WASHINGTON – Federal bank regulators increasingly look the other way when major banks’ CRA reviews show low performance on lending, investments or services, allowing bank mergers that aren’t in the public interest to proceed, The Greenlining Institute charged in a letter just sent to Federal Reserve Chair Janet Yellen and FDIC Chairman Martin Gruenberg.
“Some regulators seem to see the banking world as being just like Lake Wobegon, where ‘all the children are above average,’” said Greenlining Institute Executive Director Orson Aguilar. “We’re seeing grade inflation that could render CRA evaluations meaningless if it’s allowed to continue. Banks with such weak records on community lending and investment shouldn’t be allowed to merge without tough conditions.”
Greenlining’s letter cites the recently approved purchase of CapitalSource, which had a record of strong CRA performance, by PacWest Bancorp, which has had a weak record. PacWest, which received “low satisfactory” ratings on lending, investment and services, still received an overall rating of “satisfactory” and was approved to swallow CapitalSource without being required to meet commitments to improve. The letter points out several other examples in which banks’ “low satisfactory” evaluations in multiple areas still led to an overall rating of “satisfactory.”
In the letter, Greenlining urges Yellen and Gruenberg to take several steps, including holding public hearings on all bank mergers, increasing transparency regarding CRA evaluations, and publicly affirming their intent to hold banks to a higher standard than barely-adequate performance.
THE GREENLINING INSTITUTE
A Multi-Ethnic Public Policy, Research and Advocacy Institute