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 Three
15 MR. DAVIS: Good morning. I'm Denver City 16 Councilman Hiawatha Davis. I represent Denver's 17 City Council District Number 8, a predominantly low 18 to moderate income and minority community. 19 AUDIENCE MEMBER: Can hardly hear you. 20 MR. DAVIS: Is that better? Let me start all 21 over. 22 I'm the Denver City Councilman Hiawatha 23 Davis. I represent Denver's City Council Number 8, 24 a predominantly low to moderate income district. 48 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 This council district is in the city 2 center, and it is being impacted by dramatic 3 economic surge and a population increase that has 4 contributed to increasing rents and virtually loss 5 of low to moderate income house choices in the 6 city. 7 As rents increase, moderate income 8 families would do better if they could purchase a 9 home before they are completely priced out of this 10 city's housing market. Rental opportunities and 11 home ownership opportunities are shrinking to the 12 point of crisis. 13 Yes, Denver is in the midst of an upscale 14 housing boom with downtown loft projects and middle 15 income housing developments springing up all over 16 the city. 17 Denver is also in the midst of its worst 18 crisis in terms of affordable, low and moderately 19 priced housing. 20 There is very little capital being made 21 available for low and moderate income home buyers, 22 and not much being made available to non-profit 23 developers of low and moderately priced housing. 24 If trends continue, this crisis will only get 49 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 worse. 2 I'm here today to ask for your help in 3 getting Banc One to live up to the principles 4 articulated in the Community Reinvestment Act as it 5 pertains to Denver. 6 Prior to the close of initial comments 7 on this merger, I was joined by 10 of my 13 8 colleagues on City Council, Denver's Congresswoman, 9 three Colorado State representatives and a State 10 Senator, all of whom were concerned about 11 Banc One's discriminatory lending practices toward 12 minorities especially in the areas of home 13 mortgages. 14 We all requested an extension to the 15 comment period, which we thank the Federal Reserve 16 Board for granting, and requested a public hearing 17 in Denver. 18 While we are disappointed a hearing in 19 Denver could not be accommodated, I'm honored to be 20 here today to testify on the merger between 21 Banc One and First Chicago. 22 This merger is of no small matter to my 23 community and constituents. The new entity will be 24 the biggest bank in between the Appalachians and 50 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 the Rockies serving millions of consumers who will 2 be directly affected by the way it does business. 3 And if the way it is conducting its 4 business currently is any guide, Banc One needs to 5 significantly change its approach to lower income 6 and minority communities. 7 Its record of providing mortgage financing 8 in Denver has been appalling. In 1995, Banc One 9 made 12 mortgage loans to African Americans and 10 Latinos. In 1996, it made none. It took no 11 applications from Latinos or African Americans in 12 1996, either. 13 As I mentioned earlier, I represent a 14 predominantly minority district. I have plenty of 15 constituents struggling with high rent, struggling 16 to get ahead, who want to achieve the American 17 dream of becoming home owners, but that dream won't 18 be achieved with any help from Banc One. 19 They could not find a single minority in 20 the city of Denver in 1996 to even take an 21 application for a mortgage from. 22 Something is wrong. And unless Banc One 23 makes some commitments to change this record, when 24 my constituents ask me where to go in terms of 51 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 their banking, I won't be able to say Banc One. 2 This lack of service to the minority 3 community in Denver is outrageous. Latinos make up 4 23 percent of the population in Denver and African 5 Americans account for 12.8 percent of the 6 population. To ignore over one out of three 7 consumers in the Denver area is unconscionable. 8 Access to credit is essential to breaking 9 the cycle of poverty. Home ownership is the best 10 route to building wealth and achieving the American 11 dream. 12 One of the most important measurements of 13 an institution's commitment to move American 14 families to self-sufficiency and economic stability 15 is the entrance into home ownership. 16 Renters have greater difficulty 17 accumulating and maintaining wealth than home 18 owners. 19 Particularly for African Americans, home 20 ownership is a bellwether for wealth. According to 21 the Department of Housing and Urban Development, 22 African American renters have a net worth of $500 23 on average, while African American home owners have 24 a net worth of more than $48,000. 