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
1 take the time in terms of doing it right.
2 Now, the problem, and the major problem
3 that we have identified, is the problem that this
4 merger creates risk, and I believe that risk is
5 unnecessary and I believe that that risk can be
6 avoided and perhaps prevented if this is done right.
7 Now, the major area that is at risk as a
8 result of this merger is the middle market, the
9 so-called middle market, and that's not some elusive
10 term. I mean, these are real companies. These are
11 real people. A textile manufacturer in Fall River,
12 maybe 30 million in revenues, maybe 250 employees.
13 Real people that depend upon the success of this
14 company. Metal fabrications plant maybe in the
15 central part of the state, Worcester, with 200
16 people, $60 million in revenues, does business in
17 the Far East, needs sophisticated banking services,
18 international letters of credit. A paper
19 manufacturer in the western part of the state or the
20 trucking companies throughout the state.
21 This is a major part of our economy.
22 Perhaps at least 1,000 companies that are affected
23 by this merger. A hundred thousand people that are
24 impacted. They have a stake in this, too, and they
25 need to be heard as well.
0082
1 Right now in the current state of our
2 economy, they're doing well. They're benefitting
3 because of the competition between BankBoston and
4 Fleet. They have a demand for credit. As I said,
5 letters of credit, international letters of credit,
6 currency centers. They're getting all that and
7 they're getting it at a price that they can afford,
8 a competitive price, and certainly we are all the
9 better for that. And I just want that to continue
10 and I want a major competitor to come in and replace
11 this competition.
12 Now, it's going well now, but what happens,
13 even in good times, if the price of credit goes up
14 and the price of borrowing goes up? I don't care
15 whether it's a quarter or a half a point or a full
16 point. What happens? It effects an increase in the
17 cost of doing business in this state and this
18 region. We don't need any more of that. We want to
19 keep competitive pricing.
20 What happens in a downturn? What are the
21 protections there? What about the loss of jobs if
22 there's a credit squeeze and a tightening of credit
23 and the job growth is lost? What's the impact that
24 has? What is the impact of putting all our eggs in
25 one basket? There's no other competitor. What
0083
1 happens to our economy? Certainly these are good
2 institutions and strong institutions and wise
3 institutions, but if there's only one of them and a
4 series of mistakes happens, what happens next?
5 I believe that all this can be avoided. I
6 believe that this merger can be done, and it can be
7 done right. It can be done by playing by the rules.
8 In my opinion, the way to do that is to bring in --
9 that all of the assets that are going to be divested
10 go to one buyer for the entire region. One buyer
11 comes in and picks up this package, it ensures
12 competition. It ensures that there's going to be
13 regional competition in Massachusetts and throughout
14 this region. That is what I believe should happen.
15 Now, there are those -- and certainly I
16 respect their opinions and I value their opinions --
17 that we should carve out for some community banks.
18 I support community banks. Everyone supports
19 community banks. They don't service the middle
20 market. And they won't service the middle market
21 when this is all said and done.
22 If a major competitor picks up this piece
23 and someone with the size and scope and scale and
24 the expertise to service this middle market, it is
25 my opinion they will divest. They will not need all
0084
1 these branches, particularly some of the smaller
2 branches, and that divestiture will occur in an
3 orderly fashion and they'll be making good business
4 decisions as to what they can divest, and that is
5 the way that I certainly would urge and recommend
6 that the Board adopt the direction that I think we
7 should go.
8 In the end this is about preserving
9 competition and maintaining the competition that
10 exists and filling that gap and filling that void
11 that is in that middle market. If we do that, and
12 we do it right, we'll set the standard to make sure
13 the flow of affordable credit and competitive credit
14 flows to the businesses of Massachusetts and this
15 region that depend upon them for their survival and
16 the economic future and health of this region.
17 Thank you very much.
18 My colleague Richard Blumenthal from
19 Connecticut is next. (Applause)
20 PRESIDING OFFICER SMITH: Mr. Blumenthal?
21 MR. BLUMENTHAL: Thank you very much. I
22 want to join my colleague, Attorney General Tom
23 Reilly, in thanking you for this opportunity and say
24 that I also join in sympathizing with the arduous
25 day you're devoting to this subject. I want to make
0085
1 it clear I think you need to devote another day, if
2 you choose to do so, in Hartford, which we've asked
3 you to do, and you're always welcome, as you were
4 some years ago.
5 I want to say that my comments have been
6 submitted formally in writing, and I will just
7 briefly summarize them. And I want to say that
8 we've appreciated the cooperation and the help that
9 we've received from the Commonwealth of
10 Massachusetts, General Reilly and his staff, who
11 have done excellent work. We've done much the same
12 kind of investigation and ours, too, is ongoing
13 involving documents that we've subpoenaed from the
14 banks, which are in confidential form and submitted
15 to you in excerpt.
16 We've also spoken to customers,
17 competitors, other banks that will be affected. We
18 have reviewed the complaints that we've received
19 over the years, not only in my office, but the
20 banking department, and we have benefitted from the
21 economic analysis done by Charles Cavanaros.
22 And today's situation brings me to somewhat
23 different conclusions than my colleague, General
24 Reilly, but we share a similar view of the enormous
25 peril and threat to competition and consumer
0086
1 interests that are inherent in this merger.
2 You will remember that four years ago I
3 spoke to you in Hartford regarding the proposed
4 merger of the Fleet Financial Group and the Shawmut
5 National Corporation, and we had high expectations
6 at that time that Fleet Bank would provide superior
7 services to consumers and small businesses as well
8 as to larger customers and that its community
9 investment commitment would be a model to the
10 nation. In fact, we negotiated a package of
11 divestiture and community commitments that we
12 believed offered tremendous promise for our region
13 and for the nation.
14 The record since 1995, I say regrettably,
15 offers warning for grave caution. The record has
16 been at best mixed. I expressed concern then that
17 large banks often do not give sufficient priority to
18 smaller customers, and we've seen throughout the
19 industry a limitation in competition, unceasing ATM
20 litigation and voluminous consumer complaints.
21 At least in 1995 one of the reassuring
22 thoughts was that Fleet would still face meaningful
23 competition and BankBoston was a viable remaining
24 rival. Now Fleet is again before this Board seeking
25 approval to acquire its largest New England
0087
1 competitor, BankBoston. And this proposed merger
2 would create a behemoth of more than 200 billion
3 dollars in assets, dwarfing its next largest New
4 England competitor by more than ten fold.
5 To counter this economic and competitive
6 threat, Fleet offers to sell less than one half of
7 BankBoston's Connecticut presence; really an offer
8 that would create a mere shadow of the competitive
9 force that premerger BankBoston offered.
10 Essentially talking about the rules as
11 General Reilly did, talking about the antitrust
12 rules that I am bound to enforce as Connecticut's
13 chief antitrust official, Fleet and BankBoston have
14 attempted to justify this result with an antitrust
15 argument that is simply out of touch with those
16 rules and with economic reality. They divided New
17 England into numerous artificial municipal and
18 metropolitan markets and they have argued that even
19 the smallest of banks and credit unions compete on
20 an equal footing, despite the fact that they have
21 recognized themselves in other contexts, the
22 importance of size and scale in economies that drive
23 down costs.
24 The key flaw in this case is that it
25 persists in mistakenly using the same incorrect
0088
1 formula in antitrust terms to determine that
2 competition won't be harmed. Artificially defining
3 those markets with municipal boundaries rather than
4 seeing them as statewide or regional.
5 I urge that there be a package of larger,
6 more extensive divestiture, a more satisfactory sale
7 of assets that is necessary to counter the
8 anti-competitive effects of this merger. In a sense
9 that kind of larger-scale divestiture would enable
10 various kinds of purchasers to use those assets to
11 increase themselves as competitive, pro consumer
12 forces in the marketplace.
13 A sufficient number of branch banks,
14 deposits, ATMs, other assets must be made available
15 to our growing regional financial institutions,
16 including the community bank, so that they will grow
17 from the ground up.
18 At the same time I urge that a substantial
19 block of assets -- not all, but a block -- from all
20 three states that are affected be sold on a combined
21 basis to a strong major purchaser that has economies
22 of scale and scope to directly and immediately
23 compete with Fleet-Boston.
24 In contrast to this approach, what Fleet
25 offers is what it has called a clean sweep of
0089
1 BankBoston assets. But their broom, it seems to us,
2 is really a worn-out brush applied to one or two
3 cities; not to the relevant market as a whole.
4 BankBoston doesn't operate out of Hartford alone or
5 out of Torrington alone in the State of Connecticut.
6 It has a statewide presence. The mid market is key
7 and will be the victim of less competition, tighter
8 credit, higher rates and lower quality service if
9 this merger is permitted to go forward as it is
10 structured now.
11 And as General Reilly has said so well,
12 this mid market really is the engine that fuels our
13 economic growth in the State of Connecticut and
14 throughout the region. These are small and middle-
15 sized businesses that employ tens of thousands of
16 our citizens and, most importantly, most critically,
17 even in good times, they are the economic forces
18 that employ new workers and create new jobs.
19 Let me just say finally that I urge the
20 Board to require Fleet-Boston to make good on the
21 commitments that it has articulated more
22 specifically this morning by further defining them,
23 by stating them even more specifically, but most
24 important, saying explicitly what it will do to make
25 sure that the community investment commitments are
0090
1 actually realized. What we found in the last
2 go-around on community investment is that they are
3 completely dependent on community outreach and
4 promoting aggressively the kind of opportunities
5 that are made available. The numbers mean nothing
6 unless they are backed by a solid, aggressive
7 program of community outreach. (Applause) And that
8 is what I urge the Federal Reserve Board to require.
9 I very much appreciate this opportunity to
10 be with you this morning and for you to give me this
11 chance to talk to you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much. Ms. Nappier.
14 MS. NAPPIER: Good morning. My name is
15 Denise Nappier and I am treasurer of the State of
16 Connecticut. I am pleased to join with Attorney
17 General Richard Blumenthal from my State of
18 Connecticut and his counterpart here in
19 Massachusetts to share with you some serious
20 concerns about the proposed merger as it stands
21 today. I would also like to thank you for the
22 opportunity to testify, although I must express my
23 disappointment in your decision not to hold a
24 hearing in Connecticut on a matter that will
25 effectively remake the financial landscape in
0091
1 Connecticut.
2 The Connecticut State Treasurer's interest
3 in the proposed merger are substantial. We are a
4 shareholder and a major customer of both banks. The
5 combined shares of both banks held by the state
6 treasury is in excess of 630,000. For the past two
7 years the state treasury has spent nearly $6 million
8 on banking service fees, of which 90 percent has
9 been spent or paid to Fleet and BankBoston, Fleet
10 representing the lion's share of roughly 77 percent
11 of all fees paid, and BankBoston 15 percent.
12 I believe that a sense of responsibility
13 for the well-being of the citizens of Connecticut
14 can and must go hand in hand with the fiduciary
15 responsibilities of the state treasurer's office,
16 and it's within that context that I express my
17 concern.
18 Let me say from the onset that I believe
19 that this merger could be a tremendous opportunity
20 for Connecticut and New England. There could be
21 great promise in the establishment of a strong
22 regional bank, a great player on the national stage,
23 but that's not the blueprint we see today.
24 My office is taking a look at Fleet's track
25 record in lending in the communities, and I am
0092
1 concerned. Fleet has claimed that the merger will
2 generate greater capacity for the bank to provide
3 superior services to customers. It sounds good, but
4 I believe in checking the record, and so far the
5 record tells a different story.
6 For example, Fleet's history of post-merger
7 performance demonstrates a declining level of
8 commitment in providing better access to banking
9 services, home mortgage and small business loans, as
10 well as other forms of community investments.
11 (Applause) Now, I do understand the art of
12 statistics, but the facts speak for themselves and
13 as a fiduciary, I don't typically engage in those
14 forms of tactics. So I am here to say to you that
15 in Connecticut we know that the amount of loans to
16 low and moderate income households before the merger
17 of Fleet and Shawmut was twice the level it is
18 today. (Applause) I understand that the CEO of
19 Fleet was recently quoted as saying that the merged
20 bank will be for everyone. Well, my concern is over
21 just who is being left out here. (Applause) I am
22 generally concerned that the big losers in the
23 merger, the people being left out, may be the
24 consumers and businesses of Connecticut. That is,
25 people who are trying to get a small business up and
0093
1 running or expand a growing business and need a
2 reasonable loan. Or the low or moderate income
3 family living in our rural communities or in the
4 inner city trying to afford their first home and
5 need a mortgage at an affordable rate. And
6 consumers depend on reasonable rates, healthy
7 competition and banking parties that respond to
8 their needs.
9 Let me briefly highlight nine critical
10 areas of concern. First, due in large part to the
11 competition for business between Fleet and
12 BankBoston, the state treasurer's office here in
13 Connecticut has saved nearly $1 million reduction in
14 banking service fees from 1994 to 1998. While I can
15 speak only for the business relationship of the
16 state treasury, it would not be unreasonable to
17 assume that Fleet may possess substantial
18 competitive control over other business
19 relationships in our state.
20 We are concerned that the savings achieved
21 by my office may well be eroded as competition is
22 eliminated. Adequate capital is frequently cited as
23 the major barrier to growth and development of small
24 businesses. Undercapitalization is the largest
25 contributor to business venture failure. Therefore,
0094
1 the economic stability and well-being of small
2 businesses in our state is directly tied to the
3 availability of choices of banking services and the
4 fair lending practices of the financial institutions
5 serving our state. That's why reduction in
6 competition is of concern here. (Unintelligible)
7 bank is a program that helps small Connecticut
8 businesses that are unable to obtain conventional
9 financing with an emphasis on minority and women-
10 owned businesses.
11 As part of the Fleet-Shawmut merger Fleet
12 was required three years ago to maintain a high
13 level of urban loans. Once meeting its obligations,
14 under the agreement Fleet's participation with
15 (unintelligible) dwindled considerably, from 1.2
16 million in fiscal 1998 to 295,000 in fiscal 1999.
17 That track record is cause for serious concern.
18 The Community Reinvestment Act has fought
19 discrimination in lending practices and increased
20 access to capital for home mortgages and business
21 start-up for more than two decades. Any entity
22 emerging from a merger between Fleet and BankBoston
23 should be a leader obligated to formulate, promote
24 and implement unfolding principles of community
25 investment.
0095
1 We have seen just the opposite. For
2 example, the 1998 CRA rating report showed that
3 Fleet made nine community development loans totaling
4 just over $16 million in Connecticut while they made
5 19 community development loans totaling nearly 157
6 million dollars in Massachusetts. Of the 200
7 million in community development loans,
8 Massachusetts received 72 percent of the loans to
9 Connecticut's 7.5 percent, even though Connecticut
10 has 25 percent of the bank's branches to
11 Massachusetts' 33 percent.
12 Obviously every potential borrower in
13 Connecticut is concerned about those stats. In
14 Connecticut we understand the value of community
15 banking, where the bankers know all the
16 businesspeople and are aware of potential business
17 problems before they become critical. BankBoston
18 has developed an internationally recognized model
19 for community banking. Fleet has not. And even the
20 BankBoston model has worked more effectively in
21 Massachusetts than in Connecticut.
22 Any approved merger plan should include the
23 preservation of the banking relationships developed
24 by First Community Bank and a commitment to the
25 continued success of the First Community Bank. Now,
0096
1 we're concerned that won't happen. Connecticut's
2 urban and rural communities have traditionally been
3 underserved by financial institutions. Yet nearly
4 half of the branches targeted for sale in connection
5 with the proposed merger are located in the rural or
6 urban areas of our state. Location is particularly
7 important to low and moderate income families where
8 transportation is frequently limited. We're
9 concerned that service to these communities will be
10 disrupted at best and perhaps in some cases will be
11 eliminated.
12 Fleet and BankBoston have recently
13 announced a $14.6 billion commitment for
14 lower-income borrowers, small businesses, community
15 development programs over a five-year period of
16 time. Our internal analysis indicates this is only
17 a slight increase from the current lending patterns
18 and we have no idea from Fleet how this will affect
19 our state. Given the uneven distribution of Fleet's
20 attention to community development efforts in the
21 past, it would not be unreasonable to assume that
22 Connecticut would not fare as well as Massachusetts.
23 We remain concerned about that and would much prefer
24 that Fleet show leadership in all jurisdictions in
25 which it operates. Thank you very much. (Applause)
0097
1 PRESIDING OFFICER SMITH: Thank you.
2 Questions from the panel?
3 MR. McDONOUGH: I have a question for Mr.
4 Reilly. Your remarks today have centered around the
5 antitrust implications of this merger, particularly
6 your concern about middle market lending, and you're
7 advocating a solution where a large institution
8 would come in and acquire all the assets in all
9 three states?
10 MR. REILLY: Yes.
11 MR. McDONOUGH: Whereas, Mr. Blumenthal was
12 suggesting that maybe a large institution could
13 acquire some assets, a sufficient number, toehold or
14 whatever, to meet the middle market. Is that a
15 potential solution to this issue or do you still
16 believe -- obviously you believe -- but would it be
17 sufficient if a large institution acquired
18 sufficient assets in the three states rather than
19 acquiring everything?
20 MR. REILLY: I think the key for me would
21 be whether or not the bank that acquired the new
22 buyer was sufficient in size and scope and expertise
23 to meet the competitive demands or competitive needs
24 of that middle market. That's the focus. Once that
25 was satisfied, certainly I'm open to other
0098
1 considerations. But that's the main focus. That's
2 the main consideration. And I am concerned about in
3 terms of carving out a piece, who's going to do the
4 carving out? Is it going to be Fleet-Boston? Isn't
5 that a conflict? What about the inevitable
6 cherrypicking that's going to go on? It's going to
7 make it all the more difficult for a new, viable,
8 strong competitor that I'm looking for to come in
9 here and be willing to come in here under those
10 circumstances, if there are going to be carveouts in
11 the first stage regionally or carveouts individually
12 within the states.
13 I think it makes it more complex. It makes
14 it more difficult. Is it impossible? No, but I
15 think it's a real challenge to put on the table.
16 It's a problem that I think can be solved by the
17 solution that I'm proposing. Are there other
18 solutions? Perhaps, but we need to be very, very
19 careful here and proceed with caution. This can be
20 done I believe, but it has to be done right and I
21 believe that complicates it the more layers of
22 carving out that there are. But it could be solved.
23 If there is one strong competitor, wherever that
24 competitor comes from or evolves that can meet the
25 competitive needs of have middle market, I'll be
0099
1 satisfied, and I think this merger would ultimately
2 be a good thing for this region and for the state.
3 MR. McDONOUGH: Thank you.
4 MR. ALVAREZ: I have a question for Mr.
5 Blumenthal and Mr. Reilly. Do you find, in looking
6 at the middle market, that there is much competition
7 from banks or other lenders outside the market in
8 the contiguous area? The middle market tends to be
9 a larger geographic market than some retail markets,
10 and I'm wondering what kind of competition you're
11 finding outside the particular State of Connecticut
12 or the State of Massachusetts.
13 MR. REILLY: In Massachusetts we're finding
14 that there is some competition, but there is no
15 question that the two major competitors are
16 BankBoston and Fleet. At the lower end of that
17 middle market you'll find some competition at the
18 very higher ends. Obviously there are already more
19 options. But right smack in the middle there, these
20 are the two major competitors, and essentially the
21 only major competitors, and that's the void that
22 certainly I'm very concerned about. There's a
23 little bit of competition, but these are the primary
24 players here, and they're competing, and it's a good
25 thing. I just want to keep it going.
0100
1 MR. BLUMENTHAL: Much the same is true in
2 Connecticut. There is now competition, we find,
3 talking to customers, between BankBoston and Fleet
4 for mid-market business, and one of the key
5 differences, disagreement between ourselves and
6 Fleet-BankBoston, is on precisely that point. They
7 have in essence said they are doing enough now in
8 terms of divestiture, and going to the first
9 question that was asked, I think the focus ought to
10 be on the clean sweep. Let's really use a broom.
11 Let's sell more of those assets so that they can be
12 made available not only to a major purchaser who can
13 offer competition in the mid market, but also to
14 community banks and regional financial institutions
15 that are grown from the ground up and can also begin
16 to offer competition for that mid market.
17 These solutions are by no means mutually
18 exclusive. If the broom sweeps clean and hard
19 enough and assets are really made available, both
20 can be done. But the competition that now exists is
21 very much on a regional and statewide basis, and
22 ought not to be defined artificially and
23 unrealistically and inaccurately by municipal
24 boundaries or metropolitan areas, as the submission
25 from Fleet-BankBoston essentially does.
0101
1 PRESIDING OFFICER SMITH: Other questions?
2 MR. KWAST: A follow-up with Attorney
3 General Blumenthal for a moment. Do you have a feel
4 for how large a bank needs to be to serve
5 effectively the middle market in Connecticut or the
6 rest of New England?
7 MR. BLUMENTHAL: I can't put a precise
8 number on its assets. I would be glad to get back
9 to the Board with that kind of estimate. Part of
10 what we're doing now essentially is working with our
11 economist on exactly that question, which obviously
12 is an core one for you as it is for all of us. But
13 our feeling is that the sale of assets can be done
14 realistically and aggressively so as to enable a
15 major competitor, a large purchaser and at the same
16 time the community banks to both be involved. And
17 what exactly the size is I would be happy to submit
18 in further written testimony if the Board will
19 permit me to do so.
20 MR. REILLY: I thought a little bit about
21 that, and I don't have a hard figure, but the
22 starting point is that this merged bank is going to
23 have what? 170 billion dollars in terms of assets,
24 and certainly the closer you get to that figure, the
25 better off you're going to be. I don't know whether
0102
1 it's 30, 40, 80, 100, but the closer you get to that
2 figure, certainly the more comfortable I think we're
3 all going to be if we reach that kind of competitive
4 size and dimension that's going to provide real deep
5 pockets, real competition.
6 PRESIDING OFFICER SMITH: Thank you very
7 much for coming this morning.
8 MR. BLUMENTHAL: Thank you.
9 PRESIDING OFFICER SMITH: We'll move on to
10 Panel Four. We're ready to start and we have Ms.
11 Campbell reading a part of the statement from Ms.
12 Hurd, and I have assured her that the entire
13 statement will be part of the record.
14 MS. CAMPBELL: My name is Joyce Campbell.
15 I am going to be reading Maude's testimony. As you
16 know, Maude Hurd is the National President of the
17 community organization ACORN. She couldn't be here
18 today because she had to work, as does a lot of our
19 members. She had asked, though, that maybe in the
20 future we could have this in the evening so that we
21 could better represent our membership.
22 Anyway, as you know, ACORN members have
23 fought redlining and mortgage discrimination all
24 across the country. We use the Home Mortgage
25 Disclosure Act and Community Reinvestment Act to
0103
1 negotiate innovative agreements with banks that
2 remedy past discrimination. Since we signed the
3 first of these agreements in 1985, the ACORN Housing
4 Program has worked with banks to put over 21,000
5 families into their own homes, valued at 1.53
6 billion dollars. ACORN's program has also generated
7 an additional $4 billion in low-income community
8 investment.
9 ACORN's housing program has won awards for
10 its success in helping low-income minority borrowers
11 successfully get and pay their mortgages. Our
12 agreements with banks include progressive
13 underwriting standards, intensive one-on-one housing
14 counseling and, whenever possible, below-market
15 interest rates.
16 Fleet signed an agreement to participate in
17 the ACORN Housing Program in 1995 when it bought
18 Shawmut Bank. The agreement covered Massachusetts
19 and Connecticut and has produced over 1,000
20 successful home buyers and more than $120 million in
21 mortgages. The program has also increased access to
22 home ownership for single parents, recent
23 immigrants, lower-income buyers and people who don't
24 qualify for traditional mortgage underwriting,
25 although they still pay their bills and they pay
0104
1 them on time.
2 The Fleet-ACORN partnership program and
3 programs like it have been crucial in bringing
4 capital and credit into low-income minority
5 neighborhoods. For most American homeowners it's
6 the single biggest source of wealth. It means the
7 difference between living paycheck to paycheck and
8 building equity for yourself and your family.
9 Home ownership is even more crucial for the
10 stability and economic growth of minority
11 communities. Minority homeowners hold 75 percent of
12 their wealth in home equity. The difference between
13 owning and renting is staggering for African-
14 Americans. The average black homeowner's net worth
15 is $48,300, while for the average renter it's only
16 $500. Home ownership helps the homeowner, but it
17 also helps the community. Homeowners are much more
18 likely than renters or landlords to protect and
19 improve their property. There's more stability and
20 less crime in neighborhoods of homeowner-occupied
21 homes and greater involvement in community and civil
22 activities of all kinds.
23 With the ACORN-Fleet agreement and others
24 like it, we were really starting to see a positive
25 shift in the rate of minority home ownership. In
0105
1 early and mid-'90s the percentage of growth of
2 minority home buyers was greater than that of whites
3 for the first time ever. These deals were helping
4 our Massachusetts and Connecticut neighbors achieve
5 the American dream of home ownership, while helping
6 Fleet gain significant market share in minority
7 lending.
8 But as the '90s draw to a close, we are
9 starting to see a downward trend in lending to
10 minority and low-income census tracts. As banks
11 like Fleet get bigger and less accountable to the
12 local communities, they walk away from innovative
13 programs and begin to use cookie-cutter formulas
14 that try to fit everyone into a white middle-class
15 ideal credit situation.
16 Sometimes they even get encouragement from
17 Washington, like the conservative Congress that's
18 trying to dismantle the Community Reinvestment Act.
19 If this merger proceeds, Fleet will be the
20 biggest mortgage player by far in Boston and
21 Bridgeport and many other cities across the
22 Northeast. When they turn their backs on the
23 programs that brought in 30 to 80 percent of their
24 minority lending business in recent years, they are
25 turning their backs on our communities. And let me
0106
1 tell you, without these kinds of programs, our
2 neighborhoods don't stand a chance.
3 If Fleet turns their back on the ACORN
4 program, their record in Boston is likely to go as
5 low as it has in other cities. Over the last ten
6 years Fleet has been showing an alarming trend.
7 Each time the bank merges, it decreases its
8 community reinvestment work. Fleet's CRA ratings
9 have been going down in recent years, even when the
10 banks they have acquired have a grade of
11 "Outstanding." It happened with Northstar in 1991
12 and NatWest in 1994. These banks were high-quality
13 community lenders, but since being acquired by
14 Fleet, they have gone down to "Satisfactory" to "Low
15 Satisfactory" range and slipping.
16 Our community cannot afford to have history
17 repeat itself, as Fleet swallows up yet another bank
18 without making concrete commitments, continue
19 lending in low income and minority neighborhoods. I
20 call upon the Federal Reserve to delay this merger
21 until Fleet can prove that it will meet its
22 investment obligations to our communities. Thank
23 you. (Applause) I did it all.
24 PRESIDING OFFICER SMITH: Ms. Wilkerson on
25 behalf of Mr. Christian.
0107
1 MS. WILKERSON: Good morning. My name is
2 Angie Wilkerson and I am speaking on behalf of
3 Matthew Christian.
4 PRESIDING OFFICER SMITH: Can you bring the
5 mike closer to you?
6 MS. WILKERSON: Good morning. I'm speaking
7 on behalf of Matthew Christian, and I'd just like to
8 put some things into proper perspective for myself.
9 As a member of ACORN, as a member of the community,
10 we began the program with Fleet many years ago. We
11 were the ones who implemented the lifeline banking.
12 We were the first to implement the first-time home
13 buyers program, and if Fleet walks away from this
14 program, it would be devastating to the community.
15 I'm asking Fleet to stand by your
16 commitment that you originated with us and step up
17 to the plate and do what you're supposed to do. If
18 you walk away, it will be so devastating for our
19 community, we will have more homeless people in
20 Massachusetts than we ever had. So please continue
21 your commitment and give us the commitment that we
22 need in our community. Thank you. (Applause)
23 PRESIDING OFFICER SMITH: Thank you very
24 much. Then we have Ms. Mustafa on behalf of Ms.
25 Thompson.
0108
1 MS. MUSTAFA: My name is Lunita Mustafa.
2 I'm a mother of six children and like Ms. Elnora
3 Thompson, I am divorced and I am a single parent.
4 I'd like to say on her behalf and on my behalf that
5 the struggle of raising children by yourself is not
6 easy, as we all know. But for the past five years
7 parents like myself have had ACORN Housing
8 Authority. We have had Massachusetts Affordable
9 Housing Alliance. We have had Mayor Menino. We
10 have had the CRA, Community Reinvestment Act.
11 Five years ago parents like myself were
12 coming out before people like yourself. We were
13 carrying pictures, and we were crying. We were
14 weeping for the death of our children to gangs, to
15 violence in our streets as the result of an unstable
16 community, of moving every year from place to place.
17 The burden on the children is every other
18 year you're the new kid on the block. Every other
19 year there's a new gang or there's a new territory
20 that you have to deal with or a new school that you
21 have to settle into. But for the past five years
22 we've had a chance to rest. And today I don't have
23 a picture of dead children. No. I have a picture
24 of my two oldest children out of my six, and I'd
25 like to show it to you. This is my daughter that
0109
1 just graduated from Bentley College. (Applause)
2 And this is my son, my 18-year-old that I have been
3 in fear when I see other parents bury their children
4 on the streets, and he just joined the U.S. Navy and
5 he's a medic. He just graduated boot camp and is
6 starting a school, his first year in medical school.
7 (Applause) This is what ACORN Housing,
8 Massachusetts Affordable Housing Alliance and Mayor
9 Menino have stood by me and supported me to help me
10 to bring this about.
11 And I am crying today because five years
12 ago there was a wild beast in our community and it
13 was devouring our children. And then today I hear
14 that they're going to unleash him and send him back
15 out there, and I still have four young children. I
16 have my home, I have my CRA home, but what about the
17 rest of the people around me? What if it becomes a
18 fast rental area again?
19 This is Fleet. My son is supporting this
20 flag. This is what the investment is bringing about
21 for Boston. This is what house Boston is bringing
22 about. This is the safe Boston. This is the
23 result. These are live children, and five years ago
24 somebody would have been crying for dead children.
25 I ask you, the Federal Reserve Board,
0110
1 you're a family. Please don't release the beast on
2 my community, on my children. That's what the
3 merger represents to us. That's what the merger
4 represents to Boston. Without the support of the
5 CRA, without ACORN Housing Corporation, without
6 Massachusetts Affordable Housing Alliance and all
7 the people that supported us, we don't stand a
8 chance. There is no muzzle for that beast. Thank
9 you. (Applause)
10 PRESIDING OFFICER SMITH: Ms. Carter.
11 MS. CARTER: Can everyone hear me?
12 PRESIDING OFFICER SMITH: Yes.
13 MS. CARTER: I just hope this morning that
14 God's will be done in this hearing, and before I
15 start, I can ask for his help. So Lord, let the
16 words of my mouth and the meditation of my heart be
17 acceptable in your sight, in Jesus' name, amen.
18 Praise the Lord.
19 My name is Jennifer Carter. I have been
20 banking with BankBoston for many moons, over 20
21 years. I am very concerned about the aftermath of
22 the merger between Fleet and BankBoston. I'm
23 worried that they will cancel ACORN. After meeting
24 with them yesterday, they said that they will be
25 sitting down again with ACORN. But I am more
0111
1 concerned that this is just lip service. And that's
2 lip service. By turning their back on ACORN
3 program, Fleet is turning their back on our low-
4 income and minority community.
5 Have they forgotten that the ACORN Housing
6 Corporation borrowers made up over 30 percent of
7 Fleet's loans to low and moderate income
8 neighborhoods in 1996? Have they forgotten that
9 ACORN Housing helped Fleet increase their lending in
10 low-income neighborhoods by almost 90 percent
11 between 1995 and 1997? Have they forgotten ACORN
12 Housing is responsible for more than 50 percent of
13 BankBoston's loans to black and Latino borrowers in
14 1998 and responsible for 20 percent of BankBoston's
15 overall lending in that year?
