Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas August 13, 1998
Public Meeting Transcripts
Public Meeting Regarding Banc One and First Chicago
Thursday, August 13, 1998
Transcript of Panel Eighteen
11 MR. GOLDSTEIN: Hello. My name is Ken 12 Goldstein. I am an associate at Krislov and 13 Associates. And Ken Krislov regrets that he can't 14 attend. He was drawn out of town unexpectedly. 15 We have made submissions to the Board, a 16 public comment, and to which we had attached a 17 complaint that we had filed in Federal court, a 18 class action complaint on behalf of Meleia 19 Robinson, which we have voluntarily dismissed 20 pending this administrative process. All of those 21 submissions, I take, are incorporated by 22 reference. 23 My purpose now is to highlight and 24 summarize some of the points in our testimony that 371 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 I've submitted today. 2 The first point I'd like to make is that 3 there's no benefit for consumers generally in this 4 merger, only the elimination of competition and the 5 certainty of increased fees and charges. 6 This morning I heard the CEOs talk about 7 the merger of equals, but we see this as a 8 combination of competitors. 9 The persons -- the people who are most 10 injured by this merger, while CRA aspects are 11 terribly important, are the general average banking 12 customers, middle class consumers who are going to 13 be affected by the lack of competition and by the 14 combination of lack of choices. 15 The concentration for -- of the 16 marketplace is bad for average, middle class 17 consumers and bank customers. 18 We also have a problem with the 19 divestiture plans, which we feel are incomplete. 20 And lastly, we would request that the Board look 21 closely at the relevant market areas and the 22 antitrust standards in the bank merging -- Bank 23 Holding Company Act and the merging -- and the 24 antitrust laws. 372 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 First of all, this merger is not based 2 only on CRA grounds and a poor record of lending 3 patterns, which has been evident this whole 4 afternoon. 5 This merger hurts middle class average 6 bank customers, the core depositors who make the 7 bank's fortunes rise and fall. 8 This merger eliminates the competition for 9 most consumers, average middle class depositors, 10 based on antitrust laws. And we see this based on 11 the shrinking number of banks over time, which 12 causes less bank choices where people have nowhere 13 else to go. 14 In the past six years alone, we've seen 15 the number of banks reduced from around 12,000 to 16 around 9,000. In some places, the merger will have 17 the practical effect and literally be one-bank 18 towns. 19 In this way, average consumers lose 20 because there's nothing to be gained in having a 21 lack of competition. 22 We have not heard this morning from the 23 banks say any reason why this combination will have 24 a positive effect on interest rates for savings or 373 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 how they would reduce bank fees or create better 2 service at all because we've seen in every case 3 where banks have merged and competition lessened, 4 increased fees and market -- monopoly power market 5 exercised. 6 My next point is that the combination of 7 these banks is that in the Federal Reserve Board of 8 Boston's most recent article, we've seen that 9 banking is local. Consumers travel only two to 10 five miles to their local bank. With the 11 elimination of branches, there will be less 12 competition and we'll see an increase in fees. 13 These banks are already leaders in 14 generating fees and have been padding their bottom 15 lines in just their last month's report and 16 their -- and in the number of the amount that 17 they've been collecting in fees. 18 The last issue is on divesture. We have 19 not heard a full public disclosure of what the 20 divestiture will be in Indiana or at all in 21 northern Illinois. 22 It has not been made fully public. In 23 fact, there's been speculation that the sale of the 24 new banks will be to someone without a local 374 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 presence, which will only serve to strengthen the 2 incumbent bank's position. 3 In Illinois, we have not heard about any 4 divesture and specifically in the time of -- in the 5 towns of Evanston and Wilmette where banks are 6 literally across the street from one another. 7 To conclude, in short we ask that this 8 merger be rejected unless and until these concerns 9 to preserve competition and protect middle class 10 core depositors are fully addressed. Thank you. 11 MS. SMITH: Thank you very much. 12 Mr. Harrington. 13 MR. HARRINGTON: My name is Bill Harrington, 14 and I work in Gary, Indiana. 15 I suppose I would be one of the people 16 that would be the least thought to be here and 17 express concerns over a merger because I probably 18 am one of those people that's considered to be 19 rather privileged. 20 Had a great career, started a firm called 21 Harrington Properties in Gary, Indiana, really with 22 the idea of taking some areas that are rather 23 depressed and through private industry rehabbing 24 some houses and creating some in-fill housing to 375 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 create a neighborhood. 