Public Meeting Regarding First Chicago NBD and Banc One
Transcript of Thursday, August 13, 1998
|
Public Meeting Regarding First Chicago NBD and Banc One |
1 PUBLIC MEETING REGARDING THE PROPOSAL BY
2 BANC ONE CORPORATION, COLUMBUS, OHIO,
3 TO MERGE WITH
4 FIRST CHICAGO NBD CORPORATION, CHICAGO, ILLINOIS
5
6
7 Proceedings had in the above-mentioned
8 cause, on Thursday, the 13th day of August, 1998,
9 at The Federal Reserve Bank of Chicago, 230 South
10 LaSalle Street, Chicago, Illinois at 9:00 o'clock
11 a.m.
12
13
14
15
16
17
18
19
20 REPORTED BY: Brenda S. Tannehill, CSR
21 LICENSE NO.: 084-003336
22 - and -
23 REPORTED BY: Jeanette A. Sandei, CSR
24 LICENSE NO.: 084-003685
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1 MS. SMITH: I think we can get started. Let me
2 start by welcoming you to this important public
3 meeting on the application of Banc One Corporation
4 to merge with First Chicago NBD Corporation.
5 And I'll start by introducing myself. I'm
6 Dolores Smith, the director of the division of the
7 Consumer and Community Affairs for the Reserve
8 Board in Washington, D.C. I'm also the presiding
9 officer for this public meeting.
10 Our other panelists are Scott Alvarez,
11 who is the Associate General Counsel for the
12 Federal Reserve Board, and Alicia Williams, who is
13 Vice President and Community Affairs Officer from
14 the Federal Reserve Bank of Chicago.
15 We are here today because Banc One
16 Corporation, Columbus, Ohio, has applied for
17 approval to merge with First Chicago NBD
18 Corporation, Chicago, Illinois.
19 When the Federal Reserve Board considers
20 one of these applications, we look at a number of
21 factors under the Bank Holding Company Act. These
22 include financial issues, managerial issues,
23 competitive issues and the convenience and needs of
24 the communities affected.
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1 In doing so, we particularly look at the
2 record of performance of the parties under the
3 Community Reinvestment Act.
4 The CRA requires the Board to take into
5 account an institution's record of meeting the
6 credit needs of its entire community.
7 The Banc One application transaction also
8 involves the proposed acquisition or retention of
9 non-banking companies engaged in activities that
10 are permissible for bank holding companies.
11 The Board must determine whether the
12 proposed non-banking activities can reasonably be
13 expected to produce benefits to the public that
14 outweigh possible adverse effects such as undue
15 concentration of resources, decreased or unfair
16 competition, conflicts of interest or unsound
17 banking practices.
18 The purpose of the public meeting today is
19 to receive information regarding these factors. We
20 will be seeking to elicit this information and to
21 clarify factual issues related to the application.
22 We are very pleased that so many people
23 have been willing to come and testify at this
24 public meeting. We will have more than 90 groups
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1 and individuals represented over the course of the
2 day.
3 Let me tell you a little bit about the
4 procedures that we'll be following. First, this is
5 what we call an informal public meeting. Members
6 of this panel may ask those who are testifying
7 about their testimony.
8 This is not a formal administrative
9 hearing, so we are not bound by rules regarding
10 evidence, cross-examinations and some of the formal
11 trappings that accompany that type of proceeding.
12 As you can see from the agenda that you
13 have picked up, we do need to stick to the schedule
14 very carefully so that everyone who has asked to
15 offer oral testimony will have the chance to say
16 what they would like to say.
17 We are going to ask the witnesses today to
18 be mindful of the needs of others and to help us
19 stay on schedule. The panels and panelists will be
20 expected to keep within their allotted times.
21 And we do have a system for reminding
22 people about their time. We have two
23 time-keepers. They're up front. They will give a
24 signal when the presenter has one minute left to
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1 speak. We'll hold up a sign. And then we have
2 another sign when the time has expired.
3 And then if that doesn't work, we have --
4 we go to audio and we have a little bell. We don't
5 have a hook, so you have those opportunities.
6 Now, we have accommodated everyone who
7 made a timely request to present testimony, but
8 there may be some individuals who were unable to
9 sign up in advance. And to the extent possible, we
10 do want to give them a chance to speak as well.
11 So at the end of the meeting this
12 afternoon when all of the panelists who have been
13 listed have offered their testimony, we will make
14 the microphone available to anyone who would like
15 to make a presentation, time permitting.
16 Witnesses may submit a written supplement
17 to their oral testimony and have until next
18 Thursday, August the 20th, to do so, and then the
19 record will be closed.
20 Any written supplements should be directed
21 to Jennifer J. Johnson, Secretary of the Board,
22 Board of Governors of the Federal Reserve System,
23 Washington, D.C. 20551. They must be received
24 by 5:00 p.m. Eastern Daylight Time on Thursday,
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1 the 20th. Submissions may be faxed to area code
2 (202) 452-3462.
3 Also, for witnesses who have not already
4 turned in copies of written testimony or if there
5 are any other written statements to put into the
6 record, we're asking you to leave them with Federal
7 Reserve Bank staff at the registration table.
8 It's important that we get this
9 information and material for the record. A
10 transcript of the meeting will be available by
11 August the 18th through the Federal Reserve Bank of
12 Chicago and also from the Board.
13 In addition, the official transcript will
14 be available by close of business on August 19th on
15 the Board's public web site, which is at
16 www.bog.frb.fed.us.
17 And with that, I think we're ready to
18 begin with our proceedings. We will start first
19 with the applicant panel.
20 We have Mr. Istock from First Chicago and
21 Mr. McCoy from Banc One. And they have with them
22 Ms. Decker and Ms. Williams, so if you will --
23 Ms. Johnson. I'm sorry. I'm so sorry.
24 If we can -- Mr. Istock, are you going
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1 first?
2 MR. ISTOCK: Yes.
3 Thank you and good morning. As indicated,
4 I'm Verne Istock, chairman, president and chief
5 executive officer of First Chicago NBD.
6 And with me this morning, in addition to
7 Mary Decker, our senior vice president is David
8 Vitalle, who is the vice chairman of the
9 corporation and also president of First National
10 Bank of Chicago.
11 And also with me, as indicated, is John
12 McCoy, who is chairman and chief executive officer
13 of Banc One Corporation, and Julie Johnson, who is
14 senior vice president.
15 The banking business, even when you're
16 talking about banks the size of the new Banc One,
17 is an intensely local business.
18 As with customers, you have to understand
19 the needs of your communities and then try to
20 design solutions that will work.
21 This doesn't happen quickly or easily. It
22 takes time, effort and commitment. It takes
23 bankers who know their communities, who care and
24 who get involved.
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1 At First Chicago NBD, we've had a long
2 history of community commitment. Over time,
3 we've built solid working relationships with
4 organizations that know and understand their
5 neighborhoods and who can partner with us to design
6 products and programs that respond to community
7 needs.
8 It's pretty obvious that we can't please
9 everyone, but those organizations that have chosen
10 to work with us have found us to be good partners.
11 We've learned a lot from each other and together
12 we've achieved meaningful results.
13 Let me quote from a letter from Sokoni
14 Karanja, president for the Centers for New Horizons
15 here in Chicago, that really captures that spirit.
16 He writes, and I quote, this partnership
17 in my 30-plus years of community development
18 experience, has been a unique one, for no other
19 lending institution I have worked with over the
20 years has demonstrated the capacity to first listen
21 to the community and then find ways to make
22 philanthropic as well as strictly business
23 investments that generate wins to both the
24 community and the bank, end of quote.
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1 There is a synergy between what we do
2 that's strictly business, as Dr. Karanja put it,
3 and what we do because these are the communities
4 where we live, work and raise our families.
5 We recently published a booklet titled
6 Your Community/Our Community that highlights some
7 of the ways in which First Chicago NBD supports its
8 many communities. And I've submitted a copy for
9 the record.
10 We are especially proud of our record of
11 lending in our major urban markets, Chicago,
12 Detroit and Indianapolis.
13 In Chicago and Detroit, for example, we
14 are by far the largest locally based small business
15 lender. In Indianapolis we are the leading SBA
16 lender. And we are the number-one in Capital
17 Access programs in Michigan, Illinois and Indian.
18 We are also a leader in mortgage credit in all
19 three markets.
20 First Chicago NBD has developed many
21 innovative lending practices to serve the needs of
22 all applicants.
23 For example, we offer a number of flexible
24 mortgage loan programs that include either down
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1 payment assistance or support for closing costs.
2 Our community pride loan is targeted to
3 households with less than 50 percent of median
4 family income. This loan can be used for home
5 improvements, new or used car financing or home
6 equity loan for any purpose, including business
7 development and education.
8 Sometimes traditional bank lending isn't
9 enough. We've chartered community development
10 corporations that can also make direct investments
11 in community projects.
12 In Detroit, for example, our CDC partnered
13 with the city and the local hospital group to
14 develop Virginia Park, a subdivision of new single
15 family homes in the core city.
16 We have for 15 years been an active
17 participant and are the largest investor in
18 Chicago's Community Investment Corporation, a
19 non-profit mortgage banking organization that
20 specializes in affordable housing development.
21 In July, CIC announced a $500 million loan
22 pool, the largest in the midwest, including a
23 $100 million flex-fund to finance deals that
24 stretch the limits on what we can accomplish in
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1 distressed neighborhoods.
2 And we've been an important partner in the
3 Indianapolis Neighborhood Housing Partnership,
4 providing leadership in operating support and
5 participation in affordable loan pools.
6 Microlending is an important tool to spur
7 business development and one we're using throughout
8 our business areas. Through support of non-profit
9 lending organizations, such as ACCION in Chicago,
10 the Detroit Entrepreneurship Institute, the Lake
11 County Small Business Center and Collier County
12 Economic Development Council in Naples, Florida,
13 First Chicago NBD is helping to strengthen our
14 communities by giving entrepreneurs a start.
15 Education is an important priority for us,
16 and we're particularly interested in programs that
17 promote financial literacy.
18 Through a program called Credit: Tool or
19 Trap, NBD Bank in Michigan teaches high school,
20 community college and adult education students
21 about the power of using credit wisely.
22 This program is offered in partnership
23 with non-profit organizations and churches
24 throughout the state.
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1 We sponsor more than 130 in-school banks
2 in Michigan, Indiana and Illinois where grade
3 school students learn money management, math and
4 employment skills.
5 The merger of First Chicago NBD and
6 Banc One Corporation is a merger of equals.
7 Neither company is taking over the other by paying
8 an extraordinary premium.
9 We think that's important because it means
10 that we don't have to do the kinds of extraordinary
11 cost-cutting that could damage our franchise, hurt
12 our employees and compromise our ability to serve
13 our communities. Certainly there will be
14 efficiencies and, yes, we will reduce costs, but
15 this merger is about growth.
16 And that growth benefits our customers,
17 our employees and our communities as well as our
18 shareholders. It promotes innovation, the creation
19 of new and better products and services.
20 It allows the creation of new jobs,
21 including many at entry levels, and the opportunity
22 for achievement and advancement. And growing
23 earnings allow growing support of communities.
24 I know that when companies merge,
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1 communities always fear the loss of support. We
2 heard that concern when First Chicago and NBD
3 merged three years ago.
4 But as the earnings of the combined
5 First Chicago NBD Corporation have grown, so have
6 our contributions to the civic, educational and
7 cultural institutions of all of our communities.
8 Whether it's lending, investment or
9 philanthropy, it means being part of the community,
10 being involved, knowing and understanding its
11 needs, its hopes and its dreams and being part of
12 making it all happen. And that's our goal for the
13 new Banc One. Thank you.
14 And now it's my pleasure to introduce my
15 colleague, John McCoy.
16 MR. McCOY: Thanks, Verne.
17 We appreciate very much the opportunity
18 to appear here today. We appreciate the work
19 that the Fed staff has done. We appreciate all
20 the panelists, pro or con. I think it's a very
21 healthy atmosphere and look forward to a very
22 interesting day.
23 Banc One couldn't be more pleased to join
24 with First Chicago NBD in creating the new
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1 Banc One.
2 Verne has talked about some of the
3 strengths of First Chicago. And I'd like to talk
4 about a few of the great things Banc One will bring
5 to the table.
6 The first of these is our legacy of
7 innovation. Banc One is an entrepreneurial
8 company. 32 years ago in 1966, we introduced the
9 first credit card outside of California. And in
10 1971, we launched the first automatic teller
11 machine in the nation.
12 Eight years later in 1979, we experimented
13 with one of the first home banking systems.
14 Today, credit cards, ATMs and home banking are
15 commonplace.
16 Banc One's culture of innovation has
17 created important new products and services in all
18 lines of business, including community
19 reinvestment.
20 Some of the CRA products may even seem
21 commonplace today, while other leading-edge
22 initiatives can become tomorrow's standard.
23 CRA at Banc One means business. It means
24 designing products that meet the needs of our
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1 customers and constantly refining them to make them
2 better, more affordable and more accessible while
3 providing a fair return to the shareholder.
4 Today, you will hear many success stories
5 from our markets where we continue to innovate and
6 also from our partners who are working with us to
7 find new ways to finance affordable housing and
8 small business.
9 Our CRA record is one we are proud to
10 stand on. And I think you will agree that
11 Banc One's entrepreneurial spirit has elevated this
12 record to one of distinction.
13 I'd like to review just a few of our
14 singular achievements. In 1987, Banc One was one
15 of the first banks in the nation to finance a
16 project utilizing low-income housing tax credits.
17 Over the last 11 years, we have refined
18 our expertise in this area so that today we can
19 deliver direct assistance to projects which could
20 not otherwise be accomplished because of their size
21 or complexity.
22 These projects include the rehabilitation
23 of a former crack house in Wheeling, West Virginia,
24 across the street from an elementary school.
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1 With Banc One's technical and investment
2 support, that crack house is now a three-unit
3 affordable housing project utilizing low-income
4 housing tax credits.
5 This project may rank as the smallest tax
6 credit deal in the country, but to the kids and
7 parents in Wheeling, it's a huge success.
8 In Louisville, the city struggled for
9 20 years with a severely troubled HUD Section 8
10 project. After entering the Louisville market in
11 1992, Banc One's community development team went to
12 work with the city, HUD and a private developer to
13 create a solution.
14 The turning point was an $8.8 million
15 bridge loan structured by Banc One and participated
16 to more than 13 lenders.
17 Following our entry into Delaware,
18 Banc One was approached to provide the expertise
19 and financing for an affordable housing project
20 serving low-income, chronically mentally ill
21 residents in Wilmington. This project is now
22 underway.
23 In Colorado, Banc One resources are
24 assisting the Southern Ute Indians in developing
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1 50 single family homes which will be available on a
2 lease purchase basis to low-income members of the
3 tribe.
4 Elsewhere, our CDC designed a small loan
5 program to provide long-term fixed rate financing
6 for small, affordable, multi-family projects that
7 lacked a way to deliver that product efficiently.
8 We teamed up with the Wisconsin Housing
9 and Economic Development Authority and put together
10 a partnership where WHEDA markets and underwrites
11 the loans while Banc One CDC provides the funding.
12 Together, Banc One and WHEDA share the
13 risk. Together we created a delivery system that
14 is a win-win for Banc One and WHEDA. The people of
15 Wisconsin are the beneficiaries.
16 We are now exploring opportunities to take
17 what we have developed in Wisconsin and roll it out
18 in other Banc One states, including Kentucky, Texas
19 and Illinois.
20 In the small business area, Banc One
21 stepped forward to pilot the SBA's Fastrack and
22 Microloan programs.
23 Today, Banc One is recognized as the
24 national leader in both programs and has
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1 established a reputation as a leading
2 microenterprise expert.
3 Banc One is generating more SBA microloans
4 than any other bank in the nation and has
5 established a network of microenterprise experts
6 extending from Milwaukee all the way to the Mexican
7 border.
8 Recently, these experts joined Banc One in
9 Cleveland to help the city reinvest their local
10 microlending program.
11 In another first, Banc One is the lead
12 investor in Capital Across America, the first small
13 business investment company focused on providing
14 capital to women-owned businesses.
15 There are two special ingredients in
16 Banc One's recipe for its successful CRA program.
17 One is knowledgeable employees who devote
18 all of their time and expertise to designing
19 sustainable and profitable solutions that meet
20 community credit needs.
21 The other is strong and respected local
22 partners who are knowledgeable about their markets
23 and share our commitment to sustainable solutions.
24 At Banc One, community needs represent
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1 business opportunities and collaboration creates
2 customers.
3 Finally, I would like to take a moment to
4 express a concern which has been addressed by
5 certain community groups.
6 Banc One has entered a partnership with
7 HomeSide Lending to provide servicing for Banc One
8 Mortgage Corporation loans.
9 The servicing of our portfolio by HomeSide
10 does not negatively affect Banc One's loan
11 organization business. Banc One will continue to
12 originate mortgage loans. I think it is important
13 that this be clearly understood.
14 In fact, we recently entered a new
15 partnership with Self-Help to assist low-income and
16 minority home buyers in all of our bank markets.
17 This new program is a joint initiative
18 between Fannie Mae, the Ford Foundation and four
19 lenders to generate 35,000 affordable mortgages
20 over the next five years.
21 This program is focused on serving home
22 buyers who have difficulty meeting conventional
23 lending standards because of inadequate savings or
24 weaker credit. While HomeSide will service the
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1 loans, Banc One will be the originator.
2 We're excited about serving new markets,
3 new places where the next CRA innovations may
4 develop with new partners. We look forward to
5 sharing our expertise and learning from new
6 partners in Chicago and Detroit. Thank you.
7 MS. SMITH: Questions?
8 MR. ALVAREZ: I've got a question. Many of
9 the --
10 (Whereupon, there was a
11 vocal demonstration from the
12 audience.)
13 MS. SMITH: I would appreciate it if we could
14 have a little quiet, please.
15 MR. ALVAREZ: I'd like to ask a question,
16 actually, many of the commentors have asked in the
17 written remarks.
18 They expressed a view that neither
19 Banc One nor First Chicago has adequately addressed
20 the minority lending needs or the needs of loan
21 individuals. And they have charged that there's
22 been substantial disparities in the loan rates in
23 many communities once they are combined institution
24 to reach out to the low and moderate income
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1 communities that are served by the organization and
2 to minorities and to ensure that credit decisions
3 are complying.
4 MR. ISTOCK: I would help the Chair out and
5 suggest that common courtesy would be that people
6 in the audience would let the other people in the
7 audience hear the response.
8 I believe both of us have addressed -- and
9 I'll speak for the First Chicago NBD -- minority
10 lending. And we've worked with many, many
11 community groups to really expand minority lending,
12 both African Americans and Hispanics and others.
13 And we'll stand on our record. We've expanded
14 these types of loans in all of the markets in which
15 we've serviced.
16 There has been some criticism that our
17 denial rates are higher than others, but I also
18 will say that the number of loans that we have
19 approved are higher as well. And we have
20 aggressively sought more applicants. And I suspect
21 that as you do that, you will find that there will
22 be more denials.
23 But, nevertheless, we had a number one
24 position here in Chicago in approving mortgages in
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1 '96. And in 1997, we had a 40 percent increase in
2 the number of loans approved and it was well over a
3 hundred million dollars. So we're very proud of
4 our record.
5 MR. McCOY: As you are aware, we have done a
6 number of mergers.
7 MR. ALVAREZ: Move the microphone.
8 MR. McCOY: We've done a number of mergers and
9 are constantly being examined by both the Fed and
10 the OCC. I think the exams speak for themselves.
11 We've had very good ratings.
12 Secondly, there is rigorous monitoring
13 that goes along in all of our markets to make sure
14 that we are absolutely in compliance and also
15 rigorous training of our employees to ensure that
16 we are reaching minorities.
17 And I think the other thing that we found
18 in the acquisitions that we've done is everybody
19 does it a little bit differently.
20 And I think that there are things that
21 First Chicago has done that we applaud. I think
22 Verne would say the same thing.
23 And I think with joining together, as we
24 will in many areas, there will be synergies. And
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1 we will take the best of both programs and, I'm
2 sure, come out with even a better program.
3 MR. ALVAREZ: A question for Mr. McCoy.
4 Banc One has recently completed a reorganization
5 project called, I guess, Project One that's
6 resulted in more centralization of management and
7 operational structure.
8 Will this centralization combined with the
9 merger eliminate local credit decision-making and
10 local points of contact and the ability of the
11 organization to understand the particular needs of
12 the local communities and address in special ways
13 the special needs of local communities?
14 MR. McCOY: Absolutely not. The key to the
15 banking business, especially the community banking
16 business, is to be knowledgeable of your individual
17 communities.
18 And there are differences between Chicago,
19 Detroit and Columbus. And if you're not aware of
20 what those differences are or what the needs are,
21 you are not going to be successful.
22 So our philanthropic giving is done by the
23 local communities in the local communities, not
24 centrally. And we have market managers in each
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1 market who are challenged to make their markets
2 successful. And in reality, our CRA is done at the
3 local market level, not centrally.
4 So the key to our success is to really
5 compete with the competitors in the local market,
6 not on a national basis.
7 MR. ISTOCK: I would just add to that question
8 that John and I are in full agreement on this; that
9 while certain functions are better managed from a
10 centralization standpoint, the closer we can get
11 the decision-making individual to the individual
12 applying for a loan or whatever the case may be,
13 the better off we are, the better off the customer
14 is and the better off the community is. And we
15 subscribe to that philosophy.
16 MS. SMITH: I would ask you one question; and
17 that is, can you tell us something about your plans
18 for merging the CRA programs of your two
19 institutions? Any detail that you might give us
20 on that?
21 MR. ISTOCK: I can start with that. We have
22 just announced internally that Jerry Bulldike, who
23 is here in the audience, will be in charge of
24 public affairs for the corporation.
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1 And it will be Jerry's responsibility to
2 put together the organizational structure for
3 public affairs, which will include the community
4 reinvestment activities.
5 And both Julie Johnson and Mary Decker
6 will be involved in those activities in the
7 corporation going forward.
8 We have not finalized that structure, but
9 you have our commitment that the intensity of our
10 effort in all of the local communities that we
11 serve will not decrease. It will, in fact,
12 increase.
13 As I think John indicated, we will learn
14 from one another and apply whatever pluses we have
15 from the Banc One organization to the communities
16 that First Chicago NBD has served and vice versa.
17 So we think overall the products and
18 services that we provide will actually increase in
19 the communities and the customers will benefit.
20 MR. McCOY: I would simply add to that that it
21 is so important to be involved in the local
22 community.
23 And I've had the opportunity with Verne to
24 meet a number of groups in Chicago and a number of
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1 groups in Detroit. And so I think that you will
2 see a very strong orientation to local communities,
3 which has worked well for us in the past.
4 MR. ALVAREZ: There has been some concern
5 expressed that in moving corporate headquarters of
6 Banc One from Columbus to Chicago that there might
7 be a lessening of the new organization's commitment
8 to Ohio and Columbus, in particular. Can you
9 address that?
10 MR. McCOY: I think that that same concern was
11 echoed with First Chicago when the headquarters was
12 moved from Detroit.
13 And I think that based on what I know --
14 and I met with the Mayor of Detroit -- that they
15 are happy with the support. I've certainly met
16 with our Mayor in Columbus and the Governor of Ohio
17 and others.
18 We have a strong commitment to that
19 market. We have a large number of employees still
20 there. We're having -- several of our businesses
21 will be headquartered there.
22 And so I don't worry about that at all.
23 And Verne will let me go back every once in a
24 while.
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1 MR. ISTOCK: That same concern was raised with
2 the First Chicago NBD merger. And I think over the
3 past three years, we have, in fact, proven in the
4 Detroit market that they have not been abandon.
5 In fact, what we have accomplished in that
6 market has actually been expanded. And we have
7 terrific franchises in all of the major cities, not
8 just Columbus, Detroit, but Flint, Grand Rapids,
9 Indianapolis and in some other states.
10 And we would be making a grave mistake if
11 we abandoned any of those communities as long as
12 this continues to be successful.
13 And John and I are committed to that
14 effort. We will continue to be able to use that
15 success to enhance our relationships with those
16 communities.
17 MS. WILLIAMS: You mentioned that you had
18 entered into a new partnership with Fannie Mae and
19 it's a Self-Help program for home buyers.
20 Could you talk a little bit about what
21 market would be impacted by that.
22 MR. McCOY: Basically, as I understand it, it
23 will be a program we will introduce in all of our
24 markets. It is one that, as we learn how it works
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1 and how to make it work, it will expand hopefully
2 past the 35,000 loans that we've set as a goal.
3 MS. SMITH: Any other questions?
4 MR. ALVAREZ: I don't think so.
5 MS. SMITH: If not, we thank you very much for
6 coming here this morning and we will move on to
7 Panel 2.
8 (Whereupon, there was a
9 vocal demonstration from
10 the audience.)
11 MS. SMITH: We'll follow the order given in the
12 agenda. And I will ask each person to indicate
13 your affiliation, so we'll start with the Honorable
14 Julia Carson.
15 MS. CARSON: Thank you very much. I'm Julia
16 Carson, Congresswoman, Indianapolis, Indiana,
17 member of Congress, sit on the banking committee
18 for US Congress. Is this microphone on?
19 MR. ALVAREZ: It's not on, ma'am.
20 MS. CARSON: Okay. I'm Julia Carson,
21 Congresswoman, Indianapolis, sit on the banking
22 committee for the United States House of
23 Representatives.
24 I have listened with interest. I have
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1 another more painful side to tell of the latest
2 story of merger mania. I urge a conservative
3 course, a careful investigation of the facts, the
4 history and the harm.
5 They claim that mergers benefit companies,
6 employees and consumers, increasing competition. I
7 favor growth, but not at the cost of harm to the
8 community and to the people.
9 Indianapolis is where the two giant merger
10 partners have, perhaps, the greatest business
11 overlap, facing each other next to the Federal
12 courthouse, a massing $17.6 billion in assets
13 between them.
14 Court is where this matter will end up if
15 this process is not well and thoroughly conducted.
16 There is a better way.
17 Our Indianapolis Star newspaper warns the
18 most pressing concern is customer service and
19 cost. If history is any guide, the former will
20 drop and the latter rise as banks become more
21 competitive.
22 Joining the Star, grassroots
23 organizations, community groups and activists from
24 Indianapolis and across the country warn, too,
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1 because of the harms threatened. These voices
2 cannot all be wrong.
3 The point of business is to beat the
4 competition. We believe the competition is healthy
5 because it benefits the consumer.
6 Our law, our public policy, encourages
7 competition by legal protection. Beating the
8 competition is okay, but killing it is not.
9 And antitrust law will make the superbank
10 reduce its markets here. Selling deposits will
11 make the purchaser a new competitor. The
12 requirement to slim down is powerful. Branches
13 will be closed, operations consolidated.
14 Each bank now has 60 or more branches in
15 central Indiana. Banc One alone has 27 on the
16 block. Each branch is a center of local commerce,
17 competing with others.
18 Closing cuts consumer choice. Merger
19 will close competitive branches, neighborhood by
20 neighborhood, as the new superbank makes the
21 rational decision not to compete with itself.
22 I doubt that the buyer bank will keep these
23 branches going.
24 The incentive is small. Deposits are the
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1 most portable form of assets. Real estate and bank
2 worker -- 6,000 in central Indiana -- complicate
3 the bottom line. This plan makes them expendable.
4 More harm is predicted by history. A Wall
5 Street Journal analysis of the five largest bank
6 acquisitions last year showed that small business
7 lending fell six percent through business lending
8 increase, less for beginning businesses.
9 In Indianapolis, we need more business
10 formation, not less. Small business opportunity
11 based at home, growing over time into big
12 business. That's what works for our people.
13 Our law forbids mergers which
14 substantially lessen competition unless these facts
15 are outweighed in the public interest by the
16 probable effect of the transaction in serving the
17 convenience and needs of the community.
18 Our law is devoted to preservation, the
19 conservation of economic values vital to our way of
20 life. Our people ask that the law be applied to
21 save their jobs, their prosperity, our
22 neighborhoods.
23 For American banking, a great windfall
24 approaches. Printing and mailing of most
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1 government checks will end in 1999. These
2 transfers will be made by electronic means, flowing
3 billions of dollars through the banks, especially
4 on September the 3rd of every month when the Social
5 Security checks are transferred.
6 For direct deposit, you will need a bank
7 account. To get one, you will have to find a
8 branch, harder and harder where I live.
9 Fewer branches mean less access for a
10 whole new throng of American consumers brought into
11 the banking system by this way of the future.
12 The longer it takes to cash a check, the
13 more the money earns for the bank holding the
14 funds.
15 Nationally, we are at the door of a new
16 era in competition. This merger threatens to slam
17 doors firmly closed Indianapolis just as they begin
18 to crack open across the country.
19 For Indianapolis, the view differs
20 painfully. You will hear complaints about bank's
21 behavior hurting those with low income, about an
22 investigation for lending discrimination against
23 low to moderate income borrowers, Hispanics and
24 Blacks.
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1 I fear untold number of bank workers out
2 of work with more pain. And Community Reinvestment
3 assessments tell us that tale.
4 I'm happy that I had an opportunity to
5 come today because, for the first time, I've met
6 the chairmen of those two banking institutions and
7 had myself approached them and introduced myself to
8 them. Thank you very much.
9 MS. SMITH: Thank you. Mr. Davis.
10 MR. DAVIS: Ms. Smith, members of the panel,
11 Mr. Istock, Mr. McCoy and other participants, I'm
12 Danny Davis, Congressman of the 7th Congressional
13 District here in the state of Illinois.
14 And for those of you who are from out of
15 town, let me welcome you to the city of Chicago,
16 the most fascinating city in all of America, and to
17 the 7th District, which I represent, and it also
18 happens to be the most intriguing of all
19 Congressional districts in the country.
20 I want to begin by thanking the Federal
21 Reserve for holding these hearings. As I will
22 indicate in my testimony, the issues before us are
23 critical to the well-being of this and many other
24 communities throughout America.
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1 We need to guarantee that the merger
2 before us meet the criteria of protecting workers,
3 minorities, consumers depositors, businesses,
4 non-profits and other partners with special needs
5 in community development.
6 We've set our public policy for bank
7 mergers based on some historical lessons, and as
8 a result of some laxness to the financial sector.
9 These decisions once taken cannot be undone.
10 In his classic 1946 film, It's a Wonderful
11 Life, Frank Capra laid before us two fundamental
12 questions which have resonated with great empathy
13 with the American public.
14 He asked us to ponder the role of the
15 community bank and the community banker in the life
16 of the community.
17 And he asked us to think about the nature
18 of history in the highly divergent paths which
19 history can take, to be changed for better or for
20 worse by the actions of those of us who make
21 decisions.
22 Those are precisely the questions we face
23 in these hearings this morning. It is not my
24 intent or desire to romanticize the state of
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1 community banking in Chicago.
2 However, the relations between Chicago's
3 First National Bank and Chicago's extraordinarily
4 rich economic, social and cultural life have
5 developed over many years and as the result of the
6 efforts of many individuals and institutions.
7 We simply cannot afford to throw away or,
8 through our inaction, allow years of community/bank
9 relationships to dissipate.
10 In response to those who say the mythical
11 unregulated market is best arbiter economic
12 structures, I would assert that lack of control of
13 markets brought us the ubiquitous crack salesman,
14 one in seven children without health insurance, a
15 mountain of garbage in Lawndale and the lamentable
16 need in this day and age for a task force on
17 sweatshops in Chicago.
18 I would urge that the Federal Reserve
19 consider the impact of this merger on the health of
20 the financial industry as well as the rest of the
21 community.
22 And I am certain that you're making a
23 careful analysis of that aspect, but I would like
24 to suggest that the financial industry's health is
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1 inseparable from the health of the broader
2 community.
3 It follows logically that we should strive
4 to understand the impact of this merger on the
5 larger community and weigh that impact against any
6 benefits which may accrue. At a minimum, we should
7 consider structuring the merger to minimize
8 negative impacts on the broader community.
9 I would hope that the Fed would consider,
10 attempt to quantify and to take into account these
11 concerns; the number of jobs which may be lost,
12 especially those in the back rooms and not up
13 front, the number of jobs which may be accessible
14 to welfare to work participants; the amount of CIC
15 lending and community development investment with
16 community partners, the agreements with the Chicago
17 CRA Coalition can serve as a model for all markets
18 served by the merged companies.
19 Certainly such agreements would go far in
20 stabilizing the process of community reinvestment.
21 Lack of such agreements would certainly threaten
22 the process of reinvestment both in their direct
23 impact and as a negative signal to other investors
24 and institutions.
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1 The impact on minority lending, both the
2 availability of loans and any disproportion in the
3 rates which loans are offered. Serious questions
4 have been raised regarding the Banc One record
5 regarding minority lending such as Denver and
6 Milwaukee.
7 We believe that personnel have been
8 developed in the city of Chicago, but we would want
9 to make absolutely certain they are, in fact,
10 retained and those experiences used as Banc One
11 continues to proliferate and carry on its activity
12 in all of its marketplaces.
13 I guess there's no doubt about my time
14 being over. Lights go out. I thank you very
15 much.
16 MS. SMITH: Mayor Goldsmith.
17 MR. GOLDSMITH: Thank you, Congressman.
18 I will be sensitive to time. The
19 Congresswoman got a bell and the Congressman got
20 the lights off, so I worry about the next step.
21 I'm the Mayor of the city of
22 Indianapolis. And the heart of our city is the
23 district represented by Congresswoman Carson, so we
24 have many of the same concerns. I appreciate the
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1 attention of the Federal Reserve in this matter.
