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Public Meeting Transcripts

Public Meeting Regarding Banc One and First Chicago

Thursday, August 13, 1998

Transcript of Panel Fourteen

         16       MR. BELLAMY:  Thank you.
         17            My name is Paul Bellamy, and I'm with the
         18   Coalition for Reinvestment in Lorain County.
         19   Lorain County is due west of Cuyahoga County, which
         20   is Cleveland, Ohio.
         21            I've been asked to read on behalf of some
         22   coalition members short portions of testimony which
         23   they wanted to enter into the record.  I will
         24   confine these to two rather short versions and then
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          1   get on to my own summarized version of the facts
          2   and figures that we feel compel us to come out
          3   against the merger with Banc One.
          4            The first statement I want to read is from
          5   the Board of Commissioners for Lorain County, and
          6   in summary, it goes like this.
          7            The Board of Lorain County Commissioners
          8   supports the Coalition for Reinvestment in Lorain
          9   County's efforts to ensure that the results of the
         10   above-referenced bank merger are advantageous to
         11   Lorain County residents, organizations and
         12   political subdivisions.  The Board further
         13   acknowledges the right and obligation of banks to
         14   make sound financial business decisions.
         15            However, the Board of Commissioners does
         16   not feel that Banc One is committed to serving the
         17   low and moderate income communities unless it is to
         18   lend money on credit cards or on real estate at
         19   higher interest rates to borrowers with credit
         20   problems.
         21            While this may serve stockholders, as a
         22   bank, they are chartered to serve the communities
         23   where they do business.
         24            It appears that Banc One has been cutting
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          1   back on their commitments to the service of our
          2   county while refusing to agree to specific goals to
          3   improve their performance under CRA.
          4            Please encourage Banc One to address those
          5   issues prior to approving any merger.
          6            And that is, of course, addressed to the
          7   Federal Reserve board.
          8            I'd also like to read a short portion of a
          9   statement from Rebecca Siegal, who is representing
         10   or had hoped to represent the Catholic Action
         11   Commission of Lorain County.  It's a social action
         12   office for the Diocese of Cleveland in the state of
         13   Ohio.
         14            We have some major concerns regarding the
         15   increase in mega mergers of our banking
         16   institutions and the effects these mergers have on
         17   our local communities.
         18            When these mega mergers occur, these are
         19   local communities urban and rural alike and
         20   particularly the areas that are most populated by
         21   minorities and low and moderate income families who
         22   suffer the most.  Branches close, banking services
         23   decrease, service fees increase, jobs are lost.
         24            It is the stockholders of the banks who
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          1   most often have no vested interest in our local
          2   communities that make the decisions and the
          3   profits, yet in the case of Banc One, depositors,
          4   not stockholders, make up 70 percent of the
          5   assets.  Stockholders make up only about 15 percent
          6   on average.  It is the stockholders and senior
          7   management who walk away with gilded pockets while
          8   the depositors receive little or no return on their
          9   money.
         10            We are scraping the bottom of the pyramid
         11   with no return and placing it on the top, and if
         12   this trend is allowed to continue, the pyramid will
         13   be inverted and most likely tumble because there
         14   will no longer be support from the solid bottom.
         15            The principal difficulty that the Lorain
         16   County Coalition has with Banc One's record is not
         17   with actual dollar amounts that have gone into low
         18   and moderate income neighborhoods.
         19            In fact, I don't know if this is true in
         20   other areas, but certainly in Lorain County,
         21   there's been a great deal of money proportionately
         22   put into the low and moderate income
         23   neighborhoods.
         24            The difficulty we have is what kind of
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          1   money it is and does it, in fact, serve the needs
          2   of Lorain County?
          3            Lorain County is a Midwestern urban
          4   center.  Single-family homes are the norm.  Home
          5   ownership is the way in which a community
          6   development strategy would work in these
          7   neighborhoods.
          8            Now, let's break out all of the money that
          9   Banc One claims to be using to meet its CRA
         10   commitments.
         11            One is the purchase mortgage product,
         12   which we herald and we want to encourage them to do
         13   more of.  Unfortunately, they don't seem committed
         14   staying in that market and they don't do
         15   proportionately very much of that lending.
         16            Where we do see a heavy emphasis on their
         17   real estate lending is in refinancing.  Refinancing
         18   may serve the interest of the particular homeowner,
         19   but it does absolutely nothing to increase the
         20   value of the homes or to raise the wealth within
         21   the neighborhood.  In fact, it only inserts a lot
         22   more debt on what you might call the neighborhood
         23   balance sheet.
