Public Meeting Transcripts
Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation
Wednesday, July 7, 1999
Transcript of Panel Fourteen
6 MAYOR ALBANO: Good afternoon. Thank you 7 for the opportunity. My name is Michael Albano. 8 I'm the Mayor of Springfield, Massachusetts, a city 9 90 miles to the west of about 156,000 citizens. 10 I am here to testify not necessarily in 11 opposition nor in favor, but to ask the Board to be 12 considerate of cities like Springfield in developing 13 a policy on approving of this merger. One of the 14 common complaints I have received as Mayor of 15 Springfield is that decisions on business concerns 16 and Community Reinvestment Act dollars have to be 17 done either in Boston or some other major city. 18 What we are looking for in western 19 Massachusetts is that we do not divide the economy 20 into two areas, one east of 495 and one west of 495. 21 And it's important that we have decisions that are 22 made on the local level to encourage investment as 23 we try to rebuild a city such as Springfield. And 24 with that in mind, I would ask you to consider these 25 recommendations, should this merger be approved. 0358 1 First, we ask that the new bank name a 2 regional CEO to the Springfield bank who is 3 knowledgeable about the challenges that our city 4 faces, understands the needs of our business 5 community and the community at large, and most 6 important of all, has the capability to make 7 decisions regarding lending and community 8 reinvestment policy. 9 Now, while I am being parochial in my 10 comments today, I would say that mayors across the 11 region that this merger would impact would have 12 similar comments as mine as the Mayor of 13 Springfield. 14 Second, we ask that within the new 15 Springfield bank structure that a full-time 16 community reinvestment office be created, and that 17 it will be charged with the responsibility of 18 working with various community-based groups as well 19 as the City, in its efforts that are aimed at 20 creating new neighborhood housing and economic 21 development opportunities. 22 Third, in an effort to help the very small 23 entrepreneur, we ask that the new bank create a 24 microbusiness fund in the amount of $500,000, that 25 this fund could be modeled after the highly 0359 1 successful ACORN fund which has generated thousands 2 of new jobs particularly within the low-income 3 neighborhoods. 4 Fourth, we ask that the new bank establish 5 a pool of funds in the amount of $5 million that 6 could be used as seed capital for new businesses 7 locating to Springfield. This more venture-oriented 8 fund would be used for both product development and 9 working capital by start-up companies. 10 Fifth, to enhance our City's home ownership 11 efforts, we ask that the new bank create a pool of 12 funds in the amount of $2 million that could be used 13 for soft second mortgages and closing costs. 14 Sixth, to make home ownership a reality for 15 a greater number of people, we ask that the bank 16 commit to making $10 million in low-interest loans 17 to first-time home buyers. 18 Seventh, to assist present homeowners we 19 ask that the new bank increase their participation 20 by adding another $1 million to our very successful 21 home improvement program. 22 These are general comments about what my 23 City's needs are, and I think they are reflective of 24 cities, as I said, like Springfield across the 25 region which would be impacted by this merger. 0360 1 In conclusion, I would say that cities like 2 Springfield can be rebuilt, and we are doing that in 3 my City, but we need assistance in the form of 4 private investment. 5 This merger, if done with guarantees like I 6 have outlined, can truly make a difference in the 7 Cities like Springfield, Massachusetts. And I thank 8 you for your consideration. Thank you. 9 HEARING OFFICER SMITH: Thank you very 10 much. 11 Representative Barrios. 12 REPRESENTATIVE BARRIOS: Good afternoon. 13 My name is Jarrett Thomas Barrios. I'm the State 14 Representative from Cambridge, Massachusetts. 15 By way of background, I am on the Banks and 16 Banking Committee for the House of Representatives. 17 I'm also a member of the Housing and Urban 18 Development Committee. I also used to work at the 19 Federal Trade Commission in the Division of Credit 20 Practices, doing Equal Credit Opportunity Act work. 21 I'm also a real estate lawyer, and I want to talk to 22 you today about a very specific issue, and that 23 deals with home mortgage lending as an impact of the 24 merger. 25 We have been assured throughout this in the 0361 1 press and privately that this merger will be a one 2 plus one is greater than two. You have heard that a 3 lot today. But I would point you to some of the 4 evidence as to Fleet's past behavior in mergers 5 which would give us a cause for some concern. 