Fair Finance Watch

As Bank of Montreal Applies to Buy M&I, Game On, Beginning with Canadian Regulator OSFI

2011-01-19T07:30:00.000-05:00

by Matthew R. Lee

Bank of Montreal will be applying to buy Marshall & Ilsley (M&I), the largest bank in Wisconsin, with 374 branches also in Arizona, Indiana, Florida, Kansas and Minnesota. One predictor of how Bank of Montreal would perform is what its Harris Bank has done. Inquiry has begun, and now some outreach.

It has been raised to OSFI in Canada that, as simply one example, in its Chicago Metropolitan Statistical Area headquarters, Bank of Montreal's Harris Bank in 2009, the most recent year for which Home Mortgage Disclosure Act data is available, denied the conventional home purchase loan applications of Latinos 2.52 times more frequently than those of whites.

The shareholders who've already come out against the deal are arguing not only that Bank of Montreal should be paying more, but also that there would be layoffs and branch closings.

One wonders at what stage Bank of Montreal may try to find buyers for the branches in Kansas or Arizona or the branch listed on M&I's website in Las Vegas. Let the games begin.

Goldman as Al Capone, the Credit Union Which Fled the Bronx and the CRA

2010-04-18T20:35:00.003-04:00

We have reported on the banks which left The Bronx, snooping for example around old Chase Manhattan branches turned into churches. But it's time to mention Melrose Credit Union, which runs radio advertisements during Yankee games. Perhaps you've seen their sign, if you drive to or from JFK airport. The institution says, right on its website, that

"since 1922. Melrose was initially established to provide financial resources for individuals and small business owners from the Bronx, NY. Through the Credit Union, community residents were afforded the means to pursue their American Dreams. The success of Melrose Credit Union has not diminished its original mission statement: Empower the community by offering affordable financial products and services. Today that community commitment has helped transform Melrose into an over $1 billion credit union with over 20,000 members residing across the country and around the world."

Melrose is a neighborhood in the South Bronx, which this "successful" credit union left behind. It has no branch in The Bronx; it left the borough but speaks about empowerment of (presumably other) neighborhoods. What was that again, about there being no need for a Community Reinvestment Act on credit unions?\
Footnote on high finance: In the wider world, Goldman Sachs has finally been accused by the SEC -- not for enabling predatory lending, for which it should be charged, but for setting up for John Paulson to short a pool of dubious subprime securities and then selling it to others as a legitimate and objective investment. Well, just like Al Capone's Achilles Heel was tax evasion, perhaps misrepresentation is Goldman's. But we doubt the SEC's stomach to follow this fight through. We'll see.

Fed is Belatedly Concerned with Loan that Jumped the Gun, But Allows It: Profiles in Lassitude

2010-03-30T08:00:00.001-04:00

Fed is Belatedly Concerned with Loan that Jumped the Gun, But Allows It: Profiles in Lassitude

by Matthew R. Lee

The Fed is belatedly concerned -- but not too concerned. Following Inner City Press / Fair Finance Watch's comments, the Fed conducted an after the fact inquiry and in an approval order last week included this footnote:

A comment from the public expressed concern that FNF Group acquired control over Harleysville before obtaining Board approval of the application because of an
extension of credit FNF Group made to Harleysville. In December 2009, and after
FNF Group filed its application with the Board to acquire Harleysville, FNF
Group loaned Harleysville $50 million, secured by the shares of Harleysville
Bank. Harleysville invested the loan proceeds in Harleysville Bank to increase
the bank's capital.
The Board is concerned when a banking organization
seeking to acquire . another banking organization makes a loan to the acquiree
in advance of the Board's approval of the acquisition. Those types of loanss
raise concern thatthe transactionon would ~e, in substance, the acquisitioof af
a controlling interest or would provide the acquirer with the ability to
exercise a controlling influence over the management and policiof thethe bank
holding company before receiving Board approval. The Board has reviewed
carefully the loan to Harleysville, including the circumstances and terms of the
loan, the merger agreements, the purpose of the loan, and the relationships of
the organizations after the loan transaction. Based on all the facts of recordd,
the Board does not believe that the loan resulted in FNF Group acquiring voting
securities of, or a controlling equity interest in, Harleysville, or in FNF
Group exercising, or having the ability to exercise, a controlling influence
'over Harleysville in this case. The Board continues to believe that loans made
by an acquirer to a target organization before agency approval of its
acquisition proposal raise important issues, and it will review these
arrangements critically and carefully.

But the Fed apparently didn't know about the loan until it was raised in comments, and it let the deal go forward, after reams of arguments by banking insider H. Rodgin Cohen. This is another example of Fed lassitude, another reason that consumer protection should not be put under the Fed....

