Public Meeting Regarding First Chicago NBD and Banc One |
1 PUBLIC MEETING REGARDING THE PROPOSAL BY 2 BANC ONE CORPORATION, COLUMBUS, OHIO, 3 TO MERGE WITH 4 FIRST CHICAGO NBD CORPORATION, CHICAGO, ILLINOIS 5 6 7 Proceedings had in the above-mentioned 8 cause, on Thursday, the 13th day of August, 1998, 9 at The Federal Reserve Bank of Chicago, 230 South 10 LaSalle Street, Chicago, Illinois at 9:00 o'clock 11 a.m. 12 13 14 15 16 17 18 19 20 REPORTED BY: Brenda S. Tannehill, CSR 21 LICENSE NO.: 084-003336 22 - and - 23 REPORTED BY: Jeanette A. Sandei, CSR 24 LICENSE NO.: 084-003685 1 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. SMITH: I think we can get started. Let me 2 start by welcoming you to this important public 3 meeting on the application of Banc One Corporation 4 to merge with First Chicago NBD Corporation. 5 And I'll start by introducing myself. I'm 6 Dolores Smith, the director of the division of the 7 Consumer and Community Affairs for the Reserve 8 Board in Washington, D.C. I'm also the presiding 9 officer for this public meeting. 10 Our other panelists are Scott Alvarez, 11 who is the Associate General Counsel for the 12 Federal Reserve Board, and Alicia Williams, who is 13 Vice President and Community Affairs Officer from 14 the Federal Reserve Bank of Chicago. 15 We are here today because Banc One 16 Corporation, Columbus, Ohio, has applied for 17 approval to merge with First Chicago NBD 18 Corporation, Chicago, Illinois. 19 When the Federal Reserve Board considers 20 one of these applications, we look at a number of 21 factors under the Bank Holding Company Act. These 22 include financial issues, managerial issues, 23 competitive issues and the convenience and needs of 24 the communities affected. 2 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 In doing so, we particularly look at the 2 record of performance of the parties under the 3 Community Reinvestment Act. 4 The CRA requires the Board to take into 5 account an institution's record of meeting the 6 credit needs of its entire community. 7 The Banc One application transaction also 8 involves the proposed acquisition or retention of 9 non-banking companies engaged in activities that 10 are permissible for bank holding companies. 11 The Board must determine whether the 12 proposed non-banking activities can reasonably be 13 expected to produce benefits to the public that 14 outweigh possible adverse effects such as undue 15 concentration of resources, decreased or unfair 16 competition, conflicts of interest or unsound 17 banking practices. 18 The purpose of the public meeting today is 19 to receive information regarding these factors. We 20 will be seeking to elicit this information and to 21 clarify factual issues related to the application. 22 We are very pleased that so many people 23 have been willing to come and testify at this 24 public meeting. We will have more than 90 groups 3 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and individuals represented over the course of the 2 day. 3 Let me tell you a little bit about the 4 procedures that we'll be following. First, this is 5 what we call an informal public meeting. Members 6 of this panel may ask those who are testifying 7 about their testimony. 8 This is not a formal administrative 9 hearing, so we are not bound by rules regarding 10 evidence, cross-examinations and some of the formal 11 trappings that accompany that type of proceeding. 12 As you can see from the agenda that you 13 have picked up, we do need to stick to the schedule 14 very carefully so that everyone who has asked to 15 offer oral testimony will have the chance to say 16 what they would like to say. 17 We are going to ask the witnesses today to 18 be mindful of the needs of others and to help us 19 stay on schedule. The panels and panelists will be 20 expected to keep within their allotted times. 21 And we do have a system for reminding 22 people about their time. We have two 23 time-keepers. They're up front. They will give a 24 signal when the presenter has one minute left to 4 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 speak. We'll hold up a sign. And then we have 2 another sign when the time has expired. 3 And then if that doesn't work, we have -- 4 we go to audio and we have a little bell. We don't 5 have a hook, so you have those opportunities. 6 Now, we have accommodated everyone who 7 made a timely request to present testimony, but 8 there may be some individuals who were unable to 9 sign up in advance. And to the extent possible, we 10 do want to give them a chance to speak as well. 11 So at the end of the meeting this 12 afternoon when all of the panelists who have been 13 listed have offered their testimony, we will make 14 the microphone available to anyone who would like 15 to make a presentation, time permitting. 16 Witnesses may submit a written supplement 17 to their oral testimony and have until next 18 Thursday, August the 20th, to do so, and then the 19 record will be closed. 20 Any written supplements should be directed 21 to Jennifer J. Johnson, Secretary of the Board, 22 Board of Governors of the Federal Reserve System, 23 Washington, D.C. 20551. They must be received 24 by 5:00 p.m. Eastern Daylight Time on Thursday, 5 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the 20th. Submissions may be faxed to area code 2 (202) 452-3462. 3 Also, for witnesses who have not already 4 turned in copies of written testimony or if there 5 are any other written statements to put into the 6 record, we're asking you to leave them with Federal 7 Reserve Bank staff at the registration table. 8 It's important that we get this 9 information and material for the record. A 10 transcript of the meeting will be available by 11 August the 18th through the Federal Reserve Bank of 12 Chicago and also from the Board. 13 In addition, the official transcript will 14 be available by close of business on August 19th on 15 the Board's public web site, which is at 16 www.bog.frb.fed.us. 17 And with that, I think we're ready to 18 begin with our proceedings. We will start first 19 with the applicant panel. 20 We have Mr. Istock from First Chicago and 21 Mr. McCoy from Banc One. And they have with them 22 Ms. Decker and Ms. Williams, so if you will -- 23 Ms. Johnson. I'm sorry. I'm so sorry. 24 If we can -- Mr. Istock, are you going 6 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 first? 2 MR. ISTOCK: Yes. 3 Thank you and good morning. As indicated, 4 I'm Verne Istock, chairman, president and chief 5 executive officer of First Chicago NBD. 6 And with me this morning, in addition to 7 Mary Decker, our senior vice president is David 8 Vitalle, who is the vice chairman of the 9 corporation and also president of First National 10 Bank of Chicago. 11 And also with me, as indicated, is John 12 McCoy, who is chairman and chief executive officer 13 of Banc One Corporation, and Julie Johnson, who is 14 senior vice president. 15 The banking business, even when you're 16 talking about banks the size of the new Banc One, 17 is an intensely local business. 18 As with customers, you have to understand 19 the needs of your communities and then try to 20 design solutions that will work. 21 This doesn't happen quickly or easily. It 22 takes time, effort and commitment. It takes 23 bankers who know their communities, who care and 24 who get involved. 7 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 At First Chicago NBD, we've had a long 2 history of community commitment. Over time, 3 we've built solid working relationships with 4 organizations that know and understand their 5 neighborhoods and who can partner with us to design 6 products and programs that respond to community 7 needs. 8 It's pretty obvious that we can't please 9 everyone, but those organizations that have chosen 10 to work with us have found us to be good partners. 11 We've learned a lot from each other and together 12 we've achieved meaningful results. 13 Let me quote from a letter from Sokoni 14 Karanja, president for the Centers for New Horizons 15 here in Chicago, that really captures that spirit. 16 He writes, and I quote, this partnership 17 in my 30-plus years of community development 18 experience, has been a unique one, for no other 19 lending institution I have worked with over the 20 years has demonstrated the capacity to first listen 21 to the community and then find ways to make 22 philanthropic as well as strictly business 23 investments that generate wins to both the 24 community and the bank, end of quote. 8 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 There is a synergy between what we do 2 that's strictly business, as Dr. Karanja put it, 3 and what we do because these are the communities 4 where we live, work and raise our families. 5 We recently published a booklet titled 6 Your Community/Our Community that highlights some 7 of the ways in which First Chicago NBD supports its 8 many communities. And I've submitted a copy for 9 the record. 10 We are especially proud of our record of 11 lending in our major urban markets, Chicago, 12 Detroit and Indianapolis. 13 In Chicago and Detroit, for example, we 14 are by far the largest locally based small business 15 lender. In Indianapolis we are the leading SBA 16 lender. And we are the number-one in Capital 17 Access programs in Michigan, Illinois and Indian. 18 We are also a leader in mortgage credit in all 19 three markets. 20 First Chicago NBD has developed many 21 innovative lending practices to serve the needs of 22 all applicants. 23 For example, we offer a number of flexible 24 mortgage loan programs that include either down 9 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 payment assistance or support for closing costs. 2 Our community pride loan is targeted to 3 households with less than 50 percent of median 4 family income. This loan can be used for home 5 improvements, new or used car financing or home 6 equity loan for any purpose, including business 7 development and education. 8 Sometimes traditional bank lending isn't 9 enough. We've chartered community development 10 corporations that can also make direct investments 11 in community projects. 12 In Detroit, for example, our CDC partnered 13 with the city and the local hospital group to 14 develop Virginia Park, a subdivision of new single 15 family homes in the core city. 16 We have for 15 years been an active 17 participant and are the largest investor in 18 Chicago's Community Investment Corporation, a 19 non-profit mortgage banking organization that 20 specializes in affordable housing development. 21 In July, CIC announced a $500 million loan 22 pool, the largest in the midwest, including a 23 $100 million flex-fund to finance deals that 24 stretch the limits on what we can accomplish in 10 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 distressed neighborhoods. 2 And we've been an important partner in the 3 Indianapolis Neighborhood Housing Partnership, 4 providing leadership in operating support and 5 participation in affordable loan pools. 6 Microlending is an important tool to spur 7 business development and one we're using throughout 8 our business areas. Through support of non-profit 9 lending organizations, such as ACCION in Chicago, 10 the Detroit Entrepreneurship Institute, the Lake 11 County Small Business Center and Collier County 12 Economic Development Council in Naples, Florida, 13 First Chicago NBD is helping to strengthen our 14 communities by giving entrepreneurs a start. 15 Education is an important priority for us, 16 and we're particularly interested in programs that 17 promote financial literacy. 18 Through a program called Credit: Tool or 19 Trap, NBD Bank in Michigan teaches high school, 20 community college and adult education students 21 about the power of using credit wisely. 22 This program is offered in partnership 23 with non-profit organizations and churches 24 throughout the state. 11 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 We sponsor more than 130 in-school banks 2 in Michigan, Indiana and Illinois where grade 3 school students learn money management, math and 4 employment skills. 5 The merger of First Chicago NBD and 6 Banc One Corporation is a merger of equals. 7 Neither company is taking over the other by paying 8 an extraordinary premium. 9 We think that's important because it means 10 that we don't have to do the kinds of extraordinary 11 cost-cutting that could damage our franchise, hurt 12 our employees and compromise our ability to serve 13 our communities. Certainly there will be 14 efficiencies and, yes, we will reduce costs, but 15 this merger is about growth. 16 And that growth benefits our customers, 17 our employees and our communities as well as our 18 shareholders. It promotes innovation, the creation 19 of new and better products and services. 20 It allows the creation of new jobs, 21 including many at entry levels, and the opportunity 22 for achievement and advancement. And growing 23 earnings allow growing support of communities. 24 I know that when companies merge, 12 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 communities always fear the loss of support. We 2 heard that concern when First Chicago and NBD 3 merged three years ago. 4 But as the earnings of the combined 5 First Chicago NBD Corporation have grown, so have 6 our contributions to the civic, educational and 7 cultural institutions of all of our communities. 8 Whether it's lending, investment or 9 philanthropy, it means being part of the community, 10 being involved, knowing and understanding its 11 needs, its hopes and its dreams and being part of 12 making it all happen. And that's our goal for the 13 new Banc One. Thank you. 14 And now it's my pleasure to introduce my 15 colleague, John McCoy. 16 MR. McCOY: Thanks, Verne. 17 We appreciate very much the opportunity 18 to appear here today. We appreciate the work 19 that the Fed staff has done. We appreciate all 20 the panelists, pro or con. I think it's a very 21 healthy atmosphere and look forward to a very 22 interesting day. 23 Banc One couldn't be more pleased to join 24 with First Chicago NBD in creating the new 13 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One. 2 Verne has talked about some of the 3 strengths of First Chicago. And I'd like to talk 4 about a few of the great things Banc One will bring 5 to the table. 6 The first of these is our legacy of 7 innovation. Banc One is an entrepreneurial 8 company. 32 years ago in 1966, we introduced the 9 first credit card outside of California. And in 10 1971, we launched the first automatic teller 11 machine in the nation. 12 Eight years later in 1979, we experimented 13 with one of the first home banking systems. 14 Today, credit cards, ATMs and home banking are 15 commonplace. 16 Banc One's culture of innovation has 17 created important new products and services in all 18 lines of business, including community 19 reinvestment. 20 Some of the CRA products may even seem 21 commonplace today, while other leading-edge 22 initiatives can become tomorrow's standard. 23 CRA at Banc One means business. It means 24 designing products that meet the needs of our 14 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 customers and constantly refining them to make them 2 better, more affordable and more accessible while 3 providing a fair return to the shareholder. 4 Today, you will hear many success stories 5 from our markets where we continue to innovate and 6 also from our partners who are working with us to 7 find new ways to finance affordable housing and 8 small business. 9 Our CRA record is one we are proud to 10 stand on. And I think you will agree that 11 Banc One's entrepreneurial spirit has elevated this 12 record to one of distinction. 13 I'd like to review just a few of our 14 singular achievements. In 1987, Banc One was one 15 of the first banks in the nation to finance a 16 project utilizing low-income housing tax credits. 17 Over the last 11 years, we have refined 18 our expertise in this area so that today we can 19 deliver direct assistance to projects which could 20 not otherwise be accomplished because of their size 21 or complexity. 22 These projects include the rehabilitation 23 of a former crack house in Wheeling, West Virginia, 24 across the street from an elementary school. 15 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 With Banc One's technical and investment 2 support, that crack house is now a three-unit 3 affordable housing project utilizing low-income 4 housing tax credits. 5 This project may rank as the smallest tax 6 credit deal in the country, but to the kids and 7 parents in Wheeling, it's a huge success. 8 In Louisville, the city struggled for 9 20 years with a severely troubled HUD Section 8 10 project. After entering the Louisville market in 11 1992, Banc One's community development team went to 12 work with the city, HUD and a private developer to 13 create a solution. 14 The turning point was an $8.8 million 15 bridge loan structured by Banc One and participated 16 to more than 13 lenders. 17 Following our entry into Delaware, 18 Banc One was approached to provide the expertise 19 and financing for an affordable housing project 20 serving low-income, chronically mentally ill 21 residents in Wilmington. This project is now 22 underway. 23 In Colorado, Banc One resources are 24 assisting the Southern Ute Indians in developing 16 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 50 single family homes which will be available on a 2 lease purchase basis to low-income members of the 3 tribe. 4 Elsewhere, our CDC designed a small loan 5 program to provide long-term fixed rate financing 6 for small, affordable, multi-family projects that 7 lacked a way to deliver that product efficiently. 8 We teamed up with the Wisconsin Housing 9 and Economic Development Authority and put together 10 a partnership where WHEDA markets and underwrites 11 the loans while Banc One CDC provides the funding. 12 Together, Banc One and WHEDA share the 13 risk. Together we created a delivery system that 14 is a win-win for Banc One and WHEDA. The people of 15 Wisconsin are the beneficiaries. 16 We are now exploring opportunities to take 17 what we have developed in Wisconsin and roll it out 18 in other Banc One states, including Kentucky, Texas 19 and Illinois. 20 In the small business area, Banc One 21 stepped forward to pilot the SBA's Fastrack and 22 Microloan programs. 23 Today, Banc One is recognized as the 24 national leader in both programs and has 17 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 established a reputation as a leading 2 microenterprise expert. 3 Banc One is generating more SBA microloans 4 than any other bank in the nation and has 5 established a network of microenterprise experts 6 extending from Milwaukee all the way to the Mexican 7 border. 8 Recently, these experts joined Banc One in 9 Cleveland to help the city reinvest their local 10 microlending program. 11 In another first, Banc One is the lead 12 investor in Capital Across America, the first small 13 business investment company focused on providing 14 capital to women-owned businesses. 15 There are two special ingredients in 16 Banc One's recipe for its successful CRA program. 17 One is knowledgeable employees who devote 18 all of their time and expertise to designing 19 sustainable and profitable solutions that meet 20 community credit needs. 21 The other is strong and respected local 22 partners who are knowledgeable about their markets 23 and share our commitment to sustainable solutions. 24 At Banc One, community needs represent 18 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 business opportunities and collaboration creates 2 customers. 3 Finally, I would like to take a moment to 4 express a concern which has been addressed by 5 certain community groups. 6 Banc One has entered a partnership with 7 HomeSide Lending to provide servicing for Banc One 8 Mortgage Corporation loans. 9 The servicing of our portfolio by HomeSide 10 does not negatively affect Banc One's loan 11 organization business. Banc One will continue to 12 originate mortgage loans. I think it is important 13 that this be clearly understood. 14 In fact, we recently entered a new 15 partnership with Self-Help to assist low-income and 16 minority home buyers in all of our bank markets. 17 This new program is a joint initiative 18 between Fannie Mae, the Ford Foundation and four 19 lenders to generate 35,000 affordable mortgages 20 over the next five years. 21 This program is focused on serving home 22 buyers who have difficulty meeting conventional 23 lending standards because of inadequate savings or 24 weaker credit. While HomeSide will service the 19 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 loans, Banc One will be the originator. 2 We're excited about serving new markets, 3 new places where the next CRA innovations may 4 develop with new partners. We look forward to 5 sharing our expertise and learning from new 6 partners in Chicago and Detroit. Thank you. 7 MS. SMITH: Questions? 8 MR. ALVAREZ: I've got a question. Many of 9 the -- 10 (Whereupon, there was a 11 vocal demonstration from the 12 audience.) 13 MS. SMITH: I would appreciate it if we could 14 have a little quiet, please. 15 MR. ALVAREZ: I'd like to ask a question, 16 actually, many of the commentors have asked in the 17 written remarks. 18 They expressed a view that neither 19 Banc One nor First Chicago has adequately addressed 20 the minority lending needs or the needs of loan 21 individuals. And they have charged that there's 22 been substantial disparities in the loan rates in 23 many communities once they are combined institution 24 to reach out to the low and moderate income 20 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 communities that are served by the organization and 2 to minorities and to ensure that credit decisions 3 are complying. 4 MR. ISTOCK: I would help the Chair out and 5 suggest that common courtesy would be that people 6 in the audience would let the other people in the 7 audience hear the response. 8 I believe both of us have addressed -- and 9 I'll speak for the First Chicago NBD -- minority 10 lending. And we've worked with many, many 11 community groups to really expand minority lending, 12 both African Americans and Hispanics and others. 13 And we'll stand on our record. We've expanded 14 these types of loans in all of the markets in which 15 we've serviced. 16 There has been some criticism that our 17 denial rates are higher than others, but I also 18 will say that the number of loans that we have 19 approved are higher as well. And we have 20 aggressively sought more applicants. And I suspect 21 that as you do that, you will find that there will 22 be more denials. 23 But, nevertheless, we had a number one 24 position here in Chicago in approving mortgages in 21 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 '96. And in 1997, we had a 40 percent increase in 2 the number of loans approved and it was well over a 3 hundred million dollars. So we're very proud of 4 our record. 5 MR. McCOY: As you are aware, we have done a 6 number of mergers. 7 MR. ALVAREZ: Move the microphone. 8 MR. McCOY: We've done a number of mergers and 9 are constantly being examined by both the Fed and 10 the OCC. I think the exams speak for themselves. 11 We've had very good ratings. 12 Secondly, there is rigorous monitoring 13 that goes along in all of our markets to make sure 14 that we are absolutely in compliance and also 15 rigorous training of our employees to ensure that 16 we are reaching minorities. 17 And I think the other thing that we found 18 in the acquisitions that we've done is everybody 19 does it a little bit differently. 20 And I think that there are things that 21 First Chicago has done that we applaud. I think 22 Verne would say the same thing. 23 And I think with joining together, as we 24 will in many areas, there will be synergies. And 22 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 we will take the best of both programs and, I'm 2 sure, come out with even a better program. 3 MR. ALVAREZ: A question for Mr. McCoy. 4 Banc One has recently completed a reorganization 5 project called, I guess, Project One that's 6 resulted in more centralization of management and 7 operational structure. 8 Will this centralization combined with the 9 merger eliminate local credit decision-making and 10 local points of contact and the ability of the 11 organization to understand the particular needs of 12 the local communities and address in special ways 13 the special needs of local communities? 14 MR. McCOY: Absolutely not. The key to the 15 banking business, especially the community banking 16 business, is to be knowledgeable of your individual 17 communities. 18 And there are differences between Chicago, 19 Detroit and Columbus. And if you're not aware of 20 what those differences are or what the needs are, 21 you are not going to be successful. 22 So our philanthropic giving is done by the 23 local communities in the local communities, not 24 centrally. And we have market managers in each 23 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 market who are challenged to make their markets 2 successful. And in reality, our CRA is done at the 3 local market level, not centrally. 4 So the key to our success is to really 5 compete with the competitors in the local market, 6 not on a national basis. 7 MR. ISTOCK: I would just add to that question 8 that John and I are in full agreement on this; that 9 while certain functions are better managed from a 10 centralization standpoint, the closer we can get 11 the decision-making individual to the individual 12 applying for a loan or whatever the case may be, 13 the better off we are, the better off the customer 14 is and the better off the community is. And we 15 subscribe to that philosophy. 16 MS. SMITH: I would ask you one question; and 17 that is, can you tell us something about your plans 18 for merging the CRA programs of your two 19 institutions? Any detail that you might give us 20 on that? 21 MR. ISTOCK: I can start with that. We have 22 just announced internally that Jerry Bulldike, who 23 is here in the audience, will be in charge of 24 public affairs for the corporation. 24 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 And it will be Jerry's responsibility to 2 put together the organizational structure for 3 public affairs, which will include the community 4 reinvestment activities. 5 And both Julie Johnson and Mary Decker 6 will be involved in those activities in the 7 corporation going forward. 8 We have not finalized that structure, but 9 you have our commitment that the intensity of our 10 effort in all of the local communities that we 11 serve will not decrease. It will, in fact, 12 increase. 13 As I think John indicated, we will learn 14 from one another and apply whatever pluses we have 15 from the Banc One organization to the communities 16 that First Chicago NBD has served and vice versa. 17 So we think overall the products and 18 services that we provide will actually increase in 19 the communities and the customers will benefit. 20 MR. McCOY: I would simply add to that that it 21 is so important to be involved in the local 22 community. 23 And I've had the opportunity with Verne to 24 meet a number of groups in Chicago and a number of 25 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 groups in Detroit. And so I think that you will 2 see a very strong orientation to local communities, 3 which has worked well for us in the past. 4 MR. ALVAREZ: There has been some concern 5 expressed that in moving corporate headquarters of 6 Banc One from Columbus to Chicago that there might 7 be a lessening of the new organization's commitment 8 to Ohio and Columbus, in particular. Can you 9 address that? 10 MR. McCOY: I think that that same concern was 11 echoed with First Chicago when the headquarters was 12 moved from Detroit. 13 And I think that based on what I know -- 14 and I met with the Mayor of Detroit -- that they 15 are happy with the support. I've certainly met 16 with our Mayor in Columbus and the Governor of Ohio 17 and others. 18 We have a strong commitment to that 19 market. We have a large number of employees still 20 there. We're having -- several of our businesses 21 will be headquartered there. 22 And so I don't worry about that at all. 23 And Verne will let me go back every once in a 24 while. 26 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MR. ISTOCK: That same concern was raised with 2 the First Chicago NBD merger. And I think over the 3 past three years, we have, in fact, proven in the 4 Detroit market that they have not been abandon. 5 In fact, what we have accomplished in that 6 market has actually been expanded. And we have 7 terrific franchises in all of the major cities, not 8 just Columbus, Detroit, but Flint, Grand Rapids, 9 Indianapolis and in some other states. 10 And we would be making a grave mistake if 11 we abandoned any of those communities as long as 12 this continues to be successful. 13 And John and I are committed to that 14 effort. We will continue to be able to use that 15 success to enhance our relationships with those 16 communities. 17 MS. WILLIAMS: You mentioned that you had 18 entered into a new partnership with Fannie Mae and 19 it's a Self-Help program for home buyers. 20 Could you talk a little bit about what 21 market would be impacted by that. 22 MR. McCOY: Basically, as I understand it, it 23 will be a program we will introduce in all of our 24 markets. It is one that, as we learn how it works 27 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and how to make it work, it will expand hopefully 2 past the 35,000 loans that we've set as a goal. 3 MS. SMITH: Any other questions? 4 MR. ALVAREZ: I don't think so. 5 MS. SMITH: If not, we thank you very much for 6 coming here this morning and we will move on to 7 Panel 2. 8 (Whereupon, there was a 9 vocal demonstration from 10 the audience.) 11 MS. SMITH: We'll follow the order given in the 12 agenda. And I will ask each person to indicate 13 your affiliation, so we'll start with the Honorable 14 Julia Carson. 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 28 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, 29 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 30 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 31 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. 32 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. 33 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 34 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 35 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. 36 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 37 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 38 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 39 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 40 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 41 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 42 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 43 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 44 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. 45 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. 46 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. 47 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. 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. 48 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 49 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 50 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 51 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. 52 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. 53 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 54 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 55 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 56 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 57 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 58 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 59 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 60 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 61 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. 62 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 63 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 64 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 65 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. 5 MS. COLEMAN: Good morning. My name is Cora 6 Coleman, and I am a Board member of Local 880 of 7 the Service Employees International Union. 8 I am here to talk about what things could 9 be like for minorities here in Chicago when 10 Banc One takes over the local control of 11 First Chicago. 12 If it's anything like what went on in 13 Akron, Ohio, it could get ugly. In the early 90s, 14 Banc One took over the Local Central Trust in 15 Akron. Soon after, minority job applicants filed 16 employment discrimination complaints with the 17 Department of Labor. 18 After a two-year investigation, the 19 Department found that 31 qualified minority job 20 applicants were unfairly turned down for jobs at 21 Banc One, a clear-cut case of employment 22 discrimination. 23 For five years, Banc One fought the 24 Department of Labor's attempts to reform the bank's 66 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 hiring practices. 2 Finally, just last year, the bank was 3 forced to hire 12 of the complainants and to 4 provide financial compensation to those minority 5 applicants it had refused to hire. 6 First Chicago NBD is a larger operation 7 than Central Trust. And squeezing the two 8 companies together is going to involve all sorts of 9 job changes, all sorts of chances for Banc One's 10 record in the lending office of turning down 11 minority applicants to come shining out in the job 12 interview. 13 We know the Federal Reserve is not 14 sympathetic to this issue since they themselves are 15 facing a large class action lawsuit from its 16 minority employees, but Banc One should be careful 17 because we will be watching with our trial 18 lawyers. 19 Banc One also has violated lending 20 discrimination laws. In March of this year, 21 Banc One Mortgage Corporation signed a lending 22 discrimination settlement with HUD after their Fort 23 Worth Humans Relation Commission filed their 24 lending complaints. They found that Banc One 67 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 offered African Americans and Latinos loans at 2 worse terms than offered to whites by steering them 3 to inferior and more expensive products than their 4 conventional loan product. 5 As a result of this case, Banc One 6 Mortgage committed to provide 10 million in 7 mortgages to low and moderate income and minority 8 borrowers. 9 This pattern of discrimination continued 10 in Arizona where Banc One recently settled a case 11 with the Attorney General by agreeing to provide 12 5 million in mortgages to low and moderate income 13 residents of Yuma County. This agreement came only 14 after the state investigated complaints from five 15 Latino families who claimed they were denied 16 mortgages because of their ethnicity. Banc One 17 denied these claims, citing internal processing 18 problems. 19 One family said they received the run 20 around from Banc One Mortgage until their 21 application was delayed long enough that they lost 22 their house to another buyer. 23 When a second attempt with Banc One 24 mortgage met similar delays, they took their 68 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 application to another bank and were approved 2 within a week. 3 In another instance that is strikingly 4 similar to the Phoenix example, a Dallas homeowner 5 who applied for a Banc One home improvement loan in 6 1996 cannot get his loan processed or even his 7 application rejection. 8 This practice of deterring applications of 9 prospective minority borrowers at the outset helps 10 understate the minority rejection rates. 11 These cases indicate a pattern of 12 discrimination through a series of delays and 13 deceptions that help Banc One pad their humble 14 reporting. 15 They also show us that under the threat of 16 a lawsuit, Banc One seems able to provide 17 alternative financing to meet the needs of low 18 income and minority borrowers. 19 Banc One clearly has a problem when it 20 comes to serving the banking and employment needs 21 of African Americans and Latinos. They don't seem 22 to understand that discrimination is against the 23 law. 24 The burning issue of today is does the 69 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Federal Reserve Board understand that 2 discrimination is against the law, does the Federal 3 Reserve Board have the guts to finally say no to a 4 renegade like Banc One. 5 On behalf of my union's 10,000 members, I 6 implore you to do the right thing. 7 Thank you. 8 MS. SMITH: Thank you very much. 9 Mr. Shea. 10 MR. SHEA: Ted Thomas is going to speak next. 11 MS. SMITH: Okay. 12 MR. THOMAS: Good morning. My name is Ted 13 Thomas. I'm the president of Illinois ACORN. 14 Banc One has a history of refusing to 15 negotiate lending agreements to meet the needs of 16 the low income communities. The only time Banc One 17 has quantifably made a lending commitment to a city 18 was when it was forced to do so by Michael White, 19 the Mayor of Cleveland. 20 Mayor White was so disturbed by Banc One's 21 unwillingness to help him rebuild the central city, 22 he actually filed a CRA protest against the bank 23 and forced the bank to set CRA lending goals for 24 his city. 70 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 ACORN has negotiated lending agreements 2 and partnership with scores of banks throughout the 3 nation. For example, we worked with Nations Bank 4 in 12 cities and with Chase Bank in ten cities. 5 Our partnerships have a proven track 6 record of performance. Since 1987, we have helped 7 over 10,000 low income families, mostly African 8 American and Latino heritage, achieve the American 9 dream of home ownership. 10 We were amazed at Banc One's flat-out 11 refusal to even discuss the formation of a 12 partnership or a corporate-wide CRA lending 13 commitment. 14 Banc One's Senior Vice President, Julie 15 Johnson, sent a rejection letter to several ACORN 16 officers. She said we do not believe in negotiated 17 CRA programs. 18 In Denver, Banc One officials have 19 canceled and postponed every meeting that has been 20 scheduled with ACORN members. To this day, 21 Banc One has not set CRA lending goals or made 22 commitments to Denver. 23 In Milwaukee, Banc One's met with ACORN 24 members. They said that they were unwilling to 71 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 negotiate a lending agreement and pulled out 2 Mrs. Johnson's letter to justify their position. 3 They told the same thing to the city's Fair Lending 4 Coalition. Today, Banc One has not set CRA lending 5 goals or made a commitment to Milwaukee. 6 In Louisiana, Banc One officials have also 7 refused to enter into a partnership discussion. 8 Instead, they sent a letter saying that they 9 already do enough. To this day, Banc One has not 10 set CRA lending goals of any kind in New Orleans, 11 Baton Rouge, Shreveport or anywhere else in the 12 State of Louisiana even though they are by far the 13 largest bank in the state. 