52 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Banc One's failure to provide this needed 2 credit demonstrates its disregard for Denver's 3 minority communities and consumers. 4 The vast bulk of Banc One's mortgages went 5 to the wealthiest and the whitest Denver 6 neighborhoods. 42 percent of its mortgages were 7 made in census tracts where the population was more 8 than 90 percent white. 9 An additional 41 percent of its home 10 purchase mortgages were made to neighborhoods where 11 whites made up between 75 and 90 percent of the 12 population. 13 Only one of its loans under two percent 14 went to a census track where minorities were more 15 than half the population in 1996. And that loan 16 was not even made to a Latino or African American, 17 since we know that no applications were taken from 18 this population in 1996. 19 Banc One has a comparable disregard for 20 low income communities. In 1995, more than 21 one-third of those under 50 percent of the median 22 income were rejected for home mortgages, more than 23 three times the rate of Africans earning 24 120 percent of the area median income. 53 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 In 1996, it took more than 80 percent 2 fewer applications from low income people. Just 4 3 or less than 7 percent of its mortgage loans went 4 to neighborhoods with 50 percent of the area median 5 income. 6 Additionally, Banc One has so far refused 7 to make a lending commitment for the Denver area. 8 It has pledged 4 billion for Chicago and 3 billion 9 for Detroit, but not one penny for Denver. 10 MS. SMITH: Mr. Davis, could you bring it to a 11 conclusion. We'll be glad to have your entire 12 statement put into the record. 13 MR. DAVIS: I have submitted 11 copies of that 14 statement to the folks where I checked in. 15 But essentially the point I'm trying to 16 make here is that Banc One still has a long way to 17 go. We think that, in other words, for them to get 18 there that this merger needs to be put on hold 19 until they're able to really establish some real 20 relationships with low-moderate income communities 21 in Denver and minority communities. 22 And I am asking you to, in fact, put this 23 merger on hold until they have been able to work 24 out and really develop some serious commitments 54 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 that allow them to live up to the principle and the 2 objectives of the Community Reinvestment Act. 3 Thank you very much. 4 MS. SMITH: Thank you. Mr. Ries. 5 MR. RIES: Hello. My name is Leo Ries. I'm 6 the director of Housing and Neighborhood 7 Development for the city of Milwaukee. And I'm 8 here representing Mayor John Norquist, who sends 9 his regrets that he was not able to be here 10 personally. 11 My purpose in being here today is not to 12 really speak in favor of the merger or to protest 13 the merger, but rather to report on our experience 14 with Banc One as a corporate citizen. 15 Clearly, all banks can do a better job, 16 especially in terms of lending to low and moderate 17 income communities. 18 And clearly, the effect of this merger 19 will be different in various communities. For 20 example, unlike Indianapolis, there is very little 21 overlap in Milwaukee between First Chicago and 22 Banc One's services. 23 But having said that, I also have to say 24 that our experience with Banc One in Milwaukee has 55 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 generally been very positive. And we have no 2 reason to believe that that will change after the 3 merger. 4 That didn't occur after Banc One purchased 5 Milwaukee-owned Marine Bank in 1987 and we don't 6 suspect it will happen after this merger. 7 I would like to provide a couple examples 8 which will provide a basis for assessment. First 9 of all, in 1991, Mayor Norquist, along with 10 Congressman Jerry Blejka (phonetic), called 11 together a number of local banks and community 12 agencies to talk about the problem of affordable 13 lending. 14 What grew out of that discussion was a 15 locally based coalition called NOHOM or New 16 Opportunities for Home Ownership in Milwaukee. 17 This has been a collective effort 18 involving community groups and local lenders to 19 focus on the issue of affordable lending and to 20 address -- to look at products that will meet that 21 market need and to also work with lenders to expand 22 the availability of credit. 23 Banc One was a leader in helping to form 24 this partnership and they have continued to be a 56 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 very active member to this day. As a matter of 2 fact, one of their senior bank officials chaired 3 this effort for a couple of years. 4 We're currently working on an effort 5 involving the whole problem of home improvement 6 lending. And, again, Banc One is very active on 7 that task force. 8 But more significant, I think, is their 9 actual practice of lending or their actual history 10 of lending patterns in Milwaukee. 