Public Meeting Regarding Fleet Financial Group, Inc., and
BankBoston Corporation
Wednesday, July 7, 1999
Transcript
|
Public Meeting Regarding Fleet Financial Group, Inc., and
BankBoston Corporation |
0001
Volume I
Pages 1 to 543
Public Meeting Regarding the Proposed
Merger of Fleet Financial Group, Inc.
and BankBoston Corporation
PRESIDING: Dolores Smith, Director, Division of
Consumer and Community Affairs,
Federal Reserve Board
Held at: Federal Reserve Bank,
600 Atlantic Avenue, Boston, Massachuetts, on
Wednesday, July 7, 1999, at 9:00 a.m.
(Anne H. Bohan and
Carol H. Kusinitz,
Court Reporters)
* * * *
0002
I N D E X
SPEAKER PAGE
Dolores Smith 10
Terrence Murray 15
Chad Gifford 24
Gail Snowden 30
Agnes Bundy Scanlan 38
Terrence Murray 42
Mayor Thomas Menino 45
Congressman Michael Capuano 50
Senator Dianne Wilkerson 54
Jeanette Boone (for Sen. John Kerry) 64
Larry Ferguson (for Congressman
Patrick Kennedy) 72
Attorney General Thomas Reilly 79
Attorney General Richard Blumenthal 84
Denise L. Nappier 90
Joyce Campbell (for Maude Hurd) 102
Angie Wilkerson (for Matthew Christian) 107
Lunita Mustafa (for Elnora Thompson) 108
Jennifer Carter 110
Gwendolyn Jacobs 113
Lori Brown 118
Eddie Collazo (for Lucy Mateo) 122
Karen Miller (for Rose Blain) 124
0003
I N D E X
SPEAKER PAGE
Reverend Norvel Goff 127
Margo Strom 129
Nancy Korman 131
Tandeka Guilderson 132
Deborah Deceatis 134
Greg Williams 136
Romney Resney 139
Richard Lord 141
Martha Jones 142
William Gillison 145
Ruth Scott 147
Peter Cuenca 149
Lyndia Downie 151
Susan Rodgerson 152
Robert Regan 153
Rosa Minayo Durado 155
Lynn Swann 156
Tripp Jones 158
Michael Brown 160
Manuel Mirabal 163
Frank Moy 165
Stephen Dickerman 166
Reverend Al Sharpton 168
0004
I N D E X
SPEAKER PAGE
Martha Yager (for Matthew Lee) 172
Abdul Jabbar Muhammad 176
Ellen Feingold 181
Ken Guscott 186
Ruhi Maker 190
Ruhi Maker (for Rashmi Rangan) 194
Joan Wallace-Benjamin 199
Martha Yager 205
Mr. Albert 207
Bruce Marks 213
John C. Anderson 221
Carol Aranjo 227
Marc Draisen 230
Jeanne DuBois 234
Andrew Morehouse 238
Michael Westgate 243
Susan Worgaftik 246
David Young 250
Elizabeth Webster 258
Denise Flynn 259
Linda Whitlock 260
Jane Smith 262
Paul Guzzi 263
0005
I N D E X
SPEAKER PAGE
Peter Meade 264
Alan Macdonald 265
Robert Justis 266
James Brett 268
Ron Machtley 269
Felix Soto 271
Felix Torres 272
Douglas Johnson 273
Dennis Langley 274
Cherylyn Satterwhite 275
Jeff Campbell 277
Eric Schwartz 278
Aaron Lieberman 279
Carl Axelrod 281
Michael Widmer 282
Edward Lane Reicker 283
David Brown 284
William Farrell 285
Congressman Barney Frank 286
Congressman William Delahunt 295
Sonia Alleyne 305
Thomas Callahan 310
John Lozada 311
0006
I N D E X
SPEAKER PAGE
Rita Gonzales Levine 317
Mossik Hacobian 321
Ozell Hudson, Jr. 323
Cathy Malmstrom 327
Susan Pearson 332
Susan Bodington 337
Brenda Clement 342
Reverend Joseph Washington 345
Ray Neirinckx 352
Mayor Michael Albano 357
Representative Jarrett Thomas Barrios 360
Vermelle Parks 365
Councilor Gareth Saunders 369
John Wilson 377
Samuel C. Hamilton 378
Henry Thomas 380
Sol Soskin 382
Peter A. Gagliardi 385
Richard Kumro 386
Christopher Sikes 388
F. Carlisle Towery 390
Jim Morgo 392
Karen Phillips 394
0007
I N D E X
SPEAKER PAGE
Phillip Morrow 396
Timothy Marshall 397
Keith W. Stokes 400
Jeffrey Pollock 402
David Crowley 404
Anne S. Habiby 405
Jose Champagne 407
Fernando Comulada 408
Peter Fellenz 409
Hierberto Flores 410
Juan Cofield 411
Reverend Frank Kelly 417
Drew Astolfi 421
James T. Haskell 424
Wayne M. Burton 428
Marcia Peters 430
Gail Pisacane 433
Leo Sarkissian 440
Robert Van Meter 445
Andrew Grainger 450
John O'Connor 455
Ned Brown 461
Larry Raff 465
0008
I N D E X
SPEAKER PAGE
James Campen 469
Robert Davis 477
Donald Glass 480
Frank Carvalho 487
Roger Colton 491
Pat Cusick 496
David Harris 500
Reverend William Barnwell 506
Bruce Bolling 509
Alvin Porter 513
Luz Santana 515
Greg Vickers 517
Roger Garvin 522
Vickie Hurewitz 524
Greg Timilty 529
R. K. Schwartz 533
Dennis Flynn 538
0009
1 P R O C E E D I N G S
2 MR. WALKER: Good morning, ladies and
3 gentlemen. If you'll be seated, we'll try to get
4 these proceedings started. My name is Richard
5 Walker. I'm the Vice President for Public and
6 Community Affairs here at the bank. Just a few
7 announcements. If you are a speaker, please
8 register at the speaker's desk if you want to give
9 remarks today.
10 Also if you're a member of the press,
11 please register at the press table. Once you've
12 registered as speakers, please be in the speaker
13 assembly area at least 15 minutes before you are
14 about to come on.
15 Also, the use of cellular or portable
16 phones in the auditorium is prohibited. We want to
17 have these proceedings move as quickly as possible
18 without the distractions of the cellular phones.
19 Thank you.
20 In terms of the restrooms, they're out the
21 door and to your left, and if you have any
22 questions, please see me or any of the staff with
23 the tags on them during the course of the day.
24 Now I will turn the proceedings over to the
25 Presiding Officer, Dolores Smith, who is the
0010
1 Director of Consumer and Community Affairs at the
2 Federal Reserve Board of Governors. Dolores.
3 PRESIDING OFFICER SMITH: Thank you,
4 Richard. I am pleased to welcome you to this
5 important public meeting on the application by Fleet
6 Financial Group to acquire BankBoston Corporation.
7 Richard has already done so, but for the record I'll
8 go ahead and introduce myself. I am Dolores Smith,
9 Director of the Division of Consumer and Community
10 Affairs at the Federal Reserve Board in Washington,
11 D.C. I'll be the Presiding Officer for this
12 meeting.
13 Other members of our panel include two from
14 the Federal Reserve Bank of Boston and two from the
15 Board. First, Boston, we have Bill McDonough on my
16 extreme right, the bank's General Counsel. Then at
17 my extreme left Lynn Browne, Senior Vice President,
18 Research and Statistics.
19 From the Board on my left, Myron Kwast, who
20 is the Associate Director for the Division of
21 Research and Statistics, and to my right Scott
22 Alvarez, who is the Associate General Counsel.
23 We are here today because Fleet Financial
24 Group, Boston, Massachusetts, has applied for
25 approval to acquire BankBoston Corporation, Boston,
0011
1 Massachusetts. When the Federal Reserve considers
2 one of these applications, we look at a number of
3 factors under the Bank Holding Company Act. These
4 include financial issues, managerial issues,
5 competitive issues, and the convenience and needs of
6 the communities affected. In doing so, we
7 particularly look at the record of performance of
8 the parties under the Community Reinvestment Act.
9 The Community Reinvestment Act requires the
10 Board to take into account an institution's record
11 of meeting the credit needs of its entire community.
12 The Fleet-BankBoston application also
13 involves the proposed acquisition or retention of
14 nonbanking companies engaged in activities
15 permissible for bank holding companies. The Federal
16 Reserve Board must determine whether the proposed
17 nonbanking activities can reasonably be expected to
18 produce benefits to the public that outweigh
19 possible adverse effects such as undue concentration
20 of resources, decreased or unfair competition,
21 conflicts of interest or unsound banking practices.
22 The purpose of the public meeting today is
23 to receive information regarding these factors. We
24 will be seeking to elicit this information and to
25 clarify factual issues related to the application.
0012
1 We are very pleased that so many people
2 have been willing to come and testify at the public
3 meeting today. We expect to have more than 160
4 groups and individuals represented during the course
5 of the meeting.
6 And I want to tell you a little bit about
7 the procedures. This is what is called an informal
8 public meeting. Members of this panel may ask those
9 who are testifying about their testimony. This is
10 not a formal administrative hearing, so we are not
11 bound by rules regarding evidence,
12 cross-examination, and some of the formal trappings
13 of that kind of proceeding.
14 As you can see from the agenda, we have a
15 very long day ahead of us and we will need to stick
16 to the schedule closely so that everyone who has
17 asked to offer oral testimony will have a chance to
18 do so at the appointed time. We ask the witnesses
19 to be mindful of the needs of others and to help us
20 stay on schedule.
21 The witnesses on each panel will be
22 expected to stay within their allotted times. We
23 have a signal system that we will be using. We have
24 two timers seated at -- two timekeepers seated at
25 the table, and we will also have panels that are of
0013
1 varying sizes, so that for most of the panels the
2 witnesses will have between three and five minutes
3 to present their oral statements. In a few
4 instances the witnesses have been allotted slightly
5 longer times. The timekeeper will give you a signal
6 generally when there is one minute remaining to
7 speak and another -- do you want to hold that up in
8 both directions so that the people in back can see
9 you. And then there is a second card that they will
10 hold up when the time is up.