14 Unlike other bigger mergers this year, 15 Banc One has refused to make corporate-wide lending 16 CRA commitments. What Banc One has done is allow 17 the First Chicago NBD CRA team to promise a lot of 18 grants to non-profits here in Chicago and in 19 Detroit. 20 Four weeks ago, ACORN thought it had a 21 commitment from First Chicago NBD. This commitment 22 was personally given to me by the CEO of 23 First Chicago, Mr. Verne Istock. He looked me 24 right in the eye and said Ted, we value the 72 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 partnership with ACORN. He said that they wanted 2 to keep it going in Detroit and Chicago and 3 possibly expand it to other cities. 4 Following that meeting, his staff told us 5 that we could expand our partnerships to Milwaukee 6 and perhaps to a couple of the bank's other 7 cities. They told us that they would value the 8 ACORN mortgage counseling program because it helped 9 them to make mortgages in places like Ingallwood, 10 North Lawndale, places where for years, banks had 11 not been able to make a single loan on its own. 12 I left the meeting feeling like things 13 were going to work out. After all, I had received 14 the word of the top dog, so I thought. Can you 15 imagine to my surprise just three days later, 16 Banc One suddenly terminated our negotiation with 17 no notice or explanation of any kind. 18 The First Chicago CRA team were very 19 apologetic and said that they would still be 20 willing to continue our program in Detroit and 21 Chicago but that they were not allowed to form CRA 22 partnerships in any additional cities. 23 When we asked what had happened to the 24 commitment from Verne Istock, they sheepishly 73 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 explained that Mr. Istock had been overruled by 2 John McCoy, the CEO of Banc One. They reminded us 3 John McCoy, and not Verne Istock, was going to be 4 the CEO, the new top dog. 5 Thank you. 6 MS. SMITH: Thank you very much. 7 MR. SOZA: Hello. Good morning. 8 My name is Nelson Soza. I'm an organizer 9 with Chicago ACORN, and I want to thank the Federal 10 Reserve Bank for having reopened this comment 11 period. I think it's key for our community such as 12 the one I work in. I also want to thank the 13 members of ACORN and Local 880 that come from 14 everywhere. 15 There is justice to be made, and we think 16 that this is one of those cases, red lining. 17 People in our community understand it that way so I 18 thank everybody for being here today. 19 I proceed to read the statement. 20 The merger between Banc One and 21 First Chicago NBD poses very serious issues for the 22 residents of Chicago. It represents a loss of one 23 of the last local major banks in Chicago, one of 24 the last major banks rooted in our communities. 74 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Not that there isn't room for improvement 2 at First Chicago. Banks in Chicago reject African 3 Americans and Latinos for home loans more 4 frequently than banks in other cities, and 5 First Chicago is worse than the rest of the banks 6 here. 7 First Chicago NBD rejected African 8 Americans nearly four times as frequently as whites 9 for home loans, and Latinos were denied home loans 10 more than twice often as whites. This is far 11 higher than the citywide averages for all lenders. 12 This performance is unacceptable from a 13 bank that touts its hometown image. Incredibly, 14 even the wealthiest African Americans and Latinos 15 are rejected at the same high rates. 16 The Woodstock Institute found similar 17 patterns when looking at lower income borrowers. 18 First Chicago has much larger shares of the Chicago 19 small business and mortgage lending market for 20 wealthy borrowers than lower income borrowers. 21 Yes, First Chicago has some cracks in 22 their record, but they are nothing compared to the 23 problems of Banc One. They seem small. 24 Banc One is already in the Chicagoland 75 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 area, but as you can see from the map behind me or 2 on the side over there if you look in the corner, 3 there is a map. If you look at the map there, as 4 you can see, it just isn't in Chicago. 5 Banc One isn't in Chicago really in fact 6 with exception of its branch on LaSalle Street in 7 the Loop across the street, Banc One has avoided 8 the City of Chicago as if it were the plague. 9 Its branches are located in wealthier 10 suburban neighborhoods like Schaumburg, Winnetka 11 and Highland Park. So if people from the West Side 12 want to open an account, they have to go all the 13 way there, for instance. 14 We know if past track record is any 15 indicator, then it is very likely that once 16 Banc One takes over First Chicago, it will close 17 the few First Chicago NBD branches that are in our 18 neighborhoods. 19 Banc One has always closed branches 20 following mergers no matter what the overlap in the 21 merging bank's service areas. In fact, Banc One 22 has recently announced that it will close between 23 200 and 500 branches, and somehow, I don't think 24 that it would be the branches in Winnetka and 76 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 DuPage County that will be closed. 2 Banc One is planning on replacing the 3 branches with ATMs in regional outlets and 4 convenience stores where Banc One already charges 5 its own customers one dollar for each use. Compare 6 this to First Chicago, which provides unlimited ATM 7 use to its own customers for free. 8 Banc One is also teaming up with 9 Texas-based Mr. Payroll to install check cashing 10 stores across the country. These operations will 11 cash a check for you but only if you submit to 12 video identification or fingerprinting. After 13 treating you as if you were a common criminal, they 14 will then charge you one percent for payroll and 15 government checks, two percent for money orders and 16 three percent for personal checks. 17 Sadly enough, even these high rates may be 18 cheaper than the flat $8 fee Banc One charges to 19 cash a government check at its own branches, $8 for 20 a government check. 21 Again, compare this to First Chicago where 22 government checks are oftentimes cashed for free by 23 tellers who get to know their customers who have 24 government checks, many of whom are older and 77 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 disabled. 2 Given the choice between locally-based 3 First Chicago and notoriously customer unfriendly 4 Banc One, we'll keep what we've got. 5 I urge you to reject this merger and the 6 high cost, low volume customer services that come 7 with it. 8 Thank you very much. 9 MS. SMITH: Ms. Vargas. 10 MR. VARGAS: Good morning. My name is Shirley 11 Vargas. I live in Pleasant Grove, Dallas, Texas. 12 Me and my fiancee went to Banc One to get 13 a home loan, and when we went in there, my fiancee 14 had worked for his job -- he started in '91 and the 15 company changed over. He was a regular employee, 16 and they changed over to independent contractors so 17 he had already filed for that independent 18 contractor, and we hadn't been there -- he hadn't 19 filed very long. 20 After that, we went there, and they said 21 that he had to have at least four years tax returns 22 for an independent contractor before we could even 23 consider a loan. 24 The money I was making, he said that I 78 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 didn't qualify for the $65,000 home that we wanted 2 to purchase. We had $4,200 to put down on it, and 3 they didn't even consider that. They said that I 4 didn't make enough money and that for us to come 5 back in two years for us to get a loan. And that 6 was just unfair. 7 We didn't go anywhere else after that 8 because we thought we couldn't get a loan, we 9 couldn't get a loan from any other bank. 10 Because I had an account there, I thought 11 that Banc One would be able to help me out, and 12 they didn't. They said no, and that was it, and I 13 think it was very unfair. 14 And they didn't even look at our 15 application, they didn't even do a credit check. 16 They just said no, that we needed to come back in 17 two years after we had tax returns, we had all the 18 information that they asked us for. 19 They didn't even consider it. They just 20 said no, you need to come back. And I just think 21 that's really unfair. 22 MS. SMITH: Thank you very much. Mr. Shea. 23 MR. SHEA: Good morning. My name's Mike Shea 24 I'm Executive Director of ACORN Housing 79 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Corporation. 2 The merger of First Chicago NBD and 3 Banc One is not a merger of equals, so let's get 4 that straight, it's an acquisition. 5 We are losing First Chicago and a more 6 open and efficient cosmopolitan culture that it has 7 developed. It has been replaced by the arrogant 8 big fish in a small pond approach by Banc One, an 9 approach that is both inefficient and racially 10 prejudiced. 11 And in case anyone here still has any 12 doubts about which bank's culture will survive, 13 consider the remarks made by John McCoy to the 14 Arkansas Business Journal during another merger. 15 He he said, "I don't believe in a merger of 16 equals. We want to be sure it is the Banc One 17 culture that survives." 18 And what happened with the golden 19 parachutes recently provided to First Chicago's 20 senior management? They are very unusual in that 21 Verne Istock, David Pitalle and others must leave 22 the new bank in order to get the money. If they 23 stay, they get nothing. 24 And finally, why wasn't the outstanding 80 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 First Chicago CRA team headed by Mary Decker and Ed 2 Jacob appointed to be the national CRA directors 3 for the new bank? We like Mary. She understands 4 our communities and how to make workable 5 partnerships with the community. 6 We have supported other candidates for 7 appointment to the Board of Governors of the 8 Federal Reserve. Why is it that McCoy has hired 9 someone who has never negotiated a single CRA 10 agreement in his life to hold this key position? 11 So let's look at the Banc One culture 12 starting with politics. So Banc One is one bad 13 bank unless you are a right-wing Republican trying 14 to kill the CRA, cut the guts out of federal 15 programs that feed children and women and house the 16 poor. Then Banc One is your friend and will reward 17 you with lots of campaign money. But if you are a 18 Democrat, then this merger is very bad news 19 indeed. 20 First Chicago has always divided its 21 political contributions fairly evenly between 22 Democrats and Republicans, for example, they hosted 23 a dinner to help U.S. Senator Carol Mosely-Brown 24 retire her campaign debt from the last election, 81 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 but not so with Banc One. 2 The Banc One PAC gives four times more 3 campaign money to Republicans than the Democrats. 4 Banc One is buying First Chicago. Guess which 5 political party stands to gain. Banc One PAC's 6 largest political donations just don't go to 7 Republicans, they go to the most extreme 8 Republicans who are trying to cut the CRA, for 9 example, Exhibit A, Representative Bill McCullom of 10 Florida received $17,000 from Banc One. 11 Representative McCullom is the guy that supported 12 the amendment that passed the House Subcommittee 13 this week that would exempt 85 percent of all banks 14 in the Community Reinvestment Act. 15 Exhibit B, Senator Lloyd Faircloth, Jesse 16 Helms, heir apparent in North Carolina, gets 17 $15,000 from Banc One, Exhibit C. Congressman 18 Casich, Chair of the House Budget Committee and 19 architect of many of the Republicans Urban 20 Transportation and Children's Nutrition Programs, 21 he gets $17,000. 22 The Banc One PAC is very large. This is a 23 very politically active bank. In the 1996 election 24 cycle, Banc One PAC was the seventh largest PAC 82 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 contributing more money than the American Medical 2 Association, American Bankers Association or 3 Phillip Morris. In the '98 cycle, they have 4 already given more $535,000 with reactionary 5 Republicans again enjoying a four-to-one edge in 6 contributions over Democrats. So when Banc One 7 grows, so does the Republican Party. 8 Secondly, Banc One is one bad bank for 9 Chicago shareholders. Banc One's market value has 10 collapsed since the merger was announced in April, 11 and it's pulled down First Chicago with it. 12 The stock price on the date of the merger 13 announcement in April, First Chicago closed at 14 96.25. Banc One closed unchanged at 61.70. At the 15 close of trading on August 11th, First Chicago was 16 at $72, a decrease of 25 percent. Banc One was 17 also a decrease of 26 percent. 18 Compare this to Citibank. Citibank's 19 stock has actually increased one percent since the 20 announcement of their deal with Travelers in spite 21 of the downturn in financial stocks. 22 With this merger, we have an extremely 23 efficient bank being bought out by an extremely 24 inefficient one. According to the Wall Street 83 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Journal two weeks ago, First Chicago is the most 2 efficient bank in the country. Banc One, on of the 3 top ten, was rated eighth or ninth. 4 The track of Banc One's other mergers 5 reflects the fact that they are not efficient. 6 They have had tremendous cost overruns in every 7 other merger. 8 So to wrap up, I would say that our 9 opposition of Banc One will not stop this merger. 10 Make no mistake about it, we know that the Fed is 11 going to approve this merger like they have every 12 other single merger. Doesn't matter how bad the 13 bank is, we know the Fed's going to approve it. 14 However, we're just putting Banc One on notice at 15 this meeting that we will take our case to other 16 more impartial venues, we will take our case to 17 shareholders, take our case to the labor movement, 18 we will take our case to the community, and we will 19 take our case to the courts. We will not stop 20 until we have forced this bank to change. 21 Thank you. 22 MS. SMITH: Mr. Williams. 23 MR. WILLIAMS: Madam Chairperson and 24 distinguished members of the Federal Reserve Panel, 84 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the Coalition of Neighborhoods is a non-profit 2 coalition of six racially and economically 3 integrated communities. 4 The Coalition, in keeping with our mission 5 to maintain, expand and promote healthy, integrated 6 communities, have trained our leadership to 7 integrate the compliance requirements of HMDA, CRA, 8 ECOA, RESPA, EEO and the Fair Housing Act. 9 It is our belief that the Federal Reserve 10 System which has contributed significantly to the 11 establishment of these laws and regulations must 12 now contribute more significantly to their 13 enforcement. 14 The coalition stands behind all of the 15 statements in our July 13th, 1998 challenge of this 16 merger. Banc One's July 22nd, 1998 response to our 17 challenge may have some slightly different numbers 18 than we submitted, but the conclusions are the 19 same. 20 Their weak mortgage loan production is not 21 responsive to the need of a 38 percent home 22 ownership rate in Cincinnati. The unresponsive 23 business lending speaks for itself, but I have 24 attached to this testimony a couple of antidotal 85 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 situations that we believe illuminate what some 2 black and white businesses experienced with 3 Banc One Cincinnati. 4 We believe that a public hearing at the 5 Cincinnati Federal Reserve Bank, comparison of the 6 '96, '97 HMDA data and residential mortgage and 7 business loan file review will support what we have 8 alleged. 9 Our challenge and the bank's responses 10 adequately describes a needs to improve performance 11 based or our prospective of the lack of innovation, 12 no complexities solved and the unresponsiveness of 13 Banc One relative to the overall needs in the 14 Cincinnati area. 15 This hearing today and the subsequent 16 merger decision has more to do with the credibility 17 of the regulatory agencies than that of the two 18 banks involved. 19 Renowned HMDA, CRA and financial experts 20 from all over the country in independent 21 assessments of Banc One's performance have 22 condcluded that the bank's approval and patterns in 23 Black, Hispanic and LMI census tracts suggest 24 violation of fair lending and consumer protection 86 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 laws, and therefore, non-compliance with CRA. 2 And First Chicago NBD's 1996 data shows 3 that the bank only originated a total of 29 loans 4 in MSA 1640. All 29 went to white borrowers. 5 We find it odd that as the government, 6 regulatory and financial industries move to 7 implement direct deposit programs under the EFT 99 8 that Banc One would close one of only three 9 branches it has in Cincinnati's Black community, 10 thereby reducing access. 11 The Roselawn branch closure which is in a 12 middle class Black neighborhood closed and reduced 13 competition which may lead to overpricing of loans 14 and services by the one remaining bank in that 15 community. 16 We also find it odd that the OCC nor the 17 Federal Reserve found issue with the isolated North 18 Fairmount location and the fact that it has no ATM 19 or drive-through window. How does this meet the 20 convenience and needs of that community? 21 Banc One's poor record in the appointment 22 of Blacks its Board and officer positions and its 23 poor record in procuresment of services from Black 24 providers in comparison to whites, especially in 87 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the area of marketing and advertisement was ignored 2 on the basis that they don't fall under CRA. 3 This is a form of unsophisticated denial 4 and a sense of certainty that the Federal Reserve 5 won't integrate the analyses of these concepts in 6 context of their relationship to discriminatory 7 lending. 8 We strongly believe that a mentality and 9 culture that refuses to properly serve Blacks in 10 the areas above will have no problem in 11 rationalizing away the indications of underserving 12 and discrimination. 13 In addition, you cannot penetrate a market 14 if you don't advertise and through it and to it. 15 Since Banc One does very little in this area, the 16 low number of Black applications to Banc One from 17 Black borrowers is the result. 18 Finally, with respect to partnership, we 19 know that many NDC/CDC type organizations have and 20 will provide honest testimony as to how Banc One 21 partnered to help them achieve certain projects, 22 but projects should not substitute for a broader 23 economic substitute for a broader economic 24 development strategy and plan to address 88 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 comprehensive reinvestment needs. 2 Banc One has a business plan with a 3 budget. The Federal Reserve is deeply involved in 4 the development of its year 2000 plan and the 5 budget to get it done. 6 Given this insight, we encourage the 7 Federal Reserve to push the envelope on performance 8 and partnerships by giving the proposed Banc One/ 9 First Chicago merger a conditional approval until 10 market level negotiated agreements substitute 11 agreements similar to the agreement between 12 First Chicago NBD and the Chicago CRA Coalition 13 have been established with budgets. 14 Finally, Madam Chair, I bring this 15 testimony that was handed to me on my way out of 16 town by Ms. Lavera Kosin, a businesswoman, and we 17 will resubmit it in a typed form. 18 MS. SMITH: We will be glad to have it for the 19 record. 20 I also wanted to ask Mr. Soza, are those 21 exhibits we saw part of our testimony? Did you 22 include that in your testimony? 23 MR. SOZA: We can get copies before the end of 24 the hearings today. 89 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. SMITH: That would be great, and then we 2 will incorporate them. 3 Any questions? 4 Thank you very much for coming this 5 morning. We appreciate your comments. 6 We're up to Panel 5, and we're going to 7 start with Mr. Bush. 8 MR. BUSH: Ms. Smith, other parties and 9 concerned citizens, I'm speaking on behalf of the 10 Woodstock institute, a non-profit that promotes 11 reinvestment and economic development in lower 12 income communities and as a member of the Chicago 13 CRA Coalition. I'm also a member of the National 14 Community Reinvestment Coalition. 15 The proposed merger of two large companies 16 that would constitute the largest bank in the 17 Midwest raises serious concerns for residents of 18 low income communities and the organizations that 19 work with them. 20 The Community Reinvestment Act in its 21 21-year history has been much more honored in the 22 breach than in the observance, a fact that has 23 contributed to the economic decline of huge areas 24 of urban, small town and rural America. 90 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 In the last few years, however, because of 2 a variety of pressures and opportunities, the Act 3 has produced very important improvements in home 4 lending to lower income and minority borrowers and 5 communities. 6 In Chicago, in many ways, the hometown of 7 community reinvestment activity, one of those 8 pressures and opportunities has been the practice 9 dating from 1983 of community organizations 10 requesting and persuading banks, small and large, 11 to commit to significant community reinvestment 12 goals for specific periods of time and then 13 monitoring the bank's progress towards those goals 14 on a regular basis. 15 On the announcement of this proposed 16 merger, the Chicago CRA Coalition which Woodstock 17 convenes, entered a dialogue with First Chicago NBD 18 to set new CRA commitments in the Chicago region 19 for the new bank. We believe that if implemented, 20 the provisions of the CRA agreement will constitute 21 a good CRA program for the new bank in the Chicago 22 region by improving the bank's record in lending 23 investments and services to the benefit of the 24 regions's lower income communities. 91 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 My colleagues from the Chicago CRA 2 Coalition on this panel will speak to some of the 3 details of this agreement. 4 In my view, the highlights of the 5 agreement include the following items. 6 The bank committed to small business and 7 home loan goals based on a measure of its size and 8 market presence, namely a specific ratio of its 9 market share in lower income communities to its 10 market share in other communities. These ratios to 11 be achieved at stated rates from 1999 are 1.10 for 12 home loans and 1.15 for small business loans, and 13 this will result in massively increased lending. 14 The bank committed to open four full 15 service branches in lower income neighborhoods. 16 These neighborhoods are seriously underbranched on 17 a per capita basis compared to other 18 neighborhoods. 19 The bank committed to a high level 20 feasibility study of an affordable retail banking 21 account for lower income households which currently 22 do not have banking relationship with the goal of 23 establishing such an account. 24 The CEOs of both banks personally assured 92 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the Coalition that the new bank will have a 2 vigorous home mortgage operation in all its 3 markets. The agreement will be monitored like 4 other Chicago CRA agreements in regular meetings. 5 Unfortunately, Banc One has not negotiated 6 similar agreements in its current markets which 7 leaves it without a detailed and adequate CRA 8 plan. Absent such an agreement, we do not 9 understand how the Federal Reserve Board can 10 evaluate whether the merged institution will in 11 fact meet the convenience and needs of its 12 communities. 13 We note that the recent spate of so-called 14 mega commitments by such institutions as Nation's 15 Bank, Bank America, Travelers and Citicorp raises 16 precisely the same problem. 17 In the case of both those mergers, more 18 than half the dollar commitment so proudly 19 announced were for products not targeted to lower 20 income communities. The commitments were not 21 broken down by market area nor established with 22 reference to such concrete objective measures as 23 market share ratios. 24 Detailed CRA plans and sound community 93 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 agreements should be a necessary part of an 2 adequate bank merger application. Agreements 3 between citizens and their institutions is after 4 all a hallmark of a Democratic society. 5 The First Chicago NBD agreement for the 6 Chicago region contains community reinvestment 7 details that should be standard for all bank 8 applications as Congressman Davis argued this 9 morning. The bank regulators should demand such 10 details as a matter of course. 11 It also contains in our opinion 12 commitments that reflect the size of the bank and 13 that will promote significant, safe and sound 14 community reinvestment in the Chicago regions's 15 lower income communities. 16 Thank you. 17 MS. SMITH: Thank you very much. 18 Mr. Wysocki, are you next or have we 19 changed the order. 20 MR. WYSOCKI: Good morning. 21 In 1977, over 20 years ago, I introduced a 22 community lending resolution at that year's 23 shareholder's meeting of the First National Bank of 24 Chicago. 94 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The resolution was based on the bank's 2 poor performance at that time that was documented 3 by the first year of the Home Mortgage Disclosure 4 Act data. The resolution was defeated by 98 5 percent of the shareholders in 1977. 6 I start with this point because I think it 7 exemplified the corporate arrogance of this time 8 that required Congress to pass the Community 9 Reinvestment Act that same year. 10 Now over 20 years and three First Chicago 11 mergers later, we are here to discuss this morning 12 the need for continued regulatory vigilance and 13 community advocacy on behalf of neighborhood 14 reinvestment and in this era of financial 15 modernization and merger mania. 16 I'm also here today to share with you the 17 strength of bank partnerships that have grown as a 18 result of CRA and are now providing access to 19 affordable credit and financial services to 20 revitalize local communities. 21 At the end of 1983 was when First Chicago 22 applied to acquire American National Bank, itself 23 proclaimed intent to be the premiere bank in the 24 Midwest. In staffing those CRA negotiations, they 95 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 led to become the largest CRA lending agreement at 2 that time of 100 million over five years. That's a 3 million. Now we're talking billions. 4 We have progressed over the last 20 5 years. That commitment was renewed in 1989, and in 6 1990 a five-year evaluation of the Chicago's 7 lending program was conducted, and I wish to quote 8 from a conclusion. 9 "The fundmental test of the success of 10 neighborhood lending programs and of investment in 11 general is whether lenders, community groups and 12 community based development organizations can 13 develop and implement loan programs together in 14 partnership." 15 From my years of experience, the key 16 element to fostering and furthering such 17 partnerships is regular monitoring and reviewing of 18 progress so that continued dialogue can lead to 19 further product innovation and market penetration. 20 The key for both sides is learning to deal. 21 One example of product development through 22 our work with First Chicago is the financing of 23 mixed use real estate. 24 Chicago's neighborhoods are built around 96 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 main streets with block after block of properties 2 with apartments above store fronts. Back in 1983, 3 no conventional lender offered financing for such 4 properties. 5 At the urging of the Chicago Association 6 of Neighborhood Development Organization, 7 First Chicago was the first lender to offer 20-year 8 fully amortized mortgages for the purchase and 9 rehab of such mixed use real estate. 10 In 1995, with the merger of First Chicago 11 and NBD, this neighborhood lending program was 12 renegotiated and it is part of the new commitment 13 of two billion dollars in community lending. 14 First Chicago agreed to do a pilot program of ten 15 percent down for mixed use buildings. 16 We all know that the affordable housing 17 has developed a variety of low down payment 18 programs for residential lending. This was an 19 effort to do this for mixed use real estate. 20 Now as part of our recent agreement, the 21 bank has found this to be good business and they're 22 committed to doing this as an ongoing loan product 23 in their portfolio and now they are willing to 24 pilot a low down payment mortgage for commercial 97 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 real estate. 2 This new commitment will provide a wide 3 range of local ownerhsip, I want to emphasize local 4 ownership, not absentee ownership, and will extend 5 investment opportunities to to a whole generation 6 of other businesses. 7 My point is here this community credit 8 need was being addressed now by the private market 9 because the bank was willing to sit down and 10 jointly hammer out the design of this product. 11 It's good reinvestment, it's an example of the 12 value of CRA agreements. 13 Now, his testimony talked about the market 14 share analysis that Woodstock had done that is now 15 leading to aggressive goals for small business 16 lending. The purpose of these observations is to 17 make this final point. 18 The Federal Reserve Board should exercise 19 its regulatory authority to assure that Banc One 20 adopts the First Chicago NBD approach to community 21 reinvestment throughout its service area. 22 As Mayor Goldsmith said this morning, this 23 is an issue of attitude, and the corporate 24 arrogance or refusing to negotiate CRA agreements 98 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 whether in Indian or Ohio in this case or in the 2 case of the Nation's Bank's merger with Bank of 3 America should be unacceptable as a matter of 4 Federal Reserve Board policy. 5 So while endorsing our agreement with 6 First Chicago NBD and being pleased that Banc One 7 is willing to honor it, I am disappointed that 8 Banc One is unwilling to engage themselves in 9 designing similar agreements in other markets. 10 As Vice Chair of the Bank Regulation 11 Committee of the Federal Reserve Board's Consumer 12 Advisory Council I challenge the Federal Reserve 13 Board to only grant conditional approval, 14 conditioned on parity and market shares of specific 15 geographical markets. Let the market work. Use 16 your regulatory authority to make sure it works in 17 every market. 18 Thank you. 19 MS. SMITH: Thank you very much. 20 Mr. Jackson. 21 MR. JACKSON: Good morning. Good morning, 22 Ms. Smith, Ms. Williams and Mr. Alvarez. 23 My name is Kevin Jackson. I'm Executive 24 Director of the Chicago Rehab Network, a 99 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 20-year-old coalition of 43 non-profit housing 2 development organizations in Chicago. We are a 3 member of the steering committee of the CRA 4 Coalition here and the Chair of the Housing Task 5 Force. 6 Financial institution's responsiveness to 7 individuals and families in local neighborhoods is 8 at the heart of the importance of the Community 9 Reinvestment Act. Recognition of this is clear 10 from the proceedings today. Public involvement in 11 the decisions that impact communities, regions in 12 the country is fundmental to the Democratic process 13 and and ultimately despite its difficulties at 14 times, a good thing. 15 We congratulate the Federal Reserve Board 16 Bank for calling this hearing and acknowledging the 17 importance of all the people gathered here today. 18 We would also congratulate ACORN helping to create 19 the momentum item that resulted in this hearing in 20 the first place. 21 And finally, we congratulate First Chicago 22 NBD on demonstrating the utility and possibility of 23 CRA agreements that mean good business for the 24 institution and our communities. 100 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The Chicago Rehab Network has a long 2 history with the First National Bank of Chicago. 3 In 1984 when First Chicago acquired American 4 National Bank, we were a part of that coalition 5 that negotiated the first neighborhood lending 6 agreement. 7 Since then, we have sat on the quarterly 8 Review Board, packaged hundreds of multi-family 9 loans and provided detailed input on community 10 credit needs. 11 When First Chicago merged with NBD three 12 years ago, we were a part of that CRA Coalition 13 that negotiated a detailed CRA agreement. 14 As I stated in my opening, CRA is vital. 15 The process that led to our present CRA agreement 16 with First Chicago NBD and Banc One if it continues 17 occurred because CRA strengthens our government's 18 mediating role between the private sector and the 19 common good. 20 The CRA agreement reached by and the 21 proposed merger of First Chicago NBD and Banc One 22 is a model for CRA agreements in both its process 23 and substance. 24 After the merger was announced, the CRA 101 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Coalition moved to hold a public meeting and had 2 task force meetings to gather substantive input 3 from community organizations throughout the 4 region. 5 The Housing Task Force met three times to 6 develop the framework. We then met many times with 7 the First Chicago NBD and Banc One staff from the 8 highest levels on down. 9 For the first time in CRA negotiations, we 10 were able to use a market share analysis to develop 11 mortgage lending targets. As a result, over the 12 next six years, First Chicago NBD has committed to 13 increasing their residential lending by more than 14 8,200 loans over current levels. 15 In 1995, First Chicago established a 16 $100,000 downpayment pool for home buyers in 17 Chicago's empowerment zones. With this agreement, 18 the pool has been increased to 900,000 and extended 19 to more low and moderate income areas. 20 In discussing credit needs with 21 organizations in Chicago, there was a sense that 22 particularly in this time of mega mergers and 23 predatory lending, simply establishing lending 24 targets is barely adequate. 102 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Without a thorough analysis of the credit 2 needs of low and moderate income communities on 3 which to base lending targets, there will continue 4 to be unmet needs and borrowers who are forced to 5 get inferior high cost credit products. 6 First Chicago NBD has committed to 7 participate in the design and development of an 8 analysis of credit that serves needs in low and 9 moderate income communities and to contribute to 10 its implementation. 11 They further agreed to work with the 12 Chicago Rehab Network to expand the impact of the 13 City of Chicago Department of Housing second 14 Five-Year Affordable Housing Plan approved by the 15 City Council this past July. 16 We were particularly concerned to read in 17 the merger application that Banc One had 18 discontinued its mortgage lending business except 19 for the convenience of its customers and its CRA 20 division. 21 We believe that mortgage lending at all 22 income levels is the foundation of community 23 development and a bank's investment in a 24 community. 103 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 After discussion with both bank's CEOs and 2 many of the senior staff, the bank announced that 3 through their best practices evaluation of the 4 bank's business, they would resume full mortgage 5 lending throughout the Banc One system. 6 This is one of two system-wide commitments 7 we see from Banc One. The second is that the bank 8 will conduct a credit analysis on all am applicants 9 to the subprime lending unit and refer them to 10 appropriate loan products. 11 The process I have described created a CRA 12 agreement that is responsive to the service and 13 credit needs of low to moderate income communities, 14 businesses and households in Chicago and the 15 region. 16 With this agreement, we have a solid 17 foundation to build on for the next six years. The 18 same type of commitment must be made to low or 19 moderate income people in communities throughout 20 the Banc One system. 21 In the end, the communities in which the 22 members of the Chicago Rehab Network operate are 23 not unlike communities throughout this country 24 starting to build better neighborhoods through 104 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 affordable housing and economic development and 2 fighting the growing tide of an ever growing 3 economic disparity. 4 Our mission at the Chicago Rehab Network 5 is to promote community development without 6 displacement in our communities requires us to 7 stand in solidarity with communities across this 8 country in their relationship to financial 9 institutions. 10 We believe that First Chicago NBD's 11 leadership here should be replicated throughout the 12 country, and we call on the Federal Reserve Board 13 to ensure that same type of commitments and process 14 is made to all low and moderate income people and 15 communities. 16 Thank you. 17 MS. SMITH: Thank you very much. 18 MS. RAND: Dory Rand. I'm a staff attorney 19 with the National Clearinghouse for Legal Services, 20 a non-profit organization based here in Chicago. 21 We represent tens of thousands of low 22 income people on welfare and housing policy issues 23 through our poverty law project, and we also 24 provide support to the poverty law community and 105 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 others through our Web site, our printed 2 publications, our library and our training and 3 information services. 4 I'd like to focus my comments this morning 5 on something that Congresswoman Carson mentioned 6 earlier, and that is the advent of electronic 7 benefit transfer of government benefits and what 8 banks can and should do to serve the community 9 needs of low income people who receive government 10 benefits and who do not have bank accounts. 11 As a staff attorney with the Poverty Law 12 Project and editor of its Welfare News, I've been 13 monitoring the development and implementation of 14 electronic delivery systems both, EFT and EBT. 15 Illinois Link is the Illinois electronic 16 benefit transfer program for the delivery of cash 17 and food benefits in Illinois. EFT is the federal 18 program that are for electronic fund transfer of 19 government benefits such as Social Security, 20 Supplemental Security Income or SSI, Veteran's 21 benefits and Railroad Retirement benefits. 22 These EBT and EFT programs produce 23 tremendous cost savings for the federal and state 24 governments, and they also help to reduce misuse of 106 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 benefits and they provide some security and 2 convenience advantages for clients, but their 3 advantages could be multiplied if people who 4 receive government benefits had their benefits 5 directly deposited into bank accounts. 