Inner City Press Community Reinvestment Reporter
Archive Number 2: April - May, 1999
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May 26, 1999
Click here for new CRA poem: Phil Takes the Fifth (5th Ward of Houston)
Senator Gramm and his staff have started threatening to use Senatorial subpoena power against banks which have spoken out in favor of the CRA. Gramm is incensed that several of these large banks do not support his sunshine amendment, which would require the banks to report to their regulators all of their agreements with community groups. These banks state that these are business agreements, to gain and counsel mortgage applicants, and that the agreements would not be covered by the language of Gramms sunshine amendment, added to the Senate bill on May 6.
The irony: Gramm claims that his war on CRA is intended to free the banks from the burdens of CRA (or to make it easier to live with, as Gramms assistant Christi Harlan has put it, Charlotte Observer, May 24). But a number of bank not only do not support Gramms crusade -- they are refusing to give him documents he and his staff demands. So Gramms sunshine amendment is directed against banks, as much as against community groups. If it were about antitrust, say, one could understand a Senator attacking an industry. But here a Senator is on the warpath to free an industry large parts of which are not even complaining, and which resist even his demands for information. Some of these banks have, in the past, given Gramm campaign contributions. Wheres it all heading?
The financial modernization legislation is next set to be kicked around in the House Commerce subcommittee on finance, on Thursday, May 27.
While numerous Reps have said theyd like to introduce pro-CRA amendments, to require insurance companies to report data on where they issue homeowners policies, and to expand CRA to either all subsidiaries of financial services holding companies, or at least all lending subsidiaries -- the Commerce Committee leadership, including Rep. Dingell (D-MI), is indicating that no pro- (or anti-) CRA amendments will be allowed.
It appears that the Senate (Republican) leadership feels that the House and Senate bills are in equipoise: three anti-CRA provisions in Phil Gramms Senate bill; three small pro-CRA provisions in the House bill. Congressional sources speculate that in conference, all six provisions would be stripped, and a supposedly CRA neutral bill sent to President Clinton. Clinton and his spokespeople have repeatedly said that the President will veto any bill that stopped short, on CRA, of the current House version. Which, if true, should mean that those in the House who want to pass a bill that the President would not veto -- should be aiming to add at least three more pro-CRA amendments prior to conference. That does not appear to be the Commerce Committees thinking, and the more progressive members of the Commerce Committee seem loath to cross their leader, Rep. Dingell. Ah, Michigan, where all the banks perform well... (Italics for sarcasm).
Several Republican Senators are said to be concerned that their anti-CRA votes may be used against them in the future: John Ashcroft (R-MO), Spencer Abraham (R-MI), Rick Santorum (R-PA) and Jim Jeffords (R-VT). The demographics of the first threes districts explain their concern; Jeffords is facing a challenge from a popular liberal representative. (The Hill, May 12). Santorum and Jeffords both cast at least one pro- (or, non-anti-) CRA vote earlier this month; notably Abraham and Ashcroft did not. Well see how that plays in 2000. And well see how other Republicans will view Gramms anti-CRA jihad...
Back at the agencies, American General, to which the Office of Thrift Supervision gave a savings bank charter last month, was last week hit with $167 million in punitive damages to 29 consumers for misleading them on terms of credit agreements. Communications Daily, May 21, 1999. A jury in the Chancery Court of Jones Country, Mississippi, also ordered American General to pay each plaintiff $500,000 in compensatory damages. All of these predatory lending issues were in the record before the OTS when it decided to give the savings bank charter -- will the approval now be rescinded or amended?
Community groups met last week with OTS Director Ellen Seidman, and were reportedly told that residents and advocates in low income neighborhoods should take greater responsibility for the problems of predatory lending. This did not trigger a very positive reaction -- for obvious reasons. When groups document predatory lending done by a company applying for a thrift charter, the company gets the charter anyway, with few conditions. Even if every community group turned to providing individual consumer education, and stopped documenting and raising systematic predatory lending to the authorities, the problems would persist. Its a billion dollar industry... And this industry -- is getting into banking, primarily via the Office of Thrift Supervision.
