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February 8, 2010
In his February 3 speech barely claiming his second term as Fed chairman, Ben Bernanke bragged about the Fed's transparency, despite its withholding of information about mergers and consumer protection as well as bail outs. He said
"The Federal Reserve is already one of the most transparent and accountable central banks in the world, providing voluminous information and explanation concerning all of its activities. However, I believe that we should be prepared to do even more, to become even more transparent. It is essential that the public have the information it needs to understand and be assured of the integrity of all our operations."
Having had to litigate Freedom of Information Act cases with the Fed, which hid information about mergers and about banks' ownership of subprime lenders, we disagree.
February 1, 2010
While Inner City Press Fair Finance Watch has opposed and appealed Goldman Sachs' withholding of large portions of its submission to the New York Banking Department in response to ICP's protest of Goldman's branching application to the NYBD, it's worth making a comparison to the Federal Reserve.
Goldman Sachs must be relying on favoritism from the Fed -- while ICP has protested another Goldman application to the Fed, Goldman's response to the Fed was much more conclusory than to the NYBD. One can conclude that the Fed is a weak regulator -- and, relatedly, that it receives less information from the industry, as least on subprime questions, for that reason.
Citigroup jacked up its stake in the controlling shareholder of Banco de Chile, acquiring an additional 8.52% in LQ Inversiones Financieras for $511 million. Banco de Chile, the Andean nation's second largest bank, is controlled by the local Luksic family, which also controls U.K.-listed copper miner Antofagasta PLC (ANTO.LN) and U.S.-listed beverage company Compania Cervecerias Unidas SA (CCU), among other assets. In a 2007 deal Citigroup Inc. took a 10.44% stake in Banco de Chile, through LQ, and the Chilean bank acquired Citibank's local assets. Under the terms of the Banco de Chile-Citigroup deal, the Chilean bank took over all of Citibank's local clientele, while the U.S. bank retained control of Banco de Chile's operations on U.S. soil.
And where is Citigroup's home country regulator, the Federal Reserve?
January 25, 2010
With Geithner supposedly on the outs, and Bernanke facing more opposition -- though not enough -- in the Senate, it's not a happy time for the Federal Reserve right now.
January
18, 2010
As Obama's Bank Fees Under-Target Citigroup and AIG, Geithner;s Federal Reserve Days Questioned
By Matthew R. Lee
NEW YORK, January 14 -- The night before President Barack Obama was scheduled to unveil a scheme of fees on the three or four dozen largest financial firms, the Administration held a then embargoed conference call with the press.
Several questions centered around why the auto manufacturers which took TARP funds would not also be fined. Others wondered, if the fee regime yielded more than what the government and taxpayers lost through TARP before it expired in ten years, would the money still be collected and how would it be used?
The Administration representative, who the press was told could only be called a "senior administration official," replied that once the basis of calculating the fee had been decided on, car companies didn't fit it.
Before all questions were answered, the Administration signed off, noting that Obama would be making his announcement at 11:20 the next day. Among the questions not taken or answered was this, from Inner City Press: why assess all of the financial firms under the program at the same rate, fifteen basis points?
Citigroup,
for
example, received much more TARP and other payouts than other covered
banks. And as South Bronx based Fair Finance Watch and others showed
at the time, the government tried to help Citigroup scoop up
Wachovia, until another less subpsized offer won the day. Why benefit
Citigroup again by treating it like other, less subprime heavy banks?
The same holds for AIG.
The "senior Administration official" went out of his way to portray the program as a matter of principle for not only Obama but also "his" Treasury Secretary, Tim Geithner.
To some, the timing is meant to blunt renewed bipartisan criticism of Geithner, this time only only for not paying his taxes to the IRS -- which would be collecting the fees from the financial firms -- but for having told AIG not to disclose the preferential basis of the bailouts it was receiving, while he was at the Federal Reserve Bank of New York.
But
it was hard to
note that his seeming favorite, AIG, and the bank most benefited by
his Federal Reserve Bank of New York, Citigroup, are benefited by the
structure of this proposed Financial Crisis Responsibility Fee program.
In fact, some
say it has an aspect of a Tim Geithner bail out.
And that's... a question that should be asked, and answered. Watch this site.
January 11, 2010
So now for his work at the New York Fed, telling AIG to withhold information from the public, Geithner's on the grill. That's all to the good. But it also reflected on the wider Fed...
January 4, 2010
In the run up to
the Senate debate on Bernanke, see this
on mortgage(s) - click here.
December 28, 2009
While the Federal Reserve has yet to ask Goldman Sachs the questions it should, including as triggered by Inner City Press / Fair Finance Watch's comments on Goldman's application to acquire bank stakes, now the NY Banking Department will have a chance. Will the two coordinate? Watch this site.
December 21, 2009
So Bernanke passed, 16-7, the Senate Banking Committee, with further opposition pending in the full Senate in January.
December 14, 2009
The Federal Reserve has belatedly written to Inner City Press that "You previously submitted a FOIA request for the Goldman Sachs application. Additional information on the organizational chart has become available and is attached." We'll put the chart online here. We'll have more on this.
December 7, 2009
The holds placed in the Senate on President Obama's renomination of Ben Bernanke give more leverage to the move to audit the Federal Reserve.
November 30, 2009
Ben Bernanke has written that "the Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation." But what about the Fed's inattention to predatory lending and its role in TRIGGERING the crisis? The Fed's lack of scrutiny of the predatory lending and service issues raised against Goldman Sachs pending applications does not bode well.
November 23, 2009
The Federal Reserve Bank of New York, it turns out, is getting poorer or can't count. They claimed to have mailed a copy of Goldman Sachs' application to Inner City Press on November 3. But they did not arrive. When they did, it showed $7.30 of postage on November 3 -- then $1.15 extra on November 13, after the envelope had been returned to the Fed...
November 16, 2009
Ah, the arrogance of Goldman Sachs. Nearly a month after ICP Fair Finance Watch filed comments with the Federal Reserve, a response arrived from Goldman. They'd ignored the directions of how to send mail to Inner City Press, and hadn't bother to e-mail. And their response, while claiming that detailed reports of misdeeds, including by subsidiary Litton, by sample target Avenue Bank and in loans bought from Fremont are "replete with egregious mistakes and factual inaccuracies," does not identify a single error. They're just counting on the friendship or subservience of the Fed. Watch this space.
November 9, 2009
Long after Inner City Press filed comments and a FOIA request with the Federal Reserve on Goldman Sachs' application, it has yet to receive any responsive filing by Goldman. A Fed staffer called to say that the requested copy of the application was on its way, but it still has not arrived. Some process.
And under Dodd's proposed bill, what would happen to the Federal Reserve Banks?
November 2, 2009
Bank holding company CIT has declared bankruptcy. So what does being a BHC mean?
October 26, 2009
A week after Inner City Press' Fair Finance Watch filed a formal protest to Goldman Sachs' applications to the Federal Reserve for shares in several bank, and after the Fed has started the clock for Goldman's response, no defense has been offered.
October 19, 2009
Goldman Sachs was allowed to become a bank holding company without any public comment period or consideration of the Community Reinvestment Act, which would otherwise have been required. Since then, as simply one example, Goldman Sachs has been charged with involvement in predatory lending, including for the acts of its subprime servicing subsidiary, Litton Loan Servicing. Even Goldman's settlement left the public in the dark.
October 12, 2009
Hitting a new low, it took the Federal Reserve until September 30, 2009 to respond to Inner City Press / Fair Finance Watch's December 8, 2008 Freedom of Information Act request for the applications to become bank holding companies submitted by GMAC and the CIT Group. That's more than nine months, and even then, the Fed says it is withholding 182 pages. We will be appealing...
October 5, 2009
So one of the few proposed ways that the Fed might help CRA -- by taking on oversight power over large hedge funds, which would allow a related move to assess these funds under CRA -- Bernanke rejected last week in Q&A with Congress. Great...
September 28, 2009
As the legislation to require auditing of the Federal Reserve gather strength and supporters in Congress, the Fed sent its general council to argue that this type of accountability would just lead to higher rates. This sounds like JPMorgan Chase's argument when Georgia passed anti-predatory lending legislation...
September 21, 2009
Last week the Federal Reserve issued a letter saying it will belated begin examining non-bank subsidiaries like CitiFinancial. The Fed says in footnote one they have the legal authority to do these exams. Then why did they refuse to do them for so long? Iit's like the S&L regulator which stood by as the thrifts wasted taxpayer money -- at least its duty were passed along to the OTS.
On merger applications in the past, when community groups like ICP / Fair Finance Watch put in evidence of violations by bank's subsidiaries, the Fed would drop a footnote that the issues were being referred to the FTC and HUD -- implying that the Fed had no jurisdiction over them, certainly no commitment to do anything about them
The Fed says, "Supervisory activities will be planned based on the issues identified ...through the investigation of consumer complaints." So what has the Fed been doing to date with consumer complaints against non-bank BHC subsidiaries?
September 14, 2009
Fed Governor Tarullo on August 25 said, "there is a tendency in most organizations to fall into the habit of consulting with the same groups of actors each time a new issue arises." But look at the Fed's Community Advisory Council...
September 7, 2009
Having tangled repeatedly with the Federal Reserve about Freedom of Information Act compliance, we note Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595. Chief District Judge Loretta Preska of the SDNY wrote in a 47-page opinion, "The Board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed. Conjecture, without evidence of imminent harm, simply fails to meet the Board's burden." Preska concluded that the Fed "improperly withheld agency records in response to a FOIA request by conducting an inadequate search." Why are we not surprised?
August 31, 2009
President Obama's decision, announced from Martha's Vineyard, to re-nominate Ben Bernanke to chair the Federal Reserve represents even to some of Obama's most fervent supporters a sign that, at least on banks and the economy, his "Change We Can Believe In" may be no change at all. That Obama nominated and then stood behind the New York Fed's Tim Geithner, even after the public disclosure that the man he would put in charge of the Internal Revenue Service had himself neglected to pay his taxes, and even when caught only partially paid up, using the statute of limitations, these supporters excuse as a bittersweet decision made early on, when the economy was in crisis. That is no longer the case, according to Team Obama. So to give another term to the very same Fed chairman who presided over the predatory practices of Citigroup et al., and then bailed them and AIG out, can't be defended on crisis grounds. As we've noted, Bernanke's approach to the Community Reinvestment Act is that it needn't be enforced on mergers -- which is the law's only enforcement mechanism. This defanging of CRA is an idea that appears to be spreading. Watch this site.
August
24, 2009
Both Jackson Hole speeches put on the Fed's web site on August 21 cite Walter Bagehot ([1873] 1897), Lombard Street: A Description of the Money Market (New York: Charles Scribner's Sons)....
August 17, 2009
So now the Fed requests two reports from CIT. A little late, isn't it?
August 10, 2009
A telling omission? Gov. Tarullo's August 4 testimony did not mention the concept or even phrase "consumer" protection....
August
3, 2009
On July 31, Inner City Press asked the Western Hemisphere Division Chief of the International Monetary Fund Charles Kramer about disagreements inside the U.S. Federal Reserve:
Inner City Press: The President at the Philadelphia Federal Reserve said that he thinks that it will distract the Federal Reserve System to regulate hedge funds and other nonbanks that are called system, that it may not be a good idea. Do you have any view on that?
MR. KRAMER: Again, there are a lot of different ways to organize financial supervision and regulation. We agree that there are institutions like hedge funds or like insurance companies that can be systemic, and I would again call to the broad principle that all those system institutions need to be brought under strong supervision and regulation again just to contain the systemic risks that we can emanate from those types of institutions.
