Public Meeting Regarding J. P. Morgan Chase & Company,
and Bank One Corporation
Held on Thursday, April 15, 2004, at the Federal Reserve Bank of New
York
Unedited Transcript
|
Public Meeting Regarding J. P. Morgan Chase & Company,
and Bank One Corporation |
1
1
2 PUBLIC MEETING
3 on the
4 Proposed Merger
5 of
6 JPMORGAN CHASE & CO.
7 and
8 BANK ONE CORPORATION
9
10
11 PANELISTS:
12 SANDRA BRAUNSTEIN
13 JAMES HODGETTS
14 WALTER McEWEN
15 EDWARD KRAMER
16
17
18 April 15, 2004
19 9:00 a.m.
20
21
22 Federal Reserve Bank of New York
23 33 Liberty Street
24 New York, N.Y.
25
2
1
2 MS. BRAUNSTEIN: Good morning. I am
3 pleased to welcome you to this important
4 public meeting on the application of
5 JPMorgan Chase to acquire Bank One
6 Corporation.
7 Let me first introduce myself. I am
8 Sandra Braunstein, and I am the Director of
9 the Division of Consumer and Community
10 Affairs for the Federal Reserve Board of
11 Governors in Washington, D.C. I am going to
12 serve as the presiding officer for this
13 meeting.
14 The other panelists sitting beside me
15 are James Hodgetts, who is the Senior Vice
16 President, Legal and Compliance Risk, for
17 the Federal Reserve Bank of New York; Walter
18 McEwen, Senior Counsel, from the Legal
19 Division of the Federal Reserve Board; and
20 Edward Kramer, the Deputy Superintendent of
21 Banks, from the State of New York Banking
22 Department. Those panelists are here, and
23 you will see their name tags.
24 We are here today because JPMorgan
25 Chase & Company from New York has applied
3
1
2 for approval to acquire Bank One Corporation
3 in Chicago, Illinois.
4 When the Federal Reserve System
5 considers one of these applications, we look
6 at a number of factors under the Bank
7 Holding Company Act. These factors include
8 financial issues, managerial issues,
9 competitive issues, and the convenience and
10 needs of the communities affected.
11 In doing so, we particularly look at
12 the performance of the parties under the
13 Community Reinvestment Act, or the CRA. The
14 CRA requires the Board to take into account
15 an institution's record of meeting the needs
16 of its entire community.
17 The purpose of the public meeting today
18 is to receive information regarding these
19 factors. We will be seeking to elicit this
20 information and to clarify factual issues
21 related to the application, and from time to
22 time myself and the other panelists may ask
23 some of the people who are giving statements
24 additional questions.
25 We are very pleased that so many
4
1
2 witnesses have been willing to come and
3 testify at this public meeting. We have
4 more than 70 groups and individuals
5 represented.
6 I would like to just make a few remarks
7 about the procedures before we get started.
8 This is what is call technically an informal
9 public meeting. Members of the panel, as I
10 said, may ask some questions of the
11 testifiers, but this is not a formal
12 administrative hearing, so we are not bound
13 by rules regarding evidence,
14 cross-examinations, and some of the other
15 formal trappings of that kind of procedure.
16 Because we have so many witnesses, we
17 are going to try as hard as possible to
18 stick to the schedule that we have put out
19 publicly, so that everyone who has offered
20 to give testimony has a chance to do so. So
21 we are going to ask all of the witnesses to
22 please be mindful of the needs of others who
23 have come here to testify today and to help
24 us stay on schedule. We are asking you to
25 keep to your allotted time. We have two
5
1
2 timekeepers, and they are sitting, for the
3 panelists' information, right in the front
4 row over here. They have signs -- do you
5 want to show the signs? -- that will tell
6 you when you have two minutes to go and when
7 you need to wrap up.
8 There may have been individuals who did
9 not have an opportunity to sign up in
10 advance but would like to make a statement,
11 so to the extent possible we would like to
12 give them a chance to do so. At the end of
13 the day we have some open-mike time for
14 those that would like to make some
15 additional comments or those who would like
16 to make a presentation who did not
17 previously sign up.
18 A couple of other comments. You will
19 see that there are cameras here in this
20 room. I just wanted to note for everybody
21 that these are not live, these are not
22 recording, we are not making a video record.
23 Yesterday we had asked for them to be
24 removed, and we found out that they are
25 stationary in this room and they couldn't be
6
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2 taken out. But they are not recording.
3 However, there is an audio recording of this
4 hearing.
5 A couple of more comments about
6 testimony. Witnesses may submit a written
7 supplement to their oral testimony but must
8 do so by next Thursday, April 22, and then
9 the record will be closed. Any written
10 supplements should be directed to Jennifer
11 Johnson, secretary of the Board of Governors
12 of the Federal Reserve in Washington, D.C.,
13 2O551, and they must be received by 5 p.m.
14 Eastern Time on April 22. You may also fax
15 additional information to 202 452 3462. The
16 deadline applies to faxes also.
17 If you haven't turned in copies of your
18 written testimony or you have any other
19 written statements to put into the record,
20 and you have those with you, please leave
21 them with the Federal Reserve staff at the
22 registration table where you came in. It's
23 important that we get this material for the
24 record.
25 As I mentioned, this proceeding is
7
1
2 being audiotaped, and a transcript of these
3 proceedings will be available both in hard
4 copy and on the Federal Reserve website.
5 Those transcripts will be available on April
6 21, by the end of the day on April 21, at
7 the latest.
8 With that, I think we are going to
9 begin the proceedings. I will ask this
10 panel, as well as all the other panels,
11 before you start your statement could you
12 please state your name for the record.
13 Thank you.
14 MR. HARRISON: Thank you, Sandra.
15 MS. BRAUNSTEIN: I am sorry. And
16 organization.
17 MS. HARRISON: Excuse me?
18 MS. BRAUNSTEIN: Name and organization.
19 MR. HARRISON: I'm Bill Harrison,
20 Chairman and CEO of JPMorgan Chase. I would
21 like to introduce Heidi Miller, who is the
22 Executive Vice President and Chief Financial
23 Officer of Bank One Corporation; Mark
24 Willis, who is Executive Vice President and
25 head of JPMorgan Chase's Community
8
1
2 Development Group; and Byron Reed, who runs
3 Bank One's Community Development Group.
4 And, of course, you will be hearing from all
5 of us.
6 It is my pleasure to address you, the
7 distinguished members of today's panel, and
8 all of our distinguished people in the
9 audience.
10 First, I want to thank the Federal
11 Reserve Board for convening this public
12 meeting, giving us the opportunity to
13 discuss the proposed merger of JPMorgan
14 Chase and Bank One. I'd like to explain why
15 we believe our merger will benefit our
16 customers, our employees, our shareholders,
17 and the important communities in which we do
18 business.
19 In January, JPMorgan Chase and Bank One
20 announced our agreement to merge in a
21 strategic business combination, which, based
22 on total assets, will establish the second
23 largest banking franchise in the United
24 States. We will have assets of
25 approximately $1.1 trillion, a strong
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2 capital base, and over 2,300 branches in
3 seventeen states.
4 We will have top-tier positions in
5 retail banking and lending, which includes
6 small business and home finance, as well as
7 top-tier positions in credit cards,
8 investment banking, asset management,
9 private banking, treasury and securities
10 services, middle-market banking, and private
11 equity. With balanced earnings
12 contributions from retail and wholesale
13 banking, we believe we will be well
14 positioned to achieve strong and stable
15 financial performance and to increase
16 shareholder value over time. We will have a
17 more diverse business mix, greater scale,
18 and enhanced efficiencies and
19 competitiveness.
20 I will be Chairman and CEO. Jamie
21 Dimon, Bank One's current Chairman and CEO,
22 will be President and Chief Operating
23 Officer. Jamie will succeed me as CEO in
24 2006 and I will continue to serve as
25 Chairman.
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2 Our corporate headquarters will be in
3 New York. And both our middle market and
4 retail banking businesses will be
5 headquartered in Chicago.
6 We believe this merger will be a great
7 benefit to our communities. Making banking
8 services widely available and continuing to
9 help develop affordable housing and
10 revitalizing the neighborhoods are integral
11 to our business goals and corporate
12 values -- they always have been.
13 JPMorgan Chase has always been both a
14 major home lender nationwide and major
15 small-business lender throughout our local
16 communities, providing innovative products
17 to meet the credit needs of first-time
18 homeowners and small businesses.
