skip to main navigation skip to secondary navigation skip to content
Board of Governors of the Federal Reserve System
skip to content

Public Meeting Transcripts

Public Meeting Regarding Banc One and First Chicago

Thursday, August 13, 1998

Transcript of Panel Two

         15       MS. CARSON:  Thank you very much.  I'm Julia
         16   Carson, Congresswoman, Indianapolis, Indiana,
         17   member of Congress, sit on the banking committee
         18   for US Congress.  Is this microphone on?
         19       MR. ALVAREZ:  It's not on, ma'am.
         20       MS. CARSON:  Okay.  I'm Julia Carson,
         21   Congresswoman, Indianapolis, sit on the banking
         22   committee for the United States House of
         23   Representatives.
         24            I have listened with interest.  I have
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   another more painful side to tell of the latest
          2   story of merger mania.  I urge a conservative
          3   course, a careful investigation of the facts, the
          4   history and the harm.
          5            They claim that mergers benefit companies,
          6   employees and consumers, increasing competition.  I
          7   favor growth, but not at the cost of harm to the
          8   community and to the people.
          9            Indianapolis is where the two giant merger
         10   partners have, perhaps, the greatest business
         11   overlap, facing each other next to the Federal
         12   courthouse, a massing $17.6 billion in assets
         13   between them.
         14            Court is where this matter will end up if
         15   this process is not well and thoroughly conducted.
         16   There is a better way.
         17            Our Indianapolis Star newspaper warns the
         18   most pressing concern is customer service and
         19   cost.  If history is any guide, the former will
         20   drop and the latter rise as banks become more
         21   competitive.
         22            Joining the Star, grassroots
         23   organizations, community groups and activists from
         24   Indianapolis and across the country warn, too,
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   because of the harms threatened.  These voices
          2   cannot all be wrong.
          3            The point of business is to beat the
          4   competition.  We believe the competition is healthy
          5   because it benefits the consumer.
          6            Our law, our public policy, encourages
          7   competition by legal protection.  Beating the
          8   competition is okay, but killing it is not.
          9            And antitrust law will make the superbank
         10   reduce its markets here.  Selling deposits will
         11   make the purchaser a new competitor.  The
         12   requirement to slim down is powerful.  Branches
         13   will be closed, operations consolidated.
         14            Each bank now has 60 or more branches in
         15   central Indiana.  Banc One alone has 27 on the
         16   block.  Each branch is a center of local commerce,
         17   competing with others.
         18            Closing cuts consumer choice.  Merger
         19   will close competitive branches, neighborhood by
         20   neighborhood, as the new superbank makes the
         21   rational decision not to compete with itself.
         22   I doubt that the buyer bank will keep these
         23   branches going.
         24            The incentive is small.  Deposits are the
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   most portable form of assets.  Real estate and bank
          2   worker -- 6,000 in central Indiana -- complicate
          3   the bottom line.  This plan makes them expendable.
          4            More harm is predicted by history.  A Wall
          5   Street Journal analysis of the five largest bank
          6   acquisitions last year showed that small business
          7   lending fell six percent through business lending
          8   increase, less for beginning businesses.
          9            In Indianapolis, we need more business
         10   formation, not less.  Small business opportunity
         11   based at home, growing over time into big
         12   business.  That's what works for our people.
         13            Our law forbids mergers which
         14   substantially lessen competition unless these facts
         15   are outweighed in the public interest by the
         16   probable effect of the transaction in serving the
         17   convenience and needs of the community.
         18            Our law is devoted to preservation, the
         19   conservation of economic values vital to our way of
         20   life.  Our people ask that the law be applied to
         21   save their jobs, their prosperity, our
         22   neighborhoods.
         23            For American banking, a great windfall
         24   approaches.  Printing and mailing of most
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   government checks will end in 1999.  These
          2   transfers will be made by electronic means, flowing
          3   billions of dollars through the banks, especially
          4   on September the 3rd of every month when the Social
          5   Security checks are transferred.
          6            For direct deposit, you will need a bank
          7   account.  To get one, you will have to find a
          8   branch, harder and harder where I live.
