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New York

Feds to investigate Hudson City for alleged discriminatory lending

Probe could impact company's proposed merger with M&T Bank

M&T CEO Robert Wilmers and the late Ron Hermance
M&T CEO Robert Wilmers and the late Ron Hermance

Federal authorities have launched an investigation into Hudson City Bancorp for alleged discriminatory lending practices.

The Justice Department and Consumer Financial Protection Bureau are investigation whether or not Hudson City violated the Fair Housing Act by denying loans to members of minority communities, sources told Bloomberg. The investigation could cause problems for the long-delayed sale of the company to M&T Bank, according to the website.

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What the effects of the investigation will be on the pending merger is still unclear. The transaction has been delayed by nearly three years and a total of three times, due to a money-laundering issue, according to Bloomberg.

Hudson City has been valued at about $5 billion. If the $3.7 billion deal falls through, its market value could drop by 70 percent, Morgan Stanley analyst Ken Zerbe wrote in a note earlier this month, according to Bloomberg. Zerbe predicted that Buffalo-based M&T shares could drop 11 percent. [Bloomberg] — Claire Moses

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