Wal-Mart, with 500 More MoneyCenters, Needs Scutiny, CFPA

2010-03-25T00:04:00.001-04:00

Wal-Mart, with 500 More MoneyCenters, Needs Scutiny, CFPA

By Matthew R. Lee

Wal-Mart plans to open 500 more of its MoneyCenters. Asked for comment, Inner City Press opined

"Wal-Mart's proliferation of check cashing and $4.50 for bill payment (same day) into 500 more stores must be seen in the context of the company's recent gender discrimination settlement, use of tainted cotton from Uzbekistan, and standardless sale of the resources of the Democratic Republic of the Congo. We are still monitoring Wal-Mart, as it become more banklike without any of the regulation. We would suggest that the Consumer Financial Protection Agency, or Burea, wherever housed, also look at Wal-Mart."

The domestic and CFPA portion of the comment appeared in the Charlotte Observer and elsewhere.

"Wal-Mart adding financial sites," by Christina Rexrode, Charlotte Observer, March 16, 2010

As HUD Shut Taylor Bean, What of Its Larger Financiers? Annals of Impunity

2010-03-12T15:32:00.002-05:00

As HUD Shut Taylor Bean, What of Its Larger Financiers? Annal of Impunity

By Matthew R. Lee

WASHINGTON, March 12 -- While Congress continues to resist holding the financial institutions responsible for the meltdown accountable, five blocks from the Capitol on March 12, Federal Housing Administrator David Stevens bragged of having "shut down 356 lenders." He focused on Florida-based Taylor, Bean & Whitaker, the third largest FHA lender in the country until it filed bankruptcy in August 2009. At that time, Inner City Press / Fair Finance Watch noted that TBW had given it the run around to obtain its Home Mortgage Disclosure Act data, perhaps a clue to more fundamental illegality.

What Stevens didn't follow up on was the banks which enabled and did business with Taylor Bean and its ilk. There was, of course, Alabama-based Colonial Bank, which have been intertwined with Taylor Bean was seized by the FDIC, its branches sold to BB&T and many of them shut down.

But there were bigger players at the trough. As Inner City Press reported back in November 2009:

"Deutsche Bank AG and a unit of BNP Paribas SA separately sued Bank of America
Corp. on Wednesday, alleging that the bank has failed to repay about $1.7
billion in secured notes issued by a special-purpose entity. The
breach-of-contract lawsuits, filed in U.S. District Court in Manhattan, allege
that Bank of America has failed to redeem $480.7 million in secured notes held
by BNP Paribas and $1.2 billion held by Deutsche Bank. The notes were issued by
Ocala Funding LLC, a special-purpose entity that provided short-term liquidity
funding to Taylor, Bean & Whitaker Mortgage Corp..."

This a a sample of the chicanery behind the global financial crisis, and players who have not been held accountable.

Footnote: Stevens was preceded in the NCRC conference by another HUD official, John D. Trasvina, head of fair housing and fair lending. He was asked about HMDA data, but noted its time lag, that one can't get study disparities in rates of restructuring of mortgages. This publication has requested more recent data: watch this site.

Dodd's Bumbling Portends More Watering Down for Fed, of Groucho Marx in Reverse

2010-03-11T12:45:00.000-05:00

Dodd's Bumbling Portends More Watering Down for Fed, of Groucho Marx in Reverse

By Matthew R. Lee

WASHINGTON, March 10 -- After watering down financial reform legislation in weeks of concessions, now Senator Chris Dodd says that while a draft bill will be "unveiled" on Monday, it and he will not have any Republican co-sponsors. Insiders predict then another round of concessions, from a bill that will, they say, place consumer protection in or at the Federal Reserve.

"Sell out city," said one consumer advocate visiting Washington this week, expressing a lack of surprise that Timothy Geithner so quickly gushed with praise for lame duck Dodd.
Some consumer advocacy insiders have been defanged into supporting the Federal Reserve by the threat that if not at the Fed, the financial protection unit could be placed in the Office of the Comptroller of the Currency. Thus they resist going public with their dissatisfaction with the Fed's track record, on the "lesser of two evils" theory.

The Fed itself has placed the Consumer Financial Protection Agency issue on the agenda of the next meeting of its own Consumer Advisory Committee, half made up of bankers. Of the other half, some are in the Fed's sway on a reverse Groucho Marx theory.

Groucho said he didn't want to join any club that would accept the likes of him. The insiders won't oppose any club that has issued them an invitation. It would be funny if it weren't so sad, ill-serving consumers. Those who were previously invited but who've now left may have more freedom to speak. We will have more on this.

