CRC Proposes 5 Questions for Hearing With New York Fed President About One West Bank Merger
Los Angeles, CA- Nov 20, 2014- Disturbing reports about the New York Federal Reserve Bank deferring to the banks it is supposed to supervise has prompted the US Senate Committee on Banking, Housing, & Urban Affairs to hold a hearing tomorrow focused on bank regulators. The California Reinvestment Coalition is suggesting five questions for the New York Federal Reserve President, William Dudley to answer at the hearing.
Kevin Stein, associate director at CRC, explains: “We see the hearing as an opportunity for the president of the New York Fed to discuss how bank regulators like the Fed are looking out for consumers and communities- not just the banks and their shareholders. A current example is the proposed OneWest and CIT Group Too Big To Fail bank merger which over fifty California organizations are opposing. We have a long list of concerns about the risks created by approving this merger as compared to the seemingly nonexistent public benefit to be gained.We’ve requested that the Federal Reserve hold public hearings about this merger, but absent a firm commitment from the Fed, we are also suggesting several questions for the president of the Federal Reserve Bank of New York, William Dudley, to answer tomorrow.
Five Questions for the President of the New York Federal Reserve Bank
1) Does the NY Fed have any concerns about the optics of this proposed merger calling for millions in bonuses to be paid to OneWest Bank officers while CIT Group, (a recipient of $2.3 billion in unrepaid TARP funds),plans to use this merger to further reduce its tax liability?
2) There were reports earlier this week about Freedom Financial, a subsidiary of OneWest Bank, foreclosing on the surviving spouses of seniors despite recent cases calling such practices into question. Our coalition has also been contacted by housing counselors working with surviving family members who are facing foreclosure due toa Freedom Financial reverse mortgage. Does the Federal Reserve agree with CRC that there should be a moratorium on all Financial Freedom foreclosures of non-borrower widows and similarly situated surviving family members until Financial Freedom or HUD develop policies to ensure these grieving relatives are able to keep the family home?
3) Considering the troubled histories of these two banks, should the public be concerned about the risks and costs if regulators approve this merger, especially if this bank were to have problems again? IndyMac’s failure cost the FDIC’s Insurance Fund over $10 billion and CIT Group used bankruptcy to shirk its obligation to repay$2.3 billion in TARP funds it received from the US Treasury Department.
4) Why does the Fed believe the bank is ready to “stand on its own two feet” if the merger is dependent on transferring and continuing the shared loss agreement the FDIC extended to OneWest’s billionaire investors in2009? CRC coalition members can’t understand why the bank needs an ongoing FDIC subsidy to cover certain losses from Indymac loans made years ago if the bank leadership also believes that the bank is adequately capitalized to take on the SIFI designation.
5) Where is the required public benefit derived from this merger? Does the Fed agree that the bank should be prepared to enter into a strong and transparent Community Benefits and Reinvestment Plan that will promote affordable housing and economic development in its communities, and that such a Plan should be commensurate with the Bank’s Too Big To Fail size?
Additional Background: The California Reinvestment Coalition, and more than 50 other organizations, are opposing the CIT Group and OneWest merger and urging bank regulators to hold hearings about this proposed merger. For more information, see CRC’s overview of the merger, as well as CRC’s letter to the Federal Reserve Bank of New York and CRC’s letter to the Office of the Comptroller of the Currency.