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 Three

         15       MR. DAVIS:  Good morning.  I'm Denver City
         16   Councilman Hiawatha Davis.  I represent Denver's
         17   City Council District Number 8, a predominantly low
         18   to moderate income and minority community.
         19       AUDIENCE MEMBER:  Can hardly hear you.
         20       MR. DAVIS:  Is that better?  Let me start all
         21   over.
         22            I'm the Denver City Councilman Hiawatha
         23   Davis.  I represent Denver's City Council Number 8,
         24   a predominantly low to moderate income district.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            This council district is in the city
          2   center, and it is being impacted by dramatic
          3   economic surge and a population increase that has
          4   contributed to increasing rents and virtually loss
          5   of low to moderate income house choices in the
          6   city.
          7            As rents increase, moderate income
          8   families would do better if they could purchase a
          9   home before they are completely priced out of this
         10   city's housing market.  Rental opportunities and
         11   home ownership opportunities are shrinking to the
         12   point of crisis.
         13            Yes, Denver is in the midst of an upscale
         14   housing boom with downtown loft projects and middle
         15   income housing developments springing up all over
         16   the city.
         17            Denver is also in the midst of its worst
         18   crisis in terms of affordable, low and moderately
         19   priced housing.
         20            There is very little capital being made
         21   available for low and moderate income home buyers,
         22   and not much being made available to non-profit
         23   developers of low and moderately priced housing.
         24   If trends continue, this crisis will only get
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   worse.
          2            I'm here today to ask for your help in
          3   getting Banc One to live up to the principles
          4   articulated in the Community Reinvestment Act as it
          5   pertains to Denver.
          6            Prior to the close of initial comments
          7   on this merger, I was joined by 10 of my 13
          8   colleagues on City Council, Denver's Congresswoman,
          9   three Colorado State representatives and a State
         10   Senator, all of whom were concerned about
         11   Banc One's discriminatory lending practices toward
         12   minorities especially in the areas of home
         13   mortgages.
         14            We all requested an extension to the
         15   comment period, which we thank the Federal Reserve
         16   Board for granting, and requested a public hearing
         17   in Denver.
         18            While we are disappointed a hearing in
         19   Denver could not be accommodated, I'm honored to be
         20   here today to testify on the merger between
         21   Banc One and First Chicago.
         22            This merger is of no small matter to my
         23   community and constituents.  The new entity will be
         24   the biggest bank in between the Appalachians and
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   the Rockies serving millions of consumers who will
          2   be directly affected by the way it does business.
          3            And if the way it is conducting its
          4   business currently is any guide, Banc One needs to
          5   significantly change its approach to lower income
          6   and minority communities.
          7            Its record of providing mortgage financing
          8   in Denver has been appalling.  In 1995, Banc One
          9   made 12 mortgage loans to African Americans and
         10   Latinos.  In 1996, it made none.  It took no
         11   applications from Latinos or African Americans in
         12   1996, either.
         13            As I mentioned earlier, I represent a
         14   predominantly minority district.  I have plenty of
         15   constituents struggling with high rent, struggling
         16   to get ahead, who want to achieve the American
         17   dream of becoming home owners, but that dream won't
         18   be achieved with any help from Banc One.
         19            They could not find a single minority in
         20   the city of Denver in 1996 to even take an
         21   application for a mortgage from.
         22            Something is wrong.  And unless Banc One
         23   makes some commitments to change this record, when
         24   my constituents ask me where to go in terms of
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   their banking, I won't be able to say Banc One.
          2            This lack of service to the minority
          3   community in Denver is outrageous.  Latinos make up
          4   23 percent of the population in Denver and African
          5   Americans account for 12.8 percent of the
          6   population.  To ignore over one out of three
          7   consumers in the Denver area is unconscionable.
          8            Access to credit is essential to breaking
          9   the cycle of poverty.  Home ownership is the best
         10   route to building wealth and achieving the American
         11   dream.
         12            One of the most important measurements of
         13   an institution's commitment to move American
         14   families to self-sufficiency and economic stability
         15   is the entrance into home ownership.
         16            Renters have greater difficulty
         17   accumulating and maintaining wealth than home
         18   owners.
         19            Particularly for African Americans, home
         20   ownership is a bellwether for wealth.  According to
         21   the Department of Housing and Urban Development,
         22   African American renters have a net worth of $500
         23   on average, while African American home owners have
         24   a net worth of more than $48,000.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            Banc One's failure to provide this needed
          2   credit demonstrates its disregard for Denver's
          3   minority communities and consumers.
