As
Colonial Bank is Handed to Predatory BB&T, CRA Ignored by
Regulators, G-20 Preview
By
Matthew R. Lee
SOUTH
BRONX, NY, August 15 -- Lost in the late Friday coverage of the
handover of
Colonial BancGroup to BB&T was the way that this acquisition of a
$25 billion bank was shielded from any public comment or
consideration of the Community Reinvestment Act. The CRA of 1977,
which requires that regulators consider public comments on banks'
records of serving low and moderate income neighborhoods when they
apply for approval for mergers or expansion, has been ignored on a
number of large acquisitions, such as JPMorgan Chase's pick-up of
Washington Mutual. Click here for
an Inner City Press story on the
aftermath of branch closings.
At
that time, the
regulators were in crisis mode, so to some the waiver of applicable
law was more understandable. Now under a new administration which
says the recovery has begun, the law is again waived, for a bank
whose chairman has ridiculed the CRA while engaging in predatory
lending through BB&T's Lendmark subsidiary, sure to expand into
new markets through this acquisition.
There
has been no mention of
any post consummation consideration of BB&T's record or any CRA
plan it might have. If this is the new era of financial regulation,
it is worse not better than what came before.
BB&T's
chairmanJohn 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, regulatory oversight and Lendmark 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."
And now more in the five Colonial states...
Footnote:
In Pittsburgh, the FDIC handed over Dwelling House S&L
Association to PNC Bank with even less fanfare, and also no mention
of CRA. Next month the finance ministers of the largest economies
convene for a meeting of the so-called Group of 20. In a city
crippled by foreclosures on predatory loans, and now the site of the
U.S.'s waiver of one of its few laws meant to crack down on the
mis-service of lower-income borrowers, there will be talk of
improving the regulation and supervision of banks. But it will be
empty talk, and there will be protests. Watch this site.
Inner City Press on Geithner (video stream) click
here
* * *
Predatory
Lending Persists, Despite Rosy Views from DC,
Citi's Dark Side in Knoxville
By
Matthew R. Lee
SOUTH
BRONX, August 1 -- In Washington and New York, there is talk of an
uptick in the national housing market and a curtailment of
controversial subprime lending by such wounded giants as Citigroup.
On July 31, Inner City Press asked the
International Monetary Fund
about the regulation of subprime lending in the United States,
yielding a rosy answer
about consumer protection.
But a mortgage
broker in Knoxville, Tennessee long known to Inner City Press tells a
different story on both fronts. He has in the past been sued for
whistleblowing about Citigroup, and so will remain nameless in this
article. But he knows Citigroup's subprime business well, having
worked for and then against its consumer finance subsidiary
CitiFinancial.
Reflecting
the
collapse of the housing market, he compares 2006, when he closed over
100 home purchase loans, with the year to date 2009, in which he has
closed only six such loans.
His
income
from fees has plummeted, and
he faces a car repossession by Wells Fargo (which he calls Hells
Fargo). Still he laments others' problems more than his own,
describing to Inner City Press a sample CitiFinancial loan in
Knoxville.
"They
raked
her at twelve and a half percent," he said, referring to a 63
year old African American woman who was also charged $7,000 in fees.
"This is after they took TARP bailout funds, they won't show any
flexibility and she's about to lose her house."
He describes
another borrower who has a $1700 personal loan from Citifinancial at
25.5% interest, and a $6,000 loan at 16% from Washington Mutual
Finance, which CitiFinancial bought. The loans were consolidated at
the higher CitiFinancial rate of 25%. "They're still up to their
predatory lending," the maverick broker says. Even with the
go-go years over.
\
CitiFinancial storefronts offer 25.5% loans, IMF and regulation not
shown
On
July
31, Inner
City Press asked the
Western Hemisphere Division Chief of the
International Monetary Fund Charles Kramer about U.S. regulation of
subprime lending, current and proposed:
Inner
City Press: What do you think of the proposal by the Obama
Administration of the economic effect of separating prudential
regulation of banks from consumer protection? It's pending in the
House. I was told that the IMF will have some view on that and you
are the guys to ask. What can you say to that?
MR.
KRAMER: There are two observations we'd make on that. First of all,
the key principle is that prudential regulation needs to be
strengthened and be uniformly strong across the board, and a clear
message coming out of the crisis is that prudential regulation needs
to be enhanced significantly. Part of your question goes to an
organizational issue, and looking around the globe we see financial
supervision and regulation organized in a number of different ways.
In some places we see it organized along functional lines where you
have regulators for insurance companies and securities companies
individually and so forth, and in some countries we have regulation
along conceptual lines you could say, so you have prudential
regulation and consumer and investor protection regulation. We're not
of the view that there is any one sort of magic bullet or any one
formula for this. Again the key thing is that you need strong and
sound prudential regulation across the system.
Inner
City Press: To the degree that unregulated subprime lending in some
cases by bank affiliates at least triggered or started the rumblings
of this. What protection do you think should be in place so that that
doesn't happen again?
MR.
KRAMER: Again I think the issue is that you need strong prudential
regulation across the board. Consumer products are obviously one
area, but there are a lot of others. You mentioned nonbanks, for
example. We think it's very important that the administration has
proposed to bring nonbanks under a stronger regulatory net to the
extent that they're systemic, so we think that the proposal in
particular to designate certain banks and nonbanks as tier one
financial holding companies that would come under stronger regulation
is a very good thing.
Whether
these
moves will help people for example in Knoxville with 12.5% mortgages
and 25.5% personal loans from CitiFinancial remains to be seen.
* * *