         24            The positive side of Banc One has to be
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          1   mentioned, and that is that they have a strong home
          2   improvement product, and in these older 70 to
          3   50-year-old houses, that's a very important tool,
          4   but it must be recognized that this is a half
          5   measure at best when there is a refusal to do the
          6   hard work included in a meaningful community
          7   redevelopment purchase 30-year mortgage product
          8   that requires meeting cost value gaps and doing the
          9   difficult work of underwriting loans to first time
         10   home buyers who are most often attracted to these
         11   neighborhoods.
         12            The other problem with the home
         13   improvement product is most of it is sold through
         14   their branch network.  In Lorain County in the last
         15   three years, Banc One has gone from 19 to 4
         16   branches.
         17            In closing, I just want to mention one
         18   last development which we find very difficult, and
         19   that is the subprime lending.  It has increased
         20   from three percent in the low to moderate
         21   neighborhoods in '93 up to 15 percent of the total
         22   lending going on in the low to moderate
         23   neighborhoods now.
         24            Thank you.
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          1       MS. SMITH:  Ms. Jones.
          2       MS. JONES:  Good afternoon.  My name is Rebecca
          3   Jones.
          4            I guess I need a microphone.
          5            My name is Rebecca Jones.  I'm a resident
          6   of Wellington, Ohio, which is the southern part of
          7   Lorain County and is a rural area.
          8            My remarks at first were intended to be
          9   addressed to the Wellington area, however, I'm also
         10   the Director of a nonprofit CDC in the City of
         11   Lorain, and the Mayor of Lorain has asked me to
         12   make some remarks on his behalf today, so my
         13   comments will really be coming from the Mayor's
         14   testimony or letter to you, which is attached to my
         16            The City of Lorain is about 25 miles west
         17   of Cleveland on Lake Erie.  It is a Rust Belt
         18   city.  It's a city of 71,000 people, 30 percent of
         19   whom are minorities, and they break down 13 percent
         20   African Americans, 17 percent Hispanic.
         21            The citizens of Lorain, Ohio, which is a
         22   community of mostly low to moderate income
         23   families, have traditionally supported homegrown
         24   financial institutions such as Lorain National
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          1   Bank, Central Trust Bank, First Federal Savings and
          2   Loan, Citibank, EST and Lorain County Savings and
          3   Trust.
          4            Mergers and acquisitions of the 80s and
          5   90s have introduced a new banking trend, the
          6   establishment of regional banking organizations in
          7   the City of Lorain.
          8            This trend was substantiated by the
          9   following mergers and acquisitions:  Elyria Savings
         10   and Trust being acquired by First National Bank of
         11   Akron which created First Merit bank.  Central
         12   Trust Bank being bought by Banc One.  Citibank
         13   closing all branches.  Lorain County Savings and
         14   Trust Bank acquiring a number of Central Trust Bank
         15   locations and changing their name to Premier Bank
         16   and Trust.
         17            Most recently, in May of 1998, First Merit
         18   and Premier Bank merged, closing 17 branches,
         19   including two in the City of Lorain, and laying off
         20   approximately 200 people.
         21            You should be aware that the City of
         22   Lorain has lost additional banking service
         23   facilities and their related jobs.  Banc One has
         24   just closed two branches serving the low to
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          1   moderate income neighborhoods of South Lorain, and
          2   the Cityview, Sheffield areas.  They were closed in
          3   late Spring and early Summer, 1998, and these
          4   closures parallel the proposed merger of Banc One
          5   and First Chicago NBD.
          6            The significance of these closings is
          7   monumental, as they send a strong signal to the
          8   city's low income population that even with Banc
          9   One deposits at branches serving Lorain exceeding
         10   $85 million, their business is not important.
         11            Since the branches closed serve many low
         12   to moderate income families who do not have
         13   adequate transportation, many people will have
         14   trouble getting to the remaining Banc One
         15   branches.
         16            According to Community Reinvestment Act
         17   regulations, banks are supposed to reinvest in
         18   communities like Lorain where they obtain their
         19   deposits.
         20            Banc One bought approximately 15 Central
         21   Trust Bank branches in the 1980s, and today, they
         22   have eliminated numerous jobs and closed or sold 12
         23   branch locations, leaving three branches serving
         24   Lorain.  This appears to be disinvestment rather
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          1   than investment.