          4            The vast bulk of Banc One's mortgages went
          5   to the wealthiest and the whitest Denver
          6   neighborhoods.  42 percent of its mortgages were
          7   made in census tracts where the population was more
          8   than 90 percent white.
          9            An additional 41 percent of its home
         10   purchase mortgages were made to neighborhoods where
         11   whites made up between 75 and 90 percent of the
         12   population.
         13            Only one of its loans under two percent
         14   went to a census track where minorities were more
         15   than half the population in 1996.  And that loan
         16   was not even made to a Latino or African American,
         17   since we know that no applications were taken from
         18   this population in 1996.
         19            Banc One has a comparable disregard for
         20   low income communities.  In 1995, more than
         21   one-third of those under 50 percent of the median
         22   income were rejected for home mortgages, more than
         23   three times the rate of Africans earning
         24   120 percent of the area median income.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            In 1996, it took more than 80 percent
          2   fewer applications from low income people.  Just 4
          3   or less than 7 percent of its mortgage loans went
          4   to neighborhoods with 50 percent of the area median
          5   income.
          6            Additionally, Banc One has so far refused
          7   to make a lending commitment for the Denver area.
          8   It has pledged 4 billion for Chicago and 3 billion
          9   for Detroit, but not one penny for Denver.
         10       MS. SMITH:  Mr. Davis, could you bring it to a
         11   conclusion.  We'll be glad to have your entire
         12   statement put into the record.
         13       MR. DAVIS:  I have submitted 11 copies of that
         14   statement to the folks where I checked in.
         15            But essentially the point I'm trying to
         16   make here is that Banc One still has a long way to
         17   go.  We think that, in other words, for them to get
         18   there that this merger needs to be put on hold
         19   until they're able to really establish some real
         20   relationships with low-moderate income communities
         21   in Denver and minority communities.
         22            And I am asking you to, in fact, put this
         23   merger on hold until they have been able to work
         24   out and really develop some serious commitments
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   that allow them to live up to the principle and the
          2   objectives of the Community Reinvestment Act.
          3            Thank you very much.
          4       MS. SMITH:  Thank you.  Mr. Ries.
          5       MR. RIES:  Hello.  My name is Leo Ries.  I'm
          6   the director of Housing and Neighborhood
          7   Development for the city of Milwaukee.  And I'm
          8   here representing Mayor John Norquist, who sends
          9   his regrets that he was not able to be here
         10   personally.
         11            My purpose in being here today is not to
         12   really speak in favor of the merger or to protest
         13   the merger, but rather to report on our experience
         14   with Banc One as a corporate citizen.
         15            Clearly, all banks can do a better job,
         16   especially in terms of lending to low and moderate
         17   income communities.
         18            And clearly, the effect of this merger
         19   will be different in various communities.  For
         20   example, unlike Indianapolis, there is very little
         21   overlap in Milwaukee between First Chicago and
         22   Banc One's services.
         23            But having said that, I also have to say
         24   that our experience with Banc One in Milwaukee has
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   generally been very positive.  And we have no
          2   reason to believe that that will change after the
          3   merger.
          4            That didn't occur after Banc One purchased
          5   Milwaukee-owned Marine Bank in 1987 and we don't
          6   suspect it will happen after this merger.
          7            I would like to provide a couple examples
          8   which will provide a basis for assessment.  First
          9   of all, in 1991, Mayor Norquist, along with
         10   Congressman Jerry Blejka (phonetic), called
         11   together a number of local banks and community
         12   agencies to talk about the problem of affordable
         13   lending.
         14            What grew out of that discussion was a
         15   locally based coalition called NOHOM or New
         16   Opportunities for Home Ownership in Milwaukee.
         17            This has been a collective effort
         18   involving community groups and local lenders to
         19   focus on the issue of affordable lending and to
         20   address -- to look at products that will meet that
         21   market need and to also work with lenders to expand
         22   the availability of credit.
         23            Banc One was a leader in helping to form
         24   this partnership and they have continued to be a
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   very active member to this day.  As a matter of
          2   fact, one of their senior bank officials chaired
          3   this effort for a couple of years.
          4            We're currently working on an effort
          5   involving the whole problem of home improvement
          6   lending.  And, again, Banc One is very active on
          7   that task force.
          8            But more significant, I think, is their
          9   actual practice of lending or their actual history
         10   of lending patterns in Milwaukee.
