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By Matthew Russell Lee, Patreon Story
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FEDERAL COURT / S Bronx, Oct 19 – If the U.S. Community Reinvestment Act will be again enforced until the new Administration and its regulators is an open question.

All the more so with news that the Biden Administration is poised to nominate Saule Omarova to head the Office of the Comptroller of the Currency. While described as "anti big bank" - good - what are her views on CRA, and how would she approach, and deny some, mergers? What would she do on U.S. Bank - MUFG's Union Bank? What did she do at Davis Polk? These are questions.

Now this, as the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Federal Reserve Board (FRB) issue “Proposed Interagency Guidance on Third-Party Relationships: Risk Management” silent about rent-a-bank lending, whereby a bank rents out its charter to a financial company that is not a bank to enable attempted avoidance of state consumer protection laws, in particular interest rate and fee caps, or state oversight through licensing regimes. Consumer groups criticize this glaring omission given the rise of rent-a-bank lending and Congress’s recent action in passing bipartisan legislation nixing an OCC rule that encouraged rent-a-bank arrangements.

So will Saule Omarova be asked about this - and about CRA?

The acquisition by South State of Atlantic Capital Bank in Georgia, among others, now approved by the OCC, is a new low. South State is so disparate that in South Carolina in 2020 for mortgage loans to African Americans it had more denials (147) than loans made (133) - while making six loans to whites for every denial to a white applicant.

On August 17, Fair Finance Watch and Inner City Press on the FOIA) filed a comment with the Federal Reserve Board, below.

But the OCC's approval order only says this: "The OCC received one public comment regarding the transaction. The OCC has considered the concerns of the commenter as they related to the statutory and regulatory factors noted above, including performance under the CRA, and the probable effects of the merger on the convenience and needs of the communities to be served. Based upon this review, the OCC finds the facts to be consistent with approval." Ipse dixit, redlining defended. This was Hsu. What would Saule do?

On September 4, Fair Finance Watch commented to the Office of the Comptroller Currency, which some say has changed for the better. We'll see - now on September 7, South State has written to Fair Finance Watch, cc-ing the OCC and Fed: "Dear Mr. Lee... In the matter regarding the concerns of the Bank’s disparate marketing, the Bank is committed to providing equal access to credit throughout our footprint. The Bank takes a multi-layered approach to ensure that marketing of credit products reach all communities within the Bank’s Assessment Area and each application is underwritten without consideration of a prohibited basis. The Bank has undergone reviews by independent audit firms with reports dated June 30, 2020 and June 30, 2019 where marketing efforts have been reviewed. The reviews did not yield any fair lending concerns."

Then something is very wrong with those audits.

The Fed briefly extended the comment period - but then on September 23 asked this of South State: "This correspondence relates to the application filed by South State Corporation, Winter Haven, Florida (“South State”), parent of South State Bank, National Association (“South State Bank”), to merge with Atlantic Capital Bancshares, Inc. (“Atlantic Capital”), and thereby acquire its subsidiary, Atlantic Capital Bank, National Association (“Atlantic Capital Bank”), both of Atlanta, Georgia, pursuant to sections 3(a)(3) and 3(a)(5) of the Bank Holding Company Act of 1956, as amended (“BHC Act Application”). Please respond in full to the following additional information items, including those listed in the confidential annex, and provide supporting documentation as appropriate.  ASSET QUALITY 1. Provide the following classified asset information, as of June 30, 2021, for South State Bank, Atlantic Capital Bank, and the pro forma institution. a. The amount of internally classified assets, comprised of the separate categories of substandard, doubtful, and loss, with relevant components of other real estate owned separately identified in each category. b. Detail for the calculation of the classified assets ratio, including the level of classified assets compared to the total amount of tier 1 capital and allowance for loan loss reserves.  INTEGRATION RISK 2. Given South State’s significant and recent merger with CenterState Bank Corporation in June 2020, describe the status of integration of the two companies, including whether South State’s key resources have the bandwidth to successfully execute and integrate the proposed merger with Atlantic Capital.  OTHER INFORMATION 3. Clarify whether Atlantic Capital has elected to be treated as a financial holding company under the Bank Holding Company Act of 1956, as amended. Section 3.1 of the Agreement and Plan of Merger between South State Corporation and Atlantic Capital Bancshares, Inc. indicates that Atlantic Capital has not made this election, while the response to question 1 of the Form FR Y-3 indicates that Atlantic Capital is “a designated financial holding company.” 4. Provide the following: a. Pro forma organizational charts of South State, including South State Bank, following consummation. b. Update on the status of all other agency filings. c. Copy of the Form S-4 filed with the Securities and Exchange Commission in connection with the proposed transaction.  Request for Additional Information South State Corporation September 23, 2021  Page 2 of 2  Please address your response to Mr. Erien O. Terry and submit within eight business days." But that's after the close of the ("extended") comment period...

As to the Fed, which denies FOIA requests after five months, here, on August 25, this strange response: "Dear Mr. Lee,     This is to acknowledge receipt of your email to the Office of the Secretary for the Board of Governors of the Federal Reserve System (Board) dated August 17, 2021, regarding the proposal of South State Corporation to merge with Atlantic Capital Bancshares, Inc., and thereby indirectly acquire Atlantic Capital Bank, NA.  To date, South State Corporation has not filed an application with the Federal Reserve System.  Currently, the public comment period for the proposal will end on September 20, 2021. 

   If an application is filed within the next three months from the date your comment was sent, your correspondence will be made part of the record, and the Board will evaluate your comment.  We will also send a copy of the public portions of the application as soon as possible after the application is received.     Sincerely,     Jennifer Snow  Senior Examiner  Supervision, Regulation, and Credit  Federal Reserve Bank of Atlanta     Integrity. Excellence. Respect."

How can there be a comment period with expiration date, if there is no application? Inner City Press asked, and on August 26 is told:

"Our procedures provide that advance notice in the Federal Register may be requested in advance of a filing. The comment period end date applies to the Federal Register notice, which was filed in advance of the application being filed."

   What - the comment period running to its conclusion, before any application to comment on is available? This seems far too bank-friendly. How does it relate to the administration's Antitrust Memo? Watch this site.

Dear Chair Powell, Secretary Misback and others in the FRS:   This is  a timely first comment opposing the Applications of South State Corporation to merge with Atlantic Capital Bancshares, Inc., and thereby indirectly acquire Atlantic Capital Bank, NA .

 Fair Finance Watch has been tracking South State Bank NA:  The applicant's South State Bank NA in 2020 in Florida based on its disparate marketing made 5721 mortgage loans to whites, with 1019 denials to whites -- while making only 143 loans to African Americans, with 48 denials. This is far out of keeping with the demographics, and other lenders, in Florida - this is outrageous. 

This is a pattern. South State Bank NA in 2020 in South Carolina based on its disparate marketing made 3048 mortgage loans to whites, with 537 denials to whites -- while making only 133 loans to African Americans, with fully 147 denials. This is far out of keeping with the demographics, and other lenders, in South Carolina. The denials to African Americans are... outrageous.   

Perhaps most relevant, South State is disparate in the state it is trying to make this acquisition to impose and expand its practices. South State Bank NA in 2020 in Georgia based on its disparate marketing made 4068 mortgage loans to whites, with 451 denials to whites -- while making only 494 loans to African Americans, with 120 denials. This is far out of keeping with the demographics, and other lenders, in Georgia - this is outrageous.

 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 (and Fair Finance Watch, on the HMDA) will have more to say about this. Watch this site.

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