6 Some of the examples include funds 7 deposited in bank accounts would be protected by 8 the Federal Consumer Protection Regulation E. EBT 9 funds are not protected by Regulation E. 10 Funds deposited in bank accounts have the 11 protection and insurance of the FDIC. EBT funds do 12 not. 13 People who deposit their government 14 benefits or employee checks can pay their bills. 15 People who don't have bank accounts have to pay 16 very high fees for check cashiers. They can be 17 used as references with landlords, utility 18 companies. People without bang accounts cannot use 19 banks as references. 20 People who deposit their money in bank 21 accounts that earn interest, can increase their 22 assets. And also people who establish a good 23 relationship with a bank can possibly build on that 24 relationship later as their income increases when 107 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 they go to establish a home mortgage, a car loan. 2 They can save money in savings accounts to buy a 3 car, to get further education to help them escape 4 poverty. 5 But despite these many advantages of 6 having bank accounts, many low income individuals 7 do not have bank accounts, and there are a lot of 8 reasons for that. 9 Some of those reasons are that there are 10 not enough branches in low income communities, 11 there is not sufficient financial literacy among 12 many communities, there are not enough low cost and 13 free bank accounts. And also, bank practices of 14 screening applicants' credit histories further 15 limit access. 16 I think that banks can and should play a 17 major role in helping to address these problems by 18 ing more full service bank accounts and ATMs in 19 underserved communities, low income communities, by 20 conducting and funding financial literacy and 21 credit counseling programs and by developing and 22 marketing low cost and free checking accounts that 23 do not have credit screening. 24 To that end, I did participate as a member 108 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of the Chicago CRA Coalition Steering Committee in 2 the negotiations that led to the recent agreement 3 with First Chicago and Banc One, and I'm 4 particularly pleased that the banks agreed to open 5 at least four new full service bank branches in low 6 and moderate income communities, that they have 7 agreed to allocate $50,000 a year towards financial 8 literacy programs and that they're conducting a 9 high level feasibility study to develop low cost 10 bank accounts to serve the needs of individuals 11 with limited or poor credit histories or limited 12 experience in dealing with banks. 13 Financial chairman and CEO Verne Istock 14 sent a letter to the CRA Coalition expressing his 15 personal recognition of the need for these 16 financial services, his commitment to working on 17 developing an account that will serve those needs 18 and his willingness to continue to work with the 19 CRA Coalition on this. 20 I look forward to that, however, I have to 21 add that I am very troubled by Banc One's failure 22 to enter into similar agreements through all its 23 markets. If they really want to serve the needs of 24 the community, they must do that, and they could 109 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 use our agreement here as an example. 2 Thank you. 3 MS. SMITH: Thank you very much. 4 Ms. Durban. 5 MS. DURBAN: Good morning. My name is Kate 6 Monter Durban. I am the Assistant Director of the 7 Cleveland Housing Network. 8 The Cleveland Housing Network is a 9 coalition of 17 CDCs spread across the city of 10 Cleveland, and our primary focus is affordable 11 housing development in those communities. 12 I am here to let you know that Banc One 13 and Banc One CDC have been a strong and consistent 14 partner in our work. 15 The Cleveland Housing Network to date has 16 rehabilitated about 2,000 houses across the city, 17 and we believe that that investment has absolutely 18 made a difference in turning the -- stemming the 19 tide of disinvestment in many of those 20 communities. 21 To date, Banc One has invested over four 22 million dollars in equity investments in the lease 23 purchase program which is the program that I'm here 24 to speak about today in part. 110 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The average income of lease to purchase 2 residents is about $12,000. The majority are 3 minority single moms with two to three kids, so 4 what we know as developers is the equity investment 5 in those partnerships are absolutely critical to 6 our ability to produce an affordable monthly 7 payment. So, you know, that kind of investment has 8 made our work possible. 9 And the other way that Banc One has 10 partnered with us is they have lent us technical 11 assistance in areas when we have asked for their 12 help. 13 For example, in 1990, the Federal Low 14 Income House Tax Credit was changed in such a way 15 that jeopardized our ability to transfer title to 16 our low income residents at the end of the 15-year 17 lease purchase period. Needless to say, we were 18 very concerned about the change in the federal law 19 and immediately began to mobilize trying to change 20 the law. We were unsuccessful and ultimately 21 turned to Banc One and Banc One CDC, specifically 22 Joe Hagen, and asked him if he couldn't help us 23 based on the relationships that he had built at the 24 IRS. 111 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 So Joe, being the absolutely great guy 2 that he is, jumped into the fight with us, 3 established dialogue with the IRS, and in the 4 Summer of 1995, the IRS published a ruling 5 clarifying the law and once again clarifying our 6 ability to transfer title and home ownership to 7 families at the end of 15 years. 8 So for us, that was just an example of the 9 willingness of Banc One CDC to step in and use 10 their time and expertise to help us in a way that's 11 very critical to our organization's goals. 12 You know, undoubtedly, the work that we do 13 in Cleveland and our partnership with Banc One has 14 benefitted from the CRA agreement that has been 15 negotiated with the City of Cleveland. 16 The Mayor of the City of Cleveland through 17 these agreements has established a platform for 18 investment, and our work has absolutely benefitted 19 from that platform. 20 So for us, the bottom line is as 21 non-profit developers with the goal of affordable 22 housing development, we can't do it without 23 significant equity investment in our work, and 24 we've seen that from Banc One and Banc One CDC. 112 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Thank you. 2 MS. SMITH: Thank you. 3 Mr. McDaniel. 4 MR. McDANIEL: Thank you. 5 Good morning. I'm Mark McDaniel, and I'm 6 the President of the Michigan Capital Fund for 7 Housing. 8 The Capital Fund is a non-profit housing 9 corporation that was founded in 1993 for the 10 purpose of raising and providing investment equity 11 to create affordable housing in Michigan. 12 The fund's mission in providing equity is 13 to invest in projects that meet at least one of the 14 follow criteria: The development is located in a 15 distressed community, smaller-sized projects, 16 non-profit involvement as sponsors and serving 17 special needs populations. 18 With that mission, the fund has raised and 19 invested over $80 dollars in equity since 1993 20 creating over 2,000 units of affordable housing. 21 79 percent of those funds have gone into distressed 22 communities. 23 Through our relationship with the 24 Enterprise Social Investment Corporation, the 113 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Enterprise Foundation, and our financial 2 institution investors, the fund now offers a 3 multitude of financial resources to the development 4 community in Michigan. This includes permanent 5 debt financing, construction lending, technical 6 assistance, predevelopment loans and grants and 7 charitable activities contributions. As a result 8 of our growth and structure, we have come to 9 understand the banking industry much clearer. 10 I'm here today to tell you very simply 11 that the merger between Banc One and First Chicago 12 NBD is the best news that we've had in a long time 13 as an organization. 14 I know this is good news because this is 15 the first time that a merger has got the bankers on 16 our board grumbling. This is indicative that 17 Banc One will be very competitive and push other 18 banks to become more aggressive and more innovative 19 than they're used to being. That is in my view 20 what Banc One is bringing to Michigan, and that's 21 good. 22 Based on my 21 years of experience in 23 planning, housing development and community 24 development, I'm convinced that Banc One has a 114 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 social and financial commitment to revitalizing and 2 supporting community investment and development 3 through its market area. This is true in our case 4 even when they weren't in the Michigan market. 5 In the formative stages of the fund, Joe 6 Hagan, the President of Banc One CDC, advised us on 7 how to structure the fund and selecting our board 8 members and working with developers as we started. 9 They have provided me with input whenever I've 10 faced -- have been faced with complex issues, which 11 I've found very unusual when compared to other 12 banks. 13 Banc One has invested $125 million in 14 several national equity funds managed by 15 Enterprise. They have invested $20 million in 16 funds managed by the Ohio Capital Corporation for 17 Housing. In addition, Banc One is providing bridge 18 financing to Ohio Capital. Their commitment to 19 Illinois, to Chicago, Cleveland, Delaware, Texas 20 and Milwaukee equity funds has been similar. 21 There are some who will say so what. Tell 22 that to the single mother living in a transitional 23 housing development who without Banc One's and 24 others' investments would still be suffering the 115 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 beatings of an abusive boyfriend or be on the 2 street with nowhere to go. The same mother who has 3 got her life together because of this housing 4 opportunity is ready to move into a Habitat for 5 Humanity Home. 6 Tell that to the senior citizen in 7 Cleveland who was living as a hostage in her home 8 in a crime ridden neighborhood who as a result of a 9 Banc One investment was able to move into a new, 10 safe, secure senior community. She now has quality 11 of life in her golden years she never thought she 12 would have. 13 And finally, tell that to the young couple 14 with little ones who are forced to live in a 15 slumlord-owned house with no security, broken 16 plumbing and windows and lack of adequate heat who 17 with the help of Banc One's investment in a 18 national fund was able to find safe and decent 19 housing to raise their family in. 20 There are thousands of stories like this, 21 and I don't think those tens of thousands of people 22 who have benefited who say so what. 23 NBD is represented on our Board of 24 Directors and has as compared to other financial 116 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 institutions been a significant but not as major of 2 a player as they could be. 3 We appreciate the support and effort that 4 they have put into the fund, and we especially 5 appreciate the personal efforts of people like ^ 6 Jack Love whose works in the Detroit bank for what 7 he's been able to do and the rest of the staff in 8 promoting what NBD is able to do in Michigan. 9 There has never been a single bank merger 10 in Michigan where the lead bank has taken the time 11 or made the effort to discuss with the fund or 12 others how they can best get involved in the 13 community development in the state. Banc One is 14 the first one to do that with us, and we appreciate 15 that and believe it is indicative of how Banc One 16 will be committed to working in Michigan. 17 In closing, the Michigan Capital Fund is 18 exited and supportive of the proposed merger 19 between Banc One, First Chicago NBD. We are 20 looking forward to Banc One being one of our major 21 investors and supporters. This merger will not 22 only be good for the fund but most probably for the 23 less fortunate residents in Michigan who need 24 affordable housing. 117 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Thank you for your time, and I look 2 forward to the significant marriage between these 3 two entities. 4 MS. SMITH: Thank you very much. 5 Any questions from the Panel? 6 MR. ALVAREZ: I have one question. 7 A couple of speakers spoke about the 8 agreement in terms of market share, Banc One 9 bringing up its lending to certain market share in 10 various communities. I was curious what data was 11 used to compute market share and what the benchmark 12 is that you're asking them to bring their level up 13 to. 14 MR. BUSH: We're happy to see that some of your 15 regulators are now using this market share, so you 16 can perhaps talk to them too. It's a very simple 17 notion, and the notion is that if a bank is making 18 equal effort in low income neighborhoods, its 19 market share in low or middle income neighborhoods 20 will approach its market share and indeed exceed 21 its market share in middle and upper income 22 neighborhoods so that ratio will be 1.0 or 23 greater. 24 And we use Mortgage Act Disclosure data in 118 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 this case for the six-county region in Metropolitan 2 Chicago to calculate market share for 3 First Chicago. 4 MR. ALVAREZ: So it's a comparison of lending 5 in low and moderate income areas to middle and 6 upper income areas or -- 7 MR. BUSH: It's a comparison of a bank's market 8 share in moderate and low neighborhoods to low. 9 Using small business data, same analysis. 10 MS. SMITH: Thank you very much for coming this 11 morning. 12 We are going to take a short break, maybe 13 of the order of five minutes. 14 And unless Panel 6 has appeared in the 15 meantime, we plan to move to Panel 7, but it just 16 depends. My managers will tell me what to do. 17 (Whereupon, a short recess 18 was taken.) 19 MS. SMITH: I think we're ready to reconvene. 20 Could we have Panel 7, please? Six we're skipping 21 because they weren't here. Well, we're ready to 22 start, so why don't we? We'll go to Mr. Hagaman, 23 and the others will join us as they can. 24 Mr. Hagaman, we can start. 119 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MR. HAGAMAN: Good morning. My name is Frank 2 Hagaman, and I'm the President of Partners in 3 Housing Development of Indianapolis. 4 Partners in Housiing was founded in 1993 5 to create housing opportunities for special needs 6 populations. These include individuals with 7 chronic mental illness, AIDS/HIV, substance and 8 alcohol abuse and the frail elderly. 9 Today, our focus is on supportive housing 10 which links directly affordable housing 11 opportunities with social services. 12 In 1993, as we assembled the financing for 13 our first project, we possessed a net worth. As I 14 often explain to people, it consisted of a folder 15 chair and a Princess phone. Regardless, we 16 approached NBD First Chicago which made a one-year 17 non-interest bearing loan to us for working 18 capital. The purpose of the loan was to provide us 19 with predevelopment funds. 20 We repaid that loan ahead of schedule and 21 have subsequently borrowed on numerous occasions 22 from time to time for various predevelopment needs 23 on our projects. 24 I think the two points that are very 120 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 important about this particular loan program, and 2 they are, one, working capital was made available 3 at a critical time for a very small company with 4 obviously little financial strength, and the second 5 was that the bank demonstrated a flexibility to 6 lend on character. 7 I am a reform banker, and character loans 8 used to be very interesting, but in point of fact, 9 this loan was made based on character and on the 10 mission of our organization. 11 Additionally, NBD and First Chicago have 12 now made corporate contributions to Partners in 13 Housing Development and is currently an investor in 14 our current project, a five and a half million 15 dollar, 96-unit, single-room occupancy residence. 16 This represents the first housing of its kind in 17 Indianapolis to meet the housing needs for homeless 18 men and women. 19 By the same token, Banc One has been an 20 equally strong and long-standing partner of ours. 21 It has been a major investor in all of our projects 22 and has stood beside us on many occasions offering 23 its support and help. 24 Our station in life has increased and has 121 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 improved, and I must say it's a tip of the hat 2 again to Banc One. 3 All of our office furniture has been 4 contributed by Banc One, and quite honestly, we are 5 very happy to have one of our Board members who is 6 a Banc One employee, the former CRA director for 7 Indiana. She represents one of our most thoughtful 8 and helpful Board members. 9 In conclusion, I guess that I would like 10 to say that I can't speculate on the future of what 11 this merger means. Frankly, I don't have the time 12 to worry about it. 13 My purpose in coming here today is to 14 recognize publicly two good corporate partners of 15 ours and to encourage that their unification 16 continues to make important investment and 17 contributions to our community of low income 18 individuals and families. 19 Thank you. 20 MS. SMITH: Thank you very much. 21 Ms. Morris. 22 MS. MORRIS: I'm Cora Morris, owner of Greek 23 Grandeur in Champaign, Illinois. 24 Greek Grandeur was established in December 122 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of 1991. It is a retail and embroidery business 2 that specializes in fraternal organization and 3 company logos. 4 I am here today on behalf of African 5 American small businesses, a small business owner 6 for which Banc One has assisted for a business 7 loan. 8 I am only one of many African American 9 business owners who have experienced a great deal 10 of difficulty in financial assistance in starting a 11 business and staying in business. 12 I went to four different financial 13 institutions within my community in order to obtain 14 a small business loan and was denied. Finally, I 15 went to Banc One, who received my business plan, 16 reviewed my business plan and began to give me a 17 criteria and qualification for how to obtain a 18 small business loan. Through this, I gained 19 valuable information. Banc One helped me when no 20 one else would. 21 When I ran into trouble, they were 22 flexible and understanding with payment 23 arrangements. Due to their willingness to give me 24 a chance, we not only stayed in business but were 123 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 able to expand including a Web page on the World 2 Wide Web. 3 I would also like to add that there are 4 other Afro-Americans within our community that was 5 able to go to Banc One for assistance. One 6 included my mother. In 1996, she wanted to 7 relocate to the Champaign-Urbana area to live with 8 my sister. We wanted to buy a house for her and 9 she did not want to live in a high-rise, so we 10 started house hunting, my sister and I and my mom. 11 We went to another financial institution 12 to obtain a home mortgage loan, and we were 13 denied. We went to Banc One and were accepted. 14 In closing, Banc One has been an asset in 15 our community through their relationship with 16 Afro-Americans. My experience with this 17 organization has been beneficial, valuable and a 18 great pleasure. 19 Thank you. 20 MS. SMITH: Thank you very much. 21 Mr. Odem. 22 MR. ODEM: First of all, I want to say good 23 morning and thank you for the opportunity to 24 testify. 124 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Again, my name is Jerome Odem, and I am a 2 member of the Organization of the Northeast, better 3 known as ONE. I am also the President of the 4 Lakeview Towers Residents Association and currently 5 working to purchase our 500-unit HUD subsidized 6 unit in the uptown area. 7 Now, the Organization of the Northeast was 8 founded in 1974, and it's an organization of 60 9 dues-paying member institutions in the Uptown and 10 Edgewater communities here in Chicago. 11 Now, the mission of ONE is to sustain and 12 build a successful multi-ethnic mixed income 13 community in the Uptown and Edgewater community. 14 To this end, ONE has enjoyed a close working 15 relationship with First Chicago NBD. 16 Now, First Chicago has been a member of 17 the organization for the past nine years. 18 Currently First Chicago invests greatly in these 19 two communities financially and by close working 20 relationships with many organizations to support 21 housing development, small business development and 22 industrial retention. 23 Now, several years ago, First Chicago NBD 24 and three other banks created a commercial loan 125 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 program to provide below market financing to 2 commercial credit borrowers as a way to enhance 3 small business development and job creation in the 4 area. 5 First Chicago NBD and Banc One recently 6 committed to a new CRA agreement with ONE and six 7 other community organizations through the National 8 Training and Information Center. 9 Now, the agreement which constitutes a 10 nearly four billion, ten-year investment for all of 11 Chicago with targets for investment in specific 12 communities, this commitment is for single-family 13 housing, multi-family housing, small business 14 development, marketing and services. It provides 15 for a bank representative to work closely with each 16 of the six areas to target this agreement to 17 neighborhood needs. This agreement builds on 18 First Chicago's history of being a strong presence 19 in this community. 20 Now, the Organization of the Northeast has 21 no prior experience working with Banc One but view 22 their commitment to the CRA agreement and their 23 willingness to continue the great work that 24 First Chicago has done here in Chicago as a 126 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 positive sign. 2 We look forward to working with Banc One 3 and First Chicago to fully utilize the 4 opportunities created by the agreement. We support 5 this merger with the confidence that there is a 6 genuine commitment to this agreement in the hope 7 that similar commitments will be made for the rest 8 of Banc One and First Chicago's market. 9 Thank you. 10 MS. SMITH: Thank you. Ms. Ryan. 11 MS. RYAN: Good morning. I'd also like to 12 thank you for the opportunity to be here. 13 My name is Liz Ryan. I'm the lead Housing 14 and Banking Staff for the National Training and 15 Information Center. Gayle Stuccato regrets she was 16 out of town and unable to be here today. 17 The NTIC is a resource center that has 18 been working with grassroots, community-based 19 organizations for over 25 years. Throughout our 20 history, we have assisted literally hundreds of 21 community groups enter into partnerships with banks 22 to better their neighborhoods. Billions of dollars 23 have gone for single-family housing, small business 24 and multi-family lending through these agreements. 127 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 NTIC itself has been directly involved in 2 several community reinvestment partnerships in the 3 City of Chicago, and one of the most successful has 4 been with First Chicago NBD. 5 Throughout three renewals and 14 years, 6 NTIC with other non-profits in the city has forged 7 innovative programs and lending products to better 8 serve the credit needs of the city. 9 A critical component to this agreement 10 have been a quarterly review board meetings, a 11 process engaged in by the banks and participating 12 non-profits. The open lines of communication have 13 enabled the members to establish a real level of 14 accountability and has paved the way for true 15 problem solving. The firm commitment of 16 First Chicago and Banc One to continue on with the 17 review board process after the proposed merger is a 18 major reason for NTIC's support. 19 Recently, in the context of the merger, 20 NTIC and six neighborhood organizations which 21 Jerome just told you about also entered into a 22 ten-year reinvestment agreement with both of the 23 banks. As he said, this nearly $4 billion 24 agreement covers a range of lending products. 128 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The bank itself a committed to working 2 very closely with the individual groups. It is a 3 way to get loans actually out the door working side 4 by side with the community groups, having lending 5 officers that with interpreters and bi or 6 multi-lingual people in the community, and we're 7 very encouraged by it. 8 As a basis for comparison, the recent 9 nationwide pledge of $350 billion made by Nations 10 Bank and Bank of America in addition to falling 11 short of their current lending levels would 12 compromise only about 23 percent of their 13 residential lending. 14 Conversely, the Chicago commitment made by 15 Banc One and First Chicago would compromise a full 16 46 percent of their residential lending. Instead 17 of an empty promise and sound bytes, First Chicago 18 and Banc One have made a commitment of substance. 19 We will of course keep the Board apprised 20 of the progress on this commitment and will lodge a 21 protest if the commitments made by First Chicago 22 and Banc One are not fulfilled. 23 With the assumption that the banks will be 24 faithful in fulfilling the commitments they have 129 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 made, NTIC would support the merger of these 2 institutions. We are hopeful that the good 3 experiences we have had with First Chicago in the 4 past and renewed commitments to serve Chicago will 5 extend to the entire Banc One and First Chicago 6 market. 7 It would seem that if Banc One and 8 First Chicago see the value of well-thought-out and 9 comprehensive CRA agreements in Chicago it would 10 see the benefit of these agreements in the rest of 11 the country. We expect the Federal Reserve to 12 fulfill its responsibility and assure that this 13 will be the case. 14 Thank you. 15 MS. SCHMIDT: Thank you very much. 16 Mr. Schmidt. 17 MR. SCHMIDT: Thank you. Good morning. 18 My name is Raymond Schmidt, and I'm an 19 Executive Director of a non-profit corporation in 20 Milwaukee, Wisconsin called Select Milwaukee. 21 Select Milwaukee was formed in 1991 and is 22 dedicated to promoting supporting and facilitating 23 affordable home ownership in Milwaukee 24 neighborhoods through collaboration with private 130 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and public sectors and non-profit organizations as 2 well. 3 We do a number of different things to 4 fulfill our mission, including providing direct 5 services to potential home buyers, first time buyer 6 urban market training for mortgage lenders and real 7 estate professionals, produce neighborhood 8 marketing events, and we have developed and 9 administer for several Milwaukee employers their a 10 employer assisted home ownership and walk to work 11 programs. 12 My comments today really are designed to 13 reflect our organization's valued and long-standing 14 relationship with Banc One Wisconsin, and it's 15 based on that relationship that I extend 16 Milwaukee's support of Banc One's proposed 17 acquisition of First Chicago NBD. 18 As noted, collaboration is a major piece 19 of everything we do at Select Milwaukee. All of us 20 in this line of work have had the opportunity over 21 the years to meet with and try to enlist the 22 support of many different businesses and 23 institutions and organizations. 24 For the past several years, Select 131 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Milwaukee has developed a number of relationships 2 on various levels with many mortgage lenders in 3 Milwaukee. During that time, we've had many 4 opportunities to to work directly with Banc One 5 Wisconsin and to observe its affordable lending and 6 other community development efforts. It's those 7 experiences with Banc One that lead me to suggest 8 that Banc One is among one of Milwaukee's most 9 savvy, thoughtful and more committed affordable 10 housing financial institutions and also a very 11 valued corporate partner in many other ways in the 12 City of Milwaukee. 13 In our view, Banc One Wisconsin is clearly 14 distinguished from most Milwaukee lenders by its 15 thoughtful, serious approach to collaboration with 16 our organization and with our colleagues in 17 Milwaukee and a variety of ventures, and I'm being 18 quite candid -- and Liz eluded to this just a 19 second ago -- when I suggested that unlike some 20 other institutions, Banc One doesn't embarrass 21 itself or organizations like ours merely by talking 22 a good game, by glad handing or with product or 23 service gimmickry. 24 For us, Banc One is the respected and 132 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 valued corporate citizen it is because of a 2 corporate philosophy, and it's that philosophy that 3 I believe is also responsible for the highly 4 competent and diverse staff with which we've had 5 the pleasure to work within the past several 6 years. 7 Through my vantage point, there's probably 8 no more significant example of Banc One's 9 commitment to affordable lending here than the 10 leadership, dedication and support extended to the 11 launch of the coalition in Milwaukee called New 12 Opportunities for Home Ownership in Milwaukee or 13 NOHIM. 14 NOHIM is nationally recognized, and it's 15 comprised of 55 members including most banks, 16 thrifts and credit unions in the Milwaukee area, 17 several community-based counseling organizations, 18 MI firms, City of Milwaukee and the Wisconsin 19 Housing and Economic Development Authority. NOHIM 20 has had dramatic impact on housing opportunities 21 for Milwaukee. 22 Since its inception in 1991, NOHIM is 23 directly responsible for nearly 2,000 new modest 24 income homeowners and over $85 million in mortgage 133 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 investment in our neighborhoods, and I'm convinced 2 that it has been Banc One's leadership and 3 significant financial and staff support that 4 nurtured NOHIM, and it's really these that it's 5 largely responsibile for Milwaukee's reknown and 6 successes in affordable lending. 7 Organizations like Select Milwaukee has 8 had the garnered the support of Banc One for our 9 marketing activities, and these are home ownership 10 expositions and neighborhood tours that we believe 11 are valuable to introduce first-time home buyers to 12 the buying process and also to their housing 13 opportunities in the city as well as to expand 14 their range of options in terms of neighborhoods 15 and housings. 16 And of course there's the next component 17 of support for these types of activities, but in 18 the case of Banc One, its involvement and support 19 has always gone beyond just dollars, and I know 20 this may sound funny, but it's really easy to write 21 a check in my view, but reflecting the seriousness 22 with which the bank takes its community involvement 23 and our experience of its trademark professionalism 24 in these endeavors, significant dedication of staff 134 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 has always been a part of the bank's support of our 2 activities. 3 Corporate community affairs and marketing 4 staff lend their time and their expertise to ensure 5 that these city events are as successful and 6 well-produced as any new suburban subdivision 7 promotion. 8 I would like to say Select Milwaukee has 9 benefitted a great deal from the professional 10 comradery developed and obtained with Banc One and 11 government relations staff persons. On many 12 occasions, covering a variety of issues covering 13 regulatory matters, legislative issues, Banc One 14 served as a sounding board, provided us advice and 15 very valuable insight. 16 It doesn't mean we've always agreed, but 17 we've consistently gained from the impressive level 18 of interest their accessibility to us and their 19 thoughtfulness. 20 In conclusion, I wish to reiterate Select 21 Milwaukee's support. Our organization hopes the 22 merger can only enhance the bank's commitment and 23 capacity to invest in affordable homeownership for 24 modest income families and other community 135 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 development initiatives in Milwaukee and 2 elsewhere. Thank you. 3 MS. SMITH: Thank you very much. Any questions 4 from the Panel? 5 All right. Be sure if you haven't already 6 done so to give your written statements to the 7 people at the registration desk so that we can have 8 them for the record. And thank you very much for 9 coming this morning. 10 We're moving on to Panel 8. We're going 11 to start with Reverend Buzza. 12 MR. BUZZA: I am John Buzza, Pastor of Hope 13 Presbyterian Church in Springfield, Illinois. I am 14 here as a part of the Central Illinois Organizing 15 Project, and I am here because I care about my 16 city. 17 A busload of us from Central Illinois have 18 come here because we are deeply concerned about the 19 proposed merger between Banc One and 20 First Chicago. 21 Banc One has an extremely poor record of 22 making loans to low and moderate income residents 23 in Central Illinois. 24 I would like you to look at this map 136 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 showing the 1996 aggregate owner-occupied housing 2 loans made in the city where I live, Springfield, 3 Illinois. 4 The census tracts in solid red received 5 less than $100,000 per tract. Those outlined in 6 red received only slightly more. By contrast, the 7 solid green tracts received loans between 1.5 and 8 $3 million per tract. My city is only as healthy 9 as its least healthy neighborhood, and Census Tract 10 14 got no loans last year at all. 11 Home ownership improves property, improves 12 value, improves people's lives, and Banc One has 13 chosen to eliminate home ownership and home 14 improvement from whole sections of our city. 15 In addition, Banc One's record of loans to 16 African Americans is reprehensible and 17 indefensible. In 1996, Banc One under performed in 18 the market to African Americans in the following 19 areas: Home mortgages, home improvement loans and 20 refinancing. 21 Our point here today is to let you know 22 that what is happening in Milwaukee is not 23 happening in Central Illinois, and we would like a 24 meeting with Mr. John McCoy to help facilitate how 137 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One can help in 1999 in Central Illinois. 2 I thank you for your time. 3 MS. SMITH: Thank you very much. 4 Mr. Heuerman. 5 MR. HEUERMAN: Jack Cramer-Heuerman. I'm a 6 United Methodist pastor from Champaign-Urbana, 7 Illinois, also a part of the same organization, and 8 I wish to address some remarks related to the 9 Community Reinvestment Act. 10 The Central Illinois Organizing Project 11 has had an initial meeting with Banc One related to 12 the Community Reinvestment Act in terms of some 13 particular proposals for communities in 14 Bloomington-Normal, Illinois, Springfield, 15 Illinois, Champaign-Urbana, Illinois. We presented 16 some needs, looking again for that kind of valued 17 corporate partner sort of unique in creative use of 18 the Community Reinvestment Act funds, working 19 cooperatively to address some basic human needs. 20 It's our understanding that the Community 21 Reinvestment Act has a standard that those funds 22 need to benefit low income persons, and all of our 23 proposals certainly meet that standard. 24 What we talked about in Bloomington-Normal 138 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 is a project called Partners for Community that 2 addresses the domestic violence issue from the side 3 of working men in particular involved in the 4 domestic violence issues, a neighborhood health 5 clinic in Springfield, Illinois again in some of 6 those census tracts underserved in a number of ways 7 that would particularly address the low and 8 moderate income person's health needs in their 9 community and access nearby to those, in 10 Champaign-Urbana, the Center for Women in 11 Transition that deals specifically with women and 12 children transitioning from homelessness to 13 self-sufficiency. These are basic human needs that 14 can be met through the Community Reinvestment Act, 15 housing, health, safe neighborhoods. 16 We know that Banc One has worked with the 17 Arizona Diamond Backs stadium for leisure activity, 18 and we celebrate, and we also want to work together 19 as that corporate partner addressing basic human 20 needs. 21 Thank you. 22 MS. SMITH: Thank you. 23 Mr. Matejka. 24 MR. MATEJKA: Thank you. Good morning. My 139 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 name's Mike Matejka, Second Ward Alderman for 2 Bloomington, Illinois, also with the AFLCIO in the 3 city. 4 I appreciate your patience here today 5 because I've sat in that chair. 6 I brought a few props with me. Brought my 7 money bag. This is from Marine Bank which is 8 Banc One which is American State Bank. As we know, 9 those banks merge all the time because that's what 10 it's all about, two-and-a-half-by-six-inch strips 11 of paper. 12 If we've got these 13 two-and-a-half-inch-by-six-inch green strips, we 14 can do a lot, but if we don't have these things, we 15 can't get very far in this society. 16 According to the government, you would 17 characterize me as a low to moderate 18 European-American living in a slum-like area. 19 That's what I'm characterized as in this society. 20 Let me tell you about that slum-like area 21 I live in. It's actually an area of single family 22 homes racially integrated where people go to work 23 every day and do their jobs and we can get these 24 strips of green paper to take care of ourselves, 140 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 take care of our families, to buy gas, to feed our 2 families, but we need help when we want to buy a 3 home and when we want to improve a home, and 4 Banc One is not there to help us in that process. 5 When I look at statistics under the 6 Community Reinvestment Act of what Banc One does in 7 Bloomington, Illinois, it's pretty disappointing. 8 I look at 1996, and I see that 272 affluent white 9 families got loans but only ten African American 10 families could get a loan, and of those ten African 11 American families, only one was a low income family 12 or two of those were low income families who got 13 less than $14,000 from Banc One. 14 Our area is a prosperous area. State Farm 15 Insurance is there, and Banc One moved its market 16 ratio from four percent to nine percent in 1995 and 17 '96, but at the same time, they quit giving loans 18 in my area. We went from 79 loans to 54 loans, but 19 they more than doubled their loans in the affluent 20 areas of town. 21 We're asking Banc One not to shut out the 22 working class family, not to shut out us folks 23 characterized as low to moderate income folks 24 living in a slum-like area. Give us access to 141 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 credit to. 2 And the pattern from Banc One in the last 3 few years is to shut us out of the process. We 4 want them involved, want them involved in our 5 neighborhoods, and we are here to protest this 6 merger until we see the Community Reinvestment Act 7 is going to be lived up to. 8 I thank you for your time today. 