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November 7, 2014
Chair, Federal Reserve
20th Street and Constitution Avenue N.W.
Washington, D.C. 20551
Comptroller of the Currency
400 7th Street, SW
Washington, D.C. 20219
Why Many Black, Latino and Asian American Church, Minority Business and Minority Nonprofits Support the Acquisition of OneWest by CIT
Dear Chairwoman Yellen and Comptroller Curry,
As this letter indicates, a broad coalition of minority community groups support, for a number of reasons set forth below, this merger based upon the number of accomplishments and an even greater number of commitments by OneWest Bank pursuant to CRA including the commitment to secure “Outstanding” CRA ratings and to take a number of actions to support Chairwoman Yellen’s commitments to end income inequality.
The National Asian American Coalition is part of a major coalition of Black, Latino and Asian American organizations, from faith-based to small business to non-profits, that has played a major role, beginning with the Great Recession of 2008, in attempting to ensure that the financial industry avoids a repetition of the extraordinary crisis that may have begun as early as 2001 when some of us met with then Chairman Alan Greenspan to discuss our concerns relating to lax bank regulatory oversight.
We and our colleagues within the coalition have frequently met with all the federal banking regulators in DC, as well as with the leadership of FHFA, HUD and key congressional leaders from Republican Darrell Issa to Democrat Maxine Waters. We have also met with the leadership from more than thirty financial institutions, including leadership from the four “Too Big to Fail Banks” Citigroup, Bank of America, Wells Fargo and Chase, as well as a number of so-called “Systemically Important” banks such as Union Bank, US Bancorp, Capitol One, Regions Bank and Bank of the West.
We have also met with a number of banks that may soon be so-called “Systemically Important” including First Republic Bank and City National Bank. In addition, we have met with the leadership from mid-sized banks such as Cathay Bank, East West Bank and Pacific Western Bank, as well as a large number of community banks.
The “we” in our coalition, includes the leadership of the National Hispanic Christian Leadership Conference of 40,000 Latino Churches, the leadership of the 5,000 African Methodist Episcopal Churches, the leadership of the largest Latino Chamber of Commerce and one of the largest pan-Asian American advocacy groups in the nation. Virtually all will be affected by CIT’s acquisition of OneWest Bank.
We and the members of the minority coalition, some of whom will be submitting separate letters of support, all support the merger. However, before describing why we support the merger, we wish to offer some observations on “Systemically Important” banks and the present inadequacies of CRA particularly in its implementation by banks and regulators.
Support for Bank Regulatory Reforms with Some Qualifications
Our coalition strongly supported the Dodd-Frank Act and worked frequently with Congressman Barney Frank and Maxine Waters on various provisions. We also were initially strong supporters of the Volker Rule (until it became too complex and convoluted to be effectively enforced) and are deeply concerned about the lack of competition and the financial risks relating to “Too Big to Fail” banks. That is, we support much stronger competition than that provided by just Bank of America, Wells Fargo, Chase and Citigroup. For example, we believe that Governor Tarullo’s recent meeting with the leadership from all of the so-called “Systemically Important” banks with up to $150 billion in assets is a positive sign for possible change in the size required to be considered “Systemically Important”.
Specifically, we do not agree that a bank is automatically “Systemically Important” at the $50 billion asset level. Instead, we believe that in order to create more effective competition in addressing “Too Big to Fail” banks, banks with under $500 billion in assets should be treated as “Important” banks but not necessarily “Systemically Important” banks. For example, no bank should automatically be considered “Systemically Important” until it reaches a minimum of $100 billion in assets. Further, the stress test should be proportional to the size of the institution from $100 billion to under $500 billion. For example, banks between $250 and $500 billion, such as US Bancorp and Capitol One, should be in a separate category, distinguished from banks such as Union Bank with $105 billion in assets. Such graduated treatment could also maximize competition. It could, for example create at least ten and in some regions up to twenty competitive banks.
We have analyzed the impact of the CIT/OneWest merger in the above context from the perspective of our nation’s 130 million minorities and the 70% of our population that lives from paycheck to paycheck. Our conclusion is that this merger does not automatically create a “Systemically Important” bank.