July 20, 2009
After the financial meltdown exposed the Federal Reserve's inattention to predatory lending and credit default swaps, one would expect the Fed to hold off further loosening the rules on CDS. But you'd be wrong. Last week the Fed granted an exemption to CDS dealer ICE Trust, owned by crisis loser Citigroup and predatory Goldman Sachs, among others, giving them an easier 20 percent capital treatment rather than the 100 percent applicable to uninsured banks like ICE Trust.
Bloomberg News,
notably, spun
the story the other way, claiming
that "the Federal Reserve determined that ICE Trust is as risky as any
insured bank, according to a letter posted July 14 on the regulator’s
Web site. The Fed is requiring that bank members of ICE Trust, such
as Goldman Sachs and New York-based Citigroup Inc., set aside the
same amount of capital as parties trading as federally-backed
lenders."
But this is a
story
yet again of the Fed making it easy for the dealer community-- the
dealers sought 0% so at least the Fed is imposing 20%. Those who
don't learn from the past are condemned to repeat it...
July 13, 2009
Last week Tim Geithner ham handedly telegraphed the re-appointment of Ben Bernanke at the Fed -- on a show whose poll had nearly all respondents saying that Geithner himself should go...
July 6, 2009
From the WSJ's account of Geithner's domination of the process to name his successor at the New York Fed, "The search to replace Mr. Geithner began immediately after he was tapped in late November to be Treasury secretary...By early January, the list was narrowed to six, including Kevin Warsh, a member of the Federal Reserve Board in Washington; Rodgin Cohen, who specialized in banking law at Sullivan & Cromwell LLC; and Mr. Dudley, who had been head of the New York Fed's markets division since 2007" -- and was at Goldman Sachs before that. Dudley was Geithner's choice. JPM Chase's Jaime Dimon, on the other hand, favored his lawyer Rodgin Cohen.
June 29, 2009
The June 25 hearings on Capitol Hill about the Federal Reserve's role in Bank of America's acquisition of Merrill Lynch don't auger well for Barack Obama to renominate Ben Bernanke as Fed chairman. Bernanke repeatedly said, I don't recollect that conversation. He was asked about statements by top Fed lawyer Scott Alvarez but dodged the repeated question, doesn't he work for you? He took at least some fire from the left as well as right. Even more shameful was the Fed giving away the store to GMAC, and now to PIMCO. Is this the change to be believed in?
The hearings also recounted how little confidence a Fed government had in Bank of America CFO Joe Price, who'd go on to throw the Community Reinvestment Act under the bus during the bank's April earnings call. His statements have yet to be unpacked. But Ken Lewis, and perhaps Bernanke himself, might want to start packing.
June
22, 2009 -- Obama's
Proposal By Splitting Community Reinvestment Act from Mergers Could Cut
Enforcement, Lost in (Fed) Sauce
Byline: Matthew R. Lee of Inner City Press: News Analysis
MILWAUKEE, June 17 -- The Obama administration's financial regulation proposal, on the issue of the Community Reinvestment Act, bears the fingerprints of the Federal Reserve, not only Tim Geithner but also Ben Bernanke. While quickly praised by, for example, Paul Krugman, since the proposal shifts CRA evaluation away from the regulators who review the mergers on which CRA is actually enforced, bankers will like it, and may be behind it.
CRA
is only
enforced in connection with banks' applications for regulatory
approval for mergers and expansions, as confirmed by the Department
of Justice Office of Legal Counsel. Without taking this into account,
the Obama administration is proposing that CRA be a core function of
the Consumer Financial Protection Agency, which will not be
responsible for merger review.
Had
this proposal been made under the
Bush administration, CRA advocates would have howled that it weakened
the CRA. Since it's Obama, the response appears generally to be,
let's wait and see.
But
not only did
Obama appoint and fight for Tim Geithner, who at the Federal Reserve
Bank of New York oversaw some of the most predatory moves by
Citigroup and others -- Obama also continues to praise Ben Bernanke.
In late 2008 at the Federal Reserve in Washington, Inner City
Press
asked Ben Bernanke about his decision to waive any CRA public comment
period when he allowed Goldman Sachs and Morgan Stanley to become
bank holding companies.
Bernanke
responded
that it makes no sense to limit CRA review to regulatory approval
time -- despite that being the only legal enforcement of CRA. Now
that thinking seems to have insidiously spread within the Obama
administration.
But who will
blow the whistle? Krugman for example takes
the proposal as a "poke in the eye to right-wingers."
To skeptics, it's a perfect post modern move: cheered by ideological
but ill-informed liberals, but actually serving big business.
Postscript
-- proponents of Obama's plan have noted that the CFSA would, among
other things, hold public hearings on (some?) mergers. But if the power
to approval or deny the mergers remains with the Federal Reserve, OCC
and FDIC, the CFSA could be just a side show. The Bank Holding Company
Act and Bank Merger Act would have to be amended -- first.
On the other hand, a portion of Obama's proposal, to declare
hedge
funds which pose systemic risk to be bank holding companies, could
easily be expanded to put just funds under the CRA. Whether this
happens, or for now is at least quickly proposed, may be a litmus test.
Watch this site.
June 15, 2009
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 notice...
July 23, 2007
Before the House of Representatives last week, Fed chairman Bernanke said:
"the recent rapid
expansion of the subprime market was clearly accompanied by
deterioration in underwriting standards and, in some cases, by abusive
lending practices and outright fraud.... Rising delinquencies and
foreclosures are creating personal, economic and social distress for
many homeowners and communities; problems that likely will get worse
before they get better. The Federal Reserve is responding to these
difficulties at both the national and the local levels.
"In coordination with other federal supervisory agencies,
we are encouraging the financial industry to work with borrowers to
arrange prudent loan modifications to avoid unnecessary
foreclosures. Federal Reserve banks around the country are
cooperating with community and industry groups that work directly with
borrowers who are having trouble meeting their mortgage obligations."
Meanwhile,
William Poole, president of the Federal Reserve Bank of St Louis, said
that poor decisions led to the losses and the funds that have suffered
losses got what they deserved. A number of hedge funds have suffered
significant losses, including Australian fund Basis Capital. Ben
Bernanke, chair of the Federal Reserve Board, warned that sub-prime
losses could increase to as much as $100 billion...
Bernanke also said the Fed is "conducting a top-to-bottom
review of possible actions we might take to help prevent recurrence of
these problems." An independent review, Volker-style, as they
say, should be conducted into how and why the Fed was so hands-off as
this happened....
July 16, 2007
Countdown on the Fed: Rep. Frank told Federal Reserve Board Governor Randall Kroszner at a committee hearing four weeks ago, "If the Fed doesn't start to use that authority to roll out the rules, then we'll give it to somebody who will." Now at the conference of the National Alliance to End Homelessness in Washington, Frank's said of the Fed, "If they haven't begun to spell out the rules under their authority, then we will take it away from them." Clear?
July 9, 2007
The Mortgage Bankers Association's SVP for president for government affairs and public policy last week said that the Fed has "been doing exactly what it should be doing." The mortgage bankers would say that...
This week, an ex-Fed regulator who monetize his expertise and access, first at Citi and now GE: "If it's now 2007 and the control failure occurred in 2005, 2004 ... is there going to be any value to law enforcement, any value to the government in finding things that happened two or three years ago and reporting it now?" The speaker of these words was identified by the American Banker newspaper as "Richard Small, the global anti-money-laundering leader at GE Money, the consumer and small-business financial services division of General Electric Co., and a former top anti-laundering official at Citigroup Inc. and the Federal Reserve Board, where he was a deputy associate director in the division of banking supervision."
Then again, the American Banker newspaper also has a revolving door. From North Carolina, Citi's live checks: "a 78-year-old resident of Carolina Spring Apartments received a notice in the mail... appeared to be a real check from CitiFinancial Auto Corporation in Irving, Texas, a company that lends money for car loans over the Internet. Rob Julavits, spokesman for CitiFinancial Auto, saw a copy of the check that the Carolina Spring resident received, and said it was a fake. 'It is not a legitimate CitiFinancial Auto check,' he said. 'We are looking into the matter.'" Whether the check was authentic or not does not answer whether CitiFinancial continuing to send live checks to senior citizens is legitimate. And Julavitz... used to report on Citigroup for the American Banker, until Citigroup hired him...
On the fortieth anniversary of FOIA implementation, a bill to restore some vitality to the law has been subject to a secret block -- by Arizona's Senator Kyle, media watcher can now report. For shame...
July 2, 2007
From Fed Governor Randall Kroszner: "The guidance on adjustable-rate mortgages underscores that the Federal Reserve and other banking regulators expect lenders to make sure subprime borrowers not only can afford their monthly payments while the introductory rate is in effect but also after the interest rate resets." We note that at the latest Fed Consumer Advisory Council, Bernanke skipped, while Kroszner attended. Meanwhile, Bernanke is slated for an "off the record" lunch at a wire service this coming week. Priorities, priorities...
Just after the Federal Reserve's rubber stamp approval, Mellon Bank has agreed to pay $16.5 million to the federal government to settle claims that it allowed overwhelmed employees to destroy thousands of federal tax returns and payments in 2001. Mellon had a contract with the Internal Revenue Service to process income tax returns and tax-payment checks. Mellon employees, feeling overworked and unable to meet deadlines imposed by the contract, destroyed more than 77,000 returns and checks totaling $1.3 billion ....
Treasury's Paulson defense last week of using the Federal Reserve System to get around the Patriot Act was that "in April, the Macanese made the decision to release the funds. The Treasury supported that as a way to move the six-party talks forward." Now the Government Accountability Office is going to evaluate whether the U.S. government ran afoul of its own anti-money-laundering rules. Paul Anderson, a spokesman for the GAO, said Congress's investigative arm will decide whether to proceed with an investigation within the next week to 10 days. Molly Millerwise, Treasury spokeswoman, said, "we appreciate Congress's interest in safeguarding the U.S. financial system from abuse. The transaction the U.S. government helped to facilitate is fully consistent with all applicable laws and regulations." We'll see...
June 25, 2007
At the Federal Reserve Bank of Cleveland, which has been protested, President Sandra Pianalto acknowledged that in "the fourth quarter of 2006, Ohio had the highest foreclosure rate of any state in the nation. We know that Cuyahoga County itself has been particularly hard hit. It is unfortunate that at a time when many people are rediscovering the hidden potential of our urban neighborhoods, the current trend in foreclosures might compromise some of the real progress that has been made." Then she said -- "Please understand that the Federal Reserve Banks are not rule-makers; that authority rests with the Board of Governors in Washington."
In Washington, the Chairman and a Governor made a point of sitting down with flown-in activists, but committing to nothing. "It's very politically savvy on the part of the Fed" to hold such a meeting, even mortgage industry analyst Howard Glaser questioned. "Whether it translates into action remains to be seen."
June 18, 2007
A new low for the Federal Reserve, it prosecutes money laundering while allegedly engaging in it, since unlike banks it is not subject the USA Patriot Act: " The decision to use the Federal Reserve Bank to return the [North Korean] money to the original account holders came after government lawyers concluded that the Federal Reserve was not subject to the same legal provisions as the commercial banks." LAT....
Fed Governor Randall Kroszner last week said the Fed was struggling to figure out "how we can help to weed out abuses while also preserving incentives for responsible lenders."
