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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
So while supposedly recused at the Federal Reserve Bank of New York, Tim Geithner was weighing in on Bank of America, in support of the shotgun marriage with Merrill Lynch, it emerged in Congress last week. He denies it. But didn't he initially denied not paying his taxes?
June 8, 2009
Bank of America will be saved by... ex-regulators? Now on the board of directors are former Federal Deposit Insurance Corp. Chairman Donald Powell and former Federal Reserve Governor Susan Bies, routine denier of FOIA appeals while on the Board. That is to say, regulators who failed to stop predatory lending and the meltdown now benefit from it....
June 1, 2009
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
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
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
The Federal Reserve Bank of San Francisco has added to its Economic Advisory Council a vulture investor and previous M&A lawyer, Jonathan Coslet. So this is where the Fed gets it advice from...
April 27, 2009
The Federal Reserve took on more than $74 billion in subprime mortgages, depreciating commercial leases and other assets after Bear Stearns Cos. and American International Group Inc. collapsed. In its biggest disclosure of the securities accepted to stabilize capital markets, the Fed said yesterday it had unrealized losses of $9.6 billion on the assets as of Dec. 31. The bonds, swaps and notes were taken in from Bear Stearns, once the fifth-biggest Wall Street firm by capitalization, and AIG, which had been the world’s largest insurer. The losses on securities backed by assets such as home loans in Florida and California signal that U.S. taxpayers may be forced to reimburse the central bank through the Troubled Asset Relief Program...
April 20, 2009
Notably, thus far in 2009 the Federal Reserve's web site lists no notice and comment orders under the Bank Merger Act, one each under Sections 3 and 4 of the Bank Holding Company Act, and none under both. There's been a slow down -- that's an understatement -- and also, more things done without notice or comment...
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.
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.
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. 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.
March 16, 2009
In
DC, Officials Defend
Bailouts of Citigroup and AIG -- Federal Reserve Still Refuses to Say
Whom It Paid
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.
Meanwhile, the Fed still refuses to say whom it paid on behalf of AIG,
with Geither on March 12 saying Bernanke is still deciding. Bad
instincts...
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
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. The example for this week is even the "Financial Holding
Company Declaration" submitted to the Federal Reserve for the CIT Group
by
its outside law firm, Wachtell Lipton. The Fed followed the requests
that
information be withheld from the public, even as public bailout funds
were
being sought and doled out.
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)... Even ex-Fed Alan Greenspan is talking about
nationalization...
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
February 16, 2009
Before Congress last week, JPMorgan Chase's Jaime Dimon complained, “we have a Byzantine alphabet soup of regulators,” and that banks and lenders have to deal with the OTC, the CFTC, the SEC and so on. He pontificated that it should be a U.S. system and globally regulated, and that no one should try to create a new regulator. He suggested the Federal Reserve -- and why not, since the Fed delivered Bear Stearns to him and Chase, which then got WaMu as well... The Fed's been good to Morgan Chase.
February 9, 2009
After
Bailout, ING's Kok Blames Regulators, including Federal Reserve, for
pumping up subprime, food inflation
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." While Kok's criticism of the Federal Reserve -- he cited
Alan Greenspan's belated admission to Congress -- was deserved, 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.
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 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
As
JPMorgan Chase Shutters WaMu
Branches, Regulators Missing, Commitments Gone
Byline:
Matthew R. Lee of Inner
City Press on Wall Street: News Analysis
NEW YORK, January 23
-- JPMorgan
Chase is moving to closed down dozens of the Washington Mutual bank
branches
the government allowed it to acquire last year with no public notice or
comment
period. In Dallas, Chase has targeted 23 WaMu branches for closure, and
another
six in Fort Worth. In the Chicago area, Chase says it will shutter 57
WaMu
locations. More branch closings will follow across the nation.
Community and consumers groups are belated protesting the
acquisition,
which was a one of a slew of
so-called emergency transactions on which no
Community Reinvestment Act comments were considered, including the
accession of
Goldman Sachs and Morgan Stanley to bank holding company status,
and Bank
of
America's now discredited acquisition of Merrill Lynch.
