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Public Meeting Transcripts

Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation

Wednesday, July 7, 1999

Transcript of Panel Nine

        9            MS. ARANJO:  Good afternoon.  My name is 
         10   Carol Aranjo, and I am the CEO of D.E. Wells Federal 
         11   Credit Union in Springfield, Massachusetts, and also 
         12   a member of the African-American Executive 
         13   Leadership Council of Springfield, Massachusetts. 
         14            The African-American community of western 
         15   Massachusetts has not benefited from any of the bank 
         16   mergers or new banks entries into the State of 
         17   Massachusetts.  We often say that people in Boston 
         18   think the state ends at 128. 
         19            We have seen the press releases, and we 
         20   have also been part of the bank community group that 
         21   started about five years ago, and we have not seen 
         22   any of the dollar amounts that the banks have 
         23   pledged to be lent in the low- and moderate-income 
         24   communities drift into Springfield, Massachusetts.  
         25   Very little dollars are in there for the business 
          1   community. 
          2            The banks do lend to the nonprofits.  They 
          3   do give charitable giving.  But as every civilized 
          4   individual knows, it is the business community that 
          5   drives the community's progress. 
          6            The African-American business community has 
          7   been starved for capital and loans from the 
          8   beginning of time, since slavery.  Our community 
          9   seems to be the fertile ground for other ethnic 
         10   groups to come in and get their economic starts.  
         11   Banks loaned to everyone to come into the 
         12   African-American community to start businesses 
         13   except the African-Americans.  This is outrageous. 
         14            I am here to say that people who have 
         15   mortgages also need jobs with which to pay the 
         16   mortgages.  If they are not able to create jobs 
         17   within their community, if they are not able to 
         18   establish a credible business community, if they are 
         19   not able to provide for the needs of their citizens, 
         20   then that community becomes a ghetto, it becomes a 
         21   starved plantation. 
         22            The banks of America treat the 
         23   African-American community as a plantation.  They 
         24   are the owners.  They are the wealth of the 
         25   community.  They control it.  They choose an 
          1   overseer.  When I use the word "overseer," I'm not 
          2   talking about Uncle Tom.  Those are different.  I am 
          3   talking about someone that the bank will determine, 
          4   "We will allow you to become successful.  We will 
          5   loan to you, but only to you."  It is a method of 
          6   pitting members of the community against one 
          7   another. 
          8            This is stock and trade of the American way 
          9   in the African-American community.  For the 
         10   government, for entities of the government to 
         11   continue to allow it is to take part in it.  Racism, 
         12   the stigma of what happens in our community, will 
         13   not change until the government takes responsibility 
         14   for what it sees happening and its part in it.  
         15   Banks must be able to put these dollars that they're 
         16   talking about into community controlled 
         17   organizations. 
         18            We are recommending that the banks, if they 
         19   are committing $14 billion, that these dollars not 
         20   stay within the banks to be given out piecemeal, but 
         21   to be placed into community loan funds, community 
         22   credit unions, community CDCs that have loan pools.  
         23   The money should be placed within them over a 
         24   five-year period and allow them to loan to the 
         25   businesses in the community so that they can develop 
          1   their community. 
          2            Communities cannot be developed without 
          3   real capital, and real capital cannot be used in the 
          4   community if it is given to people outside of the 
          5   community to come in, build on their wealth and take 
          6   the wealth from the community.  So we recommend that 
          7   unless the banks are willing to put these dollars 
          8   into the hands of community lenders and allow them 
          9   to loan, then they should not be allowed to merge. 
         10            HEARING OFFICER SMITH:  Thank you very 
         11   much. 
         12            Mr. Draisen. 
         13            MR. DRAISEN:  Thank you very much.  It's a 
         14   little easier for me standing for some reason.  I'm 
         15   not quite sure why. 
         16            My name is Marc Draisen, and I'm president 
         17   and CEO of the Massachusetts Association of 
         18   Community Development Corporations. 
         19            Just for purposes of explaining a little 
         20   bit more about who I am and what I've done, I've 
         21   worked in the community development field for the 
         22   last 18 years, and I have also served for four years 
         23   as a member of the Massachusetts House of 
         24   Representatives, representing Boston and Brookline. 
         25            We represent the 68 community development 
          1   corporations of Massachusetts.  Banks play critical 
          2   roles in the work of CDCs.  They provide financing 
          3   for the construction of affordable housing, capital 
          4   for loan pools that fund small businesses or home 
          5   improvements, direct credit to entrepreneurs and 
          6   home buyers, basic banking services to consumers and 
          7   critical grant support to a host of CDC efforts. 
