A coalition of more than 50 national and local non-profit organizations penned a 13-page letter to the Federal Deposit Insurance Corp. on Feb. 3 formally opposing Washington Federal Bank’s $654 million deal to acquire Luther Burbank Savings on the grounds of fair housing, systemic risk, and managerial resource concerns.
The organizations, led by the California Reinvestment Corporation and including Bank On Our Future, California Public Banking Alliance, San Francisco Public Bank Coalition, and the Western Center on Law and Poverty, oppose the deal on the grounds that the banks have thus far “failed to demonstrate that they have met community credit needs, the merger will provide a clear public benefit or that they will meet the convenience and needs of affected communities.”
The organizations are asking the FDIC to extend the comment period and hold public hearings on the deal which was originally announced in November.
“We urge the FDIC to deny this merger application. In the alternative, we believe the FDIC must impose substantial conditions to ensure that fair housing, community reinvestment, displacement, climate, and managerial concerns are addressed,” the organizations wrote.
Top of mind for the organizations are concerns around discrimination, noting that WaFd CEO Brent Beardall is on the board of directors at the American Bankers Association, which is one of seven trade groups that filed a lawsuit against the Consumer Financial Protection Bureau and Director Rohit Chopra over a policy update aimed at combating discrimination in banking. The trade groups alleged that the change exceeds the agency’s statutory authority and violates proper notice-and-comment rulemaking procedures.
In Feb. 3’s letter to the FDIC, the CRC and other non-profits questioned WaFd’s practices under Beardall, asking, “Is it the position of Washington Federal that discrimination is not an unfair and deceptive practice?” and calling upon two separate CFPB penalties totaling $234,000 WaFd faced for mortgage data errors the CFPB said might hinder efforts to combat discrimination.
Luther Burbank’s lending performance raises concerns, the coalition said, pertaining to fair housing. In 2012, Luther Burbank settled discriminatory mortgage lending allegations with the Department of Justice. Now, a decade later, Luther Burbank is “less than half as likely to originate loans in neighborhoods of color in its [Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area] as its peers,” the letter alleged.
The letter also noted concerns that Luther Burbank “does not have in place sufficient due diligence policies and procedures to ensure that it is not financing displacement or problematic landlords,” citing a news report from Capital & Main detailing challenges that landlords mortgaged by Luther Burbank have allegedly imposed on their tenants, including “attempts to push them out of rent stabilized apartments, harassing them, and coercing them to sign documents written in English agreeing to buyouts or rent increases.”
The CRC and other non-profits also expressed concerns about WaFd’s oil and gas funding and Luther Burbank’s physical California footprint, associating them to greater climate risk.
“We can think of no greater threat to our financial system and quality of life than climate change. Bank financing of climate change poses serious physical and transition risks to financial institutions,” the letter said. “With California bombarded by atmospheric river induced flooding, just as it recovers from unforgiving wildfires, the Luther Burbank footprint is nestled. in the heart of significant climate hot spots that pose grave physical risks to the Luther Burbank portfolio and its customers.”
In noting their final concern, job loss and consumer access, the CRC and other non-profits “urge the banks and the regulators to commit and require that no California workers will lose their jobs or have their hours reduced as a result of this transaction, that no bank customer will be vulnerable to” higher or new fees.
“In 2022, after years of blatant rubber-stamping of mergers and acquisitions, federal banking regulators held two public hearings for merging banks with footprints in California,” said CRC CEO Paulina Gonzalez-Brito in a prepared statement. “We hope the FDIC will continue this streak of gathering input from the public on bank merger applications, and either reject this merger or impose substantial conditions. Not doing so would mean the FDIC is turning its backs on vulnerable communities.”
Representatives for Luther Burbank Savings, WaFd, and the ABA did not return a request for comment by press time.