The FEDs shenanigans -- know no bounds at all. As reported on ICPs Deutsche Bank page, the Fed withheld documents about its communications with Deutsche Bank and Bankers Trust -- until after the Board had voted to approve this takeover. Then, May 19, the Fed mailed ICP four memoranda that summarize correspondence between Federal Reserve System staff and representatives of Deutsche Bank. The memos state that the FRS staff spoke with representatives of Deutsche Bank to discuss application related issues. The representatives acknowledged that the Boards ex parte rules were in effect.
But the conversation took place on May 6, wasnt written up until May 12, and wasnt mailed to ICP until after the Board approved the application, on May 19. The Boards ex parte rules provide that:
All written correspondence from the System to either party, or to the System from either party, should also be sent to the other party... After the receipt of a protest, all Federal Reserve System personnel should refrain from discussing issues raised by the protest directly with Applicant or Protestant without first notifying the other, so that all parties may have the opportunity to participate in the discussion.
The Fed, while sanctimoniously referring to its ex parte rules in each memo, blatantly violated by the letter and purpose of its ex parte rules. First, the communications were not written (in which case, sending to ICP, if timely, would have complied) -- they are oral. Oral ex parte communications are prohibited by the Feds rules, and this is not cured by mailing ICP a summary, especially when, without explanation, the summary of a conversation two weeks before the Feds vote is not mailed to the Protestant until after the vote.
How many lawyers can balance on the head of a pin? How many ways can the Fed dress up violations of open government rules to look like compliance? How can one of the most powerful government agencies in the world violate the law, conspire with the industry it is supposed to be regulating, and still be lauded by purported libertarians like Senator Gramm? A rising stock market and low inflation? Kid gloves treatment for mega-companies which in turn fill the campaign coffers of those who are supposed to oversee the agency?
May 24, 1999
...In administrative news, the FDIC hired away Steve Cross from the OCC, to head up the FDICs division of compliance and consumer affairs. Inquiries have revealed that this is not simply a lateral move for Mr. Cross. At the OCC, Cross controlled CRA policy, but not operations. That is, CRA examiners at the OCC did not report to Mr. Cross. Mr. Cross could make policy statements, but there was a disconnect in these actually being implemented by OCC examiners. At the FDIC, Mr. Cross will be at the top of the examiners pyramid. Increased CRA enforcement at the FDIC should be expected; this space will monitor changes if and when they occur.
Strangely, the OCC replaced Mr. Cross with a long time employee who has never been active or visible in CRA matters: Ralph Sharpe. From 1994 to 1997, Mr. Sharpe was Deputy Comptroller for Multinational Banking -- the OCCs never-defined group of the largest national banks, all of whose applications were processed (and approved) in Washington. During that time frame, Mr. Sharpe presided over, for example, repeated approvals for Chase Manhattan, N.A., which ignored the banks affiliate mortgage company that made only jumbo mortgages -- loans over $200,000. There is nothing illegal about [only] offering jumbo mortgages, the OCC Multinational approval orders stated. The split between the OCCs policy statements on CRA, and its actual enforcement, may grow wider. Already, the OCC month after month issues lists of new CRA examinations, with scarcely a Needs to Improve rating among them. As analyzed below, some in the OCC seem to think that the best way to defend CRA is to temporarily stop enforcing it. How this relates to the still-stalled confirmation hearings for recess-appointed Comptroller Hawke -- will be explored...
May 19, 1999
[In this Report, ICP analyzes the Treasury Departments May 11 release of CRA protests are no burden statistics, and a pro-CRA arguments thats been made for New York States proposed version of financial modernization legislation].