          9            Fewer branches mean less access for a
         10   whole new throng of American consumers brought into
         11   the banking system by this way of the future.
         12            The longer it takes to cash a check, the
         13   more the money earns for the bank holding the
         14   funds.
         15            Nationally, we are at the door of a new
         16   era in competition.  This merger threatens to slam
         17   doors firmly closed Indianapolis just as they begin
         18   to crack open across the country.
         19            For Indianapolis, the view differs
         20   painfully.  You will hear complaints about bank's
         21   behavior hurting those with low income, about an
         22   investigation for lending discrimination against
         23   low to moderate income borrowers, Hispanics and
         24   Blacks.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            I fear untold number of bank workers out
          2   of work with more pain.  And Community Reinvestment
          3   assessments tell us that tale.
          4            I'm happy that I had an opportunity to
          5   come today because, for the first time, I've met
          6   the chairmen of those two banking institutions and
          7   had myself approached them and introduced myself to
          8   them.  Thank you very much.
          9       MS. SMITH:  Thank you.  Mr. Davis.
         10       MR. DAVIS:  Ms. Smith, members of the panel,
         11   Mr. Istock, Mr. McCoy and other participants, I'm
         12   Danny Davis, Congressman of the 7th Congressional
         13   District here in the state of Illinois.
         14            And for those of you who are from out of
         15   town, let me welcome you to the city of Chicago,
         16   the most fascinating city in all of America, and to
         17   the 7th District, which I represent, and it also
         18   happens to be the most intriguing of all
         19   Congressional districts in the country.
         20            I want to begin by thanking the Federal
         21   Reserve for holding these hearings.  As I will
         22   indicate in my testimony, the issues before us are
         23   critical to the well-being of this and many other
         24   communities throughout America.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            We need to guarantee that the merger
          2   before us meet the criteria of protecting workers,
          3   minorities, consumers depositors, businesses,
          4   non-profits and other partners with special needs
          5   in community development.
          6            We've set our public policy for bank
          7   mergers based on some historical lessons, and as
          8   a result of some laxness to the financial sector.
          9   These decisions once taken cannot be undone.
         10            In his classic 1946 film, It's a Wonderful
         11   Life, Frank Capra laid before us two fundamental
         12   questions which have resonated with great empathy
         13   with the American public.
         14            He asked us to ponder the role of the
         15   community bank and the community banker in the life
         16   of the community.
         17            And he asked us to think about the nature
         18   of history in the highly divergent paths which
         19   history can take, to be changed for better or for
         20   worse by the actions of those of us who make
         21   decisions.
         22            Those are precisely the questions we face
         23   in these hearings this morning.  It is not my
         24   intent or desire to romanticize the state of
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   community banking in Chicago.
          2            However, the relations between Chicago's
          3   First National Bank and Chicago's extraordinarily
          4   rich economic, social and cultural life have
          5   developed over many years and as the result of the
          6   efforts of many individuals and institutions.
          7            We simply cannot afford to throw away or,
          8   through our inaction, allow years of community/bank
          9   relationships to dissipate.
         10            In response to those who say the mythical
         11   unregulated market is best arbiter economic
         12   structures, I would assert that lack of control of
         13   markets brought us the ubiquitous crack salesman,
         14   one in seven children without health insurance, a
         15   mountain of garbage in Lawndale and the lamentable
         16   need in this day and age for a task force on
         17   sweatshops in Chicago.
         18            I would urge that the Federal Reserve
         19   consider the impact of this merger on the health of
         20   the financial industry as well as the rest of the
         21   community.
         22            And I am certain that you're making a
         23   careful analysis of that aspect, but I would like
         24   to suggest that the financial industry's health is
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   inseparable from the health of the broader
          2   community.
          3            It follows logically that we should strive
          4   to understand the impact of this merger on the
          5   larger community and weigh that impact against any
          6   benefits which may accrue.  At a minimum, we should
          7   consider structuring the merger to minimize
          8   negative impacts on the broader community.