The Federal Reserve on June 14 hauled off and approved BONY - Mellon, saying in footnote 19 that ICP / Fair Finance Watch as
A commenter expressed concern about BONY’s relationships with unaffiliated third parties engaged in subprime lending. BONY has represented that it provides corporate trust and custody services relating to some issuances backed by subprime loans or involving issuers who originate or securitize subprime loans. BONY also indicated that it provides commercial credit to some originators of subprime mortgages. In addition, BONY noted that it acts as a swap counterparty in connection with some subprime loan securitization transactions and that its proprietary treasury portfolio, and some funds for which BONY acts as investment manager, include securities that may be partially backed by subprime assets. BONY has represented that it does not play any role in the lending practices or credit review processes of its customers who engage in subprime lending. The Board expects all banking organizations to conduct their operations in a safe and sound manner with adequate systems to manage operational, compliance, and reputational risk.
CRA staff at the Fed as of mid-Thursday afternoon didn't know the application was being approved. This implies that no in-person meeting was even held on this major merger -- just "notational" voting. What a joke...
June 11, 2007
Citigroup complains that in India it can only set up branches in Akola and Nanded in Maharashtra and Kurnool in Andhra Pradesh, and not in the metros or the big cities where it wants to expand its presence much faster. India had decided to block proposals for fresh licenses from American banks since the US has been sitting on applications submitted by State Bank of India, Bank of Baroda and ICICI Bank for many years. Live by the sword, die by the sword... US Trade Representative Susan Schwab promised that she would help the treasury department, the Federal Reserve and the Indian banks sit across the table and discuss the issue. Fed politics... Reportedly, the commerce ministry as well as RBI were against granting any concessions to US banks but it was the finance ministry which suggested that a different strategy could be tried and then leave it to the US to act. So the Fed operates for Citigroup, again...
We'll report on / from Fed's June 14 hearings...
June 4, 2007
The WSJ blogs that "Four of next year’s Federal Open Market Committee meetings will last two days instead of one, the newly released schedule shows. That’s the same as in 2007. Before Ben Bernanke became chairman, in 2006, it was rare for the Fed to have more than two such meetings per year....The continued use of two-day meetings could signify that debate will go on a while longer, or perhaps officials anticipate moving next year from releasing forecasts twice a year to three or four times, instead; that may require additional time to hash things out behind closed doors. Or maybe they just enjoy spending more time together."
Whatever the rationale, consumers and communities sure haven't benefited from Bernanke's increased meeting times. In fact, on merger reviews the Fed is going less...
May 28, 2007
Along with its bogus pronouncements about HOEPA and what it's done on subprime lending, the Federal Reserve appears to have in essence repealed or much limited the Community Reinvestment Act, most recently with regard to FDIC-insured institutions on Guam. Issues were timely raised to the Federal Reserve Bank of New York, on ANZ's application to a bank on Guam. In any other previous case, the comments would have been referred to the Board in Washington, which would have asked ANZ to answer questions and then weighed the answers. But in a break with precedent, another diss to CRA and consumer protection, now the FRBNY takes it on itself to approve such applications without even asking any questions.
Here's a sampling of what the Fed ignored:
Note that in New Zealand, ANZ and its subsidiary National Bank have when added together received the most consumer ombudsman complaints (259), see, New Zealand Press Association of November 29, 2006 --
"Commission chair Sir Ian Barker noted a recent review showed a ``worryingly high'' number of bank staff knew little or nothing about their own bank's complaints procedures. And more than half of bank branches in a recent survey did not display the Banking Ombudsman leaflet. He endorsed a key recommendation on accessibility by a former ombudsman, now Governor-General, Anand Satyanand, in his review of the 14-year-old scheme this year. Ms Brown said an increasing number of complaints were about consumer finance and Internet fraud or Internet banking."
See also, "Lenders warned on limits, "The Australian Financial Review, November 14, 2006. ANZ's record in New Zealand, Australia, American Samoa, Cook Islands, Fiji, Kiribati, New Caledonia, Papua New Guinea, Samoa, Solomon Islands, Vanuatu, Tonga and Timor Leste should be reviewed, including at a public hearing, as a predictor of the impacts ANZ would have on Guam if allowed to acquire CSB.
There are other questions, and not only related to the environment and weapons, see also, "Your loss not our problem, bank tells duped investor; ANZ Bank won't discuss 'personal matter,'" The National Business Review (New Zealand), September 16, 2005.
ANZ enables and finances Rimbunan Hijau, the Malaysian logging company implicated in the widespread destruction of tropical forests in Papua New Guinea and elsewhere. See, e.g., " ANZ linked to illegal logging," ABC Premium News (Australia), April 12, 2007.That is, the Fed ignored consumer protection as well as environmental / managerial issues. The regular-mailed May 18 letter of the FRBNY's Ivan J. Hurwitz says by rote that the Fed is not required to consider consumer protection or other issues outside of the United States. As one of the common sense rebuttals, what if an applicants consumer protection record where it does business, outside the U.S., is the only predictor of how it would run a bank in the U.S.? By this Fed logic, it would approve an application by an international loan shark to buy a bank in the U.S.. It is a new low for the Fed -- if the Board does nothing, the rot has re-spread to the top.
Fed governor nominee Elizabeth "Betsy" Duke listed major holdings of a previous employer, Wachovia Corp., in financial disclosure forms filed in conjunction with her nomination to join the Fed Board. According to the disclosure forms, released Friday by the Office of Government Ethics, Duke reported holdings of Wachovia stock valued at between $5,000,001 and $25 million. She also reported holding Wachovia stock options.
Note: mere divestiture would not cure this conflict...
May 21, 2007 --
NEW YORK, May 20 -- The newest nominee to the U.S. Federal Reserve Board, recently under fire for inaction leading to the subprime lending and foreclosure crisis, comes from a notorious subprime lender, Capital One.
Larry Allan Klane, whose nomination was announced on May 15, before that worked at Deutsche Bank, whose involvement with lenders sued for predatory lending such as New York's Delta Funding has like Capital One's record been an issue considered but not acted on by the Fed.
With Fed chairman Ben Bernanke alternately promising greater scrutiny of and calling for restraint in restricting the subprime lending field, there are serious questions raised by the nomination of a longtime subprime lender to the Board. Whether these questions will arise in or even derail Klane's consideration by the U.S. Senate remains to be seen.
The May 15 personnel announcement stated that "Mr. Klane currently serves as President of Global Financial Services of Capital One Financial Corporation. Prior to this, he served as Managing Director of Corporate Trust and Agency Services at Deutsche Bank / Bankers Trust."
The connection to Capital One, but not Deutsche Bank, was reported without comment in the Washington Post and financial news wire services. Even casual television watchers associate Capital One with advertisements featuring Nordic or medieval rampaging hordes along with the promise of no- to low-fee loans from Capital One, regardless of one's credit history.
Capital One has been sued for these ads, and for the underlying business practices, by the state attorneys general in at least West Virginia and Minnesota. According to staff involved in these cases, Capital One has managed to get records of other enforcement actions against it sealed, as if the cases had never existed.
Sometimes the traces of Capital One's cover-ups are still available. A filing obtained by Inner City Press from the West Virginia Supreme Court of Appeals, for example, recites that "on June 8, 2005, Capital One Bank filed an action... to seal all records, pleadings and matters in Civil Action Nos. 05-C-71 and 05-C-72 and to enjoin the Attorney General from issuing press releases or public disclosures regarding any matter relating to its litigation against Capital One Bank."
In fact, in March 2005 when Capital One announced a proposal to buy Hibernia National Bank in (pre-Katrina) New Orleans, public records of state anti-predatory lending enforcement actions against Capital One were raised, regarding West Virginia and elsewhere. Associated Press on March 10, 2005 reported that
"Capital One's troubling practices were reflected most recently in Minnesota Attorney General Mike Hatch's lawsuit against the company. In the suit, filed in December, Hatch said Capital One's ads indicate that interest rates on its 'No Hassle' credit cards would remain at 4.99 percent. However, he says many consumers wind up paying higher rates, and those who miss payments or exceed credit limits could see rates in excess of 25 percent. Capital One said it continues to work with Hatch's office."
A Louisiana business publication noted Capital One's same-day public relations action:
"Spokeswoman Tatiana Stead emailed an additional statement this afternoon in response to the Minnesota lawsuit against the company: 'Capital One has cooperated fully with the Attorney General’s investigation, and believes it has acted properly and in full compliance with the law. Capital One regrets that the Attorney General has chosen to proceed with this lawsuit, but intends to continue to work with the Attorney General’s office to address the issues raised.'"
Whether because of this "work with Hatch's office" or not, comment has not been able to be obtained from office since Klane's nomination. The West Virginia attorney general's office, however, has indicated shock that an executive vice president from Capital One would be nominated to a seat on the Federal Reserve Board, which along with setting interest rates is charged with consumer protection. From another state, a regulator explicitly concerned about retaliation called this a nomination of a fox to serve as a hen-house's overseer.
Mr. Klane involvement with Capital One has extended beyond high-rate credit cards. He was a point-name when Capital One in 2005 bought the subprime mortgage lender eSmartloan. See, e.g., Card Line of Dec. 17, 2004.
A review of the last publicly-available Home Mortgage Disclosure Act (HMDA) data including eSmart;oan's information found 144 super high cost loans subject to the Fed-implemented Home Ownership and Equity Protection Act -- loans at rates more than eight percent higher than prime -- and 2193 loans over the Fed-defined subprime rate spread, of three percent over prime. While a purpose of HMDA is to allow for fair lending assessment by including racial and ethnic data, these eSmart (now Capital One) subprime loans were all were reported, as to race, "Information Not Provided."
The same might be said of the announcement and reporting of Mr. Klane's nomination: relThe seriousness of Senators' and the financial press' recently claimed concern about the subprime lending crisis will be tested during the consideration of Mr. Klane's qualifications for serving on the Federal Reserve Board.
* * *
The Fed's chairman Ben Bernanke, in some places described as finally taking predatory lending seriously, was in fact dismissive in his May 17 Chicago Fed speech. ''We must be careful not to inadvertently suppress responsible lending or eliminate refinancing opportunities for subprime borrowers,'' he said, adding that the Fed -- or he -- sees ''no serious broader spillover.''
As we predicted last week, and will cover going forward, the predatory lending industry is spilling over into the Federal Reserve Board...
Meanwhile, the Bank of New York, enabler of predatory lenders, has been asked by the Federal Reserve about the scope of its subprime support, in response to ICP Fair Finance Watch's challenge the BONY - Mellon merger application. BONY responded, a month after the request -- and redacted even the number of subprime lenders it helps. Inner City Press has contested the redactions. We'll see.
May 14, 2007
Who will fill the two empty seats at the Fed? According to Dow Jones -- on which Murdoch's News Corp has bid -- under consideration is one Larry Klane, Capital One Financial Corp.'s president of global financial services since 2000 and previously worked at Deutsche Bank. Bad combo -- Capital One has been challenged by state attorneys general for credit card shenanigans, and Deutsche Bank, beyond its enabling and now direct role in predatory lending, last week admitted to its long-concealed role for the recently expired dictator Turkmenbashi. What are Mr. Klane's views on these matters, both of which have been and will be raised to the Fed? Would Klane recuse himself?
May 7, 2007
The Fed says it doesn't know what it can do under HOEPA, it doesn't know the extent of its jurisdiction. It never had such doubts when it allowed banks to get into securities, and then outright broke the Glass Steagall Act to benefit Citibank. The Fed only gets cautious when it's about consumers...