Trying, strangely belatedly, to counter Senator Gramms characterization of the Community Reinvestment Act commenting process as extortion, the Treasury Department on May 11 released a study of the regulatory agencies processing times and rulings on CRA-protested merger applications.
The Treasury Department report stated that less than one percent -- 0.7% -- of the 86,582 applications subject to CRA filed from 1985 through 1998 were protested by community groups. Assistant Secretary of the Treasury Richard Carnell said, This data suggests that banks need not capitulate to unwarranted protests. The support for this were statistics showing that from 1996 through 1998, 42% of CRA-challenged applications were ruled on within 60 days, and 75% within three months.
The Treasury Departments arguments seem to reflect that Gramm and other Republicans, and portions of the banking industry, have backed the regulatory agencies into a corner. The three agencies which publicly speak in favor of CRA -- Treasurys OCC and OTS, and the FDIC -- are now claiming to be defending CRA by quickly processing, and approving, CRA-challenged applications. Similarly, for several years these agencies have been trying to give ever-shorter CRA exams to smaller banks, with fewer and fewer negative CRA ratings, to counter an earlier charge of regulatory burden. Now, these agencies CRA grade inflation is used by Senators Gramm and Shelby to argue for exempting small banks from the CRA. Why examine small banks if so few negative ratings are given? Gramm asked on the Senate floor prior to the May 6 vote.
The three agencies solicitude for smaller banks in recent years, on CRA / regulatory burden issues, is now being used to undermine CRA. It remains to be seen is the agencies other retreating strategy -- ensuring and then reporting that they are increasingly dismissive of CRA protest -- will have the same effect.
The Treasurys timing in releasing this report, after Senator Gramm had already passed his anti-CRA bill, S. 900, through the full Senate on May 6, is also strange. Inner City Press has obtained documents showing that Treasury staffers Melissa Weiss, Joan Affleck-Smith and Greg Baer, and Senator Sarbanes staffer Patience Singleton had assembled the data underlying the study as early as January of this year. On February 8, Ms. Singleton faxed the draft study to the Federal Reserve, asking for its comments by Wednesday -- that is, by February 10. The number of applications in Ms. Singletons February 8 draft -- 86,582 -- is identical to the number in the final study released by Treasury on May 11.
Why withhold the study until much of the legislative damage has been done? Senator Gramm can now go into a conference committee with the House with three anti-CRA provisions in the Senates bill, ready to exchange two or all of them for stripping out whatever pro-CRA amendment survive the House Commerce Committee. These are arcane questions that ICP is exploring, with intra-agency sources -- public sources have not proved helpful. For example, neither the OCC nor the Treasury Department even put the study on their web pages. The release of the study was slap-dash: one newspaper had it on May 12, while another reported on May 14 that it had been released on May 13. The study was largely drowned out by Robert Rubins resignation announcement.
The implications of (and some errors in) the study will be examined in this space in future reports. Its worth noting that the Federal Reserve only provided data since 1989, and not 1985. Also, the study only had two categories, approved or denied, when some agencies, most notably the OTS, imposes conditions on approvals to address meritorious CRA protests (for example, on thrift charter applications by Travelers in 1997, and Shelter Mutual in 1998). If Mr. Carnell and the Administration wish to best support that fact that public comment plays a meaningful role in the process, they shouldnt play into Senator Gramms game, or let him set the terms of the debate, as the agencies have done in inflating small (or is that, all?) banks CRA ratings.
May 12, 1999
In the aftermath of the May 6 Senate vote on the Phil Gramm-sponsored financial modernization bill, which came to the Senate floor with two anti-CRA provisions, and left with three, the contradictions in Gramms position(s) become clearer.