11 And sometimes it's hard for the witnesses
12 to be looking at the panel, the Federal Reserve
13 panel, and also to be minding the timekeeper, so
14 there may be times when the witness doesn't notice
15 that the "Please Finish" sign has been held up, in
16 which case the timekeeper will give an audio signal,
17 and we'll try to call your attention to that.
18 You will also see from the schedule that we
19 in several cases do have a rather large number of
20 persons on a given panel, and they will each have
21 about one minute at the microphone. This we have
22 done so that we can provide an opportunity for all
23 of these persons individually to have their say
24 before this public meeting.
25 Finally, there may be some persons who were
0014
1 unable to sign up in advance, so to the extent
2 possible we want to give them a chance to speak as
3 well. We have scheduled toward the end of today's
4 meeting an open-mike period when we will make the
5 microphone available to any member of the public who
6 wants to make an oral presentation, time permitting.
7 Witnesses at this public meeting also may
8 submit a written supplement to their oral testimony,
9 but they must do so by next Wednesday, July 14th,
10 and then the record will be closed. Any written
11 supplements should be directed to Jennifer J.
12 Johnson, Secretary of the Board, Federal Reserve
13 Board, Washington, D.C. 20551. They must be
14 received by 5:00 p.m. Eastern Daylight Time on the
15 14th. Submissions also could be faxed to Area Code
16 202-452-3462.
17 Witnesses, if you have not turned in copies
18 of your written testimony or if you have any other
19 written statement to put into the record, please
20 leave it with the Federal Reserve staff at the
21 registration table. It is important that we get
22 this information for the record. A transcript of
23 the meeting will be available by probably Monday,
24 July the 12th, through the Federal Reserve Bank of
25 Boston and through the Federal Reserve Board.
0015
1 In addition, the official transcript will
2 be available by the close of business July the 14th
3 on the Board's public Web site at
4 www.bog.frb.fed.us.
5 And with that, let's begin the proceedings
6 and have members of our first panel.
7 In the interest of time, what I'll ask is
8 that you each state your name, organization, and
9 then we'll start with that.
10 MR. MURRAY: I'm Terry Murray, Chairman of
11 Fleet Bank Group.
12 MR. GIFFORD: I'm Chad Gifford, Chairman,
13 BankBoston.
14 MS. SNOWDEN: Gail Snowden, Managing
15 Director, BankBoston.
16 MS. SCANLAN: Agnes Bundy Scanlan, Managing
17 Director of Fleet Financial Group.
18 PRESIDING OFFICER SMITH: Mr. Murray.
19 MR. MURRAY: Thank you. I'd like to begin
20 by thanking the Federal Reserve Board for inviting
21 me to speak on behalf of Fleet on our proposed
22 merger. Since the months since we announced our
23 proposal, it has been a very proud and challenging
24 time for all of us at Fleet and Bank of Boston. I
25 would particularly like to thank our employees, many
0016
1 of whom have been working very hard this summer to
2 ensure that our company gets off on the right foot.
3 I know there are many questions and
4 concerns about this merger and we hope to address
5 them today. All of us, employees and citizens
6 alike, are on the verge of ensuring that New England
7 will enter the 21st century with a hometown bank,
8 headquartered in this city, committed to serving our
9 customers and our community.
10 Four years ago when I testified before this
11 Board about Fleet's merger with Shawmut, I spoke
12 about the banking industry's trend towards
13 consolidation and how it affected our relations with
14 our customers and our communities. Chad talked
15 about the same issues when it came time to discuss
16 BankBoston's merger with BayBanks. We took steps
17 then to keep our institutions strong and
18 independent. Neither of us expected to be here
19 today talking about a merger between our banks, but
20 we recognize that this merger is another necessary
21 step to ensure that New England continues to have a
22 major locally-based banking presence.
23 In the past few years we've seen a number
24 of bank megamergers like NationsBank and Bank
25 America, First Chicago and Bank One. The number of
0017
1 commercial banks in the U.S. decreased by a third
2 between 1987 and 1997. The number of bank branches
3 increased by a third over the same period, as fewer
4 banks worked to expand access to service.
5 We've seen consolidation spill across
6 national borders as Deutsche Bank acquired Bankers
7 Trust, and we've seen it in France with Banque
8 Nationale de Paris' attempt to take over Sogen
9 Paribas to create a bank with a trillion dollars in
10 assets.
11 Already in Europe there are far fewer banks
12 than in the U.S., possessing far greater assets and
13 ability with which to compete in the global
14 financial markets. In the U.S. we've also seen
15 interindustry mergers between Citicorp and
16 Travelers, and E-trade and Telebank, as new
17 technologies help to break down archaic barriers
18 between banking and other financial service
19 providers.
20 By increasing in size, banks achieve
21 economies of scale that allow us to invest more in
22 technology and in people so that we can develop
23 superior products and services like banking,
24 brokerage and investment services. With products
25 such as these, we can match the increasingly
0018
1 sophisticated needs of both the businesses and
2 consumers we serve.
3 Our merger also addresses the challenges
4 offered by new kinds of competitors. We no longer
5 compete with just other banks. We now compete with
6 institutions such as Fidelity, Merrill Lynch and
7 more recently with on-line banks. More importantly,
8 this is a merger that seeks to strengthen our
9 national and international competitiveness while
10 making a deep local commitment.
11 Fleet-Boston brings together two of
12 America's oldest and most prestigious banks to
13 create one of the world's premier financial
14 institutions and financial providers right here in
15 the City of Boston.
16 When we announced the merger in mid-March,
17 our slides used the tag line, "One Plus One Equals
18 Greater Than Two." This slide illustrated the idea
19 that our combined institution could do more in total
20 for our customers, communities and stockholders than
21 what the two premerger banks have done separately.
22 This was not a statistical assertion, but rather a
23 broad statement about how the new bank's synergies
24 would make Fleet-Boston more competitive than either
25 bank would be by itself. The merger would enhance
0019
1 our geographic diversification and our role as the
2 premier financial service provider from Bangor to
3 Brazil and from Cape May to Cape Cod.
4 This diversification will help reduce our
5 vulnerability to economic downturns. Those of us
6 who went through the regional banking crisis of the
7 early '90s understand how important both geographic
8 and operating diversity are, and we don't want to be
9 at risk in the event of another economic downturn in
10 a particular region or industry sector.
11 This is indeed a very important time for
12 all of us who live in New England. It is the time
13 for us to secure our economic future by responding
14 to the competitive challenge raised by world-wide
15 banking financial services, consolidation and
16 mergers.
17 While there are many opportunities and
18 benefits to this merger, at the same time there are
19 many concerns being voiced, and I'd like to address
20 them right now.
21 One of the compelling reasons for this
22 merger and why we know it will work is that each
23 company brings certain strengths to the table.
24 Right from the beginning Chad and I understood that
25 we must leverage the advantages of each company. In
0020
1 that spirit we will have BankBoston lead the way in
2 the area of community development. They've done a
3 great job in this area for which they have been
4 rightly recognized.
5 Maintaining our outstanding CRA ratings
6 will continue to be a corporate goal for
7 Fleet-Boston. We will use the BankBoston community
8 development approach, including First Community Bank
9 and the BankBoston Development Corporation.
10 Together we look forward to setting a new standard
11 of community development.
12 We have an outstanding CRA rating in
13 Massachusetts. We have enormous successes and
14 successful partnerships that have worked to create
15 thousands of new homeowners that have invigorated
16 communities. Moving forward, we plan to continue
17 these efforts.
18 We will also sustain our support of
19 neighborhood-oriented banking services, community
20 development programs and the charitable giving that
21 makes this commitment a reality.
22 Gail will speak about these initiatives in
23 detail, but I wanted to state that we strongly
24 believe that our recently announced commitment of
25 14.6 billion dollars is a realistic and achievable
0021
1 plan and one that will increase affordable housing,
2 strengthen small business, and stabilize
3 neighborhoods in our footprint.
4 Moving forward with the new commitment,
5 we'll have an oversight board that will measure our
6 progress in serving community needs, a board with
7 representatives from many of the 125 community
8 groups we consulted when developing this plan.
9 Addressing antitrust concerns, it is
10 important to realize that the proposed merger is
11 more about combining the complementary businesses of
12 Fleet and BankBoston and not about combining
13 competing businesses. In this regard Fleet's retail
14 branch operations extend to many Northeastern states
15 in which BankBoston has no branches, whereas,
16 BankBoston's large corporate banking business
17 extends across the nation, in 23 foreign countries
18 where Fleet has no presence.
19 The merger will also bring together
20 complementary nonbanking lines of businesses such as
21 Fleet's Quick & Reilly retail brokerage franchise
22 and BankBoston's Robertson Stephens, an investment
23 banking business. Where the two banks do overlap,
24 we have proposed a divestiture plan that was
25 intended to preempt any conceivable competitive
0022
1 concerns. With more than 290 branches and
2 approximately 12-1/2 billion dollars in deposits,
3 the proposed divestitures are far and away the
4 largest ever made in the history of U.S. bank
5 mergers. As a stand-alone entity, the divestiture
6 would rank among the top 50 bank holding companies
7 in the nation in terms of small business loans and
8 total assets.
9 Chad and I both grew up with banks
10 headquartered here in our home region, banks managed
11 by people who cared about New England and its
12 people. I don't want my children or my
13 grandchildren living in a New England whose economic
14 fate is dictated from outside the region. I want
15 them to have local institutions that are strong and
16 sophisticated, but that make decisions locally with
17 New Englanders in mind. So many American cities
18 have lost that. There's no longer a major
19 indigenous bank in Los Angeles, none in Miami,
20 Denver, Dallas, Philadelphia or Houston.
21 Panelists, I mentioned at the outset how
22 excited all of us at Fleet and BankBoston are about
23 this merger. I'd like to finish by telling you how
24 much this merger means to me personally. I grew up
25 in New England, went to school here, and I've worked
0023
1 in banking here for almost four decades. This is my
2 home and this is home to Fleet and BankBoston and
3 our tens of thousands of dedicated employees. Our
4 legacy will be a large global institution domiciled
5 in New England with deep community commitments.
