Inner City Press -- Investigative Reporting From the Inner City to Wall Street to the United Nations

As Bank of Montreal Hides Reply to M&I Merger Protest Under CRA, Fair Finance Watch Challenges

by Matthew R. Lee

NEW YORK, March 20 -- Faced with Community Reinvestment Act protests to the proposed acquisition of M&I by Bank of Montreal and its Harris Bank, the Federal Reserve earlier this month asked for a description of the banks' “policies, procedures and practices to ensure compliance with the fair lending laws.”

  Inner City Press / Fair Finance Watch had raise to the Fed, for example, that in the Chicago area “Bank of Montreal's Harris Bank in 2009, the most recent year for which Home Mortgage Disclosure Act data is available, denied the conventional home purchase loan applications of Latinos 2.52 times more frequently than those of whites. An even more extreme disparity exists for African Americans in the Gary Indiana MSA.”

  But when Bank of Montreal's law firm Sullivan & Cromwell sent its answer to the Fed to Inner City Press, as required, it blacked out more than half of the response, including the entire section entitled “Self-Assessment and Monitoring,” more than a page long. Click here to see banks' response as provided to Inner City Press.

  Inner City Press has challenged the “radical redaction” of the fair lending and branch closing response of Bank of Montreal under the Freedom of Information Act, and argues that the comment period, set to close on March 22, cannot close while this information is being withheld.

  Applicable banking law requires the Federal Reserve to consider the Community Reinvestment Act (CRA). On CRA ratings, Harris has a “Low Satisfactory” rating in lending, investment and service in Wisconsin, M&I's headquarters, and a Low Satisfactory under the service test in adjacent Indiana.

  Fair Finance Watch notes that the official whom Bank of Montreal has assigned to merger integration, Cecily Mistarz, was previously in charge of strategy for “Harris Private Bank, a unit that provides wealth management services to affluent individuals and families” -- giving rise to concerns that if run by Bank of Montreal, the resulting bank would turn away from low and moderate income communities.

  Harris Bank performed relatively worse than all lenders, as a group, in the Milwaukee MSA in 2009 with respect to lending to African-American borrowers. Harris Bank issued only 0.30 percent of its prime loans to African-American borrowers, compared to 2.69 percent of all lenders' prime loans to the same borrower group. In addition, Harris Bank's market share of loans to African-American borrowers was just 11 percent of its market share to white borrowers. Harris effectively made zero percent (just one loan) of all loans to African-American borrowers and 0.62 percent of all loans to white borrowers in the Milwaukee MSA.

  In small business lending, Harris Bank's performance in 2009 was significantly worse compared to all lenders in the Milwaukee MSA as a group, in providing small business loans less than $100,000. Harris Bank issued 65 percent of its small business loans as loans less than $100,000; in contrast, all lenders in Milwaukee, as a group, issued 85 percent of their small business loans as loans less than $100,000.

  Fair Finance Watch also notes that despite M&I not having paid its TARP bail out back, the CEO of M&I stands to get a $18 million payout from the proposed acquisition.

  The 2010 HMDA data has just been obtained by Fair Finance Watch, and analysis will be submitted to the Federal Reserve and other regulators, in Wisconsin and elsewhere.

  Inner City Press is aware of comments being submitted or prepared in Missouri, Indiana, Wisconsin and beyond, and argues that the comment period, set to close on March 22, cannot close while this information is being withheld. Watch this site.