ICP Zeroes In On Huntington Bank, Shutting Low Income FirstMerit Branches

By Matthew R. Lee

NEW YORK, April 2 -- The lack of seriousness in US bank regulation grows from the relatively smaller to the largest banks, more Fed-favored banks like Goldman Sachs - through those in the upper bulge like Huntington, seeking to buy First Merit and close more than 100 branches.

 Inner City Press / Fair Finance Watch on March 19 filed with the Federal Reserve a challenge to Huntington's application to acquire First Merit and close 107 branches.

  Now Inner City Press has received Huntington's response to the Fed, and it is woefully inadequate. We've put it online here, and embedded below Inner City Press has replied:

"Huntington's Response to ICP, written by former Federal Reserve Board legal counsel Patricia Robinson -- we are concerned about this revolving door -- is dismissive of the issues raised.

 The Response states that 'Of the 107 consolidations / closings, a strong majority (62 of 107 or 58%) are short distance branch consolidations' -- but includes actions forcing consumers to travel more than one mile among these “consolidations.”

Even using this definition, Huntington in its Response to ICP admits to no fewer than 45 prospective branch closures, an extraordinary number militating for the requested public hearings.

Section D.1 of Huntington's Response to ICP lists low and moderate income branches and the income demographics of the branches that would “receive” them. Significantly, in every instance where the income demographics of the branches being shuttered and the “receiving” branch, Huntington has chosen to shutter the lower income branch.

There's moderate into middle, for example

Legacy FirstMerit Bank branch at:
430 Northfield Rd., Bedford, Ohio
44146
(Cuyahoga County)
– moderate-income census tract

“moving to”

Legacy Huntington Bank branch at:
5321 Warrensville Rd., Maple
Heights, Ohio 44137
(Cuyahoga County)
– middle-income census tract

There's low income into middle:

Legacy Huntington Bank Branch at:
1500 East Main Street, Kent, Ohio
44240
(Portage County)
– low-income census tract

moving to

Legacy FirstMerit Bank branch at:
1729 State Rt. 59, Kent, Ohio 44240
(Portage County)
– middle-income census tract

There's even moderate into upper:

Legacy FirstMerit Bank branch at:
3505 Lee Rd., Shaker Heights, Ohio
44120
(Cuyahoga County)
– moderate-income census tract

“moving to”

Legacy Huntington Bank branch at:
17121 Chagrin Blvd., Shaker
Heights, Ohio 44120
(Cuyahoga County)
– upper-income census tract

But there is NOTHING moving the other way. Hearings are necessary.

Huntington Bank's (First) Response to Inner City Press on FirstMerit by Matthew Russell Lee

ICP disagrees with Huntington's dismissive approach to HMDA analysis, and adds this on First Merit into the record:

FirstMerit in the Akron MSA in 2014 made 214 home purchase loans to whites -- and only 13 to African Americans and only two to Latinos. Troublingly, FirstMerit denied the applications of African American for home purchase loans 4.14 times more frequently than for white: a 9.2% denial rate for whites versus a whopping 38.1% denial rate for African Americans.

For refinance loans, FirstMerit in the Akron MSA in 2014 made 158 loans to whites and only six to African Americans and none to Latinos. Its denial rate for African Americans was 35.7%, versus only 20.6% for whites.

For home improvement loans, FirstMerit in the Akron MSA in 2014 made 47 loans to whites and only two to African Americans and NONE to Latinos. Its denial rate for Latinos was 100%. Its denial rate for African Americans was 77%, versus 50% for whites.

We will have more comments, but for now the comment period should be extended; evidentiary hearings should be held; and on the current record, the application should not be approved."

 
In its first comment, March 19, ICP/FFW analyzed Huntington:

  Huntington in the Akron MSA in 2014 made 197 home purchase loans to whites -- and only nine to African Americans and only three to Latinos. 

For refinance loans, Huntington in the Akron MSA in 2014 made 263 loans to whites and only nine to African Americans and only ONE to Latinos. Its denial rate for Latinos was 77.8%, versus only 50.7% for whites.

