Inner City Press: Investigative Reporting from the United Nations

Amid Bank Mergers & High-Cost Consumer Loans, Subprime Summers for Fed?

By Matthew R. Lee

NEW YORK, August 13 -- Despite being bailed out by the public and some now waning populist rhetoric from Washington, the continuing bank merger proposals show no concern for the public or for job loss.

Why should they, when President Obama considers Larry Summer, on the Board of Directors of the no-doc (and thus subprime) Lending Club, to head the Federal Reserve?

The biggest proposed bank merger in the US in the past month is the $2.3 billion agreement between Pacific Western Bank and CapitalSource Bank, to have a "national commercial lending arm."

The comment? No "benefits for current clients of either bank. This is typical of this sort of deal. Management and Wall Street think it's just dandy. Meanwhile, employees lose their jobs and customers see more fees."

But the investment bankers, of course, get paid.

Then in Arkansas there's Liberty BancShares and Home BancShares, proposing to form a $7 billion bank with 92 branches in Arkansas (#2 in that state, to Arvest) and 59 outside the state. Governor Mike Beebe appeared at the press conference in support of the merger, which would lead to job loss. That's politics.

In the Carolinas, there's Forest Commercial Bank into Carolina Alliance Bank in upstate South Carolina and western North Carolina, branches in Spartanburg, SC, Asheville, NC, and Hendersonville, NC, a loan production office in Charlotte and a proposed branch office to be located in Seneca, SC. But who would benefit?

Inner City Press / Fair Finance Watch while considering those three has now commented to the Office of the Comptroller of the Currency against Republic Bank's proposal to buy H&R Block Bank. As stated, both institutions have a history of high cost lending to consumers, through tax refund anticipation loans and otherwise. See, "Steve Trager: Pending H&R Block bank deal could return Republic Bank to being mega tax refund provider," Insider Louisville, July 11, 2013

Even if Republic denies that headline from its headquarters city, public hearings should be held on what Republic would do with H&R Block's "Emerald Card" program, particularly given its subsidiaries and their plans: Republic Prepaid Systems, "an issuing bank to offer general purpose reloadable prepaid debit, payroll, gift and incentive cards through third party program managers" and Republic Credit Solutions, "preparing to pilot short-term consumer credit products through multiple channels.”

Reviewing 2011 HMDA data, the most recent data available (and largely unaddressed in existing Community Reinvestment Act performance evaluations and fair lending exams), ICP has examined Republic Bank & Trust Co's refinance and home improvement lending in the Louisville, Kentucky and Cincinnati MSAs.

In the Louisville MSA in 2011 for refinance loans, Republic 40.4% of applications from African Americans, versus on 20% of applications from whites. Its denial rate for Latinos was even higher: 45.5%

For home improvement loans, Republic denied 50% of application from African Americans versus 24.8% of applications from whites. Its denial rate for Latinos was 100%.

In the Cincinnati MSA in 2011, Republic made 27 refinance loans to whites and NONE to African Americans, nor Latinos. It made seven home improvement loans to whites, none to African Americans (denial rate 100%) nor Latinos.

Inner City Press / Fair Finance Watch also commented to the Federal Reserve on the application by Chile's Banco De Credito E Inversiones to buy City National Bank of Florida. The current parent Bankia is surrounded by controversy and litigation, including involving the Spanish central bank with the Managing Director of the IMF Christine Lagarde mentioned as a witness, in connection with its bailout that is related to this proposed sale.

Reviewing 2011 HMDA data, ICP has examined City National Bank of Florida's home purchase and refinance lending in the Fort Lauderdale, Miami and Orlando MSAs.

In the Fort Lauderdale MSA in 2011 for refinance loans, City National Bank of Florida made 15 such loans to whites, and NONE to African Americans or Latinos. It denied all three of the applications it received from Latinos.

In the Orlanda MSA in 2011 for conventional home purchase loans -- the only kind of home purchase loans City National Bank of Florida makes or reports -- it made 53 such loans to whites, only eight to Latinos and only TWO such loans to African Americans.

In the Miami MSA in 2011 for refinance loans, City National Bank of Florida made 54 such loans to whites, only 16 to Latinos and only ONE such loan to an African American applicant.

Analysis now proceeds on other proposed acquisitions. Until July, Inner City Press used and cited SNL Financial in stories such as these. A request to continue, and specifically about these and other institutions, is pending before Christina M. Twomey of SNL Financial. We hope to have more on this - and on Larry Summers and the Fed. Watch this site.

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