“Overall, we found this to be a problematic merger that was approved in a problematic fashion.”

What Happened When We Sent a 2nd Letter to 40 Bank CEOs 

“Are you on the side of justice, equity, and sustainability, or will you continue to support actions that harm the very communities you claim to serve?”

That’s the central question we asked in a letter we sent to 40 bank CEOs. The disparities between their public statements and the legal positions taken by their trade associations regarding key civil rights, consumer protection, reinvestment and climate justice initiatives are astounding. Take a look. 

Last year, the banking trade groups lobbied and/or sued to:

1. Stop the CFPB from treating non-lending discrimination as potentially unfair and deceptive.
2. Halt the section 1071 small business data collection rule which will increase access to credit for BIPOC, women- and LGBTQ+ -owned businesses.
3. Challenge the constitutionality of the CFPB.
4. Kill legislation that would slow the onslaught of climate change.

Despite our letter, the banking trade groups then just went ahead and lobbied and/or sued to:

1. Kill the new Community Reinvestment Act rule. 
2. Stop two critical climate justice bills in California that would require transparency regarding greenhouse gas emissions and transition plans by large companies.
3. Fight CFPB efforts to end abusive credit card late fees.

Not only are nearly all banks represented by these trade groups that are taking harmful positions, but leaders of several of these banks sit on the boards of directors of those trade groups. 

The American Bankers Association (ABA) board consists of JPMorgan Chase and Washington Federal Bank representatives. The CBA board consists of representatives of Bank of America, BMO Harris, Capital One, Citibank, Comerica, Goldman Sachs, JPMorgan Chase, PNC, SoFi, U.S Bank, and Wells Fargo, amongst others. The California Chamber of Commerce board consists of representatives of Bank of America, East West Bank, JPMorgan Chase, U.S. Bank, and Wells Fargo.

So, we sent another letter to 40 Bank CEOs, reiterating our dismay at the ensuing positions taken by their trade associations in their name, and urging the banks to conduct periodic lobbying audits to address any misalignment between bank positions (what they tell the public), and the positions of their trade associations (what they actually do to impact policy). 

Nine banks (Amalgamated Bank, Beneficial State Bank, BMO Harris, Capital One, East West Bank, Hancock Whitney, JPMorgan Chase, Mechanics, and PNC) responded directly to our 2nd letter. Additionally, Bank of America and Citibank indicated a willingness to discuss the issues but have yet to schedule conversations. 

In their responses, Mechanics Bank and PNC indicated that they, in fact, have policies in place to prevent discrimination of any kind. Amalgamated, Beneficial and East West banks noted that they are not members of the ABA, CBA, Chamber of Commerce or ICBA bank trade associations — associations that are engaging in litigation against key Rise Economy priorities. 

Amalgamated Bank went further, noting its support for “federal and state policies and regulations that further racial equity and climate change mitigation.” 

Similarly, Beneficial State Bank CEO Randell Leach responded:  “We share your concerns about the banking industry’s lobbying and litigation actions and remain steadfast in our commitment to fighting discrimination of all kinds … Finally, I would like to address the industry’s lawsuit to overturn recent updates to CRA, which you mentioned in your letter. We advocated for modernizing CRA and are critical of the American Banking Association (ABA) and other business groups’ lawsuits challenging the new rule. In fact, Beneficial State Bank has filed an amicus brief with the U.S. Court of Appeals for the Fifth Circuit urging it to allow important new financial regulations under the CRA to go into effect. While last year’s updates to CRA are a step in the right direction, we have publicly stated that they fall short in addressing racial inequities.” 

Regarding our request for a lobbying audit, Leach said the bank honors certain best-in-class requirements to “disclose all of our trade group affiliations, document changes, and then put forth a timeline and action plan for change. Due to these requirements, Beneficial State Bank is already working to meet the requests outlined in your letter.”

For those looking for the big picture here, we put together this short blog to describe our concerns.