          8            In March, we began to assess the impact of 
          9   the proposed merger of Fleet and BankBoston.  We 
         10   looked at the various factors to assess whether this 
         11   merger would keep the promise that the leaders of 
         12   the banks had indicated of one plus one equaling 
         13   greater than two. 
         14            We examined Fleet and BankBoston's past 
         15   records of serving the community reinvestment needs 
         16   of low- and moderate-income communities after 
         17   previous mergers.  We asked the banks to develop a 
         18   comprehensive, detailed and publicly verifiable 
         19   series of benefits to the communities we serve, and 
         20   we asked them to formalize these commitments through 
         21   signed agreements. 
         22            Unfortunately, to date, the banks have 
         23   failed to negotiate a CRA agreement with any 
         24   legitimate community organization or elected 
         25   official.  In fact, they have flatly said they would 
          1   not do so. 
          2            Furthermore, they have failed to provide 
          3   any detailed commitments either by state or by 
          4   program area in such a way that we can determine 
          5   whether the convenience and needs of low- and 
          6   moderate-income people are being served. 
          7            Please allow me to be clear.  We have 
          8   worked for years with both of these institutions.  
          9   We know them well.  We respect their staffs.  Each 
         10   one of them has good programs and some programs that 
         11   could be improved. 
         12            However, we are also aware, I might note, 
         13   of the value of having a financial institution 
         14   headquartered in New England, although I would note 
         15   that no one knows who the next merger will be headed 
         16   by, and that remaining in New England could not last 
         17   for long. 
         18            Nonetheless, despite our relationships with 
         19   these two banks, we are not able at this time to 
         20   lend our support to this merger.  We do not take 
         21   this action lightly.  MACDC has never opposed a 
         22   merger in the five years that I've been president 
         23   and CEO. 
         24            But there are three reasons why we take 
         25   that position today:  First, the failure to 
          1   negotiate an agreement; second, we remain 
          2   unconvinced that the regionwide commitment as 
          3   promised by the bank truly meets the tests of one 
          4   plus one equals two; and finally, and perhaps the 
          5   most importantly, because the bank's statement lacks 
          6   specifics.  Gross numbers in broad categories across 
          7   six states are not good enough. 
          8            We were very precise in our requests, and 
          9   we hope the bank will be precise as well.  Yet in a 
         10   host of areas -- soft second affordable home 
         11   mortgages; rental housing production through the 
         12   Mass. Housing Partnership Fund; membership in the 
         13   Federal Home Loan Bank; basic banking, checking, and 
         14   savings accounts for unbanked households; targets 
         15   for small business lending -- we have only heard, 
         16   "We are still studying your proposal." 
         17            Therefore, without those specifics, we 
         18   cannot be supportive today.  The Fed, however, does 
         19   have the ability to turn this around.  You clearly 
         20   have the authority to establish conditions over any 
         21   approval of this merger under your regulations.  We 
         22   know you tend not to do this, but we hope that you 
         23   will do so at this time. 
         24            We hope that you will require Fleet and 
         25   BankBoston to develop a detailed and publicly 
          1   verifiable CRA plan negotiated with community 
          2   organizations and elected officials.  We hope you 
          3   will extend the public comment period for at least 
          4   two weeks after such a plan is developed and release 
          5   to the public and take into account the public's 
          6   reaction to the plan in making any decision to 
          7   approve or deny the merger.  And, finally, we hope 
          8   that you will incorporate these commitments into any 
          9   approval that the Federal Reserve might issue. 
         10            In the written testimony that we have 
         11   handed in, we have detailed -- and I might say in 
         12   great detail -- the five reasons why we believe that 
         13   in the case of this merger, there are unprecedented 
         14   conditions why you should establish these 
         15   conditions, even though you may not have established 
         16   CRA conditions in the past. 
         17            We hope you will take these recommendations 
         18   seriously, and please do what you can to make sure 
         19   that Fleet and BankBoston's commitments going 
         20   forward in fact are equal to or greater than the 
         21   activities of the two banks in the past. 
         22            Thank you for your attention. 
         23            HEARING OFFICER SMITH:  Thank you very 
         24   much. 
         25            MS. DuBOIS:  My name is Jeanne DuBois.  I'm 
          1   the director of the Dorchester Bay Economic 
          2   Development Corporation in Upham's Corner, North 
          3   Dorchester, and East Roxbury.  We're a 20-year-old 
          4   CDA, one of the larger ones in Boston.  And we have 
          5   three branches in Upham's Corner -- Fleet, 
          6   BankBoston and Citizens -- all within about 50 yards 
          7   of each other. 