16 I think that Fleet has forgotten that ACORN
17 has been -- has done -- excuse me. I think that
18 Fleet has forgotten what ACORN has done to help them
19 meet their obligation to the low-income and minority
20 community. But I would like to remind them again
21 today. If this merger goes forward and Fleet does
22 not renew its lending agreement with ACORN by August
23 1st, I, Jennifer Carter, will be closing my account
24 at BankBoston, and I will also be encouraging my son
25 to close his account at Fleet. And we, the members
0112
1 of ACORN -- raise your hands, ACORN. Praise the
2 Lord. And we, the members of ACORN, have already
3 collected several dozen letters from other community
4 residents in that they are going to close their
5 account as well. We will continue to collect these
6 letters throughout the summer. And I have some
7 letters here if you'd like us to submit that to you.
8 PRESIDING OFFICER SMITH: Yes, please do
9 so.
10 MS. CARTER: So if Fleet is planning to
11 keep taking deposits from our community but stop
12 giving us loans, then we are going to cut their
13 credit line, too. (Applause) This is our way of
14 expressing our dissatisfaction with Fleet's
15 decision. They cannot continue to keep profiting
16 from our deposits without putting back into our
17 community. So that's why I'm here today, to bring
18 to the Federal Reserve's attention the urgency and
19 the dire need for this program, because it's all
20 about helping the low-income community to accomplish
21 the American dream.
22 Please do not rush your decision by
23 allowing this merger. I believe extra time is
24 needed for Fleet to meet with ACORN again as they
25 have promised. You cannot let this merger go
0113
1 forward if it means that Fleet is allowed to walk
2 away from its community reinvestment responsibility.
3 I realize that nothing can be accomplished
4 unless God allows it, so I'm praying for you that
5 the Lord will lead and guide you. Praise God. And
6 I want to encourage Fleet, gather up the frogmen.
7 Let nothing be lost. (Applause)
8 PRESIDING OFFICER SMITH: Ms. Jacobs.
9 MS. JACOBS: Hello. My name is Gwendolyn
10 Jacobs and I am president of ACORN's New York
11 chapter. New York City has every bank there is.
12 There are so many corporate headquarters and there
13 are so much money changing hands, but not where I
14 live in Brownsville in Brooklyn. Where I live it is
15 hard to find a good bank. There weren't too many to
16 start with, and since they all started merging,
17 there are even fewer. Because of this, people in
18 neighborhoods like Brownsville don't have checking
19 accounts. They go to check-cashing stores. There's
20 no local branch of a respectable commercial bank to
21 ask for a loan, so instead we're prey to B and C
22 lenders.
23 Fleet has had dialogue with ACORN about the
24 banking problems faced by low and moderate income
25 people in New York, but they have not helped us
0114
1 address them. Before we had discussed doing any
2 programs with Fleet, we had a valuable relationship
3 with NatWest which gave good loans to minority
4 residents of New York.
5 ACORN had a highly successful underwriting
6 program and then we negotiated a mortgage program
7 offering loans at 1 percent below the market
8 interest rate. We were helping NatWest target
9 populations that were new to them, break into a
10 large, underserved Latino community and build
11 relationships with other community groups and with
12 local minority churches.
13 Then Fleet acquired them and it all ended.
14 We in the New York office were led on to believe
15 that these programs and our relationships would be
16 unaffected. At the time of the merger, they told us
17 that all that would change was the stationery. What
18 a lie. But after the acquisition was complete, we
19 were told that they didn't need our product; that
20 they were covered.
21 Well, we followed Fleet since then, and in
22 fact, they don't have coverage that matched the
23 NatWest programs that were in place. Fleet has been
24 terrible about providing communities with the
25 services prescribed by CRA. It's hard to provide
0115
1 services to a community when you don't have a branch
2 there.
3 In New York Fleet has 39 branches and four
4 of them are in predominantly Afro-American or Latino
5 communities.
6 New York State has a law that requires
7 banks to offer lifeline or basic banking accounts.
8 A few months ago when ACORN members went to these
9 four branches to ask about opening accounts, which
10 one of them happened to be my branch. They acquired
11 it from NatWest. When ACORN members went to these
12 four branches to ask about opening accounts, none of
13 them were told about the lifeline account. When
14 members asked about lifeline accounts, they were met
15 with blank stares. They were instead offered
16 accounts with a higher opening balance requirement
17 and unreasonable fees.
18 So ACORN went to Fleet so we could get this
19 fixed. The New York State law was on our side and
20 Fleet claimed to be on our side, too. We met with
21 them and asked them about their lifeline account.
22 We knew they offered it because it was in their
23 pamphlets. So why didn't the employees working in
24 their banks know about it? Why don't they advertise
25 it more, especially in the branches that serve the
0116
1 people who need it, like the law says they have to?
2 That was when Fleet told us about their
3 merger with BankBoston. They said they would make
4 sure that their employees knew before the basic
5 banking accounts and offered it more to customers.
6 They also said they would make posters for these
7 branches so people would not have to find mention of
8 the account in Fleet's pamphlet. They would know
9 about it just from standing in the bank.
10 Well, our members went back about one month
11 ago, and I went last Thursday, and still they were
12 not offering the lifeline account. Still you don't
13 find any posters either. Fleet has become an
14 example of the rich getting richer from the poor
15 getting poorer. With every merger they have made,
16 they have lost more interest in serving individuals.
17 People like me can't bring Fleet the money
18 that its corporate customers can, but we're not
19 making them lose money either. We pay our bills and
20 we pay our rent, in the same way we could pay a
21 mortgage that we can keep a checkbook. So I am
22 asking the Federal Reserve to carefully consider
23 Fleet's current merger. For every employee they
24 will lay off and every bank branch that will be
25 closed, there are hundreds of consumers who will
0117
1 have less access to banking services. In low and
2 moderate income neighborhoods we need more banks,
3 not richer ones.
4 If Fleet -- the only way I believe Fleet
5 will do anything, it would have to be memorialized.
6 They would have to put it in writing before the
7 merger and they would have to put the money where
8 their mouth is. (Applause) Put the money where
9 their mouth is. Saying it is not doing it, and
10 bigger does not necessarily mean better. Time has
11 proven that to me.
12 When they took over NatWest, the little
13 card they have for the ATM has little things like
14 little ships. Well, their ships are leaving out
15 lower and ours is coming back and we're filling them
16 up and we're getting poorer and they're sailing off
17 into the blue to the twin towers with the money.
18 (Applause) Financial Services Corporation, that's
19 where it's going. We're getting poorer and they're
20 getting richer.
21 That's unconscionable for them to merge and
22 get richer at the expense of the poor. And we are
23 the most underserved, deprived, non-served people
24 you ever saw, and they're using -- they talk about
25 they don't get anything from our money. Yes, they
0118
1 do. They get our money. They're using our money
2 while we're sleeping and we're leaving it in their
3 bank. We are their partners. They should think of
4 us as partners because they're using our money.
5 While we sleep our money is in their bank and
6 they're doing something with it overnight. Thank
7 you very much. (Applause)
8 PRESIDING OFFICER SMITH: Ms. Brown.
9 MS. BROWN: My name is Lori Brown and I
10 live in Bridgeport, Connecticut. I recently
11 purchased my home through the Fleet-ACORN program.
12 Before that I was living in a small three-room
13 apartment as a single mother; couldn't really afford
14 to get a larger place with the income that I was
15 making, but I knew if I could purchase a two-family
16 home I would be able to use the rental income to
17 bring down my housing payment to a level I could
18 handle. But since I didn't have perfect credit and
19 I had recently become self-employed, even though I
20 made decent money, it wasn't possible to get a bank
21 to actually look at me seriously at that time.
22 The only one who really would look at my
23 situation was the Fleet program with ACORN. Thanks
24 to that program my child and I are living together
25 in our new home on a quiet street where lots of
0119
1 people are homeowners and really care about keeping
2 up their neighborhood. I own my own home today and
3 my daughter has a safe place to grow up because
4 Fleet agreed to look at my loan application when no
5 one else would. Through the ACORN Housing Program
6 Fleet didn't try to fit me into a cookie-cutter
7 pattern of what I was supposed to be. Fleet took a
8 closer look.
9 I also used to work for ACORN Housing
10 Corporation as a loan counselor and now I work very
11 closely with ACORN Housing Corporation as a realtor.
12 I have worked with them for several years and I have
13 experienced how Fleet takes a closer look.
14 Most banks these days are using credit
15 scoring to decide if they want to make a loan. They
16 ask everyone the same questions and run the same
17 credit report, send all these numbers to someplace
18 to compute them and they come back with a yes or no.
19 In our low and moderate income neighborhoods,
20 especially in Bridgeport, it was mostly no. But the
21 ACORN and Fleet partnership took a closer look.
22 They looked at things that don't go into a credit
23 score, but that make a world of difference in your
24 application. They looked at my plan to use the
25 income for my renting out one apartment in a
0120
1 two-family home to help me pay my mortgage. They
2 looked at how I had a great record of paying my rent
3 and paying my other bills on time and how I had
4 cleaned up my credit issues.
5 Through the ACORN Housing Program Fleet
6 took a closer look at why a lot of other people from
7 Connecticut in low and moderate-income communities
8 weren't able to get loans. For example, there's a
9 lot of people who were paying very high rents. If
10 you can afford to pay your rent and afford to pay
11 your bills and put food on the table, but not
12 necessarily have a whole lot of money left over to
13 put into the bank, and with Fleet they had all types
14 of flexibility with how much money you had to come
15 up with, and they really took a closer look at
16 having non-traditional credit issues, among other
17 things.
18 And when they worked with the ACORN
19 program, Fleet also took a closer look at being a
20 team player, which is something you really don't see
21 today with a lot of things. While they're
22 processing the mortgage applications and
23 underwriting them, the people who are processing
24 them will call if there are any problems. So if it
25 looked like a problem with an application, instead
0121
1 of just denying it and not looking further into it,
2 they will call ACORN and work with them to work
3 through the issues and get people the mortgages that
4 they were seeking.
5 They took a closer look at my community and
6 we needed the help and we were glad to get it.
7 That's why ACORN Housing did almost 300 loans with
8 Fleet in 1996 in Connecticut. These loans have
9 worked. I know I am paying my mortgage payment
10 every month and on time and almost every one of the
11 clients that I counseled during that time period is
12 doing the same. We haven't heard any complaints
13 from Fleet about the loans or about our clients.
14 So when I heard that Fleet was going to
15 walk away from the partnership, I was very
16 surprised. I am asking Fleet to stop and take a
17 closer look now. Fleet's partnership with ACORN
18 Housing accounted for more than 66 percent of the
19 loans to blacks and Latinos in Bridgeport in 1996
20 and almost 80 percent of the loans to blacks and
21 Latinos in Stamford and Norwalk. In other words,
22 out of a total of 142 loans to blacks and Latinos in
23 Bridgeport in 1996, ACORN Housing's partnership with
24 Fleet was responsible for 94 loans. Once more,
25 ACORN Housing accounted for 50 percent of Fleet's
0122
1 conventional loans to all buyers in each of these
2 cities, 50 percent of all buyers, and in 1997 ACORN
3 Housing Program was responsible for over 60 percent
4 of Fleet's lending to blacks and Latinos, again in
5 Bridgeport, and 55 percent of lending to blacks and
6 Latinos.
7 PRESIDING OFFICER SMITH: Could you wrap
8 up, Ms. Brown?
9 MS. BROWN: Yes. I would like to wrap up
10 by saying, please take a closer look. Fleet should
11 not be allowed to increase their size without
12 increasing their community commitment, and I'm
13 asking that you oppose the merger. (Applause)
14 PRESIDING OFFICER SMITH: Next we have Mr.
15 Collazo on behalf of Ms. Mateo.
16 MR. COLLAZO: Yes. Hi. How are you doing?
17 I'm here on behalf of Mrs. Mateo. I happen to be
18 her counselor. I worked with her for quite a while
19 before she became a homeowner. Just last week she
20 managed to close the deal. So she's basically a
21 homeowner thanks to the Fleet-ACORN Program.
22 She always wanted to be a homeowner and she
23 worked hard to save the few bucks that she had
24 extra. She budgeted herself and finally she reached
25 the point where she managed to save enough money for
0123
1 a downpayment. Her husband was struggling with
2 illness which required surgery.
3 Basically what has happened after that,
4 after the surgery, other bills started accumulating
5 and Ms. Mateo was left with the responsibility of
6 paying all the finances and basically paying all the
7 bills.
8 When Ms. Mateo came to our program I worked
9 very hard with her to get her ready for the
10 responsibilities of home ownership. I knew there
11 was Fleet available for her, so I started working
12 with her to make sure she was ready to meet all the
13 criteria. No other bank would touch this loan by
14 looking at all the other issues that took effect
15 after the incident with her husband. So after
16 carefully taking care of all the outstanding debts
17 and all the bills that were left over from the
18 incident, Ms. Mateo managed to basically regain her
19 own funds and come up with a downpayment.
20 So basically what it comes down to is
21 because of Fleet and ACORN Housing, the partnership
22 that we had, they managed to become first-time home
23 buyers. You have to keep in mind without this
24 program, there will be no more Ms. Mateos around to
25 basically take advantage of such a great program
0124
1 like ours.
2 I am asking you please do not approve this
3 merger without requiring Fleet to come to some
4 agreement that they're still going to help these low
5 and moderate income people that ordinarily would not
6 be able to go elsewhere. This program was her only
7 chance and it was the only chance for many others as
8 well. Thank up (Applause)
9 PRESIDING OFFICER SMITH: Then we have Ms.
10 Miller for Ms. Blain.
11 MS. MILLER: Okay. I'm speaking for Rose
12 Blain. She lives in Mattapan and she says, "I am
13 working with ACORN and Fleet to buy my own home in
14 Brockton. For a long time I wanted to buy a house,
15 but I didn't believe that I could. I got
16 information about ACORN from a meeting in Fields
17 Corner in Dorchester and I decided to participate in
18 the program. The ACORN loan counselor, Robert
19 Davis, helped me to check my husband's credit, my
20 pay stub, my income tax and my bills. I work
21 full-time and many night shifts as a nursing
22 assistant in a hospital pediatric ward. Even though
23 my income is only $22,000 a year, ACORN's program
24 with Fleet Bank gave me the flexibility to have a
25 low downpayment and a good mortgage rate.
0125
1 I was able to get a prequalifying letter
2 for a house based partly on my plan to rent out a
3 floor to another family. The house I am trying to
4 buy is in Brockton. I will be living there with my
5 husband and four kids. It is my dream to own my own
6 home and be my own boss.
7 Even with ACORN's program it has taken me
8 two years to be ready to buy a home. Without this
9 program a lot of people will miss the opportunity to
10 have their dream. To me it is horrible that Fleet
11 is hurting so many people who would like to get a
12 house. I want many families to get the same
13 opportunity that we did working with ACORN and
14 Fleet. There's an old saying: If it ain't broke,
15 don't fix it. Well, this program ain't broke, so
16 please don't take it away from the people who need
17 it. I urge you to renew the ACORN Housing Program
18 because it works and to stop the merger.
19 On a personal note, six years ago I lost my
20 home due to a bad loan and a bad house; okay? I had
21 no credit. But a good income, and the original loan
22 that I tried to obtain from a regular bank, I got
23 turned down, so I had to go to a shyster loan
24 company. My loan was 16 percent interest and my
25 note was $2,000 a month. After a few years I lost
0126
1 everything.
2 But a sister program to ACORN helped me to
3 rebuild my life and start over again. Without the
4 program and the training to give me the tools that I
5 wouldn't run into the same problems again and the
6 loan through the CRA Act, I would not have been able
7 to get another home for my family for at least
8 another 10 or 15 years; okay?
9 So ACORN works. Megamergers do not. And
10 we urge you today to please stop the merger, renew
11 ACORN and help us to keep our community going and
12 our cities on line. Thank you. (Applause)
13 PRESIDING OFFICER SMITH: Thank you very
14 much. Any questions from the panel?
15 MS. BROWNE: I was a little unclear. Has
16 Fleet said they will not renew their relationship
17 with ACORN? Is it just up in the air? If they have
18 said that they will not renew, have they given any
19 indication why? Is it because BankBoston is sort of
20 handling community affairs? I was a little unclear
21 whether this is something that's up in the air or
22 you have some reason to believe --
23 MS. CAMPBELL: No, it's not up the air at
24 all. They said as of July 1st the program ends.
25 They walked away from the negotiation table. They
0127
1 have said since then a week ago at a meeting that
2 Marge was at and I was at, they said, oh, yeah, we
3 plan on setting up a meeting, you know, we have such
4 a good partnership. But we haven't heard from them.
5 They had a meeting yesterday, a community
6 meeting that we weren't invited to, but we found out
7 about, so we went anyway, and they said, oh, yeah,
8 we're going to meet with you next week. But I doubt
9 if that's anything concrete that we can -- you know,
10 it's up to you guys to make sure that they sit down
11 with us. I mean, if you just let them say I will
12 and wait for them to do it, I don't think it's going
13 to happen. (Applause)
14 PRESIDING OFFICER SMITH: Thank you very
15 much. We are going to take a five-minute break
16 instead of a ten-minute break. So I'll see you here
17 very soon.
18 (Short recess)
19 PRESIDING OFFICER SMITH: Would you
20 identify yourself, please, for the record.
21 REV. GOFF: My name is Reverend Norvel
22 Goff, Sr., Pastor of Baber African Methodist
23 Episcopal Church and president of the Greater
24 Rochester NAACP and Chairman of the Black Ministers
25 Alliance. I come here today to support the merger
0128
1 of Fleet-BankBoston, and I'm doing it for a number
2 of reasons:
3 One, based on their commitment to Western
4 New York and other communities in that area.
5 Two, because of their commitment to
6 faith-based lending institutions, which is inclusive
7 of the church.
8 Three, the partnership that has been
9 developed by Fleet Bank as a leader not only in
10 Western New York but New York City and New Jersey
11 and other parts of the country, where they have been
12 very proactive in committing themselves to improving
13 the quality of life.
14 In addition to that, I would like to state
15 here for the record that Fleet Bank in Upstate New
16 York has been a leader in commitment to a program
17 that is called Footprints to Home Ownership, which
18 has allowed first-time homeowners to own their own
19 home and to promote seminars and to teach them the
20 value of owning a home and also to pay the mortgage.
21 I think the relationship as president of the Greater
22 Rochester NAACP, as we look at demographics of the
23 employment track record of Fleet Bank, it shows an
24 inclusive niche of all colors.
25 And finally, let me say this, that Fleet
0129
1 Bank is not about just giving out money, but we have
2 developed a partnership, a partnership where the
3 black church comes with economic stability to
4 provide stability in our various communities. And
5 for that reason, I come on behalf of more than
6 several thousand individuals who are participants in
7 our various organizations to say we support the
8 merger because we think it's good business, good
9 business not only for the churches but good business
10 for the community in which Fleet Bank finds itself.
11 Thank you so much, and I thank my
12 colleagues for letting me cut in line, because I
13 have a one o'clock flight. Thank you so much.
14 (Applause)
15 PRESIDING OFFICER SMITH: Our panelists on
16 this panel have about one minute, which isn't a very
17 long time, but we welcome you.
18 MS. STROM: Thank you. My name is Margo
19 Strom, I am the executive director of Facing History
20 and Ourselves, a national nonprofit educational
21 organization.
22 As you well know, individuals and groups
23 and corporations and communities develop character,
24 they have identities, and they are defined by the
25 choices they make. These choices shape our
0130
1 democratic space. The democratic activity that lies
2 somewhere between government and business is the
3 independent sector, it is the home for nonprofits,
4 and it is that that I represent.
5 It is also the arena where people volunteer
6 and associate, they practice the First Amendment,
7 and it is the avenue for advocacy and outrage, as
8 you have seen here today. It is where we educate
9 people to be democratic to others. We teach about
10 this sector. It focuses on the choices individuals
11 and groups make in history either to promote social
12 justice and tolerance in inclusive democratic
13 societies or to destroy them.
14 For 20 years we have been reaching students
15 across this country, now reaching annually a
16 million. The corporate philanthropy of both
17 BankBoston and Fleet Bank represents a deep
18 commitment to the nonprofit sector. We have not
19 only been a beneficiary of their leadership but
20 witness to the extraordinary impact of their
21 stewardship and investment that has been paid off in
22 the health and vitality and education of the New
23 England community.
24 They lend not only financial backing but
25 time and advice to help leverage their investments.
0131
1 Their support lends credibility, because their
2 reputation as caring corporate partners for
3 nonprofits has become legendary. Our future depends
4 on the commitment the corporate community has to the
5 partnerships with nonprofits.
6 Thank you for this opportunity.
7 PRESIDING OFFICER SMITH: Thank you.
8 (Applause).
9 MS. KORMAN: My same is Nancy Korman, and I
10 chair the Massachusetts Service Alliance. This year
11 we distributed $13 million, $8 million from the
12 federal government and $5 million from the state
13 government. However, we do not operate on
14 government funds alone. We are required by law to
15 develop partnerships with the corporate community.
16 In other words, our success depends upon raising a
17 percentage of matching dollars.
18 So I have gone knocking on the doors of
19 both banks, and if only other corporations were as
20 generous and responsive as both BankBoston and Fleet
21 Bank have been. The money that we raise goes to
22 programs such as Americorps, Youth Build, Jump
23 Start, City Year, ROCA. These are the programs
24 which are the obvious antidote to Littleton,
25 Colorado, to alienated youth, to people who are not
0132
1 on teams. These programs put kids on teams helping
2 other kids.
3 We as an organization are committed to
4 community and the ethic of community service, and we
5 have always had equal and generous help from
6 BankBoston and Fleet. After Colin Powell's
7 Presidential Summit, the two banks equally funded
8 the Massachusetts Summit. This summit helped the
9 Alliance focus attention on the value of community
10 service, particularly as impacts on our youth. I am
11 confident that in the future both banks will not
12 just strengthen their visibility and their financial
13 capabilities but will strengthen their commitment to
14 the entire community. Thank you. (Applause)
15 MS. GUILDERSON: Good morning. My name is
16 Tandeka Guilderson. I'm the director of the Center
17 for Women and Enterprise, Boston office. I am
18 speaking on behalf of Andrea Silbert, the founder
19 and chief executive officer of the Center for Women
20 and Enterprise who has acute laryngitis.
21 The center is a regional nonprofit economic
22 development agency which provides education,
23 training, technical assistance, and access to debt
24 and equity capital to women business owners. The
25 Center For Women and Enterprise is the only women's
0133
1 business development center in the State of
2 Massachusetts. We provide our assistance to women
3 from all socioeconomic backgrounds in all stages of
4 business development spanning the range of women
5 transitioning from public assistance to women who
6 are launching and growing high-tech ventures.
7 We have been very fortunate to have been
8 supported since our founding in 1995 by BankBoston
9 and one year later by Fleet. BankBoston provided
10 CWE with a three-year $150,000 seed grant in 1995 to
11 open our doors. They have since increased that
12 amount to $75,000 per year to include our Worcester
13 office. In addition, last year at the BankBoston
14 Charitable Trust through their new economic
15 development initiative provided us with a three-year
16 grant of $225,000 to develop a special program
17 targeting very low-income women living in Boston's
18 inner city environments.
19 Finally, BankBoston launched their own
20 initiative, the Women Entrepreneurs Connection, to
21 serve as a very important and often neglected
22 market.
23 Fleet has also been a good partner to CWE.
24 Two years ago CWE found a gap in the market
25 assisting women to access equity capital to launch
0134
1 and expand high growth businesses. Fleet provided
2 us with $50,000 to conduct the research on this
3 initiative and then launched the CWE Venture Center
4 at a conference held right here at the Federal
5 Reserve Bank in November of 1998.
6 Since then Fleet has committed another
7 $100,000 to the CWE center. Fleet and BankBoston
8 have shown true interest in the women-owned business
9 market, they have committed to continuing and
10 expanding the Women Entrepreneurs Connection and
11 working with WEC to develop more programs and
12 products to assist this market. In particular, we
13 are eager to work with them to increase seed equity
14 capital and nonconventional loans to women-owned
15 businesses.
16 It is critical that we keep a super bank
17 headquartered in Boston and look forward to working
18 with Fleet Boston to see that the needs of the
19 community are met once these banks merge. Thank you
20 for your time. (Applause)
21 MS. DECEATIS: I am Deborah Deceatis, I am
22 the associate director for Patriots Trail Girl
23 Scouts. Patriots Trail Girl Scouts supports the
24 merger of Fleet Bank and BankBoston. The Girl
25 Scouts, who have 65 cities and towns which provide
0135
1 the jurisdiction served by Patriots Trail and serve
2 over 30,000 girls yearly with the help of 10,000
3 adult volunteers, benefit from a variety of support,
4 resources, and funding provided by both Fleet and
5 BankBoston.
6 Just to mention a few, collaboration and
7 development of a Financial Literacy Program for
8 young girls five years old to 18, to investigate
9 money issues, including savings, investment, loans,
10 and basic money management, as well as career
11 exploration in the financial world. We call that
12 program Smart About Money.
13 Employees of Fleet and BankBoston have been
14 encouraged to provide community service as
15 volunteers. The employees serve on our board of
16 directors, finance, and fund development committees,
17 as well as working directly as positive role models
18 to girls serving as troop leaders, trainers, program
19 support, and our ever-popular community care days of
20 service.
21 Fleet has supported our efforts to
22 recognize achievements and accomplishments of Boston
23 women who serve as positive role models for the
24 youth of our communities. In addition, they have
25 served as advocates for girls and youth in the
0136
1 neighborhoods through an ongoing partnership to make
2 it possible for girls whose families may not be able
3 to afford summer camp, to make it possible for those
4 girls to attend one of our day or resident camps by
5 funding camper shifts. Funding from Fleet has
6 helped to promote our Girls Eye View Program where
7 girls throughout New England were provided with
8 tools to express their view and perspective on the
9 world, their community, or the neighborhood, through
10 photography, poetry, and writing of stories.
11 Currently a traveling exhibit is on view throughout
12 New England.
13 Lastly, but very significantly, there has
14 been a strong commitment from Fleet to our
15 communities to support our 2500 Girl Scout troops by
16 accessing free banking services so that the funds
17 earned by these young girls are safeguarded in
18 checking accounts.
19 We have a strong partnership with Fleet and
20 BankBoston, and we look forward to the merger as
21 expanding new services, resources, and opportunities
22 for the youth in our communities that we serve.
23 Thank you. (Applause)
24 MR. WILLIAMS: Good morning. My name is
25 Greg Williams, I'm the president and owner of GW
0137
1 Enterprises, Inc., which is an information
2 technology consulting firm. And I am also the
3 president of the Mercer County Business Association,
4 which is a not-for-profit organization of more than
5 200 small and minority-owned businesses. We are an
6 advocacy group representing the interests of small
7 businesses and their owners in Mercer County and
8 throughout the State of New Jersey.
9 I'm here this morning to speak in favor of
10 the proposed merger of Fleet Bank and BankBoston.
11 The Mercer County Business Association has worked
12 very hard to make sure that small, women, and
13 minority-owned businesses are afforded the same
14 opportunities to grow and develop as larger
15 majority-owned businesses in the State of New Jersey
16 and in the country.
17 We have found a ready partner towards
18 meeting that objective in Fleet Bank, particularly
19 since Joyce Harley has become the head of the New
20 Jersey Community Development Group. Fleet and Ms.
21 Harley have shown by word and deed that there is a
22 real commitment to financing and supporting small
23 business in New Jersey. Fleet has exceeded that
24 commitment, the commitment it made when it entered
25 the state through its acquisition of NatWest Bank
0138
1 three years ago to put over $200 million in small
2 business loans on the books.
3 The Mercer County Business Association
4 meets with Ms. Harley and her staff on a regular
5 basis to monitor the commitment, and we are pleased
6 with the results. The goal has been exceeded by
7 more than 73 percent to date. Fleet has
8 particularly reached out to small, women, and
9 minority-owned businesses in our urban and poor
10 areas, offering training seminars on how to borrow
11 money and how to write business plans that, in Ms.
12 Harley's own words, tell our story so that bankers
13 understand.
14 Fleet has been the leading bank in forming
15 a partnership with the state's Entrepreneurial
16 Training Institute. That institute is a project of
17 the New Jersey Development Authority of which I am a
18 board member. Of the 10 classes offered statewide,
19 six were staffed by Fleet Bankers, including the
20 entire community development staff. Fleet has
21 worked with the Mercer County Business Association
22 to offer small businesses an opportunity to do
23 business with Fleet and other large businesses in
24 the state, many of whom are Fleet commercial
25 customers.
0139
1 In conclusion, the Mercer County Business
2 Association supports this merger because we are well
3 aware of BankBoston's fine reputation. We believe
4 that their commitment, combined with Fleet's
5 actions, will serve the interests of the small and
6 minority business community in the State of New
7 Jersey even better than it's being served today.
8 Thank you. (Applause)
9 MS. RESNEY: Good morning. I'm Romney
10 Resney, director of Mass Insight Education and
11 Research Institute. Since 1989 Mass Insight has
12 worked in developing initiatives to create a strong
13 and competitive Massachusetts economy for all
14 Massachusetts citizens. More recently, Mass Insight
15 Education is working with 47 school districts,
16 public school districts throughout Massachusetts on
17 raising student achievement.
18 It's crucial for Massachusetts community
19 groups like Mass Insight to have a strong nationally
20 competitive local bank based in New England. I
21 could, like many of my peers here, discuss the many
22 contributions BankBoston has made to our efforts,
23 but I'd like to spend some time discussing the
24 alternatives to the merger.
25 Current banking industry trends and recent
0140
1 experience show that it's unrealistic for Fleet and
2 BankBoston to remain independent and nationally
3 competitive locally based banks. We need these
4 banks in this community. Banks nationwide are
5 facing a rapidly changing competitive environment.
6 They're facing the threat of national consolidation.
7 We see this all across the country with different
8 bank mergers, facing industry convergence where
9 nontraditional banking institutions are moving into
10 the banking sector. We're also seeing the threat of
11 e-banking and e-commerce which is rapidly increasing
12 the speed with which all of this is taking place and
13 also reducing some of the implications for the local
14 branch office.
15 Fleet and BankBoston are facing these
16 competitive threats, and I honestly believe they can
17 face them stronger together. In the new banking
18 environment there are basically three options on the
19 table as I see it:
20 First, Fleet-BankBoston remain independent
21 and one or both are bought by a large, outside bank.
22 This takes away from the resources available to
23 community groups like ours.
24 Second, Fleet and BankBoston remain
25 independent, and if by some small chance they are
0141
1 not bought by an outside bank, they'll lose market
2 share to new entrants, national players, and some of
3 these other industry players who are moving into the
4 banking sector.
5 And third, and I believe the best of all
6 options, is the Fleet-BankBoston merger will create
7 a nationally competitive, locally based bank that
8 will continue to invest in the strength of the New
9 England economy. We at Mass Insight support this
10 third option and believe in the long-term interest
11 of Massachusetts community groups. Thank you.
12 (Applause)
13 MR. LORD: For the record my name is
14 Richard Lord, I'm executive vice president of
15 Legislative Policy for Associated Industries of
16 Massachusetts. Associated Industries is the
17 Commonwealth's principal statewide employer
18 organization representing 5300 businesses and
19 nonprofit entities across Massachusetts engaged in
20 virtually every economic sector.
21 This merger represents an important,
22 positive step to assure that Massachusetts and New
23 England businesses will benefit from a banking
24 system that offers both stable financial resources
25 and the increasingly sophisticated banking services
0142
1 that are essential to success of the modern economy.
2 In the first years of this decade when the
3 New England banking system was in turmoil, AIM and a
4 number of member companies consistently reported
5 serious difficulties in obtaining bank loans. We
6 have heard few, if any, such reports of such lack of
7 access to capital for more than five years now.
8 BankBoston and Fleet have been the leaders, along
9 with a group of outstanding community banks, not
10 only in restoring the financial stability of our
11 regional banking system but also in re-establishing
12 and greatly extending the range of banking services
13 available to local companies. The proposed merger
14 is vital because it will safeguard those gains.