April 30, 2007
Look who's jumping in -- Edward Gramlich, Federal Reserve governor from 1997 to 2005 now identifies himself as author of the forthcoming book "Subprime Mortgages: America's Latest Boom and Bust." This in a Knight Ridder article that reports that "at least 21 non-bank lenders have filed for bankruptcy protection or shut down since early last year. And the stocks of investment banks with large subprime holdings, such as Merrill Lynch and HSBC, are taking a hit as mortgage defaults and foreclosures climb." Uh, HSBC is hardly an "investment" bank. And HSBC was the largest subprime lender in the U.S. in 2006. The article also ran as a correction: "A story on problems in the subprime mortgage market suggested that First Franklin Financial Corp. was not subject to federal regulation. Before its recent sale to Merrill Lynch, it belonged to National City, which as a nationally chartered bank was regulated by the Office of the Comptroller of the Currency." Who would have an interest in pointing this error out?
April 23, 2007
From the Federal Reserve Bank of NY, Inner City Press on April 21 received a copy of Bank of New York's heavily redacted application to acquire Mellon. BONY revised its still-too-extensive redactions to its application on April 16; ICP has a right to comment on this material. ICP contends that this proposed combination would be anti-competitive. BONY apparently disagreed, but the bases of its argument are still being hidden, with entire pages of its antitrust memo blacked-out. BONY repeatedly cites the case Inner City Press v. FRB, then redacts even portions of its argument. ICP has contested these redactions and withholdings, and requested an extension of the comment period until the information to which ICP and the public have a right is released.
April 16, 2007
Federal Reserve chairman Ben Bernanke spoke on Wednesday, April 11 at New York University, intoning that "market-based regulation has proven an effective supplement to (or substitute for) conventional command-and-control approaches." On the other hand, we're told that at the Gridiron Club event on the last day of March, Bernanke yawned and took his leave while Dick Cheney was speaking...
April 9, 2007
In a study of the just-obtained 2006 mortgage lending data, ICP & Fair Finance Watch have identified disparities by race and ethnicity in the higher-cost lending of some of the nation's largest banks. 2006 is the third year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens. Among other findings, Wells Fargo, 19.23% of whose 2006 mortgage were subprime, denied the applications of African Americans 1.72 times more frequently than whites, while denying those of Latinos 1.57 times more frequently than whites. Wells Fargo in 2006 made 889 super high-cost HOEPA loans.
Wells Fargo's response was to hide behind the Federal Reserve. "The Federal Reserve has repeatedly emphasized that the limited data analyzed in the report cannot support a conclusion that lending practices are discriminatory," a spokesman for Wells Fargo said. "Banks Prone to Sell Minorities Pricy Loans," Reuters / Washington Post
The Federal Reserve has also said that
”black and Hispanic borrowers taken together are much more likely than non-Hispanic white borrowers to obtain credit from institutions that report a higher incidence of higher-priced loans. On the one hand, this pattern may be benign and reflect a sorting of individuals into different market segments by their credit characteristics. On the other hand, it may be symptomatic of a more serious issue. Lenders that report a lower incidence of higher-priced products may be either less willing or less able to serve minority neighborhoods. More troubling, these patterns may stem, at least in part, from borrowers being steered to lenders or to loans that offer higher prices than the credit characteristics of these borrowers warrant. Reaching accurate determinations among these alternative possible outcomes is one goal of the supervision system."
What the Federal Reserve, which missed the foreseeable crisis in the subprime lending industry, hasn't yet disclosed is that these disparities are most stark at the largest conglomerate in the country, Citigroup, including in its headquarters city's lowest-income borough.
Where the rubber will meet the road will be in how the Federal Reserve and other agencies act on specific disparities at specific lenders, including as these are formally raised to them in timely comments on merger applications, Fair Finance Watch concludes.
April 2, 2007
Ben Bernanke and the CRA: Narrow views. Last week the Fed chairman said, "Some observers have suggested extending the CRA to nonbank providers, but this proposal neglects a fundamental premise of the CRA legislation - that banks incur special obligations in exchange for the advantages conferred by their charters, such as deposit insurance." He also said, "To date, defining 'local community' for the purposes of CRA assessment has been manageable as most banks still lend in local communities where they have deposit-taking facilities or branches. However, if these trends continue, defining a 'local community' may become increasingly difficult, and the concept eventually may require reconsideration by regulators or even the Congress."
So in Bernanke's view, the CRA must remain limited to its initial "premises," but to help the banks, the regulators or Congress should reconsider its initial focus. If it's Congress that considers it, they'd be free to change the premise too, and extend CRA to the non-bank providers...
March 26, 2007
To the Dodd hearing last week, the Federal Reserve sent regulator Roger T. Cole, who finally acknowledged that "we could have done more sooner," while making much of the less than a handful of actions the Fed has taken, including its $70 million fine of Citigroup in 2004. But again, why was Citigroup not invited by Senator Dodd? And as noted, the Federal Reserve bent logic to deem U.S. Bancorp's holding to be only 24.99 percent, in order to ignore New Century issues. Now the Fed is mumbling about the fundamental strength of the economy.
March 19, 2007
Fed chairman Ben Bernanke has weighed in on whether, as with mortgages, the racial demographics of small business lending should be reported. And his answer is: no...
On the hand, Inner City Press wishes to thank the Fed legal staffer who looked into whether Comerica will need to apply for any approvals to move its headquarters from Detroit to Dallas. Apparently, while such filings are required for national bank, they are not, for state banks which are members of the Federal Reserve System, under the Federal Reserve Act.
March 12, 2007
Federal Reserve Governor Randall Kroszner said last week that his own research about larger banks suggests that as a whole U.S. banks have managed to avoid conflicts of interest that could arise from relationships such as links between boards of directors.
Uh, heard of Citigroup's Sandy Weill and AT&T?
March 5, 2007
From a Ben Bernanke speech last week: " I have foreshadowed my conclusions." That the case with Federal Reserve reviews of protested merger in their approval orders, too...
From FinancialWire: "Bank of America Corp.'s $3.3 billion acquisition of Charles Schwab Corp.'s wealth management subsidiary U.S. Trust will take about three months longer to complete than originally estimated. Charles Schwab expects to close the all-cash sale early in the third quarter instead of the early second-quarter target established late last year when the stock brokerage announced the deal with Bank of America." So now there'd be no reason for the Fed to rush on BofA's application, including on 10% deposit cap issues....
February 26, 2007
Outgoing Fed governor Susan Bies, signer of numerous FOIA denial letters, gave a speech last week about mortgage lending abuse: "There's a real transaction-based mentality in the industry today that you didn't have 20 years ago," she said. "To make a decision faster, and try to get the customer to say yes to you before they go and shop anywhere else, they'll waive terms." Now you tell us...
February 19, 2007
The Fed on Friday spoke out against a devious CRA scam:
The Federal Reserve has received inquiries and complaints from recipients of direct mail solicitations that suggest there is a "Community Reinvestment Act (CRA) program" that entitles certain homeowners to cash grants or equity disbursements. Some of these solicitations may be read to indicate that the Federal Reserve endorses or supports the offers they contain. These solicitations appear to be a deceptive effort to encourage consumers to apply for a mortgage loan secured by the consumer's home. The Federal Reserve cautions the public about loan solicitations or other offers from lenders or mortgage brokers that offer consumers cash grants or equity disbursements as part of a "CRA Program." No such federal programs exist and these programs are not required by the CRA.
Actually, under the Fed, virtually nothing is required by the CRA...
February 12, 2007
Last week the Fed announced a new head for its Atlanta Reserve Bank. It's Dennis Lockhart, of whom the Fed said he "served as managing partner at the private equity firm Zephyr Management L.P., based in New York, and held various positions with Citicorp/Citibank, which is now Citigroup Inc." Great....
We can also report, only in skeletal form for now, that there has been a development in the litigation sparked by the Federal Reserve's withholding of information concerning Wachovia's subprime connections, and refusal to conduct a search of public records to make sure it is not withholding information that is otherwise publicly available. The Federal Reserve has agreed, at the federal District Court's suggestion, to reconsider whether it should have made the search (and in implication should conduct such searches in the future before issuing blanket denials of FOIA requests). The Fed has 20 working days to decide; we'll see.
February 5, 2007
We're told of a paper by the Federal Reserve Bank of San Francisco, arguing that credit card small business lenders should be included in bank merger antitrust analysis, so that even more mergers could be approved, without any divestitures. Already, the Fed defined geographic markets so broadly that the only market in which it has denied a merger in years was in rural Georgia. The 10% deposit cap, then, is needed because the Fed refuses to effectively apply antitrust to the banking field...
January 29, 2007
And now the payday lenders' trade association heaps praise on the Federal Reserve for lending its perceived legitimacy to the fringe financial industry, most recently in a report called "Defining and Detecting Predatory Lending," by Federal Reserve Bank of New York Research Officer Donald P. Morgan. CFSA quotes the Fed report that "the problem of high prices may reflect too few payday lenders, rather than too many." Just what we need -- MORE payday lenders. The Fed has hit a new low.
Inner City Press / Fair Finance Watch has filed with the Federal Reserve a timely challenge to Bank of America's application to acquire U.S. Trust, click here for Charlotte Observer article. Now what will the Fed do? We'll see.
January 14, 2007
The arrogance of PNC, which has proposed to buy Baltimore-based Mercantile, is striking. In response to the timely challenge ICP Fair Finance Watch filed with the Federal Reserve under a Community Reinvestment Act, PNC's "chief regulatory officer," John Wixted, just by a coincidence a former Federal Reserve official, responded as tersely and conclusorily as possible. The Federal Reserve asked such questions as, describe PNC's plans to merge Mercantile's 11 banks into PNC, and describe the due diligence performed -- a foreseeable questions, since as noted in the protest, Mercantile negligently leaked many consumers' personal information. PNC answered both: "PNC's response to this item is contained in the Confidential Supplement," and didn't send this portion to ICP Fair Finance Watch. Finally the Fed asked questions about fair lending, in response to which PNC writes that "In order to meet this requirement, PNC current intends to [ ]," with four lines then whited-out and withheld. The Federal Reserve is required to review the propriety of these absurd proposed withholdings. But PNC's secrecy and arrogance, along with its disparate lending record, bode badly for communities. Developing...
January 8, 2007
On PNC - Mercantile, the Federal Reserve Bank of Cleveland has confirmed receipt of the timely protest of Fair Finance Watch. We'll see.
January 1, 2007
The Federal Reserve set December 26 as the expiration of its comment period of the $6 billion proposed acquisition of Baltimore-based Mercantile by Riggs-heir PNC. As Fair Finance Watch has had concerns about both institutions, a comment was quickly prepared. When submitted by email, auto-responders came back from both Cleveland and DC: "out of office." But if the past is any guide, if the absurd deadline had been missed, the Fed would stand on "principle" and deem the comment untimely and not to be considered. In this case, it's timely, including that in the most recent year for which HMDA data is publicly available, 2005, PNC Bank in the Washington DC MSA, where it bought Riggs, denied the conventional home purchase mortgage applications of African Americans 3.78 times more frequently than whites. In Pittsburgh, PNC's headquarters, PNC Bank in 2005 denied the conventional home purchase mortgage applications of African Americans twice as frequently than whites. We're waiting for PNC's response.
December 25, 2006
The Federal Reserve makes announcements it doesn't want you to understand. For example last week it announced that it had terminated an enforcement action against Citigroup. But it didn't say what the enforcement action had been about, only the date on which it was entered. From you, only through research, you find "the Written Agreement follows a special review of transactions involving Citigroup and its subsidiaries and the Enron Corporation, Houston, Texas. The Written Agreement requires Citigroup on its own behalf and on behalf of its subsidiaries to continue to strengthen risk-management practices, particularly those associated with complex structured-finance transactions."
