times more likely to receive a rate spread loan from Citigroup than are non-Hispanic white borrowers.

This disparate treatment by Citigroup of people of color seeking to own their homes is decidedly more pronounced, and more troubling, than for example National City Corporation’s two-to-one disparity reported in the Wall Street Journal of March 30, 2005. National City apparently presented its data in the light most favorable to it, leading to the summary conclusion that African Americans are 2.21 times more likely to receive rate spread loans than whites at National City, and Hispanics 1.26 more likely. See, “Blacks Are Found to Pay High Rates for Home Loans,” WSJ of 3/30/05, D2.

ICP had requested National City’s data on February 28, in a letter that also asked National City to justify its continued funding of payday lenders, a topic on which ICP has previously commented to the regulators. See, e.g., Crain’s Cleveland Business of May 17, 2004, reporting on ICP’s comments and that National City lends to major payday lenders like Check n 'Go, “Check into Cash of Cleveland, Tenn[essee and] Ace Cash Express of Dallas.”

The March 30 Wall Street Journal story makes clear that National City selectively pre-released its data to that publication, hoping apparently for friendlier treatment (perhaps in exchange for this “scoop”). ICP wrote to National City on March 30 demanding an explanation of the bank’s policy for responding to requests for data, and citing the HMDA regulation, which require provision of the data by March 31 for all requests submitted on March 1 (or before, as ICP’s was).

National City faxed a response:

“As I am sure you are aware, 2004 HMDA information has generated a significant amount of interest and numerous data requests. Data requests are being filled in the order they are received... [Y]our request... required more time to prepare.”

Does this mean that the Wall Street Journal submitted its request before February 28? Even if this were true, once National City had the data on a compact disk, it could have provided it to others beyond the Wall Street Journal. Apparently, the goal was to grant an exclusive or head-start to a generally conservative publication that expresses editorial skepticism about fair lending.

National City’s game-playing, however, is outdone by Wells Fargo, which has for now provided its data in Adobe / PDF format, in which it can’t be analyzed. J.P. Morgan Chase, which had offered to “pre-spin” its data prior to released, ended up not providing the data in the time required: despite ICP’s February 28 request, the data was not made available on March 31, nor April 1, nor through the weekend. HSBC provided its data in less than useful format, as did AIG and, for a truly surreal reason, Synovus (which wrote that “we previously provided the information requested in paper format because the electronic version of the Synovus LARs includes non-public information that we can not provide to you.” Uh, it’s called editing a file on a computer... There are others, and they will be named (if not shamed) in this space in the near future. Each is given a change to provide their explanation (as with National City, see above).

Back to the data: National City’s over two-to-one disparities are troubling -- but they cast Citigroup’s four-to-one disparity for African Americans, and over six-to-one disparity for Hispanics seeking home purchase loans in starker contrast. The nation’s largest bank is also its most disparate, when it come to targeting people of color with higher-cost home purchase loans. In examining Citigroup’s data, ICP has identified a loophole in the rate spread reporting system of which Citigroup is availing itself: while rate spread is defined as three percentage points over comparable Treasury securities for first liens, and five percentage points over Treasuries for all subordinated liens, Citigroup makes an exempt category of not-secured home improvement loans. Citigroup’s reasoning for reporting unsecured loans in its mortgage lending data is not known with certitude (although Citigroup’s previous mock compliance with a commitment to increase “minority” loans by making a slew of $1000 micro-mortgages does come to mind). The 2004 data shows that Citigroup made more of these unsecured home improvement loans to Hispanics than to whites, while for both first lien and subordinate lien secured home improvement loans, Citigroup made more loans to whites than Hispanics. No matter how high the interest rates on these loan, they do not show up using the rate spread filter, because they fit neither into the first lien / three percent or subordinate lien / five percent over Treasuries definition. ICP intends to pursue this issue. And as to other lenders, more studies will follow, shortly.

Beyond the mortgage data, ICP asked AmSouth Bank to justify its support for payday lenders and car title lenders; AmSouth responded that it “prohibits opening accounts for MSBs engaged in payday lending, title lending,” etc.. It doesn’t answer about its loans to these fringe financiers, however. To be continued next week.

March 28, 2005

This week from the predatory lending depths: various subprimers and their referrals to Wells Fargo’s stealth servicer. Among the range of Wells Fargo’s predatory practices is the almost disavowed “America’s Servicing Company, on which we’ve previously reported. Among the week’s mail were these two, further on Wells’ ASC:

Subj: ASC IS NORWEST

Date: 3/24/2005 8:28:54 PM Eastern Standard Time

From: [ ]

To: WellsWatch [at] innercitypress.org

I got a mortgage from Argent loan and sold to Ameriquest then to ASC which ended up as in CA. ASC do not have any license as dept. of corp and dept of real

state. Also my search about " http://www.ascservicing.com " I found out ASC are same as Norwest also sub for wells fargo and as 3/4/2005, ASC has some legal cases under National City Home Loan, HSBC Bank, Wells Fargo Home Mortgage, and more. ASC as "servicer" for all but do not have license in ca. or others too. I called more than 10 times and no one provide me any info all is secret only one person told me call BBB. What about government agency?

Yep - Federal Reserve, OCC, the states (send a cc to Inner City Press if you like).

Subj: America's Servicing Company

Date: 3/25/2005 4:09:00 PM Eastern Standard Time

From: [ ]

To: WellsWatch [at] innercitypress.com

In 2004 I built a home. I had a construction loan through a local bank. Permanent loan was then obtained through RBC Centura bank. This loan was sold to ACS.

Problems arose after ACS purchased loan. I was never notified that ACS had purchased loans. I continued to send my mortgage payment to RBC... RBC forwarded the installments to ACS for the first 60 days after they had sold loan to ACS. The installments RBC received from me after the 60 day time frame were returned to me with a letter stating they had sold loan to ACS in December of 2004 and had been forwarding my payments. The letter also advised the new mortgage company should contact me with account information etc.... I never received any notification that ACS had purchased the loan. I learned that I was in default and that I was placed in collections. I have Made repeated attempts to contact ACS to have this situation resolved to no avail....

Not only does this company not comply with fair lending and credit practices, they place accounts in collection without due course and process and without notification that they are the lender/mortgage company....

This has placed a burden on me as to impact to my credit standing and ability to obtain a mortgage with a reputable company. I am subjected to increased cost of payments, increased interest rates and will be forced to pay additional fees to obtain refinancing...

Speaking of predators, the Office of Thrift Supervision last week unilaterally extended its time to rule on Inner City Press’ FOIA appeal about H&R Block and Option One, saying it is “in the process of reviewing the file on this matter, which is voluminous.” Yeah -- the OTS withheld in full five whole binders of information from the rogue subprime lenders at H&R Block...

March 21, 2005

See how the predatory lenders spin and weave: Ameriquest last week bragged of a settlement-on-the-cheap of a California class action. But then the L.A. Times dug deeper, and reported that state attorneys general are preparing to sue or settle next month. The article quoted ICP that “Ameriquest is a ‘serial settler’ whose ‘best practices,’ adopted over the last five years, have not changed the way it does business.” For those who remember, there was a July 26, 2000 Ameriquest press conference in Washington, at which it vowed to clean up not only its own, but the industry’s, predatory lending. (Those looking even closer will find a college-classmate relationship between Ameriquest majority owner Roland Arnall and a participant at the press conference). Four and three-quarters years later, a state attorney general is quoted: "Ameriquest has violated not only the letter of our law, but also the spirit of our agreement that gave them a second chance." Fool us once...

