By Julie Steinberg
LOS ANGELES--Consumer advocacy groups and bank supporters
clashed Thursday in front of a panel of banking regulators
reviewing CIT Group Inc.'s proposed acquisition of OneWest Bank
NA's parent company.
While most of the panels were generally cordial, some consumers
had harsh words for the plan to put together a
$70-billion-in-assets bank run by former Merrill Lynch & Co.
Chief Executive John Thain.
OneWest "is not above the law," said Helen Kelly, a 67-year-old
former state prosecutor who said she encountered difficulties with
the lender when she wanted to modify the terms of her mortgage on
her Pleasanton, Calif., house. She then compared bankers to an
"Ebola virus" that had spread to contaminate homeowners.
Joseph Otting, OneWest's chief executive, declined to comment on
individuals' dealings with the bank, but said earlier that
OneWest's loan-modification process had been "extensively
tested."
Mr. Thain, CIT Group's CEO, said at the meeting that the merger
would be beneficial for consumers in Southern California, and the
combined bank would target $5 billion of community-related
investments, donations and lending over the next four years.
"I think this is an important event, and I wanted to be present
here," Mr. Thain said in an interview. "I wanted to be able to
state the case why we think this transaction's important."
Mr. Thain said he wasn't surprised by the public scrutiny of the
merger, which analysts still expect to be approved later this year.
"There haven't been very many significant bank transactions," he
said. "This is an opportunity" for groups on both sides to express
their views, he said. Mr. Thain said throughout the day he had
chatted with both supporters and opponents of the deal.
The executive agreed with some consumers' views and said
mortgage regulations should be reviewed. "I think the stories
you've just heard [on the panels] are terrible." He then referenced
one example of people being thrown out of their house but blamed
federal rule he said needed to be changed.
Public opposition has been building for months to CIT's
announced $3.4 billion deal. The California Reinvestment Coalition
along with other groups recently delivered to regulators a petition
with more than 15,000 signatures calling for a hearing.
This isn't Mr. Thain's first brush with opposition to a deal. In
2005, when he was CEO of the New York Stock Exchange, he announced
a merger with Archipelago Holdings Inc. and encountered fears and
resistance from some disgruntled NYSE seat holders, who eventually
approved the deal.
"Any time you're trying to do something different or innovative,
there's always those who don't necessarily agree," Mr. Thain
said.
Consumer advocacy groups Thursday argued Mr. Thain's latest
merger creates a bank that is "too big to fail," a contention Mr.
Thain tried to rebuff.
The current regulatory framework looks beyond asset size when
determining risks to financial stability, he said, adding that this
transaction wouldn't result in greater risk to the country's
financial system.
If the deal is completed, CIT would boost its assets above a $50
billion threshold imposed by the U.S. Dodd-Frank law requiring
Federal Reserve supervision and tougher capital rules. Still, the
assets of CIT after the deal would still fall far below the $1
trillion-plus balance sheets of the nation's largest banks.
Several business associations in testimony Thursday praised
OneWest Bank and its devotion to the community. Many groups that
appeared on opposition panels said they weren't against the idea of
a merger, but instead wanted to ensure the bank commits sufficient
resources to the community.
Write to Julie Steinberg at julie.steinberg@wsj.com
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