11 Annually, the office of the City 12 Comptroller prepares an analysis in which we 13 analyze the lending patterns of various financial 14 institutions in the Milwaukee area and especially 15 focus on their lending in what we've designated as 16 the local target area, which is the area that has 17 the lowest level of home ownership in the city. 18 And in the most recent report, copies of 19 which I've shared and I've left with the Board of 20 Governors, Banc One was listed as the best lender 21 in the target area of banks having assets of over 22 150 million. 23 And so I think it does demonstrate that, 24 again, clearly banks can all do a better job, but 57 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 based on our analysis of other lenders in the 2 Milwaukee area, Banc One has done a better than 3 average job. 4 Banc One has also been very active in 5 various other community development efforts through 6 their CDC by investing in low income housing, tax 7 credit projects and also through their various -- 8 through their Banc One Foundation. 9 And so for all of these reasons, I can -- 10 I want to just say on behalf of the Mayor that we 11 have been very satisfied with their performance as 12 a corporate citizen in Milwaukee. 13 MS. SMITH: Thank you very much. Mr. Flood. 14 MR. FLOOD: Yes, good morning. My name is 15 Lawrence Flood. I'm special council to the 16 Attorney General of Illinois. 17 And I would like to preface my remarks by 18 telling you that our office has no position 19 regarding the merger, the Banc One merger. 20 We would tell the Federal Reserve Board 21 that we would cooperate with them if we were called 22 upon to provide some assistance to you here in the 23 state of Illinois. 24 Several months ago, the Office of the 58 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Attorney General was appointed receiver for the 2 now-dissolved Dixmoor Park District after a finding 3 in chancery court that the Park District was 4 totally lacking in organization and financial 5 record-keeping. 6 It was also learned that certain 7 commissioners and members of that Park District 8 Board had misappropriated certain monies received 9 from the issuance of bonds on behalf of the Park 10 District. 11 Banc One was the underwriter. And the 12 amount of the bonds issued totaled approximately 13 $700,000 over a period of several years. 14 Criminal charges were filed against 15 members of the Board. Some of those defendants 16 have pled guilty, and some of those cases are still 17 pending. 18 When our office was appointed receiver, 19 the court directed that we review processes by 20 which the bonds were issued by Banc One. 21 We have substantially reviewed documents 22 provided by Banc One and have interviewed several 23 of the bank personnel involved in the transaction. 24 Banc One has fully cooperated with us in 59 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 providing documents and also making available to us 2 for interview bank personnel familiar with this 3 matter. 4 At this point in time, we have no reason 5 to believe that Banc One acted inappropriately in 6 the issuance of those bonds. And I bring that to 7 you for your information. Thank you. 8 MS. SMITH: Thank you. Mr. Smithers. 9 MR. SMITHERS: Good morning. My name is Ralph 10 Smithers, and I'm executive assistant to Greg 11 Lashutka, Mayor of Columbus. 12 I'm here today at the request of the 13 Mayor, who's travelling in Europe and unable to 14 present his testimony in person. 15 As you know, the merger of Banc One and 16 First Chicago is a bittersweet development for the 17 people of Columbus. 18 On one hand, it signifies that our 19 hometown bank has truly become a national company; 20 but on the other hand, its decision to relocate its 21 headquarters from Columbus to Chicago is difficult 22 for us to accept. 23 Perhaps an apt analogy would be one of a 24 parent who has watched their child grow up, but sad 60 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 to see the child leave home to go out into the 2 world. 3 But in a sense, this is different. 4 Banc One is growing up, but not really leaving us. 5 Banc One employs more than 10,000 in Columbus. And 6 following the merger, that number is not expected 7 to diminish. 8 In fact, the continued prosperity of the 9 company will likely cause an increase in employment 10 in the Columbus market. Many of Banc One's 11 significant businesses, including their retail 12 banking and computer operations center, will remain 13 in Colorado. 14 Along with these important lines of 15 business, many people will also remain. The people 16 of Banc One are leaders. 17 They have made important contributions to 18 Columbus, starting with the Chairman, John B. 19 McCoy, who has chaired one of the City's most 20 significant urban renewal programs in our history, 21 the Capital South Community Urban Redevelopment 22 Corporation. 