          2            Further, the City of Lorain has learned
          3   from Kathleen Kaufin, the CRA Vice President of
          4   Banc One, that branch locations ideally need to
          5   have 35 to $40 million in deposits to meet Banc One
          6   guidelines for profitability.
          7            If Banc One continues to follow this rule
          8   after the merger, it is likely that another branch
          9   in Lorain will be closed.  This would leave only
         10   two locations in the city and only one of those
         11   serving a low to moderate income area.
         12            The City of Lorain has joined the
         13   Coalition for Reinvestment in Lorain County and
         14   other community groups from across the nation to
         15   closely examine this merger which will result in
         16   disinvestment in central cities and urban areas
         17   across America, lost jobs, vacant and abandoned
         18   buildings and an inaccessibility to convenient
         19   banking services and products.
         20            Ultimately, if uncontested and not
         21   addressed by the Federal Reserve Bank, this mega
         22   merger and acquisition progress will lead to the
         23   erosion of high-quality, competitive banking
         24   services only to be replaced by nonpersonal,
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          1   high-cost electronic banking services provided by a
          2   few large banks with almost no competition.
          3            Working class families and individuals
          4   such as the citizens of Lorain do not need to have
          5   their disposable income further eroded due to
          6   higher banking fees and costs.
          7            Without a commitment to future
          8   participation in our community along the lines
          9   outlined above and as previously detailed in our
         10   meeting with Banc One, it is not in the best
         11   interest of the City of Lorain to endorse a mega
         12   merger such as that being proposed by Banc One and
         13   First Chicago NBD.
         14            Thank you.
         15       MS. SMITH:  Thank you.
         16            And we'll go to Ms. Rangan, who is
         17   speaking on behalf of Inner City Press Community.
         18       MS. RANGAN:  Good afternoon.
         19            My name is Rashmi Rangan, and I'm reading
         20   the written testimony prepared by Matthew Lee,
         21   Executive Director of Inner City Press Community on
         22   the Move and of the Inner City Public Interest Law
         23   Center, together, ICP.
         24            ICP on April 28th filed a 38-page protest
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          1   to this application along with Black Citizens for
          2   Justice, Law and Order of Dallas, Texas and the
          3   Delaware Community Interaction Council.
          4            We are opposed to this proposed merger
          5   primarily due to Banc One's continued predatory and
          6   discriminatory practices through its Banc One
          7   Financial Services subsidiary and due to the
          8   anticompetitive and branch closing effects the
          9   proposed merger will have, particularly in Indiana.
         10            The commitments that First Chicago has
         11   made in Detroit and Chicago do nothing to address
         12   these issues, nor is Banc One's divestiture
         13   proposal to sell off certain branches in Indiana
         14   sufficient.
         15            The proposed merger would also result in
         16   substantial branch closings, making all the worse
         17   Banc One's cynical manipulation of the target First
         18   Chicago to make lending pledges in Chicago and
         19   Detroit but not in the communities that would be
         20   most affected by this merger, including through
         21   branch closings.
         22            In 1997, the Federal Reserve Board stated
         23   in an order that it had unresolved questions about
         24   the fair lending compliance of Banc One Mortgage
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          1   Company and that its approvals were explicitly
          2   conditioned on Banc One taking such actions as the
          3   Federal Reserve might require.
          4            Since then, the Arizona Attorney General
          5   has charged Banc One with discrimination as
          6   implicitly has HUD in Texas.  The Fed has made no
          7   disclosure of how or if this important issue has
          8   been resolved, but 40 days ago, on July 2nd, we
          9   made a request for this under the Freedom of
         10   Information Act.  The Fed has yet to provide the
         11   documents.
         12            The written comments we have submitted
         13   show that in market after market, Banc One's normal
         14   interest rate lenders disproportionately exclude
         15   African Americans and Hispanics from credit, while
         16   Banc One Financial Services, a high interest rate
         17   lender, targets these communities for higher-priced
         18   credit.
         19            For example, in the Akron, Ohio MSA in
         20   1996, Banc One Mortgage Company denied 55 percent
         21   of mortgage applications from African Americans and
         22   only 17 percent of applications from whites, a
         23   denial disparity of 3.24.
         24            The mortgage company originated 164 loans
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          1   to whites and only seven to African Americans.
          2            ICP's comments calls loans to African
          3   Americans divided by loans to whites the index.
          4   The ratio between BOMC's index and BOFS's index
          5   calculated for each market can be viewed as the
          6   targeting index.