Focusing on the most recent addition to Gramms anti-CRA campaign, the so-called sunshine amendment added to the bill as part of a larger managers amendment on the night of May 6, Gramm issued a press release just after the vote: Banks CRA Agreements To Be Made Public. Gramm is directly quoted in the release, stating that community groups, in negotiations with banks, in virtually every case, insist on the confidentiality of these agreements. Interviews conducted with community groups throughout the country in recent weeks indicate that the exact opposite is true: where CRA agreements include confidentiality clauses, they were inserted at the insistence of the bank and its lawyers. Banks argue that they dont want other community groups to know what the bank has agreed to in other parts of its market. An instance found where one community group itself proposed confidentiality clauses appears to grow from the group proffering draft agreements based on the agreements it has previously reached with banks, which included confidentiality and no-protest clauses. In all other cases, it has been the banks which have demanded the no-protest clauses, as was demonstrated at length during the Federal Reserves processing of First Unions application to acquire Corestates in 1998 (see below, and see archives).
The second largest contradiction is that the Gramm-Bennett sunshine amendment creates a reporting requirement for banks -- precisely what Gramm, in the name of regulatory streamlining, has opposed in all other cases. From this it appears clear that the goal of the sunshine amendment is to discourage banks from reaching CRA agreements, the mechanism through which most of the benefits and increased banks lending in poor neighborhoods has been brought about.
The largest contradiction, however, is that many of the practices that Gramm most abhors -- have nothing to do with the Community Reinvestment Act. Gramms post-vote press release states specifically: One of the agreements obtained by the Banking Committee staff details the financial arrangement for a community group that uses money provide by a bank to make loans. The group receives 2.75 percent of the face value of each loan, according to the secret agreement.
It has been publicly confirmed that the referenced agreement involved Fleet Financial and an organization which, on May 10, announced an agreement with the Associates subprime finance company. See Boston Globe of May 6, 1999, and American Banker of May 11, 1999.
Significantly, The Associates is not a bank, and the actions that extorted (in Gramms words) the Associates to reach the May 10 agreement had nothing to do with bank regulators or regulations, the CRA, or the merger process. As recounted in the American Banker, The Associates responded to the possibility of the organization appearing and speaking at The Associates annual shareholders meeting on May 10 in Irvine, Texas.
There are a variety of views among community groups as to whether The Associates announced $100 million lending program will meaningfully address or reverse the questionable practices in which The Associates engages nation- and even continent-wide, practices exposed in detail in Mike Hudsons seminal book, Merchants of Misery, and elsewhere.
But what is irrefutable is that The Associates new agreement, reached in Phil Gramms home state of Texas, has nothing to do with the Community Reinvestment Act. If Gramm believes and is in reality trying to act on what he has propounded as the problem, neither the financial modernization bill, nor the Community Reinvestment Act, are the appropriate venue or scaffolding for Gramms campaign.
Treasury Secretary Rubin and others have repeatedly pointed out that if Gramm believes that extortion is taking place, there are laws already on the books to address this issue. Gramm has ignored this point. It has become clear that, rather than Gramms antipathy for CRA growing empirically from abuses he became aware of, Gramm is trying to use the rare instances of lender capitulation he is assembling in order to support an a priori attack on the Community Reinvestment Act.
Recent event show that the practices Gramm has stated he is most concerned about -- have little do with the CRA, and could continue in the absence of a CRA. Will Gramm seek to amend corporate law, at a federal level? Will Gramm propose that shareholders meetings, in Texas or perhaps nationwide, no longer provide for shareholder speeches or questioning? Or will Gramm continue to use events that have nothing to do with the CRA -- to attack the CRA? We shall see...
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May 3, 1999
Senator Phil Gramm (R-TX) is preparing an amendment that would require disclosure of all Community Reinvestment Act agreements between banks and community groups, and might dictate the specifics of such agreements. Gramm intends to offer this amendment once his partisan financial modernization bill, S. 900, hits the Senate floor, as early as May 3.
Also, rumors are swirling that Gramm intends to use agreements between the Neighborhood Assistance Corporation of America (NACA) and certain banks, including Fleet Financial, BankAmerica and First Union, as his lead examples of alleged extortion in the CRA process. Reportedly, Fleets agreement with NACA provided for $1.1 million in funding for NACA, and two or three percent fees on every Fleet mortgage processed by NACA.
