Kucinich to Bernanke: Public Deserves More Time to Comment on Acquisition of National City Bank with Treasury Funds

For Immediate Release

Kucinich to Bernanke: Public Deserves More Time to Comment on Acquisition of National City Bank with Treasury Funds

Fed Chair Should Overrule Previous Decision to Limit Public Comment Period

WASHINGTON -

Congressman
Dennis Kucinich (D-OH) yesterday sent a letter to the Chairman of the
Federal Reserve Bank, Mr. Ben Bernanke, asking him to overrule a
decision by the Deputy Secretary of the Federal Reserve Board, Mr.
Robert Frierson, in order to accommodate a public hearing and an
extended comment period on the proposed National City (NCC) purchase by
PNC Bank.

 

"I
believe that additional public forums can bring to light information
which casts doubt on the wisdom of this deal," Kucinich said in
explaining his persistence. "This is really a test case for
transparency in Treasury's decision to refinance certain banks, as well
as the effectiveness of the Fed's own oversight," he said.

 

The
proposed acquisition of NCC, National City Bank's holding company, by
PNC Bank was advanced after NCC was denied bailout funds and PNC was
given over $7 billion by Treasury.

 

Kucinich
was a leader of the opposition to the financial bailout legislation
because the plan did not do enough to protect homeowners facing
foreclosure.  Additionally, Kucinich stated his concern that the
bailout would allow Treasury to pick the winners and losers on Wall
Street.    

 

"The proposed acquisition of National City
by PNC cries out for further scrutiny. As a Member of Congress and the
Chairman of the Domestic Policy Subcommittee, which oversees the
workings of the FRB (Federal Reserve Bank) and other agencies, I intend
to provide some of that scrutiny in the weeks and months ahead,"
Kucinich wrote to Chairman Bernanke.

 

"The
people have a right to an extended comment period and a hearing under
these circumstances, given the taxpayers' role in financing the merger
and the effect that the merger will have on jobs, competition,
community reinvestment, and the general public interest. Interested
parties need more time to digest the magnitude of this action and to
make their views known. Deputy Frierson makes light of their need by
calling 33 days "sufficient time for commenters to prepare and submit
their comments." Given the holidays and the unprecedented nature of
this taxpayer-financed, Treasury-engineered takeover, I strongly
disagree," stated Kucinich.

 

The
Federal Reserve Bank is authorized to extend the comment period and
hold public hearings or meetings on any proposed merger  when requested
during the comment period "or if such a proceeding appears
appropriate," under its owns regulations.  Federal Reserve Bank
guidelines for holding such a meeting include "factors [that] relate to
the financial and managerial resources of the companies and banks
involved, the effects of the proposal on competition, and the
convenience and needs of the communities to be served by the companies
and banks involved." 

 

The
current deadline for comments, including protests and requests for
extended deadlines and public meetings, is December 2, 2008.  Comments
should be sent to the Federal Reserve Bank-Cleveland to the attention
of Vice President Nadine Wallman, 1455 East Sixth Street, Cleveland, Ohio  44101-2566. Fax 216-579-2932; Email nadine.m.wallman@clev.frb.gov.

 

The full text of the letter to Chairman Bernanke and the exchange with Deputy Secretary Frierson follows:

 

November 30, 2008

 

 

The Hon. Ben S. Bernanke

Chairman

Federal Reserve Board

Washington, D.C. 20551-0001

 

Dear Chairman Bernanke:

 

I
am asking you to immediately overrule the decision of one of your
subordinates who clearly is not in touch with the underlying reality
which finds thousands of jobs jeopardized and the maintenance of a true
competitive structure in American banking under threat.  In question is the survival of the largest bank in the State of Ohio due to a pending Treasury Department created takeover of National City Bank by PNC Bank. 

 

On
November 25, 2008, I asked for an extension of the comment period and a
public hearing or meeting by the Federal Reserve Bank ("FRB") beyond
the current December 2, 2008, deadline.  Your deputy, in a perfunctory response, refused.  A copy of the exchange of correspondence is attached.  The
response, written the next day by Deputy Secretary Robert Frierson,
citing an absence of "extraordinary circumstances," cannot be taken
seriously in light of the situation on the ground in Cleveland and the effect the merger will have on the taxpayers of our nation.  It is urgent that you overrule your deputy and grant the extension of the comment period and hold the public hearing.

 

PNC Bank of Pittsburgh
has applied for the acquisition of National City Corporation ("NCC"),
the holding company of National City Bank, headquartered in Cleveland.  Based
on information I have and am continuing to receive, this acquisition
was engineered by the Treasury Department and the Office of the
Comptroller of the Currency ("OCC"). 

 

I
would remind you that Congress recently enacted legislation authorizing
a $700,000,000,000 bailout of the financial services industry which you
and Treasury Secretary Henry Paulson personally requested in a
telephone conference with me and other Members of Congress on September
19, 2008.  A bailout of this magnitude is unprecedented.  As
Chairman of the FRB, you should be concerned about the manner in which
the taxpayers' money you personally asked of Congress is being used. 

 

Money from this bailout is being used to enable one bank, PNC, to acquire another bank, NCC.  The
people have a right to an extended comment period and a hearing under
these circumstances, given their role in financing the merger and the
effect that the merger will have on jobs, competition, community
reinvestment, and the general public interest.  The people need more time to digest the magnitude of this action and to make their views known.  Deputy
Frierson makes light of their need by calling 33 days "sufficient time
for commenters to prepare and submit their comments."  Given the holidays and the unprecedented nature of this taxpayer-financed, Treasury-engineered takeover, I strongly disagree.