         11            Annually, the office of the City
         12   Comptroller prepares an analysis in which we
         13   analyze the lending patterns of various financial
         14   institutions in the Milwaukee area and especially
         15   focus on their lending in what we've designated as
         16   the local target area, which is the area that has
         17   the lowest level of home ownership in the city.
         18            And in the most recent report, copies of
         19   which I've shared and I've left with the Board of
         20   Governors, Banc One was listed as the best lender
         21   in the target area of banks having assets of over
         22   150 million.
         23            And so I think it does demonstrate that,
         24   again, clearly banks can all do a better job, but
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   based on our analysis of other lenders in the
          2   Milwaukee area, Banc One has done a better than
          3   average job.
          4            Banc One has also been very active in
          5   various other community development efforts through
          6   their CDC by investing in low income housing, tax
          7   credit projects and also through their various --
          8   through their Banc One Foundation.
          9            And so for all of these reasons, I can --
         10   I want to just say on behalf of the Mayor that we
         11   have been very satisfied with their performance as
         12   a corporate citizen in Milwaukee.
         13       MS. SMITH:  Thank you very much.  Mr. Flood.
         14       MR. FLOOD:  Yes, good morning.  My name is
         15   Lawrence Flood.  I'm special council to the
         16   Attorney General of Illinois.
         17            And I would like to preface my remarks by
         18   telling you that our office has no position
         19   regarding the merger, the Banc One merger.
         20            We would tell the Federal Reserve Board
         21   that we would cooperate with them if we were called
         22   upon to provide some assistance to you here in the
         23   state of Illinois.
         24            Several months ago, the Office of the
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   Attorney General was appointed receiver for the
          2   now-dissolved Dixmoor Park District after a finding
          3   in chancery court that the Park District was
          4   totally lacking in organization and financial
          5   record-keeping.
          6            It was also learned that certain
          7   commissioners and members of that Park District
          8   Board had misappropriated certain monies received
          9   from the issuance of bonds on behalf of the Park
         10   District.
         11            Banc One was the underwriter.  And the
         12   amount of the bonds issued totaled approximately
         13   $700,000 over a period of several years.
         14            Criminal charges were filed against
         15   members of the Board.  Some of those defendants
         16   have pled guilty, and some of those cases are still
         17   pending.
         18            When our office was appointed receiver,
         19   the court directed that we review processes by
         20   which the bonds were issued by Banc One.
         21            We have substantially reviewed documents
         22   provided by Banc One and have interviewed several
         23   of the bank personnel involved in the transaction.
         24            Banc One has fully cooperated with us in
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   providing documents and also making available to us
          2   for interview bank personnel familiar with this
          3   matter.
          4            At this point in time, we have no reason
          5   to believe that Banc One acted inappropriately in
          6   the issuance of those bonds.  And I bring that to
          7   you for your information.  Thank you.
          8       MS. SMITH:  Thank you.  Mr. Smithers.
          9       MR. SMITHERS:  Good morning.  My name is Ralph
         10   Smithers, and I'm executive assistant to Greg
         11   Lashutka, Mayor of Columbus.
         12            I'm here today at the request of the
         13   Mayor, who's travelling in Europe and unable to
         14   present his testimony in person.
         15            As you know, the merger of Banc One and
         16   First Chicago is a bittersweet development for the
         17   people of Columbus.
         18            On one hand, it signifies that our
         19   hometown bank has truly become a national company;
         20   but on the other hand, its decision to relocate its
         21   headquarters from Columbus to Chicago is difficult
         22   for us to accept.
         23            Perhaps an apt analogy would be one of a
         24   parent who has watched their child grow up, but sad
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   to see the child leave home to go out into the
          2   world.
          3            But in a sense, this is different.
          4   Banc One is growing up, but not really leaving us.
          5   Banc One employs more than 10,000 in Columbus.  And
          6   following the merger, that number is not expected
          7   to diminish.
          8            In fact, the continued prosperity of the
          9   company will likely cause an increase in employment
         10   in the Columbus market.  Many of Banc One's
         11   significant businesses, including their retail
         12   banking and computer operations center, will remain
         13   in Colorado.
         14            Along with these important lines of
         15   business, many people will also remain.  The people
         16   of Banc One are leaders.