2 These two banks are both extraordinary
3 citizens of the city of Indianapolis, both have
4 outstanding records and both have been partners of
5 the city around the community for some time through
6 community lending and other initiatives.
7 This hour is a very important moment in
8 the future of our city. Because of the leadership
9 and partnership of these institutions, if the
10 merger is not done correctly, then the progress in
11 our city and its citizens are threatened. If it's
12 done correctly, the leadership played by the banks
13 is continued.
14 This is a defining point in the future of
15 Indianapolis. It's not the merger, per se, that
16 concerns us. We've been there. We've done that.
17 Banc One purchased American Fletcher
18 National Bank. And its record after the purchase
19 and merger was every bit as good as they had
20 been before.
21 Indiana National Bank was purchased by
22 NBD, which was then purchased by First Chicago or
23 merged or whatever the right word would be. And
24 their records continue to be very strong and their
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1 community participation are every bit or greater
2 than they had been previously.
3 So to me, the issue is not one of merger.
4 It's more an issue of attitude, commitment on the
5 part of management and their approach going
6 forward; not the size of the bank, but the attitude
7 of the bank that makes a difference.
8 In that regard, I'd like to make brief
9 points about what I regard to be the role of banks
10 in urban communities.
11 It is clear from the 30 years up to the
12 1990s, there will be structural investments. The
13 cash just flowed out of the center of cities and
14 into suburban communities.
15 Some of this is because the cities didn't
16 manage their own communities very well, with high
17 taxes and high prime and the capital found
18 friendlier places to go after this merger occurs.
19 It's been my goal that the merged banks
20 pay attention to the urban core and in four ways.
21 One, these banks can locate their business centers
22 and their employees anywhere in the world. They're
23 international banks. And we would appreciate the
24 sensitivity to the core that has existed
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1 premerger.
2 Secondly, community lending. There are a
3 number of great cities in the midwest. And we hope
4 that the bank will use its size to bring the best
5 practices of Chicago or Detroit or Columbus to the
6 citizens of Indianapolis, particularly those
7 citizens who are the poorest and in the most need
8 of access to capital, many of those living in
9 Congresswoman Carson's district.
10 Third, we need small business lending.
11 In this regard, Indianapolis is different than
12 the other cities. I think what will drive small
13 business lending is competition. And the Justice
14 Department is looking at the anticompetitive
15 effects in Indianapolis from the merger of the
16 banks.
17 So the size of the divesture and the
18 ability of the new bank to compete with the merged
19 banks will be, to me, the most important element of
20 assuring small business access to capital.
21 Fourth, and perhaps a little bit
22 different, this merger truly will be a grand thing
23 if I were the Mayor of Chicago, but my prediction
24 is the headquarters of the bank will be in Chicago
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1 and not in Indianapolis, therefore, I am sensitive
2 about the fact that decision-making needs to be
3 decentralized as it relates to community investment
4 and civic participation.
5 What concerns me most about the merger is
6 the ability of the people located in Indianapolis,
7 a fairly good-sized business center for the banks,
8 to make decisions that are in the best interest of
9 Indianapolis citizens.
10 So the fourth area is civic involvement.
11 These banks have had a great history. They've had
12 a great history because local officials have had
13 the authority to make decisions.
14 If these four issues are addressed, then
15 we can receive some confidence.
16 And in conclusion, essentially our
17 position is that our citizens have a right to
18 certain expectations to be filled.
19 Those expectations would include a
20 commitment to recognizing that the core of a
21 regional economy is important, that the regional
22 economy cannot succeed without the core being
23 successful and that the employment in the core is
24 critical, real estate decisions in the core are
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1 critical and lending policies in the core are
2 critical as well.
3 Our citizens have a right to expect the
4 best possible access to capital. The best
5 practices anywhere in the world engaged in by this
6 bank should be available to the citizens of
7 Indianapolis.
8 We've conducted our due diligence. We
9 have lawyers who've hired financial experts. We've
10 met with the chairman and the president. We've met
11 with officials in both banks. And we've looked at
12 this in great detail.
13 We've received assurances from both banks
14 that the issues that I have raised will be
15 addressed and they'll be addressed in a
16 constructive way.
17 Based on these assurances and the track
18 record of those banks, I remain anxious, but
19 confident, that the merger will be done in a way
20 that will continue the important role that the
21 banks have played in the city's past; and that
22 these banks after the merger, if they conduct their
23 affairs with some degree of commitment, can be done
24 equally good and equally to the benefit of our
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1 citizens. Thank you.
2 MS. SMITH: Mayor King.
3 MS. CARSON: You were way past your time.
4 MR. KING: Good morning. I'm the Mayor of
5 Gary, Indiana, a city of about 120,000, about 30
6 miles around the lake from here.
7 It's a pleasure to have been afforded the
8 opportunity to speak from our perspective. And it
9 was interesting listening to Mayor Goldsmith's last
10 comment about his fears of the impact of moving
11 decision-making out of his city to Chicago and what
12 his concerns are.
13 And to quote your children, Mayor, been
14 there, done that, in Gary. And it's not a good
15 prospect.
16 One of the problems that I see with this
17 merger, quite frankly, is that individually these
18 banks in the city of Gary, whose population is
19 85 percent African American, have not individually
20 established an appropriate track record of lending,
21 of investing, of involving the community that
22 they're in.
23 And I suspect it's not due to any malice
24 on the part of the top executives of either
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1 entity. I suspect it's due, in part, to the larger
2 you get, the more difficult it is within any
3 institution to have policy implemented at the top
4 actually carried out by middle management and
5 below.
6 I can tell you, as Mayor, I have never had
7 the occasion of a department head to walk into my
8 office and say, Mayor, I'm doing a lousy job of
9 implementing the policy that you asked my
10 department to do. It doesn't happen.
11 And I suspect for both the gentlemen who
12 preceded us on this panel, it's not a matter of
13 malice, it's a matter of a lack of awareness.
14 In the banking industry and in African
15 American communities, the truth is, whether in Gary
16 or wherever in this country, they do not have --
17 they do not enjoy a good track record.
18 One of the remaining vestiges of
19 historic race discrimination today is economic
20 discrimination. That remains a barrier for the
21 people I serve, to get into the mainstream of our
22 economy.
23 The banks, along with other industry in
24 the city of Gary and the other cities in the
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1 so-called rust bill, have about three decades of
2 disinvestment in the cities.
3 The banks went. The mills went. The jobs
4 went. And what was left was a community that
5 continued to make it day-to-day, but was cut off
6 from resources enabling it to be competitive. This
7 is made all the more frightening to me with some
8 recent studies.
9 Historically, I believe banks have
10 presupposed unfairly that investment in inner
11 cities is high risk, bad investment.
12 Well, lo and behold, a bank, Bank of
13 America, several years ago decided to find out
14 scientifically was that true or not as a premise.
15 They commissioned a study. And lo and
16 behold, the results of their study was that that
17 was a myth and a false one.
18 The truth is, the inner cities, the urban
19 centers, are good places to invest in small
20 business and housing to promote home ownership.
21 These studies commissioned by banks are there.
22 Now, I'm a realist. I'm a realist. I
23 understand we may very well face the prospect of
24 this merger being approved.
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1 If it is approved, if we are going to
2 truly be sensitive, whether it's Indianapolis,
3 Gary, whatever city we're talking about, I believe
4 it is up to this board and this entity to put some
5 teeth in the tiger of the Credit Reinvestment Act,
6 to carefully scrutinize when you're getting
7 reporting, go behind the numbers.
8 I can tell you, we've not had -- we have
9 not had more good than bad. I will not castigate
10 either bank.
11 There are some things they have done in
12 our community that have been credible, but on the
13 whole, my concern is it will get worse.
14 We have some new banks that have come into
15 our city. And I can tell you, it's been a
16 refreshing change to see honest enthusiasm about
17 making lending opportunities to the people I
18 serve.
19 My concern is by making this merger occur
20 and making them bigger, it could thwart the
21 competitiveness that's just starting our city in
22 banking and continue the legacy of what I believe
23 to be unfair practices in making capital available
24 in minority communities.
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1 I thank you for the opportunity.
2 MS. SMITH: Congresswoman Carson, would you
3 like to have another minute or so?
4 MS. CARSON: I was feeling jumped upon.
5 MS. SMITH: Maybe you can have the mike.
6 MS. CARSON: I really appreciate your
7 courtesy. I feel more at home now.
8 But I, too, am optimistic about the
9 ultimate outcome of this application for merger. I
10 would simply like to echo the words of the
11 Honorable Mayor King from Gary, and that is to
12 ensure that CRA is enhanced for the benefit of the
13 urban community.
14 An urban community, regardless of
15 someone's view, does not necessarily mean Black
16 community. People who are low income and moderate
17 income are persons who live in urban America. And
18 all of them don't come with the same color on their
19 faces.
20 And so it is an equal opportunity for all
21 American citizens to be able to access economic
22 opportunities to financial institutions who thrive
23 on the profits that they generate from urban
24 America.
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1 MS. SMITH: Thank you very much.
2 MR. ALVAREZ: Ms. Carson, you had a written
3 statement. If you would give us a copy of that,
4 we'll make sure the whole statement is put into the
5 record.
6 MS. CARSON: We have left several copies of my
7 statement, but not the latter part. I didn't know
8 I was going to get another minute.
9 MR. ALVAREZ: That's all right. And anyone
10 else on the panel that wasn't able to finish.
11 MS. SMITH: Thank you very much for coming this
12 morning. We appreciate it.
13 Okay. With Panel 3, we will start with
14 the Honorable Hiawatha Davis, Junior.
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.
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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.
5 MS. COLEMAN: Good morning. My name is Cora
6 Coleman, and I am a Board member of Local 880 of
7 the Service Employees International Union.
8 I am here to talk about what things could
9 be like for minorities here in Chicago when
10 Banc One takes over the local control of
11 First Chicago.
12 If it's anything like what went on in
13 Akron, Ohio, it could get ugly. In the early 90s,
14 Banc One took over the Local Central Trust in
15 Akron. Soon after, minority job applicants filed
16 employment discrimination complaints with the
17 Department of Labor.
18 After a two-year investigation, the
19 Department found that 31 qualified minority job
20 applicants were unfairly turned down for jobs at
21 Banc One, a clear-cut case of employment
22 discrimination.
23 For five years, Banc One fought the
24 Department of Labor's attempts to reform the bank's
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1 hiring practices.
2 Finally, just last year, the bank was
3 forced to hire 12 of the complainants and to
4 provide financial compensation to those minority
5 applicants it had refused to hire.
6 First Chicago NBD is a larger operation
7 than Central Trust. And squeezing the two
8 companies together is going to involve all sorts of
9 job changes, all sorts of chances for Banc One's
10 record in the lending office of turning down
11 minority applicants to come shining out in the job
12 interview.
13 We know the Federal Reserve is not
14 sympathetic to this issue since they themselves are
15 facing a large class action lawsuit from its
16 minority employees, but Banc One should be careful
17 because we will be watching with our trial
18 lawyers.
19 Banc One also has violated lending
20 discrimination laws. In March of this year,
21 Banc One Mortgage Corporation signed a lending
22 discrimination settlement with HUD after their Fort
23 Worth Humans Relation Commission filed their
24 lending complaints. They found that Banc One
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1 offered African Americans and Latinos loans at
2 worse terms than offered to whites by steering them
3 to inferior and more expensive products than their
4 conventional loan product.
5 As a result of this case, Banc One
6 Mortgage committed to provide 10 million in
7 mortgages to low and moderate income and minority
8 borrowers.
9 This pattern of discrimination continued
10 in Arizona where Banc One recently settled a case
11 with the Attorney General by agreeing to provide
12 5 million in mortgages to low and moderate income
13 residents of Yuma County. This agreement came only
14 after the state investigated complaints from five
15 Latino families who claimed they were denied
16 mortgages because of their ethnicity. Banc One
17 denied these claims, citing internal processing
18 problems.
19 One family said they received the run
20 around from Banc One Mortgage until their
21 application was delayed long enough that they lost
22 their house to another buyer.
23 When a second attempt with Banc One
24 mortgage met similar delays, they took their
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1 application to another bank and were approved
2 within a week.
3 In another instance that is strikingly
4 similar to the Phoenix example, a Dallas homeowner
5 who applied for a Banc One home improvement loan in
6 1996 cannot get his loan processed or even his
7 application rejection.
8 This practice of deterring applications of
9 prospective minority borrowers at the outset helps
10 understate the minority rejection rates.
11 These cases indicate a pattern of
12 discrimination through a series of delays and
13 deceptions that help Banc One pad their humble
14 reporting.
15 They also show us that under the threat of
16 a lawsuit, Banc One seems able to provide
17 alternative financing to meet the needs of low
18 income and minority borrowers.
19 Banc One clearly has a problem when it
20 comes to serving the banking and employment needs
21 of African Americans and Latinos. They don't seem
22 to understand that discrimination is against the
23 law.
24 The burning issue of today is does the
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1 Federal Reserve Board understand that
2 discrimination is against the law, does the Federal
3 Reserve Board have the guts to finally say no to a
4 renegade like Banc One.
5 On behalf of my union's 10,000 members, I
6 implore you to do the right thing.
7 Thank you.
8 MS. SMITH: Thank you very much.
9 Mr. Shea.
10 MR. SHEA: Ted Thomas is going to speak next.
11 MS. SMITH: Okay.
12 MR. THOMAS: Good morning. My name is Ted
13 Thomas. I'm the president of Illinois ACORN.
14 Banc One has a history of refusing to
15 negotiate lending agreements to meet the needs of
16 the low income communities. The only time Banc One
17 has quantifably made a lending commitment to a city
18 was when it was forced to do so by Michael White,
19 the Mayor of Cleveland.
20 Mayor White was so disturbed by Banc One's
21 unwillingness to help him rebuild the central city,
22 he actually filed a CRA protest against the bank
23 and forced the bank to set CRA lending goals for
24 his city.
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1 ACORN has negotiated lending agreements
2 and partnership with scores of banks throughout the
3 nation. For example, we worked with Nations Bank
4 in 12 cities and with Chase Bank in ten cities.
5 Our partnerships have a proven track
6 record of performance. Since 1987, we have helped
7 over 10,000 low income families, mostly African
8 American and Latino heritage, achieve the American
9 dream of home ownership.
10 We were amazed at Banc One's flat-out
11 refusal to even discuss the formation of a
12 partnership or a corporate-wide CRA lending
13 commitment.
14 Banc One's Senior Vice President, Julie
15 Johnson, sent a rejection letter to several ACORN
16 officers. She said we do not believe in negotiated
17 CRA programs.
18 In Denver, Banc One officials have
19 canceled and postponed every meeting that has been
20 scheduled with ACORN members. To this day,
21 Banc One has not set CRA lending goals or made
22 commitments to Denver.
23 In Milwaukee, Banc One's met with ACORN
24 members. They said that they were unwilling to
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1 negotiate a lending agreement and pulled out
2 Mrs. Johnson's letter to justify their position.
3 They told the same thing to the city's Fair Lending
4 Coalition. Today, Banc One has not set CRA lending
5 goals or made a commitment to Milwaukee.
6 In Louisiana, Banc One officials have also
7 refused to enter into a partnership discussion.
8 Instead, they sent a letter saying that they
9 already do enough. To this day, Banc One has not
10 set CRA lending goals of any kind in New Orleans,
11 Baton Rouge, Shreveport or anywhere else in the
12 State of Louisiana even though they are by far the
13 largest bank in the state.
14 Unlike other bigger mergers this year,
15 Banc One has refused to make corporate-wide lending
16 CRA commitments. What Banc One has done is allow
17 the First Chicago NBD CRA team to promise a lot of
18 grants to non-profits here in Chicago and in
19 Detroit.
20 Four weeks ago, ACORN thought it had a
21 commitment from First Chicago NBD. This commitment
22 was personally given to me by the CEO of
23 First Chicago, Mr. Verne Istock. He looked me
24 right in the eye and said Ted, we value the
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1 partnership with ACORN. He said that they wanted
2 to keep it going in Detroit and Chicago and
3 possibly expand it to other cities.
4 Following that meeting, his staff told us
5 that we could expand our partnerships to Milwaukee
6 and perhaps to a couple of the bank's other
7 cities. They told us that they would value the
8 ACORN mortgage counseling program because it helped
9 them to make mortgages in places like Ingallwood,
10 North Lawndale, places where for years, banks had
11 not been able to make a single loan on its own.
12 I left the meeting feeling like things
13 were going to work out. After all, I had received
14 the word of the top dog, so I thought. Can you
15 imagine to my surprise just three days later,
16 Banc One suddenly terminated our negotiation with
17 no notice or explanation of any kind.
18 The First Chicago CRA team were very
19 apologetic and said that they would still be
20 willing to continue our program in Detroit and
21 Chicago but that they were not allowed to form CRA
22 partnerships in any additional cities.
23 When we asked what had happened to the
24 commitment from Verne Istock, they sheepishly
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1 explained that Mr. Istock had been overruled by
2 John McCoy, the CEO of Banc One. They reminded us
3 John McCoy, and not Verne Istock, was going to be
4 the CEO, the new top dog.
5 Thank you.
6 MS. SMITH: Thank you very much.
7 MR. SOZA: Hello. Good morning.
8 My name is Nelson Soza. I'm an organizer
9 with Chicago ACORN, and I want to thank the Federal
10 Reserve Bank for having reopened this comment
11 period. I think it's key for our community such as
12 the one I work in. I also want to thank the
13 members of ACORN and Local 880 that come from
14 everywhere.
15 There is justice to be made, and we think
16 that this is one of those cases, red lining.
17 People in our community understand it that way so I
18 thank everybody for being here today.
19 I proceed to read the statement.
20 The merger between Banc One and
21 First Chicago NBD poses very serious issues for the
22 residents of Chicago. It represents a loss of one
23 of the last local major banks in Chicago, one of
24 the last major banks rooted in our communities.
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1 Not that there isn't room for improvement
2 at First Chicago. Banks in Chicago reject African
3 Americans and Latinos for home loans more
4 frequently than banks in other cities, and
5 First Chicago is worse than the rest of the banks
6 here.
7 First Chicago NBD rejected African
8 Americans nearly four times as frequently as whites
9 for home loans, and Latinos were denied home loans
10 more than twice often as whites. This is far
11 higher than the citywide averages for all lenders.
12 This performance is unacceptable from a
13 bank that touts its hometown image. Incredibly,
14 even the wealthiest African Americans and Latinos
15 are rejected at the same high rates.
16 The Woodstock Institute found similar
17 patterns when looking at lower income borrowers.
18 First Chicago has much larger shares of the Chicago
19 small business and mortgage lending market for
20 wealthy borrowers than lower income borrowers.
21 Yes, First Chicago has some cracks in
22 their record, but they are nothing compared to the
23 problems of Banc One. They seem small.
24 Banc One is already in the Chicagoland
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1 area, but as you can see from the map behind me or
2 on the side over there if you look in the corner,
3 there is a map. If you look at the map there, as
4 you can see, it just isn't in Chicago.
5 Banc One isn't in Chicago really in fact
6 with exception of its branch on LaSalle Street in
7 the Loop across the street, Banc One has avoided
8 the City of Chicago as if it were the plague.
9 Its branches are located in wealthier
10 suburban neighborhoods like Schaumburg, Winnetka
11 and Highland Park. So if people from the West Side
12 want to open an account, they have to go all the
13 way there, for instance.
14 We know if past track record is any
15 indicator, then it is very likely that once
16 Banc One takes over First Chicago, it will close
17 the few First Chicago NBD branches that are in our
18 neighborhoods.
19 Banc One has always closed branches
20 following mergers no matter what the overlap in the
21 merging bank's service areas. In fact, Banc One
22 has recently announced that it will close between
23 200 and 500 branches, and somehow, I don't think
24 that it would be the branches in Winnetka and
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1 DuPage County that will be closed.
2 Banc One is planning on replacing the
3 branches with ATMs in regional outlets and
4 convenience stores where Banc One already charges
5 its own customers one dollar for each use. Compare
6 this to First Chicago, which provides unlimited ATM
7 use to its own customers for free.
8 Banc One is also teaming up with
9 Texas-based Mr. Payroll to install check cashing
10 stores across the country. These operations will
11 cash a check for you but only if you submit to
12 video identification or fingerprinting. After
13 treating you as if you were a common criminal, they
14 will then charge you one percent for payroll and
15 government checks, two percent for money orders and
16 three percent for personal checks.
17 Sadly enough, even these high rates may be
18 cheaper than the flat $8 fee Banc One charges to
19 cash a government check at its own branches, $8 for
20 a government check.
21 Again, compare this to First Chicago where
22 government checks are oftentimes cashed for free by
23 tellers who get to know their customers who have
24 government checks, many of whom are older and
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1 disabled.
2 Given the choice between locally-based
3 First Chicago and notoriously customer unfriendly
4 Banc One, we'll keep what we've got.
5 I urge you to reject this merger and the
6 high cost, low volume customer services that come
7 with it.
8 Thank you very much.
9 MS. SMITH: Ms. Vargas.
10 MR. VARGAS: Good morning. My name is Shirley
11 Vargas. I live in Pleasant Grove, Dallas, Texas.
12 Me and my fiancee went to Banc One to get
13 a home loan, and when we went in there, my fiancee
14 had worked for his job -- he started in '91 and the
15 company changed over. He was a regular employee,
16 and they changed over to independent contractors so
17 he had already filed for that independent
18 contractor, and we hadn't been there -- he hadn't
19 filed very long.
20 After that, we went there, and they said
21 that he had to have at least four years tax returns
22 for an independent contractor before we could even
23 consider a loan.
24 The money I was making, he said that I
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1 didn't qualify for the $65,000 home that we wanted
2 to purchase. We had $4,200 to put down on it, and
3 they didn't even consider that. They said that I
4 didn't make enough money and that for us to come
5 back in two years for us to get a loan. And that
6 was just unfair.
7 We didn't go anywhere else after that
8 because we thought we couldn't get a loan, we
9 couldn't get a loan from any other bank.
10 Because I had an account there, I thought
11 that Banc One would be able to help me out, and
12 they didn't. They said no, and that was it, and I
13 think it was very unfair.
14 And they didn't even look at our
15 application, they didn't even do a credit check.
16 They just said no, that we needed to come back in
17 two years after we had tax returns, we had all the
18 information that they asked us for.
19 They didn't even consider it. They just
20 said no, you need to come back. And I just think
21 that's really unfair.
22 MS. SMITH: Thank you very much. Mr. Shea.
23 MR. SHEA: Good morning. My name's Mike Shea
24 I'm Executive Director of ACORN Housing
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1 Corporation.
2 The merger of First Chicago NBD and
3 Banc One is not a merger of equals, so let's get
4 that straight, it's an acquisition.
5 We are losing First Chicago and a more
6 open and efficient cosmopolitan culture that it has
7 developed. It has been replaced by the arrogant
8 big fish in a small pond approach by Banc One, an
9 approach that is both inefficient and racially
10 prejudiced.
11 And in case anyone here still has any
12 doubts about which bank's culture will survive,
13 consider the remarks made by John McCoy to the
14 Arkansas Business Journal during another merger.
15 He he said, "I don't believe in a merger of
16 equals. We want to be sure it is the Banc One
17 culture that survives."
18 And what happened with the golden
19 parachutes recently provided to First Chicago's
20 senior management? They are very unusual in that
21 Verne Istock, David Pitalle and others must leave
22 the new bank in order to get the money. If they
23 stay, they get nothing.
24 And finally, why wasn't the outstanding
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1 First Chicago CRA team headed by Mary Decker and Ed
2 Jacob appointed to be the national CRA directors
3 for the new bank? We like Mary. She understands
4 our communities and how to make workable
5 partnerships with the community.
6 We have supported other candidates for
7 appointment to the Board of Governors of the
8 Federal Reserve. Why is it that McCoy has hired
9 someone who has never negotiated a single CRA
10 agreement in his life to hold this key position?
11 So let's look at the Banc One culture
12 starting with politics. So Banc One is one bad
13 bank unless you are a right-wing Republican trying
14 to kill the CRA, cut the guts out of federal
15 programs that feed children and women and house the
16 poor. Then Banc One is your friend and will reward
17 you with lots of campaign money. But if you are a
18 Democrat, then this merger is very bad news
19 indeed.
20 First Chicago has always divided its
21 political contributions fairly evenly between
22 Democrats and Republicans, for example, they hosted
23 a dinner to help U.S. Senator Carol Mosely-Brown
24 retire her campaign debt from the last election,
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1 but not so with Banc One.
2 The Banc One PAC gives four times more
3 campaign money to Republicans than the Democrats.
4 Banc One is buying First Chicago. Guess which
5 political party stands to gain. Banc One PAC's
6 largest political donations just don't go to
7 Republicans, they go to the most extreme
8 Republicans who are trying to cut the CRA, for
9 example, Exhibit A, Representative Bill McCullom of
10 Florida received $17,000 from Banc One.
11 Representative McCullom is the guy that supported
12 the amendment that passed the House Subcommittee
13 this week that would exempt 85 percent of all banks
14 in the Community Reinvestment Act.
15 Exhibit B, Senator Lloyd Faircloth, Jesse
16 Helms, heir apparent in North Carolina, gets
17 $15,000 from Banc One, Exhibit C. Congressman
18 Casich, Chair of the House Budget Committee and
19 architect of many of the Republicans Urban
20 Transportation and Children's Nutrition Programs,
21 he gets $17,000.
22 The Banc One PAC is very large. This is a
23 very politically active bank. In the 1996 election
24 cycle, Banc One PAC was the seventh largest PAC
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1 contributing more money than the American Medical
2 Association, American Bankers Association or
3 Phillip Morris. In the '98 cycle, they have
4 already given more $535,000 with reactionary
5 Republicans again enjoying a four-to-one edge in
6 contributions over Democrats. So when Banc One
7 grows, so does the Republican Party.
8 Secondly, Banc One is one bad bank for
9 Chicago shareholders. Banc One's market value has
10 collapsed since the merger was announced in April,
11 and it's pulled down First Chicago with it.
12 The stock price on the date of the merger
13 announcement in April, First Chicago closed at
14 96.25. Banc One closed unchanged at 61.70. At the
15 close of trading on August 11th, First Chicago was
16 at $72, a decrease of 25 percent. Banc One was
17 also a decrease of 26 percent.
18 Compare this to Citibank. Citibank's
19 stock has actually increased one percent since the
20 announcement of their deal with Travelers in spite
21 of the downturn in financial stocks.
22 With this merger, we have an extremely
23 efficient bank being bought out by an extremely
24 inefficient one. According to the Wall Street
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1 Journal two weeks ago, First Chicago is the most
2 efficient bank in the country. Banc One, on of the
3 top ten, was rated eighth or ninth.
4 The track of Banc One's other mergers
5 reflects the fact that they are not efficient.
6 They have had tremendous cost overruns in every
7 other merger.
8 So to wrap up, I would say that our
9 opposition of Banc One will not stop this merger.
10 Make no mistake about it, we know that the Fed is
11 going to approve this merger like they have every
12 other single merger. Doesn't matter how bad the
13 bank is, we know the Fed's going to approve it.
14 However, we're just putting Banc One on notice at
15 this meeting that we will take our case to other
16 more impartial venues, we will take our case to
17 shareholders, take our case to the labor movement,
18 we will take our case to the community, and we will
19 take our case to the courts. We will not stop
20 until we have forced this bank to change.
21 Thank you.
22 MS. SMITH: Mr. Williams.
23 MR. WILLIAMS: Madam Chairperson and
24 distinguished members of the Federal Reserve Panel,
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1 the Coalition of Neighborhoods is a non-profit
2 coalition of six racially and economically
3 integrated communities.
4 The Coalition, in keeping with our mission
5 to maintain, expand and promote healthy, integrated
6 communities, have trained our leadership to
7 integrate the compliance requirements of HMDA, CRA,
8 ECOA, RESPA, EEO and the Fair Housing Act.
9 It is our belief that the Federal Reserve
10 System which has contributed significantly to the
11 establishment of these laws and regulations must
12 now contribute more significantly to their
13 enforcement.
14 The coalition stands behind all of the
15 statements in our July 13th, 1998 challenge of this
16 merger. Banc One's July 22nd, 1998 response to our
17 challenge may have some slightly different numbers
18 than we submitted, but the conclusions are the
19 same.
20 Their weak mortgage loan production is not
21 responsive to the need of a 38 percent home
22 ownership rate in Cincinnati. The unresponsive
23 business lending speaks for itself, but I have
24 attached to this testimony a couple of antidotal
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1 situations that we believe illuminate what some
2 black and white businesses experienced with
3 Banc One Cincinnati.
4 We believe that a public hearing at the
5 Cincinnati Federal Reserve Bank, comparison of the
6 '96, '97 HMDA data and residential mortgage and
7 business loan file review will support what we have
8 alleged.
9 Our challenge and the bank's responses
10 adequately describes a needs to improve performance
11 based or our prospective of the lack of innovation,
12 no complexities solved and the unresponsiveness of
13 Banc One relative to the overall needs in the
14 Cincinnati area.
15 This hearing today and the subsequent
16 merger decision has more to do with the credibility
17 of the regulatory agencies than that of the two
18 banks involved.
19 Renowned HMDA, CRA and financial experts
20 from all over the country in independent
21 assessments of Banc One's performance have
22 condcluded that the bank's approval and patterns in
23 Black, Hispanic and LMI census tracts suggest
24 violation of fair lending and consumer protection
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1 laws, and therefore, non-compliance with CRA.
2 And First Chicago NBD's 1996 data shows
3 that the bank only originated a total of 29 loans
4 in MSA 1640. All 29 went to white borrowers.
5 We find it odd that as the government,
6 regulatory and financial industries move to
7 implement direct deposit programs under the EFT 99
8 that Banc One would close one of only three
9 branches it has in Cincinnati's Black community,
10 thereby reducing access.
11 The Roselawn branch closure which is in a
12 middle class Black neighborhood closed and reduced
13 competition which may lead to overpricing of loans
14 and services by the one remaining bank in that
15 community.
16 We also find it odd that the OCC nor the
17 Federal Reserve found issue with the isolated North
18 Fairmount location and the fact that it has no ATM
19 or drive-through window. How does this meet the
20 convenience and needs of that community?
21 Banc One's poor record in the appointment
22 of Blacks its Board and officer positions and its
23 poor record in procuresment of services from Black
24 providers in comparison to whites, especially in
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1 the area of marketing and advertisement was ignored
2 on the basis that they don't fall under CRA.
3 This is a form of unsophisticated denial
4 and a sense of certainty that the Federal Reserve
5 won't integrate the analyses of these concepts in
6 context of their relationship to discriminatory
7 lending.
8 We strongly believe that a mentality and
9 culture that refuses to properly serve Blacks in
10 the areas above will have no problem in
11 rationalizing away the indications of underserving
12 and discrimination.
13 In addition, you cannot penetrate a market
14 if you don't advertise and through it and to it.
15 Since Banc One does very little in this area, the
16 low number of Black applications to Banc One from
17 Black borrowers is the result.
18 Finally, with respect to partnership, we
19 know that many NDC/CDC type organizations have and
20 will provide honest testimony as to how Banc One
21 partnered to help them achieve certain projects,
22 but projects should not substitute for a broader
23 economic substitute for a broader economic
24 development strategy and plan to address
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1 comprehensive reinvestment needs.
2 Banc One has a business plan with a
3 budget. The Federal Reserve is deeply involved in
4 the development of its year 2000 plan and the
5 budget to get it done.
6 Given this insight, we encourage the
7 Federal Reserve to push the envelope on performance
8 and partnerships by giving the proposed Banc One/
9 First Chicago merger a conditional approval until
10 market level negotiated agreements substitute
11 agreements similar to the agreement between
12 First Chicago NBD and the Chicago CRA Coalition
13 have been established with budgets.
14 Finally, Madam Chair, I bring this
15 testimony that was handed to me on my way out of
16 town by Ms. Lavera Kosin, a businesswoman, and we
17 will resubmit it in a typed form.
18 MS. SMITH: We will be glad to have it for the
19 record.
20 I also wanted to ask Mr. Soza, are those
21 exhibits we saw part of our testimony? Did you
22 include that in your testimony?
23 MR. SOZA: We can get copies before the end of
24 the hearings today.
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1 MS. SMITH: That would be great, and then we
2 will incorporate them.
3 Any questions?
4 Thank you very much for coming this
5 morning. We appreciate your comments.
6 We're up to Panel 5, and we're going to
7 start with Mr. Bush.
8 MR. BUSH: Ms. Smith, other parties and
9 concerned citizens, I'm speaking on behalf of the
10 Woodstock institute, a non-profit that promotes
11 reinvestment and economic development in lower
12 income communities and as a member of the Chicago
13 CRA Coalition. I'm also a member of the National
14 Community Reinvestment Coalition.
15 The proposed merger of two large companies
16 that would constitute the largest bank in the
17 Midwest raises serious concerns for residents of
18 low income communities and the organizations that
19 work with them.
20 The Community Reinvestment Act in its
21 21-year history has been much more honored in the
22 breach than in the observance, a fact that has
23 contributed to the economic decline of huge areas
24 of urban, small town and rural America.
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1 In the last few years, however, because of
2 a variety of pressures and opportunities, the Act
3 has produced very important improvements in home
4 lending to lower income and minority borrowers and
5 communities.
6 In Chicago, in many ways, the hometown of
7 community reinvestment activity, one of those
8 pressures and opportunities has been the practice
9 dating from 1983 of community organizations
10 requesting and persuading banks, small and large,
11 to commit to significant community reinvestment
12 goals for specific periods of time and then
13 monitoring the bank's progress towards those goals
14 on a regular basis.