15 Thank you for the opportunity to testify.
16 (Applause)
17 MS. JONES: Thank you. My name is Martha
18 Jones, and I'm the executive director of the
19 BankBoston Celebrity Series. The Celebrity Series
20 is New England's premier performing arts presenting
21 organization who for the past 10 years has enjoyed a
22 fruitful partnership with BankBoston; BankBoston, of
23 course, which is regarded throughout New England as
24 the premier corporate philanthropist of cultural
25 organizations.
0143
1 Since 1989, BankBoston has been the
2 Celebrity Series title sponsor and has been
3 steadfast in its commitment to our growth and
4 independence as a non-for-profit organization. Of
5 significance, the Bank's sponsorship has provided
6 the resources necessary to enhance our education and
7 community service program Project Discovery, which
8 this past season served more than 23,000 young
9 people in the Greater Boston vicinity through master
10 classes, workshops in the schools, performance
11 tickets at little or no cost, to over 40
12 performances at Symphony Hall, the Wang Center,
13 Shubert Theater, all of this as a result of
14 BankBoston's continued ongoing sponsorship.
15 I am here today to speak in support of the
16 merger between BankBoston Corporation and Fleet
17 Financial Group. Both institutions have made public
18 their intentions to continue to support community
19 cultural and healthcare charitable organizations at
20 or above current individual levels of support. I
21 believe this to be an honorable and true statement.
22 Through a previous merger with BayBanks, BankBoston
23 continued its high level of charitable giving and
24 in fact increased their support, not only of the
25 Celebrity Series but of other organizations.
0144
1 BankBoston and Fleet Financial Group are
2 already woven into the fabric of Boston's cultural
3 community, and with a new banking entity based here
4 in Boston, I would look forward and expect their
5 charitable commitments to play an even greater role
6 in strengthening that fabric. The Celebrity Series
7 is pleased to move into the next millennium with
8 this new Fleet-BankBoston Corporation. Thank you
9 for your time. (Applause)
10 MR. BESSIRE: Good afternoon, I'm Paul
11 Bessire from the Museum of Fine Arts, Boston. I am
12 also pleased to testify on behalf of the museum in
13 support of the merger of Fleet Financial Group and
14 BankBoston. Fleet and BankBoston are close partners
15 of the MFA, as well as long-time and generous
16 supporters. On an annual basis both companies have
17 led the MFA's Corporate Partners Program by giving
18 at its highest levels for many years, enabling the
19 MFA to enhance its role as a community resource.
20 Important senior executives from both banks are
21 involved with the MFA in a significant capacity as
22 overseers, volunteers, and patrons. In the past
23 several years Fleet and BankBoston have made several
24 major acquisitions possible at the MFA. In addition
25 to enriching the city's cultural life, these
0145
1 exhibitions generate significant economic activity
2 in the region by attracting large numbers of
3 visitors.
4 For example, during Monet, The 20th Century
5 sponsored by Fleet, more than 40 percent of the
6 560,000 visitors came from outside of Boston
7 providing an economic impact of over $34 million.
8 We were also particularly impressed by Fleet's
9 commitment to making Monet accessible to children
10 and seniors by creating extensive education
11 materials and by providing over 8,000 free tickets
12 to community groups.
13 BankBoston is also currently sponsoring the
14 John Singer Sargent at the MFA. This is the third
15 major exhibition sponsored by BankBoston in the last
16 four years. We have also been impressed by their
17 leadership in creating the groundbreaking program
18 Museums On Us, an innovative program featuring 21
19 New England museums. Given these track records, we
20 have full confidence that the new Fleet-Boston will
21 continue to be a good neighborhood and strong
22 supporter of Boston's museums and cultural
23 organizations. Thank you. (Applause)
24 PASTOR GILLISON: Good morning. My name is
25 William Gillison, I'm pastor of the Mt. Olive
0146
1 Baptist Church.
2 My relationship with Fleet Bank began
3 approximately 19 years ago when one of their branch
4 managers Mr. Roger Richardson and I served on a
5 community board together. At that time we shared
6 with him that Mt. Olive was experiencing growing
7 pains, and we were looking for a bank that would
8 assist us in seeing that our vision would come to
9 fruition. Even though we had no banking
10 relationship with Fleet Bank at the time, Fleet was
11 the bank that responded first to our business
12 proposal. And at that time no other lending
13 institution would even speak with us.
14 Fleet's bank managers -- Fleet assigned a
15 vice president to our particular plan, and we are
16 glad to say that Fleet was the first in our area to
17 lend any African-American bank over a million -- a
18 church, that is, over a million and a half dollars
19 based upon a fair look at our business plan and our
20 record. We do believe we stand today to ask this
21 commission if they would grant Fleet this
22 opportunity to continue expressing this type of
23 leadership in the industry. (Applause)
24 MR. PARROTT: I'm Charles Parrott, I'm vice
25 chairman of the YMCA of Greater Boston. The YMCA of
0147
1 Greater Boston is the largest childcare provider in
2 the Greater Boston area. It has a number of other
3 programs for inner city children. Those programs
4 could not exist without the support of corporate
5 Boston. Over the years BankBoston has been a
6 substantial contributor, it goes back as far as the
7 YMCA does, and that's almost 150 years. In recent
8 years Fleet has become a substantial contributor to
9 the programs of the YMCA.
10 It is our hope that should this merger go
11 through, that the combined bank will be able to
12 continue that support. We have every reason to
13 believe that it will through what we read in the
14 press. I thank you for this opportunity.
15 PRESIDING OFFICER SMITH: Thank you.
16 MS. SCOTT: My name is Ruth Scott and I'm
17 president and CEO of Scott Consulting Associates. I
18 come to this question from an interesting
19 perspective, a broad-based one. I started out in
20 the '70s as the president of an organization that
21 did the initial research on the redline issue, and
22 then over the years I've been involved with Fleet
23 and with other banking institutions across the
24 country, as well as neighborhood Reinvestment
25 Corporation and neighborhood groups in trying to
0148
1 figure out how these organizations could speak
2 effectively with each other and form collaborations
3 that work.
4 I come in favor of the merger between Fleet
5 and BankBoston because I see things there that make
6 me understand that they know what it's all about and
7 they will do the thing that is right in terms of
8 these partnerships and community development. I
9 want to just give an example of a leveraging that
10 Fleet often does in its marketplace.
11 I was involved with a community development
12 organization, a faith- based organization, three
13 years ago which wanted to build a complex as the
14 first African-American organization in Rochester,
15 New York, to do such a thing. We went to Fleet and
16 asked them for $5,000 originally as seed money to
17 establish a corporation, and they gave us that.
18 That commitment grew over time to $100,000. It
19 wasn't just that, though. That commitment grew in
20 addition to a $500,000 commitment for building, and
21 it grew in addition with other organizations giving
22 over $500,000 to the organization and HUD giving a
23 $3 1/2 million grant. It is that kind of leveraging
24 that Fleet understands as we go into the 21st
25 century.
0149
1 As I have looked at banks across the
2 country, what I have found is these kind of mergers
3 work when you have three things: a solid and an
4 active commitment to community building; a mission
5 engaged in understanding of a changing landscape and
6 its imperative to merge and collaborate with
7 like-minded corporations; and a solid organizational
8 profit base which allows for the keeping of those
9 commitments. I believe that this merger would give
10 all of those things.
11 There is a saying that "When certain people
12 whisper, everybody listens." I think that's true in
13 our communities. As Fleet has grown stronger, when
14 it whispers, other corporations and governments also
15 listen. And in addition, when the community speaks,
16 Fleet listens. And I believe that the
17 Fleet-BankBoston merger will continue to do that.
18 Thank you.
19 PRESIDING OFFICER SMITH: Thank you very
20 much. (Applause)
21 MR. CUENCA: Good afternoon. My name is
22 Peter Cuenca, I'm the president of CuencaVision,
23 WCA-T.V., it's a Spanish television station. I am
24 also the editor and the publisher of the newspaper
25 Las Manos, which is a weekly Spanish newspaper in
0150
1 the New England area.
2 I am here to tell you about my experience
3 with Fleet Bank. I was in need of financial
4 assistance of a loan from the bank, and I went to
5 them, to the community development department, and I
6 found there people that would listen to me. They
7 did help me, they gave me a loan, and thanks to them
8 I am able to have new equipment, to expand our
9 services to the community.
10 And I find that they have a corporate
11 responsibility, that they have listened to many
12 people like me in the community, they are committed
13 for the future to do that, and if that is the case,
14 based on my experience, obviously this merger is a
15 good thing for our community. It's important to
16 face the fact that our global economy today, there
17 is a need for a strong financial institutions.
18 And based on that, we also have to think in
19 terms there is enough turning the forces around to
20 keep them with the proper commitment to our
21 communities. Banks are not only local banks now,
22 they are national banks, they are international
23 banks. And those commercial or competitive forces
24 will be strong enough, I believe, to maintain a good
25 relationship between the community and the banking
0151
1 system. Thank you.
2 PRESIDING OFFICER SMITH: Thank you.
3 (Applause)
4 MS. DOWNIE: I'm Lyndia Downie, I'm the
5 Acting President of the Pine Street Inn. We're an
6 agency that provides shelter, job training, and
7 affordable housing to homeless individuals and most
8 recently homeless families. And I too am here to
9 support the merger of Fleet and BankBoston.
10 Fleet has been a strong, responsive, and
11 good corporate citizen. They have been supporting
12 the Inn's work for many, many years since they have
13 been in Boston. Last year they helped us put an
14 outreach van on the street that provides
15 transportation, blankets, and referrals to homeless
16 people living on the street. In previous years they
17 helped us start a program for homeless elderly woman
18 focused on finding them housing.
19 We have been developing affordable housing
20 for over 10 years, and Fleet has consistently
21 offered support, both corporate support and lending
22 support, for those affordable housing projects. And
23 they have been very responsive to all the issues
24 around homelessness. In fact, last winter when a
25 number of people died on the street, Fleet was the
0152
1 first to call and say, "Is there anything we can do
2 to help?" We hope that they will continue this and
3 have every expectation they will continue to be good
4 and strong corporate citizens and they will continue
5 to be in support of homeless issues. Thank you.
6 (Applause)
7 PRESIDING OFFICER SMITH: Thank you very
8 much.
9 MS. RODGERSON: Hi. My name is Susan
10 Rodgerson, and I'm the founder and director of
11 Artists for Humanity, which is a grass-roots
12 organization here in Boston that serves urban teens
13 in an after-school program.
14 Fleet and BankBoston both have been very
15 supportive from the corporate philanthropy
16 departments of their institutions. But more
17 importantly, we provide products and services for
18 the business community that are performed by teens,
19 and Fleet Bank has hired us very often to do jobs
20 that are professional and performed by teenagers.
21 And I really believe that their commitment
22 to the inner city through working with youth is an
23 important one, and I also think that this is a great
24 opportunity for two strong institutions that are
25 local, that have been here for a long time, to merge
0153
1 and to increase their level of support and
2 commitment through their shared history in Boston.
3 So I support the merger and hope that they will
4 maximize this opportunity for both of them to
5 succeed. Thank you.
6 PRESIDING OFFICER SMITH: Thank you very
7 much.
8 MR. REGAN: My name is Bob Regan, and I'm
9 president and CEO of New England College of Finance.
10 New England College of Finance is a unique
11 educational resource founded in Boston in 1909.
12 This organization has evolved into an accredited,
13 degree-granting college, the only banking institute
14 in America ever to achieve full collegiate status
15 with 250-member institutions and annual enrollments
16 in excess of 7500, this is a very important resource
17 to our financial industry.
18 Fleet Financial Group is a member of the
19 college and is the highest participating bank in our
20 programs. It is extremely generous in encouraging
21 its employees to pursue their education. This
22 generosity is especially important to lower-paid
23 employees and to minorities, the latter population
24 comprising nearly 40 percent of our total annual
25 enrollments. Fleet also provides the college with
0154
1 extraordinary support in the form of governance and
2 faculty leadership and free use of classroom space
3 at several of their locations throughout New
4 England.
5 Simply put, without the support of Fleet
6 Financial Group, the financial services industry in
7 this area would have great difficulty sustaining
8 this important educational resource and many
9 individuals would be denied access to a college
10 education.
11 In addition to its dominant role in the
12 college, Fleet is a founding member of the Financial
13 Services Academy, a newly created service of the
14 college, working with CBOs like Urban League, ABCD,
15 and Stride, the mission of the academy is to recruit
16 and train diverse inner city populations for
17 entry-level jobs in the industry. During the first
18 three months of operation the academy has trained 77
19 individuals, many of whom have already been placed
20 in good-paying jobs. Of these graduates, more than
21 90 percent are ethnic minorities and recent
22 immigrants and 75 percent identified English as
23 their second language.
24 In short, I personal cannot say enough good
25 things about Fleet Financial Group. As
0155
1 consolidation creates ever-larger banking
2 institutions, I believe we are very fortunate in New
3 England that a responsible powerhouse is being
4 formed. Thank you.
5 PRESIDING OFFICER SMITH: Thank you.
6 MS. DURADO: Good afternoon. My name is
7 Rosa Minayo Durado, I am here as a board member of
8 the Latino Professional Network. Latino
9 Professional Network is an organization that links
10 Boston's Latino professionals with employment and
11 business opportunities.
12 The Latino Professional Network is here to
13 support the merger with Fleet for many reasons. One
14 of them is that Fleet has followed and continues to
15 support the mission of the Latino Professional
16 Network, which is to give access information and
17 business opportunity to the Latino professionals.
18 Fleet has given to individuals and also to different
19 businesses credit opportunity. It has helped
20 technical assistance to some of the small Latino
21 businesses, and also the Community Development Group
22 of the Fleet works very closely with many of the
23 members that run nonprofit agencies.
24 So as a board member of the LPN, I would
25 like to support the Fleet merger. Thank you.
0156
1 (Applause)
2 PRESIDING OFFICER SMITH: Thank you very
3 much.
4 MR. SWANN: My name is Lynn Swann, and I
5 come to this by way of being a member of the Fleet
6 In-City Advisory Board. We make suggestions and
7 comments and discussions, debates on Fleet's policy
8 to low- to moderate-income families and mortgages,
9 small business loans, existing loans, loans to
10 existing businesses, so that they can serve the
11 community, even as far as small farm equipment for
12 Fleet.
13 But I really come here because I've been a
14 volunteer for more than 19 years, starting with Big
15 Brothers and Big Sisters of America as a board
16 member, as a national board president and chair of a
17 national capital campaign. And it's this area I'd
18 like to talk to you about in terms of Fleet's
19 involvement with the community.
20 In 1998, there were 17,000 employees who
21 were volunteers in the Fleet program. 95,000
22 volunteer hours in 1998 alone. These were made
23 possible because Fleet's policy is to give their
24 employees two days off with pay to volunteer in the
25 community. That translated into 39,000 kids
0157
1 participating in 450 community projects. Since
2 1996, 82,000 children and young adults have been
3 involved in over 1,000 community service projects
4 and more than $850,000 awarded to winning teams in
5 the Fleet All Star Program.
6 You don't have those kinds of programs
7 unless you're committed to a program, unless you're
8 committed to building a community, because these
9 aren't your traditional people who are banking in
10 your institute, these are people who are going to be
11 making deposits somewhere down the road. And if
12 you're committed to the community, these are the
13 kinds of involvements you have. Fleet has created
14 20 tutorial centers, their commitment is to have 25
15 by the year 2000 throughout the Northeast, and
16 mentoring is an important component in growing a
17 community and building that infrastructure. If you
18 don't think so, let me just give you a couple of
19 quick numbers.
20 Through Big brothers and Big Sisters, here
21 is what mentoring has done: 52 percent, in a
22 scientific study, 52 percent of the kids in a
23 mentoring relationship are less likely to skip
24 school, 46 percent are less likely to use drugs, 27
25 percent are less likely to use alcohol, 33 percent
0158
1 are less likely to use physical force to resolve
2 conflicts. As the woman who testified earlier about
3 programs at Fleet through ACORN having saved her
4 family's life, this is the kind of involvement that
5 builds the infrastructure of a community, where
6 young people grow, feel safe, and can be productive
7 citizens.
8 PRESIDING OFFICER SMITH: Thank you very
9 much. (Applause)
10 MR. JONES: My name is Tripp Jones, and I'm
11 the cofounder and executive director of The
12 Massachusetts Institute for a New Commonwealth, also
13 known as MassInc., a nonprofit, nonpartisan public
14 policy think-tank based here in Boston. MassInc.
15 was established four years ago to develop public
16 policy approaches that result in a flourishing
17 middle class in Massachusetts.
18 I will refrain from elaborating more on
19 MassInc., but I do want to use this opportunity to
20 testify that the encouragement and support we have
21 received from BankBoston and Fleet made an enormous
22 contribution to our success. I have witnessed first
23 hand the determination of both institutions, not
24 only to provide vital financial support to community
25 organizations like MassInc. but to develop strong
0159
1 give-and-take dialogues with local groups borne out
2 of sheer commitment to the civic life of our
3 Commonwealth.
4 At a time when many corporations are
5 myopically devoted to bottom-line considerations,
6 these two institutions have shown the kind of
7 leadership, a willingness to take risks, like
8 supporting a small, start-up think-tank, that puts
9 them in the front rank of our very best corporate
10 citizens in Massachusetts.
11 The economic vitality of our state as a
12 whole, and to some degree the vitality of our
13 community organizations like MassInc., depend on the
14 ability of our banking industry to retain its
15 independence in the midst of extremely competitive
16 national and international pressures to the extent
17 that Fleet and BankBoston have found common ground
18 in a way to sustain that gain, I support their
19 efforts.
20 It is often argued that as the Internet and
21 other technologies continue to shrink the world in
22 which we live, circumstances of geography and place
23 are less important in our lives. Today I want to
24 argue that the opposite is often true. Geography
25 matters. In this case it matters a great deal that
0160
1 the banking decisions affecting the lives of New
2 Englanders be made by New Englanders whenever
3 possible. It's not to say that regional industries
4 don't have to operate within larger economic
5 realities, but it does suggest that we should jump
6 at opportunities to bolster our regional economic
7 independence and to secure our long-term health.
8 I want to applaud the holding of this
9 public hearing ensuring that the Fleet-BankBoston
10 merger results in equally shared benefits for
11 shareholders, customers, and all citizens who
12 require a great deal of judgment, compromise, and
13 trust building among all parties involved, and I am
14 pleased to have had the opportunity to participate.
15 PRESIDING OFFICER SMITH: Thank you very
16 much.
17 MR BROWN: My name is Michael Brown, I'm
18 the president and cofounder of the City Year
19 organization, a national service organization
20 founded in Boston that engages over 1,000 young
21 adults ages 17 to 24 in the area of full-time
22 community service. I appreciate this opportunity to
23 testify on behalf of City Year on behalf of the
24 proposed merger between BankBoston and Fleet
25 Financial Group.
0161
1 We know from direct experience that it is
2 critically important for Massachusetts to remain a
3 headquarters for a major national financial
4 institution. Indeed, were it not for BankBoston
5 and the active leadership of Chad Gifford and Ira
6 Jackson, City Year would not exist today. 10 years
7 ago when City Year was no more than words on paper,
8 BankBoston stepped forward and provided the seed
9 capital for our launch. And along with that initial
10 funding came an extraordinary commitment to the
11 young people of Greater Boston. Through their
12 direct involvement, BankBoston has helped to grow
13 City Year's 54 members in Boston to 1,000 across the
14 country.
15 BankBoston leads our efforts here and
16 around the country to now engage over 300
17 corporations, and Chad and Ira have testified before
18 Congress and have helped to build the Americorps
19 program nationwide. Recently BankBoston, which
20 sponsored the first team in our history 10 years
21 ago, permanently endowed a team of young people in
22 service to City Year Boston. This is the first
23 endowed community service positions for young people
24 in America history.
25 Fleet Bank has also been essential to our
0162
1 organization, partnering with us since 1990 and
2 cofounding with BankBoston our Rhode Island program.
3 Fleet Bank executives now serve on our local
4 advisory board, contributing their time, energy, and
5 vision and make possible our annual celebrations of
6 Dr. Martin Luther King's holiday and our Black
7 History Month celebrations. Over the past 10 years
8 these two banks combined have ensured that 260 young
9 people have provided a year of full-time service.
10 That means 442,000 hours of service tutoring and
11 mentoring children.
12 Our relationship with both institutions has
13 been one of integrity and purpose based on shared
14 values and deep wonder of the power of young people.
15 Our support for the merger is based on a decade of
16 partnership and belief. I am confident that the
17 banks' firmly established traditions of community
18 partnership and involvement will continue in the
19 decade to come. Thank you.
20 PRESIDING OFFICER SMITH: Thank you.
21 (Applause)
22 I'd like to remind the witnesses that they
23 may submit their statements for the record, and the
24 sooner you get them to our registration table the
25 better it will be for our court reporters. Thank
0163
1 you.
2 MR. MIRABAL: My name is Manuel Mirabal,
3 I'm the president and CEO of the National Puerto
4 Rican Coalition, a nonprofit public policy
5 organization out of Washington, D.C. and I am also
6 the chair of the Hispanic Association on Corporate
7 Responsibility out of washington, D.C.
8 Since 1994, NPRC and Fleet have been
9 working in partnership on issues of community
10 economic development and neighborhood
11 revitalization, affordable housing development, home
12 mortgage lending, and consumer banking issues. In
13 the New England states where Fleet has a major
14 presence, the Puerto Rican community makes up more
15 than 50 percent of all of the Latino population. In
16 New York and New Jersey, it is 1.5 million of the 3
17 million Hispanics who live in those states.
18 We have had many opportunities to meet with
19 the senior officials of Fleet and have found them to
20 be always accessible, including Mr. Terry Murray,
21 Fleet CEO, and Agnes Bundy Scanlan, the managing
22 director of Fleet's Community Development
23 Department. And we have had several opportunities
24 to discuss the needs of the Latino community with
25 them and other banking officials. We have seen a
0164
1 steady improvement in the bank's investments to
2 support community housing development projects.
3 We have also targeted corporate and
4 foundation resources to support the work of
5 organizations serving our communities. Throughout
6 our partnership, this has increased to a level which
7 now approaches, we believe, an equitable
8 distribution of these funds to the growing Latino
9 community. Fleet has also created one of the most
10 flexible, affordable loan programs and has as a
11 result helped many Latino low-income families get
12 their dream of buying a home.
13 Fleet has also responded to our concerns
14 over the hiring of more Latinos in their structure,
15 and they have done so throughout their system
16 through recruitment and hiring. Based on their
17 commitment to neighborhood reinvestment and
18 investment in our projects and the corporate
19 responsibility which Fleet has demonstrated in
20 working`with NPRC over the last six years I
21 encourage the Federal Reserve Bank to approve the
22 merger between Fleet Group and BankBoston. Thank
23 you.
24 PRESIDING OFFICER SMITH: Thank you very
25 much. (Applause)
0165
1 MR. MOY: My name is Frank Moy, and I'm the
2 chairman of the Boston Chamber of Neighborhood
3 Commerce. The Boston Chamber of Neighborhood
4 Commerce was formed in 1991 during a very difficult
5 recession period by a group of small business owners
6 and representatives from every neighborhood business
7 district in Boston representing several thousand
8 neighborhood businesses. Recently the Boston
9 Chamber Neighborhood Commerce became an affiliate
10 member of the Greater Boston Chamber of Commerce.
11 The primary mission of the BCNC is to
12 enhance the vitality of Boston's neighborhood
13 commercial districts. The Boston Chamber
14 Neighborhood Commerce supports the Fleet-BankBoston
15 merger because both banks have New England roots and
16 have been active participants in promoting small
17 business lending and banking services. Fleet and
18 BankBoston provide financial and staff support to
19 the Boston Chamber Neighborhood Commerce.
20 Staff from Fleet and BankBoston have and
21 continue to serve on the BCNC Board of Directors and
22 have participated in numerous workshops on small
23 business lending procedures, including the 5 C's of
24 Credit, Small Business Administration Low Doc
25 Program, second look program if a loan is denied,
0166
1 and the Community Reinvestment Act. Fleet and
2 BankBoston have participated in business support
3 programs on marketing, public relations, community
4 and public review process, e-commerce, retail
5 security, One Stop Program at the Empowerment
6 Center, and small business management.
7 In closing, we support the Fleet and
8 BankBoston merger because both organizations have
9 demonstrated their commitment to Boston's small
10 business community during good and bad economic
11 times. Thank you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much.
14 MR. DICKERMAN: Hello. I'm Stephen
15 Dickerman, the executive director of Friends of New
16 England Holocaust Memorial. I've held this position
17 for 11 years. Since our earliest days it's been our
18 dream to build a memorial to the Holocaust on
19 Boston's Freedom Trail, and I am pleased to share
20 with you the legacy of community leadership that we
21 at the memorial have experienced with BankBoston.
22 While the idea of the memorial was
23 conceived by a group of survivors to the Holocaust
24 and encouraged by a small group of their supporters,
25 it could not have been realized without the
0167
1 leadership from Boston's corporate and philanthropic
2 community. I have witnessed BankBoston making such
3 a leadership happen.
4 In 1991, the head of the Boston
5 Redevelopment Authority invited business leaders to
6 learn more about the potential impact that Message
7 of Memory could have on this important American
8 site. It was at that meeting that the crucial
9 relationship between the Memorial and BankBoston
10 began.
11 BankBoston participated in that meeting and
12 responded to our plans and saw in it the opportunity
13 to remember the historical tragedies of European
14 Jews in a way that would speak to the universal
15 issues of danger of bigotry, intolerance, and racial
16 hatred. BankBoston began a relationship with the
17 Memorial providing us with financial resources as
18 well as a wide range of support. Most importantly,
19 BankBoston provided leadership to enlist other
20 institutions and individuals in support of the
21 project.
22 BankBoston's influence on our project has
23 been extraordinary. The bank has supported our
24 capital campaign in a wide range of special projects
25 that help bring universal lessons to young people
0168
1 and visitors from all backgrounds. I'm very proud
2 of the Memorial, its critical success, and its
3 ability to speak to hundreds of thousands of
4 visitors. Simply put, the Memorial could not have
5 been built and would not have sustained its
6 operations and extraordinary and educational
7 programs without BankBoston's remarkable leadership.
8 I also think the experience with the
9 Memorial told us a lot in support of a Boston-based
10 institution. BankBoston, Fleet, and all of our
11 corporate supporters were Boston based. I'm pleased
12 to speak in support of the merger.
13 PRESIDING OFFICER SMITH: Thank you very
14 much. (Applause)
15 We are ready for the next panel.
16 (A pause)
17 PRESIDING OFFICER SMITH: Panel Six will
18 start with the Reverend Sharpton.
19 REV. SHARPTON: I'm Reverend Al Sharpton,
20 President of National Action Network, and we have
21 members throughout the area that if this merger were
22 to go forward would cover much of that area. I come
23 as president of the Network with the vice chair,
24 Senator Ephraim Gonzalez, who heads the National
25 Coalition of Hispanic State Legislators, to express
0169
1 our unilateral concern and at this hearing objection
2 to the merger that is proposed today for several
3 reasons.
4 I think that first you must distinguish
5 between business policy and philanthropy. It is
6 very admirable that Fleet Bank gives away a lot of
7 money to certain charities. That has nothing to do
8 with its business policies and the policies that
9 will service or not service the community. You can
10 find I'm sure if you check in history slave masters
11 were good contributors to certain charities, but
12 their business was slavery. We're not here to talk
13 about their philanthropy; we're here to talk about
14 their policy, and their policy has left a lot
15 wanting.
16 The proposal that they give you, the CRA
17 proposal, the $14.6 billion, is just about what they
18 spend in Massachusetts alone. For you to approve a
19 merger where they would have more range, more states
20 for the same amount of money, in fact allows them to
21 reduce their commitment to borrowing and lending in
22 the community. They would argue because of certain
23 disvestments this is what figure they could best
24 come up with, yet with their divestments they have
25 an opportunity with the Boston Bank of Commerce to
0170
1 let a black bank that would service the communities
2 pick up some of those branches. They have not
3 chosen to make that arrangement.
4 So it seems that there is a situation here
5 where they want it all on their side and not on the
6 side of the community that needs development, that
7 needs fair borrowing and lending practices, that
8 needs policies that are fair for the people that the
9 federal government, and therefore the Federal
10 Reserve, are sworn to protect.
11 If they had made the effort to try and work
12 out some equation, certainly many of us would not
13 take that position. But clearly when you hear what
14 they have done with ACORN housing, when you hear the
15 problems that you have in mortgages and borrowing,
16 and when you hear their own proposal, which I think
17 falls far short of what is fair and equitable, we
18 have no choice but to appeal to you to block this
19 merger. We have no problem dealing with a Fleet
20 Bank, but we do have a problem dealing with being
21 fleeced by Fleet Bank. (Applause)
22 As they expand into other states, if this
23 merger is approved, clearly we have the right to be
24 concerned. The chairman, who the last panelist said
25 is such a nice guy, questioned why we would even
0171
1 want to deal with this hearing. Why would we be
2 here? He's coming in our house with a record from
3 allies that gives us a lot to be desired. It's like
4 me knocking on your door asking you "Why are you
5 answering it?" You answer it because you live
6 there. We live in New Jersey; we live in
7 Connecticut; we live in Massachusetts.
8 So, Mr. Chairman, all of us are not on your
9 payroll or your charity roll. Some of us don't want
10 a donation. We want fairness; we want equity; we
11 want parity. (Applause) We want to see loans to
12 those that seek mortgages and business loans that
13 are not at rates that are unbearable and not set up
14 with clauses that are unachievable. We want to see
15 an amount of money there that is representative of a
16 commitment toward development. If the Federal
17 Reserve passes this merger, where you have no real
18 commitment, with the dollar figures where they are
19 now, you have in effect already undone the purpose
20 of having CRA.
21 CRA is to have some redevelopment, not to
22 have bankers set their own bar, something they could
23 easily make, make all the profit they want and the
24 people be damned. And we would encourage you to
25 block this merger until a respectable proposal has
0172
1 been put forth on the divestment side, as I said,
2 with the Boston Bank of Commerce. And clearly they
3 should increase what they propose in the borrowing
4 and lending department, and their policies around
5 loans, and their policies around what they do with
6 their housing money.
7 I would hope that you will not ignore the
8 will of many people. Many say these hearings are
9 formality. I would hope that as we are on the brink
10 of a new millennium that people's wishes will not be
11 just listened to, patted on the head, and you go
12 forward with business as usual, because we in other
13 parts of New England will resist being policed by
14 any means necessary. Thank you. (Applause)
15 PRESIDING OFFICER SMITH: Ms. Yager, on
16 behalf of Mr. Lee.
17 MS. YAGER: Good afternoon. Matthew Lee,
18 the executive director of Inner City Press/
19 Community on the Move and Inner City Public Interest
20 Law Center was unable to attend today and asked me
21 to read his comments into is the record.
22 I see he is opposed to this
23 anti-competitive merger proposal. After each of its
24 previous mergers, Fleet has dramatically reduced
25 lending to low- and moderate-income neighborhoods.
0173
1 Fleet's lending record in New York reveals a bank
2 with a troubled history of discriminatory lending.
3 For example, in May 1996, Fleet settled
4 discrimination charges with the U.S. Department of
5 Justice that it systematically overcharged
6 minorities from its two New York City area mortgage
7 offices. Fleet's record has not improved. Fleet
8 acquired Shawmut in 1995 and NatWest in 1996. In
9 New York State in 1995, Fleet made 4,994 home
10 purchase loans, NatWest made 2,995 such loans, and
11 Shawmut before being taken over made 70 such loans,
12 for a three-institution total in New York State of
13 8,059.
14 In 1996, in New York State the combined
15 entities made only 4,300 such loans, and by 1997
16 this number had declined to 2,415 loans. The
17 combined Fleet's 1997 total was less than NatWest
18 alone in 1995. Particularly troubling is that
19 Fleet's lending volumes have declined even more to
20 minorities and low income and moderate income census
21 tracts in communities overall. The details are
22 included in the written testimony.
