Public Hearing Regarding Bank of America Corporation,
and FleetBoston Financial Corporation
Held on Wednesday, January 14, 2004, at the Federal Reserve Bank of
Boston
Unedited Transcript
|
Public Hearing Regarding Bank of America Corporation,
and FleetBoston Financial Corporation |
0001
1 Volume I
Pages 1 - 423
2
3 FEDERAL RESERVE BOARD
4
Public Hearing Re
5
Application of Bank of America Corporation
6 To Acquire
FleetBoston Financial Corporation
7
8
9 Before Federal Reserve Panal:
10 Dolores Smith, Presiding Officer
Mac Alfriend
11 William McDonough
Patricia Robinson
12
13
* * * *
14
15
Held at:
16 Federal Reserve Bank of Boston
600 Atlantic Avenue
17 Boston, Massachusetts
Wednesday, January 14, 2004
18 8:30 a.m.
19
20
21 Jane M. Williamson
Registered Merit Reporter
22 Carol H. Kusinitz
Registered Professional Reporter
23
24
. 0002
1 P R O C E E D I N G S
2 PRESIDING OFFICER SMITH: I am pleased to
3 welcome you to this important public meeting on the
4 application by Bank of America Corporation to
5 acquire Fleet Financial Corporation. And I'll start
6 by introducing myself.
7 I'm Dolores Smith, the Division Director
8 for Consumer and Community Affairs at the Federal
9 Reserve Board in Washington, D.C. I'm the presiding
10 officer for this public meeting. And I want to
11 introduce our other panelists.
12 At the far end is Bill McDonough, who is
13 general counsel from the Federal Reserve Bank of
14 Boston. Next to him is Mac Alfriend, Senior Vice
15 President, Banking Supervision and Regulation from
16 the Federal Reserve Bank of Richmond. And Pat
17 Robinson, Managing Senior Counsel, Legal Division,
18 from the Federal Reserve Board.
19 We are here today because Bank of America
20 Corporation, Charlotte, North Carolina, has applied
21 for approval to acquire FleetBoston Financial
22 Corporation, Boston, Massachusetts.
23 When the Federal Reserve system considers
24 one of these applications, we look at a number of
. 0003
1 factors under the Bank Holding Company Act. These
2 include financial issues, managerial issues,
3 competitive issues and the convenience and needs of
4 the communities affected.
5 In doing so, we particularly look at the
6 record of performance of the parties under the
7 Community Reinvestment Act. The CRA requires the
8 board to take into account an institution's record
9 of meeting the credit needs of its entire community.
10 The purpose of the public meeting today is
11 to receive information regarding these factors. We
12 will be seeking to elicit this information and to
13 clarify factual issues related to the application.
14 We are really very pleased that so many witnesses
15 have been willing to come and testify at this public
16 meeting. We will have more than 100 groups and
17 individuals represented.
18 I'll make a few remarks about the
19 procedures. This is what we call an informal public
20 meeting. Members of the panel may ask those who are
21 testifying about their testimony. This is not a
22 formal administrative hearing, so we are not bound
23 by rules regarding evidence, cross examinations and
24 some of the formal trappings of that kind of
. 0004
1 proceeding. And because we have so many witnesses,
2 we do need to stick to the schedule, so that
3 everyone who has asked to offer oral testimony will
4 have a chance to do so. We are going to ask the
5 witnesses today to be mindful of the needs of others
6 and to help us stay on schedule.
7 The panels of witnesses have been assigned
8 times and will be expected to stay within those
9 allotted times. We do have a signal system with
10 regard to timing. We have two timers at the table
11 here in front. And the timekeepers will be giving a
12 signal when the witness has one minute left to speak
13 and another signal when the time has expired.
14 There may be some individuals who were
15 unable to sign up in advance to offer testimony. To
16 the extent possible, we want to give them a chance
17 to speak as well. And so at the end of the meeting
18 today we will make the mic available to anyone who
19 would like to make a presentation, time-permitting.
20 One more comment about testimony.
21 Witnesses may submit a written supplement to their
22 oral testimony, but must do so by next Wednesday,
23 January 21st. And then the record will be closed.
24 Any written supplements should be directed to -- and
. 0005
1 here I'm going to give information for the record --
2 but the information also is available on a sheet
3 that is available out front at the registration
4 desk. So any written supplements should be directed
5 to Jennifer J. Johnson, Secretary of the Board of
6 Governors of the Federal Reserve, Washington, D.C.
7 They must be received by 5 p.m. eastern daylight
8 time on January 21st. You may also fax your
9 submission to 202-452-3462.
10 If you haven't turned in copies of your
11 written testimony or if you have any other written
12 statements to put into the record, please leave them
13 with the Federal Reserve staff at the registration
14 desk. It is important for us to get this material
15 for the record.
16 A paper copy of the official transcript of
17 the meeting will be available on Tuesday, January
18 20th, through the Federal Reserve Bank of Boston and
19 the Federal Reserve Board. In addition, the
20 official transcript will be available by close of
21 business on January 20th on the board's public
22 website. And here again I'll say the address, but
23 the information is available at the registration
24 table. The board's public website is
. 0006
1 www.federalreserve.gov/events/public meetings/.
2 With that, we are ready to begin. I will
3 ask each of the panels to start by saying their name
4 and the name of their organization.
5 Mr. Lewis?
6 MR. LEWIS: My name is Ken Lewis. I'm the
7 CEO of Bank of America.
8 MR. GIFFORD: My name is Chad Gifford. I'm
9 CEO of Bank of Boston.
10 PRESIDING OFFICER SMITH: Proceed.
11 MR. GIFFORD: Good morning. Thank you, Ms.
12 Smith. My name is Chad Gifford. I'm chairman and
13 CEO Bank of Boston Financial.
14 I'm delighted to be joined by my new
15 partner, Ken Lewis of Bank of America. On behalf of
16 both of organizations, I'd like to begin by thanking
17 the Federal Reserve for inviting us to address the
18 proposed merger of our two institutions. We welcome
19 this opportunity to discuss some of the reasons
20 behind and benefits of this merger and why we
21 believe this merger is in the best interests of all
22 of our stakeholders -- customers, employees, and
23 communities, as well as our shareholders.
24 In the two months since we announced our
. 0007
1 intention to combine our two organizations, we have
2 worked diligently and honestly to communicate openly
3 about what this merger will mean to the residents
4 and businesses located here in the northeast.
5 Many of our colleagues of Bank of America
6 and Fleet have collectively met with more than 150
7 community-based organizations across this region.
8 The team's mission has been to ensure that we
9 understand and continue to do our very best to meet
10 the needs of our communities.
11 This is certainly not a new scenario for
12 the region and particularly for New England, since
13 it was just over four years ago that I sat before
14 many of you here today to present the case for the
15 Fleet/BankBoston merger. At that time the level of
16 discussion was about preserving our Boston-based
17 institutions. Looking back at the questions that
18 particular deal raised, we believe the merger was
19 the right decision at the right time for our two
20 banks and for the local communities.
21 The rightness of that decision has been
22 playing out in what most of you is a very successful
23 melding of two powerful competitors into a singular
24 customer community and employee-focused institution.
. 0008
1 The FleetBoston franchise brought to the region a
2 full range of community development efforts, most
3 notably through our $14.6 billion community
4 investment commitment. I'm proud to say that we are
5 entering this new relationship with Bank of America
6 having already surpassed this five-year commitment
7 in just four years.
8 To date, the lending and investment efforts
9 total $18.4 billion across the northeast. This has
10 been a truly bank-wide effort calling on the skills
11 and commitment of numerous businesses at Fleet. In
12 other words, we followed through on what we said we
13 would deliver. Incidentally, we are grateful for
14 the dedication of our community oversight committee,
15 a group of regional community leaders which has
16 faithfully met with us over these past four years to
17 provide feedback and community insights that helped
18 accelerate our results.
19 Through our efforts in the community, Fleet
20 received outstanding ratings from our chief
21 regulators, the OCC, in our last CRA exam, including
22 the overall rating as well as in each of the exam
23 categories of lending, investment and services.
24 Bank of America has also earned this
. 0009
1 highest rating, as Ken will outline in a few
2 minutes.
3 Specifically in our community, impact has
4 been felt through, one, focus on our serving low and
5 moderate income neighborhoods through our Fleet
6 Community Bank. FCB is an absolute leader in the
7 nation in this effort.
8 Second, leadership and funding non-profits
9 that support economic activity, youth services and
10 arts and culture throughout the region with
11 approximately $25 million in charitable giving in
12 grants each year.
13 And finally, with the support of our
14 greatest assets, our own people, Fleet employees,
15 volunteers have contributed more than 120,000 hours
16 to community projects each year.
17 I'm proud of where our community's efforts
18 have taken us over these past four years, and I'm
19 proud of our employees and of the company we are
20 today. However, over these past four years the
21 stakes within the financial services industry have
22 gotten much higher. As successful and well
23 regarded, we believe, that the Fleet organization
24 has become, it is significantly more difficult to
. 0010
1 survive solely on a regional level.
2 Recognizing this industry reality, my own
3 struggle internally centered on considering the
4 alternative. Preserving the hometown bank in our
5 region was a passionate and a very personal factor
6 for me.
7 I'm the son of a former New England banker
8 with deep roots in the financial services industry
9 in this region. I take it very seriously. But
10 doing what's best for our franchise, given the
11 realities of financial services, it became more
12 important than simply preserving the Boston base.
13 Thankfully we were in a position where we didn't
14 have to do a deal to survive.
15 We turned the corner on revenue, credit
16 quality, customer service and employee morale. We
17 could operate from a position of strength. We
18 therefore had the time to carefully consider a
19 partner that best matched our deeply-held values in
20 addition to business synergies. We also looked to
21 create the least amount of disruption and change for
22 our customers in our community and our own
23 employees.
24 In that line of thinking, let us digest one
. 0011
1 national franchise, Bank of America. The benefits
2 that this merger with Bank of America present to the
3 region will allow for a secure economic future by
4 providing the financial depth and resources that
5 will meet the competitive challenges raised by
6 worldwide financial service consolidation.
7 Our excitement at the prospect of being
8 part of one of the most respected corporations in
9 the United States is palpable throughout Fleet. Our
10 people recognize the tremendous opportunities and
11 resources this merger will bring to our region and
12 to them personally and professionally.
