Last December I wrote about a bank merger deal that could create yet another "too big to fail" bank from the smoking embers of two of the very banks that helped blow up our economy in 2008: OneWest Bank (formerly IndyMac) and CIT Bank. While I'm baffled that this merger is still pending, I'm happy to report a bit of good news.
The federal officials who must approve the merger have listened to the pleas of community groups and consumer advocates that they not rush this deal through. Groups like the California Reinvestment Coalition and The Greenlining Institute (where I work) strongly urged the feds to hold a public hearing to ensure full vetting of the deal's impact on the communities these companies serve -- or fail to serve, as is more often the case. The Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency have agreed to hold a joint public hearing on the impact of the merger this Thursday, Feb. 26 in Los Angeles, including testimony from individuals and community organizations.
All of the reasons I laid out for being skeptical of this merger still hold. Both banks have a sketchy past: OneWest emerged from the ashes of the failed IndyMac, one of the largest bank failures in American history. CIT experienced one of the largest bankruptcies on record, and did so after taking $2.3 billion in federal bailout money and breaking its promise to help small businesses. Executives of both banks dismiss this history as if it never happened.
In addition, bank officials have failed to address the needs of the communities the new supersized bank would serve (including an initial refusal to make meaningful commitments to low-income communities under the Community Reinvestment Act), acting instead as a bank for the top 1 percent. OneWest does almost no purchasing from minority-owned businesses, and CEO Joseph Otting has responded to legitimate questions with crude attempts to strong-arm community groups into supporting the deal.
Now the people will get to speak to the regulators. Live. In person. Face to face. Because opportunities like this are rare, it's important for people who want a fair and responsive banking system to show up in numbers.
Of course, no one can predict what the Fed and the OCC will eventually do, but even if they approve the merger, they could attach conditions that would benefit consumers, particularly those not part of the 1 percent. But whatever action officials finally take, the very fact that this hearing is happening is a small win for the people.
Why? For one thing, it will create a public record. All the comments -- from the public and community advocates as well as from the banks and their supporters -- will be public and available online, creating an invaluable resource for all who want to keep the new institution honest as it moves forward.
Just as importantly, it helps establish that these sorts of bank megamergers shouldn't be easy or quick. Banks should know that they'll have to go through a thorough examination at which the communities they serve will have a real voice, and they should be ready to address those concerns or face time-consuming, expensive delays.
Strikingly, rather than address those concerns, Otting tried to head off a hearing by generating a blitz of form-letter emails to regulators, claiming that "there is no need for a public hearing" and that the "merger will retain and create new jobs in California." That he didn't get away with it is a good thing all by itself. Hopefully, Otting will be able to explain what jobs will be created, other than the few multimillion-dollar-compensated executive positions CIT will move to the state.
If you will be in Los Angeles Feb. 26, I urge you to attend. The hearing will be held from 8 a.m. to 4 p.m. at the Los Angeles Branch of the Federal Reserve Bank of San Francisco, located at 950 South Grand Avenue in downtown Los Angeles. If you can't make it for the whole day, opponents of the merger will hold a rally outside the building starting at 12:15 p.m. And by all means join the conversation online by using the hashtag #StopOneWestCIT. My colleagues will be posting updates on Twitter @Greenlining.