JPMorgan
Chase
benefited from regulator-protected acquisitions not only of WaMu but,
before
that, of Bear Stearns. As first
reported by Inner City Press, Bronx-based Fair
Finance Watch submitted to the Federal Reserve Board comments on
these
transactions, but was told that emergency did not allow consideration
of the
issues raised, including prospective branches closings.
JPMorgan Chase has now told groups who have asked if it will
continue
Washington Mutual's CRA programs and commitments that since there is no
more
Washington Mutual, there is no more commitment.
This
comes in the wake of JPMorgan Chase's
Jaime Dimon reversing himself from a stated commitment to mortgages
through
brokers to abruptly shutting down Chase's wholesale mortgage unit.
While groups
are told this will give Chase more control over the terms of loans,
brokers point
out that Chase ultimately had control in the wholesale business, too. Commitments are made to be broken,
apparently, particularly those by companies the federal regulators
bailed out
or merged out of existence. What, the question grows, is Timothy
Geithner's
position on this Main Street issue?
Update: later on January 23, community groups were told that JPMorgan Chase plans to close over 40 WaMu branches in New York State...
January
19, 2009
So the Fed puts in charge of AIG Chester
Feldberg, former chairman of Barclays Americas, and Douglas Foshee,
owner of El
Paso Corp. Can you say, conflict of interest?
And
the
Fed's purported advisor on community issued, fresh from CCC, is not
allow to
talk to the press -- and he accepts it?
Geithner-gate is in this week's CRA Report...
January
12, 2009
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."
January
5, 2009
To
show how
unserious the Fed was about banks' transparency, before before the
Fall, we
note that while New York Community Bancorp was one of the institutions
which
insisted on providing Fair Finance Watch with its Home Mortgage
Disclosure Act
data only in paper or PDF form, so that it couldn't be analyzed, the
Fed has on
its Thrift Institution Advisory Council the CEO of NYCB, Joseph
Ficalora. Talk
about impunity...
December
29, 2008
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
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...
Who
knew? Morgan Stanley, which the Federal
Reserve let become a bank holding company with no public comment, now
applies
on an expedited basis for its Greenwich, Connecticut-based subsidiary
Frontpoint
to own a stake in a start-up bank that says it will serve Manhattan,
Brooklyn
and parts of Long Island: Heritage Bank. Then, there is a China-related
application by Morgan Stanley, on which the comment period is still
open.
Expect more on this.
December 15, 2008
Swept
Under the TARP by the Federal Reserve, Grabs by GMAC, PHH and CIT,
Wachovia's
Sewers
Byline:
Matthew R. Lee of Inner
City Press on Wall Street: News Analysis
NEW YORK, December
8 -- After most big banks and
even many non-banks have already drawn down their bailout funds from
the government's
Troubled Assets Relief Program, there's belated interest in Congress in
what banks
have been doing. Monday afternoon on the Senate floor, Byron Dorgon of
North
Dakota expressed shock at Wachovia's
purchase and lease-back of German sewer
system, just so it could use the depreciation of the German pipes to
avoid its
U.S. taxes.
Now that Wachovia is being bought -- by Wells Fargo and not as Washington wanted Citigroup -- is it easy to finally criticize it and its outgoing management. But how about Citigroup and its entrenched officials Robert Rubin andVikram Pandit, who right after its second bailout serving spent eight billion Euros buying the highway business of Spanish construction firm Sacyr Vallehermoso?
The
TARP program is
full of abuses. Focus only on some pending ones, the conglomerate PHH
says it
is applying for TARP funds, without owning any bank or thrift. Its
application
is not even on the Office of Thrift Supervision's website. Nor, on the Federal
Reserve's website, can any notice be found for the applications of
GMAC and
CIT. The Fed has sent Inner City Press a copy of GMAC's -- but
why is the required public notice not on the Fed's web site?
December
8, 2008
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.