23 Fleet's combined entities home purchase
24 lending volume and LMI census tracts declined 76.6
25 percent between 1995 and 1997. An even steeper
0174
1 decline went to New York State communities overall.
2 Fleet's mergers have hurt entire communities. They
3 have disproportionately harmed low and moderate
4 income neighborhoods and communities of color as
5 well.
6 For example, in the New York city
7 metropolitan statistical area, in 1997, for home
8 improvement loans, Fleet Bank NA in New Jersey
9 denied 74 percent of applications from African-
10 Americans and Latinos versus only 44 percent
11 applications for whites.
12 This proposed merger would be
13 anti-competitive. Fleet proposes to acquire
14 BankBoston through consolidation of the four
15 previous competitors into a single institution. The
16 proposal should not be approved. Even since it has
17 been announced, it has triggered further
18 consolidation. For example, People's Heritage
19 Corporation from Maine has proposed acquiring Bank
20 North of Burlington, Vermont, and Citizens Bank has
21 proposed acquiring U.S. Trust, and in Connecticut
22 Websters has made a recent proposal.
23 Even where Fleet claims to be proposing a
24 clean sweep in its divestiture, it discloses in
25 footnotes that it would be retaining a number of
0175
1 Fleet's or BankBoston's operations. For example,
2 see Fleet's antitrust memo, Page 15, stating in a
3 footnote that, quote, "The parties proposed to
4 retain certain special industry customers in Boston
5 and other New England markets, some of which may
6 have revenues less than $100 million."
7 This is not a clean sweep proposal. It is
8 imperative that Fleet calculate and disclose the
9 amounts by which the proposed divestiture would be
10 reduced by the withdrawal and retention of deposits
11 associated with these retained lines of business.
12 Fleet would also gain an anti-competitive
13 share and market power in ATMs. The Providence
14 Journal on May 21st wrote, "After its takeover of
15 BankBoston, Fleet would control about 36 percent of
16 all ATMs operated by banks and credit unions in
17 Massachusetts up from 12 percent." This issue is
18 not addressed in Fleet's antitrust memo. The
19 comment period should not close until Fleet reveals
20 more of the nature of its divestiture proposal and
21 until Fleet completes the proposal by naming the
22 banks that would buy the assets it proposes to
23 divest.
24 His last comment is that he requests that
25 the -- he asserts that the community commitment is
0176
1 entirely inadequate and the details of that are in
2 the written testimony.
3 PRESIDING OFFICER SMITH: Thank you very
4 much. (Applause)
5 MR. MUHAMMAD: Greetings. My name is Abdul
6 Jabbar Muhammad, and I'm here on behalf of the
7 Nation of Islam under the leadership of the
8 Honorable Mr. Louis Farrakhan.
9 When Fleet merged with the Bank of New
10 England, we, the Nation of Islam, supported the move
11 based on a commitment to help the community, its
12 organizations, and its businesses. However, Fleet
13 did not honor this commitment. And the community,
14 its organizations, and businesses have paid the
15 price. We have seen documents that show unfair and
16 unethical lending practices by Fleet Bank. Are we
17 going to relive the mortgage scandal with this new
18 merger? Will we see our seniors losing homes
19 because of unethical lending practices?
20 The merger at issue with Fleet Bank and
21 Bank of Boston has successfully created a scenario
22 of infighting within the community. Your customers
23 are not sure what this merger will bring. A survey
24 conducted by Survey USA asked the following
25 question: What kind of service do you think
0177
1 customers of the new bank will receive? 44 percent
2 don't think the merger will have an impact on
3 service while 42 percent think things will get
4 worse.
5 The banking and insurance business is the
6 most lucrative business in this country. This
7 merger will serve your interests. Bigger is not
8 necessarily better. A nickel is bigger and weighs
9 more than a dime, but it is less in value. When
10 airlines merged we were told to expect better
11 service, and we received peanuts and half a
12 beverage. (Applause)
13 Hospitals merged with the vision of better
14 service and healthcare for minority communities.
15 Division has been lost. Minority communities have
16 not experienced better service or healthcare. Will
17 this merger bring more personalized service to the
18 community? We no longer have the word "trust"
19 within banking institutions, we need the word
20 "trust" reflected within the practices of banks,
21 your bank.
22 The only thing we have in our best interest
23 is the Community Reinvestment Act. The Nation of
24 Islam has a suggestion on how you could honor the
25 CRA. We want a letter of commitment to the
0178
1 community. You have an obligation to offer more
2 than lip service. The letter should detail what you
3 propose to do for minority communities.
4 How can you, Fleet Bank, assure us that
5 things will not get worse? William Sands wrote a
6 paper entitled "Proper Attitude is Key to Successful
7 Community Lending." He states the CRA was one of a
8 series of laws passed by Congress to address
9 problems of unequal access to credit. The CRA
10 emphasizes the continuing and affirmative obligation
11 of lending institutions to meet the deposit and
12 credit needs of the entire community, including low-
13 and moderate-income areas, consistent with safe and
14 sound lending practice.
15 What is your attitude towards minority
16 communities? How will you ensure that the spirit
17 and intent of the CRA be met? One way is for Fleet
18 to support the Boston Bank of Commerce. The Boston
19 Bank of Commerce understands our needs and is
20 committed to fostering economic and social
21 development.
22 Yes, Fleet should make it a project to aid
23 and support this community by aiding and supporting
24 the Boston Bank of Commerce. They're not your
25 competitor; they're the only African-American-owned
0179
1 bank and the only minority-owned community
2 development financial institution in New England.
3 It is the right and moral thing to do. It is good
4 business practice. In fact, it is right in line
5 with the spirit of serving the convenience and needs
6 of the community.
7 I don't know what this merger will bring to
8 Boston, do you? How will this merger, creating the
9 third largest lender in the nation, handle the
10 individual? The small businesses? The not-for-
11 profit businesses in minority communities?
12 I do know that the Boston Bank of Commerce
13 is in the best position to handle the needs within
14 minority communities. They have provided over 15
15 years of community development and support. They
16 have not lost sight of the individual. They have
17 not lost sight of the small businesses. They have
18 not lost sight of the not-for-profit businesses in
19 our communities. Support the community by
20 supporting the Boston Bank of Commerce. Anything
21 less than Fleet will leave us banking while black,
22 banking while brown. Thank you. (Applause)
23 PRESIDING OFFICER SMITH: Questions from
24 the panel?
25 MR. ALVAREZ: Reverend Sharpton and
0180
1 Honorable Muhammad, you both mentioned the Boston
2 Bank of Commerce. Do you know, has the Boston Bank
3 of Commerce made a bid for any of the branches in
4 the Fleet package?
5 REV. SHARPTON: It is my understanding that
6 they have made a bid. I understand that the
7 thinking was that they wanted in the divestment
8 phase of this merger a major bank to take over most
9 of it and some 10 to 15 percent would be left. I
10 think the Boston Bank of Commerce, if I'm not
11 mistaken, had only made a bid for like 18 branches
12 out of 280, which I think is clearly, as Minister
13 Muhammad said, not dealing with the competitiveness.
14 The fact that nothing has been made concrete there
15 shows to me an arrogance and an insensitivity on not
16 even trying to work with the community.
17 I don't think that's a reasonable proposal,
18 given the fact you're talking about 280 branches
19 will become available and the bid for the only black
20 bank in the region is only for about less than 10
21 percent of that.
22 MR. ALVAREZ: But as far as you know, a bid
23 has been made.
24 REV. SHARPTON: A bid has been made.
25 MR. ALVAREZ: Bids haven't yet been
0181
1 announced.
2 REV. SHARPTON: It might be while we're
3 here today.
4 MR. ALVAREZ: Yes.
5 PRESIDING OFFICER SMITH: If there are no
6 further questions, we thank you very much for coming
7 this morning and afternoon.
8 (A pause)
9 PRESIDING OFFICER SMITH: We are ready to
10 start with Panel Seven, and we have about five
11 different organizations with five minutes total
12 each.
13 So where we have Ms. Feingold and Mr.
14 Gornstein, is one of you speaking?
15 MS. FEINGOLD: Just one.
16 PRESIDING OFFICER SMITH: Thank you very
17 much.
18 MS. FEINGOLD: My name is Ellen Feingold,
19 and I'm president of Citizens' Housing and Planning
20 Association. Thank you for providing us with the
21 opportunity to testify today. I'm also here as the
22 developer and manager of a large nonprofit
23 organization that provides housing for very
24 low-income elderly and another that provides housing
25 for homeless elderly. I am on the ground as well as
0182
1 being representing a large organization.
2 CHAPA was established in 1967. It's a
3 nonprofit organization that advocates for the
4 production and preservation of affordable housing
5 for low-income people. Our membership of 1500 is
6 made up of a broad range of interests, including
7 housing providers and developers, tenants, advocacy
8 organizations, government officials, local planners,
9 lenders, and many others. We are one of the largest
10 and most diverse housing coalitions in the area.
11 The proposed merger between Fleet and
12 BankBoston is especially important to the affordable
13 housing community for three reasons:
14 Number one, to date we are facing an
15 enormous and growing housing crisis. Low- and
16 middle-income residents in New England are being
17 priced out of home ownership and rental markets in
18 record numbers.
19 Number two, government cutbacks at the
20 state and federal levels have meant that affordable
21 housing developers must rely on private financial
22 institutions like BankBoston and Fleet to a much
23 greater extent than ever before.
24 Third, in recent years the housing
25 community has worked closely with both Fleet and
0183
1 BankBoston to craft solutions to the housing
2 affordability problem. This merger provides an
3 important opportunity to build and expand on this
4 recent progress. But, on the other hand, without
5 certain specific lending commitments that will
6 directly benefit low and moderate income people,
7 this merger poses a real danger because community
8 investment could fall dramatically in the areas that
9 need it the most.
10 We take the banks' commitments to make one
11 plus one equal more than two as genuine, but there
12 need to be details behind that commitment. Since
13 the merger was announced, Fleet and BankBoston have
14 submitted a general proposal to commit $4 billion in
15 affordable housing mortgages and $2 billion in
16 community development lending over the next five
17 years. As part of your consideration of this
18 merger, the Federal Reserve should require that
19 Fleet and BankBoston do the following:
20 Number one, provide details, details on how
21 this overall commitment compares with the combined
22 lending of the two banks over the past three years
23 with a breakdown for each New England state. Their
24 proposed level of commitment can't be evaluated with
25 that information.
0184
1 Number two, provide specific programmatic
2 details for each lending area. For example, it's
3 not enough to say that a certain amount of money
4 will go towards rental housing development. The
5 proposal must specify what will be the terms, how
6 will it be achieved, what are the delivery systems,
7 and, most important, what income groups will be
8 served.
9 Third and finally, Fleet and BankBoston
10 should enter into a written agreement with the
11 appropriate housing and community development
12 organizations similar to previous CRA agreements
13 that both banks have entered into. It is absolutely
14 essential that a sound mechanism be developed to
15 ensure that these commitments will be upheld and
16 monitored, and the Federal Reserve must assure
17 continuing performance under these commitments.
18 In order for the banks to fulfill these
19 requirements, we ask that the Federal Reserve extend
20 its public comment period for an additional two
21 weeks after the banks submit a revised and more
22 detailed community investment proposal.
23 Now, CHAPA's particular focus is on
24 affordable housing, and we therefore would like to
25 see the following five priorities addressed as a
0185
1 condition of the merger:
2 Number one, Fleet and BankBoston should
3 expand their commitment to the Soft Second Mortgage
4 Program statewide. The Soft Second Program has been
5 one of the most effective programs for helping low-
6 income families become homeowners. A statewide
7 expansion is necessary.
8 Second, the banks should convert their
9 required Massachusetts Housing Partnership Fund
10 commitment to equity, similar to that which
11 BankBoston did during the merger between BankBoston
12 and BayBanks. While there are many sources of
13 permanent financing to build rental housing, it's
14 very difficult to obtain the equity so that
15 developers of low-income housing can provide more
16 affordable apartments.
17 Third, the merged bank should expand its
18 commitment to funding and sustaining home buyer
19 education and counseling throughout the region. As
20 banks move towards more flexible underwriting, it's
21 critical to support the network of homebuyer
22 counseling agencies for both pre-purchase, post-
23 purchase, and foreclosure prevention.
24 Four, the merged bank should continue its
25 membership in the Federal Home Loan Bank of Boston
0186
1 over the long term -- now, Fleet is a member now;
2 BankBoston is not -- to ensure access to the Federal
3 Home Loan Bank's affordable housing and community
4 investment programs.
5 Five, the combined bank should expand its
6 commitment to foundation giving. Many groups which
7 receive funds from both banks believe that they will
8 see reduced foundation funding as a result of this
9 merger. We heard in Panel Five many groups who are
10 supported by both banks. This kind of support must
11 continue at at least this level, and the Federal
12 Reserve needs to ensure that no reduction in
13 foundation-giving occurs.
14 We look forward to receiving more details
15 on the ways in which the merged bank will maintain
16 and expand its commitment to investing in low and
17 moderate income neighborhoods. Thank you very much.
18 I appreciate the opportunity to testify. (Applause)
19 PRESIDING OFFICER SMITH: You may stay
20 seated at the table. You just pull the mike close
21 to you.
22 MR. GUSCOTT: My name is Ken Guscott, I am
23 president of the Minority Developers Association of
24 Boston. This is an association that consists of 35
25 minority builders, contractors, and developers, and
0187
1 we're the ones that supply and can find minority
2 people to build the houses, whether they're low
3 income or commercial houses, within the Greater
4 Boston area. And that's what I'm going to speak
5 about today.
6 We thank you for this public opportunity to
7 express our views on the impact of the proposed
8 merger of BankBoston and Fleet Bank upon our
9 community's minority and women-owned businesses.
10 As you know, small businesses employ over
11 53 percent of this nation's work force, and they
12 produce over half of the nation's gross domestic
13 product, and they provide virtually all of the new
14 Net jobs added to the economy.
15 Financial institutions have an obligation
16 to provide vital financial services to the
17 communities which they are located in. In today's
18 growing economy, we have an opportunity to grow
19 productive, stable businesses, particularly within
20 the minority-owned business sector, that will
21 continue to provide job opportunities for community
22 residents.
23 Consolidation within the banking and real
24 estate industries makes access to capital for small
25 and midsized real estate companies difficult.
0188
1 Smaller sized and mixed-use projects cannot be
2 financed through the public capital markets and
3 often rely on federal, state, and local programs
4 combined with creative, flexible, and innovative
5 bank financing in order to be successfully
6 completed.
7 Companies and customers located in inner-
8 city neighborhoods know that the untapped market
9 potential in their neighborhoods is enormous. The
10 challenges for these businesses are also great.
11 Having a relationship with a bank which knows the
12 market and is experienced with the technical aspects
13 of public/private partnership financing enables
14 companies to spend less time trying to find capital
15 and more time growing their business.
16 BankBoston Development Corporation LLC, a
17 part of the BankBoston Community Banking Group, has
18 pioneered in meeting the financial needs of the
19 minority and women-owned business enterprises by
20 providing just such vital financial service: equity
21 investments that grow minority businesses.
22 As part of the regulatory and community
23 review and approval of the proposed merger of
24 BankBoston and Fleet Bank, it is vital that an
25 equity investment fund, consisting initially of $500
0189
1 million, be dedicated to continue providing
2 substantial equity investments in viable minority
3 and women-owned businesses.
4 I bring to your attention that yesterday
5 the President of the United States and the Chairman
6 of the Bank of America pledged that they would put
7 $500 to $600 million to serve these communities
8 because it's good business.
9 The emerging market, minority, and
10 women-owned businesses is the fastest-growing
11 segment of the business community. These businesses
12 are also a tremendous growing business opportunity
13 for the new bank. By building upon the successful
14 track record of BankBoston Development Corporation
15 and by expanding its capacity for direct equity
16 investment in minority and women-owned businesses,
17 this new financial institution will make a great and
18 lasting contribution to our community.
19 With substantial financial equity
20 investment focused on our community's MBE and WBE
21 businesses, the new bank will empower the
22 productive, economic capacity of our community's
23 businesses. The hard work, long hours, and personal
24 sacrifices of the owners of these MBE/WBE
25 businesses, properly capitalized, will then generate
0190
1 new jobs, security for the working families of our
2 community, and successful role models for our
3 children.
4 I thank you for the opportunity to appear
5 before you. (Applause)
6 PRESIDING OFFICER SMITH: Thank you very
7 much. Ms. Maker, speaking on behalf of Rashmi
8 Rangan and yourself?
9 MS. MAKER: Right. I'm going to be myself.
10 I have overheads. Is this on now?
11 I am Ruhi Maker, and I'm coconvenor of the
12 Greater Rochester Community Reinvestment Coalition
13 and a senior attorney with the Public Interest Law
14 Office of Rochester.
15 I am a data freak, I have to confess to
16 that, and therefore I will spare you some of the
17 anecdotes and share some data with you. We've been
18 analyzing data since 1993. I just released my fifth
19 lending analysis which is included as part of these
20 comments. And I think really the data says many of
21 the points I want to make. I'll turn this on and
22 hope you people can see.
23 Essentially -- and this is included in my
24 comments -- essentially what's happened with Fleet
25 in the last three years and really in the last five
0191
1 years is lending has declined. You know, in the MSA
2 they're down 20 percent. In the city they're down
3 53 percent. Black/Hispanic households they're down
4 66 percent. They only made 41 loans in 1997, and
5 the trend continues.
6 Earlier there was an indication that, well,
7 of course we all know that market share has changed
8 really dramatically in the last five years, much of
9 my report speaks to that, and we go into great
10 detail as to who is doing the lending now.
11 Unfortunately, some of that lending has gone to some
12 primes.
13 But we need to put the context of Fleet
14 along with their peers, and I think that's extremely
15 important. And I'm going to do that for a minute
16 and show you what some of the other banks have done,
17 because we have been working very closely with a
18 number of other banks, and we have commitments from
19 them and, for one reason or another, they have
20 managed to do a better job than Fleet. And this is
21 just comparing the top eight banks, and I'll show
22 you a market share in a minute.
23 When you look at 3 percent of Fleet's total
24 loans were to Black/Hispanic households, when you
25 compare their total MSA lending, whereas looking at
0192
1 their competitors, the top eight area banks, 7
2 percent was to Black and Hispanic households.
3 Going on, 26 percent low-moderate income
4 households in the MSA, that's Fleet, everyone else,
5 their peers were doing better, 30 percent. It
6 continues. I think particularly the minority census
7 tracts, 1 percent of Rochester MSA loans Fleet were
8 minority tracts compared with 4 percent of the top
9 eight area banks.
10 I know this is a lot of data, I asked for
11 20 minutes, but I'll try and condense it into five.
12 Bear with me. And I think this little market share
13 chart, it really is all in there, so you don't have
14 to try and absorb it all. I don't know how well you
15 can see, but if you look down Fleet's column, and if
16 you look at the middle column where it says "Market
17 Share," 5 percent of the market share in Rochester,
18 and the market share in all its other communities,
19 communities we care about, the city, Black/Hispanic,
20 low-mod household, is less than its MSA market
21 share. And that is only true for Fleet. All of the
22 other competitors do at least as well in the
23 underserved communities as they do in the MSA, and
24 Fleet is the only bank that shows that.
25 To lighten things up a little bit and show
0193
1 you a little color map of small business lending --
2 I'll trying to wake you guys up since it's
3 lunchtime, and I know I've been up since 5:30.
4 There we go. This I think -- I'll show you the rest
5 of the map.
6 As you know, small business loans, we don't
7 know which census tracts, the data isn't available
8 by census tract. However, we do know where a bank
9 made no loan at all. And the little blue map in the
10 corner shows the minority neighborhoods, and the
11 little Fleet map up there shows that they had
12 absolutely no small business loans in predominant
13 areas of the City of Rochester and a large
14 correlation with the minority.
15 And their small business lending, by the
16 way, it is just about the only bank that managed to
17 decrease its small business lending and lost to some
18 of its competitors, who I know I've been critical of
19 in the past. If you look at Marine and M&T, a
20 pretty good spread. Fleet's small business lending
21 goes down. I know a colleague of mine -- well, a
22 colleague of somebody's earlier spoke about how well
23 they do in Rochester, New York.
24 I had a coalition member come and tell me
25 when I was here in Boston last fall talking to some
0194
1 of the CRA corporate officers, and we were trying to
2 get, you know, some investments, and essentially I
3 was told, "Well, Fleet doesn't have a CRA problem in
4 New York, why should we do anything for you?" And
5 I'm here to say, "Hey, guys. Fleet does have a CRA
6 program in New York, a big problem."
7 This is my eighth merger in about five
8 years. I testified last year at City Group. And
9 essentially City Group went through -- maybe I'm
10 being cynical, I assume this will go through, but
11 what can you do?
12 What you can do, what we have found works
13 is, when you have written commitments, you can
14 condition this merger on specific lending
15 commitments by region. So what are they going to do
16 in Rochester? What are they going to do in New
17 York, not just Massachusetts? Much was said of New
18 England and we care about New York. (Applause) So
19 I conclude now.
20 PRESIDING OFFICER SMITH: Ms. Yager, will
21 you be speaking?
22 MS. MAKER: I'm doing Rashmi's.
23 So now let's pretend we're in sci-fi, I
24 don't know, whatever, 21st century, and I'm now
25 Rashmi Rangan, into a quick switch. Actually, she
0195
1 is the same size as me in brown, I think, slightly
2 different accent.
3 My name is Rashmi Rangan, I'm the executive
4 director of the Delaware Community Reinvestment
5 Action Council, or DCRAC. For over 12 years our
6 organization has advocated for fair and equal access
7 to credit and capital for the underserved
8 Delawareans.
9 We are opposed to the merger proposal of
10 Fleet Financial Group (Fleet) and BankBoston Corp.
11 (BankBoston). This application should be denied.
12 The merger proposal does not serve the convenience
13 and needs of the community, nor does the merger
14 proposal have a positive market impact.
15 The Federal Reserve cannot approve any
16 proposal under Section 3 of the Bank Holding Company
17 Act which would substantially lessen competition in
18 any banking market, unless the anti-competitive
19 effects are clearly outweighed in the public
20 interest by the convenience and needs of the
21 community. This propose merged merger is
22 anti-competitive. Public convenience and needs are
23 not served through this merger. The Federal Reserve
24 Board should deny this application. By reference,
25 DCRAC introduces the June 6, 1999, comments of Inner
0196
1 City Press and its analysis of the anti-competitive
2 effects of this merger.
3 Again, DCRAC submits, by reference, ICP's
4 analysis on the same Fleet's Troubling Fair Lending
5 Record Calls for Denial. Fleet acquired Shawmut in
6 1995, and NatWest in 1996. Fleet's combined
7 entities' lending volume declined 70 percent between
8 '95 and '97. The decline is greater in lending to
9 minorities and in LMI census tracts. Fleet's past
10 mergers have not only hurt communities, but an
11 adverse factor under the CRA, they have
12 disproportionately harmed low and moderate income
13 communities.
14 Fleet's Predatory Lending Abuses Call for a
15 Denial. In May 1996, Fleet settled discrimination
16 charges with the U.S. Department of Justice, charges
17 that it systematically overcharged minorities from
18 its two New York City area mortgage offices. In
19 1999, Fleet continues abusive lending practices.
20 By reference I enter the Boston Globe
21 article "Easy Loan Program Nothing but a Headache
22 for Some Consumers" by Patricia Wen and Bruce Mohl,
23 June 6, 1999. The article reports that Fleet's
24 "fast-loan check" program delivered an easy-to-cash
25 check of $10,000 to a 74-year-old mentally impaired
0197
1 man whose sole residence and mailing address in the
2 past 18 years was a veterans' hospital in Bedford.
3 Fleet sees no shame in it.
4 Fleet's Poor Record of Serving the
5 Convenience and Needs of the Community calls for a
6 Denial. A bank which treats its long-term customers
7 the way Fleet treats its elderly says much about the
8 bank's efforts at not meeting the convenience and
9 needs of its community. By reference, I enter the
10 Providence Journal article of May 29, 1999, "A
11 Really Big Bank Leaves Little Room for the Small
12 Stuff," by Bob Kerr, who reports that the elderly
13 customer, slapped with fines for insufficient funds,
14 was told he could get $25 back, but only if he
15 purchased overdraft protection for $24. Then he
16 "was told he could get $37.50 back, but only if he
17 purchased overdraft protection and signed up for
18 direct deposit of Social Security checks."
19 Fleet in Delaware. It has been our
20 practice to approach Delaware's non-profit status
21 providing community such small business lenders and
22 counselors and home ownership counseling agencies to
23 learn about a bank's direct involvement in our
24 community. Consistently, each agency maintained
25 with Fleet's acquisition of NatWest in 1996, Fleet
0198
1 has done nothing in Delaware. They do not even have
2 a CRA officer? Vindicating charges of Fleet's bad
3 performance after each of its past acquisitions.
4 Fleet's HMDA Analysis for Delaware. The
5 following Fleet entities conducted mortgage lending
6 business: Fleet Funding Corp. and Fleet Home Equity
7 USA. Between the two, they received 63 applications
8 for mortgage, home improvement, and refinance loans.
9 Fleet did not collect data by race for 40
10 of these applications, or 63.4. This is a violation
11 of the Home Mortgage Disclosure Act (HMDA). HMDA
12 was enacted with the goal of assessing who is and
13 who is not having access to the credit system. By
14 eliminating fully 64 percent of data from review,
15 Fleet violates the intent and spirit of the law.
16 Fleet's approval rate for whites was 65
17 percent compared with 50 percent for African
18 Americans. Fleet's denial rate for whites was 23
19 percent compared with 25 percent for African
20 Americans. Fleet received 18 applications from
21 white applicants and three from African Americans.
22 Relative to applicant incomes, from
23 applicants with median incomes below 50 percent,
24 Fleet received two applications and denied both, a
25 denial rate of 100 percent. From applicants with
0199
1 median incomes 50 to 79 percent, there's a little
2 more, they basically conclude, you know, it says
3 what we've been saying, that there's a problem, and
4 let's try and do something about it. Thank you.
5 PRESIDING OFFICER SMITH: Fine. We'll have
6 the complete statement. Ms. Wallace.
7 MS. WALLACE: Good morning. My name is
8 Joan Wallace-Benjamin, and I am the president and
9 CEO of the Urban League of Eastern Massachusetts.
10 The Urban League of Eastern Massachusetts an
11 82-year-old civil rights, direct service, and
12 advocacy organization in the City of Boston. We are
13 part of a large national organization of 114 Urban
14 League affiliates across the country.
15 On behalf of the Urban League and the
16 communities we serve, I am here to express our
17 concerns about and make recommendations about the
18 proposed merger and the accompanying bank branch
19 divestiture. I am also here to speak to Fleet
20 Boston's proposed Community Investment Plan as well
21 as its likely negative impact, if care is not taken,
22 on minority, low and moderate income people, small
23 businesses, and community development programs.
24 Before I begin my comments, I would like to
25 take a moment to thank you for granting me this
0200
1 opportunity to testify before you.
2 The proposed merger is a clear example that
3 "the big are getting bigger." Currently Fleet and
4 BankBoston are the number one and number two largest
5 banks in New England. If they merge, the newly
6 combined Fleet-Boston Bank will not only be the
7 dominant lender in the New England region, it will
8 be the eighth largest bank in the United States. In
9 other words, Fleet Boston is about to become a
10 megabank.
11 As we enter the new millennium, banks
12 should be expanding access to credit/capital and
13 affordable investment opportunities to minorities
14 and women and in low- and moderate-income
15 communities. We are not asking Fleet-Boston to do
16 this alone. We are asking, however, as a leading
17 lending institution and increasingly powerful bank
18 that it do its reasonable and fair share. This
19 includes, at the very least, maintaining its
20 premerger lending level. Such an institution would
21 have a widely disseminated community investment
22 strategy, with accountability features built in,
23 that incorporates specific written standards to
24 document and measure progress and success.
25 Under the circumstances, Fleet-Boston's
0201
1 proposed community commitment to set aside $14.6
2 billion over five years for low-income borrowers,
3 small businesses, and community development programs
4 is woefully inadequate. No community investment
5 plan with measurable and verifiable indices of
6 progress and success has been disseminated for
7 review and/or comment.
8 $14.6 billion sounds like a lot of money;
9 however, a closer look clearly demonstrates that it
10 is not so much. In fact, this amount is
11 significantly less than Fleet Bank and BankBoston's
12 premerger combined lending in the small business,
13 affordable housing/mortgages to low and moderate
14 income borrowers, and the community development
15 investment categories.
16 More specifically, the analysis of
17 Fleet-Boston's proposed commitments regarding
18 Fleet's and BankBoston's current lending levels by
19 Inner City Press, for example -- and that analysis
20 was presented by Inner City press to the Federal
21 Reserve as part of its June 7th protest -- using
22 Fleet's proposed methodology shows large shortfalls
23 in the aforementioned small business, affordable
24 housing/mortgages to low- and moderate-income
25 borrowers, and the community development lending/
0202
1 investment categories.
2 Rather than creating a lending shortfall,
3 we believe that, at the very least, the overall
4 volume of business currently done by the banks
5 should also be maintained after the merger.
6 The banks do business in eight states. The
7 Community Investment Plan, as currently designed, is
8 to be dispersed in those states. The fairness or
9 the unfairness of the proposed set aside cannot be
10 adequately judged because the banks have failed to
11 date to provide sufficient or detailed information
12 as to how they came up with this $14.6 billion
13 figure or how it would be dispersed among or between
14 the eight states in which it will operate. Simple
15 mathematical averaging, however, demonstrates that
16 $14.6 billion spread over six categories: small
17 business lending; affordable housing/mortgages to
18 low- and moderate-income borrowers; community
19 development lending/investment; community lending in
20 LMI areas; equity investments; and technical
21 assistance and support, divided by eight over five
22 years will not go very far.
23 On the issue of the 250-bank branch
24 divestiture, we are opposed to one or more large
25 banks being allowed to purchase all of the divested
0203
1 bank branches. Fair competition and community
2 service concerns demand that small to midsized
3 community and minority banks should be allowed to
4 purchase the divested branches. In fact, we
5 strongly suggest that, as a minority-owned and
6 -managed community bank in the City of Boston, the
7 only bank that is a Community Development Financial
8 Institution (CFDI) in New England, the Boston Bank
9 of Commerce receive a sufficient base of branches to
10 secure its position as a primary lender and a major
11 minority business.
12 No divestiture of a bank branch in a
13 low-income or minority community should be made to a
14 bank that does not intend to keep the bank branches'
15 doors open. People who live or work in these
16 communities should not have to travel long distances
17 or be forced to go into unfamiliar or unwelcoming
18 communities. We need banks that will aggressively
19 market their products in low- and moderate-income
20 minority communities. This reality is compounded by
21 the fact that past and present patterns of
22 discrimination have created an environment where
23 members of these communities have not been well
24 served. We need to ensure that women, low- and
25 moderate-income people are not left post-merger with
0204
1 less access to fulfill individual and community
2 specialized banking needs.
3 In our view, in spite of the fact that
4 Fleet-BankBoston representatives have indicated
5 their CEO's goal of having this new "big"
6 divestiture buyer pick up the 20 percent share of
7 community investment obligations that Fleet Boston
8 plans to relinquish, we want to ensure that this
9 buyer is obligated to meet CRA goals. We know that
10 the Fleet-Boston divestiture plan is not altruistic.
11 It is being done to make the bank more profitable
12 and to increase shareholder and senior officer
13 wealth.
14 Therefore, as stated earlier, they must as
15 a combined entity maintain the investment level each
16 bank has currently achieved. Knowing that they will
17 be successful, as their asset size grows, a
18 proportionate share of those increases must be
19 committed to the community into the future and make
20 achieving these goals a part of their CRA rating.
21 PRESIDING OFFICER SMITH: Thank you very
22 much.
23 MS. WALLACE: We hope you carefully
24 consider these recommendations. Thank you.
