Community groups have begun negotiating with U.S. Bancorp over mortgage assistance and payouts to financial nonprofits under an investment deal that would grease the rails for the company’s pending acquisition of MUFG Union Bank.
People involved in the talks expect the eventual price tag to exceed the $88 billion commitment from Pittsburgh’s PNC Financial Services Group when it bought BBVA USA — then the largest-ever such agreement — though some advocates acknowledge that the headline numbers on these agreements can overstate the size of the new commitments the purchaser is making.
Two sources familiar with the discussions expect Minneapolis-based U.S. Bancorp to face an extra hurdle requested by a growing chorus of local advocates in California and even some members of Congress: public hearings.
"It's about 80% likely,” one source said.
The Federal Reserve last hosted a public hearing on a bank merger in 2019, when community groups voiced concerns about the BB&T-SunTrust Banks deal that formed the now $530 billion-asset Truist Financial.
The Fed has yet to make a decision on whether to grant public hearings on U.S. Bancorp’s deal for San Francisco-based Union Bank. A spokesperson for the central bank declined to comment. A U.S. Bancorp spokesperson also declined to comment.
The community groups’ demands come at a time when the political landscape has shifted against big bank mergers. Earlier this year, President Biden
Though the talks with U.S. Bancorp are in their early stages, community groups have rallied around concerns about losing Union Bank’s presence and investments in California. The $567 billion-asset parent company of U.S. Bank argues the acquisition will give it a leg up to compete with even larger players. The banks expect their deal to close in the first half of 2022.
"This is a big one,” said Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition. “And even that feels like an understatement."
The California Reinvestment Coalition, the National Community Reinvestment Coalition and the Greenlining Institute were among 50 groups that sent a letter to the Fed on Nov. 8 opposing the merger unless “major investments” are made, and public hearings are held in Los Angeles, San Francisco and Fresno, California.
Last week, a group of advocates led by the National Minority Community Reinvestment Co-operative was preparing a separate letter to send to Fed Gov. Lael Brainard to request a public hearing.
Brainard, who is said to be under consideration by Biden for Fed chair, abstained from voting on PNC’s deal for BBVA USA in May, while raising questions about the approval process.
“We’re all aligned on this,” said Al Pina, CEO of the National Minority Community Reinvestment Co-operative, referring to the views of various community groups about the need for public hearings. “And there must be a hearing so that publicly the CEO of U.S. Bank can state their position.”
Several advocacy leaders involved in the talks with U.S. Bank referenced a recent call by House Financial Services Committee Chair Maxine Waters for more public hearings on bank mergers.
During a Sept. 29 hearing, Waters, D-Calif., urged federal banking regulators to allow advocates to face off against banking executives.
“We must open up this opportunity,” Waters said, “because this business of mergers without real community involvement has got to stop.”
While the two advocacy factions may agree about public hearings, they are taking different approaches to the investment deal to be negotiated with U.S. Bancorp.
The group led by the California Reinvestment Coalition, the National Community Reinvestment Coalition and the Greenlining Institute is in talks about a broader deal that would include investments focused on low- and moderate-income neighborhoods and people of color.
In their Nov. 8 letter, the groups did not list a total dollar figure, but they did make broad requests including “an annual increase” in mortgage originations for lower-income borrowers and homebuyers of color. The groups also made some specific demands, such as $37.5 billion in small business lending, especially for business owners who do not have Social Security numbers.
"It’s going to be bigger than PNC. It has to be,” Gonzalez-Brito said. “Whether the bank agrees with that, I don’t know."
On a recent phone call facilitated in part by the California Reinvestment Coalition, roughly 80 organizations in the Golden State raised concerns that benefits two banks currently provide to nonprofits and the communities they serve will soon be doled out by one. The groups want U.S. Bank to more than make up the difference.
"We’ve been saying that one plus one has to equal more than two. It has to equal three,” Gonzalez-Brito said. “You had two banks previously doing philanthropy and low-income housing tax credits, and now you’re going to have one. Usually what that means is communities have to get less."
The side led by the National Minority Community Reinvestment Co-operative wants more of the deal’s benefits to be directed specifically to Black, Hispanic, Asian and other communities of color than has been the case with other agreements, Pina said.
In a Nov. 10 letter that Pina’s group and its alliance sent to U.S. Bank CEO Andy Cecere, the groups called for a $100 billion investment deal. But in an interview, Pina acknowledged the headline figures for these deals can often be a “mirage” because of how the investments are counted.
The group’s main objective, he said, is to establish a carve-out specific to the groups they represent in whatever deal the bank strikes, rather than establishing a headline dollar amount.
Cecere has personally met with more than 100 community groups so far, listening to concerns and touting the bank’s Community Reinvestment Act scores, according to a U.S. Bank presentation on the deal.
“We think that this is a merger that actually enhances competition in the California markets,” U.S. Bank Chief Financial Officer Terry Dolan said in an October interview. “We think it’s a positive for the communities.”
As regulators
If a public hearing is granted, advocates are expected to press U.S. Bank hard for bigger investments in their communities. “These hearings are going to be fire and brimstone,” Pina said.