December 18, 2006
In the UK, "there has been a lot of fallout following the Financial Services Authority's statement that many brokers' sub-prime mortgage advertising is misleading clients... More than 200 brokers have been forced to withdraw or amend misleading sub-prime advertising."
Why doesn't the US Federal Reserve work on these issues, with even half the energy and independence?
December 4, 2006
Last week the Federal Reserve put on its Thrift Advisory Counsel the CEO of the nation's largest savings bank, Washington Mutual. Kerry Killinger is added to a group including representatives from American Express and ING. What is the purpose of the Thrift Advisory Counsel? If it's to get a view of savings (as opposed to commercial) banking views, why put on an European insurer like ING?
November 27, 2006
In the hoopla about Fed chairman Bernanke agreeing to ride shotgun with Hank Paulson on his trip to pressure Beijing, something missed was the Federal Reserve's duty to scrutinize the China moves of U.S.-based holding companies like BofA and Citigroup. For these, the Fed is home country supervisor. And yet there's no public scrutiny, and little at the Fed, of the deals these banks are making. Citi buying into Guangdong will have no comment period. The Fed will issue no order describing what it considered. Citi may give notice along after the fact. Will Ben Bernanke ask? We'll see.
November 20, 2006
Of the Federal Reserve System, what can be said? They're getting worse and worse, more open in their contempt for public comment. A recent example is the Federal Reserve Bank of New York's decision to disregard detailed comments about HSBC's predatory lending and alleged money laundering, for being a few days late. In fact, there was no way to know what HSBC's application to the Fed was about, until a copy of HSBC's related application to another agency came in. Meanwhile the Federal Reserve Bank of Atlanta tried to demand money for copy of the Regions - AmSouth application. And as set forth below, when the Fed does get paid, for HMDA data on disk, it takes more than a month to get it.
We've held off but now it must be said: the Federal Reserve is one of the worst order-processors in the United States. Last week when Inner City Press ordered up the HMDA data, it took the Fed weeks to send. This year, they sent the wrong year's data, then apologized, saying they'd Fed Ex the correct data the next day at their expense. This never happened, not even close.
Maybe *this* is why the Fed is so reluctant to criticize abuses of consumers by banks -- the Fed itself misserves consumers, with one of the few products it sells...
November 13, 2006
In Washington, the (CRA) talk is of oversight hearings, more likely in the House than Senate, on the agencies' non-enforcement of the Community Reinvestment Act and consumer protections. Examples given include last week's Federal Reserve approval of Capital One buying North Fork, in which the Fed's order ignores the Cap One predatory lending issues including not only in timely comments to the Fed, but even Business Week, in its November 6 expose. The Fed's rubber-stamp approval of the Regions - AmSouth merger, despite the banks' records in the Katrina Zone, is exhibit number two.
There is also the question of Dodd, Chris Dodd, and where he stands on consumer protection. He has spoken of credit cards, but less of insurance. In anti-predatory lending he has largest been unseen. Will Capital One, and the Fed's velvet glove treatment of Cap One's gouging of consumers, trigger some Dodd deeds? We'll see.
November 6, 2006
For those following the delay on the Capital One - North Fork deal, Business Week of Nov. 6 explains some of the issues, including that "according to Cap One's regulatory filings, 30% of its credit card loans are subprime. Representatives of 32 credit counseling agencies contacted by BusinessWeek say that Cap One has long stood out for the number of cards it's willing to give to subprime borrowers." As Fair Finance Watch raised in its comments to the Fed, " Last year, West Virginia Attorney General Darrell V. McGraw Jr. filed an action in state court seeking documents from Cap One related to its issuance of multiple cards, as well as other credit practices. Other than that, however, Cap One's practices do not appear to have drawn regulatory scrutiny. A spokesman for the Federal Reserve, Cap One's primary federal overseer, declined to comment about Cap One, but said that in general the regulator doesn't object to multiple cards."
Increasingly typical, that the Fed would try to provide comfort to a predator...
October 30, 2006
Fed governor Susan Bies last week at the agency's Consumer Advisory Board -- fewer than one half of whose members are consumer advocates -- promised those present that the Fed will "reconsider" its guidance on exotic mortgages, issued only last months. "We will go through a process to clarify exactly what the terms are, what the scope is," she said, adding that the Fed's lawyers "have heard from some of the folks ... Apparently we do need to make some technical corrections to make this more 'principle' based as opposed to 'detail' based." Sort of like the Fed's recent merger approval orders -- why get bogged down in the detail of lending disparities and even adverse CRA sub-ratings, when the Fed can recite generalities and then approve a merger? And the mysterious limbo of Capital One - North Fork continues...
October 23, 2006
The Fed on Friday hauled off and approved Regions - AmSouth. Of CRA the Fed said:
"Several commenters expressed concern about the less-than-satisfactory ratings the bank received for its CRA performance in some of its assessment areas. The bank received an overall rating of 'needs to improve' in the Chattanooga multistate metropolitan area, and received 'low satisfactory' ratings under the lending test for Louisiana and the Augusta and Texarkana multistate metropolitan areas. In each of these assessment areas, examiners noted that there are a relatively high proportion of families below the poverty level and that these families may not qualify for residential real estate loans because of their lower capacity for debt repayment. Examiners indicated that these conditions may have hindered the bank's efforts to lend to LMI individuals in these assessment areas. The bank received higher ratings under the lending and other tests in other areas, and examiners concluded that the bank’s record of CRA performance during the review period, when viewed as whole, merited a rating of 'satisfactory.'"
How nice, to explain away even adverse CRA sub-ratings. Meanwhile inquiring minds increasingly wonder what is up with Capital One - North Fork...
October 16, 2006
Last week the Federal Reserve handed an approval to National City to buy Harbor Federal, noting "that on September 5, 2006, National City signed an agreement to sell its principal subsidiary that originates subprime mortgage loans, First Franklin Financial Corporation to Merrill Lynch & Co., and also announced its intention to sell to Merrill Lynch $5.6 billion of loans originated by First Franklin." Of course, the Fed won't be reviewing that transaction...
October 9, 2006
Becoming evermore perfunctory, the Federal Reserve on September 19 asked Wachovia to "discuss the extent of any subprime loans in the World Savings Bank loan portfolio." Wachovia's Courtney D. Allison's misleading answer, dated September 25 but mailed only days later to Inner City Press, was received after the Fed had approved the merger, and it had been consummated...
Similarly, in an email of September 26 to National City that was not cc-ed to Fair Finance Watch, the Fed has apparently asked questions about Harbor Florida Bankshares' appraisal company, with an eye toward allowing National City to continue in the business. Since the Fed in violation of its own rules on ex parte communications didn't send Inner City Press a copy of the questions it posed to National City, and Nat City's curt answer didn't repeat the questions, there's no way to know...
October 2, 2006
The Federal Reserve's approval on Sept. 25 of Wachovia - Golden West reaches new loans. The Fed writes for example that ICP Fair Finance Watch
"also alleged that World Savings directs customers to low- or no-documentation loan products as a means to exaggerate the customer’s income and places the customers in loan products that exceed their ability to repay, which ultimately results in foreclosures. According to information provided by Wachovia and Golden West, World Savings requires low- or no-documentation on 90 percent of the loan applications it processes and uses the same underwriting standards for all applications."
But ICP Fair Finance Watch pointed out that this absurd level of no- and low-doc lending results in forced sales of homes, not foreclosures. The Fed recites that ICP Fair Finance Watch
"expressed concern about Wachovia’s relationships with unaffiliated pawn shops and other nontraditional providers of financial services. As a general matter, the activities of the consumer finance businesses identified by the commenter are permissible, and the businesses are licensed by the states in which they operate when so required. Wachovia stated that it makes loans to these types of nontraditional providers under terms, circumstances, and due-diligence procedures that are more stringent than those it applies to other borrowers."
But again the information was withheld. The Fed gives weight to
"more than 200 comments supporting the proposed transaction. These commenters stated that Wachovia and Golden West have been responsive to the needs of their communities through innovative mortgage products designed for LMI borrowers and have provided significant financial, technical, and personnel support for community development projects."
None of these were sent to Inner City Press, despite its timely challenge to the deal.
September 25, 2006
The Federal Reserve, which despite its own internal rules no longer sends commenters a copy of its letters to banks requesting additional information on protested application, does still suggest to banks that they send copies of their responses to the commenters. And so last week National City Corporation's terse answer to the Fed's September 8 questions -- which are not reproduced in Nat City's answer -- arrived, in connection with the challenge of Fair Finance Watch of Nat City's proposal to acquire Harbor Florida Bankshares. The response included Cincinnati foreclosure data, 2004 and 2005:
"For the year 2005, National City has sixty-seven (67) mortgage loan foreclosures in Hamilton County, Ohio with sixty-six (66) of those foreclosures being within the City of Cincinnati. Therefore, for 2004, the number of National City foreclosures in Hamilton County amounted to 1.11% of the total of National City's loans in that County, and 1.16% of the total number of National City loans in Cincinnati. For the year 2005, National City has eighty-nine (89) mortgage loan foreclosures in Hamilton County, Ohio with eighty-four (84) of those foreclosures being within the City of Cincinnati. Therefore, for 2005, the number of National City foreclosures in Hamilton County amounted to 1.21% of the total of National City's loans in that County, and 1.24% of the total number of National City loans in Cincinnati."
As it is clear, the foreclosure trend is up...
September 18, 2006
From the Sept. 11 speech of the Boston Fed's Cathy Minehan to the National Association of Business Economists"
"In our estimation, the run-up in housing values over the past several years did not spur much of a bigger-than-expected increase in consumer spending - if anything, the response was a bit on the low side compared to the historical average. So we wonder about how large a spending effect one should expect to accompany a fall in housing prices, if that were to occur. Clearly mortgage equity withdrawals have been sizable during the housing 'boom,' but many of these withdrawals were used to reduce other forms of consumer debt and to make one-time improvements in the housing stock. Indeed, as a result, overall household balance sheets today continue to look fairly strong. That is not to say, however, that rising mortgage interest rates are not negatively affecting borrowers. It also does not mean that new types of mortgages won't contain more than a few nasty surprises. Of particular concern are sub-prime borrowers and perhaps some depository institutions specializing in subprime lending."
Then why has there been virtually NO inquiry by the Fed into Regions Financial's subprime lending, which makes up seventy-some percent of all its mortgages to African Americans? And why is the Fed withholding virtually all antitrust information from Regions on AmSouth? The Fed continues hitting new lows...
September 11, 2006
Welcome to the world of the lawless. Last week's Federal Reserve order on Credit Agricole, Boetie, et al., recites in footnote 12 that ICP Fair Finance Watch
"asserted that Boetie violated the BHC Act by acquiring the voting shares of Credit Agricole before submitting the proposal to the Board for approval. In addition, the commenter complained that Boetie and Credit Agricole violated the BHC Act through the acquisition of all the shares of Credit Lyonnais in 2003 without the Board’s prior approval for the acquisition of Credit Lyonnais’s nonbanking operations. The commenter asserted that the Board lacked authority to waive the BHC Act’s application filing requirements with respect to such transactions and inappropriately shielded such transactions from comment. As noted above, Boetie and Credit Agricole have operated the U.S. subsidiaries under the temporary authority granted by the Board under section 4(c)(9) of the BHC Act, which does not provide for public notice."
So the Fed says it can grant temporary approvals to transactions without even telling the public... The next footnote, 13, is on money laundering, that FFW
"cited various news and congressional reports from 2003 through 2005 regarding allegations that ES Bank concealed assets and money laundering in connection with accounts held for the benefit of certain international individuals, including former Chilean President Augusto Pinochet."
