CIT Group's $3.4-billion takeover of Pasadena's OneWest Bank will come under scrutiny today at a public-benefit hearing called by U.S. bank regulators.
The Federal Reserve and the Office of the Comptroller of the Currency scheduled the hearing at the Fed's office on Grand Avenue at Olympic Boulevard in downtown Los Angeles.
Joseph Otting, chief executive of OneWest Bank, and John Thain, the CEO of CIT, a large commercial lender based in New York are scheduled to be the first to testify at 8:40 a.m.
Both firms have been controversial. OneWest was created from the remains of IndyMac Bank, a specialist in high-risk mortgages whose failure in 2008 cost the federal deposit insurance fund more than $13 billion.
The collapsed bank was taken over by a group of wealthy private investors, including hedge fund operator George Soros and Dell Computer mogul Michael Dell. The Federal Deposit Insurance Corp. agreed to shoulder billions of dollars in losses on the bank's soured mortgages to sweeten the deal.
CIT filed for bankruptcy after receiving a federal bailout in 2009 and, thus, avoided repaying nearly $2.3 billion in taxpayer assistance.
The merger would be the first since the financial crisis to create a bank with more than $50 billion in assets, the regulatory definition of a systemically important financial institution -- one whose failure could potentially jeopardize the banking system.
Critics said the merger would create a new "too big to fail" bank subsidized by "corporate welfare." They called on regulators to withold approval of the merger until the banks committed to higher levels of lending and other services for poor neighborhoods.
But supporters said they believed OneWest would fulfill pledges by Otting and Thain to earn an outstanding rating under the Community Reinvestment Act, which mandates that banks provide support for low- and moderate-income areas.
Testimony was scheduled from numerous members of each camp.
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