WASHINGTON — Two Democratic senators have flagged concerns to the Office of the Comptroller of the Currency over the agency's approval of New York Community Bank's acquisition of Flagstar Bancorp, according to a letter first seen by American Banker. 

Sens. Elizabeth Warren, D-Mass., a leading progressive voice on the Senate Banking Committee, and Richard Blumenthal, D-Conn., were critical of Flagstar's fair lending practices and NYCB's exposure to multifamily loans. The lawmakers said that, according to a report from The Capitol Forum, an anonymous Federal Deposit Insurance Corp. employee said that the agency wasn't comfortable recommending approval for the deal. 

"After a year had passed without FDIC movement, NYCB and Flagstar schemed to restructure their merger so it no longer needed FDIC approval," the lawmakers said in the letter, sent Monday afternoon. "Flagstar converted from a federal savings bank, under FDIC oversight, to a national bank under OCC's authority, cutting FDIC out of the process and allowing the banks to merge after OCC approval." 

After the Flagstar deal, NYCB received FDIC and OCC approval to take over Signature Bank following that bank's failure. This pushed NYCB above the $100 billion threshold that mandates higher prudential standards. According to Warren and Blumenthal, the pair of deals contributed to the turmoil NYCB found itself in earlier this year. 

"Ultimately, these two rushed, rubber-stamped mergers created grave risks for NYCB," the lawmakers said. "NYCB's Chief Risk Officer and Chief Audit Executive left their posts soon after the Signature acquisition, foreshadowing the incoming storm."

After the two deals, the OCC continued to be lax in its oversight of NYCB, Warren and Blumenthal said.

"The OCC reviewed NYCB's financials every quarter, yet allowed NYCB to pay consistent dividends, up until the most recent drastic cut," they said in the letter. "This is deeply troubling, especially since lax bank examiner oversight was a major factor of the March 2023 bank failures. Regulators promised to do better, but the near-collapse of NYCB in early 2024 indicated the OCC has once again abdicated its oversight responsibilities." 

The senators asked the OCC to provide more information on why the agency approved the Flagstar deal, if the agency consulted with the FDIC and other details about the OCC's oversight of NYCB by May 15.