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Fed, OCC Announce Public Meeting for Proposed M&A Transaction

OneWest Bank CIT GroupThe Federal Reserve Board of Governors and the Office of the Comptroller of the Currency have announced a public meeting for Thursday, February 26, to discuss a proposed merger and acquisitions transaction between two financial holding companies that have experienced their share of financial troubles.

The proposal includes New Jersey-based CIT Group's move to acquire California-based IMB Holdco and its subsidiary, OneWest Bank, for $3.4 billion, and also includes the proposed merger between CIT Group and OneWest Bank. The purpose of the meeting will be to "collect information relating to the convenience and needs of the communities to be served, including a review of the insured depository institutions' performance under the Community Reinvestment Act," according to an announcement from the Fed. The agencies will also be discussing other factors such as what effect the transaction will have on the U.S. banking and financial systems, the managerial and financial resources and future prospects of each institution, and competition in relevant markets.

The public meeting will take place at the Los Angeles Branch of the Federal Reserve Bank of San Francisco. Anyone wishing to testify at the public meeting may submit a request by email, fax, or regular mail; contact information for making a request to testify can be found by clicking here.

The proposed merger between the two was announced in July 2014, and should it be approved, it would be create a Systematically Important Financial Institution, otherwise known as a "Too Big to Fail" bank, according to the California Reinvestment Coalition (CRC), a group that is opposed to the merger. CRC reported on February 7 that more than 100 state and national organizations are opposing the merger, and that more than 15,000 people have signed a petition calling for the Fed to deny the transaction.

"While it's a very quick turn-around between now and the hearings, this is a good first step and shows that the regulators are taking seriously the concerns raised by community groups and tens of thousands of people across the country," said Kevin Stein, associate director of the CRC. "We are hopeful that this hearing won’t be a dog and pony show by the bank followed by a rubber stamp approval of the merger by the regulators. Instead, the community should be able to give their input about this merger and whether or not they want or need another Too Big To Fail bank. We also expect that regulators will ask the bank to answer the many tough questions we have raised about this merger that thus far have gone unanswered."

OneWest Bank was previously known as IndyMac Bank, which, when it failed in 2008, was the third-largest bank failure ever in the United States at a cost of more than $10 billion to the Federal Deposit Insurance Corporation (FDIC). IndyMac was purchased by investors in 2009 and renamed OneWest Bank. The FDIC agreed to a "shared loss agreement" in which they would begin "sharing" the cost of bad loans once OneWest paid for about 20 percent of loan losses, or about $2.5 billion. As part of the agreement, OneWest agreed to use government programs to prevent foreclosures, but instead has initiated foreclosures on about 35,000 California homes in the last six years, according to CRC.

A whistleblower lawsuit was filed against OneWest in 2014 accusing the bank of violating the government's 2009 Home Affordable Modification Program (HAMP) by adding thousands of dollars onto the principal balances of struggling homeowners without disclosing the terms of the agreement to those homeowners – borrowers who had received HAMP modifications to avoid foreclosure.

"We have spent the last five years building OneWest Bank into a premier regional bank in Southern California," IMB Holdco chairman Steven Mnuchin said in July when the merger was announced. "We are confident that this transaction will provide our retail and commercial customers with access to the broad range of high-quality financial products and services offered by CIT, and allow OneWest to benefit from CIT’s expansive client base and global reach. I look forward to joining the CIT Board, and to ensuring a smooth integration of CIT Bank and OneWest for the benefit of both companies’ stakeholders."

Meanwhile, CIT Group received $2.3 billion in bailout funds from the government's Troubled Asset Relief Program (TARP) in 2008 but filed for bankruptcy in late 2009 to reduce the debt. With the help of investors, the company continued to operate following the bankruptcy. The group reported a net income of $1.13 billion for the full year 2014.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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