19 We have also distinguished ourselves in
20 the community development field as a lead
21 lender for large, complex transactions
22 resulting in affordable housing for low- and
23 moderate-income households, and for economic
24 development transactions, that create new
25 jobs and help revitalize communities. In
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2 fact, I am very proud to note that JPMorgan
3 Chase Bank again earned the highest rating
4 of "Outstanding" on its most recent CRA
5 performance examination from the Federal
6 Reserve Bank of New York. This is the
7 seventh consecutive time, spanning fourteen
8 years, that our lead bank has earned this
9 highest rating of "Outstanding." All three
10 of our subsidiary banks currently have
11 "Outstanding" CRA ratings. We are
12 determined that our new firm will maintain
13 the highest possible CRA ratings.
14 Since the merger was announced,
15 community investment officers of both firms
16 have already reached out to more than 700 of
17 our existing community partners across the
18 country, seeking innovative ways for banks
19 to work with strategic local and national
20 partners. Based on responses from the
21 community groups, we are creating new
22 initiatives and redoubling our efforts on
23 existing ones.
24 On that note, I am proud to announce,
25 on behalf of JPMorgan Chase and Bank One, an
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2 unprecedented nationwide $800 billion
3 community investment commitment during the
4 next decade. I am especially proud because
5 this is the biggest such commitment ever
6 made by any financial services company.
7 This pledge, which includes mortgages,
8 small-business lending and community
9 development lending, reaffirms our national
10 leadership position in community and
11 economic development. It also underscores
12 our efforts to support the credit and
13 capital needs of underserved markets,
14 efforts that will involve much of our new
15 firm, ranging from our market-leading home
16 finance business to our municipal finance
17 team.
18 Our commitment includes $675 billion in
19 mortgages nationwide for both minority and
20 lower-income communities and borrowers, and
21 an expansion of credit and mortgage
22 counseling programs, $90 billion in loans
23 and investments to assist small businesses
24 and community-based nonprofit organizations;
25 $35 billion in loans and investments for
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2 affordable housing and commercial and
3 economic development in low- and moderate
4 income communities; and a new financial
5 education partnership office that many
6 sponsor financial education and social
7 entrepreneurship programs; work with
8 mortgage counseling groups; develop
9 anti-predatory lending programs; work with
10 our branches to develop bank programs that
11 are designed to serve recent immigrants; and
12 teach credit fundamentals to not-for-profit
13 personnel. This $800 billion pledge
14 reaffirms our commitment to "Outstanding"
15 CRA ratings and strong fair lending
16 programs.
17 But we can't do this alone. We are
18 relying on many of the groups who are in
19 this room today -- our partners who are here
20 in support of us, and those who have come to
21 raise reasonable concerns.
22 Our new firm will strive to reach all
23 segments in our markets. We value the
24 leadership and innovation of our community
25 development group, confident that they, with
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2 the help of our community partners, will
3 continue to deliver outstanding results.
4 Before I hand the microphone over to my
5 future colleague, Heidi Miller, I want to
6 thank you again for this opportunity to
7 speak at today's meeting. And though Heidi
8 and I will only be able to stay for the
9 first panel's presentations, Mark Willis,
10 who will head the combined firm's Community
11 Development Group, will be here for the
12 entire session and address any follow-up
13 questions you may have regarding CRA.
14 Heidi.
15 MS. MILLER: Thank you, Bill. Good
16 morning. I am Heidi Miller, Executive Vice
17 President and Chief Financial Officer of
18 Bank One. I am appearing here today on
19 behalf of Jamie Dimon, Bank One's Chairman
20 and CEO, who is traveling out of the country
21 and therefore is unable to attend today. I
22 too would like to talk about the benefits of
23 our proposed merger.
24 By way of background, I spent the first
25 thirteen years of my banking career at
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2 Chemical Bank, a predecessor firm of
3 JPMorgan Chase, and then eight years with
4 Citigroup and its predecessor firms. In
5 October 2000, I joined Bank One's board of
6 directors and seventeen months later, in
7 March of 2002, I became a Bank One executive
8 officer, stepping down from the board at
9 that point. Now that we are putting
10 together Bank One and JPMorgan Chase, I am
11 seeing many friends and familiar faces,
12 including Bill. So I know both companies
13 from different and important perspectives.
14 I also understand the important role
15 that Bank One and its predecessors have
16 played in their communities across the
17 country for well over 100 years, and in fact
18 more than 150 years in a few cities. Like
19 all major banks in the country today, Bank
20 One has grown through acquisitions and
21 mergers, gaining scale, strength and breadth
22 to serve our customers, our employees, our
23 shareholders and our communities in even
24 better ways.
25 Over the last four years, Bank One has
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2 faced some very tough challenges. Through
3 diligence, discipline and hard work, we have
4 created a strong, healthy company that has
5 begun to expand again. In 2003, we opened
6 58 new branches, for a total of 1,841
7 branches in 14 states, and we've already
8 added more branches this year as we continue
9 to expand. We are in the process of
10 replacing every one of our 4,300 ATMs in our
11 network and we are investing millions more
12 in refurbishing our branches. In 2003, we
13 added more than 1,000 additional salespeople
14 to help customers with everything from
15 checking accounts and mortgages to
16 investments and college saving plans. As we
17 open additional branches in 2004, we will
18 continue to add salespeople to help our
19 customers.
20 The proposed merger with JPMorgan Chase
21 & Co. Will begin another exciting chapter in
22 our company's history. We know that
23 consolidation will continue in the banking
24 industry, and we believe that our combined,
25 stronger company will have more control over
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2 our future than we would have had
3 separately. We now have the unique
4 opportunity to create one of the truly great
5 global financial institutions.
6 We believe that each major business in
7 the combined enterprise will be strengthened
8 by the efficiencies that come with scale and
9 that the businesses will complement each
10 other, providing substantial competitive
11 advantage.
12 For current and prospective customers,
13 the combined company will provide access to
14 a broader offering of products and services
15 more competitively priced. For employees, a
16 stronger company ultimately results in
17 expanded opportunities for career growth and
18 development, even though, unfortunately, in
19 the beginning there will be some painful
20 staff reductions. For each of our
21 communities, a vibrant, healthy company is
22 the prerequisite for responsible corporate
23 citizenship. That is a value deeply held by
24 both our companies.
25 This merger also will afford the
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2 combined company a more diversified earnings
3 stream, a larger capital base, stronger
4 capital generation capabilities, and
5 increased capacity to invest in our
6 businesses. All of these we believe should
7 ultimately lead to a lower cost of capital
8 and the ability to better withstand
9 difficult times in the economic cycle.
10 The combined strength of our retail
11 businesses will be crucial in serving our
12 communities because it includes not only the
13 branch and ATM network, but also the
14 mortgage lending and small business lending.
15 The company will have their 2,300 branches
16 in 17 states, and we plan to add more than
17 100 branches annually for at least the next
18 three years. We will open them in low- and
19 moderate-income neighborhoods as well as
20 fast-growing suburban areas. In fact, in
21 Chicago alone, we will open twelve branches
22 in LMI areas by the end of next year.
23 Equally important, JPMorgan Chase's
24 large mortgage business will be good news
25 for consumers across Bank One's fourteen
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2 footprint states. While Bank One has
3 provided excellent banking services, the
4 merger will provide our customers with a
5 wider range of mortgage products, helping
6 them achieve the American dream of home
7 ownership.
8 Small business owners too will benefit
9 from this merger. Small businesses need
10 banking services -- especially credit -- to
11 grow, and we will offer the best products
12 and services of both companies to help our
13 small business customers do just that.
14 Mortgage lending and small business
15 lending are two of the most important
16 factors in evaluating a bank's Community
17 Reinvestment Act performance. Bank One's
18 lending has helped it earn "Outstanding" and
19 "Satisfactory" ratings in its markets across
20 the country.
21 We are proud that our merger partner's
22 lead bank, headquartered in New York, has
23 earned an "Outstanding" CRA rating -- the
24 highest possible -- for its mortgage, small
25 business and community development lending
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2 and community development investments and
3 services. In fact, as Bill pointed out, it
4 has received "Outstanding" CRA ratings for
5 the last seven consecutive periods covering
6 more than fourteen years. It's even more
7 important to know that the combined company
8 will strive to maintain that "Outstanding"
9 record.