6 The financial system that is now taking
7 shape in which the Federal Reserve Board has done so
8 much to make possible is one that reflects the
9 vision and innovation that has made our nation the
10 world's financial leader.
11 I'm also pleased that the House of
12 Representatives last week passed the Financial
13 Services Act of 1999. With the House and Senate
14 both voting to appeal the outdated Glass-Steagal
15 Act, we're a step closer to ensuring that this
16 nation's financial institutions can thrive and
17 compete in the next century.
18 Thank you for the opportunity to speak, and
19 let me also thank the concerned citizens of all
20 viewpoints who cared enough to join us today and
21 share their thoughts.
22 PRESIDING OFFICER SMITH: Thank you. I'd
23 like to remind witnesses that they can submit their
24 full written statement for the record, so that to
25 the extent you can abbreviate your comments, that
0024
1 would be helpful and help us stay within the
2 allotted time for the panel.
3 Mr. Gifford?
4 MR. GIFFORD: That's one heck of an
5 introduction. Thank you. I'll move quickly in my
6 mind. But thank you, Terry. Thanks all for
7 participating with us. I, too, welcome this
8 opportunity to discuss some of the reasons behind
9 and benefits of BankBoston's proposed merger with
10 Fleet. I feel strongly, strongly that this merger
11 is in the best interests of all our stakeholders,
12 our employees, our customers, our communities, not
13 just shareholders. I do not want to pick out any
14 one of those as being more important than any other,
15 but it's no secret -- and we said this in March when
16 we announced it -- the opportunity to preserve a
17 financial service powerhouse in New England was
18 important, and you heard Terry comment on that. I
19 clearly share his passion for preserving the
20 hometown banks in the region, serving the individual
21 cities and communities that make up this great
22 fabric.
23 I, too, am a New Englander. I'm a son of a
24 former New England bank chairman, so the importance
25 of a strong, locally-based banking organization has
0025
1 been with me for a long, long time, and surely, as
2 Terry also referenced, all of us learned a very
3 painful lesson about the importance of a strong
4 banking organization about a decade ago.
5 As Terry has described, the consolidation
6 and convergence are the hallmarks, the realities of
7 financial services today. BankBoston is no stranger
8 to that tradition, having participated in the
9 purchase of BayBanks in '95, Robertson Stephens, an
10 investment bank, in 1998 as part of a continued
11 consolidation in convergence of financial services.
12 I'm moving faster now, Madam Chairwoman.
13 But our proposed merger is not just about size and
14 strength, of course, but quality and commitment.
15 Our first principle from our first conversation has
16 been to preserve the best of Fleet and the best of
17 BankBoston, to build a new company that leverages on
18 respective strengths as well as honors and reaffirms
19 our shared commitments.
20 We will take the best talent and best
21 practices and make them one of everyday standards
22 and go on to build one of the premier financial
23 service organizations in the world and surely one
24 this region will be proud of.
25 The new Fleet-Boston will be one of the top
0026
1 two employers in the region. After the merger,
2 divestitures and consolidations, we will employ some
3 25,000 New Englanders and infuse into this company
4 no less than a billion-five in purchasing power and
5 tax dollars.
6 Acknowledging the painful impact of job
7 loss on some employees, we have pledged to treat
8 affected employees fairly and compassionately. We
9 will provide a generous severance program and a
10 cutting-edge transition assistance program of
11 support for career retraining, starting a business,
12 or doing bank-subsidized community work. At the
13 same time, and I think very importantly, we envision
14 career opportunities for tens of thousands of local
15 residents in a dynamic growth company.
16 The new Fleet-Boston will be a leader in
17 many markets around the world, able to meet the full
18 financial service needs of consumers, businesses of
19 all sizes, large and small, public sector entities
20 and nonprofit organizations. We will be the premier
21 banking franchise in the Northeast, serving eight
22 million households through nearly 6,000 branches and
23 ATMs. Nationwide the new company will serve more
24 than 20 million consumers and will have 450,000
25 small business customers and more than 100 billion
0027
1 dollars in assets under management.
2 When our wholesale banking capabilities are
3 combined, the results will be equally valuable for
4 commercial customers. We're talking about a bank in
5 CNI lending in the top three, the number one bank in
6 commercial field, premier investment bank, top five
7 in cash management provider, the top tier leader in
8 private equity, a strong company based here in
9 Boston.
10 BankBoston's unique Latin America
11 franchise, formed more than 80 years ago, of the
12 commercial needs of New England merchants will
13 continue to put Boston on the world map, helping to
14 forge links between businesses and nations in our
15 hemisphere. The new Fleet-Boston will be able to
16 leverage this connection even further.
17 Finally, Fleet-Boston will have the
18 resources that Terry also referenced to be a major
19 player in E-banking, leveraging, for example,
20 BankBoston's base of a half million on-line banking
21 customers and Fleet's quarter million electronic
22 sure trade customers, again assuring that Boston
23 will participate in this very important growth
24 industry.
25 In short, a local financial service
0028
1 company, competitive across the country and around
2 the world, will be a valuable asset to individuals
3 and communities and an invaluable partner to New
4 England businesses seeking to operate in today's and
5 tomorrow's global economy.
6 But again, this is not about size alone.
7 It's ironic, just as we're on the verge of an
8 industry that will conduct more and more of its
9 business electronically, without walls and without
10 boundaries, without bricks and mortar, without paper
11 or passbooks. Our determination also to be grounded
12 in our local communities is greater than ever.
13 For me, this merger would not be effective,
14 would not be right if we were only able to build a
15 powerful regional, national, global business, if we
16 were only a large and strong employer, and if we
17 left behind the communities that have nurtured both
18 companies for a few centuries. As we are poised to
19 become one of the leading financial institutions, we
20 have also pledged to remain a local partner and one
21 that will -- he took all the time. (Laughter) I'm
22 not sure how the system works.
23 I want to emphasize we remain a local
24 partner, continuing the development of our
25 communities. We look at community development very
0029
1 broadly as a strategic -- as a business opportunity.
2 We see as part of it the access by minority and
3 women-owned businesses, to the purchasing power of
4 Fleet-Boston. We intend to continue and strengthen
5 our minority vendor programs.
6 We see as part of community development the
7 support we offer employee volunteers. Between Team
8 Fleet and Eagle Core almost 20,000 of our employees
9 devote 150,000 hours making our community stronger
10 and healthier. We see as part of community
11 development the embracing of individuals of all
12 races, genders, sexual orientations, customers and
13 employees.
14 Diversity will be an integral part of the
15 management of Fleet-Boston reporting directly to me.
16 We will continue to add to the very strong record we
17 are trying to achieve.
18 Terry has been explicit about the intention
19 to proceed with the BankBoston model for community
20 investment and very complimentary about our record.
21 To say that I am proud of First Community Bank and
22 BankBoston Development Company is an understatement,
23 but it is very important that we will continue to
24 play a leadership role in our new company.
25 Therefore, I ask you all to look at these
0030
1 pledges in light of the very strong community
2 leadership records of Fleet and BankBoston, and
3 driven by our shared New England values, operating
4 in a global economy, grounded in the local
5 community, Terry and I will be supported and aided
6 by the 25,000 employees who, like us and our
7 company, call this region home. We will preserve
8 and enhance the best of our two approaches and
9 records. We will commit our honor and we will honor
10 our commitments.
11 Two months ago I was privileged to
12 represent BankBoston at a White House ceremony where
13 we were given the Ron Brown award for corporate
14 leadership. BankBoston was cited for its community
15 banking group which has successfully served the
16 urban population as an emerging market. I was
17 joined on that day, as I have been joined throughout
18 this effort, by the woman who is most singly
19 responsible for the success of our community banking
20 efforts at BankBoston and who will become the leader
21 of Fleet-Boston's community banking investment
22 initiatives, a daughter of a community activist, a
23 product of the community, a 30-year veteran of
24 BankBoston and by friend, Gail Snowden.
25 MS. SNOWDEN: Thank you, Chad, and thank
0031
1 you to the Board for the opportunity to present our
2 viewpoints and vision for the new bank now taking
3 shape. It's extremely gratifying to me to have
4 heard from both Terry and Chad on the strong
5 position that community investment and in particular
6 BankBoston's model of development will take in the
7 new entity.
8 Nine years ago BankBoston began to redefine
9 the mission and objectives of its retail business in
10 the inner city. By taking a more holistic approach
11 to economic development, we acknowledged that
12 economic growth must evolve from job creation to
13 wealth creation if sustainable growth was to happen.
14 We knew we had to prove we were willing to take
15 risks and to truly invest in community growth in a
16 more direct way.
17 We have learned much along the way,
18 receiving national recognition for our efforts in
19 urban banking through First Community Bank and the
20 BankBoston Development Company, both of which will
21 become part of the new company.
22 Like BankBoston, Fleet has been a leader in
23 small business and mortgage lending, helping to
24 revitalize entire neighborhoods and create new
25 enterprises, particularly those owned by minorities
0032
1 and women. Continuing these records going forward,
2 Fleet-Boston Corp. intends to be the number one
3 small business bank in New England, maintaining its
4 strong ties to keep partnerships with organizations
5 such as the SBA.
6 We believe the key to our success has been
7 our commitment to strong partnerships in the
8 community, whether with individuals, community
9 groups, governments or private organizations. They
10 provide us with essential ties to the fabric of the
11 community. These relationships have helped Fleet
12 and BankBoston to be more responsive to the unique
13 needs of our diverse communities by providing the
14 customer focus that did not exist before.
