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With Flagstar's NYCB Bid Stalled at FRB Amid Wisp of  Fair Lending Action OCC Whispers on Digital

By Matthew Russell Lee, Patreon
BBC - Guardian UK - Honduras - CJR - PFT

SOUTH BRONX / SDNY, Nov 3 – Back in April 2021, Fair Finance Watch and Inner City Press predicted that the proposed merger of New York Community Bank and Flagstar would flounder, on disparate lending and regulatory evasions.

  Fair Finance Watch found that in 2019 Flagstar made 60,982 mortgage loans to whites, with 13,963 denial to whites - while making only 3799 loans to African Americans with fully 1777 denials to African American. This was significantly worse than other lenders.

  New York Community Bank's record as an enabler of and profiteer off slumlords led Inner City Press file a Community Reinvestment Act challenge to its then-proposed merger with Astoria Bank, which fell apart.

Now more than a year a half later, the proposed merger is still not done amid talk of, as we predicted, fair lending action.

But with the Fed not yet ruling, the Office of the Comptroller of the Currency this week hauled off and handed out an approval. (This while the OCC brags about a February 2023 symposium on mergers - more on this to follow). These two banks immediately extended their drop dead date, and said "The Fed Approval is not expected to have any associated waiting period." They talk about the Fed approval as a fait accompli. And why no waiting period?

On November 3, with the approval order still not made available clearly on the OCC website, it was reported that the OCC whispers conditions: The Office of the Comptroller of the Currency's approval of the pending deal between New York Community Bancorp Inc. and Flagstar Bancorp Inc. is subject to multiple conditions related to digital assets.  One merger approval condition from the banking watchdog is related to New York Community's participation and equity investments in the USDF Consortium, an association including nine banks that aims to further the adoption and interoperability of tokenized deposits by referencing fiat currency on blockchain.  New York Community's unit, New York Community Bank, is a founding member of the Consortium and participated in one of the first tests in January, helping a customer receive payments via USDF minted by another member, NBH Bank, a subsidiary of National Bank Holdings Corp. The Consortium relies on the Provenance Blockchain, a public blockchain that can be accessed by developers via Provenance's utility token Hash.  As New York Community Bancorp and Flagstar Bancorp plan to form a national bank as a result of the merger, to be known as Flagstar Bank NA, the combined entity is required to obtain written permission from the OCC to retain its membership interest in the USDF Consortium.... Flagstar NA shall not increase its membership interest in the USDF Consortium or its holdings of Hash or any other crypto-assets without the OCC's permission, according to the approval letter.  In another digital-asset related condition, Flagstar NA must submit, within 30 days after the merger is closed, a written request for supervisory non-objection regarding activities related to crypto-asset, distributed ledger or stablecoins addressed in OCC Interpretive Letters 1170, 1172 or 1174. Flagstar NA will otherwise cease and divest of these activities within two years after the merger closes, according to the approval letter.  Other bank members of the USDF Consortium include FirstBank, a subsidiary of FB Financial Corp.; Webster Financial Corp.'s Webster Bank NA; Synovus Financial Corp.'s Synovus Bank; Amerant Bank NA; Atlantic Union Bankshares Corp.'s Atlantic Union Bank; ConnectOne Bancorp Inc.'s ConnectOne Bank; and Primis Financial Corp.'s Primis Bank.

Inner City Press has gone back to find Flagstar's comments on the proposed and still pending Community Reinvestment Act regulations - tellingly, full of resistance: "Because Flagstar supports the goals of the CRA, the Bank submits this comment letter to highlight concerns about the Agencies' proposed reforms to the CRA framework. This Proposal would undermine the objectives of the CRA and run contrary to the Agencies' stated effmts to ensure that the law continues to be an effective force for strengthening banks and the communities they serve, which j: intludes (i) low- and moderate-income ("LMI") individuals, families, and neighborhoods; (ii) small businesses and farms; and (iii) communities in need of financial services and economic development. Flagstar is particularly concerned about the proposed retail lending assessment area requirements, which would impose significant regulatory, operational, and staffing burdens on banks (especially when coupled with the proposed data collection requirements); force banks to spread limited CRA resources thin and undermine the effectiveness of their CRA programs; and place banks at a competitive disadvantage to nonbanks and other lenders not subject to the CRA. In our view, these challenges will discourage banks from engaging in retail lending and other CRA activities that could otherwise benefit local communities, contrary to the spirit of the law. Moreover, as applied to Flagstar, the proposed retail lending assessment requirements would be so overly burdensome and unworkable that they would likely cause us to question and rethink our business model. 1. There is insufficient data to justify abandoning longstanding interpretations of the CRA to require the delineation of lending-based assessment areas; Requiring the delineation of a lending-based assessment area would go beyond the text and purpose of the CRA." Yeah.

Both companies' stock prices are down. CRA and fair lending sometimes do have an impact. Watch this site.

 Watch this site.

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