Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas July 9-10, 1998
Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Thursday, July 9, 1998
Transcript of Panel One
35 1 MS. SMITH: Thank you very much for your 2 presentation and we will move on to the first panel. 3 MS. ORR-SMITH: Madam Chairman, I'd like to 4 address this letter to Mr. McColl and Mr. Coulter 5 requesting a meeting with some of the protestors to 6 discuss the specific issues raised. Thank you. 7 MS. SMITH: I think the first panel is mostly up 8 but if there's anyone who hasn't made it up. And if you 9 will just introduce yourselves to the audience as you are 10 seated and let's start with the person on the extreme 11 right. 12 MR. MARTIN: Good morning, my name is DeWayne 13 Martin, I'm Chief of Staff for the City of Atlanta, 14 Georgia. 15 MS. BROOKS: Did you want us to introduce 16 ourselves? 17 MS. SMITH: No, please, just continue to speak. 18 MR. MARTIN: Thank you. Members of the panel, 19 I'm DeWayne Martin, Chief of Staff to Mayor Bill Campbell. 20 MS. SMITH: Can you pull the mike closer? 21 MR. MARTIN: Mayor Campbell regrets that he's 22 unable to be here today but I have come on behalf of the 23 City of Atlanta because we believe that the issue before 24 this panel is very important. 25 Seven years ago Atlanta, Georgia was in the same 26 place San Francisco is today, a major merger between . 36 1 Georgia's leading bank and North Carolina National Bank 2 was before the country. This merger was the formation of 3 NationsBank. 4 From the onset, NationsBank showed its commitment 5 to corporate leadership. And at that time our city was 6 vying to attract the world's most watched event, the 1996 7 centennial Olympic games. NationsBank stepped to the 8 table from the onset extending a $300 million line of 9 credit to the Atlanta Organizing Committee at a critical 10 juncture in that process. 11 At that point in our nation's history when many 12 corporations were accused of disinterest in the 13 communities in which they lived and do business, 14 NationsBank has shown and continues to show by example 15 that good business still means community responsibility 16 and commitment. Certainly economic development, 17 affordable housing and expanding employment opportunities 18 are all important issues for any city. 19 Through its broad array of financial services, 20 NationsBank has served all levels of Atlanta's community, 21 whether helping small businesses expand or supporting 22 efforts to retain or attract large corporations to our 23 area. NationsBank plays a fundamental role in the 24 economic vitality of our city and our region. This has, 25 in turn, helped create jobs which is extremely important 26 to our city. . 37 1 The capacity and positive effect of economic 2 development in Atlanta to develop affordable housing and 3 create jobs can only be enhanced by the combination of 4 resources of NationsBank and the Bank of America. 5 The most visible, in fact, of the NationsBank 6 community commitment in Atlanta is in the neighborhoods of 7 Atlanta through neighborhood development initiatives. 8 During the past five years, the City of Atlanta 9 has worked in partnership with NationsBank to create the 10 availability of affordable housing and reinvigorate 11 Atlanta's once forgotten neighborhoods. And for the first 12 time in over 25 years, Atlanta, Georgia has experienced an 13 increase in housing and in population in the inner city, a 14 trend that reverses a trend in many major cities where 15 populations have decreased over the past 25 years. 16 I will simply touch on three projects which block 17 by block are making a difference and are evidence of 18 Nationsbank's commitment to cities and communities. 19 First, the Historic Development -- Redevelopment 20 Partnership is revitalizing the Martin Luther King 21 District in Atlanta. When completed next year, the 22 district will have 67 new or historically re-habbed houses 23 representing an investment of four and a half million 24 dollars. This project has increased property values in 25 the area and is attracting more homeowners and businesses 26 to the inner city. Additional phases are being planned . 38 1 with the help of NationsBank. 2 Another public/private partnership is the $5.9 3 million to replace at Summerhill which includes 70 4 single-family homes constructed along the neighbor 5 traditional designs. In Summerhill, this development has 6 been a catalyst for additional development, continuing 7 development in the inner city. 8 And the park at Lakewood, a $6.8 million project, 9 represents complete overhaul of a multi-family complex. 10 More than 200 units have been provided. An additional $10 11 million of indirect investment is furthering neighborhood 12 and economic development efforts in Atlanta. 13 NationsBank has established itself as a leader in 14 the community because of its commitment to involvement and 15 investment in the crucial parts of our city and across the 16 country through effective public and private partnerships. 