December
1, 2008
Let's
compare two holding company regulators. "The Office of Thrift
Supervision,
which regulates savings and loans, has levied 34 cease-and-desist
orders this
year, with 23 coming since June. The Federal Reserve issued two such
orders
this month after issuing only one in the year through October." The Fed
--
some tough regulator... To bend over backwards to be fair, if it is the
Fed's
strategy to regulate without public cease and desist orders, the Fed
has to
stop being so resistant to providing documents under the Freedom of
Information
Act. Bernanke knows best? Where's the evidence of that?
November
24, 2008
The
choice
of Tim Geithner as Treasury Secretary put a protege of Citigroup's
Robert Rubin
in charge of the economy, just as Citigroup teeters near failure due to
its
predatory lending. Rubin did nothing to stop Citi's gouging practices,
just as
Geithner did little as head of the Federal Reserve Bank of New York to
regulate
and reign in the lenders under his jurisdiction. How, some are asking,
is this
is change one can believe in?
November 17, 2008
Under the headline, "Economists offer support for Bernanke," this weekend's Wall Street Journal Europe quotes without qualification JPMorgan Chase economist Bruce Kasman that "Bernanke has done a good job." No mention that Bernanke gave Bear Stearns l and then Washington Mutual to JPM Chase, with no public comment period. Sure, if you were JPMC or Jaime Dimon, you'd lavish praise on Bernanke for these moves. But others?
November
10, 2008
AP
breathlessly reported that "the Federal Reserve says banks and
investment firms
borrowed from its emergency lending program over the past week at a
slightly
slower -- but still brisk -- pace. The Fed's report shows commercial
banks
averaged nearly $110 billion in daily borrowing over the past week. For the week ending Wednesday, investment
firms drew $77 billion. This category was recently broadened to include
any
loans that were made to the U.S. and London-based broker-dealer
subsidiaries of
Goldman Sachs, Morgan Stanley and Merrill Lynch."
So
the Fed
by allowing all three in the world of bank holding companies, in all
three
cases with no public comment period at all, has creates business for
itself...
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.
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...
So GE
has
signed up for the Fed's commercial paper program. It's evasions of the
CRA, or
limitations to a single credit card bank and Utah industrial loan
company,
should end... Better late than never, we suppose, for Alan Greenspan to
apologize for ignoring evidence of predatory lending.
October
20, 2008
The Fed's
Caja Madrid approval order is one of the most superficial and
conclusory to
date, ignoring several of the adverse issued raised, and merely pasting
in a boiler
plate paragraph about fair lending concerns...
It's telling, in terms of how
sloppy the corporate
giveaways have been, that the Fed did not think through how buying
warrants in
the big banks would put them in the position of reducing book value or
recording a loss. What a regulator...
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
There
are
other responsive records, still not given or denied, which Inner City
Press will be 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...
October
6, 2008 -- for an angry debate by Inner
City Press on the bailout, click here
From
what
are now the Fed's regulators, " Taiwan's
Financial Supervisory
Commission said late Sunday the three investment units of American
International Group Inc. (AIG) on the island have sound fundamentals,
but it
will monitor their operations closely. 'The commission will monitor
closely the
three companies' financial and operation changes, and will take
appropriate
measures when needed,' the island's top financial regulator said in a
statement.
AIG said Friday all of its non-insurance businesses are for sale.
Outside the
U.S., AIG said it wants to keep at least a majority stake in American
International Assurance Co., which sells life insurance and retirement
products
in China, Thailand, South Korea, Australia, New Zealand, Vietnam,
Indonesia and
India." Has the Fed signed off on this?
September
28, 2008
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, which claimes that it does
not control AIG, despite owning warrants for 79% of its stock...
September
22, 2008
So
with its
$85 billion bailout of AIG, the Federal Reserve will come to run a
predatory lending
operation. Click here
September
15, 2008
As
the
Federal Reserve through the New York Fed is involved in trying to set
up yet
another bail-out, the two most recent speeches on the Fed's web site
are
Bernanke on historically black colleges, and Kohn on academic
articles...
September 8, 2008
Incoming Freddie Mac chief David 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 Fed dodged the question until U.S. Bancorp eventually sold the stake...