15 On the announcement of this proposed
16 merger, the Chicago CRA Coalition which Woodstock
17 convenes, entered a dialogue with First Chicago NBD
18 to set new CRA commitments in the Chicago region
19 for the new bank. We believe that if implemented,
20 the provisions of the CRA agreement will constitute
21 a good CRA program for the new bank in the Chicago
22 region by improving the bank's record in lending
23 investments and services to the benefit of the
24 regions's lower income communities.
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1 My colleagues from the Chicago CRA
2 Coalition on this panel will speak to some of the
3 details of this agreement.
4 In my view, the highlights of the
5 agreement include the following items.
6 The bank committed to small business and
7 home loan goals based on a measure of its size and
8 market presence, namely a specific ratio of its
9 market share in lower income communities to its
10 market share in other communities. These ratios to
11 be achieved at stated rates from 1999 are 1.10 for
12 home loans and 1.15 for small business loans, and
13 this will result in massively increased lending.
14 The bank committed to open four full
15 service branches in lower income neighborhoods.
16 These neighborhoods are seriously underbranched on
17 a per capita basis compared to other
18 neighborhoods.
19 The bank committed to a high level
20 feasibility study of an affordable retail banking
21 account for lower income households which currently
22 do not have banking relationship with the goal of
23 establishing such an account.
24 The CEOs of both banks personally assured
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1 the Coalition that the new bank will have a
2 vigorous home mortgage operation in all its
3 markets. The agreement will be monitored like
4 other Chicago CRA agreements in regular meetings.
5 Unfortunately, Banc One has not negotiated
6 similar agreements in its current markets which
7 leaves it without a detailed and adequate CRA
8 plan. Absent such an agreement, we do not
9 understand how the Federal Reserve Board can
10 evaluate whether the merged institution will in
11 fact meet the convenience and needs of its
12 communities.
13 We note that the recent spate of so-called
14 mega commitments by such institutions as Nation's
15 Bank, Bank America, Travelers and Citicorp raises
16 precisely the same problem.
17 In the case of both those mergers, more
18 than half the dollar commitment so proudly
19 announced were for products not targeted to lower
20 income communities. The commitments were not
21 broken down by market area nor established with
22 reference to such concrete objective measures as
23 market share ratios.
24 Detailed CRA plans and sound community
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1 agreements should be a necessary part of an
2 adequate bank merger application. Agreements
3 between citizens and their institutions is after
4 all a hallmark of a Democratic society.
5 The First Chicago NBD agreement for the
6 Chicago region contains community reinvestment
7 details that should be standard for all bank
8 applications as Congressman Davis argued this
9 morning. The bank regulators should demand such
10 details as a matter of course.
11 It also contains in our opinion
12 commitments that reflect the size of the bank and
13 that will promote significant, safe and sound
14 community reinvestment in the Chicago regions's
15 lower income communities.
16 Thank you.
17 MS. SMITH: Thank you very much.
18 Mr. Wysocki, are you next or have we
19 changed the order.
20 MR. WYSOCKI: Good morning.
21 In 1977, over 20 years ago, I introduced a
22 community lending resolution at that year's
23 shareholder's meeting of the First National Bank of
24 Chicago.
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1 The resolution was based on the bank's
2 poor performance at that time that was documented
3 by the first year of the Home Mortgage Disclosure
4 Act data. The resolution was defeated by 98
5 percent of the shareholders in 1977.
6 I start with this point because I think it
7 exemplified the corporate arrogance of this time
8 that required Congress to pass the Community
9 Reinvestment Act that same year.
10 Now over 20 years and three First Chicago
11 mergers later, we are here to discuss this morning
12 the need for continued regulatory vigilance and
13 community advocacy on behalf of neighborhood
14 reinvestment and in this era of financial
15 modernization and merger mania.
16 I'm also here today to share with you the
17 strength of bank partnerships that have grown as a
18 result of CRA and are now providing access to
19 affordable credit and financial services to
20 revitalize local communities.
21 At the end of 1983 was when First Chicago
22 applied to acquire American National Bank, itself
23 proclaimed intent to be the premiere bank in the
24 Midwest. In staffing those CRA negotiations, they
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1 led to become the largest CRA lending agreement at
2 that time of 100 million over five years. That's a
3 million. Now we're talking billions.
4 We have progressed over the last 20
5 years. That commitment was renewed in 1989, and in
6 1990 a five-year evaluation of the Chicago's
7 lending program was conducted, and I wish to quote
8 from a conclusion.
9 "The fundmental test of the success of
10 neighborhood lending programs and of investment in
11 general is whether lenders, community groups and
12 community based development organizations can
13 develop and implement loan programs together in
14 partnership."
15 From my years of experience, the key
16 element to fostering and furthering such
17 partnerships is regular monitoring and reviewing of
18 progress so that continued dialogue can lead to
19 further product innovation and market penetration.
20 The key for both sides is learning to deal.
21 One example of product development through
22 our work with First Chicago is the financing of
23 mixed use real estate.
24 Chicago's neighborhoods are built around
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1 main streets with block after block of properties
2 with apartments above store fronts. Back in 1983,
3 no conventional lender offered financing for such
4 properties.
5 At the urging of the Chicago Association
6 of Neighborhood Development Organization,
7 First Chicago was the first lender to offer 20-year
8 fully amortized mortgages for the purchase and
9 rehab of such mixed use real estate.
10 In 1995, with the merger of First Chicago
11 and NBD, this neighborhood lending program was
12 renegotiated and it is part of the new commitment
13 of two billion dollars in community lending.
14 First Chicago agreed to do a pilot program of ten
15 percent down for mixed use buildings.
16 We all know that the affordable housing
17 has developed a variety of low down payment
18 programs for residential lending. This was an
19 effort to do this for mixed use real estate.
20 Now as part of our recent agreement, the
21 bank has found this to be good business and they're
22 committed to doing this as an ongoing loan product
23 in their portfolio and now they are willing to
24 pilot a low down payment mortgage for commercial
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1 real estate.
2 This new commitment will provide a wide
3 range of local ownerhsip, I want to emphasize local
4 ownership, not absentee ownership, and will extend
5 investment opportunities to to a whole generation
6 of other businesses.
7 My point is here this community credit
8 need was being addressed now by the private market
9 because the bank was willing to sit down and
10 jointly hammer out the design of this product.
11 It's good reinvestment, it's an example of the
12 value of CRA agreements.
13 Now, his testimony talked about the market
14 share analysis that Woodstock had done that is now
15 leading to aggressive goals for small business
16 lending. The purpose of these observations is to
17 make this final point.
18 The Federal Reserve Board should exercise
19 its regulatory authority to assure that Banc One
20 adopts the First Chicago NBD approach to community
21 reinvestment throughout its service area.
22 As Mayor Goldsmith said this morning, this
23 is an issue of attitude, and the corporate
24 arrogance or refusing to negotiate CRA agreements
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1 whether in Indian or Ohio in this case or in the
2 case of the Nation's Bank's merger with Bank of
3 America should be unacceptable as a matter of
4 Federal Reserve Board policy.
5 So while endorsing our agreement with
6 First Chicago NBD and being pleased that Banc One
7 is willing to honor it, I am disappointed that
8 Banc One is unwilling to engage themselves in
9 designing similar agreements in other markets.
10 As Vice Chair of the Bank Regulation
11 Committee of the Federal Reserve Board's Consumer
12 Advisory Council I challenge the Federal Reserve
13 Board to only grant conditional approval,
14 conditioned on parity and market shares of specific
15 geographical markets. Let the market work. Use
16 your regulatory authority to make sure it works in
17 every market.
18 Thank you.
19 MS. SMITH: Thank you very much.
20 Mr. Jackson.
21 MR. JACKSON: Good morning. Good morning,
22 Ms. Smith, Ms. Williams and Mr. Alvarez.
23 My name is Kevin Jackson. I'm Executive
24 Director of the Chicago Rehab Network, a
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1 20-year-old coalition of 43 non-profit housing
2 development organizations in Chicago. We are a
3 member of the steering committee of the CRA
4 Coalition here and the Chair of the Housing Task
5 Force.
6 Financial institution's responsiveness to
7 individuals and families in local neighborhoods is
8 at the heart of the importance of the Community
9 Reinvestment Act. Recognition of this is clear
10 from the proceedings today. Public involvement in
11 the decisions that impact communities, regions in
12 the country is fundmental to the Democratic process
13 and and ultimately despite its difficulties at
14 times, a good thing.
15 We congratulate the Federal Reserve Board
16 Bank for calling this hearing and acknowledging the
17 importance of all the people gathered here today.
18 We would also congratulate ACORN helping to create
19 the momentum item that resulted in this hearing in
20 the first place.
21 And finally, we congratulate First Chicago
22 NBD on demonstrating the utility and possibility of
23 CRA agreements that mean good business for the
24 institution and our communities.
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1 The Chicago Rehab Network has a long
2 history with the First National Bank of Chicago.
3 In 1984 when First Chicago acquired American
4 National Bank, we were a part of that coalition
5 that negotiated the first neighborhood lending
6 agreement.
7 Since then, we have sat on the quarterly
8 Review Board, packaged hundreds of multi-family
9 loans and provided detailed input on community
10 credit needs.
11 When First Chicago merged with NBD three
12 years ago, we were a part of that CRA Coalition
13 that negotiated a detailed CRA agreement.
14 As I stated in my opening, CRA is vital.
15 The process that led to our present CRA agreement
16 with First Chicago NBD and Banc One if it continues
17 occurred because CRA strengthens our government's
18 mediating role between the private sector and the
19 common good.
20 The CRA agreement reached by and the
21 proposed merger of First Chicago NBD and Banc One
22 is a model for CRA agreements in both its process
23 and substance.
24 After the merger was announced, the CRA
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1 Coalition moved to hold a public meeting and had
2 task force meetings to gather substantive input
3 from community organizations throughout the
4 region.
5 The Housing Task Force met three times to
6 develop the framework. We then met many times with
7 the First Chicago NBD and Banc One staff from the
8 highest levels on down.
9 For the first time in CRA negotiations, we
10 were able to use a market share analysis to develop
11 mortgage lending targets. As a result, over the
12 next six years, First Chicago NBD has committed to
13 increasing their residential lending by more than
14 8,200 loans over current levels.
15 In 1995, First Chicago established a
16 $100,000 downpayment pool for home buyers in
17 Chicago's empowerment zones. With this agreement,
18 the pool has been increased to 900,000 and extended
19 to more low and moderate income areas.
20 In discussing credit needs with
21 organizations in Chicago, there was a sense that
22 particularly in this time of mega mergers and
23 predatory lending, simply establishing lending
24 targets is barely adequate.
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1 Without a thorough analysis of the credit
2 needs of low and moderate income communities on
3 which to base lending targets, there will continue
4 to be unmet needs and borrowers who are forced to
5 get inferior high cost credit products.
6 First Chicago NBD has committed to
7 participate in the design and development of an
8 analysis of credit that serves needs in low and
9 moderate income communities and to contribute to
10 its implementation.
11 They further agreed to work with the
12 Chicago Rehab Network to expand the impact of the
13 City of Chicago Department of Housing second
14 Five-Year Affordable Housing Plan approved by the
15 City Council this past July.
16 We were particularly concerned to read in
17 the merger application that Banc One had
18 discontinued its mortgage lending business except
19 for the convenience of its customers and its CRA
20 division.
21 We believe that mortgage lending at all
22 income levels is the foundation of community
23 development and a bank's investment in a
24 community.
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1 After discussion with both bank's CEOs and
2 many of the senior staff, the bank announced that
3 through their best practices evaluation of the
4 bank's business, they would resume full mortgage
5 lending throughout the Banc One system.
6 This is one of two system-wide commitments
7 we see from Banc One. The second is that the bank
8 will conduct a credit analysis on all am applicants
9 to the subprime lending unit and refer them to
10 appropriate loan products.
11 The process I have described created a CRA
12 agreement that is responsive to the service and
13 credit needs of low to moderate income communities,
14 businesses and households in Chicago and the
15 region.
16 With this agreement, we have a solid
17 foundation to build on for the next six years. The
18 same type of commitment must be made to low or
19 moderate income people in communities throughout
20 the Banc One system.
21 In the end, the communities in which the
22 members of the Chicago Rehab Network operate are
23 not unlike communities throughout this country
24 starting to build better neighborhoods through
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1 affordable housing and economic development and
2 fighting the growing tide of an ever growing
3 economic disparity.
4 Our mission at the Chicago Rehab Network
5 is to promote community development without
6 displacement in our communities requires us to
7 stand in solidarity with communities across this
8 country in their relationship to financial
9 institutions.
10 We believe that First Chicago NBD's
11 leadership here should be replicated throughout the
12 country, and we call on the Federal Reserve Board
13 to ensure that same type of commitments and process
14 is made to all low and moderate income people and
15 communities.
16 Thank you.
17 MS. SMITH: Thank you very much.
18 MS. RAND: Dory Rand. I'm a staff attorney
19 with the National Clearinghouse for Legal Services,
20 a non-profit organization based here in Chicago.
21 We represent tens of thousands of low
22 income people on welfare and housing policy issues
23 through our poverty law project, and we also
24 provide support to the poverty law community and
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1 others through our Web site, our printed
2 publications, our library and our training and
3 information services.
4 I'd like to focus my comments this morning
5 on something that Congresswoman Carson mentioned
6 earlier, and that is the advent of electronic
7 benefit transfer of government benefits and what
8 banks can and should do to serve the community
9 needs of low income people who receive government
10 benefits and who do not have bank accounts.
11 As a staff attorney with the Poverty Law
12 Project and editor of its Welfare News, I've been
13 monitoring the development and implementation of
14 electronic delivery systems both, EFT and EBT.
15 Illinois Link is the Illinois electronic
16 benefit transfer program for the delivery of cash
17 and food benefits in Illinois. EFT is the federal
18 program that are for electronic fund transfer of
19 government benefits such as Social Security,
20 Supplemental Security Income or SSI, Veteran's
21 benefits and Railroad Retirement benefits.
22 These EBT and EFT programs produce
23 tremendous cost savings for the federal and state
24 governments, and they also help to reduce misuse of
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1 benefits and they provide some security and
2 convenience advantages for clients, but their
3 advantages could be multiplied if people who
4 receive government benefits had their benefits
5 directly deposited into bank accounts.
6 Some of the examples include funds
7 deposited in bank accounts would be protected by
8 the Federal Consumer Protection Regulation E. EBT
9 funds are not protected by Regulation E.
10 Funds deposited in bank accounts have the
11 protection and insurance of the FDIC. EBT funds do
12 not.
13 People who deposit their government
14 benefits or employee checks can pay their bills.
15 People who don't have bank accounts have to pay
16 very high fees for check cashiers. They can be
17 used as references with landlords, utility
18 companies. People without bang accounts cannot use
19 banks as references.
20 People who deposit their money in bank
21 accounts that earn interest, can increase their
22 assets. And also people who establish a good
23 relationship with a bank can possibly build on that
24 relationship later as their income increases when
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1 they go to establish a home mortgage, a car loan.
2 They can save money in savings accounts to buy a
3 car, to get further education to help them escape
4 poverty.
5 But despite these many advantages of
6 having bank accounts, many low income individuals
7 do not have bank accounts, and there are a lot of
8 reasons for that.
9 Some of those reasons are that there are
10 not enough branches in low income communities,
11 there is not sufficient financial literacy among
12 many communities, there are not enough low cost and
13 free bank accounts. And also, bank practices of
14 screening applicants' credit histories further
15 limit access.
16 I think that banks can and should play a
17 major role in helping to address these problems by
18 ing more full service bank accounts and ATMs in
19 underserved communities, low income communities, by
20 conducting and funding financial literacy and
21 credit counseling programs and by developing and
22 marketing low cost and free checking accounts that
23 do not have credit screening.
24 To that end, I did participate as a member
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1 of the Chicago CRA Coalition Steering Committee in
2 the negotiations that led to the recent agreement
3 with First Chicago and Banc One, and I'm
4 particularly pleased that the banks agreed to open
5 at least four new full service bank branches in low
6 and moderate income communities, that they have
7 agreed to allocate $50,000 a year towards financial
8 literacy programs and that they're conducting a
9 high level feasibility study to develop low cost
10 bank accounts to serve the needs of individuals
11 with limited or poor credit histories or limited
12 experience in dealing with banks.
13 Financial chairman and CEO Verne Istock
14 sent a letter to the CRA Coalition expressing his
15 personal recognition of the need for these
16 financial services, his commitment to working on
17 developing an account that will serve those needs
18 and his willingness to continue to work with the
19 CRA Coalition on this.
20 I look forward to that, however, I have to
21 add that I am very troubled by Banc One's failure
22 to enter into similar agreements through all its
23 markets. If they really want to serve the needs of
24 the community, they must do that, and they could
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1 use our agreement here as an example.
2 Thank you.
3 MS. SMITH: Thank you very much.
4 Ms. Durban.
5 MS. DURBAN: Good morning. My name is Kate
6 Monter Durban. I am the Assistant Director of the
7 Cleveland Housing Network.
8 The Cleveland Housing Network is a
9 coalition of 17 CDCs spread across the city of
10 Cleveland, and our primary focus is affordable
11 housing development in those communities.
12 I am here to let you know that Banc One
13 and Banc One CDC have been a strong and consistent
14 partner in our work.
15 The Cleveland Housing Network to date has
16 rehabilitated about 2,000 houses across the city,
17 and we believe that that investment has absolutely
18 made a difference in turning the -- stemming the
19 tide of disinvestment in many of those
20 communities.
21 To date, Banc One has invested over four
22 million dollars in equity investments in the lease
23 purchase program which is the program that I'm here
24 to speak about today in part.
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1 The average income of lease to purchase
2 residents is about $12,000. The majority are
3 minority single moms with two to three kids, so
4 what we know as developers is the equity investment
5 in those partnerships are absolutely critical to
6 our ability to produce an affordable monthly
7 payment. So, you know, that kind of investment has
8 made our work possible.
9 And the other way that Banc One has
10 partnered with us is they have lent us technical
11 assistance in areas when we have asked for their
12 help.
13 For example, in 1990, the Federal Low
14 Income House Tax Credit was changed in such a way
15 that jeopardized our ability to transfer title to
16 our low income residents at the end of the 15-year
17 lease purchase period. Needless to say, we were
18 very concerned about the change in the federal law
19 and immediately began to mobilize trying to change
20 the law. We were unsuccessful and ultimately
21 turned to Banc One and Banc One CDC, specifically
22 Joe Hagen, and asked him if he couldn't help us
23 based on the relationships that he had built at the
24 IRS.
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1 So Joe, being the absolutely great guy
2 that he is, jumped into the fight with us,
3 established dialogue with the IRS, and in the
4 Summer of 1995, the IRS published a ruling
5 clarifying the law and once again clarifying our
6 ability to transfer title and home ownership to
7 families at the end of 15 years.
8 So for us, that was just an example of the
9 willingness of Banc One CDC to step in and use
10 their time and expertise to help us in a way that's
11 very critical to our organization's goals.
12 You know, undoubtedly, the work that we do
13 in Cleveland and our partnership with Banc One has
14 benefitted from the CRA agreement that has been
15 negotiated with the City of Cleveland.
16 The Mayor of the City of Cleveland through
17 these agreements has established a platform for
18 investment, and our work has absolutely benefitted
19 from that platform.
20 So for us, the bottom line is as
21 non-profit developers with the goal of affordable
22 housing development, we can't do it without
23 significant equity investment in our work, and
24 we've seen that from Banc One and Banc One CDC.
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1 Thank you.
2 MS. SMITH: Thank you.
3 Mr. McDaniel.
4 MR. McDANIEL: Thank you.
5 Good morning. I'm Mark McDaniel, and I'm
6 the President of the Michigan Capital Fund for
7 Housing.
8 The Capital Fund is a non-profit housing
9 corporation that was founded in 1993 for the
10 purpose of raising and providing investment equity
11 to create affordable housing in Michigan.
12 The fund's mission in providing equity is
13 to invest in projects that meet at least one of the
14 follow criteria: The development is located in a
15 distressed community, smaller-sized projects,
16 non-profit involvement as sponsors and serving
17 special needs populations.
18 With that mission, the fund has raised and
19 invested over $80 dollars in equity since 1993
20 creating over 2,000 units of affordable housing.
21 79 percent of those funds have gone into distressed
22 communities.
23 Through our relationship with the
24 Enterprise Social Investment Corporation, the
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1 Enterprise Foundation, and our financial
2 institution investors, the fund now offers a
3 multitude of financial resources to the development
4 community in Michigan. This includes permanent
5 debt financing, construction lending, technical
6 assistance, predevelopment loans and grants and
7 charitable activities contributions. As a result
8 of our growth and structure, we have come to
9 understand the banking industry much clearer.
10 I'm here today to tell you very simply
11 that the merger between Banc One and First Chicago
12 NBD is the best news that we've had in a long time
13 as an organization.
14 I know this is good news because this is
15 the first time that a merger has got the bankers on
16 our board grumbling. This is indicative that
17 Banc One will be very competitive and push other
18 banks to become more aggressive and more innovative
19 than they're used to being. That is in my view
20 what Banc One is bringing to Michigan, and that's
21 good.
22 Based on my 21 years of experience in
23 planning, housing development and community
24 development, I'm convinced that Banc One has a
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1 social and financial commitment to revitalizing and
2 supporting community investment and development
3 through its market area. This is true in our case
4 even when they weren't in the Michigan market.
5 In the formative stages of the fund, Joe
6 Hagan, the President of Banc One CDC, advised us on
7 how to structure the fund and selecting our board
8 members and working with developers as we started.
9 They have provided me with input whenever I've
10 faced -- have been faced with complex issues, which
11 I've found very unusual when compared to other
12 banks.
13 Banc One has invested $125 million in
14 several national equity funds managed by
15 Enterprise. They have invested $20 million in
16 funds managed by the Ohio Capital Corporation for
17 Housing. In addition, Banc One is providing bridge
18 financing to Ohio Capital. Their commitment to
19 Illinois, to Chicago, Cleveland, Delaware, Texas
20 and Milwaukee equity funds has been similar.
21 There are some who will say so what. Tell
22 that to the single mother living in a transitional
23 housing development who without Banc One's and
24 others' investments would still be suffering the
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1 beatings of an abusive boyfriend or be on the
2 street with nowhere to go. The same mother who has
3 got her life together because of this housing
4 opportunity is ready to move into a Habitat for
5 Humanity Home.
6 Tell that to the senior citizen in
7 Cleveland who was living as a hostage in her home
8 in a crime ridden neighborhood who as a result of a
9 Banc One investment was able to move into a new,
10 safe, secure senior community. She now has quality
11 of life in her golden years she never thought she
12 would have.
13 And finally, tell that to the young couple
14 with little ones who are forced to live in a
15 slumlord-owned house with no security, broken
16 plumbing and windows and lack of adequate heat who
17 with the help of Banc One's investment in a
18 national fund was able to find safe and decent
19 housing to raise their family in.
20 There are thousands of stories like this,
21 and I don't think those tens of thousands of people
22 who have benefited who say so what.
23 NBD is represented on our Board of
24 Directors and has as compared to other financial
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1 institutions been a significant but not as major of
2 a player as they could be.
3 We appreciate the support and effort that
4 they have put into the fund, and we especially
5 appreciate the personal efforts of people like ^
6 Jack Love whose works in the Detroit bank for what
7 he's been able to do and the rest of the staff in
8 promoting what NBD is able to do in Michigan.
9 There has never been a single bank merger
10 in Michigan where the lead bank has taken the time
11 or made the effort to discuss with the fund or
12 others how they can best get involved in the
13 community development in the state. Banc One is
14 the first one to do that with us, and we appreciate
15 that and believe it is indicative of how Banc One
16 will be committed to working in Michigan.
17 In closing, the Michigan Capital Fund is
18 exited and supportive of the proposed merger
19 between Banc One, First Chicago NBD. We are
20 looking forward to Banc One being one of our major
21 investors and supporters. This merger will not
22 only be good for the fund but most probably for the
23 less fortunate residents in Michigan who need
24 affordable housing.
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1 Thank you for your time, and I look
2 forward to the significant marriage between these
3 two entities.
4 MS. SMITH: Thank you very much.
5 Any questions from the Panel?
6 MR. ALVAREZ: I have one question.
7 A couple of speakers spoke about the
8 agreement in terms of market share, Banc One
9 bringing up its lending to certain market share in
10 various communities. I was curious what data was
11 used to compute market share and what the benchmark
12 is that you're asking them to bring their level up
13 to.
14 MR. BUSH: We're happy to see that some of your
15 regulators are now using this market share, so you
16 can perhaps talk to them too. It's a very simple
17 notion, and the notion is that if a bank is making
18 equal effort in low income neighborhoods, its
19 market share in low or middle income neighborhoods
20 will approach its market share and indeed exceed
21 its market share in middle and upper income
22 neighborhoods so that ratio will be 1.0 or
23 greater.
24 And we use Mortgage Act Disclosure data in
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1 this case for the six-county region in Metropolitan
2 Chicago to calculate market share for
3 First Chicago.
4 MR. ALVAREZ: So it's a comparison of lending
5 in low and moderate income areas to middle and
6 upper income areas or --
7 MR. BUSH: It's a comparison of a bank's market
8 share in moderate and low neighborhoods to low.
9 Using small business data, same analysis.
10 MS. SMITH: Thank you very much for coming this
11 morning.
12 We are going to take a short break, maybe
13 of the order of five minutes.
14 And unless Panel 6 has appeared in the
15 meantime, we plan to move to Panel 7, but it just
16 depends. My managers will tell me what to do.
17 (Whereupon, a short recess
18 was taken.)
19 MS. SMITH: I think we're ready to reconvene.
20 Could we have Panel 7, please? Six we're skipping
21 because they weren't here. Well, we're ready to
22 start, so why don't we? We'll go to Mr. Hagaman,
23 and the others will join us as they can.
24 Mr. Hagaman, we can start.
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1 MR. HAGAMAN: Good morning. My name is Frank
2 Hagaman, and I'm the President of Partners in
3 Housing Development of Indianapolis.
4 Partners in Housiing was founded in 1993
5 to create housing opportunities for special needs
6 populations. These include individuals with
7 chronic mental illness, AIDS/HIV, substance and
8 alcohol abuse and the frail elderly.
9 Today, our focus is on supportive housing
10 which links directly affordable housing
11 opportunities with social services.
12 In 1993, as we assembled the financing for
13 our first project, we possessed a net worth. As I
14 often explain to people, it consisted of a folder
15 chair and a Princess phone. Regardless, we
16 approached NBD First Chicago which made a one-year
17 non-interest bearing loan to us for working
18 capital. The purpose of the loan was to provide us
19 with predevelopment funds.
20 We repaid that loan ahead of schedule and
21 have subsequently borrowed on numerous occasions
22 from time to time for various predevelopment needs
23 on our projects.
24 I think the two points that are very
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1 important about this particular loan program, and
2 they are, one, working capital was made available
3 at a critical time for a very small company with
4 obviously little financial strength, and the second
5 was that the bank demonstrated a flexibility to
6 lend on character.
7 I am a reform banker, and character loans
8 used to be very interesting, but in point of fact,
9 this loan was made based on character and on the
10 mission of our organization.
11 Additionally, NBD and First Chicago have
12 now made corporate contributions to Partners in
13 Housing Development and is currently an investor in
14 our current project, a five and a half million
15 dollar, 96-unit, single-room occupancy residence.
16 This represents the first housing of its kind in
17 Indianapolis to meet the housing needs for homeless
18 men and women.
19 By the same token, Banc One has been an
20 equally strong and long-standing partner of ours.
21 It has been a major investor in all of our projects
22 and has stood beside us on many occasions offering
23 its support and help.
24 Our station in life has increased and has
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1 improved, and I must say it's a tip of the hat
2 again to Banc One.
3 All of our office furniture has been
4 contributed by Banc One, and quite honestly, we are
5 very happy to have one of our Board members who is
6 a Banc One employee, the former CRA director for
7 Indiana. She represents one of our most thoughtful
8 and helpful Board members.
9 In conclusion, I guess that I would like
10 to say that I can't speculate on the future of what
11 this merger means. Frankly, I don't have the time
12 to worry about it.
13 My purpose in coming here today is to
14 recognize publicly two good corporate partners of
15 ours and to encourage that their unification
16 continues to make important investment and
17 contributions to our community of low income
18 individuals and families.
19 Thank you.
20 MS. SMITH: Thank you very much.
21 Ms. Morris.
22 MS. MORRIS: I'm Cora Morris, owner of Greek
23 Grandeur in Champaign, Illinois.
24 Greek Grandeur was established in December
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1 of 1991. It is a retail and embroidery business
2 that specializes in fraternal organization and
3 company logos.
4 I am here today on behalf of African
5 American small businesses, a small business owner
6 for which Banc One has assisted for a business
7 loan.
8 I am only one of many African American
9 business owners who have experienced a great deal
10 of difficulty in financial assistance in starting a
11 business and staying in business.
12 I went to four different financial
13 institutions within my community in order to obtain
14 a small business loan and was denied. Finally, I
15 went to Banc One, who received my business plan,
16 reviewed my business plan and began to give me a
17 criteria and qualification for how to obtain a
18 small business loan. Through this, I gained
19 valuable information. Banc One helped me when no
20 one else would.
21 When I ran into trouble, they were
22 flexible and understanding with payment
23 arrangements. Due to their willingness to give me
24 a chance, we not only stayed in business but were
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1 able to expand including a Web page on the World
2 Wide Web.
3 I would also like to add that there are
4 other Afro-Americans within our community that was
5 able to go to Banc One for assistance. One
6 included my mother. In 1996, she wanted to
7 relocate to the Champaign-Urbana area to live with
8 my sister. We wanted to buy a house for her and
9 she did not want to live in a high-rise, so we
10 started house hunting, my sister and I and my mom.
11 We went to another financial institution
12 to obtain a home mortgage loan, and we were
13 denied. We went to Banc One and were accepted.
14 In closing, Banc One has been an asset in
15 our community through their relationship with
16 Afro-Americans. My experience with this
17 organization has been beneficial, valuable and a
18 great pleasure.
19 Thank you.
20 MS. SMITH: Thank you very much.
21 Mr. Odem.
22 MR. ODEM: First of all, I want to say good
23 morning and thank you for the opportunity to
24 testify.
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1 Again, my name is Jerome Odem, and I am a
2 member of the Organization of the Northeast, better
3 known as ONE. I am also the President of the
4 Lakeview Towers Residents Association and currently
5 working to purchase our 500-unit HUD subsidized
6 unit in the uptown area.
7 Now, the Organization of the Northeast was
8 founded in 1974, and it's an organization of 60
9 dues-paying member institutions in the Uptown and
10 Edgewater communities here in Chicago.
11 Now, the mission of ONE is to sustain and
12 build a successful multi-ethnic mixed income
13 community in the Uptown and Edgewater community.
14 To this end, ONE has enjoyed a close working
15 relationship with First Chicago NBD.
16 Now, First Chicago has been a member of
17 the organization for the past nine years.
18 Currently First Chicago invests greatly in these
19 two communities financially and by close working
20 relationships with many organizations to support
21 housing development, small business development and
22 industrial retention.
23 Now, several years ago, First Chicago NBD
24 and three other banks created a commercial loan
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1 program to provide below market financing to
2 commercial credit borrowers as a way to enhance
3 small business development and job creation in the
4 area.
5 First Chicago NBD and Banc One recently
6 committed to a new CRA agreement with ONE and six
7 other community organizations through the National
8 Training and Information Center.
9 Now, the agreement which constitutes a
10 nearly four billion, ten-year investment for all of
11 Chicago with targets for investment in specific
12 communities, this commitment is for single-family
13 housing, multi-family housing, small business
14 development, marketing and services. It provides
15 for a bank representative to work closely with each
16 of the six areas to target this agreement to
17 neighborhood needs. This agreement builds on
18 First Chicago's history of being a strong presence
19 in this community.
20 Now, the Organization of the Northeast has
21 no prior experience working with Banc One but view
22 their commitment to the CRA agreement and their
23 willingness to continue the great work that
24 First Chicago has done here in Chicago as a
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1 positive sign.
2 We look forward to working with Banc One
3 and First Chicago to fully utilize the
4 opportunities created by the agreement. We support
5 this merger with the confidence that there is a
6 genuine commitment to this agreement in the hope
7 that similar commitments will be made for the rest
8 of Banc One and First Chicago's market.
9 Thank you.
10 MS. SMITH: Thank you. Ms. Ryan.
11 MS. RYAN: Good morning. I'd also like to
12 thank you for the opportunity to be here.
13 My name is Liz Ryan. I'm the lead Housing
14 and Banking Staff for the National Training and
15 Information Center. Gayle Stuccato regrets she was
16 out of town and unable to be here today.
17 The NTIC is a resource center that has
18 been working with grassroots, community-based
19 organizations for over 25 years. Throughout our
20 history, we have assisted literally hundreds of
21 community groups enter into partnerships with banks
22 to better their neighborhoods. Billions of dollars
23 have gone for single-family housing, small business
24 and multi-family lending through these agreements.
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1 NTIC itself has been directly involved in
2 several community reinvestment partnerships in the
3 City of Chicago, and one of the most successful has
4 been with First Chicago NBD.
5 Throughout three renewals and 14 years,
6 NTIC with other non-profits in the city has forged
7 innovative programs and lending products to better
8 serve the credit needs of the city.
9 A critical component to this agreement
10 have been a quarterly review board meetings, a
11 process engaged in by the banks and participating
12 non-profits. The open lines of communication have
13 enabled the members to establish a real level of
14 accountability and has paved the way for true
15 problem solving. The firm commitment of
16 First Chicago and Banc One to continue on with the
17 review board process after the proposed merger is a
18 major reason for NTIC's support.