17 We've seen that this commitment can make a difference and 18 we believe that it will continue to. Thank you very much. 19 MS. BROOKS: Good morning. My name is Roberta 20 Brooks and I'm Assistant District Director for 21 Congresswoman Barbara Lee representing the 9th District, 22 California. Thank you for providing -- I'm quoting her. 23 Thank you for providing this opportunity to me and my 24 representative, Ms. Roberts Brooks to address the issue of 25 the merger of Bank of America with NationsBank. I very 26 much regret not being here personally to talk with you but . 39 1 I only learned about this meeting accidentally and not in 2 time to rearrange my schedule. 3 The first issue I will raise is the regulatory 4 role of the Federal Reserve Board relative to the ability 5 of these two banks to merge. Congress, through the 1956 6 Bank Holding Company Act, gave the Federal Reserve System 7 the responsibility to review such mergers and to 8 specifically consider the likely affects of the 9 acquisition on competition and the convenience and needs 10 of the community to be served. Due to the increasing 11 number of mergers in the 1950s, Congress reinforced the 12 1956 Act by passing the Bank Merger Act in 1960. 13 The Bank Merger Act strengthened the language of 14 the Federal Reserve Board's responsibility. It stated 15 that the Federal Reserve may not approve any merger that 16 could substantially reduce competition. It also was 17 concerned that a merger not create a monopoly unless it 18 finds that the anticompetitive effects of the transaction 19 are outweighed by the transaction's probable beneficial 20 effects regarding the convenience and needs of the 21 community served. 22 The second issue I wish to address is that of the 23 scale of the banks that are merging. The planned merger 24 of BankAmerica with NationsBank would make it the second 25 largest bank in the United States with assets of $580 26 billion. This merger must be placed in the context not of . 40 1 a single event but as the first of a series of announced, 2 planned mergers, Citcorp's $72 billion merger with 3 Travelers Corp., and First Chicago Corp's $30 billion deal 4 with Bank One Corp. Another merger with similar 5 significance to California as BankAmerica is that of 6 California Wells Fargo with Norwest Corp. The 7 consolidation of Wells Fargo with Norwest Corp will make 8 it the seventh largest bank in the nation with assets of 9 190 billion. 10 This leads me to my third point. Given the 11 regulatory responsibilities of the Federal Reserve System 12 and the size of the banks under consideration, I would 13 expect, as many of my constituents and colleagues on the 14 House Banking Committee do, that the Federal Reserve would 15 consider this merger with appropriate gravity. One 16 measure of the seriousness of the Federal Reserve would be 17 its willingness -- is its willingness to listen and the 18 respect it will give to the testimony from people who 19 would be affected by such a merger. 20 It was, therefore, suprising to learn that only 21 one session was to be held on a single day in all of 22 California. You have undoubtedly received a great volume 23 of mail on the subject of your willingness to listen. I 24 understand that, as a consequence of the extent of the 25 mail, we the public now have two days instead of the 26 original single day. . 41 1 I run the risk of stating the obvious, that a 2 two-day hearing in one part of California on the loss of 3 the largest bank in California is totally inadequate. And 4 with the risk of being rude by being clear, it's 5 unacceptable behavior from a government agency. 6 My colleagues on the House Banking Committee, 7 Congresswoman Lucille Roybal-Allard and Maxine Waters, 8 representing constituents in Southern California share my 9 concern with the negligible time that's being given by the 10 Federal Reserve to the public and to elected 11 representatives to hold the appropriate discourse on this 12 merger. Although, I am pleased that my representative did 13 not have to travel to Los Angeles to voice our concerns, I 14 am dismayed that so serious a matter should be given such 15 short attention. 16 This is a merger that affects the entire nation, 17 just as Microsoft's practices affects the whole nation. I 18 strongly recommend that the Federal Reserve hold hearings 19 in every state in which either BankAmerica or NationsBank 20 has assets of $1 billion or more. 21 I ask that a letter signed by myself, 22 Representative Roybal-Allard and Waters to Hugh McColl, 23 Chairman and CEO of NationsBank, and David Coulter, 24 Chairman and CEO of Bank of America, be accepted as part 25 of my testimony. We will fax that at a later time. 26 So I have one minute left. I need to move on. . 42 1 The major concerns that we have are loss of 2 service. There is a great anxiety expressed by our 3 constituents very directly over the steady decline in the 4 last 20 years or so of banking services and the 5 accompanying tariffs for even the smallest services, such 6 as using the ATM. The pattern of less service and more 7 cost is so clear as to make this proposed merger a crisis 8 point. By delegation from Congress, the Federal Reserve 9 System has the responsibility for responding to these 10 concerns. How are you executing this responsibility? 