10 Bank One has been a terrific civic
11 leader and major contributor in our markets
12 across the country, contributing more than
13 $40 million annually to economic
14 empowerment, youth education, and arts and
15 culture. Our senior executive officers and
16 other employees serve on the boards of
17 civic, community, development, educational
18 and cultural institutions across all our
19 markets. And our employees volunteer in
20 their neighborhoods, in religious
21 organizations and in communitywide efforts
22 throughout the country.
23 That kind of support will continue
24 after the companies merge. Our CEO, Jamie
25 Dimon, reaffirmed our commitment to
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2 Chicago's community leaders the night the
3 merger was announced. Bill Harrison just
4 went even further in announcing our $800
5 billion pledge for mortgages, small business
6 loans, and community investments and loans
7 over the next ten years. That unprecedented
8 commitment will be delivered one family, one
9 small business and one apartment building at
10 a time across America.
11 There is no doubt that the combined
12 JPMorgan Chase will be a national and
13 international leader in banking. And there
14 should be no doubt that the combined
15 JPMorgan Chase will also be a civic leader
16 in every market it serves.
17 Now let me turn the podium over to my
18 colleague, Byron Reed, who, as Bill said, is
19 the Director of Bank One's Community
20 Investment Management Group. Byron will
21 provide more detailed assessment of how Bank
22 One has been a leader in our communities
23 across the country.
24 MR. REED: Good morning. I'm Byron
25 Reed, the Managing Director of Bank One's
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2 Community Investment Management Group. I
3 appreciate the chance to talk about Bank
4 One's proud tradition of serving our
5 communities and about how this merger can
6 help us even more.
7 Bigger, Better, Stronger -- you have
8 heard it from Bill Harrison and from Heidi
9 Miller. Certainly, it is exciting for our
10 customers, employees and shareholders. But
11 for me, the most exciting aspect of the
12 merger is what a bigger, stronger bank can
13 do with our current and future partners for
14 our communities.
15 Sometimes community development is
16 headline news, attracting local dignitaries
17 and the media. For example:
18 * In Chicago, Bank One's construction
19 loan helped replace high-rise tenement
20 buildings with mixed income townhomes at
21 North Town Village, the largest
22 reconstruction of public housing in the
23 United States.
24 * In West Dallas, Bank One helped
25 welcome the first family to Casa Rio, the
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2 first affordable single-family housing
3 development in that part of town.
4 * In Denver, Bank One helped create a
5 170-acre master planned community, Belle
6 Creek, with over 900 units of affordable and
7 market rate housing, a charter school, a
8 community center, and retail and commercial
9 space.
10 * In Tulsa, Bank One's investment in
11 historical bank credits and our construction
12 funding helped reincarnate the Tulsa Tribune
13 Building as housing as the city of Tulsa
14 worked to redevelop and revitalize the Brady
15 Arts District.
16 Most often, however, community
17 development takes place quietly, with the
18 biggest impact coming in small and steady
19 increments:
20 * Knowing that small businesses are a
21 mainstay of the U.S. economy, Bank One has
22 made the SBA Community Express program a
23 core component of its outreach to small
24 businesses. In 2003 alone, Bank One closed
25 nearly 2000 Community express loans totaling
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2 just under $22 million. Earlier this year,
3 Bank One's manager of national SBA, Brian
4 Burke, was awarded the inaugural SBA of the
5 Year award from the Colorado Lending Source,
6 the nation's largest and most well regarded
7 CDC.
8 While a relatively small player in
9 overall mortgage origination, Bank One has
10 focused on some areas of greatest need
11 because it recognizes the vital role
12 homeownership plays for low- and
13 moderate-income families and their
14 neighborhoods. Let me share with you just a
15 few examples:
16 O Bank One was the first large
17 national bank to offer a Section 8 mortgage
18 product for very low income families moving
19 from welfare and public assistance to
20 self-sufficiency and homeownership.
21 O Bank One's HUD 184 financing,
22 including the Apache Dawn project in
23 Arizona, has provided over 300 families
24 safe, decent and affordable housing on
25 Native American tribal lands.
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2 Bank One was the first national bank to
3 participate in the HUD Title VI program
4 which helps development on Native American
5 tribal lands. This project remains the
6 country's largest.
7 O Bank One was the first bank to offer
8 the Fannie Mae HomeChoice and Group Home
9 products for people with disabilities,
10 providing loans and loans for markets.
11 O Bank One was the first bank to
12 provide down payment and closing cost
13 assistance as part of Fannie Mae's Employer
14 Assisted Housing Program for eligible
15 employees.
16 O Bank One has already lent nearly $5
17 billion of a five-year $12.5 billion
18 commitment with Fannie Mae for both single-
19 and multi-family homes across Bank One
20 footprint states.
21 As Heidi noted, we can do much more
22 when we pair JPMorgan Chase's extensive
23 mortgage origination business and Bank One's
24 1,800-plus branch network. And we plan to
25 add at least 100 branches a year for each of
26
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2 the next three years in all communities,
3 including low- and moderate-income
4 communities.
5 Bank One has established itself as a
6 leader in financial education and in helping
7 families take advantage of financial
8 opportunities. The many examples include:
9 * Bank One has underwritten The Money
10 Farm, a public television program in which
11 children teach children about money, savings
12 and other aspects of banking. It airs in
13 multiple communities across the country.
14 * In Illinois, Indiana, Texas,
15 Wisconsin and Arizona, Bank One has
16 sponsored financial literacy "train the
17 trainer" programs for the directors and
18 employees of multiple nonprofits, increasing
19 the capacities of nonprofits across the
20 states.
21 * In Arizona, a Bank One grant helped
22 launch Arizona Saves, a savings and
23 wealth-building program focused on
24 low-income families.
25 * In Chicago, Bank One contributed
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2 $100,000 each year from 1999 through 2003 to
3 support National Housing Service's
4 education, community building and
5 neighborhood leading and real estate
6 development efforts.
7 * Bank One employees volunteer as
8 board members, project coordiators and
9 fund-raisers for a broad variety of
10 community-based organizations.
11 * Bank One employees, as well as Bank
12 One grants, help working families take
13 advantage of the complicated Earned Income
14 Tax Credit, putting real dollars in their
15 pockets.
16 * Bank One this year introduced a Visa
17 debit card so that income-tax filers without
18 bank accounts can quickly receive an
19 electronic refund, which can be withdrawn
20 all at once or over time.
21 * Bank One provides millions of
22 dollars in tax credit equity each year,
23 fueling thousands of affordable multifamily
24 units for low-income families in communities
25 across the nation. Since 2000, Bank One
28
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2 invested over $1.9 billion in low-income tax
3 credit projects either directly or through
4 funds.
5 The mid-1900s, in partnership with the
6 Greater Dallas Community Churches and
7 Congregations, bank employees have
8 contributed thousands of hours to low-income
9 families in Dallas, San Antonio, Phoenix and
10 Fort Worth. Bank One also makes a
11 contribution to computer supplies, which
12 reaches a broad range of individuals,
13 including Hispanic and recent immigrants in
14 the areas here.
15 Bank One this year introduced the Visa
16 Demo card to pay income tax without bank
17 accounts. It follows terms quickly and It
18 receives refunds, which one may withdraw all
19 at once or over time. Bank One provides
20 millions of dollars in tax credit equity
21 each year, helping thousands of multi-family
22 units for long-term loans in communities
23 across the nation. Since 2000, Bank One has
24 $1.9 billion into loans with respect to
25 income tax products, either directly or in
29
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2 funds.
3 At Bank One, we are very proud of what
4 we have done with our partners to serve our
5 communities. And we are very excited about
6 the opportunities that this merger brings to
7 our communities. I know my future
8 colleague, Mark Willis, head of JPMorgan
9 Chase's Community Development, shares this
10 excitement. Thank you for the opportunity
11 to present my testimony.
12 MR. WILLIS: Thank you, Byron, for
13 sharing some examples of the responsive and
14 meaningful work Bank One is doing throughout
15 its footprint.
16 Good morning. My name is Mark Willis.
17 I manage JPMorgan Chase & Co.'s Community
18 Development Group and I have been asked to
19 head it after the merger. Thank you for
20 giving us the opportunity to:
21 - discuss JPMorgan Chase's unique and
22 innovative community development program.
