Mergers may be good for corporations, but they’re rarely good for economic stability and financial equity for consumers — especially for Black, Indigenous and People of Color (BIPOC) and low to moderate-income (LMI) communities.
That was the message delivered on Tuesday, March 8 by members of dozens of nonprofits, real estate agents and community-based organizations who spoke in opposition to the proposed merger of U.S. Bank and Union Bank during a virtual joint public hearing of the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC).
The public hearing, a rare occurrence for banks undergoing the merger process, was held in response to a request submitted in November by CRC and more than 60 of its partners. The $8 billion acquisition, which includes more than $600 billion in total assets nationally, was announced in September of 2021.
“The loss of a bank with CRA responsibility is potentially devastating to CA communities struggling to address critical needs, such as affordable housing finance, CDFI investments, support for Community Land Trusts and anti-displacement measures, credit for Native American communities, and broadband access so that all communities can connect to the myriad of benefits that the CRA provides,” said Kevin Stein, CRC’s Chief of Legal and Strategy.
Bank merger numbers in the US are unsettling. Over the last four decades, the US has lost more than 70 percent of its banks due to mergers and consolidations, according to companion comments to an Executive Order from President Joe Biden. Additionally, a bank merger hasn’t been rejected in more than 15 years, according to a Reuters report that cited research from University of Michigan professor Jeremy Kress.
Several elected officials recently have called for a more critical review of bank mergers. Earlier this year, Rep. Maxine Waters (D-CA), Chair of the House Financial Services Committee, called on federal regulators to halt all mergers totaling more than $100 billion in assets. Shortly after the acquisition was announced, Sen. Elizabeth Warren (D-Mass.) and Rep. Jesús “Chuy” García (D-Ill.) reintroduced the Bank Merger Review Modernization Act, which would restrict bank consolidation. Federal banking regulators are also considering reviews of the bank merger process.
Doni Tadesse, CRC’s Southern California Organizer, echoed those calls from Waters, Warren and García, and spoke to the federal regulators’ review process during the hearing.
“While Chairman Powell and the FDIC have stated that they are conducting reviews to update merger and acquisition approval procedures, the historical record suggests that this merger will ultimately be approved. This has resulted in a public sentiment that is cynical of the merger approval process and efforts to reform it,” Tadesse said. “While we appreciate your willingness to hold this hearing, please note that some of our members and members of affected communities were hesitant to freely voice their concerns.”
While proponents of the merger say that there has been measurable investment from both banks, CRC has pointed to U.S. Bank’s track record for closing branches (863 branches between 2017 and 2021), its mortgage lending disparities between white and non-white applicants and neighborhoods, and it’s costly overdraft policies. In 2020, U.S. Bank charged $340 million in overdraft fees and $338 million in overdraft fees in 2021. In January, however, U.S. Bank reformed its overdraft policies — eliminating fees for nonsufficient funds and offering customers 24 hours to deposit funds into an account that has a negative balance of more than $50. The bank still charges $36 per overdraft.
Additionally, some fear that the loss of Union Bank due to the merger will result in fewer affordable housing finance options.
CRC Board Treasurer Paul Ainger called the acquisition the “poster child for a deal that reduces competition in the affordable housing financing industry.” Ainger, who oversaw affordable housing development for various nonprofit organizations within the northern California market for more than 20 years, spoke to his previous experience with both banks.
“Both [U.S. Bank and Union Bank] are active in lending and investing in these deals,” Ainger said. “Both have competed for my deals, which increased the stock of affordable housing for low-income folks. But, the OCC and the Federal Reserve need to know this: Bank consolidation is bad for affordable housing financing.”
While the potential harms of bank consolidation are exponential, many of the organizations expressed a willingness to work with U.S. Bank to create a Community Benefit Agreement that stabilizes LMI communities and BIPOC communities should the merger be formally accepted.
“We don’t want another big bank that might just be ‘too big to fail,’’ said Dolores Golden of Los Angeles-based Multicultural Real Estate Alliance. “If you all would sit down with us to create a CBA that would sustain our communities, that would be something we would want to hear. We’re willing to work together as a community to make sure this happens. We don’t want you to abandon Black and Brown communities by closing brick-and-mortar banks.”
Still, Sharon Kinlaw, CRC board chair and executive director of the Fair Housing Council of the San Fernando Valley, warns that any benefits agreement must fairly address the most critical needs of California communities.
“We are not in the position to do business as usual…we need to have something that looks different, feels different, acts different and addresses the needs of today,” Kinlaw said.