September
1, 2008
The WSJ has pegged New York Federal Reserve President Timothy Geithner to be Treasury Secretary in an Obama administration. Oh the profits of bail-outs...
How to explain
Citigroup
changing former Treasury
Secretary 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?
August 25, 2008
Bernanke's spin
So, the lesson learned from a bailout with no public comment is
a
rulemaking with the industry with no input from the public...
August
18, 2008
Like
a coup
leader trying to ex post facto legalize their seizure of power, the
Federal
Reserve has included in its "Legal Developments 2nd Quarter 2008"
publication released last week its Orders - with no public comment
allowed --
bailing out Bear Stearns and letting JPM Chase buy
it, available at http://www.federalreserve.gov/Pubs/Bulletin/2008/pdf/legalq208.pdf
.All the patina of legality with none of the content...
August
11, 2008
So
Elizabeth
Duke was sworn
in
August
4, 2008
Ah, FBSEA-- " The Federal Reserve Board on Thursday announced the approval of an application by International Bank of Azerbaijan, Baku, Azerbaijan, to establish a representative office in New York"....
July
28, 2008
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
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
July
14, 2008
Approvals
with no prior public notice, much less comment: In a letter dated July
1, the
Fed granted a request to allow JPMorgan Chase
Bank to purchase a $44 billion
portfolio of Bear Stearns derivative transactions and hedges acquired
by the
holding company when it bought Bear Stearns. The portfolio includes
Bear
Stearns Forex Inc. and Bear Stearns Credit Products Inc. The Fed spun
that
"the proposed transaction in this case is a byproduct of a one-time
corporate reorganization and would facilitate the integration of
recently
merged companies," and granted the waiver. The Fed also granted
JPMorgan's
request to exempt from Fed rules certain transactions between the firm
and
Maiden Lane LLC - the limited liability company set up with the Federal
Reserve
Bank of New York to hold some Bear Stearns assets. "Although
(JPMorgan Chase) has a
substantial subordinated exposure to Maiden Lane, the (New York Fed)
has the
predominant economic interest in Maiden Lane," the letter from the Fed
to
JPMorgan, dated June 26, stated. "Granting
the exemption also appears to be in the public interest because it will
facilitate the consummation of the (New York Fed) facility," the Fed
letter
said. So the Fed considers consummation of its own transaction to be in
the
public interest. But did they hear from the other sides?
Annals of oversight: "Bernanke said the Fed consulted Congressional leaders during the weekend in March when it decided to facilitate the Bear Stearns rescue, and that he didn't get the sense that there was any objection."
July
7, 2008
Here
is an
outrage on which action must be taken -- 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.
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."
June 23, 2008
The
filing on June 15 by Inner
City Press / Fair Finance Watch
June
16, 2008
This
week
with the Federal Reserve, 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 Bank of New York'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.
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.
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
So would whoever's the new President ask Bernanke to suggest four replacements on the Federal Reserve Board? Gov. Frederick Mishkin announced on May 28 that he would leave the board at the end of the summer. Two other Fed governor positions have been open since last year and Gov. Randall Kroszner has remained in his seat even though his term expired Jan. 31.
Whatever happened to checks and balances?
June 2, 2008
Econ-talk: Fed Vice Chair Kohn has been pitching the idea of giving Wall Street securities firms permanent access to Federal Reserve loans. Permanent bailout? Note to the Fed: Citigroup and JP Morgan Chase have been wildly understating their borrowing costs for LIBOR calculations, in order to hide what those in the know think of these two companies and their prospects...
May
26, 2008
In a
May 9
meeting in which he was criticized for the Bear Stearns bail-out, the
Fed's Ben
Bernanke expressed interest in local concessions from banks on interest
rates,
but little desire to clamp down on predatory lending, or extend the
Community
Reinvestment Act to non-banks...
May
19, 2008
In
a speech on May 15, Federal Reserve Governor Frederic Mishkin
said, “Our
regulatory framework should be structured to address failures in
information or
market incentives that contribute to credit-driven bubbles." But
where
was he when the other Fed governors rubber-stamped the first part of
the Bear
Stearns bail-out by JPM Chase, which required unanimity?