For home improvement loans, Huntington in the Akron MSA in 2014 made 23 loans to whites and only FOUR to African Americans and NONE to Latinos. Its denial rate for Latinos was 100%.

    Huntington in the Cleveland MSA in 2014 made 582 home purchase loans to whites -- and only 37 to African Americans and only nine to Latinos. 

For refinance loans, Huntington in the Cleveland MSA in 2014 made 680 loans to whites and only 58 to African Americans and only 14 to Latinos. Its denial rate for Latinos was 80%, versus only 54% for whites; Huntington's denial rate for African Americans was 72%.

For home improvement loans, Huntington in the Cleveland MSA in 2014 made 88 loans to whites and only NINE to African Americans and only one to Latinos. Its denial rate for Latinos was 96.4%, versus only 72.8% for whites; its denial rate for whites was fully 94%.

    We will have more comments, but for now the comment period should be extended; evidentiary hearings should be held; and on the current record, the application should not be approved."

There is talk of how divestiture might impact this; some seem inappropriately resigned to it.

  One development pointing in the other direction is the Community Reinvestment Act downgrade of Regions Bank.

The same should happen to Huntington.

Inner City Press has previously commented to the regulators on disparities in Regions' record, while noting that the bank has timely provided its Home Mortgage Disclosure Act Loan Application Register data.

  As simply one example, in the Jackson, Mississippi MSA in 2014, Regions Bank denied the applications for convention home purchase loans of African Americans 3.21 times more frequently than whites.

Now, no new mergers. Shouldn't this apply to some other banks as well?

 Republic was caught on its overdrafts, an issue Inner City Press has raised and will continue to raise.

  On Republic, Inner City Press / Fair Finance Watch in late 2015 challenged its proposal to acquire Cornerstone Bank, stating among other things:

" In the Louisville MSA in 2014 for home purchase loans, Republic made 651 such loans to whites and only 22 to African Americans, and only13 to Latinos. It denied the applications of African Americans 2.15 times more frequently than those of whites. For refinance loans, it made 215 loans to whites and only 10 to African Americans; for home improvement loans it made 129 loans to whites and only ONE to an African American, while denying 7 of 10 applications received from African Americans.

  In Nashville in 2014, Republic made 13 home purchase loans to whites, NONE to African Americans or Latinos.

“Washington-based Fenway Summer LLC, in January reached a deal with Louisville, Ky.-based Republic Bancorp Inc. to offer a credit card that is being pitched as a more affordable alternative to payday loans, which are short-term loans that often charge triple-digit interest rates. The Build Card, which is being rolled out later this year, will charge an annualized interest rate of 25% to 30% and will cap borrowers’ initial credit lines at $500.”

  Thirty percent interest? In New York, that's called usury."

 And, in fact, Inner City Press has photographed Republic's high cost tax loan posters in New York City. Now the Fed has asked:

In Republic’s letter to the Federal Reserve Bank of St. Louis dated December 17, 2015 (the “Letter”), Republic asserted that, “[RepublicBank] no longer offers refund anticipation loans and will not provide tax refund anticipation loans as a result of the proposed transaction. The fact that [RepublicBank] previously provided refund anticipation loans does not relate to the
competitive effects of the transactions contemplated by the [a]pplication, does notrelate to Republic’s financial and managerial resources, does not have any bearing on Republic’s ability to meet community needs, does not relate to compliance with the Bank Secrecy Act, and does not affect the financial stability of the United States. Consequently, we respectfully submit that the fact that [Republic Bank] previously provided refund anticipation loans is simply not relevant to any of the
statutory factors the FRB is required to consider under the Bank Holding Company Act.”

 But now it does...

 So the Fed asks, "consumer advocates have expressed
concern that tax preparers may pass along RAL fees to customers. Please respond to this concern. Your response should include a description of Republic Bank’s monitoring and auditing plans."