An aside: Louisiana assistant attorney general Mike Guy, who last week fed out pro-Ameriquest quotes, must have a strange definition of consumer protection -- and of his job. Seemingly on-demand, he whipped out more damning quotes (and subpoenas) against a lender targeted by an Ameriquest fan. So who does this Guy work for?

In other Washington shenanigans, on March 18 Alan Greenspan stood at a podium in the basement ballroom of the Hyatt Regency and urged community groups to more objectively study their successes and failure. That was his watchword, at the NCRC conference: “Objectivity is paramount” ... “Objectivity requires great discipline and integrity; it requires that researchers resist any innate desire to characterize results in the most- or least-favorable light possible.” But how objective was Fed governor Olson’s recent statement that discrimination in lending no longer exists, because his college student children can get loans? Or statements about social security, and silence on budget deficits? Is the Fed telling the banking industry to stop lobbying and advocating, and become more objective? Apparently not: at the same event, banks were trying to pre-spin their Home Mortgage Disclosure Act data. Fed staffer Dan Sokolov made disparaging remarks about the CRA (that it’s heat and light and not substance -- this based on attendance at a single early morning workshop, very objective); another Fed staffer has said that the new HMDA data shouldn’t be used to identify pricing discrimination by lenders. Why not? If that’s what the data show?

March 17, 2005

Events midweek in Washington require this report. On the predatory lending front, the “Ney - Kanjorski” bill is being supported by, for example, the Bond Marketing Association. Why? Because it eviscerates assignee liability for the white shoe / Wall Street firms which buy, securitize and profit from predatory loans. Preempting local laws which provide more protection for consumers would be a step in the wrong direction, most consumer groups agree. Here is a report on ICP's view on a competing bill; here is the L.A. Times interim March 15 article on predatory lending actions against Ameriquest.

More nitty-gritty: in the Federal Reserve Board’s order issued late on March 16 on the Citigroup - First American Bank application on which Inner City Press / Fair Finance Watch has been commenting since October 2004 -- not only on predatory lending issues, but also Citigroup’s serial crises in Japan, the European bond market, and, only yesterday, money laundering for Pinochet -- the Fed states as follows:

“Given the size, scope, and complexity of Citigroup’s global operations, successfully addressing the deficiencies in compliance risk management that have given rise to a series of adverse compliance events in recent years will require significant attention over a period of time by Citigroup’s senior management and board of directors. The Board expects that management at all levels will devote the necessary attention to implementing its plan fully and effectively and will not undertake significant expansion during the implementation period. The Board believes it important that management’s attention not be diverted from these efforts by the demands that mergers and acquisitions place on management resources.”

As reported by CBS Marketwatch's David Weidner, "The Fed challenge does not entirely come out of the blue. Inner City Press/Fair Finance Watch, a Bronx, N.Y.-based community group, opposed the First American acquisition citing Citigroup's lending practices and the scandals faced by the bank. 'Unless Citigroup actually improves its practices, rather than only its public relations as has until now been the case, this block on expansion should become permanent,' said... the group's executive director. 'The Fed should not have given Citigroup any merger approval given the scandals that are swirling around it.'"

Initial press reports entirely missed the above-quoted language from the order and merely noted the approval, and (near-meaningless) antitrust numbers. ICP/Fair Finance Watch endeavored to correct this, emphasizing the above: the Fed “expects” that Citigroup “will not undertake significant expansion” for the foreseeable future. The Fed’s inappropriate failure to address last week’s comment and Report (below on this page), and yesterday’s Pinochet report on Citigroup from the Senate, will be inquired into going forward. The Order also acknowledges disparities in Citigroup’s mortgage lending and other issues ICP raised (click here for PDF of the Fed's order) -- but the above-quoted seemed noteworthy. On this, ICP’s position: While the Fed should not have given Citigroup any merger approval given the scandals that are swirling around it -- from money laundering including for Augusto Pinochet and in Japan, to rogue bond trading and predatory lending -- ICP take note of the Fed implying that Citigroup can’t expand any more, for the foreseeable future. Unless Citigroup actually improves its practices, rather than only its public relations as has until now been the case, this block on expansion should become permanent.

The press coverage by Thursday afternoon noted the language, but quoted a slew of industry analysts trying to first minimize then generalize its import. Reuters quoted a former Fed associate general counsel that "the Fed is not saying Citigroup can't make acquisitions." Dow Jones newswires later quoted ex-Comptroller Jerry Hawke that "If Citigroup is told in the context of a small, not terribly consequential acquisition that they should steer away from more substantial mergers until they get their risk management in shape, that's a message to everybody." Of course, it might be be so "inconsequential" if you lived in a community previously served by First American Bank, now to be replaced if the Fed has its way by "Doctor Evil." DJNS noted that "the Fed's guidance to Citigroup was buried in its order approving the deal, with a number of banking experts only discovering it Thursday after reviewing what at first glance seemed like a routine bank order." But Inner City Press has learned that a Federal Reserve staffer urgently called Washington media outlets trying to reach reporters directly after 5 p.m. on Wednesday, to specifically alert them that an order, presumably important and out of the norm, was coming. So why was the language missed "at first glance"? Perhaps because Citigroup has been so embroiled in scandals, for so long, that it seems normal. It is not. On Friday the WSJ, which has generally turned a blind eye to number of Citi-scandals, including predatory lending, chimed in that "From time to time, the Fed has placed similar restrictions on other institutions, but rarely on such a large institution, in writing and in such a public form." The Citi - FAB order was public because the application was challenged; Fifth Third for example, and PNC before it, needed nods from the Fed to even consider acquisitions. But the language in this order is unique.

CBS Marketwatch quoted a professor from NYU that "Citigroup will have to open a backdoor dialogue with the Federal Reserve and receive tacit approval before pursuing a deal. 'They'll have to have assurance it's worth the bother.'" But the Fed is not allowed by pre-approve (or "tacit[ly] approv[e]") merger applications, which are subject to public comment, the Community Reinvestment Act, and other statutory factors. "Backdoor dialogue" with a rogue bank would not be appropriate. The Fed should stick to it, and also take appropriate enforcement actions against Citigroup.

March 14, 2005

On March 6, Capital One announced a proposal to buy Hibernia, for $5.35 billion. By March 10, Inner City Press / Fair Finance Watch 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 one of the month’s smaller but wackier deals, the payday lender Dollar Financial has bought We The People, a “legal documents preparation company” with 170 franchise offices across 30 states, for $ 17.5 million. Dollar offers its high-cost loans under such names as Money Mart, Loan Mart and Money Shop, with over 1000 stores, including in Canada and the U.K.. Our question: will a Dollar-owned We The People help one prepare legal papers to sue Dollar for predatory lending?

