by Kate Berry
Two activist groups are urging federal regulators to investigate whether OneWest Bank in Pasadena, Calif., used donations and other sweeteners to buy community support for its $3.4 billion sale to CIT Group.
The Greenlining Institute alleges that OneWest’s chief executive, Joseph Otting, promised money to church and community groups in exchange for their support of the merger.
“Do regulators support CEOs promising monetary assistance to groups to gain support for mergers? We hope not,” Orson Aguilar, the executive director of the Greenlining Institute, wrote in a three-page letter Wednesday to Federal Reserve Chair Janet Yellen and Comptroller of the Currency Thomas Curry. “If left unchecked, more CEOs will use corporate dollars to skew public participation and render the entire public comment process a sham.”
Aguilar asked regulators to obtain and make public a list of nonprofit groups that OneWest solicited in support of the merger, and a list of pending and planned grants to nonprofit groups made by OneWest. Greenlining is trying to determine whether “there is a pattern of such support being skewed toward backers of the deal,” Aguilar’s letter said.
Another consumer advocacy group went even further on Friday. Paulina Gonzalez, the executive director of the California Reinvestment Coalition, sent a letter to the Fed and OCC asking that the investigation be extended to include “all lending, investment and contractual relationships entered into or promised by OneWest and CIT during and relating to the period of time the banks were attempting to build support for their applications.”
Gonzalez wrote that regulators could then ensure that all support for the M&A deal was “freely given and not the result of the banks exerting pressure or undue influence.”
OneWest officials did not return calls and emails seeking comment Friday.
Greenlining and the reinvestment coalition opposed the deal at a public hearing held by the Fed in Los Angeles on Feb. 26.
Many supporters of the proposed merger took to the microphone at the hearing, hailing Otting as a man of integrity who would provide substantial financial assistance to minority communities. Many of the groups are located in low- and moderate-income areas of Los Angeles where OneWest does not have branches.
Greenlining’s Aguilar said nonprofits that did not support the merger “are now at a disadvantage when applying for funding due to the substantial percentage [of funding] already committed,” by the bank. He wants Otting to sign a formal statement pledging not to punish groups that opposed the merger.
Critics of the merger are particularly piqued that the two banks received nearly $5 billion in corporate subsidies to recover from the financial crisis, according to the reinvestment coalition.
CIT, a $48 billion-asset specialty finance company based in Livingston, N.J., received $2.3 billion in taxpayer support from the U.S. Troubled Asset Relief Program. But that infusion was wiped out in 2009 when CIT filed for bankruptcy.
The $23 billion-asset OneWest, received lucrative loss-sharing deals from the Federal Deposit Insurance Corp. that are expected to carry over to the merged company.
The combined company would have $70 billion in assets and 73 branches. Nearly all of those branches belong to OneWest; only two of them are located in low-income areas.