25 PRESIDING OFFICER SMITH: Thank you very
0205
1 much. (Applause)
2 MS. YAGER: My name is Martha Yager, I am
3 program coordinator for the Granite State Community
4 Reinvestment Association in New Hampshire, which is
5 a project of the New Hampshire program American
6 Friends Services Committee. Appearing with me is
7 Arnold Albert, chair of GSCRA.
8 GSCRA was formed six years ago in response
9 to the Shawmut and Dartmouth merger. Our mission is
10 to assist local community groups, especially low
11 income and minority groups, in assessing local and
12 credit service needs and to promote public
13 involvement to influence the policies and practices
14 of financial institutions that are practicing in New
15 Hampshire. The association includes religious
16 groups, civil rights, and social justice advocacy
17 organizations and is staffed by the American Friends
18 Services Committee.
19 The Fleet-BankBoston merger does not serve
20 the convenience and needs of the communities of New
21 Hampshire and poses significant potential loss of
22 lending and services. In April we met with Fleet
23 and BankBoston community development teams. We
24 followed that with a letter reiterating the need for
25 the bank to make specific commitments to lending for
0206
1 affordable housing, small business, and community
2 development. We also asked for an explanation of
3 the unusually high denial rates by Fleet Bank in its
4 mortgage lending. We have had no response to these
5 matters from Fleet other than form letters saying
6 that it will make no local commitments.
7 Community development lending does not
8 happen easily at Fleet. The bank prefers large
9 deals with big customers, cookie-utter loans that
10 require little or no human interaction, and
11 guaranteed loan programs. Fleet's highly
12 centralized structure makes it a difficult partner
13 in putting together deals. This is not behavior
14 that lends itself to building community trust that
15 the bank will create a functional community
16 development lending strategy. Quite the contrary.
17 This lack of performance has been documented by
18 federal regulators in the steadily decreasing CRA
19 ratings throughout the Fleet system outside of
20 Massachusetts.
21 One plus one was to equal at least two.
22 The nation market area has paid a high price for
23 bank consolidation. We have documented dramatic
24 decline in mortgage lending in this area in other
25 documents and will not repeat that information here.
0207
1 Since banks are the source of many of the loan
2 products designed for lower-income borrowers, this
3 decline has been particularly punishing for low-
4 income people wanting to buy their own home.
5 Community groups across the region have
6 harped on the theme of one plus one is at least
7 equal to two, meaning simple arithmetic, in loan
8 volumes for affordable housing, community
9 development, small business lending, and charitable
10 giving. And yet Fleet doesn't get it. In a letter
11 dated June 8th over the signature of Agnes Bundy
12 Scanlan and Gail Snowden, the bank says that they
13 understand, quote, that "one plus one equals two
14 means retaining the best of both institutions and
15 improving on them."
16 No. That's not what we mean. We are
17 talking simple arithmetic as well as programs.
18 Since Fleet's mortgage lending is below its market
19 share relative to other banks in the area, one plus
20 one is an absolute minimum. Please see our
21 correspondence from the Federal Reserve for those
22 details.
23 MR. ALBERT: One of the problems with this
24 merger the way it's been handled has been the
25 divestiture aspect. You've heard today references
0208
1 to there being three states from which Fleet will
2 have to divest. Actually there are four. The
3 fourth state is New Hampshire. New Hampshire is a
4 separate state. It has its own unique tax system,
5 different levels of state support for affordable
6 housing and economic development, different local
7 economic profile and, for better or worse, its own
8 political climate.
9 Now, Terry Murray when he started out this
10 morning, he said something, I don't have the exact
11 quote, but I believe he said he wants children and
12 grandchildren to have local institutions. And he
13 said that so many of our nation's cities have lost
14 that. He talked about the need for a hometown bank.
15 Well, in Nashua, as Martha has mentioned, there is
16 no longer such a thing as the hometown bank. The
17 hometown bank, NFS, was lost to BayBanks, which was
18 lost to BankBoston. Indian Head became part of
19 Fleet.
20 From the beginning of this process, public
21 statements have indicated that the Massachusetts
22 divestiture would go to a single large bidder in the
23 effort to create a strong competitor for Fleet in
24 the Boston area. The problem with this is that New
25 Hampshire in need of small banks in this affected
0209
1 market was listed as part of the Massachusetts sale.
2 When it began to appear that small banks could apply
3 in the bidding process, there was nowhere near
4 enough time for small banks to put together a bid.
5 Small banks don't have a mergers department that's
6 doing this all the time.
7 The complete disregard for the market needs
8 of an entire metropolitan area is unacceptable. If
9 this application is to proceed toward approval, we
10 request that the bidding process be reopened for 90
11 days allowing small banks to bid on individual
12 branches. Governor Jean Shaheen and the New
13 Hampshire Banking Commissioner will be making a
14 similar request which you will receive by letter
15 today.
16 There are a host of reasons why this merger
17 should not be approved. It's a classic case of
18 business done solely for the benefit of the
19 stockholders at the expense of the rest of the
20 stakeholders. It is anti-competitive even with the
21 divestiture. A bank with a steadily declining CRA
22 record is buying a bank that does a better job of
23 listening to and responding to community credit and
24 service needs. That performance should not be
25 rewarded. A bank that has redlined rural markets,
0210
1 as was the case with Fleet in New Hampshire, should
2 not be rewarded with its next merger request.
3 There is no specific plan for how the bank
4 will meet community development needs addressing the
5 needs of different markets. Given the dismal record
6 of decreased lending following other mergers
7 involving these banks, simplistic plans are simply
8 not enough. We urge the Board of Governors to deny
9 this application. Thank you. (Applause)
10 PRESIDING OFFICER SMITH: Thank you very
11 much.
12 Please be sure your statements have been
13 submitted for the record. And do we have any
14 questions?
15 MS. BROWNE: I guess I have a question.
16 Perhaps several of the panelists might want to
17 respond. The attorneys general from Massachusetts
18 and Connecticut made the case that they were very
19 eager to see a large player enter the market because
20 of the concerns of middle market businesses. Yet
21 several of you emphasize the importance of smaller
22 banks having a role here. Are you concerned about
23 the entry of a large player? You would like to see
24 small entities, smaller banks as well, or perhaps
25 you could clarify? Is this a conflict, or is it you
0211
1 would just like to see an opportunity for smaller
2 banks as well? Or do you feel the middle market
3 issue is not a real one?
4 MR. GUSCOTT: I'd be glad to take a stab at
5 that question. We have met with the Attorney
6 General and discussed his point of view. And as we
7 explained to the Attorney General of Massachusetts,
8 you have an emerging local market of MBEs and WBEs,
9 minorities and women, and it takes a special type of
10 structure to deal with them. You have to be very
11 sensitive to what their needs are. And it's our
12 feeling that you should have a local smaller bank
13 that understands the community that they're in to
14 provide services to this need -- for this group of
15 people.
16 That's why -- he understood what we
17 requested. But that's our reason why we wanted to
18 see not just one big bank but some local banks
19 involved in this, to better service the community.
20 MS. WALLACE: We made special reference to
21 the Boston Bank of Commerce, because we believe
22 this is an opportunity to build and strengthen a
23 historically owned, African-American-owned
24 and -operated financial institution. When you do
25 that, like you do that with other minorities/small
0212
1 business, you build the security and stability of
2 the community, as well as the customer service
3 affinity that a bank like BBOC would have.
4 And so I think that if there were a large
5 player, which would not be our preference, there are
6 some real preconditions that must exist in the way
7 they interact with the community in order for that
8 to be possible. But our preference would be that it
9 would be small and community-based financial
10 institutions.
11 MS. YAGER: The New Hampshire situation is
12 a little bit different. In this particular market
13 area it has proven the theory wrong. When
14 interstate banking was being passed about five years
15 ago, there was almost a mantra, there will always be
16 small community banks around. Well, in this area
17 there are no small community banks remaining. There
18 are none serving an area of over 150,000 people.
19 That's a very different situation than you have in
20 Massachusetts. There are community banks around in
21 many of the towns there. We have a need to have
22 some of these branches broken out and sold to the
23 very small little banks that are in the area that
24 could move into that market, if given the amount of
25 time they need to put a bid together.
0213
1 PRESIDING OFFICER SMITH: Thank you very
2 much for coming.
3 MR. MARKS: I wonder if there are others
4 who oppose this merger and if you'd be willing to
5 stand up at this time in the room. (People stand)
6 PRESIDING OFFICER SMITH: We're going to
7 start with Mr. Anderson.
8 MR. MARKS: We would like to start only
9 because there have been a lot of people waiting here
10 for the half hour.
11 PRESIDING OFFICER SMITH: That will be
12 fine, Mr. Marks. We'll start. And we have a total
13 of 10 minutes for Mr. Marks's speakers total, 10
14 minutes among the three people who I understand will
15 be speaking. So you may start.
16 MR. MARKS: We are going to translate what
17 we're saying into Spanish.
18 My name is Bruce Marks, I am the executive
19 director of the Neighborhood Assistance Corporation
20 of America. (Remarks translated into Spanish)
21 And with me are some of the homeowners and
22 some of the people who are in the process who have
23 taken advantage of the best mortgage product in the
24 country. Because what was happening, over five
25 years ago, we said that people work hard, people
0214
1 here work hard. It's tough to save. People should
2 be able to buy with no downpayment with no closing
3 costs.
4 What I would like to start off with is to
5 have Reverend Hagler, who is the development
6 director of NATCA, he is going to say a few words,
7 and then we're going to make some other comments
8 about Fleet's acquisition of the Bank of Boston.
9 REV. HAGLER: I am Reverend Grayland Scott
10 Hagler. And I want to just start off by saying,
11 like was said, in 1991 Fleet was ripping off the
12 poor and elderly communities, stealing homes, and
13 destroying neighbors. And every single soul in the
14 communities knew this to be true, and yet, and yet,
15 basically the Federal Reserve shirked in their
16 duties and disregarded the law and expeditiously
17 approved Fleet's acquisition of the Bank of New
18 England. And NATCA had to spend the next four years
19 doing the job which should have been done here,
20 monitoring Fleet and holding it accountable to its
21 predatory and discriminatory lending practices.
22 In 1994 it was the Neighborhood Assistance
23 Corporation of America, and unfortunately not the
24 Federal Reserve, that paved the way for the new and
25 innovative mortgage products that have helped to
0215
1 create thousands of new homeowners in previously
2 destabilized communities and therefore is a major
3 participant in revitalizing inner cities like Boston
4 and Lawrence, Massachusetts. Fleet's community
5 initiatives moved from an institution which had a
6 total disregard for low- and moderate-income
7 communities to one with a satisfactory lending
8 record.
9 Now we have before us the Fleet acquisition
10 of Bank of Boston. We are at the crossroads again.
11 On one hand, we have Fleet, with a better community
12 lending record than it had five years ago, only
13 because of community pressure, and the Bank of
14 Boston, with a much better institutionalized
15 community lending program. But the differences,
16 they are very significant.
17 Fleet categorizes its branches as tier one,
18 two, or three. The tier three branches are the
19 least staffed and with the fewest resources. The
20 Fleet branch, for example, on Gallivan Boulevard
21 with $40 million in assets has four staff people.
22 It used to have nine when it was a Shawmut branch.
23 A similarly sized branch of U.S. Trust also located
24 in Dorchester has nine staff members.
25 Why is it that the majority of the tier
0216
1 three branches are in low- and moderate-income
2 communities serving a primarily of color base?
3 Isn't this discriminatory on the surface? Surely
4 when you look at the numbers, it is.
5 Fleet still sees community lending as a
6 necessary evil. This is what is reflected in the
7 current community proposals. They have made the
8 absolute minimum commitment. They have taken each
9 bank's community lending commitment, downsized it,
10 and combined the two. This does not demonstrate a
11 genuine commitment to community lending, and we
12 cannot afford, and you cannot afford, to allow Fleet
13 to backslide into their previous posture of over
14 five years ago.
15 The Federal Reserve must not sit back and
16 ignore its obligations in this case and its
17 obligations under the law. Surely the Neighborhood
18 Assistance Corporation of America will not sit back
19 and allow Fleet to backslide. And the Federal
20 Reserve cannot do anything less than this. It must
21 hold them accountable, it must hold their feet to
22 the fire, and as Reverend Al Sharpton said, "Don't
23 let Fleet fleece the community." (Remarks
24 translated into Spanish)
25 MR. MARKS: Let me add a few more comments.
0217
1 That we're not just concerned about Fleet's low- and
2 moderate-income community lending. Fleet is loved
3 by Wall Street. The stockholders, the investors
4 love Fleet because of the low cost of doing
5 business. But the consequence of that is some of
6 the worst services of any lending institution in the
7 country.
8 So what we've done is we've taken the name
9 and address and gotten the information on every
10 customer within New England, within Rhode Island,
11 Massachusetts, Connecticut, who has gotten a
12 mortgage from Fleet, from '94 forward, over 74,000
13 people. And we commit to the record the names of
14 the 74,000 people, names and addresses of those
15 people, and expect that to be put into the
16 Congressional record -- into the record.
17 Those 74,000 people are going to receive a
18 Fleet customer service questionnaire to ask what
19 type of business they've done with Fleet. How would
20 they rate their services with Fleet? Where one is
21 excellent; two, good; three, satisfactory; four,
22 poor; or five, very poor; or six, not applicable.
23 We constantly, because we've been known to
24 have some issues with Fleet, get calls from people
25 who are fed up with doing business with Fleet. And
0218
1 those people come from throughout New England. They
2 cross geographic/racial/income barriers. It seems
3 like everybody hates working with Fleet. But maybe
4 that's just anecdotal, but we need a comprehensive
5 survey. So we want to know from people, and we want
6 to know from other people who bank at the branches
7 who might not have a mortgage, what they think of
8 Fleet.
9 So we're requesting that the Federal
10 Reserve open up the process, to keep it open, to
11 take those 74,000 names, so that they can submit
12 their comments, so you're hearing more than just
13 from the activists, from the politicians, from the
14 union leaders, you're hearing from people who have
15 an everyday experience with Fleet. So you can judge
16 whether Fleet, as the feudal landlord, because
17 they're going to be the one institution within New
18 England, whether they're going to be the feudal
19 landlord that's going to be held accountable or the
20 feudal landlord that's going to stamp on the
21 customer needs for everybody.
22 So we think that this is fundamental.
23 These are the names. We would like that to be put
24 into the record. (Documents submitted to Board)
25 (Remarks translated into Spanish)
0219
1 MR. MARKS: And now as part of the survey,
2 we are going to ask people to give us the authority,
3 to give NATCA the authority, to submit all their
4 complaints to the appropriate bank -- to the
5 appropriate bank regulators. So as an ex-Federal
6 Reserve employee, I understand I had to spend, and a
7 lot of the Federal Reserve staff has to spend, a lot
8 of time investigating every one of the complaints
9 that someone sends in.
10 So we hope and expect that you're going to
11 take all those 74,000 names there and do your own
12 output, but we're doing ours just to make sure you
13 don't do the same thing you did in 1991. When Fleet
14 Finance was documented as being a predatory loan-
15 sharking operation, you ignored that, and you
16 approved Fleet's acquisition of the Bank of New
17 England, even though they used blood money to do
18 that, because 55 percent of the profits were from
19 Fleet Bank.
20 So we hope you're going to take it more
21 seriously. We don't have a lot of confidence you're
22 going to do that, so we're going to be out there
23 doing that, to get these surveys to submit the
24 information and expect that you're going to
25 investigation every one of what we anticipate being
0220
1 thousands of people who have had concerns but no
2 vehicle to address their issues about Fleet.
3 (Remarks translated into Spanish)
4 We hope that you're going to join us with
5 the Fleet accountability project. Let me make two
6 more comments, two things that should be responded
7 to.
8 All this stuff how Fleet is so thrilled to
9 deal with Fannie Mae, well, certainly they are,
10 because Fannie Mae will buy the loans, Fleet has no
11 risks. That's just another pullback from the
12 community. They have to take some responsibility,
13 they have to assume some of the risk, not just push
14 that off on Fannie Mae.
15 The argument that says the combined
16 Fleet-BankBoston is going to be good for New
17 England, we're going to have a New England-based
18 institution here, I'm sure the First Unions, the
19 Bank of Americas, the Bank Ones, the Wells Fargos
20 are all looking there and saying, "We can't wait for
21 you to lay off 5,000 people to make this institution
22 so that we can come back in a year or two and
23 swallow the new Fleet up." So that idea that
24 somehow we're creating a New England-based
25 institution for the long term just doesn't carry
0221
1 water, just is not real. And we all know it but no
2 one will say that publicly.
3 So with that, the fact of the matter is,
4 Fleet should be better than these two single parts
5 of BankBoston and Fleet and try to backslide to
6 where they were, become the old Fleet. The Fleet
7 accountability project will ensure the people here,
8 and with the thousands of people who have benefitted
9 from the NATCA program and others involved in the
10 NATCA program, to help keep Fleet's feet to the fire
11 so Fleet cannot fleece our community. (Applause)
12 If you have any questions before we leave.
13 PRESIDING OFFICER SMITH: Yes? I don't
14 think so, but thank you very much.
15 (Applause)
16 PRESIDING OFFICER SMITH: Now we will go to
17 Mr. Anderson.
18 MR. ANDERSON: What's the line in
19 vaudeville? I have to follow them? I find it
20 ironic that Bruce uses the analogy about holding
21 Fleet's feet to the fire. When we tried doing that
22 back in '96, Bruce and NATCA protested us.
23 I sat down and started preparing about 15
24 different drafts of what I wanted to do today, none
25 of which I liked, so I threw them away and figured
0222
1 I'd come in here and wing it. So I'll apologize in
2 advance if I'm redundant and if I ramble.
3 PRESIDING OFFICER SMITH: Just so you do it
4 in four and a half minutes.
5 MR. ANDERSON: I sat on this very stage
6 during the Fleet-Shawmut merger hearings and tried
7 to summarize the work of myself and Adam Moser at
8 the time at the Codman Square Development
9 Corporation on work that we had done in revealing
10 mortgage irregularities involving first-time
11 homebuyers -- the First-Time Homebuyer Program at
12 Fleet Bank. And there was reference made to my
13 comments, and Fleet said that they'd address the
14 situation, and the Federal Reserve Board made them
15 promise to work with community groups to fix the
16 problems.
17 Unfortunately the problems were never
18 fixed. I handed federal -- I handed the Board on
19 that day in August a list of 100 properties flipped
20 by two people, two individuals in Dorchester, using
21 Fleet's financing. The sales of the properties was
22 financed by Fleet. The Codman Square group gave
23 them a list of 29. Fleet conveniently ignored my
24 list of 100 and decided to work with the Codman
25 Square group's list of 29.
0223
1 According to Kimberly Boyaton, a reporter
2 at the Boston Globe, Fleet will admit to having
3 fixed three of those loans. There were seven
4 condominiums that were mentioned in that list, Hale
5 Terrace and East Street and Capen Street. I've
6 included them in some of the information that I've
7 given you. Of those seven that were included, four
8 were foreclosed. So, in other words, Fleet fixed
9 them by foreclosing on more than they say that they
10 fixed.
11 The other argument at the time was that
12 these speculators were flipping properties and
13 charging grossly more than the market value of the
14 properties. Unfortunately, we had to wait for what
15 we were warned were going to be the foreclosures,
16 and the foreclosures are happening, to determine
17 what the value of the properties is. And one of
18 those condominiums on Hale Terrace, Unit No. 4, just
19 was foreclosed about a month ago, Unit 4.
20 In 1994, Fleet told everybody it was worth
21 $90,000, and the Fed certainly didn't make them fix
22 the problem, because they foreclosed. I think they
23 got $44,000 at the auction. None of the properties
24 in these condominiums that Fleet said were worth
25 $90,000 have gone for anything more than $75,000,
0224
1 despite a booming real estate market, the market in
2 Dorchester is up 60 percent.
3 These properties just didn't lose value,
4 they were grossly overpriced at the time, and the
5 Federal Reserve Bank did not make Fleet fix them,
6 and Fleet did not fix them. And these are low-
7 income, almost overwhelming blank homeowners who
8 were screwed in the process.
9 On this stage I mentioned when Fleet under
10 pressure cut off certain developers, they turned
11 around and they started flipping properties through
12 Shawmut. We had Shawmut foreclosures on these same
13 properties, one on Speedwell Street, in which I
14 asked the woman, "Did you have the downpayment?"
15 "No, I didn't have the downpayment." "How did you
16 get the downpayment?" "Well, this church I didn't
17 belong to, that I never heard of before, gave me
18 part of the downpayment." Who? "Well, did you have
19 the rest of the downpayment?" "No, we didn't have
20 the downpayment."
21 In this particular loan program, a family
22 member is able to give up to $2,000 to the
23 homebuyer. The homebuyer -- the seller gave the
24 homebuyer's sister the $2,000, who then gave it to
25 her.
0225
1 So we have lots of examples -- and we have
2 four examples of this -- of outright fraud going on
3 in these mortgage programs, and nothing has been
4 done about them. Now, this isn't just old news,
5 this continues to happen. And I'll be quick.
6 These are flips that took place in the last
7 year, financed by Fleet Bank: 2 Wyoming Street in
8 Roxbury which was foreclosed on for $103,000. It
9 was flipped a couple of months later for $180,000, a
10 $77,000 profit. There's no work permits listed in
11 the Inspectional Services for any work having been
12 done. 58 Leyland Way in Dorchester was foreclosed
13 for $123,000 by Fleet Bank. It was flipped a couple
14 of months later for $190,000 financed by Fleet Bank.
15 And 11 Vesta Road in Dorchester, which Fleet
16 foreclosed for $80,000, flipped it a couple of
17 months later for $187,000. Now, this one had about
18 $8,000 worth of work done. So, in other words, a
19 quick $100,000 profit.
20 I'll finish very quickly. But we also
21 discovered more irregularities. We have discovered
22 a series of non-owner-occupied investors using Fleet
23 loans -- ironically by NATCA; I informed Bruce of
24 this -- all of which we would not have noticed,
25 because they looked pretty normal, but they're all
0226
1 being foreclosed by Fleet.
2 Before you approve of the merger, which
3 you're going to do anyway, find out what is going on
4 in these programs. We had a woman speak eloquently
5 earlier about getting a mortgage through ACORN, and
6 how she has stability and how her kids are doing
7 well. That's wonderful. This is the other side of
8 the equation.
9 This isn't old news. This continues to
10 happen, as we speak, and the Federal Reserve Board
11 has not addressed it. The blood, the financial
12 blood of low-income homeowners is on the hands of
13 these speculators who prey on them. It's also on
14 the hands of the Fleet executives who finance them.
15 And unfortunately, it's increasingly on the hands of
16 the Federal Reserve Board who refuses to make the
17 banks accountable. (Applause)
18 PRESIDING OFFICER SMITH: Thank you very
19 much for coming. We're going to take our lunch
20 break now, and we'll reconvene in 30 minutes.
21 (Whereupon, at 2:00 p.m. the hearing
22 was adjourned for luncheon recess)
23
24
25
0227
1 AFTERNOON SESSION
2 HEARING OFFICER SMITH: We'll go ahead and
3 start. On our next panel, the witnesses have four
4 minutes each, and we truly would appreciate it if
5 you would keep an eye on the timekeeper and get the
6 signal for the one minute remaining, and when your
7 time's up, please close.
8 So we'll start with Ms. Aranjo.
9 MS. ARANJO: Good afternoon. My name is
10 Carol Aranjo, and I am the CEO of D.E. Wells Federal
11 Credit Union in Springfield, Massachusetts, and also
12 a member of the African-American Executive
13 Leadership Council of Springfield, Massachusetts.
14 The African-American community of western
15 Massachusetts has not benefited from any of the bank
16 mergers or new banks entries into the State of
17 Massachusetts. We often say that people in Boston
18 think the state ends at 128.
19 We have seen the press releases, and we
20 have also been part of the bank community group that
21 started about five years ago, and we have not seen
22 any of the dollar amounts that the banks have
23 pledged to be lent in the low- and moderate-income
24 communities drift into Springfield, Massachusetts.
25 Very little dollars are in there for the business
0228
1 community.
2 The banks do lend to the nonprofits. They
3 do give charitable giving. But as every civilized
4 individual knows, it is the business community that
5 drives the community's progress.
6 The African-American business community has
7 been starved for capital and loans from the
8 beginning of time, since slavery. Our community
9 seems to be the fertile ground for other ethnic
10 groups to come in and get their economic starts.
11 Banks loaned to everyone to come into the
12 African-American community to start businesses
13 except the African-Americans. This is outrageous.
14 I am here to say that people who have
15 mortgages also need jobs with which to pay the
16 mortgages. If they are not able to create jobs
17 within their community, if they are not able to
18 establish a credible business community, if they are
19 not able to provide for the needs of their citizens,
20 then that community becomes a ghetto, it becomes a
21 starved plantation.
22 The banks of America treat the
23 African-American community as a plantation. They
24 are the owners. They are the wealth of the
25 community. They control it. They choose an
0229
1 overseer. When I use the word "overseer," I'm not
2 talking about Uncle Tom. Those are different. I am
3 talking about someone that the bank will determine,
4 "We will allow you to become successful. We will
5 loan to you, but only to you." It is a method of
6 pitting members of the community against one
7 another.
8 This is stock and trade of the American way
9 in the African-American community. For the
10 government, for entities of the government to
11 continue to allow it is to take part in it. Racism,
12 the stigma of what happens in our community, will
13 not change until the government takes responsibility
14 for what it sees happening and its part in it.
15 Banks must be able to put these dollars that they're
16 talking about into community controlled
17 organizations.
18 We are recommending that the banks, if they
19 are committing $14 billion, that these dollars not
20 stay within the banks to be given out piecemeal, but
21 to be placed into community loan funds, community
22 credit unions, community CDCs that have loan pools.
23 The money should be placed within them over a
24 five-year period and allow them to loan to the
25 businesses in the community so that they can develop
0230
1 their community.
2 Communities cannot be developed without
3 real capital, and real capital cannot be used in the
4 community if it is given to people outside of the
5 community to come in, build on their wealth and take
6 the wealth from the community. So we recommend that
7 unless the banks are willing to put these dollars
8 into the hands of community lenders and allow them
9 to loan, then they should not be allowed to merge.
10 HEARING OFFICER SMITH: Thank you very
11 much.
12 Mr. Draisen.
13 MR. DRAISEN: Thank you very much. It's a
14 little easier for me standing for some reason. I'm
15 not quite sure why.
16 My name is Marc Draisen, and I'm president
17 and CEO of the Massachusetts Association of
18 Community Development Corporations.
19 Just for purposes of explaining a little
20 bit more about who I am and what I've done, I've
21 worked in the community development field for the
22 last 18 years, and I have also served for four years
23 as a member of the Massachusetts House of
24 Representatives, representing Boston and Brookline.
25 We represent the 68 community development
0231
1 corporations of Massachusetts. Banks play critical
2 roles in the work of CDCs. They provide financing
3 for the construction of affordable housing, capital
4 for loan pools that fund small businesses or home
5 improvements, direct credit to entrepreneurs and
6 home buyers, basic banking services to consumers and
7 critical grant support to a host of CDC efforts.
8 In March, we began to assess the impact of
9 the proposed merger of Fleet and BankBoston. We
10 looked at the various factors to assess whether this
11 merger would keep the promise that the leaders of
12 the banks had indicated of one plus one equaling
13 greater than two.
14 We examined Fleet and BankBoston's past
15 records of serving the community reinvestment needs
16 of low- and moderate-income communities after
17 previous mergers. We asked the banks to develop a
18 comprehensive, detailed and publicly verifiable
19 series of benefits to the communities we serve, and
20 we asked them to formalize these commitments through
21 signed agreements.
22 Unfortunately, to date, the banks have
23 failed to negotiate a CRA agreement with any
24 legitimate community organization or elected
25 official. In fact, they have flatly said they would
0232
1 not do so.
2 Furthermore, they have failed to provide
3 any detailed commitments either by state or by
4 program area in such a way that we can determine
5 whether the convenience and needs of low- and
6 moderate-income people are being served.
7 Please allow me to be clear. We have
8 worked for years with both of these institutions.
9 We know them well. We respect their staffs. Each
10 one of them has good programs and some programs that
11 could be improved.
12 However, we are also aware, I might note,
13 of the value of having a financial institution
14 headquartered in New England, although I would note
15 that no one knows who the next merger will be headed
16 by, and that remaining in New England could not last
17 for long.
18 Nonetheless, despite our relationships with
19 these two banks, we are not able at this time to
20 lend our support to this merger. We do not take
21 this action lightly. MACDC has never opposed a
22 merger in the five years that I've been president
23 and CEO.
24 But there are three reasons why we take
25 that position today: First, the failure to
0233
1 negotiate an agreement; second, we remain
2 unconvinced that the regionwide commitment as
3 promised by the bank truly meets the tests of one
4 plus one equals two; and finally, and perhaps the
5 most importantly, because the bank's statement lacks
6 specifics. Gross numbers in broad categories across
7 six states are not good enough.
8 We were very precise in our requests, and
9 we hope the bank will be precise as well. Yet in a
10 host of areas -- soft second affordable home
11 mortgages; rental housing production through the
12 Mass. Housing Partnership Fund; membership in the
13 Federal Home Loan Bank; basic banking, checking, and
14 savings accounts for unbanked households; targets
15 for small business lending -- we have only heard,
16 "We are still studying your proposal."
17 Therefore, without those specifics, we
18 cannot be supportive today. The Fed, however, does
19 have the ability to turn this around. You clearly
20 have the authority to establish conditions over any
21 approval of this merger under your regulations. We
22 know you tend not to do this, but we hope that you
23 will do so at this time.
24 We hope that you will require Fleet and
25 BankBoston to develop a detailed and publicly
0234
1 verifiable CRA plan negotiated with community
2 organizations and elected officials. We hope you
3 will extend the public comment period for at least
4 two weeks after such a plan is developed and release
5 to the public and take into account the public's
6 reaction to the plan in making any decision to
7 approve or deny the merger. And, finally, we hope
8 that you will incorporate these commitments into any
9 approval that the Federal Reserve might issue.
10 In the written testimony that we have
11 handed in, we have detailed -- and I might say in
12 great detail -- the five reasons why we believe that
13 in the case of this merger, there are unprecedented
14 conditions why you should establish these
15 conditions, even though you may not have established
16 CRA conditions in the past.
17 We hope you will take these recommendations
18 seriously, and please do what you can to make sure
19 that Fleet and BankBoston's commitments going
20 forward in fact are equal to or greater than the
21 activities of the two banks in the past.
22 Thank you for your attention.
23 HEARING OFFICER SMITH: Thank you very
24 much.
25 MS. DuBOIS: My name is Jeanne DuBois. I'm
0235
1 the director of the Dorchester Bay Economic
2 Development Corporation in Upham's Corner, North
3 Dorchester, and East Roxbury. We're a 20-year-old
4 CDA, one of the larger ones in Boston. And we have
5 three branches in Upham's Corner -- Fleet,
6 BankBoston and Citizens -- all within about 50 yards
7 of each other.
8 I think we would be considered one of what
9 BankBoston and Fleet call their neighborhood
10 development partners. So there are many positives
11 over the years that we have experienced with them,
12 and we have some concerns.
13 They have supported our Small Business
14 Microloan Program. We have our own in-house loan
15 program right in Upham's Corner. We work with 400
16 entrepreneurs/microlenders right in the
17 neighborhood. We have made over half a million
18 dollars of our own direct loans to small start-ups
19 and small businesses. They have invested in over
20 500 units of rental housing through Mass. Housing
21 Investment Corp.
22 They have supported our home improvement
23 loan program to unbankable homeowners. We have many
24 people living in -- 80 percent of the housing stock
25 is owner occupied in North Dorchester, so our home
0236
1 improvement lending is important.