May
12, 2008
From
Gov. Kroszner's speech last week --
"The
cost of foreclosures is not limited to individual homeowners. Communities in which a high number of
foreclosures have occurred are increasingly faced with large numbers of
properties held by lenders or servicers as "real estate owned," or
"REO." REO is costly to hold,
and many lenders are not well equipped to handle large REO inventories. As a result, the number of vacant homes in
some neighborhoods has increased markedly.
After averaging about 1.7 percent starting in 1990 through 2006,
the
home-vacancy rate rose sharply in 2006 and hit 2.9 percent in the first
quarter
of 2008, according to the U.S. Census Bureau. Properties left vacant
for long
periods have many negative effects on a community.
Research indicates that foreclosures tend to
reduce the value of nearby properties; the magnitude of these price
declines
appears to differ, depending on the presence of variables such as the
strength
of the local housing market or the distance between a foreclosed home
and other
surrounding homes."
And
that's why cities like Baltimore and
Cleveland are suing predatory lenders, like Wells Fargo --
click here
for a
report this week to Inner City Press from a whistleblower..
May
5, 2008
Some savvy
April
28, 2008
From Scott Alvarez' April 24 testimony -- "Citigroup recently received a capital infusion from the Kuwait Investment Authority (KIA), the Abu Dhabi Investment Authority (ADIA), and the Government of Singapore Investment Corporation (GIC), one of Singapore's two sovereign investment funds. None of these funds acquired more than 5 percent of Citigroup's total equity. Three sovereign wealth funds, the Korea Investment Corporation (KIC), Temasek, and KIA, each made similar noncontrolling investments in convertible preferred stock in Merrill Lynch and Co. These are all passive investments that have not triggered formal review under U.S. banking law." And is that wise?
April
21, 2008
The
Federal Reserve continues to hit new
lows. In an order dated April 1 (mailed
out on April 11), the Fed purported to review -- with no public input
-- and
approve JPMorgan
Chase's proposal to acquire Bear Stearns and its New
Jersey-based bank, Bear Stearns Bank & Trust. "Based on all the
facts
and circumstances, the Board has determined that an emergency exists
requiring
expeditious action on the proposal." So much for CRA... To be continued.
April 14, 2008
Delaware vice-chancellor Donald Parsons has stayed litigation challenging the proposed acquisition of Bear Stearns by JPMorgan Chase, deferring to a similar court case in New York. Parsons noted that the Delaware lawsuit mirrors five lawsuits that have been consolidated on an expedited basis by the New York Supreme Court. That court has scheduled a May 8 hearing on a preliminary injunction barring a shareholder vote to approve the deal. "The judge also noted the unique circumstances of the planned government-assisted merger" -- so now, the Federal Reserve's outrageous exclusion of any public review of the deal is used by court to avoid judicial review...
And this is not even dealing yet with the Fed's sleazy deal with Blackrock, answers on which are due on April 18...
There's something positively ghoulish, in Greg Ip's Greenspan story last week, about letter extracted on his death bed from Ned Gramlich, that "I truly wish the press would stop kicking you around on this subprime supervision issue. What happened was a small incident." The reference, as Ip tells it, was to
"In 2000, then-Fed governor Edward Gramlich, who was in charge of the Fed's consumer affairs, proposed to Mr. Greenspan that the Fed's staff examiners look for abusive lending practices in banks' lightly regulated mortgage affiliates. In an interview with The Wall Street Journal last June, three months before his death, Mr. Gramlich said that at the time, he generally considered subprime loans a good thing. He didn't then know the extent to which the loans would become a problem, but he wanted the 'Fed to be a leader' in cracking down on predatory lending. Mr. Greenspan recalls that he demurred, saying that the Fed shouldn't have oversight of these lenders. Shady operations could portray their Fed-regulated status as a seal of approval, he suggested, giving them unearned credibility with customers."
But if Gramlich was pushing for exams of BANK-AFFILIATED lenders, like CitiFinancial, these were already benefiting from a bank- and FRB-affiliated status...