All of our organizations fully support Federal Reserve Chair, Janet Yellen’s October 17th speech to the Federal Reserve Bank of Boston on income inequality. As referenced in the speech, banks play a crucial role in eliminating income inequality and wealth inequality. One of the four pillars of Chairwoman Yellen’s speech is the education of our children and its impact on future income and wealth inequality. Another key feature is the building of wealth through homeownership. A third key pillar in transmitting wealth and reducing income inequality is through small business development and technical assistance.
We urge that all banks seeking to merge should be judged, in part, by their role in helping reduce income and wealth inequality.
Two Percent of Pretax Profits Directed at Underserved Communities
One of the keys to reducing income and wealth inequality is the amount of corporate philanthropy relative to assets, and/or relative to deposits, and/or relative to revenue and particularly relative to pretax profits allocated for the above referenced reductions in income and wealth inequality. For many years we and one of the most respected opponents of income inequality, Greenlining Institute, have urged that at a minimum, every financial institution commit a minimum of two percent of pre-tax profits to underserved communities rather than the prevalent less than one percent of net profits that is often distributed primarily to elite causes such as art museums and universities. We therefore urge that this merger and future mergers be examined in this context and the degree to which a bank meets the two percent of pre-tax profit standard. (This is just one-fifth of the ten percent tithing among many church members.
Outstanding and Outstanding Plus CRA Ratings
As we have pointed out in comments filed with the Federal regulators on September 8th relating to CRA reforms, the present CRA rating system is an inadequate evaluator of what a financial institution does to benefit the community. We believe it will be improved once Maxine Waters’ Section 342 diversity provisions are implemented under the Dodd-Frank Act (CFPB will hopefully announce its requirements for greater transparency by the end of this year.)
Similarly, too many banks that are nonresponsive to community needs receive so-called “Outstanding” CRA ratings and rarely is a mediocre bank subject to a “Negative Needs to Improve” CRA rating. (None of the so-called “Systemically Important” banks, to our knowledge have received an overall “Needs to Improve” rating even though many are lacking in service, investments and lending to underserved communities)
This is why, in our September 8th CRA comments to the regulators, we urged a new category, which we believe requires no legislation. The new rating is “Outstanding Plus,” a rating we believe no large bank has yet earned. OneWest Bank has committed to receiving an outstanding CRA rating in the future in the three categories of lending, service and investments in the community. They also have informed us that should the regulators create the new and higher rating of “Outstanding Plus,” as we have proposed, they will consider quickly seeking to achieve such a rating.
Specifics of Why We Support the Acquisition
From our initial discussions, it appears that 60 to 100 minority church, small business and nonprofits will be working with us to support the merger because of the specific commitments with OneWest Bank and its CEO to assist underserved communities and because of its pledge to be at a minimum an “Outstanding” bank in terms of CRA.
We are specifically working on a number of pilot programs by OneWest and its CEO that could double or triple the effectiveness of youth financial education programs and substantially reduce income inequality throughout California. This is especially likely, if some other so-called “Systemically Important” banks join with OneWest Bank.
A.) We are working with OneWest Bank on a number of job creation and small business development and technical assistance programs that, if adopted or embraced by “Systemically Important” financial institutions, could within two years reduce California’s unemployment rate to well below the national average. It could also create tens of thousands of new jobs, particularly among unemployed and underemployed minorities. Further it could help develop long-term sustainable small businesses, some of whom could eventually be employers of hundreds if not thousands of inner-city unemployed or underemployed residents.
B.) We are working on a number of home lending programs including alternatives that, if adopted by the major mortgage originators doing business in California, could substantially alter the present lack of home originations to the vast majority of eligible Black, Latino and Southeast Asian potential homeowners in California.
C.) We are in the early stages of discussing a new bank model for large banks that is similar to the once prevalent practice of community bank CEOs of being personally involved in the community.
D.) We also note a number of commendable programs consistent with reducing income inequality and promoting youth financial education adopted by OneWest Bank prior to the proposed acquisition by CIT. These programs include Junior Achievement, Boys and Girls Clubs, Partnership for LA Schools, City Year Los Angeles and Mind Institute among others.
E.) We are working with the CEO of OneWest on developing an innovative Community Advisory Council that will have substantial input on future bank policies intended, for example, to reduce income inequality including creating of jobs, homeownership and youth financial education.