15 Over these last few months I have joined
16 with my colleagues at both banks in listening to the
17 frank discussions that took place with
18 representatives from over 125 community
19 organizations throughout New England. Our goal was
20 to gain maximum insight into the needs of emerging
21 low to moderate income markets and to develop a
22 comprehensive investment plan that was both business
23 minded and community minded. These discussions have
24 underscored the tremendous gains that our banks have
25 made in helping to revitalize entire neighborhoods
0033
1 within our New England communities such as Codman
2 Square and Egleston Square.
3 The key themes that surfaced provided the
4 framework for our community investment commitment.
5 The result is a 14.6 billion dollar commitment over
6 five years which incorporates the best of our banks'
7 programs while establishing a leadership role of
8 continuing to earn an outstanding CRA rating. This
9 dollar commitment represents a continuation and in
10 most cases an enhancement of LMI lending activities
11 by Fleet and BankBoston when adjusted for divested
12 branches and deposits. We view the plan as
13 responsive and affirmative and continuing to enhance
14 those programs that support wealth creation and
15 economic development.
16 In the past, particularly during merger
17 discussions, various banks have reached agreements
18 with community organizations that may have been too
19 narrowly focused with regard to issues or geography.
20 Fleet-Boston has chosen to create a broad-based plan
21 for its entire marketplace that effectively responds
22 to critical community issues and will offer
23 significant opportunities for multi-state
24 partnerships with organizations as committed as we
25 are to the revitalization of urban and rural areas.
0034
1 I would now like to spend some time
2 outlining the five-year 14.6 billion dollar
3 strategy. Because we believe entrepreneurs are the
4 engine for growth creation and job creation that
5 transform entire communities, over half of this
6 entire commitment, 17.5 billion, is earmarked for
7 the support of small business lending. We will
8 continue our strong support of small business
9 development in LMI communities, with special
10 consideration given to minority and women-owned
11 businesses.
12 In addition, we will go beyond the
13 traditional role of lending to small businesses by
14 providing 100 million in equity investment over five
15 years to help new business development. We also
16 foresee an enhanced SDA partnership in addition to
17 our conventional loan activity. With affordable
18 housing in the forefront of community concerns, we
19 are committing four billion over the next five years
20 to provide additional options for low and moderate
21 income homebuyers in need of home purchase mortgages
22 and refinancing.
23 Additionally, it provides sufficient
24 product flexibility to continue our existing
25 mortgage program partnerships such as the soft
0035
1 second mortgage program to first-time home buyers in
2 Massachusetts.
3 The bank will continue its leadership in
4 community development lending, including at a
5 minimum 1.5 billion in CRA-eligible loans in LMI
6 areas. In addition, the bank will invest 500
7 million in low-income housing tax credit investments
8 in support of the development of much needed
9 affordable housing.
10 We will continue to meet basic consumer
11 borrowing needs with the commitment of one billion
12 for consumer lending in LMI areas.
13 Finally, the bank will expand its technical
14 assistance and support with the commitment of 15
15 million. Interwoven throughout this commitment is
16 what I view as a precedent-setting partnership that
17 we are announcing between Fleet-Boston and Fannie
18 Mae over the next five years. The
19 Fleet-Boston/Fannie Mae communities initiative will
20 commit much needed resources to home ownership and
21 affordable housing and is projected to create
22 affordable housing options for tens of thousands of
23 families in the communities we serve.
24 Affordable home ownership, loans to LMI
25 home borrowers through a variety of innovative and
0036
1 flexible programs such as a new women head of
2 household mortgage initiative, affordable
3 multifamily rental housing, a comprehensive plan to
4 preserve and accelerate the production of affordable
5 rented housing units. We heard this so many times
6 from community groups.
7 And finally, neighborhood revitalization.
8 Fleet-Boston and Fannie Mae will stimulate new
9 housing and community development activity through
10 an innovative, comprehensive, strategic neighborhood
11 investment initiative.
12 What I have presented is a framework of the
13 partnership with Fannie Mae, and we will be
14 announcing more details in the next month or so.
15 Accountability. We see community
16 organizations as critical partners in implementing
17 our commitment for capital access, outreach and
18 education. Key to this approach is the issue of
19 accountability, and we are prepared to be held
20 publicly accountable for meeting all the commitments
21 laid out today. An oversight board comprised of
22 community leaders will be formed and will meet twice
23 a year to receive information and to give us
24 feedback. A community investment subcommittee of
25 the Fleet-Boston board will meet regularly during
0037
1 the year to monitor the corporation's accountability
2 for community initiatives. And in addition, a
3 business line steering committee will meet regularly
4 to monitor business line performance against our
5 commitments and our goals.
6 In conclusion, I look upon this new
7 organization, Fleet-Boston, with the same enthusiasm
8 and excitement as when we undertook the challenge of
9 building a profitable business in New England's
10 underserved urban markets nine years ago. We enter
11 our alliance with Fleet Financial Group with a
12 blueprint for success in this emerging market in
13 which everyone benefits: Our shareholders, our
14 customers and the communities we serve.
15 My colleagues at BankBoston and I are
16 gratified by this opportunity that Terry and Chad
17 are giving us to continue our work within a larger,
18 stronger community. I believe in their commitment
19 to community investment and neighborhood
20 revitalization and that's why I'm sitting here today
21 committed to realizing upon this initiative.
22 At this point I would like to pass the
23 microphone to my colleague, Agnes Bundy Scanlan, who
24 has been instrumental in developing and managing
25 Fleet's community development program since 1994 and
0038
1 who has worked tirelessly over the past few months
2 in meeting with community groups to help develop
3 this community investment commitment.
4 MS. SCANLAN: Thank you, Gail. Good
5 morning. I'm pleased to be here today speaking on
6 behalf of the Fleet-BankBoston merger. Fleet and
7 BankBoston are committed to working toward improving
8 the quality of life and the overall vitality of our
9 communities. I would like to reiterate the pledge
10 expressed by Terry, Chad and Gail. We stand
11 committed to continue to meet the needs of
12 communities we serve through a wide range of
13 financial services and products.
14 We enthusiastically embrace our role in
15 fostering job creation, promoting home ownership,
16 enhancing economic growth and providing education
17 and support to individuals and businesses in urban,
18 rural and suburban communities. This is without
19 question the most rewarding part of my job.
20 Understandably there have been concerns
21 expressed about this merger in terms of its effect
22 upon communities, businesses, and consumers. Terry,
23 Chad, Gail and I have addressed some of them here
24 and in other meetings with concerned parties.
25 Nonetheless, apprehension and misapprehensions
0039
1 remain, fueled in part by incomplete and in some
2 instances incorrect information.
3 In fact, we have some very good stories to
4 tell which have not been noted to date. Affordable
5 housing. In our 125 community meetings, and indeed
6 in everyday conversations, it becomes clear that
7 affordable housing is of great importance to all of
8 us. When Professor James Campen released his study
9 on mortgage lending, it garnered a great deal of
10 attention. He noted that Fleet cut back on its
11 lending following the Shawmut merger and concluded
12 that bank mergers mean less mortgage lending for LMI
13 and minority borrowers.
14 Fleet did experience a decline in mortgage
15 lending overall. It is important to note that Fleet
16 did not intentionally cut back on its loan volume or
17 cede market share willingly. Rather, several
18 factors contributed to reductions in overall
19 mortgage lending, including increased competition
20 within the marketplaces, particularly from
21 non-banks, merger-related branch divestitures and
22 significant management turnover and operational
23 changes at Fleet Mortgage.
24 Despite these developments, Fleet has
25 remained the leader in affordable housing. For the
0040
1 six-state region cited in the study, Fleet held the
2 number one market share for home purchase loans to
3 LMI borrowers in 1995 and 1996, and held the number
4 two market share to these borrowers in 1997,
5 exceeding industry averages.
6 In Massachusetts, a primary area
7 highlighted in the Campen study, Fleet held the
8 number one market share for LMI black and Hispanic
9 borrowers for the period 1995 through 1997. In this
10 regard, even though our combined bank will only be
11 65 percent of its predivestiture size in
12 Massachusetts, today we have announced a commitment
13 commensurate with 100 percent of our predivestiture
14 size for affordable housing lending in this state.
15 In the City of Boston Fleet also held the
16 number one market share for LMI and minority
17 borrowers for the three-year period 1995 through
18 1997. I believe these statistics confirm our
19 commitment to LMI minority borrowers. Fleet and
20 BankBoston are doing the heavy lifting here.
21 Perhaps we should consider the point that
22 as other lenders increase market share, they have an
23 obligation to increase their share of lending to
24 these traditionally underserved markets. Even if
25 they do not have CRA requirements as the banks do,
0041
1 the combined voices of community groups, opinion
2 leaders and the public generally can raise this
3 imperative.
4 Small business lending. In the course of
5 our meetings we heard concerns about the
6 availability of credit to small business. But I
7 think one should consider the fine record of both
8 companies in working with small businesses as an
9 indication of our commitment moving forward. In
10 fact, the largest component of our commitment to
11 small businesses at 7.5 billion over five years,
12 coupled with technical assistance support, is large.
13 At Fleet we serve more than 320,000 small business
14 customers in eight states.
15 Today Fleet is the largest provider of
16 financial services to small businesses in New
17 England. According to the latest industry data, as
18 of June 1998, Fleet is ranked 10th among bank
19 holding companies for small businesses. We are a
20 leading SBA lender. In 1997 Fleet was the top SBA
21 lender in New England with more than 70 million in
22 total SBA volume.
23 I have some more remarks that I would like
24 to submit for the record, but in deference to time
25 I'd like to submit my time and yield to Terry Murray
0042
1 to close.
2 MR. MURRAY: Thank you, Agnes. And that
3 concludes our remarks. We'll be happy to respond to
4 the panel.
5 PRESIDING OFFICER SMITH: Thank you.
6 Questions from the panel?
7 MR. ALVAREZ: I have a question. There are
8 a number of commenters who have referred to the
9 study that Ms. Scanlan discussed, suggesting that
10 Fleet's lending in LMI areas in particular, in home
11 mortgage lending in particular, has declined after
12 each of the last two major mergers Fleet has been
13 involved in, and that has caused some folks to be
14 concerned that one plus one does not equal greater
15 than two in low and moderate income neighborhoods.