Some point out that NACA is providing a service to Fleet, and negotiated its fees at arms length, in a private agreement that Republican ideology would say should not be questioned by the government. Others point out that NACAs agreements with First Union and NationsBank had nothing to do with the CRA process, in that NACA never filed comments with regulators opposing either bank.
Meanwhile, Gramms counsel Dina Ellis, in an open session sponsored by the Consumer Bankers Association, stated that Gramm does not plan to offer his anti-extortion amendment (described below and in archives). We have no plan right not to pursue that amendment. Thats just something weve discussed, Ellis said. BNA Banking Daily, April 28, 1999. In the days before the possible May 3 debate, Ms. Ellis indicated that Gramms sunshine amendment wasnt yet ready. Developing...
More specifically, after the inconclusive meeting between Senate leaders Lott and Daschle, Gramm and Sarbanes on April 29, Gramm has held further pep rallies with industry lobbyists, telling them to hang tough, because Im not giving. Gramm bragged to the lobbyists that when minority leader Daschle asked to bring Treasury Secretary Rubin to the meeting, Gramm said hed only agree if Fed Chairman Greenspan could also come. Given Greenspans attacks on the Treasury Department in testimony before the House Commerce Committee one day earlier (reviewed below), Lott and Daschle decided not to have Rubin (or Greenspan) attend.
As reported by the Journal of Commerce, The Republicans... believe they can push the bill through anyway, thanks to strong pressure from large financial firms such as Citigroup. The Republican also expect support from the Fed, which would have its supervisory powers greatly strengthened by this bill and is lobbying hard to keep the bill moving. Mr. Greenspan met with at least two key members of Congress this week to discuss the legislation, a clear sign that he view the bill as a top priority.
Alan Greenspans April 28 appearance before the House Commerce Finance and Hazardous Materials Subcommittee was truly extraordinary. Greenspan claimed that the House Banking Committees version of the bill would put all Americans at risk, because risky activities would gravitate toward bank operating subsidiaries, which, Greenspan stated, have a 10 to 12 basis point subsidy. When asked the basis of this figure, Greenspan replied:
What we did is that we merely tabulated for 35 bank holding companies the credit rating given to the debentures of the holding company and the credit rating given to the debentures of the parent -- Im sorry, of the major bank of that holding company. What we found is that in no cases did the bank holding company have as good a rating as the bank. And is some cases the difference was more than just marginal.
The superficial nature of the Federal Reserves study that formed the basis of Chairman Greenspans April 28 claims cannot be ignored. For the agency charged with setting interest rates, the study was notably fast and loose -- simply comparing publicly available credit ratings. The Fed reached the conclusion that serves its already-announced lobbying position, while ignoring alternative explanations of the credit ratings. Could it be that the market realizes that the Office of the Comptroller of the Currency examines national banks more closely for risk than the Fed examines bank holding companies? The more relevant comparison is between national banks operating subsidiaries, and bank holding companies subsidiaries. But the Fed did not even do, or announce, such a study or comparison. This was not raised by the Subcommittee, whose members did little but applaud Greenspan. Rep. Dingell even prefaced a question with: Parenthetically, Ill say Im on your side, but I want to get your comments. Rep. Edolphus Towns (D-NY) began with: New York is the home to our most important securities firms, like Goldman Sachs, Merrill Lynch, major money center banks like Citibank, J.P. Morgan and important insurance companies like New York Life, Metropolitan Life, and the list goes on and on... Repealing Glass-Steagall will improve competition in services; it will help consumers and it will maintain our global leadership in the financial community... Chairman Greenspans reputation is legendary..... This is oversight? We shall see...