6 I'm one of the founding members of the 7 Latino Caucus in the Legislature. I have been sort 8 of particularly paying attention to Fleet's behavior 9 in the Latino community, and I want to just cite a 10 couple of statistics for you. 11 Prior to Fleet's mergers with NatWest and 12 Shawmut, the total banks, those three banks lending 13 in 1995, there was, I guess, 1575 home mortgages 14 underwritten by the three banks. Post-merger in 15 1997, only 600 loans were underwritten. That's a 16 decline of 62 percent. 17 I understand that part of this perhaps has 18 something to do with divestiture post-merger. 19 However, I would just ask you to contrast that with 20 the BayBank-BankBoston merger. Post-merger, there 21 was actually an increase of 83.3 percent lending in 22 the Latino community. 23 These statistics matter because what they 24 tell us is how post-merger we might expect Fleet to 25 behave, as Fleet is the ultimate inheritor and 0362 1 director of how the lending is going to continue. 2 Fleet's takeover of BankBoston is a cause 3 of concern for us because 63 percent of loans to 4 low- and moderate-income people, to Latinos, 5 African- Americans and other minorities, come right 6 now in Massachusetts from Fleet and BankBoston. 7 What that's going to be post-merger we're 8 not sure, but nonetheless, we can be sure that Fleet 9 in large part is going to be the only game in town. 10 And for us, who are concerned about home mortgages 11 and home ownership, in advancing those goals in the 12 minority communities, we must be concerned by what 13 we see in Fleet's behavior in the past. 14 These numbers give some statistical context 15 to my community's anxiety over this merger. I want 16 to give you a little bit of business and policy 17 context as well. As a member of the Housing 18 Committee, we see a lot of legislation which 19 attempts to advance the goal of home ownership, 20 which is a policy initiative both Republicans and 21 Democrats seem to embrace. 22 Recently, we were able to secure increase 23 in funding for the soft second mortgage program, but 24 no matter what we do in the Legislature, it only 25 gets around the edges. For example, the soft second 0363 1 mortgage only is a 20 percent second mortgage. We 2 still have to have a first mortgager, someone to 3 underwrite that initial loan, somebody which is 4 usually Fleet or BankBoston if we're in 5 Massachusetts. 6 The private market really must participate 7 in our efforts if we're going to make an impact at a 8 policy level in advancing home ownership as a goal 9 throughout Massachusetts. 10 So I guess in this context the statistical 11 anxiety that many of the people have been testifying 12 today, I think, reproduces itself a little bit as a 13 suspicion: How is it that the number of loans has 14 declined so much? What is it about the business 15 behavior of Fleet which should give us concern? 16 A demonstrated record by Fleet in the past 17 of inflexible lending criteria through mortgage 18 scoring and other practices really is a cause for 19 some of this concern. Diminished number of loans 20 originated by Fleet suggests that business practices 21 inherent in the loan origination process of Fleet 22 are not the same practices of BankBoston and other 23 victims of the mergers, if you will, of past mergers 24 by Fleet, that these business practices by Fleet are 25 somehow toxic to low- and moderate-income 0364 1 communities, to minority communities, communities 2 which would like to advance as a policy goal that of 3 home ownership. 4 And now the Community Reinvestment Act of 5 course doesn't require any bank to lend more to low- 6 and moderate-income neighborhoods, to minority 7 communities, but it does allow you, as those who 8 review, through the merger process, their track 9 records, it does allow you to ask questions which I 10 am not able to as a legislator, which communities 11 activists aren't able to, as representatives from 12 their bully pulpits in their communities. 13 So I guess I would ask you, as a 14 representative of the 450,000 Latinos in this 15 Commonwealth, and the 2 million people who are low 16 and moderate income in this Commonwealth who don't 17 own homes but perhaps hope to one day, to ask hard 18 questions and be mindful of Fleet's past practices, 19 and respect the community's request for a written 20 agreements from Fleet, because I think their 21 suspicions really are well placed, and I think the 22 past practices of Fleet really are cause for grave 23 concern for all of us as to the future practices of 24 Fleet going forward. 25 Thank you very much. 0365 1 HEARING OFFICER SMITH: Thank you. 2 Vermelle Parks. 3 MS. PARKS: Good afternoon. My name is 4 Vermelle Parks, and I am a here on behalf of the 5 chairwoman of the Federal Financial Assistance 6 Committee, the House of Representatives, 7 Representative Shirley Owens-Hicks, who is also 8 serving the 6th Suffolk District. 