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

By Matthew R. Lee

SOUTH BRONX, September 27 -- At the second of the Federal Reserve Board's three public meetings on Capital One's application to acquire ING DIRECT, Capital One in Chicago Tuesday morning made much of the $180 billion, ten year lending pledge it made on September 20.

 But when asked if this would be broken down by region, Capital One's representative said "no," adding "we may change what we have included" in the pledge.

Inner City Press' testimony asserted that some portion of Capital One's pledge may be predatory lending of the type engaged in by the Household International platform Capital One is seeking simultaneously to buy from HSBC.

The Fed has yet to schedule a hearing in New York, where it allowed Capital One to buy North Fork Bank and make further disparate its lending. So ICP's testimony was graceously read into the record by another NCRC member.

Even so, the Federal Reserve decided to "comment" on the testimony, telling Inner City Press to submit a new Freedom of Information Act request for ING's "request for a non-control determination" for its proposal to own 9.8% of Capital One.

Inner City Press has said ING should apply, to allow comment on issues like ING being under investigation for violating sanctions and doing business in Sudan and Syria. Now the Fed says to request a copy of ING's "request for a non-control determination" -- on which no public comment is accepted. And the Fed has delayed responding ICP's pending FOIA requests.

The next hearing -- ostensibly the last -- is next week in San Francisco, with the Fed's comment period slated to close on October 12. We will continue on this.

Fed board & Bernanke, ING's Sudan & Syria business & HSBC's predatory cards not shown

Below are portions of the testimony of Inner City Press / Fair Finance Watch:

...Inner City Press wishes therefore to focus on what is improperly NOT before the Federal Reserve, militating for new application, new hearings including in New York, and the dismissal of the ING Direct application as incomplete.

First, as Inner City Press has argued in the nine written comments it has submitted to date, since Capital One proposes to pay ING partial in stock, ING should be applying to the Fed to acquire up to 9.8% of Capital One. That level of ownership, ICP contends, constitutes control for purposes of the Bank Holding Company Act. We have noted significant adverse issues in ING's record, including for example an active Department of Justice investigation of ING violating sanctions and doing business in Sudan and Syria. The Fed should suspend Capital One's incomplete application and require ING to apply...

Inner City Press, based in the Bronx where the large North Fork Bank franchise Capital One acquire and worsened does business, has for week asked that a hearing be held in New York, one of Capital One's major markets. For some reason this was not done; ICP is presenting this testimony through a fellow NCRC member in Chicago, without prejudice to its ongoing demand for a hearing in Capital One's major market of New York.

Capital One's mortgage lending disparaties in 2010, the most recent year for year data is available (from Capital One, as ICP obtained it), was MORE disparate in New York State than elsewhere.

For example, in New York State in 2010 Capital One denied a whopping 72.7% of applications from Latinos, and 69.2% of application from African Americans, both higher that its nationwide numbers.

Also in New York, Capital One is moving to eliminate 135 jobs in Mattituck, Long Island...

Capital One's (first) response says that FHA lending down to 580 FICO scores "would qualify as subprime lending" and "put taxpayers dollars at risk" -- this from a company now trying to buy the subprime credit card business of HSBC, which HSBC bought from Household International. Just by the terms of Capital One's own response, public hearings are needed...

The Fed has still yet to fully respond to ICP's FOIA requests and appeals: this should take place forthwith. Inner City Press has received a Federal Reserve letter of September 12, responding to ICP's August 19 FOIA request by saying "there may be delays." The comment period should, in that case, be extended.

In this context it is unreasonable to expect new FOIA requests, for example for the withheld portions of the September 9 response Capital One was supposed to send. The improperly withheld portions from be provided forthwith. And for the additional reasons set forth before a public meeting should be held in New York, where the Fed allowed Capital One to acquire North Fork, and in New Orleans, Louisiana and Texas.

It is reported that "[a]lthough Federal Reserve Board officials promised to unveil a long-awaited package of key Dodd-Frank rules by the end of the summer, the central bank is likely to need more time to complete them. The rules, which implement Section 165 of the regulatory reform law, cover some of the biggest issues in financial services, including risk-based capital requirements, leverage, resolution planning and concentration limits."

Given the issues raised, including by Federal Reserve official Thomas Hoenig and NCRC and others, about this proposal, it is imperative that the Fed either finalize these regulations before the public meetings, or further extend the comment period.

On the questions of interconnectedness and too-big-to-fail, we refer for the record to the statement of longtime Kansas City Fed official Hoenig to Reuters that [quote]

"he has serious doubts about Capital One Financial Corp's proposed purchase of ING Groep NV's online bank ING Direct. 'I have very grave concerns about allowing these amalgamations of institutions that by their very structure are too big to fail, too interconnected to fail and I think the burden should be very heavily against that,' Hoenig said."

With even Fed officials now openly expressing these concerns, the comment period must be extended and further evidentiary hearings held. On the current record, for the Fed to approve Capital One's proposals would be arbitrary and capricious and subject to reversal in an appropriate Federal Court of Appeals.