19 Recently, in the context of the merger,
20 NTIC and six neighborhood organizations which
21 Jerome just told you about also entered into a
22 ten-year reinvestment agreement with both of the
23 banks. As he said, this nearly $4 billion
24 agreement covers a range of lending products.
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1 The bank itself a committed to working
2 very closely with the individual groups. It is a
3 way to get loans actually out the door working side
4 by side with the community groups, having lending
5 officers that with interpreters and bi or
6 multi-lingual people in the community, and we're
7 very encouraged by it.
8 As a basis for comparison, the recent
9 nationwide pledge of $350 billion made by Nations
10 Bank and Bank of America in addition to falling
11 short of their current lending levels would
12 compromise only about 23 percent of their
13 residential lending.
14 Conversely, the Chicago commitment made by
15 Banc One and First Chicago would compromise a full
16 46 percent of their residential lending. Instead
17 of an empty promise and sound bytes, First Chicago
18 and Banc One have made a commitment of substance.
19 We will of course keep the Board apprised
20 of the progress on this commitment and will lodge a
21 protest if the commitments made by First Chicago
22 and Banc One are not fulfilled.
23 With the assumption that the banks will be
24 faithful in fulfilling the commitments they have
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1 made, NTIC would support the merger of these
2 institutions. We are hopeful that the good
3 experiences we have had with First Chicago in the
4 past and renewed commitments to serve Chicago will
5 extend to the entire Banc One and First Chicago
6 market.
7 It would seem that if Banc One and
8 First Chicago see the value of well-thought-out and
9 comprehensive CRA agreements in Chicago it would
10 see the benefit of these agreements in the rest of
11 the country. We expect the Federal Reserve to
12 fulfill its responsibility and assure that this
13 will be the case.
14 Thank you.
15 MS. SCHMIDT: Thank you very much.
16 Mr. Schmidt.
17 MR. SCHMIDT: Thank you. Good morning.
18 My name is Raymond Schmidt, and I'm an
19 Executive Director of a non-profit corporation in
20 Milwaukee, Wisconsin called Select Milwaukee.
21 Select Milwaukee was formed in 1991 and is
22 dedicated to promoting supporting and facilitating
23 affordable home ownership in Milwaukee
24 neighborhoods through collaboration with private
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1 and public sectors and non-profit organizations as
2 well.
3 We do a number of different things to
4 fulfill our mission, including providing direct
5 services to potential home buyers, first time buyer
6 urban market training for mortgage lenders and real
7 estate professionals, produce neighborhood
8 marketing events, and we have developed and
9 administer for several Milwaukee employers their a
10 employer assisted home ownership and walk to work
11 programs.
12 My comments today really are designed to
13 reflect our organization's valued and long-standing
14 relationship with Banc One Wisconsin, and it's
15 based on that relationship that I extend
16 Milwaukee's support of Banc One's proposed
17 acquisition of First Chicago NBD.
18 As noted, collaboration is a major piece
19 of everything we do at Select Milwaukee. All of us
20 in this line of work have had the opportunity over
21 the years to meet with and try to enlist the
22 support of many different businesses and
23 institutions and organizations.
24 For the past several years, Select
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1 Milwaukee has developed a number of relationships
2 on various levels with many mortgage lenders in
3 Milwaukee. During that time, we've had many
4 opportunities to to work directly with Banc One
5 Wisconsin and to observe its affordable lending and
6 other community development efforts. It's those
7 experiences with Banc One that lead me to suggest
8 that Banc One is among one of Milwaukee's most
9 savvy, thoughtful and more committed affordable
10 housing financial institutions and also a very
11 valued corporate partner in many other ways in the
12 City of Milwaukee.
13 In our view, Banc One Wisconsin is clearly
14 distinguished from most Milwaukee lenders by its
15 thoughtful, serious approach to collaboration with
16 our organization and with our colleagues in
17 Milwaukee and a variety of ventures, and I'm being
18 quite candid -- and Liz eluded to this just a
19 second ago -- when I suggested that unlike some
20 other institutions, Banc One doesn't embarrass
21 itself or organizations like ours merely by talking
22 a good game, by glad handing or with product or
23 service gimmickry.
24 For us, Banc One is the respected and
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1 valued corporate citizen it is because of a
2 corporate philosophy, and it's that philosophy that
3 I believe is also responsible for the highly
4 competent and diverse staff with which we've had
5 the pleasure to work within the past several
6 years.
7 Through my vantage point, there's probably
8 no more significant example of Banc One's
9 commitment to affordable lending here than the
10 leadership, dedication and support extended to the
11 launch of the coalition in Milwaukee called New
12 Opportunities for Home Ownership in Milwaukee or
13 NOHIM.
14 NOHIM is nationally recognized, and it's
15 comprised of 55 members including most banks,
16 thrifts and credit unions in the Milwaukee area,
17 several community-based counseling organizations,
18 MI firms, City of Milwaukee and the Wisconsin
19 Housing and Economic Development Authority. NOHIM
20 has had dramatic impact on housing opportunities
21 for Milwaukee.
22 Since its inception in 1991, NOHIM is
23 directly responsible for nearly 2,000 new modest
24 income homeowners and over $85 million in mortgage
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1 investment in our neighborhoods, and I'm convinced
2 that it has been Banc One's leadership and
3 significant financial and staff support that
4 nurtured NOHIM, and it's really these that it's
5 largely responsibile for Milwaukee's reknown and
6 successes in affordable lending.
7 Organizations like Select Milwaukee has
8 had the garnered the support of Banc One for our
9 marketing activities, and these are home ownership
10 expositions and neighborhood tours that we believe
11 are valuable to introduce first-time home buyers to
12 the buying process and also to their housing
13 opportunities in the city as well as to expand
14 their range of options in terms of neighborhoods
15 and housings.
16 And of course there's the next component
17 of support for these types of activities, but in
18 the case of Banc One, its involvement and support
19 has always gone beyond just dollars, and I know
20 this may sound funny, but it's really easy to write
21 a check in my view, but reflecting the seriousness
22 with which the bank takes its community involvement
23 and our experience of its trademark professionalism
24 in these endeavors, significant dedication of staff
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1 has always been a part of the bank's support of our
2 activities.
3 Corporate community affairs and marketing
4 staff lend their time and their expertise to ensure
5 that these city events are as successful and
6 well-produced as any new suburban subdivision
7 promotion.
8 I would like to say Select Milwaukee has
9 benefitted a great deal from the professional
10 comradery developed and obtained with Banc One and
11 government relations staff persons. On many
12 occasions, covering a variety of issues covering
13 regulatory matters, legislative issues, Banc One
14 served as a sounding board, provided us advice and
15 very valuable insight.
16 It doesn't mean we've always agreed, but
17 we've consistently gained from the impressive level
18 of interest their accessibility to us and their
19 thoughtfulness.
20 In conclusion, I wish to reiterate Select
21 Milwaukee's support. Our organization hopes the
22 merger can only enhance the bank's commitment and
23 capacity to invest in affordable homeownership for
24 modest income families and other community
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1 development initiatives in Milwaukee and
2 elsewhere. Thank you.
3 MS. SMITH: Thank you very much. Any questions
4 from the Panel?
5 All right. Be sure if you haven't already
6 done so to give your written statements to the
7 people at the registration desk so that we can have
8 them for the record. And thank you very much for
9 coming this morning.
10 We're moving on to Panel 8. We're going
11 to start with Reverend Buzza.
12 MR. BUZZA: I am John Buzza, Pastor of Hope
13 Presbyterian Church in Springfield, Illinois. I am
14 here as a part of the Central Illinois Organizing
15 Project, and I am here because I care about my
16 city.
17 A busload of us from Central Illinois have
18 come here because we are deeply concerned about the
19 proposed merger between Banc One and
20 First Chicago.
21 Banc One has an extremely poor record of
22 making loans to low and moderate income residents
23 in Central Illinois.
24 I would like you to look at this map
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1 showing the 1996 aggregate owner-occupied housing
2 loans made in the city where I live, Springfield,
3 Illinois.
4 The census tracts in solid red received
5 less than $100,000 per tract. Those outlined in
6 red received only slightly more. By contrast, the
7 solid green tracts received loans between 1.5 and
8 $3 million per tract. My city is only as healthy
9 as its least healthy neighborhood, and Census Tract
10 14 got no loans last year at all.
11 Home ownership improves property, improves
12 value, improves people's lives, and Banc One has
13 chosen to eliminate home ownership and home
14 improvement from whole sections of our city.
15 In addition, Banc One's record of loans to
16 African Americans is reprehensible and
17 indefensible. In 1996, Banc One under performed in
18 the market to African Americans in the following
19 areas: Home mortgages, home improvement loans and
20 refinancing.
21 Our point here today is to let you know
22 that what is happening in Milwaukee is not
23 happening in Central Illinois, and we would like a
24 meeting with Mr. John McCoy to help facilitate how
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1 Banc One can help in 1999 in Central Illinois.
2 I thank you for your time.
3 MS. SMITH: Thank you very much.
4 Mr. Heuerman.
5 MR. HEUERMAN: Jack Cramer-Heuerman. I'm a
6 United Methodist pastor from Champaign-Urbana,
7 Illinois, also a part of the same organization, and
8 I wish to address some remarks related to the
9 Community Reinvestment Act.
10 The Central Illinois Organizing Project
11 has had an initial meeting with Banc One related to
12 the Community Reinvestment Act in terms of some
13 particular proposals for communities in
14 Bloomington-Normal, Illinois, Springfield,
15 Illinois, Champaign-Urbana, Illinois. We presented
16 some needs, looking again for that kind of valued
17 corporate partner sort of unique in creative use of
18 the Community Reinvestment Act funds, working
19 cooperatively to address some basic human needs.
20 It's our understanding that the Community
21 Reinvestment Act has a standard that those funds
22 need to benefit low income persons, and all of our
23 proposals certainly meet that standard.
24 What we talked about in Bloomington-Normal
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1 is a project called Partners for Community that
2 addresses the domestic violence issue from the side
3 of working men in particular involved in the
4 domestic violence issues, a neighborhood health
5 clinic in Springfield, Illinois again in some of
6 those census tracts underserved in a number of ways
7 that would particularly address the low and
8 moderate income person's health needs in their
9 community and access nearby to those, in
10 Champaign-Urbana, the Center for Women in
11 Transition that deals specifically with women and
12 children transitioning from homelessness to
13 self-sufficiency. These are basic human needs that
14 can be met through the Community Reinvestment Act,
15 housing, health, safe neighborhoods.
16 We know that Banc One has worked with the
17 Arizona Diamond Backs stadium for leisure activity,
18 and we celebrate, and we also want to work together
19 as that corporate partner addressing basic human
20 needs.
21 Thank you.
22 MS. SMITH: Thank you.
23 Mr. Matejka.
24 MR. MATEJKA: Thank you. Good morning. My
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1 name's Mike Matejka, Second Ward Alderman for
2 Bloomington, Illinois, also with the AFLCIO in the
3 city.
4 I appreciate your patience here today
5 because I've sat in that chair.
6 I brought a few props with me. Brought my
7 money bag. This is from Marine Bank which is
8 Banc One which is American State Bank. As we know,
9 those banks merge all the time because that's what
10 it's all about, two-and-a-half-by-six-inch strips
11 of paper.
12 If we've got these
13 two-and-a-half-inch-by-six-inch green strips, we
14 can do a lot, but if we don't have these things, we
15 can't get very far in this society.
16 According to the government, you would
17 characterize me as a low to moderate
18 European-American living in a slum-like area.
19 That's what I'm characterized as in this society.
20 Let me tell you about that slum-like area
21 I live in. It's actually an area of single family
22 homes racially integrated where people go to work
23 every day and do their jobs and we can get these
24 strips of green paper to take care of ourselves,
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1 take care of our families, to buy gas, to feed our
2 families, but we need help when we want to buy a
3 home and when we want to improve a home, and
4 Banc One is not there to help us in that process.
5 When I look at statistics under the
6 Community Reinvestment Act of what Banc One does in
7 Bloomington, Illinois, it's pretty disappointing.
8 I look at 1996, and I see that 272 affluent white
9 families got loans but only ten African American
10 families could get a loan, and of those ten African
11 American families, only one was a low income family
12 or two of those were low income families who got
13 less than $14,000 from Banc One.
14 Our area is a prosperous area. State Farm
15 Insurance is there, and Banc One moved its market
16 ratio from four percent to nine percent in 1995 and
17 '96, but at the same time, they quit giving loans
18 in my area. We went from 79 loans to 54 loans, but
19 they more than doubled their loans in the affluent
20 areas of town.
21 We're asking Banc One not to shut out the
22 working class family, not to shut out us folks
23 characterized as low to moderate income folks
24 living in a slum-like area. Give us access to
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1 credit to.
2 And the pattern from Banc One in the last
3 few years is to shut us out of the process. We
4 want them involved, want them involved in our
5 neighborhoods, and we are here to protest this
6 merger until we see the Community Reinvestment Act
7 is going to be lived up to.
8 I thank you for your time today.
9 MR. ERICKSON: I'm pleased to share my view of
10 what's a real concern on my part. I'm Reverend
11 Joel Erickson, Pastor at Resurrection Lutheran
12 Church in Bloomington.
13 And my concern is where are the people
14 from Banc One? I just want to know is there anyone
15 from Banc One here? Is there anyone from Banc One
16 here?
17 Okay.
18 We'd like to say that the question that we
19 have asked as we have negotiated and wanted to talk
20 to the people of Banc One is we want to know where
21 John McCoy is, Mr. McCoy. We wanted to speak to
22 him because in our negotiating with National
23 Citicorp we challenged the merger of National
24 Citicorp with First of America, and as a result of
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1 that challenge, Dave Deberco, the CEO of that bank,
2 came and talked to us along with Danny Cameron, the
3 Vice President. We know them personally, we've
4 talked about them, and we value that relationship,
5 and we've built a relationship with them.
6 And we're wondering where is the CEO from
7 Banc One because what's necessary is for us to
8 develop a relationship because we're the ones that
9 own the homes, we're the ones that live on the
10 streets, we're the ones that buy the groceries.
11 This is our community, and we want a relationship
12 with the leaders of this bank. And there's been no
13 talk. And we need to make those kinds of
14 connections.
15 And we have a good relationship and do
16 know Dave Deberco and Danny Cameron of NCC, and
17 they're doing fine. They've not suffered as a
18 result of our relationship. We have a good
19 relationship with them, and that's what we're
20 expecting from Banc One.
21 You notice we have a wanted poster for
22 Mr. John McCoy. Why doesn't this man want to meet
23 us? We want to meet with him, we want to talk with
24 him and express the concerns that have been shared
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1 here at this table, and we want a good relationship
2 where we can build a community that's positive
3 because we're the ones living in the local
4 communities.
5 Our concerns is as the mergers take place,
6 people move further away from our community, and we
7 represent Bloomington-Normal, Peoria, Springfield,
8 Decatur, Champaign-Urbana, this whole region. Its
9 concern is that we reach out and respond to the
10 needs of a community, and that's where we're coming
11 from is our own local community.
12 So we hope to see Mr. John McCoy present
13 with us, talk with us, and then we'll see whether
14 that bank is really one that's desired to be
15 connected with the community of our region.
16 And we're very thankful, very privileged
17 that we have an opportunity to express this
18 concern.
19 As a Pastor of a local congregation of 500
20 members, I want you to know it matters to us that
21 organizations such as banks are responsive to the
22 local community.
23 Thank you very much.
24 MR. ALVAREZ: A question for Reverend Buzza.
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1 You showed us your chart. I'm not
2 familiar with the Springfield area. Could you
3 explain a bit about the census tracts?
4 The ones, for example, that received no
5 loans, what characteristics are those?
6 MR. BUZZA: They are primarily the ones in the
7 center of Springfield occupied primarily by low and
8 moderate income families, and most of our ethnic
9 minority families live in those census tracts.
10 The only public housing area is in Census
11 Tract -- Rudy, help me -- 15.
12 AUDIENCE MEMBER: 12 or 14.
13 MR. BUZZA: And the area around the outside is
14 the fast growing area particularly to the west side
15 and down in the corner here around what is Lake
16 Springfield. Census Tract 31 is where the figures
17 are 1.5 to $3 million of loans in that tract.
18 MS. WILLIAMS: I'm sorry. I have a question.
19 Can you say the level of home ownership in
20 those tracts that got no loans, and also could you
21 describe if there's like home sales, because I'm
22 not as familiar with Springfield as well?
23 MR. BUZZA: Well, this just has to do with the
24 number of loans that Banc One made last year for
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1 mortgages, for home improvement and for refinancing
2 and, it's by income in those areas, but those of us
3 who live in Springfield also realize that the
4 majority of our African American neighbors live in
5 that central neighborhood that is either red or
6 red-and-white striped.
7 Have I answered your question?
8 MS. WILLIAMS: I guess as far as like the level
9 of owner occupied, is that a 20 percent in that
10 area or 40 percent or less?
11 MR. BUZZA: I'm not sure I know the answer in
12 terms of statistics, but many of the homes in that
13 area are now rental property and have been
14 purchased by non-resident rental owners, and that
15 is one of our great concerns because the upkeep of
16 those houses does not match what homeowners do when
17 they have the chance to own it themselves.
18 MS. SMITH: Thank you very much.
19 MR. MATEJKA: Could I ask our folks who came up
20 with us, drove up with us today, to stand up?
21 MS. SMITH: Please.
22 we had a panel this morning that didn't
23 show up, unless they have come in. I don't think
24 they have.
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1 Let me say the names in case there has
2 been any confusion. James Hall, Robert Hawhtorne,
3 the Reverend Carey Long, Patrick Quinn, James
4 Taylor.
5 We will want if they come this afternoon
6 to work them into the schedule, but we may want
7 to -- would we want to start a little earlier than
8 1:00? We're scheduled to reconvene at 1:00. If we
9 have the next -- if we can either have or can
10 construct a panel starting at a quarter of 1:00, we
11 would like to do that.
12 So those of you who are scheduled for a
13 later panel but who are here now, you might check
14 in with our registration people and see what we can
15 do to work you up a little earlier into the
16 schedule.
17 So thank you very much. We'll see you.
18 I am supposed to announce to keep your
19 name tags on so that you can get back into the
20 conference center if you go out.
21 Thank you.
22 (Whereupon, a short recess
23 was taken.)
24 MS. SMITH: I think we're ready to start with
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1 our next panel. This is Panel 9, and we're going
2 to start with Ms. Cannon. You'll need to pull the
3 mic.
4 MS. CANNON: Thank you.
5 MS. SMITH: I will -- in case -- well, let's
6 see, since many of you drove -- were driving this
7 morning, you didn't hear my announcements, but I
8 will -- we have two timekeepers. They will give a
9 signal when you have one minute remaining and then
10 they will hold up another card when your time has
11 expired.
12 Sometimes you might try looking up every
13 once in a while, but if you miss it, we'll give you
14 a few extra seconds, but then we go to audio and
15 we'll give you a little musical note.
16 MS. CANNON: That means you finished.
17 REVEREND LONG: In more ways than one.
18 MS. SMITH: So Ms. Cannon?
19 MS. CANNON: Good afternoon. My name is
20 Bessie Cannon and I am President of SEIU Local
21 880. I appreciate the opportunity to testify on
22 Banc One's awful record throughout the Midwest.
23 It is terribly unfortunate that the
24 Federal Reserve is not holding hearings in more
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1 than one city.
2 REVEREND LONG: Amen.
3 MS. CANNON: Millions of Americans cannot
4 possibly be represented at one hearing to give
5 input on a merger that will affect citizens from
6 Canada to the Gulf of Mexico. And if anyone has
7 the resources to hold hearings in every city
8 affected by this merger, it is the Federal
9 Reserve.
10 One thing is clear about both Banc One and
11 First Chicago NBD. They are first -- first of the
12 worst! In Denver, Detroit, and Milwaukee,
13 minorities were rejected much more frequently than
14 white applicants for every kind of housing loan
15 that the bank makes. Even more troubling, it
16 appears that Banc One routinely steers minorities
17 to more costly and inferior subprime loans.
18 In Denver, Banc One received no
19 applications from either African Americans or
20 Latinos for conventional mortgages in 1996. Not a
21 single applicant in 1995. In 1995, it took only
22 six applications from either African Americans or
23 Latinos.
24 Moreover, there is not -- this is not
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1 because Denver is a predominantly white city.
2 Indeed, the majority of the residents of the city
3 of Denver are now members of racial minorities, nor
4 is it because the minority population of Denver is
5 so poor that they can't afford to buy homes. Over
6 half of Denver's minority households are
7 homeowners.
8 The reason that Banc One gets no home
9 loans applications from minorities in Denver is
10 because Banc One doesn't market to minority
11 communities. Instead, Banc One pumps credit into
12 the very whitest parts of Denver like it was
13 water.
14 In 1996, more than 40 percent of Banc
15 One's mortgage loans were made to neighborhoods
16 where more than 90 percent of the residents are
17 white. An additional 40 percent of the bank's
18 loans went to the neighborhoods where whites made
19 up between 70 and 90 percent of the population.
20 Just two percent of the mortgages were
21 made to neighborhoods where over half the
22 population is nonwhite. And since the data shows
23 that the bank made no loans to Latinos or blacks
24 that year, we know that two percent of the loans
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1 that did go to our neighborhoods did not go to us.
2 In Detroit, First Chicago NBD's
3 performance is similar, but even more sinister,
4 given the size of the African American population
5 there. Although the City of Detroit is over
6 70 percent black, the entire Metro area is 22
7 percent black.
8 In 1996, NBD took only two percent of its
9 applications from blacks. The bank took 93 percent
10 of applications from whites. In real terms, this
11 means that African Americans are 11 times more
12 likely to reside in Detroit than First Chicago
13 NBD's applicant pool.
14 While there was fewer applications from
15 minorities, the few that did apply were rejected
16 more frequently than white applicants. African
17 Americans were rejected nearly 40 percent more
18 frequently.
19 Incredibly, this disparity widens for the
20 wealthiest minority applicants. Upper-income
21 African Americans were rejected twice as frequently
22 as upper-income white applicants.
23 In Milwaukee, Banc One has aggressively
24 pushed its home improvement lending and refinanced
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1 loans while ignoring conventional mortgages. But
2 with Banc One, we find that no matter what type of
3 home loan we look at, the pattern is the same;
4 African American applicants are rejected many times
5 more frequently than whites. African Americans
6 were rejected three times more frequently than
7 white applicants for refinance and home improvement
8 loans in 1996.
9 Last time I looked, racial discrimination
10 is still against the law in our country. And when
11 a multi-million dollar bank like Banc One breaks
12 the law and denies people access to credit on the
13 basis of their skin color, they should be punished,
14 not rewarded. It is time for the Federal Reserve
15 Board to punish Banc One. It is time for the
16 Federal Reserve to just say no. Thank you.
17 MS. SMITH: Thank you very much.
18 Reverend Long?
19 REVEREND LONG: I bring you greetings from the
20 near east side of Indianapolis where I pastor a
21 congregation and also serve as board member for the
22 Near East Side Community Organization.
23 I've been asked by the Board President,
24 who could not come today, to speak as the official
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1 representative of the Near East Side Community
2 Organization and also a copartner with the
3 Organization for a New East Side and to say to the
4 Federal Reserve Board: Please listen to us.
5 Listen to the fact that over 50 percent of
6 our populant folks are neighbors who live in and
7 around the Banc One branch that was closed in a
8 rather cold-hearted way in the midst of the
9 winter.
10 They have affected us -- excuse me. They
11 have affected us quite negatively. They have cared
12 little for listening to us. And so we come here
13 asking that this not be the last time that you hear
14 folks from Indianapolis, that rather than Chicago,
15 that you come to Indianapolis, preferably, send
16 whatever faction you need to the East Side, since
17 our residents are too poor to make this journey.
18 They cannot afford to.
19 So I come speaking on behalf and along
20 with my brothers and sisters of the East Side
21 saying Banc One has been a horrible neighbor to
22 us. I don't need to quote you all the raw data.
23 You all have that. I trust that your education
24 lets you glean that for yourself and understand
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1 what bad business partners Banc One and NBD are.
2 I want to share with you an example of how
3 that has lived out in the Near East Side. The
4 Woodriff Place Branch on 10th Street, which is a
5 major corridor for the Near East Side, we were
6 notified was closing, not might close, would close
7 because it was no longer a money-making, profitable
8 branch.
9 They were a self-fulfilling prophecy, as
10 we say in the church business, because they made
11 sure it was not profitable by cutting business
12 services right and left, cutting personnel
13 services, and as their records shows to us
14 constantly, they are not making adequate small
15 business loans or adequate home mortgage loans
16 available in our census tracts. They have all our
17 money.
18 I am a Banc One client, have been in the
19 two years I've been in Indianapolis, because they
20 have such an overwhelming majority that trying to
21 get to another branch to adequately access services
22 is virtually impossible because they've run
23 everybody out of town.
24 If this merger goes through, we fear the
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1 real loss of the NBD branch that is in the Near
2 East Side. In spite of feigned attempts by
3 Banc One/NBD to say that they are going to ask the
4 Department of Justice to exempt that branch from
5 divestiture, we believe them as far as we can throw
6 them. And since we can't throw them, we don't
7 believe them.
8 They have lied to us time and again. They
9 told us that they were going to work with us in
10 trying to find an alternative way to use that
11 branch that would best serve the neighborhood. And
12 that simply meant they weren't going to allow it to
13 be a pawn shop or a check-cashing organization.
14 You know, there are other distracting
15 factors to our neighborhood besides pawn shops,
16 bars, and check-cashing organizations. We try and
17 sit down with them in good faith negotiations.
18 According to their response to you all
19 from the Near East Side Community Organization's
20 letter asking for denial of this merger, what they
21 have in paper isn't, in fact, what they did. It is
22 not what they said to us. It is not how they
23 treated us.
24 There again, they have the money. They
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1 have the attorneys. They can write it to make it
2 sound just exactly like they hope you will want to
3 hear. They don't want you to hear the truth. They
4 don't want you to hear us say they did not
5 negotiate in good faith with us.
6 They told us that the branch would be
7 donated to the Near East Side Community Development
8 Credit Union. And they gave us first one month to
9 make that a reality. You cannot transact that kind
10 of business in four weeks' time. They then backed
11 it up. We won a small victory.
12 They said they would give us three
13 months. And by the time that that three months was
14 up, we had already found out that they had sold the
15 building to the holding company that is purchasing
16 property around Indianapolis for CBS Drugstore.
17 The drugstore is not what's going in
18 there. We have found out, through East Side
19 Community Development Corporation that, in fact,
20 they are in high-level negotiations with another
21 credit union to go in place in that branch. But
22 quite frankly, we don't know what that will be
23 either, nor how it will be a detracting factor to
24 our small community development credit union.
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1 They've been poor partners. They always
2 tell us that the ultimate answer has to come from
3 Columbus. When we ask who that is, they tell us
4 too bad, so sad, you lose. We won't tell you. You
5 only get to talk to us. That is not good faith.
6 Thank you.
7 MS. SMITH: Thank you. Ms. Rice?
8 MS. RICE: Good morning -- I'm sorry, good
9 afternoon. My name is Bobby Rice. I'm from
10 Dallas, Texas and I am here to speak about the
11 problems we are all having in Dallas, Texas.
12 I am from a low- and moderate-income area
13 in Dallas, Texas. I am against Banc One merging
14 because of my own experiences with Banc One and
15 because of stories that I have heard from others
16 about their treatment by the bank.
17 Banc One is not a bank that does a very
18 good job servicing people in my community. Some
19 people in my community have a difficult time
20 understanding the complex banking fee structure and
21 no one takes the time to explain the fee to them
22 until it is too late or they're just rude to us,
23 insensitive, and in some cases, they are racist.
24 For example, there's a man that lives in
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1 Dallas, Texas by the name of Ogan Defreeze.
2 Mr. Defreeze is an -- I'm sorry, African American
3 senior citizen living on a fixed income of about
4 $500 a month. He has been a Banc One customer for
5 many years. He even banked at the same bank before
6 it got its name changed to Banc One.
7 He always went in to use the teller
8 because that is what he had always done. The only
9 problem was that Banc One decided to charge people
10 two dollars to use a teller. Now, two dollars may
11 not sound a lot to you all or some people, but as
12 low-income people, we have to think of our budget
13 and not waste our money.
14 Now, Mr. Defreeze wrote checks to pay
15 bills, all money he thought he had, but because of
16 the fee, he bounced checks and had to pay bounced
17 check fees. He estimated that Banc One took almost
18 $200 from him in bouncing check fees before someone
19 explained about the teller fee. $200 is nearly
20 half of his monthly income.
21 Banc One also lost a $10 deposit of
22 Mr. Defreeze's. Then they found it. Banc One
23 found the $10 deposit. You know what they done?
24 They refused to refund a bounced check fee that
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1 occurred due to their mistake, which is Banc One.
2 I have had a similar experience myself. I
3 have a saving account at Banc One. The reason I
4 have a saving account is exactly -- I have a saving
5 account at Banc One. And the reason why I'm having
6 the account is because I need to save my money. I
7 am also on a fixed income. I am supporting my
8 grandchildren by adopting them and I must save as
9 much as I can.
10 However, Banc One charged me ten dollars
11 per month to maintain my account. That's not
12 fair. The only way the service charge is forgiven
13 is if I maintain -- maintain a $1,500 balance at
14 all time. If I cannot possible afford to keep this
15 amount, then why must I pay this outrageous sum of
16 money per month?
17 I am penalized just for being poor. I
18 used to have a checking account also with Banc One,
19 but I found it is impossible to balance my book
20 accordingly to the statement. Many time there were
21 mistakes on the statement, but the bank never took
22 credit for them. I don't know how they do this,
23 but somehow or another the statement will win, not
24 correct, win. It's no way that you can prove it
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1 the way they do the statement.
2 I would have certain of my drafting twice
3 monthly instead of once. So what Banc One does, I
4 wanted Banc One only to draft one check per month,
5 but nothing were ever done because they drafted
6 twice. When they drafted twice on my account, that
7 made three of my bank -- three of my check bounce.
8 Because as a low income person, I only have certain
9 time -- I mean, a certain amount of money to
10 spend.
11 Many time there was mistakes on the
12 statement, but the bank never took credit for
13 them. I would have certain amount of draft -- of
14 twice instead of one, but nothing was ever done to
15 make these correction to my account.
16 Oftentime because mine was drafted more
17 than once or my deposit was not added to my account
18 when they was supposed to, my check will bounce.
19 Rather than the bank pick up the charge for their
20 mistake, I would have to pay the overdraft fee of
21 25 per check. That's not fair.
22 I try calling several time to speak to
23 someone in a management position, but I was not
24 able to speak to the person or I also left a
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1 message and no one called me back. The Soria
2 family had similar problems with Banc One and their
3 account.
4 MS. SMITH: Ms. Rice, we'll be glad to enter
5 the remainder of your statement into the record.
6 If you'd like to take half a minute to bring it to
7 conclusion.
8 MS. RICE: Oh, I'm sorry. I got off into it.
9 I just got off into it. I told them it was like
10 I'm -- okay. Only thing -- I thought you said I
11 had three minutes.
12 MS. SMITH: No. 30 seconds, half a minute.
13 MS. RICE: Half a minute, okay.
14 Only thing I want to comment on Banc One,
15 that they should realize that there are low income
16 people as well as people that has money. We also
17 would like to buy a boat and a Cadillac too, but we
18 cannot. So help us too.
19 MS. SMITH: Thank you very much.
20 MR. SIMS: Good afternoon. My name is Reverend
21 Wesley Simms, and I'm from Dallas, Texas.
22 We're opposed to the merger of Banc One/
23 First Chicago, and I'm here to testify to Banc
24 One's service in low income and minority
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1 communities and consumers.
2 In general, Banc One under serves and red
3 lines minority neighborhoods and rejects African
4 Americans and Latinos.
5 Banc One's performance in Dallas lagged
6 significantly behind the market averages. First,
7 in Dallas, African Americans were rejected for home
8 purchase loans nearly three times as frequently as
9 white applicants in 1996. This rate is higher than
10 the market average of conventional home lenders
11 rejecting African Americans at twice a rate of
12 white applicants.
13 Even African Americans above 120 percent
14 of the median income were rejected more than two
15 and a half times as frequently as whites of similar
16 incomes. In fact, the African American were
17 rejected at rates double than that of moderate
18 income and white applicants, 35 and 17 percent
19 respectively.
20 In Dallas, Latinos receive comparable
21 treatment at the Banc One offices. Latinos were
22 rejected more than twice as frequently as white
23 applicants for conventional mortgages in 1996. And
24 this rate, again, is higher than the market average
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1 rejection rate of 1.78 for all Dallas lenders.
2 Upper-income Latinos were also rejected
3 twice as frequently as upper-income white
4 applicants.
5 A similar pattern is found in Houston
6 where the African Americans and Latinos are
7 rejected much more frequently than white
8 applicants. African Americans were rejected more
9 than three and a half times as frequently as whites
10 in 1996, up slightly from the 1995 of just shy of
11 three and a half.
12 This figure is more than double the market
13 average of African Americans being rejected, more
14 than one and a half times as frequently as white.
15 Incredibly, the rejection rates for
16 upper-income African Americans is nearly triple
17 that of moderate income white applicants, 29 and 11
18 percent respectively.
19 The picture was no brighter for Houston
20 Latinos. Latinos was rejected nearly twice as
21 frequently as white applicants in 1996. This
22 figure is also an increase from the one and a half
23 times Latinos were rejected in comparison to white
24 applicants in 1995.