13 I will tell you that a key component of our
14 agreement was the unprecedented commitment by Ken to
15 maintain Fleet's current employment level in New
16 England, as well as our charitable giving and
17 existing community commitments throughout the Fleet
18 region post-merger. But the rationale and benefits
19 of this proposed merger go much deeper. It creates
20 the second largest financial institution in the
21 United States; in fact, No. 1, when one looks at
22 only American assets.
23 The new organization, with increased size
24 and strength, will be in a position to achieve the
. 0012
1 economies of scale that allow us to invest more in
2 technology, more in people and to develop superior
3 products, the best, and services, such as online
4 banking, brokerage and investment services.
5 This strengthened portfolio of products and
6 services ensures that we can match the increasingly
7 sophisticated needs and expectations of both
8 businesses and the consumers we serve.
9 My confidence in this agreement and its
10 benefits to local communities rests in the
11 tremendous synergies between the two entities and in
12 the areas that mean an awful lot to me personally,
13 including the shared commitment to community
14 development, philanthropy and volunteerism I
15 mentioned a moment ago.
16 Both Fleet and Bank of America view
17 community development very broadly as a strategic
18 opportunity. Our community investment efforts are
19 an integral part of our business strategy. Both
20 banks embrace the concept of diversity -- valuing
21 individuals of all races, gender, sexual orientation
22 as customers and employees. Each focus on employee
23 development and opportunity and holds the value of
24 inclusion among our highest priorities.
. 0013
1 Due to our unique franchises, there is
2 little to no overlap in our retail distribution.
3 Therefore, there will be no disruption of service to
4 our customers due to divestiture of bank branches.
5 Additionally, and as I referenced earlier, we will
6 sustain total employment levels in New England and
7 will sustain our levels of customer-facing
8 employees, which again mean continuity in delivering
9 our products and services to our customers.
10 For those who are opposed to this merger
11 based on the grounds that our headquarters city in
12 our region will be losing their local focus, I point
13 to all that has been committed to date on behalf of
14 the merger to preserve in advance the needs of the
15 northeast in community development, philanthropy and
16 employment.
17 That point is further demonstrated in the
18 executive leadership that has been advanced to date
19 to manage the new company. Two of the most senior
20 executives of the new corporation will have national
21 responsibilities and yet be Boston-based; Brad
22 Warner in our premiere in small business and Brian
23 Moynihan in wealth and investment management. In
24 addition, two of my closest colleagues at Fleet,
. 0014
1 Gene McQuade and Jay Sarles. Gene will be president
2 of the new corporation. Jay will be a very
3 important strategic advisor to Ken.
4 More specifically, in terms of maintaining
5 local leadership and decision-making for this
6 region, we were pleased to announce the appointment
7 earlier this month of Ann Finucane, as president of
8 the northeast. In this new role, Ann, well-known to
9 Boston, will oversee the development of a strategic
10 plan focused on a successful transition in the
11 northeast, as well as continued business success in
12 the region. She will ensure the cross-functional
13 coordination of the company's efforts in our
14 communities, including charitable giving
15 sponsorships, customer service issues, public
16 policy, government and media relations and other
17 strategic needs of the market.
18 Despite all the compelling advantages of
19 the merger, I have to admit this was the toughest
20 decision I have had to make personally here in my
21 career, but I also believe with increasing
22 conviction that this has been one of the very, very
23 best. I am personally committed to helping Ken and
24 our associates merge us into a company that indeed
. 0015
1 does value employees, customers and the community.
2 Earlier I mentioned the size and strength
3 of our new company. It's compelling. But this is
4 much more than about size or quantity. It's about
5 quality as well. I have heard Ken state on many
6 occasions that he wants Bank of America to be the
7 most admired company in the world, not necessarily
8 the biggest, not only the most profitable, but the
9 most admired. This is a company with deeply-held
10 values and commitment, vibrancy and opportunity, and
11 I am very proud to be part of it.
12 In closing, let me thank each of you who
13 cared enough to come to offer your support and even
14 raise concerns about the significant transaction
15 before us.
16 And now I'm delighted to turn it over to my
17 new partner, Mr. Ken Lewis.
18 MR. LEWIS: Thanks, Chad. I appreciate
19 your comments about the Bank of America and the
20 bright future our companies and our communities
21 share. I could not agree with you more about the
22 assessment of where we stand and where we're headed
23 together.
24 I've talked a lot over the past two months
. 0016
1 about the competitive and business rationale for
2 this merger and why I believe our new company will
3 be better positioned to serve our customers and our
4 shareholders. Chad covered some of this today, and
5 my thoughts are detailed in the public speeches I
6 made since we announced the merger.
7 Today's meeting, though, has a specific
8 purpose. I'd like to use my time here to address
9 that purpose directly. Today we're here to talk
10 about the effect the combination of our companies
11 will have on our communities and specifically those
12 in our communities who are most in need of
13 affordable, convenient access to financial services.
14 When I assumed the leadership of our
15 company three years ago, I set a simple, clear goal,
16 as Chad just mentioned. I said we will aspire to be
17 the most admired company in the world. Achieving
18 this goal requires that we set and achieve high
19 standards of performance for all of those who have a
20 stake in the company -- not only customers and
21 shareholders, but also the leaders, partners and
22 citizens with whom we work to make all of our
23 communities strong.
24 Our goal in any merger is to build a
. 0017
1 business. This means that working with our new
2 teammates, we intend to lend more money, develop
3 more affordable housing, do more business with
4 minority suppliers, provide more charitable giving
5 and generally make a bigger difference in our
6 communities that a predecessor could have as an
7 independent institution.
8 Simply put, our goal is to be the most
9 admired, the most visible and most effective
10 financial institution in the communities where we do
11 business.
12 I'll respond directly to some of the
13 concerns we've heard from community partners in
14 regard to our planned merger, and I'll discuss my
15 company's accomplishments in community
16 development-related activities, as well as our plans
17 and goals in the following five areas: Community
18 development banking; philanthropy; access to
19 financial services for low- and moderate-income
20 customers; minority business development; and
21 community leadership and associate volunteerism.
22 In each area our approach is based on three
23 principles: One, national goals and corporate
24 values delivered and differentiated locally. Two,
. 0018
1 proactive partnerships with local community-based
2 organizations to achieve shared goals. And three,
3 fully transparent reporting and strict
4 accountability.
5 By adhering to these principles, we are
6 striving to set the highest standards of performance
7 and accountability, not only for our industry, but
8 for the business community in our country.
9 As you know, Bank of America has a strong
10 and consistent record of achievement in community
11 development banking. We have achieved and
12 maintained outstanding CRA ratings throughout our
13 franchise for many years. We've been a leader in
14 our local markets. And we have consistently sought
15 out local community-based partners to help us
16 achieve our community development goals.
17 Consider some of our results:
18 In the five years since we began our
19 ten-year, $350 billion commitment to community
20 development lending and investing, we have loaned
21 and invested more than $230 billion in traditionally
22 underserved American communities. We said at the
23 time that the commitment represented a floor and not
24 a ceiling and our performance proves this point.
. 0019
1 We are ahead of schedule and at our current
2 pace would exceed the $350 billion goal before the
3 eighth year of the ten-year commitment. This
4 performance -- in combination with our plan to merge
5 with Fleet -- is why we decided to set a new, even
6 more ambitious goal.
7 Last week we announced that starting in
8 2005, the new Bank of America will set a community
9 development lending goal of $750 billion over ten
10 years, once again setting a higher standard for
11 community development banking in our country.
12 In pursuing these goals, we have worked
13 with hundreds of community groups with shared values
14 and goals. Examples are our partnership with the
15 Enterprise Foundation, through which we've helped
16 create thousands of units of affordable multi-family
17 rental housing over the past 20 years; our 16-year
18 partnership with ACORN, with which we've financed
19 new homes for more than 23,000 families in 18 cities
20 over the past four years; our seven-year
21 relationship with Neighborhood Assistance
22 Corporation of America, with which we helped 2,300
23 families in 21 cities buy homes in 2002 alone, and
24 our most recent work with National Council of
. 0020
1 LARASA, with which we have recently begun to work to
2 help Hispanic customers throughout the nation buy
3 their own homes.
4 We also maintain membership in the Federal
5 Home Loan Bank of Boston.
6 In addition to housing finance, we believe
7 small business lending is an important source of
8 economic support for underserved communities. We
9 have been ranked the number one SBA lender in the
10 country for the past two years, with almost 27
11 percent of all small business or small farm loans
12 made in low- and moderate-income census tracts.
13 In addition, we made 22 percent of all our
14 government-guaranteed loans to minority-owned
15 businesses and 24 percent of such loans to
16 businesses owned by women.
17 Now, even as we consistently set and exceed
18 ever-higher standards in community development and
19 even as we demonstrate a record of working with
20 community partners to achieve shared goals, there
21 are those who oppose this merger because we have not
22 signed CRA agreements or itemized our goals by
23 market or product.
24 I understand the passion these
. 0021
1 organizations have for their communities. As I've
2 said, we share common goals. However, their desire
3 to receive the greatest financial support possible
4 for their individual causes or communities should
5 not overshadow the fact that our pledge -- the
6 largest of its kind ever -- is designed to benefit
7 all of our communities.
8 When we created this pledge, we projected
9 that about $100 billion of it would be deployed in
10 the northeast region of the country. But we decided
11 for good reasons not to itemize it by market.
12 Because community needs and circumstances are always
13 changing, we believe the best approach is a pledge
14 that establishes goals on a nationwide basis, yet it
15 is flexible so we can respond to capacity and demand
16 within each market.
17 We made the same case five years ago in
18 California, and our results are proof that our
19 approach works. The state of California represents
20 about 34 percent of all deposits at our company, and
21 over the past five years 35 percent of all our
22 community investment dollars have been deployed
23 there.
24 Our outstanding record of achievement,
. 0022
1 accountability and public reporting of results
2 demonstrates that CRA agreements and itemized
3 commitments are unnecessary for our company. Our
4 goal is to leverage the power of our financial
5 strength and geographic reach to serve all of our
6 communities with the products, services and
7 resources they need, when and where they need them.
8 Philanthropic investment in our communities
9 has been an important part of our culture throughout
10 the history of our company. Contrary to what you
11 may have heard from some of our critics,
12 philanthropic giving at Bank of America is not
13 declining. Far from it.