2 We have many deals in the works.
3 BankBoston and we are working on a manufacturing
4 plant to go into Savin Hill Industrial Park that
5 will create 70 jobs. We have had gap financing that
6 we have done with Little Brazil Restaurant in
7 Allston-Brighton. Through our community business
8 network, we were able to complete a deal. There is
9 an elevator company now. We are starting to do
10 bigger and bigger deals where we are packaging them,
11 and the banks can make loans as these smaller
12 entrepreneurs graduate.
13 We have also worked positively with the CDC
14 divisions of both BankBoston and Fleet. People are
15 on our boards and committees. So these are all the
16 positives I wanted to give you as a background while
17 I raise some concerns so you know this is not just
18 going one way.
19 Our anchor supermarket in Upham's Corner is
20 called America's Food Basket. I think many people
21 have heard of it. We have 16,000 shoppers a week.
22 They have 200 workers in the market. It pays
23 $36,000 a week in local salaries. This has been a
24 Fleet loan for many years with a $280,000 City
25 guarantee behind it.
0237
1 When Mr. Medina, the owner, expanded his
2 very successful market to Hyde Park, he got into
3 some management problems -- often businesses will
4 have these kind of problems when they grow -- and
5 had some losses in his first year. Fleet called the
6 loan.
7 We wound up, with the help of Fleet CDC
8 staff, getting some extensions. But it's an example
9 where now we're working with U.S. Trust and the CDC
10 Tax Credit Collaborative to try to cover this loan.
11 It should never have happened. This is our
12 anchor market. This is our jewel in the crown.
13 This is what is turning the Upham's Corner business
14 district around. It is one of our key businesses,
15 and we think that the relationship banking should
16 have been more operative in this case. We think
17 BankBoston has acted more like a partner, and we
18 hope that that culture will prevail.
19 The second business is Kasmeric Elevator.
20 This is a Caucasian man who had been 20 years in the
21 elevator business, went out on his own, and Fleet
22 did a $30,000 line of credit and term loan with him.
23 And again, he needed $70,000 to meet the kind of
24 contracts that he was hoping for, and they were not
25 able to do it. We had to take it to BankBoston, who
0238
1 successfully made the loan, and his business is
2 growing.
3 We are finding a lot of our small
4 entrepreneurs don't want to go to Fleet. There is a
5 real problem here. There is a culture problem, an
6 attitude problem. Our Board also, last night, said
7 there is a customer service problem in our local
8 branch -- too few staff, long lines, and little
9 participation in local business activities.
10 The attitude is important. The community
11 banking and relationship banking is important. I've
12 said this to other friends in other divisions of
13 Fleet. We need some specific commitments, and there
14 are some specific statements in the MACDC position
15 paper about loan size and loan volume and the size
16 of businesses. We would like those specifics
17 incorporated. We are concerned that it won't happen
18 otherwise.
19 HEARING OFFICER SMITH: Mr. Morehouse.
20 MR. MOREHOUSE: Thank you. Good afternoon.
21 Thank you for the opportunity to testify at this
22 hearing.
23 My name is Andrew Morehouse. I'm the
24 executive director of the Greater Holyoke Community
25 Development Corporation and the chair of the
0239
1 Community Reinvestment Committee of the
2 Massachusetts Association of CDCs.
3 By helping the constituency that I serve in
4 greater Holyoke specifically, we are able to build
5 the incomes, assets and human capital. And through
6 that, in my role as a member and the chair of the CR
7 committee, other CDCs are able to do the same in
8 their respective communities.
9 In turn, these individuals, low-income and
10 minority individuals, generate income demand for
11 goods, services, and, yes, even financial services.
12 However, community development organizations, the
13 banking community, and public officials have learned
14 that financial services must be adapted to these
15 underserved communities and markets.
16 Only by investing in innovative financial
17 products and services can economic activity be
18 stimulated, generating profitable opportunities for
19 business lending, home mortgages, and community
20 development projects. Yet it takes all three of
21 these institutions working together to revitalize
22 our nation's underserved communities.
23 In Massachusetts, Fleet Bank and BankBoston
24 are major partners in innovative financing. Past
25 commitments and contributions of Fleet and
0240
1 BankBoston are critical to the success of regional
2 intermediaries of community development, to
3 community organizations and to state programs like
4 the Massachusetts Housing Investment Corporation and
5 the Massachusetts Housing Partnership.
6 Small community banks generally just do not
7 have the assets and economies of scale to be able to
8 afford innovative financial products and the volume
9 of lending that Fleet and BankBoston have the
10 capacity to offer as a result of their respective
11 mergers with smaller banks.
12 I would like to share with you, however, a
13 different picture, one that is quite disturbing. As
14 both banks have merged with other banks over the
15 past decade, amassing greater financial assets and
16 profits for shareholder, their lending overall to
17 minorities and low-income census tracts has fallen
18 precipitously. HMDA data show that in the
19 Springfield MSA, the percentage decline in mortgage
20 lending is even greater than that of the
21 Commonwealth.
22 Focusing on Fleet and Shawmut lending
23 before and after the merger, from 1994 to 1998,
24 loans to low- and moderate-income borrowers dropped
25 83 percent; to Latino borrowers, 90 percent; and to
0241
1 black borrowers, 96 percent. Total lending for the
2 same period dropped 71 percent.
3 These figures represent a significant
4 retreat from underserved communities in particular
5 and home mortgages in general. It also raises the
6 specter that BankBoston's far better track record of
7 home mortgage lending will cease to exist after the
8 merger.
9 Further declines of the proposed banks'
10 combined home mortgage lending, especially to low-
11 income and minority individuals and census tracts,
12 will seriously impair the revitalization efforts of
13 these communities. The proposed divestitures and
14 likely branch closings will certainly be cited as a
15 justification for further reductions in home
16 mortgage lending.
17 The public must have guarantees that the
18 proposed bank will reserve this trend in home
19 mortgage lending to underserved communities. In
20 other words, the public should be assured that the
21 proposed FleetBank will uphold its commitment to one
22 plus one is greater than two in these communities.
23 If fact, this should hold true in all of western
24 Massachusetts, where no divestitures are reportedly
25 going to take place.
0242
1 I'm here to request that if the merger is
2 approved -- and it seems likely -- it be contingent
3 on the two banks negotiating in good faith a
4 detailed and measurable community reinvestment plan
5 with community organizations and elected officials.
6 As publicly insured institutions, these
7 banks have an obligation to serve the communities
8 whose savings are being entrusted in them. This is
9 nowhere more crucial than in low-income and minority
10 communities that are traditionally underserved.
11 Without a negotiated community reinvestment
12 plan, there is every reason to believe that their
13 home mortgage lending will continue to spiral
14 downward. Moreover, there is no guarantee that the
15 banks will even sustain, much less increase, their
16 current commitments to affordable rental housing,
17 basic banking services, and accessible branches and
18 ATM sites.
19 Community organizations and public
20 officials from across the Commonwealth have
21 painstakingly reached out to each other to debate
22 the impact of the proposed merger on community
23 reinvestment in underserved communities. Coalitions
24 representing diverse constituencies have come
25 together to formulate a realistic and measurable
0243
1 plan that the banks have steadfastly refused to
2 negotiate in good faith.
3 I respectfully call upon the Federal
4 Reserve Bank to break the impasse by requiring the
5 banks to negotiate a community reinvestment plan,
6 plain and simple. Moreover, I urge the Federal
7 Reserve to extend the comment period after a
8 negotiated plan can be reached so that all affected
9 parties have an opportunity to respond to it.
10 In my humble opinion, I think we should
11 expect no less from the Federal Reserve.
12 Thank you again for inviting me to testify
13 before you.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 Mr. Westgate.
17 MR. WESTGATE: My name is Michael Westgate
18 from Chelsea Neighborhood Housing Services. We've
19 been around for 20 years. We do about 1.2 million a
20 year in rehab of buildings in Chelsea for low- and
21 moderate-income people, almost all of it -- I would
22 say all of it in fact in partnership with banks.
23 And the resulting benefits to the community include
24 about a half million dollars in wages paid to
25 Chelsea residents.
0244
1 About two years ago a Cambodian family came
2 into my office. They had recently bought a house
3 for $150,000. This was a duplex. They had a
4 $127,000 mortgage from Fleet. The bankers on my
5 Loan Committee said that the building was only worth
6 $120,000, and it needed $20,000 worth of work. It
7 needed a new roof, it had no second means of egress,
8 the furnace was completely busted.
9 It was a Cambodian family, as I mentioned.
10 They were unwilling to stick their necks out. We
11 wanted to go to bat for them, but they came from a
12 culture where if you stick your neck out too far, it
13 was literally blown off. And there were a lot of
14 people that are not willing to step forward.
15 I wanted to do something more than
16 anecdotal, because we did have some other anecdotes
17 like that. When we started with a 120 percent
18 loan-to-value ratio before they even came in for a
19 home improvement loan, there wasn't much we could do
20 for them.
21 Did I ask NCRC, the National Coalition --
22 the National Community Reinvestment Coalition, and
23 they did a study of all of the loans made by all of
24 the banks in Chelsea during the period of comment on
25 Fleet's application for review. And while the
0245
1 numbers were high, in gross numbers, numbers when
2 you picked them apart were rather startling, that if
3 you took as a common denominator the average price
4 in Chelsea, Asian applicants had paid 120 percent --
5 excuse me -- their mortgages were 120 percent of
6 average value, Hispanics were 130 percent, and
7 African-Americans were 140 percent.
8 I presented that to the OCC a year ago. It
9 took months to get an acknowledgment. I gave it to
10 the head of their CRA office when I was down in
11 Washington in March of this year.
12 I know OCC is not FRB, but just to explain
13 the difficulty that we see in having regulators take
14 responsibility for regulating, it was particularly
15 insulting to see Fleet get an outstanding review
16 from Massachusetts when we -- and I know people in
17 Dorchester and elsewhere -- had similar experiences.
18 What we're seeing today is a violent
19 escalation of prices. Where during the downtrend
20 prices in Chelsea went down 1 percent a month, they
21 are now going up 1.5 percent, and unfortunately,
22 Fleet is among the leaders in giving excessive
23 loans, and it's the banks that are the determinants
24 of value rather than the buyers.
25 We oppose the merger. We see that there
0246
1 has been irresponsible lending in Chelsea and
2 elsewhere. We see dollar headlines for millions of
3 dollars, but the devil is in the details.
4 We have seen millions of dollars languish
5 at Mass. Housing Partnership. We were given loans
6 by Mass. Housing Partnership. The terms were too
7 onerous for us to use, so we went elsewhere.
8 The solution, I believe, is enforceable
9 agreements with regional groups that take full
10 advantage of our knowledge of the communities, the
11 regulators' ability to regulate, and the banks
12 stepping forward with programs that will work.
13 CRA today is being gutted in Congress, and
14 I think it's incumbent on the people in this room to
15 come up with a new tripartite agreement that would
16 apply to this or any other major merger where the
17 goals are spelled out, we can all agree to them,
18 they're transparent, they're enforceable.
19 And I thank you for your attention.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 MS. WORGAFTIK: My name is Susan Worgaftik.
23 I'm chair of the Massachusetts Micro-Enterprise
24 Coalition and director of This Neighborhood Means
25 Business!, a micro-entrepreneurship education and
0247
1 technical assistance program in Dorchester,
2 Massachusetts. I would like to thank the Federal
3 Reserve for this opportunity to present my views.
4 The announcement of the merger of Fleet
5 Bank and BankBoston foreshadows a change of great
6 concern to micro-enterprise training, technical
7 assistance and loan programs.
8 The micro-enterprise programs of the
9 Commonwealth serve entrepreneurs with businesses of
10 five employees or fewer and low and moderate
11 individuals who are in the process of creating their
12 own businesses. Most of these businesses are
13 located in the Commonwealth's inner cities and rural
14 areas. The development of new micro-enterprises has
15 been an important element in the recent economic
16 improvements in urban neighborhoods and rural
17 communities throughout the Commonwealth.
18 In the last decade, we've been able to work
19 very closely with both BankBoston and Fleet Bank to
20 create loan products designed specifically for the
21 smallest of Massachusetts entrepreneurs. In the
22 early days of micro-entrepreneurship, the
23 development of these programs in Massachusetts was
24 very difficult. The large banks did not want to
25 involve themselves in these types of small loans.
0248
1 Competition between both BankBoston and Fleet Bank
2 was very helpful to us in the development of the
3 kinds of loan products we need, and today we have
4 many loan products that are available to our
5 smallest entrepreneurs that were not available to us
6 ten years ago.
7 In addition, the foundation and corporate
8 support that micro-entrepreneurship programs have
9 received from BankBoston and Fleet Bank have been
10 essential to the development of the technical
11 assistance and entrepreneurship education programs
12 that are crucial to making micro-enterprises
13 succeed. Without those programs, we have found that
14 many of our entrepreneurs fail very early in their
15 business life.
16 So, clearly, BankBoston and Fleet Bank
17 believe that the synergy that's created by the
18 merger will be beneficial in the development of
19 their business. We believe that the same should be
20 true for the communities, the businesses, and the
21 individuals which the banks serve. If one plus one
22 equals more than two for the banks, it should also
23 equal that for the businesses and the individuals in
24 our communities.
25 It's my hope that this merger will mean an
0249
1 increase in the number of loans available to micro
2 and small community entrepreneurs in urban and rural
3 communities, and that there will be a significant
4 increase in the technical assistance and education
5 support grants essential for making those loans
6 successful. Anything less is a direct step backward
7 from the commitments that these two banks have made
8 to our communities for micro-entrepreneurs in the
9 past.
10 As a partner in the efforts of the
11 Massachusetts Association for Community Development
12 Corporations, Massachusetts Affordable Housing
13 Alliance, and the Organization for a New Equality, I
14 had hoped that we would be able to have a verifiable
15 agreement with the new Fleet-Boston by now.
16 I had hoped that such an agreement would
17 ensure that the number and availability of funds for
18 loans to micro-entrepreneurs would expand much the
19 same way that the expectations for the new
20 Fleet-Boston would forecast their future. I had
21 hoped that this agreement would recognize the
22 importance of entrepreneurship training and
23 technical assistance to the success of micro loans
24 and that there would be funds available for that
25 purpose. At this time, no such agreement exists.
0250
1 As we move into a new era of banking, it's
2 essential that all aspects of the economy benefit
3 from the progress and the projections that are put
4 forward. At this time, the projections that we
5 have -- that have been presented publicly -- don't
6 mention the needs and the concerns of the
7 micro-entrepreneurs of the Commonwealth.
8 I urge you to recommend that the new
9 Fleet-Boston resume discussions with MACDC, MAHA and
10 ONE to develop a balanced plan for the future which
11 will make this merger a success in everyone's eyes,
12 a merger which benefits all of us.
13 Thank you.
14 HEARING OFFICER SMITH: Thank you.
15 Mr. Young.
16 MR. YOUNG: I'm here representing a rural
17 perspective. Our CDC works in nine towns, 300
18 square miles, about 25,000 people. To personalize
19 it, if my septic system fails, and you drink water
20 in Boston, you get it. North Quabbin Region is the
21 place I'm representing.
22 We have got to be mindful that the CRA,
23 coupled with strong compliance on the part of
24 financial institutions and regulatory agencies,
25 makes stronger communities. Communities of the
0251
1 North Quabbin Region are concerned over the proposed
2 merger, and the concerns thus far raised by the
3 North Quabbin Community Reinvestment Coalition are,
4 first, diminished local autonomy.
5 This has had a profound negative impact on
6 institution involvement in our community, as, for
7 instance, the role of Fleet, formerly known as
8 Shawmut, formerly known to us as Franklin County
9 Trust, formerly known as Orange National Bank, has
10 been diminished to the point that the Orange -- that
11 the Fleet Bank in Orange is jokingly referred to as
12 a manned ATM. But it is not really a joking matter,
13 and regulators should look with a keen eye on the
14 possible outcomes of this merger on rural
15 communities.
16 The second concern is the increased
17 reliance of credit scoring. We understand the needs
18 of the bank to meet the community's credit needs
19 consistent with safe and sound lending practices.
20 Small businesses in our region face difficulties
21 obtaining credit, and they warrant special
22 consideration. The use of credit scoring continues
23 to increase the difficulty.
24 With every merger, more and more of our
25 small and micro-businesses are no longer
0252
1 creditworthy. This diminished creditworthiness
2 comes, in many instances, after decades of hard
3 work, decades of prior credit having been repaid as
4 agreed. Our small and rural and sometimes
5 unconventional businesses fall through the cracks in
6 national and regional credit scoring models.
7 Thirdly, financial institutions need to
8 participate in educational and social service
9 support. Fourthly, banks need to provide portfolio
10 lending in our region, especially for renovation of
11 owner-occupied one- to four-family properties. The
12 portfolio aspect is critical, that they be held and
13 not resold.
14 The merged bank needs to be responsive to
15 community leaders and members of our area. We
16 suggest an advisory Board be made up of members of
17 respective regions to ensure that all community
18 concerns are addressed by the management of the
19 combined bank.
20 A little more than a year ago, our CDC went
21 through this with Family Bank. We raised concerns
22 about local lending authority, loan funds, mortgage
23 outreach, portfolio lending, and in the end we
24 signed an agreement. The agreement provided for
25 various commitments by Family Bank to enhance its
0253
1 community development activities. In the end, I
2 think Family Bank appreciated our concerns. The
3 needs were addressed. Community development banking
4 is good business.
5 Please extend the comment period. Don't
6 approve this merger without a signed agreement,
7 because it's in our mutual interest.
8 HEARING OFFICER SMITH: Thank you very
9 much.
10 Questions from the panel?
11 HEARING OFFICER KWAST: I have a question.
12 Mr. Morehouse, I think touched on this, but
13 I wonder if some of the other panel members might
14 comment on the role of smaller and medium-sized
15 banks in serving the needs of the organizations and
16 needs of your customers.
17 MR. DRAISEN: We've had a lot of
18 discussions internally, Mr. Kwast, among our CDCs
19 about the divestiture issue and the different sized
20 banks. And I think the sense among our CDCs is that
21 there's a role for everyone.
22 Very frequently, we have individual CDCs
23 that have a very close relationship with a local
24 bank that really knows the customers in that
25 community, the entrepreneurs that the CDC is dealing
0254
1 with, and their presence is invaluable. So the loss
2 of those community banks is a severe problem. Or,
3 conversely, the possibility of those community banks
4 picking up a few additional branches would be a very
5 good thing.
6 From another perspective, however, if we
7 have a very large bank that comes into the area,
8 sometimes it has greater overall CDC -- overall CRA
9 capacity, it knows how to work with some of the
10 bigger programs, it has experience from other parts
11 of its portfolio with doing some of the more
12 complicated deals that sometimes involve three
13 government programs and six different funding
14 programs and things like that.
15 I think the summary is that we want to make
16 sure that it's not just one big bank, that gets to
17 deal here. We do want to see more competition. We
18 understand the value of that. We sense that that's
19 going to be the direction that the divestiture goes
20 in. But there's also a very important role for the
21 small or the medium-sized banks, and we work with
22 them very closely, and they should not be shut out.
23 MS. WORGAFTIK: In relationship to
24 micro-entrepreneurs, I would second that. And I
25 would also point out that in some ways, the size of
0255
1 the bank relates to programmatic issues, but the
2 availability of the bank is something that the
3 micro-entrepreneurs need.
4 We often find that we don't have banks
5 staffed well enough to be -- and some of the larger
6 banks -- in terms of their real recognition of the
7 micro-entrepreneurs to really give them the kind of
8 attention that they need. It is kind of -- so I
9 would be looking for the kind of staffing from any
10 sized bank that would really be able to say, "We are
11 serious about the work that is done with the
12 community and just not simply that we have an
13 outpost here."
14 So regardless of whether it is a larger
15 bank or a smaller bank, that question of taking the
16 time to really work through issues of
17 entrepreneurship is extremely important to our
18 members.
19 MR. YOUNG: The smaller banks are critical
20 to our success. For example, the most recent real
21 estate deal we did involved -- we were attempting to
22 purchase a building from Fleet which was a
23 foreclosure. While we were trying to borrow money
24 from Fleet's community development side, it couldn't
25 hold back the asset management or foreclosure side,
0256
1 and they sold the building to Bob Fader.
2 Ultimately, it was a local bank that financed the
3 deal, and we had to renegotiate it with somebody who
4 bought the sold-off paper.
5 So in my region, Fleet's branch is really a
6 nonplayer. Although BankBoston and Fleet have been
7 important supporters to my organization in terms of
8 banking services, they are only going for the
9 highest cut, which is really not our CDC strategy in
10 economic revitalization.
11 MS. ARANJO: In the African-American
12 community -- and as you can see, there are not many
13 of us here testifying -- I run a credit union. I
14 just had a gentleman who has a million dollars worth
15 of orders from J.C. Penney and the U.S. Army. These
16 are not people who won't pay. They needed a credit
17 line of $348,000 for their merchandise to be made.
18 Fleet Bank turned them down even after getting a
19 guaranty from the business association in Washington
20 who guarantees minority loans, and they were still
21 turned down.
22 This happens too often in the
23 African-American community. They will give you
24 loans of all types except those which allow us to
25 develop credible businesses which allow us to
0257
1 develop our community. And I would like to say that
2 it is important to the African-American community
3 that there are local, community-driven banks or
4 financial institutions which take the time to know
5 the community and understand that color is not
6 character.
7 MR. WESTGATE: It's the competition that we
8 all need, both for our own agencies and for the
9 people we serve. Just to illustrate it, we had an
10 unsecured line of credit with a local bank at prime
11 plus 2. Another bank came in, and now we have an
12 unsecured line of $400,000 of prime minus a half.
13 If you have competition, both the
14 homeowners and the businesses and the nonprofits can
15 profit from that. If you have no competition, then
16 we all have to live with some of the stories you've
17 heard today.
18 HEARING OFFICER BROWNE: I have a question
19 for Mr. Westgate.
20 In talking about the high value -- well,
21 high loan-to-value lending in Chelsea, was that
22 unique to Fleet, or did you see that in other
23 institutions as well?
24 MR. WESTGATE: I won't say it is absolutely
25 unique to Fleet, but in the NCRC data, it was the
0258
1 only banking institution that showed up that way.
2 HEARING OFFICER SMITH: Thank you very much
3 for coming this afternoon, and I'm sorry you all had
4 to wait so long, as other panels also are having to
5 do.
6 (Pause)
7 HEARING OFFICER SMITH: Thank you. With
8 this next group, we again have very brief
9 presentations; but what we are also doing is setting
10 a time limit, so that at a certain point, if people
11 haven't made it through, we will have to move them
12 to later in the day in order to not have our other
13 panels running quite so late. So --
14 MS. WEBSTER: What is our time limit?
15 HEARING OFFICER SMITH: One minute.
16 MS. WEBSTER: Good afternoon. My name is
17 Elizabeth Webster. I'm here from Ithaca, New York,
18 which is the true upstate region of New York State.
19 I'm here without statistics or media or
20 T-shirts or a group behind me. I have a story of a
21 phone call from a community development corporation
22 -- to a community development corporation from an
23 economic opportunity corporation.
24 We asked the absurd. We asked Fleet Bank
25 to think as a philanthropist. In fact, they were
0259
1 able to do that at every turn. We need to become
2 self-sufficient in our community so we can continue
3 to serve the 5,000 clients or consumers who we are
4 guiding on their road to self-sufficiency.
5 Fleet Bank came to the table. Then they
6 got on a plane, they came to Tompkins County, they
7 listened to the real people that are the statistics
8 that have been quoted today, the people who need
9 help with their heat bill, the people who need to
10 use a food pantry, people who are learning the
11 skills to save money for their own home.
12 They met what we like to consider reality,
13 and then they went back to their bottom line, and
14 they tried it again and again and again. And the
15 bottom line finally was able to satisfy us and them.
16 And now because of that, we have $1.5 million that
17 will enable an institution to become completely
18 self-sufficient.
19 HEARING OFFICER SMITH: Thank you very
20 much.
21 MS. FLYNN: My name is Denise Flynn. I'm
22 the vice-president of Junior Achievement for
23 Northern New England.
24 For several decades, BankBoston and Fleet
25 have worked together to support our organizations
0260
1 which teaches kids in grades K through 12 about
2 business and how business works.
3 Although BankBoston has been one of our
4 largest supporters, we have also received support
5 from Fleet. Together, the banks have helped JA to
6 grow from serving 5,000 students ten years ago to
7 over 50,000 students this month.
8 We're an organization that serves all kinds
9 of students. In the past few years, we've tried to
10 focus our efforts on programs and schools where
11 students have least access to business people. In
12 Boston alone, we serve more than 6,000 students who
13 were able to meet a business person this year.
14 In addition, volunteers from Fleet and
15 BankBoston have enabled Junior Achievement to extend
16 its reach to areas like Lynn, Lawrence, Lowell,
17 Quincy, Worcester and Springfield. In short, the
18 banks have actively supported volunteers in schools
19 throughout New England.
20 We at Junior Achievement hope that the
21 merger will solidify our presence in New England,
22 and we hope that the combined banks will help us to
23 build a critical mass of volunteers at the new
24 larger bank that will enable us to reach 20 percent
25 of the student population by the year 2005.
0261
1 This may or may not have been possible
2 without the merger, but clearly would have been
3 impossible if a non-New England bank had assumed
4 control of either bank.
5 Thank you.
6 HEARING OFFICER SMITH: Thank you.
7 MS. WHITLOCK: Hello. My name is Linda
8 Whitlock, and I'm speaking as president and CEO of
9 Boys and Girls Clubs of Boston. And I speak on
10 unabashedly in support of the merger.
11 I'm speaking on behalf of nearly 7,000
12 citizens, some of the poorest neighborhoods in
13 Boston and Chelsea, citizens whose voices are absent
14 today because they are children and teens who are
15 doing what children and teens should be doing on a
16 hot day in July. They're at our clubs learning to
17 swim, to surf the Net safely, to cooperate with
18 peers, to confide in a trusted adult, all because of
19 the notable generosity of donors like BankBoston and
20 Fleet Bank. Stellar corporate citizens, these two
21 banks, and BankBoston in particular, are peerless in
22 their charitable giving to inner-city programs like
23 ours.
24 Since 1978 BankBoston has given our
25 organization in excess of $800,000 for program and
0262
1 building needs. Similarly, Fleet has provided us
2 with nearly $300,000. Maintaining the corporate
3 headquarters in Boston will ensure that there is no
4 diminution of civic and philanthropic involvement on
5 the part of the new merged entity.
6 I'm honored to endorse the merger on behalf
7 of our courageous, worthy and very grateful boys and
8 girls.
9 Thank you for letting me speak today.
10 HEARING OFFICER SMITH: Thank you.
11 DR. SMITH: Good afternoon. My name is
12 Jane Smith, and I am a member of the Fleet INCITY
13 Advisory Board. I'm also president and CEO of the
14 National Council of Negro Women, with a membership
15 of over 450,000 women of African descent.
16 Previously, I directed the Atlanta Project at the
17 Carter Presidential Center, which was about
18 neighborhoods and corporations being partners to
19 improve our citizens' lives.
20 I endorse the merger. I endorse the merger
21 because my job has a simple job description, which
22 is to be the watchdog for African-American women in
23 terms of commerce and banking. I have thoroughly
24 enjoyed as a member of the INCITY Board seeing the
25 balance and response to change that Fleet offers as
0263
1 they look in the inner city to see what women need
2 to have wholesome families with or without a partner
3 in the same household.
4 I have appreciated the support systems that
5 have been given to women in terms of training that
6 the banks have offered, guidance by the appropriate
7 kinds of staff being hired, even those who speak
8 other languages, so that the women do not have
9 difficulty in making their way through the services
10 of the particular banks.
11 It is important that BankBoston and Fleet
12 have the opportunity to continue their work and to
13 continue it together. Thank you.
14 HEARING OFFICER SMITH: Thank you.
15 MR. GUZZI: Good afternoon. My name is
16 Paul Guzzi, and I'm president and CEO of the Greater
17 Boston Chamber of Commerce.
18 Boston is a vibrant, world-class city with
19 important cultural, education, and medical
20 institutions, as well as an innovative economy. A
21 great city like Boston should have a world-class
22 bank located within its borders to meet our unique
23 regional needs. This merger ensures that result.
24 But we should also judge this merger by whether
25 Fleet-Boston can meet very high standards in terms
0264
1 of customer service, community outreach, and
2 investment in corporate citizenship.
3 I am convinced that Fleet-Boston is
4 committed to maintain high performance standards in
5 each of these areas; and for those reasons, we
6 encourage you to support this merger.
7 MR. MEADE: Good afternoon. Thank you for
8 this opportunity to testify.
9 My name is Peter Meade. I come to you as
10 an individual who is a customer of Fleet Bank and as
11 an individual who ran an organization, a regional
12 business organization, that had been supported by a
13 line of credit from Fleet Bank.
14 I want to say to you that the leadership of
15 both banks and their contribution to this community
16 range from laudable to singularly extraordinary
17 kinds of contributions that many times businesses
18 don't make. They have played an important part as
19 the pillars of this community.
20 I also believe that if this merger had not
21 taken place, the man you talk to at the bank would
22 be answering the phone in Atlanta or North Carolina,
23 in New York or San Francisco. And so I strongly
24 urge you to approve this merger.
25 HEARING OFFICER SMITH: Thank you very
0265
1 much.
2 MR. MACDONALD: My name is Alan Macdonald,
3 and I'm the executive director of the Massachusetts
4 Business Roundtable, which is a group of 75
5 executives from leading institutions in the state,
6 leading by nature of their size and activity in the
7 economy. We really exist to help those large
8 institutions be involved in channeling their public
9 involvement for the improvement of the quality of
10 life in Massachusetts, and we have existed for 20
11 years in doing that kind of service.
12 We work very closely with headquartered
13 businesses in Massachusetts, and we find that the
14 effectiveness of the public involvement really is
15 helped tremendously by the headquarters in
16 Massachusetts, and by the fact that the leading
17 executives are here, part of the community, part of
18 the life, and that they are able to see the needs of
19 the community in helping the institutions to support
20 those needs.
21 As a practical matter, what is happening in
22 the banking industry as we see it, around the world
23 in fact, is that it takes some financial size to
24 remain independent. And to be headquartered in
25 Massachusetts, we want to have a bank that has the
0266
1 financial size to provide the very resources that we
2 note today that we worry about losing and not having
3 administered in a proper way.
4 We think that the kinds of problems we hear
5 today, whether they're CRA or otherwise directed,
6 are the kinds that we have public officials to worry
7 about regardless of size. And we really favor this
8 combination of Fleet Financial Group and BankBoston
9 so that we will have the resources in our community
10 to be placed in the very spots that we worry about
11 losing those resources. So we support, and hope you
12 will, the combination.
13 Thank you very much.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 MR. JUSTIS: My name is Robert Justis. I'm
17 here to speak in support of the merger. I prepared
18 15 minutes worth of comments, and I have submitted
19 them for the record. I can't speak that fast, so
20 I'll just excerpt a couple of the comments.
21 I'm presently the economic development
22 director for the Central Vermont Public Service
23 Corporation and also a member of the Fleet INCITY
24 Advisory Board.
25 Immediately prior to my present job, I was
0267
1 for over four years the CEO of a nonprofit community
2 development corporation -- Northern Community
3 Investment Corporation -- that serves the Northeast
4 Kingdom and the North Country of New Hampshire, six
5 counties having as many square miles as the State of
6 Connecticut and some of the highest concentrations
7 of poverty in northern New England.
8 It was at NCIC that I first came to know
9 well and develop great respect for Fleet Financial
10 Group. During the time I spent with NCIC between
11 1990 and 1994, Fleet was an active partner with us
12 in our housing development and business lending
13 activities.
14 You will recall that the early '90s were
15 especially difficult economic times in northern New
16 England. Both Fleet and NCIC had our share of
17 troubled clients and projects together. Throughout
18 this difficult period, Fleet was diligent and fair
19 in working with NCIC, and both organizations
20 survived intact and continued to do good work.
21 I sincerely hope that you will approve the
22 merger in the interests of the communities of our
23 service area.
