A Big Test for Janet Yellen: Stop the OneWest-CIT Merger

Peter Dreier
June 19, 2015

In the face of the July 2008 failure of Pasadena-based IndyMac Bank, FDIC allowed a small group of wealthy private investors to buy the bank’s $23.5 billion in loans and other assets for $13.9 billion, and rename it OneWest. The federal government subsequently provided OneWest with $9 billion in financing and agreed to guarantee some of the bank’s troubled assets. OneWest also entered into a lucrative loss share agreement with the FDIC to cover losses from its portfolio of IndyMac loans.

As part of the deal, OneWest agreed to modify mortgages of borrowers, many of them victims of IndyMac scams, so they could avoid foreclosure and stay in their homes. Instead, OneWest has foreclosed on about 36,000 California families, many of them in the greater LA area.

Now, advocacy groups, including Neighborhood Legal Services of Los Angeles County (NLSLA), are demanding that Janet Yellen, chair of the Federal Reserve, intervene in the takeover of Pasadena-based OneWest Bank by the New Jersey-based CIT Group until these banks pay reparations for the damage they caused. In urging Yellen to withhold her support of the OneWest-CIT merger, these groups are asking her not only to consider OneWest’s reckless lending practices in minority communities but also to take into account the fact that both OneWest and CIT have received billions of dollars in government subsidies but have done little to help homeowners who are drowning in debt and facing foreclosure.

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Organizations mentioned/involved: Neighborhood Legal Services of Los Angeles County (NLSLA)