16 I understand that the program that you have
17 discussed, the CRA plan, is going forward. I was
18 interested in how the 14.6 billion dollar plan
19 compares to the amount of lending that the two
20 organizations are doing now and whether there are
21 any special steps that Fleet proposes to take to
22 ensure that lending will not decline after this
23 merger if this is approved.
24 MS. SNOWDEN: I'll take that one. In terms
25 of how we got to the number, particularly on
0043
1 affordable mortgage lending, we took a look at the
2 past three years, and the projected combined annual
3 average amount was 820 million dollars a year. We
4 then took an 80 percent divestiture factor, which
5 would give you a number of 736 million.
6 However, our plan commits on an average
7 annual amount of 800 million. So we feel that we
8 are maintaining the same level, and in fact this one
9 is an enhanced level. How you make sure you meet
10 your goals, you have goals, you have tracking at the
11 line of business level. You have the oversight
12 committee, you have the CRA Council that reports to
13 Chad. And so we'll be monitoring this initiative,
14 as we do most business initiatives, to make sure
15 that we stay on track.
16 PRESIDING OFFICER SMITH: Other questions?
17 MR. KWAST: I have a question regarding
18 proposed divestitures. As I think Mr. Murray
19 pointed out, you are proposing to divest a large
20 amount of offices and dollars of deposits. My
21 question is, when considering who to divest your
22 offices to, what are the major factors that you
23 consider in deciding who the winning bidders are.
24 MR. MURRAY: Well, to a large degree
25 Justice has certain ground rules. They are
0044
1 obviously looking for a major new competitor in this
2 marketplace. Subject to that, however, we've been
3 fortunate in that there's been a great deal of
4 interest in the pieces as well as the whole of the
5 divested package. And we have received enormous
6 amounts of interest. And I guess from an ideal
7 point of view we can address Justice's concerns in
8 terms of viable competitors as well as some of the
9 local concerns, and that is something the community
10 banks and local banks participated in these
11 purchases.
12 Over the next two or three weeks we
13 collectively will be looking at the various bids.
14 Obviously it is an auction, and price is a
15 consideration, but not the sole consideration. And
16 I think it's a balance. It's balancing factors
17 between community bank expansion possibilities as
18 well as satisfying Justice's issues of viable
19 competition.
20 The major divestiture is in the State of
21 Massachusetts, which is 8 to $9 billion of the 12
22 billion dollar package; the others being in Rhode
23 Island and Connecticut. But there have been dozens
24 of bids on the packages.
25 PRESIDING OFFICER SMITH: Other questions?
0045
1 If not, thank you very much for coming this morning.
2 And we'll go on to panel number two.
3 Thank you very much.
4 (At this point there was a chant from some
5 members of the audience, saying "Shame on you")
6 PRESIDING OFFICER SMITH: We're going to
7 call on the panelists in the order in which they are
8 listed. So we'll start with Mayor Menino.
9 MAYOR MENINO: Thank you very much and
10 thank you for allowing me to testify this morning.
11 In my remarks I want to focus on the impact that the
12 proposed merger would have on my city and ask you to
13 consider that impact in your deliberations.
14 This merger comes at a time when the local
15 and national economies are on a roll. The
16 consolidation of firms into larger institutions is
17 happening in many industries. This evolution is not
18 only fueling the stock market, it's also changing
19 the way we do business and the way companies can
20 grow within a region and even across international
21 borders.
22 Boston's banks can't hide from this trend.
23 They must go out and compete in these expanding
24 markets like any others. But the consolidation of
25 capital in this merger will take Fleet to a position
0046
1 where the banking needs of ordinary citizens will
2 seem insignificant compared to the attraction of
3 foreign markets and bigger deals, including
4 additional mergers.
5 As fewer banks survive and grow into bigger
6 players on the national and international stage, the
7 fundamental question we face is this: Who will care
8 whether a community grows or dies? The number of
9 banks whose fates are tied to the fate of Boston is
10 shrinking. The Bank of New England is gone.
11 Shawmut Bank is gone. BayBank is gone. With this
12 merger BankBoston will also be gone. Gone, too,
13 will be more local jobs and BankBoston's spirit of
14 dedication to every segment of our community.
15 In banking, the idea of fair service to all
16 is a result of the Community Investment Act. It was
17 written into law because Americans saw what happened
18 when banks ignored some of our neighborhoods and
19 wrote off credit-worthy neighborhoods. The
20 Community Reinvestment Act has brought people on the
21 margins into the mainstream of American life.
22 Without it, Boston would not be a city of come-back
23 neighborhoods. It would see fewer first-time home
24 buyers, more abandoned houses, and whole
25 neighborhoods rotting from disinvestment.
0047
1 Take Blue Hill Avenue, for example. For
2 years it was little more than a depressing
3 collection of vacant lots and boarded-up buildings.
4 Since I became mayor we've invested over $65 million
5 up and down the avenue. By building new homes and
6 businesses, we're rebuilding a whole community. And
7 soon we'll start construction on the Grove Hall
8 Mall. And some people said that would never happen.
9 A new shopping center with a supermarket, a
10 drugstore, a Dunkin' Donuts and other shops.
11 Our partner on this deal is BankBoston. We
12 ended up with BankBoston because they could handle
13 the financing. The bank wants to do this deal.
14 Chad Gifford knew this was important to the city, so
15 he put a good team on it, and today we have a deal.
16 Some banks are better than others. In
17 spite of generous ratings from regulators, Fleet has
18 a troubled lending history in our community and
19 Fleet's approach to this merger leads me to believe
20 it will adopt a take-it-or-leave-it approach to
21 lending in our neighborhoods. That troubles me, and
22 it should trouble every business leader in Greater
23 Boston, because the health of a city sets the tone
24 for investing throughout the wider region.
25 Some big banks believe the Community
0048
1 Reinvestment Act gets in the way of their growth
2 strategy. They see it as a nuisance. They have
3 enlisted the help of their friends in Congress to do
4 away with it, people like Senator Phil Gramm of
5 Texas, who is no friend of the people in America's
6 cities. For years Phil Gramm has been telling
7 government to get out of the business of rebuilding
8 communities. Now he's telling business to get out
9 of that business, too.
10 Here in Boston the two banks have told us
11 their merger would mean a 20 percent reduction in
12 combined lending to our community. If you want to
13 know what happens to a community when lending
14 disappears, try to remember the conditions of our
15 neighborhoods in the early 1970s. Or follow
16 President Clinton's trip across the country with
17 business leaders this week. Whether in Boston or
18 East St. Louis or Los Angeles, one stubborn fact
19 remains the same: Capitalism does not work in a
20 community when that community is denied access to
21 capital.
22 As the mayor of this city I am concerned by
23 any merger that would deny my capital city in favor
24 of expanding markets somewhere else. I am concerned
25 about a reduction in home mortgage loans, a
0049
1 reduction in community development loans and small
2 business loans, and I'm concerned that the new bank
3 will not act as if it's life depended on the health
4 of our neighborhoods.
5 I ask you, how can any bank call itself a
6 local bank with pride if the bank is less than fully
7 committed to the local economy?
8 I am sorry to say that I have yet to hear
9 why this merger is a forward step for my community.
10 So until the Federal Reserve Board can convince me
11 otherwise, I cannot offer the City of Boston's
12 support for this merger.
13 You as regulators hold great power over the
14 future of banking in America. You hold great power
15 over the economy of our communities and you have a
16 responsibility to protect the public interest. So I
17 respectfully request that you remember the interests
18 of my constituents whose banking needs rest upon
19 your shoulders while you deliberate and decide the
20 merits of this merger.
21 In closing, let me say, my office would be
22 happy to supply you with some of the facts of my
23 detailed statement. Also -- let me just finish up.
24 This might be a good deal for the stockholders, but
25 I don't believe this is a good deal for the
0050
1 stakeholders. Thank you very much.
2 (Applause)
3 PRESIDING OFFICER SMITH: And we will not
4 exactly follow the order. We'll go next to
5 Congressman Capuano.
6 CONGRESSMAN CAPUANO: Thank you. First of
7 all, I'd like to thank the Federal Reserve for
8 having this hearing because it wasn't on the
9 original schedule when this merger was announced,
10 and I know that the Federal Reserve listened to the
11 requests of many people in this community to have
12 this. I also know you have a very long day ahead of
13 you and I respectfully send my regrets for that, but
14 my thanks for having me here nonetheless.
15 As each of you know, the Congressional
16 delegation of Massachusetts has sent several letters
17 on this matter to the Federal Reserve and to others.
18 We have another one in the record today that
19 basically reiterates what we have said in the past,
20 naming four points that we've tried to focus on.
21 The fact that we want our community banks to have a
22 fair opportunity to bid and then purchase a fair
23 portion of the divested parts of this merger if and
24 when it happens; that we want both the remaining
25 bank of this particular item and whoever wins the
0051
1 divestitures to continue and to expand their
2 neighborhood investment.
3 We want the Federal Reserve to make sure
4 that all employees are fairly treated and honestly
5 treated, and, of course, we want local charities to
6 continue the relationship they've had with the banks
7 in the past. That's what the delegation has said.
8 For myself, for the last four months as a
9 member of the banking community and a new member of
10 Congress I've actually worked a little harder on
11 this than most because I've had a lot of catching up
12 to do on these kinds of matters. And when this
13 merger was announced, right from the beginning I
14 asked for several pieces of information -- I think
15 pretty easy pieces of information -- such as the
16 details of charitable giving, some statistics on low
17 and moderate income loans, things like that.
18 Since then we've had a study done by a
19 professor at UMass-Boston that's come out that's
20 raised some serious questions on the lending
21 practices of these institutions. We've had comments
22 from a group called Inner City which has raised
23 serious questions. We've had the bank itself come
24 out with a 14.6 billion dollar community investment
25 proposal that has virtually no detail to it.
