NEW YORK (MainStreet) — The CIT Group and OneWest financial institutions are following in the foot steps of Banc of California with their proposed merger, but they have yet to sit down and create a community credit plan with local organizers.
“The new financial institution would have nearly $70 billion in assets, and we’re concerned that communities meant to be served will be lost in the merger,” said Kevin Stein, associate director at the California Reinvestment Coalition (CRC).
CRC is urging regulators to extend the comment period that’s set to end this month to give CIT Group and OneWest more time to respond.
“We are asking for a written public commitment to serve the needs of the community with investments, mortgages, small business loans and refinancing,” Stein told MainStreet.
CRC is a membership organization that promotes fair and equal access to banking and financial services for California’s low-income communities and communities of color.
“Given the troubled history of both CIT and OneWest, we believe this merger should not move forward until leadership works with community groups to create a strong Community Benefit and Reinvestment Plan that will ensure a clear benefit as a result of this merger and ensure no further harm by these banks,” said Paulina Gonzalez, executive director with CRC.
OneWest Bank is the successor to IndyMac Bank, whose failure cost the Federal Deposit Insurance Fund more than $10 billion and is still benefiting from loss sharing agreements with the FDIC.
“IndyMac’s mortgages caused a great deal of financial heartaches as thousands of people lost their homes,” said Sherri Jackson, president of the Multicultural Real Estate Alliance for Urban Change. “Regulators need to thoughtfully consider safeguards for the community, including increased access to responsible, safe mortgages for first-time homebuyers prior to any acquisition moving forward.”
Since January 2007, Indymac/OneWest oversaw 45,000 foreclosures in California, according to data from Foreclosure Radar, and the CIT Group has had its own financial struggles.
"The facts are that CIT received $2.3 billion TARP funds before filing one of the largest Chapter 11 bankruptcies in history,” Stein said. “We want to see an end to this subsidy of investors and financial institutions. We need investment in communities.”
The Troubled Asset Relief Program (TARP) is U.S. government funding used to purchase assets and equity from financial institutions signed into law by former president George W. Bush on October 3, 2008.
Union Bank also has a public reinvestment plan that details its commitment to lend, invest and provide financial services to low income communities and even though Union’s plan expires next year, the bank is working with CRC and other community groups to renew its commitments.
"Small businesses need access to capital in order to grow but that capital has been difficult to access especially from banks, since the recession,” said Roberto Barragan, president of the Valley Economic Development Corporation. “A priority on lending to small businesses articulated through a Community Benefit and Reinvestment Plan will help strengthen and rebuild our communities."
One West is headquartered in Pasadena with branches in Southern California, including San Diego, Riverside, Ventura and Orange County. CEO Joseph Otting failed to respond to outreach from MainStreet by press time.
--Written by Juliette Fairley for MainStreet