23 - outline our $800 billion public
24 commitment, and
25 - talk a little bit about the creation
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2 of a compact with our communities, an
3 initiative that is being driven by the
4 JPMorgan Chase Community Advisory Board.
5 We are proud that our Community
6 Development Group is a leader in creating
7 new approaches to financing community
8 development projects. As JPMorgan Chase has
9 grown, our Community Development Group has
10 designed new capabilities to deliver a far
11 more sophisticated array of products and
12 services.
13 We have also helped incubate the
14 affordable mortgage business by providing
15 mortgages with flexible underwriting
16 criteria and we have seen this business grow
17 and mature. In the early 1990s, we held
18 tens of millions of dollars in such
19 mortgages in our portfolio because they did
20 not conform to the existing secondary market
21 criteria. All of these mortgages developed
22 into a well-seasoned portfolio. The
23 secondary market learned from our experience
24 and created some new affordable products
25 that all lenders could provide. It's a
31
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2 great success when we can mainstream a
3 product because it has become both
4 ubiquitous and profitable.
5 Our Community Development Group's
6 entrepreneurial spirit and willingness to
7 focus on our customers' unique banking needs
8 has distinguished JPMorgan Chase as the
9 cutting edge leader for innovation. While
10 we are announcing a ten-year $800 billion
11 program today, we will continue to celebrate
12 those small, tangible, day-to-day successes
13 which make such a difference for our
14 customers and our community partners.
15 Let me now lay out in a little more
16 detail our ten-year plan. The components of
17 the plan are a set of key performance
18 measurements against which the public can
19 assess our annual results. Bill has talked
20 about the top-line numbers that comprise the
21 plan, and I would like to touch on the major
22 components again and then discuss some new
23 initiatives. The vast majority of this
24 ten-year $675 billion is comprised of
25 mortgages, which are so vitally important to
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2 cities and neighborhoods in every market
3 across the country. These loans will be
4 made to households with annual incomes at or
5 below the median household income and on
6 properties located in predominantly minority
7 communities.
8 Second, we will make more than $90
9 billion in loans to small businesses and
10 not-for-profit organizations in the 17
11 states served by the combined company's
12 branch system. Finally, we anticipate $35
13 billion in community development loans and
14 investments.
15 Let me now talk about the initiatives
16 that grew from our discussions with
17 literally hundreds of community leaders and
18 advocates, including some who oppose this
19 merger.
20 1. We are creating a new Home
21 Ownership Preservation Office in Chase Home
22 Finance mortgage business that will:
23 - work with community groups that help
24 victims of fraud or other abusive mortgage
25 practices and
33
1
2 - restructure, when possible, their
3 mortgages to help them keep their homes.
4 - work with the mortgage industry and
5 HUD on FHA foreclosure policy; and
6 - work with community groups to sell
7 or donate certain REO property to help
8 minimize any negative impact on their
9 neighborhoods.
10 2. We are creating a national
11 community mortgage-lending unit to serve the
12 home-buying needs of low- and moderate
13 income consumers looking to buy their first
14 homes in inner cities and other historically
15 underserved communities. In large markets,
16 we will use salaried loan officers who will
17 have both lending goals and outreach goals.
18 In other markets, we will have incentives
19 for commissioned loan officers to serve the
20 needs of mortgage counseling agencies and
21 their clients.
22 3. We will also provide $1 billion in
23 loans and investments to CDFIs, community
24 investment institutions, across our markets
25 as part of our $800 billion plan.
34
1
2 4. We will create a new Financial
3 Education Partnership Office to focus on the
4 basic financial education needs of consumers
5 so that they can make more informed choices
6 about borrowing, investing, saving and
7 selecting the right banking account for
8 their needs. We launched a basic bank
9 curriculum over a year ago.
10 5. We will open new Business Resource
11 Centers and expand the SBA Community Express
12 program across our retail banking franchise.
13 We are also retaining the JPMorgan
14 Chase Community Development Group model that
15 allows us to bring together, in a single
16 organization, community development experts
17 from across both banks.
18 Let's turn now to our Community
19 Advisory Board, which is comprised of 46
20 community leaders. At our last two meetings
21 of this group, we spent a great deal of time
22 discussing whether to announce a 10-year
23 plan. The board voiced its confidence in
24 our commitment to community development and
25 to outstanding CRA performance. They did
35
1
2 not feel that a large dollar amount would
3 add incremental value. However, they wanted
4 to expand the debate beyond dollars to
5 values and impact. Their idea was to create
6 a kind of "compact with our
7 communities."
8 A Board subcommittee has started to
9 outline principles to guide the compact,
10 including the following:
11 * Partner with the community
12 * Listen to all perspectives
13 * Execute locally
14 * Strive for economic sustainability
15 * Share knowledge
16 * Invest in innovation
17 * Go beyond regulatory requirements
18 * Lead with best practices in fair and
19 responsible lending
20 * Deliver the full resources of the
21 firm.
22 We value our Community Advisory Board
23 because the members keep us focused on the
24 really important issues. We also learn from
25 the perspectives and experiences of members
36
1
2 from around the country as they too learn
3 from one another. We look forward to
4 expanding the board to include community
5 leaders from the Bank One footprint.
6 The merger will have great benefits for
7 the communities we serve. We are very
8 excited about the challenges, the
9 opportunities, and the responsibility.
10 Thank you very much.
11 MS. BRAUNSTEIN: Thank you very much.
12 I have a question for the panel. One of the
13 things that we often hear from consumer
14 community groups about large organizations,
15 especially organizations that have grown in
16 size through mergers and acquisitions, is
17 that there is some loss of local control and
18 local responsiveness, and that oftentimes,
19 because of the time of the organizations,
20 there are a range of cookie-cutter products
21 that are put out which sometimes don't meet
22 the needs of specific local communities.
23 My question for you is: As JPMorgan
24 Chase continues to grow in size and become
25 truly a nationwide bank, how do you plan to
37
1
2 retain both a local kind of emphasis and how
3 do you plan to meet local communities?
4 MR. HARRISON: Sandra, that's a great
5 question, and it's the question I get a lot,
6 because it relates to all of our activities,
7 whether it is our community activities that
8 we are talking about this morning or whether
9 it relates to how we serve our middle market
10 or corporate clients across our respective
11 markets.
12 The answer is: We are a very big
13 company today, and big by itself is not
14 necessarily a good thing. You need to make
15 big good, and you make big good by doing a
16 lot of things. One is making it more local.
17 Mark talked a little bit about that, but we
18 want the people who represent this firm in
19 our local communities to be very active, to
20 have enough authority to get the job done in
21 all the activities. That sounds like the
22 obvious thing to say, but we do work hard at
23 that, and the firms that can execute that
24 better than the others will have a huge
25 advantage, because the fact of the matter
38
1
2 is, you can combine good local presence with
3 the global capabilities of a very large firm
4 if we have integrated properly, and that is
5 what we work very hard at. And I think we
6 do a pretty good job at it, and we will
7 continue to do a better job at it because it
8 is a great opportunity for us.
9 MS. BRAUNSTEIN: Thank you.
10 MR. HODGETTS: I have a question, if I
11 may, about predatory lending. Generally,
12 there is a concern that large banks are
13 engaged in the purchase and securitization
14 of mortgage loans and, indirectly through
15 that practice, encourage predatory lending
16 practices. Could you comment on the steps
17 you have taken to mitigate that risk?
18 MR. WILLIS: First of all, we share
19 everybody's concern about predatory lending
20 and abusive lending practices, and we are as
21 diligent as we can possibly be in trying to
22 make sure that we do not in any way make
23 those kinds of loans. I think we all want
24 to know -- I won't take the time here -- the
25 best practices in subprime lending. One of
39
1
2 the ideas that we have here with this
3 group -- I created the Home Ownership
4 Preservation Office -- is to work with
5 groups out there that may have better ways
6 than we have found to make sure that we are
7 not doing business with companies that do
8 not live up to standards that we think they
9 should.
10 So we have, again, outlined in our
11 letters here a lot of internal controls to
12 try and ensure that we are not dealing with
13 predatory lenders, and we are constantly
14 trying to learn from our experiences and
15 learn from others if there are ways that we
16 can do that better. We have had some very
17 good conversations with community groups on
18 this issue. We see this office as being
19 very critical in helping us in that area.
20 MR. McEWEN: A follow-up question on
21 that. Our main concern as expressed by
22 community groups actually relates to abusive
23 practices by home builders. What are you
24 doing to control the risk of abusive
25 practices by those groups?