As Congress Dithers for Payday Lenders, CRA Activists Raise Stakes in St. Louis and Philadelphia

2010-03-10T23:38:00.000-05:00

As Congress Dithers for Payday Lenders, CRA Activists Raise Stakes in St. Louis and Philadelphia

By Matthew R. Lee

WASHINGTON, March 10 -- As legislators from both political parties dally on Capitol Hill, considering handing consumer protection to the Federal Reserve like Democratic Senator Chris Dodd or leaving enforcement over payday lenders off to the side like Republican Bob Corker, the real work of protecting consumers is done by grassroots groups.

Inner City Press learned on Wednesday of an all too rare Community Reinvestment Act challenge filed recent in Missouri, which has delayed the recalcitrant bank's application for regulatory approval for several months. The Metropolitan St. Louis Equal Housing Opportunity Council, which filed the protest, says that CRA has been largely moribund in St. Louis for the last 20 to 30 years.

Now, in the face of the economic meltdown, it is back. On the sidelines of the NCRC conference, three EHOC staffers spoke of pouring over list of regulatory approvals, commenting on CRA performance evaluation, reaching out for allies to Kansas and Jefferson City. Meanwhile a former NCRC staffer is starting work at the Federal Reserve Bank of Philadelphia. Progress can be slow -- but it is still faster than Congress.

Lame Duck Dodd Follows Republicans to the Federal Reserve: CFPAbsurd

2010-03-04T00:53:00.001-05:00

As of March 4, the move in the Senate is to put a consumer protection divisions inside the Federal Reserve, the same agency which stood by as Citigroup, HSBC, Bank of America and JPMorgan Chase got more and more involved in subprime lending.

Why would anyone believe the Fed can or will crack down now? Beyond being lax, the Fed may have the fastest revolving door in Washington. Stephen Friedman, former NY Fed chief, reportedly benefits from the Fed's bail out of AIG. Another former NY Fed head, Corrigan, appears in Europe to defend his new employer Goldman Sachs' shenanigans to help Greece conceal its level of debt from the EU. Why would one consider entrusting consumer protection to this gang?

As JPM Chase and BofA enable subprimers like World Acceptance, Regulators Do Nothing

2010-02-28T21:42:00.002-05:00

Bottom feeding subprime lender World Acceptance, charging interest rates up to 215%, is enabled by credit lines from JPM Chase and Bank of America, among others.

World Acceptance feasts off repeated refinances and roll overs, using the rule of 78s to fleeces its borrowers.

Do Chase and BofA have any standards for the subprime lenders they will lend to?

JPM Chase was previously exposed by Inner City Press / Fair Finance Watch for extensive lending to pawn shops and high cost check cashers. Even post-crisis, the sleaze just continues. And what do the regulators do? Watch this site.

Public Comment Period on Merger Only a "Technicality," Bank Law Insider Argues

2010-02-20T14:00:00.001-05:00

When is a Federal Reserve public comment period not public?

When banking law insider H. Rodgin Cohen says so, he seems to feel. In a February 17 letter copied to the Fed's general counsel Scott Alvarez, H "Can We Call You Rodge" Cohen urges the Fed to disregard a timely comment on lending disparities and other irregularities, arguing that the comment period was only open due to a "technicality."

While some would think this beneath ol' Rodge, perhaps Sullivan & Cromwell markets him as truly full service...

-on behalf of Inner City snark

As Wells Fargo’s Stumpf Cashes In, Stealth Subprime Highlighted by FFW in The Guardian (UK)

2010-02-16T22:58:00.001-05:00

The Guardian (UK), in a February 16 article outing “Wells Fargo chairman John Stumpf []as corporate America's highest paid executive last year,” quotes Fair Finance Watch that

“although Wells Fargo was not involved in packaging toxic mortgage-backed securities on the capital markets, it did its fair share of risky lending on the high street, shrewdly passing the loans on to third parties. ‘They were as big in sub-prime as some of the others were but they weren't left holding the baby when the music stopped,’ said Lee.”

What do we mean by what? Well, how many subprime loans a company made can be measured with some objectivity, using Home Mortgage Disclosure Act data including the Federal Reserve’s own definition of subprime: three percentage points over prime on a first lien, five on a second. By that measure, Wells Fargo has been a major subprime mortgage lender.
But beyond mortgages, Wells Fargo is a major subprime personal loan provider, through storefronts of Wells Fargo Financial. See, www.innercitypress.org/wells.html

Fifth Third, from foreclosures to horse loans, scrutiny is needed

2010-02-10T19:54:00.001-05:00

Fifth Third Bank is not only involved in foreclosing on families’ homes – it is also seeking to find a horse that it lent against, or actually 203 horses. From the Thoroughbred Times:

“Fifth Third Bancorp claims Ahmed Zayat concealed a mortality insurance claim for multiple Grade 1 winner Thorn Song last summer in order to hide $2,750,000 in proceeds that he should have paid to the bank. Zayat Stables owned Thorn Song, who was pulled up in the Eddie Read Handicap (G1) on July 25 at Del Mar after bolting to the outside rail in the first turn… Fifth Third said it made multiple inquiries into the whereabouts and well-being of the Unbridled’s Song horse… Fifth Third said the concealed insurance payment is evidence that a receiver should be appointed to oversee Zayat Stables' 203 horses, which are collateral for $34,265,970 in loans that he owes the bank.”