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1 Again, the ratio is measurably higher than
2 the market average, where Latinos were rejected 27
3 percent more frequently than whites. Upper-income
4 Latinos were rejected nearly twice as frequently as
5 moderate-income white applicants.
6 These figures are appalling. If the
7 stories from Dallas consumers are any guide, these
8 numbers may be understating the problem.
9 Minorities in Texas don't have a chance at Banc One
10 lenders' office.
11 Meanwhile, many neighborhoods are in
12 desperate need of access to credit and new
13 homeowners. It is unlikely that they will find it
14 at Banc One. ACORN has discovered that Banc One is
15 most likely to lend to the whitest and wealthiest
16 neighborhoods in Houston and in Dallas.
17 In Dallas, 23 percent of the nearly 400
18 conventional mortgage loans Banc One made in 1996
19 went to census tracts where whites made up more
20 than 90 percent of the population. Only 11 percent
21 went to census tracts where minorities made up the
22 majority of the population. A mere 4 percent of
23 those originations went to census tracts below
24 50 percent of the area median income. 88 percent
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1 of those low-income tracts received no loans at
2 all.
3 In Houston, the pattern was, if anything,
4 more troubling. 45 percent of Banc One's more than
5 700 conventional loans went to census tracts where
6 whites made up more than 80 percent of the
7 population. Only 13 percent of the loans went to
8 census tracts where minorities made up the majority
9 of the population. Less than half of those went to
10 the census tracts where minorities made up more
11 than 75 percent of the population. A mere 2
12 percent of the conventional mortgages went to
13 census tracts where a household income was below
14 50 percent of the area median. Of the 117
15 low-income census tracts in Houston, 86 percent
16 received no conventional mortgages.
17 Taken together, these two facts show a
18 dual pattern of rejection of Banc One in Texas.
19 Minority individuals are frequently turned down for
20 loans at Banc One, more frequently than their white
21 counterparts. Low income and minorities
22 neighborhoods are likewise unserved by Banc One.
23 The road to home ownership is essential to build
24 wealth of families and to shore up neighborhoods
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1 and communities. Homeowners build equity in their
2 families and their neighborhoods benefit. With
3 inadequate access to fair credit, these
4 neighborhoods and families suffer unduly. Banc One
5 is a contributor to this unfairness.
6 ACORN has tried to get commitments from
7 Banc One to turn these problems around. ACORN met
8 with Banc One with the help of our Congresswoman
9 Eddie Bernice Johnson. I was at that hearing. And
10 I asked weren't they concerned that so few loans
11 went to African Americans. They kept changing the
12 subject talking about other lending like credit
13 card lending and personal loans. Well, getting
14 people in debt is not the same thing as helping
15 people to become homeowners. We need more
16 homeowners in our neighborhoods.
17 The banker at the meeting also kept
18 talking about the loans they do with affordable
19 housing groups. We heard some of that here this
20 morning. That's great, but ACORN is a group that's
21 concerned about what happens to the ordinary
22 everyday person who walks into the bank. With Banc
23 One, they seem not to make very many loans to make
24 people homeowners.
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1 At the meeting, we asked -- just one
2 thing -- that Banc One do one of two things.
3 Either make a commitment matching the commitments
4 in Detroit and Chicago as to how much they will
5 lend to minority and low- to moderate-income
6 neighborhoods or tell what program they would use
7 to do a better job of lending to minorities. They
8 did not make either commitment.
9 The Federal Reserve should take this
10 opportunity to address this inadequate record and
11 reject the proposed merger without practical and
12 workable changes in Banc One's operation. I thank
13 you very much.
14 MS. SMITH: I do think you have the record
15 today for how fast you speak.
16 MR. RICE: They gave us a book to read, and now
17 they said read it in four minutes. No way.
18 MS. SMITH: Mr. Taylor.
19 MR. TAYLOR: Good afternoon. My name is James
20 Taylor.
21 MS. SMITH: Would you use the mic, please?
22 MR. TAYLOR: Is that better? Good afternoon.
23 First give an honor to the great creator.
24 My name is James Taylor. I'm a community organizer
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1 for the organization for a New East Side.
2 Our organization opposes the merger of
3 these banks unless there are clear and definite
4 commitments to lending, investments, employment,
5 services and procurement of services for low and
6 middle income Indiana residents, senior citizens,
7 handicapped, those on fixed incomes and Indiana
8 residents of color.
9 Mega mergers often have a harmful effect
10 on communities, but this merger would create an
11 unprecedented mega bank in Indianapolis, banking
12 service monopoly that's going to decrease
13 competition.
14 In the last several years, branches have
15 closed and fees have gone up for most of us.
16 First-time home buyers have decreased lending, as
17 we've heard before, especially after mergers.
18 Some of the harmful effects of mega
19 mergers, -- and I'll just be brief and give other
20 folks a chance to speak, too -- the creation of
21 these large banks, if it doesn't create a monopoly,
22 it definitely diminishes competition. And from
23 what I understand, competition is good for
24 consumers because true competition gives us the
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1 best services at the lowest rate.
2 Branches close. That adds to the
3 instability in any neighborhood when a financial
4 institution like a bank leaves. And there are too
5 many institutions, financial institutions, in
6 communities like banks. Higher fees affect all of
7 us, low to moderate income, moderate to high
8 income. Some can afford that better than others,
9 as you can see.
10 What happens if these mega mergers fail?
11 I don't want to wish anything bad on Banc One, NBD
12 or anything else, but if my memory serves me
13 correctly, the American public has paid 800 billion
14 dollars to bail out a savings and loan fiasco that
15 wasn't insured as well.
16 This addresses the safety and soundness
17 and stability of banking services in Indiana and in
18 Indianapolis. And even though Indianapolis is the
19 capital, the city that appears from the data we've
20 looked at that will be most affected will be
21 Lafayette, where Banc One will have a 56 market
22 share. And I may be a little over on that, so, you
23 know, that stands to be corrected.
24 Special devastation to the low and
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1 moderate income communities. Most of the folks in
2 our communities -- when I speak of low to moderate
3 income, that's 40 percent of the American public,
4 too, if my numbers are right. But in these lower
5 income communities and these low to moderate income
6 communities, transportation is limited to go the
7 distance to the nearest bank -- the nearest bank as
8 these other branches close.
9 Limited financial resources are eaten away
10 by higher fees. Loss of banking services yield
11 less financial stability to our neighborhoods.
12 What that puts in place are check cashing
13 places, pawn shops -- oh, and underground economy.
14 We all know that means guns, drugs, theft, violence
15 and the things that go with underground economies.
16 We don't need that in our neighborhood on the Near
17 East Side. We have it. We'd rather have banks in
18 and guns out.
19 What we're asking for pretty simply is a
20 moratorium on the venture and have the Fed have
21 local public hearings. That could be in
22 Indianapolis. That could be in Lafayette. As long
23 as you have one in the state of Indiana, I think we
24 can get folks there to satisfy that.
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1 We believe it's time and demand that it's
2 time for the banks to work with communities toward
3 a plan to provide more sound financial planning for
4 our communities. We want the banks to provide for
5 stronger CRA agreements with our federal
6 communities.
7 We don't need bureaucrats who aren't the
8 experts in our communities. We need community
9 folks who can speak to the banks so that the banks
10 know how they affect us and how, in fact, we can
11 help them.
12 The banking situation is a win-win
13 situation if the bank takes the aggressive posture
14 that it's going to lend to us with the products and
15 services that are designed to work in our
16 communities, but they don't.
17 And last, we would like to provide for a
18 community monitoring mechanism for our state so
19 that we can enjoy the luxury of seeing how the
20 banks are working with our communities.
21 In our community, Banc One and NBD are the
22 two largest real estate renters downtown. When
23 these banks combine, we're going to have a deficit
24 for office space because they're the number one and
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1 the number two occupants. That's not going to be
2 just bank employees. That's going to have an
3 effect on folks that run the elevators, wash the
4 windows, park the cars in the garages. It's going
5 to have a devastating effect.
6 I thank you for your time.
7 MS. SMITH: Thank you very much.
8 Any questions?
9 And I want to remind you that -- to be
10 sure to give your written statements if you haven't
11 already provided them to our people at the
12 registration desk so that they can be entered fully
13 into the record. So thank you very much for coming
14 this afternoon.
15 Okay. We'll start with Ms. Rangan,
16 please, if someone will pass her the mic.
17 MS. RANGAN: Good afternoon. My name is Rashmi
18 Rangan. I'm the Executive Director of Delaware
19 Community Reinvestment Action Council. I am also a
20 board member of the National Community Reinvestment
21 Coalition, which is a great association of 650 plus
22 organizations. I am also a member of Inner City
23 Press Community on the move.
24 And I am here today to testify against
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1 this merger. And this is the second time I'm
2 testifying against Banc One acquiring another
3 bank.
4 And the last time, we had brought selfish
5 use before the Federal Reserve Board and many of
6 them have been justified in today's testimony.
7 Every concern that we raised earlier has been
8 spoken today.
9 The treatment of the consumers, the
10 customers at Banc One's hands, the fair lending
11 concerns that we have had, the predatory lending
12 concerns that we have had about Banc One have been
13 attested to today.
14 Before I address my concerns with Banc
15 One, let me address my concerns with this
16 particular process today.
17 It is probably appropriate that you have
18 renamed public hearings by calling it public
19 meetings. Apparently you're no longer willing to
20 hear what we have to say, but we do have a lot to
21 say, particularly about Banc One's record.
22 Based on the factors that the Board must
23 consider in approving this application and the
24 managerial issues, many, many concerns have already
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1 been addressed, but I will refer you to a few.
2 The first one, Dr. Kenneth Thomas has
3 already commented on in his July 27th, 1998,
4 communication to you regarding the management's
5 apparent violation of confidentiality of individual
6 examination ratings on Y2K.
7 In Arizona, the Attorney General's case,
8 and in Texas the HUD's apparent acceptance that
9 there is discrimination, Banc One has been charged
10 with discrimination, and this after the Fed's own
11 conditional approval in recent application by Banc
12 One where Banc One acquired First USA, a Delaware
13 bank.
14 Apparently, Banc One failed to meet the
15 Fed's condition. On these grounds alone, this
16 application should be denied.
17 Banc One, we charged previously -- we'll
18 repeat this charge today -- is a predatory lender
19 through its finance company. And while we have
20 raised this issue many times, we sense that the
21 Feds really do not understand the full import of
22 our accusations. Therefore, attached as Exhibit A
23 to my testimony today is a catalogue of predatory
24 mortgage lending abusive practices prepared by
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1 Mr. Bill Brenan of Atlanta Legal Aid Society.
2 Please review that very carefully.
3 We have asked the Feds previously to
4 review the finance company's subsidiary of the bank
5 holding company and its lending record. We repeat
6 again today, we and others have presented ample
7 evidence of the existence of predatory and
8 discriminatory lending practices practiced by Banc
9 One finance companies.
10 In 1995 through the finance company, it
11 approved 7,805 loans. 1996, 32,712. So it has
12 actually grown in size, a 319 percent increase of
13 lending through its finance company.
14 You have seen many HMDA analyses all point
15 to the very same concern that we have for the
16 second time presented today.
17 On convenience and needs issues, how can
18 the convenience and needs of my community be served
19 when the acquirer, Banc One, has shown a remarkable
20 disdain for Delaware?
21 May I remind the Board of concerns we
22 raised when Banc One applied to acquire First USA?
23 First USA, a limited purpose bank, cited its
24 inability to meet its CRA obligations and, hence,
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1 established First USA, FSB.
2 When Banc One acquired First USA, the
3 thrift was gone. Relative to Banc One/First USA,
4 after the merger, meeting the convenience and needs
5 of my community, it is abysmal.
6 In comparison, FCC and its CRA officer,
7 Mr. Roland Ridgeway, have not let the standard
8 excuse that. The limited purpose bank status nor
9 the Delaware Financial Center Development Act
10 restrictions get in the way of meeting these
11 obligations under the CRA.
12 At issue here is not -- I'll take only
13 half a minute. At issue is not who, where and how
14 much each bank does or gives individually or
15 collectively. At issue here today is the who from,
16 the where from and the how much does Banc One take
17 away from the community through its predatory
18 lending practices. On these grounds alone, this
19 application must be denied.
20 Thank you.
21 MS. SMITH: Thank you very much.
22 Mr. Reynolds.
23 MR. REYNOLDS: Thank you. Greetings. My name
24 is Jerry Reynolds. I will be delivering the
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1 remarks of Rebecca Adamson, President of First
2 Nations Development Institute, a Native American
3 economic development organization of 18 years
4 standing headquartered in Fredericksburg,
5 Virginia.
6 Ms. Adamson could not be here today, but
7 from our Information Services Department, I monitor
8 Community Reinvestment Act issues as they pertain
9 to our country. I'm a board member of the National
10 Community Reinvestment Coalition.
11 I spoke with a consultant to a tribal
12 council some weeks ago. In the midst of our
13 conversation, he made the statement: The tribe is
14 isolated. It's a 200-mile round trip for
15 necessities like cash.
16 More than three-quarters of one million
17 Native Americans and tribes reside in the market
18 area that would be created in the proposed
19 acquisition of First Chicago NBD Corporation by
20 Banc One. Many of them are as remote to the
21 nearest banking services, and some more so.
22 Sadly, a First Nations Development
23 Institute survey, which is attached to our written
24 testimony, of Native American banking needs within
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1 the merged entities' market area found that much
2 less remote tribes, tribes within a 20 to 40-mile
3 range of Banc One branches, have been regularly
4 neglected by Banc One.
5 My point is that geography is a major
6 hurdle to the provision of banking and financial
7 services to Native Americans. The proposed merger,
8 if approved, would provide the new entity with the
9 resources to get over this geographic hurdle. With
10 these resources, the bank should be able to absorb
11 the development cost of products and services that
12 would enable it to surmount some of the geographic
13 challenges to lending in Indian Country.
14 Given that Banc One's record of services
15 to Native American communities according to our
16 survey findings is characterized by a concentration
17 on a cream of the crop, on those native communities
18 whose more evolved economies translate to lower
19 risk for banking activities, the Board's approval
20 of the merger should be contingent upon substantial
21 improvements in Banc One's outreach and deliverable
22 services to native communities, including urban
23 native populations who starve for credit in cities
24 with an abundance of Banc One branches.
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1 Again, the augmented resources of the
2 merged entities should provide the incentive for
3 business initiatives.
4 Further, the new Banc One should be
5 required to develop plans for native specific loan
6 products in coordination with the diversity of
7 Native American groups, an approach recommended
8 toward other community groups by First Chicago
9 chairman Verne Istock. This would contribute in
10 future to sidetracking such avoidable debacles as
11 Banc One's disaster and with mobile unit banks.
12 When the initiative first began to bring
13 credibility Banc One's way through newspaper
14 articles and conference presentations, First
15 Nations was reluctant to criticize a financial
16 institution that was at least trying to make credit
17 available in Indian Country.
18 Still, we had strong doubts about an
19 initiative that amounted to little more than
20 rolling out 20th Century technology, the
21 automobile, to serve 19th Century needs, personal
22 and consumer loans.
23 Now that Banc One having reaped a windfall
24 of publicity but no profit has garaged this
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1 antiquated road show and left Indian Country to
2 overcome its failure, we can assert with certainty
3 that sustained collaboration with the diversity of
4 native groups has been the missing ingredient in
5 Banc One's limited approaches to Indian Country.
6 For starters, mobile units in the 21st
7 century must be fully operational banks securitized
8 through satellite communications technology. No
9 one will have to ride shotgun.
10 In the event the merger is approved, we
11 trust the Federal Reserve to urge the updated
12 approach to mobile unit banking on Banc One's
13 attention.
14 I want to digress briefly from my prepared
15 remarks to say that I was in a major meeting in
16 banking in Indian Country, and already, some Native
17 Americans are saying that they can't see mobile
18 unit banking as a way to serve Indian Country. .
19 I believe that Banc One's failure in this
20 regard has a chance to make mobile unit banking a
21 nonstarter in Indian Country. That would be a
22 great misfortune.
23 First Nations also wishes to acknowledge
24 some of the outstanding lending services that Banc
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1 One does provide in some native communities.
2 Some of these include a recent grant to a
3 North American Native Bankers Association. They
4 recently went on a site visit to Wisconsin to visit
5 some of the tribes there and their lending needs --
6 of course this happened while the merger process
7 was in full swing -- Gila and Camp Verde Yavapai
8 Apache Nation in Arizona as well as an internal
9 appointment of a team to familiarize Banc One
10 Mortgage Corporation with HUD Section 184 loan
11 guarantee programs show a flexibility and
12 consideration worthy of the merged entity.
13 Give me half a minute here.
14 Such commitments are considerable in
15 themselves, not to be minimized. But on this
16 momentous occasion, First Nations can affirm the
17 proposed merger only on the understanding that all
18 of Banc One's efforts in Indian Country to date
19 amount to a modest beginning.
20 We call upon bank regulators to ride herd
21 on their post-merger follow-through and upon Banc
22 One to establish a collaborative task force on
23 Native American lending and services as merging --
24 as other merging entities have done.
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1 Thank you.
2 MS. SMITH: Thank you very much.
3 Mr. VanTol.
4 MR. VANTOL: Good afternoon, Members of the
5 Panel. I am Hubert VanTol. I am the Cochair of
6 the Legislative Committee of the National Community
7 Reinvestment Coalition. I'm testifying this
8 afternoon on behalf of John Taylor, our President
9 and CEO, who is unavoidably unable to be here
10 today.
11 NCRC is the nation's CRA trade association
12 of over 680 community reinvestment organizations
13 from inner city neighborhoods and rural areas.
14 NCRC's members are dedicated to revitalizing low
15 income and minority communities.
16 As a trade association, we do not
17 regularly comment on applications to the Federal
18 Reserve Bank. We usually provide the research and
19 other support to our members who do the commenting
20 during the application process.
21 However, we have recently decided that we
22 do need to comment on the applications that present
23 significant public policy issues.
24 I am addressing two main issues this
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1 afternoon: Community reinvestment performance and
2 fair lending.
3 On the topic of community reinvestment
4 performance, simply put, mega mergers are harmful
5 for low income and minority communities if they
6 result in massive branch closures and drastic
7 decreases in lending and investing. This is why
8 NCRC has asked the Federal Reserve to require banks
9 to submit community reinvestment plans to the Board
10 and the reserve banks as part of their application
11 process.
12 These plans would outline how the merging
13 banks plan to maintain and increase the number of
14 loans, investments and services in lower income and
15 minority communities after mergers.
16 The community reinvestment plans would be
17 developed for each urban and rural community the
18 bank serves. Moreover, they would not be
19 unilateral like the mega pledges recently announced
20 by other large banks.
21 Instead, they would be responsive to
22 specific credit needs in various communities
23 because they would be developed with the input of
24 community organizations.
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1 The community reinvestment plans would
2 explain how lenders would preserve their CRA
3 performance in all of their major markets in the
4 wake of post-merger institutional changes.
5 For example, the CRA performance of Banc
6 One and First Chicago could deteriorate
7 substantially in the state of Indiana due to the
8 branch closures and divestiture requirements.
9 And you know, the State of Indiana is the
10 market where the bank's operations substantially
11 overlap, yet despite the looming changes
12 confronting Indiana's traditionally underserved
13 communities, Banc One has neither negotiated a CRA
14 agreement with the community organizations in
15 Indiana, nor has it submitted a community
16 reinvestment plan to the Federal Reserve explaining
17 how CRA performance will be maintained in the
18 state.
19 NCRC is pleased that First Chicago and NBD
20 have worked out CRA agreements with NCRC members in
21 Chicago and Detroit, however, these agreements
22 address CRA performances in two of Banc One's
23 markets.
24 In order for community reinvestment
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1 performance to be preserved in all of the bank's
2 markets, NCRC believes it is the responsibility of
3 the Federal Reserve Board to require the bank to
4 offer in detail the community reinvestment plan
5 explaining how it will maintain and improve its
6 post-merger CRA performance.
7 These plans would also be a starting point
8 for negotiations leading to CRA agreements with
9 community organizations.
10 In addition, the Federal Reserve Board
11 should issue conditional approvals in instances
12 where the applying banks do not satisfactorily
13 outline how CRA performance will be maintained in
14 places like Indiana and many others that are likely
15 to be affected by the merger.
16 On the topic of fair lending, over a year
17 ago, the Federal Reserve Board approved Banc One's
18 acquisition of First USA, a credit card lender,
19 despite unresolved fair lending issues.
20 In its approval order, the Federal Reserve
21 stated that it would impose conditions at a later
22 date if its investigation revealed fair lending
23 violations. NCRC and its members strongly believe
24 that this was an indication -- that this was an
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1 abdication of the Federal Reserve's responsibility
2 to enforce the nation's fair lending laws.
3 Fair lending problems will intensify if
4 the Federal Reserve does not complete fair lending
5 investigations and issue the necessary conditions
6 before acting on these latest Banc One
7 applications -- this latest Banc One application.
8 We ask the Federal Reserve to follow the
9 lead of its regulatory counterparts in seriously
10 investigating and issuing fair lending and CRA
11 conditional approvals when necessary. The Federal
12 Reserve should be leading its counterparts, but it
13 should at least follow them.
14 The OTS approval order of the Travelers
15 application is an example, likewise, the Office of
16 the Comptroller of The Currency's recent
17 conditional approval of First Union/Money Store
18 merger, which would require access for all
19 applicants to both prime and subprime lending
20 products.
21 We appreciate this opportunity to express
22 these significant reinvestment issues before you
23 that are associated with this merger.
24 We hope that the Federal Reserve Board
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1 does everything in its power to ensure fair lending
2 and continued progress in community reinvestment.
3 MS. SMITH: Thank you very much.
4 Ms. Wilkins. Wilmington good evening.
5 Can you hear? Is the mic on?
6 MS. SMITH: Yes, that's good. Wilmington can
7 you hear me?
8 MS. SMITH: Bring it a little closer.
9 Wilmington okay. I know I'm the short one in the
10 bunch.
11 My name is Betty Wilkins, and I would
12 like, first of all, to thank you for the
13 opportunity to testify on Banc One's unfair and
14 ugly lending record in Colorado, and I am the board
15 member of Colorado ACORN. It's an organization of
16 over 1,300 low and moderate income families in my
17 community who is working and trying to make a
18 decent place to live and to increase hope --
19 hopefully that we can increase the community
20 reinvestment and increase jobs and city services in
21 our community.
22 And the members of the Colorado ACORN
23 urges the Federal Reserve Board not to allow this
24 merger because of Banc One is not making loans to
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1 low and moderate income and minority people in the
2 City of Denver.
3 You have heard some of the statistics, and
4 when I heard that, I -- it was unbelievable.
5 First of all, when Banc One opened up in
6 my community, it was a beautiful and a welcome
7 sight because we really did need a bank that was
8 close where we don't have to hop on a bus every
9 time we want to go to the bank.
10 But within the past two and a half years
11 since I have been banking and trying to help my
12 community bank with Banc One, we have received
13 absolutely nothing as far as a community
14 reinvestment by -- put back into our community, and
15 I think this is very unfair and it's a very ugly
16 thing.
17 I took it on myself to do some
18 investigating on Banc One. I went by the bank last
19 Saturday morning about 9:00 o'clock. That's what
20 time the banks open. And there was a line there of
21 Afro and Latinos waiting to get in the bank to
22 deposit their money.
23 My thought was then -- I didn't say that
24 to the clients, but I thought to myself, where is
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1 this money going to go today, it definitely is not
2 going to my community because Banc One is not that
3 kind of bank to low and moderate income
4 neighborhoods.
5 And I can say it truthfully today because
6 I live it. And then I asked myself, I said, well,
7 now, how can this be? I'm not going to give you
8 any statistics at this point. I'm going to give
9 you some stories as to how this happened.
10 It seemed impossible, but it is not. And
11 I got permission from the community to do this to
12 give you some stories of what really happens.
13 One of our members, Betty Fortenberry, who
14 is African American, heard an advertisement on the
15 radio and said that she could get approved over the
16 phone for a mortgage loan.
17 She proceeded to call the number and was
18 switched over to three different people and holding
19 for a very long time. And that never did come --
20 there never did come an answer. And then after she
21 called back, she went through the same procedure,
22 except she was transferred to a fourth person and
23 then she was disconnected.
24 And she called back. And she was
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1 transferred to two different people. And finally,
2 one -- she spoke with the person who acted like she
3 knew what she was talking about. The woman asked
4 her a few questions which included name, address,
5 zip code and her annual monthly income.
6 The woman proceeded to tell her. And then
7 she said, well, I'll tell you now, you will not be
8 approved because you will have to have $10,000 of
9 your own money saved to proceed with just getting
10 the application.
11 It seemed to me that Banc One basically
12 told her she need to not apply. Mrs. Fortenberry
13 certainly could pay because she pays $800 a month
14 in rent.
15 A second story, Sandra Neville, who is
16 African American, another one of our members, saw
17 an ad on TV. And being able to be approved in 24
18 hours over the phone for a home improvement loan?
19 She called and gave them the information they asked
20 for. It took 72 hours for her to hear back, and
21 she was told that she was being denied because of a
22 problem of her credit report. And about a month
23 later, Ms. Neville was approved for the same loan
24 from her credit union.
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1 Another Latino member which did not want
2 me to use her name, but she is a member of our
3 organization who at this time wants to disclose
4 recently what happened to her. Okay.
5 What she did and -- she went to the ACORN
6 Housing Corporation where she had them to pull up
7 her savings and checking account number to check on
8 what had gone wrong with her credit. Come to find
9 out, it was Banc One that has caused this problem
10 and caused this flaw on her credit. They said that
11 she owed Banc One the whole amount of $5. And just
12 because of this, they did not take her
13 application.
14 Now, will you tell me, is this bank worthy
15 of a merger with -- to get any bigger and able to
16 treat more people as they've been doing in the
17 past?
18 I would urge you today, please, that you
19 can do this. Please take a closer look at what
20 we're telling you. It is true. Please don't have
21 this merger take place until they have their CRA
22 practices in place where me, my community, Latino
23 community or any other community can receive
24 services just like anyone else. Even though we
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1 live in a certain zone, we do work, and we do pay
2 our bills, and we're worthy of credit.
3 Thank you.
4 MS. SMITH: Thank you very much.
5 Any questions?
6 Okay. Thank you very much for coming this
7 afternoon.
8 And we'll move on to Panel 11. All
9 right. We'll start with Reverend Anthony.
10 MR. ANTHONY: We're together. Mr. Parker's
11 going to go first.
12 MS. SMITH: All right.
13 MR. PARKER: Thank you and good afternoon.
14 My name is Bernard Parker. I am the
15 Co-Chair of Alliance For Fair Banking out of
16 Detroit's coalition of organizations. They came
17 together about 12 years ago. And I'm also a Wayne
18 County Commissioner serving the East Side of the
19 City of Detroit. And I'm the Executive Director of
20 a community organization Operation Get Down for 28
21 years now.
22 I'm here to speak in support of the merger
23 for one particular reason, and that is the history
24 of what we have had in relationship to working with
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1 National Bank of Detroit NBD in the City of
2 Detroit.
3 Back in 1986, we had a similar type of
4 situation where we came together to express some
5 real concerns about the disinvestment and the lack
6 of involvement of NBD and other banks in the City
7 of Detroit, and we came together and negotiated an
8 agreement with them under the leadership of the
9 NAACP, and they were able to come to an agreement
10 at that particular time. And then after that, we
11 reached another agreement with them.
12 What we have found is that as we've had
13 many concerns, opposed what they were doing, we
14 found that communication, working with them and
15 meeting with them on a regular basis at least twice
16 a year and going through our agreements and going
17 through the various items that we have and working
18 with them to try to improve their investment in the
19 community really was a way that we were able to, I
20 think, achieve some outstanding type of agreements
21 and loans to the City of Detroit.
22 Just some examples of that, in 1995, we
23 reached an agreement with NBD and for $677 million
24 over a three-year period, and by working with them,
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1 though, and by encouraging and by on a regular
2 basis having a staff that worked with their staff,
3 they were able to achieve 1.5 billion dollars worth
4 of lending in that same three-year period,
5 surpassing the low income mortgages by 144 percent
6 of the goal that we have set as small businesses
7 under $1 million located in the City of Detroit by
8 765. An outstanding achievement what they were
9 able to do by us working with them.
10 Under procurement, when we went with them,
11 they admitted that they did not even know if there
12 was any minorities that were serving their company
13 to any degree and particularly African Americans.
14 And Detroit representatives 75 percent African
15 Americans. We were very concerned about that.
16 The CEO at that time put it as a major
17 objective for him to increase that, and we worked
18 with them, and they created a division called the
19 Minority Procurement Division and appointed a
20 person there that was very supportive in the
21 community. And as a result of that, they have
22 increased that minority procurement and now has
23 become a model that is used throughout our
24 grievance with other financial institutions, and
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1 that is used throughout the country in setting up a
2 department that does procurement.
3 In employment, we're very pleased that
4 they have one of the highest levels of senior
5 management that there is in the banking community
6 in Detroit and as we understand across the country
7 and they have promoted people from within and
8 brought in others in order to have a diverse type
9 of senior management and unemployment level also.
10 We think that has been very helpful.
11 So what we believe is that this merger is
12 something that is happening throughout the city.
13 It's something that is probably going to happen
14 even more so in the future.
15 And what is important is that we're going
16 to have to -- they are going to have to understand,
17 Banc One as well as First Chicago NBD and those
18 entities, that it is important to work with all the
19 communities that have come out here and expressed
20 some concerns as we were able to do in Detroit by
21 coming together and meeting on a regular basis. We
22 think that they will be able to achieve some of the
23 similar goals that we've been able to do in Detroit
24 with NBD. And we think that those are very
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1 important goals.
2 Some of the things that we think are going
3 to allow us to make sure that we continue to have
4 representation in Banc One and continue to have
5 some influences there, one, we have met with John
6 McCoy and we have had very enlightening discussion
7 with him about exactly what we want to see happen.
8 There's agreement that we will have one of
9 our members that we select that will be on the
10 advisory board of NBD, their advisory council, that
11 is formerly the board members of NBD before the
12 merger with First Chicago.
13 there's an agreement there will be a real
14 effort on diversity in the senior management of
15 Banc One, and we'll be looking at those numbers on
16 a regular basis whenever we meet with them to make
17 sure there is diversity on all levels of management
18 and that we want to continue to have that type of
19 communication with them.
20 And we feel confident that NBD has agreed
21 and have said -- it has been a good business
22 decision to work with us. It has increased their
23 time and their relationship with the community and
24 they're now recognized as a real leader in the City
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1 of Detroit.
2 Thank you very much.
3 MS. SMITH: Thank you.
4 MR. ANTHONY: Thank you very much.
5 My name is Wendell Anthony. I'm president
6 of the Detroit Branch of the NAACP and also
7 Co-Chair of the Detroit Alliance For Fair Banking.
8 Pardon me if I leave when I finish because
9 I have a flight to catch.
10 I do want to echo some of the concerns
11 that Mr. Parker said.
12 One of the things I think that is
13 important for us to point out is that several years
14 ago, many persons in our community along with the
15 local news media did an expose on all of the banks
16 in the City of Detroit, and we found that all of
17 them were guilty of noncompliance to access to
18 capital, to discriminating against minorities, to
19 not including us in procurement, to not including
20 us in the full benefits of what banks do derive
21 from their communities.
22 So the alliance was formed. The first
23 agreement that we reached with NBD at that time,
24 the National Bank of Detroit, was for $1 million.
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1 Today, we have an agreement with them for $3.25
2 billion for the next three years. That came after
3 negotiations and pain and some gain.
4 We believe that it's important for us to
5 engage in the community. We certainly understand
6 where a lot of people are in terms of their own
7 local communities, but I think it was Diane
8 Karmasol that said one must be true to his or her
9 own reality.
10 Our reality is what we're pointing out to
11 you today, and that is that we have reached a point
12 in Detroit particularly that is driven by First
13 Chicago NBD in conjunction with Banc One with this
14 new agreement.
15 The Detroit Alliance For Fair Banking is
16 made up of several organizations, almost a
17 hundred. We have, in fact, enlisted not only their
18 thoughts but also tapped into the sources and the
19 thinking that our community would have this merger
20 presents an opportunity to open the door even
21 wider.
22 Just recently in Detroit, over 400
23 businesspersons, African Americans 99 percent of
24 them, were at a Detroit sit-in in which we talked
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1 about the debriefing which would be accomplished as
2 a new plan. The new plan accomplishes new homes,
3 commercial development, small business development,
4 hiring of minorities in various areas of the bank.
5 One of the things that we were very
6 concerned about was how this is going to transfer
7 itself, if, in fact, this merger would take place.
8 Would Banc One be driving the other way or would
9 the other way be driving Banc One.
10 We believe that this marriage has some
11 promise to the degree the two cultures can come
12 together and impact each other.
13 We have found that First Chicago NBD has
14 been a good culture and a good experience for us,
15 otherwise, we would not be here talking to you.
16 For so many years, banks have been talking
17 loud and doing nothing. Well, in Detroit, they are
18 now talking loud and they're doing something. The
19 fact that we do have businesses we can point to who
20 have been the recipients of loans from the bank,
21 the fact that we do have African Americans and
22 women and other minorities who have received home
23 mortgage improvements and loans and start up
24 capital is a fact that we can point to.
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1 The fact that in this recent agreement
2 they have predevelopment moneys which allow
3 businesses who are trying to develop a business
4 plan heretofore might not have the expertise to do
5 that, but they can now back out of their grants or
6 their loans.