          9            I would hope that the Fed would consider,
         10   attempt to quantify and to take into account these
         11   concerns; the number of jobs which may be lost,
         12   especially those in the back rooms and not up
         13   front, the number of jobs which may be accessible
         14   to welfare to work participants; the amount of CIC
         15   lending and community development investment with
         16   community partners, the agreements with the Chicago
         17   CRA Coalition can serve as a model for all markets
         18   served by the merged companies.
         19            Certainly such agreements would go far in
         20   stabilizing the process of community reinvestment.
         21   Lack of such agreements would certainly threaten
         22   the process of reinvestment both in their direct
         23   impact and as a negative signal to other investors
         24   and institutions.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            The impact on minority lending, both the
          2   availability of loans and any disproportion in the
          3   rates which loans are offered.  Serious questions
          4   have been raised regarding the Banc One record
          5   regarding minority lending such as Denver and
          6   Milwaukee.
          7            We believe that personnel have been
          8   developed in the city of Chicago, but we would want
          9   to make absolutely certain they are, in fact,
         10   retained and those experiences used as Banc One
         11   continues to proliferate and carry on its activity
         12   in all of its marketplaces.
         13            I guess there's no doubt about my time
         14   being over.  Lights go out.  I thank you very
         15   much.
         16       MS. SMITH:  Mayor Goldsmith.
         17       MR. GOLDSMITH:  Thank you, Congressman.
         18            I will be sensitive to time.  The
         19   Congresswoman got a bell and the Congressman got
         20   the lights off, so I worry about the next step.
         21            I'm the Mayor of the city of
         22   Indianapolis.  And the heart of our city is the
         23   district represented by Congresswoman Carson, so we
         24   have many of the same concerns.  I appreciate the
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   attention of the Federal Reserve in this matter.
          2            These two banks are both extraordinary
          3   citizens of the city of Indianapolis, both have
          4   outstanding records and both have been partners of
          5   the city around the community for some time through
          6   community lending and other initiatives.
          7            This hour is a very important moment in
          8   the future of our city.  Because of the leadership
          9   and partnership of these institutions, if the
         10   merger is not done correctly, then the progress in
         11   our city and its citizens are threatened.  If it's
         12   done correctly, the leadership played by the banks
         13   is continued.
         14            This is a defining point in the future of
         15   Indianapolis.  It's not the merger, per se, that
         16   concerns us.  We've been there.  We've done that.
         17            Banc One purchased American Fletcher
         18   National Bank.  And its record after the purchase
         19   and merger was every bit as good as they had
         20   been before.
         21            Indiana National Bank was purchased by
         22   NBD, which was then purchased by First Chicago or
         23   merged or whatever the right word would be.  And
         24   their records continue to be very strong and their
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   community participation are every bit or greater
          2   than they had been previously.
          3            So to me, the issue is not one of merger.
          4   It's more an issue of attitude, commitment on the
          5   part of management and their approach going
          6   forward; not the size of the bank, but the attitude
          7   of the bank that makes a difference.
          8            In that regard, I'd like to make brief
          9   points about what I regard to be the role of banks
         10   in urban communities.
         11            It is clear from the 30 years up to the
         12   1990s, there will be structural investments.  The
         13   cash just flowed out of the center of cities and
         14   into suburban communities.
         15            Some of this is because the cities didn't
         16   manage their own communities very well, with high
         17   taxes and high prime and the capital found
         18   friendlier places to go after this merger occurs.
         19            It's been my goal that the merged banks
         20   pay attention to the urban core and in four ways.
         21   One, these banks can locate their business centers
         22   and their employees anywhere in the world.  They're
         23   international banks.  And we would appreciate the
         24   sensitivity to the core that has existed
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   premerger.
          2            Secondly, community lending.  There are a
          3   number of great cities in the midwest.  And we hope
          4   that the bank will use its size to bring the best
          5   practices of Chicago or Detroit or Columbus to the
          6   citizens of Indianapolis, particularly those
          7   citizens who are the poorest and in the most need
          8   of access to capital, many of those living in
          9   Congresswoman Carson's district.
         10            Third, we need small business lending.
         11   In this regard, Indianapolis is different than
         12   the other cities.  I think what will drive small
         13   business lending is competition.  And the Justice
         14   Department is looking at the anticompetitive
         15   effects in Indianapolis from the merger of the
         16   banks.