11 Loss of jobs. How many jobs will be lost when 12 Bank of America moves from the Bay Area to North Carolina? 13 Job holders, families and the public need to have an 14 answer to this. 15 Community development and reinvestment, we have 16 heard a strong commitment from the bank with that but we 17 are concerned about it. 18 I don't have time to finish. I'll submit the 19 written testimony but I just want to indicate that we 20 trust that the Federal Reserve does remember its birth in 21 the republic and its true loyalties will be with the 22 people and give time for people to really give their 23 opinions throughout the country. Thank you very much. 24 MS. SMITH: Thank you. Mr. Brown. 25 MR. BROWN: Thank you, I'm Lee Brown, I'm the 26 Mayor of Houston, Texas which is the fourth largest city . 43 1 in America and I want to express my appreciation for the 2 opportunity to provide testimony here today. 3 I've been a customer of NationsBank or one of its 4 predecessor banks for several years. Currently I hold 5 several accounts with the bank plus a mortgage loan. But 6 today I want to talk about NationsBank as a corporate 7 citizen in our city. NationsBank has been an excellent 8 corporate citizen, but most important, it has been a 9 partner with our efforts to improve the quality of life 10 for our citizens in Houston. 11 There are staff in Houston led by Joe Mosellino 12 (phonetic) who is the vice-chairman of NationsBank. They 13 have engaged in hundreds of hours of volunteer work. They 14 have supported many major philanthropic endeavors. And 15 often they've taken the lead in those efforts. Joe has 16 been very active in our Houston Chamber of Commerce which 17 is known as the Greater Houston Partnership and, thus, 18 worked very closely with the city on numerous economic 19 development efforts. 20 NationsBank has been a strong supporter of 21 affirmative action for many years. It was Hugh McColl, 22 the CEO of NationsBank, who called the press conference in 23 Washington, D.C. several years ago to champion affirmative 24 action at a time when the issue is being debated on 25 Capitol Hill. I would like to point out that he did not 26 have to do that, but he did it because he believed in what . 44 1 our country, America, stands for, equal opportunity for 2 all. And that philosophy is reflected in the culture of 3 the organization. 4 Last year in Houston when this issue was being 5 voted on in our city, NationsBank lenders were out front 6 supporting this cause. And although I wasn't mayor at the 7 time, I'm told that NationsBank or its predecessors have 8 supported community development programs launched by the 9 City of Houston since 1980. 10 The $350 billion commitment announced by 11 NationsBank and BankAmerica is intended to address the 12 major concerns that I, as mayor of my city, and many other 13 mayors across the country have. Concerns such as how can 14 we get more affordable housing in our cities? This 15 commitment has $150 billion for affordable housing. 16 Concerns such as how can we assist small businesses which 17 provides jobs and economic opportunity to our cities? The 18 NationsBank/BankAmerica commitment will provide $180 19 million for small businesses. 20 This commitment, I'm told, and as we heard 21 earlier from Mr. McColl, is a floor, not a ceiling. So we 22 can expect more to happen. 23 During the past few years, the NationsBank has 24 provided a report to communities which documented the 25 progress they made on previous $10 billion commitments. 26 In 1993, NationsBank committed to spending $10 billion . 45 1 within ten years to help build urban communities. They 2 exceeded that goal in four years. We expect they will 3 continue this practice with the $350 billion commitment. 4 I've been pleased with what I've observed about 5 NationsBank, pleased both on a personal basis and as a 6 leader of our city. Our cities throughout America need 7 responsible corporate leaders and community development 8 needs strong private sector commitments to make it a 9 reality. 10 And that's why I'm here today, to give support to 11 the proposal by NationsBank Corporation of Charlotte, 12 North Carolina to acquire BankAmerica Corporation of 13 San Francisco, California. And thank you for allowing me 14 the opportunity to speak before you today. 15 MS. SMITH: Thank you. 16 MS. TAVANLAR: Hello, ladies and gentleman, my 17 name is Katrina Tavanlar and I'm representing 18 Congresswoman Lucille Roybal-Allard from the 33rd District 19 of California. 20 As a member of the Banking Committee and Chair of 21 the California Democratic Congressional Delegation, I'm 22 writing to express my concern ith the proposed merger of 23 Bank of America and NationsBank. I'm especially concerned 24 about its impact on lending, investing, employment and 25 other financial services for low-income and minority 26 Californians. . 