          8            I think we would be considered one of what 
          9   BankBoston and Fleet call their neighborhood 
         10   development partners.  So there are many positives 
         11   over the years that we have experienced with them, 
         12   and we have some concerns. 
         13            They have supported our Small Business 
         14   Microloan Program.  We have our own in-house loan 
         15   program right in Upham's Corner.  We work with 400 
         16   entrepreneurs/microlenders right in the 
         17   neighborhood.  We have made over half a million 
         18   dollars of our own direct loans to small start-ups 
         19   and small businesses.  They have invested in over 
         20   500 units of rental housing through Mass. Housing 
         21   Investment Corp. 
         22            They have supported our home improvement 
         23   loan program to unbankable homeowners.  We have many 
         24   people living in -- 80 percent of the housing stock 
         25   is owner occupied in North Dorchester, so our home 
          1   improvement lending is important. 
          2            We have many deals in the works.  
          3   BankBoston and we are working on a manufacturing 
          4   plant to go into Savin Hill Industrial Park that 
          5   will create 70 jobs.  We have had gap financing that 
          6   we have done with Little Brazil Restaurant in 
          7   Allston-Brighton.  Through our community business 
          8   network, we were able to complete a deal.  There is 
          9   an elevator company now.  We are starting to do 
         10   bigger and bigger deals where we are packaging them, 
         11   and the banks can make loans as these smaller 
         12   entrepreneurs graduate. 
         13            We have also worked positively with the CDC 
         14   divisions of both BankBoston and Fleet.  People are 
         15   on our boards and committees.  So these are all the 
         16   positives I wanted to give you as a background while 
         17   I raise some concerns so you know this is not just 
         18   going one way. 
         19            Our anchor supermarket in Upham's Corner is 
         20   called America's Food Basket.  I think many people 
         21   have heard of it.  We have 16,000 shoppers a week.  
         22   They have 200 workers in the market.  It pays 
         23   $36,000 a week in local salaries.  This has been a 
         24   Fleet loan for many years with a $280,000 City 
         25   guarantee behind it.
          1            When Mr. Medina, the owner, expanded his 
          2   very successful market to Hyde Park, he got into 
          3   some management problems -- often businesses will 
          4   have these kind of problems when they grow -- and 
          5   had some losses in his first year.  Fleet called the 
          6   loan. 
          7            We wound up, with the help of Fleet CDC 
          8   staff, getting some extensions.  But it's an example 
          9   where now we're working with U.S. Trust and the CDC 
         10   Tax Credit Collaborative to try to cover this loan. 
         11            It should never have happened.  This is our 
         12   anchor market.  This is our jewel in the crown.  
         13   This is what is turning the Upham's Corner business 
         14   district around.  It is one of our key businesses, 
         15   and we think that the relationship banking should 
         16   have been more operative in this case.  We think 
         17   BankBoston has acted more like a partner, and we 
         18   hope that that culture will prevail. 
         19            The second business is Kasmeric Elevator.  
         20   This is a Caucasian man who had been 20 years in the 
         21   elevator business, went out on his own, and Fleet 
         22   did a $30,000 line of credit and term loan with him.  
         23   And again, he needed $70,000 to meet the kind of 
         24   contracts that he was hoping for, and they were not 
         25   able to do it.  We had to take it to BankBoston, who 
          1   successfully made the loan, and his business is 
          2   growing. 
          3            We are finding a lot of our small 
          4   entrepreneurs don't want to go to Fleet.  There is a 
          5   real problem here.  There is a culture problem, an 
          6   attitude problem.  Our Board also, last night, said 
          7   there is a customer service problem in our local 
          8   branch -- too few staff, long lines, and little 
          9   participation in local business activities. 
         10            The attitude is important.  The community 
         11   banking and relationship banking is important.  I've 
         12   said this to other friends in other divisions of 
         13   Fleet.  We need some specific commitments, and there 
         14   are some specific statements in the MACDC position 
         15   paper about loan size and loan volume and the size 
         16   of businesses.  We would like those specifics 
         17   incorporated.  We are concerned that it won't happen 
         18   otherwise. 
         19            HEARING OFFICER SMITH:  Mr. Morehouse. 
         20            MR. MOREHOUSE:  Thank you.  Good afternoon.  
         21   Thank you for the opportunity to testify at this 
         22   hearing. 
         23            My name is Andrew Morehouse.  I'm the 
         24   executive director of the Greater Holyoke Community 
         25   Development Corporation and the chair of the 
          1   Community Reinvestment Committee of the 
          2   Massachusetts Association of CDCs. 
          3            By helping the constituency that I serve in 
          4   greater Holyoke specifically, we are able to build 
          5   the incomes, assets and human capital.  And through 
          6   that, in my role as a member and the chair of the CR 
          7   committee, other CDCs are able to do the same in 
          8   their respective communities. 