0052
1 Those are serious issues and I believe they
2 have been seriously presented. However, not until
3 yesterday at three o'clock in the afternoon did any
4 representative from the bank have anything to say
5 about any of those matters.
6 Now, I'll tell you that I do think that
7 both Fleet and the Bank of Boston have done a good
8 job going out and listening and I do think it's
9 important to maintain a strong regional bank in
10 Boston. I think that's fine. And I congratulate
11 the banks for going out to listen. But listening is
12 only one half of the equation. The second half of
13 the equation is then responding to what you have
14 heard. Not necessarily agreeing with it, not
15 necessarily disagreeing with it, but simply
16 responding. Do you agree? Don't you agree? Let's
17 work this out. There has been none of that until
18 three o'clock yesterday.
19 Today has been an extended period of time
20 for public comment. I don't think that less than 24
21 hours for people to respond or to react to the
22 response is a fair amount of time. I think it's an
23 inappropriate amount of time. (Applause) And I
24 think it could raise any number of questions. I
25 know that this is a difficult merger. I understand
0053
1 that and I respect the fact that the bank has been
2 busy. If that's the case, okay; great. It also
3 raises potential questions that the bank is being
4 insensitive to community input. If that's the case,
5 that's the worst possible scenario.
6 The whole reason we're doing this is to
7 make sure that the successful bidders and the merged
8 entity are responsive to community needs. If there
9 wasn't a community component to that, we wouldn't be
10 here. If it was simply banking, bottom-line
11 banking, you wouldn't do this, you wouldn't need our
12 input, we wouldn't have a whole lot to offer.
13 We're not bankers. We're here representing
14 the community, and if the community is not listened
15 to, not necessarily agree with them on every point,
16 what have we done? You're wasting your entire day.
17 I'm wasting an awful lot of time and most of the
18 people in this audience have wasted an awful lot of
19 time. (Applause)
20 To my way of thinking, I want this merger
21 to end up in one plus one is greater than two. I
22 really do. Not just for the shareholders; also for
23 the communities and, as the mayor put it, for the
24 stakeholders. That's why today the written
25 testimony that I've given, which is a little bit
0054
1 more detailed than the verbal comments, I'm asking
2 for a couple of things:
3 If the Federal Reserve finds it in the
4 interest of the community, which I think it is
5 obviously, I ask that the Federal Reserve delay any
6 decision-making and extend the public comment period
7 of time to at least 30 days after these responses
8 have been given by the bank, because we need a fair
9 amount of time to see whether their responses are
10 fair or not fair, reasonable or not reasonable.
11 Absent that extension of time, then I have to
12 strongly oppose this merger at this time.
13 (Applause) And I have to oppose it not because I
14 have made a final decision in my own mind as to
15 whether this merger serves the needs of the
16 community, but because I haven't been allowed the
17 time to do that. So I respectfully ask the Federal
18 Reserve to extend the period of time to 30 days
19 after receipt of responses by the banks, and if they
20 can't do that, then I have to oppose this merger.
21 Thank you.
22 (Applause)
23 PRESIDING OFFICER SMITH: Senator
24 Wilkerson.
25 SENATOR WILKERSON: Good morning to you,
0055
1 Presiding Officer, members of the Board. For the
2 record, my name is Dianne Wilkerson and I currently
3 serve as State Senator in Massachusetts and I have
4 done so for seven years. Prior to that I practiced
5 law in Massachusetts and was a member of the
6 Community Investment Coalition which negotiated with
7 Fleet Bank in 1990 when it took over the Bank of New
8 England. The CIC also negotiated again in 1994 the
9 Shawmut-Fleet merger, and I represented as a lawyer
10 over 600 individuals who were victims of the
11 infamous second mortgage scam, one of the most
12 devastating financial scandals that destabilized
13 both the Boston and Springfield Afro-American home
14 ownership communities.
15 I also was a member of the team that
16 negotiated the second mortgage scam settlement with
17 BayBank, the former BayBank and the former Shawmut
18 Bank. And I have previously testified before this
19 Board where I have raised serious issues and
20 concerns to this body.
21 However, I have never testified in
22 opposition to a merger until now, and I do so with
23 sadness and disappointment. (Applause) Since April
24 of this year I have served as the convener of what
25 is called the Community Advisory Committee for the
0056
1 Fleet Bank-BankBoston merger. The committee is a
2 40-plus member group comprised of racial, gender and
3 professional, university, government and religious
4 areas from across the Commonwealth who came together
5 to solicit comments and concerns from interested and
6 impacted parties across the state. The committee
7 hosted a statewide town meeting in May. Over 200
8 persons turned out to offer testimony, and we have
9 provided the videotape of that meeting to the banks
10 and to this Board.
11 The committee met with members of our
12 Congressional delegation. We met with officials
13 from the Department of Justice Antitrust Division,
14 the Federal Reserve Bank of Boston, the Attorney
15 General of the Commonwealth of Massachusetts, and
16 the Massachusetts Division of Banks. We've had the
17 unprecedented support and collegiality from our
18 entire Congressional delegation from the mayor of
19 our City of Boston and it's never happened before,
20 and I think that that unified position ought to tell
21 you something, because this is different.
22 We also met with the bank principals early
23 in June and at that meeting we transmitted to them a
24 lengthy written document in addition to other
25 information that the committee had gathered. It was
0057
1 our hope and expectation that those concerns would
2 be taken into account as the proposal was developed.
3 The committee waited for some time to offer public
4 comment because we were optimistic that the
5 committee would be able to engage in a productive
6 dialogue with bank principals to ensure that the
7 banking needs and the needs of the Massachusetts
8 communities, in particular women and people of color
9 in low and moderate income communities would be met.
10 I'm sorry to say that that June 4th communication
11 and the detailed concerns and issues that have been
12 raised have never had the courtesy of a response.
13 On June 24th we received the bank's
14 proposal and have spent a considerable amount of
15 energy reviewing this plan. In sum, the proposal
16 does not meet the regulatory standards that the
17 Federal Reserve Bank must have satisfied in order to
18 approve this merger application. There is much that
19 I could offer, but I will focus my testimony on two
20 pieces of the criteria of review for this Board
21 under the Bank Holding Company Act. That is,
22 competition and convenience and needs of the
23 community.
24 As to competition, among other things, this
25 application would involve the largest branch
0058
1 divestiture in the history of the United States.
2 However, even if a large bank were to purchase all
3 the branches, the most it could represent would be
4 six percent of the Massachusetts market share. The
5 merged institution would be at least 30 percent,
6 leaving its next closest competitor about five times
7 smaller, hardly an encouraging picture for
8 competition.
9 The divestment discussion to date has
10 ignored an important and serious issue for the
11 communities which I represent, and that is that many
12 of the branches on the divestment list were cited
13 specifically to fill a void in urban and rural
14 markets which until the last five years were
15 woefully underserved by banks and saturated with
16 check-cashing stores. The citing of many of the
17 branches on the sale list were negotiated in the
18 aftermath of the last two mergers. Several of the
19 branches were cited based on an acknowledgment and a
20 determination that the convenience and needs of a
21 certain segment of our community were not being met.
22 Special care must be taken by this Board to
23 ensure that we don't go backwards. It would be our
24 position that no grant cited in an urban market to
25 fill a void should be sold to anyone who does not
0059
1 intend at least to keep the branch open. Who gets
2 these branches is also of critical importance to us.
3 We have been fortunate in the Greater Boston
4 community of color to have a bank that is certified
5 with the United States Treasury as the only bank
6 community development finance institution in the
7 state and whose focus market is urban, the urban and
8 LMI communities, and especially people of color,
9 African-American, Latino.
10 Local and community banks should be
11 strengthened by this merger, not weakened. You must
12 pay special attention to the Boston Bank of Commerce
13 and the market that they serve.
14 Lastly, much has been made about the
15 expectation of the applicant banks that there would
16 be competition in the market to pick up market share
17 in areas where the applicant will decrease lending
18 and spending; for example, in mortgage lending. It
19 is our contention that there is simply no basis for
20 such an assumption, and in fact history tells us
21 different. With the slim pickings to be left in the
22 bank market for mortgage seekers, there is no
23 rational expectation that the purchasing bank or the
24 remaining Massachusetts banks soon to be but one, if
25 the next merger is approved, could pick up the slack
0060
1 with the merged bank to continue the double-digit
2 decreases in mortgages that have been made to
3 African-Americans and Latinos that we have been
4 sustaining every year for the past four years.
5 Oddly enough, the biggest hits have come
6 post merger of BankBoston and BayBank and even
7 bigger decreases in the post Fleet-Shawmut Bank
8 merger, and unless the Federal Reserve takes special
9 consideration of the need to ensure contingent
10 competition for the low and moderate income market,
11 there will be little or none available.
12 And please note that we do not consider
13 second-mortgage companies charging 20-plus percent
14 interest competition for the LMI and minority income
15 market.
16 I know that Professor Campen is going to be
17 testifying later, but I think that the analysis that
18 he has done is uncontroverted and would hope that
19 this Board would take some special note to look at
20 those numbers, and not only the numbers for Boston,
21 but for the Commonwealth of Massachusetts as a
22 whole. The loans to black borrowers decreased 52
23 percent. From 1997, 1998, the loan to
24 Latin-American, Latino borrowers decreased 49
25 percent and the loan to LMI borrowers decreased by
0061
1 fifty percent as a result of both the BayBank-
2 BankBoston merger and the Fleet-Shawmut merger. And
3 we accept this concept that there would be some
4 decrease, but the double-digit decreases that we
5 have sustained in these two particular communities
6 are irrational, inexplicable, and can only be
7 explained by racial factors. And even the
8 Massachusetts Banking Council has supported that
9 position.
10 This Federal Reserve did a study which set
11 off a whole litany of similar studies across this
12 country, and I think that it's important to note
13 that the Federal Reserve Bank of Boston led the way
14 nationally on what became a higher standard and
15 reported for tons of data.