9 MR. ERICKSON: I'm pleased to share my view of 10 what's a real concern on my part. I'm Reverend 11 Joel Erickson, Pastor at Resurrection Lutheran 12 Church in Bloomington. 13 And my concern is where are the people 14 from Banc One? I just want to know is there anyone 15 from Banc One here? Is there anyone from Banc One 16 here? 17 Okay. 18 We'd like to say that the question that we 19 have asked as we have negotiated and wanted to talk 20 to the people of Banc One is we want to know where 21 John McCoy is, Mr. McCoy. We wanted to speak to 22 him because in our negotiating with National 23 Citicorp we challenged the merger of National 24 Citicorp with First of America, and as a result of 142 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 that challenge, Dave Deberco, the CEO of that bank, 2 came and talked to us along with Danny Cameron, the 3 Vice President. We know them personally, we've 4 talked about them, and we value that relationship, 5 and we've built a relationship with them. 6 And we're wondering where is the CEO from 7 Banc One because what's necessary is for us to 8 develop a relationship because we're the ones that 9 own the homes, we're the ones that live on the 10 streets, we're the ones that buy the groceries. 11 This is our community, and we want a relationship 12 with the leaders of this bank. And there's been no 13 talk. And we need to make those kinds of 14 connections. 15 And we have a good relationship and do 16 know Dave Deberco and Danny Cameron of NCC, and 17 they're doing fine. They've not suffered as a 18 result of our relationship. We have a good 19 relationship with them, and that's what we're 20 expecting from Banc One. 21 You notice we have a wanted poster for 22 Mr. John McCoy. Why doesn't this man want to meet 23 us? We want to meet with him, we want to talk with 24 him and express the concerns that have been shared 143 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 here at this table, and we want a good relationship 2 where we can build a community that's positive 3 because we're the ones living in the local 4 communities. 5 Our concerns is as the mergers take place, 6 people move further away from our community, and we 7 represent Bloomington-Normal, Peoria, Springfield, 8 Decatur, Champaign-Urbana, this whole region. Its 9 concern is that we reach out and respond to the 10 needs of a community, and that's where we're coming 11 from is our own local community. 12 So we hope to see Mr. John McCoy present 13 with us, talk with us, and then we'll see whether 14 that bank is really one that's desired to be 15 connected with the community of our region. 16 And we're very thankful, very privileged 17 that we have an opportunity to express this 18 concern. 19 As a Pastor of a local congregation of 500 20 members, I want you to know it matters to us that 21 organizations such as banks are responsive to the 22 local community. 23 Thank you very much. 24 MR. ALVAREZ: A question for Reverend Buzza. 144 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 You showed us your chart. I'm not 2 familiar with the Springfield area. Could you 3 explain a bit about the census tracts? 4 The ones, for example, that received no 5 loans, what characteristics are those? 6 MR. BUZZA: They are primarily the ones in the 7 center of Springfield occupied primarily by low and 8 moderate income families, and most of our ethnic 9 minority families live in those census tracts. 10 The only public housing area is in Census 11 Tract -- Rudy, help me -- 15. 12 AUDIENCE MEMBER: 12 or 14. 13 MR. BUZZA: And the area around the outside is 14 the fast growing area particularly to the west side 15 and down in the corner here around what is Lake 16 Springfield. Census Tract 31 is where the figures 17 are 1.5 to $3 million of loans in that tract. 18 MS. WILLIAMS: I'm sorry. I have a question. 19 Can you say the level of home ownership in 20 those tracts that got no loans, and also could you 21 describe if there's like home sales, because I'm 22 not as familiar with Springfield as well? 23 MR. BUZZA: Well, this just has to do with the 24 number of loans that Banc One made last year for 145 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 mortgages, for home improvement and for refinancing 2 and, it's by income in those areas, but those of us 3 who live in Springfield also realize that the 4 majority of our African American neighbors live in 5 that central neighborhood that is either red or 6 red-and-white striped. 7 Have I answered your question? 8 MS. WILLIAMS: I guess as far as like the level 9 of owner occupied, is that a 20 percent in that 10 area or 40 percent or less? 11 MR. BUZZA: I'm not sure I know the answer in 12 terms of statistics, but many of the homes in that 13 area are now rental property and have been 14 purchased by non-resident rental owners, and that 15 is one of our great concerns because the upkeep of 16 those houses does not match what homeowners do when 17 they have the chance to own it themselves. 18 MS. SMITH: Thank you very much. 19 MR. MATEJKA: Could I ask our folks who came up 20 with us, drove up with us today, to stand up? 21 MS. SMITH: Please. 22 we had a panel this morning that didn't 23 show up, unless they have come in. I don't think 24 they have. 146 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Let me say the names in case there has 2 been any confusion. James Hall, Robert Hawhtorne, 3 the Reverend Carey Long, Patrick Quinn, James 4 Taylor. 5 We will want if they come this afternoon 6 to work them into the schedule, but we may want 7 to -- would we want to start a little earlier than 8 1:00? We're scheduled to reconvene at 1:00. If we 9 have the next -- if we can either have or can 10 construct a panel starting at a quarter of 1:00, we 11 would like to do that. 12 So those of you who are scheduled for a 13 later panel but who are here now, you might check 14 in with our registration people and see what we can 15 do to work you up a little earlier into the 16 schedule. 17 So thank you very much. We'll see you. 18 I am supposed to announce to keep your 19 name tags on so that you can get back into the 20 conference center if you go out. 21 Thank you. 22 (Whereupon, a short recess 23 was taken.) 24 MS. SMITH: I think we're ready to start with 147 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 our next panel. This is Panel 9, and we're going 2 to start with Ms. Cannon. You'll need to pull the 3 mic. 4 MS. CANNON: Thank you. 5 MS. SMITH: I will -- in case -- well, let's 6 see, since many of you drove -- were driving this 7 morning, you didn't hear my announcements, but I 8 will -- we have two timekeepers. They will give a 9 signal when you have one minute remaining and then 10 they will hold up another card when your time has 11 expired. 12 Sometimes you might try looking up every 13 once in a while, but if you miss it, we'll give you 14 a few extra seconds, but then we go to audio and 15 we'll give you a little musical note. 16 MS. CANNON: That means you finished. 17 REVEREND LONG: In more ways than one. 18 MS. SMITH: So Ms. Cannon? 19 MS. CANNON: Good afternoon. My name is 20 Bessie Cannon and I am President of SEIU Local 21 880. I appreciate the opportunity to testify on 22 Banc One's awful record throughout the Midwest. 23 It is terribly unfortunate that the 24 Federal Reserve is not holding hearings in more 148 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 than one city. 2 REVEREND LONG: Amen. 3 MS. CANNON: Millions of Americans cannot 4 possibly be represented at one hearing to give 5 input on a merger that will affect citizens from 6 Canada to the Gulf of Mexico. And if anyone has 7 the resources to hold hearings in every city 8 affected by this merger, it is the Federal 9 Reserve. 10 One thing is clear about both Banc One and 11 First Chicago NBD. They are first -- first of the 12 worst! In Denver, Detroit, and Milwaukee, 13 minorities were rejected much more frequently than 14 white applicants for every kind of housing loan 15 that the bank makes. Even more troubling, it 16 appears that Banc One routinely steers minorities 17 to more costly and inferior subprime loans. 18 In Denver, Banc One received no 19 applications from either African Americans or 20 Latinos for conventional mortgages in 1996. Not a 21 single applicant in 1995. In 1995, it took only 22 six applications from either African Americans or 23 Latinos. 24 Moreover, there is not -- this is not 149 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 because Denver is a predominantly white city. 2 Indeed, the majority of the residents of the city 3 of Denver are now members of racial minorities, nor 4 is it because the minority population of Denver is 5 so poor that they can't afford to buy homes. Over 6 half of Denver's minority households are 7 homeowners. 8 The reason that Banc One gets no home 9 loans applications from minorities in Denver is 10 because Banc One doesn't market to minority 11 communities. Instead, Banc One pumps credit into 12 the very whitest parts of Denver like it was 13 water. 14 In 1996, more than 40 percent of Banc 15 One's mortgage loans were made to neighborhoods 16 where more than 90 percent of the residents are 17 white. An additional 40 percent of the bank's 18 loans went to the neighborhoods where whites made 19 up between 70 and 90 percent of the population. 20 Just two percent of the mortgages were 21 made to neighborhoods where over half the 22 population is nonwhite. And since the data shows 23 that the bank made no loans to Latinos or blacks 24 that year, we know that two percent of the loans 150 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 that did go to our neighborhoods did not go to us. 2 In Detroit, First Chicago NBD's 3 performance is similar, but even more sinister, 4 given the size of the African American population 5 there. Although the City of Detroit is over 6 70 percent black, the entire Metro area is 22 7 percent black. 8 In 1996, NBD took only two percent of its 9 applications from blacks. The bank took 93 percent 10 of applications from whites. In real terms, this 11 means that African Americans are 11 times more 12 likely to reside in Detroit than First Chicago 13 NBD's applicant pool. 14 While there was fewer applications from 15 minorities, the few that did apply were rejected 16 more frequently than white applicants. African 17 Americans were rejected nearly 40 percent more 18 frequently. 19 Incredibly, this disparity widens for the 20 wealthiest minority applicants. Upper-income 21 African Americans were rejected twice as frequently 22 as upper-income white applicants. 23 In Milwaukee, Banc One has aggressively 24 pushed its home improvement lending and refinanced 151 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 loans while ignoring conventional mortgages. But 2 with Banc One, we find that no matter what type of 3 home loan we look at, the pattern is the same; 4 African American applicants are rejected many times 5 more frequently than whites. African Americans 6 were rejected three times more frequently than 7 white applicants for refinance and home improvement 8 loans in 1996. 9 Last time I looked, racial discrimination 10 is still against the law in our country. And when 11 a multi-million dollar bank like Banc One breaks 12 the law and denies people access to credit on the 13 basis of their skin color, they should be punished, 14 not rewarded. It is time for the Federal Reserve 15 Board to punish Banc One. It is time for the 16 Federal Reserve to just say no. Thank you. 17 MS. SMITH: Thank you very much. 18 Reverend Long? 19 REVEREND LONG: I bring you greetings from the 20 near east side of Indianapolis where I pastor a 21 congregation and also serve as board member for the 22 Near East Side Community Organization. 23 I've been asked by the Board President, 24 who could not come today, to speak as the official 152 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 representative of the Near East Side Community 2 Organization and also a copartner with the 3 Organization for a New East Side and to say to the 4 Federal Reserve Board: Please listen to us. 5 Listen to the fact that over 50 percent of 6 our populant folks are neighbors who live in and 7 around the Banc One branch that was closed in a 8 rather cold-hearted way in the midst of the 9 winter. 10 They have affected us -- excuse me. They 11 have affected us quite negatively. They have cared 12 little for listening to us. And so we come here 13 asking that this not be the last time that you hear 14 folks from Indianapolis, that rather than Chicago, 15 that you come to Indianapolis, preferably, send 16 whatever faction you need to the East Side, since 17 our residents are too poor to make this journey. 18 They cannot afford to. 19 So I come speaking on behalf and along 20 with my brothers and sisters of the East Side 21 saying Banc One has been a horrible neighbor to 22 us. I don't need to quote you all the raw data. 23 You all have that. I trust that your education 24 lets you glean that for yourself and understand 153 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 what bad business partners Banc One and NBD are. 2 I want to share with you an example of how 3 that has lived out in the Near East Side. The 4 Woodriff Place Branch on 10th Street, which is a 5 major corridor for the Near East Side, we were 6 notified was closing, not might close, would close 7 because it was no longer a money-making, profitable 8 branch. 9 They were a self-fulfilling prophecy, as 10 we say in the church business, because they made 11 sure it was not profitable by cutting business 12 services right and left, cutting personnel 13 services, and as their records shows to us 14 constantly, they are not making adequate small 15 business loans or adequate home mortgage loans 16 available in our census tracts. They have all our 17 money. 18 I am a Banc One client, have been in the 19 two years I've been in Indianapolis, because they 20 have such an overwhelming majority that trying to 21 get to another branch to adequately access services 22 is virtually impossible because they've run 23 everybody out of town. 24 If this merger goes through, we fear the 154 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 real loss of the NBD branch that is in the Near 2 East Side. In spite of feigned attempts by 3 Banc One/NBD to say that they are going to ask the 4 Department of Justice to exempt that branch from 5 divestiture, we believe them as far as we can throw 6 them. And since we can't throw them, we don't 7 believe them. 8 They have lied to us time and again. They 9 told us that they were going to work with us in 10 trying to find an alternative way to use that 11 branch that would best serve the neighborhood. And 12 that simply meant they weren't going to allow it to 13 be a pawn shop or a check-cashing organization. 14 You know, there are other distracting 15 factors to our neighborhood besides pawn shops, 16 bars, and check-cashing organizations. We try and 17 sit down with them in good faith negotiations. 18 According to their response to you all 19 from the Near East Side Community Organization's 20 letter asking for denial of this merger, what they 21 have in paper isn't, in fact, what they did. It is 22 not what they said to us. It is not how they 23 treated us. 24 There again, they have the money. They 155 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 have the attorneys. They can write it to make it 2 sound just exactly like they hope you will want to 3 hear. They don't want you to hear the truth. They 4 don't want you to hear us say they did not 5 negotiate in good faith with us. 6 They told us that the branch would be 7 donated to the Near East Side Community Development 8 Credit Union. And they gave us first one month to 9 make that a reality. You cannot transact that kind 10 of business in four weeks' time. They then backed 11 it up. We won a small victory. 12 They said they would give us three 13 months. And by the time that that three months was 14 up, we had already found out that they had sold the 15 building to the holding company that is purchasing 16 property around Indianapolis for CBS Drugstore. 17 The drugstore is not what's going in 18 there. We have found out, through East Side 19 Community Development Corporation that, in fact, 20 they are in high-level negotiations with another 21 credit union to go in place in that branch. But 22 quite frankly, we don't know what that will be 23 either, nor how it will be a detracting factor to 24 our small community development credit union. 156 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 They've been poor partners. They always 2 tell us that the ultimate answer has to come from 3 Columbus. When we ask who that is, they tell us 4 too bad, so sad, you lose. We won't tell you. You 5 only get to talk to us. That is not good faith. 6 Thank you. 7 MS. SMITH: Thank you. Ms. Rice? 8 MS. RICE: Good morning -- I'm sorry, good 9 afternoon. My name is Bobby Rice. I'm from 10 Dallas, Texas and I am here to speak about the 11 problems we are all having in Dallas, Texas. 12 I am from a low- and moderate-income area 13 in Dallas, Texas. I am against Banc One merging 14 because of my own experiences with Banc One and 15 because of stories that I have heard from others 16 about their treatment by the bank. 17 Banc One is not a bank that does a very 18 good job servicing people in my community. Some 19 people in my community have a difficult time 20 understanding the complex banking fee structure and 21 no one takes the time to explain the fee to them 22 until it is too late or they're just rude to us, 23 insensitive, and in some cases, they are racist. 24 For example, there's a man that lives in 157 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Dallas, Texas by the name of Ogan Defreeze. 2 Mr. Defreeze is an -- I'm sorry, African American 3 senior citizen living on a fixed income of about 4 $500 a month. He has been a Banc One customer for 5 many years. He even banked at the same bank before 6 it got its name changed to Banc One. 7 He always went in to use the teller 8 because that is what he had always done. The only 9 problem was that Banc One decided to charge people 10 two dollars to use a teller. Now, two dollars may 11 not sound a lot to you all or some people, but as 12 low-income people, we have to think of our budget 13 and not waste our money. 14 Now, Mr. Defreeze wrote checks to pay 15 bills, all money he thought he had, but because of 16 the fee, he bounced checks and had to pay bounced 17 check fees. He estimated that Banc One took almost 18 $200 from him in bouncing check fees before someone 19 explained about the teller fee. $200 is nearly 20 half of his monthly income. 21 Banc One also lost a $10 deposit of 22 Mr. Defreeze's. Then they found it. Banc One 23 found the $10 deposit. You know what they done? 24 They refused to refund a bounced check fee that 158 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 occurred due to their mistake, which is Banc One. 2 I have had a similar experience myself. I 3 have a saving account at Banc One. The reason I 4 have a saving account is exactly -- I have a saving 5 account at Banc One. And the reason why I'm having 6 the account is because I need to save my money. I 7 am also on a fixed income. I am supporting my 8 grandchildren by adopting them and I must save as 9 much as I can. 10 However, Banc One charged me ten dollars 11 per month to maintain my account. That's not 12 fair. The only way the service charge is forgiven 13 is if I maintain -- maintain a $1,500 balance at 14 all time. If I cannot possible afford to keep this 15 amount, then why must I pay this outrageous sum of 16 money per month? 17 I am penalized just for being poor. I 18 used to have a checking account also with Banc One, 19 but I found it is impossible to balance my book 20 accordingly to the statement. Many time there were 21 mistakes on the statement, but the bank never took 22 credit for them. I don't know how they do this, 23 but somehow or another the statement will win, not 24 correct, win. It's no way that you can prove it 159 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the way they do the statement. 2 I would have certain of my drafting twice 3 monthly instead of once. So what Banc One does, I 4 wanted Banc One only to draft one check per month, 5 but nothing were ever done because they drafted 6 twice. When they drafted twice on my account, that 7 made three of my bank -- three of my check bounce. 8 Because as a low income person, I only have certain 9 time -- I mean, a certain amount of money to 10 spend. 11 Many time there was mistakes on the 12 statement, but the bank never took credit for 13 them. I would have certain amount of draft -- of 14 twice instead of one, but nothing was ever done to 15 make these correction to my account. 16 Oftentime because mine was drafted more 17 than once or my deposit was not added to my account 18 when they was supposed to, my check will bounce. 19 Rather than the bank pick up the charge for their 20 mistake, I would have to pay the overdraft fee of 21 25 per check. That's not fair. 22 I try calling several time to speak to 23 someone in a management position, but I was not 24 able to speak to the person or I also left a 160 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 message and no one called me back. The Soria 2 family had similar problems with Banc One and their 3 account. 4 MS. SMITH: Ms. Rice, we'll be glad to enter 5 the remainder of your statement into the record. 6 If you'd like to take half a minute to bring it to 7 conclusion. 8 MS. RICE: Oh, I'm sorry. I got off into it. 9 I just got off into it. I told them it was like 10 I'm -- okay. Only thing -- I thought you said I 11 had three minutes. 12 MS. SMITH: No. 30 seconds, half a minute. 13 MS. RICE: Half a minute, okay. 14 Only thing I want to comment on Banc One, 15 that they should realize that there are low income 16 people as well as people that has money. We also 17 would like to buy a boat and a Cadillac too, but we 18 cannot. So help us too. 19 MS. SMITH: Thank you very much. 20 MR. SIMS: Good afternoon. My name is Reverend 21 Wesley Simms, and I'm from Dallas, Texas. 22 We're opposed to the merger of Banc One/ 23 First Chicago, and I'm here to testify to Banc 24 One's service in low income and minority 161 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 communities and consumers. 2 In general, Banc One under serves and red 3 lines minority neighborhoods and rejects African 4 Americans and Latinos. 5 Banc One's performance in Dallas lagged 6 significantly behind the market averages. First, 7 in Dallas, African Americans were rejected for home 8 purchase loans nearly three times as frequently as 9 white applicants in 1996. This rate is higher than 10 the market average of conventional home lenders 11 rejecting African Americans at twice a rate of 12 white applicants. 13 Even African Americans above 120 percent 14 of the median income were rejected more than two 15 and a half times as frequently as whites of similar 16 incomes. In fact, the African American were 17 rejected at rates double than that of moderate 18 income and white applicants, 35 and 17 percent 19 respectively. 20 In Dallas, Latinos receive comparable 21 treatment at the Banc One offices. Latinos were 22 rejected more than twice as frequently as white 23 applicants for conventional mortgages in 1996. And 24 this rate, again, is higher than the market average 162 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 rejection rate of 1.78 for all Dallas lenders. 2 Upper-income Latinos were also rejected 3 twice as frequently as upper-income white 4 applicants. 5 A similar pattern is found in Houston 6 where the African Americans and Latinos are 7 rejected much more frequently than white 8 applicants. African Americans were rejected more 9 than three and a half times as frequently as whites 10 in 1996, up slightly from the 1995 of just shy of 11 three and a half. 12 This figure is more than double the market 13 average of African Americans being rejected, more 14 than one and a half times as frequently as white. 15 Incredibly, the rejection rates for 16 upper-income African Americans is nearly triple 17 that of moderate income white applicants, 29 and 11 18 percent respectively. 19 The picture was no brighter for Houston 20 Latinos. Latinos was rejected nearly twice as 21 frequently as white applicants in 1996. This 22 figure is also an increase from the one and a half 23 times Latinos were rejected in comparison to white 24 applicants in 1995. 163 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Again, the ratio is measurably higher than 2 the market average, where Latinos were rejected 27 3 percent more frequently than whites. Upper-income 4 Latinos were rejected nearly twice as frequently as 5 moderate-income white applicants. 6 These figures are appalling. If the 7 stories from Dallas consumers are any guide, these 8 numbers may be understating the problem. 9 Minorities in Texas don't have a chance at Banc One 10 lenders' office. 11 Meanwhile, many neighborhoods are in 12 desperate need of access to credit and new 13 homeowners. It is unlikely that they will find it 14 at Banc One. ACORN has discovered that Banc One is 15 most likely to lend to the whitest and wealthiest 16 neighborhoods in Houston and in Dallas. 17 In Dallas, 23 percent of the nearly 400 18 conventional mortgage loans Banc One made in 1996 19 went to census tracts where whites made up more 20 than 90 percent of the population. Only 11 percent 21 went to census tracts where minorities made up the 22 majority of the population. A mere 4 percent of 23 those originations went to census tracts below 24 50 percent of the area median income. 88 percent 164 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of those low-income tracts received no loans at 2 all. 3 In Houston, the pattern was, if anything, 4 more troubling. 45 percent of Banc One's more than 5 700 conventional loans went to census tracts where 6 whites made up more than 80 percent of the 7 population. Only 13 percent of the loans went to 8 census tracts where minorities made up the majority 9 of the population. Less than half of those went to 10 the census tracts where minorities made up more 11 than 75 percent of the population. A mere 2 12 percent of the conventional mortgages went to 13 census tracts where a household income was below 14 50 percent of the area median. Of the 117 15 low-income census tracts in Houston, 86 percent 16 received no conventional mortgages. 17 Taken together, these two facts show a 18 dual pattern of rejection of Banc One in Texas. 19 Minority individuals are frequently turned down for 20 loans at Banc One, more frequently than their white 21 counterparts. Low income and minorities 22 neighborhoods are likewise unserved by Banc One. 23 The road to home ownership is essential to build 24 wealth of families and to shore up neighborhoods 165 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and communities. Homeowners build equity in their 2 families and their neighborhoods benefit. With 3 inadequate access to fair credit, these 4 neighborhoods and families suffer unduly. Banc One 5 is a contributor to this unfairness. 6 ACORN has tried to get commitments from 7 Banc One to turn these problems around. ACORN met 8 with Banc One with the help of our Congresswoman 9 Eddie Bernice Johnson. I was at that hearing. And 10 I asked weren't they concerned that so few loans 11 went to African Americans. They kept changing the 12 subject talking about other lending like credit 13 card lending and personal loans. Well, getting 14 people in debt is not the same thing as helping 15 people to become homeowners. We need more 16 homeowners in our neighborhoods. 17 The banker at the meeting also kept 18 talking about the loans they do with affordable 19 housing groups. We heard some of that here this 20 morning. That's great, but ACORN is a group that's 21 concerned about what happens to the ordinary 22 everyday person who walks into the bank. With Banc 23 One, they seem not to make very many loans to make 24 people homeowners. 166 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 At the meeting, we asked -- just one 2 thing -- that Banc One do one of two things. 3 Either make a commitment matching the commitments 4 in Detroit and Chicago as to how much they will 5 lend to minority and low- to moderate-income 6 neighborhoods or tell what program they would use 7 to do a better job of lending to minorities. They 8 did not make either commitment. 9 The Federal Reserve should take this 10 opportunity to address this inadequate record and 11 reject the proposed merger without practical and 12 workable changes in Banc One's operation. I thank 13 you very much. 14 MS. SMITH: I do think you have the record 15 today for how fast you speak. 16 MR. RICE: They gave us a book to read, and now 17 they said read it in four minutes. No way. 18 MS. SMITH: Mr. Taylor. 19 MR. TAYLOR: Good afternoon. My name is James 20 Taylor. 21 MS. SMITH: Would you use the mic, please? 22 MR. TAYLOR: Is that better? Good afternoon. 23 First give an honor to the great creator. 24 My name is James Taylor. I'm a community organizer 167 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 for the organization for a New East Side. 2 Our organization opposes the merger of 3 these banks unless there are clear and definite 4 commitments to lending, investments, employment, 5 services and procurement of services for low and 6 middle income Indiana residents, senior citizens, 7 handicapped, those on fixed incomes and Indiana 8 residents of color. 9 Mega mergers often have a harmful effect 10 on communities, but this merger would create an 11 unprecedented mega bank in Indianapolis, banking 12 service monopoly that's going to decrease 13 competition. 14 In the last several years, branches have 15 closed and fees have gone up for most of us. 16 First-time home buyers have decreased lending, as 17 we've heard before, especially after mergers. 18 Some of the harmful effects of mega 19 mergers, -- and I'll just be brief and give other 20 folks a chance to speak, too -- the creation of 21 these large banks, if it doesn't create a monopoly, 22 it definitely diminishes competition. And from 23 what I understand, competition is good for 24 consumers because true competition gives us the 168 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 best services at the lowest rate. 2 Branches close. That adds to the 3 instability in any neighborhood when a financial 4 institution like a bank leaves. And there are too 5 many institutions, financial institutions, in 6 communities like banks. Higher fees affect all of 7 us, low to moderate income, moderate to high 8 income. Some can afford that better than others, 9 as you can see. 10 What happens if these mega mergers fail? 11 I don't want to wish anything bad on Banc One, NBD 12 or anything else, but if my memory serves me 13 correctly, the American public has paid 800 billion 14 dollars to bail out a savings and loan fiasco that 15 wasn't insured as well. 16 This addresses the safety and soundness 17 and stability of banking services in Indiana and in 18 Indianapolis. And even though Indianapolis is the 19 capital, the city that appears from the data we've 20 looked at that will be most affected will be 21 Lafayette, where Banc One will have a 56 market 22 share. And I may be a little over on that, so, you 23 know, that stands to be corrected. 24 Special devastation to the low and 169 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 moderate income communities. Most of the folks in 2 our communities -- when I speak of low to moderate 3 income, that's 40 percent of the American public, 4 too, if my numbers are right. But in these lower 5 income communities and these low to moderate income 6 communities, transportation is limited to go the 7 distance to the nearest bank -- the nearest bank as 8 these other branches close. 9 Limited financial resources are eaten away 10 by higher fees. Loss of banking services yield 11 less financial stability to our neighborhoods. 12 What that puts in place are check cashing 13 places, pawn shops -- oh, and underground economy. 14 We all know that means guns, drugs, theft, violence 15 and the things that go with underground economies. 16 We don't need that in our neighborhood on the Near 17 East Side. We have it. We'd rather have banks in 18 and guns out. 19 What we're asking for pretty simply is a 20 moratorium on the venture and have the Fed have 21 local public hearings. That could be in 22 Indianapolis. That could be in Lafayette. As long 23 as you have one in the state of Indiana, I think we 24 can get folks there to satisfy that. 170 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 We believe it's time and demand that it's 2 time for the banks to work with communities toward 3 a plan to provide more sound financial planning for 4 our communities. We want the banks to provide for 5 stronger CRA agreements with our federal 6 communities. 7 We don't need bureaucrats who aren't the 8 experts in our communities. We need community 9 folks who can speak to the banks so that the banks 10 know how they affect us and how, in fact, we can 11 help them. 12 The banking situation is a win-win 13 situation if the bank takes the aggressive posture 14 that it's going to lend to us with the products and 15 services that are designed to work in our 16 communities, but they don't. 17 And last, we would like to provide for a 18 community monitoring mechanism for our state so 19 that we can enjoy the luxury of seeing how the 20 banks are working with our communities. 21 In our community, Banc One and NBD are the 22 two largest real estate renters downtown. When 23 these banks combine, we're going to have a deficit 24 for office space because they're the number one and 171 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the number two occupants. That's not going to be 2 just bank employees. That's going to have an 3 effect on folks that run the elevators, wash the 4 windows, park the cars in the garages. It's going 5 to have a devastating effect. 6 I thank you for your time. 7 MS. SMITH: Thank you very much. 8 Any questions? 9 And I want to remind you that -- to be 10 sure to give your written statements if you haven't 11 already provided them to our people at the 12 registration desk so that they can be entered fully 13 into the record. So thank you very much for coming 14 this afternoon. 15 Okay. We'll start with Ms. Rangan, 16 please, if someone will pass her the mic. 17 MS. RANGAN: Good afternoon. My name is Rashmi 18 Rangan. I'm the Executive Director of Delaware 19 Community Reinvestment Action Council. I am also a 20 board member of the National Community Reinvestment 21 Coalition, which is a great association of 650 plus 22 organizations. I am also a member of Inner City 23 Press Community on the move. 24 And I am here today to testify against 172 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 this merger. And this is the second time I'm 2 testifying against Banc One acquiring another 3 bank. 4 And the last time, we had brought selfish 5 use before the Federal Reserve Board and many of 6 them have been justified in today's testimony. 7 Every concern that we raised earlier has been 8 spoken today. 9 The treatment of the consumers, the 10 customers at Banc One's hands, the fair lending 11 concerns that we have had, the predatory lending 12 concerns that we have had about Banc One have been 13 attested to today. 14 Before I address my concerns with Banc 15 One, let me address my concerns with this 16 particular process today. 17 It is probably appropriate that you have 18 renamed public hearings by calling it public 19 meetings. Apparently you're no longer willing to 20 hear what we have to say, but we do have a lot to 21 say, particularly about Banc One's record. 22 Based on the factors that the Board must 23 consider in approving this application and the 24 managerial issues, many, many concerns have already 173 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 been addressed, but I will refer you to a few. 2 The first one, Dr. Kenneth Thomas has 3 already commented on in his July 27th, 1998, 4 communication to you regarding the management's 5 apparent violation of confidentiality of individual 6 examination ratings on Y2K. 7 In Arizona, the Attorney General's case, 8 and in Texas the HUD's apparent acceptance that 9 there is discrimination, Banc One has been charged 10 with discrimination, and this after the Fed's own 11 conditional approval in recent application by Banc 12 One where Banc One acquired First USA, a Delaware 13 bank. 14 Apparently, Banc One failed to meet the 15 Fed's condition. On these grounds alone, this 16 application should be denied. 17 Banc One, we charged previously -- we'll 18 repeat this charge today -- is a predatory lender 19 through its finance company. And while we have 20 raised this issue many times, we sense that the 21 Feds really do not understand the full import of 22 our accusations. Therefore, attached as Exhibit A 23 to my testimony today is a catalogue of predatory 24 mortgage lending abusive practices prepared by 174 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Mr. Bill Brenan of Atlanta Legal Aid Society. 2 Please review that very carefully. 3 We have asked the Feds previously to 4 review the finance company's subsidiary of the bank 5 holding company and its lending record. We repeat 6 again today, we and others have presented ample 7 evidence of the existence of predatory and 8 discriminatory lending practices practiced by Banc 9 One finance companies. 10 In 1995 through the finance company, it 11 approved 7,805 loans. 1996, 32,712. So it has 12 actually grown in size, a 319 percent increase of 13 lending through its finance company. 14 You have seen many HMDA analyses all point 15 to the very same concern that we have for the 16 second time presented today. 17 On convenience and needs issues, how can 18 the convenience and needs of my community be served 19 when the acquirer, Banc One, has shown a remarkable 20 disdain for Delaware? 21 May I remind the Board of concerns we 22 raised when Banc One applied to acquire First USA? 23 First USA, a limited purpose bank, cited its 24 inability to meet its CRA obligations and, hence, 175 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 established First USA, FSB. 2 When Banc One acquired First USA, the 3 thrift was gone. Relative to Banc One/First USA, 4 after the merger, meeting the convenience and needs 5 of my community, it is abysmal. 