Some issues resonate across the political spectrum — particularly, it seems, issues of local economics.ÊTake, for instance, New Haven Savings Bank and its proposal to acquire two other banks and to convert from mutual form, owned by its depositors, to a publicly-traded company owned by, well, who knows? These proposals require governmental approval, after a comment period and, possibly, public hearings. Fair Finance Watch/Inner City Press earlier this week filed challenges with the Federal Deposit Insurance Corporation and Connecticut Banking Commissioner John Burke, based on NHSB’s exclusion of African Americans and Latinos from its lending, including in New Haven. The comment periods remain open at least until Oct. 30; here’s why you might want to get involved.
NHSB is the number one bank in New Haven, measured both by deposits and market share of mortgage loans made. Its market shares of mortgages to whites and people of color, however, are strikingly different. In 2002, NHSB made 29 percent of the home improvement loans that were made to whites in the New Haven area, while having only half that market share of loans made to African Americans, and a third of that market share of loans made to Latinos. The reason might be found in NHSB’s high denial rates for people of color; for home improvement loans in New Haven in 2002, NHSB denied Latinos’ applications 2.52 times more frequently than whites’ — and denied the applications of African Americans 3.15 times more frequently than those of whites. The underlying data is public, available on www.ffiec.gov, and reflects similar disparities in NHSB’s home purchase and refinance lending, in New London, Bridgeport and beyond. NHSB doesn’t contest these numbers because it can’t: the data, for it and its peers is public under the Home Mortgage Disclosure Act. NHSB does, of course, mount a defense, one that centers on a Community Reinvestment Act rating awarded to it by the FDIC. That rating did not consider the 2002 lending data, nor, we’d contend, did it sufficiently consider fair lending. For what it’s worth, the FDIC rates 98 percent of banks “Satisfactory” or “Outstanding” under the CRA. This grade inflation limits the credibility of the ratings, which, in any event, are not conclusive when a bank’s application for approval to expand is challenged.
What’s the relationship between fairness in lending and NHSB’s pending merger applications? Well, there’s a federal law, the Community Reinvestment Act (CRA), which requires regulators to consider whether a bank serves its entire community, including low and moderate-income neighborhoods and by extension communities of color, when evaluating the bank’s applications for approval to merge, expand or convert. The last of these three is what makes NHSB’s proposal unique. Currently, NHSB is owned by its depositors, similar in some ways to a credit union. It proposes, without any vote of the depositors, to sell stakes in the bank on the stock market, and in all probability to sell the entire bank to another, larger bank after a three year waiting period is over. This is more than Chicken Little speculation: of 25 mutual savings banks in Connecticut that converted from 1983 to 2000, 23 were subsequently sold to larger banks. So this is what would await NHSB and its two current targets, the Savings Bank of Manchester and Tolland Bank. The passage from mutual to stock ownership to merger-bait can result in the elimination of up to half of a bank’s jobs, as we’ve just seen with Boston-area Cambridgeport Bank, which converted, waited four days more than the requisite period, then sold itself to Royal Bank of Scotland’s Citizens Financial Group. Last week it was announced that half the jobs at Cambridgeport are gone (Boston Business Journal, “Nearly Half of Port Jobs Gone after Citizens Buy,” 10/20).
Fair Finance Watch and Inner City Press have their headquarters in the South Bronx of New York City, but are periodically active in Connecticut (as one example, Inner City Press has a Freedom of Information Act Commission hearing scheduled for Nov. 18 in Hartford, against the Connecticut Attorney General’s Office). Being here in New York, we’ve interviewed groups of Yale students twice in recent years, both at events characteristic of the political left: a protest against the World Economic Forum, which shut down Park Avenue for a few hours, and a protests against Citigroup, at which several Yale students spoke. New Haven Savings Bank represents the local face of privatization and even globalization; we’d assume that students concerned about the World Trade Organization and the International Monetary Fund would want to take the time at home to speak out against New Haven Savings Bank’s proposals.
But students to the right (said otherwise, those who highly value free enterprise and competition), should also get involved. Ownership of a home is a major wrung in the ladder of the American Dream; if people are flung from this wrung or not allowed to climb, in ways that fall along racial lines, it undermines both free enterprise and fair competition.
And so — drum roll! — those interested should, at a minimum, send short letters requesting public hearings, to the FDIC and to John Burke, the Connecticut Banking Commissioner. There may be another comment period, to the Federal Reserve, but it hasn’t yet begun. Beyond Fair Finance Watch, there are local community groups in New Haven with which to collaborate. But before Oct. 30, send in a letter. Democracy and fairness are not only issues overseas, or in Washington or Hartford — they are right in New Haven, and there are things you can do.
Matthew Lee is the coordinator of Inner City Press/Fair Finance Watch, a non-profit organization based in the South Bronx of New York.