23 Mr. McCoy has committed to the Mayor that 24 he will continue on in his capacity as chairman of 61 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Capital South and other Banc One officers will also 2 continue to serve in leadership roles for our 3 Riverfront Development, our Chamber of Commerce, 4 the City's Neighborhood Development Loan Committee, 5 the Columbus Compact and Fannie Mae's Columbus 6 Partnership Office and many other initiatives which 7 are important to our community. 8 The people of Banc One volunteer to help 9 children with their school work through our 10 Adopt-a-school program. They provide help to the 11 homeless and food to the needy. 12 They're actively engaged in supporting 13 quality healthcare in our community and have 14 consistently set the pace for one of the most 15 successful United Way Organizations in America. 16 Perhaps less well-known are the many 17 unsung personal contributions made by the employees 18 of Banc One who, as they have prospered on an 19 individual basis, have provided significant support 20 to the Columbus Foundation. 21 The Columbus Foundation is one of the 22 largest community foundations in America. The 23 generous contributions from people who work for 24 companies like Banc One have made this possible. 62 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 With respect to economic and community 2 development, Banc One has been a reliable partner 3 as long as I can remember. And I've been around 4 for more than 30 years. 5 When the City undertook a large and risky 6 central city redevelopment project in the 70s, 7 Banc One stepped forward to help with the 8 financing. 9 When the federal government threatened to 10 pull its financial support, Banc One lenders flew 11 to Washington to change their minds. 12 When the City of Columbus decided to 13 launch a major public-private partnership with the 14 Enterprise Foundation to promote home ownership and 15 foster community based development, Banc One 16 stepped out in front with both it's human and 17 financial capital. 18 During the last five or so years, Banc One 19 has financed more than 1,200 units of affordable 20 rental housing in the city of Columbus, including 21 two major YMCA and YWCA single room occupancy 22 projects and the first redevelopment of a public 23 housing project in the State. 24 Last year alone, Banc One made more than 63 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 12,000 loans to consumers residing in low and 2 moderate income neighborhoods of the Columbus area 3 and financed $162 million in small business loans 4 to more than 1,800 small business owners. 5 Recently, a group of neighborhood 6 representatives wanted to undertake a comprehensive 7 revitalization of their community. 8 They went to Banc One for help in getting 9 started. Banc One's staff took the group to other 10 markets where they had participated in similar 11 initiatives. 12 I accompanied the group to Indianapolis to 13 study how projects started. The one thing we 14 learned is that partnership is the foundation of 15 community development and that partnerships are 16 built on local resources and local commitment. 17 No two cities are the same. And the 18 beauty of a company like Banc One is that it has 19 the local capital -- financial, human, technical 20 and philanthropic -- and the autonomy to commit to 21 worthy local endeavors. 22 There are some folks who think this merger 23 will cause Banc One to turn its back on the 24 Columbus community or who think that the commitment 64 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 of its people will somehow diminish if the 2 corporate headquarters leaves the city. 3 But I don't think this merger is about 4 creating something less or dismantling the culture 5 that made Banc One a great institution. 6 I have seen what Banc One has accomplished 7 in other markets. And their commitment to the 8 community is no less today than it will be in 9 Columbus tomorrow. 10 We look forward to your approval of this 11 merger and to a bright future with a strong 12 company. We are proud to be a Banc One community 13 and look forward to working together in the days to 14 come to address the needs of our common 15 constituencies. 16 MS. SMITH: Thank you very much. 17 Any questions from the panel? Thank you 18 very much for coming this morning. We'll, again, 19 be glad to have your entire statements entered into 20 the record. And we'll move onto Panel 4. 21 I will mention as the panelists are coming 22 to the table that there have been some changes from 23 the names that were listed on your agenda, so we 24 will -- we do have -- we will have people introduce 65 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 themselves and say their names for the benefit of 2 the audience who may not be able to see the name 3 plates. 4 We are going to start with Ms. Coleman.
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