So Fifth Third, still fueled with TARP bail out funds, has been lending tens of millions of dollars secured by horses. We first ran into Fifth Third when they bought Old Kent, coming into the Detroit market. Click here for a scan of a newspaper article about the Community Reinvestment Act challenge, complete with St. Patrick’s Day karaoke and happy hour ads, courtesy of Google.

After the Federal Reserve approved the Fifth Third’s Old Kent acquisition, in the Detroit MSA “at Fifth Third Mortgage, American Americans were over 10.3 times more likely to be confined to higher cost loans than whites, and Hispanics were over 6.3 times more likely to be confined to higher cost loans than non-Hispanic whites.”

And now, horses. Fifth Third deserves more scrutiny….

Subprimers from Fremont resurface as bottom feeders buying foreclosed home: Impunity

2010-02-10T14:57:00.000-05:00

Once subprime, always subprime. Or, subprime never dies --

"Kyle Walker, a former top executive at Fremont Investment & Loan - a once-high-flying subprime lender - has a new firm that is buying distressed homes, some for as little as $1,000... 'We have a pitch book out with Cohen Financial and hope to raise between $6 million and $7 million,' said Mr. Walker. The company he owns and manages is called Home America. His management team includes Bob Clafford, a former executive vice president in charge of wholesale lending at FI&L." NMN

Our first run-in with Fremont was when, despite a timely request for the Home Mortgage Disclosure Act (HMDA) data in electronic format, they refused and gave it in a format that could not be analyzed. Later, Fremont settled predatory lending charges for $10 million with Massachusetts Attorney General Martha "Don't Go There" Coakley.

Now Fremont's Walker and Clafford resurface, buying foreclosed homes and renting or "land contracting" them back to lower income people while holding the note or deed in portfolio.

Some might call this impunity. And they would be correct.

As NJ Senator Lobbied Fed for Campaign Donor Bank, re (CRA?) Sunshine

2010-02-09T10:01:00.000-05:00

Today's WSJ news, that NJ Senator Menendez wrote to urge the Federal Reserve to fast approve an acquisition by JJR Bank Holding Co. of First BankAmericano, whose owners were big contributors to his campaigns, brings to mind the so-called Community Reinvestment Act "sunshine" provisions the Senate adopted in 1999. Their rationale was that community groups should disclose any support from banks. Then Senator Phil Gramm, now with Swiss bank UBS, called commenting, mostly to the Federal Reserve, by funded groups "a piece of old Italy." But now it seems that it's elected officials, in this case a Senator, who are more in need of sunshine....

Who's that sleeping behind Geithner? Business press asks and finds out

2010-02-08T19:47:00.000-05:00

A profile of the business press, Congress and Geithner, during the Snowmaggedon lull -- following a recent Geithner appearance on Capitol Hill, business reporters at a major Mayor-named publication spent countless hours trying to identify the person behind Geithner, nodding off. Who could they be?

Ultimately this press concluded it had been a Geithner staffer with narcolepsy. One opined that maybe Geithner brought this staffer on purpose, for sympathy. And still it won't save him. Nor should it....

What did and does Hank Paulson think of the Community Reinvestment Act?

2010-02-08T19:01:00.000-05:00

So what did and does Hammering Hank Paulson think of the Community Reinvestment Act? He was Secretary of the Treasury, in charge of the Office of the Comptroller of the Currency and Office of Thrift Supervision, which regulate national banks and saving banks, respectively, including for CRA.

But on February 2 on the Larry Kudlow show, when Kudlow included CRA among the causes of the economic crash, Paulson said nothing, then agreed, "That's right... you had all of this going on."

From the transcript:

Mr. PAULSON: Well, what you need to understand is what had happened before even the middle of '07, which is you'd had these excesses had been building up for some times. You'd had a--we had been overstimulating housing. So if you look at the combined weight of all of our policies in the US government...
KUDLOW: Wait. It's HUD-backed, unaffordable mortgage loans, Fannie and Freddie?
Mr. PAULSON: What you have--yeah, yeah, Fannie and Freddie, the FHA, various state programs.
KUDLOW: Community Reinvestment Act.
Mr. PAULSON: You know, mortgage interest deduction. I'm not saying of them were...KUDLOW: Zero capital gains tax on home sales.
Mr. PAULSON: That's right. And so you had--so you had all of this going on

Meanwhile, click HERE for an InnerCityPress.com article last week about Paulson's book.