Just shy of a year after the deal was first announced, federal banking regulators have signed off on New Jersey lender CIT Group Inc.’s purchase of Pasadena’s OneWest Bank.
The Office of Comptroller of the Currency, the nation’s primary bank regulator, and the Federal Reserve on Tuesday announced they have approved the deal, which the companies first announced on July 22 last year.
The merger is one of L.A.’s biggest recent bank deals – topped only by the planned acquisition of top local bank City National by Toronto’s Royal Bank of Canada – and one that has drawn the ire of community groups whose objections helped string out the approval process.
While regulators in February took the relatively rare step of holding a public hearing on the deal, almost every banking observer the Business Journal has spoken with about the merger expected the deal to eventually go through.
Opponents of the deal have slammed CIT and OneWest as beneficiaries of huge public subsidies.
CIT went bankrupt after receiving more than $2 billion in TARP funds – money that wasn’t paid back after the bankruptcy. OneWest, meanwhile, was built from the wreckage of failed lender IndyMac Bank by a team including hedge fund manager George Soros; computer tycoon Michael Dell; and another hedge funder, Steven Mnuchin, who would become the bank’s chairman.
In a crucial part of that deal – which came together during the depths of the financial crisis – the Federal Deposit Insurance Corp. agreed to absorb much of the former thrift’s bad debt under a loss-share agreement that will continue to benefit the merged bank should the deal go through.
Since the loss-share deal was struck, OneWest’s original investors have pulled more than $2 billion in dividends out of the bank, and should make almost that much again through the sale to CIT, which plans to combine OneWest with its CIT Bank unit. Though CIT will remain in New Jersey, the combined banks will be headquartered in Pasadena.
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