          7            In this particular MSA, for the mortgage
          8   company, it was .043, and for the finance arm, it
          9   was .193, 4.49 times higher than the mortgage
         10   company.  In Cleveland, Ohio, 4.47 times higher
         11   than the mortgage company.  In Dallas, 17.86 times
         12   higher than the mortgage company.  In Detroit, 5.61
         13   times higher.  In Gary, Indiana, 5.52 times
         14   higher.  Milwaukee, 8.53 times higher.  These are
         15   just examples of what the difference between the
         16   two is.
         17            The above analysis makes out a prima facie
         18   case or red flag that Banc One Corp through its
         19   normal interest rate lenders, including Banc One
         20   Mortgage, and through its higher interest rate
         21   lender, Banc One Financial Services, are engaged in
         22   lending discrimination, including pricing
         23   discrimination.
         24            On this record, the Federal Reserve Board
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          1   must conduct on-site fair lending examinations of
          2   Banc One financial services.
          3            On the current record, this mega merger
          4   proposal which would expand Banc One's practices
          5   could not legitimately be approved.
          6            There are other adverse issues, including
          7   the foreseeable loss of various First Chicago
          8   programs and Banc One's record in its existing
          9   states have been raised by Ohio and others.
         10            For all the reasons stated, this proposed
         11   merger should be denied.
         12            Thank you.
         13            And we will submit additional comments by
         14   August 20th, 1998.
         15       MS. SMITH:  Thank you very much.
         16            Ms. Sharpley.
         17       MS. SHARPLEY:  Hello.  My name is Adenike
         18   Sharpley.  I'm a board member of the Zion Community
         19   Development Corporation of Oberlin, Ohio.
         20            Our target area is the southeast
         21   quadrangle of Oberlin, which is a semi-rural area.
         22            I am going to talk about the effects of
         23   the Banc One merger on Oberlin, Ohio as a resident,
         24   from a customer and employee point of view.
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          1            The Oberlin Bank Building at 5 South Main
          2   Street, Oberlin, Ohio, until the mid 1980s, was
          3   primarily one bank.  The Oberlin Bank Company
          4   founded in 1889 would in 1904 combine with the
          5   State Savings Bank and move to 5 South Main
          6   Street.  That same year, it would be renamed The
          7   Oberlin Savings Bank.  So for 76 years, the
          8   community of Oberlin has had pretty much the same
          9   bank.
         10            In the mid-1980s, the musical bank
         11   management began at 5 South Main Street.  This
         12   included in 1990 Central Trust, in 1996 Banc One,
         13   in 1998 Premier Bank and the Merit transfer on
         14   Labor Day of this year.
         15            In 15 years, two local banks were lost,
         16   Oberlin Savings Bank and People's Bank, with a host
         17   of players to become one mega bank, one small local
         18   bank, one savings and loan bank which is located or
         19   comes its home out of Cleveland and one credit
         20   union which is also based in Cleveland.
         21            The staff working in these banks feel
         22   intense stress from both bank officials, management
         23   and customers.
         24            The customer does not understand the
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          1   changes in rules and regulations.  The employee
          2   must learn changes from old to new systems,
          3   learning new rules and regs from the new bank and
          4   absorb job shifts, moving from new offices to
          5   maintain jobs while branches are closing.
          6            These changes also include shifts in pay
          7   scale which would be from lower to higher or vice
          8   versa.
          9            Most of the people absorbing these changes
         10   are at the bottom of the chain, tellers, clerks, et
         11   cetera, and most of these are women, head of
         12   households or who are major bread winners in their
         13   family.
         14            From the customers' point of view,
         15   customers have to deal with new hours, new staff,
         16   new rules, new regulations and usually new banking
         17   and service products.
         18            The control of these banks are moved
         19   further away from the customer.  Their bank
         20   managers are usually there a few days per week
         21   along with what I call the roving loan officer.
         22            Usually the new staff is less familiar
         23   with the new branch and its customers are not
         24   usually hired locally, therefore, do not know the
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          1   community.
          2            The new staff do not have a connection to
          3   the community they serve.  They are less willing to
          4   cash checks for those without ID because they don't
          5   know the customer.  And in turn, the staff asks for
          6   ID each time they see the customer, no matter how
          7   many times they see them.
