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Not only should regulators investigate the timing of OneWest's charitable donations to supporters of its proposed merger with CIT Group, they should encourage both banks to adopt clear CRA benchmarks that would hold them accountable for future investments in local communities.
March 20 -
Two activist groups want regulators to investigate whether OneWest Bank used philanthropic contributions to win the support of community organizations. But this could set a precedent that would discourage banks from making much-needed donations.
March 16 -
Two activist groups are urging the Fed and OCC to investigate whether OneWest used donations and other sweeteners to buy community support for its sale to CIT.
March 6 -
Amid heartbreaking tales told by distressed homeowners and reverse mortgage holders, many community groups praised OneWest CEO Joseph Otting for spending time speaking to them and hearing their communities' concerns.
February 26
Leaders of two community groups recently asked regulators to
Such disclosures are exactly what the Greenlining Institute requested earlier this year, claiming that OneWest "bought" support for the merger by pledging funding to community groups and, worse yet, threatening to withhold contributions to groups that opposed it. "We fear these threats have in fact increased public support and muted public opposition to the proposed merger," said Orson Aguilar, Greenlining's Executive Director in a
Greenlining
The Los Angeles Times
Two community leaders with the National Diversity Coalition, which brought 225 community leaders to the hearing to support the merger,
But the great irony is that Greenlining did the exact same thing it accused other community groups of doing some 20 years ago.
With all due respect to Greenlining and all the good things the group has done over the years, it was one of the few community groups to support Wells Fargo's 1995 hostile acquisition of local rival First Interstate Bancorp. (In all fairness to Greenlining and Wells Fargo, both are now under different management.)
This was the second-largest merger ever at the time and one of the deals that helped "make" Wells Fargo. Most community groups and analysts, including the author, opposed this deal on the grounds of both antitrust laws as well as the statutory convenience and needs requirement, arguing instead for the white-knight bid of Minneapolis' First Bank Systems.
My
The Fed and Wells Fargo refused my repeated petitions to disclose these contributions, and Greenlining volunteered nothing. The Fed's 1996 order approving the deal specifically
So what is the solution to this CRA public-policy problem? It's understandable that cash-starved community groups will try to get what they can from banks in a merger. Likewise, can you blame bank CEOs for trying to appease such groups to get their deal approved?
The real problem here is that the Fed has refused the disclosures I recommended 20 years ago the same ones now being recommended by Greenlining.
Janet Yellen, one of the four Fed governors who approved the 1996 Wells Fargo merger,
Kenneth H. Thomas, an independent bank consultant and economist, is the author of The CRA Handbook and was a lecturer in finance at the University of Pennsylvania's Wharton School for over 40 years.