 

In
its application, PNC represents to the FRB that both banks "have strong
records under the Community Reinvestment Act [("CRA")]," yet NCC finds
itself in its current vulnerable predicament due in large part to the
predatory lending practices under its subprime affiliate First Franklin.  The
logic of the applicant boasting a strong CRA record by the acquired
bank, and the necessity for the bank's acquisition due to the
unscrupulous lending practices of its affiliate, astounds me.  While
the FRB has not yet approved the merger, its denial of more time for
the public to respond represents, at the very least, complicity to hold
back information from the people who provided the financing to the
bailout.  This is unacceptable.

 

The people of Ohio's 10th Congressional District, the State of Ohio,
and the entire region have serious concerns about the Congressional
bailout and the use of any part of the $700,000,000,000 to facilitate
the acquisition of banks disfavored by Treasury by banks favored by
Treasury.  This seems to be exactly what is happening here.  The FRB clearly foresaw situations such as this when promulgating 12 C.F.R.  §
262.25 and 12 C.F.R. § 265.5 which authorize such hearings or meetings
and extension of comment periods when questions arise regarding the
financial and managerial resources of the banks involved, the effects
of the merger on competition, and the convenience and needs of the
communities.  See 12 C.F.R.   § 262.25(d). 

 

As
the U.S. Representative of a major city affected by this proposed
acquisition, I can assure you that the circumstances here are truly
extraordinary.  As outlined above, we see Congressional bailout money being used to strengthen favored banks at the expense of unfavored banks.  Home
foreclosures are proceeding at a record pace due to predatory practices
of banks which represent themselves to the FRB as having strong CRA
records.  Yet, the Deputy Secretary of the FRB
sees no "extraordinary circumstances" when those same banks ask for
approval for their merger.  I strongly question
the FRB's sanguine attitude toward this merger when the circumstances
among the banks under FRB jurisdiction are as uncertain as you
represented them to be in the September 19 meeting and are proving to
be in the current financial crisis.

 

The proposed acquisition of NCC by PNC cries out for further scrutiny.  As
a Member of Congress and the Chairman of the Domestic Policy
Subcommittee which oversees the workings of the FRB and other agencies,
I intend to provide some of that scrutiny is the weeks and months ahead. 

 

You
are now in a position where you can prepare in advance for the
questions you will be asked by Congress by providing adequate scrutiny
of this merger.  I suggest that you might want to
know the facts behind this merger since it was your personal plea on
September 19 which gave Members of Congress the perception that a
bailout of this magnitude was necessary.  The FRB
would be remiss if it rubberstamps this taxpayer-funded bank holding
company takeover without at least the further oversight of a public
hearing or meeting and an extension of the comment period as you are
clearly authorized to do.  The FRB must do its
due diligence in this matter by taking the time necessary to respond to
the public and their needs and extending the comment period on this
merger and holding a public hearing or meeting.  Please act immediately to reverse your deputy's decision. 

 

Sincerely,

/s/

Dennis J. Kucinich

Member of Congress

 

 

 

November 26, 2008

 

The Honorable Dennis J. Kucinich

U.S. House of Representatives

2445 Rayburn House Office Building

Washington, D.C. 20515

 

Dear Congressman Kucinich:

 

            This responds to your letter on November 25, 2008 to Sandra Pianalto, President, Federal Reserve Bank of Cleveland, regarding the application filed under the Bank Holding Company Act ("BHC Act") by The PNC Financial Services Group, Inc., Pittsburgh, Pennsylvania, to acquire and merge with National City Corporation, Cleveland, Ohio.  You
request that the Board extend the public comment period on this
proposal, which ends on December 2, 2008, for a period of at least
thirty days.

 

            The
Board provides a public comment period for an application to permit
interested persons the opportunity to submit information and views
related to the statutory factors it must consider under the BHC Act.  The
Board's procedures for processing applications contemplate that the
public comment period will not be extended absent extraordinary
circumstances.

 

            Notice of the proposal was published in the Federal Register on November 5, 2008, and newspaper notices were published on October 30 and November 3.  As noted, the comment period ends on December 2.  Accordingly, interested person have approximately 33 days to submit their views.  This period provides sufficient time for commenters to prepare and submit their comments.

            Based
on all the facts of record, including the reasons discussed above, the
Secretary of the Board, acting pursuant to authority delegated by the
Board,[1] has determined not to extend the public comment period on this proposal.

 

                                                            Sincerely yours,

                                                            /s/

                                                            Robert deV. Frierson

                                                            Deputy Secretary of the Board

 

Cc:       Sandra Pianalto, President

            Federal Reserve Bank of Cleveland

            James S. Keller, Chief Regulatory Counsel

            The PNC Financial Services Group, Inc.

 

 

 

November 25, 2008

 

 

Ms. Sandra Pianalto

President

Federal Reserve Bank of Cleveland

1455 East 6th Street

Cleveland, Ohio 44114-2594

 

Dear Ms. Pianalto:

 

Since
the announcement of PNC Bank's (PNC) proposed acquisition of National
City Corporation (NCC), I have learned of the possibility that PNC Bank
may have received favorable treatment from the Department of the
Treasury.  I have made an inquiry to the office of the Comptroller of
the Currency regarding this matter.  Given the gravity of the loss of
National City Bank to the entire Cleveland region of the Federal
Reserve Bank and to the people of the region, I ask that you hold a public
hearing or meeting at the Federal Reserve Bank of Cleveland or another
appropriate and nearby venue in conjunction with 12 C.F.R. § 262.25(d)
of the federal banking regulations.  I also ask
that you provide an extended comment period for at least 30 days after
the current Dec. 2 deadline.  I intend to provide further comment
before the end of the comment period.  Thank you for your prompt attention to this matter.

 

Sincerely,

/s/

Dennis J. Kucinich

Member of Congress

 



[1] 12 CFR 265.5(a).

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