14 In 2002 we gave more than $75 million. In
15 2003 we gave more than $81 million. In 2004 our
16 Foundation budget is $84 million. And this is cash.
17 Combined with Fleet's $25 million budget, we expect
18 to give at least $109 million to non-profit
19 organizations this year. Decisions about how to
20 deploy these funds will be made in accordance with
21 the priorities identified by local leaders,
22 following our philosophy of neighborhood excellence
23 in corporate giving. This simply means we believe
24 that local leaders are best able to identify the
. 0023
1 needs of their neighborhoods, so we use a
2 grassroots, bottom-up funding strategy.
3 We think this record and the trend it
4 represents is impressive. But again, we have staked
5 ourselves out as the company that will set the
6 highest standards for American business. So we're
7 raising the bar. On the same day we announced our
8 new Community Development Lending Goal, we also
9 announced, for the first time ever, a goal for
10 philanthropy. $1.5 billion over ten years, starting
11 in 2005. This will make us the most generous
12 corporation in American by a wide margin.
13 With this pledge, our Foundation will be
14 better equipped than ever to work with our
15 businesses, our associates and our community
16 partners to support the vital programs and
17 organizations that make our communities strong.
18 In addition to our community development
19 and Foundation activities, we also work proactively
20 to ensure that we're providing affordable,
21 accessible products and services to all segments of
22 our communities. Consistently, Bank of America
23 originates more mortgage loans to minority borrowers
24 than any other mortgage lender. Also, Bank of
. 0024
1 America originates a higher percentage of mortgage
2 loans to minority borrowers than most lenders. At
3 the end of 2002, 25 percent of our home loans were
4 made to minority customers, while the industry
5 average for all lenders is only 18.8 percent.
6 We also offer a basic checking product that
7 is well-suited to low- and moderate-income
8 customers: MyAccess Checking. This product features
9 a low opening deposit of $25, free checking with
10 direct deposit, no minimum balance, unlimited check
11 writing, free online banking with bill pay, a check
12 card with Photo Security option, and unlimited
13 access to funds using the our nationwide ATM
14 network, online banking and telephone banking.
15 We are also constantly working with
16 community groups to develop new, innovative products
17 specifically targeted to the needs of minority
18 individuals and communities.
19 About 15 years ago our company began to see
20 a great need to take affirmative steps to support
21 small, entrepreneurial companies owned by women and
22 minorities through our supplier procurement process.
23 We immediately put a team in place and rapidly
24 became one of the nation's leading practitioners of
. 0025
1 supplier diversity. In fact, we've twice been named
2 Corporation of the Year by the Minority Supplier
3 Development Council.
4 Five years ago we added companies owned by
5 disabled people to the program and continued to
6 pursue our goals aggressively. We have a goal of
7 directing 15 percent of all supplier spending to
8 companies owned by women, minorities or the
9 disabled. In 2002 we spent $545 million with these
10 companies, representing 7 percent of overall
11 spending.
12 While final figures for last year are not
13 yet available, based on results of the third
14 quarter, we expect to have reached nearly 9 percent
15 in 2003.
16 Our Multicultural Supplier Development team
17 is working with a number of organizations and
18 agencies to increase the percentage spent with such
19 firms. We have hosted eight annual Supplier
20 Diversity Showcases in major markets to provide
21 vendors an opportunity to meet with our business
22 leaders. And we are also a member and strong
23 supporter of the National Minority Supplier
24 Development Council.
. 0026
1 Finally, I'd like to take just a moment to
2 talk about one of the most important aspects of our
3 culture at Bank of America: community leadership and
4 associate volunteerism.
5 At the corporate level we provide
6 leadership to our communities by putting our
7 financial muscle behind important community
8 projects -- by advocating for a stronger CRA and by
9 working with local governments and community
10 organizations to achieve shared goals. At the local
11 level, we encourage all of our associates to provide
12 leadership to their communities, sharing their
13 personal talents and professional skills with the
14 public and private organizations that form the
15 foundation of community life.
16 We also have a strong culture of associate
17 volunteerism. Associate volunteers receive two
18 hours of paid time off every week to work in a
19 school of their choice -- a program that has the
20 potential to generate up to 6 million volunteer
21 hours for our nation's schools each year. Team Bank
22 of America supports local councils within the bank
23 that identify volunteer opportunities for
24 associates -- and a Volunteer Grants program offers
. 0027
1 cash grants in an associate's name to organizations
2 at which associates volunteer.
3 Like any successful business, we understand
4 that our associates are our most precious
5 resource -- not just for our customers, but for our
6 communities as well.
7 In conclusion, we believe this merger
8 raises no concerns under federal or state law, and
9 we urge the Board to swiftly approve our
10 application. Both banks are well-managed and
11 well-capitalized, and our new company will continue
12 to be so upon completion of the merger. Both banks
13 have strong records under the Community Reinvestment
14 Act. The merger does not pose any antitrust
15 concerns and will not result in any merger-related
16 branch closures. The surviving company will hold
17 9.94 percent of the nation's deposits, less than the
18 federal cap on deposits held by one institution.
19 To date, the Board has received hundreds of
20 letters expressing support for the merger, while
21 less than a third of the letters received by the
22 Board have expressed opposition to the merger. The
23 supportive letters have been sent by community
24 development corporations, state and local
. 0028
1 governmental agencies, business and civic
2 organizations, cultural, philanthropic, educational
3 and religious organizations, and customers from
4 across both banks' franchises. Each tells a
5 different story about the positive difference we
6 have made in the communities where we do business.
7 As I said at the beginning of my remarks,
8 our goal at Bank of America is to become the world's
9 most admired company in the eyes of all our
10 stakeholders -- customers, shareholders, associates,
11 community partners and the general public. We are
12 pursuing this goal by setting and achieving higher
13 standards every day in all we do. Leveraging all
14 the parts of our company to support our communities
15 is a fundamental part of our culture and the way we
16 do business. It's essential to the future health of
17 our company. Most important, it's simply the right
18 thing to do.
19 This has been our history, and the proof is
20 in the public record of our performance. It also
21 will be our future, as expressed in the new goals we
22 have set in community development, philanthropic
23 giving, business performance and service to our
24 customers.
. 0029
1 I look forward to working with all of our
2 community partners in the Northeast and across the
3 nation as we pursue our common goals. And I look
4 forward to all we'll accomplish together for our
5 communities and for our country.
6 Thank you.
7 PRESIDING OFFICER SMITH: Questions from
8 the panel?
9 MS. ROBINSON: I have a question. How and
10 where do you plan to administer your CRA programs in
11 the region where FleetBoston is located?
12 MR. LEWIS: You said, how do we plan to
13 administrate?
14 MS. ROBINSON: Right. How and where.
15 MR. LEWIS: Every region -- first, there's
16 a national organization and then subsequently
17 there's local teams and a foundation by which we
18 fundamentally -- there are a group of people who
19 would actually carry out the activities and then of
20 course make sure that the records are appropriate,
21 so that we can consolidate them on a national basis
22 for you in your assessment of how we do or the OCC.
23 And so it's both a national organization, but
24 delivered locally and sublevels of administration
. 0030
1 done.
2 PRESIDING OFFICER SMITH: Any other
3 questions?
4 (No response)
5 PRESIDING OFFICER SMITH: Thank you very
6 much.
7 Welcome, Mr. Congressman.
8 MR. FRANK: Thank you.
9 PRESIDING OFFICER SMITH: Start by
10 identifying yourself for the record.
11 MR. FRANK: My name is Barney Frank. I am a
12 member of the United States House of
13 Representatives, representing the Fourth
14 Congressional District of Massachusetts, which
15 starts about three miles from here. And I serve as
16 the senior democrat on the Committee on Financial
17 Services.
18 I want to note by saying at the beginning
19 I've been in touch with a number of my congressional
20 colleagues. My colleague, Mr. Capuano, was at a
21 press conference with me yesterday. I know Mr.
22 Lynch, who represents the place where I was sitting,
23 Mr. McGovern has spoken, and in fact, I appreciate
24 the fact by having this hearing, which is not
. 0031
1 automatic. And all of the members of the
2 congressional delegation through the Massachusetts
3 House Senate did write to the Federal Reserve to ask
4 for this hearing, and I appreciate its being
5 granted.
6 I want to begin by some general comments
7 before getting to my specific ones. And they
8 probably deal with what we've said. I want to begin
9 by mentioning something that he didn't say, but some
10 of us have been asked, "Well, what's the
11 justification for going to this bank, this private
12 corporation owned by stockholders, and making these
13 requests, demands, et cetera?" And I think we
14 should be very clear about that.
15 The banking system in America exists in
16 part because of governmental assistance. It's a
17 private sector operation. And the purpose should be
18 to make a profit. I believe in the free market.
19 And I think the way the free market works is the way
20 in which we generate prosperity. But we haven't
21 decided to have an unrestricted market.
22 For example, one of the reasons that people
23 put their money into banks is the existence of
24 Federal Deposit Insurance. The Federal Deposit
. 0032
1 Insurance system is a very significant example of
2 government assistance to the banking system.
3 The Community Reinvestment Act is specific
4 in its intent.
5 It says that when a financial institution
6 takes advantage of the various federal rules and
7 goes into a particular community and provides this
8 financial intermediary function, there is some
9 obligation to make sure that the community in which
10 the money is raised is beneficiary, because
11 theoretically you could have a situation in which
12 money was put in and simply taken out. And it is a
13 somewhat local statute.
14 Now, there is some suggestion from time to
15 time that we're being too parochial, and I must say
16 that in some of the conversations I've had in
17 requesting that some specific commitments be made,
18 I've gotten the impression that my intervention was
19 not entirely welcome. I don't take that personally.
20 I am used to not being always welcome in various
21 venues. It sort of goes with the job.
22 But I do want to give why I think there is
23 justification for some localism. It's not simply
24 that money is raised in the community. I spent much
. 0033
1 of last year at the request of, among other
2 institutions, Fleet and Bank of America working on
3 legislation which in the end said to every state in
4 this country, You may not pass legislation that
5 regulates the granting of credit to individuals,
6 because overwhelmingly the financial institutions of
7 this country said to us we cannot have states making
8 their own choices with regard to consumer protection
9 in this field.
10 We understand that consumer protection is
11 important, but we need to have a national system.
12 So I participated, and we passed a national law
13 which preempts state law. The State of
14 Massachusetts by the law we passed cannot do certain
15 things it might wanted to have done with regard to
16 protecting consumers, with regard to identity theft
17 and the granting of credit, et cetera. In return, I
18 believe we got very significant consumer protection.