46 1 This merger will no doubt have a greater impact 2 on California than any other state in the country. The 3 relocation of the headquarters of California's largest 4 financial institution to North Carolina particularly 5 concerns me, and the merger activity that has occurred in 6 California to date reinforces this concern. 7 In California alone, more than 80 banks and 8 thrifts have been acquired by other institutions since 9 1996. In 1992, when Bank of America purchased Security 10 Pacific Bank, they closed over 400 branches. In 1996, 11 Wells Fargo closed hundreds of branches throughout the 12 state after purchasing First Interstate Bank. While we 13 cannot fully anticipate the long-term effects of these and 14 future mergers, the obvious and the immediate impact has 15 been fewer branches and escalating bank fees. 16 I commend Bank of America for its prior and 17 current community reinvestment commitments to our 18 California communities. 19 However, I would appreciate receiving details on 20 how this pledge will benefit California's consumers and 21 communities. In requesting this information, I would 22 respectfully point out that these specific requests are 23 not unprecedented and reflect commitments that other 24 California institutions have made in the past. Therefore, 25 I am confident that NationsBank and Bank of America will 26 continue the good faith efforts to meet the needs of our . 47 1 California communities. 2 Specifically, I would appreciate your response to 3 the following questions. One, does the bank intend to 4 earmark a portion of the 350 billion to California? Given 5 Bank of America's dominance in California, it's critical 6 that the community reinvestment commitment be California 7 specific and commensurate with the proportion of the 8 bank's deposits and activities originating in the state. 9 How will the institution fulfill regional 10 commitments within California given the geographical, 11 social and ethnic diversity of our communities? What 12 culturally appropriate products and services will be 13 available to consumers considering the various credit, 14 investment and economic development needs of our state's 15 communities? 16 Second, how will the new bank maintain and expand 17 Bank of America's present programs and commitments in 18 California such as the Community Development Bank, Rural 19 2000 Initiative, Economic Development Initiative, the 20 BankAmerica Foundation and affordable housing activities? 21 It is vital that these programs be distinct entities 22 within the merged bank and continue to be based in 23 California, given the tremendous need in our state and the 24 collective expertise Bank of America has acquired in 25 serving our communities. 26 Third, what will be the bank's specific goals on . 48 1 the type and amounts of loan for minority or women-owned 2 businesses -- small businesses and home loans? 3 Fourth, how will the new bank minimize branch 4 closings and increase branch openings in regions and 5 communities that are presently underserved by traditional 6 banking institutions. 7 And finally, does the new bank intend to lower or 8 stabilize ATM and bank fees? I am very concerned about 9 rising bank fees and their adverse impact on financially 10 underserved and low-income communities. 11 A dedicated commitment to California is an 12 exciting and challenging opportunity for banks. This 13 merger has the potential to create mutually beneficial 14 outcomes for both consumers and banks, given ever growing 15 entrepreneurial immigrant communities, expanding small 16 business markets and the booming economy. 17 I look forward to working with you to meet these 18 above-mentioned goals and anticipate your prompt reply. 19 Sincerely, Lucille Roybal-Allard, Member of Congress. 20 MS. SMITH: Thank you. 21 MR. LENO: Good morning and thank you very much 22 for your warm welcome. My name is Mark Leno and I'm a 23 member of the Board of Supervisors for the City and County 24 of San Francisco. 25 Since NationsBank announced in April that it 26 would acquire Bank of America, the San Francisco Board of . 49 1 Supervisors has been very concerned about the potential 2 decline and community reinvestment that could result from 3 the proposed merger. We, the undersigned, believe that 4 the proposed Bank of America/NationsBank $350 billion 5 community reinvestment commitment should be included in 6 the bank's intermerger application to make it binding on 7 the new bank. 8 Also, we have asked NationsBank/Bank of America 9 to provide specific commitments to California and the 10 San Francisco Bay Area and its small businesses, minority 11 businesses, minority and low-income neighborhoods and 12 nonprofit organizations. We have concern that consumer 13 services, small business lending, low-income housing and 14 charitable giving may all be negatively affected by the 15 NationsBank acquisition. 