40
1
2 MR. WILLIS: As part of our best
3 practice here, we do screen the companies
4 that we do business with. We look to make
5 sure -- we don't take, for example, HOEPA
6 loans, as people understand, and we don't
7 securitize HOEPA loans. We do a full due
8 diligence of people that we are doing
9 business with, and we are eager to have an
10 initial input from the community groups in
11 terms of their own due diligence of these
12 groups. We have systems that get involved
13 in properties that are flipping. There are
14 a whole bunch of abusive practices that we
15 look to here to make sure that, as best as
16 we can, we are doing business with people
17 that meet the law, meet the regulatory
18 requirements.
19 MS. BRAUNSTEIN: Thank you very much.
20 Any other questions? OK, thank you very
21 much.
22 MR. HARRISON: Thank you for giving us
23 the opportunity to be with you.
24 MS. BRAUNSTEIN: The next panel can
25 come forward, please.
41
1
2 As with the last panel, I would ask
3 that everyone please state your name and
4 organization for the record.
5 Reverend Jackson, would you like to
6 lead us off?
7 REV. JACKSON: Good morning. My name
8 is Jesse L. Jackson Sr. I am the President
9 and Founder of the Rainbow/PUSH Coalition,
10 citizenship Education Fund and its
11 initiative, the Wall Street Project. I
12 begin my comments by stating that presently
13 we are neither opposed to nor in favor of
14 JPMorgan Chase's application for merger with
15 Bank One. Our role at this time is to
16 provide research and counsel as to the
17 importance of inclusion and access as you
18 consider this merger.
19 We feel that safeguards are essential,
20 flowing from the upper levels of planning
21 and execution. You often see the Mt.
22 Everest effect of large and tall mountains
23 snow-capped at the top but with a lack of
24 ground bases.
25 Secondly, given the amount of
42
1
2 investment banker fees in this present deal,
3 a history of slavery and race-based legacy
4 with these companies to be cleared up, it is
5 a matter of real concern. The plan to
6 greenline historically redlined zones, the
7 matter of CRA and lending predators, people
8 who prey on the poor -- we work harder for
9 less, we pay more for less -- demonstrates
10 something, and the impact of this merger
11 could have an impact on this, positively or
12 negatively.
13 Given the massive corporate malfeasance
14 that is leading the world's headlines, we
15 are currently appealing to the New York
16 Attorney General's Office, the Senate
17 Banking Committee and corporate America to
18 take an active role in opening doors of
19 opportunity and inclusion for diverse
20 financial services entities.
21 The Community Reinvestment Act, passed
22 by Congress in 1977, encourages financial
23 institutions to help meet their communities'
24 needs -- through safe and sound lending
25 practices and by providing retail banking
43
1
2 and community development services. This
3 law must be enforced. So I have desire to
4 work with you in this process.
5 This nearly $60 billion merger will
6 create the second largest financial services
7 entity in the world; yet, discussion
8 concerning diversity has been, I feel,
9 essentially marginalized. Thus, we have
10 several basic questions as we seek to
11 establish a 5 percent outsourcing goal for
12 diverse financial firms that is measurable.
13 It is important to note that these two
14 entities, combined, may control and manage
15 nearly $600 billion, and thus we cannot
16 dispute those who want to see measurable
17 goals and timetables.
18 Will we see any usage of women,
19 African-American, Hispanic or other
20 ethnically diverse persons in legal,
21 transition management and auditing firms
22 participate in this merger?
23 If so, what percentage will be
24 allocated? If not, why are we excluded from
25 the table?
44
1
2 The fees that will be generated alone
3 by this merger may total nearly $100
4 million. Just as minorities exist as
5 contributors of capital to our financial
6 markets, there must be a representative
7 distribution of the management of that
8 capital. Again, our organization recommends
9 5 percent.
10 Will we see an overall increase in the
11 outsourcing of opportunities for diverse
12 asset management firms, brokerage firms, as
13 well as investment in community-based banks
14 and minority venture capital funds?
15 As stated earlier, the combined assets
16 under management will total in the hundreds
17 of billions of dollars. Imagine how
18 equitable the playing field would be if
19 JPMorgan Chase and Bank One would assign
20 just 5 percent of that endeavor.
21 How will the supplier diversity offices
22 and/or initiatives of both of these
23 organizations be combined after the merger?
24 Has there been any sort of analysis done to
25 determine, out of Bank One and JPMorgan
45
1
2 Chase, which entity has the better diversity
3 programs?
4 What will be the combined procurement
5 budget for these two entities? What is the
6 current spend allocation for each concerning
7 African American vendors, Hispanic vendors,
8 native American vendors, and Asian vendors?
9 How will current relationships be maintained
10 and enhanced?
11 African Americans and Hispanics,
12 concerned about the impact of the loss of
13 jobs at Bank America, are shedding 12,500
14 jobs worldwide as part of a move to justify
15 the $48 billion it spent buying Fleet Boston
16 Financial Corporation, and yet there has
17 been silence concerning the effect that
18 these layoffs have had on the job markets to
19 those who came in last.
20 What are the current retention rates of
21 people of color?
22 How will the workforce diversity
23 offices or positions be merged?
24 Do the selected executive leadership
25 teams and new board members reflect the.
46
1
2 Increased diversity of the combined entity's
3 climate base? Our Initial research
4 indicates zero percent diversity within Bank
5 One's executive leadership or planning group
6 and a nominal percentage in diversity among
7 JPMorgan Chase at the top.
8 Subsequent to the merger, what will
9 happen to females and diverse executives who
10 were on leadership tracks within each of
11 these banks?
12 Will we see an increase in investments
13 and venture capital funds that help to grow
14 women and minority owned businesses?
15 Lastly, today you will hear from a host
16 of esteemed organizations concerning CRA,
17 predatory lending, subprime lending, so I
18 will limit my remaining remarks to just two
19 primary areas: The importance of financial
20 literacy in faith-based communities, and the
21 historical context that will provide
22 justification for inclusion.
23 According to the SEC, churches,
24 especially African American churches, are
25 one of the largest victims of unscrupulous
47
1
2 financial advisers and bank representatives.
3 Our churches are in need of more than just
4 free checking accounts, housing fairs, and
5 large unfulfilled public commitments to
6 provide mortgage lending. The Church is the
7 cornerstone for education and leadership in
8 our communities.
9 I close with a bit of historical
10 context. Blocks away from this building
11 lies an African Slave burial ground. We
12 must remember that Wall Street was started
13 on the commodities industry -- exporting
14 cotton and importing slaves. The cries and
15 pleas of our foreparents whose enslaved
16 labor helped to grow these banks must not be
17 ignored.
18 If we were to compare the Civil Rights
19 movement in our country to a Freedom
20 Symphony, it should be broken down in four
21 stages: End of slavery; securing the right
22 to vote; end of segregation; and fourth,
23 access to capital, industry and technology.
24 We must address these four stages and use
25 this magnificent moment to close the gap.
48
1
2 The last stage must be that of economic
3 empowerment through shared access to
4 capital. Regardless of your views on
5 reparation. African Americans, Hispanics,
6 women, and other underserved groups still
7 are not exposed to an open playing field
8 when it comes to wealth creation in this
9 country. I implore you to help assist in
10 filling that void.
11 Thank you very much.
12 MS. BRAUNSTEIN: Thank you.
13 MR. LEE: Ms. Braunstein, I wanted to
14 ask a question to start, which is on the
15 comment period. Is it the 23rd or the 22nd?
16 I thought it was the 23rd. I think when the
17 board put out their notice of meeting, not
18 that it is -- from what we have just heard,
19 I don't know.
20 MS. BRAUNSTEIN: It is the 23rd.
21 MR. LEE: All right.
22 Good morning. My name is Matthew Lee.
23 I am the Executive Director of the nonprofit
24 organizations Inner City Press and Fair
25 Finance Watch, which are based in the South
49
1
2 Bronx here in New York City.
3 I want to say one thing. As to
4 everything that I am going to say here, I am
5 not at all clear that this eleventh-hour,
6 $800 billion pledge will address any of the
7 issues that I am about to discuss, and I
8 wish that that pledge had been made
9 available before the public meeting so that
10 the people could actually look at it and
11 comment on it. So I am going to stick to --
12 you know, it is what it is, but I think you
13 might even want to take an extended comment
14 period. To do it at the day of the hearing
15 is sort of a new technique, let's say.