9 Thank you for allowing me to talk about the 10 things she has entered already as testimony. Given 11 the fact that this merger will result in the closing 12 of over 200 branches, the loss of approximately 13 5,000 jobs, and the renegotiation of critically 14 important programs that address home ownership and 15 rental housing, we respectfully urge that prior to 16 the approval of this merger, the Federal Reserve 17 Bank of Boston mandate that Fleet Bank Boston offer 18 a significant written and measurable commitment that 19 will provide the loans, investments and services 20 needed for low- and moderate-income communities as 21 well as people of color. 22 We believe that flexibility and 23 underwriting guidelines is absolutely necessary in 24 order to make home ownership a reality for low- and 25 moderate-income populations. In the past ACORN 0366 1 offered a very successful first-time home buyer's 2 program in collaboration with Fleet Mortgage 3 Corporation, BankBoston and Citizens Mortgage 4 Corporation. 5 This program allowed loan applicants to 6 certify funds including Social Security, WIC, food 7 stamps, unemployment benefits, foster care money and 8 other entitlements as part of their income in order 9 to qualify for loans. The program focused on income 10 continuity rather than job continuity, and only one 11 year of good credit was required. 12 ACORN informs us that over the life of 13 their program with Fleet, only three mortgages were 14 foreclosed and that the delinquency rate was 6 15 percent. Clearly this delinquency rate is lower 16 than that of conventional loan delinquencies. 17 Therefore, we encourage Fleet to renegotiate this 18 program and similar community lending programs. In 19 fact, collaboration with local partners must be 20 expanded rather than dissolved. 21 Home ownership fosters community stability. 22 Families who have a vested interest in the 23 neighborhoods where they live become involved in 24 neighborhood improvement activities, maintain their 25 properties, thus eliminating blight in vacant 0367 1 buildings and add to the safety and economic 2 viability of our their cities. 3 Programs that serve this basic need must 4 acknowledge the reality that families who are 5 currently forced to pay exorbitant amounts of rental 6 money have the ability to pay reasonable mortgages. 7 Therefore, relaxed underwriting guidelines together 8 with community home ownership programs are crucial 9 to the revitalization of our cities. 10 With the potential loss of jobs that this 11 merger will precipitate, we are concerned that last 12 hired not become first fired. Approximately 5,000 13 individuals will soon find themselves without 14 paychecks to support their families, unless the 15 institutions that purchase these branches decide to 16 hire them, and we sincerely hope that this occurs. 17 In the event that these employees are not 18 hired, we urge the Federal Reserve to use its power 19 to assure that these employees have access to a 20 combination of private and public resources that 21 will enable them to secure transitional income, 22 training and access to other employment. 23 Additionally, we ask that our concerns 24 about the potential loss of bilingual employees, and 25 how this will affect the needs of Latina, Asian and 0368 1 other population who depend upon this assistance in 2 order to transact banking business, be addressed so 3 that the critical needs of non-English speaking 4 populations will not be negatively impacted. 5 The location of the merged entities' 6 branches is also of concern. Residents and 7 community-based organizations representing various 8 underserved neighborhoods have worked long and hard 9 to negotiate the opening of branches in low- and 10 moderate-income neighborhoods. We feel that 11 limiting access to banking services will negatively 12 impact individuals who need to establish credit 13 histories, who wish to cash checks, or who wish to 14 access any other service that banks offer in other 15 neighborhoods. 16 Finally, we believe that the nation is 17 looking at this merger and how Fleet-BankBoston will 18 respond to the needs of low- and moderate-income 19 communities as well as how they intend to honor the 20 commitments that they have made in the past. 21 This is an excellent opportunity for Fleet- 22 BankBoston to set the standard for community 23 investment practices. We sincerely hope that they 24 will accept this challenge and turn this to a win- 25 win situation for all concerned. 0369 1 Thank you very much. 2 HEARING OFFICER SMITH: Thank you. 3 Mr. Saunders. 