“The WaFdl/Luther Burbank merger should not have been approved,
and certainly not without significant conditions.”

Sorry (insert bank name), I almost did not see you there hiding behind the ABA

In recent months, banking trade groups have harmfully turned to litigation and lobbying in an attempt to kill:

  1. The updated Community Reinvestment Act (CRA) rules.
  2. The Consumer Financial Protection Bureau (CFPB) as a funded federal agency.
  3. The CFPB’s section 1071 rule which would help identify lending discrimination against BIPOC and women-owned small businesses.
  4. The CFPB’s efforts to root out discrimination by deeming non-credit discrimination (like when someone tries to open a bank account) as an unfair and deceptive practice.
  5. California’s two recently enacted landmark climate disclosure laws which would go far to shed light on greenhouse gas emission outliers and, in so doing, help fight climate change.

In other words, the banking trade groups are fighting major Rise Economy priorities that our members and allies have worked hard to enact, and which reflect the deep values that we hold and that banks have professed to share. 

But these trade groups – the American Bankers Association (ABA), the Consumer Bankers Association, the Independent Community Bankers of America, the U.S. Chamber of Commerce, and the California Chamber of Commerce – represent the interests, and act in the name of their members: banks. Many of the bigger banks operating in California even have seats on the boards of these trade groups.

And for those who wonder if bankers are being truthful when they tell us they also care about the initiatives being challenged, we note that the ABA was recently quoted as saying regarding its challenge to the new CRA rule, “We have been gratified by the strong support from across our membership for this legal action.” A Citibank spokesperson added: “…there was broad support for litigation and it would be inaccurate to depict Citi as one of the louder voices in the room.”

Given the resonance these industry attacks on civil rights measures are having with Rise Economy members, we will continue to engage and fight back. 

When it comes to fighting discrimination, redlining, consumer abuse and climate change, the question must be asked of all banks – which side are you on?

Read our letter to 44 bank CEOs about harmful lobbying and litigation practices, signed by 100 community groups.

We need bank merger reform: The WaFd/Luther Burbank case study 

On the subject of talking a good game, banking regulators have professed an interest in soliciting community input, yet appear not to value it. Nowhere is this more evident than in the bank merger context, where very few mergers are denied based on community concerns.

As one example, the Federal Deposit Insurance Corporation (FDIC) recently approved the merger of Washington Federal Bank (WaFd) and Luther Burbank Savings. Rise Economy and 50 community organizations opposed this merger due to mortgage lending disparities, displacement financing, fossil fuel finance, climate-related financial risk, and policy concerns (the CEO of WaFd is on the board of the ABA, which is challenging the CFPB’s funding structure as unconstitutional, determination that non-credit discrimination is an unfair and deceptive practice, and section 1071 small business data rule).

Given the complexity of the issues raised, we asked for an extension of the comment period. 

That request was denied. 

“A closed comment period for me (Rise Economy and community groups) me, but not for thee (the banks)”

And yet, after the comment period closed, the FDIC accepted and later approvingly cited 110 comment letters submitted in support of the merger. Several questions come to mind: Who asked those groups to submit letters? Presumably the banks. Was it after the comment period was closed?  It appears so. And how the regulators decided that was appropriate to include it in the record. A closed comment period for me (Rise Economy and community groups), but not for thee (the banks).

More concerning, the statement accompanying the approval order notes our comments but then refers to confidential submissions by the bank and a “supplemental lending analysis performed” as apparently addressing our concerns. None of this information or analysis, or a summary thereof, was shared with us and we were not provided an opportunity to comment on those submissions or provide our analysis of new HMDA data which was released after the comment period closed.

The merger was approved without any conditions reflecting our concerns or indication that the merger would provide a public benefit to California communities. The regulators determined that the convenience and needs of communities would be met because a bigger bank would provide more products in more places and for more hours of the week than two smaller banks. These conditions are likely true in almost every merger. 