          9            In turn, these individuals, low-income and 
         10   minority individuals, generate income demand for 
         11   goods, services, and, yes, even financial services. 
         12   However, community development organizations, the 
         13   banking community, and public officials have learned 
         14   that financial services must be adapted to these 
         15   underserved communities and markets. 
         16            Only by investing in innovative financial 
         17   products and services can economic activity be 
         18   stimulated, generating profitable opportunities for 
         19   business lending, home mortgages, and community 
         20   development projects.  Yet it takes all three of 
         21   these institutions working together to revitalize 
         22   our nation's underserved communities. 
         23            In Massachusetts, Fleet Bank and BankBoston 
         24   are major partners in innovative financing.  Past 
         25   commitments and contributions of Fleet and 
          1   BankBoston are critical to the success of regional 
          2   intermediaries of community development, to 
          3   community organizations and to state programs like 
          4   the Massachusetts Housing Investment Corporation and 
          5   the Massachusetts Housing Partnership. 
          6            Small community banks generally just do not 
          7   have the assets and economies of scale to be able to 
          8   afford innovative financial products and the volume 
          9   of lending that Fleet and BankBoston have the 
         10   capacity to offer as a result of their respective 
         11   mergers with smaller banks. 
         12            I would like to share with you, however, a 
         13   different picture, one that is quite disturbing.  As 
         14   both banks have merged with other banks over the 
         15   past decade, amassing greater financial assets and 
         16   profits for shareholder, their lending overall to 
         17   minorities and low-income census tracts has fallen 
         18   precipitously.  HMDA data show that in the 
         19   Springfield MSA, the percentage decline in mortgage 
         20   lending is even greater than that of the 
         21   Commonwealth. 
         22            Focusing on Fleet and Shawmut lending 
         23   before and after the merger, from 1994 to 1998, 
         24   loans to low- and moderate-income borrowers dropped 
         25   83 percent; to Latino borrowers, 90 percent; and to 
          1   black borrowers, 96 percent.  Total lending for the 
          2   same period dropped 71 percent. 
          3            These figures represent a significant 
          4   retreat from underserved communities in particular 
          5   and home mortgages in general.  It also raises the 
          6   specter that BankBoston's far better track record of 
          7   home mortgage lending will cease to exist after the 
          8   merger. 
          9            Further declines of the proposed banks' 
         10   combined home mortgage lending, especially to low- 
         11   income and minority individuals and census tracts, 
         12   will seriously impair the revitalization efforts of 
         13   these communities.  The proposed divestitures and 
         14   likely branch closings will certainly be cited as a 
         15   justification for further reductions in home 
         16   mortgage lending. 
         17            The public must have guarantees that the 
         18   proposed bank will reserve this trend in home 
         19   mortgage lending to underserved communities.  In 
         20   other words, the public should be assured that the 
         21   proposed FleetBank will uphold its commitment to one 
         22   plus one is greater than two in these communities.  
         23   If fact, this should hold true in all of western 
         24   Massachusetts, where no divestitures are reportedly 
         25   going to take place. 
          1            I'm here to request that if the merger is 
          2   approved -- and it seems likely -- it be contingent 
          3   on the two banks negotiating in good faith a 
          4   detailed and measurable community reinvestment plan 
          5   with community organizations and elected officials. 
          6            As publicly insured institutions, these 
          7   banks have an obligation to serve the communities 
          8   whose savings are being entrusted in them.  This is 
          9   nowhere more crucial than in low-income and minority 
         10   communities that are traditionally underserved. 
         11            Without a negotiated community reinvestment 
         12   plan, there is every reason to believe that their 
         13   home mortgage lending will continue to spiral 
         14   downward.  Moreover, there is no guarantee that the 
         15   banks will even sustain, much less increase, their 
         16   current commitments to affordable rental housing, 
         17   basic banking services, and accessible branches and 
         18   ATM sites. 
         19            Community organizations and public 
         20   officials from across the Commonwealth have 
         21   painstakingly reached out to each other to debate 
         22   the impact of the proposed merger on community 
         23   reinvestment in underserved communities.  Coalitions 
         24   representing diverse constituencies have come 
         25   together to formulate a realistic and measurable 
          1   plan that the banks have steadfastly refused to 
          2   negotiate in good faith. 