Elsewhere in Inner City Press this week, highlights include a Citigroup Watch Report on fraud and cover-up, recounted by a whistleblower and now filed by ICP with the Federal Reserve; and excerpts from the Freedom of Information Act case against the Federal Reserve Board’s withholding of the list of payday lenders, pawnshops and other subprime lenders assisted by Wachovia. Until next time, for or with more information, contact us.

March 7, 2005

This week: cloak and dagger among the subprime lenders, Wachovia branch closures, and payday lending numbers.

Two HSBC - Household facts were reported during the last week but not sufficiently related. After the earnings hoopla (largely but too vaguely characterized as disappointing), HSBC filed with the U.S. SEC on March 4 a terse disclosure that it had “identified a material weakness in the internal controls” at Household International, now renamed HSBC Finance Corporation. The question left unexplored is how this relates to the February 28 announcement that Household’s Bill Aldinger, will be out on April 29, a full year early. He was called indispensable, and now suddenly he’s gone.

CitiFinancial’s mandatory arbitration clause has been found to be “unconscionable” in North Carolina by Durham County Judge Ronald Stephens. The suit was filed in Vance County, north of Raleigh, in 2002 by CitiFinancial customers Fannie Lee Tillman of High Point and Shirley Richardson of Henderson. Their suit accuses CitiFinancial, formerly doing business as Commercial Credit Loans Inc., of excessive and improper fees. It’s important to note this case has nothing to do with Associates First Capital, but rather the subprime operation designed since 1986 by those now controlling Citigroup.

How this fits in to the 25-minute revisionist video Citigroup began screening last week for its employees is not yet clear, nor have the just-hired Howard Baker’s views on CitiFinancial’s practices beyond the U.S. been inquired into yet. On March 1 in Singapore, Marge Magner announced that Citi “will be opening 200 branches across Asia for consumer finance.” Magner said countries that would see more Citi outlets this year include India, Indonesia, Thailand and the Philippines. Unconscionability goes global... Of Howard Baker, note that the law firm he was at, Baker, Donelson, Bearman, Caldwell & Berkowitz PC, has represented CitiFinancial on predatory lending-related matters...

In continued merger fall-out, Wachovia announced last week 174 branch closings, most of them SouthTrust branches. A list from Tampa / St. Pete, Florida is contained in this week’s ICP Wachovia Watch. Other hit-lists will follow, along with quotes from Wachovia’s wacky claims in the Freedom of Information Act case in which it claims that disclosing the subprime lenders it works with would cause it substantial competitive harm.

Following the FDIC’s payday lending announcement on March 2, here were the effects on three (Texas-based) payday lenders: the stock price of Cash America International Inc. of Fort Worth fell 13 percent; First Cash Financial Services Inc. of Arlington, down more than 9 percent; and Ace Cash Express Inc. of Irving, off about 8 percent.

In New Mexico, among the lobbyists for the payday lending industry is former House Speaker Raymond Sanchez. Last week at the annual conference of payday lenders’ trade association CFSA, the speakers included Tom Feeney, former speaker of the Florida House of Representatives, and, big-ticket (and closed door fundraiser), Rep. Paul Kanjorski, D-PA, and House Majority Leader Tom DeLay. This is from the event’s program; there was a hospital suite sponsored by Bank of America... Where does the money to lobby come from? Well, the financial director of Atlanta-based (and Synovus-linked) payday lender CompuCredit Jay Putnam tells this month’s Credit Card Management magazine that he expects the return on investment generated by the payday loan business to be between 20 and 25 percent... Until next time, for or with more information, contact us.

February 28, 2005

We’ll focus this week’s Inner City Press CRA Report on three sides of Wells Fargo: stealth servicing, disparate treatment, and the push into subprime. Last week, we reported on complaints about America's Servicing Company, including a request to know who owns it. ICP went online and read that “America's Servicing Company, better known as ASC, a division of a well-known and respected mortgage company, is the subservicing/contract servicing operation. Loans may be serviced under the name of the client or ASC.” Why say, “a well-known and respected mortgage company” without naming it? Further inquiry found that this apparently ashamed owner of ASC is none other than Wells Fargo.

Our noting this has given rise to more inquiries. For example:

Subj: ASC bka Wells Fargo

Date: 2/24/2005 1:06:56 PM Eastern Standard Time

From: [ ]

To: WellsWatch [at] innercitypress.org

I just recently stumbled across your web page while i was doing some research about America's Servicing Company.

I am really troubled about some practices and recently found out that they are the same as Wells Fargo. ASC is currently my mortgage lender but i was offered a small loan in the month of December from Wells Fargo which I accepted....and they never indicated that they are the same as ASC. I have been bombarded since then with phone calls from various offices of Wells Fargo (with all of my credit and personal info, I might add) offering to re-finance me with a 15 year lower interest rate (all financing and fees included i’m sure). They have mailed me information and are constantly calling. They asked me who I was currently with and I told them ASC. They never indicated that they were the same. When I filed my taxes, the tax preparer found that ASC and Wells Fargo had the same ID or tax number (meaning they are the same company?). I just spoke with the representative in the office of Wells Fargo and he said that he doesn't know who ASC is and they have no affiliation and not the same. He said that they are a publicly traded (what does that mean) company and have no affiliation with Wells Fargo.....needless to say, at this point i don't believe him.

When I went to the web site i typed in subsidiaries of ASC and guess what came up.....yep, Wells Fargo.

This is unfair and deceptive practices.

We agree... Another Wells Fargo complaint received last week:

Date: 2/24/2005 5:39:57 PM Eastern Standard Time

From: [ ]

To: WellsWatch [at] innercitypress.org

I am an Anglo massage therapist in Napa, CA...an area with a large Hispanic population. Our chiropractic office has two Anglo employees and three Hispanic employees. Yesterday, Dr. Brackett sent out Lupe, the Hispanic receptionist to cash a check at Wells Fargo for petty cash. Because she didn't have a bank account there, they charged Lupe $5 to cash the check and required two IDs, and a thumb print. When I have gone there to cash personal checks for my mother along with a business check for my pay, they have required $5 from me... but no extra ID and no thumb print. My mother's personal check for a much greater amount is never any problem.

So, this was my theory...Wells Fargo charges $5 to cash business checks here in Napa because they can get away with it. Of course I wasn't going pay $5 to cash my check so I just took it to my mother and she cashed it for me. But a migrant worker doesn't have the resources I do. So, the next day, Tara Booth, the Anglo office manager went in to cash another check to test my theory that Lupe Valasquez was discriminated against...and they not only didn't charge her the $5 but they didn't require any extra ID! I know it is tiny compared to lending practices discrimination...but it really makes us mad!

Us too (or, grammatical but stilted, “we as well”). And yet another:

Subj: Wells Fargo nightmare

Date: 2/24/2005 5:51:40 PM Eastern Standard Time

From: [ ]

To: WellsWatch [at] innercitypress.org

Below is my letter to Wells Fargo, I have had no resolution. I ended up signing at a 9.9% interest rate (I was leaving 5.5% on my construction loan) for no reason. My credit score is 636 when I view it—they claim it is 580 but won’t show it to me. I had no choice but to close as they kept me waiting until I was in a bind. They then made me sign two papers, both of which I was told if I did not sign, I could not get the loan... Please publish my story as it is a nightmare!