What a generous description, "international individuals." And how kind the Fed is to Espiritu Santo Bank, of which FFW
" questioned the veracity of ES Bank’s reporting of no denials of home mortgage applications in 2001 and 2002 and generally alleged that the bank prescreened its home mortgage applications. Specifically, the commenter contended that ES Bank violated HMDA by not accurately reporting its home mortgage applications and violated the Equal Credit Opportunity Act (“ECOA”) (15 U.S.C. § 1691 et seq.) by not providing adverse action notices when required. ES Bank has represented that it reported no denials because it is a wholesale bank engaged primarily in international private banking and that its residential mortgages are generally extended as an accommodation to private banking customers where a mortgage loan approval would be expected. The commenter also questioned ES Bank’s characterization of loans generated by brokers as accommodation loans. Applicants represented that ES Bank began using two licensed mortgage brokers in 2001 in an effort to increase its loan portfolio during a period when internal referrals had slowed. Applicants also represented that ES Bank’s brokers referred a small number of mortgage loans to the bank in 2005."
In footnote 16, the Fed doesn't even bother spelling correctly, writing that FFW
"alleged Credit Agricole and Credit Lyonnais are signatories to international human rights and environmental agreements and that the organizations have exhibited a lack of envirnonmental and human rights standards."
Much care went into this Order, it's clear...
September 4, 2006
Will the Federal Reserve take note, while it considers Wachovia's application to buy Golden West, of Money Marketing of August 31, reporting that Wachovia will specifically target the sub-prime and non-conforming home loan sector via intermediaries, adding to the commercial mortgage operation it is building. A spokesman says: "We will be looking at mortgages, sub- prime, non-conforming as well as consumer loans and credit cards." If only Wachovia were nearly as honest in the USA, or in the portions of its filings with the Fed that get provided to commenters like Fair Finance Watch...
August 28, 2006
In the run-up to the Federal Reserve's spin of the 2005 Home Mortgage Disclosure Act data, Inner City Press can this week report on the Fed's partial Freedom of Information Act response to its request for all records concerning the Fed's list of lenders with disparate 2004 HMDA data. The Fed withheld "five linear feet of documents," and has so far sent only a fax of parts of a single document, the required mailed copy of which Inner City Press is awaiting in order to file its FOIA appeal. (The Fed is far behind in its FOIA responses, then because sending garbled faxes which do not comply with the regulation.) This particular fax, which the Fed's cover letter describes as "a description of the methodology used in generating the HMDA lenders list," is in fact a manual directed at the Fed's examination staff. It states that
"The purpose of the Federal Reserve's matched-pair analysis is to compute lender-specific racial or gender disparities in denial rates, high rate pricing incidences and average APR spreads for loans above the threshold controlling for other factors including, market, income and loan amount. Each minority (or female) is matched to as many non-minority (or male) applicants (or borrowers) as meet the matching criteria. The outcomes of the minority (female) is compared with the average outcome of the non-minority (males) matched to it. The difference is the individual minority's (female's) 'matched pair disparity.' The disparities of all matches minorities (females) are averaged by product area or for sub areas such as MSAs...
"Optionally, the matched pair procedures can be used to test for 'steering' within an organization such as a holding company. The outcome variable is the selection of a particular subsidiary of an organization (say a subprime lender) over another (say a prime lender) and the analysis tests whether this choice is related to the race of gender controlling for other factors including, market, income and loan amount. The user needs to specify how to classify lenders into the 'subprime' and 'prime' groups."
While Inner City Press will have more once it receives the required mailed version of this document, we now we note Citigroup's recent announcement that it will merge its subprime CitiFinancial into its mostly-prime CitiMortgage, thereby evading this "optional" steering analysis....
On Regions - AmSouth, the sleazing has begun. Regions has provided Fair Finance Watch with a copy of a CRA submission, with the names of all groups it funds blacked out. Meanwhile Regions solicits letters of support from such groups. Separately, Regions writes to thank such groups, starting "Thank you for taking the time to write a letter of support for the application by Regions Financial Corporation to merge with AmSouth Bancorporation... We at Regions very much appreciate your positive attitude toward our organization." But the identity of funded groups must be unmasked to weigh their testimony. Developing...
August 21, 2006
The Federal Reserve has received, via Wachovia, a response from World Savings to comments FFW filed "with respect to World's Quick Qualifier (QQ) loan process." The purported response states that under World's QQ, "the customer may specify his or her income without necessarily having to pull together the documentation traditionally associated with the mortgage loan application process."
Yeah -- like a form W-2...
The letter continues that "turning to the specific questions asked by FFW in its letter, we are glad to provide the following information. FFW first asked what percentage of World's loans are QQ loans. To date in 2006, approximately 94% of World's loan originations have been submitted as QQ loans... FFW questions why World would allow a loan applicant who can produce a W-2 for earned wages to apply on a QQ basis." Yes, FFW is asking that -- as the Federal Reserve should. Developing....
August 14, 2006
Hitting a new low, the Federal Reserve on August 11 telephone Fair Finance Watch for the second time denying any extension of that day's expiration of the comment period on Wachovia's application to acquire Golden West. Then at 5:36 p.m. on August 11, the Federal Reserve faxed FFW documents responsive to its FOIA request of July 16, including various support letters that Wachovia solicited. A new low...
August 7, 2006
A specific indication of the Federal Reserve's lackadaisical approach to enforcing even the antitrust laws is to be found in Florida in the Punta Gorda market. As presented by the Sarasota Herald-Tribune in a July 31 report on Fair Finance Watch's opposition to Wachovia's application to acquire Golden West, the group also notes the bank will wind up with an 'anti-competitive' market share in Charlotte. As of Dec. 31, Wachovia's 11 branches held $763.8 million in deposits in Charlotte, a 22.17 percent market share. Adding World's single office and $184 million in deposits in Punta Gorda would boost its market share to 27.51 percent.... Wachovia isn't even the largest bank in Charlotte County right now. Bank of America's seven branches held $775.9 million in deposits, a 22.52 percent market share, as of Dec. 31." Talk about duopoly...
July 31, 2006
The Fed's FOIA sleaze continues. Responding to Inner City Press' complaint last week that, after for years granting ICP a FOIA fee waiver, as all other bank regulatory agencies do, the Fed suddenly responded with a letter that fees are expected -- this in the midst of ICP's Wachovia FOIA litigation against the Fed, and the Fed having delayed six to eight months on ICP's subsequent FOIA requests. Last week the Fed provided a slightly amended acknowledgement letter, not granting the always-previously-granted fee waiver, but rather stating:
This will acknowledge receipt of your letter dated 7/16/2006, and received by the Board on 7/17/2006, in which you request, pursuant to the [FOIA] records pertaining to the application by Wachovia Corporation to acquire Golden West and thereby indirectly acquire the voting shares of World Savings... unless a request for a fee waiver is granted, this letter also confirms our assumption that you will pay all fees incurred in the processing of your request. The Board makes every effort to fulfill requests in a timely manner; however, there may be delays in fulfilling complex requests or those that require consultation. Please feel free to contact the Board's FOIA Requester Service Center at (202) 452-3684 to obtain information about the status of your FOIA request.
Well, given how many of Inner City Press' FOIA requests have been delayed six to eight months, that newly provided phone number must be busy...
July 24, 2006
Hitting yet another new low, the Federal Reserve last week after for years granting Inner City Press / Fair Finance Watch fees waivers under FOIA, tried to charge fees, even for processing requests. Substantively, ICP has contested the withholding of the exhibits Wachovia has unilaterally deemed "confidential," and continues to await the other records responsive to the July 16, 2006, FOIA request. The Board's response states that it "confirms our understanding that you will pay all fees incurred in the processing of your request." The FRB has granted ICP and its affiliates fee waivers for years. An observer, a court, even the Department of Justice, could easily surmise that the FRB's attempt to impose fees is no more than retaliation for having dared to challenge in the Federal District Court for the Southern District of New York the FRB's withholding of Wachovia's subprime lending information. Ever since that case was filed, the FRB has begun delaying up to eight months on FOIA requests, and now seeks to impose fees. We'll see.
July 17, 2006
The Federal Reserve, which has spent many hours of legal work trying to withhold information about Wachovia's assistance to subprime lenders, now has before it an application by Wachovia to acquire Golden West and World Savings. Inner City Press / Fair Finance Watch has submitted a FOIA request which "includes a complete copy of the application, it also includes all other communications and records during the time frame that relate to the issues, including managerial issues, that the FRB must consider in connection with the application. We specifically refer to Wachovia's engagement with subprime lenders, regarding which the Federal Reserve has previously withheld information from Inner City Press, giving rise to FOIA litigation, a partial chiding of the FRB by District Court Judge Cote, and the recently-heard appeal in the Second Circuit. We note as part of this request the arguments in the FRB reply brief in that case is that Wachovia's provision of a list of the subprime lenders it assists was "voluntary" because Wachovia submitted it early in the process. The FRB acknowledges that in cases "prior to Wachovia" SouthTrust, it asked for the names of subprime lenders assisted, but that Wachovia include this in its application, making it voluntary. That sleight of hand cannot legitimately be used to evade FOIA."
July 10, 2006
Seven months ago, Inner City Press submitted to the Federal Reserve Board a Freedom of Information Act request, for records "regarding the Federal Reserve System having compiled a list of lenders with disparate 2004 Home Mortgage Disclosure Act data and transmitting such lists beyond the FRS."
Under the Freedom of Information Act, the Fed is supposed to provide records within twenty business day. But with a single letter six months ago, the Fed unilaterally extended its time to respond. Now, as it prepares its required annual FOIA report to the Department of Justice, the Fed begrudgingly sends a second letter, which states that "approximately five linear feet of documents will be withheld from you... no reasonably segregable nonexempt information was found."
An appeal will follow... Also last week, Synovus' Columbus Bank & Trust along with CompuCredit were forced to pay $11 million in restitution to residents of New York State for failing to disclose activation fees of up to $179 on Aspire Visa cards. Inner City Press has raised Synovus' consumer abuse to the Federal Reserve a number of times in recent years. Now what will the Fed do?
July 3, 2006
This now from the Fed, dated the 21st of June: "This is in response to your letter, dated and received by the Board's Freedom of Information office on October 3, 2005... In an October 20, 2005, telephone conversation with Ms. Alison Thro of the Board's Legal Division, you clarified..."
Why then did it take EIGHT MONTHS to act on Inner City Press' clarified and narrowed request? And what will DOJ say?
Given the disparities in Citigroup's 2005 HMDA data, the Federal Reserve's wordless lifting of its 2004 cease-and-desist predatory lending order against CitiFinancial is shameful. So too was Citigroup's meeting with the Office of Management and Budget in June, to lobby about Basel II...
June 26, 2006
In the Second Circuit Court of Appeals on June 22, thee Federal Reserve lawyers appeared, to defend the Fed's withholding despite Inner City Press' Freedom of Information Act request a list of subprime lenders assisted by Wachovia. Since the arguments on both sides involved whether the names on the list are "otherwise publicly available" in SEC documents, the Fed was asked who thought of checking the SEC database. Rather than acknowledge that the issue was raised in ICP's comments on the Wachovia - Southtrust merger, the Fed's lawyer claimed that the District Court judge in the subsequent FOIA case thought it up. But that wasn't true....