          3            I respectfully call upon the Federal 
          4   Reserve Bank to break the impasse by requiring the 
          5   banks to negotiate a community reinvestment plan, 
          6   plain and simple.  Moreover, I urge the Federal 
          7   Reserve to extend the comment period after a 
          8   negotiated plan can be reached so that all affected 
          9   parties have an opportunity to respond to it. 
         10            In my humble opinion, I think we should 
         11   expect no less from the Federal Reserve. 
         12            Thank you again for inviting me to testify 
         13   before you. 
         14            HEARING OFFICER SMITH:  Thank you very 
         15   much. 
         16            Mr. Westgate.
         17            MR. WESTGATE:  My name is Michael Westgate 
         18   from Chelsea Neighborhood Housing Services.  We've 
         19   been around for 20 years.  We do about 1.2 million a 
         20   year in rehab of buildings in Chelsea for low- and 
         21   moderate-income people, almost all of it -- I would 
         22   say all of it in fact in partnership with banks.  
         23   And the resulting benefits to the community include 
         24   about a half million dollars in wages paid to 
         25   Chelsea residents. 
          1            About two years ago a Cambodian family came 
          2   into my office.  They had recently bought a house 
          3   for $150,000.  This was a duplex.  They had a 
          4   $127,000 mortgage from Fleet.  The bankers on my 
          5   Loan Committee said that the building was only worth 
          6   $120,000, and it needed $20,000 worth of work.  It 
          7   needed a new roof, it had no second means of egress, 
          8   the furnace was completely busted. 
          9            It was a Cambodian family, as I mentioned.  
         10   They were unwilling to stick their necks out.  We 
         11   wanted to go to bat for them, but they came from a 
         12   culture where if you stick your neck out too far, it 
         13   was literally blown off.  And there were a lot of 
         14   people that are not willing to step forward. 
         15            I wanted to do something more than 
         16   anecdotal, because we did have some other anecdotes 
         17   like that.  When we started with a 120 percent 
         18   loan-to-value ratio before they even came in for a 
         19   home improvement loan, there wasn't much we could do 
         20   for them. 
         21            Did I ask NCRC, the National Coalition -- 
         22   the National Community Reinvestment Coalition, and 
         23   they did a study of all of the loans made by all of 
         24   the banks in Chelsea during the period of comment on 
         25   Fleet's application for review.  And while the 
          1   numbers were high, in gross numbers, numbers when 
          2   you picked them apart were rather startling, that if 
          3   you took as a common denominator the average price 
          4   in Chelsea, Asian applicants had paid 120 percent -- 
          5   excuse me -- their mortgages were 120 percent of 
          6   average value, Hispanics were 130 percent, and 
          7   African-Americans were 140 percent. 
          8            I presented that to the OCC a year ago.  It 
          9   took months to get an acknowledgment.  I gave it to 
         10   the head of their CRA office when I was down in 
         11   Washington in March of this year. 
         12            I know OCC is not FRB, but just to explain 
         13   the difficulty that we see in having regulators take 
         14   responsibility for regulating, it was particularly 
         15   insulting to see Fleet get an outstanding review 
         16   from Massachusetts when we -- and I know people in 
         17   Dorchester and elsewhere -- had similar experiences. 
         18            What we're seeing today is a violent 
         19   escalation of prices.  Where during the downtrend 
         20   prices in Chelsea went down 1 percent a month, they 
         21   are now going up 1.5 percent, and unfortunately, 
         22   Fleet is among the leaders in giving excessive 
         23   loans, and it's the banks that are the determinants 
         24   of value rather than the buyers. 
         25            We oppose the merger.  We see that there 
          1   has been irresponsible lending in Chelsea and 
          2   elsewhere.  We see dollar headlines for millions of 
          3   dollars, but the devil is in the details. 
          4            We have seen millions of dollars languish 
          5   at Mass. Housing Partnership.  We were given loans 
          6   by Mass. Housing Partnership.  The terms were too 
          7   onerous for us to use, so we went elsewhere. 
          8            The solution, I believe, is enforceable 
          9   agreements with regional groups that take full 
         10   advantage of our knowledge of the communities, the 
         11   regulators' ability to regulate, and the banks 
         12   stepping forward with programs that will work. 
         13            CRA today is being gutted in Congress, and 
         14   I think it's incumbent on the people in this room to 
         15   come up with a new tripartite agreement that would 
         16   apply to this or any other major merger where the 
         17   goals are spelled out, we can all agree to them, 
         18   they're transparent, they're enforceable. 
         19            And I thank you for your attention. 
         20            HEARING OFFICER SMITH:  Thank you very 
         21   much. 
