OneWest was created out of the remains of IndyMac Bank, which specialized in subprime mortgages. Those risky mortgages cost the federal deposit insurance fund more than $13 billion.
At the hearing, chief executives from New York-based CIT Group and OneWest Bank promised the planned buyout would be good for poor neighborhoods in Southern California. John Thain of CIT said the combined bank would provide "a significant increase" in lending, philanthropy and other support for lower-income and minority communities, according to the Los Angeles Times.
Joseph Otting, CEO of OneWest Bank, said the potential deal could create a hometown bank big enough to compete with the megabanks based elsewhere.
Meanwhile, critics argued that if the Fed approves the merger, it would create the newest “too big to fail bank.” The merger would be the first since the recent economic crisis to create a financial institution with more than $50 billion in assets, the regulatory definition of a systemically important financial institution.
The proposed merger of CIT Group and OneWest Bank would result in a bank with nearly $70 billion in assets.
In early February, California community advocates delivered over 15,000 petitions to the Federal Reserve urging it not to approve the merger.
"Over 15,000 Americans who signed the Daily Kos petitions are angry that banks like CIT Group received billions while ordinary Americans lost their homes,” Paul Hogarth, campaign director at Daily Kos, said at the time. “We're calling on the Federal Reserve to not approve of this merger, to not repeat the same mistakes again, and to not create another Too Big To Fail bank.”
At a public-benefit hearing Thursday in downtown Los Angeles, officials from the Federal Reserve and the Office of the Comptroller of the Currency scrutinized CIT Group’s $3.4 billion takeover of Pasadena, California-based OneWest Bank.