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Banker Allison of BB&T
in Meltdown Misdirection, Subprime Loans Were Shielded
Byline: Matthew R. Lee of Inner
City Press on Wall Street: News Analysis
SOUTH
BRONX, February 1 -- Given
the hundreds of billions of dollars being thrown at banks in response
to the
subprime lending-triggered meltdown, holding accountable those who
turned
American finance down the subprime path would seem to be important.
Conservatives blame the Community Reinvestment Act, saying that this
law
enacted in 1977 to combat the redlining of and refusal to lend in inner
city
areas was something of a time bomb, set to explode 30 years later.
But the explosive growth of
subprime
lending took place in parts of financial holding companies which are
not
covered by CRA, like Citigroup's CitiFinancial and similar consumer
finance
subsidiary in Wells Fargo and HSBC, purchased as Household
International. The
subprime loans were securitized by investment banks not only like the
defunct
or swallowed Lehman Brothers, Bear Stearns and Merrill Lynch, but also Goldman
Sachs and Morgan Stanley, entirely outside of CRA, before they ran to the
Federal Reserve to get their bailout money.
One tier down the world of finance, the chairman of
regional bank BB&T
John Allison gave a speech on January 29 in which he blamed the CRA
for the
financial crisis. This is more than a little ironic, given BB&T's
engagement under Allison in subprime lending.
When the Bronx-based Fair Finance Watch documented
to the Federal
Reserve that BB&T's banks referred turned-down loan applicants to
their high-cost
subprime affiliate Lendmark Financial Services, during the public
comment period on BB&T's
application for approval to acquire Georgia's Main Street Banks, the
Federal
Reserve ignored the issues. Click here for 2006
coverage from Inner City Press, and here in 2009 for Lendmark's
own website,
still reciting "non-conforming mortgage loans" from "104 branch
locations throughout Georgia, Tennessee, Virginia, Maryland, Florida,
North Carolina, South Carolina, Kentucky, West Virginia, and Delaware."
BB&T's once and future chairmen, subprime
Lendmark and CRA not shown
Click here
for the Federal Reserve approval
order, which recited from the comments of Fair
Finance Watch
"concern about referrals of loan applicants to
Lendmark Financial Services ('LFS'), a nonbank subsidiary of BB&T
that
makes subprime loans. BB&T has represented that it might refer to
LFS
applications denied by a BB&T subsidiary bank that do not meet the
bank's
underwriting guidelines. Before making a referral, however, these
applications
undergo an internal second-review procedure. In addition, BB&T
notes that
LFS has a policy to refer applicants who meet the Freddie Mac
underwriting
guidelines to BB&T's subsidiary banks."
But as Inner City
Press noted, BB&T's
referrals up and down do not use the same standard. On fringe finance
the Federal
Reserve said that Fair Finance Watch
"expressed concern
about BB&T's relationships with unaffiliated pawn shops and other
nontraditional providers of financial services. As a general matter,
the
activities of the consumer finance businesses identified by the
commenter are
permissible, and the businesses are licensed by the states where they
operate.
BB&T has stated that it does not focus on marketing credit services
to such
nontraditional providers and that it makes loans to those firms under
the same
terms, circumstances, and due diligence procedures applicable to
BB&T's
other small business borrowers."
BB&T
admitted in its responses into the record before the Federal Reserve
relationships
with 45 payday and other fringe financiers. BB&T under Allison
ran
headlong into subprime -- as Fair Finance Watch and then the Fed noted,
in its
order
"A
commenter
asserted that the Board should, in the context of the current proposal,
review
BB&T's recently announced plans to acquire the assets of FSB
Financial Ltd.
('FSB'), Arlington, Texas, a nonbanking company that purchases
automobile-loan
portfolios. The FSB acquisition is not related to the current
proposal.
Moreover, if the FSB acquisition is consummated under authority of
section 4(k)
of the BHC Act, the acquisition would not require prior approval
of the
Federal Reserve System. BB&T would require prior Federal Reserve
System
approval if the acquisition were proposed under sections 4(c)(8) and
4(j) of
the BHC Act, and the transaction would be reviewed in light of the
requirements
and standards discussed above."
The
Gramm-Leach-Bliley Act of 1999
amended the Bank Holding Company Act of 1956 and made it easier for
subprime lenders to be acquired with no prior review by the
Federal Reserve, no public comment period, no CRA review. BB&T John
Allison's fulimations notwithstanding, that deregulatory GLB Act,
passed in part to
legalize after the fact the merger that created Citigroup, is the
statute
investigators should be looking at. And the acts of subprime-hungry
bankers
like John Allison of BB&T. We'll have more on this meltdown
misdirection, in the spirit of accountability.
For now,
consider this
buzz about Lendmark in 1997, this 2006
BB&T investor relations presentation (also of its subprime
Liberty Mortgage Corporation), and again, Lendmark's own website,
still reciting "non-conforming mortgage loans" from "104 branch
locations throughout Georgia, Tennessee, Virginia, Maryland, Florida,
North Carolina, South Carolina, Kentucky, West Virginia, and Delaware."
Inner City Press on Geithner (video stream) click here
Click here for Inner City Press'
review-of-2008 UN Top Ten debate
Click here for Inner
City Press' December 24 debate on UN budget, Niger
Click here from Inner City Press'
December 12 debate on UN double standards
Click here for Inner
City Press' November 25 debate on Somalia, politics
Click here for Inner City
Press Nov. 7 debate on the war in Congo
Watch this site, and this Oct. 2 debate, on
UN, bailout, MDGs
and this October 17 debate, on
Security Council and Obama and the UN.
* * *
These
reports are
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Click
here
for a Reuters
AlertNet piece by this correspondent
about Uganda's Lord's Resistance Army. Click
here
for an earlier Reuters AlertNet piece about the Somali
National
Reconciliation Congress, and the UN's $200,000 contribution from an
undefined trust fund. Video
Analysis here
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