         22            MS. WORGAFTIK:  My name is Susan Worgaftik.  
         23   I'm chair of the Massachusetts Micro-Enterprise 
         24   Coalition and director of This Neighborhood Means 
         25   Business!, a micro-entrepreneurship education and 
          1   technical assistance program in Dorchester, 
          2   Massachusetts.  I would like to thank the Federal 
          3   Reserve for this opportunity to present my views. 
          4            The announcement of the merger of Fleet 
          5   Bank and BankBoston foreshadows a change of great 
          6   concern to micro-enterprise training, technical 
          7   assistance and loan programs. 
          8            The micro-enterprise programs of the 
          9   Commonwealth serve entrepreneurs with businesses of 
         10   five employees or fewer and low and moderate 
         11   individuals who are in the process of creating their 
         12   own businesses.  Most of these businesses are 
         13   located in the Commonwealth's inner cities and rural 
         14   areas.  The development of new micro-enterprises has 
         15   been an important element in the recent economic 
         16   improvements in urban neighborhoods and rural 
         17   communities throughout the Commonwealth. 
         18            In the last decade, we've been able to work 
         19   very closely with both BankBoston and Fleet Bank to 
         20   create loan products designed specifically for the 
         21   smallest of Massachusetts entrepreneurs.  In the 
         22   early days of micro-entrepreneurship, the 
         23   development of these programs in Massachusetts was 
         24   very difficult.  The large banks did not want to 
         25   involve themselves in these types of small loans.  
          1   Competition between both BankBoston and Fleet Bank 
          2   was very helpful to us in the development of the 
          3   kinds of loan products we need, and today we have 
          4   many loan products that are available to our 
          5   smallest entrepreneurs that were not available to us 
          6   ten years ago. 
          7            In addition, the foundation and corporate 
          8   support that micro-entrepreneurship programs have 
          9   received from BankBoston and Fleet Bank have been 
         10   essential to the development of the technical 
         11   assistance and entrepreneurship education programs 
         12   that are crucial to making micro-enterprises 
         13   succeed.  Without those programs, we have found that 
         14   many of our entrepreneurs fail very early in their 
         15   business life. 
         16            So, clearly, BankBoston and Fleet Bank 
         17   believe that the synergy that's created by the 
         18   merger will be beneficial in the development of 
         19   their business.  We believe that the same should be 
         20   true for the communities, the businesses, and the 
         21   individuals which the banks serve. If one plus one 
         22   equals more than two for the banks, it should also 
         23   equal that for the businesses and the individuals in 
         24   our communities. 
         25            It's my hope that this merger will mean an 
          1   increase in the number of loans available to micro 
          2   and small community entrepreneurs in urban and rural 
          3   communities, and that there will be a significant 
          4   increase in the technical assistance and education 
          5   support grants essential for making those loans 
          6   successful.  Anything less is a direct step backward 
          7   from the commitments that these two banks have made 
          8   to our communities for micro-entrepreneurs in the 
          9   past. 
         10            As a partner in the efforts of the 
         11   Massachusetts Association for Community Development 
         12   Corporations, Massachusetts Affordable Housing 
         13   Alliance, and the Organization for a New Equality, I 
         14   had hoped that we would be able to have a verifiable 
         15   agreement with the new Fleet-Boston by now. 
         16            I had hoped that such an agreement would 
         17   ensure that the number and availability of funds for 
         18   loans to micro-entrepreneurs would expand much the 
         19   same way that the expectations for the new 
         20   Fleet-Boston would forecast their future.  I had 
         21   hoped that this agreement would recognize the 
         22   importance of entrepreneurship training and 
         23   technical assistance to the success of micro loans 
         24   and that there would be funds available for that 
         25   purpose.  At this time, no such agreement exists. 
          1            As we move into a new era of banking, it's 
          2   essential that all aspects of the economy benefit 
          3   from the progress and the projections that are put 
          4   forward.  At this time, the projections that we 
          5   have -- that have been presented publicly -- don't 
          6   mention the needs and the concerns of the 
          7   micro-entrepreneurs of the Commonwealth. 
          8            I urge you to recommend that the new 
          9   Fleet-Boston resume discussions with MACDC, MAHA and 
         10   ONE to develop a balanced plan for the future which 
         11   will make this merger a success in everyone's eyes, 
         12   a merger which benefits all of us. 
         13            Thank you. 
         14            HEARING OFFICER SMITH:  Thank you. 
         15            Mr. Young. 
         16            MR. YOUNG:  I'm here representing a rural 
         17   perspective.  Our CDC works in nine towns, 300 
         18   square miles, about 25,000 people.  To personalize 
         19   it, if my septic system fails, and you drink water 
         20   in Boston, you get it.  North Quabbin Region is the 

         21   place I'm representing. 
