WASHINGTON, D.C.— Dennis Kelleher, Co-founder, President and CEO, issued the following statement in connection with the release of a Fact Sheet, New York Community Bancorp: A Frankenstein Monster Federal Regulators Created:
“Most of the reporting about New York Community Bancorp (NYC Bancorp) has focused on its commercial real estate (CRE) portfolio and concerns about possible contagion, but has failed to note that the bank is a unique Frankenstein monster created by regulatory failures. The fact sheet details the shocking process whereby federal banking regulators inexplicably approved multiple rapid-fire mergers, enabled irresponsibly fast growth with inevitable operational and risk deficiencies, overlooked and ignored regulatory arbitrage, and despite multiple serious discrimination and fair lending concerns.
“After trying and failing to get approval from the Federal Deposit Insurance Company (FDIC) and Federal Reserve (Fed), NYC Bancorp shopped for a more friendly regulator and found one at the Office of the Comptroller of the Currency (OCC), that simultaneously approved its acquisition of Flagstar Bank and Flagstar Bank’s acquisition of New York Community Bank (NYCB) on December 1, 2022. That merger ballooned Flagstar from $25 billion in assets to $90 billion in assets. With the ink barely dry on that merger, the banking regulators—just 100 or so days later—approved Flagstar’s acquisition of Signature Bank, causing its total assets to jump to $123 billion.
“At that point, the bank’s growth exceeded what was reported by all three of the 2023 regional banks in the years leading up to their failures. Over the course of just two quarters, the bank’s two acquisitions quadrupled its asset size and more than doubled its employee count.
“Allowing the creation of this Frankenstein monster by throwing together these three banks without any time to properly manage and integrate their operations, systems, controls, management, and other typical facets of post-merger activities was irresponsible and virtually guaranteed the problems that have materialized. That and allowing a bank to switch regulators and receive a different decision on a merger application is wholly inappropriate. Adding insult to injury, the regulators also overlooked, ignored or disregarded serious racial discriminatory conduct by merger participants on multiple occasions in approving the mergers.
“The American people deserve much better from their financial regulators, who should conduct a searching review of this process and take concrete action to ensure that it does not happen again. The full details of that review and the actions taken should be publicly released, as happened with the failures of Silicon Valley Bank and Signature Bank.”
Learn more in our fact sheet.
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