2 In 1994, I happened to, as a favor to my 3 parent company that I ran then as president and 4 CEO, bought some commercial property. 5 NBD had been my bank since -- or Gainer 6 Bank had been my bank since 1984. And I went to 7 NBD Bank. And they were very gracious and loaned 8 me the money. 9 I ended up with a $312,000 mortgage and 10 also later a line of credit of $50,000, which they 11 secured with a second mortgage on a house that the 12 company owned and that I paid rent in excess of 13 market value for. 14 We had an agreement that when -- I asked 15 when the release of this mortgage on the house 16 would be, and that would be whenever the $50,000 17 note was paid. 18 And when the primary note was below 19 $285,000, the formula was that they wanted to see 20 the loan to the point that the developed land, the 21 three acres with the buildings on it, were -- the 22 debt was less than 80 percent of appraised value 23 and 50 percent on the vacant land, which sounded 24 reasonable. 376 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 1996, 97, our line of credit was 2 established for 50,000 and later increased to 3 $100,000, obviously secured by inventories, 4 equipment, receivables, as well as a personal 5 guarantee, which I have never had a problem 6 giving. 7 I guess my point is that when I was 8 renewing the last line of credit in 1997 and I'm 9 looking at the documents which are given to me to 10 review, I happen to get one document I wasn't 11 supposed to get, and that's the bank's internal 12 document. And that document said, CRA, yes. 13 Now, the bank on a hundred thousand 14 dollar line of credit when they had collateralized 15 everything in the company and me personally 16 guaranteed with a personal financial statement well 17 in excess of a million dollars, it started to 18 trigger me why we have difficulty in Gary, Indiana, 19 in attracting capital to the inner city if the bank 20 can satisfy its needs through nonrisk loans being 21 qualified for Community Reinvestment Act credits. 22 I guess if you really want to find out 23 where the heart of your bank is, go ask them for a 24 $250,000 nonrecourse line of credit to rehab a city 377 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 block that today looks like Beirut, Lebanon, which 2 I did in writing, submitted a letter to NBD, who 3 was at one time Gary National Bank, Gainer Bank, 4 now NBD, and was pretty flatly rejected. 5 They said, you know, if you want to 6 come in and borrow some money and tie up your 7 corporation and personally endorse the note, we'll 8 loan you some money to do some work, but, you know, 9 we want to be collateralized. 10 I guess my point is this. Six months ago 11 through a developer that wanted to partner with me, 12 I decided I would approach the bank to release the 13 vacant land since by then the mortgage was well 14 below $200,000, which certainly left them in an 15 oversecured position. 16 And, you know, they told me they'd be just 17 more than happy to do that if I, again, would give 18 them my house as collateral, which by then had no 19 mortgage on it at all. 20 And that's okay. I'm not here to complain 21 about the treatment that I've had with NBD Bank. I 22 guess my concern is Gary, Indiana, and all of the 23 little people. 24 And that is, if I have the kinds of 378 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 problems in -- with a lot of resources in 2 attracting some capital into a city like Gary, 3 Indiana, that people like Bennie Simmons, like 4 other businesspeople that have little resources 5 that want to reach out and rebuild a community, it 6 really is a struggle. 7 I don't know Banc One well. And Jim 8 Danduran called me one day from Merrillville. 9 And I had a breakfast meeting, and he bought 10 breakfast. So I'm sure they're a pretty good bank 11 and he's a pretty good guy. I've never had any 12 other dealings with Banc One. 13 I guess I'm not saying that I'm totally 14 opposed to the merger, but I would sure like to see 15 a commitment, as those that we've read about in the 16 paper to Chicago and to other communities, that the 17 bank that at one time was Gary's bank, who now has 18 at least partially abandoned Gary, would make a 19 commitment to Gary, Indiana. 20 And the one thing I would say not only to 21 NBD and Banc One, but to every other bank, great 22 community on the rebound and, you know, with 23 everybody leaving it would be a great place to 24 open a bank. Thank you. 379 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 MS. SMITH: Mr. Simmons, please. 2 MR. SIMMONS: Yes. My name is Bennie 3 Simmons. I'm president, founder, CEO of the 4 Marshall Plan for Gary. I have some major problems 5 with the merger, just some incidents. 6 Number one is that I went into Banc One to 7 request a CRA report. And what they gave me was a 8 report of the city of Indianapolis and not Gary. 9 Reason why is because Banc One 10 consolidated several years ago. And when they 11 consolidated, they moved a lot of their operations 12 down in Indianapolis. So when I make a phone call 13 for help, I have to dial a 1-(800) number and talk 14 to someone down in Indianapolis. So I couldn't get 15 a proper CRA report on what's happening inside of 16 Gary, Indiana. 