MY LETTER – No response yet

Wells Fargo Financial

Des Moines, IA 50309

To: Thomas Shippee, Alan Blenner, David Kvamme, Michael McCoy & Dennis Young

I am writing this letter out of total frustration so that you can see what is going on with your company at the local level.

I am a real estate agent in Mississippi. I have recently built a home and wanted to get permanent financing and pull my down payment back out. (I put down $33,000 on the home). I have several connections in Mortgage brokerage but I had recently heard that Wells Fargo was doing home mortgages in the prime market so I called the Jackson, Mississippi office, located on county line road. I was asked to come in. My husband and I went into the office and gave our information and had our credit checked. We were told that we could get a home mortgage for 6.5 %. This was one percent lower than the rate I currently had and I was told that because of my credit, I could never get the 5.5% again. They said that they only use Trans Union and my score with them was 580. My score has never been 580 with anyone. I told them that I checked with all three agencies and my lowest score was 625. They said that they figured it differently than I did. Is a FICO score not the way to figure it? I didn’t understand this but I told them that I would take the higher rate if I could pull out at least $20,000 ( My loan with the bank was for $206,000.) I was then told that if my home appraised for $250,000 or above, I could pull this money out and refinance the house at 6.5% on a three year ARM. I told them okay and waited. Two weeks later, after accumulating all of the paperwork, the appraisal came back at $265,000. I was then told that it did not appraise high enough for me to pull the cash out. I was told that they could refinance it but not pull the money out. Why, I asked would I refinance at one percent higher rate and not pull money out? I then inquired about a home equity loan or any type program where I could keep my original mortgage and just borrow against the equity. I was told “they didn’t do that anymore” and I would have to refinance the entire home. They offered me a rate of 7.25%. Ben (the Manager) told me that I should take the 7.25% and pull out 95% of the equity, pay down my debt which was the only reason for my low score. Then, he stated, my credit score would go up and he would refigure the loan based on the new credit score. This entire time, I had pulled my credit online and showed 628. Ben keeps insisting that their records showed my score at 580. I could not understand why he showed such a lower score. I asked him to run the credit again. This is a total of two times I authorized for my credit to be checked. After checking my credit, he said that it still showed 580 and that if I took the 7.25 % I could get up to 95% of the equity, pay down my debt and come in within 45 days and receive the new interest rate of 6.5. I asked for this in writing and was told that “I had his word and it was their policy not to put things in writing.” With time being lost (wasted) I told him to go ahead with the loan at 7.25% and then asked what the payment would be. His payment was very much higher than what I figured it should be which he explained by the APR. Even though the rate was 7.25, it seems the payment was figured on 7.9. Okay, I said, even though I have never heard of this I gave him the go ahead to submit the loan. I was told we should get approval that day. That was on a Friday. The following Friday, after many phone calls and many reassurances that everything was fine, I was called and told to come in and close, the loan was ready.

My husband and I made the one hour trip down to the loan office and sat down with a girl we have never met to close the loan. It turns out, the paperwork was done at 7.9% with $19,000 cash back and no other bills paid. I told her that this was not the loan we had agreed to and she stated that they would not do the loan we agreed to. I asked for Ben and was told he was headed out of town for the weekend. I then asked for a number of someone higher that I could call. I walked outside to make the call but since it was after 5:00, no one answered. I then went in and told the girl that because they kept me waiting for over a month, I was now in a bind to get the loan and would sign the papers because I had to have the money but I was going to go to an attorney afterwards. I was told that I couldn’t get the money for three days anyway. I had never heard this before and in over 100 loan closings that I had been to, I have never seen a customer wait three days until getting the money. I told her that I would sign and she then informed me that the loan had been cancelled. I said “how can you cancel the loan in 5 minutes.” She said she had. I asked for a copy of the paperwork and was told she had just shredded it. I then demanded that they get in touch with Ben. I waited around a half hour for Ben to return my call. He stated that they would not go over 85% at the interest rate of 7.9% and he was sorry he didn’t inform me of that earlier. He stated that I could go 90% with an interest rate of 8.9% (which is incredibility high to me when there is nothing on my credit that I see that should keep me from getting a decent loan). He said that they could do the 8.9% and then pay down the debt and I could come in and redo the loan within 45 days at no cost and my rate would be 7.9%. Everything is now over a point higher than I agreed to. It seems, every week that I wait, the percentage goes up another point. Now, I am in a bind, I have been lied to and played with for over a month. I have no choice but to take what he is offering but I want you to know that not only will I never refer anyone to you for a mortgage, I plan to take an ad out in the Clarion Ledger about this and also to post a letter on the Realtor Multiple listing web site in Jackson. I also plan to go to the attorney General regarding all the lies I was told. AND to top it all off, I check my credit again last night to try and justify the 580 you keep claiming to show. I got 627; it went down a point because you apparently have checked my credit 4 times in the last month, two of which were without my consent. To say that this has been disappointing is an understatement, it has been a nightmare. I will not let this die. To top it all off, he still will not give me something in writing that states the rate will go down later and he has made me wait so long that it’s to late to start over with another company. Is this the way you do business?

Yes, that is how Wells does business...

At the FDIC’s Feb. 22 meeting, Office of Thrift Supervision director James Gilleran made a motion for the other three agencies to simply follow the OTS, in calling all institutions below $1 billion in assets small banks. He couldn’t find a second for the motion, nor for another attempt, to loosen CRA on institutions above $1 billion. This isolation or ineptitude may be a good sign. But a question is, how similar would Comptroller-nominee John C. Dugan be to Gilleran, on CRA and other matters? The question(s) should be asked...

We love to see the concept of CRA showing up in unforeseen places. Take, for example, this article about hospitals in Las Vegas, describing “a bill that would require Nevada health care providers to reinvest a portion of their profits into the local community before sending money to out-of-state corporate offices. The proposal would be modeled after the federal Community Reinvestment Act that requires banks to make a percentage of their loans -- roughly 60 to 70 percent -- within the communities in which they accept deposits.” Now that’s not exactly what CRA does. But we like the idea.

Brazen Santander, in the lack of CRA: in the U.K., following Grupo Santander’s acquisition of Abbey National, the new CEO Francisco Gomez-Roldan announced last week that the bank will relocate fully a quarter of its branches over the next three years, moving them to “more profitable areas.” Speaking at an earnings-report press conference in London on February 25, Gomez-Roldan said that the branches will be moved to “better” areas. We’re not saying that this doesn’t happen in the U.S. -- but it wouldn’t be phrased so brazenly. ICP/Fair Finance Watch has fought a few rounds with Santander. See, e.g., “FSA Urged to Block Abbey Bid,” The London Observer, September 26, 2004, http://observer.guardian.co.uk/business/story/0,,1312662,00.html>. Looks like more will be necessary....

February 22, 2005

From Brussels, the administration has just announced the nomination of corporate lawyer John C. Dugan to become Comptroller of the Currency. For more than a decade, Mr. Dugan has been at the law firm of Covington & Burling, from which he has lobbied for Banker Trust (which was soon to be caught in scandal and sold to Deutsche Bank; National Journal 5/28/94), PNC Bank and others. Mr. Dugan lobbied for auction houses opposing the return of stolen Nazi art. (Source: Washington Post, 4/1/98.) Representing trade associations, Mr. Dugan opposed privacy advocates’ proposals to limit businesses’ use of Social Security numbers.