There's also those in the middle, seeking to become a Systemically Important Financial Institution like New York Community Bancorp is, applying to buy Astoria Bank.

 After Inner City Press / Fair Finance Watch filed a timely protest, the Federal Reserve On January 8 asked NYCB 14 questions. Inner City Press has put the Additional Information letter online here, including a request to know which branches NYCB would close, how it would try to sell of Astoria's loans, etc. Inner City Press said, there should now be more fair lending questions, and the comment period should be extended.

 On January 21, the Federal Reserve informed Inner City Press / Fair Finance Watch that the Fed is re-opening and extending its comment period on NYCB - Astoria until Tuesday, February 16. We'll have more on this (see here).

Back on January 15, after Inner City Press / Fair Finance Watch also filed comments with the FDIC, that agency has written to NYCB's Joseph Ficalora asking for a response, and stating that

"We are writing in reference to the enclosed e-mail that we received from Executive Director Matthew Lee, of Inner City Press/Fair Finance Watch concerning your institution's application to acquire Astoria Bank. We reviewed the subject e-mail in accordance with the guidelines of 12 C.F.R. Section 303, and deemed it a Community Reinvestment Act (CRA) protest for the purpose of your application. The subject e-mail raises issues regarding your institution's record of lending to African American and Latino persons. The anticipated time and research required to investigate these issues has contributed to the removal of your institution's application from expedited processing."

 NYCB's home mortgage lending is extremely disparate; its multi-family lending, some to slumlords, is no defense. Inner City Press / Fair Finance Watch has filed this with the Fed:

  “On behalf of Inner City Press / Fair Finance Watch, this is a timely first comment opposing and requesting a complete copy of an and an extension of the FRB's public comment period on the Application by New York Community Bancorp ('NYCB') to acquire 100% of the voting shares of Astoria Financial Corp and indirectly acquire Astoria Bank.

  The applicant NYCB in the New York City MSA in 2014 made 109 home purchase loans to whites -- and only THREE to African Americans. For refinance loans, NYBC in the the NYC MSA in 2014 made 27 loans to whites and only ONE to an African American.

  While NYCB may attempt to minimize these severe disparities by pointing to multi-family loans, there are significant complaints about that lending; note also this account of the CFPB which lists the ostensibly mostly multi-family NYCB with more complaints against it than banks that are both larger and more “retail."

  In the Nassau Suffolk (Long Island) MSA in 2014 NYCB made 107 home purchase loans to whites -- and only ONE to an African American, while denying African Americans 4.7 times more frequently than whites. For refinance loans, NYBC in the the Long Island MSA in 2014 made 52 loans to whites and only three to African Americans and only TWO to Latinos, while denying Latinos 2.32 times more frequently than whites.
 
  In the Cleveland, Ohio MSA (where NYCB bought Ohio Savings), NYCB in 2014 made 17 refinance loans to whites in 2014 and only one to an African American, while denying African Americans, while denying African Americans three times more frequently than whites. Similar disparities exist for NYCB in New Jersey, Arizona and Florida -- ICP is requesting public hearings on this ill-conceived proposed merger.
 
  As the Federal Reserve surely knows, this proposal was driving by activist investor pressure on Astoria (by Basswood Capital Management LLC); both institutions' securities fell significantly in price when it was announced. The price to consumers would include the closure of branches, disclosure of which should be demanded during the extended comment period and at the requested public hearing(s).

 The comment period should be extended; evidentiary hearings should be held; and on the current record, the application should not be approved.”

  Inner City Press / Fair Finance Watch, which also opposes NYCB's requests for approvals from the FDIC, New York and other regulators, has prepared this comparison of NYCB to other lenders:

  “In the Nassau Suffolk (Long Island) MSA in 2014 NYCB made 107 home purchase loans to whites -- and only ONE to an African American, while denying African Americans 4.7 times more frequently than whites.”
  