4 COUNCILOR SAUNDERS: Good evening. I'm 5 Boston City Councilor Gareth Saunders. I represent 6 approximately 70,000 residents in Roxbury and parts 7 of Dorchester, the South End, Mission Hill and the 8 Fenway. I am a member of the City of Boston's 9 Linked Deposit Commission and have worked in the 10 banking industry in Boston in various positions. As 11 a manager of a loan office, I worked as a mortgage 12 originator and business development officer. 13 My duties as the business development 14 officer included assisting the bank with outreach to 15 the Boston community concerning the Community 16 Reinvestment Act. 17 I ask the Federal Reserve Bank of Boston to 18 listen carefully to what the people are saying 19 today. As a regulatory agency, we look to you for 20 guidance as relates to the formulation of monetary 21 policy and overseeing many aspects of the New 22 England banking system. 23 What is true from my experiences is that 24 the people, the customers, the affected communities 25 of New England must get a clearly spelled-out 0370 1 commitment from the proponents of this proposed 2 merger in writing prior to any approvals. 3 First and foremost, a strong commitment 4 must come from the top, Terry Murray and Chad 5 Gifford, accompanied with an aggressive plan of 6 implementation. This plan should include a 7 comprehensive marketing plan of the actual and 8 potential customer base with a strong emphasis on 9 low- to moderate-income earners and specifically 10 tailored programs that ensure equitable credit 11 availability to traditionally underserved borrowers, 12 because they unfortunately will be 13 disproportionately and adversely affected by this 14 proposed merger. 15 Below, I'm just going to give you a brief 16 list of what I see as some of the general types of 17 commitments that we must see in writing prior to any 18 regulatory approval. 19 No. 1, it is important that we are 20 diversity of the work force, both racial diversity, 21 gender, as well as geographical diversity. And we 22 must emphasize that we have diversity as it relates 23 to the decision-makers within the new institution. 24 No. 2, mortgage products, home improvement 25 and other consumer loans, loan products targeting 0371 1 underserved communities and populations. 2 We must look at the small business lending 3 programs of the new entity. 4 We must maintain and enhance programs like 5 BankBoston's First Community Banking and Community 6 Development Bank. These are very successful models 7 that we must keep and enhance. 8 And fifthly, there must be a comprehensive 9 approach to this proposed merger that still provides 10 consumer choices. For example, there is still a 11 niche for smaller banks like the Boston Bank of 12 Commerce. This bank has submitted a proposal to 13 purchase 18 branches that would make it the largest 14 minority-owned bank in New England. 15 And with regards to some of the other banks 16 that are looking to buy some of the assets that the 17 bank, Fleet Bank and other banks must sell off, we 18 must look to make sure that we have a banking entity 19 that is committed to this region, that has a strong 20 presence in this region and that will be willing to 21 locate its headquarters in this region. That is 22 very important, that we can go right into the 23 president's or the CEO's office and not have to jump 24 on a plane, you know, and travel thousands of miles 25 to get that type of access. 0372 1 I would like to use this example. I sat in 2 this room with some of the supporters out here more 3 than ten years ago when the Federal Reserve Bank 4 came out with a study that showed that there was 5 discriminatory lending based on race, with mortgage 6 lending the city. And what did you do? And what 7 did the community do? And what did the banks do? 8 We all came together, and I was there with 9 many of the activists in this room. We came 10 together. We worked out a plan, and we aggressively 11 attacked the problem. 12 New branches were opened in communities 13 where we have not seen branches for years. ATMs 14 were instituted in certain neighborhoods. People of 15 color and women were hired into decision-making 16 positions. 17 When we look at the underwriters for the 18 mortgages and other lending products, it is 19 important to have people who understand the local 20 economy making these decisions. And it worked. 21 From 1990 to 1994, look at the mortgage 22 rates in the minority community, particularly in the 23 African-American and the Latino communities. That 24 is a successful model that worked. And I hope, if, 25 in fact, this Board and other regulatory entities 0373 1 approve this merger, that part of that statement 2 would be that there must be a commitment, a strong 3 commitment from the top down through the ranks of 4 the bank in writing prior to any approval. That 5 way, you ensure that the underserved communities 6 will not be left out to dry. 7 Thank you very much for listening to my 8 testimony, and I hope that you would really consider 9 what I had to say and share with you this evening. 