Banking

Community groups require hearings on U.S. Bank-Union Bank offer

Community groups have actually started working out with U.S. Bancorp over home loan support and payments to monetary nonprofits under a financial investment offer that would grease the rails for the business’s pending acquisition of MUFG Union Bank.

People associated with the talks anticipate the ultimate cost to go beyond the $88 billion dedication from Pittsburgh’s PNC Financial Services Group when it purchased BBVA U.S.A. — then the largest-ever such arrangement — though some supporters acknowledge that the heading numbers on these contracts can overemphasize the size of the brand-new dedications the buyer is making.

Two sources knowledgeable about the conversations anticipate Minneapolis-based U.S. Bancorp to deal with an additional obstacle asked for by a growing chorus of regional supporters in California and even some members of Congress: public hearings.

In September, when U.S. Bancorp revealed an offer to obtain MUFG Union Bank, the 2 business stated they anticipate the merger to close in the very first half of 2022.

“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 encouraged the Justice Department and federal bank regulators to tighten their scrutiny of acquisitions. The White House said at the time that branch closings resulting from M&A deals can reduce small-business lending by about 10% and lead to higher borrowing costs.

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 huge one,” stated Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition. “And even that seems 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 larger than PNC. It needs to be,” Gonzalez-Brito stated. “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 stated. “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” due to the fact that of how the financial investments are counted.

The group’s primary goal, he stated, is to develop a carve-out particular to the groups they represent in whatever deal the bank strikes, instead of developing a heading dollar quantity.

Cecere has actually personally consulted with more than 100 neighborhood groups up until now, listening to issues and promoting the bank’s Community Reinvestment Act ratings, according to a U.S. Bank discussion on the offer.

“We think that this is a merger that actually enhances competition in the California markets,” U.S. Bank Chief Financial Officer Terry Dolan stated in an October interview. “We think it’s a positive for the communities.”

As regulators think about strengthening CRA requirements for significant banks, Pina stated groups like his will likely drop the method of drawing out big payments as part of the merger approval procedure. But in the meantime, he stated, the deals use their only take advantage of to score more financial investments and bring more analysis of bank executives.

If a public hearing is approved, supporters are anticipated to push U.S. Bank hard for larger financial investments in their neighborhoods. “These hearings are going to be fire and brimstone,” Pina stated.



Gabriel

A news media journalist always on the go, I've been published in major publications including VICE, The Atlantic, and TIME.

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