         17            So the size of the divesture and the
         18   ability of the new bank to compete with the merged
         19   banks will be, to me, the most important element of
         20   assuring small business access to capital.
         21            Fourth, and perhaps a little bit
         22   different, this merger truly will be a grand thing
         23   if I were the Mayor of Chicago, but my prediction
         24   is the headquarters of the bank will be in Chicago
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   and not in Indianapolis, therefore, I am sensitive
          2   about the fact that decision-making needs to be
          3   decentralized as it relates to community investment
          4   and civic participation.
          5            What concerns me most about the merger is
          6   the ability of the people located in Indianapolis,
          7   a fairly good-sized business center for the banks,
          8   to make decisions that are in the best interest of
          9   Indianapolis citizens.
         10            So the fourth area is civic involvement.
         11   These banks have had a great history.  They've had
         12   a great history because local officials have had
         13   the authority to make decisions.
         14            If these four issues are addressed, then
         15   we can receive some confidence.
         16            And in conclusion, essentially our
         17   position is that our citizens have a right to
         18   certain expectations to be filled.
         19            Those expectations would include a
         20   commitment to recognizing that the core of a
         21   regional economy is important, that the regional
         22   economy cannot succeed without the core being
         23   successful and that the employment in the core is
         24   critical, real estate decisions in the core are
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   critical and lending policies in the core are
          2   critical as well.
          3            Our citizens have a right to expect the
          4   best possible access to capital.  The best
          5   practices anywhere in the world engaged in by this
          6   bank should be available to the citizens of
          7   Indianapolis.
          8            We've conducted our due diligence.  We
          9   have lawyers who've hired financial experts.  We've
         10   met with the chairman and the president.  We've met
         11   with officials in both banks.  And we've looked at
         12   this in great detail.
         13            We've received assurances from both banks
         14   that the issues that I have raised will be
         15   addressed and they'll be addressed in a
         16   constructive way.
         17            Based on these assurances and the track
         18   record of those banks, I remain anxious, but
         19   confident, that the merger will be done in a way
         20   that will continue the important role that the
         21   banks have played in the city's past; and that
         22   these banks after the merger, if they conduct their
         23   affairs with some degree of commitment, can be done
         24   equally good and equally to the benefit of our
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   citizens.  Thank you.
          2       MS. SMITH:  Mayor King.
          3       MS. CARSON:  You were way past your time.
          4       MR. KING:  Good morning.  I'm the Mayor of
          5   Gary, Indiana, a city of about 120,000, about 30
          6   miles around the lake from here.
          7            It's a pleasure to have been afforded the
          8   opportunity to speak from our perspective.  And it
          9   was interesting listening to Mayor Goldsmith's last
         10   comment about his fears of the impact of moving
         11   decision-making out of his city to Chicago and what
         12   his concerns are.
         13            And to quote your children, Mayor, been
         14   there, done that, in Gary.  And it's not a good
         15   prospect.
         16            One of the problems that I see with this
         17   merger, quite frankly, is that individually these
         18   banks in the city of Gary, whose population is
         19   85 percent African American, have not individually
         20   established an appropriate track record of lending,
         21   of investing, of involving the community that
         22   they're in.
         23            And I suspect it's not due to any malice
         24   on the part of the top executives of either
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   entity.  I suspect it's due, in part, to the larger
          2   you get, the more difficult it is within any
          3   institution to have policy implemented at the top
          4   actually carried out by middle management and
          5   below.
          6            I can tell you, as Mayor, I have never had
          7   the occasion of a department head to walk into my
          8   office and say, Mayor, I'm doing a lousy job of
          9   implementing the policy that you asked my
         10   department to do.  It doesn't happen.
         11            And I suspect for both the gentlemen who
         12   preceded us on this panel, it's not a matter of
         13   malice, it's a matter of a lack of awareness.