          8            For the customer, this means fewer what I
          9   call service value for their dollar, and this is
         10   especially true for the low and moderate income
         11   individual.  This results in a transfer of wealth
         12   aware from the community, benefitting the
         13   stockholders, as I say, upstairs.
         14            Along with no services such as utility
         15   bill payment, no product for those who maintain
         16   small balances in checking and savings accounts
         17   without incurring charges against their account
         18   each month, these charges will sometimes result in
         19   customers finding that their account has been
         20   closed by the end of the month.  These customers
         21   are usually low and moderate income people, seniors
         22   on fixed incomes or those due to disabilities and
         23   minorities.
         24            At times, the above-mentioned group would
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          1   receive unfriendly and discriminating treatment by
          2   tellers, adding insult to injury, this classist and
          3   racist behavior by tellers who treat their
          4   constituency as if they have little or no money.
          5   This leads to fewer service values for the elderly,
          6   the disenfranchised and the people of color in the
          7   Oberlin community.
          8            Thank you.
          9       MS. SMITH:  Thank you very much.
         10            And we'll go next to Ms. Tyler.
         11       MS. TYLER:  Why is it that Banc One has made no
         12   commitment to Ohio but they have made commitments
         13   in Michigan and Illinois?
         14            Why is it that Banc One Financial Services
         15   which offers higher interest rate loans has a more
         16   aggressive marketing strategy in low income and
         17   minority communities?
         18            And how is it that the largest Midwest
         19   bank can decide to get out of the home purchase
         20   business?
         21            These are questions on which I would like
         22   to focus your attention for the nest few minutes.
         23            I am Dawn Tyler representing the Ohio
         24   Community Reinvestment Project, a project of the
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          1   Coalition on Homelessness and Housing in Ohio.
          2            OCRP's mission is to promote investment in
          3   Ohio's low income communities and communities of
          4   color.
          5            Members of OCRP met with Banc One for
          6   several months.  Constructive dialogue took place
          7   with representatives of the bank.
          8            On numerous occasions, the bank gave us
          9   every indication that they were willing to enter
         10   into a community action agreement that would
         11   ultimately increase lending, service and investment
         12   opportunities within Banc One's service areas.
         13            Some areas we were willing to set
         14   reasonable benchmarks include home purchase loans,
         15   small business lending, multi-family housing
         16   investments and lending and community development
         17   grants.
         18            At the eleventh hour, however, about less
         19   than a week before the end of the comment period,
         20   the bank decided they did not want to move forward
         21   with negotiations, and for those of you that were
         22   here this morning, it sounds very similar to a
         23   story told by Ted Thomas from ACORN.
         24            Banc One's refusal to negotiate a
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          1   meaningful community action plan for Ohio raises
          2   questions about their commitment to Ohio
          3   post-merger.  The bank did not operate in good
          4   faith.
          5            Our primary concern is that this proposed
          6   merger could have dramatic consequences for
          7   financial services consumers throughout the State
          8   of Ohio since the corporate headquarters of Banc
          9   One currently based in Columbus will move to
         10   Chicago.  This merger could result in substantial
         11   disinvestment in Ohio communities.
         12            My second point is the disparate treatment
         13   of African Americans in accessing credit for
         14   mortgage loans from Banc One and its mortgage
         15   company.
         16            Low and moderate income consumers are
         17   denied access to mortgage loans more frequently
         18   than by other lenders, and Banc One lacks
         19   aggressive marketing efforts to African American
         20   and low and moderate income applicants,
         21   particularly by the bank's affiliates and Banc One
         22   Mortgage Company.
         23            Rashmi has done a sufficient job of
         24   sharing some statistics from Akron and Cleveland,
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          1   so I will not repeat those details, but Banc One
          2   Mortgage Company does not have an aggressive
          3   lending record to minorities and low and moderate
          4   income applicants.
          5            Banc One Financial Services, the BNC
          6   lender, charges customers higher interest rate
          7   loans compared to rates offered by Banc One
          8   Mortgage Company and is engaged in extremely
          9   aggressive marketing practices through direct mail
         10   and phone solicitation which targets low and
         11   moderate income people in minority census tracts.
         12            This is a clear illustration of the
         13   predatory lending practices of Banc One Financial
         14   Services which disproportionately targets African
         15   Americans for higher interest rate credit,
         16   originates loans at a higher rate than the mortgage
         17   company.
         18            The bank should offer A loans to all
         19   applicants who qualify, regardless if they come
         20   into the bank, the mortgage company or financial
         21   services.