19 But the point is this: I do not think
20 institutions can tell us on one hand that at the
21 federal level we should pass legislation that
22 restricts what local governments can do, but then
23 tell the federal government that we should not then
24 intervene to try to be an advocate for local
. 0034
1 interest to make some of their own decisions here.
2 I think given the logic of a technological
3 economy today, that makes sense, but I think it also
4 justifies some local concerns. So I want to be
5 clear. We are talking here not about this
6 gratuitous intrusion on this purely private entity;
7 but rather, we are talking about an entity which
8 performs an enormously important service, which does
9 its job very well, which plays a very important role
10 in our capitalistic economy, which serves us very
11 well, but which benefits from Federal Deposit
12 Insurance, which benefits from a federal law that
13 preempts states from making some of their own
14 consumer protection laws. This is an inter-mixed
15 system. And I say that because -- and I don't mean
16 to address this to the people here in my dealings
17 with the people at Fleet and Bank of Boston. I have
18 not found this to be their attitude. I don't mean
19 to impute it to them. I don't mean to impute it to
20 Bank of America. I haven't had great dealings with
21 the Bank of America yet.
22 But there is an argument that essentially
23 becomes very one-sided. It says that what the
24 government should do is, in fact, to protect the
. 0035
1 interests of the financial institutions -- by the
2 way, in addition to what I've talked about, we
3 passed a bill this year that allows financial
4 institutions, banks, to send only copies of checks.
5 We have given relief to banks -- it's called "check
6 truncation," which is very important to the Feds.
7 To use a technical term, you used to have to schlep
8 a lot of checks around, and you wouldn't have
9 to do that anymore. And so we passed a law. And
10 now you don't automatically get your checks. You
11 can get copies of your checks.
12 We've done other things to facilitate this.
13 We are endangering America here -- and I really want
14 to set this in context, because again, we have
15 people acting as if this is somehow some intrusion
16 on or exception to what should be the free
17 enterprise system. As I said, I'm a great believer
18 in capitalism. I think it works very well. The
19 rest of the world, where that has not been
20 discovered, is discovering it. And the essential
21 element in capitalism is inequality. We should
22 understand that if you are a believer in the free
23 market, you are a believer that inequality is an
24 important part of the system. Because if people are
. 0036
1 not rewarded unequally, then the system does not
2 work.
3 I also believe, however, that left entirely
4 to its own, our capitalist system will produce more
5 inequality than is necessary for maximum efficiency.
6 And the Community Reinvestment Act in this
7 proceeding is one way in which we seek to diminish
8 inequality -- not abolish it -- diminish it, and
9 diminish it in a way that I do not think will in any
10 way interfere with the efficiency of the market
11 system.
12 So that's the context in which we are
13 operating. It's a context in which banks receive
14 benefits from the federal government, receive
15 protection from the federal government, deposit
16 insurance, legislation that will improve the
17 efficiency. Indeed, over the past few years there
18 have been a number of laws that have helped banks.
19 When I got to Congress, there were very
20 great restrictions on the ability of banks to branch
21 to different states. There were very severe
22 restrictions on the ability of banks to get into the
23 securities business and vice versa.
24 When I first got there, many institutions
. 0037
1 resisted the banks being able to do that.
2 You said two minutes. I thought I had more
3 than that. What's my time obligation?
4 TIME KEEPER: Ten.
5 MR. FRANK: Now let me get specific. When
6 I approached the banks, I asked for some specific
7 commitments here in Massachusetts. And here's where
8 I will take issue with Mr. Lewis on two grounds.
9 First of all -- and partly it's the
10 statute. I am pleased to learn of past performance,
11 but I think it is legitimate also to be more future
12 oriented.
13 Now, I have to say I think there's a flaw
14 in the Community Reinvestment Act here. The
15 Community Reinvestment Act does not, I think,
16 empower the regulators enough to look at things.
17 The Community Reinvestment Act comes into play here
18 for a very specific reason. No one thinks that it
19 would be a good idea regularly to revoke charters to
20 financial institutions because they failed the
21 Community Reinvestment Act obligations. It would be
22 very disruptive. It is unlikely to be done. And I
23 must say with all due respect, the Fed is
24 particularly unlikely to do it. The notion that
. 0038
1 you're going to go and revoke charters because
2 people didn't do enough for poor people is a harder
3 one to accept than some others with which I have to
4 live with from time to time.
5 But when a decision has to be made to go
6 forward, that's when the Community Reinvestment Act
7 ought to be coming into play.
8 Secondly, I am glad to know about national
9 activity, but it's the Community Reinvestment Act.
10 And it's particularly important here because this is
11 a unique moment. The last major financial
12 institution rooted here in Boston, in New England,
13 is about to be bought up by people outside. That
14 means that national commitments won't work. We need
15 to have some fairly specific commitments.
16 Now, I'm glad to know that some of them
17 have been made; staying in the Federal Home Loan
18 Bank system's affordable housing program, cashing
19 out part of the Mass. Housing partnership, agreeing
20 with Mass. affordable housing.
21 A week ago I would have been here asking
22 you to reject this because of a lack of specificity.
23 I'm not doing that today. I wish I could be more
24 enthusiastic, but I have moved from opposition to
. 0039
1 saying it's incomplete. And I know we will have
2 more work to do.
3 So I just want to close by saying this:
4 We've been told we're going to make some specific
5 commitments further on. I do want to stress again
6 that I disagree with the suggestion that it's
7 somehow inappropriate to look for state-specific and
8 community-specific rules. I think that violates the
9 spirit of the Community Reinvestment Act.
10 And all I can say is this: I expect if
11 this is approved -- and I would not bet heavily
12 against that prospect -- as a member of the
13 Financial Services Committee, it will be my
14 intention to talk to the chairman of that committee.
15 And about seven or eight months from now, after
16 we've had a chance to get further, after the
17 November elections, to have a hearing here of the
18 Financial Services Subcommittee, in which we could,
19 several of us, review the progress that has been
20 made, both with regard to the specifics of this
21 merger and because I think this is the time to take
22 a look at the Community Reinvestment Act.
23 Thank you for your time.
24 PRESIDING OFFICER SMITH: Thank you very
. 0040
1 much. We have Panel No. 2. And you each have three
2 minutes. I just want to remind you we have the
3 timer, who will give you the signal when you have
4 two minutes left, mainly to let you know how quickly
5 one minute goes. And then when you have one minute
6 and then when your time has expired, if you're in
7 the middle of a sentence when the time has expired,
8 please finish, but make it a shortening.
9 I'd like for you to start by giving your
10 name and the name of your organization, if you're
11 representing one. And then just to remind you that
12 if you have written testimony, either present it to
13 our registration folks or submit it. You may submit
14 comments by a week from today, close of business
15 information at the registration table.
16 If you will start, Mr. Kriesberg.
17 MR. KRIESBERG: Good morning. My name is
18 Joseph Kriesberg. I'm the president of the
19 Massachusetts Association of CDCs, and I have two
20 minutes left now.
21 We appreciate that the Federal Reserve is
22 having this hearing, and we think it's very
23 important because Massachusetts is not North
24 Carolina and it's not California. And it's not just
. 0041
1 that the weather is different here. I'm surprised
2 that you still want to buy this bank, given today's
3 weather, but it's because we have our own
4 Massachusetts state community reinvestment law that
5 must be conformed with. And that law does require
6 the banks to show a net benefit to this merger going
7 forward.
8 And so it's a very different situation than
9 I believe any other state, but certainly most other
10 states. And that is why from the beginning we have
11 asked Bank of America to do what Fleet and Citizens
12 and Sovereign and all the major banks have done in
13 the past decade, which is to lay out their plans
14 going forward for community investment in
15 Massachusetts.
16 And I am pleased to say that after a couple
17 of months of uncertainty about that, the bank has
18 agreed to adopt a business strategy for
19 Massachusetts and to make that available to the
20 public and to work with us in putting that together.
21 And we have made some progress on that, some of the
22 things that Congressman Frank mentioned. But we
23 think that there is a lot of work that has yet to be
24 done. And until such time that it is done, we would
. 0042
1 encourage the Fed not to improve the merger.
2 Some of the things involve money,
3 obviously -- lending, investments and so forth --
4 and very much fit within the $750 billion national
5 commitment. But it isn't just about dollars and big
6 dollars. That commitment tells us that Bank of
7 America is a very large institution, and we already
8 knew that.
9 Some of the things that are most important
10 don't involve dollars at all. They involve the
11 availability of branches in low income areas, the
12 availability of low cost checking accounts, like the
13 basic banking account here in Massachusetts.
14 Sometimes we want less dollars, not more.
15 We want small business loans, not big business
16 loans. And so sometimes what we're looking for is
17 for the bank to make smaller loans which may result
18 in a lower total dollar amount, but more impact. So
19 we think there's still a lot of work to be done in
20 terms of figuring out how this is going to affect
21 Massachusetts and my colleagues. My board members
22 and members that are here with me today are going to
23 talk a little bit more about our experience in the
24 communities in Massachusetts and the needs that we
. 0043
1 have -- the credit and capital needs that we have in
2 our communities.
3 Thank you.
4 PRESIDING OFFICER SMITH: Ms. Lattimore?
5 MS. LATTIMORE: I'm going to read from my
6 testimony. My name is Gail Lattimore. I'm the
7 Executive Director of the Codman Square Neighborhood
8 Development Corporation, also known as "NDC."
9 The NDC is a non-profit community
10 development corporation located in the South
11 Dorchester neighborhood of Boston.
12 Our mission is to stabilize our inner-city
13 service area, on behalf of the 50,000 plus primarily
14 low and moderate-income residents, by implementing
15 initiatives that focus on real estate development,
16 assets and wealth-building and community planning
17 and organizing.
18 Over the past 23 years we developed over
19 600 units of affordable housing, 50,000 square feet
20 of commercial space, and have supported the
21 strengthening of a large number of civic and block
22 associations and small businesses.
23 Our accomplishments are due in no small way
24 to the impact of resources available through our
. 0044
1 advocacy around and involvement in key community
2 reinvestment issues.