6 In comparison, FCC and its CRA officer, 7 Mr. Roland Ridgeway, have not let the standard 8 excuse that. The limited purpose bank status nor 9 the Delaware Financial Center Development Act 10 restrictions get in the way of meeting these 11 obligations under the CRA. 12 At issue here is not -- I'll take only 13 half a minute. At issue is not who, where and how 14 much each bank does or gives individually or 15 collectively. At issue here today is the who from, 16 the where from and the how much does Banc One take 17 away from the community through its predatory 18 lending practices. On these grounds alone, this 19 application must be denied. 20 Thank you. 21 MS. SMITH: Thank you very much. 22 Mr. Reynolds. 23 MR. REYNOLDS: Thank you. Greetings. My name 24 is Jerry Reynolds. I will be delivering the 176 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 remarks of Rebecca Adamson, President of First 2 Nations Development Institute, a Native American 3 economic development organization of 18 years 4 standing headquartered in Fredericksburg, 5 Virginia. 6 Ms. Adamson could not be here today, but 7 from our Information Services Department, I monitor 8 Community Reinvestment Act issues as they pertain 9 to our country. I'm a board member of the National 10 Community Reinvestment Coalition. 11 I spoke with a consultant to a tribal 12 council some weeks ago. In the midst of our 13 conversation, he made the statement: The tribe is 14 isolated. It's a 200-mile round trip for 15 necessities like cash. 16 More than three-quarters of one million 17 Native Americans and tribes reside in the market 18 area that would be created in the proposed 19 acquisition of First Chicago NBD Corporation by 20 Banc One. Many of them are as remote to the 21 nearest banking services, and some more so. 22 Sadly, a First Nations Development 23 Institute survey, which is attached to our written 24 testimony, of Native American banking needs within 177 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the merged entities' market area found that much 2 less remote tribes, tribes within a 20 to 40-mile 3 range of Banc One branches, have been regularly 4 neglected by Banc One. 5 My point is that geography is a major 6 hurdle to the provision of banking and financial 7 services to Native Americans. The proposed merger, 8 if approved, would provide the new entity with the 9 resources to get over this geographic hurdle. With 10 these resources, the bank should be able to absorb 11 the development cost of products and services that 12 would enable it to surmount some of the geographic 13 challenges to lending in Indian Country. 14 Given that Banc One's record of services 15 to Native American communities according to our 16 survey findings is characterized by a concentration 17 on a cream of the crop, on those native communities 18 whose more evolved economies translate to lower 19 risk for banking activities, the Board's approval 20 of the merger should be contingent upon substantial 21 improvements in Banc One's outreach and deliverable 22 services to native communities, including urban 23 native populations who starve for credit in cities 24 with an abundance of Banc One branches. 178 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Again, the augmented resources of the 2 merged entities should provide the incentive for 3 business initiatives. 4 Further, the new Banc One should be 5 required to develop plans for native specific loan 6 products in coordination with the diversity of 7 Native American groups, an approach recommended 8 toward other community groups by First Chicago 9 chairman Verne Istock. This would contribute in 10 future to sidetracking such avoidable debacles as 11 Banc One's disaster and with mobile unit banks. 12 When the initiative first began to bring 13 credibility Banc One's way through newspaper 14 articles and conference presentations, First 15 Nations was reluctant to criticize a financial 16 institution that was at least trying to make credit 17 available in Indian Country. 18 Still, we had strong doubts about an 19 initiative that amounted to little more than 20 rolling out 20th Century technology, the 21 automobile, to serve 19th Century needs, personal 22 and consumer loans. 23 Now that Banc One having reaped a windfall 24 of publicity but no profit has garaged this 179 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 antiquated road show and left Indian Country to 2 overcome its failure, we can assert with certainty 3 that sustained collaboration with the diversity of 4 native groups has been the missing ingredient in 5 Banc One's limited approaches to Indian Country. 6 For starters, mobile units in the 21st 7 century must be fully operational banks securitized 8 through satellite communications technology. No 9 one will have to ride shotgun. 10 In the event the merger is approved, we 11 trust the Federal Reserve to urge the updated 12 approach to mobile unit banking on Banc One's 13 attention. 14 I want to digress briefly from my prepared 15 remarks to say that I was in a major meeting in 16 banking in Indian Country, and already, some Native 17 Americans are saying that they can't see mobile 18 unit banking as a way to serve Indian Country. . 19 I believe that Banc One's failure in this 20 regard has a chance to make mobile unit banking a 21 nonstarter in Indian Country. That would be a 22 great misfortune. 23 First Nations also wishes to acknowledge 24 some of the outstanding lending services that Banc 180 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 One does provide in some native communities. 2 Some of these include a recent grant to a 3 North American Native Bankers Association. They 4 recently went on a site visit to Wisconsin to visit 5 some of the tribes there and their lending needs -- 6 of course this happened while the merger process 7 was in full swing -- Gila and Camp Verde Yavapai 8 Apache Nation in Arizona as well as an internal 9 appointment of a team to familiarize Banc One 10 Mortgage Corporation with HUD Section 184 loan 11 guarantee programs show a flexibility and 12 consideration worthy of the merged entity. 13 Give me half a minute here. 14 Such commitments are considerable in 15 themselves, not to be minimized. But on this 16 momentous occasion, First Nations can affirm the 17 proposed merger only on the understanding that all 18 of Banc One's efforts in Indian Country to date 19 amount to a modest beginning. 20 We call upon bank regulators to ride herd 21 on their post-merger follow-through and upon Banc 22 One to establish a collaborative task force on 23 Native American lending and services as merging -- 24 as other merging entities have done. 181 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Thank you. 2 MS. SMITH: Thank you very much. 3 Mr. VanTol. 4 MR. VANTOL: Good afternoon, Members of the 5 Panel. I am Hubert VanTol. I am the Cochair of 6 the Legislative Committee of the National Community 7 Reinvestment Coalition. I'm testifying this 8 afternoon on behalf of John Taylor, our President 9 and CEO, who is unavoidably unable to be here 10 today. 11 NCRC is the nation's CRA trade association 12 of over 680 community reinvestment organizations 13 from inner city neighborhoods and rural areas. 14 NCRC's members are dedicated to revitalizing low 15 income and minority communities. 16 As a trade association, we do not 17 regularly comment on applications to the Federal 18 Reserve Bank. We usually provide the research and 19 other support to our members who do the commenting 20 during the application process. 21 However, we have recently decided that we 22 do need to comment on the applications that present 23 significant public policy issues. 24 I am addressing two main issues this 182 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 afternoon: Community reinvestment performance and 2 fair lending. 3 On the topic of community reinvestment 4 performance, simply put, mega mergers are harmful 5 for low income and minority communities if they 6 result in massive branch closures and drastic 7 decreases in lending and investing. This is why 8 NCRC has asked the Federal Reserve to require banks 9 to submit community reinvestment plans to the Board 10 and the reserve banks as part of their application 11 process. 12 These plans would outline how the merging 13 banks plan to maintain and increase the number of 14 loans, investments and services in lower income and 15 minority communities after mergers. 16 The community reinvestment plans would be 17 developed for each urban and rural community the 18 bank serves. Moreover, they would not be 19 unilateral like the mega pledges recently announced 20 by other large banks. 21 Instead, they would be responsive to 22 specific credit needs in various communities 23 because they would be developed with the input of 24 community organizations. 183 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The community reinvestment plans would 2 explain how lenders would preserve their CRA 3 performance in all of their major markets in the 4 wake of post-merger institutional changes. 5 For example, the CRA performance of Banc 6 One and First Chicago could deteriorate 7 substantially in the state of Indiana due to the 8 branch closures and divestiture requirements. 9 And you know, the State of Indiana is the 10 market where the bank's operations substantially 11 overlap, yet despite the looming changes 12 confronting Indiana's traditionally underserved 13 communities, Banc One has neither negotiated a CRA 14 agreement with the community organizations in 15 Indiana, nor has it submitted a community 16 reinvestment plan to the Federal Reserve explaining 17 how CRA performance will be maintained in the 18 state. 19 NCRC is pleased that First Chicago and NBD 20 have worked out CRA agreements with NCRC members in 21 Chicago and Detroit, however, these agreements 22 address CRA performances in two of Banc One's 23 markets. 24 In order for community reinvestment 184 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 performance to be preserved in all of the bank's 2 markets, NCRC believes it is the responsibility of 3 the Federal Reserve Board to require the bank to 4 offer in detail the community reinvestment plan 5 explaining how it will maintain and improve its 6 post-merger CRA performance. 7 These plans would also be a starting point 8 for negotiations leading to CRA agreements with 9 community organizations. 10 In addition, the Federal Reserve Board 11 should issue conditional approvals in instances 12 where the applying banks do not satisfactorily 13 outline how CRA performance will be maintained in 14 places like Indiana and many others that are likely 15 to be affected by the merger. 16 On the topic of fair lending, over a year 17 ago, the Federal Reserve Board approved Banc One's 18 acquisition of First USA, a credit card lender, 19 despite unresolved fair lending issues. 20 In its approval order, the Federal Reserve 21 stated that it would impose conditions at a later 22 date if its investigation revealed fair lending 23 violations. NCRC and its members strongly believe 24 that this was an indication -- that this was an 185 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 abdication of the Federal Reserve's responsibility 2 to enforce the nation's fair lending laws. 3 Fair lending problems will intensify if 4 the Federal Reserve does not complete fair lending 5 investigations and issue the necessary conditions 6 before acting on these latest Banc One 7 applications -- this latest Banc One application. 8 We ask the Federal Reserve to follow the 9 lead of its regulatory counterparts in seriously 10 investigating and issuing fair lending and CRA 11 conditional approvals when necessary. The Federal 12 Reserve should be leading its counterparts, but it 13 should at least follow them. 14 The OTS approval order of the Travelers 15 application is an example, likewise, the Office of 16 the Comptroller of The Currency's recent 17 conditional approval of First Union/Money Store 18 merger, which would require access for all 19 applicants to both prime and subprime lending 20 products. 21 We appreciate this opportunity to express 22 these significant reinvestment issues before you 23 that are associated with this merger. 24 We hope that the Federal Reserve Board 186 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 does everything in its power to ensure fair lending 2 and continued progress in community reinvestment. 3 MS. SMITH: Thank you very much. 4 Ms. Wilkins. Wilmington good evening. 5 Can you hear? Is the mic on? 6 MS. SMITH: Yes, that's good. Wilmington can 7 you hear me? 8 MS. SMITH: Bring it a little closer. 9 Wilmington okay. I know I'm the short one in the 10 bunch. 11 My name is Betty Wilkins, and I would 12 like, first of all, to thank you for the 13 opportunity to testify on Banc One's unfair and 14 ugly lending record in Colorado, and I am the board 15 member of Colorado ACORN. It's an organization of 16 over 1,300 low and moderate income families in my 17 community who is working and trying to make a 18 decent place to live and to increase hope -- 19 hopefully that we can increase the community 20 reinvestment and increase jobs and city services in 21 our community. 22 And the members of the Colorado ACORN 23 urges the Federal Reserve Board not to allow this 24 merger because of Banc One is not making loans to 187 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 low and moderate income and minority people in the 2 City of Denver. 3 You have heard some of the statistics, and 4 when I heard that, I -- it was unbelievable. 5 First of all, when Banc One opened up in 6 my community, it was a beautiful and a welcome 7 sight because we really did need a bank that was 8 close where we don't have to hop on a bus every 9 time we want to go to the bank. 10 But within the past two and a half years 11 since I have been banking and trying to help my 12 community bank with Banc One, we have received 13 absolutely nothing as far as a community 14 reinvestment by -- put back into our community, and 15 I think this is very unfair and it's a very ugly 16 thing. 17 I took it on myself to do some 18 investigating on Banc One. I went by the bank last 19 Saturday morning about 9:00 o'clock. That's what 20 time the banks open. And there was a line there of 21 Afro and Latinos waiting to get in the bank to 22 deposit their money. 23 My thought was then -- I didn't say that 24 to the clients, but I thought to myself, where is 188 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 this money going to go today, it definitely is not 2 going to my community because Banc One is not that 3 kind of bank to low and moderate income 4 neighborhoods. 5 And I can say it truthfully today because 6 I live it. And then I asked myself, I said, well, 7 now, how can this be? I'm not going to give you 8 any statistics at this point. I'm going to give 9 you some stories as to how this happened. 10 It seemed impossible, but it is not. And 11 I got permission from the community to do this to 12 give you some stories of what really happens. 13 One of our members, Betty Fortenberry, who 14 is African American, heard an advertisement on the 15 radio and said that she could get approved over the 16 phone for a mortgage loan. 17 She proceeded to call the number and was 18 switched over to three different people and holding 19 for a very long time. And that never did come -- 20 there never did come an answer. And then after she 21 called back, she went through the same procedure, 22 except she was transferred to a fourth person and 23 then she was disconnected. 24 And she called back. And she was 189 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 transferred to two different people. And finally, 2 one -- she spoke with the person who acted like she 3 knew what she was talking about. The woman asked 4 her a few questions which included name, address, 5 zip code and her annual monthly income. 6 The woman proceeded to tell her. And then 7 she said, well, I'll tell you now, you will not be 8 approved because you will have to have $10,000 of 9 your own money saved to proceed with just getting 10 the application. 11 It seemed to me that Banc One basically 12 told her she need to not apply. Mrs. Fortenberry 13 certainly could pay because she pays $800 a month 14 in rent. 15 A second story, Sandra Neville, who is 16 African American, another one of our members, saw 17 an ad on TV. And being able to be approved in 24 18 hours over the phone for a home improvement loan? 19 She called and gave them the information they asked 20 for. It took 72 hours for her to hear back, and 21 she was told that she was being denied because of a 22 problem of her credit report. And about a month 23 later, Ms. Neville was approved for the same loan 24 from her credit union. 190 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Another Latino member which did not want 2 me to use her name, but she is a member of our 3 organization who at this time wants to disclose 4 recently what happened to her. Okay. 5 What she did and -- she went to the ACORN 6 Housing Corporation where she had them to pull up 7 her savings and checking account number to check on 8 what had gone wrong with her credit. Come to find 9 out, it was Banc One that has caused this problem 10 and caused this flaw on her credit. They said that 11 she owed Banc One the whole amount of $5. And just 12 because of this, they did not take her 13 application. 14 Now, will you tell me, is this bank worthy 15 of a merger with -- to get any bigger and able to 16 treat more people as they've been doing in the 17 past? 18 I would urge you today, please, that you 19 can do this. Please take a closer look at what 20 we're telling you. It is true. Please don't have 21 this merger take place until they have their CRA 22 practices in place where me, my community, Latino 23 community or any other community can receive 24 services just like anyone else. Even though we 191 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 live in a certain zone, we do work, and we do pay 2 our bills, and we're worthy of credit. 3 Thank you. 4 MS. SMITH: Thank you very much. 5 Any questions? 6 Okay. Thank you very much for coming this 7 afternoon. 8 And we'll move on to Panel 11. All 9 right. We'll start with Reverend Anthony. 10 MR. ANTHONY: We're together. Mr. Parker's 11 going to go first. 12 MS. SMITH: All right. 13 MR. PARKER: Thank you and good afternoon. 14 My name is Bernard Parker. I am the 15 Co-Chair of Alliance For Fair Banking out of 16 Detroit's coalition of organizations. They came 17 together about 12 years ago. And I'm also a Wayne 18 County Commissioner serving the East Side of the 19 City of Detroit. And I'm the Executive Director of 20 a community organization Operation Get Down for 28 21 years now. 22 I'm here to speak in support of the merger 23 for one particular reason, and that is the history 24 of what we have had in relationship to working with 192 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 National Bank of Detroit NBD in the City of 2 Detroit. 3 Back in 1986, we had a similar type of 4 situation where we came together to express some 5 real concerns about the disinvestment and the lack 6 of involvement of NBD and other banks in the City 7 of Detroit, and we came together and negotiated an 8 agreement with them under the leadership of the 9 NAACP, and they were able to come to an agreement 10 at that particular time. And then after that, we 11 reached another agreement with them. 12 What we have found is that as we've had 13 many concerns, opposed what they were doing, we 14 found that communication, working with them and 15 meeting with them on a regular basis at least twice 16 a year and going through our agreements and going 17 through the various items that we have and working 18 with them to try to improve their investment in the 19 community really was a way that we were able to, I 20 think, achieve some outstanding type of agreements 21 and loans to the City of Detroit. 22 Just some examples of that, in 1995, we 23 reached an agreement with NBD and for $677 million 24 over a three-year period, and by working with them, 193 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 though, and by encouraging and by on a regular 2 basis having a staff that worked with their staff, 3 they were able to achieve 1.5 billion dollars worth 4 of lending in that same three-year period, 5 surpassing the low income mortgages by 144 percent 6 of the goal that we have set as small businesses 7 under $1 million located in the City of Detroit by 8 765. An outstanding achievement what they were 9 able to do by us working with them. 10 Under procurement, when we went with them, 11 they admitted that they did not even know if there 12 was any minorities that were serving their company 13 to any degree and particularly African Americans. 14 And Detroit representatives 75 percent African 15 Americans. We were very concerned about that. 16 The CEO at that time put it as a major 17 objective for him to increase that, and we worked 18 with them, and they created a division called the 19 Minority Procurement Division and appointed a 20 person there that was very supportive in the 21 community. And as a result of that, they have 22 increased that minority procurement and now has 23 become a model that is used throughout our 24 grievance with other financial institutions, and 194 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 that is used throughout the country in setting up a 2 department that does procurement. 3 In employment, we're very pleased that 4 they have one of the highest levels of senior 5 management that there is in the banking community 6 in Detroit and as we understand across the country 7 and they have promoted people from within and 8 brought in others in order to have a diverse type 9 of senior management and unemployment level also. 10 We think that has been very helpful. 11 So what we believe is that this merger is 12 something that is happening throughout the city. 13 It's something that is probably going to happen 14 even more so in the future. 15 And what is important is that we're going 16 to have to -- they are going to have to understand, 17 Banc One as well as First Chicago NBD and those 18 entities, that it is important to work with all the 19 communities that have come out here and expressed 20 some concerns as we were able to do in Detroit by 21 coming together and meeting on a regular basis. We 22 think that they will be able to achieve some of the 23 similar goals that we've been able to do in Detroit 24 with NBD. And we think that those are very 195 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 important goals. 2 Some of the things that we think are going 3 to allow us to make sure that we continue to have 4 representation in Banc One and continue to have 5 some influences there, one, we have met with John 6 McCoy and we have had very enlightening discussion 7 with him about exactly what we want to see happen. 8 There's agreement that we will have one of 9 our members that we select that will be on the 10 advisory board of NBD, their advisory council, that 11 is formerly the board members of NBD before the 12 merger with First Chicago. 13 there's an agreement there will be a real 14 effort on diversity in the senior management of 15 Banc One, and we'll be looking at those numbers on 16 a regular basis whenever we meet with them to make 17 sure there is diversity on all levels of management 18 and that we want to continue to have that type of 19 communication with them. 20 And we feel confident that NBD has agreed 21 and have said -- it has been a good business 22 decision to work with us. It has increased their 23 time and their relationship with the community and 24 they're now recognized as a real leader in the City 196 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of Detroit. 2 Thank you very much. 3 MS. SMITH: Thank you. 4 MR. ANTHONY: Thank you very much. 5 My name is Wendell Anthony. I'm president 6 of the Detroit Branch of the NAACP and also 7 Co-Chair of the Detroit Alliance For Fair Banking. 8 Pardon me if I leave when I finish because 9 I have a flight to catch. 10 I do want to echo some of the concerns 11 that Mr. Parker said. 12 One of the things I think that is 13 important for us to point out is that several years 14 ago, many persons in our community along with the 15 local news media did an expose on all of the banks 16 in the City of Detroit, and we found that all of 17 them were guilty of noncompliance to access to 18 capital, to discriminating against minorities, to 19 not including us in procurement, to not including 20 us in the full benefits of what banks do derive 21 from their communities. 22 So the alliance was formed. The first 23 agreement that we reached with NBD at that time, 24 the National Bank of Detroit, was for $1 million. 197 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Today, we have an agreement with them for $3.25 2 billion for the next three years. That came after 3 negotiations and pain and some gain. 4 We believe that it's important for us to 5 engage in the community. We certainly understand 6 where a lot of people are in terms of their own 7 local communities, but I think it was Diane 8 Karmasol that said one must be true to his or her 9 own reality. 10 Our reality is what we're pointing out to 11 you today, and that is that we have reached a point 12 in Detroit particularly that is driven by First 13 Chicago NBD in conjunction with Banc One with this 14 new agreement. 15 The Detroit Alliance For Fair Banking is 16 made up of several organizations, almost a 17 hundred. We have, in fact, enlisted not only their 18 thoughts but also tapped into the sources and the 19 thinking that our community would have this merger 20 presents an opportunity to open the door even 21 wider. 22 Just recently in Detroit, over 400 23 businesspersons, African Americans 99 percent of 24 them, were at a Detroit sit-in in which we talked 198 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 about the debriefing which would be accomplished as 2 a new plan. The new plan accomplishes new homes, 3 commercial development, small business development, 4 hiring of minorities in various areas of the bank. 5 One of the things that we were very 6 concerned about was how this is going to transfer 7 itself, if, in fact, this merger would take place. 8 Would Banc One be driving the other way or would 9 the other way be driving Banc One. 10 We believe that this marriage has some 11 promise to the degree the two cultures can come 12 together and impact each other. 13 We have found that First Chicago NBD has 14 been a good culture and a good experience for us, 15 otherwise, we would not be here talking to you. 16 For so many years, banks have been talking 17 loud and doing nothing. Well, in Detroit, they are 18 now talking loud and they're doing something. The 19 fact that we do have businesses we can point to who 20 have been the recipients of loans from the bank, 21 the fact that we do have African Americans and 22 women and other minorities who have received home 23 mortgage improvements and loans and start up 24 capital is a fact that we can point to. 199 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The fact that in this recent agreement 2 they have predevelopment moneys which allow 3 businesses who are trying to develop a business 4 plan heretofore might not have the expertise to do 5 that, but they can now back out of their grants or 6 their loans. 7 Money for predevelopment is a major, major 8 factor. We've also set up a program where they 9 will now work with the local community colleges so 10 that students can be trained in the banking 11 community. 12 As you may or may not have heard, Detroit 13 is on the cusp of getting casinos in our 14 community. Usually, though, it's the persons who 15 are from banks, the tellers and the financial 16 people, are the first ones that are snatched to 17 work in those industries. What we believe that's 18 going to occur, then there should be a constant 19 flow going into the banking community. 20 So we structured a program whereby through 21 a feasibility study and work with other banks that 22 we can train students in Wayne County Community 23 College and in Detroit at the Lewis College of 24 Business inside the City of Detroit to prepare them 200 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 for the future in the banking industry. 2 We believe that while this merger may not 3 be perfect, it certainly puts us in a situation of 4 being able to impact and to influence the bank, and 5 we believe that in other communities, if they 6 begin -- and I'm sure they are already -- doing the 7 same types of things that we are doing, and perhaps 8 we can loan some expertise to them in some other 9 areas. We'll be glad to do that. There will be 10 some new pavement that will be open to all of us. 11 We support the merger. It's drawn from 12 our experience which to us has been a good 13 partner. We believe through their impact, Banc One 14 can also become a good partner. 15 Thank you. 16 MS. SMITH: Thank you very much. 17 Mr. Cardona. 18 MR. ANTHONY: Please excuse me. 19 MR. ALVAREZ: Thank you very much. 20 MS. SMITH: Thank you for coming. 21 MR. CARDONA: Good afternoon. My name is Hugo 22 Cardona. I'm the President and Chief Executive 23 officer for SER Jobs Progress National. 24 I'm here to speak on behalf of Banc One 201 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and its merger with Bank Chicago. 2 SER is the largest in serving minorities, 3 especially Hispanics. We empower people to go from 4 welfare to work. We were founded in 1964; 5 therefore, we have been 34 years serving the 6 communities. 7 We were founded by LAUC, the Latin 8 American United Citizens, and the GI Forum, the two 9 organizations that serve the Hispanics minorities 10 and Hispanic minorities for civil rights. 11 Our mission is very simple. We empower 12 the individual to find the skills that they need to 13 be useful to the communities. We give the 14 education, the training, the housing, whatever they 15 need. 16 Our challenge is very simple. We need to 17 empower the 21st Century work force to have the 18 skills in such a way that at this time that we have 19 a good economy, everybody's being hired, but two 20 years from now, if we have organization, they will 21 be the first ones to go if we don't empower them to 22 have the skills to survive. 23 To do that, we have our national 24 headquarters in Dallas. We have 38 affiliates 202 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 located in 17 states, the District of Columbia and 2 Puerto Rico. We are in 91 locations. We have more 3 than 180 programs. We serve more than 400,000 4 individuals a year, of which we place more than 5 30,000 in meaningful jobs, meaning jobs beyond the 6 minimum wage with full benefits. 7 This means for the economy between $701 8 billion in purchasing power that these individuals 9 that were on welfare now have as a Hispanic 10 community. Our funding exceeds $68 million a 11 year. 12 To do this empowerment, we have different 13 programs. We have programs like One Stop Career 14 Centers where anybody can come and we will take 15 care of them. We will evaluate their needs and we 16 will find a way for them. We have housing in which 17 we assist minorities to buy their first homes. We 18 have distance learning. Through the computer, we 19 are able to give today from your home Associate's 20 Degrees, K-4 to K-16 education, GED, English as a 21 second language, basic skills, whatever you need. 22 We have different programs for women, for 23 youth, for children. And we have peoples with 24 disability, homemakers that are disabled. 203 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Whatever it is, we take care of our 2 minorities before they are born until they are -- 3 until they die. To do that, we have two sources of 4 funding; the government, who take cares of the 5 present. They give us through competitive grants 6 the ability in these locations to serve the needs 7 of the people, but we must take care of the 8 future. 9 And this is where Corporate America and 10 individuals like you come into place. You are the 11 ones who give us the money to develop the things 12 that we need to be better, all the distance 13 learning and all these programs that we need to 14 serve the minorities. 15 And this is where Banc One comes into 16 play. They have been our partners in our housing 17 program. In the last three years, we have placed 18 more than 270 individuals in homes, people that did 19 not have a credit record, people that did not have 20 the down payment. We were able with the assistance 21 of Banc One to put them in homes. Their 22 contribution to our work will be this year more 23 than $100,000 dollars. 24 And we are negotiating right now a million 204 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 dollar credit line on what we need to replace all 2 the computers in our network, and we will be able 3 to place the old computers in the homes of the 4 minorities. 5 This is an outstanding record for an 6 organization that is working with us into making 7 this positive. 8 So as I said, look at Banc One as a 9 partner that with this measure we increase the 10 support to the community, but we work for the 11 community in making this possible. So we do 12 support this merger. 13 Thank you so much. 14 MS. SMITH: Thank you very much. 15 Ms. Hunt. 16 MR. CARDONA: And I apologize, but I also have 17 to leave. 18 MS. HUNT: Good afternoon. 19 My name is Gladys Hunt, and I am with the 20 Community Collaboration for Economic Development in 21 Champaign, Illinois. 22 And I'm here to represent the Community 23 Collaboration for Economic Development. It's a 24 relatively young organization. It was initially 205 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 convened as an informal community group in June of 2 1997. 3 This group came together to address the 4 needs of the low income and minority community in 5 terms of small business development. It's an 6 informal community group comprised of 7 representatives from the African American business 8 community, from municipal government, nonprofit 9 civic groups like the NAACP and the Urban League of 10 Champaign County, women's business groups and the 11 University of Illinois. 12 In the Spring of 1998, the Community 13 Collaboration for Economic Development was legally 14 incorporated as a nonprofit organization. 15 Our mission is to create an ongoing 16 economic development project to increase the number 17 of businesses within the low income and minority 18 community. 19 The mission is to develop human capital to 20 promote unique ideas through business education, 21 technical assistance and targeted economic 22 development programs. 23 To date, we have graduated one 24 entrepreneurial small business development class 206 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 this past spring. We graduated 14 out of 15 2 persons who started in the class. And in the 3 class, people were given technical assistance and 4 business development information. 5 Our next class will start August 29th, and 6 we have 18 people signed up in that class, and we 7 have 28 people on the waiting list to start a class 8 next spring. 9 In addition, this month, we're going to 10 start a support organization to assist not only our 11 graduates but other small business -- other 12 minority and low income business owners, a minority 13 business council of sorts. 14 The project started, as I mentioned, in 15 the Spring of 1997 with a partnership Illinois 16 grant, which is a new funding program through the 17 University of Illinois to encourage the university 18 to become involved in the local community. 19 We received an initial seed grant through 20 that program and we worked with local city 21 government and banks, including Banc One in our 22 area, to receive matching funds to fund the 23 program. 24 At this point, we're seeking -- well, 207 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 we've made it to the second round of the community 2 development financial institutions, the CDFI, 3 technical assistance grant, and we're in the 4 process of seeking monies from global banks and 5 from municipal governments to start a revolving 6 loan fund so that not only will we give our low 7 income and minority community technical and 8 business assistance, but we will also be able to 9 help them with financial assistance in starting 10 their business. 11 Now, what does all this have to do with 12 Banc One and the proposed merger? In our efforts 13 to put this community collaboration together, Banc 14 One has been there every step of the way from the 15 beginning. They were at the table at the first 16 meeting that took place in the Spring of 1997, and 17 they've continued to provide leadership on the 18 committee as a whole and in various subcommittees, 19 specifically the Alternative Funding Committee, the 20 Future Funding Committee, the Mentoring Committee 21 and the Small Business Development Workshop 22 Committee. 23 They provided leadership in the form of 24 staff and financial resources. Banc One has led 208 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the way in sponsoring financial -- various 2 financial aspects of the CCED, -- or the CCED -- 3 I'm using the initials -- the Community 4 Collaboration for Economic Development Operations. 5 Wherever we needed to partner with financial 6 institutions in continuing and expanding our 7 operations, they've been at the table to help us. 8 For example, when we decided that we 9 needed this revolving loan fund to help fund our 10 small business development class because they did 11 not meet the criteria for some of the traditional 12 business funding, again Banc One staffs were at the 13 table providing that leadership helping us develop 14 new and innovative strategies to bridge that 15 between -- to bridge that gap in meeting the needs 16 of low and income minority business community. 17 Finally, I must add that in working with 18 Banc One in developing this outstanding 19 entrepreneur program for our community with the 20 CCED, this was not my personally first encounter 21 with them, this their proactive -- in what I 22 consider a proactive and progressive stance in 23 reaching out to the low income and minority 24 community. 209 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 In 1991, as Assistant Executive Director 2 of the Housing Authority of Champaign County, I was 3 appointed to serve on Banc One's Community 4 Reinvestment Advisory Committee to assist the bank 5 in developing strategies and policies to serve the 6 needs of low income and moderate neighborhoods. 7 I served in that capacity until 1995. And 8 during those four years, I saw Banc One work 9 diligently and proactively to meet the needs of the 10 low income community. And we did that in the 11 housing area, and we're do -- oh, it's expired -- 12 we're doing -- I'm sorry -- in the business area. 13 But I just want to say that we at the 14 Community Collaboration for Economic Development 15 wholeheartedly endorse and support the proposed 16 merger between Banc One and First Bank NBD, and we 17 would just -- I would just add that I would -- 18 well, my time has expired. I'll stop. I won't go 19 so fast. 20 MS. SMITH: Mr. Smith. 