A New York-based consumer action group Monday filed a 21-page document with the Federal Reserve Board challenging the proposed acquisition of First Security Corp. by Wells Fargo, charging San Francisco-based Wells with a variety of anti-consumer policies.
According to Matthew Lee, executive director of Inner City Press/Community on the Move and its Inner City Public Interest Law Center, based in Bronx, N.Y., Wells Fargo practices "redlining, predatory lending, antitrust, branch closures and CRA" violations.
Redlining refers to the refusal of a lending institution to make loans, usually home mortgages, in areas though to have higher numbers of poor people or minorities. CRA is the Community Reinvestment Act, a federal law that requires banks to make loans in the communities in which they do business.
If the Wells/First Security merger were to go through, "The $2.9 billion proposed acquisition, announced on April 10, would expand Wells Fargo's practices through First Security's 330 bank branches, and to First Security's Crossland Mortgage, which operates nationwide," said the consumer group in a statement.
First Security shareholders met July 31 in a special session at the Marriott Hotel to vote on the merger with Wells Fargo. The deal was overwhelmingly approved. Now, only federal regulatory approvals are required to close the deal and the two banks said last week that those are expected in October.
But not if the New York group has anything to say about it, and it has plenty to say. On April 18, the consumer group filed a challenge with the Federal Reserve opposing Wells Fargo's plan to buy National Bancorp of Alaska Inc. for $907 million. At the time, it also said it would attempt to stop the Wells/First Security deal, then valued at $3.2 billion.
In the Alaska action, the group accused a Wells subsidiary, Home Improvement Inc., of showing a pattern of lending discrimination by making most of its "subprime" (high interest rate) loans to minorities. Lee said at the time that Fed Chairman Alan Greenspan and Fed Board of Governors member Edward Gramlich had called for a crackdown on "predatory lending" practices.
"If they mean what they've said, there are many things in Wells Fargo they will look at and clean up in the process," said Lee.
Wells Fargo spokesman Tom Unger told the Deseret News in April that the chances of Lee stopping Wells' acquisition of First Security are "somewhere between zero and none," adding that Lee seems to have made a career out of protesting bank mergers and he's not sure what he gets out of it.
One thing is sure, the group's protest of the Wells Fargo/National Bancorp of Alaska deal apparently fell on deaf ears at the Fed because that merger was closed last month.
Marilyn Taylor, spokeswoman for Wells Fargo, would not comment directly on the group's accusations filed with the Fed on Monday but said, "We're confident that the merger will be successfully completed and we're excited about our future with First Security."
"Well, we'll see," said Lee, noting that the California Reinvestment Committee, another consumer group, also has filed a shorter comment with the Fed opposing the deal and that other groups in the Pacific Northwest are also expected to oppose the merger in Fed filings later this week.
"Wells has been a little slow on the draw filing their application for the Fed's approval," Lee told the Deseret News on Monday. "The comment period runs to August 14."
Along with charges of redlining and discriminatory lending, the Bronx group claims the merger will create an "overconcentration" of Wells branches in Salt Lake City; Las Cruces, N.M.; Truckee-Tahoe, Calif./Nev.; and Twin Falls, Bonner County and Pocatello, Idaho.
It also contends that in areas where it has made major acquisitions, Wells Fargo "has a history of service reductions, branch closings and diminished focus on the local communities in which it buys banks."