3 As has been the case nationally, over the
4 past decade or more there have been a number of
5 mergers and acquisitions of locally-based banks in
6 New England. As a member of the Massachusetts
7 Association of Community Development Corporation,
8 the Codman Square Neighborhood Development Corp. has
9 worked, as these transitions occurred, to ensure the
10 strong community investment plans which positively
11 impact community development needs in low and
12 moderate income neighborhoods are put in place. I
13 want to speak a little bit about our past experience
14 with Fleet in this regard and then talk about some
15 of the concerns we have going forward around this
16 particular acquisition.
17 Fleet's early track record in our
18 neighborhood raised some significant concerns. In
19 the early to mid 1990s certain census tracts in the
20 Codman Square area experienced the highest rate of
21 home foreclosures than any other area of Boston.
22 Upon investigation of this troubling
23 situation, the Codman Square NDC discovered, among
24 other things, that unscrupulous speculators were
. 0045
1 flipping dilapidated homes to unsuspecting and
2 unprepared low/moderate income homebuyers at well
3 above market sale prices. These sales prices were
4 supported by questionable bank appraisals. Fleet
5 Bank was the investor in a number of these loans.
6 Around this same time, Fleet was involved
7 in acquiring Bank of Boston. The development of a
8 local community investment plan was key to the
9 Codman Square NDC's ability to resolve this issue.
10 It was within this context an environment that the
11 Codman Square NDC was able to negotiate with Fleet
12 to address concerns related to Fleet's home mortgage
13 lending operations and practices in our service
14 area.
15 Based on Fleet's track record in our
16 community, prior to these negotiations, the Codman
17 Square's NDC Board's policy was to not do business
18 with Fleet. Since these early days, things have
19 evolved more positively. With the Fleet/BankBoston
20 merger and the development of a responsive local
21 community investment plan and Fleet's apparent
22 embracing of the First Community BankBoston
23 approaches to community development lending and
24 support, those working within the community
. 0046
1 development field have seen increasing partnerships
2 with Fleet. The Codman Square NDC is currently
3 working with Fleet as a lending partner on the
4 development of 26 units of affordable housing with
5 the prospects of partnering to develop an additional
6 50 units within the next year. This progress has to
7 continue and be further strengthened with Bank of
8 America's acquisition of Fleet.
9 A local community investment plan is
10 required to continue this progress. The strong
11 existing network of community development
12 corporations and other such groups in Massachusetts
13 that understand and have successfully advocated for
14 the financial and community development needs of our
15 communities stands ready to continue to work with
16 Bank of America on this plan. The Codman Square NDC
17 urges you to condition Bank of America's acquisition
18 of Fleet Bank on the development of such a plan so
19 that we don't lose the significant progress that
20 we've made with Fleet, as it is incorporated into
21 the Bank of America.
22 Thank you for allowing me to testify.
23 PRESIDING OFFICER SMITH: Thank you.
24 MR. THAL: Good morning. My name is
. 0047
1 Richard Thal. I'm Executive Director of the Jamaica
2 Plain Neighborhood Development Corporation.
3 Like a lot of inner-city neighborhoods, our
4 community for many years suffered the effects of
5 disinvestment. In fact, some of the first
6 organizing efforts in this Commonwealth were
7 undertaken by residents of our community in response
8 to the systematic disinvestment in neighborhoods
9 similar to ours.
10 I'm happy to say, however, that especially
11 over the last ten years or so, we have seen a lot of
12 improvements. And Fleet and its predecessor
13 entities have played an important role in some of
14 the changes that we've seen and some of the
15 investments that they've made, whether it's in
16 affordable housing cooperatives for low income
17 families -- the first major supermarket to come back
18 into the inner city in about 15 years in Boston that
19 Fleet was a major investor in, the creation of
20 opportunities for first-time home buyers on
21 long-abandoned sites. And we are starting to see
22 over the last few years -- though the progress has
23 been slower -- starting to see progress in an area
24 that is very important to us, which is the lending
. 0048
1 activities with small businesses.
2 We have the largest Latino business
3 district in New England with over 100 businesses in
4 our main area, over 80 percent of whom are owned by
5 Latino individuals and families. And the process of
6 improvement and openness to that market has been
7 slow.
8 I'm happy to say that where a few years ago
9 there was almost no opening and very little activity
10 with the entrepreneurs in our neighborhood, that
11 that has slowly been changing. And that's a
12 positive development, but we certainly are very
13 concerned -- and especially looking at some of the
14 larger statewide and regional numbers of some of the
15 small business lending that Fleet has been involved
16 in and Bank of America, as it enters this market, we
17 feel that that emphasizes the need for a very
18 specific plan with specific targeted goals, so that
19 those low income business owners and people of
20 color, who are so important to our community, have
21 the opportunities that they need to move forward.
22 Thank you.
23 MS. VAN CAMPEN: Good morning. My name is
24 Jennifer Van Campen, and I'm the Executive Director
. 0049
1 of the Waltham Alliance to Create Housing, a
2 community development corporation in Waltham,
3 Massachusetts.
4 Waltham is a suburban community, but we
5 still have poor people. WATCH serves about 350 low
6 and moderate income individuals and families each
7 year, but there are over 19,000 families in Waltham
8 who are eligible for affordable housing. There are
9 over 8,000 low-wage workers in Waltham looking for
10 better jobs. And there are over 2,000 recent
11 immigrants looking for English classes. WATCH needs
12 to help more families in the coming years, not less.
13 We need to make sure that the Fleet/Bank of America
14 merger adds up to more, not less for our
15 communities.
16 Fleet has been a strong partner of WATCH's
17 over the last few years. Fleet's small business
18 products have met several of our company's needs
19 while their charitable donations have launched
20 several new initiatives in Waltham. Fleet is a
21 major employer in Waltham and has lent volunteers to
22 several of our projects and programs. Our
23 job-training program has placed several people in
24 Fleet's branches. A recent Fleet donation has
. 0050
1 helped position us to acquire a 10-unit residential
2 property. We have come to rely on Fleet. Will we
3 have the same partner in Bank of America? Without a
4 specific commitment to our cities and towns, how can
5 we be sure that this merger will help and not hurt
6 our efforts?
7 Banks will merge and local control will
8 evaporate. Banks will become fewer and power will
9 consolidate in far-away places. But we don't have
10 to accept less. If huge national banks are the
11 trend, then let state-by-state plans be the trend,
12 too. If banks can announce huge national plans, let
13 them announce detailed local plans, too. They're
14 smart. They can do both. Thank you.
15 MR. VAN METER: Thank you for the
16 opportunity to testify today. My name is Bob Van
17 Meter. I'm the Executive Director of the
18 Allston-Brighton Community Development Corporation
19 which serves Allston-Brighton, the western-most
20 neighborhood in the city of Boston with 70,000
21 residents. I'm an MACDC board member and support
22 the overall goals articulated by Joe Kriesberg, our
23 president.
24 I'm here to speak about the variety of
. 0051
1 community development activities and initiatives
2 that Fleet Bank is now engaged with in our community
3 and how important it is that these initiatives
4 continue in the future here in Massachusetts. As my
5 colleagues have stated, community reinvestment is
6 about communities and requires specific plans and
7 goals in local communities and perhaps even more
8 importantly, locally accessible and accountable
9 people to undertake the work.
10 Just five weeks ago we broke ground on 50
11 affordable new homes in our community. Fleet Bank
12 is providing a construction loan of over $7 million
13 for that development, and we've been delighted to
14 work with knowledgeable and creative staff in the
15 Fleet lending group who have been of great
16 assistance in moving the project further. Fleet
17 provided a technical assistance grant to the project
18 during the predevelopment period, which was also
19 very helpful.
20 Our CDC offers education and counseling for
21 first-time homebuyers, and Fleet has been a partner
22 in our first-time homebuyer program over the last
23 five years. Over 40 graduates of our classes have
24 bought homes with mortgages from Fleet Bank over the
. 0052
1 last five years. Fleet's support of the SoftSecond
2 Program continues to be very important to our
3 homebuyers.
4 We're part of a collaborative of ten
5 community development corporations here in Boston
6 called the Community Business Network, which
7 provides technical assistance to small businesses.
8 Fleet has supported the Community Business Network
9 with philanthropic grants and Fleet staff has served
10 on an advisory committee for the Community Business
11 Network and on the loan committee for one of our
12 member CDCs.
13 Our CDC, the Allston-Brighton CDC, is
14 pioneered in creating individual development
15 accounts or matched savings accounts to help low
16 income people build assets. Fleet has worked very
17 hard with us over the last two years as we have
18 tested the development of a new model of account
19 management for individual development accounts.
20 With Fleet's support and the support of another
21 organization, Doorways to Dreams, 17 individuals
22 have saved for the last 18 months and are making
23 their savings deposits and managing their accounts
24 electronically. It is our collective hope that this
. 0053
1 will be an important innovation which will help make
2 individual development accounts accessible on a
3 broad scale. Fleet staff committed many hours to
4 the technical and other challenges involved in a new
5 banking product.
6 Fleet has also supported the development of
7 a statewide collaborative of community-based
8 organizations of which we are the lead agency, the
9 Massachusetts Individual Development Account
10 Solutions collaborative, which is promoting best
11 practices and training in building IDA programs.
12 Fleet's philanthropy has been consistent
13 and Fleet's philanthropy staff has been accessible
14 and knowledgeable about the issues facing Boston and
15 Massachusetts, taking the time to listen and learn
16 and to challenge us to think about new ideas as
17 well.
18 Finally, I'd like to add on a similar note
19 to my colleague, Jennifer Van Campen, the
20 Allston-Brighton neighborhood, like many Boston
21 neighborhoods, has experienced rapidly rising rents
22 and prices of homes and condominiums. Despite this,
23 there is a substantial population of low and
24 moderate income people. It's important that
. 0054
1 community reinvestment and community development
2 efforts support strategies to maintain diversities
3 in these communities, as well as meeting the needs
4 of low income communities.
5 Thank you.
6 MR. WAITE: Good morning. My name is John
7 Waite. I'm the Executive Director of the Franklin
8 County Community Development Corporation located in
9 Greenfield, Massachusetts, which is the western part
10 of Massachusetts.
11 I'm attending this public meeting, and I'm
12 making a statement on behalf of my Board of
13 Directors, who represent people from 26 towns in
14 rural Franklin County. I am also on the Board of
15 Directors of the Mass. Association of CDCs. I
16 represent some 68 members as well.
17 The Franklin County CDC has been involved
18 in community economic development for more than 25
19 years. We have a lending program, a small business
20 incubator and a technical assistance program.