21 MR. SMITH: Thank you. Thanks for letting me 22 come before you here. 23 My name is Charlie Smith. I'm Director of 24 the housing authority in Wilmington, Delaware, and 210 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I was a little nervous and reluctant to come speak 2 when I saw such great opposition to this merger, 3 especially since I'm in favor of -- my agency as 4 well as my community is in favor of the merger with 5 Banc One and FCC. And you ask, well, why? 6 At least we have some people -- at least 7 we're all on the same page in terms of going along 8 with this merger. I think it's going to enhance 9 the relationship that I have established with both 10 banks. 11 My first encounter has been with FCC. 12 Well, FCC has been very creative in working with 13 our community, especially in the public housing 14 arena, to address some of the concerns as ways to 15 employment opportunity, business development and as 16 well as home ownership in our community. 17 And I know Roland Ridgeway, who's very 18 active in our community, who's been a leader in our 19 city with FCC to try to encourage collaboration and 20 partnership not only with communities, but he's 21 also in his efforts to try to get them more 22 involved in the neighborhoods with other banks and 23 pulled together banking interest and collaborated 24 in development programs and activities that have 211 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 helped facilitate opportunities of our community in 2 Wilmington. 3 Banc One has been good corporate partner 4 as well as FCC, and that's a good corporate 5 partner. 6 It's not often I've had an opportunity to 7 work with an institution that will come to you and 8 say, look, what can we do to assist you in your 9 efforts in your community? 10 And Banc One took the lead in coming to 11 the Wilmington Housing Authority because the 12 Wilmington Housing Authority has had the 13 distinction of having so many vacant units in its 14 inventory throughout the City of Wilmington, 15 somewhere around 500. And we put up a plan to 16 address those vacant units. 17 And when the newspaper reported our plan, 18 how we proposing to do it, Banc One and FCC were 19 one of the first banks who came in and said what 20 can we do to facilitate and participate in your 21 efforts to address your home ownership as well as 22 your vacant units? One specifically. 23 FCC is right now pulling together several 24 banks in which they're taking the lead on putting 212 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 together a $5 million pool, revolving pool we're 2 referring to it as. 3 One of the reasons this pool is necessary 4 for us is because we cannot collateralize our 5 property, our public housing. We can't use it as 6 collateral. This pool will be used to help 7 collateralize some property so we can get some 8 money from private as well as state to help us 9 facilitate elimination of our vacant units that 10 we're having. 11 So FCC has really taken a lead on getting 12 some banks together to be partners with them to 13 help put together this pool of money so we can use 14 to -- acquire some money for us to do something 15 with these units that we have in this old city. 16 Banc One came and said, look, what can we 17 do, how can we be a partner with you to help 18 dealing with not only housing, but what other 19 areas? 20 So we're talking about community 21 development, about funding some programs as it 22 relates to mortgages. 23 Wilmington has a distinction. We have 24 like 54 banks just in Wilmington alone. In our 213 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 case, we have so many banks falling on each other 2 to get to do things in the community that we have 3 the luxury, we can almost pick and choose who we'd 4 like to work with, but Banc One and FCC has stepped 5 up to the plate and really has demonstrated some 6 guts in trying to work with public housing. 7 I don't know how often they have an 8 opportunity to do that, but they came to us. They 9 brought the thing to us and say, look, you guys sit 10 down and talk and see where we can help you in your 11 community and facilitate programs and activities 12 that would help enhance. 13 And they have done a tremendous job. one 14 of the things I've asked them to do and consider, 15 personally give me some technical assistance. They 16 took two of my staff people recently, about two or 17 three months ago they had a conference for their 18 staff, Banc One staff, on how to put together 19 packages for development of corporations and 20 housing development, that stuff. And they invited 21 two of our staff to go to Texas to participate in 22 that program. 23 As a result, we're doing a private 24 development on our own where we take one of our 214 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 largest high-rises and turn it into a private 2 market venture and using tax credits and all that 3 and provided us technical assistance on pulling 4 this whole process together. 5 So we've had good experience with Banc One 6 and FCC. And I'm kind of surprised that we have 7 such opposition. The relationship we've had has 8 been a positive one. This merger I think is going 9 to enhance the relationship. I've had work with 10 both FCC and Banc One. So I think that merger is 11 going to enhance not only the opportunity for us to 12 do more work in our community and our neighborhood 13 but also is going to help facilitate some greater 14 opportunities for economic development in home 15 ownership as well as community development in our 16 community and neighbors in our community in 17 Wilmington. 18 MS. SMITH: Thank you very much. We'll hear 19 now from Mr. Reid. 20 MR. REID: Thanks very much. I appreciate the 21 opportunity to be here. 22 I'm Jim Reid, President and founder of the 23 Southern Dallas Development Corporation. We're a 24 nonprofit community development financial 215 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 institution that concentrates on business lending, 2 and I'm glad to have this opportunity. I'm glad to 3 be where it's a little cooler than Texas. 4 I'd like to provide some background on our 5 organization, talk about our experience with Banc 6 One and draw some conclusions with some of the 7 issues before this group. 8 Our organization, its mission is to assist 9 businesses, create jobs and promote investment in 10 Southern Dallas. Southern Dallas is -- about half 11 the City of Dallas, 45 percent of the population, 12 75 percent of the population, is a minority 13 population, African American and Hispanic, but it 14 only has 13 percent of the commercial tax base, and 15 the median income is about 60 percent of the 16 northern sector, so Dallas is really bisected in 17 terms of our economy. 18 We were created to help create jobs and 19 started out with one loan fund, and now we manage 20 five different loan funds including an SBA 21 microloan program, CDFI-funded fund and indirectly 22 a bank CDC and an SBA community development 23 corporation. 24 With those funds, we've been able to lend 216 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 22 million directly, leverage about 27 million in 2 our community, 2,500 jobs where they're needed 3 most, including a thousand jobs in the last two 4 years for a small community-based organization. 5 We did that with the support of partners 6 in the community like Banc One. And Banc One, 7 although they're not the largest bank in our 8 market, they are the largest investor in our 9 multi-bank CDC, and that's especially important 10 because with a community loan corporation bank, you 11 can do things banks cannot. 12 We provide a lot of money in terms of 13 subordinated debt, and that's very important to 14 minority businesses. That's about 70 percent of 15 our portfolio is minority businesspersons. 16 They have participated with us in 29 17 deals, joint and financing where they brought money 18 to the table totaling about 34 million dollars. 19 They provided match to about $100,000 for the 20 Community Development Financial Institutions Funds 21 and pledged 200,000 in match. 22 The underwriter newspaper that we put out 23 every year going through all of the people who 24 receive the Dallas Morning News telling about the 217 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 positive features of our community, one thing that 2 we found, trying to promote investment is the 3 negative image of what can happen to low and 4 moderate income communities, so we publish our own 5 newspaper, and we know it's the truth because we 6 write it. 7 They have helped us in terms of providing 8 loan bankers and have helped us in terms of a 9 volunteer member of our board, in fact, our current 10 Board Chairman is a member of Banc One. 11 Now, three issues. Would they be 12 responsive in a new community? They came into 13 Texas and bought a bank there. And they were 14 responsive in our community. Will they lend to the 15 minority community? Our experience in terms of 16 managing a portfolio that's 70 percent has gone to 17 minority borrowers, we believe the answer is yes. 18 And then finally, in terms of an issue 19 before people doing small business lending, right 20 now small business lending has changed dramatically 21 in the last two years, and it's because credit's 22 growing. You know credit's growing if offering 23 lower transaction charges and quicker turnaround. 24 It also means if you don't make the profile, you 218 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 don't get money. That's where alternative lenders 2 like us have come in. Banc One has worked with us 3 in two ways. There are people out there that are 4 on the bubble and are not getting funded because of 5 credit. 6 We get referrals from Banc One and we 7 provide an award to one of their staff persons 8 providing the most referrals last year. 9 The second thing I think is more 10 important; they have created a community 11 development lending arm within the bank that has 12 special regulations, special allowances in terms of 13 the time that they can spend with clients and their 14 loan losses they are allowed and so forth. 15 Basically, in this credit storing system, 16 if you're a special kind of a deal that needs more 17 help, you get put to the bottom of the pile. This 18 means that organizationally, they've helped address 19 this just as we have addressed it by delivering 20 alternative products. 21 So we're very positive about this merger 22 because of our experience. People today have had 23 different experience. Our experiences have been 24 positive, and we urge you to support the merger. 219 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. SMITH: Thank you very much. 2 Any questions? 3 Then we thank you very much for coming 4 this afternoon. Be sure and give your written 5 statements, if you haven't already, to the people 6 at the registration desk so they can be fully 7 entered into the record. 8 And we're going on to Panel 12. 9 We're going to start with Mr. Bromley. 10 MR. BROMLEY: My name is Charles Bromley. I'm 11 the Director of a statewide fair housing 12 organization called Metropolitan Strategy Group 13 based in Cleveland, Ohio. I also serve as the 14 Chair for the Ohio Community Reinvestment Project, 15 a statewide coalition of community-based 16 organizations committed to fair lending throughout 17 the State of Ohio. 18 Because a picture is worth a thousand 19 words and I've been allocated five minutes, I've 20 prepared some pictures that outline a snapshot of 21 the lending behavior of Banc One and its affiliates 22 in the State of Ohio. 23 Let me first review Banc One's behavior in 24 an area where they are ranked as a very large 220 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 volume lender, which is small business lending. 2 They are third in the country. 3 According to Ken Stevens, who is the head 4 of this unit or retail lending, I guess it is, a 5 small business customer doesn't care where the 6 corporate headquarters are. What they care about 7 is local execution, are they doing a job for me, is 8 my relationship manager serving my needs? 9 Apparently, Mr. Stevens forgot to review 10 his small business lending record with Blacks in 11 greater Cleveland. 12 Let me look at some of the statistical 13 data in our first chart, which in theory -- the 14 A.V. crew, if I remember them from junior high, 15 always had problems. Apparently, as adults, we are 16 still struggling with this equipment. Maybe 17 eventually we'll get it right. I don't know. 18 But what you see here in terms of the 19 picture of their lending in census tracts, this is 20 the census tracts of greater Cleveland. There are 21 685 census tracts. There are 185 census tracts 22 that have a minority population of 50 percent or 23 more. The percent of tracts with no Banc One small 24 business loans is 68 percent, nearly 70 percent, 221 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and census tracts that are under ten percent 2 minority, in other words, predominantly white, they 3 have a percent of tracts with no Banc One loans of 4 38.58. 5 Now, when you look at the issue of the 6 next chart which looks at stratification by income, 7 and the percent of tracts with no Banc One loans is 8 65.22. As you go to the upper income part of the 9 chart, you'll see it's 39.86. 10 So this is a bank that has an affinity for 11 wealthy, white census tracts in terms of their 12 small business lending. There is no question about 13 that pattern as it occurs in greater Cleveland. 14 Now, we mapped this data so you can see 15 it, which should be the next -- I don't know if 16 we're on the wrong -- okay. Stop. Okay. There 17 you go. That's fine. 18 This is the map of our standard 19 Metropolitan statistical area. In the middle of 20 the map, there is kind of like a county, and you 21 can't really see it, but it's the white area, and 22 that's the area where there are no small business 23 loans. 24 Cuyahoga County has the largest percentage 222 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of minorities in that statistical area. The area 2 that is predominantly blue is the area that is all 3 white. So you get a sense of where their small 4 business lending is and also where it's not. 5 Next. 6 Now, that's just a highlight of Cuyahoga 7 County. So you can see specifically that in 8 addition to red lining in Cuyahoga County, they 9 also red line the first ring suburbs, which is 10 those integrated communities, that which is closest 11 to the City of Cleveland. I hope a picture really 12 does tell you something. 13 It's difficult with small business lending 14 because you don't know how many loans per tract. 15 All you know is whether they made one or they could 16 have made a dozen. You do know where they made 17 none. So we do have that data there. 18 Next. 19 This is much less clear, I guess, in terms 20 of coming out. This is the data for Cuyahoga 21 County, and the screen on this is low to moderate 22 income tracts. And you can see there's a strong 23 correlation between the tracts and where their 24 loans are. 223 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I realize I have one minute left. Maybe 2 we can flip here to Toledo. 3 It's hard to see, but in the stuff here, 4 you can see this is their market share. Their 5 large product that they have in Ohio is home 6 improvement lending, and as you go into the 7 minority tracts, you find two things: One, the 8 lack of applications and, two, their market share 9 shrinks to zero. This is their major product. 10 They seem to have an affinity to stay away from 11 those neighborhoods. 12 The last one is Cincinnati, and you can 13 see the same pattern is seen there where their 14 applications are very low in minority census 15 tracts, and you can see that their market share is 16 very low in those census tracts and very high in 17 those other tracts. 18 I've included in my testimony -- I just 19 want to take 30 seconds. 20 We have taken our testimony, we have 21 turned it over to the Assistant Attorney General 22 for Civil Rights at the Department of Justice. We 23 hope that they will give a thorough review. 24 We believe there are serious fair lending 224 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 issues relative to Banc One in the State of Ohio. 2 And before the Federal Reserve Bank acts 3 on this merger, the Department of Justice should be 4 given the opportunity to completely review the fair 5 lending record of Banc One in the State of Ohio. 6 Thank you so much. 7 MS. SMITH: Mr. McDermitt. 8 MR. McDERMITT: Good afternoon. My name is 9 Matt McDermitt. I'm a Policy Specialist with the 10 Chicago Coalition for the Homeless. 11 The Coalition is a 17-year-old advocacy 12 organization focusing on the root causes of 13 homelessness and working to find permanent 14 solutions to the problem. 15 The Coalition has nearly 15,000 members in 16 the greater Chicago area and nearly 800 17 organizational members, shelters, churches and 18 other organizations serving the homeless. 19 The Coalition has very serious concerns 20 about the proposed merger between Banc One and 21 First Chicago NBD. 22 We understand that Banc One has a very 23 poor CRA record and a wavering commitment to the 24 very important mortgage lending business, very 225 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 important to the housing market. 2 In addition, Banc One has refused to 3 negotiate directly with community groups and 4 coalitions. While they maintain all agreements 5 made by other parties to the merger will be 6 honored, there is unfortunately no guarantee of 7 that. 8 All three parties related to the merger, 9 Banc One, First Chicago and NBD, also have less 10 than admirable records of lending in African 11 American and Latino communities. 12 These shortcomings by major market 13 institutions seeking to increase their market 14 dominance have tragic consequences. 15 The lack of capital in many communities -- 16 the lack of capital in many communities prevents 17 the creation of new housing and new employment 18 opportunities. 19 While many of these potential 20 opportunities might not directly be available to 21 the people I represent, the absence of -- excuse me 22 -- their absence is the beginning of a spiral that 23 winds up impacting the poorest members of our 24 communities, those who we don't often think of when 226 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 we think about banks, but homeless people. 2 Because bank capital is not available to 3 create these opportunities, we increasingly see a 4 reliance on government funding for housing and job 5 creation for middle and moderate income folks. 6 This demand on government resources, 7 usually a successful demand over those needs of 8 very low income folks, truly -- I'm sorry. Lost my 9 place here. 10 This demand on government resources 11 competes against funding for projects for very low 12 income and homeless people which truly cannot be 13 served by market institutions like banks. 14 With 80,000 homeless people in Chicago 15 every year and more children among them every year, 16 we have an average age of homeless people in 17 Chicago and across the nation now of only nine 18 years old. Because we have so many children in the 19 population today, we must have greater commitment 20 from our banks to serve the entire community rather 21 than profiting from creating more disparities in 22 our country. If we do not, the results will be 23 even greater tragedy in the next generation. 24 For this reason, the coalition opposes the 227 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One/First Chicago merger until all parties 2 make direct community investment commitments. 3 Thank you very much. 4 MS. SMITH: Thank you. 5 I'm going to let you say your own name. 6 MR. GIERUT: My name is Father Casimir Gierut. 7 As a consumer seeking banking services, I 8 strongly oppose the proposal by Banc One 9 Corporation to merge with First Chicago Corporation 10 for the following reasons: First, the merger will 11 destroy competition between the two banks. 12 Competition is a financial asset in the 13 favor of all consumers. We have the opportunity to 14 compare different interest rates offered by the two 15 banks. The final decision is in our favor to 16 accept a bank offering a higher interest rate in 17 reference to the purchase of a Certificate of 18 Deposit or to accept a bank offering the lowest 19 interest rate toward a loan. 20 This merger will force the consumer to 21 deal only with one mega bank. Our freedom to 22 choose the other bank will be gone. There will be 23 no alternative but to accept whatever interest 24 rates the bank wishes to offer to the public. That 228 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 is not the right way to do business in a 2 capitalistic society. 3 To possess financial power at the hands of 4 few bankers as a byproduct of merging banks into 5 mega banks is to be feared. 6 Secondly, I oppose the merger of Banc One 7 with First Chicago because it will become a huge 8 monopoly. 9 The United States Attorney General, Janet 10 Reno, should file suit, an antitrust suit, against 11 this merger to stop this becoming the biggest 12 monopoly in the United States. 13 Banks are not an agency of the Federal 14 Government which will exempt them from any 15 antitrust laws. Banks are privately-owned 16 financial institutions. The title corporation and 17 the name following Banc One Corporation tells us it 18 is a private corporation. The title again 19 corporation in the name following First Chicago 20 corporation tells us again that this is a private 21 corporation. 22 It is not fair nor just to file an 23 antitrust suit against Bill Gates' Microsoft 24 Corporation merging with another giant computer 229 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 corporation because the merger is considered to be 2 a monopoly and not applying the same antitrust suit 3 against Banc One and the First Chicago which 4 obviously is a monopoly. 5 Justice is not served equally in the 6 application of the antitrust laws to private 7 corporations. To allow Banc One and First Chicago 8 to merge into a monopoly is unlawful, illegal and 9 contrary to the antitrust laws. 10 Thirdly, the mergers are not made for the 11 good of consumers. The bottom line is how much 12 profit is made for the good of the bank, and this 13 leads to greediness. 14 I recall standing in line to open an 15 account at the First Chicago. As many tellers 16 there are accounts for so many long lines of people 17 standing patiently to be assisted by the teller. 18 Instead of First Chicago being pleased to see long 19 lines of people, the greedy bank decided to charge 20 a fee of three dollars for a teller's assistance. 21 I heard many complain that the three 22 dollars may be a fee in the mind of the banker, but 23 I call the three dollars an act of extortion. 24 Either you turn over three dollars or you will not 230 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 be served by the teller. Such a procedure is 2 extortion and unacceptable in the lawful business 3 world of finance. 4 Lastly and the most important reason why I 5 oppose the merger of Banc One with First Chicago is 6 that this kind of a merger decreases the existence 7 of any growth of banking. 8 In the year 1985, there were 14,480 9 banks. Today, the year of 1998, the number of 10 banks has dwindled down to 9,435 banks and 11 decreasing in number with each new merger. 12 For the power to be vested in the hands of 13 a few bank presidents and bank directors is 14 contrary to principles of capitalism which is the 15 way of life for 231 million Americans. 16 I want to quote Robert Hamphil, the former 17 credit manager of the Federal Reserve Bank of 18 Atlanta, Georgia, who said: "We are completely 19 dependent on commercial banks. If the banks create 20 ample supply of money, we are prosperous. If they 21 don't, we starve. The banking problem is so 22 important that our present civilization may 23 collapse banking unless it is wisely understood and 24 the defects remedied very soon." 231 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Merging of banks is one of those defects 2 will bring about a new kind of slavery. Financial 3 dominance in the hands of a few will create a 4 financial enslavement of people and civilization. 5 And this is why I oppose the merging of 6 Banc One with First Chicago. 7 Thank you. 8 MS. SMITH: Thank you very much for your 9 comments. 10 We'll go to Mr. Kamp. 11 MR. KAMP: On behalf of the Wisconsin Rural 12 Development Center, I would like to thank the 13 Federal Reserve Board for the opportunity to speak 14 with you on the proposed merger of First Chicago 15 and Banc One. 16 We are a 300-member statewide community 17 organization which has worked with family farmers 18 and rural small businesses for over 15 years. 19 Our mission is to support family farm 20 agriculture, rural development and enhance economic 21 opportunities for rural residents throughout the 22 state. 23 Our organization previously submitted 24 formal comments on this application. Specific 232 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 concerns cited in those comments included Banc 2 One's low-level of originations to low and moderate 3 income conventional home buyers, its lack of 4 participation in state and federal guaranteed 5 programs designed to assist LMI first-time home 6 buyers, small farms and small businesses, its 7 systematic targeting of loans to upper income 8 borrowers and consequently the bank's disinvestment 9 in low income and underserved rural communities. 10 An analysis of 1997 HMDA and CRA aggregate 11 data shows that Banc One continued to make 12 significant cuts in conventional home ownership and 13 small business originations in our state. 14 Based on deposit share, Banc One is the 15 third largest commercial institution in Wisconsin. 16 Clearly, how it conducts its business and meets 17 reinvestment obligations has a substantial impact 18 on our state's economy and the communities it 19 serves. 20 Changes in lending policies and practices 21 can often have devastating consequences, especially 22 for a state's poor. 23 According to 1997 data, these changes are 24 beginning to occur. Nationally, Banc One is the 233 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 second largest home mortgage lender. However, 2 fewer than two percent of all conventional home 3 mortgages are originated by Banc One in our state, 4 and that share appears to be declining. 5 Between 1996 and 1997, conventional home 6 ownership dropped by over 35 percent. At the same 7 time, loans to LMI borrowers were cut by nearly 43 8 percent. 9 In six of the seven MSAs which we looked 10 at, LMI borrowers consistently received a 11 disproportionately low share of one to four family 12 conventional home mortgages while upper income 13 borrowers consistently exceeded MSA share averages. 14 Banc One also accounts for significant 15 business lending in the state. The bank is the 16 third largest business lender in Wisconsin with 2.8 17 billion in loans outstanding. However, according 18 to FFIEC small business data, substantial cuts were 19 also reported in 1997. Business originations 20 declined by nearly 21 percent, over $90 million 21 from the previous year. Over one-third of those 22 cuts were to businesses with gross revenues of less 23 than one million. 24 Although numerous studies have stressed 234 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the need for small business development in the 2 state, fewer than 49 percent of all loan numbers 3 and 38 percent of all dollar amounts went to 4 businesses with gross revenues of under 5 $1 million. 6 Of particular concern is Banc One's 7 minimal use of state and federal guaranteed 8 programs which are designed to serve the needs of 9 LMI borrowers. In 1997, less than eight percent of 10 all conventional home loans were guaranteed under 11 the Wisconsin Housing and Economic Development 12 Authority's Home Ownership Mortgage Program, the 13 WHEDA Home Program. 14 Banc One's assessment areas include 11 15 rural counties. Deposits within these assessment 16 areas represent 60 percent or 738 million of all 17 Banc One deposits in the state. 18 In our initial comments, we criticized the 19 bank's low-level of lending in rural areas, 20 specifically regarding small farm originations. 21 In their written response, Mr. Steven 22 Bennett and Ms. Julie Johnson stated that Banc One 23 serves a predominantly urban market and they 24 implied are under no obligation to meet all the 235 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 credit needs within rural areas. 2 However, we believe this attitude raises 3 serious questions about the bank's lack of 4 commitment in meeting the convenience and needs of 5 communities they are supposed to serve. 6 Are we done? 30 seconds. 7 Simply, a bank cannot ignore credit needs 8 within its delineated area and then originate the 9 same type of loan in other more affluent 10 nonassessment areas. However, according to the 11 1997 FFIAC small farm data, over 21 percent of all 12 farm loan numbers and 23 percent of all dollar 13 amounts were originated outside of delineated 14 assessment areas. The eight highest income rural 15 counties in the state received 78 percent of all 16 Banc One small farm originations. 17 In rural Wisconsin, the percentage of low 18 income families often exceeds rates found in 19 central cities. Clearly, a need exists, however, 20 the bank's use of federal and state programs is 21 minimal. 22 Based on Banc One's CRA performance in 23 Wisconsin, we request that the Board of Governors 24 deny the proposed merger until the bank can take 236 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 affirmative steps to address the deficiencies cited 2 above. 3 Thank you. 4 MS. SMITH: Thank you very much. 5 Mr. VanTol is wearing a different hat. 6 MR. VANTOL: Yes. 7 I want to thank you for allowing me to 8 double dip here. Now I get to speak my own piece 9 instead of that of a coalition. 10 My name is Hubert VanTol of Sparta, 11 Wisconsin. I am the President of Bank Watchers. 12 We provide information and other services for 13 community-based organizations on banking and 14 community reinvestment issues. 15 As I said, in speaking for John Taylor, I 16 also serve as a board member of the National 17 Community Reinvestment Coalition. 18 I agree with most of the issues that have 19 been raised about Banc One's deficient CRA record, 20 and since I can't possibly do justice to those many 21 complex issues in this short time, I'm going to 22 focus just on the one issue of how CRA gets 23 interpreted for rural areas. 24 My colleague, Marv Kamp, has outlined some 237 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of the concerns about how Banc One provides 2 services and loans to rural Wisconsin. I think his 3 comments highlight the importance of the Federal 4 Reserve giving more careful thought than it has in 5 the past to how the Community Reinvestment Act 6 should be enforced in rural areas. 7 With mega mergers like these happening, 8 they're transforming the shape of the banking 9 industry, and it's very important that we think 10 these issues through better. 11 What does providing fair access to credit 12 in rural America mean for huge institutions that 13 are buying up the branches and the ability to 14 provide services in suburban and in some cases 15 inner city markets but are leaving the rural 16 counties and particularly the lower income rural 17 counties that span the areas between those urban 18 areas completely out of the picture? 19 You've heard that Banc One is providing 20 agricultural loans at a much higher rate in some of 21 the wealthier rural counties of Wisconsin than in 22 the poorer ones, and you've heard that they've 23 closed a number of rural branches in Ohio. 24 In the enforcement of CRA, what is the 238 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 practical difference between an urban bank which 2 draws a bright red line around the low to moderate 3 income census tract in its local assessment area 4 and says it won't provide services and loans within 5 that area and a super regional bank like Banc One 6 which draws an invisible line around the poorest 7 rural counties in the several states that it 8 operates in and then closes branches, does away 9 with services, makes very little proactive effort 10 to meet the credit needs of the residents of those 11 areas? 12 I live in a moderate income section of a 13 rural Wisconsin, and we are seeing the same results 14 of disinvestment that low income inner city 15 neighborhoods have seen for a long time. 16 The subprime and predatory lenders have 17 started opening up shop. It's becoming harder to 18 get loans with a fair rate. Indeed, it's becoming 19 harder to get fair rates on related financial 20 services like property insurance. 21 This is happening because the largest 22 institutions have decided that they can make more 23 money meeting the credit needs of wealthy 24 communities or putting money into derivatives or 239 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 whatever the current hot money fad is than they can 2 make in communities like ours. 3 It's not that they can't make money in our 4 communities. They just can't make enough to please 5 Wall Street. 6 As a result, we still have competition in 7 financial services in our communities but not the 8 kind of competition that middle and upper income 9 suburbanites can count on. 10 We have the competition between the very 11 smallest financial institutions, the 12 semi-legitimate, subprime lenders and the loan 13 sharks, but if the Community Reinvestment Act were 14 enforced with rural communities in mind, we could 15 enjoy the same fruits of real competition in the 16 same way that suburbanites do. 17 I think the testimonies of the various 18 people have given you a clear picture of different 19 ways in which community reinvestment needs can be 20 met, the very promising road we can do down, the 21 Chicago and Detroit road, or the negative road that 22 some of the other communities have testified to. 23 So if this mega merger provides for 24 specific agreements with measurable and reasonable 240 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 targets similar to what the Chicago Reinvestment 2 Coalition negotiated with First Chicago for each of 3 the urban and rural sections of the state, most of 4 us wouldn't be here today. Most of my colleagues, 5 I'm sure, would watch such a merger happen without 6 the outrage that we feel now. 7 In this case, however, it seems clear what 8 the dominant philosophy that survives in the 9 surviving bank will be. 10 So we ask you to go ahead and make our 11 day, surprise us and do the right thing. 12 MS. SMITH: Thank you very much. Thank you 13 very much for coming. 14 MR. ALVAREZ: Can I ask a quick question? I am 15 sorry. 16 Mr. Kamp, and Mr. Bromely in particular, 17 you had further remarks than the time allowed and 18 you had a lot of statistics. Are all of these 19 statistics in your packages and explained in the 20 material? 21 MR. KAMP: Yes. 22 MR. ALVAREZ: And the numbers that you put 23 together for your comparisons of loans in low to 24 moderate income neighborhoods versus other areas, 241 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 is that based on number of loans or dollar amounts 2 or -- 3 MR. KAMP: For my analysis, both number and 4 dollar. 5 MR. BROMLEY: We had numbers. 6 MR. ALVAREZ: And you used the numbers? 7 MR. BROMLEY: Yes. 8 And ours, the home improvement lending was 9 aggregated. We rolled up all the Banc Ones in Ohio 10 and made one master file. So they have a number of 11 Banc Ones, and we put them all together. I think 12 corporately, they rounded them up in 13 '97 so you can see it, and it's applications and 14 then it's market share. 15 MR. ALVAREZ: Thank you very much. 16 MR. KAMP: Market share is also. 17 MR. ALVAREZ: Okay. 18 MS. SMITH: All right. We are ready to start, 19 Ms. Carrillo. 20 MS. CARRILLO: Thank you. My name is Rita 21 Carrillo. 22 MS. SMITH: Oops, oops, I guess we're not 23 ready. 24 MS. CARRILLO: My name is Rita Carrillo. I'm 242 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the Executive Director of Neighborhood Housing 2 Services of Phoenix. 3 The NHS of Phoenix is a nonprofit 4 organization founded in 1975 and is dedicated to 5 neighborhood revitalization through the creation of 6 home ownership opportunities for low and moderate 7 income families. 8 To accomplish this, the NHS provides home 9 buyer education and counselling, develops new and 10 rehabilitated, affordable single-family homes and 11 develops flexible mortgage financing programs to 12 meet the credit needs of low and moderate income 13 borrowers. 14 In the last three years, the NHS of 15 Phoenix has provided home buyer education to over a 16 thousand families, created 251 new homeowners and 17 developed 30 affordable new single-family homes for 18 a total community investment of over $17 million. 19 I mention this because Banc One Arizona 20 has been a strong and long-standing partner of the 21 NHS in all of these endeavors. 22 Banc One and its predecessor, Valley 23 National Bank, have been leaders in corporate 24 support for community development in the Phoenix 243 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Metropolitan area. And in the Phoenix area, this 2 is very significant because we are not headquarters 3 to many major corporations and banks have 4 traditionally been the corporate leaders in our 5 community. 6 Banc One is the NHS's single largest 7 financial contributor and a major contributor to 8 numerous other community development efforts in the 9 City of Phoenix. It is also exemplary in the 10 leadership provided by top management on important 11 community issues. 12 Banc One Arizona's CEOs are and have had a 13 tradition of being active members of the 14 community. They volunteer their time and resources 15 to organizations and initiatives for the betterment 16 of the community. This includes issues such as 17 mass transportation programs, homelessness and 18 public education programs. This commitment to 19 volunteerism filters down to all levels of the 20 bank. 21 As the largest bank in Arizona, Banc One 22 sets the tone and level of commitment provided by 23 the other financial institutions in the state. For 24 example, the NHS of Phoenix recently launched an 244 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 effort to create a second mortgage loan pool that 2 would provide below-market interest rate loans to 3 low and moderate income families. Banc One was the 4 first to make a verbal commitment for a major 5 investment in the loan pool. With that commitment, 6 the other banks at the table quickly signed on as 7 well. 8 The current Banc One Arizona CEO, Michael 9 Wellborne, is a member of the NHS Board of Trustees 10 and as such assists the NHS by soliciting other 11 corporate support for our programs. 