24 Thank you very much for the opportunity to
25 speak.
0268
1 HEARING OFFICER SMITH: Thank you very
2 much, and we appreciate having your longer statement
3 for the record.
4 MR. BRETT: Former Congressman Mo Udall
5 once said, "Everything has been said, but not by
6 everyone," so I'll be extremely brief here.
7 My name is Jim Brett, and I'm the president
8 and CEO of the New England Council. New England
9 Council is the oldest regional business organization
10 in the United States. It is made up of large and
11 small companies, academic and health institutions,
12 nonprofit and for-profit; and our purpose is to
13 promote economic growth and high quality of life in
14 New England.
15 If we were giving out a gold medal this
16 year, it would go to Fleet Bank for the work that
17 they have done on behalf the New England economy
18 promoting economic vitality.
19 I am here in support of a combination of
20 Fleet Financial and BankBoston. The Chamber of
21 Commerce here in Boston did a study last year, and
22 they talked about one of the leading industries here
23 in greater Boston area, financial services, in
24 particular the banking industry.
25 With this new combination of two major
0269
1 banks, it will be a major player here in the city
2 and the state and the region. It has already been
3 alluded to about this could have been a worst-case
4 scenario of an outside bank coming in and bringing
5 about a merger. This merge makes sense for the
6 city, it makes sense for the region. So I think
7 there are tremendous benefits here.
8 They have been an outstanding neighbor, a
9 citizen. You have heard the testimony this morning
10 about all of the volunteer hours that they give. I
11 think this is good news for our region. I look
12 forward to the merger being enacted.
13 Thank you very much for your attention.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 MR. MACHTLEY: Hello. My name is Ron
17 Machtley. I've been a lifelong resident of Rhode
18 Island. During my adult years, I've been a naval
19 officer, a lawyer, for six years a United States
20 Congressman, and now I'm president of Bryant College
21 in Smithfield, Rhode Island.
22 From these various vantage points I have
23 observed both BankBoston and Fleet Financial. They
24 have been wonderful corporate citizens of our state,
25 taking care of our citizens.
0270
1 I believe, as a college which has
2 instituted the first financial service program in
3 New England, that banking is going to change
4 dramatically just as the telecommunications industry
5 has. If we do not have a large regional bank, we
6 will be taken over by an out-of-region bank or a
7 bank out of this country. It is absolutely
8 important to our region that we have CEOs who are
9 New Englanders, who are here to take care of us.
10 There are those who testified today that
11 there is need for capital to low, medium, moderate,
12 and minority populations. I agree with that. But
13 where Fleet has excelled and BankBoston has excelled
14 is not just in capital, but ensuring that the people
15 in our state and our region have education.
16 They have provided a Women's Resource
17 Summit in which over 600 women came to Bryant
18 College at no cost to learn the fundamentals of
19 business entrepreneurship, financial resource and
20 management. They've provided capital for our joint
21 venture Bryant School of Design. BankBoston funded
22 our World Trade Day where 600 businesses learned.
23 This is an organization, both at BankBoston
24 and Fleet Financial, which is committed to our
25 region. And for that reason, I strongly support the
0271
1 merger and hope that you will support it as well.
2 Thank you very much.
3 HEARING OFFICER SMITH: Thank you very
4 much.
5 MR. SOTO: Good afternoon. My name is
6 Felix Soto. I'm the owner of J&M Auto Sales located
7 at 235 Hyde Park Avenue in Jamaica Plain.
8 I am in favor of this merger because three
9 years ago I came to Fleet Bank from another banking
10 institution, and Fleet really took a serious look at
11 my situation and where I wanted to go.
12 Ever since, I have been growing. Fleet has
13 supported me 100 percent. They have given me
14 several lines of credit and loans, and also they
15 have approved loans to buy property where my
16 business is, which other banking institutions didn't
17 do. And also they have given me a piece of the
18 American dream, to own my own house, and I'm very
19 thankful for that.
20 I thank Ron Walker that was the person who
21 really introduced me to the Fleet CDC, Grant
22 Patterson and Mark Hartunian, who helped me in every
23 way possible. I really thank you, Fleet Bank, and I
24 am in favor of the merger.
25 Thank you very much.
0272
1 HEARING OFFICER SMITH: Thank you very
2 much.
3 MR. TORRES: My name is Felix Torres. I'm
4 the executive director of Manchester Neighborhood
5 Housing Services in New Hampshire. We're the
6 largest community-based, nonprofit housing developer
7 in the State of New Hampshire. I'm here to support
8 the merger, and that should come as no surprise.
9 We provide affordable housing. We do home
10 ownership lending and counseling, and we do
11 community advocacy. Fleet and BankBoston have been
12 partners of ours from the very beginning, and I'm
13 not here to dwell on the past. But it is important
14 to say that their commitment has been total, it has
15 been innovative, it has been creative, and it has
16 been substantial.
17 We believe the merger is important, one,
18 because we need a large bank in New England. I
19 don't want to call Columbus. I don't want to go to
20 New York. I don't want to go to Charlotte. Boston
21 is about as far as I want to travel to talk to a
22 banker.
23 Second, we think that the sum of the whole
24 ought to be greater than the individual parts. Our
25 history, we have gone through mergers before with
0273
1 both BankBoston and Fleet. In each case in
2 Manchester, they have put more resources on the
3 street to help low-income families and low-income
4 neighborhoods.
5 Finally, we have a long relationship with
6 Fleet and BankBoston. We know how to work with
7 them, and we look forward to continuing to work with
8 them as a unified entity.
9 HEARING OFFICER SMITH: Thank you very
10 much.
11 MR. JOHNSON: Good afternoon. My name is
12 Douglas Johnson. I'm president of Heritage
13 Consulting Group, a Providence-based firm, a
14 management consulting firm that has the privilege
15 over the last ten years of working with Fleet
16 Financial Group.
17 We were first engaged by Fleet back in 1989
18 with the opportunity to support the development of
19 its initial Community Reinvestment Act statement.
20 Since that time, we have grown as a firm, as a
21 little, small business in Rhode Island, to the point
22 where now we have a wide variety of clients that are
23 based both here in New England and elsewhere in the
24 United States.
25 We're here today to support this merger
0274
1 because we believe it provides an opportunity for
2 small businesses such as ours to interact and to
3 obtain important business from major corporations
4 such as Fleet, BankBoston.
5 It has been a great relationship for our
6 firm. We have, over the years, managed to grow our
7 business to the point where we believe that if other
8 businesses follow a similar pattern, they too will
9 benefit enormously from this proposed merger.
10 We thank you for this opportunity and
11 certainly endorse what is being proposed before you.
12 Thank you.
13 HEARING OFFICER SMITH: Thank you very
14 much.
15 MR. LANGLEY: My name is Dennis Langley,
16 the executive director for the Urban League of Rhode
17 Island.
18 The global society means more than
19 geographical location to us. It requires
20 organizations and businesses to position themselves
21 for survival. The mega-society sees distance as no
22 obstacle in transacting businesses; therefore,
23 innovative thinking and concepts must be developed.
24 Fleet Bank, in conjunction with Boston,
25 recognizes the need to readjust and to position
0275
1 itself for survival within our society. We need
2 that within the Northeast Region. Failing to do
3 that, someone else will take the task and move on
4 with the system, which obviously would leave it to
5 be noncompliant to many of the concerns you have
6 heard earlier on. We are, therefore, in support of
7 this merger.
8 Two concerns: one, that they continue
9 their CRA policies; two, we look at the downsizing
10 and the employment of those individuals that will be
11 laid off. We are concerned with that, because if
12 they do that, that will be to the demise of our
13 society.
14 Finally, please, Fleet needs us. We need
15 Fleet and BankBoston. We wholeheartedly support
16 this venture. The merger is important. It is
17 productive to our community. Please don't let
18 another agency or another business come in to take
19 over. Grant them the opportunity to do what is
20 prudent for us in this community.
21 Thank you.
22 HEARING OFFICER SMITH: Thank you very
23 much.
24 MS. SATTERWHITE: Good afternoon. My name
25 is Cherylyn Satterwhite. I'm the executive director
0276
1 of the Dunbar Community Center in Springfield,
2 Mass., and I am speaking I guess for western
3 Massachusetts, I do believe.
4 I have a stack of cards, and I'm trying to
5 figure out how to summarize these cards for you.
6 I thought I might speak to Fleet in an
7 instance or perspective that has not been spoken to,
8 since I've been here at least, and that is Fleet's
9 commitment to youth development.
10 Fleet and BankBoston I've had very
11 favorable experiences with over the past several
12 years. Like most banks, they maintain seats on our
13 board of directors, contributing annually to
14 operating expenses, but show some flexibility and
15 are able to respond additionally in times of
16 expenses, Fleet keeping children warm when boilers
17 burn in the middle of the winter.
18 Fleet, through Agnes Scanlon, helped to
19 move the agency's technology to the 21st century,
20 assuring that inner-city kids will have equal
21 opportunity and access to computer literacy and to
22 the wonderful world of the Web.
23 The Center has embarked on a $4.5 million
24 capital campaign. Fleet again has taken a major
25 role in leadership of developing young children.
0277
1 The campaign is chaired by the Western Mass.
2 regional president, Richard Bilowitz. The New
3 Building Steering Committee is co-chaired by a Fleet
4 officer, Neal McBride, who has shared resources for
5 many years to the Center.
6 Through the efforts of Glenn Davis and
7 Martin Guiten, the Fleet CDC has extended a
8 significant line of credit to help us move forward
9 toward developing young people and producing
10 productive citizens.
11 So we speak in favor of this merger and
12 Fleet's demonstration of support for developing
13 youth. Thank you.
14 MR. CAMPBELL: Good afternoon. My name is
15 Jeff Campbell. I'm president and CEO of Cuts and
16 Creations, Inc. We were founded in 1994. We're a
17 unisex hair salon, barber shop. We have one store
18 in the Westgate Mall in Brockton. That's our
19 headquarters store. We have a brother store in the
20 Mystic Mall in Chelsea called Just Cuts.
21 Cuts and Creations is a growing company.
22 We have about 37 employees now. We just recently
23 signed a ten-year lease with the Arsenal Mall in
24 Watertown Massachusetts for an expansion store
25 called Cuts and Creation II.
0278
1 We would like to thank Fleet and the CDC
2 and also the SBA for the opportunity for us to grow.
3 We both employ about 20 to 25 more employees in the
4 community. And I signed a lease, I didn't have the
5 funds, but we went to Fleet, and they granted us the
6 funds, and they have been working with me strong.
7 Mark Hartunian, Grant Patterson, and a
8 mixture of Fleet CDC and the SBA have been good to
9 Cuts and Creations, Inc. And I think it's a help
10 and a good help to the community, and the merger
11 would help the community also.
12 I'd also like to say thanks, from Jeff
13 Campbell who is here from the company, to Fleet, and
14 I hope you guys grant the merger.
15 Thank you.
16 HEARING OFFICER SMITH: Thank you very
17 much.
18 MR. SCHWARTZ: Good afternoon. My name is
19 Eric Schwartz. I'm the cofounder and president of
20 Citizens Schools.
21 Our mission at Citizens Schools is to help
22 educate children and strengthen the community
23 through a network of ten after-school and summer
24 school programs spread across the City of Boston.
25 We have had a chance to work closely with both Fleet
0279
1 Bank and, particularly in the last year, BankBoston
2 in developing really a network of adults who can get
3 involved in kids' lives.
4 I have here the course catalogues
5 representing 124 different courses are being offered
6 to 9-to-14-year-old children this summer, all led by
7 volunteers in this community, ranging from
8 seamstresses who work out of their home, to small
9 funeral home operators in Roslindale, to employees
10 of large institutions like BankBoston and Fidelity.
11 I guess the message that I would leave you
12 with is that when it comes to corporate citizenship,
13 bigger can be better. And in the case of
14 BankBoston, they have really worked with us in a
15 very hand-tailored way. We have had an opportunity
16 to work with employees in this very large
17 organization and have them provide very hand-
18 tailored and wonderful personalized support to
19 children in Boston.
20 So thank you, and I do support the merger.
21 HEARING OFFICER SMITH: Thank you very
22 much.
23 MR. LIEBERMAN: Hi. I'm Aaron Lieberman,
24 president and CEO and one of the founders of
25 Jumpstart. Thank you very much for letting me
0280
1 speak, especially before this cutoff.
2 I am here because five years ago, when I
3 first wanted to start Jumpstart as a 22-year-old
4 right out of college, I had a dream and absolutely
5 no hope of getting anyone to support us in the City
6 of Boston, but two local institutions really
7 responded.
8 The Fleet trust officer met with us,
9 figured out what could work, and provided one of our
10 first grants to get Jumpstart up and going.
11 BankBoston shortly followed with becoming one of our
12 first real corporate sponsors to support all of our
13 aspects.
14 I think that just tells part of the story
15 of how they have helped us build Jumpstart into a
16 national organization, now based in Boston, but
17 touching the lives of over 1,000 preschoolers this
18 summer. There have been so many different ways, but
19 the involvement has really been quite deep.
20 In New Haven BankBoston has been one of our
21 lead corporate sponsors. Kim Alene, a BankBoston
22 staff person, has served on our Boston Board of
23 Advisors. Volunteers from both banks have served
24 regularly at our service days. Even the little
25 stuff, the furniture that we all sit on in our
0281
1 headquarters was donated through BankBoston, and
2 they have even provided countless conference space
3 and things like that. For us it has been an
4 important partnership on all levels, and they have
5 really helped us make change.
6 Thanks.
7 HEARING OFFICER SMITH: Thank you very
8 much.
9 MR. AXELROD: Good afternoon, ladies and
10 gentlemen. My name is Carl Axelrod, and I chair the
11 New England Regional Board of the Anti-Defamation
12 League. As chairman I have the honor of delivering
13 to you the remarks -- or excerpts from the remarks,
14 given the one-minute limitation -- of Lenny Zakim,
15 our esteemed executive director who could not be
16 with us today.
17 We at the New England Office of the ADL are
18 pleased to be here today to support this merger and
19 to participate in this important hearing. We were
20 founded as a Jewish civil rights organization in
21 1913 to combat anti-Semitism and all forms of
22 bigotry and to secure equal justice for all.
23 To translate those democratic ideals into
24 action, we have utilized public advocacy, education,
25 coalition building, and programmatic initiatives
0282
1 that connect people of different racial, religious
2 and ethnic groups and economic classes with each
3 other and our community.
4 We have been fortunate at ADL in New
5 England in having Fleet participate with us in many
6 creative and new programs, including Black Jewish
7 Seder, the Catholic Jewish Seder, Team Harmony in
8 particular, and A World of Difference. The A World
9 of Difference program was supported initially by
10 Fleet and by one other major corporation. They have
11 been fantastic in terms of the financial support as
12 well as in the volunteer help that they have given
13 to us.
14 And with your permission, I would like to
15 submit the remarks of Lenny Zakim to the Board.
16 HEARING OFFICER SMITH: Yes. Please do.
17 MR. WIDMER: My name is Michael Widmer.
18 For the past seven years, I've been president of the
19 Massachusetts Taxpayers Foundation, a nonprofit
20 organization dealing with fiscal, tax and economic
21 issues in Massachusetts.
22 Both Fleet and BankBoston are strong
23 supporters of the Foundation and have taken an
24 active part in our activities. Most recently, for
25 example, BankBoston underwrote a major study of the
0283
1 Massachusetts economy which we released last week.
2 I want to emphasize two points. The first
3 is that having a corporate headquarters in Boston
4 makes a huge difference in terms of that company's
5 commitment to the community, whether that commitment
6 takes the form of leadership, dollars, volunteer
7 support, or an overall level of energy.
8 Secondly, financial services institutions
9 headquartered here have been particularly
10 conscientious in meeting their public
11 responsibilities, including both BankBoston and
12 Fleet.
13 In contrast, when local corporations are
14 bought by out-of-state entities, a sharply reduced
15 commitment to this community inevitably follows.
16 Given these facts, the merger of Fleet and
17 BankBoston with headquarters in Boston is especially
18 important for this city, state, and region.
19 Thank you.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 MR. REICKER: My name is Edward Lane
23 Reicker. I've been a banking lawyer for nearly 40
24 years and a banking law teacher for about 20. I
25 will leave some remarks with the panel.
0284
1 But in brief, it seems to me that if the
2 past 20 years teaches us anything, it is that
3 mergers of this magnitude are inevitable. So the
4 only real question is whether this merger is
5 superior to some of the other kinds of mergers that
6 might come along if this merger is not approved.
7 And it seems to me that the banking public
8 and borrowers will be better served by dealing with
9 bankers that they know in Boston, rather than
10 bankers in perhaps San Francisco or New York or
11 Frankfurt. I think that would even be true for
12 community activists who would rather negotiate their
13 demands with bankers they know.
14 And, finally, it seems to me that as a
15 citizen of Massachusetts and a resident of Boston,
16 both Massachusetts and Boston will be better places
17 if they are the home of a major global banking
18 organization.
19 Thank you.
20 HEARING OFFICER SMITH: Thank you.
21 MR. BROWN: I'm David Brown, the CFO and
22 part owner of the Purple Cactus, which a burrito and
23 wrap bar. We have two locations, one in the South
24 End and one now in Jamaica Plain. I have menus if
25 anybody is hungry.
0285
1 This winter we were at a critical juncture.
2 We had eroded a lot of our capital. We had lost
3 some money through mistakes. We had one really
4 strong store, and we found a great location.
5 We went around to talk to banks. I heard a
6 lot of "We don't do restaurants. You're not making
7 money. Come back in a year." But we found a bank,
8 Fleet, that really believed in us. They came, Grant
9 Patterson, others came. They met with us, they ate
10 the food, they saw our lines. They took our
11 financials, and three weeks later we had conditional
12 approval.
13 A lot of work went on from there, but they
14 really made us turn the business around, and we're
15 very grateful. And if that's what they are going to
16 do for small businesses as a combined entity, the
17 area will be better off.
18 Thank you.
19 HEARING OFFICER SMITH: And, last.
20 MR. FARRELL: My name is William Farrell.
21 I'm general counsel to the Rhode Island Bankers
22 Association. The RIBA is the major trade banking
23 association for the banking community in Rhode
24 Island. Bank of Boston, through its former
25 subsidiary The Rhode Island Hospital Trust, and
0286
1 Fleet have been active members in our association
2 since its inception in 1915.
3 One of the major objectives of our
4 association has been to develop the legal and
5 regulatory environment that would foster the
6 development of a major national banking association
7 located here in New England. I believe that this
8 proposed merger goes a long way in accomplishing
9 that objective.
10 I have also had numerous opportunities to
11 work with both institutions on community issues, and
12 I believe the initiatives that have been approved in
13 the past will continue with this new merger.
14 Thank you.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 At the Presiding Officer's prerogative, we
18 are going to skip for the moment Panels 11 and 12
19 and go to Panel 13, which includes Congressman
20 Barney Frank and Congressman Delahunt. If you would
21 come on up.
22 (Pause)
23 HEARING OFFICER SMITH: I'm pleased to
24 welcome you, and if you would start.
25 CONGRESSMAN FRANK: Thank you very much. I
0287
1 appreciate being taken at this point. And I, thanks
2 to the Massachusetts Legislature's whims, have a
3 district that goes from about a mile away from here
4 down to Wareham, and I was in parts of it today, in
5 Fall River and New Bedford, and wasn't able to get
6 in earlier. I appreciate your accommodating me now.
7 This decision that the federal regulators
8 will be making is very important both in itself and
9 as an example of the most important public policy
10 issue, I believe, facing this country today. I feel
11 similarly today the way I did when we passed the
12 banking bill last week, a very important piece of
13 legislation that will be soon going to a
14 House-Senate conference. And I expect to be a
15 conferee, and I want to make the same point in that
16 venue that I want to make here.
17 We have been doing an excellent job in
18 America in fostering the conditions in which
19 capitalism can flourish, and that's a good thing.
20 We all benefit when capitalism flourishes. Wealth
21 is created, and that wealth is available for
22 satisfying our needs.
23 We have not done nearly as well in seeing
24 to the equity with which that wealth is distributed.
25 And in some cases, we're not simply talking about
0288
1 the rich getting richer and the rest being left
2 behind. In some cases, the very process by which
3 capitalism flourishes erodes the condition of some
4 other people.
5 There are elements of that in the
6 international competition in technological advance.
7 And what we have got to do is to find a better way
8 to go forward with setting the rules by which the
9 capitalist system advances, but we do better by the
10 people who are not automatically going to benefit.
11 Let me say this is not simply a matter of
12 equity, it is a matter of self-interest. A country
13 in which a substantial number of the population sees
14 itself more threatened than advanced by economic
15 measures of the sort we talked about in the Congress
16 last week or this merger represents will block that
17 from happening.
18 People who are in the financial community
19 ought to understand, if they don't do a better job
20 of dealing with these equity and fairness issues,
21 they will generate resistance to those measures
22 which they believe, and which I often agree with
23 them, are in our overall interest. People will not
24 sit idly by and be left behind.
25 And in deference to the chairman of this
0289
1 august system, the Federal Reserve System, Mr.
2 Greenspan, I have to differ with him. He gave a
3 speech a couple of months ago. This is really very
4 relevant. He was talking about trade, but it has to
5 do with the whole process of technical and economic
6 advance. He said, "Yes, sometimes some people will
7 get hurt, but they should understand that this is
8 part of the process of creative destruction
9 described by Joseph Schumpeter, and it leads in the
10 end to better results."
11 Perhaps he would like to come to Fall River
12 and New Bedford and preach Schumpeter to people who
13 are losing their jobs. I have not found it
14 fruitful, and it is not a process that I wish to
15 pursue.
16 Instead, what I want to do is to say we
17 will understand that there is an element of creative
18 destruction. It's very important for us to
19 understand this. Progress overall will mean some
20 pain for some people, and we have a responsibility
21 to alleviate that. That's what I'm talking about
22 here today, because unlike some others who may be
23 critical of this merger, I think it's inevitable,
24 and therefore a good thing, because I think it is a
25 bad thing to object to the inevitable.
0290
1 Technology is clearly driving the market.
2 Clearly, a merger was called for. Having it
3 headquartered in our area, I think, is a good thing.
4 So I am in favor of this merger. I think it is a
5 recognition of economic reality, just as I was in
6 favor of many of the pieces of legislation we voted
7 on last week that would relax restrictions on banks
8 and allow banks and other financial institutions to
9 come together more. I think that's where the
10 technology and the market take us.
11 But just as I voted against that bill last
12 week, I would vote against this merger, if I had to
13 vote on it today, under the conditions that have
14 been presented to us. That is, it does a good job
15 of advancing the functioning of the capitalist
16 system in our region. I do believe the
17 intermediation function will do well.
18 Having these two institutions merge has a
19 great deal of promise and was probably driven by
20 market forces, but it is not enough just to do that.
21 It is not enough to say, to the significant
22 percentage of our people who will be left behind,
23 that that's all we're going to do.
24 We recently had a very good report issued
25 by Ed Muscovitch about the 495 dividing line in
0291
1 Massachusetts, about our two economies, about an
2 economy where technological change and globalization
3 are very good news. People who are in the
4 information industry, people who are in software, in
5 biotechnology, in financial services, they do very
6 well.
7 But I just left a lot of people who used to
8 be fishermen, people who did basic manufacturing,
9 people in industries where America is not advancing
10 as much. And they're being left behind, and there
11 is no reason for that. That's a failure of will;
12 it's not a failure of capacity. So that's the model
13 that I hope you will insist on in this case.
14 Yes, the merger should go forward, as long
15 as, as part of that merger, the legal and moral
16 obligations represented by the Community
17 Reinvestment Act are fully supported, and it is very
18 important that the Community Reinvestment Act be
19 seen both as a legal and a moral obligation.
20 Those who are wealthy and will get
21 wealthier, those who will prosper, those who will
22 progress, have an absolute obligation to extend a
23 helping hand to the people who would otherwise be
24 left behind. And it's not just their obligation,
25 it's common sense, because if they don't, they will
0292
1 build up resistance.
2 Now, let me say I have been talking to CEOs
3 of banks for some time. I have urged them to meet
4 with a variety of groups that are interested in
5 affordable housing and economic development. They
6 have begun the process of meeting.
7 But I must tell you that, watching them
8 deal with various aspects of this, it is clear to me
9 that meeting the moral and legal obligations of the
10 Community Reinvestment Act have not been highest on
11 their agenda.
12 We have some substantive promises that look
13 reasonable, but they are at this point only promises
14 with very little in the way of specifics, either as
15 to what actually is going to happen in the housing
16 and economic development area in particular
17 regions -- you can't build housing in general, you
18 can't help economic development in general; it has
19 got to be specific as to where it's going to happen,
20 and you have to be talking about organizations you
21 are going to work with. We have to know that
22 they're going to be monitoring operations.
23 So I will be strongly urging -- I am doing
24 this now -- the Federal Reserve to hold off on
25 approval of this merger until we get from the two
0293
1 institutions specific, reasonable statements of what
2 they plan to do to meet their community reinvestment
3 obligations in conjunction with the very responsible
4 organizations that have a great deal of experience
5 in doing this. That is, I think the merger is a
6 good thing on its own terms, but I voted against the
7 bill last week, as I said, not because of what it
8 did, but because of what it didn't do. I approved
9 of what it did, but it didn't do enough.
10 The merger taking these two important New
11 England institutions and giving them a chance to
12 work together, that's a good thing, but it is not a
13 sufficient thing. I guess that's the answer. The
14 merger of these two institutions is a necessary but
15 not a sufficient set of actions for what we need in
16 our region.
17 Yes, I want to see a strengthened
18 institution, but I want to see as well specific
19 actions promised and described that are going to
20 help the people who otherwise get left behind.
21 I should add finally that I was very
22 pleased with the Justice Department statement that
23 among the things we will have is a bidding process
24 for the assets to be divested. That will allow
25 community banks to be strengthened. Efficiency is a
0294
1 good thing, large institutions do good work, but
2 having locally based institutions are a part of the
3 kind of overall picture we want.
4 So I urge you very strongly, as I said --
5 and I will be continuing this view in other
6 forums -- I know the Federal Reserve will have a
7 great deal of interest in the outcome of the
8 Conference Committee. And as a member of that
9 Conference Committee, my view on the speed with
10 which we can pass a banking bill will be somewhat
11 colored by how well we do with the current process.
12 And I hope that we will have some -- I hope you will
13 show me that the Fed is capable of enforcing the
14 Community Reinvestment Act.
15 Let me just close with a quotation. Some
16 people have argued that the Community Reinvestment
17 Act is kind of a nuisance and an interference and it
18 detracts from the ability of the capitalist
19 institutions to perform their important function,
20 and it is very important function.
21 I received a letter from the Governor of
22 the Federal Reserve Board a few years ago whose
23 responsibility it was on the Board to monitor the
24 Community Reinvestment Act, the Home Mortgage Act,
25 and other social elements. And he wrote me a long
0295
1 letter amplifying testimony which said, "There is no
2 evidence that any of these laws have caused us any
3 harm whatsoever. They have not raised safety or
4 soundness issues. They have no way interfered with
5 the main function of banks."
6 The author of that letter is a man named
7 Lawrence Lindsey. He is no longer the Fed Governor
8 in charge of this. He is now the chief economic
9 advisor to Governor George W. Bush. So I think we
10 have a pretty good pedigree here to say that there
11 is no reason for capitalists to fear this. Indeed,
12 in their own self-interest, I hope they will embrace
13 it with more enthusiasm than they have shown so far.
14 Thank you.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 CONGRESSMAN DELAHUNT: Thank you. I think
18 I'll just associate myself with the remarks of my
19 colleague on the Banking Committee. I do share a
20 lot of his sentiments.
21 He referred to substantive promises
22 combined with a lack of specificity and a lack of
23 detail. That causes me a similar concern.
24 I think what would be appropriate here is a
25 thoughtful conversation, negotiations if you will,
0296
1 among the stakeholders to design a plan with
2 specificity memorialized in writing to be reviewed
3 by the Board.
4 And I'd go beyond what Barney just
5 articulated in terms of the CRA. I would suggest
6 that the resulting entity has clearly a legal
7 obligation but also truly, as he indicated, a moral
8 obligation far in excess of the CRA.
9 He and others have talked about the fact
10 that it's a good merger because it's inevitable.
11 There is this aura of, well, inevitability: "We're
12 here. Truly, the economy has changed. We are now
13 in a different world." It's true that the economy
14 is global in nature. Competition has changed. We
15 now compete on an international level.
16 Now, I don't know whether that's good or
17 bad. I have serious reservations about it. I only
18 hope that someday we will not rue the consequences
19 of not having done something positively and
20 constructively and thoughtfully and reflectively
21 until we reach that time that everybody predicts we
22 will have two or three large megabanks in this
23 nation.
24 I daresay I would hope that they would not
25 err and make the same mistakes as we all witnessed
0297
1 back in the late '80s and in the early '90s. It
2 clearly had a devastating impact here in the
3 Northeast. But I also, too, recognize that the
4 world is change and it is inevitable.
5 I would like to address -- I'm not going to
6 get into the specifics, but what I would like to
7 address is the broader transformation of the
8 financial services industry of which this particular
9 transaction is really only the latest manifestation,
10 and to the extent to which what is happening in this
11 industry is part of an avalanche, if you will, of
12 mergers taking place on an unprecedented scale,
13 again, not just domestically but internationally.
14 And I also clearly recognize your role in
15 reviewing this transaction is a narrow one, and your
16 task is to examine the effects of this particular
17 merger on competition and on the convenience and
18 needs of the communities served by these
19 institutions. Yet I suggest that you cannot carry
20 out this mandate without taking into account the
21 competitive environment in which this merger is
22 taking place.
23 It was just about a year ago that the House
24 Judiciary Committee held an antitrust hearing on
25 consolidation and competition in the financial
0298
1 services industry. At that hearing -- and I'm
2 quoting here -- Governor Lawrence Meyer of the
3 Federal Reserve Board testified that over 7,000 bank
4 mergers had taken place since 1980 and that the pace
5 was continuing to accelerate.
6 At that time, nearly 75 percent of domestic
7 banking assets were held by the 100 largest banks,
8 25 percent by the top ten banks alone. I guess this
9 is what we talk about when we use the term
10 "inevitability."
11 That was before, by the way, this past
12 year's string of colossal mergers, including the
13 acquisition of the Bank of America by NationsBank,
14 which I understand placed 8 percent of all U.S. bank
15 deposits under the control of the resulting entity.
16 And I'll acknowledge that this phenomenon is not
17 unique to the financial sector.
18 Again, having served on the Judiciary
19 Committee, we have had the opportunity to review the
20 impact of mergers and acquisitions on many sectors
21 of our economy. And it seems to me that whether one
22 looks at banking or aerospace, health care or
23 telecommunications, the ultimate question ought to
24 be the same: What is the effect of these
25 transactions on the life of our communities and the
0299
1 well-being of our workers, consumers, and the
2 neighborhoods that sustain them?
3 I would suggest that this is the concept of
4 moral responsibility that my colleague referred to
5 earlier.
6 Now, some mergers will create some economic
7 efficiencies that are and will be in the interests
8 of both shareholders and the public. Now, some may
9 be consolidation mergers dictated by genuine
10 business necessity as opposed to proxy fights and
11 leveraged buyouts and hostile takeovers that we saw
12 in the 1980s.
13 But even where this is the case, most of us
14 would agree, hopefully, that economic efficiencies
15 are not the only values at stake. And whether your
16 preferred metaphor is the demise of the independent
17 drugstore with its soda fountain or the Bailey
18 Building and Loan Company immortalized by Frank
19 Harper, the displacement of local institutions
20 represents a loss of much of the glue that binds us
21 together as communities through the hard times. And
22 that's what we're really talking about.
23 There is great prosperity right now. We
24 all know that this is not going to last forever.
25 And it was only 30 years ago that Justice Douglas on
0300
1 the Supreme Court warned that economic control was
2 being transferred from local communities to distant
3 cities where men on the 54th floor with only balance
4 sheets and profit-and-loss statements before them
5 decide the fates of communities with which they have
6 little or no relationship.
