The Strange Case of Bank of America

by Tom Yamachika, President, Tax Foundation Hawaii

Once upon a time, there was a big bank called Bank of America.  It wanted to try doing business in Hawaii, since it was already in many of the other western states, so it reached a deal to buy Honolulu Federal (do you remember HonFed?) and took over all of their branches in Hawaii.  This was in 1992.  

In 1993-94, Bank of America tried to expand its presence in Hawaii by buying Liberty Bank.  At the time, Na Po‘e Kokua, supposedly an organization established to assist native Hawaiians with housing and related matters, formed the Hawaii Fair Lending Coalition (HFLC) and objected to the acquisition, saying that the bank was violating federal laws by failing to lend to Native Hawaiians on homestead land although the federal government had a program, under section 247 of the National Housing Act (12 U.S.C. section 1715z–12), under which such loans would be insured by the Federal Housing Administration.  Bank of America apparently pledged to make $150 million of FHA-247 loans available to the Native Hawaiian borrowers as a result.

A few years later, in 1997, Bank of America exited our state, making a deal with American Savings Bank, a subsidiary of HEI, to buy the Bank of America branches.

In 2004, Bank of America applied to buy FleetBoston in a $47 billion deal, and the HFLC sued to block the transaction, complaining that Bank of America had not delivered on the $150 million loan commitment.  The suit in U.S. District Court here, Haili v. Greenspan, Case No. 04-CV-00089, was ultimately dismissed for lack of jurisdiction; the court concluded it didn’t have the authority to order the federal government to disapprove the proposed bank merger.

Between 2003 and 2007, according to testimony offered to the Senate Committee on Hawaiian Affairs this year, extensive discussions took place between DHHL and the bank, resulting in what are claimed to be agreed changes to the commitment, a list of loans, grants, and investments totaling over $150 million leading Bank of America to argue that the commitment had been met.  A letter of October 3, 2007 from the Deputy Chair of the Hawaiian Homes Commission states, “The statement of BoA contributions toward fulfillment of its commitment appear to be in order.  The Department of Hawaiian Home Lands (DHHL) is therefore pleased to formally acknowledge that the $150,000,000 commitment has been met by Bank of America.”

In 2012, HFLC again raised its hand against a proposed merger by Bank of America.  That prompted the Office of the Comptroller of the Currency, in CRA Decision 154 (2012), to write that the record “was not entirely clear” as to whether the $150 million commitment was ordered by the Office of Thrift Supervision as a condition of the Liberty Bank merger, but that if there were indeed conditions they disappeared in 1995.  The OCC approved the merger anyway.

It is now 2019.  The HFLC (or perhaps the activists behind it) still hasn’t given up.  It pointed to a May 2012 letter from the then-chairman of the Hawaiian Homes Commission saying that the 2007 letter was unauthorized, and it persuaded Governor Ige to send a letter to Bank of America offering to host negotiations to “reach a fair and final settlement.”  In the meantime, the Hawaii Senate (SR 32) and the four County Councils have each passed resolutions, supposedly in support of the Governor’s efforts.

What we now have is a real mess.  A lot happened between 1993 and 2007.  DHHL says the bank lived up to what it agreed to, and both the courts and OCC are not willing to say that the commitment was legally enforceable.  DHHL reentered the fray in 2012 to call into question what happened in 2007, and the wounds are being reopened this year, 2019.  

We need this to stop.  Our government gave Bank of America an official communication in 2007 saying that the controversy was pau.  Anyone who received such a communication would have assumed that it was valid (in law, the concept is called “apparent authority”).  Which means we gave them our word.  Why are we talking about a “fair and final settlement” in 2019 if we gave one to the bank in 2007?  If we don’t want the rest of the world to treat us like lawless savages, we must respect the rule of law and stand by the promises we have made, and not toss both aside years or decades later.