April 7, 2008
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.
March 31, 2008
Ironic in light of the Fed's
highly-questionable bail-out of Bear
Stearns via JPM Chase, the Minneapolis Fed's Gary Stern last week
intoned "A final TBTF comment:
Recent events have likely reaffirmed
and strengthened some creditors' expectations of support, or have
created those
expectations for the first time. I think one would be hard pressed to
dismiss
our analyses or proposals by claiming that such expectations do not
exist. On
the opposite end of the spectrum, some might dismiss our suggestions,
arguing
that we cannot influence creditors' expectations. I reject that view as
equally
untenable. We simply cannot allow widespread perceptions of government
support
to pervade the financial system."
So what is the Fed going to do about
it?
March 24, 2008
Since the Fed 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?
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. So where was Gov. Mishkin?
On Fed chair Bernanke's way to the podium for his speech in DC on Friday, Inner City Press asked him if he would be taking any questions. "No," he said, remaining expressionless as Inner City Press called after him, "Bear Stearns? JPMorgan Chase? Why?" His speech, purportedly on the subprime lending crisis, did not even mention the role of securitizers. And when it was over, his entourage decamped in two large black cars, license plate BJ 3135, out onto D Street with siren lights on top...
March 10, 2008
Sources tell Inner City Press that the Federal Reserve Bank of New York placed online zip code specific foreclosure data, then quickly pulled it back. But too late, as we intend to cover, quantitatively, going forward...
March 3, 2008
As far back as February 18, the Federal Reserve Bank of Richmond said it had Bank of America's application to acquire Countrywide. But for days, no notice was published by the Federal Reserve in DC. Finally it was posted, with a comment period to March 31. Let the commenting begin!
February 25, 2008:
As the beginning of the 2007 HMDA data season approached, the Fed has let another year go by without providing simple guidance. Soon there will be requests to extend comment periods on Bank of America - Countrywide, until each institutions provides its 2007 data. And that will only be the beginning...
February 18, 2008
Last week at the UN, several states' pension funds and other institutional investors spoke of pushing the SEC to deal with companies' exposure to climate change. Inner City Press asked if they were also pushing the Federal Reserve in this regard. No, was the answer. Not YET, that is...
February 11, 2008
On Royal Bank of Canada and the pawnshops and quick cash joints, the Fed had this to say, that ICP Fair Finance Watch
"expressed concern about RBC Centura'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. RBC Centura has stated that it conducts substantial due diligence reviews of its customers who provide alternative financial services, including reviews of anti-money laundering and Bank Secrecy Act compliance, and that it does not play any role in the lending practices, credit review processes, or other business practices of those firms."
Sounds like the Fed's approach to subprime mortgage lending, before the fall..
February 4, 2008
In quiet Fed political news, Paul Volcker last week was reported to endorse Barack Obama. And what of Alan Greenspan, now advising Deutsche Bank?
January 28, 2008
How shameful that the Fed got spooked by Societe General's sell-off, and won't even criticize them publicly... And ex-FRBNY Ernie Patrikis, now through the revolving door a partner at Pillsbury Winthrop Shaw Pittman, was quoted last week that mortgage "servicers must act in the best interest of investors"...
January 21, 2008
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...
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 Federal Reserve allowed it all to happen, on its advisory board...
January 14, 2008
The Fed has appointed to its "Consumer" Advisory Council Kevin Rhein, a representative of Wells Fargo, which was sued last week by the City of Baltimore for predatory and discriminatory lending...
January 7, 2008
The communication policy of the Federal Reserve is currently a work in progress, Fed Vice Chair Donald Kohn told the American Economic Association. Ya don't say...
December 31, 2007
"We want consumers to make decisions about home mortgage options confidently, with assurance that unscrupulous home mortgage practices will not be tolerated," Fed chairman Bernanke said. But why then allow five year prepayment penalties, and yield spread premiums?