Finally, ICP has learned more about First Unions contravention of its commitment to support the Community Reinvestment Act. As reported below, First Union intentionally undermined its formally pro-CRA statement by stating that it was required to take this position, and then wrote to the ABA opposing the CRA enforcement mechanism. ICP has been directed to the precise language of First Unions Philadelphia commitment, which is available on the Internet (click here to view). Reportedly, First Union has been asked to submit clarifications of its position(s) on CRA to newspaper in Philadelphia and Washington. Developing...
Notably, BankAmerica HAS spoken out in favor of CRA -- at least through its most recent spokesman, Torod Neptune. See, e.g., The Baltimore Sun of April 30, 1999: What you see with us is a bank that has made a very good business out of the law [CRA], said Torod Neptune, Bank of Americas vice president for corporate affairs. Mr. Neptune is not a long time banker -- he moved from the Powell Tate public relations firm to BankAmerica in 1998. See, e.g., U.S. Newswire of July 8, 1997, Expert Panel to Discuss Revelation from Stalin Era Today, listing Mr. Neptune as representing the Public Broadcasting Corporation, PBS.
The same April 30 Baltimore Sun article quotes Gramm that [m]any people still see CRA as a very small program, and view these community groups as, you know, little people who are the champions of the downtrodden, Gramm said. But now, he said, banks are making $9 billion in direct payments to community investment groups each year.... Where Gramms $9 billion figure comes from is unclear. As is the spectacle of a Senate Banking Committee Chairman trying to convince the press that those he has chosen to attack are not, as they appear, little people. When Goliath attacks David, Goliath tries to convince observers that this is fair, and that David is actually -- Stalin. Enough surrealism. To be updated....
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April 26, 1999
CRA Legislative Roundup: Those Little Flowers
While Senator Gramms focus is temporarily diverted into seeking parliamentary tricks (and press coverage) for blocking U.S. participation in NATOs human rights enforcement action in Kosovo, some community groups demonstration at Gramms house in D.C. temporarily heightened and changed the spotlight on the Community Reinvestment Act. Senator Gramm called the police, then granted interviews through his intercom. Later, at a pep rally for lobbyists, Gramm claimed that the groups had shouted through his windows, Wendy, we know now where you live! (referring to Gramms wife, a former chairman of the Commodities Futures Trading Commission), and that the groups turned a philosophical debate into a personal matter. Who knew that Gramms charges that community advocates are extortionists was -- a philosophical debate?
Meanwhile, it is reported that Gramm and his staff have been calling various banks, asking for anti-CRA stories. According to Gramm, the OCCs polling of banks for pro-CRA stories was highly improper, and Gramms spokeswoman has stated that this is the basis of holding up the hearing on Jerry Hawkes confirmation as Comptroller of the Currency. Presumably, a Senate Banking Committee Chairmans inquiry for anti-CRA stories is different, because a legislator doesnt directly regulate banks. But the record of the 80s shows a number of interventions by Gramm for the savings and loans, and particular S&Ls, most often under the philosophical concept of forbearance.
Pittsburgh CRA advocate Aggie Brose reports that I know of at least one Pittsburgh bank executive who was contacted by the senators staff looking for an extortion horror story when they were subjected to a CRA protest... When the executive would not characterize the protest -- or the partnership that resulted -- as extortion, the conversation quickly ended. Pittsburgh Post-Gazette, April 22, 1999. More on these conversations forthcoming in this space.
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On April 21, Rep. Michael Oxley (R-OH) joked that Gramm promised me if I was a good boy he wouldnt release my home address to certain parties. Oxley is the Chairman of the House Commerce Finance Subcommittee, which will hold hearings on H.R. 10 on April 28 and May 5. Fed Chairman Alan Greenspan will be the only witness on April 28 -- All Greenspan, all the time, Oxley said.