12 Banc One staff sit on the NHS Board of 13 Directors and participate on the NHS Loan 14 Committee. 15 As mentioned by others testifying here 16 today, of most importance to a community is a 17 financial institution's approach to community 18 development and corporate social responsibility. 19 Banc One has always sought to be 20 knowledgeable on community issues. It is an 21 approach that seeks to understand diverse 22 perspectives and respond to rather than dictate 23 community needs and priorities. 24 Of significance to the nonprofit and 245 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 minority communities in the City of Phoenix and to 2 me personally was my appointment four years ago to 3 the Banc One Arizona Corporate Board of Directors. 4 Of its own accord, Banc One chose to 5 become the first and still the only major bank or 6 any bank in Arizona, in the state, to appoint a 7 representative of a nonprofit community development 8 organization and a minority woman to its legal 9 Board of Directors. 10 With the continuation of this commitment 11 and this approach to community activism and 12 development, the merger of Banc One and First 13 Chicago NBD will create a stronger bank and, thus, 14 should bring additional resources and stability to 15 the community development efforts in the City of 16 Phoenix. 17 As a result, the NHS of Phoenix 18 anticipates a continued and strengthened 19 partnership with the post-merger Banc One. 20 Thank you. 21 MS. SMITH: Thank you. 22 And we'll go to Ms. Coleman. 23 MS. COLEMAN: Good afternoon. My name is Marva 24 Coleman. I am the Executive Director of the Five 246 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Points Business Association in Denver, Colorado. 2 We are a nonprofit organization that has 3 been founded since 1963. We promote economic 4 development in our area. Also, we do business 5 counselling, special events, business improvement, 6 marketing and we provide economic development in 7 our area. 8 The demographics of the area that I do 9 work in is 65 percent African American, 35 percent 10 Hispanic and Asian. 11 The area that we work in, that I work in, 12 is a seven-block area that is very important to 13 keep because it's the only African American strip 14 that is left in Colorado that is seven blocks 15 long. It has restaurants and it provides many 16 entrepreneurs that are minorities, and we need to 17 keep that alive. 18 One of the roles of Banc One is to provide 19 financial support for my office. Because we're 20 nonprofit, it's very difficult to find funding, and 21 Banc One has provided this kind of support for six 22 years. 23 They provide things such as technical 24 assistance. We have Ma and Pa restaurants, 247 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 existing business, new businesses that really does 2 need technical assistance. They provide 3 scholarship funds for us. They provide a lot of 4 funding for an event that we put on in Colorado, in 5 Denver especially, called Juneteenth. And this 6 year, we were able to provide a huge, huge number 7 of support. 180,000 people went to our Juneteenth 8 event, which has made us larger than Texas, which 9 was very interesting. 10 They also provide banking education, which 11 means that they come into our establishment, 12 provide classes. 13 One of the very, very important things 14 which I mentioned before is the scholarship 15 program. We have given over $100,000 worth of 16 scholarships, and without Banc One's support, we 17 are not able to do this. And it's very important 18 for the education of the African Americans, Asian 19 and Hispanics in our area. 20 I would like to at this time support the 21 merger because Banc One is one of the banks that's 22 always been in our corner. They've always provided 23 services for us. We can call on them at any time. 24 They've been there. 248 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 We also have an employee that is on our 2 board, and that is very important. She keeps us in 3 line, she supports us tremendously and makes sure 4 that we are on target and also makes sure that we 5 know exactly what's going on in the banking 6 industry. 7 I thank you very much for your time. 8 MS. SMITH: Thank you, Ms. Coleman. 9 Mr. Fairfield. 10 MR. FAIRFIELD: My name is Steven Fairfield. 11 I'm the Executive Director of Fifth Ward Community 12 Redevelopment Corporation in Houston, Texas, a 13 resident-founded and resident-governed CDC in 14 Houston's lowest income community and the home of 15 Barbara Jordan, Mickey Leland, George Foreman and 16 other trailblazers in the African American 17 community. 18 I agree with my colleagues that public 19 subsidy in the form of Federal Deposit Insurance 20 creates an obligation to provide a corresponding 21 public benefit and that too much industry 22 consolidation can adversely affect the scope and 23 depth of investment and credit available in low 24 income communities. 249 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 However, I am here to testify that Banc 2 One has delivered the goods in our community and 3 their entry into the Houston market earlier this 4 decade through the acquisition of an old Texas 5 institution served to expand the scope and depth of 6 investment and credit available in our community. 7 Our first experience with Banc One in 1991 8 was not a positive one with the mortgage shop 9 saddled with peculiar southern operating practices 10 remaining from the institution they acquired 11 previously in Houston. 12 After complaining about these practices, 13 Banc One instituted a housecleaning resulting in 14 the creation of the city's friendliest mortgage 15 shop for our low income clients, something that was 16 later copied by other local lending institutions. 17 The bank has subsequently donated 18 furniture for our offices, provided general 19 operating grants to us, offered us construction 20 lines of credit, financed a neighborhood finance 21 center on an environmentally troubled tract of land 22 will feature an electronic banking kiosk for Banc 23 One, as well as a roaming loan officer, a small 24 business center, consuming credit counselling 250 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 services case manager, policed storefront, new home 2 ownership center and a one-stop insurance center. 3 The bank has also offered competitive 4 investment and mortgage financing for a mixed use 5 retail and residential project we have under 6 construction. In fact, unfortunately, the bank has 7 offered us so much credit that we haven't been able 8 to use it all because we have a policy of working 9 with multiple lenders, but they're always there 10 with an offer for us when we have a new project. 11 As an advocate six years ago, I and four 12 Texas colleagues formed the Texas Housing Finance 13 Corporation to raise investment equity for 14 hard-to-do affordable housing transactions that 15 were small or rural or had special uses and were 16 more difficult to originate. 17 Banc One was our first multi-million 18 dollar investment commitment for that fund and has 19 continued as a lead investor in subsequent funds, 20 and they are now entertaining an investment in a 21 new venture capital fund we have created in Houston 22 to invest in minority-owned businesses in Houston's 23 inner city. 24 In short, seven years ago, we were a CDC 251 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 on paper only. Since that time, we have developed 2 over 300 units of new rental affordable housing, 3 nearly a hundred scattered site homes, over 200 4 senior home repairs and improvements, two 5 neighborhood clinics, a Head Start center, a 6 finance center, a policed storefront, the equity 7 funds I mentioned and other economic development, 8 public safety and beautification initiatives. 9 Through this time, Banc One has been the 10 best top-to-bottom person who's committed to what 11 we're trying to do in Houston's lowest income 12 community of banks that are not based in our city. 13 And we haven't, in fact, been able to use all of 14 the resources that they have offered to us. 15 So I speak here in support of what Banc 16 One has done in our community for our low income 17 residents. 18 Thank you. 19 MS. SMITH: Thank you very much. 20 We'll go to Mr. Garcia. 21 MR. GARCIA: I want to first thank you for the 22 opportunity to come here today before you. I'm the 23 past president of the Indiana Hispanic Chamber of 24 Commerce. 252 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I was the president for five years and 2 have a long relationship with the Banc One 3 organization. And fortunate enough, we have a 4 relationship with NBD and First Chicago NBD, so we 5 have the best of both worlds in Indianapolis. 6 I've heard a lot of opinions and 7 definitely a lot of facts here today, but I can 8 only speak in regards to Indianapolis and the 9 Indiana community. 10 Banc One and First Chicago NBD continue to 11 provide us with leadership and support within our 12 community. 13 I have been involved in three mergers 14 individually and as the representative of the 15 Indiana Hispanic Chamber of Commerce, and some of 16 them have been very uncomfortable, and I would say 17 that the last one -- maybe we're getting it down 18 now, but it has it has become more comfortable. 19 And through those mergers, the success has 20 been primarily dependent upon maybe three things, 21 and one is definitely communication with community, 22 commitment to that community. And probably most 23 important is the adherence, if you will, or 24 maintaining of the current leadership. 253 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Our leaders, our bank leaders, the bank 2 leaders from Banc One and NBD in Indianapolis, 3 Indiana continue to fight, continue to promote the 4 involvement in our community of Indianapolis. 5 Many of those founders or I would 6 primarily say Andy Payne and Joe Barnett, who are 7 the leaders there in Indianapolis founded many 8 minority and women-owned minority programs that 9 still live today, and these are programs that have 10 been in existence for ten or more years. 11 So with the culture that we have received 12 in Indianapolis, it's been very positive in 13 strengthening all through the mergers that we have 14 experienced. 15 The merger of First Chicago NBD and Banc 16 One can propose success or failure. It's really 17 dependent upon, again, the continuity of the 18 culture and the individuals that stay within that 19 area. And that's why we are cautious but we are 20 confident that NBD, First Chicago NBD -- there's so 21 many names, I can't get them all out -- and Banc 22 One will be positive to the communities that we 23 work in and have. 24 I can say a few things about the Hispanic 254 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Chamber of Commerce and my company. I'm President 2 of GM Construction in Indianapolis, Indiana, but I 3 take a very proactive approach within the community 4 that we work in. 5 First Chicago and Banc One and NBD 6 continue to support organizations like statewide 7 certified development corporations which provides 8 funding and guidance and leadership to small 9 businesses. 10 They also provide leadership and 11 involvement to the Indiana Hispanic Chamber of 12 Commerce, the Black Chamber of Commerce, also 13 Indiana's Business Development Corp. They supplied 14 us with two million dollars of a loan pool that we 15 could draw on. Our MESBIC, which we call LINKS, 16 which is primarily -- I believe it's quarter of a 17 million dollars and above in loans, they supplied 18 $2 million for that fund also. 19 And again, it goes back to my previous 20 statement, which is our leaders are involved in the 21 Indianapolis community, and that's why we're 22 successful. 23 Banc One has never turned down one of my 24 clients, if you will, or my representatives with 255 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the Indiana Hispanic Chamber of Commerce. I've 2 brought numerous numbers, over 25 people or more, 3 and we have never walked away from the table 4 without some type of positive result. 5 Now, maybe those individuals at that time 6 or those companies could not perform or provide the 7 information needed for that criteria, but we always 8 had a secondary plan, and Banc One stood at the 9 table and stayed there until we came up with that 10 secondary plan. And we thank them for that. 11 And because of that, in Indianapolis, I 12 know that we have in the top 100 companies in the 13 Hispanic 500, we have two of them. And in the 200, 14 we have five of them. 15 So in Indianapolis, which has an Hispanic 16 community of only about two percent, has been very 17 progressive and forthcoming as far as experience 18 and success, and part of that is due to the 19 relationship with Banc One. 20 I would say in closing that the Latino 21 community, Hispanic community, of Indianapolis, we 22 support this merger. 23 We have had individuals that continue to 24 sit on the CRA Advisory Council for Banc One for 256 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the State of Indiana, and they listen to us. They 2 take our recommendations and implement them. 3 Our only concern, again, is that both 4 entities continue with the proactive approaches 5 towards the Hispanic community of Indianapolis and 6 other cities and that the new Banc One, as it's 7 been deemed, is even more sensitive to the needs of 8 our community. So we support it in totality. 9 Thank you. 10 MS. SMITH: Thank you. 11 Ms. Gnau. 12 MS. GNAU: Thank you for the opportunity to 13 speak with you today about our relationship with 14 Banc One. 15 My name is Debbie Gnau, and I'm one of 16 three female owners of the Chesapeake Group in 17 Cincinnati, Ohio. 18 We started the Chesapeake Group in 1994, 19 and we specialize in package designs for consumer 20 package goods companies. Our clients include 21 Hines, Starkist, Jergens, Paragon Trade Brands, 22 Marzetti, Chiquita and many others. 23 Our business has grown from $600,000 in 24 1995, our first full year of business, to 257 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 $1.4 million last year, and we're on target to do 2 $2 million this year. 3 We view Banc One as a key partner in this 4 success, our provider of choice. They serve as a 5 lender and cash management provider as well as an 6 important advisor to our company. 7 Our relationship with Banc One began in 8 November of 1994 with a meeting in Cincinnati with 9 Dave Outcalt, a Banc One officer. Dave met with 10 Geralyn Curtis, our president, and reviewed our 11 five-year start-up business plan. 12 Despite limited prospects for any 13 tremendous business from us at the offset, he 14 nonetheless spent several hours with her getting to 15 know our business plan, understanding what we felt 16 we would uniquely bring to the party and 17 understanding our detailed financial assumptions 18 and business plans. 19 They reviewed financing options, cash 20 management details, and importantly, Dave also 21 provided us with a few recommendations for other 22 key advisors, including our attorney who we believe 23 to be one of the best at what he does. 24 We decided initially to self-fund our 258 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 start-up, so based on the helpfulness Dave 2 provided, we moved our checking account from 3 Provident Bank to Banc One with our incorporation 4 in January of 1995. We've had our checking account 5 with Banc One since that time. 6 Starting with the day we opened our 7 account, the branch managers have typically gone 8 above and beyond the call of duty. On that first 9 day enabling us to leave the bank with the check we 10 needed to sign our office lease that day. 11 The managers have been consistently 12 helpful and timely with all of our requests, 13 including the time one of us accidently threw away 14 our check register and we had to try and 15 restructure it. Unfortunately, I have to admit to 16 be the one that did that. 17 Finally and very important to us, Banc One 18 has loaned us money to help meet our cash 19 management and growth needs. Kevin Plaugher met 20 with us in 1996 and spent a great deal of time 21 learning about what we do. 22 MS. SMITH: You're fading. 23 MS. GNAU: Learning about what we do. 24 MS. SMITH: That's better. 259 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. GNAU: Learning about what we do, what our 2 growth plans were and where we needed help. 3 As a result of our meeting, we were able 4 to obtain both a term loan to fund commuter 5 equipment we needed as we hired additional 6 designers as well as to obtain a line of credit to 7 address the lag in receivables which was growing 8 large. Since that time, we've expanded our line of 9 credit as our business has grown. 10 Wanda Walker-Smith joined Kevin in working 11 with us, too. She, too, has spent a good deal of 12 time getting to know us and our business. She was 13 also kind enough to nominate Geralyn Curtis, our 14 president, for Woman Entrepreneur of the Year, 15 which Geralyn was awarded in June. 16 Wanda has also worked with us to make sure 17 we're aware of and utilizing any specific services 18 that can make our work easier. 19 We also had the opportunity to talk over 20 lunch with Kevin, Wanda and Larry Bradley, the 21 Senior Vice President of the Business Banking Group 22 in Cincinnati, about our needs and to provide our 23 insight for the future in an effort to make sure 24 Banc One has the appropriate products in place for 260 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 customers like us. 2 We look forward to working with Banc One 3 as our company continues to grow and appreciate 4 their ability to take time to counsel us on ways to 5 better manage our money and our future growth. 6 Thank you. 7 MS. SMITH: Thank you very much. We'll now go 8 to Mr. Gary. 9 MR. GARY: My name is Printice L. Gary, and I'm 10 the managing partner of Carlton Residential 11 Properties located in Dallas, Texas. 12 Carlton Residential is a for-profit 13 developer and general contractor of affordable as 14 well as market rate housing throughout the State of 15 Texas. Carlton also happens to be a 100 percent 16 minority owned company. I have two other partners 17 in the business. 18 I founded Carlton Residential in 1991, and 19 my first transaction was the acquisition of a 20 192-unit affordable housing project in South 21 Dallas, which is predominantly a minority 22 community, and this acquisition was funded by a 23 $2.9 million acquisition loan from Banc One at a 24 time when the banking industry in Texas was pretty 261 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 much in chaos. And this kind of marked what I 2 considered to be a truly outstanding banking 3 relationship with Banc One looking at that time 4 going forward. 5 Since that time through different project 6 level entities, Banc One has provided more than $67 7 million in construction, permanent and equity 8 financing for Carlton Residential. This has 9 produced 1,240 units of housing, 740 of which are 10 affordable strictly, rent restricted, and obviously 11 has enhanced the growth of our company. 12 Our relationship with Banc One has been 13 one distinguished by their ability to be innovative 14 and their willingness to venture with us in new and 15 creative development formats and financing 16 structures. 17 By way of example, and I'm going to use 18 two, both are in impacted areas and both projects 19 have public housing projects within a stone's throw 20 of each of these developments. By way of example, 21 consider the Trainmore City Place, 192 units, mixed 22 income, new development in Texas. 23 In this transaction, Banc One provided a 24 $2.5 million bridge loan as well as a $2.8 million 262 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 tax credit equity for the transaction. 2 The key element here is that the entire 3 transaction became a reality when Banc One 4 committed early to the transaction at a time when 5 other banks in Texas wouldn't touch a mixed income 6 type project development. As it turns out today, 7 mixed income across the nation is the way of the 8 future. 9 The project was very successful, and it 10 was so outstanding that we proceeded to Phase 2 11 which included 70 units, and in that transaction, 12 Banc One performed as our permanent lender, and as 13 it turned out, First Chicago was our equity 14 investor and they purchased the tax credits in what 15 turned out to be a pretty seamless transaction. 16 As a second case in point, a local 17 nonprofit community development organization, Maple 18 Avenue Development Corp, in Dallas, discovered a 19 six-acre land parcel in their neighborhood that 20 appeared to be appropriate for multi-family 21 affordable housing production. 22 Carlton combined with Maple Avenue and we 23 got the land under contract, produced a site plan 24 that included 144 affordable units and went out 263 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 looking for equity, someone that would partner with 2 us and provide the necessary financing. 3 While this urban neighborhood clearly was 4 improving, the gentrification was showing, because 5 of the presence of the project housing project 6 nearby, most Texas banks wouldn't even take a look 7 at it. 8 Banc One CDC stepped in and after 9 thoroughly reviewing the market with us provided a 10 $1.4 million equity commitment for the project and 11 also provided a seven and a half million dollar 12 permanent takeout through Banc One CDC which 13 supported a seven and a half million dollar 14 construction loan from their local affiliate in 15 Dallas, Banc One of Texas. 16 Believe me, at that time, there's no other 17 bank in Dallas that would have provided that kind 18 of comprehensive commitment for the production of 19 affordable housing. 20 A couple of other points. 21 I really applaud Banc One's approach to 22 community development where they take a partnering 23 approach as opposed to some other institutions 24 forming their own development corporations, and 264 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 that partnering approach allows people like myself 2 as well as some of the local community people to 3 build to capacity and to experience and development 4 their companies. 5 Looking forward, Texas is going to 6 probably experience greater growth than most of the 7 other -- many other cities in the nation and 8 thereby create a real need for affordable housing. 9 The way I see it, I think that Banc One 10 has its delivery system already in place. The 11 combination with First Chicago will add more 12 capital and overall provide for more -- 30 13 seconds -- financing for affordable housing in the 14 state. 15 If I could show you just one image, and it 16 just shows the quality that can be produced by 17 local developers if you've got the right kind of 18 financial partner. This is the Trainmore City 19 Place. And without Banc One's help, this simply 20 wouldn't have happened. 21 Now right in that neighborhood is a public 22 housing project. They have applied for Hope 6 23 funding. Together with the development of the 24 Trainmore, which is a real cornerstone that helps 265 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 revitalize that neighborhood, hopefully, that 2 entire area will be revitalized. 3 Obviously, I'm very much in favor of the 4 Banc One/First Chicago merger. I think that it 5 will enhance the ability to do more affordable 6 housing in Texas, and hopefully, they will continue 7 their relationship with us. 8 Thank you. 9 MS. SMITH: Thank you very much. 10 Any questions? 11 I have an announcement. Nancy Hayne, you 12 have a fax, if you would stop by the registration 13 table. 14 We'll be starting with Mr. Bellamy, if we 15 can hand him the mic. 16 MR. BELLAMY: Thank you. 17 My name is Paul Bellamy, and I'm with the 18 Coalition for Reinvestment in Lorain County. 19 Lorain County is due west of Cuyahoga County, which 20 is Cleveland, Ohio. 21 I've been asked to read on behalf of some 22 coalition members short portions of testimony which 23 they wanted to enter into the record. I will 24 confine these to two rather short versions and then 266 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 get on to my own summarized version of the facts 2 and figures that we feel compel us to come out 3 against the merger with Banc One. 4 The first statement I want to read is from 5 the Board of Commissioners for Lorain County, and 6 in summary, it goes like this. 7 The Board of Lorain County Commissioners 8 supports the Coalition for Reinvestment in Lorain 9 County's efforts to ensure that the results of the 10 above-referenced bank merger are advantageous to 11 Lorain County residents, organizations and 12 political subdivisions. The Board further 13 acknowledges the right and obligation of banks to 14 make sound financial business decisions. 15 However, the Board of Commissioners does 16 not feel that Banc One is committed to serving the 17 low and moderate income communities unless it is to 18 lend money on credit cards or on real estate at 19 higher interest rates to borrowers with credit 20 problems. 21 While this may serve stockholders, as a 22 bank, they are chartered to serve the communities 23 where they do business. 24 It appears that Banc One has been cutting 267 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 back on their commitments to the service of our 2 county while refusing to agree to specific goals to 3 improve their performance under CRA. 4 Please encourage Banc One to address those 5 issues prior to approving any merger. 6 And that is, of course, addressed to the 7 Federal Reserve board. 8 I'd also like to read a short portion of a 9 statement from Rebecca Siegal, who is representing 10 or had hoped to represent the Catholic Action 11 Commission of Lorain County. It's a social action 12 office for the Diocese of Cleveland in the state of 13 Ohio. 14 We have some major concerns regarding the 15 increase in mega mergers of our banking 16 institutions and the effects these mergers have on 17 our local communities. 18 When these mega mergers occur, these are 19 local communities urban and rural alike and 20 particularly the areas that are most populated by 21 minorities and low and moderate income families who 22 suffer the most. Branches close, banking services 23 decrease, service fees increase, jobs are lost. 24 It is the stockholders of the banks who 268 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 most often have no vested interest in our local 2 communities that make the decisions and the 3 profits, yet in the case of Banc One, depositors, 4 not stockholders, make up 70 percent of the 5 assets. Stockholders make up only about 15 percent 6 on average. It is the stockholders and senior 7 management who walk away with gilded pockets while 8 the depositors receive little or no return on their 9 money. 10 We are scraping the bottom of the pyramid 11 with no return and placing it on the top, and if 12 this trend is allowed to continue, the pyramid will 13 be inverted and most likely tumble because there 14 will no longer be support from the solid bottom. 15 The principal difficulty that the Lorain 16 County Coalition has with Banc One's record is not 17 with actual dollar amounts that have gone into low 18 and moderate income neighborhoods. 19 In fact, I don't know if this is true in 20 other areas, but certainly in Lorain County, 21 there's been a great deal of money proportionately 22 put into the low and moderate income 23 neighborhoods. 24 The difficulty we have is what kind of 269 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 money it is and does it, in fact, serve the needs 2 of Lorain County? 3 Lorain County is a Midwestern urban 4 center. Single-family homes are the norm. Home 5 ownership is the way in which a community 6 development strategy would work in these 7 neighborhoods. 8 Now, let's break out all of the money that 9 Banc One claims to be using to meet its CRA 10 commitments. 11 One is the purchase mortgage product, 12 which we herald and we want to encourage them to do 13 more of. Unfortunately, they don't seem committed 14 staying in that market and they don't do 15 proportionately very much of that lending. 16 Where we do see a heavy emphasis on their 17 real estate lending is in refinancing. Refinancing 18 may serve the interest of the particular homeowner, 19 but it does absolutely nothing to increase the 20 value of the homes or to raise the wealth within 21 the neighborhood. In fact, it only inserts a lot 22 more debt on what you might call the neighborhood 23 balance sheet. 24 The positive side of Banc One has to be 270 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 mentioned, and that is that they have a strong home 2 improvement product, and in these older 70 to 3 50-year-old houses, that's a very important tool, 4 but it must be recognized that this is a half 5 measure at best when there is a refusal to do the 6 hard work included in a meaningful community 7 redevelopment purchase 30-year mortgage product 8 that requires meeting cost value gaps and doing the 9 difficult work of underwriting loans to first time 10 home buyers who are most often attracted to these 11 neighborhoods. 12 The other problem with the home 13 improvement product is most of it is sold through 14 their branch network. In Lorain County in the last 15 three years, Banc One has gone from 19 to 4 16 branches. 17 In closing, I just want to mention one 18 last development which we find very difficult, and 19 that is the subprime lending. It has increased 20 from three percent in the low to moderate 21 neighborhoods in '93 up to 15 percent of the total 22 lending going on in the low to moderate 23 neighborhoods now. 24 Thank you. 271 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. SMITH: Ms. Jones. 2 MS. JONES: Good afternoon. My name is Rebecca 3 Jones. 4 I guess I need a microphone. 5 My name is Rebecca Jones. I'm a resident 6 of Wellington, Ohio, which is the southern part of 7 Lorain County and is a rural area. 8 My remarks at first were intended to be 9 addressed to the Wellington area, however, I'm also 10 the Director of a nonprofit CDC in the City of 11 Lorain, and the Mayor of Lorain has asked me to 12 make some remarks on his behalf today, so my 13 comments will really be coming from the Mayor's 14 testimony or letter to you, which is attached to my 15 comments. 16 The City of Lorain is about 25 miles west 17 of Cleveland on Lake Erie. It is a Rust Belt 18 city. It's a city of 71,000 people, 30 percent of 19 whom are minorities, and they break down 13 percent 20 African Americans, 17 percent Hispanic. 21 The citizens of Lorain, Ohio, which is a 22 community of mostly low to moderate income 23 families, have traditionally supported homegrown 24 financial institutions such as Lorain National 272 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Bank, Central Trust Bank, First Federal Savings and 2 Loan, Citibank, EST and Lorain County Savings and 3 Trust. 4 Mergers and acquisitions of the 80s and 5 90s have introduced a new banking trend, the 6 establishment of regional banking organizations in 7 the City of Lorain. 8 This trend was substantiated by the 9 following mergers and acquisitions: Elyria Savings 10 and Trust being acquired by First National Bank of 11 Akron which created First Merit bank. Central 12 Trust Bank being bought by Banc One. Citibank 13 closing all branches. Lorain County Savings and 14 Trust Bank acquiring a number of Central Trust Bank 15 locations and changing their name to Premier Bank 16 and Trust. 17 Most recently, in May of 1998, First Merit 18 and Premier Bank merged, closing 17 branches, 19 including two in the City of Lorain, and laying off 20 approximately 200 people. 21 You should be aware that the City of 22 Lorain has lost additional banking service 23 facilities and their related jobs. Banc One has 24 just closed two branches serving the low to 273 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 moderate income neighborhoods of South Lorain, and 2 the Cityview, Sheffield areas. They were closed in 3 late Spring and early Summer, 1998, and these 4 closures parallel the proposed merger of Banc One 5 and First Chicago NBD. 6 The significance of these closings is 7 monumental, as they send a strong signal to the 8 city's low income population that even with Banc 9 One deposits at branches serving Lorain exceeding 10 $85 million, their business is not important. 11 Since the branches closed serve many low 12 to moderate income families who do not have 13 adequate transportation, many people will have 14 trouble getting to the remaining Banc One 15 branches. 16 According to Community Reinvestment Act 17 regulations, banks are supposed to reinvest in 18 communities like Lorain where they obtain their 19 deposits. 20 Banc One bought approximately 15 Central 21 Trust Bank branches in the 1980s, and today, they 22 have eliminated numerous jobs and closed or sold 12 23 branch locations, leaving three branches serving 24 Lorain. This appears to be disinvestment rather 274 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 than investment. 2 Further, the City of Lorain has learned 3 from Kathleen Kaufin, the CRA Vice President of 4 Banc One, that branch locations ideally need to 5 have 35 to $40 million in deposits to meet Banc One 6 guidelines for profitability. 7 If Banc One continues to follow this rule 8 after the merger, it is likely that another branch 9 in Lorain will be closed. This would leave only 10 two locations in the city and only one of those 11 serving a low to moderate income area. 12 The City of Lorain has joined the 13 Coalition for Reinvestment in Lorain County and 14 other community groups from across the nation to 15 closely examine this merger which will result in 16 disinvestment in central cities and urban areas 17 across America, lost jobs, vacant and abandoned 18 buildings and an inaccessibility to convenient 19 banking services and products. 20 Ultimately, if uncontested and not 21 addressed by the Federal Reserve Bank, this mega 22 merger and acquisition progress will lead to the 23 erosion of high-quality, competitive banking 24 services only to be replaced by nonpersonal, 275 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 high-cost electronic banking services provided by a 2 few large banks with almost no competition. 3 Working class families and individuals 4 such as the citizens of Lorain do not need to have 5 their disposable income further eroded due to 6 higher banking fees and costs. 7 Without a commitment to future 8 participation in our community along the lines 9 outlined above and as previously detailed in our 10 meeting with Banc One, it is not in the best 11 interest of the City of Lorain to endorse a mega 12 merger such as that being proposed by Banc One and 13 First Chicago NBD. 14 Thank you. 15 MS. SMITH: Thank you. 16 And we'll go to Ms. Rangan, who is 17 speaking on behalf of Inner City Press Community. 18 MS. RANGAN: Good afternoon. 19 My name is Rashmi Rangan, and I'm reading 20 the written testimony prepared by Matthew Lee, 21 Executive Director of Inner City Press Community on 22 the Move and of the Inner City Public Interest Law 23 Center, together, ICP. 24 ICP on April 28th filed a 38-page protest 276 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 to this application along with Black Citizens for 2 Justice, Law and Order of Dallas, Texas and the 3 Delaware Community Interaction Council. 4 We are opposed to this proposed merger 5 primarily due to Banc One's continued predatory and 6 discriminatory practices through its Banc One 7 Financial Services subsidiary and due to the 8 anticompetitive and branch closing effects the 9 proposed merger will have, particularly in Indiana. 10 The commitments that First Chicago has 11 made in Detroit and Chicago do nothing to address 12 these issues, nor is Banc One's divestiture 13 proposal to sell off certain branches in Indiana 14 sufficient. 15 The proposed merger would also result in 16 substantial branch closings, making all the worse 17 Banc One's cynical manipulation of the target First 18 Chicago to make lending pledges in Chicago and 19 Detroit but not in the communities that would be 20 most affected by this merger, including through 21 branch closings. 22 In 1997, the Federal Reserve Board stated 23 in an order that it had unresolved questions about 24 the fair lending compliance of Banc One Mortgage 277 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Company and that its approvals were explicitly 2 conditioned on Banc One taking such actions as the 3 Federal Reserve might require. 4 Since then, the Arizona Attorney General 5 has charged Banc One with discrimination as 6 implicitly has HUD in Texas. The Fed has made no 7 disclosure of how or if this important issue has 8 been resolved, but 40 days ago, on July 2nd, we 9 made a request for this under the Freedom of 10 Information Act. The Fed has yet to provide the 11 documents. 12 The written comments we have submitted 13 show that in market after market, Banc One's normal 14 interest rate lenders disproportionately exclude 15 African Americans and Hispanics from credit, while 16 Banc One Financial Services, a high interest rate 17 lender, targets these communities for higher-priced 18 credit. 19 For example, in the Akron, Ohio MSA in 20 1996, Banc One Mortgage Company denied 55 percent 21 of mortgage applications from African Americans and 22 only 17 percent of applications from whites, a 23 denial disparity of 3.24. 24 The mortgage company originated 164 loans 278 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 to whites and only seven to African Americans. 2 ICP's comments calls loans to African 3 Americans divided by loans to whites the index. 4 The ratio between BOMC's index and BOFS's index 5 calculated for each market can be viewed as the 6 targeting index. 7 In this particular MSA, for the mortgage 8 company, it was .043, and for the finance arm, it 9 was .193, 4.49 times higher than the mortgage 10 company. In Cleveland, Ohio, 4.47 times higher 11 than the mortgage company. In Dallas, 17.86 times 12 higher than the mortgage company. In Detroit, 5.61 13 times higher. In Gary, Indiana, 5.52 times 14 higher. Milwaukee, 8.53 times higher. These are 15 just examples of what the difference between the 16 two is. 17 The above analysis makes out a prima facie 18 case or red flag that Banc One Corp through its 19 normal interest rate lenders, including Banc One 20 Mortgage, and through its higher interest rate 21 lender, Banc One Financial Services, are engaged in 22 lending discrimination, including pricing 23 discrimination. 24 On this record, the Federal Reserve Board 279 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 must conduct on-site fair lending examinations of 2 Banc One financial services. 3 On the current record, this mega merger 4 proposal which would expand Banc One's practices 5 could not legitimately be approved. 6 There are other adverse issues, including 7 the foreseeable loss of various First Chicago 8 programs and Banc One's record in its existing 9 states have been raised by Ohio and others. 