21 Fleet has provided us with funding for our
22 technical assistance program for the past year and a
23 half, and we are very grateful for its financial
24 support. And we believe it's been made possible
. 0055
1 because Fleet understands western Mass. and they
2 know about our programs. They have a staff person
3 out in Springfield.
4 We are concerned that Bank of America will
5 not have the local community presence, knowledge and
6 decision-making to effectively work with
7 organizations like ours, who work with low and
8 moderate income people that have few, if any, other
9 options to start to improve the business.
10 We are concerned that Bank of America will
11 close branches in rural areas that have smaller
12 populations and in areas with low income residence.
13 In Franklin County we are lucky to still have two
14 local banks and one regional banks that have not
15 disappeared in all these mega-mergers. However,
16 many rural and low-income areas have lost their
17 local banks and branches due to the consolidations,
18 and the residents depend on the services from the
19 branches that do remain.
20 I wrote this statement actually two days
21 ago. This morning driving in I heard on the news
22 that our regional bank has actually just requested
23 to close the Conway branch, which is one of the
24 smaller towns in Franklin County. This town has had
. 0056
1 a bank -- at least a branch since 1854. So for 150
2 years they've had a bank located in this rural area
3 of western Massachusetts and now they're going to
4 lose it. This is just a result and this is one of
5 the things that we're most concerned about when
6 these large banks move in.
7 We're also concerned that Bank of America
8 will not address the needs of small businesses.
9 Fleet has done a decent job of providing these loans
10 under $100,000 and to businesses with annual
11 revenues under a million dollars. We would expect
12 Bank of America to establish aggressive goals for
13 the percentage of these types of loans as well.
14 In addition, we would want Bank of America
15 to employ a second look program for its small
16 business loans, which means that the applicants will
17 be looked at individually and not just put through
18 some computer-based assessment process. Bank of
19 America should also refer declined loans to
20 technical assistance programs and non-traditional
21 lenders such as ourselves where appropriate. And as
22 earlier, Bank of America should continue to expand
23 on Fleet's contracts with community-based
24 organizations that provide technical assistance.
. 0057
1 We do not support this acquisition because
2 it will take ownership and control even further away
3 from our community, which is contrary to our
4 organization's mission statement, which says we
5 strive to maximize community control over our
6 economic destiny.
7 In closing, I want to tell you that in our
8 business technical assistance program we teach
9 business people about the triple bottom line --
10 social and environmental as well as economic. We
11 ask that Bank of America develop a meaningful plan
12 and be held accountable as a socially responsible
13 business.
14 Thank you very much.
15 PRESIDING OFFICER SMITH: Thank you all
16 very much. Do we have questions from the panel?
17 (No response)
18 PRESIDING OFFICER SMITH: We are ready to
19 start with the panel. And we are a little bit ahead
20 of schedule, so we can give them four minutes each.
21 If you are reading your comments, if you would try
22 to sort of glance toward the time-keeper
23 periodically. So with that, we're ready to start
24 with Mr. Sanchez.
. 0058
1 MR. SANCHEZ: Good morning. My name is
2 Jeffrey Sanchez. I'm the state representative for
3 the 15th Suffolk District. That includes the areas
4 of Jamaica Plain, Roxbury, Mission Hill, Brookline.
5 Thank you for this opportunity to come
6 before you today to testify regarding this merger.
7 I am also someone who has actually lived through
8 mergers myself. I worked in the California banking
9 system and have seen a great deal in a span of about
10 five years at the time that I was there in
11 California.
12 While at times mergers can be good for
13 particular communities, at times there's a lot
14 that's left unclear. And I think that that's the
15 case right now. I know that there's been certain --
16 there has been certain discussion that Bank of
17 America has worked with a few people within
18 particular segments of the community. But I think
19 given the breadth of this merger, it behooves them
20 to continue to work with cross-sections of the
21 communities throughout the Commonwealth.
22 FleetBoston has worked diligently in terms
23 of working with particular communities. And I think
24 that there were certain commitments that were made
. 0059
1 to communities that still haven't necessarily shown
2 total fruition right now in terms of the outcomes.
3 And I think that given that, we still need to make
4 sure that the Fleet/Bank of America merger respects
5 a number of those commitments that were made in the
6 previous merger with Fleet and BankBoston.
7 I'm aware that Bank of America has a
8 history of making few or small business loans under
9 $100,000 in smaller institutions, and I think it's a
10 concern because we have such a great number of
11 microenterprise within our communities. While small
12 business is definitely a priority, microenterprise
13 makes up our small business communities in our main
14 streets districts, and we would like a significant
15 presence there.
16 Given the time frame that I have to
17 discuss -- I have a lot to discuss, but I'm going to
18 try and generalize a number of things. While again
19 there were certain commitments that were made
20 through a press conference yesterday, I'm still
21 concerned that Bank of America has not addressed the
22 issue of work force development effectively and
23 completely yet, as well as procurement, as well as
24 the community development dollars; and given the
. 0060
1 presence the Bank of America will have in this
2 region, I feel that Bank of America should commit to
3 an increased percentage in the amount of community
4 development dollars which they disperse to
5 communities.
6 I would also again support the legislatures
7 of the banking committee and request that Bank of
8 America voluntarily submit to local regulations. I
9 think it would be an extreme act of goodwill that
10 would show that Bank of America is willing to work
11 at a local level, not only at the national.
12 I would also like to -- I'll actually
13 conclude by saying that there was a group that was
14 working at the Community Advisory Committee, which
15 Senator Wilkerson here was sitting -- actually, I
16 think cochairing, if I'm correct -- that submitted a
17 lengthy list of pieces for Bank of America to
18 address. And in looking at that, I feel it's
19 extremely detailed. There are a number of issues
20 that are addressed through it. I would ask
21 respectfully that the people that are involved in
22 this merger, both Fleet and Bank of America, sit
23 down with this Community Advisory Committee to
24 discuss these details to make sure that we get the
. 0061
1 biggest bang for our buck in your plans to move into
2 our communities.
3 There were certain -- when I got involved
4 in communicating myself with Bank of America, I was
5 happy to see that I received a letter from them.
6 Unfortunately, I didn't receive anything from the
7 Fleet side, and I was a little concerned with that.
8 And with the Bank of America, it was noted that they
9 would refer me to a public relations or a public
10 affairs person, and I'm still currently waiting to
11 hear from that person.
12 So again, I would hope that this is not an
13 indication of how the bank will come into our
14 communities. We have active communities. We have
15 felt positive impacts within the past with Fleet.
16 And while, again, it's unclear to me what the total
17 impact -- what the commitment to -- our previous
18 commitments were -- the commitments that currently
19 exist, I would encourage those to please -- those in
20 this merger to please stick with us in the
21 community, because we will also make your
22 institutions thrive.
23 Thank you very much.
24 PRESIDING OFFICER SMITH: Thank you.
. 0062
1 Mr. Fort?
2 MR. FORT: My name is Vincent Fort. I
3 served the Third and Ninth District in Atlanta,
4 Georgia.
5 Over the last four years I've led the fight
6 in Georgia against predatory mortgage lending.
7 During that time, we passed the strongest law to
8 restrict predatory mortgage lending in 2002. That
9 same law was gutted just last year in 2003.
10 Councilmember Derrick Boazman, who is to my right,
11 authored an Atlanta city ordinance that prohibited
12 the city from doing business with companies that did
13 predatory lending. In both instances Bank of
14 America opposed those legislative efforts to
15 restrict predatory lending.
16 While working on these issues, we've become
17 intimately familiar with predatory lending practices
18 of Bank of America. And I'd like to talk very
19 quickly about five points that I'd like to make.
20 While Bank of America shuttered
21 NationsCredit and EquiCredit in 2001, we find that
22 many of these loans are still alive. That is,
23 people are still paying on these loans, still
24 entrapped in these loans that are characterized by
. 0063
1 high interest rates and single premium financed
2 credit life insurance. We know that Bank of America
3 in one instance acquired about $10 billion of
4 securities in their own subprime loans.
5 Over the years I have received complaints
6 regarding these loans. One that comes to mind is
7 that of a minister in my community who was
8 downstreamed from Bank of America and sent over to
9 NationsCredit to get a loan. Shortly thereafter, he
10 was foreclosed upon by NationsCredit.
11 These loans that are still in place ought
12 to be reformed. They ought to be reviewed and their
13 terms adjusted, so that the victims of these loans
14 can be made whole.
15 From an examination of the available data,
16 Bank of America denies African-Americans in the
17 Metropolitan Atlanta area 2.66 times more frequently
18 than they do whites. And Latinos are denied 3.5
19 times more frequently than whites. These
20 discriminatory patterns -- and these are refinance
21 loans, by the way -- ought to stop. These practices
22 fuel predatory lending. People of color who are
23 turned down by Bank of America find themselves
24 forced into the subprime market.
. 0064
1 3. Bank of America is further involved in
2 predatory lending by virtue of its purchasing of
3 subprime loans. These loans contain prepayment
4 penalties and once again, very high interest rates.
5 For example, Bank of America purchases Option One
6 loans. And I have a fax sheet of one victim in the
7 Atlanta area that I will share with you. I don't
8 have it available now, but I will share a fax sheet
9 of one victim who has come to Atlanta Legal Aid for
10 redress. So this is an issue that we need to deal
11 with.
12 4. Bank of America fuels predatory lending
13 by securitizing subprime lenders in the last two
14 years, such as Ameriquest, Wells Fargo Home
15 Mortgage, and New Century. Bank of America also
16 securitized Superior Bank loans which are
17 characterized by many of the features that I've
18 already mentioned.
19 5. Bank of America has made capital
20 business loans to payday lenders, which are
21 increasingly becoming a legislative focus in
22 Georgia, particularly as they function around
23 military bases.
24 We have increasingly gotten complaints and
. 0065
1 a lot of media attention regarding servicemen near
2 these payday loan companies that Bank of America
3 finances who are being ripped off. That's a
4 particularly, in my thinking, an egregious situation
5 where the servicemen who are in harm's way, so to
6 speak, servicemen who are committed to protecting
7 each and every one of our lives, are in a situation
8 where they are being ripped off by the payday loan
9 companies. That is beyond the pale of my
10 estimation.
11 The merger of Bank of America with Fleet
12 should not go forward until they cease their
13 indirect and direct involvement in predatory lending
14 practices. Otherwise, such a merger will create a
15 larger machine to do even more predatory lending.