Throughout this letter, we have focused on minority communities, but believe all underserved communities should be served, without regard to race and ethnicity. We are, however, stressing minority since A) 60% of Californians are minorities, B) 75% of our K-12 public school students are minorities and C) 80-85% of underserved communities in California are minority communities.
Monthly Coalition Evaluations of OneWest
This preliminary report on why we support the merger will, on a month by month basis be updated and contain specific actions and results by OneWest Bank that relate to achieving an outstanding, CRA rating and specific efforts to help reduce income and wealth inequality.
In the Banc of California merger, 58 of our coalition members requested expedited approval of the Banc of California acquisition of Banco Popular. Because of the larger size of this merger, and the regulators present view of “Systemically Important” banks, we merely support timely approval. However, should the regulators reexamine and redefine “Systemically Important” banks, we may, based on subsequent achievements by OneWest Bank, urge the same type of expedited approval that we urged in the Banc of California/Banco Popular case.
D.C. Meetings with Regulators Including Federal Reserve and OCC
During the period November 12 to 14, 2014, we and many of our coalition members will be in Washington DC for meetings with key bank regulators, including Federal Reserve Chair Janet Yellen, Mel Watt, the head of FHFA, OCC, the FDIC, HUD and the CFPB to further discuss, based on the commitments of OneWest and its CEO, the potential positive benefits of this merger. We are also open at any time to a community dialogue with the key Federal Reserve and OCC staff on this matter and we believe that the CEO of both CIT and OneWest are prepared to join us if you wish.
|/s/ Faith Bautista
President & CEO, National Asian American Coalition
|/s/ Sam Rodriguez
President, National Hispanic Christian Leadership Conference of 40,000 Latino Churches
|/s/ Mark Whitlock
Senior Minister, COR AME Church, Irvine, CA
Director of Corporate Partnerships, 5,000 African Methodist Episcopal Churches
Executive Director, Ecumenical Center for Black Church Studies
Chair, Orange County Interdenominational Alliance
|/s/ Jesse Miranda
Founder, Jesse Miranda Center for Hispanic Leadership
Former CEO, National Hispanic Christian Leadership Conference
|/s/ Sergio De La Mora
Senior Pastor, Cornerstone Church of San Diego (6,500 Member Congregation)
Co-Founder, Turning the Hearts Center/s/ Theresa Martinez
Chief Executive Officer, Los Angeles Latino Chamber of Commerce/s/ Charles Dorsey ________
Associate Pastor – Youth and Young Adults, Christ Our Redeemer AME Church, Irvine, CA
|/s/ Gilbert Vasquez
Chair, Los Angeles Latino Chamber of Commerce Serving 250,000 Latino Businesses
/s/ Arnulfo Manriquez
President & CEO, MAAC/s/ Jin Sung
Executive Director, OASIS Center International
|/s/ Lee de Leon___________________________________
Pastor Lee de Leon, President and Founder Templo Calvario CDC
|/s/ Dan de Leon__________________________________
Pastor, Templo Calvario CDC
|/s/ Cora Oriel
President, Asian Journal Publications/s/ Alex Anderson ________
Co-Chair, African Americans for Economic Justice/s/ Vivian Araullo
Executive Director, West Bay Pilipino Multi-Service Center
|/s/ Eric Le
Director, Vietnamese & Laotian Community Alliance for San Diego and Orange County/s/ George McDaniel ________ ________ ________
Co-Chair, African Americans for Economic Justice/s/ Cathy Zhang
Executive Director, Chinese-American Institute for Empowerment & Sound of Hope
CC Federal Reserve and OCC Senior Executives
CEO of CIT
CEO of OneWest
CRA Director for OneWest
 This incentive is necessary since the stick approach has not worked. That is, large and medium sized banks are never prevented from seeking a merger since no bank pf significant size has, in recent memory, received an overall “Needs to Improve” CRA rating.
 Should the regulators embrace our September 8th comments on CRA and develop an “Outstanding Plus” CRA rating, we will also report on OneWest Bank’s efforts in supporting and achieving such.
 See for example Federal Reserve Governor Tarullo’s recent meeting with so-called “Systemically Important” banks with assets of $50 billion to $150 billion