 

5 “weird” things about the FDIC’s approval of the WaFd/Luther Burbank merger 

Last year, Rise Economy and 53 of our members and allies opposed the proposed merger of Washington Federal Bank (WaFd) and Luther Burbank Savings Bank. We identified several significant concerns and felt the FDIC might be hard-pressed to approve this merger without any substantive conditions. What transpired was, well, weird. Here are the five weirdest aspects of the merger approval process.

1. A matter of punctuation. The public comment period for bank opponents ended with an “!” but was more of a “?” for WaFd and its supporters. Fifty-four groups opposed the proposed merger, and apparently, no groups supported it, at least initially.
   
   Rise Economy requested an extension of the comment period to allow for more public engagement, but we ceased our outreach when the FDIC formally denied our request. Yet after the comment period ended, and after the FDIC denied our request for an extension of the comment period, the bank apparently first solicited support from groups and later produced 110 letters of support over two months.Why did WaFd decide to seek support letters after the comment period ended? Did someone suggest to them that they should? The FDIC was impressed enough by this effort that it cited all of those untimely letters of support in the Statement accompanying merger approval. Weird!
2. Public comments? Neither the FDIC nor WaFd shared the bank support letters with us when they were submitted. We only discovered the letters existed once we read the approval order (which was unusually hard to find). The FDIC even refused our requests to see those public documents. Even more bizarrely, the FDIC denied our formal Freedom of Information Act (FOIA) request to see them.Eventually, the FDIC relented and shared the letters with us. The letters were, well, weird. One organization initially opposed the merger and then wrote again supporting it, a few identical letters appeared twice in the FDIC packet, and a few organizations supported the merger from states where the bank does not even have branches. Why did the FDIC feel these letters should carry so much weight? Weird!
3. (Dis)serving Asian American borrowers. In our comments, we noted that Luther Burbank was approximately four times worse than its peers in serving Asian American borrowers, and approximately four times more aggressive in serving the homebuying needs of corporate entities in the LA metropolitan area. And, it was nearly 14 times worse than its chosen peer group in lending to LMI borrowers, a key CRA analysis.As such, we called on the banks to publicly increase their efforts to serve the community and urged that the banks agree to or be required by the FDIC to develop a Special Purpose Credit Program (SPCP) targeted to Asian American borrowers who were particularly underserved. The banks and the FDIC refused to do so, even though other banks have agreed to develop SPCPs and even though the FDIC has required banks during merger approvals to develop new fair housing and CRA plans.In addition, the National Community Reinvestment Coalition (NCRC) analyzed WaFd’s 2023 lending in the top-10 metro areas where the bank makes loans and found that WaFd lagged significantly behind its peers for lending across BIPOC, LMI borrowers, and in LMI and majority-minority census tracts. Yet several groups that indicated an interest in homeownership for BIPOC borrowers wrote in favor of the bank merger.Did whoever asked those groups to support the merger tell them about the lending disparities faced by AAPI and other communities and our push for an AAPI SPCP? Did those groups disagree with that analysis and recommendation? None of this is clear from the record, only that the FDIC notes how many groups wrote in support of the merger. Weird!
4. Transparency. One of the goals identified by the FDIC in proposing new bank merger rules is the promotion of transparency. Yet in approving this merger, the FDIC cited “confidential information” and “supplemental lending analysis.” Neither the FDIC nor WaFd described or shared any of this analysis with community commenters. Our FOIA request for this information was denied. What did this information and analysis include? If it was based on publicly available Home Mortgage Disclosure Act (HMDA) data, why should that be deemed confidential and shielded from disclosure?Regardless, the approval of this merger did not address any of the substantive points raised by merger opponents, including concerns about the bank’s commitment to fighting lending discrimination, mortgage lending disparities, displacement financing, and climate-related physical and transition risks. Weird!
5. Did you think we wouldn’t find out? Unlike in every other merger where we have submitted comments, the FDIC did not inform us when a decision was made or share the approval order. In fact, the FDIC did not respond to multiple inquiries regarding the status of the merger, even after the merger was apparently approved. We found out about the merger approval from reading media reports and from community groups who heard about it from the bank and who then sought our take. The approval order did not appear on the FDIC’s website. We only received a response from the FDIC 15 days after the approval order was issued, which may violate the FDIC’s procedures. Why does it seem they didn’t want to tell us? Weird!Overall, we found this to be a problematic merger that was approved in a problematic fashion. Despite this and the absence of any public commitments from the bank to serve the community, we hope WaFd and the FDIC will do better. We will be watching.