16 MR. BOAZMAN: Good morning. I want to
17 thank the panel to allow me the opportunity to be
18 here this morning.
19 PRESIDING OFFICER SMITH: Please state your
20 name.
21 MR. BOAZMAN: I'm Derrick Boazman. I'm a
22 member of the Atlanta City Council, representing the
23 12th District of the City of Atlanta. And I am here
24 really to be the voice for the thousands who could
. 0066
1 not be here. I left sunny Atlanta where it's 60
2 degrees to come to the coldest day in Boston,
3 because I thought it important that this committee
4 hear from the voice of the voiceless.
5 Senator Fort really laid out the case, and
6 he has worked very diligently alongside me as my
7 partner over the state legislature as we dealt with
8 this issue at the city level. But I wanted to make
9 sure that it get reemphasized.
10 When we see these mega-mergers, there's
11 also a human factor. Unfortunately, on the Bank of
12 America side in particular, the human factor plays
13 out in predatory mortgage lending, the subprime
14 market we see, as Senator Fort has already stated,
15 people who are looking to refinance, as well as
16 people who are looking for loans on the first end,
17 oftentimes sent out of the door of the primary bank,
18 where the signal sets forth a certain reputation to
19 the subprime market, as it was said, which was
20 supposed to be closed in 2002. NationsCredit and
21 EquiCredit have millions and millions of dollars
22 that are still being made off the securitization of
23 those loans which have been bought back by Bank of
24 America. It's very problematic.
. 0067
1 I've sat in too many homes, most of them
2 widows. The only thing that stands between them and
3 the one asset that they still hold is a slickster.
4 And oftentimes that slickster, whether he shows up
5 as a home repair company, goes straight to the
6 subprime lenders, EquiCredit and NationsCredit. And
7 at the end of the day, they end up losing their
8 home. But not only do they lose their home to this
9 pernicious practice, they oftentimes lose their
10 dignity and their self-worth. And we thought that
11 that was an effort to reform and make some mends to
12 this community.
13 No doubt you will hear small
14 community-based organizations, from Girl Scouts and
15 Boy Scouts, come and talk about how much uniforms
16 have been donated and how much money has been given.
17 But in those same communities grandma is losing her
18 home because of the practices of Bank of America.
19 What is particularly troubling is also the
20 capitalization and the continued funding at levels
21 that are just unheard of of organizations like
22 payday loan companies.
23 Payday loans are nothing more than modern
24 day sharecroppers. It's a modern day sharecropping
. 0068
1 system that preys on sometimes the poorest of the
2 poor, who pay to cash checks, only because Bank of
3 America have pulled their branches out of these very
4 same neighborhoods.
5 So we see payday loan companies come when
6 the banks pull out on the front end. And so those
7 are some very serious concerns.
8 Going back to those who we represent and
9 sitting in their homes and looking at the
10 devastation of their lives, when we see people,
11 particularly seniors moving out of our communities,
12 we think that they're just moving back in with their
13 children and their daughters and their sons because
14 that's what they want to do. But oftentimes the
15 option is either be forced out into the street or to
16 move back into a housing arrangement back with
17 families, simply because they have been swindled out
18 of their homes. And at the end of that transaction
19 is Bank of America in some form, whether it's
20 through their predatory lending or through the
21 capitalizations of payday loans and other kinds of
22 predatory practices.
23 So we are very concerned about this merger,
24 because what it does is give a greater level of
. 0069
1 resource to continue the practices that have
2 devastated lives and devastated homes.
3 So we would ask you to look with a serious
4 discernment into this issue. It may be legally
5 right, but it's morally wrong. It may be legally
6 right to extend these loans, but it's morally wrong
7 to extend the loan when you know that this
8 individual has no possibility of making the payment
9 terms that is given to them.
10 So we would ask you to forego the moving
11 forward of this merger and to look very seriously
12 into this issue, because the human toll is
13 tremendous, and it is terribly unfair.
14 MS. WILKERSON: Good morning to the
15 presiding officer and members of the panel. Welcome
16 to Boston. For the record, my name is Dianne
17 Wilkerson. For 11 and a half years I've had the
18 privilege of serving as the State Senator from
19 Boston, of Boston Second Suffolk District. And I
20 sit in that capacity, as well as in the capacity
21 this morning as the convener of the Statewide
22 Community Advisory Committee, which was actually
23 created in 1999. The original name was the
24 Statewide Community Advisory Committee for the Fleet
. 0070
1 Bank/BankBoston merger.
2 Within three months of the creation of the
3 committee, Citizens Bank announced the plan to
4 acquire Sovereign Bank, so we changed our name to
5 the Community Advisory Committee on Bank Mergers.
6 We've been busy, busy, busy. And we are here today
7 yet again.
8 I want to stay at the outset and make it
9 emphatically clear that I am here to speak in
10 opposition to the merger as it has been presented
11 today. I am a realist. I understand that this is
12 looking like a juggernaut, but I am appealing to
13 you, because it is my understanding that you are the
14 only avenue that we have to address what I think are
15 some very serious issues. The Community Advisory
16 Committee is made up of about 45 organizations from
17 mostly eastern Massachusetts. And we did believe
18 that it was important to have a unified voice,
19 because we didn't know just from the experience in
20 Roxbury or Dorchester what the banking experiences
21 were on the ground.
22 So organizations -- everyone from the
23 NAACP, the Lawyers' Committee for Civil rights, the
24 Burroughs Group, professional organizations, civil
. 0071
1 rights organizations -- the collective and common
2 interests that they all have is that they have a
3 customer base of regular folks who depend on access
4 to credit on a day-to-day basis. And it is that
5 standard, the realization that your obligation and
6 our obligation to make sure that whatever merger
7 that is approved or acted upon, among other things,
8 meets the credit needs of the community. That is
9 what I am here to speak to you today.
10 I sat on the Community Reinvestment
11 Committee in 1990, when Fleet came to Boston in the
12 demise of Bank of New England. I sat on the
13 Community Negotiating Committee during the Shawmut,
14 BankBoston, BayBank. In 1999 I sat on this stage
15 and appealed to you when Fleet took over BankBoston,
16 and we're here today. In fact, the 1999 testimony
17 was the first time I ever testified in opposition to
18 a merger, and so today would certainly make the
19 second.
20 I also happened to sit in the state
21 senate -- and I am sitting here today as the senate
22 sponsor of our state's predatory lending bill. By
23 way of common interests with my colleague from
24 Georgia, I will tell you that we have not enjoyed
. 0072
1 the support -- in the very small list of our banking
2 financial institutions -- support of that bill.
3 Yet, the Federal Reserve Bank of Boston in the first
4 quarter of last year of 2003 in the quarterly report
5 published an article that said even the Federal
6 Reserve Bank understood that it appeared that the
7 predatory lenders were back. And in fact, I think
8 one of the lines said they appear to be back with a
9 vengeance. In my opinion, they have never gone
10 away. I think that our vigilance against this has
11 waned; and in that void, they are back.
12 We are still in my office on a weekly basis
13 receiving phone calls -- we got one yesterday --
14 from people who were in the throes of foreclosure
15 and about to lose their loans. We are still
16 cleaning up the 1990 mess. You may know that in
17 1990, Boston was the scene of an unprecedented
18 hearing in which the entire congressional delegation
19 convened in Boston over the Memorial Day weekend and
20 sat in Roxbury, in the middle of my district, to
21 hear testimony on the 8,000 homeowners whose homes
22 were destabilized as a result of that second
23 mortgage scam.
24 You may also remember that the major lender
. 0073
1 of the second mortgage scam artist was Fleet Bank.
2 And for the last ten years, we have spent time to
3 clean up their mess, and we are not done yet.
4 So I'm a little concerned when I read the
5 history of Bank of America and I look and I see what
6 they're doing around the country, because I think
7 that the experiences of both of these institutions
8 are relevant as we process going forward. If, in
9 fact, Bank of America had a good record, then we
10 would feel relieved that they were coming in and
11 have some optimism. I don't think that's the case.
12 I think that the statistics speaks for
13 themselves -- not mine, but theirs -- that their
14 mortgages -- the Bank of America, first, they're
15 only doing 16.8 of the mortgages, and the industry
16 did 21 percent. For the fourth largest -- about to
17 be the largest -- that doesn't bode well for a
18 community like ours, where there are only going to
19 be three institutions left.
20 We have small business lending. Bank of
21 America has consistently made less of the
22 under-$100,000 loans than their peers. And we're
23 concerned about the work force reductions, because
24 we do not think that this was an issue that had the
. 0074
1 level of importance and focus by Fleet. So if this
2 merger was to go forward, we would want to see that
3 the work force reductions be done in a way not to
4 further decrease the number of employees of color.
5 The predatory lending issue is real. I was
6 especially cognizant that this whole issue of race
7 and the implication for black and Latino borrowers
8 has, for some reason, not been an issue that people
9 have wanted to address. Even our prior panel, which
10 are people that I respect, our Community Development
11 Corporations, in the testimony, only one person on
12 the panel mentioned minorities.
13 Yet, the Mass. Community Banking Council
14 issued their report last week that we have continued
15 to see a spike in the racial and ethnic disparities
16 in mortgage lending for blacks and Latinos in
17 Massachusetts.
18 So I'm reading about how our current banks
19 are doing, and I'm looking at Bank of America's
20 status, and I'm concerned about that and hope that
21 you would be as well.
22 We submitted a comment letter to the Feds
23 for the December deadline. And in fact, Bank of
24 America sent me yesterday a copy of their response.
. 0075
1 I have not had a chance to review it totally, but I
2 thought the issue on predatory lending was relevant
3 for this panel. We set the stats about Ocwen. I
4 think there's some testimony. They are bad actors,
5 and they get their money from Bank of America. The
6 HMDA data also speaks of the same things we speak
7 to, so it's not just our staff.
8 The response from the Bank of America to
9 this issue that we raised was that the HMDA data
10 should be not determinative of their performance. I
11 don't know what would be, unless they planned to
12 give me a report that they issued to Dianne
13 Wilkerson, because the only thing we have is that
14 data.
15 Ocwen is involved in several lawsuits
16 across this country where they're being charged with
17 unscrupulous lending and loan purchasing activity.
18 As I said, I spoke to the black and Latino mortgage
19 rates -- by speaking to another point -- and I'm
20 going to submit some further testimony in response
21 to the comments letter to this panel, but I want to
22 speak to the comments that were made last week in
23 response to the $750 billion loan commitment.