         22            We encourage the Feds to follow the lead
         23   of the OCC as in the case of First Union Money
         24   Store and mandate that Banc One offer prime loan
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          1   products to all who qualify.
          2            Thirdly, Banc One has decided to get out
          3   of the home purchase business.
          4            It was interesting to hear about the new
          5   self-help product that was mentioned this morning,
          6   however, historically, the bank has ignored the
          7   credit needs of LMI communities.  This is
          8   unacceptable for a bank the size of Banc One.
          9            And my fourth issue relates to small
         10   business lending which Chuck Bromley, our OCRP
         11   Chairperson, has shared on the previous panel.
         12            Time does not permit for me to talk about
         13   the over 60 branch closures that have taken place
         14   in Ohio or the $8 check cashing fee that's imposed
         15   on Banc One customers.
         16            In closing, we do not dispute the fact
         17   that Banc One, especially the CDC, has been active
         18   in areas such as tax credit projects and community
         19   development grants to nonprofits, however, there
         20   are no safeguards in place to ensure that this is
         21   continue after the merger.
         22            We ask the bank to make some very basic
         23   commitments to minimize the potential negative
         24   impacts, and after dragging us along for several
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   months, they refused, despite the fact that they
          2   are planning to honor similar commitments in the
          3   communities of Chicago and Detroit.
          4            The bank claims that no market will be
          5   abandoned and the commitment will continue.  If
          6   this is the case, why is there such a hesitancy on
          7   the part of the bank to put such a commitment in
          8   writing?
          9            Earlier today, Banc One mentioned one part
         10   of their recipe for success is relationships with
         11   local partners.  How can I as a local partner be
         12   part of that recipe for success when I've been
         13   kicked out of the kitchen?
         14            Please consider carefully the information
         15   that has been presented today.  I urge the Federal
         16   Reserve to postpone the merger until mutually
         17   beneficial community action plans have been reached
         18   in all of Banc One's markets.
         19            Your meaningful intervention can
         20   facilitate fair lending, service and investment
         21   opportunities in Ohio's low income communities and
         22   communities of color that have historically been
         23   overlooked and underserved.
         24       MS. SMITH:  Thank you.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            Ms. Walker.
          2       MS. WALKER:  I'd like to thank the Federal
          3   Reserve to have the freedom to speak today.
          4            I am Marge Walker, and I'm a resident of
          5   the City of Lorain, 30 miles west of Cleveland, and
          6   I'm speaking on behalf of the South Lorain
          7   Merchants Association.
          8            I have been a hairdresser for a long time,
          9   and due to situations, I have been had to be
         10   retrained because I can no longer stand for long
         11   periods of time.
         12            My neighborhood is adjacent to an old
         13   steel plant that once employed 7,000 men.  It now
         14   employs less than 2,000 people.  Can you imagine
         15   what it does to a community?
         16            Once Banc One's retail operations have --
         17   the severe cutback in Lorain County.  We are told
         18   that the cutback has nothing to do with the
         19   merger.  In my perspective, it has everything to do
         20   with the merger because that is the trend of the
         21   country these days.
         22            Money loaning and the -- are joining with
         23   the money grabbing businesses.  Our Banc One branch
         24   that just closed, it has five million dollars in
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   it.  I guess it's not enough money.  They says it's
          2   nothing personal, but business is business.
          3            I would like to talk about trends.  The
          4   Federal Reserve reports -- own report seems to
          5   conclude that small business lending suffers when
          6   big banks buy smaller banks.
          7            Small bank -- small business lending
          8   depends upon relationships with neighborhoods,
          9   merchants, and big banks don't look at their
         10   operations over the long-term with the investment
         11   in the community.
         12            We are told that the United States is fast
         13   approaching a time when whites will be in the
         14   minority.  I recently read that the buying power in
         15   the Black community has grown recently to 8.2
         16   percent in the consumer economy.  With this kind of
         17   trend underway, how is it that the bottom line,
         18   conscientious banks haven't the foresight to
         19   actively pursue the growing minority market.
         20            If all these bank branches and the lending
         21   institutions are, in fact, race neutral, why aren't
         22   we seeing fierce competition for the minorities?
         23            People forget the depositors contribute
         24   more money to the banks than the stockholders, but
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   every time I turn around, there are always fewer
          2   advantages for depositors and more and more for the
          3   stockholders.