         17            They have made important contributions to
         18   Columbus, starting with the Chairman, John B.
         19   McCoy, who has chaired one of the City's most
         20   significant urban renewal programs in our history,
         21   the Capital South Community Urban Redevelopment
         22   Corporation.
         23            Mr. McCoy has committed to the Mayor that
         24   he will continue on in his capacity as chairman of
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   Capital South and other Banc One officers will also
          2   continue to serve in leadership roles for our
          3   Riverfront Development, our Chamber of Commerce,
          4   the City's Neighborhood Development Loan Committee,
          5   the Columbus Compact and Fannie Mae's Columbus
          6   Partnership Office and many other initiatives which
          7   are important to our community.
          8            The people of Banc One volunteer to help
          9   children with their school work through our
         10   Adopt-a-school program.  They provide help to the
         11   homeless and food to the needy.
         12            They're actively engaged in supporting
         13   quality healthcare in our community and have
         14   consistently set the pace for one of the most
         15   successful United Way Organizations in America.
         16            Perhaps less well-known are the many
         17   unsung personal contributions made by the employees
         18   of Banc One who, as they have prospered on an
         19   individual basis, have provided significant support
         20   to the Columbus Foundation.
         21            The Columbus Foundation is one of the
         22   largest community foundations in America.  The
         23   generous contributions from people who work for
         24   companies like Banc One have made this possible.
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1            With respect to economic and community
          2   development, Banc One has been a reliable partner
          3   as long as I can remember.  And I've been around
          4   for more than 30 years.
          5            When the City undertook a large and risky
          6   central city redevelopment project in the 70s,
          7   Banc One stepped forward to help with the
          8   financing.
          9            When the federal government threatened to
         10   pull its financial support, Banc One lenders flew
         11   to Washington to change their minds.
         12            When the City of Columbus decided to
         13   launch a major public-private partnership with the
         14   Enterprise Foundation to promote home ownership and
         15   foster community based development, Banc One
         16   stepped out in front with both it's human and
         17   financial capital.
         18            During the last five or so years, Banc One
         19   has financed more than 1,200 units of affordable
         20   rental housing in the city of Columbus, including
         21   two major YMCA and YWCA single room occupancy
         22   projects and the first redevelopment of a public
         23   housing project in the State.
         24            Last year alone, Banc One made more than
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   12,000 loans to consumers residing in low and
          2   moderate income neighborhoods of the Columbus area
          3   and financed $162 million in small business loans
          4   to more than 1,800 small business owners.
          5            Recently, a group of neighborhood
          6   representatives wanted to undertake a comprehensive
          7   revitalization of their community.
          8            They went to Banc One for help in getting
          9   started.  Banc One's staff took the group to other
         10   markets where they had participated in similar
         11   initiatives.
         12            I accompanied the group to Indianapolis to
         13   study how projects started.  The one thing we
         14   learned is that partnership is the foundation of
         15   community development and that partnerships are
         16   built on local resources and local commitment.
         17            No two cities are the same.  And the
         18   beauty of a company like Banc One is that it has
         19   the local capital -- financial, human, technical
         20   and philanthropic -- and the autonomy to commit to
         21   worthy local endeavors.
         22            There are some folks who think this merger
         23   will cause Banc One to turn its back on the
         24   Columbus community or who think that the commitment
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   of its people will somehow diminish if the
          2   corporate headquarters leaves the city.
          3            But I don't think this merger is about
          4   creating something less or dismantling the culture
          5   that made Banc One a great institution.
          6            I have seen what Banc One has accomplished
          7   in other markets.  And their commitment to the
          8   community is no less today than it will be in
          9   Columbus tomorrow.
         10            We look forward to your approval of this
         11   merger and to a bright future with a strong
         12   company.  We are proud to be a Banc One community
         13   and look forward to working together in the days to
         14   come to address the needs of our common
         15   constituencies.
         16       MS. SMITH:  Thank you very much.
         17            Any questions from the panel?  Thank you
         18   very much for coming this morning.  We'll, again,
         19   be glad to have your entire statements entered into
         20   the record.  And we'll move onto Panel 4.
         21            I will mention as the panelists are coming
         22   to the table that there have been some changes from
         23   the names that were listed on your agenda, so we
         24   will -- we do have -- we will have people introduce
                         McCORKLE COURT REPORTERS, INC.
                       CHICAGO, ILLINOIS - (312) 263-0052
          1   themselves and say their names for the benefit of
          2   the audience who may not be able to see the name
          3   plates.
          4            We are going to start with Ms. Coleman.
Last update: December 3, 2010