Community Groups Worry “Too Big to Fail” Merger between CIT Group and One West Will Fail Communities
COMMUNITY COALITION CALLS ON BANK REGULATORS TO ENSURE LARGEST BANK MERGER IN CALIFORNIA IN THE LAST TWO YEARS RESULTS IN COMMUNITY BENEFIT-NOT HARM
September 16 2014—Los Angeles: Citing concerns about the impact on communities of the proposed merger of CIT Group and OneWest banks, that would create another bank that is “Too Big to Fail”, the California Reinvestment Coalition (CRC) is calling on the Federal Reserve to extend the comment period and hold hearings on the proposed merger. OneWest Bank is the successor to IndyMac Bank, which has the notorious distinction of being one of the largest bank failures in the country and whose failure cost the FDIC’s Deposit Insurance Fund over $10 billion. The California Reinvestment Coalition (CRC) is a membership organization that advocates for fair and equal access to banking and financial services for California’s low-income communities and communities of color. CRC’s membership consists of over 300 organizational members working in these communities across the state of California.
The proposed bank acquisition would create one of the largest banks headquartered in Southern California, and advocates are concerned about the impact on communities that were not considered “too big to fail” when the foreclosure crisis hit. According to data from Foreclosure Radar, since January 2007, Indymac/OneWest oversaw45,000 foreclosures in California.
Dolores Golden, CEO, and Sherri Jackson, president of the Multicultural Real Estate Alliance for Urban Change, comment: “IndyMac’s mortgages caused a great deal of financial heartaches as thousands of people lost their homes. Regulators need to thoughtfully consider safeguards for the community, including increased access for responsible, safe mortgages for first-time homebuyers prior to any acquisition moving forward.”
Paulina Gonzalez, executive director at the California Reinvestment Coalition points to similarities with Banc of California’s recent acquisition of 20 Banco Popular branches. “It’s important that impacted communities have a seat at the table amidst this wave of bank mergers in California. Given the troubled history of both banks, we believe this merger should not move forward until the bank leadership works with community groups to create a strong Community Benefit and Reinvestment Plan that will ensure a clear community benefit as a result of this merger and ensure no further harm by these banks.”
Roberto Barragan, president of the Valley Economic Development Corporation, a Community Financial Development Institution, explains: “Small businesses need access to capital in order to grow, but that capital has been difficult to access, especially from banks, since the recession. A priority on lending to small businesses,articulated through a Community Benefit and Reinvestment Plan, will help strengthen and rebuild our communities.”
In a letter signed by 35 community groups, the California Reinvestment Coalition is calling on the bank to negotiate a strong Community Benefit and Reinvestment Plan that includes commitments for the bank’s total CRA activity (in the areas of lending, community development investing, contributions and financial services)that exceed 25% of the bank’s California deposits. CRC calls on these commitments to include small business lending and investments, philanthropic contributions, affordable mortgage loan products with flexible underwriting guidelines for families earning less than 120% of the Area Median Income, and investments for affordable housing and community development.
Letter to John Thain and Joseph Otting from 35 organizations
Links to Bank Application to Federal Reserve:
Letter to CRC from Federal Reserve
Application PDF 1
Application PDF 2
Application PDF 3
Background on Community Benefit and Reinvestment Plans: CRA plans are detailed documents that banks can use to articulate their commitment to communities through small business lending and technical assistance,philanthropic commitments, investments in affordable housing via tax credits and loans, access to responsible mortgages, providing checking accounts that meet CRC’s SafeMoney™ account standards, supplier diversity programs and more.
Example of a Community Reinvestment Plan: Banc of California and Union Bank both have public reinvestment plans that detail meaningful commitments to lend, invest, and provide financial services to low income communities. Click here to view Banc of California’s recently announced plan. Union’s current plan expires next year, and the bank is working with CRC and other community groups to renew its commitments.Click here to view Union Bank plan.