Given the frontal assault on the Community Reinvestment Act being carried out by, for example, Office of Thrift Supervision director James Gilleran, it appears inevitable that Mr. Dugan will be asked to answer questions about his support for the principles and practice of community reinvestment and fair lending, and what approach the OCC would take to these issues, if he’s confirmed. This is particularly true in light of the proposal just announced by the FDIC and OCC (which Mr. Dugan would head) to weaken CRA enforcement on banks below $1 billion in assets, allowing them to be examined under the streamlined test previously applicable only to banks with assets below $250 million. Now, it is imperative that Mr. Dugan be required to answer questions about his position on this CRA weakening proposal, and any further proposals he would proffer. Developing; for or with more information, contact us.

Stepping back, what’s the trend, in predatory payday lending? The story is mixed. Last week in Kentucky, an attempt to raise the cap on payday loans from $500 to $1,000 failed, despite the efforts of the state’s commissioner of financial institutions, Thomas Miller, who’d met extensively with payday lobbyists. Meanwhile, on a February 15 conference call, the newly-public payday lender QC Holdings bragged that the regulatory trend is pro-payday, and that it plans to open 150 new payday stores in 2005. (It operates under such names as Quik Cash, First Payday Loans and Nationwide Budget Finance, which got sued last week, as did CompuCredit’s unit.) The conference call, which Inner City Press monitored, was surreal and euphemistic. References were made to “our convenient lending model,” to “twenty dollar states” and “fifteen dollar states;” a supposed stock analyst advised the company to treat those on the call as QC’s “partners.” Well, no. The whole discussion ignored, for example, the anti-payday testimony delivered to the House subcommittee on Military Quality of Life during the same week:

I want to call attention to an industry that has made it a practice to prey upon our Sailors, taking advantage of those who lack savings in the bank or a credit card that can absorb unexpected expenses. Within a short walk outside the gates in the communities that surround our homeports are payday loan outlets that lure our Sailors with offers of easy loans that appear to be the easiest option to climb out of those rough patches. These lenders give quick, short-term loans, regardless of a Sailor's credit history, but for a hefty price. These fees and interest can add up to rates as high as 300 percent per year in some cases. As a result, our Sailors who turn to these payday loan outlets end up far worse off than before. These businesses are finding easy targets among young service men and women, but more senior Sailors have been caught in the spiraling interest of these payday loans. Besides the obvious concern that our Sailors who take these easy loans find themselves in further debt due to the interest charged on these loans, there is a larger interest. It is not being dramatic to state payday loans to our troops could be a threat to our military readiness and our ability to fight the Global War on Terrorism. We do not need Sailors distracted by the debt incurred from payday loans, nor can we ignore the security risks from Sailors in debt who could be compromised. In speaking with senior enlisted leadership at the fleet and force level, I have found that Sailors place the blame for the dire financial straits they are in on themselves, but I point the finger as well at these payday lenders who promise quick, easy money at these unconscionable terms. Educating our Sailors to the danger of payday loans is the least we can do, but bringing the issue of payday lenders to the attention of this committee is something I need to do as well for our Sailors.

So what was that, about a pro-payday regulatory trend? In Georgia, legislation has been introduced to lower the cap on car title lenders’ interest rates to 60% a year, and the industry claims that would be akin to outlawing the practice. Well alright, then....

Speaking of predatory, HSBC is in a tax-season frenzy of RAL lending, through its augustly named HSBC Taxpayer Financial Services, offering both tax "refund anticipation loans" and "refund anticipation check" through H&R Block at interest rates over 100%. The Buffalo News reported that “Last summer, HSBC Bank USA became the lender for H&R Block's loans. Prior to the merger, Household used its own thrift and one in California.” That’d be Household FSB (dissolved to make HSBC’s acquisition move forward without CRA review) and ITLA Capital. Household funded $11.7 billion in refund anticipation loans in 2003, the most recent data available. That's up from $10.7 billion in 2002 and $8.4 billion in 2001. Now it’s HSBC in this predatory game....

A suspicious lack of candor: last week ICP received complaints about America's Servicing Company, including a request to know who owns it. ICP went online and read that “America's Servicing Company, better known as ASC, a division of a well-known and respected mortgage company, is the subservicing/contract servicing operation. Loans may be serviced under the name of the client or ASC.” Why say, “a well-known and respected mortgage company” without naming it? Further inquiry finds that this apparently ashamed owner of ASC is none other than Wells Fargo. Now we understand...

The FDIC meeting on Feb. 22, the rumor is that a brand new CRA proposal will be made, and put out for comment for 60 days. We’ll see...

Finally, in terms of the Wild West-nature of the payday lending field, we can’t top this sad story, of a wannabe lender who himself got defrauded...

February 14, 2005

For nearly a year now, Inner City Press has been investigating large banks’ enabling of fringe financiers. Mostly this has focused on payday lenders, and auto pawn / car title lenders. But there’s a notably overlap between payday lending and, for example, the pawnbroker business. And so ICP has raised those issues too.

Recently, ICP received a bristling letter from the National Pawnbrokers Association. The letter stated that NPA and an affiliate “have read the protests your organization has filed in recent applications by bank holding companies to acquire banks or bank holding companies and have noted your group’s representation about pawnbrokers.” NPA asks “to learn why your organization appears to have singled our industry out for comment in your filings with the Board of Governors.”

Well, okay then. ICP has replied to the Government Relations Committee of the National Pawnbrokers Association:

“ICP has raised the issue of bank-applicants having funded, apparently without standards or full due diligence, a range of what the Fed staff calls “nontraditional providers of financial services,” using the term to encompass, among other providers, payday lenders and pawnbrokers.

“Thus, while your letter states that ICP has ‘singled [y]our industry out for comment in []our filings with the Board of Governors,’ ICP’s comments have been on the range of nontraditional providers, also including payday lenders and car title lenders. We notice from your trade association’s web site, NationalPawnbrokers.org, that you include as members firms that offer payday loans. As simply one example, Cash America -- see, <www.nationalpawnbrokers.org/dirdetail.cfm?state=TX>. As you should know, Cash America is a major payday lender. See, e.g., Investor's Business Daily of October 6, 2004, Cash America International: Fort Worth, Texas, Operator Of Pawnshops Does A Little Dealing, reporting that ‘added stores are key for Cash America's expansion of payday loan services, which represent the largest growth opportunity. Revenue from short-term cash advances makes up 27% of total company sales. Analysts expect the percentage to hit 36% by the end of 2005.’

“We’ve also noticed that your association’s member-questionnaire asks if each member makes, inter alia, payday loans or even car title loans. See, <www.nationalpawnbrokers.org/downloads/NPA%20Survey.pdf>. Since your own questionnaire asks this question, we’d like to know the following:

--what percentage of your members offer payday loans and/or car title loans;

--what standards and/or criteria your trade association has for granting membership to payday lenders and/or car title lenders;

--which of your members, by name and location, offer payday loans and/or car title loans.