Inner City Press has been informed that the Federal Reserve's long-time fair lending guru Robert Cook now works at and for Countrywide, which has the subprime unit Full Spectrum. When Inner City Press asked about anti-revolving door provisions, noting that even the OCC prohibits a bank's examiner from going to work for the bank for a year after leaving the OCC, it was noted that Mr. Cook recently attended a Federal Reserve meeting with and for Countrywide. That is to say, he appeared, quite literally, for Countrywide, which was and is a bank holding company regulated by the Fed...
June 19, 2006
The Federal Reserve hits new lows daily. Last week we reported that the Fed has for months stopped responding to Freedom of Information Act requests, including a request Inner City Press filed months ago about the Fed's actions (or inaction) on disparities in the 2004 Home Mortgage Disclosure Act data.
Now the Fed is turning a blind eye to glaring disparities in the 2005 data. For example, in its BB&T Order last week, the Fed ignores the issues raised about BB&T's refers-down to its subprime unit Lendmark. BB&T's response to Inner City Press / Fair Finance Watch's comments included the volume of loans referred up in 2005, but no such figure for referrals-down. Nor did the Fed request it. Despite the speechmaking about HMDA data, the Fed is hitting new lows daily.
And this coming week, on June 22, the Fed will be in the Second Circuit Court of Appeals in New York, on the cross-appeals concerning the Fed's withholding of the names of subprime lenders assisted by Wachovia and SouthTrust. While the case has been pending, the Fed has stopped responding to ICP's FOIA requests, and has stopped asking application for the names of the subprime lenders they assist. Like we said, the Fed is hitting new lows daily...
June 12, 2006
From Inner City Press / Fair Finance Watch's just-filed comment to the Federal Reserve just after receiving from the FDIC a copy of HSBC's related tax Refund Anticipation Loan (RAL) application, which ICP timely requested: Note for the record on this request that ICP made its FOIA request for the application to the FDIC and not the FRB because the FRB has allowed fully 22 FOIA request from ICP to remaining pending, some for over eight months -- ICP recently waived and limited some, to get at least some documents -- in the interim, ICP directs its FOIA request to other, non-FRS agencies -- for shame...
June 5, 2006
Among the slipperier of the Fed's arguments in its reply brief in the ICP v. FRB Second Circuit FOIA case is that Wachovia's provision of a list of the subprime lenders it assists was "voluntary" because Wachovia submitted it early in the process. The Fed acknowledges that in cases "prior to Wachovia" SouthTrust, it asked for the names of subprime lenders assisted, but that Wachovia include this in its application, making it voluntary. What's worse, the Fed since the District Court decision no longer asks for any names. So secretive it has stopped regulating (at least on this point).
The Fed also complains that neither it nor applicants should have to make sure that withheld information is not otherwise publicly available, that it should fall to requesters to show that names they have not seen are, in fact, publicly available. Too much burden for a multi-billion dollar bank to certify that the information it is trying to withhold is not contained in its own SEC filings...
May 29, 2006
In the Fed's Santander-Sovereign rubber stamp last week, this, from footnote 30: ICP "expressed concerns about Santander’s acquisition of Island Finance Puerto Rico Inc. ("Island Finance"), an entity engaged in subprime lending. As a general matter, the activities of the consumer finance business identified by the commenter are permissible and the commenter did not provide evidence that Santander or Island Finance had originated, purchased, or securitized "predatory" loans or otherwise engaged in abusive lending practices." Hmm -- what ICP raised what Island Finance's practice of charging 25% on consumer loans, targeted at Latinos, without even checking people's credit histories. If that's not predatory, what is?
The Fed also recites that ICP "expressed concern about Santander’s ability to share information for purposes of complying with applicable U.S. anti-money laundering laws." The reference here is to the fact that Santander refused to disclose, even to its own US affiliates, the owner of accounts into which money was wired (as described in Senate's Riggs report, the owner was the dictator of Equatorial Guinea). So how can the Fed go on to "note[] that Santander has committed to make available to the Board information on the operations of Santander and any of its affiliates that the Board deems necessary to determine and enforce compliance with applicable laws"? Does that mean that the Fed endorses the type of no-name offshore wiring (that is, money laundering) as is described in the Senate's Riggs report? We'll see...
May 22, 2006
A deafening no-comment, and lack of action by the Fed -- following the Wall Street Journal's May 11 article on the continuing investigation into the billions looted from Nigeria by ex-dictator Sani Abacha, which named as a conduit for Abacha's Transnational Bank's nostro accounts Citigroup and only one other institution (Deutsche Bank), nothing said by Citigroup, or the Fed...
While the Federal Reserve fights on appeal to keep confidential the list it has of subprime lenders helped by Wachovia, on March 24, 2006, subprime lender NovaStar simultaneously announced the purchase of a $940 million pool of payment option adjustable rate mortgages, and plans to structure its first securitization of the year as an on-balance sheet transaction. The $1.35 billion on-balance sheet deal closed April 28, led by Wachovia Securities -- enabler of predatory lending, as is coming to a head in the FOIA litigation now in the 2d Circuit Court of Appeals in New York...
A non-bank deal we see as significant was last week's announcement by Deutsche Bank that it intends to acquire California-based subprime mortgage lender Chapel Funding LLC. The idea is to cut out the middle man. The head of Deutsche Bank's Global Markets Americas unit, Phil Weingord, said that "the integration of a mortgage originator will provide significant competitive advantages, such as access to a steady source of product." Deutsche Bank is not only a trustee on subprime loans, it is also a securitizer. It has begun subprime lending in the United Kingdom, and last December bought a mortgage lender in Mexico, to securitize. And what is the Federal Reserve doing to review these moves? Nothing, that we can see...
And here's a development -- on Credit Agricole SAS Rue La Boetie, on which ICP commented long ago, finally the Fed has asked questions, about the glaring lack of denials in the lending of Espiritu Santo Bank. Credit Agricole (under a Caylon cover letter) tried to claim that the borrowers are "mostly" individuals with a Private Banking relationship with ESB. But in one of the years reviewed, non-clients were 75% of the borrowers. Something's fishy (and not only on this) -- we'll see what the Fed does.
May 15, 2006
For the attention of the Federal Reserve, which has given its rubber stamp approval to the anti-money laundering regime in Japan, despite scandal after scandal, including that involving Citigroup -- Regarding money laundering in Japan: "Banker off hook in loan shark money-laundering," blared The Japan Times on March 23. The Yomiuri Shimbun chimed in with "Court ruling could make Japan a money-laundering haven", questioning the Tokyo District Court ruling that experts say undermines claims that Japan is making progress on due diligence compliance. The case behind the headlines involved Susumu Kajiyama - the "loan-shark king" of the Yamaguchi-gumi underworld group - hiding $659.47 million raised from loaning money at illegally high interest rates. The funds were transferred to accounts opened at Credit Suisse in May 2003, in transactions completed by Atsushi Doden, an employee of the Hong Kong branch. A report on the transfer led to Kajiyama being sentenced to 61/2 years in prison in November. The judge ruled on March 22 that "reasonable doubt" existed that Doden knew the money was profits from criminal activities and that testimony from another gangster about a conspiracy with Doden was not trustworthy. Observers are quoted in the SCMN that while "suspicious transaction reports" are being filed, but that those identified by Japanese watchdog Financial Intelligence Unit as requiring further investigation by the National Police Agency cannot all be examined adequately. In 2005, there were 98,935 STRs filed by financial institutions in Japan, of which 66,812 were referred to the police for investigation. In 2003, the number of STRs stood at 43,768 and, in 1998, just 13 such reports showed up on the authorities' radar. The FIU still employs only about 20 staff, including financial intelligence analysts examining suspicious transactions. Japan's anti-money laundering regime is covered by The Law Concerning Confirmation of Client Identity of Fiscal Institutions, The Organized Crime Punishment Law and The Foreign Exchange and Foreign Trade Law. These laws have remained substantially unchanged over the past two years, despite the scandals, including the one involving Citigroup. Good place to launder -- will the Federal Reserve reconsider its FBSEA rubber stamp? We'll see.
Inner City Press / Fair Finance Watch has filed its reply brief in the ongoing case about the Federal Reserve's withholding of information about the subprime lenders enabled by Wachovia. The Fed's arguments have been shifting; we'll see what they say at oral argument next month. Developing...
May 8, 2006
In a May 3 letter faxed to Inner City Press, the Federal Reserve states that "under the terms of the proposal, JPMC is to sell its corporate trust assets to BNY, and BNY is to sell its retail and middle-market banking business to JPMC... prior approval of the Federal Reserve System is not required to effect the proposal. The FRS therefore does not expect to receive any application in connection with the proposed transactions."
This is the same Federal Reserve which just found Bank of New York money laundering for the second time... And what will the Fed do on this -- on May 2, BofA announced a proposal to acquire a $2.2 billion stake in Banco Itau through an asset-swap, which would involve Itau taking control of BofA's BankBoston unit in Brazil, which has about 140 offices and $9 billion of assets under management. Itau has also been given exclusive rights to buy subsidiaries of BankBoston in Chile and Uruguay. For a U.S.-based holding company to buy such a stake in a bank in another country -- does the Fed even review these acquisitions?
May 1, 2006
Here's a variation on the revolving door -- the repeat settlement. Bank of New York, which the Federal Reserve hit with a $38 million money laundering fine in 2000 (for having moved $7 billion in hot Russian money), has now settled again, without even paying a fine. The Fed and the New York Banking Department have slapped Bank of New York on its BONY wrist for new deficiencies in the bank's money laundering controls, giving it 60 days to comply with yet another order.And if it doesn't? Well, it can just settle again. This will be raised, and reviewed, in connection with JPMorgan Chase's application[s] to acquire 338 (presumably money laundering) branches from BONY...
April 24, 2006
The Federal Reserve has let AmSouth off the hook, releasing it from anti-money laundering scrutiny. We'll see how that works. AmSouth is a lender which refused to provide it mortgage data in analyzable form, and the Fed did nothing about it. Meanwhile at the Citigroup annual shareholders' meeting on April 18, CEO Chuck Prince said that if the Fed has removed the block on significant expansions, Citi must be good. Hmm...
April 17, 2006
The Fed continues contorting its bank supervision in order to keep the public in the dark. We now have an April 13 response from Santander (and Sovereign, apparently) to questions posed by the Federal Reserve. The first question is about Sovereign's connections with "alternative financial providers" such as "pawn shops, check cashers, or money service businesses." Santander admits that Sovereign has such connections, specifically confirming exhibits submitted by ICP about Century Pawnbroker and Cash Advance System, and implying there are more but leaving these unnamed. The Fed, of course, is striving not to ask for names, since a Federal court has said these can't be withheld.
Click here to view Inner City Press / Fair Finance Watch's challenge to JPMorgan Chase's proposal to buy 338 branches from Bank of New York (and to close at least 50 of the branches)....
April 10, 2006
Last week the Federal Reserve Board filed a 59-page brief in the Second Circuit Court of Appeals, continuing it defend its withholding of information about assistance to subprime lenders provided by banks -- in this case, Wachovia and its SouthTrust. The Fed continues to argue that it can withhold the names of subprime lenders with which an applicant bank does business, even if these business connections and names are required to be public in SEC filings, as long as the requester doesn't read the Board's mind and name the precise names, without having seen them. Earlier the Fed had argued that it should be entitled to withhold names that must be public because most requesters don't have access to professional searches of public records like Lexis, and free searches like Edgar are unlikely to dig up the connections. The Fed has become a defender of questionable subprime lenders and the banks which enable them -- in fact, during the pendency of this case, and now the Fed's appeal, the Fed has stopped asking applicants to provide the names of subprime lenders they assist, but rather only their "policies." This shows that, in order to protect and coddle banks, the Fed will even forego information that it previously made clear it needed, in order to appropriately regulate. For shame...