7 Money for predevelopment is a major, major
8 factor. We've also set up a program where they
9 will now work with the local community colleges so
10 that students can be trained in the banking
11 community.
12 As you may or may not have heard, Detroit
13 is on the cusp of getting casinos in our
14 community. Usually, though, it's the persons who
15 are from banks, the tellers and the financial
16 people, are the first ones that are snatched to
17 work in those industries. What we believe that's
18 going to occur, then there should be a constant
19 flow going into the banking community.
20 So we structured a program whereby through
21 a feasibility study and work with other banks that
22 we can train students in Wayne County Community
23 College and in Detroit at the Lewis College of
24 Business inside the City of Detroit to prepare them
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1 for the future in the banking industry.
2 We believe that while this merger may not
3 be perfect, it certainly puts us in a situation of
4 being able to impact and to influence the bank, and
5 we believe that in other communities, if they
6 begin -- and I'm sure they are already -- doing the
7 same types of things that we are doing, and perhaps
8 we can loan some expertise to them in some other
9 areas. We'll be glad to do that. There will be
10 some new pavement that will be open to all of us.
11 We support the merger. It's drawn from
12 our experience which to us has been a good
13 partner. We believe through their impact, Banc One
14 can also become a good partner.
15 Thank you.
16 MS. SMITH: Thank you very much.
17 Mr. Cardona.
18 MR. ANTHONY: Please excuse me.
19 MR. ALVAREZ: Thank you very much.
20 MS. SMITH: Thank you for coming.
21 MR. CARDONA: Good afternoon. My name is Hugo
22 Cardona. I'm the President and Chief Executive
23 officer for SER Jobs Progress National.
24 I'm here to speak on behalf of Banc One
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1 and its merger with Bank Chicago.
2 SER is the largest in serving minorities,
3 especially Hispanics. We empower people to go from
4 welfare to work. We were founded in 1964;
5 therefore, we have been 34 years serving the
6 communities.
7 We were founded by LAUC, the Latin
8 American United Citizens, and the GI Forum, the two
9 organizations that serve the Hispanics minorities
10 and Hispanic minorities for civil rights.
11 Our mission is very simple. We empower
12 the individual to find the skills that they need to
13 be useful to the communities. We give the
14 education, the training, the housing, whatever they
15 need.
16 Our challenge is very simple. We need to
17 empower the 21st Century work force to have the
18 skills in such a way that at this time that we have
19 a good economy, everybody's being hired, but two
20 years from now, if we have organization, they will
21 be the first ones to go if we don't empower them to
22 have the skills to survive.
23 To do that, we have our national
24 headquarters in Dallas. We have 38 affiliates
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1 located in 17 states, the District of Columbia and
2 Puerto Rico. We are in 91 locations. We have more
3 than 180 programs. We serve more than 400,000
4 individuals a year, of which we place more than
5 30,000 in meaningful jobs, meaning jobs beyond the
6 minimum wage with full benefits.
7 This means for the economy between $701
8 billion in purchasing power that these individuals
9 that were on welfare now have as a Hispanic
10 community. Our funding exceeds $68 million a
11 year.
12 To do this empowerment, we have different
13 programs. We have programs like One Stop Career
14 Centers where anybody can come and we will take
15 care of them. We will evaluate their needs and we
16 will find a way for them. We have housing in which
17 we assist minorities to buy their first homes. We
18 have distance learning. Through the computer, we
19 are able to give today from your home Associate's
20 Degrees, K-4 to K-16 education, GED, English as a
21 second language, basic skills, whatever you need.
22 We have different programs for women, for
23 youth, for children. And we have peoples with
24 disability, homemakers that are disabled.
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1 Whatever it is, we take care of our
2 minorities before they are born until they are --
3 until they die. To do that, we have two sources of
4 funding; the government, who take cares of the
5 present. They give us through competitive grants
6 the ability in these locations to serve the needs
7 of the people, but we must take care of the
8 future.
9 And this is where Corporate America and
10 individuals like you come into place. You are the
11 ones who give us the money to develop the things
12 that we need to be better, all the distance
13 learning and all these programs that we need to
14 serve the minorities.
15 And this is where Banc One comes into
16 play. They have been our partners in our housing
17 program. In the last three years, we have placed
18 more than 270 individuals in homes, people that did
19 not have a credit record, people that did not have
20 the down payment. We were able with the assistance
21 of Banc One to put them in homes. Their
22 contribution to our work will be this year more
23 than $100,000 dollars.
24 And we are negotiating right now a million
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1 dollar credit line on what we need to replace all
2 the computers in our network, and we will be able
3 to place the old computers in the homes of the
4 minorities.
5 This is an outstanding record for an
6 organization that is working with us into making
7 this positive.
8 So as I said, look at Banc One as a
9 partner that with this measure we increase the
10 support to the community, but we work for the
11 community in making this possible. So we do
12 support this merger.
13 Thank you so much.
14 MS. SMITH: Thank you very much.
15 Ms. Hunt.
16 MR. CARDONA: And I apologize, but I also have
17 to leave.
18 MS. HUNT: Good afternoon.
19 My name is Gladys Hunt, and I am with the
20 Community Collaboration for Economic Development in
21 Champaign, Illinois.
22 And I'm here to represent the Community
23 Collaboration for Economic Development. It's a
24 relatively young organization. It was initially
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1 convened as an informal community group in June of
2 1997.
3 This group came together to address the
4 needs of the low income and minority community in
5 terms of small business development. It's an
6 informal community group comprised of
7 representatives from the African American business
8 community, from municipal government, nonprofit
9 civic groups like the NAACP and the Urban League of
10 Champaign County, women's business groups and the
11 University of Illinois.
12 In the Spring of 1998, the Community
13 Collaboration for Economic Development was legally
14 incorporated as a nonprofit organization.
15 Our mission is to create an ongoing
16 economic development project to increase the number
17 of businesses within the low income and minority
18 community.
19 The mission is to develop human capital to
20 promote unique ideas through business education,
21 technical assistance and targeted economic
22 development programs.
23 To date, we have graduated one
24 entrepreneurial small business development class
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1 this past spring. We graduated 14 out of 15
2 persons who started in the class. And in the
3 class, people were given technical assistance and
4 business development information.
5 Our next class will start August 29th, and
6 we have 18 people signed up in that class, and we
7 have 28 people on the waiting list to start a class
8 next spring.
9 In addition, this month, we're going to
10 start a support organization to assist not only our
11 graduates but other small business -- other
12 minority and low income business owners, a minority
13 business council of sorts.
14 The project started, as I mentioned, in
15 the Spring of 1997 with a partnership Illinois
16 grant, which is a new funding program through the
17 University of Illinois to encourage the university
18 to become involved in the local community.
19 We received an initial seed grant through
20 that program and we worked with local city
21 government and banks, including Banc One in our
22 area, to receive matching funds to fund the
23 program.
24 At this point, we're seeking -- well,
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1 we've made it to the second round of the community
2 development financial institutions, the CDFI,
3 technical assistance grant, and we're in the
4 process of seeking monies from global banks and
5 from municipal governments to start a revolving
6 loan fund so that not only will we give our low
7 income and minority community technical and
8 business assistance, but we will also be able to
9 help them with financial assistance in starting
10 their business.
11 Now, what does all this have to do with
12 Banc One and the proposed merger? In our efforts
13 to put this community collaboration together, Banc
14 One has been there every step of the way from the
15 beginning. They were at the table at the first
16 meeting that took place in the Spring of 1997, and
17 they've continued to provide leadership on the
18 committee as a whole and in various subcommittees,
19 specifically the Alternative Funding Committee, the
20 Future Funding Committee, the Mentoring Committee
21 and the Small Business Development Workshop
22 Committee.
23 They provided leadership in the form of
24 staff and financial resources. Banc One has led
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1 the way in sponsoring financial -- various
2 financial aspects of the CCED, -- or the CCED --
3 I'm using the initials -- the Community
4 Collaboration for Economic Development Operations.
5 Wherever we needed to partner with financial
6 institutions in continuing and expanding our
7 operations, they've been at the table to help us.
8 For example, when we decided that we
9 needed this revolving loan fund to help fund our
10 small business development class because they did
11 not meet the criteria for some of the traditional
12 business funding, again Banc One staffs were at the
13 table providing that leadership helping us develop
14 new and innovative strategies to bridge that
15 between -- to bridge that gap in meeting the needs
16 of low and income minority business community.
17 Finally, I must add that in working with
18 Banc One in developing this outstanding
19 entrepreneur program for our community with the
20 CCED, this was not my personally first encounter
21 with them, this their proactive -- in what I
22 consider a proactive and progressive stance in
23 reaching out to the low income and minority
24 community.
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1 In 1991, as Assistant Executive Director
2 of the Housing Authority of Champaign County, I was
3 appointed to serve on Banc One's Community
4 Reinvestment Advisory Committee to assist the bank
5 in developing strategies and policies to serve the
6 needs of low income and moderate neighborhoods.
7 I served in that capacity until 1995. And
8 during those four years, I saw Banc One work
9 diligently and proactively to meet the needs of the
10 low income community. And we did that in the
11 housing area, and we're do -- oh, it's expired --
12 we're doing -- I'm sorry -- in the business area.
13 But I just want to say that we at the
14 Community Collaboration for Economic Development
15 wholeheartedly endorse and support the proposed
16 merger between Banc One and First Bank NBD, and we
17 would just -- I would just add that I would --
18 well, my time has expired. I'll stop. I won't go
19 so fast.
20 MS. SMITH: Mr. Smith.
21 MR. SMITH: Thank you. Thanks for letting me
22 come before you here.
23 My name is Charlie Smith. I'm Director of
24 the housing authority in Wilmington, Delaware, and
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1 I was a little nervous and reluctant to come speak
2 when I saw such great opposition to this merger,
3 especially since I'm in favor of -- my agency as
4 well as my community is in favor of the merger with
5 Banc One and FCC. And you ask, well, why?
6 At least we have some people -- at least
7 we're all on the same page in terms of going along
8 with this merger. I think it's going to enhance
9 the relationship that I have established with both
10 banks.
11 My first encounter has been with FCC.
12 Well, FCC has been very creative in working with
13 our community, especially in the public housing
14 arena, to address some of the concerns as ways to
15 employment opportunity, business development and as
16 well as home ownership in our community.
17 And I know Roland Ridgeway, who's very
18 active in our community, who's been a leader in our
19 city with FCC to try to encourage collaboration and
20 partnership not only with communities, but he's
21 also in his efforts to try to get them more
22 involved in the neighborhoods with other banks and
23 pulled together banking interest and collaborated
24 in development programs and activities that have
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1 helped facilitate opportunities of our community in
2 Wilmington.
3 Banc One has been good corporate partner
4 as well as FCC, and that's a good corporate
5 partner.
6 It's not often I've had an opportunity to
7 work with an institution that will come to you and
8 say, look, what can we do to assist you in your
9 efforts in your community?
10 And Banc One took the lead in coming to
11 the Wilmington Housing Authority because the
12 Wilmington Housing Authority has had the
13 distinction of having so many vacant units in its
14 inventory throughout the City of Wilmington,
15 somewhere around 500. And we put up a plan to
16 address those vacant units.
17 And when the newspaper reported our plan,
18 how we proposing to do it, Banc One and FCC were
19 one of the first banks who came in and said what
20 can we do to facilitate and participate in your
21 efforts to address your home ownership as well as
22 your vacant units? One specifically.
23 FCC is right now pulling together several
24 banks in which they're taking the lead on putting
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1 together a $5 million pool, revolving pool we're
2 referring to it as.
3 One of the reasons this pool is necessary
4 for us is because we cannot collateralize our
5 property, our public housing. We can't use it as
6 collateral. This pool will be used to help
7 collateralize some property so we can get some
8 money from private as well as state to help us
9 facilitate elimination of our vacant units that
10 we're having.
11 So FCC has really taken a lead on getting
12 some banks together to be partners with them to
13 help put together this pool of money so we can use
14 to -- acquire some money for us to do something
15 with these units that we have in this old city.
16 Banc One came and said, look, what can we
17 do, how can we be a partner with you to help
18 dealing with not only housing, but what other
19 areas?
20 So we're talking about community
21 development, about funding some programs as it
22 relates to mortgages.
23 Wilmington has a distinction. We have
24 like 54 banks just in Wilmington alone. In our
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1 case, we have so many banks falling on each other
2 to get to do things in the community that we have
3 the luxury, we can almost pick and choose who we'd
4 like to work with, but Banc One and FCC has stepped
5 up to the plate and really has demonstrated some
6 guts in trying to work with public housing.
7 I don't know how often they have an
8 opportunity to do that, but they came to us. They
9 brought the thing to us and say, look, you guys sit
10 down and talk and see where we can help you in your
11 community and facilitate programs and activities
12 that would help enhance.
13 And they have done a tremendous job. one
14 of the things I've asked them to do and consider,
15 personally give me some technical assistance. They
16 took two of my staff people recently, about two or
17 three months ago they had a conference for their
18 staff, Banc One staff, on how to put together
19 packages for development of corporations and
20 housing development, that stuff. And they invited
21 two of our staff to go to Texas to participate in
22 that program.
23 As a result, we're doing a private
24 development on our own where we take one of our
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1 largest high-rises and turn it into a private
2 market venture and using tax credits and all that
3 and provided us technical assistance on pulling
4 this whole process together.
5 So we've had good experience with Banc One
6 and FCC. And I'm kind of surprised that we have
7 such opposition. The relationship we've had has
8 been a positive one. This merger I think is going
9 to enhance the relationship. I've had work with
10 both FCC and Banc One. So I think that merger is
11 going to enhance not only the opportunity for us to
12 do more work in our community and our neighborhood
13 but also is going to help facilitate some greater
14 opportunities for economic development in home
15 ownership as well as community development in our
16 community and neighbors in our community in
17 Wilmington.
18 MS. SMITH: Thank you very much. We'll hear
19 now from Mr. Reid.
20 MR. REID: Thanks very much. I appreciate the
21 opportunity to be here.
22 I'm Jim Reid, President and founder of the
23 Southern Dallas Development Corporation. We're a
24 nonprofit community development financial
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1 institution that concentrates on business lending,
2 and I'm glad to have this opportunity. I'm glad to
3 be where it's a little cooler than Texas.
4 I'd like to provide some background on our
5 organization, talk about our experience with Banc
6 One and draw some conclusions with some of the
7 issues before this group.
8 Our organization, its mission is to assist
9 businesses, create jobs and promote investment in
10 Southern Dallas. Southern Dallas is -- about half
11 the City of Dallas, 45 percent of the population,
12 75 percent of the population, is a minority
13 population, African American and Hispanic, but it
14 only has 13 percent of the commercial tax base, and
15 the median income is about 60 percent of the
16 northern sector, so Dallas is really bisected in
17 terms of our economy.
18 We were created to help create jobs and
19 started out with one loan fund, and now we manage
20 five different loan funds including an SBA
21 microloan program, CDFI-funded fund and indirectly
22 a bank CDC and an SBA community development
23 corporation.
24 With those funds, we've been able to lend
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1 22 million directly, leverage about 27 million in
2 our community, 2,500 jobs where they're needed
3 most, including a thousand jobs in the last two
4 years for a small community-based organization.
5 We did that with the support of partners
6 in the community like Banc One. And Banc One,
7 although they're not the largest bank in our
8 market, they are the largest investor in our
9 multi-bank CDC, and that's especially important
10 because with a community loan corporation bank, you
11 can do things banks cannot.
12 We provide a lot of money in terms of
13 subordinated debt, and that's very important to
14 minority businesses. That's about 70 percent of
15 our portfolio is minority businesspersons.
16 They have participated with us in 29
17 deals, joint and financing where they brought money
18 to the table totaling about 34 million dollars.
19 They provided match to about $100,000 for the
20 Community Development Financial Institutions Funds
21 and pledged 200,000 in match.
22 The underwriter newspaper that we put out
23 every year going through all of the people who
24 receive the Dallas Morning News telling about the
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1 positive features of our community, one thing that
2 we found, trying to promote investment is the
3 negative image of what can happen to low and
4 moderate income communities, so we publish our own
5 newspaper, and we know it's the truth because we
6 write it.
7 They have helped us in terms of providing
8 loan bankers and have helped us in terms of a
9 volunteer member of our board, in fact, our current
10 Board Chairman is a member of Banc One.
11 Now, three issues. Would they be
12 responsive in a new community? They came into
13 Texas and bought a bank there. And they were
14 responsive in our community. Will they lend to the
15 minority community? Our experience in terms of
16 managing a portfolio that's 70 percent has gone to
17 minority borrowers, we believe the answer is yes.
18 And then finally, in terms of an issue
19 before people doing small business lending, right
20 now small business lending has changed dramatically
21 in the last two years, and it's because credit's
22 growing. You know credit's growing if offering
23 lower transaction charges and quicker turnaround.
24 It also means if you don't make the profile, you
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1 don't get money. That's where alternative lenders
2 like us have come in. Banc One has worked with us
3 in two ways. There are people out there that are
4 on the bubble and are not getting funded because of
5 credit.
6 We get referrals from Banc One and we
7 provide an award to one of their staff persons
8 providing the most referrals last year.
9 The second thing I think is more
10 important; they have created a community
11 development lending arm within the bank that has
12 special regulations, special allowances in terms of
13 the time that they can spend with clients and their
14 loan losses they are allowed and so forth.
15 Basically, in this credit storing system,
16 if you're a special kind of a deal that needs more
17 help, you get put to the bottom of the pile. This
18 means that organizationally, they've helped address
19 this just as we have addressed it by delivering
20 alternative products.
21 So we're very positive about this merger
22 because of our experience. People today have had
23 different experience. Our experiences have been
24 positive, and we urge you to support the merger.
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1 MS. SMITH: Thank you very much.
2 Any questions?
3 Then we thank you very much for coming
4 this afternoon. Be sure and give your written
5 statements, if you haven't already, to the people
6 at the registration desk so they can be fully
7 entered into the record.
8 And we're going on to Panel 12.
9 We're going to start with Mr. Bromley.
10 MR. BROMLEY: My name is Charles Bromley. I'm
11 the Director of a statewide fair housing
12 organization called Metropolitan Strategy Group
13 based in Cleveland, Ohio. I also serve as the
14 Chair for the Ohio Community Reinvestment Project,
15 a statewide coalition of community-based
16 organizations committed to fair lending throughout
17 the State of Ohio.
18 Because a picture is worth a thousand
19 words and I've been allocated five minutes, I've
20 prepared some pictures that outline a snapshot of
21 the lending behavior of Banc One and its affiliates
22 in the State of Ohio.
23 Let me first review Banc One's behavior in
24 an area where they are ranked as a very large
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1 volume lender, which is small business lending.
2 They are third in the country.
3 According to Ken Stevens, who is the head
4 of this unit or retail lending, I guess it is, a
5 small business customer doesn't care where the
6 corporate headquarters are. What they care about
7 is local execution, are they doing a job for me, is
8 my relationship manager serving my needs?
9 Apparently, Mr. Stevens forgot to review
10 his small business lending record with Blacks in
11 greater Cleveland.
12 Let me look at some of the statistical
13 data in our first chart, which in theory -- the
14 A.V. crew, if I remember them from junior high,
15 always had problems. Apparently, as adults, we are
16 still struggling with this equipment. Maybe
17 eventually we'll get it right. I don't know.
18 But what you see here in terms of the
19 picture of their lending in census tracts, this is
20 the census tracts of greater Cleveland. There are
21 685 census tracts. There are 185 census tracts
22 that have a minority population of 50 percent or
23 more. The percent of tracts with no Banc One small
24 business loans is 68 percent, nearly 70 percent,
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1 and census tracts that are under ten percent
2 minority, in other words, predominantly white, they
3 have a percent of tracts with no Banc One loans of
4 38.58.
5 Now, when you look at the issue of the
6 next chart which looks at stratification by income,
7 and the percent of tracts with no Banc One loans is
8 65.22. As you go to the upper income part of the
9 chart, you'll see it's 39.86.
10 So this is a bank that has an affinity for
11 wealthy, white census tracts in terms of their
12 small business lending. There is no question about
13 that pattern as it occurs in greater Cleveland.
14 Now, we mapped this data so you can see
15 it, which should be the next -- I don't know if
16 we're on the wrong -- okay. Stop. Okay. There
17 you go. That's fine.
18 This is the map of our standard
19 Metropolitan statistical area. In the middle of
20 the map, there is kind of like a county, and you
21 can't really see it, but it's the white area, and
22 that's the area where there are no small business
23 loans.
24 Cuyahoga County has the largest percentage
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1 of minorities in that statistical area. The area
2 that is predominantly blue is the area that is all
3 white. So you get a sense of where their small
4 business lending is and also where it's not.
5 Next.
6 Now, that's just a highlight of Cuyahoga
7 County. So you can see specifically that in
8 addition to red lining in Cuyahoga County, they
9 also red line the first ring suburbs, which is
10 those integrated communities, that which is closest
11 to the City of Cleveland. I hope a picture really
12 does tell you something.
13 It's difficult with small business lending
14 because you don't know how many loans per tract.
15 All you know is whether they made one or they could
16 have made a dozen. You do know where they made
17 none. So we do have that data there.
18 Next.
19 This is much less clear, I guess, in terms
20 of coming out. This is the data for Cuyahoga
21 County, and the screen on this is low to moderate
22 income tracts. And you can see there's a strong
23 correlation between the tracts and where their
24 loans are.
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1 I realize I have one minute left. Maybe
2 we can flip here to Toledo.
3 It's hard to see, but in the stuff here,
4 you can see this is their market share. Their
5 large product that they have in Ohio is home
6 improvement lending, and as you go into the
7 minority tracts, you find two things: One, the
8 lack of applications and, two, their market share
9 shrinks to zero. This is their major product.
10 They seem to have an affinity to stay away from
11 those neighborhoods.
12 The last one is Cincinnati, and you can
13 see the same pattern is seen there where their
14 applications are very low in minority census
15 tracts, and you can see that their market share is
16 very low in those census tracts and very high in
17 those other tracts.
18 I've included in my testimony -- I just
19 want to take 30 seconds.
20 We have taken our testimony, we have
21 turned it over to the Assistant Attorney General
22 for Civil Rights at the Department of Justice. We
23 hope that they will give a thorough review.
24 We believe there are serious fair lending
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1 issues relative to Banc One in the State of Ohio.
2 And before the Federal Reserve Bank acts
3 on this merger, the Department of Justice should be
4 given the opportunity to completely review the fair
5 lending record of Banc One in the State of Ohio.
6 Thank you so much.
7 MS. SMITH: Mr. McDermitt.
8 MR. McDERMITT: Good afternoon. My name is
9 Matt McDermitt. I'm a Policy Specialist with the
10 Chicago Coalition for the Homeless.
11 The Coalition is a 17-year-old advocacy
12 organization focusing on the root causes of
13 homelessness and working to find permanent
14 solutions to the problem.
15 The Coalition has nearly 15,000 members in
16 the greater Chicago area and nearly 800
17 organizational members, shelters, churches and
18 other organizations serving the homeless.
19 The Coalition has very serious concerns
20 about the proposed merger between Banc One and
21 First Chicago NBD.
22 We understand that Banc One has a very
23 poor CRA record and a wavering commitment to the
24 very important mortgage lending business, very
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1 important to the housing market.
2 In addition, Banc One has refused to
3 negotiate directly with community groups and
4 coalitions. While they maintain all agreements
5 made by other parties to the merger will be
6 honored, there is unfortunately no guarantee of
7 that.
8 All three parties related to the merger,
9 Banc One, First Chicago and NBD, also have less
10 than admirable records of lending in African
11 American and Latino communities.
12 These shortcomings by major market
13 institutions seeking to increase their market
14 dominance have tragic consequences.
15 The lack of capital in many communities --
16 the lack of capital in many communities prevents
17 the creation of new housing and new employment
18 opportunities.
19 While many of these potential
20 opportunities might not directly be available to
21 the people I represent, the absence of -- excuse me
22 -- their absence is the beginning of a spiral that
23 winds up impacting the poorest members of our
24 communities, those who we don't often think of when
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1 we think about banks, but homeless people.
2 Because bank capital is not available to
3 create these opportunities, we increasingly see a
4 reliance on government funding for housing and job
5 creation for middle and moderate income folks.
6 This demand on government resources,
7 usually a successful demand over those needs of
8 very low income folks, truly -- I'm sorry. Lost my
9 place here.
10 This demand on government resources
11 competes against funding for projects for very low
12 income and homeless people which truly cannot be
13 served by market institutions like banks.
14 With 80,000 homeless people in Chicago
15 every year and more children among them every year,
16 we have an average age of homeless people in
17 Chicago and across the nation now of only nine
18 years old. Because we have so many children in the
19 population today, we must have greater commitment
20 from our banks to serve the entire community rather
21 than profiting from creating more disparities in
22 our country. If we do not, the results will be
23 even greater tragedy in the next generation.
24 For this reason, the coalition opposes the
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1 Banc One/First Chicago merger until all parties
2 make direct community investment commitments.
3 Thank you very much.
4 MS. SMITH: Thank you.
5 I'm going to let you say your own name.
6 MR. GIERUT: My name is Father Casimir Gierut.
7 As a consumer seeking banking services, I
8 strongly oppose the proposal by Banc One
9 Corporation to merge with First Chicago Corporation
10 for the following reasons: First, the merger will
11 destroy competition between the two banks.
12 Competition is a financial asset in the
13 favor of all consumers. We have the opportunity to
14 compare different interest rates offered by the two
15 banks. The final decision is in our favor to
16 accept a bank offering a higher interest rate in
17 reference to the purchase of a Certificate of
18 Deposit or to accept a bank offering the lowest
19 interest rate toward a loan.
20 This merger will force the consumer to
21 deal only with one mega bank. Our freedom to
22 choose the other bank will be gone. There will be
23 no alternative but to accept whatever interest
24 rates the bank wishes to offer to the public. That
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1 is not the right way to do business in a
2 capitalistic society.
3 To possess financial power at the hands of
4 few bankers as a byproduct of merging banks into
5 mega banks is to be feared.
6 Secondly, I oppose the merger of Banc One
7 with First Chicago because it will become a huge
8 monopoly.
9 The United States Attorney General, Janet
10 Reno, should file suit, an antitrust suit, against
11 this merger to stop this becoming the biggest
12 monopoly in the United States.
13 Banks are not an agency of the Federal
14 Government which will exempt them from any
15 antitrust laws. Banks are privately-owned
16 financial institutions. The title corporation and
17 the name following Banc One Corporation tells us it
18 is a private corporation. The title again
19 corporation in the name following First Chicago
20 corporation tells us again that this is a private
21 corporation.
22 It is not fair nor just to file an
23 antitrust suit against Bill Gates' Microsoft
24 Corporation merging with another giant computer
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1 corporation because the merger is considered to be
2 a monopoly and not applying the same antitrust suit
3 against Banc One and the First Chicago which
4 obviously is a monopoly.
5 Justice is not served equally in the
6 application of the antitrust laws to private
7 corporations. To allow Banc One and First Chicago
8 to merge into a monopoly is unlawful, illegal and
9 contrary to the antitrust laws.
10 Thirdly, the mergers are not made for the
11 good of consumers. The bottom line is how much
12 profit is made for the good of the bank, and this
13 leads to greediness.
14 I recall standing in line to open an
15 account at the First Chicago. As many tellers
16 there are accounts for so many long lines of people
17 standing patiently to be assisted by the teller.
18 Instead of First Chicago being pleased to see long
19 lines of people, the greedy bank decided to charge
20 a fee of three dollars for a teller's assistance.
21 I heard many complain that the three
22 dollars may be a fee in the mind of the banker, but
23 I call the three dollars an act of extortion.
24 Either you turn over three dollars or you will not
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1 be served by the teller. Such a procedure is
2 extortion and unacceptable in the lawful business
3 world of finance.
4 Lastly and the most important reason why I
5 oppose the merger of Banc One with First Chicago is
6 that this kind of a merger decreases the existence
7 of any growth of banking.
8 In the year 1985, there were 14,480
9 banks. Today, the year of 1998, the number of
10 banks has dwindled down to 9,435 banks and
11 decreasing in number with each new merger.
12 For the power to be vested in the hands of
13 a few bank presidents and bank directors is
14 contrary to principles of capitalism which is the
15 way of life for 231 million Americans.
16 I want to quote Robert Hamphil, the former
17 credit manager of the Federal Reserve Bank of
18 Atlanta, Georgia, who said: "We are completely
19 dependent on commercial banks. If the banks create
20 ample supply of money, we are prosperous. If they
21 don't, we starve. The banking problem is so
22 important that our present civilization may
23 collapse banking unless it is wisely understood and
24 the defects remedied very soon."
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1 Merging of banks is one of those defects
2 will bring about a new kind of slavery. Financial
3 dominance in the hands of a few will create a
4 financial enslavement of people and civilization.
5 And this is why I oppose the merging of
6 Banc One with First Chicago.
7 Thank you.
8 MS. SMITH: Thank you very much for your
9 comments.
10 We'll go to Mr. Kamp.
11 MR. KAMP: On behalf of the Wisconsin Rural
12 Development Center, I would like to thank the
13 Federal Reserve Board for the opportunity to speak
14 with you on the proposed merger of First Chicago
15 and Banc One.
16 We are a 300-member statewide community
17 organization which has worked with family farmers
18 and rural small businesses for over 15 years.
19 Our mission is to support family farm
20 agriculture, rural development and enhance economic
21 opportunities for rural residents throughout the
22 state.
23 Our organization previously submitted
24 formal comments on this application. Specific
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1 concerns cited in those comments included Banc
2 One's low-level of originations to low and moderate
3 income conventional home buyers, its lack of
4 participation in state and federal guaranteed
5 programs designed to assist LMI first-time home
6 buyers, small farms and small businesses, its
7 systematic targeting of loans to upper income
8 borrowers and consequently the bank's disinvestment
9 in low income and underserved rural communities.
10 An analysis of 1997 HMDA and CRA aggregate
11 data shows that Banc One continued to make
12 significant cuts in conventional home ownership and
13 small business originations in our state.
14 Based on deposit share, Banc One is the
15 third largest commercial institution in Wisconsin.
16 Clearly, how it conducts its business and meets
17 reinvestment obligations has a substantial impact
18 on our state's economy and the communities it
19 serves.
20 Changes in lending policies and practices
21 can often have devastating consequences, especially
22 for a state's poor.
23 According to 1997 data, these changes are
24 beginning to occur. Nationally, Banc One is the
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1 second largest home mortgage lender. However,
2 fewer than two percent of all conventional home
3 mortgages are originated by Banc One in our state,
4 and that share appears to be declining.
5 Between 1996 and 1997, conventional home
6 ownership dropped by over 35 percent. At the same
7 time, loans to LMI borrowers were cut by nearly 43
8 percent.
9 In six of the seven MSAs which we looked
10 at, LMI borrowers consistently received a
11 disproportionately low share of one to four family
12 conventional home mortgages while upper income
13 borrowers consistently exceeded MSA share averages.
14 Banc One also accounts for significant
15 business lending in the state. The bank is the
16 third largest business lender in Wisconsin with 2.8
17 billion in loans outstanding. However, according
18 to FFIEC small business data, substantial cuts were
19 also reported in 1997. Business originations
20 declined by nearly 21 percent, over $90 million
21 from the previous year. Over one-third of those
22 cuts were to businesses with gross revenues of less
23 than one million.
24 Although numerous studies have stressed
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1 the need for small business development in the
2 state, fewer than 49 percent of all loan numbers
3 and 38 percent of all dollar amounts went to
4 businesses with gross revenues of under
5 $1 million.
6 Of particular concern is Banc One's
7 minimal use of state and federal guaranteed
8 programs which are designed to serve the needs of
9 LMI borrowers. In 1997, less than eight percent of
10 all conventional home loans were guaranteed under
11 the Wisconsin Housing and Economic Development
12 Authority's Home Ownership Mortgage Program, the
13 WHEDA Home Program.
14 Banc One's assessment areas include 11
15 rural counties. Deposits within these assessment
16 areas represent 60 percent or 738 million of all
17 Banc One deposits in the state.
18 In our initial comments, we criticized the
19 bank's low-level of lending in rural areas,
20 specifically regarding small farm originations.
21 In their written response, Mr. Steven
22 Bennett and Ms. Julie Johnson stated that Banc One
23 serves a predominantly urban market and they
24 implied are under no obligation to meet all the
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1 credit needs within rural areas.
2 However, we believe this attitude raises
3 serious questions about the bank's lack of
4 commitment in meeting the convenience and needs of
5 communities they are supposed to serve.
6 Are we done? 30 seconds.
7 Simply, a bank cannot ignore credit needs
8 within its delineated area and then originate the
9 same type of loan in other more affluent
10 nonassessment areas. However, according to the
11 1997 FFIAC small farm data, over 21 percent of all
12 farm loan numbers and 23 percent of all dollar
13 amounts were originated outside of delineated
14 assessment areas. The eight highest income rural
15 counties in the state received 78 percent of all
16 Banc One small farm originations.
17 In rural Wisconsin, the percentage of low
18 income families often exceeds rates found in
19 central cities. Clearly, a need exists, however,
20 the bank's use of federal and state programs is
21 minimal.
22 Based on Banc One's CRA performance in
23 Wisconsin, we request that the Board of Governors
24 deny the proposed merger until the bank can take
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1 affirmative steps to address the deficiencies cited
2 above.
3 Thank you.
4 MS. SMITH: Thank you very much.
5 Mr. VanTol is wearing a different hat.
6 MR. VANTOL: Yes.
7 I want to thank you for allowing me to
8 double dip here. Now I get to speak my own piece
9 instead of that of a coalition.