7 It seems to me that the sheer pace and
8 volume of today's merger mania suggests that the
9 danger that Douglas was describing is at least as
10 great now as it was back then.
11 Again, we all recognize that change is an
12 irreducible fact of life, this sense of
13 inevitability. But to me, it isn't mere nostalgia
14 or being sentimental to worry about the damage that
15 may be done to local economies when a giant bank
16 merger closes scores of branches and wipes out
17 thousands of jobs.
18 It's not naive to ask what happens to lower
19 and middle class families struggling to afford a
20 home, what happens to neighborhood businesses that
21 need fresh capital to expand or simply to stay
22 afloat, what happens to the local tax base when
23 these businesses go under, and what happens to local
24 charities that depend on corporate support to make
25 their payroll.
0301
1 Now, I know that such concerns are unlikely
2 to prevent this merger from going forward, and it
3 will proceed like thousands have before it.
4 According to Governor Meyer's testimony last year,
5 the Board has only denied some four merger
6 applications during the entire decade.
7 But I think it's important, and
8 Representative Frank indicated, there is unanimity
9 among the Congressional delegation, I think it is
10 important to state, at least members of the House,
11 to ask that the Board require the parties, as a
12 condition of approval, to enter into clear and
13 enforceable undertakings that will mitigate these
14 concerns. Get it in writing. Let's have it in
15 writing after a negotiated process with the
16 stakeholders in the community.
17 Now, these commitments should provide for
18 increased lending in underserved communities, new
19 investments to revitalize older, lower-income
20 neighborhoods, and assistance to the some 5,000 --
21 that's what I read in the newspapers -- 5,000
22 workers and their families who will lose their
23 livelihoods as a result of this transaction.
24 And I thought it was interesting to note --
25 and, again, I'm quoting here -- a spokesman for
0302
1 Fleet Bank, Mr. Mahoney, who stated severance
2 packages for laid-off workers will be among the most
3 generous in any merger. Well, let's get it in
4 writing, and let's hope that that is the case.
5 And as, again, Representative Frank
6 indicated, a divestiture plan that makes adequate
7 provisions for bids by smaller and medium-sized
8 institutions with roots in the communities they
9 serve.
10 I would also suggest and submit that these
11 commitments, once they have been entered into, the
12 Board and the Department of Justice carefully
13 monitor their implementation to assure they are
14 fully carried out once the merger has been
15 consummated.
16 And while I don't have a specific remedy in
17 mind, I believe the Board should exercise its
18 authority to fashion significant sanctions to be
19 applied if full compliance is not achieved. If it's
20 not achieved, there ought to be a sanction imposed
21 upon the resulting entity.
22 Now, this is especially important in light
23 of a study that was presented by economists and
24 community organizations regarding Fleet's conduct
25 following previous mergers. Let me cite this one
0303
1 study done by a professor from the University of
2 Massachusetts. Clearly, I can't verify its
3 accuracy, its methodology, but this is what was
4 said.
5 He looked at mortgage lending by Fleet and
6 Shawmut in 1995 and compared those figures to
7 Fleet's lending levels in 1997 following its
8 acquisition of Shawmut. According to Professor
9 Campen, Fleet's 1997 lending, both overall and to
10 traditionally underserved borrowers, was
11 approximately half of what Fleet and Shawmut had
12 done jointly in 1995.
13 Well, if such statistics are to be
14 believed, they suggest that binding commitments are
15 important. I also recognize that the Bank of Boston
16 in a different way had a much different record and
17 was very positive.
18 But let me conclude by daresaying that I
19 would hope that the Board would take these
20 suggestions and reflect on them. And to sum it up,
21 I guess it's get it in writing, and if there is not
22 full compliance, that there be a mechanism to impose
23 sanctions on the resulting entity.
24 Thank you.
25 HEARING OFFICER SMITH: Thank you very
0304
1 much.
2 Any questions?
3 Thank you very much for coming this
4 afternoon. And now we will move back to Panel 11.
5 (Pause)
6 HEARING OFFICER SMITH: Thank you very much
7 for your patience.
8 Now, where we have two people from the
9 organization, is one of you making the presentation?
10 MS. ALLEYNE: Both of us.
11 HEARING OFFICER SMITH: Are you sharing
12 your five minutes?
13 MS. ALLEYNE: Yes.
14 MR. CALLAHAN: We're actually told we had
15 five minutes each. I am planning to take one
16 minute.
17 HEARING OFFICER SMITH: And then she will
18 have four.
19 MR. CALLAHAN: Can she have five? We have
20 been here since nine.
21 HEARING OFFICER SMITH: Can we start with
22 Mr. Callahan.
23 MR. CALLAHAN: Sonia is going to start.
24 HEARING OFFICER SMITH: Okay. Fine.
25 MS. ALLEYNE: First of all, I would like to
0305
1 thank you for the opportunity --
2 HEARING OFFICER SMITH: Would you say your
3 name and organization, please.
4 MS. ALLEYNE: My name is Sonia Alleyne.
5 I'm the director of community investment for the
6 Massachusetts Affordable Housing Alliance.
7 Our question for you today isn't should the
8 Federal Reserve Board approve the merger of
9 BankBoston and Fleet. Everyone in this auditorium
10 knows that the Fed will approve this merger. The
11 Fed almost always approves mergers whether or not
12 they benefit consumers, so let us suggest a
13 different question:
14 Will the Fed use its power to require an
15 aggressive, detailed Community Reinvestment Act
16 agreement from Fleet and BankBoston? Will the Fed
17 insist that low-income communities be better served
18 after this merger than they are now?
19 The Massachusetts Affordable Housing
20 Alliance is a statewide nonprofit organization
21 working to increase public and private sector
22 investment in affordable housing. Our campaigns
23 since 1985 have resulted in over $2.2 billion in
24 commitments to lower-income neighborhoods throughout
25 the Commonwealth. Our Grass-Roots Home Buyers Union
0306
1 based in Dorchester negotiated CRA agreement with
2 ten area banks, including Fleet and BankBoston, for
3 over $500 million in below-market mortgages,
4 mortgage commitments, since 1990.
5 Fleet and BankBoston have a tremendous
6 opportunity to create the best urban community bank
7 in the country, and the Federal Reserve can help
8 them get there. In Massachusetts, Fleet has a
9 chance to go much further in developing a model for
10 a true bank-community partnership.
11 Fleet's history in Massachusetts has been
12 decidedly mixed. Fleet has demonstrated an ability
13 to pump out low-cost mortgages to lower-income,
14 first-time home buyers. Indeed, Fleet and
15 BankBoston have been the leading lenders in the
16 state's most affordable mortgage program, the soft
17 second, first-time home buyers program.
18 On May 12 of this year, Fleet and
19 BankBoston pledged to make 1100 of these mortgages
20 in Boston before 1200 people, community residents at
21 a MAHA meeting in the athletic center in Roxbury.
22 But yet, as UMass Professor Jim Campen points out in
23 his recent study, Fleet has fallen far short of
24 meeting the goal of one plus one equals two in
25 mortgage lending to minority and low- and
0307
1 moderate-income borrowers after their merger with
2 Shawmut Bank in 1995.
3 We have asked Fleet to commit another 1500
4 soft second mortgages outside of Boston over the
5 next five years. If they do this, one plus one will
6 be greater than two in this program, which has both
7 lower than normal delinquency rates and saves home
8 buyers up to $200 a month.
9 Fleet should build on the success of
10 BankBoston, which has shown the country how to make
11 an urban branch network profitable through its First
12 Community Bank. Fleet must challenge all of its
13 executives to add innovation and flexibility to
14 their game plan in urban neighborhoods.
15 BankBoston, during its merger with BayBank,
16 made an impressive statement about innovation when
17 they agreed to convert the $90 million loan
18 commitment to the Massachusetts Housing Partnership
19 to $10 million in equity contribution.
20 For the past year and a half, Fleet has
21 looked at this possibility but ultimately rejected
22 it. Now Fleet has another chance. This merger will
23 result in a loan commitment of somewhere between
24 $300 million and $600 million to MHP. In today's
25 market, developers need more equity. Fleet can help
0308
1 solve the equity gap, and the Federal Reserve can
2 help them get there. Fleet and BankBoston can
3 welcome lower-income customers instead of driving
4 them into the greedy arms of check cashers.
5 The Massachusetts Community and Banking
6 Council has developed a Basic Banking for
7 Massachusetts Program which established minimum
8 criteria for qualifying low-cost checking and
9 savings accounts. Both Fleet and BankBoston
10 participate in the program, but more needs to be
11 done. It is not just enough to have an account; you
12 must market it.
13 Fleet should build on the success of the
14 marketing campaign done by BayBank in 1994 and 1995
15 and make a commitment to open 42,000 new basic
16 banking accounts for low-income consumers in
17 Massachusetts over the next two years. Fleet can do
18 this, and the Federal Reserve can help them get
19 there. Fleet and BankBoston can create a new model
20 for megamergers.
21 Fleet did not use its press conference on
22 March 14, 1999, to hype a multibillion dollar CRA
23 plan that would have been meaningless and hopelessly
24 short on details as other banks have done. Fleet
25 then decided to meet with 125 groups in 30 days to
0309
1 listen to suggestions from community banks and
2 organizations.
3 Last week, however, Fleet unveiled to the
4 community groups a $14.6 billion plan that was short
5 on details. Yesterday, Fleet filled in some but not
6 all of these details. It is still a work in
7 progress. Fleet has listened to some of our
8 concerns, but Fleet's work is not done.
9 We join other groups throughout the
10 Northeast in asking the Federal Reserve Bank to
11 extend the comment period for a period of two weeks,
12 or as Congressman Capuano says, for 30 days, fine
13 with us, from the date on which Fleet delivers its
14 final plan to the community groups. Fleet needs to
15 made make a statement to the community and others
16 that bigger can be better.
17 This agreement should push Fleet to do
18 more. Fleet should assure that one plus one is
19 greater than two, as stated by Terry Murray and Chad
20 Gifford when they announced the megamerger. And
21 Fleet and the community groups should demand and
22 expect mutual accountability, and you can help us
23 get there.
24 Do not approve this merger until or unless
25 Fleet agrees to sign a detailed, verifiable CRA
0310
1 agreement that meets the needs identified by
2 community organizations throughout the Northeast.
3 And with your help, we can get there.
4 Thank you.
5 MR. CALLAHAN: Thank you. My name is
6 Thomas Callahan. I'm from the Mass. Affordable
7 Housing Alliance. I will be very brief.
8 Fleet has told us -- Fleet and BankBoston
9 told us this morning a lot about the merger, what
10 will happen after this merger, but there is a lot
11 more that we don't know about this merger.
12 Some of the questions we still have are:
13 What is Fleet's commitment? What will Fleet's
14 commitment to the statewide soft second mortgage
15 program that Sonia talked about, what will it be?
16 Will they convert the MHP loan commitment to an
17 equity commitment as is needed by rental housing
18 developers? How many basic banking accounts will
19 Fleet open in Massachusetts over the next two years?
20 Will Fleet continue to fund post-purchase
21 homeowner counseling and foreclosure prevention that
22 is so needed in this era of trying to create
23 sustainable home ownership? How many loans and
24 housing tax credits in Massachusetts will Fleet
25 invest in? Will they be members of the Federal Home
0311
1 Loan Bank?
2 I could go on and on. There are too many
3 unanswered questions for the Federal Reserve Board
4 to approve this measure at this time.
5 One last comment I would have is we have
6 seen a couple of large panels with one minute each
7 talking about supporting this merger. It is
8 interesting to watch those panels as they come up
9 and speak. By my observation, most of those folks
10 talked about grants and charitable contributions.
11 In 1977, CRA was not passed because
12 community groups complained they couldn't get a
13 grant from a bank. I respectfully submit to those
14 organizations that this is not about charity, this
15 is not about grants. This is about investments, and
16 we should keep the focus, and hopefully the Federal
17 Reserve will keep the focus, on loans and
18 investments that the banks can make, not about
19 charitable contributions.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 Mr. Lozada.
23 MR. LOZADA: Thank you for your
24 consideration and having me speak today. Good
25 afternoon. My name is John Lozada, and I'm an
0312
1 attorney in private practice with a law firm called
2 Sessa Glick Quiroga & Hibbard in Boston,
3 Massachusetts, where I serve clients on small
4 business matters, employment discrimination,
5 education law, real estate law, and general legal
6 concerns.
7 My focus as an attorney has been to use the
8 legal profession to help build infrastructure
9 principally within the Latino community in
10 Massachusetts. And I have been fortunate to join a
11 law firm that both respects my career choices and
12 plays a major role in community economic development
13 in the field of affordable housing.
14 By way of background, I was raised in
15 public housing in East Harlem, New York, by a
16 single-parent mother. I'm of Puerto Rican and
17 Mexican heritage and reflect the third generation of
18 my family to live in the United States. I have
19 studied, worked and lived in eastern and western
20 Massachusetts for over 24 years, during which time
21 I've come to know much of the infrastructure of
22 Massachusetts and the Latino community of this
23 Commonwealth.
24 I have been president of the Massachusetts
25 Association of Hispanic Attorneys and have served on
0313
1 the Board of the Massachusetts Chapter of the
2 National Congress of Puerto Rican Rights, a
3 statewide grass-roots network. My experience has
4 taught me to value, respect and encourage diversity,
5 achievement, and ethics across dimensions of
6 difference, poverty, wealth, power, humility and
7 integrity.
8 I am here today to speak against the
9 proposed measure of the Fleet Bank and BankBoston as
10 it is currently before the Federal Reserve Bank. My
11 reasons for opposing this merger are fourfold.
12 First, I am deeply troubled by the overall
13 lack of cultural competency and commitment of Fleet
14 Bank and of the proposed merged bank and the Fleet
15 Bank's lack of vision into the multicultural
16 character, potential, and needs of the Latino
17 community.
18 Second, based on my experience and the
19 experience my law firm, the lack of lending done by
20 Fleet Bank in the area of affordable housing
21 development causes grave concern for the future.
22 And, frankly, billion dollar promises without
23 substantive written commitments should not suffice
24 for the Fed to approve this merger, based on Fleet
25 Bank's track record on similar promises, which are
0314
1 well documented.
2 Third, based on my experience and belief,
3 Fleet Bank and BankBoston must be challenged by the
4 Federal Reserve Bank to quantify and revise their
5 proposed $15 million investment towards technical
6 assistance in low- and moderate-income areas,
7 because that figure, spread across the states
8 Fleet-Boston will serve, will not meet the needs of
9 the Latino community to sustain technical support in
10 the area of business development.
11 Fundamentally, it is the lack of
12 understanding about how businesses function in this
13 country which poses the most daunting challenge to
14 the development of effective Latino businesses and
15 communities in Massachusetts.
16 Fourth, it is my perception and belief that
17 Fleet Bank and BankBoston have presented no position
18 on how their commitment to community reinvestment
19 will help to combat the reluctance of Latinos to use
20 commercial banking services and reduce our
21 communities' excessive reliance on check-cashing
22 institutions.
23 Finally, while I am in opposition to the
24 proposed merger of Fleet Bank and BankBoston as
25 currently presented, I see great potential for this
0315
1 merger to make a major positive difference for many
2 citizens and residents in Massachusetts,
3 particularly among Latinos, who have the gift of
4 their multiculturalism but have been most left out
5 of the economic boom that is shaping Massachusetts
6 and this nation.
7 Unfortunately, it is certain that the Fleet
8 Bank and BankBoston merger seeks, in Fleet Chairman
9 Terry Murray's words today, to be able to meet the
10 sophisticated needs of consumers. How does CEO
11 Murray respond to the question of the needs of
12 Latino borrowers who may not be as sophisticated as
13 he might like, but who are in dire need of access to
14 the resources that his megabank has to offer?
15 How many Latinos own a computer, how many
16 have achieved high school or college educations, and
17 how many have dared to dream of careers or
18 professions? In Massachusetts, a state with an
19 estimated 500,000 Latino population, the Latino
20 community is the largest minority population in this
21 Commonwealth.
22 Our numbers are explosive, as is our need
23 for education, leadership development, mentorship,
24 and finances. These are the needs that must be met
25 for the Latino community to become self-reliant,
0316
1 visionary and successful in this society, and the
2 Fleet Bank-BankBoston merger fails to address any of
3 these questions.
4 What has Fleet Bank done with respect to
5 the Latino community along the lines I have
6 mentioned? It is hard to say. I know that they
7 have supported parties and cultural events, as have
8 many other banks and institution in this state. I
9 know that they have promised $25 million in
10 charitable contributions upon the merger. And this
11 appears to be a large figure, but based on what
12 economy of scale?
13 The Latino community needs service,
14 assistance and meaningful access to resources, not
15 simply charity. How many small business loans has
16 Fleet Bank made within the Latino community? What
17 is the experience of Latino borrowers in seeking
18 loans from Fleet Bank? How difficult is it for
19 Latino businesspeople to meet the lending
20 requirements of Fleet Bank? What flexibility
21 commitment has Fleet demonstrated in its lending
22 practices? How many among the 500,000 Latinos in
23 this Commonwealth even realize that this merger is
24 pending, and what has Fleet Bank's outreach to the
25 Latino community been?
0317
1 There was apparently an outreach to 125
2 community groups. How many of those groups were
3 within the Latino community and how many Latino
4 leaders are reflected in these hearings today?
5 The fundamental reality is that the Latino
6 community must be included as a player. If we are
7 ignored, if we are not brought into these decisions
8 and processes that affect our lives, then as a
9 community, we will never be a fully contributing
10 member of this society. Fleet Bank and BankBoston
11 have the power, if not the will, to accomplish 150
12 billion times what I could ever achieve in my
13 lifetime.
14 I respectfully implore the Federal Reserve
15 Bank, please delay your approval. Make these banks
16 account to my community. Make them answer to the
17 questions I have posed. And make them put their
18 commitment into writing.
19 Thank you.
20 HEARING OFFICER SMITH: Now, Mr. Hacobian,
21 Ms. Gonzales Levine, are you sharing your time, or
22 is just one of you speaking?
23 MR. HACOBIAN: We're sharing our time.
24 MS. GONZALES LEVINE: Good afternoon. My
25 name is Rita Gonzales Levine. I'm the chairman of
0318
1 Urban Edge Housing Corporation, a nonprofit housing
2 development and economic development corporation in
3 Jamaica Plain and Roxbury sections of Boston. Thank
4 you for the opportunity to testify regarding the
5 proposed merger.
6 This testimony is informed by recent
7 meetings and conversations with representatives of
8 the two banks and includes our initial reactions to
9 a document entitled "Community Commitment: A
10 Proposal for the Fleet Boston Transaction," dated
11 June 22, 1999.
12 As we will detail later, both Fleet and
13 BankBoston have been strong partners for Urban Edge
14 during the past several years. In fact, Urban
15 Edge's history goes back nearly 25 years with both
16 banks, if we include banks that have merged with or
17 been acquired by Fleet and BankBoston. Urban Edge's
18 success of the past 10 to 15 years would have been
19 impossible without the strong partnership with Fleet
20 and BankBoston.
21 We ask you for your support for the
22 following four requests that we have already made to
23 Fleet and BankBoston in our recent meetings with
24 their representatives.
25 No. 1: We must monitor the impact of the
0319
1 Fleet-Boston merger on Boston's neighborhoods and
2 ensure that the City and its neighborhoods gain and
3 not lose ground. We must work together to determine
4 the best indicators for this effort, and we must
5 have a way of measuring and reporting the impact
6 credibly and consistently over time.
7 We urge, secondly, that there be a written
8 agreement between Fleet Boston and coalitions of
9 community groups and public sector entities. Urban
10 Edge is a signatory to the proposal submitted to
11 Fleet and BankBoston by the MACDC, the Massachusetts
12 Affordable Housing Alliance, and the Organization
13 for a New Equality.
14 An agreement or comparable written
15 statement is important for several reasons. First,
16 an agreement will clearly articulate the commitments
17 being made by the banks. Second, it will provide
18 details to be monitored and, if necessary, adjusted
19 over time. Third, with the possibility that the new
20 bank may itself merge with another bank in the
21 future, commitments contained in a written agreement
22 have a greater likelihood of surviving future bank
23 consolidations.
24 We urge that the commitment of the merged
25 bank to the Mass. Housing Partnership Fund be
0320
1 converted to equity. There is a critical need for
2 resources to produce and preserve affordable rental
3 housing in Boston and throughout Massachusetts.
4 With reductions in federal and state rent subsidies,
5 we find it difficult to use loan capital for
6 affordable rental housing production. The estimated
7 $30 million to $50 million in equity that the
8 proposed merger could yield would go a long way to
9 help meet the urgent affordable housing needs of
10 Boston and its neighborhoods.
11 Lastly, we ask that the Eggleston Square
12 branch of Fleet Bank remain with Fleet-Boston and be
13 exempt from divestiture. We urge that Fleet and
14 BankBoston branches that were established as a
15 result of negotiations with the Community Investment
16 Coalition be considered in a special category of
17 branches. Two of these branches are located in the
18 Urban Edge service area. We are pleased that the
19 BankBoston branch in Hyde Square will continue to
20 operate as part of the Fleet-Boston system.
21 The Fleet branch in Eggleston Square is the
22 first bank branch ever in this neighborhood and was
23 opened as part of the commitment to take over Bank
24 of New England. The Eggleston Center development
25 was made possible by the Fleet commitment to open
0321
1 this branch and led to considerable economic
2 development in the Eggleston Square area.
3 With the sale of this branch, Fleet-Boston
4 risks sending a message to the community that its
5 needs are not as important anymore. We believe this
6 is not the intention of either bank. We are told
7 that it is a regulatory requirement.
8 If the branch must be sold, we urge that
9 the purchasing bank be required to commit to
10 continue to operate the branch and continue the
11 important position the Fleet branch has gained in
12 the community during the past seven years.
13 HEARING OFFICER SMITH: Would you take
14 about a minute.
15 MR. HACOBIAN: Yes. I'll wrap up.
16 I'm Mossik Hacobian, also from Urban Edge.
17 In response to the package that we received
18 a couple of weeks ago, we understand there's a new
19 interpretation of the initial statement of one plus
20 one equals greater than two.
21 As we understand, we are to measure that by
22 the performance of the BankBoston-Fleet merger, the
23 merged entity, plus the incoming bank. This is a
24 more practical, perhaps, interpretation of what was
25 initially announced, but it requires a much more
0322
1 complicated monitoring process and implementation,
2 which we urge the Fed to require both the merging
3 banks and the incoming bank to commit to monitor and
4 implement.
5 I would like to stress that, as Rita said
6 earlier, a great deal of success has been achieved
7 in our neighborhood with Fleet and BankBoston's
8 commitments. The Eggleston branch -- the Fleet Bank
9 branch in Eggleston Square started the whole
10 revitalization effort that continues.
11 BankBoston was the major contributor to the
12 CDC Tax Rate Collaborative Fund with a $625,000
13 grant, which with Fleet's $200,000 grant and the
14 former BayBank $200,000 loan together make up more
15 than half of this $2 million fund which we're using
16 to invest in the growth of existing businesses and
17 incoming new businesses. Both banks have
18 contributed to production of thousands of units of
19 affordable housing.
20 We think all of this can continue, but it
21 can be achieved better and monitored more
22 effectively with a written agreement that we can all
23 follow over the years to come.
24 Thank you.
25 HEARING OFFICER SMITH: Thank you very
0323
1 much.
2 Staying with the order on the agenda, I
3 would like to go to Mr. Hudson.
4 MR. HUDSON: Good afternoon. My name is
5 Ozell Hudson, Jr. I am the executive director of
6 the Boston Lawyers Committee for Civil Rights. I am
7 here on behalf of my client, the client of the
8 Lawyers Committee, the Fair Housing Center of
9 Greater Boston.
10 Fist of all, I want to thank you for this
11 opportunity and thank many of the other panelists
12 who spoke earlier, especially those who urged some
13 study, some conditions be considered by the Federal
14 Reserve Board before approving this merger.
15 I want to specifically adopt and affirm
16 both the prior oral and written comments that were
17 offered by Senator Dianne Wilkerson, as well as the
18 written objections of the inner city press regarding
19 Fleet's diminished lending, mortgage lending,
20 especially to communities of color.
21 Now, basically, my theme is this, and we
22 don't have a lot of time: It's basically that due
23 to Fleet's predatory and racially discriminatory
24 mortgage lending practices and history, it is
25 imperative that the Federal Reserve Bank use its
0324
1 regulatory authority under the Community
2 Reinvestment Act to establish the parameters by
3 which the Fleet-BankBoston merger may be approved.
4 I most certainly think that it will probably be
5 approved, but I think that there should be some
6 strong conditions.
7 Now, I'm not here to bury Fleet. I can't
8 do that; it's too big a behemoth. But I am here to
9 praise it. I want to praise it for all its
10 charitable contributions, and I want to give it all
11 the recognition it deserves for its long history and
12 pattern of racial discrimination in communities of
13 color across the Commonwealth, in New England, and
14 in my home state of Georgia.
15 Because I know that in the early '90s, I
16 personally directed attorney friends of mine to
17 proceed with negotiating with Michael Bowers, the
18 Attorney General in Georgia, to take up the case
19 against Fleet, to solicit Michael Bowers' help. And
20 sure enough, as reported right here in the Federal
21 Reserve's own publication, Fleet settled the case,
22 home improvement fraud of what, $120 million, 18,000
23 borrowers.
24 That was just only one case. There was
25 another case in Augusta. Then later on, they
0325
1 settled one with the Department of Justice for
2 multimillion dollars, and that's how Bruce Marks got
3 his money. I was surprised to see him standing up
4 here this morning, but welcome on board the
5 struggle.
6 I'm here to praise Fleet for its long
7 history of doing it in very legal ways, doing it in
8 ways through its subsidiary, Fleet Investment
9 Mortgage Company -- I'll get it right eventually in
10 terms of the name, but they know who I'm talking
11 about -- and after Fleet made billions of dollars
12 through this company, then they sold it off, got rid
13 of that dirty laundry. They made billions of
14 dollars. They settled those cases. What's the
15 price of doing discrimination in America today?
16 What's the risk?
17 In other words, Fleet made a conscious
18 choice, I believe, that is, how much can we get away
19 with, and how much are we willing to pay for it?
20 And then it got to the point that they felt they
21 paid enough, they unloaded that baggage, and that
22 was that subsidiary.
23 So let's not be here to bury Fleet. No,
24 we're here to praise them for all their racially
25 discriminatory practices.
0326
1 Now, moving forward, where we need to get
2 to on this thing is the Federal Reserve Board
3 definitely needs to set some parameters, not only to
4 guide this merger, but any of the other megamergers
5 that are going to come forward in the future that
6 will speak to mergers in this area.
7 So, basically, my theme is that, and I want
8 to say this: Not only was it the mortgage lending
9 discrimination, it was the home improvement fraud,
10 because Fleet is saying, "Let the mortgage companies
11 take up the slack."
12 But these mortgage companies are predators.
13 They wouldn't stay in business unless they were
14 getting lines of credit from the banks. And we have
15 dealt with the cases where there was one mortgage
16 company -- well, it was nine of them, Resource,
17 Incorporated, each one of them set up to get a
18 different line of credit from a specific bank. And
19 Fleet settled cases in that regard as well.
20 Also more importantly, why we need this
21 written agreement, Fleet, when it acquired the Bank
22 of New England, the Bank of New England had $100
23 million offered to the community to resolve the
24 Community Reinvestment Act services. Fleet acquired
25 it. It rejected that $100 million commitment,
0327
1 walked away from it, had a side deal with Mayor
2 Flynn over some $11 million.
3 Yes, we need a written, enforceable,
4 specific agreement broken down by geographical area,
5 types of financial services that will be offered,
6 who is to benefit, what is to be the vehicle for the
7 delivery of those services, how it's to be
8 structured. And that's the important theme in order
9 to bring this matter to some type of wholesome,
10 conclusive end.
11 Thank you very much.
12 HEARING OFFICER SMITH: Ms. Malmstrom.
13 MS. MALMSTROM: Tough act to follow.
14 My name is Cathy Malmstrom. I'm the
15 banking and housing organizer for New Jersey Citizen
16 Action, which is New Jersey's largest consumer
17 watchdog coalition with 90 affiliate organizations
18 and 60,000 individual and family members. A
19 sampling of the names of our organizations is
20 included in the written testimony. I won't list
21 them here.
22 In the last 13 years, Citizen Action has
23 negotiated written CRA agreements with 28 banks
24 across the state, including the largest and smallest
25 institutions. As a result of these agreements, more
0328
1 than $8 billion has been set aside for below-market
2 interest mortgages and home improvement loans for
3 low- and moderate-income families, loans to
4 nonprofit developers for construction and permanent
5 financing, and loans to small businesses owned by
6 women and minorities in low- and moderate-income
7 areas.
8 Through 16 loan counseling offices located
9 in urban areas throughout New Jersey, Citizen Action
10 offers free loan counseling to low- and
11 moderate-income, first-time home buyers, as well as
12 home improvement counseling. Two of these offices,
13 by the way, are cosponsored by Fleet Bank.
14 In order to help banks reach targeted
15 populations, Citizen Action has worked to develop
16 and help market special products such as loans for
17 lead abatement and disabilities access remodeling.
18 Because Fleet Bank has not been
19 particularly forthcoming with regard to its overall
20 CRA pledge, and has given absolutely no indication
21 of what portion of its overall pledge will be
22 allocated to the State of New Jersey, Citizen Action
23 is requesting that the public comment period on this
24 merger be extended at least two weeks from the day
25 that Fleet submits a final and specific pledge.
0329
1 Moreover, we request that the merger
2 approval be denied unless the CRA loan and
3 investment commitment of the merged bank is greater
4 than the current level of CRA loans and investments
5 of the two separate banks.
6 When two powerful banks merge, the
7 resulting synergy creates an entity more powerful
8 than the sum of its parts. Nevertheless, the record
9 has shown that big bank mergers often result in
10 lower levels of lending to low- and moderate-income
11 communities than before a merger.
12 To assure that low- and moderate-income
13 communities are not harmed by this merger, there
14 must be a public pledge to increase the commitment
15 to the community by more than the sum of the two
16 entities' previous investments. One plus one must
17 equal more than two.
18 Fleet Bank rose to prominence in New Jersey
19 with the 1996 acquisition of NatWest, a bank with an
20 excellent record of commitment to low- and
21 moderate-income communities in our state. Fleet is
22 currently the fourth largest bank in the state, but
23 has had to struggle to bring up its level of lending
24 to low- and moderate-income communities.
25 In 1995, Fleet, Shawmut and NatWest were
0330
1 all actively lending to single-family borrowers in
2 New Jersey. Combined, they issued a total of 5,344
3 loans. By the end of 1997, more than a year after
4 Fleet had acquired both banks, Fleet Bank made only
5 3,572 loans to single families in New Jersey.
6 Lending to black and Hispanic households had
7 decreased by 32 percent and 29 percent respectively,
8 and loans to low- and moderate-income borrowers and
9 census tracts had decreased about 40 percent.
10 During that time, communication between New
11 Jersey and Fleet's home bases in Boston and in
12 Providence had more static and was less frequent
13 than that between the planet Naboo and the Imperial
14 City on the planet Corescat. We sent out signals
15 but got no help.
16 Fleet's New Jersey CRA staff had little
17 authority of their own, and lines between our
18 outpost and home base often seemed to be down.
19 Since September 1996, New Jersey Citizen Action has
20 had a letter of understanding with Fleet, which we
21 considered to be an agreement, as it contains
22 specific loan products and lending goals for New
23 Jersey.
24 Fleet Bank has already indicated to us --
25 and this is at one face-to-face meeting and at least
0331
1 two phone calls -- that it will not renew this
2 letter when it expires in September, because the
3 expiration would probably occur before the merger is
4 completed.
5 During the past year, the bank has made
6 some progress in meeting goals of this agreement,
7 but only with lots of hard work, guidance, and
8 direct participation of community organizations.