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As BMO Harris Applies For Bank of the West Litmus Test on Fairness for Rudderless Regulators

By Matthew Russell Lee, Patreon Story
BBC - Guardian UK - Honduras - ESPN

FEDERAL COURT / S Bronx, Dec 21 – Whether or not the U.S. Community Reinvestment Act will be again enforced until the new Administration and its regulators remains an open question. BMO Harris' application to buy Bank of the West and its more than 500 branches from BNP will be a litmus test.

 Fair Finance Watch notes, from Day 1, that in 2020 BMO Harris denied many more mortgage applications from African Americans than it approved: 509 denied versus only 223 loans made to African Americans, nationwide. BMO's numbers for whites were the reverse: 9270 loans made, versus less then six thousand denials. So what will the (new?) regulators do?

First came the news that the Biden Administration had nominated Saule Omarova to head the Office of the Comptroller of the Currency. While described as "anti big bank" - good - Inner City Press and others asked, What are her views on CRA, and how would she approach, and deny some, mergers? This got lost in the comrade talk. Now her nomination is over, with Omarova pulling the plug after opposition by Sens. Jon Tester (D-Mont.) Mark Warner (D-Va.) Kyrsten Sinema (D-Ariz.), John Hickenlooper (D-Colo.) and Mark Kelly (D-Ariz.). So who's next?


Meanwhile the proposed acquisition by South State of Atlantic Capital Bank in Georgia remains a litmus test. South State is so disparate that in South Carolina in 2020 for mortgage loans to African Americans it had more denials (147) than loans made (133) - while making six loans to whites for every denial to a white applicant.

On August 17, Fair Finance Watch and Inner City Press on the FOIA) filed a comment with the Federal Reserve Board, below.

On September 4, Fair Finance Watch commented to the Office of the Comptroller Currency, which some say has changed for the better. We'll see - now on September 7, South State has written to Fair Finance Watch, cc-ing the OCC and Fed: "Dear Mr. Lee... In the matter regarding the concerns of the Bank’s disparate marketing, the Bank is committed to providing equal access to credit throughout our footprint. The Bank takes a multi-layered approach to ensure that marketing of credit products reach all communities within the Bank’s Assessment Area and each application is underwritten without consideration of a prohibited basis. The Bank has undergone reviews by independent audit firms with reports dated June 30, 2020 and June 30, 2019 where marketing efforts have been reviewed. The reviews did not yield any fair lending concerns."

Then something is very wrong with those audits.

The Fed briefly extended the comment period - but then on December 17 asked this of South State and its outside counsel: "This correspondence relates to the application filed by South State Corporation, Winter Haven, Florida (“South State”), parent of South State Bank, National Association (“South State Bank”), to merge with Atlantic Capital Bancshares, Inc. (“Atlantic Capital”), and thereby acquire its subsidiary, Atlantic Capital Bank, National Association (“Atlantic Capital Bank”), both of Atlanta, Georgia, pursuant to sections 3(a)(3) and 3(a)(5) of the Bank Holding Company Act of 1956, as amended. Please respond in full to the following additional information items, including those listed in the confidential annex, and provide supporting documentation as appropriate. 1) In a response to a public comment dated September 17, 2021, South State indicated that South State Bank “annually engages an independent audit firm and conducts quarterly internal comparative file reviews of approved/declined loans to identify if there is inequitable pricing or underwriting of loans based on the prohibited basis found under the Equal Credit Opportunity Act and/or the Fair Housing Act.” a. Clarify whether the independent annual audit is separate from the quarterly internal comparative file review and discuss the types of information reviewed by both processes. Also discuss the role, if any, that South State or South State Bank staff have in the independent annual audit. b. Provide the most recent independent audit report. 2) At the time of its most recent Community Reinvestment Act (“CRA”) evaluation, Atlantic Capital Bank operated a network of branches in Georgia and Tennessee. Describe the process by which Atlantic Capital Bank reduced its branch network to its current two branches, including any steps that were taken to ensure continued compliance with the CRA." But that's after the close of the ("extended") comment period...

As to the Fed, which denies FOIA requests after five months, here, on August 25, this strange response: "Dear Mr. Lee,     This is to acknowledge receipt of your email to the Office of the Secretary for the Board of Governors of the Federal Reserve System (Board) dated August 17, 2021, regarding the proposal of South State Corporation to merge with Atlantic Capital Bancshares, Inc., and thereby indirectly acquire Atlantic Capital Bank, NA.  To date, South State Corporation has not filed an application with the Federal Reserve System.  Currently, the public comment period for the proposal will end on September 20, 2021. 

   If an application is filed within the next three months from the date your comment was sent, your correspondence will be made part of the record, and the Board will evaluate your comment.  We will also send a copy of the public portions of the application as soon as possible after the application is received.     Sincerely,     Jennifer Snow  Senior Examiner  Supervision, Regulation, and Credit  Federal Reserve Bank of Atlanta     Integrity. Excellence. Respect."

How can there be a comment period with expiration date, if there is no application? Inner City Press asked, and on August 26 was told:

"Our procedures provide that advance notice in the Federal Register may be requested in advance of a filing. The comment period end date applies to the Federal Register notice, which was filed in advance of the application being filed."

   What - the comment period running to its conclusion, before any application to comment on is available? This seems far too bank-friendly. How does it relate to the administration's Antitrust Memo? How will that be applied to BMO's BNP bid? Watch this site.

 Inner City Press (and Fair Finance Watch, on the HMDA) will have more to say about this. Watch this site.


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