| And the Beat Goes On: Mega-mergers Continue
|
Citigroup has announced plans to acquire The Associates for $31.1 billion. The Associates, the largest publicly traded finance company in the U.S., with managed assets of over $100 billion, is better known to activists as a subprime and frequently predatory lender. “[Associates is] the poster child of bad lending behavior,” says John Taylor, director of National Community Reinvestment Coalition (www.ncrc.org). However, Inner City Press (ICP), a community reinvestment watchdog, points out that thanks to the recent Financial Modernization Act and some loopholes that allow the Associates to be considered a “non-bank” company, the merger is not subject to CRA review.Leah Johnson, Citigroup Public Affairs Director, speaking from a prepared statement, said “We have a long history of succeeding in integrating companies with differing cultures and bringing these businesses to our standards and practices quickly.” Johnson referred to the turn-around effected at subprime lender Primerica after Citibank acquired it in 1989 as an example of this track record.
“We’re glad to hear Citibank saying they are going change the culture and habits of Associates, but the devil’s in the details,” says Taylor. And, he adds, “there’s still a lot of concern about Citigroup’s lending performance.” According to an official challenge filed by Inner City Press/Communities on the Move (www.innercitypress.org/bankbeat.html), Citigroup disproportionately denies applications from people of color for normal interest rate loans, while its higher rate lender, Citifinancial, and Associates target these same communities with high interest rate loans. “A cynic would say Citigroup is acquiring [Associates] in order to continue the profitability they have had,” concludes Taylor. “An optimist would say that Citibank, as a CRA regulated entity, would change the culture. Our members tend to be skeptical, but we look forward to becoming optimists, when there’s reason to do so.” NCRC will be meeting with Sanford Weill, Chairman and CEO of Citigroup, in the hope of securing some reasons to be optimistic. Meanwhile, ICP reports that Chase CEO Bill Harrison has said that the impending merger between Chase and investment banking firm for the affluent JP Morgan is “all about wholesale.” The merged company will have assets of approximately $660 billion and stockholders’ equity of more than $36 billion. “We remain as committed to community development as we have ever been,” says Mark Willis, executive vice president of Chase’s Community Development Group “I don’t want to leave any doubt in anyone’s mind about that.” |
|
|
|
| Housing Comes On Gates’ Radar; Will Housing Policy Be Next? | The technology companies starting to abandon Silicon Valley because of its high housing costs recognize the importance of affordable housing. The Bill & Melinda Gates Foundation (www.gatesfoundation.org; 206-709-3112), which focuses on children’s healthcare and education, has also begun to consider affordable housing, especially for very poor families facing homelessness or domestic violence. The Foundation recently committed $40 million to establish the Healthy Families Program (www.soundfamilies.org), which will develop new transitional housing facilities for women and children who are homeless or in danger of becoming so.The grant will cover three counties in the Seattle region, and will be administered through the Foundation, the City of Seattle, the counties, and the state. The University of Washington School of Social Work will evaluate the program. Actual projects will be funded through RFPs, and the Foundation’s contribution is expected to only cover 15-20 percent of the cost of each project.
Nonetheless, $40 million is larger than Seattle’s entire human services budget, and is expected to double the number of transitional housing facilities in the region – a figure that smacks suspiciously of taking a project to scale. John Fox of the Seattle Displacement Coalition, however, told Seattle’s newspaper Real Change (8/15/00) that without addressing the causes of the decreasing supply of affordable housing even such a generous gift “run[s] the risk of creating the false impression that private donors can substitute for government involvement.” Fox pointed out that while the Healthy Families Program’s goal is creating 1,500 transitional housing units in three years, 4,000 existing affordable units could be lost when federally subsidized Section 8 building owners face contract renewal and a hot real estate market. Perhaps the Foundation’s next step could be to support national housing advocates? |
|
|
|
| Flashback to 1994: Lazio Redux? | Despite HUD’s drastic management reforms, reduced staff, and streamlined programs, Senator Wayne Allard (R-CO) is playing an old tune. His recently introduced “Local Housing Opportunities Act” is rife with measures aimed at restricting and “reforming” the agency, and block granting out its responsibilities to the state level, á la welfare reform. Is Allard looking back to 1994? Is he trying to succeed where Rep. Rick Lazio failed? Or is he looking forward to a Bush administration? |
About the Author
Comments