Public CRA Benchmarks Would Boost Transparency in Bank Mergers

Earlier this week, the authors of an American Banker blog post suggested that the Greenlining Institute and the California Reinvestment Coalition should not have asked the Federal Reserve and the Office of the Comptroller of the Currency to investigate the timing of grants, lending, and investments made to nonprofits in relation to the proposed merger of CIT Group and OneWest Bank.

As members of these state-wide coalitions, we've been involved in opposing this proposed merger. We stand by the position that regulators should investigate the timing of OneWest's grants, lending, and investments. If in fact these banks are attempting to influence support with the promise of payoffs, regulators should not allow it.

Despite disagreeing with the overall tone of the post, we did find some common ground with the authors' suggestions. We had earlier called on OneWest and CIT to commit at least .03% of deposits to charitable purposes. We now join in their suggestion that the two banks strengthen their commitment by dedicating .05% of their deposits to charitable purposes, which would more than double what the bank has proposed under its current CRA plan.
However, philanthropy is only one aspect of the activities that banks engage in under the CRA, which is why our coalition members advocate for public benchmarks on all CRA activities.

In working with banks, our coalitions advocate for the banks to develop clear CRA plans that include benchmarks on activities like community development investments, small business lending, home loans to low- and moderate-income borrowers and branch presence. In our experience, clearly defined goals are the foundation of a strong CRA plan and commitment. They allow for objective analysis of a bank's CRA record, comparison to peer banks, and a better way to measure the public benefit (or lack thereof) from a proposed merger.

While our coalitions already use these benchmarks in our work with banks, we believe that broader adoption by all of the banks and their regulators would enable everyone to see which banks are performing well and which ones are not.

This change would make it less convenient for banks to make vague promises to do better in the future-if their merger is approved now.

Public CRA benchmarks also create an increased level of transparency that puts to rest any questions about whether banks might improperly use grants to secure support for proposed mergers (or even if those grants might give the appearance of impropriety).

With 96% of banks receiving a "satisfactory" rating or better since the inception of the CRA, using transparent benchmarks would also address both advocate concerns about CRA grade inflation and banks' concerns about CRA exams being too subjective.

For these reasons, we call on OneWest and CIT Group to commit to a strong and transparent CRA plan for reinvesting in California communities.

Unfortunately, OneWest and CIT Group's proposed plan currently falls short on all of our benchmarks. Based on the CRC's analysis of the limited data provided by the banks, their proposed plan calls for a level of activities that are a fraction of what their peer banks and even smaller banks are already doing.

Moreover, the proposed CRA plan also contradicts stronger goals established in OneWest's strategic plan for the years 2012-2015. For example, OneWest's CRA strategic plan calls for annual lending and investment goals, as well as multifamily lending goals. But in the latest version of the proposed CRA plan, there are no actual goals set for multifamily lending or community development loans.

The banks' current CRA plan is especially disappointing given that both CIT Group and OneWest Bank received subsidies provided by taxpayers and the Federal Deposit Insurance Corp., to say nothing of the harm caused by tens of thousands of OneWest foreclosures across the country. Based on our analysis, we believe the merger should not move forward until the banks create a more robust CRA plan.

Until there is agreement among banks, regulators, and advocacy coalitions about adopting clear CRA benchmarks, advocacy coalitions like CRC and Greenlining will continue to call for public hearings on troubled bank mergers, to remind people about earlier public subsidies to banks, and to ask difficult questions. Our clients, communities—and our fellow taxpayers, in the case of this merger—depend on this vigilance.

Roberto Barragan is president and chief executive of VEDC and a board member of the
California Reinvestment Coalition. Earl 'Skip' Cooper II is president and CEO of the
Black Business Association and a coalition member of the Greenlining Institute.