The last of these three questions may be the most important. Numerous bank-applicants to the Federal Reserve, once asked by ICP and then by the Fed to name the alternative providers to which they lend, have sought to withhold such lists. This is the case with Toronto Dominion / Banknorth, referenced in your letter; this is also the case with Wachovia / SouthTrust, which has given rise to currently-pending Freedom of Information Act litigation. Perhaps your association / committee should direct a letter to the ten largest and other pertinent banks, to not be ashamed of loans they make, nor to claim derivative competitive harm on behalf of (some of) your members. We are eager to receive the information requested above.”

And its receipt, or non-receipt, will be reported in this space. And now, in news from all over, a Phoenix woman sued Wells Fargo & Co. in federal court on Feb. 9, alleging her former employer failed to pay overtime. The lawsuit seeks class-action status to represent thousands of current and former so-called ``business systems'' employees who produce automated versions of paper forms and perform other automation jobs. The suit was brought by Jasmin Gerlach, who worked in the bank's Phoenix office from 1995 to 2004. She claims she is entitled to being paid for past overtime work because she and others were wrongly classified as being exempt from overtime pay...

Financial literacy in the Kremlin: last week, Russian president Putin met Citigroup's still-chairman Sandy Weill. During the meeting, Weill suggested that Putin open a credit card account with Citigroup. Putin responded: "I need to see your interest rates.” Good question....

February 7, 2005

Predatory news from all over: the Los Angeles Times of February 4 ran Mike Hudson’s and E. Scott Reckard’s joint expose of Ameriquest, just before Ameriquest’s Super Bowl ad-fest. The article could have run longer that its 3500 words; it’s supplemented for now by Rich Lord’s January 6 article in the Pittsburgh City Paper, which reported among other things on “a foreclosure complaint, against Brian and Marilyn Rotharmel of McKeesport, was filed Dec. 2.... Ameriquest Mortgage Co. hires this subsidiary of a German-based multinational bank to handle the giant pools of mortgages it creates -- and, where necessary, to foreclose. Foreclosures are rarely filed under Ameriquest’s own name.” That German multinational is Deutsche Bank, click here for ICP/Fair Finance Watch’s reports on the subprime activities of Deutsche Bank (and, this week, on DB’s private banking for the dictator of Turkmenistan). The LA Times article reported among many other things that “on Jan. 10, the Connecticut Department of Banking said it would seek to bar Ameriquest from doing business in the state for allegedly charging excessive fees and repeatedly violating a state law aimed at preventing loan flipping.” Here is the full text, on the web site of the Connecticut Department of Banking:

“Ameriquest violated Section 36a-498a of the Connecticut General Statutes, as amended by Public Act 04-69, by imposing prepaid finance charges in connection with the refinancing of at least 53 first mortgage loans that when aggregated with the prepaid finance charges imposed on previous financings by Ameriquest or one of its affiliates within two years of the current refinancing exceeded the greater of five percent of the principal amount of the initial loan or $2,000; and (b) Town & Country violated Section 36a 498a, as amended, by imposing prepaid finance charges in connection with the refinancing of at least two first mortgage loans that when aggregated with the prepaid finance charges imposed on previous financings by Town & Country or one of its affiliates within two years of the current refinancing exceeded the greater of five percent of the principal amount of the initial loan or $2,000. The respondents were afforded an opportunity to request a hearing.”

The Orange County Register of February 5 added that “a hearing is scheduled for March 31 on the Connecticut Department of Banking's proposal that 24 lending licenses held by Ameriquest and a subsidiary not be renewed. Ameriquest has been accused of charging excessive refinance fees from 179 Connecticut customers in the past three years -- 39 of them after the firm settled with the state over similar allegations by agreeing to pay nearly $ 670,000 in refunds and penalties. Losing the licenses could mean that Ameriquest would stop offering loans in Connecticut. The company also faces as much as $ 5.5 million in additional penalties.”

So subprime eyes will be on Hartford on March 31 -- and on Raleigh less than a month later. The North Carolina Commissioner of Bank last week set April 19 as the hearing date to determine whether payday lender Advance America has violated the law, and if so what remedies to seek or assess.... Meanwhile, payday lender Dollar Financial’s January 27 initial public offering was followed five days later by Dollar’s announcement that it has just “acquired 17 stores in the U.K. and 24 stores in Louisiana.” Dollar’s IPO was co-managed by ABN Amro, owner of Chicago-based LaSalle Bank...

Reporting on the bankruptcy of subprime lender American Business Financial last week, Dow Jones’ Christine Richard noted that ICP “petitioned the Federal Reserve last summer to make public a full list of RBS Greenwich's subprime lending affiliates when the bank was seeking to acquire Charter One Financial. RBS Greenwich relented, releasing a list of around thirty entities, including Aames Capital Corp., which is being investigated for predatory lending. Clearwing Capital, the entity involved with American Business Financial, also was on the list. Greenwich didn't return calls seeking comment on its relationship with Clearwing.” The list was of the subprime lenders that RBS Greenwich Capital Markets lent to; RBS’ July 9, 2004, letter to the Fed claimed that

“Greenwich Capital has in place due diligence standards appropriate to its role as securitizer and warehouse provider... [T]he review often includes a compliance review to determine if the originator is complying with existing federal and state fair lending and consumer protection laws and regulations... If results of such a review were unsatisfactory, Greenwich Capital would review its relationship from both a credit and reputational perspective.”

But RBS Greenwich Capital has recently lent to ABFI despite its widely-reported (and readily-apparent) problems, and predatory ripping-off not only of borrowers, but also of its smaller unsecured investors. Yes, it’s a boiler room industry...

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/FFW commented to the Federal Reserve back in 2003, is still pending... (The RBS Coutts and Espirito Santo connections were reported among other places in the newspaper Clarin). 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. Quite a rogue’s gallery... But this, for this week, is the topper: Deutsche Bank, which forecloses on Ameriquest’s (and other predators’) loans, is also the prime banker for the mad dictator of Turkmenistan, who has renamed the months, and built a golden statue of himself, which rotates to follow the sun across the sky. Click here for ICP/ Fair Finance Watch’s report on DB and Turkmenbashi.

January 31, 2005

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.

Subprime fall-out: last week, the troubled mortgage lender American Business Financial Services declared bankruptcy, and a set of fast loans arranged by, among others, Royal Bank of Scotland’s Greenwich Capital unit. Those who were conned into buying ABFI’s retail unsecured debt, which was hawked from a boiler room-like phone bank inside ABFI, stand to be left out. ABFI’s bankruptcy filing listed as the largest unsecured creditor, at over $2 million, a money management firm called The Stewardship Center, described as giving investment advice to Catholic organizations. Advise that, given ABFI’s lending practices, was not only immoral, but also now unprofitable...

