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FINANCIAL CRISIS INQUIRY COMMISSION REPORT
income and weak or subprime credit are not the same. In fact, Citigroup’s pledge
of billion in mortgage lending “consisted of entirely prime loans” to low- and
moderate-income households, low- and moderate-income neighborhoods, and mi-
nority borrowers. These loans performed well. JP Morgan’s largest commitment to a
community group was to the Chicago CRA Coalition: billion in loans over
years. Of loans issued between and , fewer than have been -or-more-
days delinquent, even as of late . Wachovia made billion in mortgage loans
between and under its billion in unilateral pledges: only about .
were ever more than days delinquent over the life of the loan, compared with an
estimated national average of . The better performance was partly the result of
Wachovia’s lending concentration in the relatively stable Southeast, and partly a re-
flection of the credit profile of many of these borrowers.
During the early years of the CRA, the Federal Reserve Board, when considering
whether to approve mergers, gave some weight to commitments made to regulators.
This changed in February , when the board denied Continental Bank’s applica-
tion to merge with Grand Canyon State Bank, saying the bank’s commitment to im-
prove community service could not offset its poor lending record. In April , the
FDIC, OCC, and Federal Home Loan Bank Board (the precursor of the OTS) joined
the Fed in announcing that commitments to regulators about lending would be con-
sidered only when addressing “specific problems in an otherwise satisfactory record.”
Internal documents, and its public statements, show the Fed never considered
pledges to community groups in evaluating mergers and acquisitions, nor did it en-
force them. As Glenn Loney, a former Fed official, told Commission staff, “At the
very beginning, [we] said we’re not going to be in a posture where the Fed’s going to
be sort of coercing banks into making deals with . . . community groups so that they
can get their applications through.”
In fact, the rules implementing the changes to the CRA made it clear that the
Federal Reserve would not consider promises to third parties or enforce prior agree-
ments with those parties. The rules state “an institution’s record of fulfilling these
types of agreements [with third parties] is not an appropriate CRA performance cri-
terion.” Still, the banks highlighted past acts and assurances for the future. In ,
for example, when NationsBank said it was merging with BankAmerica, it also an-
nounced a -year, billion initiative that included pledges of billion for af-
fordable housing, billion for consumer lending, billion for small businesses,
and and billion for economic and community development, respectively.
This merger was perhaps the most controversial of its time because of the size of
the two banks. The Fed held four public hearings and received more than , com-
ments. Supporters touted the community investment commitment, while opponents
decried its lack of specificity. The Fed’s internal staff memorandum recommending
approval repeated the Fed’s insistence on not considering these promises: “The Board
considers CRA agreements to be agreements between private parties and has not fa-
cilitated, monitored, judged, required, or enforced agreements or specific portions of
agreements. . . . NationsBank remains obligated to meet the credit needs of its entire
