A California housing rights coalition is spearheading an effort to block a $654 million merger of two banks the organization accuses of fostering systemic racism and unfair lending practices and promoting climate change by financing oil and gas projects.
The California Reinvestment Coalition is joined in the effort by 53 other nonprofits, which last week signed a joint letter urging the Federal Deposit Insurance Corp. (FDIC) to extend the comment period and hold a public hearing on the proposed acquisition of Luther Burbank Savings Bank, in Santa Rosa, California, by Washington Federal Bank in Seattle.
The merger agreement was announced in November 2022.
“The more than 50 organizations that signed this letter understand bank mergers are in banks’ best interest but typically result in harm to communities,” California Reinvestment Coalition CEO Paulina Gonzalez-Brito told The NonProfit Times.
“As advocates, we must work together and use our voice to let regulators know that bank mergers should not be approved without ensuring that anti-discrimination, community reinvestment, household stability, neighborhood health and consumer protection measures are enhanced, not diminished,” Gonzalez-Brito said.
The signatories to the 13-page letter allege that Luther Burbank is “less than half as likely to originate loans in neighborhoods of color” in the Los Angeles metro area as its peer institutions, which they suggest shows a continuation of the discriminatory mortgage lending practices that led to a 2012 settlement between Luther Burbank and the Justice Department. They also accuse Luther Burbank of lending to landlords with a record of harassing immigrant families and other vulnerable tenants to force them out of rent-controlled apartments, and of refusing to meet with the group to discuss these concerns.
Washington Federal Bank has itself been sanctioned by the federal Consumer Financial Protection Bureau for mortgage data errors that the bureau said could hinder anti-discrimination enforcement, according to the letter. Also cited in the letter is a lawsuit against the bureau that the American Bankers Association, on whose board Washington Federal CEO Brent Beardall sits, joined last September with six other trade groups regarding the bureau’s plans to update rules on unfair, deceptive and abusive acts or practices.
“Is it the position of Washington Federal that discrimination is not an unfair and deceptive practice?” they ask.
The signers of the letter also cite concerns over the banks’ respective oil and gas portfolios and request that approval of the merger agreement be conditioned on “commitments to fund climate resiliency in communities of color.” They also urge regulators to “require that no California workers will lose their jobs or have their hours reduced as a result of this transaction” and “that no bank customer will be vulnerable to higher fees” or higher minimum account balance requirements.
The two banks responded to the letter by way of a joint statement their spokespeople issued to The NonProfit Times on Friday.
“Both Washington Federal Bank and Luther Burbank Savings recently became aware of the community groups’ opposition to our proposed transaction and their letters to the FDIC,” they wrote. “We respect the process of soliciting input from impacted stakeholders and look forward to discussions with the groups to understand their perspectives. Ultimately our objective will be to work together to find a path forward whereby the combined organization can and will do more good in our communities than has previously been accomplished.”
The California Reinvestment Coalition, based in Oakland, states on its most recently available Form 990 that its mission is to is “to build an inclusive and fair economy that meets the needs of communities of color and low-income communities by ensuring that banks and other corporations invest and conduct business in communities in a just and equitable manner.”
The group states that its members include “affordable housing developers, community development financial institutions, housing counseling agencies, small business assistance providers, legal services agencies, and community-based organizations.”