Sen. Rod Grams (R-MN) opined on April 21 that he expects the full Senate to pass Gramms bill overwhelmingly, probably by a 70-30 vote.... I hope the President does not make a political issue of this bill, because there is so much good in it. Apparently, Gramms anti-CRA provisions are not political issues. Grams stated that Gramm will hold hearings in May on the CRA issue. Grams also said he is working in tandem with Gramm and the Securities Subcommittees ranking Democrat, Sen. Christopher Dodd (D-CT). See Soft Democrats, below and in ICP's CRA Reporter Archives.
April 21, 1999
The politics of redlining continue to fascinate. While Republicans on the Senate Banking Committee, notably Texan Gramm and Alabaman Shelby, attack the Community Reinvestment Act as extortion, Republicans on the Senate Commerce Committee, led by John McCain of Arizona and Conrad Burns of Montana, assert that telecommunications companies are redlining rural and low-income areas. Click here to see report on ICPs Telecom Page.
The apparent difference? There are Internet service providers (large campaign contributors) who want legislation forcing the dominant providers to have to allow them access to their wires, which might be gained by beating the redlining drum. In banking and insurance, fewer campaign contributions come for asserting or legislating against redlining. Still, Republicans might want to make their messages more consistent...
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Gramms Foreign Policy
Meanwhile, on March 31, Gramm met with Czech Senate deputy chairman Petr Pithart, and Michael Zantovsky, and said that he was not worried by different or reserve reactions on the Czech political scene to NATO air strikes in Yugoslavia. Czech News Agency, March 31, 1999, U.S. Senator Understands Reserved Czech Stance on Air Strikes. That is, Senator Gramm is implicitly encouraging other countries in NATO to disagree with President Clintons strategy vis-a-vis the Serbs.
Update on March 23, D.C. story below--
The Office of Thrift Supervision has responded to ICPs Freedom of Information Act request seeking to identify whos been seeking to problematize the OTS communications with consumer groups. As suspected, the real-party-in-interest has used a front: Washington Document Services. On both January 20, 1999 and March 9, 1999, Robert W. Postel, Jr. of Washington Document Services submitted FOIA requests to the OTS asking for:
all materials, notes taken by OTS employees (handwritten or typed), agendas, transcripts, a list of which pending applications were discussed, and list of all participants at any meeting between OTS Director Ellen Seidman and/or staff members of any community group (including, but not limited to, Matthew Lee, Inner City Press/Community on the Move, Bruce Marks, Neighborhood Assistance Corporation of America, Robert Gnaizda, Greenlining Coalition, Alan Fisher, California Reinvestment Committee, John Taylor, National Community Reinvestment Coalition, ACORN or Consumers Union) that occurred on, about, or after March 20, 1998... including a memorandum from Dwight C. Smith and Diana L. Garmus memorializing a meeting in March 1998 [and] any memoranda or directive authorizing the waiver of any costs to the individuals or groups noted above, including photocopy costs associated with Freedom of Information requests.
Mr. Postel / Washington Document Services cc-ed the second, March 9, 1999, request to the OTS Ombudsman and to the Treasury Departments Inspector General.
Washington Documents Service has offices in New York and D.C.; it claims to be able to quickly obtain documents its clients want. Most of the Hot Documents it lists are corporate securities class action documents. Its client in this request is clearly concerned about / trying to stop communications between the OTS and consumers groups, and even FOIA fee waivers for consumer groups (though these are provided for in the Treasury Departments FOIA regulation). ICP continues to inquire into the real-party-in-interest in this anti-participation campaign, and will be updating this story.
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Senate Banking Chairman Gramm (R-TX) has said he plans "pretty extensive hearings" on the Community Reinvestment Act this summer.
Click HERE to view banks' contributions to Sen. Gramm, from FEC records.
Gramm Defends Banks His Bill Would Criminalize
Senator Gramm has embraced and advocated for a bank whose explicit behavior in 1998 Senator Gramm is trying to criminalize in 1999.
During the Federal Reserves consideration of First Unions application to acquire CoreStates in 1998, several commenters asked the Fed to take action on First Unions statements to groups that the bank would only reach CRA agreements if groups would commit in writing not to comment on First Unions applications for three to five years.