16 Given what we understand to be the standard
17 of review for the Federal Reserve in assessing
18 merger applications, we believe in order for the
19 Federal Reserve to recommend approval of this
20 merger, the bank would have to find that the bank's
21 proposal of June 24th which provides for a 14.6
22 billion dollar commitment for six states over five
23 years meets the convenience and needs of the
24 community, although the figure represents less
25 resources from the combined bank than the two banks
0062
1 provided separately in 1998.
2 For the record, I never expected one plus
3 one to equal greater than two. I was prepared to
4 declare victory of one plus one equal to one and a
5 half. It doesn't. Apparently the comments from
6 Fleet-BankBoston suggest even they acknowledge that
7 the formula has changed. On July 1st there were two
8 statements issued that said, one, it was never our
9 intention when we made that statement in March to
10 suggest that between us we would be greater than the
11 two. What we really meant was that the divestiture
12 bank would be responsible with us and we would hold
13 them accountable to the community.
14 Also, this proposal represents 80 percent
15 of what we have been doing because we are divesting
16 20 percent of our branches, so we're going to be
17 smaller. In some categories it's more than 80
18 percent. We haven't found them yet.
19 Various members of the committee have run
20 the numbers in different variations and we all keep
21 getting the same results. The numbers simply don't
22 support the bank's representation of this equaling
23 even 80 percent, the current activity, let alone
24 100.
25 Meeting the needs of the convenience and
0063
1 needs of the community is not just about CRA. One
2 of the best indicators of future performance is past
3 history. That being the measure, the Federal
4 Reserve Bank must look very carefully not only at
5 the recent data it studied on the bank's
6 performance, but also on the compliance or lack
7 thereof to prior commitments and agreements. The
8 history is substantial. I have included some
9 information that attests to this history, which we
10 will submit to you for the record, including the
11 committee's June 4th letter to the bank, which never
12 received the courtesy of a response.
13 We believe there's at least a segment of
14 the community; namely, the LMI urban and rural
15 communities and women whose needs are not being
16 adequately served. There is a fear that with
17 another merger history suggests these communities
18 will sustain yet another decrease.
19 PRESIDING OFFICER SMITH: Thank you very
20 much, and we'll be glad to have your full statement
21 for the record.
22 SENATOR WILKERSON: If I could end by
23 making a request to you, as the Congressman and the
24 Mayor have done, and that would be that you would
25 use your regulatory powers to do the right thing by
0064
1 the communities who depend on the regulatory
2 authority for protection. Whatever this proposal
3 is, it's not complete. Even the bank principals
4 referred to it yesterday afternoon as a work in
5 progress. You can say no. You can say go back to
6 the drawing board. You can say you need more
7 information. You can say to the banks, respond to
8 the questions that have been asked. But whatever
9 you say, don't say that this is enough to meet the
10 standard, because it's not, and the community has
11 nowhere else to go but to you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much. (Applause) Now we have Ms. Boone on behalf
14 of Senator Kerry.
15 MS. BOONE: My name is Jeanette Boone, and
16 I currently serve as senior issues manager in the
17 Boston office of Senator John Kerry. On behalf of
18 Senator John Kerry I want to thank you for the
19 opportunity to express the Senator's views on the
20 Fleet-BankBoston merger. While Senator Kerry is
21 unable to give this testimony in person, I want to
22 thank you for the opportunity to place his full
23 testimony in the record today.
24 As a member of the Senate Banking
25 Committee, I have witnessed an unprecedented amount
0065
1 of consolidation in the banking and financial
2 services industry. The Fleet-BankBoston merger is
3 further proof that the continued consolidation of
4 financial services markets is one of the
5 inevitabilities of the new global economy.
6 Today there are 30 percent fewer banks in
7 the United States than there were just 10 years ago.
8 Our banks are competing beyond city limits and
9 neighborhood borders, competing against banks across
10 the country and literally across the world. To do
11 so effectively they must have the strength, the
12 market share and the ability to deliver high-quality
13 service.
14 This proposed merger will make the planned
15 Fleet-Boston Corporation the eighth largest bank in
16 the country and one of the most significant
17 financial presence in New England. I believe it is
18 imperative to maintain a strong and robust financial
19 services industry based in New England. To this
20 end, it is critical that we take the appropriate
21 steps to ensure that Boston remains a hub of
22 financial services in the new century and that New
23 England-based banks will continue to be available to
24 depositors in New England.
25 We must move forward in that process in a
0066
1 careful and measured way with government, business,
2 and community leaders working together to ensure
3 that high standards of customer service and
4 corporate community engagement are maintained.
5 Corporate citizenship should be a part of a
6 redefined bottom line in banking. Everyone
7 understands the importance of capital in developing
8 our low-income neighborhoods. Access to credit,
9 along with education, healthcare and decent housing,
10 is one of the most important tools working Americans
11 need to compete successfully in this country.
12 Massachusetts banks, large and small, have
13 the responsibility, the very real responsibility of
14 providing access to capital to our underserved
15 communities. They are integral partners in our
16 effort to lead the transition to a new economy where
17 no one is left behind. Through the Community
18 Reinvestment Act, Congress set standards for the
19 private sector in building an economy in which we
20 can all participate. CRA has been extremely
21 successful in Massachusetts where financial
22 institutions have made more than 1.6 billion in
23 commitments to assist low-income neighborhoods.
24 It's making a difference in Boston's inner city
25 neighborhoods from Roxbury and Jamaica Plain to the
0067
1 South End and has increased home ownership,
2 affordable housing development and minority small-
3 business lending across Massachusetts.
4 However, even at this time of record
5 economic growth, there is much work left to be done.
6 The Boston Federal Reserve showed conclusively that
7 African-Americans get turned down on mortgage
8 applications 1.6 times more often than whites, even
9 after taking into account many economic, income and
10 creditworthiness differences.
11 More than 35 million Americans still live
12 in poverty. Almost one in five children lives in
13 poverty. We must continue to expand the winner's
14 circle to empower every community to participate in
15 this economic expansion. We must not allow any
16 community to be denied access to credit or new
17 banking facilities and services. It is with these
18 principles in mind that together with the entire
19 Mass. Congressional delegation I signed a letter to
20 the new Fleet-Boston Corporation to stress the
21 importance of maintaining a vigorous community
22 reinvestment effort.
23 I am pleased that the new Fleet-Boston
24 Corporation has begun a dialogue with the major
25 organizations in Massachusetts that are dedicated to
0068
1 housing and community reinvestment. I am hopeful
2 that this dialogue will continue and that this
3 merger will result in progress toward the goals of
4 the Community Reinvestment Act and not an
5 opportunity to pass this responsibility to others.
6 I have also sent a letter with Senator
7 Kennedy to Assistant Attorney General Joel Klein
8 requesting that the Justice Department consider
9 allowing a small portion of the new Fleet-Boston
10 Corporation's assets to be sold to a Massachusetts
11 minority-owned community development financial
12 institution that has been providing access to
13 capital to many of our low-income neighborhoods and
14 working families. With your approval I would like
15 to make both letters part of the record.
16 We have other responsibilities as well,
17 particularly the responsibility of meeting the
18 immediate challenges of work force dislocations
19 caused by this merger. Any time two large firms are
20 combined, restructuring can be expected. Layoffs
21 seem to be an inevitability in the reshuffling to
22 maximize cost efficiencies. The Boston Globe has
23 estimated we expect to see the loss of 4,000 to
24 5,000 jobs as a result of this latest decision.
25 Every effort must be taken to minimize job loss and
0069
1 provide sufficient retraining and job placement
2 assistance to workers displaced by this decision.
3 I believe the best way to minimize the
4 anticipated job loss resulting from this merger is
5 to see that the required divested deposits, branches
6 and ATMs of the Fleet-Boston Corporation are sold to
7 banks based in New England. Back in April I wrote
8 to Assistant Attorney General Joel Klein to express
9 my opposition to any decision to sell all divested
10 funds to a single financial institution based
11 outside of Massachusetts. Any divestiture related
12 to this merger must encourage local competition and
13 expand consumer choice.
14 In that letter I also asked that every bank
15 in Massachusetts be given the opportunity to bid on
16 the assets that the merged banks will be required to
17 divest. I am pleased that the Justice Department
18 has taken my advice and will not insist that all
19 assets be acquired by a single buyer, so long as
20 there is a buyer in the mix that will preserve
21 competitive conditions in middle-market lending.
22 I am hopeful that the new Fleet-Boston
23 Corporation will seriously consider any competitive
24 bids from all New England-based banks. Small,
25 medium sized and independent banks have been an
0070
1 important source for financial services to small
2 businesses and low-income communities in
3 Massachusetts. This will also help ensure that
4 Boston remains a hub of financial services in the
5 next century and that Boston-based banks will
6 continue to be available to depositors in New
7 England.
8 Finally, it is the best way to minimize the
9 job loss related to the merger. Over the last years
10 in the Senate Banking Committee I have come to
11 realize that economic change, particularly in the
12 financial service industry, is an inevitability that
13 must be wisely managed. We cannot lull ourselves
14 into believing that we are powerless to shape the
15 contours of this new economy. We know the New
16 England banking industry can provide economic
17 leadership, but we also expect and demand that our
18 banks demonstrate leadership in customer service and
19 corporate citizenship as well.
20 I know that from our efforts on the Banking
21 Committee to your work here, we will be watching to
22 ensure that those goals are merged into one unifying
23 vision of banking in New England.
24 Over the past several months I have worked
25 with the Community Advisory Committee and a large
0071
1 number of groups involved with housing and economic
2 development from across Massachusetts. It is my
3 strong hope that you will listen carefully to the
4 testimony that representatives from these groups
5 will be making today and give serious consideration
6 to the level of need in the community. This merger
7 cannot deal a devastating blow to underserved
8 communities by undercutting the current programs by
9 BankBoston and Fleet, especially those in the areas
10 of small business lending, affordable housing and
11 mortgage lending to low and moderate income
12 homeowners, community development and consumer
13 lending and equity investment and technical
14 assistance and support.