16 In the South Bronx of New York City, we
17 have seen Chase close more than a dozen bank
18 branches. Now, we find that JPMorgan Chase
19 finances check cashiers in the same
20 neighborhoods where it closed its bank
21 branches. We have found, and demonstrated
22 in written submission to the Federal
23 Reserve, that Bank One supports and enables
24 payday lenders and even pawn and gun
25 shops -- a shadow world of fringe finance
50
1
2 and predatory lending.
3 We believe that there are a number of
4 reasons that this merger should be denied.
5 Based on Morgan Chase's conduct in the Enron
6 stock research scandals, it would create
7 another too-big-to-fail, scandal-plagued
8 megabank, and would limit competition and
9 raise prices. But in the five minutes
10 allotted today, I'll focus on predatory
11 lending from payday lenders to check
12 cashiers, in The Bronx and elsewhere, and
13 even pawn and gun shops nationwide.
14 Inner City Press is today submitting
15 for the record a series of Uniform
16 Commercial Code filings which show that Bank
17 One finances payday lenders, both large and
18 small. Here are a few examples:
19 First Cash Financial Services, a
20 top-ten pawnshop chain with 130 storefronts
21 in 11 sites.
22 Illinois Payday Loans, Inc.
23 Discount Payday Loans of Colorado --
24 the use of the word "discount" is perhaps
25 unintentionally ironic, or Orwellian.
51
1
2 Mister Payday of Kentucky.
3 These are all in exhibits that we
4 turned in.
5 First American Cash Advance, which is a
6 top-ten payday lender with 330 storefronts
7 in 11 sates -- a company which has been
8 extensively criticized for its high-cost
9 lending, particularly to members of the
10 military. There is a Washington Post
11 article to that effect.
12 The two banks' responses today on these
13 issues have been evasive. In their April 7
14 response to the Delaware Banking Department,
15 to which ICP has also commented -- and
16 Rashmi Rangan you will hear from later --
17 the banks have claimed that "although Bank
18 One does not specifically target this
19 market, it has made credit facilities
20 available to a relatively small number of
21 small- and middle-market consumer finance
22 lenders whose predominant business is payday
23 lending" -- which is a long sentence that I
24 think flies in the face of the statement we
25 heard from the bank's panel as to an attempt
52
1
2 to not do business with people who don't
3 live up to your standards. Because if these
4 lenders live up to the bank's standards,
5 then the bank has no standards.
6 The statement I just read was and is
7 misleading. Far from being limited to
8 "small" or "middle-market" payday lenders,
9 Bank One finances at least two top-ten
10 payday lenders: First Cash Financial and
11 First American Cash Advance. We have
12 recently gone back to the salt mines of
13 research, and now, as part of the exhibits
14 demonstrated, Bank One is financing the
15 following companies -- i have the list:
16 National Pawn Brokers Outlet of Flint,
17 Michigan;
18 Pyramid Pawn of Danville, Kentucky.
19 Moe's Pawn Shop and Gun Store of
20 Columbus, Ohio.
21 Instant Cash Advance, Inc., of Miami,
22 Florida.
23 Indiana's Casino Cash and Pawn, Inc.
24 Sunset Cash Advance, Corp. -- a payday
25 lender.
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1
2 Tomcats Pawn, Inc. Of Bloomington,
3 Indiana.
4 Cash Till Payday L.t.d.
5 Bronco Pawn & Gun, Hornet Pawn & Gun,
6 and Longhorn Pawn and Gun, Inc., all of
7 Austin, Texas.
8 There are many more; I'm stopping here
9 because JPMorgan Chase too is an enabler not
10 only of predatory mortgage lending but also
11 of fringe finance. In the South Bronx, we
12 have turned in exhibits showing there is
13 financing at Claremont Check Cashing Co., at
14 510 Claremont Parkway, The Bronx, which is
15 across from four housing projects where
16 25,000 people live and there is no bank
17 branch.
18 You know, there are a number of others:
19 All American Check Cashing Corp, Kimball
20 Check Cashing. All of these are in the
21 South Bronx.
22 They are also in Brooklyn, Jersey City
23 and Rochester. And you are going to hear
24 from Ruhi in a moment, you will hear from
25 others, that the JPMorgan Chase
54
1
2 securitization of subprime lenders is done
3 without standards. Many of us have raised
4 the point that they should have the same
5 standards of securitization that they have
6 on their own loans. They said they might
7 but they currently don't. It is imperative
8 that we nail it down. $800 billion doesn't
9 change that.
10 The biggest problem in terms of this
11 process in front of the Fed is that once we
12 raised the issue of payday lending and
13 subprime lending by JPMorgan Chase, the Fed
14 asked the banks for a list of the lenders
15 that it does business for. The bank turned
16 it in, but asked for confidential treatment.
17 So it doesn't want to show the list to the
18 public. We are pursuing the list from the
19 Fed under the Freedom of Information Act.
20 They say that they only want be to do
21 business with companies that live up to
22 their standards. It is imperative that, if
23 that be true, they release the list so
24 everyone can comment on it. To hide the
25 list I think flies in the face of being a
55
1
2 responsible company.
3 The $800 million or billion dollars, or
4 whichever it is, to do it on the day of the
5 hearing indicates that had there not been
6 this hearing they wouldn't have made the
7 pledge.
8 With the Community Advisory Board, many
9 of whose members I respect and we will hear
10 from later, I wonder whether JPMorgan Chase
11 has asked them about payday lending and
12 whether it is a good thing for our
13 communities.
14 Thank you very much.
15 We are opposed to the motion, by the
16 way.
17 MS. MAKER: Good morning. My name
18 is --
19 MS. BRAUNSTEIN: I am glad you
20 clarified that. (Laughter)
21 MR. LEE: I wanted to.
22 MS. MAKER: My name is Ruhi Maker, and
23 I too am here to oppose this motion, despite
24 the $800 billion pledge. I co-convene the
25 Greater Rochester Community Reinvestment
56
1
2 Coalition, and am also a senior attorney of
3 the Public Interest Law Office of Rochester.
4 GRCRC is a coalition of over 35
5 not-for-profits from the greater Rochester
6 area. PILOR has a foreclosure prevention
7 project in Rochester. This project of ours
8 is a foreclosure project which has been
9 around for a few years but it has really
10 taken off. We have got already hundreds of
11 clients, and it is very, very scary for me.
12 So I want to focus on due diligence.
13 Mark raised that, and I welcome the
14 fact that JPMorgan Chase seems to recognize
15 that due diligence is a problem. My opening
16 comments on the issue of due diligence are:
17 Is it just words or is there going to be
18 specific enforceability in the order that
19 the Fed issues as to what is done for due
20 diligence and how due diligence is improved?
21 Will it have teeth and will it be
22 monitorable and enforceable? And will there
23 be public information provided as to how
24 this due diligence is going to improve?
25 Let's talk about JPMorgan Chase's
57
1
2 mortgage lending. You will hear from some
3 of my colleagues about specific examples of
4 clients. I will paint with a broad brush.
5 Chase, Chase's attorneys, in a March 23
6 letter, responded to the Fed and stated
7 there a 42,000 mortgage borrowers in 2003
8 alone in long-term default. If necessary, I
9 could quote the exact words. This resulted
10 in those 42,000 borrowers and homeowners
11 ending up in payoffs, in restitution and
12 foreclosure.
13 Now, what number of those are FHA
14 loans, I don't know. What number of those
15 are subprime loans, I don't know. What
16 number of those are abusive loans, I don't
17 know. We all know foreclosures occur
18 because of death, disease and divorce, but
19 without the real due diligence that should
20 exist we really don't have a true measure of
21 the problem. Does Chase know? Does the Fed
22 know? I don't know, and that really
23 disturbs me. So let's talk about real due
24 diligence.
25 We have clients, for example, who get a
58
1
2 loan to securitize -- and these are not
3 Chase loans, by the way; I want to make that
4 clear -- where you have a teacher who is a
5 substitute teacher, she is a substitute
6 teacher, and months after she stops
7 teaching, her income is half of what she had
8 and her role becomes problematic. Does due
9 diligence capture that? Does it capture
10 benefits that a grandmother gets from her
11 17-year-old child which is going to age out
12 after the loan has been securitized,
13 whatever? There are lots and lots of
14 problems that we believe due diligence does
15 not capture as yet.