         22            We have got to be mindful that the CRA, 
         23   coupled with strong compliance on the part of 
         24   financial institutions and regulatory agencies, 
         25   makes stronger communities.  Communities of the 
          1   North Quabbin Region are concerned over the proposed 
          2   merger, and the concerns thus far raised by the 
          3   North Quabbin Community Reinvestment Coalition are, 
          4   first, diminished local autonomy. 
          5            This has had a profound negative impact on 
          6   institution involvement in our community, as, for 
          7   instance, the role of Fleet, formerly known as 
          8   Shawmut, formerly known to us as Franklin County 
          9   Trust, formerly known as Orange National Bank, has 
         10   been diminished to the point that the Orange -- that 
         11   the Fleet Bank in Orange is jokingly referred to as 
         12   a manned ATM.  But it is not really a joking matter, 
         13   and regulators should look with a keen eye on the 
         14   possible outcomes of this merger on rural 
         15   communities. 
         16            The second concern is the increased 
         17   reliance of credit scoring.  We understand the needs 
         18   of the bank to meet the community's credit needs 
         19   consistent with safe and sound lending practices.  
         20   Small businesses in our region face difficulties 
         21   obtaining credit, and they warrant special 
         22   consideration.  The use of credit scoring continues 
         23   to increase the difficulty. 
         24            With every merger, more and more of our 
         25   small and micro-businesses are no longer 
          1   creditworthy.  This diminished creditworthiness 
          2   comes, in many instances, after decades of hard 
          3   work, decades of prior credit having been repaid as 
          4   agreed.  Our small and rural and sometimes 
          5   unconventional businesses fall through the cracks in 
          6   national and regional credit scoring models. 
          7            Thirdly, financial institutions need to 
          8   participate in educational and social service 
          9   support.  Fourthly, banks need to provide portfolio 
         10   lending in our region, especially for renovation of 
         11   owner-occupied one- to four-family properties.  The 
         12   portfolio aspect is critical, that they be held and 
         13   not resold. 
         14            The merged bank needs to be responsive to 
         15   community leaders and members of our area.  We 
         16   suggest an advisory Board be made up of members of 
         17   respective regions to ensure that all community 
         18   concerns are addressed by the management of the 
         19   combined bank. 
         20            A little more than a year ago, our CDC went 
         21   through this with Family Bank.  We raised concerns 
         22   about local lending authority, loan funds, mortgage 
         23   outreach, portfolio lending, and in the end we 
         24   signed an agreement.  The agreement provided for 
         25   various commitments by Family Bank to enhance its 
          1   community development activities.  In the end, I 
          2   think Family Bank appreciated our concerns.  The 
          3   needs were addressed.  Community development banking 
          4   is good business. 
          5            Please extend the comment period.  Don't 
          6   approve this merger without a signed agreement, 
          7   because it's in our mutual interest.
          8            HEARING OFFICER SMITH:  Thank you very 
          9   much. 
         10            Questions from the panel? 
         11            HEARING OFFICER KWAST:  I have a question. 
         12            Mr. Morehouse, I think touched on this, but 
         13   I wonder if some of the other panel members might 
         14   comment on the role of smaller and medium-sized 
         15   banks in serving the needs of the organizations and 
         16   needs of your customers. 
         17            MR. DRAISEN:  We've had a lot of 
         18   discussions internally, Mr. Kwast, among our CDCs 
         19   about the divestiture issue and the different sized 
         20   banks.  And I think the sense among our CDCs is that 
         21   there's a role for everyone. 
         22            Very frequently, we have individual CDCs 
         23   that have a very close relationship with a local 
         24   bank that really knows the customers in that 
         25   community, the entrepreneurs that the CDC is dealing 
          1   with, and their presence is invaluable.  So the loss 
          2   of those community banks is a severe problem.  Or, 
          3   conversely, the possibility of those community banks 
          4   picking up a few additional branches would be a very 
          5   good thing. 
          6            From another perspective, however, if we 
          7   have a very large bank that comes into the area, 
          8   sometimes it has greater overall CDC -- overall CRA 
          9   capacity, it knows how to work with some of the 
         10   bigger programs, it has experience from other parts 
         11   of its portfolio with doing some of the more 
         12   complicated deals that sometimes involve three 
         13   government programs and six different funding 
         14   programs and things like that. 
