Community groups have begun negotiations with US Bancorp over mortgage aid and payments to nonprofit financial organizations in an investment deal that would pave the way for the pending acquisition. MUFG Union Bank company.
Those involved in the talks expect the final price to exceed the $ 88 billion commitment of Pittsburgh’s PNC Financial Services Group when it bought BBVA USA – then the biggest deal of its kind – although some advocates recognize that the headlines of these agreements can overstate the scale of new commitments made by the buyer.
Two sources familiar with the discussions expect Minneapolis-based US Bancorp to face an additional hurdle demanded by a growing number of local California lawyers and even some members of Congress: public hearings.
“It’s about 80% likely,” a source said.
The Federal Reserve last held a public hearing on a bank merger in 2019, when community groups raised concerns over the BB & T-SunTrust Banks deal that formed the Truist Financial asset, which now represents 530 billions of dollars.
The Fed has yet to decide whether or not to grant public hearings on US Bancorp’s deal with San Francisco-based Union Bank. A central bank spokesperson declined to comment. A spokesperson for Bancorp also declined to comment.
The demands of community groups come at a time when the political landscape has shifted against big bank mergers. Earlier this year, President Biden encouraged the Department of Justice and federal bank regulators to tighten their control over acquisitions. The White House said at the time that branch closures resulting from mergers and acquisitions can cut small business lending by about 10% and lead to higher borrowing costs.
Although talks with US Bancorp are in their early stages, community groups have rallied around concerns over the loss of Union Bank’s presence and investments in California. US Bank’s parent company, with $ 567 billion in assets, says the acquisition will give it a head start to compete with even bigger players. Banks expect their deal to be completed in the first half of 2022.
“It’s a big deal,” said Paulina Gonzalez-Brito, executive director of the California Reinvestment Coalition. “And even that sounds 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” were 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 prepared a separate letter to send to Fed Governor Lael Brainard requesting a public hearing.
Brainard, reportedly under consideration by Biden for Fed chairman, abstained from voting on the PNC deal for BBVA USA in May, while raising questions about the approval process.
“We all agree on this point,” said Al Pina, CEO of the National Minority Community Reinvestment Co-operative, referring to the views of various community groups on the need for public hearings. “And there has to be a hearing so that the CEO of the US bank can publicly express his position.”
Several advocacy leaders involved in the talks with US Bank referred to a recent call by House Financial Services Committee Chair Maxine Waters for more public hearings on bank mergers.
In a September 29 hearing, Waters, D-Calif., Urged federal banking regulators to allow lawyers to confront bank executives.
“We have to open up this opportunity,” Waters said, “because this business of mergers with no real community involvement has to stop. “
While the two militant factions can agree on the public hearings, they are taking different approaches to the investment deal to be negotiated with US Bancorp.
The group led by the California Reinvestment Coalition, the National Community Reinvestment Coalition and the Greenlining Institute is in talks on a broader deal that would include investments focused on low- and moderate-income neighborhoods and people of color.
In their November 8 letter, the groups did not give a total dollar figure, but did make broad demands, including “an annual increase” in mortgage origination for low-income borrowers and home buyers. colored house. The groups have also made specific requests, such as $ 37.5 billion in small business loans, especially for business owners who do not have a Social Security number.
“It’s going to be bigger than PNC. It has to be,” Gonzalez-Brito said. “I don’t know if the bank is ok with this.”
In a recent phone call facilitated in part by the California Reinvestment Coalition, about 80 organizations in the Golden State raised concerns about the benefits that two banks currently provide to nonprofits and the communities they serve. will soon be distributed by one. The groups want US Bank to do more than make up the difference.
“We said that one plus one has to be equal to more than two. It has to be equal to three,” Gonzalez-Brito said. going to have one. Usually this means that communities need to have less. “
The team led by the National Minority Community Reinvestment Co-operative wants more of the deal’s benefits to go specifically to black, Hispanic, Asian and other communities of color than has been the case with other deals. , Pina said.
In a Nov. 10 letter that the Pina 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 that the headlines of these deals can often be a “mirage” because of the way investments are counted.
The main goal of the group, he said, is to establish an exclusion specific to the groups they represent in any deal the bank makes, rather than setting a lump sum in dollars.
Cecere has personally met with more than 100 community groups so far, listening to concerns and touting the scores of the Bank Community Reinvestment Act, according to a presentation by the US Bank on the deal.
“We believe this is a merger that really strengthens competition in California markets,” US bank CFO Terry Dolan said in an interview in October. “We think it’s positive for the communities.
As regulators consider toughening CRA requirements for the big banks, Pina said groups like his would likely abandon the tactic of extracting large payments as part of the merger approval process. But for now, he said, the deals offer their only leverage to score more investments and bring more scrutiny to the bank’s executives.
If a public hearing is granted, advocates should lobby the U.S. bank for larger investments in their communities. “These hearings are going to be fire and brimstone,” Pina said.