16 So is it really a question of the
17 bank's inability to figure this out and not
18 do real due diligence, or is it a convenient
19 way to look the other way while short-term
20 money is made with little thought for
21 long-term consequences?
22 I have been a poverty lawyer for 25
23 years. I lay awake thousands of nights to
24 make sure of what I am going to do to ensure
25 these kids are not the victims of predatory
59
1
2 lending. So I have passion in my voice; I
3 am told I am very passionate. And I want
4 all of you -- some of you live in gated
5 communities -- to think about the cost of
6 predatory lending and the cost of
7 homelessness and the damage to families,
8 because I see it every single day and it
9 breaks my heart.
10 What I would like to focus on is
11 whether the percentages are low of defaults,
12 whatever those percentages are. 45,000
13 people were in default in 2003 alone. These
14 are Chase loans. That troubles me and that
15 needs to stop. We need to find a way of
16 minimizing that number, short of death,
17 disease and divorce, but let's set what that
18 number is. Can a multibillion-dollar
19 corporation operate? You know what you are
20 doing. I know in this world they can and do
21 operate in a way that is damaging, and we
22 need to change that.
23 There is a concern about state laws
24 that result in assignee liability for
25 abusive loans. They claim it is impossible
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1
2 to price securitized pools to reflect the
3 potential cost of abusive loans which may
4 end up in these pools. Yet they claim to
5 practice thorough due diligence that ensures
6 that the loans in the pools are not abusive.
7 They can't have it both ways.
8 Do we know how pervasive this problem
9 is? Or is it like the proverbial elephant?
10 The banks grab the tail and deem it
11 minuscule. The regulators grab the trunk
12 and hold hearings. The consumer advocates
13 repeatedly bump into the massive body and
14 talk of abandoned neighborhoods and
15 devastated communities. They look people in
16 the eye who are losing or have lost their
17 homes and say, "You were ripped off but I
18 can't help you."
19 So let's get some real due diligence.
20 I am glad Mark wants you to talk to the
21 advocates. There are lots of people who can
22 tell Chase and other lenders how to do this.
23 The question for the Fed is: Are you going
24 to put this in your order, or are we all
25 going to go away, have nice conversations
61
1
2 for the next two years, and nothing is going
3 to change?
4 The way it changes is: You put it in
5 your order, you follow through. You know
6 you have done it before. We know what I am
7 talking about and I know what we are talking
8 about. Let's get it right this time. Thank
9 you.
10 MS. BRAUNSTEIN: Thank you.
11 MS. RANGAN: My name is Rashmi Rangan.
12 I am with the Delaware Community
13 Reinvestment Action Council, and I am here
14 opposing this merger.
15 Thank you for this opportunity today to
16 testify. My oral testimony supplements the
17 written comments that have been submitted
18 into the record to date. I have also
19 included communications with the Delaware
20 Banking Commissioner into the record.
21 One of the factors to consider, and we
22 mentioned, was the convenience and the needs
23 of the entire community that the bank serve.
24 We are going to talk about the needs that
25 the bank does not serve or, rather, hurts
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1
2 communities.
3 On that note, the applicants should
4 release the list of their subprime, payday,
5 Refund Anticipation lenders, and other
6 partners. The list that Mr. Lee has
7 mentioned you should make available to the
8 public should they not voluntarily do so.
9 As Mr. Lee has already mentioned, his
10 research has found a long list of
11 questionable lenders as both Bank One's and
12 Chase's partners -- a very short list. I
13 would mention, which had been entered into
14 your record, compliance compiled by ICP
15 shows Chase's support of and profit from All
16 American Check Cashing Corp. Of 412
17 Soundview Avenue, Kimball Check Cashing
18 Corp. Of 101 East Burnside Avenue, A & A
19 Check Cashing Corp. Of 1488 Williamsbridge
20 Road, Dyre Check Cashing Corp. Of 3813 Dyre
21 Avenue, etc., etc.
22 Because the record is already
23 supplemented with information that is
24 publicly available, there is absolutely no
25 need to ask for or get confidentiality for
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1
2 this list. If the applicants have nothing
3 to hide, what are they afraid of? If the
4 applicants are ashamed of their partners,
5 why enter into such partnerships? If the
6 applicants are to engage in such business,
7 there should be greater scrutiny and
8 openness. Who the applicants partner with
9 demonstrates the standard of due diligence
10 that they choose to apply.
11 Therefore, Exhibit 7, list of their
12 prime investors, Exhibit 9, list of their
13 asset-based relationships, Exhibit 10. List
14 of their RAL and payday lenders, and any
15 other similar lists concerning which they
16 frivolously asked for confidentiality must
17 be released. The public has a right to know
18 whom they do business with.
19 On page 46 of the March 23 letter to
20 you, the applicants acknowledge, and I quote
21 here: "Although there is no specific credit
22 policy requirement that enhanced due
23 diligence or fair lending compliance be done
24 with respect to companies engaged in payday
25 lending or tax anticipation refund lending,
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2 credit evaluations are expected to deal
3 with, as applicable, the customer's
4 reputation and other character-related
5 issues as well as issues peculiar to the
6 customer that may affect credit risk."
7 Given the absence of due diligence, DCRAC
8 asks that should you approve the merger, it
9 should be conditioned on the new entity
10 disengaging from this line of business. The
11 applicants have, in their response to such a
12 request by Metropolitan Milwaukee Fair
13 Housing Council, on March 30, 2004, at page
14 6, stated: "It would not be appropriate to
15 discuss exiting these businesses."
16 Mr. Harrison talked about
17 anti-predatory lending education, and this
18 is a predatory business that they have
19 refused to disengage themselves from.
20 Just two days ago, at a public hearing
21 in Delaware, the applicants, through
22 counsel, asked the Delaware Banking
23 Commissioner to ignore any testimony not
24 directly relevant to the two entities'
25 credit card operations. What the parent and
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2 its affiliates do outside Delaware is very
3 relevant to Delaware.
4 Attached is a News Journal editorial
5 entitled "Payday loans sully the state's
6 reputation as a financial center." Even
7 from a bank-friendly state such as Delaware,
8 the media recognized that "payday loans are
9 a shameful exploitation of inner-city
10 residents and low-income workers living
11 day-to-day or in neighborhoods without
12 regular banks."
13 My time is up. I want to thank you.
14 MS. BRAUNSTEIN: You oppose this
15 merger. Thanks.
16 MS. HOWARD: Good morning. My name is
17 Deb Howard. I am Executive Director of the
18 Pratt Area Community Council, a
19 community-based housing organization serving
20 central Brooklyn. We provide homebuyer and
21 homeowner services, tenant and community
22 organizing, affordable housing and economic
23 development and, through these activities,
24 we work to preserve the economic and social
25 diversity of our communities.
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2 I am appearing here today to express
3 some of the reservations we have for the
4 impact of the proposed merger of JPMorgan
5 Chase and Bank One on our communities. With
6 over 200 branches, JPMorgan Chase remains
7 the financial institution in New York City
8 with the strongest on-the-ground presence in
9 traditionally underserved neighborhoods. In
10 the Bedford-Stuyvesant community which we
11 serve, JPMorgan Chase is one of the very few
12 banks with a physical branch in the area.
13 In fact, its bank is right in the center of
14 Bed Stuy.
15 Given that the merging entities have no
16 redundancies in their branch locations
17 within the five boroughs, we would expect
18 that the new company's presence will remain
19 constant, if not increase, in these
20 communities. However, because the retail
21 banking operations are moving in Chicago, we
22 are gravely concerned that this will not be
23 the case. Though JPMorgan Chase has a
24 decent record in these communities, we urge
25 the Federal Reserve Board to carefully
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2 scrutinize the proposed merger so that low-
3 and moderate-income and minority communities
4 are served by tangible benefits and
5 continued commitment.
6 Once the New York City leader in
7 community development lending, in our
8 experience Chase has backed off from this
9 commitment to affordable housing production
10 since its last merger with JPMorgan. In the
11 1990s when Chase was accessible and
12 committed to working hand in hand with
13 neighborhood organizations, PACC had two
14 projects funded by Chase. Our last two
15 projects have been funded by Fleet because
16 it has stepped up as flexible committed
17 lender.
18 We recommend that, as a consequence of
19 this merger, JPMorgan Chase/Bank One again
20 establish a community development structure
21 that effectively supports neighborhood-based
22 organizations in their efforts to produce
23 affordable housing for their communities.