We did not even get timely notice of merger approval. Usually, when we comment on a bank merger, the regulator will provide a copy of the final approval order once it is filed, often on the same day, but certainly in the first few days. Here, we did not receive any order and only read about the approval in the media. And it was difficult to find a copy of the approval order anywhere on the FDIC website. After multiple requests, we received a copy of the approval order 15 business days after it was issued — this seems to violate the FDIC’s own procedures.

The WaFdl/Luther Burbank merger should not have been approved, and certainly not without significant conditions. 

Comment on the Bank Merger Process

Bank mergers rarely benefit communities. For example, a recent report by the Federal Reserve Bank of Philadelphia looking at bank branch closures since the onset of the COVID-19 pandemic noted that there is evidence that recent mergers involving large banks resulted in an overall reduction of bank branches, and found that California lost the greatest number of bank branches (640), that areas with high concentrations of low-income, Asian, Black and disabled residents, as well as racially diverse areas, lost branches at a disproportionate rate, and that banking desert increases in majority-Black areas outpaced the national average.

Without a robust CRA and bank merger process that reflects community input and concerns, reinvestment in affordable housing, homeownership and small business development will suffer.

The bank merger process needs reform to better reflect the anti-competitive, fair lending, reinvestment, climate-related risk and consumer protection impacts on affected communities. If regulators genuinely want to receive public input, they should ponder how the failure to meaningfully consider and address public concerns impacts the public’s desire to provide further input. 

The Office of the Comptroller of the Currency (OCC)  is currently seeking comments on its proposal to address certain aspects of its bank merger process. Rise Economy will reach out to members about this in the coming weeks. 

Rise Economy meets with JPMorgan Chase

In November, 40 Rise Economy member organizations met in Los Angeles (and virtually), with representatives from JPMorgan Chase.

We discussed several issues, including the bank’s progress on its racial equity commitment, Special Purpose Credit Programs (SPCPs), affordable housing, support for smaller BIPOC-led CDFIs and nonprofit organizations, challenges facing low-income consumers and fossil fuel finance.

In light of Chase’s purchase of First Republic Bank, we continue to urge the Bank to be more transparent about its past and current CRA-related performance and to commit to clear, transparent and stronger goals going forward through a Community Benefits Agreement (CBA). Here, we compare Chase unfavorably to First Citizens Bank which, after making its own commitments to California communities, also embraced those made by Silicon Valley Bank, which it acquired in an emergency merger similar to that of Chase and First Republic Bank.

Rise Economy members thank JPMorgan Chase for the meeting, the constructive dialogue and the Bank’s willingness to have follow-up conversations relating to affordable housing, homeownership and community land trusts.

 

Mega (credit card) bank merger – Capital One and Discover

Last but not least, you may have heard that Capital One is proposing to buy Discover. If approved, the merger would result in the largest credit card issuer in the U.S. Capitol One would also benefit from Discover’s payment network, the rail system that connects merchants and consumers and competes with Visa and Mastercard. 

More than  a decade ago, we strongly opposed Capital One’s purchase of ING Bank, citing concerns about lending disparities by ING, auto and credit card lending by Capital One and the lack of any meaningful reinvestment in California due to its lack of branch presence and despite making significant profits here. This last point was one of the driving arguments for reform and update of the CRA. Click here to see the transcript from the San Francisco public hearing on that 2011 merger. 

“There is no public benefit here.”

Fast forward, and Capital One is reportedly one of the banks most vocal about urging the ABA to sue to halt the CRA rules, which, amongst other things, would require online banks like Capital One to reinvest in communities where they profit and beyond where their branches are located. Capital One reportedly denies it is a ringleader in industry challenges. 

Rise Economy is strongly against this merger. ”We cannot allow the regulators to approve this mega merger which will create another Too Big To Fail Bank, the largest credit card issuer in the country and a threat to consumers in our state,” said Rise Economy CEO Paulina Gonzalez-Brito. “There is no public benefit here.”