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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

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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.

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Bank of America, Moving to Close 600 Branches, Blames Merrill Lynch Deal, Regulators Conflicted

By Matthew R. Lee

NEW YORK, July 28 -- Bank of America's government subsidized takeover of Merrill Lynch will now lead to the closing of 600 neighborhood bank branches, it emerged on Tuesday. B of A spokesman James Mahoney said, "'what we are heading to is a model where we have fewer but more robust branches that incorporate the investment and mortgage services that we have picked up with the acquisition of Merrill Lynch'... People are accessing their money in new ways and have less need for the traditional neighborhood branch."

   But is this lesser need for bank branches true in the lower income communities of color which Bank of America claims to care about? If anything, it has been the lack of bank branches with normally priced credit which drove residents of such neighborhoods to the subprime lenders, many of them funded and enabled by Bank of America, which set off the financial crisis. Click here for an Inner City Press story on B of A's subprime ties.

   As Bank of America has fallen under financial, regulatory and finally Congressional pressure, it has been jettisoning its stance on the Community Reinvestment Act. In April of this year, and still unexplained by Bank of America, B of A chief financial officer Joe Price told stock analysts on a recorded conference call that while "CRA" loans are only 7% of B of A's portfolio, they were 24% of their losses. Click here for audio, Price made his statement at Minute 26:25.

  Price's name shows up in the contexted e-mail chain about the government's pressure on Bank of America's top officials, using their desperation to keep their jobs and perks, to consummate its subsidized takeover of Merrill Lynch.

B of A (and Merrill), 600 branch closings not yet shown

  Now that acquisition is cited by Bank of America as a reason they will move to close down neighborhood bank branches and consolidate into larger facilities with Merrill's investment services, presumably in more affluent areas.

  Would the same regulators who pushed Bank of America to close the Merrill acquisition credibly constrain B of A from the branch closings the bank says flow from the deal?

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.

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These reports are usually also available through Google News and on Lexis-Nexis.

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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