December 24, 2007
Speaking like a supplicant in Charlotte, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, last Wednesday defended the Fed's plans to belatedly clean up predatory lending. In a brief Q&A session, Lacker said the Fed is offering a "set of significant measures," but not banning Yield Spread Premiums, only required that they be disclosed. Eliminating such practices, Lacker said, "could raise mortgage borrowing costs." But what of the costs of predatory lending?
December 17, 2007
With the Fed slated to announce its long overdue predatory lending rules this week, as early as Tuesday, December 18, and with the rules expected to leave prepayment penalty abuse unreformed, it's worth remember this quote from Roger T. Cole, the Fed's director of banking supervision and regulation, to the Senate Banking Committee in March: "Given what we known now, yes, we could have done more sooner." Yeah....
December 10, 2007
Governor Kroszner last week told the House, "We would recommend that the amount of such civil money penalties, if imposed, be given a ceiling as well as a floor because of the market uncertainty that can be introduced by open-ended liability. We would also suggest that some discretion in the actual amount of the penalty, within such a range, be given to the enforcing agencies. This sort of flexibility in enforcement would help the agencies adjust the punishment to fit the infraction." So, the Fed wants to cap predators' liability, and to be given discretion even under the cap...
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
Another regional president of the Federal Reserve, which stood by while the subprime mess gathered force, has now cautioned against over-regulation. "Some reforms might impose significant costs and contribute to outcomes we would prefer to avoid. Ultimately, policymakers could find themselves relearning old lessons rather than improving social welfare," Minneapolis Fed President Gary Stern said last week in Singapore...
November 18, 2007
The Fed's defenders claim that in its Consumer Advisory Council, real work is getting done. From the outside, there's been nothing -- no enforcement action on disparities in HMDA data and high cost lending, no enforcement through the merger review process, nothing...
In the Senate, a red flag has been raised about the attempt to give Gov. Kroszner a new 14-year terms. And still not action on Elizabeth Duke of Towne Bank and Larry Klane of Capital One Financial Corp, the high-cost card and mortgage lender...
November 12, 2007
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...
November 5, 2007
From the WSJ last week: "On Aug. 8, Mr. Rubin called Mr. Bernanke. The Citigroup executive said he suspected a lot of people were telling Mr. Bernanke he should have cut rates. Yet Mr. Rubin said he thought the Fed had done the right thing, say people familiar with the call."
Questions: is it appropriate for the head of the largest bank's office of the chairman to just dial up the main regulator and shoot the breeze? When that largest bank has massive bets on predatory subprime? What else was said?
October 29, 2007
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
Miller-Watt-Frank, it is reported, may exclude the Fed from rulemaking. Use it or lose, it, Rep. Frank had said. The American Banker quotes an ex-Fed lawyer spinning that the Fed's exclusion may be inadvertent. Yeah, right...
October 15, 2007
So Alan Greenspan spent $25,000 to fly himself and one staffer back and forth to London. He says he never know about the subprime problems, despite activist wagging their jaws in front of him for meeting after meeting. Maybe he was mind-dialing rich man's Travelocity while they spoke...
October 8, 2007
The Federal Reserve's general counsel Scott Alvarez, in testimony to Congress last week about Industrial Loan Companies, offered rare plug for CRA, which some say the Fed's actual practice, of review of CRA in mergers, does not justify: "The ILC exception undermines these requirements by allowing financial firms to own and operate an FDIC-insured bank without abiding by the capital, managerial, and CRA standards established in the GLB Act." But if the Fed wanted there to be CRA standards, they wouldn't rubber stamp approvals, increasingly with less and less detailed review. This point was lost amid the focus on commercial companies owning ILCs. Cynics say that the Fed just wants jurisdiction over everything -- that the Fed has no problem with loopholes, only with those that it doesn't control...
Meanwhile, south of the border approval has been procured for Banco Wal-Mart de Mexico Adelante, which Citigroup says will open 10 to 12 branches in the next year. Then again, in the 12 months to June 2007, Citigroup in Mexico opened 207 retail bank and consumer finance / Citifinancial branches.