16 There is cause for concern that the new bank may 17 not be as responsive to the needs of San Francisco and the 18 Bay Area. In general, larger banks mean higher fees, 19 fewer bank branches, fewer product options and fewer 20 banking options for consumers. A Federal Reserve survey 21 of bank fees and interest rates reveals that, on average, 22 large banks charge higher fees than small banks with an 23 average monthly fee on interest-bearing checking accounts 24 of $10.12 at large banks and $6.13 at small banks. By 25 contrast, the average yield on interest-bearing accounts 26 is 1.1 percent at large banks and 1.58 percent at small . 50 1 ones. 2 With bank mergers comes the possibility of bank 3 closures. The National Community Reinvestment Coalition 4 has noted that mergers lead to fewer branches in 5 underserved communities. A 1997 Federal Reserve study 6 found that from 1980 through 1995 branches in middle and 7 moderate income neighborhoods increased eight percent 8 while branches in low- and moderate-income neighborhoods 9 decreased 14 percent. The closure of a branch in a 10 low-income neighborhood could reduce lending in the area, 11 and in turn, spur the decline of the neighborhood. In 12 addition, when bank branches close, teller and other bank 13 jobs disappear. 14 Small business lending is also affected by 15 mergers. A study by Federal Reserve economists predict 16 that small business lending will continue to decline in 17 the next three to five years at the rate of 33 percent. 18 This is the same rate of decline as that of the last five 19 years. A February '98 study of the Federal Reserve Bank 20 of San Francisco found subtle discrimination in lending 21 against minority businesses in the Bay Area. If community 22 reinvestment is diminished in the Bay Area, minority 23 businesses will be the first to suffer. 24 A decline in lending to small and minority-owned 25 businesses would also affect the city's ability to meet 26 our welfare-to-work mandate. The city is counting on . 51 1 small businesses to play a significant role in providing 2 jobs for those moving from welfare to work. Small 3 businesses are creating more jobs than larger businesses 4 in the Bay Area and, therefore, more opportunities for 5 welfare recipients. King Security, a local small 6 business, was the first to hire welfare-to-work recipients 7 in San Francisco. 8 NationsBank's record of community reinvestment 9 raises additional concerns. For example, Bank of 10 America's level of lending for low-income households in 11 California is 21.3 percent, but NationsBank's level of 12 lending for low-income households in North Carolina is 13 only 6.3 percent compared to an average for all lenders of 14 8.4 percent. 15 There is a litany of additional questions 16 regarding the activities of NationsBank. As of March 17 1998, NationsBank offered one of the most expensive 18 checking accounts in the country. NationsBank was 19 recently fined $7 million by Wall Street regulators for 20 illegally selling high risk mutual funds to unwary, and 21 mostly elderly, investors. NationsBank is in the process 22 of closing 205 branches in Florida since its purchase of 23 Barnett Bank in 1997. State regulators in Texas are 24 examining NationsBank's transfer of almost half of the 25 bank's Dallas deposits to its corporate headquarters in 26 Charlotte, North Carolina in April to determine if the . 52 1 transfer was an attempt to circumvent the state's merger 2 rules. 3 Given that California will suffer the most with 4 the acquisition and loss of Bank of America, we believe a 5 major proportion of the $350 billion community 6 reinvestment pledge should be committed to California. To 7 date, we have not received any commitments, and we 8 understand that the bank will not establish specific goals 9 until after the completion of the merger. The bank merger 10 should be -- the bank should be directed to outline 11 specific community reinvestments in their intermerger 12 application. Our communities deserve a stronger show of 13 commitments to the specific needs of the San Francisco Bay 14 Area. The possible loss of Bank of America, a bank with a 15 proven record of community reinvestment would be 16 devastating and specific commitments are necessary. 17 This is cosigned by my colleagues on the board 18 Michael Yaki, Tom Ammiano, Sue Bierman, Amos Brown, Leslie 19 Katz and Jose Medina. I thank you very much. 20 MS. SMITH: Thank you very much. Are there any 21 questions? 22 MR. FRIERSON: I'd like to thank all of the 23 panelists for coming and sharing your views with us this 24 morning. 25 Mr. Leno, I just have one question from you. 26 Could you provide us with a little more detail on this . 53 1 February 1998 study showing the subtle discrimination? 2 And you can just provide that to us. We can proceed to 3 track down that stuff. 4 MR. LENO: I certainly will. 5 MR. FRIERSON: Thank you very much. 6 MS. SMITH: Any other questions? Fine. Thank 7 you very much for coming today and we will go on to the 8 next panel. I might mention that this is a very large 9 panel as you will see on the agenda, however, the time 10 allocations have all been made to fit within a 50 minute 11 period.
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