         14            In the banking industry and in African
         15   American communities, the truth is, whether in Gary
         16   or wherever in this country, they do not have --
         17   they do not enjoy a good track record.
         18            One of the remaining vestiges of
         19   historic race discrimination today is economic
         20   discrimination.  That remains a barrier for the
         21   people I serve, to get into the mainstream of our
         22   economy.
         23            The banks, along with other industry in
         24   the city of Gary and the other cities in the
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   so-called rust bill, have about three decades of
          2   disinvestment in the cities.
          3            The banks went.  The mills went.  The jobs
          4   went.  And what was left was a community that
          5   continued to make it day-to-day, but was cut off
          6   from resources enabling it to be competitive.  This
          7   is made all the more frightening to me with some
          8   recent studies.
          9            Historically, I believe banks have
         10   presupposed unfairly that investment in inner
         11   cities is high risk, bad investment.
         12            Well, lo and behold, a bank, Bank of
         13   America, several years ago decided to find out
         14   scientifically was that true or not as a premise.
         15            They commissioned a study.  And lo and
         16   behold, the results of their study was that that
         17   was a myth and a false one.
         18            The truth is, the inner cities, the urban
         19   centers, are good places to invest in small
         20   business and housing to promote home ownership.
         21   These studies commissioned by banks are there.
         22            Now, I'm a realist.  I'm a realist.  I
         23   understand we may very well face the prospect of
         24   this merger being approved.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            If it is approved, if we are going to
          2   truly be sensitive, whether it's Indianapolis,
          3   Gary, whatever city we're talking about, I believe
          4   it is up to this board and this entity to put some
          5   teeth in the tiger of the Credit Reinvestment Act,
          6   to carefully scrutinize when you're getting
          7   reporting, go behind the numbers.
          8            I can tell you, we've not had -- we have
          9   not had more good than bad.  I will not castigate
         10   either bank.
         11            There are some things they have done in
         12   our community that have been credible, but on the
         13   whole, my concern is it will get worse.
         14            We have some new banks that have come into
         15   our city.  And I can tell you, it's been a
         16   refreshing change to see honest enthusiasm about
         17   making lending opportunities to the people I
         18   serve.
         19            My concern is by making this merger occur
         20   and making them bigger, it could thwart the
         21   competitiveness that's just starting our city in
         22   banking and continue the legacy of what I believe
         23   to be unfair practices in making capital available
         24   in minority communities.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            I thank you for the opportunity.
          2       MS. SMITH:  Congresswoman Carson, would you
          3   like to have another minute or so?
          4       MS. CARSON:  I was feeling jumped upon.
          5       MS. SMITH:  Maybe you can have the mike.
          6       MS. CARSON:  I really appreciate your
          7   courtesy.  I feel more at home now.
          8            But I, too, am optimistic about the
          9   ultimate outcome of this application for merger.  I
         10   would simply like to echo the words of the
         11   Honorable Mayor King from Gary, and that is to
         12   ensure that CRA is enhanced for the benefit of the
         13   urban community.
         14            An urban community, regardless of
         15   someone's view, does not necessarily mean Black
         16   community.  People who are low income and moderate
         17   income are persons who live in urban America.  And
         18   all of them don't come with the same color on their
         19   faces.
         20            And so it is an equal opportunity for all
         21   American citizens to be able to access economic
         22   opportunities to financial institutions who thrive
         23   on the profits that they generate from urban
         24   America.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1       MS. SMITH:  Thank you very much.
          2       MR. ALVAREZ:  Ms. Carson, you had a written
          3   statement.  If you would give us a copy of that,
          4   we'll make sure the whole statement is put into the
          5   record.
          6       MS. CARSON:  We have left several copies of my
          7   statement, but not the latter part.  I didn't know
          8   I was going to get another minute.
          9       MR. ALVAREZ:  That's all right.  And anyone
         10   else on the panel that wasn't able to finish.
         11       MS. SMITH:  Thank you very much for coming this
         12   morning.  We appreciate it.
         13            Okay.  With Panel 3, we will start with
         14   the Honorable Hiawatha Davis, Junior.
Last update: December 3, 2010