24 I'm sure that you are more aware of Dick
. 0076
1 Bove than I. I'm learning he is a five-star
2 analyst, considered to be an all-American analyst.
3 Every bank in this country looks to him, because he
4 advises and influences investors.
5 The day after the announcement was made,
6 Mr. Bove said that he wanted to ensure investors who
7 were thinking about investing in Bank of America not
8 to worry, because there is no way that Bank of
9 America could in fact perform a $750 million.
10 Either Mr. Bove is wrong -- and I don't think he
11 could be wrong and have a five-star rating -- or we
12 don't have all the information.
13 So I think one of the things that we need
14 to get is an audit on the performance of the
15 commitment that's already been made. When you have
16 the number one bank analyst in the country -- in the
17 world saying that they can't do what they're
18 promising to do, then I think we have to do more.
19 Finally, the Sunshine Law --
20 PRESIDING OFFICER SMITH: Could we just
21 have those submitted in writing?
22 MS. WILKERSON: We will. We will have many
23 people testifying today. I just want to suggest
24 that we have a right to have it made public that
. 0077
1 anybody who testifies in support of this merger who
2 has an agreement will be getting money that they
3 have to be made public. And if they don't
4 acknowledge it to you, I would ask that you request
5 that they submit it, so we can access it from you.
6 I think it ought to be part of what you would be
7 processing as you process the comments and all the
8 support and data that you would hear today from
9 people who are going to be cashing those checks from
10 Bank of America, who got those checks from Fleet.
11 Even our United States Congress has acknowledged
12 this.
13 Black and Latinos are getting crushed. The
14 access to capital in this market has been
15 decreasing -- it's decreasing the Bank of America's
16 market. It's decreasing Fleet's market. How we
17 could be better off with the two together is really
18 the challenge I think for them to prove to us.
19 And if and when they do, I will stand there
20 and I will support it. But there is no information
21 that we have today that will suggest that we're
22 going to be better off or the credit needs for this
23 community will be met. They are not being met now,
24 and I am appealing to you to make sure that those
. 0078
1 questions get asked and answered, or you have them
2 talk to us, because they have not been very willing
3 to do that either. They don't want to talk to us
4 about the facts and about race. And I'm appealing
5 to you, because this is the only place that we can
6 come for relief.
7 And I think you for your patience.
8 PRESIDING OFFICER SMITH: Thank you very
9 much.
10 Mr. Blumenthal?
11 MR. BLUMENTHAL: Yes. Thank you. I
12 apologize for being a bit late, although I think
13 maybe --
14 PRESIDING OFFICER SMITH: You made it just
15 in time.
16 MR. BLUMENTHAL: I very much appreciate
17 this opportunity to be with you. As you know, we
18 asked -- the treasurer of the State of Connecticut
19 and I, as Attorney General -- asked that a hearing
20 be held in Hartford, and we haven't received a
21 response from the board as yet, so we will convene a
22 hearing of our own that will give citizens there an
23 opportunity to be heard. And we will make a record
24 and forward it to you. But I very much appreciate
. 0079
1 this opportunity to be with you this morning.
2 I want to say right at the very outset that
3 we regard FleetBoston as an enormously productive
4 and important partner in the community reinvestment
5 effort. Whenever each of our major banks in
6 Connecticut has been acquired, whatever its name or
7 identity, we have negotiated community reinvestment
8 commitments, as we did with Fleet in the latest
9 merger that took place. And the partnership with
10 FleetBoston has been really exemplary. We've made
11 enormous progress. The $2.9 billion commitment over
12 a period of years has been profoundly significant.
13 And so we have very mixed feelings about losing that
14 partner through this acquisition. We want to make
15 sure that the community reinvestment is real.
16 We have two concerns. First, the total
17 amount that has been committed, the $750 billion.
18 Of that amount, $100 billion has been committed to
19 the area that FleetBoston covers. We believe that
20 that amount is insufficient. The total amount does
21 not take into account of the fact that 20 percent of
22 the assets and more than 20 percent of the deposits
23 from the merged institution will be from the Fleet
24 footprint area, but only 13 percent of the CRA
. 0080
1 commitment right now, according to what the
2 announcement has been, will go to that area.
3 Equally important, we are concerned about
4 the state-by-state allotments. We recognize that
5 the Bank of America has said that state-specific
6 commitments would be unwieldy, inflexible -- those
7 are the terms they've used -- but we want to know
8 the specifics. We need to know those specifics.
9 And we think that the Federal Reserve Board ought to
10 condition approval on commitments that specifically
11 outline what the allocations will be state by state,
12 region by region, at least in minimum terms.
13 I want to say that I recognize that New
14 England may be regarded nationally as one of the
15 more affluent areas. Connecticut is one of the
16 wealthiest states in the country. It also has four
17 of the poorest cities in the country. The panel has
18 referred to two connectors. And we think that kind
19 of community need on the part of certain of our
20 urban areas really requires those kinds of specific
21 state commitments. And also that there be
22 allocations within communities through advisory
23 boards, through means that respond to communities
24 and provide for a governing structure, a community
. 0081
1 responsive mechanism. Without those kinds of
2 specifics, much of what's been announced may simply
3 be eye candy -- looking good, smelling good, but
4 without the real center known at this point and
5 without also how much real energy and enduring value
6 there is.
7 Finally, let me just say that we have real
8 governance concerns relating to the ongoing
9 investigation by federal and state authorities into
10 improper trading activities. We would require
11 specifically that there be a condition on
12 cooperation with those ongoing investigations. Bank
13 of America has committed to cooperate, but we think
14 as a matter of public policy, this board has the
15 opportunity and obligation to condition approval of
16 this transaction on continuing cooperation. And
17 we've raised in our testimony also the issue of
18 compensation as a matter of corporate governance.
19 We think there needs to be more accountability and
20 transparency on what would happen relating to
21 compensation if this merger is approved.
22 So we are concerned about the unanswered
23 questions. We think the board has a right and
24 responsibility to demand answers. And on behalf of
. 0082
1 the State of Connecticut as Attorney General, I urge
2 that all of these issues be addressed, including, as
3 has been raised before, the issue of employment and
4 layoffs. We want a commitment as part of this
5 merger that there will be a four-year commitment to
6 no layoffs in the State of Connecticut, again,
7 consistent with some of the representations that
8 have been made by Bank of America, but more
9 specific, clear, transparent and accountable under
10 the terms that you will impose.
11 I have submitted written testimony that
12 more fully outlines the concerns that Treasurer
13 Denise Napier and myself wish to bring to the
14 Board's attention.
15 In the interest of time, I will finish here
16 again with my thanks for giving me this opportunity.
17 PRESIDING OFFICER SMITH: Thank you very
18 much. The written testimony will be made a part of
19 the official record.
20 MR. BLUMENTHAL: Thank you.
21 MS. WILKERSON: To the panel members, could
22 I just offer, on behalf of my colleague, State
23 Representative Gloria Fox, who was schedule to
24 testify -- she did submit a letter and ask that I
. 0083
1 present it to you.
2 PRESIDING OFFICER SMITH: Fine. We have no
3 questions from the panel. Thank you very much.
4 We have Panel 4 ready, and we were planning
5 to go ahead and have them make their presentations
6 before the break. We'll go ahead with the break.
7 We'll reconvene in 15 minutes.
8 (Recess)
9 PRESIDING OFFICER SMITH: We'll move to
10 Panel No. 4. You each have five minutes. You will
11 get signals when it's two minutes to go and one
12 minute to go.
13 Please give your name and affiliation to
14 start, for the record.
15 MR. FONFARA: Good morning. For the
16 record, my name is John Fonfara. I'm the state
17 senator representing the First District of Hartford
18 in Wethersfield, Connecticut.
19 Before I begin my formal remarks, I would
20 like to say that in listening to my Attorney
21 General, Richard Blumenthal, I, too, would ask that
22 you give attention to the issue of specifying the
23 community reinvestment that is done by region, as
24 opposed to the way it has been proposed so far.
. 0084
1 I am testifying today in support of the
2 acquisition of FleetBoston Financial Corporation by
3 the Bank of America Corporation. The fact that I am
4 here today speaking in support of this acquisition
5 might surprise a number of my colleagues in the
6 Connecticut legislature.
7 In my former role as senate chairman of the
8 Banks Committee I resisted strongly for two years
9 Fleet's ultimately successful efforts to impose ATM
10 surcharges on non-customers. My opinion of the bank
11 then was that it was an out-of-state giant more
12 interested in serving its own financial interests
13 than it was in serving the interests of Connecticut
14 and its residents.
15 My firmly-held view of Fleet was challenged
16 somewhat about five years ago, when the bank
17 invested $2.5 million to leverage $1 million in
18 state funds for the creation of a loan pool for the
19 Spanish American Merchant's Association, known as
20 SAMA, in Hartford. SAMA, headed by its talented
21 executive director, Julio Mendoza, is the primary
22 advocacy organization for Latino small businesses in
23 Hartford, New Haven, New Britain, Meriden and soon
24 over the entire state of Connecticut.
. 0085
1 Under the leadership of Mr. Mendoza and
2 others who will be testifying today, SAMA has been
3 reversing the tide of urban small business
4 disinvestment that has impacted many Connecticut
5 cities. The most important tool that SAMA has had
6 in this effort has been the ability to provide very
7 low interest loans for small business start-ups and
8 expansion.
9 I believe it is critical for regulators to
10 understand what the resources provided by Fleet to
11 SAMA has meant to my constituents. In many cases it
12 has meant the difference between having a job and
13 being on welfare. Some of my constituents who are
14 on welfare are now small business owners, thanks to
15 the loan pool administered by SAMA and funded
16 primarily by Fleet. I recognize this acquisition
17 involves billions of dollars, but to me the state
18 senator representing one of the poorest cities in
19 America, it is about changing lives and improving
20 neighborhoods. Fleet has happened to do both.
21 This fall, despite having no assurances
22 that the State of Connecticut would commit any
23 additional funds to SAMA, Fleet stepped up again.
24 This time for $3.7 million in a revolving fund for
. 0086
1 Hartford, New Haven, New Britain and other cities.
2 This investment, combined with $3 million from the
3 State, will enable SAMA to continue to help
4 stabilize neighborhoods, create jobs, redirect
5 private investment and give hope to communities and
6