10 My name is Hubert VanTol of Sparta,
11 Wisconsin. I am the President of Bank Watchers.
12 We provide information and other services for
13 community-based organizations on banking and
14 community reinvestment issues.
15 As I said, in speaking for John Taylor, I
16 also serve as a board member of the National
17 Community Reinvestment Coalition.
18 I agree with most of the issues that have
19 been raised about Banc One's deficient CRA record,
20 and since I can't possibly do justice to those many
21 complex issues in this short time, I'm going to
22 focus just on the one issue of how CRA gets
23 interpreted for rural areas.
24 My colleague, Marv Kamp, has outlined some
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1 of the concerns about how Banc One provides
2 services and loans to rural Wisconsin. I think his
3 comments highlight the importance of the Federal
4 Reserve giving more careful thought than it has in
5 the past to how the Community Reinvestment Act
6 should be enforced in rural areas.
7 With mega mergers like these happening,
8 they're transforming the shape of the banking
9 industry, and it's very important that we think
10 these issues through better.
11 What does providing fair access to credit
12 in rural America mean for huge institutions that
13 are buying up the branches and the ability to
14 provide services in suburban and in some cases
15 inner city markets but are leaving the rural
16 counties and particularly the lower income rural
17 counties that span the areas between those urban
18 areas completely out of the picture?
19 You've heard that Banc One is providing
20 agricultural loans at a much higher rate in some of
21 the wealthier rural counties of Wisconsin than in
22 the poorer ones, and you've heard that they've
23 closed a number of rural branches in Ohio.
24 In the enforcement of CRA, what is the
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1 practical difference between an urban bank which
2 draws a bright red line around the low to moderate
3 income census tract in its local assessment area
4 and says it won't provide services and loans within
5 that area and a super regional bank like Banc One
6 which draws an invisible line around the poorest
7 rural counties in the several states that it
8 operates in and then closes branches, does away
9 with services, makes very little proactive effort
10 to meet the credit needs of the residents of those
11 areas?
12 I live in a moderate income section of a
13 rural Wisconsin, and we are seeing the same results
14 of disinvestment that low income inner city
15 neighborhoods have seen for a long time.
16 The subprime and predatory lenders have
17 started opening up shop. It's becoming harder to
18 get loans with a fair rate. Indeed, it's becoming
19 harder to get fair rates on related financial
20 services like property insurance.
21 This is happening because the largest
22 institutions have decided that they can make more
23 money meeting the credit needs of wealthy
24 communities or putting money into derivatives or
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1 whatever the current hot money fad is than they can
2 make in communities like ours.
3 It's not that they can't make money in our
4 communities. They just can't make enough to please
5 Wall Street.
6 As a result, we still have competition in
7 financial services in our communities but not the
8 kind of competition that middle and upper income
9 suburbanites can count on.
10 We have the competition between the very
11 smallest financial institutions, the
12 semi-legitimate, subprime lenders and the loan
13 sharks, but if the Community Reinvestment Act were
14 enforced with rural communities in mind, we could
15 enjoy the same fruits of real competition in the
16 same way that suburbanites do.
17 I think the testimonies of the various
18 people have given you a clear picture of different
19 ways in which community reinvestment needs can be
20 met, the very promising road we can do down, the
21 Chicago and Detroit road, or the negative road that
22 some of the other communities have testified to.
23 So if this mega merger provides for
24 specific agreements with measurable and reasonable
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1 targets similar to what the Chicago Reinvestment
2 Coalition negotiated with First Chicago for each of
3 the urban and rural sections of the state, most of
4 us wouldn't be here today. Most of my colleagues,
5 I'm sure, would watch such a merger happen without
6 the outrage that we feel now.
7 In this case, however, it seems clear what
8 the dominant philosophy that survives in the
9 surviving bank will be.
10 So we ask you to go ahead and make our
11 day, surprise us and do the right thing.
12 MS. SMITH: Thank you very much. Thank you
13 very much for coming.
14 MR. ALVAREZ: Can I ask a quick question? I am
15 sorry.
16 Mr. Kamp, and Mr. Bromely in particular,
17 you had further remarks than the time allowed and
18 you had a lot of statistics. Are all of these
19 statistics in your packages and explained in the
20 material?
21 MR. KAMP: Yes.
22 MR. ALVAREZ: And the numbers that you put
23 together for your comparisons of loans in low to
24 moderate income neighborhoods versus other areas,
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1 is that based on number of loans or dollar amounts
2 or --
3 MR. KAMP: For my analysis, both number and
4 dollar.
5 MR. BROMLEY: We had numbers.
6 MR. ALVAREZ: And you used the numbers?
7 MR. BROMLEY: Yes.
8 And ours, the home improvement lending was
9 aggregated. We rolled up all the Banc Ones in Ohio
10 and made one master file. So they have a number of
11 Banc Ones, and we put them all together. I think
12 corporately, they rounded them up in
13 '97 so you can see it, and it's applications and
14 then it's market share.
15 MR. ALVAREZ: Thank you very much.
16 MR. KAMP: Market share is also.
17 MR. ALVAREZ: Okay.
18 MS. SMITH: All right. We are ready to start,
19 Ms. Carrillo.
20 MS. CARRILLO: Thank you. My name is Rita
21 Carrillo.
22 MS. SMITH: Oops, oops, I guess we're not
23 ready.
24 MS. CARRILLO: My name is Rita Carrillo. I'm
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1 the Executive Director of Neighborhood Housing
2 Services of Phoenix.
3 The NHS of Phoenix is a nonprofit
4 organization founded in 1975 and is dedicated to
5 neighborhood revitalization through the creation of
6 home ownership opportunities for low and moderate
7 income families.
8 To accomplish this, the NHS provides home
9 buyer education and counselling, develops new and
10 rehabilitated, affordable single-family homes and
11 develops flexible mortgage financing programs to
12 meet the credit needs of low and moderate income
13 borrowers.
14 In the last three years, the NHS of
15 Phoenix has provided home buyer education to over a
16 thousand families, created 251 new homeowners and
17 developed 30 affordable new single-family homes for
18 a total community investment of over $17 million.
19 I mention this because Banc One Arizona
20 has been a strong and long-standing partner of the
21 NHS in all of these endeavors.
22 Banc One and its predecessor, Valley
23 National Bank, have been leaders in corporate
24 support for community development in the Phoenix
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1 Metropolitan area. And in the Phoenix area, this
2 is very significant because we are not headquarters
3 to many major corporations and banks have
4 traditionally been the corporate leaders in our
5 community.
6 Banc One is the NHS's single largest
7 financial contributor and a major contributor to
8 numerous other community development efforts in the
9 City of Phoenix. It is also exemplary in the
10 leadership provided by top management on important
11 community issues.
12 Banc One Arizona's CEOs are and have had a
13 tradition of being active members of the
14 community. They volunteer their time and resources
15 to organizations and initiatives for the betterment
16 of the community. This includes issues such as
17 mass transportation programs, homelessness and
18 public education programs. This commitment to
19 volunteerism filters down to all levels of the
20 bank.
21 As the largest bank in Arizona, Banc One
22 sets the tone and level of commitment provided by
23 the other financial institutions in the state. For
24 example, the NHS of Phoenix recently launched an
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1 effort to create a second mortgage loan pool that
2 would provide below-market interest rate loans to
3 low and moderate income families. Banc One was the
4 first to make a verbal commitment for a major
5 investment in the loan pool. With that commitment,
6 the other banks at the table quickly signed on as
7 well.
8 The current Banc One Arizona CEO, Michael
9 Wellborne, is a member of the NHS Board of Trustees
10 and as such assists the NHS by soliciting other
11 corporate support for our programs.
12 Banc One staff sit on the NHS Board of
13 Directors and participate on the NHS Loan
14 Committee.
15 As mentioned by others testifying here
16 today, of most importance to a community is a
17 financial institution's approach to community
18 development and corporate social responsibility.
19 Banc One has always sought to be
20 knowledgeable on community issues. It is an
21 approach that seeks to understand diverse
22 perspectives and respond to rather than dictate
23 community needs and priorities.
24 Of significance to the nonprofit and
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1 minority communities in the City of Phoenix and to
2 me personally was my appointment four years ago to
3 the Banc One Arizona Corporate Board of Directors.
4 Of its own accord, Banc One chose to
5 become the first and still the only major bank or
6 any bank in Arizona, in the state, to appoint a
7 representative of a nonprofit community development
8 organization and a minority woman to its legal
9 Board of Directors.
10 With the continuation of this commitment
11 and this approach to community activism and
12 development, the merger of Banc One and First
13 Chicago NBD will create a stronger bank and, thus,
14 should bring additional resources and stability to
15 the community development efforts in the City of
16 Phoenix.
17 As a result, the NHS of Phoenix
18 anticipates a continued and strengthened
19 partnership with the post-merger Banc One.
20 Thank you.
21 MS. SMITH: Thank you.
22 And we'll go to Ms. Coleman.
23 MS. COLEMAN: Good afternoon. My name is Marva
24 Coleman. I am the Executive Director of the Five
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1 Points Business Association in Denver, Colorado.
2 We are a nonprofit organization that has
3 been founded since 1963. We promote economic
4 development in our area. Also, we do business
5 counselling, special events, business improvement,
6 marketing and we provide economic development in
7 our area.
8 The demographics of the area that I do
9 work in is 65 percent African American, 35 percent
10 Hispanic and Asian.
11 The area that we work in, that I work in,
12 is a seven-block area that is very important to
13 keep because it's the only African American strip
14 that is left in Colorado that is seven blocks
15 long. It has restaurants and it provides many
16 entrepreneurs that are minorities, and we need to
17 keep that alive.
18 One of the roles of Banc One is to provide
19 financial support for my office. Because we're
20 nonprofit, it's very difficult to find funding, and
21 Banc One has provided this kind of support for six
22 years.
23 They provide things such as technical
24 assistance. We have Ma and Pa restaurants,
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1 existing business, new businesses that really does
2 need technical assistance. They provide
3 scholarship funds for us. They provide a lot of
4 funding for an event that we put on in Colorado, in
5 Denver especially, called Juneteenth. And this
6 year, we were able to provide a huge, huge number
7 of support. 180,000 people went to our Juneteenth
8 event, which has made us larger than Texas, which
9 was very interesting.
10 They also provide banking education, which
11 means that they come into our establishment,
12 provide classes.
13 One of the very, very important things
14 which I mentioned before is the scholarship
15 program. We have given over $100,000 worth of
16 scholarships, and without Banc One's support, we
17 are not able to do this. And it's very important
18 for the education of the African Americans, Asian
19 and Hispanics in our area.
20 I would like to at this time support the
21 merger because Banc One is one of the banks that's
22 always been in our corner. They've always provided
23 services for us. We can call on them at any time.
24 They've been there.
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1 We also have an employee that is on our
2 board, and that is very important. She keeps us in
3 line, she supports us tremendously and makes sure
4 that we are on target and also makes sure that we
5 know exactly what's going on in the banking
6 industry.
7 I thank you very much for your time.
8 MS. SMITH: Thank you, Ms. Coleman.
9 Mr. Fairfield.
10 MR. FAIRFIELD: My name is Steven Fairfield.
11 I'm the Executive Director of Fifth Ward Community
12 Redevelopment Corporation in Houston, Texas, a
13 resident-founded and resident-governed CDC in
14 Houston's lowest income community and the home of
15 Barbara Jordan, Mickey Leland, George Foreman and
16 other trailblazers in the African American
17 community.
18 I agree with my colleagues that public
19 subsidy in the form of Federal Deposit Insurance
20 creates an obligation to provide a corresponding
21 public benefit and that too much industry
22 consolidation can adversely affect the scope and
23 depth of investment and credit available in low
24 income communities.
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1 However, I am here to testify that Banc
2 One has delivered the goods in our community and
3 their entry into the Houston market earlier this
4 decade through the acquisition of an old Texas
5 institution served to expand the scope and depth of
6 investment and credit available in our community.
7 Our first experience with Banc One in 1991
8 was not a positive one with the mortgage shop
9 saddled with peculiar southern operating practices
10 remaining from the institution they acquired
11 previously in Houston.
12 After complaining about these practices,
13 Banc One instituted a housecleaning resulting in
14 the creation of the city's friendliest mortgage
15 shop for our low income clients, something that was
16 later copied by other local lending institutions.
17 The bank has subsequently donated
18 furniture for our offices, provided general
19 operating grants to us, offered us construction
20 lines of credit, financed a neighborhood finance
21 center on an environmentally troubled tract of land
22 will feature an electronic banking kiosk for Banc
23 One, as well as a roaming loan officer, a small
24 business center, consuming credit counselling
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1 services case manager, policed storefront, new home
2 ownership center and a one-stop insurance center.
3 The bank has also offered competitive
4 investment and mortgage financing for a mixed use
5 retail and residential project we have under
6 construction. In fact, unfortunately, the bank has
7 offered us so much credit that we haven't been able
8 to use it all because we have a policy of working
9 with multiple lenders, but they're always there
10 with an offer for us when we have a new project.
11 As an advocate six years ago, I and four
12 Texas colleagues formed the Texas Housing Finance
13 Corporation to raise investment equity for
14 hard-to-do affordable housing transactions that
15 were small or rural or had special uses and were
16 more difficult to originate.
17 Banc One was our first multi-million
18 dollar investment commitment for that fund and has
19 continued as a lead investor in subsequent funds,
20 and they are now entertaining an investment in a
21 new venture capital fund we have created in Houston
22 to invest in minority-owned businesses in Houston's
23 inner city.
24 In short, seven years ago, we were a CDC
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1 on paper only. Since that time, we have developed
2 over 300 units of new rental affordable housing,
3 nearly a hundred scattered site homes, over 200
4 senior home repairs and improvements, two
5 neighborhood clinics, a Head Start center, a
6 finance center, a policed storefront, the equity
7 funds I mentioned and other economic development,
8 public safety and beautification initiatives.
9 Through this time, Banc One has been the
10 best top-to-bottom person who's committed to what
11 we're trying to do in Houston's lowest income
12 community of banks that are not based in our city.
13 And we haven't, in fact, been able to use all of
14 the resources that they have offered to us.
15 So I speak here in support of what Banc
16 One has done in our community for our low income
17 residents.
18 Thank you.
19 MS. SMITH: Thank you very much.
20 We'll go to Mr. Garcia.
21 MR. GARCIA: I want to first thank you for the
22 opportunity to come here today before you. I'm the
23 past president of the Indiana Hispanic Chamber of
24 Commerce.
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1 I was the president for five years and
2 have a long relationship with the Banc One
3 organization. And fortunate enough, we have a
4 relationship with NBD and First Chicago NBD, so we
5 have the best of both worlds in Indianapolis.
6 I've heard a lot of opinions and
7 definitely a lot of facts here today, but I can
8 only speak in regards to Indianapolis and the
9 Indiana community.
10 Banc One and First Chicago NBD continue to
11 provide us with leadership and support within our
12 community.
13 I have been involved in three mergers
14 individually and as the representative of the
15 Indiana Hispanic Chamber of Commerce, and some of
16 them have been very uncomfortable, and I would say
17 that the last one -- maybe we're getting it down
18 now, but it has it has become more comfortable.
19 And through those mergers, the success has
20 been primarily dependent upon maybe three things,
21 and one is definitely communication with community,
22 commitment to that community. And probably most
23 important is the adherence, if you will, or
24 maintaining of the current leadership.
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1 Our leaders, our bank leaders, the bank
2 leaders from Banc One and NBD in Indianapolis,
3 Indiana continue to fight, continue to promote the
4 involvement in our community of Indianapolis.
5 Many of those founders or I would
6 primarily say Andy Payne and Joe Barnett, who are
7 the leaders there in Indianapolis founded many
8 minority and women-owned minority programs that
9 still live today, and these are programs that have
10 been in existence for ten or more years.
11 So with the culture that we have received
12 in Indianapolis, it's been very positive in
13 strengthening all through the mergers that we have
14 experienced.
15 The merger of First Chicago NBD and Banc
16 One can propose success or failure. It's really
17 dependent upon, again, the continuity of the
18 culture and the individuals that stay within that
19 area. And that's why we are cautious but we are
20 confident that NBD, First Chicago NBD -- there's so
21 many names, I can't get them all out -- and Banc
22 One will be positive to the communities that we
23 work in and have.
24 I can say a few things about the Hispanic
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1 Chamber of Commerce and my company. I'm President
2 of GM Construction in Indianapolis, Indiana, but I
3 take a very proactive approach within the community
4 that we work in.
5 First Chicago and Banc One and NBD
6 continue to support organizations like statewide
7 certified development corporations which provides
8 funding and guidance and leadership to small
9 businesses.
10 They also provide leadership and
11 involvement to the Indiana Hispanic Chamber of
12 Commerce, the Black Chamber of Commerce, also
13 Indiana's Business Development Corp. They supplied
14 us with two million dollars of a loan pool that we
15 could draw on. Our MESBIC, which we call LINKS,
16 which is primarily -- I believe it's quarter of a
17 million dollars and above in loans, they supplied
18 $2 million for that fund also.
19 And again, it goes back to my previous
20 statement, which is our leaders are involved in the
21 Indianapolis community, and that's why we're
22 successful.
23 Banc One has never turned down one of my
24 clients, if you will, or my representatives with
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1 the Indiana Hispanic Chamber of Commerce. I've
2 brought numerous numbers, over 25 people or more,
3 and we have never walked away from the table
4 without some type of positive result.
5 Now, maybe those individuals at that time
6 or those companies could not perform or provide the
7 information needed for that criteria, but we always
8 had a secondary plan, and Banc One stood at the
9 table and stayed there until we came up with that
10 secondary plan. And we thank them for that.
11 And because of that, in Indianapolis, I
12 know that we have in the top 100 companies in the
13 Hispanic 500, we have two of them. And in the 200,
14 we have five of them.
15 So in Indianapolis, which has an Hispanic
16 community of only about two percent, has been very
17 progressive and forthcoming as far as experience
18 and success, and part of that is due to the
19 relationship with Banc One.
20 I would say in closing that the Latino
21 community, Hispanic community, of Indianapolis, we
22 support this merger.
23 We have had individuals that continue to
24 sit on the CRA Advisory Council for Banc One for
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1 the State of Indiana, and they listen to us. They
2 take our recommendations and implement them.
3 Our only concern, again, is that both
4 entities continue with the proactive approaches
5 towards the Hispanic community of Indianapolis and
6 other cities and that the new Banc One, as it's
7 been deemed, is even more sensitive to the needs of
8 our community. So we support it in totality.
9 Thank you.
10 MS. SMITH: Thank you.
11 Ms. Gnau.
12 MS. GNAU: Thank you for the opportunity to
13 speak with you today about our relationship with
14 Banc One.
15 My name is Debbie Gnau, and I'm one of
16 three female owners of the Chesapeake Group in
17 Cincinnati, Ohio.
18 We started the Chesapeake Group in 1994,
19 and we specialize in package designs for consumer
20 package goods companies. Our clients include
21 Hines, Starkist, Jergens, Paragon Trade Brands,
22 Marzetti, Chiquita and many others.
23 Our business has grown from $600,000 in
24 1995, our first full year of business, to
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1 $1.4 million last year, and we're on target to do
2 $2 million this year.
3 We view Banc One as a key partner in this
4 success, our provider of choice. They serve as a
5 lender and cash management provider as well as an
6 important advisor to our company.
7 Our relationship with Banc One began in
8 November of 1994 with a meeting in Cincinnati with
9 Dave Outcalt, a Banc One officer. Dave met with
10 Geralyn Curtis, our president, and reviewed our
11 five-year start-up business plan.
12 Despite limited prospects for any
13 tremendous business from us at the offset, he
14 nonetheless spent several hours with her getting to
15 know our business plan, understanding what we felt
16 we would uniquely bring to the party and
17 understanding our detailed financial assumptions
18 and business plans.
19 They reviewed financing options, cash
20 management details, and importantly, Dave also
21 provided us with a few recommendations for other
22 key advisors, including our attorney who we believe
23 to be one of the best at what he does.
24 We decided initially to self-fund our
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1 start-up, so based on the helpfulness Dave
2 provided, we moved our checking account from
3 Provident Bank to Banc One with our incorporation
4 in January of 1995. We've had our checking account
5 with Banc One since that time.
6 Starting with the day we opened our
7 account, the branch managers have typically gone
8 above and beyond the call of duty. On that first
9 day enabling us to leave the bank with the check we
10 needed to sign our office lease that day.
11 The managers have been consistently
12 helpful and timely with all of our requests,
13 including the time one of us accidently threw away
14 our check register and we had to try and
15 restructure it. Unfortunately, I have to admit to
16 be the one that did that.
17 Finally and very important to us, Banc One
18 has loaned us money to help meet our cash
19 management and growth needs. Kevin Plaugher met
20 with us in 1996 and spent a great deal of time
21 learning about what we do.
22 MS. SMITH: You're fading.
23 MS. GNAU: Learning about what we do.
24 MS. SMITH: That's better.
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1 MS. GNAU: Learning about what we do, what our
2 growth plans were and where we needed help.
3 As a result of our meeting, we were able
4 to obtain both a term loan to fund commuter
5 equipment we needed as we hired additional
6 designers as well as to obtain a line of credit to
7 address the lag in receivables which was growing
8 large. Since that time, we've expanded our line of
9 credit as our business has grown.
10 Wanda Walker-Smith joined Kevin in working
11 with us, too. She, too, has spent a good deal of
12 time getting to know us and our business. She was
13 also kind enough to nominate Geralyn Curtis, our
14 president, for Woman Entrepreneur of the Year,
15 which Geralyn was awarded in June.
16 Wanda has also worked with us to make sure
17 we're aware of and utilizing any specific services
18 that can make our work easier.
19 We also had the opportunity to talk over
20 lunch with Kevin, Wanda and Larry Bradley, the
21 Senior Vice President of the Business Banking Group
22 in Cincinnati, about our needs and to provide our
23 insight for the future in an effort to make sure
24 Banc One has the appropriate products in place for
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1 customers like us.
2 We look forward to working with Banc One
3 as our company continues to grow and appreciate
4 their ability to take time to counsel us on ways to
5 better manage our money and our future growth.
6 Thank you.
7 MS. SMITH: Thank you very much. We'll now go
8 to Mr. Gary.
9 MR. GARY: My name is Printice L. Gary, and I'm
10 the managing partner of Carlton Residential
11 Properties located in Dallas, Texas.
12 Carlton Residential is a for-profit
13 developer and general contractor of affordable as
14 well as market rate housing throughout the State of
15 Texas. Carlton also happens to be a 100 percent
16 minority owned company. I have two other partners
17 in the business.
18 I founded Carlton Residential in 1991, and
19 my first transaction was the acquisition of a
20 192-unit affordable housing project in South
21 Dallas, which is predominantly a minority
22 community, and this acquisition was funded by a
23 $2.9 million acquisition loan from Banc One at a
24 time when the banking industry in Texas was pretty
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1 much in chaos. And this kind of marked what I
2 considered to be a truly outstanding banking
3 relationship with Banc One looking at that time
4 going forward.
5 Since that time through different project
6 level entities, Banc One has provided more than $67
7 million in construction, permanent and equity
8 financing for Carlton Residential. This has
9 produced 1,240 units of housing, 740 of which are
10 affordable strictly, rent restricted, and obviously
11 has enhanced the growth of our company.
12 Our relationship with Banc One has been
13 one distinguished by their ability to be innovative
14 and their willingness to venture with us in new and
15 creative development formats and financing
16 structures.
17 By way of example, and I'm going to use
18 two, both are in impacted areas and both projects
19 have public housing projects within a stone's throw
20 of each of these developments. By way of example,
21 consider the Trainmore City Place, 192 units, mixed
22 income, new development in Texas.
23 In this transaction, Banc One provided a
24 $2.5 million bridge loan as well as a $2.8 million
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1 tax credit equity for the transaction.
2 The key element here is that the entire
3 transaction became a reality when Banc One
4 committed early to the transaction at a time when
5 other banks in Texas wouldn't touch a mixed income
6 type project development. As it turns out today,
7 mixed income across the nation is the way of the
8 future.
9 The project was very successful, and it
10 was so outstanding that we proceeded to Phase 2
11 which included 70 units, and in that transaction,
12 Banc One performed as our permanent lender, and as
13 it turned out, First Chicago was our equity
14 investor and they purchased the tax credits in what
15 turned out to be a pretty seamless transaction.
16 As a second case in point, a local
17 nonprofit community development organization, Maple
18 Avenue Development Corp, in Dallas, discovered a
19 six-acre land parcel in their neighborhood that
20 appeared to be appropriate for multi-family
21 affordable housing production.
22 Carlton combined with Maple Avenue and we
23 got the land under contract, produced a site plan
24 that included 144 affordable units and went out
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1 looking for equity, someone that would partner with
2 us and provide the necessary financing.
3 While this urban neighborhood clearly was
4 improving, the gentrification was showing, because
5 of the presence of the project housing project
6 nearby, most Texas banks wouldn't even take a look
7 at it.
8 Banc One CDC stepped in and after
9 thoroughly reviewing the market with us provided a
10 $1.4 million equity commitment for the project and
11 also provided a seven and a half million dollar
12 permanent takeout through Banc One CDC which
13 supported a seven and a half million dollar
14 construction loan from their local affiliate in
15 Dallas, Banc One of Texas.
16 Believe me, at that time, there's no other
17 bank in Dallas that would have provided that kind
18 of comprehensive commitment for the production of
19 affordable housing.
20 A couple of other points.
21 I really applaud Banc One's approach to
22 community development where they take a partnering
23 approach as opposed to some other institutions
24 forming their own development corporations, and
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1 that partnering approach allows people like myself
2 as well as some of the local community people to
3 build to capacity and to experience and development
4 their companies.
5 Looking forward, Texas is going to
6 probably experience greater growth than most of the
7 other -- many other cities in the nation and
8 thereby create a real need for affordable housing.
9 The way I see it, I think that Banc One
10 has its delivery system already in place. The
11 combination with First Chicago will add more
12 capital and overall provide for more -- 30
13 seconds -- financing for affordable housing in the
14 state.
15 If I could show you just one image, and it
16 just shows the quality that can be produced by
17 local developers if you've got the right kind of
18 financial partner. This is the Trainmore City
19 Place. And without Banc One's help, this simply
20 wouldn't have happened.
21 Now right in that neighborhood is a public
22 housing project. They have applied for Hope 6
23 funding. Together with the development of the
24 Trainmore, which is a real cornerstone that helps
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1 revitalize that neighborhood, hopefully, that
2 entire area will be revitalized.
3 Obviously, I'm very much in favor of the
4 Banc One/First Chicago merger. I think that it
5 will enhance the ability to do more affordable
6 housing in Texas, and hopefully, they will continue
7 their relationship with us.
8 Thank you.
9 MS. SMITH: Thank you very much.
10 Any questions?
11 I have an announcement. Nancy Hayne, you
12 have a fax, if you would stop by the registration
13 table.
14 We'll be starting with Mr. Bellamy, if we
15 can hand him the mic.
16 MR. BELLAMY: Thank you.
17 My name is Paul Bellamy, and I'm with the
18 Coalition for Reinvestment in Lorain County.
19 Lorain County is due west of Cuyahoga County, which
20 is Cleveland, Ohio.
21 I've been asked to read on behalf of some
22 coalition members short portions of testimony which
23 they wanted to enter into the record. I will
24 confine these to two rather short versions and then
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1 get on to my own summarized version of the facts
2 and figures that we feel compel us to come out
3 against the merger with Banc One.
4 The first statement I want to read is from
5 the Board of Commissioners for Lorain County, and
6 in summary, it goes like this.
7 The Board of Lorain County Commissioners
8 supports the Coalition for Reinvestment in Lorain
9 County's efforts to ensure that the results of the
10 above-referenced bank merger are advantageous to
11 Lorain County residents, organizations and
12 political subdivisions. The Board further
13 acknowledges the right and obligation of banks to
14 make sound financial business decisions.
15 However, the Board of Commissioners does
16 not feel that Banc One is committed to serving the
17 low and moderate income communities unless it is to
18 lend money on credit cards or on real estate at
19 higher interest rates to borrowers with credit
20 problems.
21 While this may serve stockholders, as a
22 bank, they are chartered to serve the communities
23 where they do business.
24 It appears that Banc One has been cutting
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1 back on their commitments to the service of our
2 county while refusing to agree to specific goals to
3 improve their performance under CRA.
4 Please encourage Banc One to address those
5 issues prior to approving any merger.
6 And that is, of course, addressed to the
7 Federal Reserve board.
8 I'd also like to read a short portion of a
9 statement from Rebecca Siegal, who is representing
10 or had hoped to represent the Catholic Action
11 Commission of Lorain County. It's a social action
12 office for the Diocese of Cleveland in the state of
13 Ohio.
14 We have some major concerns regarding the
15 increase in mega mergers of our banking
16 institutions and the effects these mergers have on
17 our local communities.
18 When these mega mergers occur, these are
19 local communities urban and rural alike and
20 particularly the areas that are most populated by
21 minorities and low and moderate income families who
22 suffer the most. Branches close, banking services
23 decrease, service fees increase, jobs are lost.
24 It is the stockholders of the banks who
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1 most often have no vested interest in our local
2 communities that make the decisions and the
3 profits, yet in the case of Banc One, depositors,
4 not stockholders, make up 70 percent of the
5 assets. Stockholders make up only about 15 percent
6 on average. It is the stockholders and senior
7 management who walk away with gilded pockets while
8 the depositors receive little or no return on their
9 money.
10 We are scraping the bottom of the pyramid
11 with no return and placing it on the top, and if
12 this trend is allowed to continue, the pyramid will
13 be inverted and most likely tumble because there
14 will no longer be support from the solid bottom.
15 The principal difficulty that the Lorain
16 County Coalition has with Banc One's record is not
17 with actual dollar amounts that have gone into low
18 and moderate income neighborhoods.
19 In fact, I don't know if this is true in
20 other areas, but certainly in Lorain County,
21 there's been a great deal of money proportionately
22 put into the low and moderate income
23 neighborhoods.
24 The difficulty we have is what kind of
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1 money it is and does it, in fact, serve the needs
2 of Lorain County?
3 Lorain County is a Midwestern urban
4 center. Single-family homes are the norm. Home
5 ownership is the way in which a community
6 development strategy would work in these
7 neighborhoods.
8 Now, let's break out all of the money that
9 Banc One claims to be using to meet its CRA
10 commitments.
11 One is the purchase mortgage product,
12 which we herald and we want to encourage them to do
13 more of. Unfortunately, they don't seem committed
14 staying in that market and they don't do
15 proportionately very much of that lending.
16 Where we do see a heavy emphasis on their
17 real estate lending is in refinancing. Refinancing
18 may serve the interest of the particular homeowner,
19 but it does absolutely nothing to increase the
20 value of the homes or to raise the wealth within
21 the neighborhood. In fact, it only inserts a lot
22 more debt on what you might call the neighborhood
23 balance sheet.
24 The positive side of Banc One has to be
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1 mentioned, and that is that they have a strong home
2 improvement product, and in these older 70 to
3 50-year-old houses, that's a very important tool,
4 but it must be recognized that this is a half
5 measure at best when there is a refusal to do the
6 hard work included in a meaningful community
7 redevelopment purchase 30-year mortgage product
8 that requires meeting cost value gaps and doing the
9 difficult work of underwriting loans to first time
10 home buyers who are most often attracted to these
11 neighborhoods.
12 The other problem with the home
13 improvement product is most of it is sold through
14 their branch network. In Lorain County in the last
15 three years, Banc One has gone from 19 to 4
16 branches.
17 In closing, I just want to mention one
18 last development which we find very difficult, and
19 that is the subprime lending. It has increased
20 from three percent in the low to moderate
21 neighborhoods in '93 up to 15 percent of the total
22 lending going on in the low to moderate
23 neighborhoods now.
24 Thank you.
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1 MS. SMITH: Ms. Jones.
2 MS. JONES: Good afternoon. My name is Rebecca
3 Jones.
4 I guess I need a microphone.
5 My name is Rebecca Jones. I'm a resident
6 of Wellington, Ohio, which is the southern part of
7 Lorain County and is a rural area.
8 My remarks at first were intended to be
9 addressed to the Wellington area, however, I'm also
10 the Director of a nonprofit CDC in the City of
11 Lorain, and the Mayor of Lorain has asked me to
12 make some remarks on his behalf today, so my
13 comments will really be coming from the Mayor's
14 testimony or letter to you, which is attached to my
15 comments.
16 The City of Lorain is about 25 miles west
17 of Cleveland on Lake Erie. It is a Rust Belt
18 city. It's a city of 71,000 people, 30 percent of
19 whom are minorities, and they break down 13 percent
20 African Americans, 17 percent Hispanic.
21 The citizens of Lorain, Ohio, which is a
22 community of mostly low to moderate income
23 families, have traditionally supported homegrown
24 financial institutions such as Lorain National
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1 Bank, Central Trust Bank, First Federal Savings and
2 Loan, Citibank, EST and Lorain County Savings and
3 Trust.
4 Mergers and acquisitions of the 80s and
5 90s have introduced a new banking trend, the
6 establishment of regional banking organizations in
7 the City of Lorain.
8 This trend was substantiated by the
9 following mergers and acquisitions: Elyria Savings
10 and Trust being acquired by First National Bank of
11 Akron which created First Merit bank. Central
12 Trust Bank being bought by Banc One. Citibank
13 closing all branches. Lorain County Savings and
14 Trust Bank acquiring a number of Central Trust Bank
15 locations and changing their name to Premier Bank
16 and Trust.