One Step Closer: CFPB moving to close the racial wealth gap

We celebrated another big step forward in the ongoing fight to close wealth gaps for BIPOC-, women- and LGBTQ+ -owned small businesses when a federal district court judge in Texas last week rejected the American Bankers Association’s (ABA) challenge to the CFPB’s Section 1071 small business data collection rule.

For decades, we called for transparency in the small business lending market. A similar data collection regime has existed for many years in the mortgage market, where HMDA data enables enforcement agencies to identify and attack discrimination and fair housing violations, while also increasing access to credit for BIPOC borrowers and aiding public policy efforts. 

Our community also knows that Rise Economy helped bring the Section 1071 rule to fruition by suing the CFPB for its failure to develop the rule, despite the charge from Congress to do so in the 2010 Dodd-Frank Wall Street Reform Act of 2010. The settlement in CRC v CFPB resulted in the CFPB’s promulgation of a strong rule in 2023, only to see that rule challenged by the ABA and other bank trade groups.

The federal judge denied the ABA’s motion for summary judgment, finding that the CFPB did not exceed its authority and did not run afoul of the Administrative Procedures Act by failing to consider industry objections or inadequately conducting a cost-benefit analysis of the rule. In his ruling, the judge noted that the CFPB did, in fact, create a comprehensive record upon which it based its final rule. Thanks, CFPB!

While we know that the ABA and other trade groups will continue their distressing fight to halt the implementation of the rule, we appreciate that most banks report that they are preparing to follow it.

Rise Economy, our member organizations, our allies and all who truly support small businesses continue to await the rule’s implementation and impacts with great enthusiasm. 

Do we still believe in a bank called Hope?

Rise Economy last week submitted a comment letter to the FDIC, raising concerns about Bank of Hope as it seeks to acquire Territorial Savings Bank in Hawaii.

This letter expresses our disappointment that the bank has not met the commitments it made to the community after the merger of BBCN Bank and Wilshire Bank in 2016. We appreciate that Bank of Hope agreed to certain community commitments, offered to meet with our members annually, and provided data on its performance.

But at the same time, we note that the bank failed to meet its contributions goals every year for seven years, did not meet its commitment for seven years to support nonprofit loan loss reserves, never developed a small business loan referral program to allow denied small business borrowers to seek loans from nonprofit lenders and work to become bankable, engaged primarily in non-impactful community development investments, and did not always meet its overall annual CRA goals.  

We also were concerned the bank did not respond to our outreach to meet with and hear the concerns of the Koreatown Immigrant Workers Alliance (KIWA). KIWA believes that Bank of Hope finances problematic landlords and anti-union supermarket chain store owners and that the Bank may seek (and obtain) CRA community development credit for this by arguing it is helping to create good housing and job opportunities for community members. 

We believe that Bank of Hope should not be allowed to get further distracted from its CRA obligations in California by growing unless it commits to increased and impactful investment, the signing of our Anti Displacement Code of Conduct and the development of a similar due diligence process to ensure that employer financing does not further anti-union or anti-worker activities. And the bank should meet with KIWA to hear them out and see if problems can be addressed collaboratively. We appreciate the recent dialogue with the Bank and look forward to Bank of Hope better serving its communities in the future.