          4            The depositors have fewer banks to go to,
          5   fewer hours to get service from and fewer staff who
          6   are shifted around in the system so that there is
          7   no relationship with the community.  Deposits earn
          8   less and less interest while fees go up and up.
          9            So while some executives get very rich and
         10   stockholders look to increase their return on
         11   investments and lower returns on their deposits and
         12   increased costs.
         13            Now banks have made it clear that they
         14   don't want to be banks anymore, they want to be
         15   stockbrokers, insurance agents, pension advisors,
         16   investment specialists, et cetera.  They want to
         17   cross-sell their customers into every conceivable
         18   financial imaginary product except plain,
         19   old-fashioned human-oriented service.
         20            Just once I would like to see the
         21   announcement of another bank merger or acquisition
         22   that would conclude with the following sentence:
         23   The merger is subject to regulatory and depositor
         24   approval.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            If depositors had a voice in these
          2   matters, maybe the executives, high fliers and
          3   golden parachuters would have to promise them
          4   higher interest rates on a deposit, lower fees and
          5   more locations and longer hours and better service
          6   to people.
          7            This regulatory body is all that stands
          8   between the voice of depositors and the greedy
          9   money grabbing depositors -- at depositors'
         10   expense.
         11            You are duty bound to look at the
         12   competition, convenience and the needs of the
         13   communities.
         14            On behalf of South Lorain Merchants
         15   Association, I want to tell you to deal with
         16   this -- tell you this deal does not create
         17   competition.  We need competition in the
         18   community.  We have an example right now with BP
         19   and Amoco merging.  We're losing a thousand jobs in
         20   Cleveland and the space that it takes for rental in
         21   Cleveland.
         22            If you continue along the lines of having
         23   less competition, there's going to be no
         24   competition.  How many banks are going to be left
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   when we get through with all this?
          2            As somebody earlier had commented about
          3   having 9,000 banks at one time and now it's getting
          4   down to less and less, what are you going to do
          5   when there's no competition, when there's nobody to
          6   go to?
          7            That's it.
          8       MS. SMITH:  Thank you very much.
          9            Any questions?
         10       MS. WILLIAMS:  I've got one.
         11       MS. SMITH:  Okay.  We have a question.
         12       MS. WILLIAMS:  This is for Mr. Bellamy.
         13            You mentioned that subprime lending went
         14   from 3 to 15 percent.  Was this in Lorain County,
         15   and over what period, and was this percentage for
         16   one institution?
         17       MR. BELLAMY:  This is for Banc One.  This is in
         18   Lorain County only.  This is for Banc One.
         19            And the financial services subprime
         20   lending branch of Banc One just came into the
         21   county in '93, and at that time, they had, as I
         22   say, only three percent of the total investments in
         23   the low to mod areas.
         24            In 1996, the financial services branch,
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   the subprime lender, is up to 15 percent of the
          2   residential lending in that same category of low to
          3   mod areas.
          4       MS. WILLIAMS:  Okay.  Thank you.
          5       MS. SMITH:  Thank you very much.
          6            I will remind people that you may submit
          7   written supplements to your oral testimony by next
          8   Thursday, August the 20th.  And the information
          9   about where to provide them has, I think, been
         10   given to you, or you can get them from the
         11   registration desk.
         12            We're scheduled for a ten-minute break.
         13   We're about a half an hour behind schedule.  I
         14   think we're going to save five minutes by cutting
         15   it to a five-minute break, so we'll see you here
         16   very soon.  And I think the timers are going to
         17   time us.
         18                      (Whereupon, a recess was
         19                      taken.)
         20                      (Whereupon, further proceedings
         21                      were had which are bound under
         22                      separate cover.)
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          3                      TO MERGE WITH
          7            Proceedings had in the above-mentioned
          8   cause, on Thursday, the 13th day of August,
          9   1998, at The Federal Reserve Bank of Chicago,
         10   230 South LaSalle Street, Chicago, Illinois, at
         11   9:00 o'clock a.m.
         15                        VOLUME II
         20   REPORTED BY:  Brenda S. Tannehill, CSR
         21   LICENSE NO.:  084-003336
         22            -and-
         23   REPORTED BY:  Jeanette A. Sandei, CSR
         24   LICENSE NO.:  084-003685
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1                      (Whereupon, proceedings were
          2                      previously had which are bound
          3                      under separate cover.)
          4       MS. SMITH:  We're starting with Mr. Ruf.
Last update: December 3, 2010