10 Thank you. 11 HEARING OFFICER SMITH: Any questions? 12 HEARING OFFICER KWAST: I have a question. 13 Mr. Saunders addressed this point, but I would be 14 interested in what Mr. Barrios and Mayor Albano had 15 to say. 16 In your experience, what has been the role 17 of smaller and medium-sized banks in the economic 18 development of a city like Springfield or in the 19 granting of housing and other kinds of loans to low- 20 and moderate-income communities? 21 MR. SAUNDERS: The question is -- who is 22 the question -- 23 HEARING OFFICER KWAST: You addressed the 24 issue. I'm interested in the role of small and 25 medium-sized banks in meeting the kinds of concerns 0374 1 that you expressed. 2 MR. ALBANO: Just on the issue of dealing 3 with a bank such as Fleet and BankBoston, as mayor 4 of Springfield, we have to get decisions from Boston 5 to major economic development projects, major 6 housing projects; and that takes time. And 7 sometimes those decision makers at the top are 90 8 miles away and are not sensitive to the needs in 9 cities like Springfield. And we have to be cautious 10 about that, make sure that any type of merger 11 guarantees that there is accountability and that 12 there is investment. 13 The second part I would respond to is that 14 under the Community Reinvestment Act, I'm not sure 15 how the ratings are done statewide. I can see that 16 some banks have great ratings, but I don't know what 17 they're doing for cities like Springfield. So I 18 would like to have more of a regional Community 19 Reinvestment Act grading so that we can be sure that 20 there is investment in cities like mine. And I'm 21 not sure that we're receiving that. 22 So between the two, I mean, having to get 23 certification or approval from 90 miles away or not 24 being sure of what the grade is for the Community 25 Reinvestment Act in my particular community, I would 0375 1 hope in this Board would do something to offset that 2 so that we can have guarantees on these types of 3 decisions and these types of investments in cities 4 like Springfield. 5 MR. SAUNDERS: Can I just address -- in 6 this decade of mergers, it is important that we have 7 different size banks because the larger banks and 8 some of the mid-sized banks have no interest in 9 serving some of the small and poorer communities; 10 but there are smaller banks who have an interest. 11 So that's important that we have a clear 12 balance of the big -- from the biggest megabanks to 13 the mid-size banks to smaller banks that can really 14 give a tailored approach to the specific 15 neighborhoods needs. 16 MR. BARRIOS: I would just say as a part of 17 getting my testimony together, I took the time to 18 speak to a number of leaders both in my community 19 and Cambridge, in the Latino community in Chelsea, 20 in the greater Boston area and Jamaica Plain and 21 Roxbury; and there is generally a level of anxiety 22 about the mergers of the banks because it seems as 23 if, as Mayor Albano has said, it is sort of further 24 away, not just geographically but sort of 25 psychologically further away from the access that 0376 1 you might like to see. 2 It is always the case that -- at least in 3 my community in Cambridge -- that the community 4 banks are seen as friendlier places to go, and I 5 think that is in large part a function of size. 6 I know that Fleet has been generous to some 7 local nonprofits in Cambridge, but the perception of 8 the average person as to the accessibility of credit 9 or to community development corporations -- 10 locally-based grass roots community development 11 corporations that want to do either economic 12 development or do an affordable housing project, the 13 perception is we first go to the community bank. 14 Cambridgeport Bank or Cambridge Trust are the two 15 big ones in my community. 16 Chelsea, I guess there was a bank, which 17 was recently acquired which was sort of the one 18 everybody went to. Now it is U.S. Trust, but now 19 U.S. Trust is becoming Citizens so nobody really 20 knows where they were going in Chelsea at this 21 point. 22 Smaller, at that level, I guess, induces 23 more confidence. 24 I don't know if that answers directly. 25 HEARING OFFICER SMITH: Thank you very 0377 1 much. 2 We're now going to take a five-minute break 3 and then continue with Panel 15, which is not even 4 halfway through the agenda. 5 (Recess) 6 HEARING OFFICER SMITH: Why don't we get 7 started, and the way we're -- okay. We'll do it the 8 same way as before, which is we have, what, 30 9 minutes? And we'll get as many people through as we 10 can in that time. And if anybody is left, then we 11 will move them toward the end of the day, which is 12 an encouragement to take a minute.
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