On March 17, 1998, the Fed wrote to First Union and asked: Several speakers [at the public meeting] stated that First Unions agreements with community-based groups required the groups not to comment or assist others in commenting to any of the Federal banking agencies on any First Union applications for a period of up to five years. Please describe the terms of any provision that restricts the ability of any group or person to provide information to the Federal banking agencies that First Union has obtained in connection with such agreements.
On March 20, 1998, First Union wrote back to the Fed, stating among other things that First Union believes that such arrangements are reasonable. First Union has entered into long-term commitments with a number of community organizations. First Union is seeking to prevent the situation where it is bound for a lengthy period of time, but a community organization could nonetheless seek to require additional commitments by protesting...
As the record developed, ICP raised to the Fed an instance of First Union threatening to withdraw support from an organization that had signed up to testify at the Feds February 13, 1998, public meeting in Philadelphia on the merger. First Union responded by letter dated April 2, 1998, confirming that First Union had inquired into the groups planned testimony prior to the meeting. First Union stated that We regard th[is] inquiry... as being completely appropriate. First Union has always maintained that partnering with community groups and protesting of First Union acquisitions cannot coexist. A group cannot be a partner and a protestor at the same time.
First Union submitted to the Fed, as an attachment to its April 2, 1998, letter, a memorandum in which a First Union President wrote to a community group, on March 13, 1998, that the implementation of the agreement is contingent upon your positive verbal testimony at the hearing today. I look forward to hearing the accolades from your testimony. -- J. William Knott, First Union Maryland Area President.
So here you had First Union explicitly making a CRA agreement contingent upon... positive verbal testimony at the hearing of the Federal Reserve Board.
Senator Gramms Anti-Extortion proposal would make it a crime for a bank to intentionally attempt to motivate, encourage, or influence testimony of any person, group, entity or other organization... before an appropriate Federal banking agency regarding compliance with the CRA.
First Union did just this, in writing, in 1998. The Federal Reserve Board was made aware of it, and did nothing about it -- the Feds approval Order mentioned the issue but minimized it, explaining how groups could still comment to regulators, they just couldnt protest merger applications. The Office of the Comptroller of the Currency was also made aware of First Union's actions.
Ironically, sources report that it was First Union which complained to Senator Gramm earlier this year that the Office of the Comptroller of the Currency was having its examiners ask national banks like First Union if they would speak positively about the CRA. Senator Gramm immediately jumped to the defense of First Union, rebuking the OCC and telling a meeting of banks that under Gramms watch, banks would be free from this type of political pressure.
...even the Federal Reserve Board, hardly a CRA activist organization, has recently begun publishing a newsletter called Capital Connections, which begins with the statement that [t]he Federal Reserve has a longstanding interest in, and commitment to, fostering community development. The Feds newsletter recounts that in Puerto Rico, the New York Reserve Bank hosted, with the Puerto Rico Community Foundation, two workshops on CRA and community development -- one for bankers and one for community development organizations.
The Feds newsletter also claims that each Reserve Bank creates it own Community Affairs strategy and responds to particular needs in its geographic district. ICPs experience does not confirm this decentralization. As recounted elsewhere on this web site, an article solicited by the San Francisco Reserve Bank was effectively delayed by the Feds D.C. staff (click here for this story); ICP has also been told by Fed D.C. staff that it should not contact Reserve Banks Community Affairs officers (because sometimes they answer questions differently than D.C. staff does). The Federal Reserve speaks through Orders, ICP was told. But what then of this new newsletter, and its claim of autonomous, decentralized power at the Reserve Banks? Let a hundred voices bloom!
It is ironic that Senator Gramm attacks the OCC, and Senator Shelby attacks the FDIC -- both for things that the Federal Reserve also does. The kid-glove treatment of the Fed by the Senate Banking Committee -- should come to an end. As grandiose as it might sound -- democracy is at stake.
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