Predatory lending news from all over: On January 27, Dollar Financial rakes in $120 million in an initial public offering... In Birmingham, Alabama there are 66 payday lenders and 61 pawnshops, according to the Alabama Banking Department... ICP’s comments to the Federal Reserve on Synovus have now resulted in Fed questions including a requirement that Synovus describe its outreach “to make home mortgage credit available to African Americans and individuals residing in minority census tracts, including in the markets of Montgomery, Birmingham, Huntsville, and Atlanta.” While decidedly regional in focus, this may reflect why assessing and documenting the disparate patterns of banks’ lending is worthwhile. An earlier example: in 2004, after ICP’s comments, the Fed asked Regions / Union Planters about activities in Atlanta. (See, e.g., American Banker of June 21, 2004: “Though the Federal Reserve Board approved the $ 6 billion deal between Regions Financial Corp. and Union Planters Corp. Wednesday, it did not exactly give the two companies an A-plus. In its 38-page order approving the merger-of-equals deal, the Fed said that 30% of the Atlanta market is African-American, and that ‘the percentage of applications received by [Regions] from African-Americans was significantly lower than the percentage for aggregate lenders.’... Though the Fed noted that in most markets Regions' percentage of loans to blacks rose from 2001 to 2003, ‘the Board expects that Regions Bank ... will continue to take steps to improve its mortgage lending performance to African-American borrowers,’ particularly in Atlanta. ‘The Federal Reserve System will monitor and evaluate the performance of Regions Bank as part of the supervisory process.’ In a letter protesting the deal, [ICP] had asserted that most lenders in Atlanta have a higher approval percentage than Regions for loans to African-Americans.” Yep...

January 24, 2005

The Office of Thrift Supervision, whose director James Gilleran has proposed loosening the Community Reinvestment Act test applicable to savings banks with over $1 billion in assets, had received and placed on its web site 193 letters on the proposal as of January 21. (ICP submitted its comment that day; it should appear this week on the OTS’ site, accompanied by a recent OTS Freedom of Information Act denial.) The vast majority of the 193 comments opposed the OTS’ proposal. But it is anticipated that won’t matter to James Gilleran. He is on a crusade to weaken CRA. His approach is at odds with the other three federal bank regulatory agencies, and with his own predecessors at the OTS. For example, under previous OTS directors Seidman and Fiechter, ICP had experience with the informal and formal hearing process that James Gilleran has now unilaterally eliminated. The process served to narrow and sharpen issues, and resulted in improved services of low- and moderate-income areas. Then-director Fiechter granted ICP’s request for a hearing when Dime (now WaMu) acquired Anchor; that process was memorialized by a much needed bank branch on 161^st Street in the South Bronx, which remains to this day serving the community. See, e.g., American Banker of November 30, 1994, “Dime and Anchor agree to open branch and lend in poor areas.” Director Fiechter stated that CRA “challenges that have been brought to his agency have been a lot more substantive and factual.” Regulatory Compliance Watch, April 3, 1995. Another example is the hearing the OTS held on Conseco’s application to acquire the subprime lender Green Tree. See, e.g., Indianapolis Star of March 12, 1999, “Conseco's proposed bank draws opposition; N.Y. group asks to halt charter, calling Green Tree subsidiary a 'questionable' lender.” As it turned out, Green Tree was questionable, and the deal ill-fated.

Since then, the OTS has moved backwards: providing less scrutiny of thrifts and their subprime affiliates, even helping shield such affiliations from regulatory reviews, for example by the OTS’ stealth and speeded-up “dissolution” of Household International’s thrift so that HSBC could not have to apply to acquire it. See, e.g., Financial Times of November 20, 2002, “Household acts to thwart block on bid.” Things have gotten even worse since then, with the OTS pre-approving applications for thrift charters -- for example, that of JP Morgan Chase, to preempt state consumer protection laws, see, e.g., American Banker of October 31, 2003, “OTS Counts Its Chickens, then Hatches Them,” incorporated herein by reference). Even more recently, the OTS is seeking to withhold more than five hundred pages concerning the proposals for a thrift charter by H&R Block, a much-sued Tax Refund Anticipation Lender (and owner of Option One, a subprime mortgage lender). See OTS Freedom of Information Act denial dated January 18, 2005, which ICP is appealing. The comments are in; now we’ll see.

On Citigroup’s Jan. 20 earnings conference call, Citi’s CEO Chuck Prince bragged of global grown. "Mexico is up. Asia is way up. We increased our stake in Brazil just recently,” Prince said. "I think that we are going to do very, very well in the future.” In Japan consumer finance, building on The Associates’ predatory inroads there, “CitiFinancial Japan KK” now plans to increase its fleet of automatic consumer loan application machines about 40 per cent this year. The Citi subprime unit operates such consumer finance companies as AIC Corp. and DIC Finance Corp in Japan...

Meanwhile, HSBC’s morphing into subprime is nearly complete. Now Household Auto Finance, a high-cost lender, has been rebranded HSBC Auto Finance. As predicted, the merger does not involve HSBC Bank reforming the predatory Household. Rather, the known Chicago-land predator is expanding its practices onto HSBC, first in the U.S. and then beyond... From the Asian Banking Journal of Jan. 15: “HSBC plans to expand Asia’s consumer finance market in year 2005 by adopting the techniques of Household International. It could focus on the personal financial services and consumer finance businesses.”

Good news from across the pond, in HSBC’s (for now) headquarters country: the U.K.’s Consumer Credit Bill, whose provisions include an "unfair credit test" which will make it easier for people to take lenders and finally gives greater powers to the Office of Fair Trading to police the lending industry. The legislative history includes testimony from Leeds, of cases where “doorstep lenders” offered £100 but wanted back £220.24 - an APR of 440%, like some U.S. payday and car title lenders..

January 18, 2005

In Fall 2004, Webster Bank applied to buy a Wisconsin bank’s nationwide health savings account deposit-collecting business, without specifying any Community Reinvestment Act plan (or addressing the impact of the part of the Wisconsin bank it intended to jettison). Inner City Press/Fair Finance Watch filed timely comments. Now, in a January 11 letter to the Federal Reserve, Webster’s outside counsel curtly answers questions about Webster’s links with subprime lenders, then “ask[s] once against that you bear in mind that Webster will incur a substantial daily financial penalty ($3,000 per day) for each day after January 15, 2005 that it does not consummate its proposed acquisition of EWBI. Since Webster may not consummate its acquisition of EWBI until the Department of Justice’s 15-day waiting period has expired, which will not begin until after the regulatory filings by Webster and the Bank are approved... Webster will have to pay over $30,000 in penalties under its agreement with EWBI as of the date of this letter.”

But question: why did Webster so arrogant project a fast-closing date? And then be so unresponsive about its links with subprime lenders, and its CRA plans? Speaking of unresponsive, on the Office of Thrift Supervision FOIA beat, we have a January 11 fax stating that “[b]ecause of the need to search for, collect, and appropriately examine the material relevant to your request, and to do so during the holiday season just concluded, I have extended the response deadline... to and through January 18, 2005.”

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

Legislating on the fringe: in Indiana, a legislative move is afoot to permit car title lending, also known as auto pawn. Indiana’s pawnbroker regulation, IC 28-7-5, requires that collateral be held by the pawnbroker. Now there’s a proposal, Senate Bank 121, to permit the holding of the vehicle’s title. Sources say that the prime impetus behind the bill is a Georgia firm on which Inner City Press has previously reported, and which Regions / Union Planters funds. Developing...