17 Most recently, in May of 1998, First Merit
18 and Premier Bank merged, closing 17 branches,
19 including two in the City of Lorain, and laying off
20 approximately 200 people.
21 You should be aware that the City of
22 Lorain has lost additional banking service
23 facilities and their related jobs. Banc One has
24 just closed two branches serving the low to
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1 moderate income neighborhoods of South Lorain, and
2 the Cityview, Sheffield areas. They were closed in
3 late Spring and early Summer, 1998, and these
4 closures parallel the proposed merger of Banc One
5 and First Chicago NBD.
6 The significance of these closings is
7 monumental, as they send a strong signal to the
8 city's low income population that even with Banc
9 One deposits at branches serving Lorain exceeding
10 $85 million, their business is not important.
11 Since the branches closed serve many low
12 to moderate income families who do not have
13 adequate transportation, many people will have
14 trouble getting to the remaining Banc One
15 branches.
16 According to Community Reinvestment Act
17 regulations, banks are supposed to reinvest in
18 communities like Lorain where they obtain their
19 deposits.
20 Banc One bought approximately 15 Central
21 Trust Bank branches in the 1980s, and today, they
22 have eliminated numerous jobs and closed or sold 12
23 branch locations, leaving three branches serving
24 Lorain. This appears to be disinvestment rather
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1 than investment.
2 Further, the City of Lorain has learned
3 from Kathleen Kaufin, the CRA Vice President of
4 Banc One, that branch locations ideally need to
5 have 35 to $40 million in deposits to meet Banc One
6 guidelines for profitability.
7 If Banc One continues to follow this rule
8 after the merger, it is likely that another branch
9 in Lorain will be closed. This would leave only
10 two locations in the city and only one of those
11 serving a low to moderate income area.
12 The City of Lorain has joined the
13 Coalition for Reinvestment in Lorain County and
14 other community groups from across the nation to
15 closely examine this merger which will result in
16 disinvestment in central cities and urban areas
17 across America, lost jobs, vacant and abandoned
18 buildings and an inaccessibility to convenient
19 banking services and products.
20 Ultimately, if uncontested and not
21 addressed by the Federal Reserve Bank, this mega
22 merger and acquisition progress will lead to the
23 erosion of high-quality, competitive banking
24 services only to be replaced by nonpersonal,
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1 high-cost electronic banking services provided by a
2 few large banks with almost no competition.
3 Working class families and individuals
4 such as the citizens of Lorain do not need to have
5 their disposable income further eroded due to
6 higher banking fees and costs.
7 Without a commitment to future
8 participation in our community along the lines
9 outlined above and as previously detailed in our
10 meeting with Banc One, it is not in the best
11 interest of the City of Lorain to endorse a mega
12 merger such as that being proposed by Banc One and
13 First Chicago NBD.
14 Thank you.
15 MS. SMITH: Thank you.
16 And we'll go to Ms. Rangan, who is
17 speaking on behalf of Inner City Press Community.
18 MS. RANGAN: Good afternoon.
19 My name is Rashmi Rangan, and I'm reading
20 the written testimony prepared by Matthew Lee,
21 Executive Director of Inner City Press Community on
22 the Move and of the Inner City Public Interest Law
23 Center, together, ICP.
24 ICP on April 28th filed a 38-page protest
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1 to this application along with Black Citizens for
2 Justice, Law and Order of Dallas, Texas and the
3 Delaware Community Interaction Council.
4 We are opposed to this proposed merger
5 primarily due to Banc One's continued predatory and
6 discriminatory practices through its Banc One
7 Financial Services subsidiary and due to the
8 anticompetitive and branch closing effects the
9 proposed merger will have, particularly in Indiana.
10 The commitments that First Chicago has
11 made in Detroit and Chicago do nothing to address
12 these issues, nor is Banc One's divestiture
13 proposal to sell off certain branches in Indiana
14 sufficient.
15 The proposed merger would also result in
16 substantial branch closings, making all the worse
17 Banc One's cynical manipulation of the target First
18 Chicago to make lending pledges in Chicago and
19 Detroit but not in the communities that would be
20 most affected by this merger, including through
21 branch closings.
22 In 1997, the Federal Reserve Board stated
23 in an order that it had unresolved questions about
24 the fair lending compliance of Banc One Mortgage
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1 Company and that its approvals were explicitly
2 conditioned on Banc One taking such actions as the
3 Federal Reserve might require.
4 Since then, the Arizona Attorney General
5 has charged Banc One with discrimination as
6 implicitly has HUD in Texas. The Fed has made no
7 disclosure of how or if this important issue has
8 been resolved, but 40 days ago, on July 2nd, we
9 made a request for this under the Freedom of
10 Information Act. The Fed has yet to provide the
11 documents.
12 The written comments we have submitted
13 show that in market after market, Banc One's normal
14 interest rate lenders disproportionately exclude
15 African Americans and Hispanics from credit, while
16 Banc One Financial Services, a high interest rate
17 lender, targets these communities for higher-priced
18 credit.
19 For example, in the Akron, Ohio MSA in
20 1996, Banc One Mortgage Company denied 55 percent
21 of mortgage applications from African Americans and
22 only 17 percent of applications from whites, a
23 denial disparity of 3.24.
24 The mortgage company originated 164 loans
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1 to whites and only seven to African Americans.
2 ICP's comments calls loans to African
3 Americans divided by loans to whites the index.
4 The ratio between BOMC's index and BOFS's index
5 calculated for each market can be viewed as the
6 targeting index.
7 In this particular MSA, for the mortgage
8 company, it was .043, and for the finance arm, it
9 was .193, 4.49 times higher than the mortgage
10 company. In Cleveland, Ohio, 4.47 times higher
11 than the mortgage company. In Dallas, 17.86 times
12 higher than the mortgage company. In Detroit, 5.61
13 times higher. In Gary, Indiana, 5.52 times
14 higher. Milwaukee, 8.53 times higher. These are
15 just examples of what the difference between the
16 two is.
17 The above analysis makes out a prima facie
18 case or red flag that Banc One Corp through its
19 normal interest rate lenders, including Banc One
20 Mortgage, and through its higher interest rate
21 lender, Banc One Financial Services, are engaged in
22 lending discrimination, including pricing
23 discrimination.
24 On this record, the Federal Reserve Board
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1 must conduct on-site fair lending examinations of
2 Banc One financial services.
3 On the current record, this mega merger
4 proposal which would expand Banc One's practices
5 could not legitimately be approved.
6 There are other adverse issues, including
7 the foreseeable loss of various First Chicago
8 programs and Banc One's record in its existing
9 states have been raised by Ohio and others.
10 For all the reasons stated, this proposed
11 merger should be denied.
12 Thank you.
13 And we will submit additional comments by
14 August 20th, 1998.
15 MS. SMITH: Thank you very much.
16 Ms. Sharpley.
17 MS. SHARPLEY: Hello. My name is Adenike
18 Sharpley. I'm a board member of the Zion Community
19 Development Corporation of Oberlin, Ohio.
20 Our target area is the southeast
21 quadrangle of Oberlin, which is a semi-rural area.
22 I am going to talk about the effects of
23 the Banc One merger on Oberlin, Ohio as a resident,
24 from a customer and employee point of view.
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1 The Oberlin Bank Building at 5 South Main
2 Street, Oberlin, Ohio, until the mid 1980s, was
3 primarily one bank. The Oberlin Bank Company
4 founded in 1889 would in 1904 combine with the
5 State Savings Bank and move to 5 South Main
6 Street. That same year, it would be renamed The
7 Oberlin Savings Bank. So for 76 years, the
8 community of Oberlin has had pretty much the same
9 bank.
10 In the mid-1980s, the musical bank
11 management began at 5 South Main Street. This
12 included in 1990 Central Trust, in 1996 Banc One,
13 in 1998 Premier Bank and the Merit transfer on
14 Labor Day of this year.
15 In 15 years, two local banks were lost,
16 Oberlin Savings Bank and People's Bank, with a host
17 of players to become one mega bank, one small local
18 bank, one savings and loan bank which is located or
19 comes its home out of Cleveland and one credit
20 union which is also based in Cleveland.
21 The staff working in these banks feel
22 intense stress from both bank officials, management
23 and customers.
24 The customer does not understand the
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1 changes in rules and regulations. The employee
2 must learn changes from old to new systems,
3 learning new rules and regs from the new bank and
4 absorb job shifts, moving from new offices to
5 maintain jobs while branches are closing.
6 These changes also include shifts in pay
7 scale which would be from lower to higher or vice
8 versa.
9 Most of the people absorbing these changes
10 are at the bottom of the chain, tellers, clerks, et
11 cetera, and most of these are women, head of
12 households or who are major bread winners in their
13 family.
14 From the customers' point of view,
15 customers have to deal with new hours, new staff,
16 new rules, new regulations and usually new banking
17 and service products.
18 The control of these banks are moved
19 further away from the customer. Their bank
20 managers are usually there a few days per week
21 along with what I call the roving loan officer.
22 Usually the new staff is less familiar
23 with the new branch and its customers are not
24 usually hired locally, therefore, do not know the
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1 community.
2 The new staff do not have a connection to
3 the community they serve. They are less willing to
4 cash checks for those without ID because they don't
5 know the customer. And in turn, the staff asks for
6 ID each time they see the customer, no matter how
7 many times they see them.
8 For the customer, this means fewer what I
9 call service value for their dollar, and this is
10 especially true for the low and moderate income
11 individual. This results in a transfer of wealth
12 aware from the community, benefitting the
13 stockholders, as I say, upstairs.
14 Along with no services such as utility
15 bill payment, no product for those who maintain
16 small balances in checking and savings accounts
17 without incurring charges against their account
18 each month, these charges will sometimes result in
19 customers finding that their account has been
20 closed by the end of the month. These customers
21 are usually low and moderate income people, seniors
22 on fixed incomes or those due to disabilities and
23 minorities.
24 At times, the above-mentioned group would
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1 receive unfriendly and discriminating treatment by
2 tellers, adding insult to injury, this classist and
3 racist behavior by tellers who treat their
4 constituency as if they have little or no money.
5 This leads to fewer service values for the elderly,
6 the disenfranchised and the people of color in the
7 Oberlin community.
8 Thank you.
9 MS. SMITH: Thank you very much.
10 And we'll go next to Ms. Tyler.
11 MS. TYLER: Why is it that Banc One has made no
12 commitment to Ohio but they have made commitments
13 in Michigan and Illinois?
14 Why is it that Banc One Financial Services
15 which offers higher interest rate loans has a more
16 aggressive marketing strategy in low income and
17 minority communities?
18 And how is it that the largest Midwest
19 bank can decide to get out of the home purchase
20 business?
21 These are questions on which I would like
22 to focus your attention for the nest few minutes.
23 I am Dawn Tyler representing the Ohio
24 Community Reinvestment Project, a project of the
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1 Coalition on Homelessness and Housing in Ohio.
2 OCRP's mission is to promote investment in
3 Ohio's low income communities and communities of
4 color.
5 Members of OCRP met with Banc One for
6 several months. Constructive dialogue took place
7 with representatives of the bank.
8 On numerous occasions, the bank gave us
9 every indication that they were willing to enter
10 into a community action agreement that would
11 ultimately increase lending, service and investment
12 opportunities within Banc One's service areas.
13 Some areas we were willing to set
14 reasonable benchmarks include home purchase loans,
15 small business lending, multi-family housing
16 investments and lending and community development
17 grants.
18 At the eleventh hour, however, about less
19 than a week before the end of the comment period,
20 the bank decided they did not want to move forward
21 with negotiations, and for those of you that were
22 here this morning, it sounds very similar to a
23 story told by Ted Thomas from ACORN.
24 Banc One's refusal to negotiate a
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1 meaningful community action plan for Ohio raises
2 questions about their commitment to Ohio
3 post-merger. The bank did not operate in good
4 faith.
5 Our primary concern is that this proposed
6 merger could have dramatic consequences for
7 financial services consumers throughout the State
8 of Ohio since the corporate headquarters of Banc
9 One currently based in Columbus will move to
10 Chicago. This merger could result in substantial
11 disinvestment in Ohio communities.
12 My second point is the disparate treatment
13 of African Americans in accessing credit for
14 mortgage loans from Banc One and its mortgage
15 company.
16 Low and moderate income consumers are
17 denied access to mortgage loans more frequently
18 than by other lenders, and Banc One lacks
19 aggressive marketing efforts to African American
20 and low and moderate income applicants,
21 particularly by the bank's affiliates and Banc One
22 Mortgage Company.
23 Rashmi has done a sufficient job of
24 sharing some statistics from Akron and Cleveland,
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1 so I will not repeat those details, but Banc One
2 Mortgage Company does not have an aggressive
3 lending record to minorities and low and moderate
4 income applicants.
5 Banc One Financial Services, the BNC
6 lender, charges customers higher interest rate
7 loans compared to rates offered by Banc One
8 Mortgage Company and is engaged in extremely
9 aggressive marketing practices through direct mail
10 and phone solicitation which targets low and
11 moderate income people in minority census tracts.
12 This is a clear illustration of the
13 predatory lending practices of Banc One Financial
14 Services which disproportionately targets African
15 Americans for higher interest rate credit,
16 originates loans at a higher rate than the mortgage
17 company.
18 The bank should offer A loans to all
19 applicants who qualify, regardless if they come
20 into the bank, the mortgage company or financial
21 services.
22 We encourage the Feds to follow the lead
23 of the OCC as in the case of First Union Money
24 Store and mandate that Banc One offer prime loan
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1 products to all who qualify.
2 Thirdly, Banc One has decided to get out
3 of the home purchase business.
4 It was interesting to hear about the new
5 self-help product that was mentioned this morning,
6 however, historically, the bank has ignored the
7 credit needs of LMI communities. This is
8 unacceptable for a bank the size of Banc One.
9 And my fourth issue relates to small
10 business lending which Chuck Bromley, our OCRP
11 Chairperson, has shared on the previous panel.
12 Time does not permit for me to talk about
13 the over 60 branch closures that have taken place
14 in Ohio or the $8 check cashing fee that's imposed
15 on Banc One customers.
16 In closing, we do not dispute the fact
17 that Banc One, especially the CDC, has been active
18 in areas such as tax credit projects and community
19 development grants to nonprofits, however, there
20 are no safeguards in place to ensure that this is
21 continue after the merger.
22 We ask the bank to make some very basic
23 commitments to minimize the potential negative
24 impacts, and after dragging us along for several
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1 months, they refused, despite the fact that they
2 are planning to honor similar commitments in the
3 communities of Chicago and Detroit.
4 The bank claims that no market will be
5 abandoned and the commitment will continue. If
6 this is the case, why is there such a hesitancy on
7 the part of the bank to put such a commitment in
8 writing?
9 Earlier today, Banc One mentioned one part
10 of their recipe for success is relationships with
11 local partners. How can I as a local partner be
12 part of that recipe for success when I've been
13 kicked out of the kitchen?
14 Please consider carefully the information
15 that has been presented today. I urge the Federal
16 Reserve to postpone the merger until mutually
17 beneficial community action plans have been reached
18 in all of Banc One's markets.
19 Your meaningful intervention can
20 facilitate fair lending, service and investment
21 opportunities in Ohio's low income communities and
22 communities of color that have historically been
23 overlooked and underserved.
24 MS. SMITH: Thank you.
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1 Ms. Walker.
2 MS. WALKER: I'd like to thank the Federal
3 Reserve to have the freedom to speak today.
4 I am Marge Walker, and I'm a resident of
5 the City of Lorain, 30 miles west of Cleveland, and
6 I'm speaking on behalf of the South Lorain
7 Merchants Association.
8 I have been a hairdresser for a long time,
9 and due to situations, I have been had to be
10 retrained because I can no longer stand for long
11 periods of time.
12 My neighborhood is adjacent to an old
13 steel plant that once employed 7,000 men. It now
14 employs less than 2,000 people. Can you imagine
15 what it does to a community?
16 Once Banc One's retail operations have --
17 the severe cutback in Lorain County. We are told
18 that the cutback has nothing to do with the
19 merger. In my perspective, it has everything to do
20 with the merger because that is the trend of the
21 country these days.
22 Money loaning and the -- are joining with
23 the money grabbing businesses. Our Banc One branch
24 that just closed, it has five million dollars in
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1 it. I guess it's not enough money. They says it's
2 nothing personal, but business is business.
3 I would like to talk about trends. The
4 Federal Reserve reports -- own report seems to
5 conclude that small business lending suffers when
6 big banks buy smaller banks.
7 Small bank -- small business lending
8 depends upon relationships with neighborhoods,
9 merchants, and big banks don't look at their
10 operations over the long-term with the investment
11 in the community.
12 We are told that the United States is fast
13 approaching a time when whites will be in the
14 minority. I recently read that the buying power in
15 the Black community has grown recently to 8.2
16 percent in the consumer economy. With this kind of
17 trend underway, how is it that the bottom line,
18 conscientious banks haven't the foresight to
19 actively pursue the growing minority market.
20 If all these bank branches and the lending
21 institutions are, in fact, race neutral, why aren't
22 we seeing fierce competition for the minorities?
23 People forget the depositors contribute
24 more money to the banks than the stockholders, but
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1 every time I turn around, there are always fewer
2 advantages for depositors and more and more for the
3 stockholders.
4 The depositors have fewer banks to go to,
5 fewer hours to get service from and fewer staff who
6 are shifted around in the system so that there is
7 no relationship with the community. Deposits earn
8 less and less interest while fees go up and up.
9 So while some executives get very rich and
10 stockholders look to increase their return on
11 investments and lower returns on their deposits and
12 increased costs.
13 Now banks have made it clear that they
14 don't want to be banks anymore, they want to be
15 stockbrokers, insurance agents, pension advisors,
16 investment specialists, et cetera. They want to
17 cross-sell their customers into every conceivable
18 financial imaginary product except plain,
19 old-fashioned human-oriented service.
20 Just once I would like to see the
21 announcement of another bank merger or acquisition
22 that would conclude with the following sentence:
23 The merger is subject to regulatory and depositor
24 approval.
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1 If depositors had a voice in these
2 matters, maybe the executives, high fliers and
3 golden parachuters would have to promise them
4 higher interest rates on a deposit, lower fees and
5 more locations and longer hours and better service
6 to people.
7 This regulatory body is all that stands
8 between the voice of depositors and the greedy
9 money grabbing depositors -- at depositors'
10 expense.
11 You are duty bound to look at the
12 competition, convenience and the needs of the
13 communities.
14 On behalf of South Lorain Merchants
15 Association, I want to tell you to deal with
16 this -- tell you this deal does not create
17 competition. We need competition in the
18 community. We have an example right now with BP
19 and Amoco merging. We're losing a thousand jobs in
20 Cleveland and the space that it takes for rental in
21 Cleveland.
22 If you continue along the lines of having
23 less competition, there's going to be no
24 competition. How many banks are going to be left
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1 when we get through with all this?
2 As somebody earlier had commented about
3 having 9,000 banks at one time and now it's getting
4 down to less and less, what are you going to do
5 when there's no competition, when there's nobody to
6 go to?
7 That's it.
8 MS. SMITH: Thank you very much.
9 Any questions?
10 MS. WILLIAMS: I've got one.
11 MS. SMITH: Okay. We have a question.
12 MS. WILLIAMS: This is for Mr. Bellamy.
13 You mentioned that subprime lending went
14 from 3 to 15 percent. Was this in Lorain County,
15 and over what period, and was this percentage for
16 one institution?
17 MR. BELLAMY: This is for Banc One. This is in
18 Lorain County only. This is for Banc One.
19 And the financial services subprime
20 lending branch of Banc One just came into the
21 county in '93, and at that time, they had, as I
22 say, only three percent of the total investments in
23 the low to mod areas.
24 In 1996, the financial services branch,
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1 the subprime lender, is up to 15 percent of the
2 residential lending in that same category of low to
3 mod areas.
4 MS. WILLIAMS: Okay. Thank you.
5 MS. SMITH: Thank you very much.
6 I will remind people that you may submit
7 written supplements to your oral testimony by next
8 Thursday, August the 20th. And the information
9 about where to provide them has, I think, been
10 given to you, or you can get them from the
11 registration desk.
12 We're scheduled for a ten-minute break.
13 We're about a half an hour behind schedule. I
14 think we're going to save five minutes by cutting
15 it to a five-minute break, so we'll see you here
16 very soon. And I think the timers are going to
17 time us.
18 (Whereupon, a recess was
19 taken.)
20 (Whereupon, further proceedings
21 were had which are bound under
22 separate cover.)
23
24
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1 PUBLIC MEETING REGARDING THE PROPOSAL BY
2 BANC ONE CORPORATION, COLUMBUS, OHIO,
3 TO MERGE WITH
4 FIRST CHICAGO NBD CORPORATION, CHICAGO, ILLINOIS
5
6
7 Proceedings had in the above-mentioned
8 cause, on Thursday, the 13th day of August,
9 1998, at The Federal Reserve Bank of Chicago,
10 230 South LaSalle Street, Chicago, Illinois, at
11 9:00 o'clock a.m.
12
13
14
15 VOLUME II
16
17
18
19
20 REPORTED BY: Brenda S. Tannehill, CSR
21 LICENSE NO.: 084-003336
22 -and-
23 REPORTED BY: Jeanette A. Sandei, CSR
24 LICENSE NO.: 084-003685
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1 (Whereupon, proceedings were
2 previously had which are bound
3 under separate cover.)
4 MS. SMITH: We're starting with Mr. Ruf.
5 MR. RUF: My name is Fritz Ruf. I'm the
6 Executive Director of Wisconsin Housing And
7 Economic Development Authority and here to testify
8 in support of the merger of Banc One and First
9 Chicago NBD.
10 Wisconsin Housing and Economic Development
11 Authority is a State Housing Finance Authority
12 created in 1973.
13 Our mission is to serve Wisconsin
14 residents and communities by working with others to
15 provide creative financing and technical resources
16 to stimulate and preserve affordable housing, small
17 business and agriculture.
18 One of our oldest and most reliable
19 partners has been Banc One and its predecessor,
20 Marine National Exchange Bank. Together, we have
21 provided millions of dollars of affordable
22 financial resources to Wisconsin home buyers,
23 farmers and small business owners.
24 Consider the following track record
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1 established by WHEDA and Banc One. And incidently,
2 these numbers are not included in the HMDA data
3 that has been referred to previously because we are
4 still in the process of working with the Federal
5 Reserve Bank of Chicago to determine a method to
6 permit this information to be accumulated as the --
7 in the HMDA data to give a more accurate reflection
8 of low to moderate income lending in Wisconsin.
9 1,539 home purchase loans totaling
10 $72,765,867; 41 home improvement loans totaling
11 $350,000; 2 beginning farmer loans totaling
12 $288,000; 133 agricultural production loan
13 guarantees totaling $1,758,000; 10 small business
14 loan guarantees totaling $1,055,000; and 23 small
15 business loan subsidies totaling $683,000.
16 Moreover, Banc One is the first
17 corporation to invest in Wisconsin whole
18 income housing credit development. Today, Banc One
19 has debt or equity investments in 35 Wisconsin
20 communities.
21 While we are pleased with this record,
22 we continue to seek opportunities to do more.
23 Recently, Wisconsin Housing and Economic
24 Development Authority talked to numerous investment
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1 bankers, underwriters, insurance companies and
2 banks in an effort to find some parties interested
3 in providing financial assistance for the
4 development of low-income, multi-family housing in
5 rural areas in Wisconsin where the need is very
6 acute and the ability to meet that need has been
7 very limited by the size of the loans and the
8 inability to acquire adequate capital to be -- who
9 would be attracted to this market.
10 Banc One was the first and only
11 institution to respond to this search of ours. And
12 we have developed with them a corporation known as
13 the Wisconsin Affordable Housing Alliance, LLC.
14 The purpose of the alliance is to provide
15 a permanent loan product for financing of small,
16 nonmetropolitan, multifamily developments that
17 use low-income housing tax credits, to leverage
18 private capital for multifamily development, to
19 fill a market need with a product not otherwise
20 available in Wisconsin, and to create quality
21 rental housing for low to moderate income
22 Wisconsinites in small income markets.
23 Until the alliance, Wisconsin tax credit
24 developers had difficulty accessing long-term
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1 credit. Many relied on short-term organizations
2 with uncertain and unknown future terms. This
3 mismatch of resources to purpose was limited to
4 production of smaller-scale developments that are
5 badly needed in many Wisconsin communities.
6 Through the alliance, developers can now
7 plan their projects with more confidence and also
8 readily assess equity from investors who favor such
9 long-term financing.
10 This program has allowed us to put forth
11 $1,975,000 in three developments containing 92
12 units. Presently, the alliance is committed -- has
13 committed to additional loans of up to $5,124,000,
14 this from a corporation in which we have
15 contributed $1 million of equity, Banc One CDC
16 contributed a million dollars in equity and a line
17 of credit of up to $10 million.
18 We feel very strongly that Banc One has
19 been and will continue to be a very aggressive
20 provider of lending product to low to moderate
21 income families in Wisconsin. And we'd urge the
22 Federal Reserve Bank to favorably consider the
23 merger that is before them today. Thank you.
24 MS. SMITH: Thank you very much. We'll go to
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1 Mr. Barbash.
2 MR. BARBASH: Good afternoon. I appreciate
3 your allowing me to move up. It allows me to get
4 back to Columbus and not miss the Savage Garden
5 concert, which my 15-year old daughter has insisted
6 I be back for.
7 MR. ALVAREZ: Lucky for you.
8 MR. BARBASH: Yeah, lucky me.
9 My name is Mark Barbash. I'm Executive
10 Director of Columbus Countywide Development
11 Corporation. We are what's called a certified
12 development company.
13 We've been in existence since 1981. And
14 our mission in life is to create jobs. We do this
15 by filling the capital access gap for small
16 businesses by providing financing which takes
17 substantially greater risk than conventional bank
18 financing and which may involve substantial
19 technical assistance to entrepreneurs.
20 The purpose of my appearance here today is
21 to strongly support the merger of Banc One and NBD
22 First Chicago.
23 And I do this primarily based upon the
24 record of practical day-to-day partnership that
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1 exists in Columbus between Banc One, and not just
2 Columbus Countrywide, which is the primary
3 small business lender in the area, but a whole
4 range of other economic development, social
5 service organizations, the Ohio State University,
6 and so on.
7 Let me give you four specific examples of
8 Banc One's involvement.
9 The first is their involvement in regular
10 standard small business lending through the SBA 504
11 program. In our business, we make loans -- second
12 mortgage loans to small businesses for real estate
13 expansions so they can grow and hire people.
14 Since 1981, Banc One has financed
15 $60 million in SBA 504 financing in essentially
16 three counties of central Ohio. This is about
17 14 percent of the total investment that our
18 certified development company has made in SBA 504
19 financing. They are the lead bank in this area.
20 Second is the area of microenterprise
21 financing. In 1993, we established a central Ohio
22 microloan program. We did this by using funding
23 from the Small Business Administration, but it
24 required contributions of area lenders to establish
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1 a loan loss reserve fund.
2 Banc One was the first in the gate. They
3 contributed $14,000 to this program. It was a
4 small amount, but since then we've put out just
5 under a million dollars in financing to 150
6 start-up small businesses primarily in the inner
7 city of Columbus. 30 percent of this has gone to
8 minority-owned businesses, 49 percent to
9 women-owned businesses and 40 percent to low-income
10 business owners.
11 The third area is microenterprise
12 training, which you discover when you make loans to
13 start-up small businesses is it's not just the
14 money, it's the ability to run the business.
15 Banc One was the lead founder of a program
16 in Columbus called Fast Track, which was set up by
17 a group called the Ohio Foundation for
18 Entrepreneurial Education, which is a practical
19 day-to-day training program to help entrepreneurs
20 become better entrepreneurs.
21 To date, they've put $65,000 in
22 operational funding in and have funded $15,000 in
23 scholarships. In 18 months, we've basically
24 trained 150 small businesses.
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1 Fourth, recently Banc One participated in
2 the establishment of the Columbus Growth Fund,
3 which is a Mezzanine Financing Fund between debt
4 and equity targeted at minority women-owned
5 businesses in the city of Columbus.
6 Banc One's specific involvement has been
7 $545,000 towards this project. Banc One's
8 involvement is not just money. It's day-to-day
9 involvement by their officers, both line lenders,
10 by senior managers and loan review committees,
11 evaluations of applications. They really put in
12 thousands of hours.
13 Let me stress a couple of points. The
14 first one is our organization, as I've said, is not
15 the only game in town. I represent but one facet
16 of Banc One's involvement in Columbus economic
17 development activities.
18 Second thing is that there's been some
19 concern about the impact of Banc One's local
20 economic development activities by the impact of
21 the merger.
22 In another role, I am the President of an
23 organization called the National Association of
24 Development Companies, which is an association of
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1 groups like ours around the country.
2 And when Banc One would buy a local bank,
3 I would get calls from local certified development
4 companies around the country saying, you're from
5 Columbus, tell us about Banc One. I tell them
6 about my good experience.
7 And with almost universal response, six
8 to twelve months later these certified development
9 companies call back and say, you know, you were
10 right, it took them a little while, but, in fact,
11 they're very active in local economic development.
12 Around the country, they seem to be having this
13 effect.
14 A lot has been said here about the
15 desirability of having special agreements. I want
16 to finish by saying that we don't have a special
17 agreement with Banc One. We don't have a written
18 piece of paper.
19 What we have is a practical, day-to-day
20 working relationship with the bank that caused --
21 has obligations on our part to do our job,
22 obligations on Banc One's part to help do this.
23 And we strongly support the merger.
24 MS. SMITH: Thank you very much.
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1 MR. BARBASH: Thank you.
2 MS. SMITH: Ms. Carlstedt.
3 MS. CARLSTEDT: Is this --
4 MS. SMITH: I'm not sure that that -- here,
5 just use that one.
6 MS. CARLSTEDT: Thank you for this opportunity
7 to address the Federal Reserve Panel. My name is
8 Moria Carlstedt, and I am the President of the
9 Indianapolis Neighborhood Housing Partnership.
10 The partnership was formed in 1988 and is
11 a catalyst and intermediary to support the
12 creation of affordable housing opportunities in
13 Indianapolis, as well as just to support the
14 sustaining of our current affordable housing
15 stock.
16 Through partnerships with Federal, State
17 and local governments, as well as our philanthropic
18 institutions, community development corporations
19 and the financial institutions, the Indianapolis
20 Neighborhood Housing Partnership has been involved
21 in counselling, credit counselling, home ownership
22 training and direct lending through loan pools.
23 Since 1988, we have counselled
24 approximately 5,000 customers. We have conducted
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1 150 classes. And we've been involved in
2 approximately 2,000 units of home ownership
3 opportunity and/or quality rental opportunities.
4 The Housing Partnership has had a
5 long-standing relationship with Banc One and First
6 Chicago NBD. They have been with us since the
7 beginning. Both institutions have participated in
8 two single-family loan pool opportunities, as well
9 as one multi-family loan pool.
10 Banc One and First Chicago represented --
11 First Chicago NBD, excuse me, represented
12 approximately 46 percent of our first loan pool,
13 they represent 40 percent of our existing loan
14 pool and about 66 of our multi-family lending
15 loan pool.
16 The pools have been the primary source
17 of funds dedicated to creating affordable and
18 low-income housing opportunities in Indianapolis.
19 Additionally, among the financial
20 institutions, since 1988 Banc One and First Chicago
21 NBD have been the single largest donating -- they
22 have donated more money to our partnership and
23 supported our operations.
24 They also have membership on our Board of
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1 Directors and have been actively involved in our
2 community in the -- supporting the affordable
3 housing delivery system.
4 The Housing Partnership has been working
5 with Banc One and we have been in communications
6 with Banc One to ensure that the momentum and
7 significant community -- the significant community
8 development activity that has taken place over the
9 years remains at a pace that will meet the needs of
10 our citizens.
11 The Housing Partnership recognizes and
12 respects the business activities or the business
13 reasons for the merger. And we believe that
14 Banc One will, in fact, remain a strong community
15 partner.
16 We are always there in communication with
17 Banc One to remind them that the post-merger bank
18 will need to remain committed to our organization
19 and other organizations such as ours, like the
20 Community Development Corporations and other
21 partners and stakeholders.
22 It is imperative that Banc One remain
23 involved in order to enable us to sustain the pace
24 at which we are developing affordable housing
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1 opportunities.
2 We are communicating with Banc One on a
3 regular basis to remind them of the tremendous
4 financial investment that has taken place in
5 Indianapolis over the years.
6 Our philanthropic institutions and our
7 community development corporations, the government
8 and the private sector, have worked well together
9 and we have made tremendous accomplishments. And
10 Banc One and First National and NBD have been there
11 primarily in the form of the loan pools and by
12 supporting the partnership.
13 We are always reminding Banc One of the
14 need for them to continue to play a significant
15 role. Our community has just completed a task
16 force which will guide our growth and our community
17 in the form of its housing policy for the next ten
18 years. And it is clear that Banc One and all of
19 the financial institutions will be imperative -- it
20 will be imperative that they participate in our
21 growth in the next ten years.
22 Finally, we don't hesitate to remind Banc
23 One and the other banks in our community about the
24 profitable business opportunities in remaining in
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1 partnership and remaining actively engaged in the
2 community development movement.
3 Through our counselling, we refer
4 hundreds, hundreds of citizens to Banc One and
5 other banks in our community who and then -- who
6 then are able to access traditional mortgage
7 products.
8 Banc One and the Indianapolis Neighborhood
9 Housing Partnership have communicated throughout
10 this entire process. And we are optimistic that
11 that commun