Do Minority Banks Lend Enough to Other Minorities?
For 24 years, the Greenlining Institute has pressured big banks to do more for financially stressed areas of California, winning hundreds of billions of dollars in pledges from Wells Fargo & Co., Bank of America Corp., Washington Mutual Inc. and others to provide residential and small-business loans to minorities.
Now the San Francisco nonprofit, created by a coalition of minority community groups, has a new target: the large Asian American banks that have thrived in California’s diverse landscape.
Greenlining contends that these banks have grown to the point that they should develop aggressive programs to serve Latinos, blacks and other minorities in addition to their core customers.
“Californians are a very diverse group,” said Greenlining board member Darlene Mar, who heads the Council of Asian American Business Assns. of California. “Just serving one part of the community is not what we want a larger bank to do.”
The new approach has put Greenlining on a collision course with at least one prominent Asian American banker: Chairman Thomas S. Wu of San Francisco’s UCBH Holdings Inc.
Based on its concerns about UCBH’s minority-lending practices, Greenlining has asked federal regulators to block UCBH’s proposed $50-million takeover of Rosemead-based First Continental Bank.
More broadly, officials from Greenlining and the California Reinvestment Committee, another leading advocacy group, are meeting today with the Federal Deposit Insurance Corp. to request a hearing on lending practices by large minority-controlled U.S. banks. FDIC fair-lending specialist Frank A. Hartigan, the agency’s deputy regional director in San Francisco, declined to comment.
Greenlining previously has wrung large minority-lending pledges from California subsidiaries and affiliates of big Japanese banks, but taking on homegrown ethnic banks is a new twist.
As in the case of UCBH, a favorite tactic of the community groups is to gain concessions from the banks by intervening in mergers. Last year, they sought to block Citigroup Inc.’s takeover of the parent of Golden State Bancorp, although the acquisition was eventually approved without the far-reaching lending commitments the community groups sought.
Greenlining has focused its efforts on banks with at least $1 billion in assets, acknowledging that banks with assets below that level are too small to develop comprehensive programs for lower-income and minority markets, and should be allowed to concentrate on their niches.
Except for Latino-owned International Bancshares Corp. in Laredo, Texas, the only minority-controlled banks in the U.S. with more than $1 billion in assets are Chinese and Korean American institutions in California, said Robert Gnaizda, Greenlining’s policy director.
The parent of United Commercial Bank, which has 42 offices in California, UCBH has $4.85 billion in assets.
UCBH is well-regarded on Wall Street -- its stock is up almost 37% this year. And federal regulators have given the bank an “outstanding” rating for compliance with the Community Reinvestment Act of 1977, the federal law requiring lending to low-income and minority customers.
Greenlining is unimpressed. In letters to the FDIC and the Federal Reserve, the group said UCBH has no effective plan to serve non-Chinese minorities, concentrates on the high end of the Chinese American market, has virtually no Spanish-speaking employees, and has “neither the ability nor the will to serve” Los Angeles County’s large population of blacks, Latinos and Filipino Americans.
UCBH chairman Wu described Greenlining’s account as “mistaken,” saying home-loan data supplied to the federal government by the bank show a commitment to low- and moderate-income borrowers.
Wu also pointed to a small-business lending guide posted in Spanish on his bank’s Internet site and a United Commercial lending office in Montebello run by a Spanish-speaking Latino.
“I don’t know what they are talking about,” he said of Greenlining, adding that UCBH is confident of reaching an understanding with the group, as long as it’s not required to come up with a plan as comprehensive as those of major banks that have a presence in virtually every California neighborhood.
“Even though we’ve gotten bigger, we’re still a community bank,” Wu said. “Our market share of deposits in California is still less than 0.5%. How can you compare UCB with all the majors -- Bank of America and Wells Fargo?”
Gnaizda said he’d rather compare United Commercial to East West Bancorp, the San Marino-based parent of East West Bank, which he said has the best record among Chinese American banks of lending to blacks and Latinos.
The U.S. Small Business Administration’s report for the fiscal year ending Sept. 31 showed that only two of UCBH’s 86 SBA loans in 2002 went to African American owned businesses, compared to six of East West’s 41 SBA loans, Gnaizda said.
Greenlining also is looking into the pending merger of two L.A.-based Chinese American banks: Cathay Bancorp’s agreement to pay more than $430 million for GBC Bancorp, parent of General Bank. The deal would create an even bigger banking concern than UCBH, with more than $5 billion in assets.
Cathay has been “quite forthcoming” in dealing with Greenlining and appears willing to work out a minority-lending plan, Gnaizda said. Such a plan is needed, he said, because Cathay didn’t make any home loans to blacks in L.A. County last year and has no Latinos or African Americans on its board.
Cathay Chairman Dunson Cheng declined to comment because of the pending merger.
One likely point of contention is Greenlining’s insistence that UCBH and Cathay contribute 2% of their pretax profits to charity, matching previous pledges extracted from Comerica Inc., a Detroit Bank with large California operations, and UnionBanCal Corp. of San Francisco, whose majority owner is Bank of Tokyo-Mitsubishi.
Richard Hartnack, vice chairman of UnionBanCal and past president of the California Bankers Assn., said banks can’t ignore Greenlining, whose tactics have set a precedent for advocacy groups nationwide.
“They’re smart people and absolutely committed to their constituency,” he said, but they are also realists.
“Most people have found that when you deal with them in a positive way, you come away with agreements you can live with for years to come,” he said. “You hate to give credit to your enemies, but they’ve made us a better bank.”