From the mail bag, responding to last week’s CitiWatch Report:

Subj: Wombold
Date: 1/10/2005 2:06:26 AM Eastern Standard Time
From: [14 year Manager]
To: CitiWatch [at] innercitypress.org
I was intrigued by reading your follow up to the Wombold case. As a former CitiFinancial Manager, I know how money grubbing these individuals are/were. The objective at Citi continues to be to make the maximum profit possible on each customer without regard for "doing the right thing" (their motto by the way). At Citi, doing the right thing is whatever is best for the company's bottom line. By the way, I would love to hear their response to the heavy prepayment penalties CitiFinancial imposes on their real estate loans... Customers also can't refinance with CitiFinancial without taking an additional cash advance of $10,000 or more in many cases. This includes a refinance for lower rate purposes only. In other words, the only way to get a lower rate mortgage is to wait until your prepayment penalty expires or by taking a BIGGER loan out. They never waive the prepayment penalty... Color me glad I left after 14 years...

Until next time, for or with more information, contact us.

January 10, 2005

Our current focus is the global spread of high-cost consumer finance, exemplified last week by HSBC pitching HFC-like loans in Bangladesh, Citigroup getting fined for consumer fraud in India, GE announcing plans for a retail bank in Thailand, and Wells Fargo Financial taking on its own name in Canada, and a French name as well. From Wells Fargo’s own press release: “One element of the name change project is creation of a new French logo and corporation name, Societe financiere Wells Fargo Canada, to be used in Quebec. It represents the first time a Wells Fargo entity has conducted business under a French name.” At least one that can be printed in a family newspaper... Citigroup is part of the trend as well, of course -- for this week, Citi-watchers may want to read the just-released Montana Supreme Court decision, in Wombold v. CitiFinancial / Associates, affirming among other things that Associates / CitiFinancial “violated the Montana Consumer Loan Act.” More indicative of its future, Citigroup is also being fined for consumer fraud in India:

“The Visakhapatnam District Consumer Forum has directed the Citibank not to make illegal demand and pay Rs.10,000 as compensation to a consumer for deficiency in service. An agent of the foreign bank wooed a consumer, A.B.V.K. Ramalingeswara Rao of Ukkunagaram into taking a credit card, which allows withdrawal of emergency cash from any of the ATMs. For this the consumer needs a pin number, which the bank promised to send shortly. Even before the consumer received the pin number, the agent informed the consumer that the latter had withdrawn Rs.5,000 on his credit card and had to repay Rs.5,146.60 as outstanding dues. Stunned by this, the consumer explained he was yet to get the pin number. The consumer later received the pin number but without opening the sealed envelope, he went to the branch office of the bank in the city. From there, he was asked to contact the Citibank's Chennai office. The latter, to his surprise, alleged that he had used the Indian Oil Citibank card which he held for the last two years and which could also be used to draw the money. However, the consumer was not aware of it until he was told about it. Also, the number of Indian Oil card, which he was said to have allegedly used and the card, which he possessed were different. When his repeated pleas went in vain and he was harassed by the bank's agents, the consumer filed a complaint (Consumer Dispute No: 696/2004) against the Citibank.” More here, from India’s National Newspaper, “Citibank asked to pay compensation”

Meanwhile, from the Bangladeshi newspaper Daily Star of January 5: “A four-day fair to display loan products of Hongkong Shanghai Banking Corporation (HSBC), Bangladesh begins in Chittagong tomorrow... Furniture, travel, automobile, motorbike, power and electronics, interior design, real estate and IT companies will put their products and services on display at the fair, the first of its kind in Chittagong. Visitors can buy the products with the loan facilities of HSBC.” And somewhere Bill Aldinger cackles, at the idea of high-cost furniture loans in Bangladesh...

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...

January 3, 2005

As the new year dawns, the need to modernize the Community Reinvestment Act to deal with new business models is ever more clear. Most recently it’s raised in connection with the application by Connecticut-based Webster Bank to buy a “Health Savings Account” deposit-collecting business, which does business nationwide. Webster proposes no expansion of its CRA assessment area, no CRA plan for the new territories. Webster’s outside counsel, who until recently was a Federal Reserve Board staff attorney, argues to his ex-colleagues that the Fed has already rejected this, in 2004 rulemaking and decision-making, on the J.P. Morgan Chase - Bank One application. But the issue was mis-handled in connection with that application; Webster’s proposal is based on Health Savings Account legislation which was not considered in that proceeding nor in any other CRA regulatory forums of which ICP is aware. Webster’s last CRA performance evaluation is now a full three years out of date; CRA itself may be even further behind. Also, Webster’s counsel argues that “the concern regarding ‘fringe’ lenders expressed in ICP’s comment letter... does not raise an issue under Section 3 of the Bank Holding Company Act.” The simplest rebuttal, that such issues are relevant and must be considered, is contained in a recent FRB affidavit:

“In a number of past applications, where public commenters have raised the issue, the Board has taken into accounting information on the acquiring and target institutions’ relationships with commercial customers who are engaged in subprime lending in assessing financial and managerial resources. In these applications, such information was necessary to the Board’s assessment of financial and managerial factors because lending to commercial customers who engage in subprime lending can present legal, credit and reputational risks to the lending institutions.”

Affidavit of Federal Reserve Board Counsel Andrew Baer, filed this week in Inner City Press v. FRB, Civ. No. 04 CV 8337, pending in the U.S. District Court for the Southern District of New York. The affidavit says the same of those providing alternative products including pawnshops, and also note that the risks are not only about anti-money laundering safeguards, but rather reputations, anti-predatory lending, etc., safeguards not even purportedly addressed in Webster’s Response. ICP has reiterated its request for a hearing, and/or a more substantive response from Webster.

Meanwhile, in global subprime news, HSBC now vows to push Household International’s predatory business model into two more countries in Asia. Michael Smith of HSBC's Asian division told the Financial Times last week that high-cost lending to "sub-prime" customers would be launched in one or two Asian countries at first before expanding more broadly. Smith said: "At the moment we are in the process of looking to see whether we can get some quick wins in the region." Household’s desire for “quick wins” led to regulatory enforcement actions and a $480 million settlement of predatory lending charges. HSBC is counting of less regulatory scrutiny in the (unnamed) counties to which it’s going. Smith declined to specify in which country the new consumer finance products would be launched first. We’ll be watching...

ICP has published a book about the CRA-relevant topic of predatory lending - click here for sample chapters, a map, and ordering information. CBS MarketWatch of April 23, 2004, says the the novel has "some very funny moments," and that the non-fiction mixes "global statistics and first-person accounts." The Washington Post of March 15, 2004, calls Predatory Bender: America in the Aughts "the first novel about predatory lending;" the London Times of April 15, 2004, "A Novel Approach," said it "has a cast of colorful characters." See also, "City Lit: Roman a Klepto [Review of 'Predatory Bender']," by Matt Pacenza, City Limits, Oct. 2004. The Pittsburgh City Paper says the 100-page afterword makes the "indispensable point that predatory lending is now being aggressively exported to the rest of the globe." Click here for that review; click here to Search This Site

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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: CRA [at] innercitypress [dot] org