   While NYCB made 107 home purchase loans to whites for one to an African Americans (ratio of 107-to-1), the aggregated in 2014 for home purchase loans on Long Island had a ratio of 13.41 loans to whites for every loan to an African American (15,081 loans to whites, 1125 loans to African Americans).  NYCB is eight times more disparate than other lenders.

  Also on Long Island, compared to NYCB's 4.7 denial rate disparity between African Americans and whites, the aggregate denied African Americans 1.66 times more frequently than whites. NYCB is 2.83 times more disparate than other lenders.

  NYCB in the New York City MSA in 2014 made 109 home purchase loans to whites -- and only THREE to African Americans.

  While NYCB made 109 home purchase loans to whites and three to African Americans in NYC (ratio of 36.3-to-1), the aggregated in 2014 for home purchase loans in the New York City MSA had a ratio of 11.39 loans to whites for every loan to an African American (47,166 loans to whites, 4,140 loans to African Americans).  NYCB is 3.19 times more disparate than other lenders in the New York City MSA.

 Meanwhile Goldman Sachs ultimately on March 21 obtained Federal Reserve approval to buy $16 billion in insured deposits from GE Capital, and the Fed, documents  released to Inner City Press under the Freedom of Information Act (FOIA) show, is inappropriately bent on helping, including by closing its comment period...  The Federal Reserve has belatedly responded to Inner City Press / Fair Finance Watch's September 2 FOIA request, with some of its internal documents, many heavily redacted. FOIA letter here; FOIA documents released to ICP here, and embedded below.

 On April 2, Inner City Press submitted a timely request for reconsideration:

"While there are many portions of the approval order crying for reconsidering, to be clear ICP will herein have the the following focus, because it goes to the heart of a major flaw with today's Federal Reserve: the Approval Order states

"Two commenters express concerns about GS Bank’s use of the Board’s prefiling process, suggesting that commenters could not participate in the resolution of substantive issues raised by the proposal because these issues were resolved before the filing of this application. One of these commenters withdrew its comments in full following its discussions with GS Bank.

“The Federal Reserve has established a prefiling process to provide potential applicants with information about the procedural requirements, such as timing and the applicable forms, associated with a proposal. See SR Letter 12-12. This process also helps to identify information that may be needed in connection with issues that the Board typically considers in connection with a particular type of application or notice, such as competition or financial stability. The prefiling process is not used, and was not used in this case, to resolve or predetermine the outcome of any substantive issues. As in every case, the substantive issues involved in this case were considered and resolved as part ofthe processing of GS Bank’s formal application. In doing so, the Board considered all public comments on the proposal.”

This misrepresents ICP's comments, and more importantly the Fed's actual process as reflected by documents the Fed belatedly released in response to ICP's FOIA requests.

To emphasize: the FRB's General Counsel solicitiously agreed to weekend phone calls with Goldman's outside council Rodgin "Rodge" Cohen at Sullivan & Cromwell, and the Fed submitted its "Additional Information" request to Goldman in July, a full month before any application was submitted or the deal publicly announced.

Specifically, on July 13, the Fed sent Cohen a "request for additional information concerning the proposal by GS Bank to purchase certain assets and assume the deposit liabilities of GE Capital Bank." The proposed transaction was not publicly announced until August 13, and Goldman did not submitted its (pre-vetted) application until August 18.

How can this too-early Additional Information letter be consider consistent with the Order's statement that “the prefiling process is not used, and was not used in this case, to resolve or predetermine the outcome of any substantive issues”?

It cannot be.

Even as redacted, the belatedly released documents show that on May 14 and May 18, Goldman Sachs and its outside counsel Rodgin Cohen of Sullivan & Cromwell told the Fed and its General Counsel Scott Alvarez of their plans for GE Capital Bank.

On May 28, the Fed met with Goldman which presented a "deck" of information about "Project Apple," much of it still redacted.

Likewise, the redactions from “Rodge's” May 29, 2015 letter are outrageous, and appealed.A similar letter was submitted by Cohen on June 16, attaching a letter the Fed has redacted in full from Goldman Sachs' Esta E. Stecher, redactions from which also appealed.

