Connecticut Attorney General and Senator-elect Richard Blumenthal LAW ’73 came to New Haven Tuesday to support the city’s effort to keep a city bank in local hands.
First Niagara, a Buffalo-based bank, is seeking to buy New Haven-based NewAlliance Bank for $1.5 billion. Outside the NewAlliance headquarters on Church Street on Tuesday afternoon, Blumenthal joined Mayor John DeStefano, Jr. despite freezing gusts to call for public hearings before the Federal Reserve Bank of New York approves the merger. DeStefano said the merger would hurt job creation in New Haven because of reductions in lending to small businesses.
“The community deserves answers about how this is going to affect jobs in New Haven, and they deserve an opportunity to be heard,” Blumenthal said, in front of about 20 residents and reporters standing in the 30-degree weather.
DeStefano has submitted letters opposing the takeover to the Federal Reserve Bank of New York, the state banking commission, and the comptroller of the currency in the past week. In his letters, DeStefano argued that by law, approval of bank mergers must take the “convenience and needs of the community” into account. The merger, he wrote, could be a disaster for the New Haven community because it would “reduce the credit available to low- and moderate-income individuals, small businesses and homebuyers, and cause significant job losses.”
DeStefano criticized the bank’s conversion to a publicly traded company in 2003, predicting that it would set the stage for the bank to be sold.
The mayor’s prediction proved accurate.
“This is a transaction that will transfer wealth to a narrow number of corporate officers at the expense of New Haven residents,” DeStefano said Tuesday.
In 2003, under public pressure from the city, NewAlliance, which began as New Haven Savings Bank, agreed to several concessions to accompany its conversion to a public company. The bank set aside $25 million for the creation of First City Development Corporation, a non-profit community lender.
U.S. Representative Rosa DeLauro, who represents New Haven, also submitted a letter on Dec. 1 to the New York Federal Reserve. In her letter, DeLauro argued that smaller community-based banks have “in these past two years largely avoided making risky decisions heading into this economic crisis and continued to make credit available.”
Meanwhile, a new community-based bank is set to open shortly.
A new bank called START has been cleared by the Federal Deposit Insurance Corporation to begin operating with over $16 million in capital from the original $25 million NewAlliance set aside as part of its concessions to the city. START, which aims to fulfill local lending needs in the wake of NewAlliance’s regionalization, plans to open for business in January, according to the New Haven Independent.
NewAlliance bank is the fourth-largest bank headquartered in New England, with 88 branches in Connecticut and Western Massachusetts.