24 Just to comment on Mark Willis's
25 statements also, as a community
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2 organization, which has been providing
3 foreclosure and default counseling and
4 financial literacy and education for over
5 ten years in our community, I'm a little
6 affronted when he said the bank is going to
7 come and teach us about these practices and
8 teach us about loss mitigation counseling
9 and false counseling. So I also say that I
10 hope that the banks will enlist the help of
11 neighborhood-based community organizations
12 that provide these services in spreading the
13 word on how to better serve our clients.
14 Our reservations about the proposed
15 merger can be assuaged by a formalized
16 written CRA agreement with JPMorgan
17 Chase/Bank One that commits them to an
18 increase in lending and philanthropic giving
19 for community development and housing
20 preservation, and sets clearly defined goals
21 in relation to investing practices and
22 retail services in LMI and Minority Census
23 Tract areas. JPMorgan Chase and Bank One
24 have been negotiating a detailed agreement
25 with organizations in Chicago and that
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2 agreement could easily serve as a template
3 for such an agreement in New York and other
4 major markets where JPMorgan Chase and Bank
5 One have significant influence. With
6 agreements such as these in place, the new
7 entity will be ultimately much more
8 responsive and attuned to the needs of low
9 and moderate income and minority
10 communities.
11 As our original bank around the corner
12 moves to be the bank of the nation and the
13 world, we hope that this new firm will
14 expand its services for our community and
15 continue to be a strong community partner.
16 Thank you.
17 MS. BRAUNSTEIN: Thank you.
18 MR. MURIANA: Good morning. And thank
19 you for this opportunity to testify.
20 My name is Joe Muriana, and I am the
21 President of the Board of University
22 Neighborhood Housing Program, created twenty
23 years ago by Fordham University, the Jesuit
24 university of New York City, where I
25 currently serve as Associate Vice President
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2 for Government and Urban Affairs.
3 UNHP is a community-institutional
4 partnership designed to promote the creation
5 and preservation of affordable housing in
6 the northwest Bronx, serving as a community
7 financial intermediary, a technical
8 assistance and loan packaging assistance
9 provider, and a catalyst on affordable
10 housing issues. University Neighborhood
11 also has been designated as a Community
12 Development Financial institution by the
13 U.S. Treasury Department. We have made and
14 leveraged over 70 acquisition, renovation
15 and refinancing loans to over 50 multifamily
16 affordable housing projects totaling more
17 than $15 million, as well as advancing other
18 projects with tens of millions of other
19 dollars invested in projects where we have
20 provided technical assistance and loan
21 packaging services.
22 University Neighborhood Housing Program
23 has a long history with JPMorgan Chase and
24 with the various predecessor entities that
25 have become part of the JPMorgan Chase
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2 organization in recent years. We have
3 received grant support from JPMorgan Chase
4 for a number of years. Our Executive
5 Director, Jim Buckley, currently serves on
6 the Chase Advisory Board.
7 Chase Manhattan was the first lender to
8 participate in UNHP's multifamily
9 acquisition loan fund back in 1988. Chase
10 initially established a below prime rate
11 revolving line of credit for $100,000 that
12 permitted us to make loans to permit the
13 acquisition by community-based nonprofit
14 housing groups of two multifamily properties
15 that were in serious states of
16 deterioration. We were able to continue
17 drawing against the revolving line of credit
18 to do other deals, and when it became time
19 for renewal, Chase increased the line to a
20 quarter million dollars. Chase's
21 willingness to take the lead in this
22 instance paved the way to bring other
23 financial institutions into our work.
24 Chase initially provided acquisition
25 and construction financing in the amount of
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2 $4 million on five multi-family buildings
3 containing 275 apartment units. We then
4 began to develop other lending tools to
5 assist tenant and community organizations.
6 This time we worked with the folks at
7 Chemical and ultimately at Chase, through
8 their Housing Opportunities Program. Our
9 first deal involved $50,000 zero percent
10 loan to get gas service restored to 87
11 families on Garden Street. That deal and
12 its success led to Chase's funding of
13 University Neighborhood's other lending
14 programs with another $250,000 loan through
15 the Housing Opportunities Program in 1996.
16 Chase issued a new loan in 2001 for $400,000
17 that we have continued to use to support our
18 ongoing loan programs.
19 Chase also collaborated with UNHP to
20 combine philanthropic dollars and
21 market-rate loan money to allow the
22 acquisition and rehabilitation of two
23 buildings with 31 apartments known as
24 Tremont-Anthony. This project highlighted
25 the value of bank flexibiity and creativity
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2 combined with our own to make a difficult
3 deal work that linked together Low Income
4 Housing Tax Credits with a variety of other
5 funding sources.
6 The Merger.
7 In the course of the many banking
8 mergers we have undergone in the Bronx, we
9 always remain concerned about their impact
10 on our communities. While we have had a
11 generally positive history with Chase in our
12 community, it is only reasonable and
13 realistic that we would be concerned about
14 the maintenance of effort, creativity and
15 willingness to initiate new efforts in and
16 on the part of the new bank. It is very
17 possible for community-based organizations
18 such as ours to get lost in bank
19 megastructures, especially if they become
20 geographically more remote. It is with
21 these concerns in mind that we make the
22 following comments:
23 Corporate and community leadership has
24 been a common thread in the history of our
25 relationship with Chase. Over sixteen
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2 years, Chase has maintained its efforts with
3 us, and the benefit has been clear for both
4 the bank and our community. If the merger
5 is approved, we expect that the new bank
6 will provide exceptional leadership. As
7 part of Jim Buckley's participation on the
8 Community Advisory Board, We are involved in
9 ongoing discussions with both banks about
10 the development of a new compact that Mark
11 Willis referred to, that would outline some
12 basic principles that the bank will commit
13 to as part of their community development
14 efforts with groups and communities like
15 ours. One of those principles is the
16 importance of developing plans and goals in
17 active partnership with local leaders.
18 Chase has been good at this in the past; we
19 want to make sure that they continue to be
20 good at it in the future.
21 Another theme is the recognition that
22 community development needs are different in
23 different communities, and that frequently
24 there is a need for innovative efforts to
25 meet those needs. We do support the general
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2 direction in which these discussions are
3 headed. We are eager for the tentatively
4 merging banks to announce that they will --
5 I guess they announced it this morning,
6 although it is just an announcement --
7 reengage with their communities in new, more
8 productive and creative ways. Where much is
9 given, much is expected. We along with
10 other community organizations look forward
11 to working with the banks to make this
12 compact a living, breathing and concrete
13 reality in our communities.
14 In our own neighborhood, we
15 specifically look to the bank to maintain
16 and expand current lending with us. We also
17 expect to see greater bank leadership
18 activity and initiative in the following
19 areas:
20 With regard to multi-family housing, we
21 urge the bank to take a leadership role in
22 strategic efforts to preserve and maintain
23 currently occupied, privately owned,
24 affordable housing. The vast majority of
25 affordable rental housing in New York is
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2 privately held. A significant amount of
3 that housing is currently at risk, in part
4 due to rising prices. Chase has been a
5 major leader in multi-family rehabilitation
6 financing and can be an invaluable asset in
7 developing awareness in the financial
8 community about the issues confronting this
9 type of housing.
10 Based on our underwriting of recent
11 sales transactions, margins are very tight,
12 and if and when the current record low
13 interest rates rise, the large number of
14 5-year balloon mortgages with 20- to 30-year
15 amortization schedules that will be coming
16 due in the next few years will raise
17 significant challenges for our
18 neighborhoods. We have experienced the
19 bursting of real estate bubbles before, and
20 the results for most buildings and tenants
21 are not good. We look to the bank to join
22 us in our efforts to strengthen existing
23 vehicles and possibly create new ones that
24 will allow early intervention in financially
25 distressed buildings to address this
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2 problem.
3 With regard to one- to four-family
4 homes, there is a problem. We are concerned
5 with the growing number of foreclosures. We
6 have communicated with Chase about the need
7 to develop a greater effort on foreclosure
8 prevention on Chase-serviced mortgages.
9 Research has shown that a large number of
10 the Chase-related foreclosures in the Bronx
11 are FHA-insured. We view as essential the
12 proposed creation of a centralized office of
13 operation in the new bank which would make
14 information available to assist homeowners
15 and groups trying to assist those
16 homeowners. We urge both banks to make this
17 office a model for the industry and we offer
18 our assistance to make that happen.
19 In closing, we at University
20 Neighborhood pose