• Thu. Dec 1st, 2022

Within the fight to get banks to benefit their communities

ByCindy J. Daddario

Feb 7, 2022

At a time when big banks Get easy approval for profitable mergers, some California community groups say, not anytime soon. Dozens of them are trying to block the US bank’s takeover bid for Union Bank unless the former lifts it $90 billion for lending and charitable giving to the state’s lower-income areas and communities of color.

the $8 billion mergerannounced September 21, 2021, would incorporate California fifth largest bank, a $680 billion mega-corporation that would compete with giants like Bank of America and JPMorgan Chase. How the Biden administration responds to the merger will be a test of whether the government intends to review rather than approve bank consolidation.

In a July 2021 supreme command President Biden called for a more critical approach to merger approvals, noting that “overconsolidation increases costs for consumers, restricts small business lending and hurts low-income communities.”


The $8 billion merger would create California’s fifth-largest bank, a $680 billion megacorp that would compete with giants like Bank of America and JPMorgan Chase.



The merger would be a win for bank managers Paulina Gonzalez Britothe CEO of the Oakland-based company California Reinvestment Coalition, made up of local housing advocates and non-profit development groups, is leading opposition to the acquisition. Gonzalez-Brito says low-income communities have a lot to lose in the deal.

To date, US Bank and Union Bank have each provided financing for affordable housing. Everyone makes home and small business loans, donates to local charities and community lenders.

“Now there is a risk that one will disappear. You end up with less than what you started with and the communities are getting fewer,” noted Gonzalez-Brito.

Much of the $90 billion package the CRC has proposed would be used for one of the state’s greatest needs: housing. This is reported by the California Housing Partnership 1.2 million low-income renters there is a lack of safe and affordable housing.

The California Reinvestment Coalition is calling for public hearings on the merger in Los Angeles, Fresno and San Francisco. CRC’s proposals include: Special programs to encourage home ownership among African Americans and Native American small businesses. They are also calling for smaller opportunities for tenants like Maria Montes de Oca to own and manage their own buildings.

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In Oakland, just before Christmas 2021 was celebrated by Montes de Oca and a handful of neighbors. Her landlord, who she said had doubled the rent over the past two years while refusing to clean up mold or fix clogged plumbing, had tentatively agreed to sell her building to the Oakland Community Land Trust.

“Now I can relax,” said Montes de Oca, because after a two-year rent strike, the Land Trust promises to keep the building affordable and make repairs – that is, if the deal is made.

Steve King, executive director of the Oakland Community Land Trust, said he expects to cobble together funding from the City of Oakland and nonprofit lenders to purchase the building from Montes de Oca.


US Bank claims its acquisition of Union Bank is in itself a benefit to the communities in which it operates and promises to provide affordable and improved access to finance.



CRC argues that the $90 billion benefits package would ensure low- and middle-income communities of color have access to housing and small business financing opportunities and mitigate the potential damage of consolidation.

However, such agreements are not legally binding and enforcement can be difficult. “That’s generally difficult,” said Mike Calhoun, president of the Center for Responsible Lending, based in Washington, DC. “They will say they will make X dollars worth of loans. It’s often fuzzy as to whether it’s beyond what they’ve done. How do you count which loans are eligible?”

In New York, Kathryn Franco, Chair of the Buffalo Niagara Reinvestment Coalitionsaid her group is trying to ensure the public is part of the process to help enforce agreements by being “really transparent about the information that we have, [and] to make it known to the community members.”

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The US Bank for its part Claims that the Union Bank acquisition is in itself a benefit to the communities in which it operates, promising in its October 2021 merger proposal to provide affordable and better access to finance, “tackle systemic racism” and to support “sustainable environmental practices”. The merger proposal also notes that both banks passed their most recent Community Reinvestment Act audits with a rating of “Outstanding”.

Under the Community Reinvestment Act, which aims to eliminate credit discrimination by banks, regulators regularly review each bank’s lending and community investments, and assign ratings ranging from unsatisfactory to excellent. But note inflation is rife, Gonzalez-Brito said, and 96% of banks are passing their exams.


In 2019, Senator Elizabeth Warren forced Federal Reserve Chair Jerome Powell to publicly admit that the Fed had approved 3,813 mergers and denied none since 2006.



Banks often accept co-benefit arrangements to quench resistance and grease the slides for mergers. CRC secured 12 such offers by urging regulators to deny bank mergers and acquisitions due to poor community reinvestment performance. But a $90 billion commitment by the US bank would be California’s largest yet.

Still, the entire process from merger announcement to community group concessions to eventual consolidation resembled more kabuki theater than transparent regulatory scrutiny, as bank mergers — at least for the past 15 years — have had virtually guaranteed approval.

In 2019, Senator Elizabeth Warren (D-Mass.) put an end to all doubts by forcing Federal Reserve Chair Jerome Powell to publicly admit that the Fed had agreed since 2006 3,813 mergers and zero rejected.

But that can change. After President Biden issued his executive order last July, both the DOJ and the FDIC have signaled that they will review their merger approval rules more carefully.

California Congresswoman Maxine Waters (D-Los Angeles), chair of the House Financial Services Committee, has urged regulators to slow the US bank-Union Bank deal and other pending mergers involving banks with assets of more than 100 Billions of US dollars would create until the federal authorities develop new regulations.

Echoing the reinvestment coalition’s call for public hearings on the merger, Waters wrote in a December 2021 letter to federal regulators that evidence “shows that bank consolidation is having a negative impact on small business lending, financial inclusion, financial stability and the rights of financial institutions workers.” impaired”.


In 2020, the US Bank rejected just 24% of loan applications from white areas, compared to 30% of applicants from predominantly African-American neighborhoods.



In its opposition to the merger, the CRC drew attention to the closure of US bank branches in lower-income neighborhoods and communities of color. The group cited a study by the National Community Reinvestment Coalition that showed US Bank closed a quarter of its 643 California branches between 2017 and 2020. CRC fears the consolidation would bring more closures, leading more people to turn to expensive check cashing and payday loans.

The bank’s lending also shows that despite its top CRA rating, racial disparity among borrowers in California persists.

In 2020, the US Bank rejected just 24% of loan applications from white areas, compared to 30% of applicants from predominantly African American neighborhoods and almost 38% from predominantly Hispanic communities.

Data drawn from banks’ federal disclosures also shows that as of 2020, about 38% of Californians lived in majority-white communities, with about the same percentage in majority-Hispanic neighborhoods. But 56% of the bank’s loan applicants were white and only 16.1% were Hispanic.

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US Bank spokesman Jeff Shelman argued in an email to Capital & Main that the bank’s “lending and approval processes were carefully designed with fair lending requirements in mind.” He cited $37 million in charitable giving and $1.3 billion in community development investments, such as a recent building Building with 98 residential units in San Bernardino County or a Motel for affordable housing Conversion in Anaheim. Shelman didn’t say the bank would not close any branches, but he did say, “We will not be leaving any communities that Union Bank currently serves and we are committed to keeping all branch employees on the front lines.”

However, CRC insists that banks put their commitments in writing. Gonzalez-Brito said U.S. bank officials have held at least two “listening sessions” with their group, but no real negotiations so far.

“I’m surprised at how slowly they’re progressing,” she said, adding that the community groups she works with are getting nervous.

Now that more critical merger scrutiny is on the horizon, groups like CRC and New York State’s Buffalo Niagara Reinvestment Coalition may have greater impact, and banks may be willing to spend more on communities to consolidate.

“I hope the way banks approach mergers will really change,” said Kathryn Franco of the Buffalo Coalition.



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