Amazing too that the Federal Reserve System last week gave Citigroup the gift of saying, "go forth for large acquisitions," just as Citigroup got sued for insider trading by the Australian regulator, and while the Fed already had Citigroup's 2005 mortgage lending data, which is even more disparate than in 2004.
Inner City Press / Fair Finance Watch has just released a study of the new 2005 Home Mortgage Disclosure Act data, click here for more.
April 3, 2006
The Federal Reserve approval order last week approval to BB&T - Main Street Bank noted that Inner City Press / Fair Finance Watch
"expressed concern about referrals of loan applicants to Lendmark Financial Services ('LFS'), a nonbank subsidiary of BB&Tthat 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 BB&T's referrals up and down do not use the same standard. On fringe finance the Fed says that ICP"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 relationships with 45 payday and other fringe financiers. BB&T is growing in subprime -- as ICP 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 purchasesautomobile-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."
Thanks to the GLB Act, subprime lenders can be acquired
with no prior review by the Federal Reserve (which is at the same time
fighting for greater regulatory rights with regard to Industrial Loan
Companies, for example the ILC proposed be Wal-Mart).
ICP/Fair Finance Watch will be continuing its watchdogging of BB&T
and its growing (and murky) involvements in subprime lending.
March 27, 2006
The Federal Reserve has now asked about Santander's acquisition of the subprime lender Island Finance from Wells Fargo, seeking confirmation that Santander "intends to file a post-transaction notice under section 225.87 of Regulation Y" and asking generically for information on Santander's due diligence on Island. Santander responds that it will file by March 29. Why let a company buy a controversial subprime lender and only "notify" the Fed of the acquisition a month after it is consummated?
Meanwhile in response to Federal Reserve questions, BB&T has disclosed that it has made at least 45 loans to subprime lenders, including to pawn shops, rent to own businesses and even to a "pay day loan provider"...
Speaking March 20 at the Economic Club of New York, new Fed chairman Ben Bernanke began with advice from his daddy back in South Carolina: "if you ever get the opportunity to keep your mouth shut, take advantage of it."
But United States anti-money laundering, or at least FinCEN, has devolved into a revolving door. Two months after Bill Fox cashed out to Bank of America, now FinCEN's William D. Langford jumps to JP Morgan Chase. “I have an absolutely incredible opportunity with an incredible institution – it’s that simple,” Langford said in a telephone interview. Again - if the Treasury Department's OCC has adopted anti-revolving door safeguards in the wake of the Riggs Bank scandal, why hasn't FinCEN?
March 20, 2006
Now the Federal Reserve doesn't care if an investment for which it gave Community Reinvestment Act credit turns out to be fraudulent and to benefit not a single low or moderate income person. In its M&I - Gold Bank order last week, the Fed said that Inner City Press / Fair Finance Watch
"criticized Gold Bank's investment-performance record and investment rating because of credit Gold Bank received in its 2005 CRA Evaluation from the Kansas City Reserve Bank for making an investment in multifamily housing revenue bonds that were ultimately intended to benefit LMI residents. The Board has consulted with the Kansas City Reserve Bank on this matter. Through no fault of Gold Bank, the bonds were called and no multifamily housing was constructed. Gold Banc made various, timely public disclosures regarding the impairment of the bonds"...
That sure is friendly to Gold Bank. As the old saw has it, when something sounds too good to be true, it's usually fraudulent. In this case, the bond Gold Bank bought had a 30% return. ICP has also been told, by a knowledgeable source, that Gold Bank's management knew of the problems with the bonds well before it told the Fed. And in any event, the Fed never amended the CRA credit it gave, for an investment that did not benefit a single low or moderate income person.
On mortgage lending, the Fed in its M&I - Trustcorp order said that ICP commented, "based on 2004 HMDA data, M&I FSB imposed higher-cost loans to Latinos as compared to nonminority borrowers in Missouri. M&I FSB has no assessment areas in Missouri." But M&I FSB does M&I's subprime lending all over the country, and is an insured financial institution. So now, according to the Fed, it can ignore subprime affiliates not only if they are mortgage companies, but even if they're insured financial institutions, as long as they keep their headquarters (and limited assessment areas) away from the merger zone. By this logic, banks that are affiliated should trade lending and reporting such that all problematic subprime lending is done by the affiliated headquarters out-of-market. Is this how the Fed is assessing and acting on the economy?
Question: why didn't the Fed include Santander in its March 17 cease-and-desist orders against three (other) Puerto Rico banks which had to restate their earnings? Could it be because Santander has a contested application pending, and a cease-and-desist order would only add fuel to the fire?
March 13, 2006
The U.S.
Federal Reserve, despite its talk about anti-money laundering and fair
lending, is even more committed to doling out approvals to any proposed
merger or acquisition. On fair lending, the Fed last week approved an
application by Whitney to buy 1st National, reciting that Inner City
Press / Fair Finance Watch
"alleged, based on 2004 HMDA data, that Whitney Bank and 1st Bank
disproportionately denied applications for HMDA-reportable loans by
minority applicants in several Metropolitan Statistical Areas...
Although the HMDA data might reflect certain disparities in the rates
of loan applications, originations, denials, or pricing among members
of different racial or ethnic groups in certain local areas, they
provide an insufficient basis by themselves on which to conclude
whether or not
Whitney Bank or 1st Bank is excluding or imposing higher credit costs
on any racial or ethnic group on a prohibited basis."
The "certain disparities" alluded to by the Fed includes these, identified to the Fed by ICP: In the New Orleans MSA in 2004, Whitney National Bank denied the conventional home purchase applications of African Americans fully 3.53 times more frequently than whites. These disparities at Whitney extend into each of its other footprint states: In Mississippi, in the Gulfport - Biloxi MSA, Whitney National Bank in 2004 denied the refinance loan applications of African Americans 5.48 times more frequently than whites. In Alabama, in the Mobile MSA, Whitney National Bank in 2004 denied the conventional home purchase applications of African Americans 3.22 times more frequently than whites.The Fed's approval order also notes that ICP
"expressed concern
about Whitney Bank's relationship with a rent-to-own company, which is
an unaffiliated, nontraditional provider of financial services. As a
general matter, the activities of this type of business are
permissible, and such businesses are licensed by the states where
they operate. Whitney Bank has implemented a policy for its commercial
credit facilities to finance companies or other consumer lenders to
fund consumer loans. This policy provides for an evaluation of the
practices of such borrowers to identify any potentially predatory
lending practices and for ongoing monitoring and management of
relationships with such borrowers."
But it's not at all clear in the record what practices or safeguards Whitney has -- and in previous cases, the Fed has tried to withhold such information (leading to a brief ICP filed last week in the Second Circuit Court of Appeals in the ongoing ICP v. FRB Freedom of Information Act case about Wachovia's enabling of predatory lenders).
Also last week, In the face of public reports of Bank Hapoalim's involvement in ongoing money laundering investigations, the Fed gave Bank Hapoalim an approval. The Fed's order noted the comments of ICP Fair Finance Watch that
"expressed concern about the proposal based on news reports of investigations by Israeli authorities into allegations of money laundering at Bank Hapoalim. As a matter of practice and policy, the Board generally has not tied consideration of a proposal to the scheduling or completion of an investigation if, as in this case, the applicant or notificant and reviewed reports of examination from the appropriate federal and state supervisors of the U.S. operations of Bank Hapoalim that assessed its managerial resources. Based on all the facts of record, the Board has concluded that considerations relating to the financial and \managerial resources of Notificants are consistent with approval."
So the Fed's policy is to ignore active investigations? And to ignore reports of its sister agency, the State Department? The Fed's Hapoalim order says that ICP/FFW
"expressed concern about Israel's anti-money laundering policies and
procedures [but] in June
2002, the FATF recognized that Israel had addressed the deficiencies
identified in its 2000 report. FinCEN withdrew its advisory in July
2002, noting that Israelhas in place a counter-money laundering system
that generally meets international standards." FinCEN Advisory
Withdrawal Issue 17A."
But the U.S. State Department's more recent 2006 report, also released last week, states that in Israel, "there is a continuing need for more effective bank supervision and proactive investigations of money laundering associated with criminal activity, especially on the part of organized crime figures and syndicates." Oh but don't let that get in the way of a merger...
March 6, 2006
At Howard University on March 3, the exiting Roger Ferguson played econo-nerd to a generally befuddled audience, saying for example, in answer to a question read by Mr. Diallo, "You know that an economist will predict either the direction or the timing or never both," and musing about housing costs in Australia. One was left wondering why there are never any dissents, on the Federal Reserve Board… Meanwhile back in the real world, in a response just filed with the Federal Reserve, BB&T among other things claims that the questions that the Fed has asked other banks about due diligence conducted before lending to pawn shops and payday lenders are "unreasonable and overbroad." But the Fed has asked NC-based Wachovia exactly these questions, and Wachovia answered. BB&T's response is essentially ideological -- not surprising, perhaps, given the bank's CEO's recent fulminations on the AP that his favorite writer is Ayn Rand. Then again, ex-chairman Greenspan was also once a fan…
February 27, 2006
Last week we reported on and raised to the Federal Reserve a Community Reinvestment Act scam, in which Gold Bank, which M&I is trying to buy, was given CRA credit by the Federal Reserve for buying bonds which in fact never resulted in a single unit of housing, low- or moderate-income or otherwise. In response, M&I and Gold Bank filed letters with the Fed specifying at least the names and dates of the bonds, while admitting that no housing was built, and that the CRA credit has never been withdrawn or corrected --
“On July 19, 2001, Gold Bank purchased the City of Lee’s Summit, Missouri, Multifamily Housing Revenue Bonds, Series 2001C, for $4,600,000 (the ‘Missouri Bonds’). On February 28, 2002, Gold Bank purchased the Oklahoma Housing Development Authority, Multifamily Housing Revenue Bonds, 2002 Series C, for $5,000,000 (the ‘Oklahoma Bonds’). On August 15, 2002, Gold Bank purchased the Community Development Authority of the City of Manitowoc, Wisconsin Multifamily Housing Revenue Bonds, 2002 Series C, for $4,600,000 (the ‘Wisconsin Bonds’)… In August and September 2005, in large part because no housing projects were funded with the proceeds of the Bonds, the [IRS] notified Gold Bank that it had made preliminary determinations that the interest which the Issuers previously paid Gold Bank on the Bonds was not excludable from the gross income of Gold Bank for tax purposes. On October 17, 2005, Gold Bank paid approximately $3.5 million to settle the IRS claim…
“Gold Bank purchased the Bonds based upon representations from the Issuers that the proceeds of the Bonds would be used by the Issuers to make loans for low and moderate income multifamily housing projects… Notwithstanding such Issuer representations, the Issuers subsequently did not fund any low and moderate income multifamily housing projects with the proceeds of the Bonds… In fact, prior to the CRA examination, Gold Bank had disclosed to the Kansas City Federal Reserve… the impairment in the value of the Bonds and the reasons for such impairment.”
CRA credit given (and not retracted) for a fraudulent investment which never resulted in a single unit of housing. Is this what the Federal Reserve has come to?
February 20, 2006
At new chairman Bernanke’s testimony to the House of Representatives last week, the Community Reinvestment Act was mentioned, albeit a single time. Mr. Bernanke said
“my very first trip as a governor of the Federal
Reserve was to Brownsville, Texas, to see how a set of nonprofit
organizations were using funds provided under the Community
Reinvestment Act from banking institutions to rede
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