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

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....

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

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.

Lame Duck Dodd Follows Republicans to the Federal Reserve: CFPAbsurd

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?

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

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

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....