15 I urge you to weigh and evaluate this
16 testimony as you reach decisions regarding this
17 proposed merger. Ultimately it will be our
18 responsibility to ensure that this process moves
19 forward with a fair and competitive merger and
20 divestiture process that encourages local
21 competition and investment while expanding consumer
22 choice.
23 PRESIDING OFFICER SMITH: Thank you very
24 much, Ms. Boone. We'll take it all and put it all
25 into the record.
0072
1 Mr. Ferguson on behalf of Congressman
2 Kennedy.
3 MR. FERGUSON: Thank you, Madam Presiding
4 Officer and members of the Board. For the record my
5 name is Larry Ferguson. I'm the District Director
6 for Congressman Patrick Kennedy of Rhode Island, and
7 I'm here today on his behalf.
8 Congressman Kennedy has a strong interest
9 in the financial industry of New England and most
10 notably his concern that integrity and competition
11 is upheld in the everchanging marketplace. He feels
12 strongly that the upcoming merger of Fleet Bank and
13 BankBoston will uphold the goals of integrity and
14 consumer choice through competition.
15 What I would like to do now is to read into
16 the record a letter that he sent to the Board dated
17 June 29th. "Dear Mr. Johnson: I write in support
18 of the proposed merger between Fleet Financial Group
19 and BankBoston and urge that the Board move
20 expeditiously to approve the merger. To comply with
21 the requisite regulatory and antitrust aspect of
22 this transaction, the two institutions have done an
23 excellent job in reaching out to a large number of
24 community-based organizations throughout its market
25 area. They have also reached out to elected
0073
1 officials on the state and local level and those of
2 us in Congress. As a consequence I believe that an
3 effective job has been done in explaining the
4 rational behind the merger, the plans for
5 restructuring the combined organizations in a most
6 efficient and effective way possible and in
7 anticipating and dealing with the impact of the
8 merger on customers of the institutions and the
9 communities impacted.
10 I am very pleased to learn that an issue of
11 major concern to me that local and regional
12 institutions be allowed to bid on some or all of the
13 assets being divested was clarified recently by the
14 Department of Justice. Furthermore, it is
15 reassuring to learn Fleet and BankBoston will soon
16 announce a major community reinvestment program
17 valued at more than fourteen million dollars over
18 the next five years. This plan will be designed to
19 deal with affordable housing, small business
20 lending, urban renewal and consumer education
21 programming.
22 I believe that the successful bidders on
23 the Fleet and BankBoston branches to be divested
24 will provide effective competition and enhanced
25 choices for consumers. I therefore urge the Board
0074
1 to approve this merger which should produce both
2 substantial short- and long-term public benefits.
3 Sincerely, Patrick Kennedy, member of Congress."
4 Again, I want to thank you for allowing me
5 the opportunity to submit this letter for the record
6 and allowing me to testify here today.
7 PRESIDING OFFICER SMITH: Thank you very
8 much. Questions from the panel?
9 MS. BROWNE: I have a question for Mayor
10 Menino. You expressed some deep concern about the
11 loss of BankBoston. Perhaps you might elaborate a
12 little bit more about what makes BankBoston special
13 from your perspective, what distinguishes it perhaps
14 from other institutions.
15 MAYOR MENINO: Well, my dealings in the
16 last six years with BankBoston have been on a
17 continual basis. We had an issue in the
18 neighborhoods that we developed a neighborhood or
19 needed money for housing, they were there. They
20 were the first ones out willing to work with us to
21 fashion different programs to our needs, and they
22 were very helpful to what we did on the
23 revitalization of a lot of the neighborhoods of the
24 City of Boston.
25 MR. KWAST: I have a question for Mayor
0075
1 Menino and Senator Wilkerson. Could you explain a
2 little bit more whether you think a bank
3 headquartered out of Boston could or could not enter
4 the Boston market and become an effective competitor
5 for the banks that are already in Boston?
6 SENATOR WILKERSON: I don't believe I ever
7 said I didn't believe that they could. I suggested
8 that if a large bank bought all the branches, the
9 best they could do is 6 percent of the market and
10 that I don't consider that competition in the
11 literal sense of the word because this resulting
12 merged bank would be 30 percent, and they're going
13 to be the eighth largest in the country, not just in
14 Massachusetts. So it depends on what your
15 definition of "competition" is.
16 Our concern is that there will be no one
17 competing for the business of my constituents unless
18 this Board takes a special look at that and looks at
19 banks who have had track records in doing business
20 and believe that our communities are about business.
21 It's not about charity, and that's a very -- it's an
22 offensive discussion. We always get to that. We're
23 not asking for people to give us money, you know.
24 This is about mortgages. This is about if I present
25 the same kind of indicators as everyone else, that I
0076
1 shouldn't be denied. And the records are just
2 overwhelmingly supportive of the notion that that's
3 what's happening, and we don't think there's any
4 other competition outside of large banks like this
5 that are going to be picking up that market unless
6 you take that into consideration and are looking at
7 our small and local banks who see us as business and
8 are making money in ways.
9 So if you just talk about selling to a big
10 bank, we don't think that that particular sector and
11 segment of our community's banking needs are going
12 to be met. But I have no opposition to an outside
13 bank. I actually for the record also want to say, I
14 think we'd be better off having a bank that -- you
15 know, I want to keep Fleet-BankBoston here. We're
16 not opposed to that. Given the choice, I'd rather
17 have a Massachusetts headquartered bank. But that
18 doesn't mean I don't then get to raise questions
19 about this proposal and the plan that they put on
20 the table, because I don't think it's going to
21 satisfy what I understand to be your regulatory
22 standards in its present form. We could get there
23 with your help, but we're not there.
24 MAYOR MENINO: I agree with the Senator on
25 the fact that Fleet-BankBoston merged. No big
0077
1 problem. But what's the commitment? What's the
2 future? We can't talk about the past. I think
3 we're talking about the past. I'm talking about the
4 future. When this merger happens, what does the
5 future look like for the community that I represent
6 as Mayor of Boston, Senator Wilkerson, Congressman
7 Capuano. And sometimes, I'll tell you, having a
8 homegrown institution headquarters doesn't mean a
9 lot to you, but sometimes a foreign bank who might
10 have an office or an operation in the city will do
11 more for you. I have several world headquarters in
12 our city, and I get more out of some other
13 corporations that aren't home based.
14 So it's the attitude, and it's the attitude
15 of the folks. Do they really want to get involved
16 in the community or are they saying we're Boston
17 based. You have to love us. We don't have to love
18 you. We have to tolerate you, but you have to love
19 us.
20 CONGRESSMAN CAPUANO: I want to make it
21 clear that the delegation as a whole has opposed
22 bringing in someone from the outside. We feel that
23 bank competition is good. We understand what the
24 general goal is, but bank competition doesn't have
25 to be from the outside. There has been nothing that
0078
1 has stopped an outside bank from coming in for
2 several years now. You know as well as I do -- in
3 fact, better than I do -- Citicorp already had
4 several hundred people in Boston for years, for
5 years. It's not new. Most of the large banks do
6 business in Boston right now. Right now. It's not
7 new. Nothing could stop them at all -- well, not
8 nothing. You could. But theoretically you wouldn't
9 stop them from buying small branches today over the
10 last several years.
11 That's not the issue. The issue is what do
12 you want to do with the divested branches if this
13 merger is allowed now, and our argument has been,
14 build from the inside. Help your own family to get
15 stronger as opposed to giving it away to the
16 outside. The outside is going to come in. There's
17 nobody here trying to create a Chinese wall along
18 the borders of New England. They're here now. They
19 will continue to grow. When they grow, where's the
20 competition going to be?
21 And I just want to go back historically.
22 It strikes me that many of you were probably around
23 the last time, well before Tom Menino was mayor,
24 when Boston was in serious trouble back in the late
25 '70s. No bank in the world should have loaned them
0079
1 a nickel, but the Bank of Boston did because they
2 understood the benefits of having a strong City of
3 Boston instead of having the City of Boston go
4 bankrupt. That is the benefit of a regional --
5 strong, locally based regional bank. And that's
6 what we're trying to keep and that's what we're
7 trying to grow. (Applause)
8 PRESIDING OFFICER SMITH: Thank you very
9 much. We'll go on to Panel Three. We will start
10 with Mr. Reilly.
11 MR. REILLY: Good morning. My name is Tom
12 Reilly. I'm the Attorney General for Massachusetts.
13 I want to thank you for the opportunity to offer
14 comments to this panel today on the proposed merger.
15 I know you have a long day ahead of you and I will
16 certainly do my best to not make that day any
17 longer.
18 There are a number of important issues that
19 you have to consider. We've heard a lot about CRA
20 issues. They certainly are important. I have
21 submitted a letter, and I would ask with your
22 permission on those issues to have that letter be
23 made part of the record.
24 I would like to focus my attention and my
25 comments on competition, the need to replace the
0080
1 competition that will be caused by this merger.
2 By way of background, my office has done an
3 extensive investigation that is not yet complete on
4 this proposed merger. We've done it along with the
5 Department of Justice. We've administered several
6 investigative demands, market surveys, retained the
7 services of a respected economist, Dr. Kalamaris,
8 from Columbia University. We've conducted scores of
9 interviews with all the affected communities and
10 businesses and people that are involved in this
11 process. Now, that investigation, as I said, is
12 still ongoing, but we have identified certain
13 problems and certain major concerns that I would
14 like to share with you today.
15 First, as you well know, this is
16 unprecedented in terms of this merger. The one and
17 two major players for key sectors of our economy are
18 merging, and the key sector I want to focus on today
19 is the middle market. And that creates problems
20 whenever that competition is lost.
21 Secondly, this merger has national
22 implications, because there are other markets
23 throughout this country that are looking at this in
24 order to determine and foresee what the rules are
25 going to be. So I think this is important that we
0081