         15            I think the summary is that we want to make 
         16   sure that it's not just one big bank, that gets to 
         17   deal here.  We do want to see more competition.  We 
         18   understand the value of that.  We sense that that's 
         19   going to be the direction that the divestiture goes 
         20   in.  But there's also a very important role for the 
         21   small or the medium-sized banks, and we work with 
         22   them very closely, and they should not be shut out. 
         23            MS. WORGAFTIK:  In relationship to 
         24   micro-entrepreneurs, I would second that.  And I 
         25   would also point out that in some ways, the size of 
          1   the bank relates to programmatic issues, but the 
          2   availability of the bank is something that the 
          3   micro-entrepreneurs need. 
          4            We often find that we don't have banks 
          5   staffed well enough to be -- and some of the larger 
          6   banks -- in terms of their real recognition of the 
          7   micro-entrepreneurs to really give them the kind of 
          8   attention that they need.  It is kind of -- so I 
          9   would be looking for the kind of staffing from any 
         10   sized bank that would really be able to say, "We are 
         11   serious about the work that is done with the 
         12   community and just not simply that we have an 
         13   outpost here." 
         14            So regardless of whether it is a larger 
         15   bank or a smaller bank, that question of taking the 
         16   time to really work through issues of 
         17   entrepreneurship is extremely important to our 
         18   members. 
         19            MR. YOUNG:  The smaller banks are critical 
         20   to our success.  For example, the most recent real 
         21   estate deal we did involved -- we were attempting to 
         22   purchase a building from Fleet which was a 
         23   foreclosure.  While we were trying to borrow money 
         24   from Fleet's community development side, it couldn't 
         25   hold back the asset management or foreclosure side, 
          1   and they sold the building to Bob Fader.  
          2   Ultimately, it was a local bank that financed the 
          3   deal, and we had to renegotiate it with somebody who 
          4   bought the sold-off paper. 
          5            So in my region, Fleet's branch is really a 
          6   nonplayer.  Although BankBoston and Fleet have been 
          7   important supporters to my organization in terms of 
          8   banking services, they are only going for the 
          9   highest cut, which is really not our CDC strategy in 
         10   economic revitalization. 
         11            MS. ARANJO:  In the African-American 
         12   community -- and as you can see, there are not many 
         13   of us here testifying -- I run a credit union.  I 
         14   just had a gentleman who has a million dollars worth 
         15   of orders from J.C. Penney and the U.S. Army.  These 
         16   are not people who won't pay.  They needed a credit 
         17   line of $348,000 for their merchandise to be made. 
         18   Fleet Bank turned them down even after getting a 
         19   guaranty from the business association in Washington 
         20   who guarantees minority loans, and they were still 
         21   turned down. 
         22            This happens too often in the 
         23   African-American community.  They will give you 
         24   loans of all types except those which allow us to 
         25   develop credible businesses which allow us to 
          1   develop our community.  And I would like to say that 
          2   it is important to the African-American community 
          3   that there are local, community-driven banks or 
          4   financial institutions which take the time to know 
          5   the community and understand that color is not 
          6   character. 
          7            MR. WESTGATE:  It's the competition that we 
          8   all need, both for our own agencies and for the 
          9   people we serve.  Just to illustrate it, we had an 
         10   unsecured line of credit with a local bank at prime 
         11   plus 2.  Another bank came in, and now we have an 
         12   unsecured line of $400,000 of prime minus a half. 
         13            If you have competition, both the 
         14   homeowners and the businesses and the nonprofits can 
         15   profit from that.  If you have no competition, then 
         16   we all have to live with some of the stories you've 
         17   heard today. 
         18            HEARING OFFICER BROWNE:  I have a question 
         19   for Mr. Westgate. 
         20            In talking about the high value -- well, 
         21   high loan-to-value lending in Chelsea, was that 
         22   unique to Fleet, or did you see that in other 
         23   institutions as well? 
         24            MR. WESTGATE:  I won't say it is absolutely 
         25   unique to Fleet, but in the NCRC data, it was the 
          1   only banking institution that showed up that way. 
          2            HEARING OFFICER SMITH:  Thank you very much 
          3   for coming this afternoon, and I'm sorry you all had 
          4   to wait so long, as other panels also are having to 
          5   do.
          6            (Pause)
          7            HEARING OFFICER SMITH:  Thank you.  With 
          8   this next group, we again have very brief 
          9   presentations; but what we are also doing is setting 
         10   a time limit, so that at a certain point, if people 
         11   haven't made it through, we will have to move them 
         12   to later in the day in order to not have our other 
         13   panels running quite so late.  So --
         14            MS. WEBSTER:  What is our time limit? 
         15            HEARING OFFICER SMITH:  One minute.

Last update: December 3, 2010