Scott Alvarez took the conversation onto the telephone, not subject to FOIA, on June 16. His accompanying e-mails, as redacted, only say "Thanks! Scott." This evasion of FOIA and of the Fed' stated process should be addressed in your ruling on this request for reconsideration.

On June 26, the Fed's Alison Thro wrote that "Rodgin Cohen was in today briefly to discuss, among other things, GS’s plans to acquire the deposits of GE’s ILC. He asked what the next steps might be." What were those "other things"? And by conducting this “review” prior to any public notice, the Fed is evading the ex-parte rules. This too should be addressed - and corrected - in connection with this.

On July 13, the Fed sent Cohen a "request for additional information concerning the proposal by GS Bank to purchase certain assets and assume the deposit liabilities of GE Capital Bank." Why was this sent BEFORE ANY APPLICATION or public notice? This must be addressed.

On Friday, July 17 the Fed's Thomas Baxter wrote to Scott Alvarez that the transaction would be publicly announced the next Monday -- AFTER the Fed's "additional information request" -- based on a long voice-mail from Harvey Schwartz of Goldman Sachs. (Page 59 of FOIA response to ICP). Alvarez was on the phone with "Esta of GA and Rodge Cohen."

Alvarez said he was willing to talk with Goldman Sachs on Sunday, July 19. Cohen had written to Alvarez:

"In view of the various communications on Friday and the intended announcement of the deposit assumption transaction on Monday, GS believes that it must decide over this weekend whether it can proceed as scheduled and, as a matter of fairness and transparency, what it can tell GE. As we have discussed, this transaction appears to be a centerpiece of the GE restructuring. We would therefore most appreciate the opportunity to have a conference call as soon as possible over the weekend to obtain as much clarity as possible as to timing and other relevant matters.
We apologize for intruding into your weekend and thank you your consideration of this request." (Page 65 of FOIA response.)

The reference to "fairness and transparency" was apparently without irony. But this announcement was postponed. Alvarez wrote on July 20 that "Rodge just sent a note that GS wants to postpone signing the deal with GE and the announcement for 2 to 3 weeks." More review continued, outside of public scrutiny. Alvarez made himself available on Sunday, July 26. But to no avail.

The deal was publicly announced on August 13 and Goldman Sachs on August 18 submitted the apparently pre-vetted application. This was contrary to law, and now to the Order.

While our focus is on the above, we note for this that (March 30) “An ex-Goldman Sachs Group Inc. banker, Rohit Bahal, was ordered on probation, after having his former co-worker, Jason Gross, steal documents from the Federal Reserve Bank of New York. Judge Gabriel Gorenstein stated that Bahal's two-year probation time was sufficient because his reputation has already been ruined on social media. Prosecutors were displeased with the outcome as they Bahal's should have received tougher, punishment for stealing about 35 documents on 20 separate occasions.”

ICP said that a hearing was needed, and reiterates that.

On Goldman Sachs, Federal Reserve's Initial FOIA Response to Inner City Press on GE Capital Bank by Matthew Russell Lee

 On October 20, the Federal Reserve asked Goldman Sachs five questions, but not on the predatory lending issues raised... Only this from Goldman Sachs, only snail-mailed by its counsel:

Goldman Sachs' 2d Reply to Inner City Press, As Fed Withholds FOIA Documents by Matthew Russell Lee

 On October 13 Inner City Press published the Federal Reserve's communications with the CIT Group's outside counsel, which shows how the release of public documents is allowed by the Fed to be delayed. CIT made disingenuous requests for confidential treatment of information that could not be withheld, without any repercussion. They were rewarded with FOIA appeal denials by Fed Governor Jay Powell; now Goldman is trying to withhold information that should be public. Will there be any repercussion or accountability? Watch this site.

Revealed: Federal Reserve Asking CIT Group About Inner City Press FOIA Request: Now Goldman Sachs? by Matthew Russell Lee

 

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