17 Millions of dollars are deposited into 18 Banc One and First Chicago NBD in Gary, Indiana; 19 the City government money, the school City money, 20 unions, churches every Monday, Gary residents. And 21 those millions of dollars are being used to finance 22 the communities outside of Gary. 23 The majority of the citizens will tell 24 you -- just ask them -- that there is racial 380 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 discrimination in Banc One's banking system. I 2 think we need to adhere to what Matthew Lee 3 was saying. 4 Economic blight; I have some pictures here 5 that my friend, Darryl Curie, kind of helped me 6 with on Gary, Indiana. And I think the panel has a 7 copy and there's a copy out in the hallway there. 8 And if you could see this, here's the 9 beginning of Gary from Merrillville, but here is a 10 senior citizen's building here, NBD and Banc One in 11 a couple of blocks. That's only about two 12 businesses. The rest of that area is nothing but 13 blight, boarded-up buildings. 14 Here is another picture here of a 15 building, three and a half blocks, okay? There's 16 nothing but blight. A picture here of two doors 17 from -- one, it's a lady digging in the abandoned 18 building looking for garbage, okay, right almost 19 adjacent to Banc One. 20 That's the reality of what is happening in 21 my community. I've been there all my life. My 22 father has too. He's 75 years old. 23 Senior citizens; there's a large senior 24 citizens building right across the street from Banc 381 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 One. The first of the month, the senior citizens, 2 you know, they get their checks and they go down 3 to -- across the street to the bank. 4 They have seven teller windows and 5 there's two windows being manned, operated. So my 6 grandparents have to stand in that line, sick and 7 old. And we complain and nothing is done. 8 That's the relation. There's almost an 9 adversary relationship between Banc One NBD, First 10 Chicago and Gary, Indiana, against our community. 11 And that's a reality. 12 So there's been a tale of two cities 13 here. I like to call it the doughnut. You've 14 heard people -- there's a part of the nourishing 15 part of the doughnut. 16 They've been telling you that Banc One is 17 great. And they're telling the truth. Oh, they 18 helped build our community. It's wonderful. 19 But then there's other areas like Lorraine 20 area of Ohio and Gary, Indiana, and Milwaukee where 21 there's nothing there. There's a doughnut hole. 22 So you cannot base your decisions to 23 approve this merger based on the nutrition outside 24 the doughnut hole. 382 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 I'm not saying that this merger should be 2 denied because I imagine no bank mergers have been 3 denied. What I'm asking is that for this bank 4 merger to be delayed until Banc One and NBD First 5 Chicago make the same commitments that they made 6 with Woodstock here in Chicago, to places like Gary 7 that is right next door. In fact, we got an 8 airport called Gary-Chicago Airport. So this is 9 what we ask you for. 10 Now, why is that the doughnut hole? Is it 11 because that is John McCoy's intentions? No, I 12 don't believe that. 13 But what I believe is this. I believe 14 there's been a lack of managerial responsibility. 15 So if you got a racist bank president or racist 16 bank managers, they do what they want to to these 17 communities. And we complain, you know, but 18 nothing's done. 19 So I'm asking -- they had an advertisement 20 in northwest Indiana saying, we want to give 21 $2 billion. Well, I'm asking John McCoy to commit 22 $1 billion to Gary, Indiana, over the next eight 23 years to rebuild that community in loans, in 24 grants, business loans, mortgages to Gary, Indiana, 383 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 and then do the same to those other doughnut holes 2 across the country. And if you do that, Banc One 3 would be a great bank. 4 Lastly, Citibank; the mayor of 5 South Dakota went to Citibank and said, look, we 6 need help. We think that we can handle your 7 database and your credit cards at one-third the 8 cost. And whoever is in the leadership of Citibank 9 said okay. So you know when you get your statement 10 back, it says South Dakota. 11 I think there's ways in which creatively 12 Banc One and places like Gary and Milwaukee can -- 13 we can barter together. We can sit down and reason 14 together, you know, and not paint a glowing picture 15 like everything is okay because it's not. 16 So it is my recommendation that this 17 merger be not denied, but delayed until such 18 commitments can be made, just like they did with 19 Woodstock here in Chicago. Thank you. 20 MS. SMITH: Thank you very much. We appreciate 21 your being here this afternoon. 22 And we will go onto, I think, another 23 panel. 24 MR. ALVAREZ: Mr. Simmons, you left a copy of 384 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 the pictures? 2 MR. SIMMONS: They out there, yeah. I left two 3 copies. One's on the desk and then -- 4 MR. ALVAREZ: Thank you very much. 5 MR. SIMMONS: Yes, thank you. 6 MS. SMITH: We'll start with Mr. Reyes.
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