Software Nerd

Friday, October 03, 2008

Emergency Legislation we really need

There is one piece of emergency legislation that we really need right now: temporary suspension of CRA-related review of bank mergers and acquisitions.

I'm politically savvy enough to know that the CRA isn't going to be repealed any time soon. However, political pressure can be brought so that the government temporarily suspends (they might call it "give a lower weight to") past CRA compliance, when approving buy-outs.

This will allow sound banks that have money to bid for poor banks, even if the sound bank has not done what the government wanted under CRA. There is a large example of that right now. The government told Wachovia to merge with Citibank, and as part of the deal, the government underwrote some of the riskier Wachovia assets.

Now, Wells Fargo -- probably the best bank among the super-large, national ones -- has offered to buy Wachovia for more, and without requiring the government to underwrite risky assets. It is imperative that the government does not stand in the way of this merger. If Wachovia has made some commitments to Citi, let the courts decide that; but, the executive and legislature must not favor one over the other for CRA reasons... let the higher bidder win.

An activist group from Florida is up in arms about the Wells Fargo offer. Here is their criticism: "[Wells Fargo] has virtually no CRA presence in Florida. It exists mainly to fulfill objectives derived from its California headquarters with little or no input from Floridians. They have showed total disregard for Florida’s minority and under-served communities... ”

It is sick that these cannibals aren't happy they devoured their previous golden geese; they want the old parasitical rules to apply to those who are still standing. In the spirit of "emergency" the government may go light on a CRA-review and let the deal go through. I intend to write to to the President and my legislators, telling them I'd like to see a formal emergency suspension of CRA reviews.



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