October 1, 2007
As Capital One's Larry Klane is slated to join the august (?) Federal Reserve Board, the Detroit News of Sept. 28 lists Capital One as one of top three lenders for cosmetic surgery -- Capital One Healthcare Finance: www.capitalonehealthcarefinance -- How do you think they foreclose? Nip/Tuck, is this predatory lending? Maybe Ben Bernanke will ask...
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...
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.
Meanwhile, Citigroup's Mexican banking arm Banamex and a group of Mexican investors said Wednesday they plan to launch a $150.7 million counter offer for airline Consorcio Aeromexico SA (AMEXICO.MX), which is currently the target of a takeover bid by two local businessmen. Banamex said the group has requested authorization from the National Banking and Securities Commission and the Federal Competition Commission.
What about the U.S. Federal Reserve, putatively Citigroup's comprehensive supervisor? Citigroup can own airlines outside of the U.S.?
September 9, 2007
In Larry Klane's ongoing drive to join the Federal Reserve Board, now this DJNS quote: "Mr. Klane's involvement in subprimes raises questions, but we'll withhold judgment until we get answers," said Sen. Charles Schumer.
The Capital One unit at issue used to be called eSmartLoan before Cap One bought it. As previously analyzed by Inner City Press, in 2004 eSmartLoan made 144 super high cost HOEPA loans (loans subject to the Home Equity and Ownership Protection Act, in essence costing at least eight hundred basis points over comparable Treasury securities). The HMDA-LAR file included 2193 higher cost, rate spread loans (loans three hundred basis points or more over Treasuries on a first lien, five hundred on a subordinate lien). All of these high cost loans were reported, as to race, “Information Not Provided.” The originations in the file for which race was reported are predominantly in Missouri and Kansas. ICP takes these to be the retail loans of National Bank of Kansas City, from which Capital One acquired eSmartLoan, which is a subprime lender directed at many more states. Of the over 6000 race-not-reported loans, one-third of them rate spread, only four were in Kansas, and only four in Missouri. The rest were all over the country -- high cost and race not reported...
September 3, 2007
While Fed watchers make much of if and when Bernanke will move to cut the fed-funds rate, his hands-off approach to consumer protection, and even the provision of information to consumers, strike us as more indicative...
August 27, 2007
From Sen. Dodd's press conference after meeting with Fed chair Ben 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" -- we and logic disagree, but it's noteworthy that the Fed has no problem with those who meet Bernanke speaking out afterwards. Why then the off the record lunch with Reuters reporters? We'll see.
August 20, 2007
Why is it that the Federal Reserve's sudden interest rate cut has the feel of a cover-up? That is, after having allowed predatory lending to flourish, and then the resulting financial chaos (two months ago, the Fed dismissively called the subprime problem "contained), it finally acted to prop up the markets, because too many fingers were starting to point back at 20th Street and Constitution Avenues...
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-Fed consultant...
On an entirely different note, there is the sadness of learning about Ned Gramlich's sickness, in Saturday's NY Times. Here's hoping that his decision to eschew treatment works out for the best...
August 13, 2007 -- Greenspan's Shameless Cash-Out to Deutsche Bank Is a Sub-Crime, Consumers Complain
The Federal Reserve, intent on seeming earnest, more quietly claims to be bereft of power. Case in point? The Fed, when asked about banks which refuse to provide their mortgage data in electronic format, pretends to be surprised. Later, more quietly, the Fed claims it has no authority to tell banks to be reasonable, and not opening evade the spirit of the rules. But isn't that the problem? As the House Banking Committee is saying, "use it or lose it."
August 6, 2007
Larry Klane of Capitol One, charged with fraudulent marketing by several state attorneys general, told the Senate last week that, if confirmed, he "would bring my energy, focus, and experience to vigorously fulfilling the Fed's consumer protection responsibilities." Why don't we believe that?
July 30, 2007
Banco Santander was reported last week to have continued to do business with sanctioned Bank Sepah until at least March 2007. How this might impact the Santander - RBS - Fortis bid for ABN Amro, including their pending applications before the U.S. Federal Reserve, remains to be seen. Federal Reserve, take