Focus On The Fed

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Questions on a Bank Merger

Representative Barney Frank, a Democrat of Massachusetts, got it exactly right this week when he asked the Federal Reserve to do more than just rubber-stamp the proposed purchase of the online bank, ING Direct, by the Capital One Financial Corporation.

Since that merger would create the fifth-largest bank in the United States, the Federal Reserve should make sure that the new entity is good for the banking sector generally and in full compliance with the Community Reinvestment Act, which requires banks to lend, invest and provide services in poor communities.

A number of civil rights, consumer protection and housing advocacy groups have raised troubling questions about Capital One’s lending policies as they affect creditworthy, low-income minority families. The Department of Housing and Urban Development is currently investigating a formal complaint filed by the National Community Reinvestment Coalition, an advocacy group that focuses on community redevelopment issues.

The complaint alleges that the company shuts out low-income borrowers by requiring higher credit scores than are necessary to meet the standards of the Federal Housing Administration, which insures mortgages mainly for low- and moderate-income families. The complaint also argues that the bank’s policy is racially discriminatory because it has a disparate impact on black and Hispanic borrowers.

These issues should be fully aired before the Federal Reserve approves this proposed deal. Mr. Frank has asked the regulator to extend the public comment period on the transaction for at least 60 days instead of ending it on Monday, as was originally scheduled. Given what’s at stake, that’s a perfectly reasonable thing to do.


http://www.nytimes.com/2011/08/20/opinion/questions-on-the-merger-of-ing-direct-and-capital-one.html?partner=rssnyt&emc=rss&pagewanted=print