10 For all the reasons stated, this proposed 11 merger should be denied. 12 Thank you. 13 And we will submit additional comments by 14 August 20th, 1998. 15 MS. SMITH: Thank you very much. 16 Ms. Sharpley. 17 MS. SHARPLEY: Hello. My name is Adenike 18 Sharpley. I'm a board member of the Zion Community 19 Development Corporation of Oberlin, Ohio. 20 Our target area is the southeast 21 quadrangle of Oberlin, which is a semi-rural area. 22 I am going to talk about the effects of 23 the Banc One merger on Oberlin, Ohio as a resident, 24 from a customer and employee point of view. 280 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The Oberlin Bank Building at 5 South Main 2 Street, Oberlin, Ohio, until the mid 1980s, was 3 primarily one bank. The Oberlin Bank Company 4 founded in 1889 would in 1904 combine with the 5 State Savings Bank and move to 5 South Main 6 Street. That same year, it would be renamed The 7 Oberlin Savings Bank. So for 76 years, the 8 community of Oberlin has had pretty much the same 9 bank. 10 In the mid-1980s, the musical bank 11 management began at 5 South Main Street. This 12 included in 1990 Central Trust, in 1996 Banc One, 13 in 1998 Premier Bank and the Merit transfer on 14 Labor Day of this year. 15 In 15 years, two local banks were lost, 16 Oberlin Savings Bank and People's Bank, with a host 17 of players to become one mega bank, one small local 18 bank, one savings and loan bank which is located or 19 comes its home out of Cleveland and one credit 20 union which is also based in Cleveland. 21 The staff working in these banks feel 22 intense stress from both bank officials, management 23 and customers. 24 The customer does not understand the 281 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 changes in rules and regulations. The employee 2 must learn changes from old to new systems, 3 learning new rules and regs from the new bank and 4 absorb job shifts, moving from new offices to 5 maintain jobs while branches are closing. 6 These changes also include shifts in pay 7 scale which would be from lower to higher or vice 8 versa. 9 Most of the people absorbing these changes 10 are at the bottom of the chain, tellers, clerks, et 11 cetera, and most of these are women, head of 12 households or who are major bread winners in their 13 family. 14 From the customers' point of view, 15 customers have to deal with new hours, new staff, 16 new rules, new regulations and usually new banking 17 and service products. 18 The control of these banks are moved 19 further away from the customer. Their bank 20 managers are usually there a few days per week 21 along with what I call the roving loan officer. 22 Usually the new staff is less familiar 23 with the new branch and its customers are not 24 usually hired locally, therefore, do not know the 282 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 community. 2 The new staff do not have a connection to 3 the community they serve. They are less willing to 4 cash checks for those without ID because they don't 5 know the customer. And in turn, the staff asks for 6 ID each time they see the customer, no matter how 7 many times they see them. 8 For the customer, this means fewer what I 9 call service value for their dollar, and this is 10 especially true for the low and moderate income 11 individual. This results in a transfer of wealth 12 aware from the community, benefitting the 13 stockholders, as I say, upstairs. 14 Along with no services such as utility 15 bill payment, no product for those who maintain 16 small balances in checking and savings accounts 17 without incurring charges against their account 18 each month, these charges will sometimes result in 19 customers finding that their account has been 20 closed by the end of the month. These customers 21 are usually low and moderate income people, seniors 22 on fixed incomes or those due to disabilities and 23 minorities. 24 At times, the above-mentioned group would 283 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 receive unfriendly and discriminating treatment by 2 tellers, adding insult to injury, this classist and 3 racist behavior by tellers who treat their 4 constituency as if they have little or no money. 5 This leads to fewer service values for the elderly, 6 the disenfranchised and the people of color in the 7 Oberlin community. 8 Thank you. 9 MS. SMITH: Thank you very much. 10 And we'll go next to Ms. Tyler. 11 MS. TYLER: Why is it that Banc One has made no 12 commitment to Ohio but they have made commitments 13 in Michigan and Illinois? 14 Why is it that Banc One Financial Services 15 which offers higher interest rate loans has a more 16 aggressive marketing strategy in low income and 17 minority communities? 18 And how is it that the largest Midwest 19 bank can decide to get out of the home purchase 20 business? 21 These are questions on which I would like 22 to focus your attention for the nest few minutes. 23 I am Dawn Tyler representing the Ohio 24 Community Reinvestment Project, a project of the 284 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Coalition on Homelessness and Housing in Ohio. 2 OCRP's mission is to promote investment in 3 Ohio's low income communities and communities of 4 color. 5 Members of OCRP met with Banc One for 6 several months. Constructive dialogue took place 7 with representatives of the bank. 8 On numerous occasions, the bank gave us 9 every indication that they were willing to enter 10 into a community action agreement that would 11 ultimately increase lending, service and investment 12 opportunities within Banc One's service areas. 13 Some areas we were willing to set 14 reasonable benchmarks include home purchase loans, 15 small business lending, multi-family housing 16 investments and lending and community development 17 grants. 18 At the eleventh hour, however, about less 19 than a week before the end of the comment period, 20 the bank decided they did not want to move forward 21 with negotiations, and for those of you that were 22 here this morning, it sounds very similar to a 23 story told by Ted Thomas from ACORN. 24 Banc One's refusal to negotiate a 285 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 meaningful community action plan for Ohio raises 2 questions about their commitment to Ohio 3 post-merger. The bank did not operate in good 4 faith. 5 Our primary concern is that this proposed 6 merger could have dramatic consequences for 7 financial services consumers throughout the State 8 of Ohio since the corporate headquarters of Banc 9 One currently based in Columbus will move to 10 Chicago. This merger could result in substantial 11 disinvestment in Ohio communities. 12 My second point is the disparate treatment 13 of African Americans in accessing credit for 14 mortgage loans from Banc One and its mortgage 15 company. 16 Low and moderate income consumers are 17 denied access to mortgage loans more frequently 18 than by other lenders, and Banc One lacks 19 aggressive marketing efforts to African American 20 and low and moderate income applicants, 21 particularly by the bank's affiliates and Banc One 22 Mortgage Company. 23 Rashmi has done a sufficient job of 24 sharing some statistics from Akron and Cleveland, 286 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 so I will not repeat those details, but Banc One 2 Mortgage Company does not have an aggressive 3 lending record to minorities and low and moderate 4 income applicants. 5 Banc One Financial Services, the BNC 6 lender, charges customers higher interest rate 7 loans compared to rates offered by Banc One 8 Mortgage Company and is engaged in extremely 9 aggressive marketing practices through direct mail 10 and phone solicitation which targets low and 11 moderate income people in minority census tracts. 12 This is a clear illustration of the 13 predatory lending practices of Banc One Financial 14 Services which disproportionately targets African 15 Americans for higher interest rate credit, 16 originates loans at a higher rate than the mortgage 17 company. 18 The bank should offer A loans to all 19 applicants who qualify, regardless if they come 20 into the bank, the mortgage company or financial 21 services. 22 We encourage the Feds to follow the lead 23 of the OCC as in the case of First Union Money 24 Store and mandate that Banc One offer prime loan 287 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 products to all who qualify. 2 Thirdly, Banc One has decided to get out 3 of the home purchase business. 4 It was interesting to hear about the new 5 self-help product that was mentioned this morning, 6 however, historically, the bank has ignored the 7 credit needs of LMI communities. This is 8 unacceptable for a bank the size of Banc One. 9 And my fourth issue relates to small 10 business lending which Chuck Bromley, our OCRP 11 Chairperson, has shared on the previous panel. 12 Time does not permit for me to talk about 13 the over 60 branch closures that have taken place 14 in Ohio or the $8 check cashing fee that's imposed 15 on Banc One customers. 16 In closing, we do not dispute the fact 17 that Banc One, especially the CDC, has been active 18 in areas such as tax credit projects and community 19 development grants to nonprofits, however, there 20 are no safeguards in place to ensure that this is 21 continue after the merger. 22 We ask the bank to make some very basic 23 commitments to minimize the potential negative 24 impacts, and after dragging us along for several 288 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 months, they refused, despite the fact that they 2 are planning to honor similar commitments in the 3 communities of Chicago and Detroit. 4 The bank claims that no market will be 5 abandoned and the commitment will continue. If 6 this is the case, why is there such a hesitancy on 7 the part of the bank to put such a commitment in 8 writing? 9 Earlier today, Banc One mentioned one part 10 of their recipe for success is relationships with 11 local partners. How can I as a local partner be 12 part of that recipe for success when I've been 13 kicked out of the kitchen? 14 Please consider carefully the information 15 that has been presented today. I urge the Federal 16 Reserve to postpone the merger until mutually 17 beneficial community action plans have been reached 18 in all of Banc One's markets. 19 Your meaningful intervention can 20 facilitate fair lending, service and investment 21 opportunities in Ohio's low income communities and 22 communities of color that have historically been 23 overlooked and underserved. 24 MS. SMITH: Thank you. 289 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Ms. Walker. 2 MS. WALKER: I'd like to thank the Federal 3 Reserve to have the freedom to speak today. 4 I am Marge Walker, and I'm a resident of 5 the City of Lorain, 30 miles west of Cleveland, and 6 I'm speaking on behalf of the South Lorain 7 Merchants Association. 8 I have been a hairdresser for a long time, 9 and due to situations, I have been had to be 10 retrained because I can no longer stand for long 11 periods of time. 12 My neighborhood is adjacent to an old 13 steel plant that once employed 7,000 men. It now 14 employs less than 2,000 people. Can you imagine 15 what it does to a community? 16 Once Banc One's retail operations have -- 17 the severe cutback in Lorain County. We are told 18 that the cutback has nothing to do with the 19 merger. In my perspective, it has everything to do 20 with the merger because that is the trend of the 21 country these days. 22 Money loaning and the -- are joining with 23 the money grabbing businesses. Our Banc One branch 24 that just closed, it has five million dollars in 290 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 it. I guess it's not enough money. They says it's 2 nothing personal, but business is business. 3 I would like to talk about trends. The 4 Federal Reserve reports -- own report seems to 5 conclude that small business lending suffers when 6 big banks buy smaller banks. 7 Small bank -- small business lending 8 depends upon relationships with neighborhoods, 9 merchants, and big banks don't look at their 10 operations over the long-term with the investment 11 in the community. 12 We are told that the United States is fast 13 approaching a time when whites will be in the 14 minority. I recently read that the buying power in 15 the Black community has grown recently to 8.2 16 percent in the consumer economy. With this kind of 17 trend underway, how is it that the bottom line, 18 conscientious banks haven't the foresight to 19 actively pursue the growing minority market. 20 If all these bank branches and the lending 21 institutions are, in fact, race neutral, why aren't 22 we seeing fierce competition for the minorities? 23 People forget the depositors contribute 24 more money to the banks than the stockholders, but 291 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 every time I turn around, there are always fewer 2 advantages for depositors and more and more for the 3 stockholders. 4 The depositors have fewer banks to go to, 5 fewer hours to get service from and fewer staff who 6 are shifted around in the system so that there is 7 no relationship with the community. Deposits earn 8 less and less interest while fees go up and up. 9 So while some executives get very rich and 10 stockholders look to increase their return on 11 investments and lower returns on their deposits and 12 increased costs. 13 Now banks have made it clear that they 14 don't want to be banks anymore, they want to be 15 stockbrokers, insurance agents, pension advisors, 16 investment specialists, et cetera. They want to 17 cross-sell their customers into every conceivable 18 financial imaginary product except plain, 19 old-fashioned human-oriented service. 20 Just once I would like to see the 21 announcement of another bank merger or acquisition 22 that would conclude with the following sentence: 23 The merger is subject to regulatory and depositor 24 approval. 292 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 If depositors had a voice in these 2 matters, maybe the executives, high fliers and 3 golden parachuters would have to promise them 4 higher interest rates on a deposit, lower fees and 5 more locations and longer hours and better service 6 to people. 7 This regulatory body is all that stands 8 between the voice of depositors and the greedy 9 money grabbing depositors -- at depositors' 10 expense. 11 You are duty bound to look at the 12 competition, convenience and the needs of the 13 communities. 14 On behalf of South Lorain Merchants 15 Association, I want to tell you to deal with 16 this -- tell you this deal does not create 17 competition. We need competition in the 18 community. We have an example right now with BP 19 and Amoco merging. We're losing a thousand jobs in 20 Cleveland and the space that it takes for rental in 21 Cleveland. 22 If you continue along the lines of having 23 less competition, there's going to be no 24 competition. How many banks are going to be left 293 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 when we get through with all this? 2 As somebody earlier had commented about 3 having 9,000 banks at one time and now it's getting 4 down to less and less, what are you going to do 5 when there's no competition, when there's nobody to 6 go to? 7 That's it. 8 MS. SMITH: Thank you very much. 9 Any questions? 10 MS. WILLIAMS: I've got one. 11 MS. SMITH: Okay. We have a question. 12 MS. WILLIAMS: This is for Mr. Bellamy. 13 You mentioned that subprime lending went 14 from 3 to 15 percent. Was this in Lorain County, 15 and over what period, and was this percentage for 16 one institution? 17 MR. BELLAMY: This is for Banc One. This is in 18 Lorain County only. This is for Banc One. 19 And the financial services subprime 20 lending branch of Banc One just came into the 21 county in '93, and at that time, they had, as I 22 say, only three percent of the total investments in 23 the low to mod areas. 24 In 1996, the financial services branch, 294 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the subprime lender, is up to 15 percent of the 2 residential lending in that same category of low to 3 mod areas. 4 MS. WILLIAMS: Okay. Thank you. 5 MS. SMITH: Thank you very much. 6 I will remind people that you may submit 7 written supplements to your oral testimony by next 8 Thursday, August the 20th. And the information 9 about where to provide them has, I think, been 10 given to you, or you can get them from the 11 registration desk. 12 We're scheduled for a ten-minute break. 13 We're about a half an hour behind schedule. I 14 think we're going to save five minutes by cutting 15 it to a five-minute break, so we'll see you here 16 very soon. And I think the timers are going to 17 time us. 18 (Whereupon, a recess was 19 taken.) 20 (Whereupon, further proceedings 21 were had which are bound under 22 separate cover.) 23 24 295 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 PUBLIC MEETING REGARDING THE PROPOSAL BY 2 BANC ONE CORPORATION, COLUMBUS, OHIO, 3 TO MERGE WITH 4 FIRST CHICAGO NBD CORPORATION, CHICAGO, ILLINOIS 5 6 7 Proceedings had in the above-mentioned 8 cause, on Thursday, the 13th day of August, 9 1998, at The Federal Reserve Bank of Chicago, 10 230 South LaSalle Street, Chicago, Illinois, at 11 9:00 o'clock a.m. 12 13 14 15 VOLUME II 16 17 18 19 20 REPORTED BY: Brenda S. Tannehill, CSR 21 LICENSE NO.: 084-003336 22 -and- 23 REPORTED BY: Jeanette A. Sandei, CSR 24 LICENSE NO.: 084-003685 296 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 (Whereupon, proceedings were 2 previously had which are bound 3 under separate cover.) 4 MS. SMITH: We're starting with Mr. Ruf. 5 MR. RUF: My name is Fritz Ruf. I'm the 6 Executive Director of Wisconsin Housing And 7 Economic Development Authority and here to testify 8 in support of the merger of Banc One and First 9 Chicago NBD. 10 Wisconsin Housing and Economic Development 11 Authority is a State Housing Finance Authority 12 created in 1973. 13 Our mission is to serve Wisconsin 14 residents and communities by working with others to 15 provide creative financing and technical resources 16 to stimulate and preserve affordable housing, small 17 business and agriculture. 18 One of our oldest and most reliable 19 partners has been Banc One and its predecessor, 20 Marine National Exchange Bank. Together, we have 21 provided millions of dollars of affordable 22 financial resources to Wisconsin home buyers, 23 farmers and small business owners. 24 Consider the following track record 297 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 established by WHEDA and Banc One. And incidently, 2 these numbers are not included in the HMDA data 3 that has been referred to previously because we are 4 still in the process of working with the Federal 5 Reserve Bank of Chicago to determine a method to 6 permit this information to be accumulated as the -- 7 in the HMDA data to give a more accurate reflection 8 of low to moderate income lending in Wisconsin. 9 1,539 home purchase loans totaling 10 $72,765,867; 41 home improvement loans totaling 11 $350,000; 2 beginning farmer loans totaling 12 $288,000; 133 agricultural production loan 13 guarantees totaling $1,758,000; 10 small business 14 loan guarantees totaling $1,055,000; and 23 small 15 business loan subsidies totaling $683,000. 16 Moreover, Banc One is the first 17 corporation to invest in Wisconsin whole 18 income housing credit development. Today, Banc One 19 has debt or equity investments in 35 Wisconsin 20 communities. 21 While we are pleased with this record, 22 we continue to seek opportunities to do more. 23 Recently, Wisconsin Housing and Economic 24 Development Authority talked to numerous investment 298 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 bankers, underwriters, insurance companies and 2 banks in an effort to find some parties interested 3 in providing financial assistance for the 4 development of low-income, multi-family housing in 5 rural areas in Wisconsin where the need is very 6 acute and the ability to meet that need has been 7 very limited by the size of the loans and the 8 inability to acquire adequate capital to be -- who 9 would be attracted to this market. 10 Banc One was the first and only 11 institution to respond to this search of ours. And 12 we have developed with them a corporation known as 13 the Wisconsin Affordable Housing Alliance, LLC. 14 The purpose of the alliance is to provide 15 a permanent loan product for financing of small, 16 nonmetropolitan, multifamily developments that 17 use low-income housing tax credits, to leverage 18 private capital for multifamily development, to 19 fill a market need with a product not otherwise 20 available in Wisconsin, and to create quality 21 rental housing for low to moderate income 22 Wisconsinites in small income markets. 23 Until the alliance, Wisconsin tax credit 24 developers had difficulty accessing long-term 299 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 credit. Many relied on short-term organizations 2 with uncertain and unknown future terms. This 3 mismatch of resources to purpose was limited to 4 production of smaller-scale developments that are 5 badly needed in many Wisconsin communities. 6 Through the alliance, developers can now 7 plan their projects with more confidence and also 8 readily assess equity from investors who favor such 9 long-term financing. 10 This program has allowed us to put forth 11 $1,975,000 in three developments containing 92 12 units. Presently, the alliance is committed -- has 13 committed to additional loans of up to $5,124,000, 14 this from a corporation in which we have 15 contributed $1 million of equity, Banc One CDC 16 contributed a million dollars in equity and a line 17 of credit of up to $10 million. 18 We feel very strongly that Banc One has 19 been and will continue to be a very aggressive 20 provider of lending product to low to moderate 21 income families in Wisconsin. And we'd urge the 22 Federal Reserve Bank to favorably consider the 23 merger that is before them today. Thank you. 24 MS. SMITH: Thank you very much. We'll go to 300 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Mr. Barbash. 2 MR. BARBASH: Good afternoon. I appreciate 3 your allowing me to move up. It allows me to get 4 back to Columbus and not miss the Savage Garden 5 concert, which my 15-year old daughter has insisted 6 I be back for. 7 MR. ALVAREZ: Lucky for you. 8 MR. BARBASH: Yeah, lucky me. 9 My name is Mark Barbash. I'm Executive 10 Director of Columbus Countywide Development 11 Corporation. We are what's called a certified 12 development company. 13 We've been in existence since 1981. And 14 our mission in life is to create jobs. We do this 15 by filling the capital access gap for small 16 businesses by providing financing which takes 17 substantially greater risk than conventional bank 18 financing and which may involve substantial 19 technical assistance to entrepreneurs. 20 The purpose of my appearance here today is 21 to strongly support the merger of Banc One and NBD 22 First Chicago. 23 And I do this primarily based upon the 24 record of practical day-to-day partnership that 301 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 exists in Columbus between Banc One, and not just 2 Columbus Countrywide, which is the primary 3 small business lender in the area, but a whole 4 range of other economic development, social 5 service organizations, the Ohio State University, 6 and so on. 7 Let me give you four specific examples of 8 Banc One's involvement. 9 The first is their involvement in regular 10 standard small business lending through the SBA 504 11 program. In our business, we make loans -- second 12 mortgage loans to small businesses for real estate 13 expansions so they can grow and hire people. 14 Since 1981, Banc One has financed 15 $60 million in SBA 504 financing in essentially 16 three counties of central Ohio. This is about 17 14 percent of the total investment that our 18 certified development company has made in SBA 504 19 financing. They are the lead bank in this area. 20 Second is the area of microenterprise 21 financing. In 1993, we established a central Ohio 22 microloan program. We did this by using funding 23 from the Small Business Administration, but it 24 required contributions of area lenders to establish 302 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 a loan loss reserve fund. 2 Banc One was the first in the gate. They 3 contributed $14,000 to this program. It was a 4 small amount, but since then we've put out just 5 under a million dollars in financing to 150 6 start-up small businesses primarily in the inner 7 city of Columbus. 30 percent of this has gone to 8 minority-owned businesses, 49 percent to 9 women-owned businesses and 40 percent to low-income 10 business owners. 11 The third area is microenterprise 12 training, which you discover when you make loans to 13 start-up small businesses is it's not just the 14 money, it's the ability to run the business. 15 Banc One was the lead founder of a program 16 in Columbus called Fast Track, which was set up by 17 a group called the Ohio Foundation for 18 Entrepreneurial Education, which is a practical 19 day-to-day training program to help entrepreneurs 20 become better entrepreneurs. 21 To date, they've put $65,000 in 22 operational funding in and have funded $15,000 in 23 scholarships. In 18 months, we've basically 24 trained 150 small businesses. 303 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Fourth, recently Banc One participated in 2 the establishment of the Columbus Growth Fund, 3 which is a Mezzanine Financing Fund between debt 4 and equity targeted at minority women-owned 5 businesses in the city of Columbus. 6 Banc One's specific involvement has been 7 $545,000 towards this project. Banc One's 8 involvement is not just money. It's day-to-day 9 involvement by their officers, both line lenders, 10 by senior managers and loan review committees, 11 evaluations of applications. They really put in 12 thousands of hours. 13 Let me stress a couple of points. The 14 first one is our organization, as I've said, is not 15 the only game in town. I represent but one facet 16 of Banc One's involvement in Columbus economic 17 development activities. 18 Second thing is that there's been some 19 concern about the impact of Banc One's local 20 economic development activities by the impact of 21 the merger. 22 In another role, I am the President of an 23 organization called the National Association of 24 Development Companies, which is an association of 304 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 groups like ours around the country. 2 And when Banc One would buy a local bank, 3 I would get calls from local certified development 4 companies around the country saying, you're from 5 Columbus, tell us about Banc One. I tell them 6 about my good experience. 7 And with almost universal response, six 8 to twelve months later these certified development 9 companies call back and say, you know, you were 10 right, it took them a little while, but, in fact, 11 they're very active in local economic development. 12 Around the country, they seem to be having this 13 effect. 14 A lot has been said here about the 15 desirability of having special agreements. I want 16 to finish by saying that we don't have a special 17 agreement with Banc One. We don't have a written 18 piece of paper. 19 What we have is a practical, day-to-day 20 working relationship with the bank that caused -- 21 has obligations on our part to do our job, 22 obligations on Banc One's part to help do this. 23 And we strongly support the merger. 24 MS. SMITH: Thank you very much. 305 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MR. BARBASH: Thank you. 2 MS. SMITH: Ms. Carlstedt. 3 MS. CARLSTEDT: Is this -- 4 MS. SMITH: I'm not sure that that -- here, 5 just use that one. 6 MS. CARLSTEDT: Thank you for this opportunity 7 to address the Federal Reserve Panel. My name is 8 Moria Carlstedt, and I am the President of the 9 Indianapolis Neighborhood Housing Partnership. 10 The partnership was formed in 1988 and is 11 a catalyst and intermediary to support the 12 creation of affordable housing opportunities in 13 Indianapolis, as well as just to support the 14 sustaining of our current affordable housing 15 stock. 16 Through partnerships with Federal, State 17 and local governments, as well as our philanthropic 18 institutions, community development corporations 19 and the financial institutions, the Indianapolis 20 Neighborhood Housing Partnership has been involved 21 in counselling, credit counselling, home ownership 22 training and direct lending through loan pools. 23 Since 1988, we have counselled 24 approximately 5,000 customers. We have conducted 306 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 150 classes. And we've been involved in 2 approximately 2,000 units of home ownership 3 opportunity and/or quality rental opportunities. 4 The Housing Partnership has had a 5 long-standing relationship with Banc One and First 6 Chicago NBD. They have been with us since the 7 beginning. Both institutions have participated in 8 two single-family loan pool opportunities, as well 9 as one multi-family loan pool. 10 Banc One and First Chicago represented -- 11 First Chicago NBD, excuse me, represented 12 approximately 46 percent of our first loan pool, 13 they represent 40 percent of our existing loan 14 pool and about 66 of our multi-family lending 15 loan pool. 16 The pools have been the primary source 17 of funds dedicated to creating affordable and 18 low-income housing opportunities in Indianapolis. 19 Additionally, among the financial 20 institutions, since 1988 Banc One and First Chicago 21 NBD have been the single largest donating -- they 22 have donated more money to our partnership and 23 supported our operations. 24 They also have membership on our Board of 307 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Directors and have been actively involved in our 2 community in the -- supporting the affordable 3 housing delivery system. 4 The Housing Partnership has been working 5 with Banc One and we have been in communications 6 with Banc One to ensure that the momentum and 7 significant community -- the significant community 8 development activity that has taken place over the 9 years remains at a pace that will meet the needs of 10 our citizens. 11 The Housing Partnership recognizes and 12 respects the business activities or the business 13 reasons for the merger. And we believe that 14 Banc One will, in fact, remain a strong community 15 partner. 16 We are always there in communication with 17 Banc One to remind them that the post-merger bank 18 will need to remain committed to our organization 19 and other organizations such as ours, like the 20 Community Development Corporations and other 21 partners and stakeholders. 22 It is imperative that Banc One remain 23 involved in order to enable us to sustain the pace 24 at which we are developing affordable housing 308 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 opportunities. 2 We are communicating with Banc One on a 3 regular basis to remind them of the tremendous 4 financial investment that has taken place in 5 Indianapolis over the years. 6 Our philanthropic institutions and our 7 community development corporations, the government 8 and the private sector, have worked well together 9 and we have made tremendous accomplishments. And 10 Banc One and First National and NBD have been there 11 primarily in the form of the loan pools and by 12 supporting the partnership. 13 We are always reminding Banc One of the 14 need for them to continue to play a significant 15 role. Our community has just completed a task 16 force which will guide our growth and our community 17 in the form of its housing policy for the next ten 18 years. And it is clear that Banc One and all of 19 the financial institutions will be imperative -- it 20 will be imperative that they participate in our 21 growth in the next ten years. 22 Finally, we don't hesitate to remind Banc 23 One and the other banks in our community about the 24 profitable business opportunities in remaining in 309 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 partnership and remaining actively engaged in the 2 community development movement. 3 Through our counselling, we refer 4 hundreds, hundreds of citizens to Banc One and 5 other banks in our community who and then -- who 6 then are able to access traditional mortgage 7 products. 8 Banc One and the Indianapolis Neighborhood 9 Housing Partnership have communicated throughout 10 this entire process. And we are optimistic that 11 that communication will continue to the benefit of 12 the community. 13 Therefore, based on the significant level 14 of participation of Banc One and the history of the 15 Community Development Corporation of the community 16 development movement and in their commitment to the 17 partnership, as well as assurances that we have 18 received during this process and a belief that 19 local bank management will, in fact, be making 20 decisions for the local community, the Housing 21 Partnership is encouraged about the future. 22 And we believe that Banc One will remain 23 committed to the Indianapolis community, to the 24 partnership and to community development. Thank 310 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 you for this opportunity. 2 MS. SMITH: Thank you. Ms. Jones-Kibby. 3 MS. JONES-KIBBY: Hello. I want to thank 4 you -- I need a microphone. 5 Good afternoon. I want to thank you for 6 the opportunity to speak out in support of the 7 merger between Banc One and First Chicago NBD. 8 My name is Denise Jones-Kibby, and I'm the 9 Policy Director at Women's Self-Employment Project, 10 as well as the Chair of Illinois State 11 Microenterprise Initiative, also known as ISMI. 12 Women's Self-employment Project founded 13 ISMI in the fall of 1995. ISMI is a coalition of 14 service providers, financial institutions, State, 15 local and private agencies. 16 Our mission is to provide an organized 17 voice to advocate for community economic 18 empowerment and to create growth opportunities 19 for microenterprise development throughout the 20 state of Illinois. 21 Microenterprise are defined as very small 22 businesses having fewer than five employees, 23 limited access to the commercial banking sector, 24 are able to utilize a loan under $15,000 and are 311 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 generally sole proprietors. 2 A study by the Aspen Institute found that 3 entrepreneurs served by microenterprise development 4 programs are predominantly women, people of color 5 and low to moderate income. 6 Many microenterprise businesses are 7 located in residential communities. By providing 8 business services in residential communities, 9 microenterprise affords economic fabric that is 10 critical to maintaining economically viable 11 neighborhoods. 12 There are over 200,000 microenterprise 13 businesses in Chicago. Microenterprise is growing 14 at an annual rate of 7 to 8 percent. The number of 15 microenterprise businesses is expected to reach 16 27.8 million nationwide by the year 2001. 17 66 percent of the new jobs created 18 in Illinois between 1992 and 1996 were 19 microenterprises compared with the net loss of 20 jobs in firms over 100 employees. 21 As a number of microenterprise businesses 22 increase in Illinois, it is imperative that the 23 government and private sector leaders recognize and 24 support microenterprise as an essential component 312 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 of economic development and welfare-to-work 2 strategies that result in job creation and 3 self-sufficiency. 4 I am testifying today to inform you that 5 Banc One Illinois has been very supportive of 6 ISMI's efforts to promote microenterprise in 7 Illinois. Banc One was one of the first financial 8 institutions to join ISMI and has taken a 9 leadership role in several of its initiatives. 10 In March of 1998, ISMI held its first 11 statewide microenterprise conference in 12 Springfield, Illinois. Banc One financially 13 sponsored the conference, assisted in the planning 14 and facilitated discussions. 15 Banc One has also taken a leadership role 16 in the development of a database and a directory of 17 microenterprise organizations in Illinois. We 18 anticipate that both items will be accessible 19 through the Internet in the near future. 20 Access to information is often cited as an 21 impediment to microenterprise development. And 22 ISMI anticipates that this second edition of the 23 directory will be as popular and useful statewide 24 as the first. 313 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One is working with other ISMI 2 members to research and develop a report 3 identifying the barriers faced by 4 microentrepreneurs in Illinois. 5 We will use this report to increase our 6 advocacy for creating a public and private sector 7 environment in Illinois that fosters 8 microenterprise development in fund-raising. 9 As ISMI works towards its goals of 10 developing a comprehensive public policy agenda 11 that promotes microenterprise as a viable economic 12 development alternative, especially for communities 13 with limited access to resources, addressing the 14 needs of microenterprise development programs and 15 building a network to exchange information between 16 microenterprise organizations in Illinois, ISMI 17 believes that Banc One will continue to be a 18 valuable partner and, therefore, ISMI supports this 19 merger application. Thank you. 20 MS. SMITH: Thank you very much. Mr. Kudek. 21 MR. KUDEK: Thank you. 22 My name is Ken Kudek. I'm Assistant 23 Director and Vice President of Focus Hope in 24 Detroit. Focus Hope is a human and civil rights 314 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 organization. And we are this year celebrating our 2 30th anniversary. 3 I think it's fair to say, up front, that 4 First Chicago NBD is one of three major banks that 5 we do a lot of business with in Detroit. We have 6 an operating budget of $60.2 million and usually 7 have a capital devolvement budget of $20 million a 8 year operating, okay? At least two of those banks 9 probably wish I wasn't here testifying in favor of 10 this merger today. 11 The programs that we run, let me start 12 with the key program, the Food Prescription 13 Program. It's a Federal Commodities Supplemental 14 Food Program for low-income pregnant women, 15 postpartum women, infants and children to six years 16 of age and senior citizens in Detroit. 17 During the first Reagan administration, we 18 actually got it introduced as a pilot legislation 19 when every other program -- social program in the 20 United States was coming under jeopardy. 21 The Food Prescription Program in the last 22 depression that we had in Detroit, which was in 23 1991, fed 90,000 people a year. It's that 24 experience that drives us as a civil and human 315 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 rights organization to community and economic 2 development. 3 We chose human skill development as the 4 primary driver, the one thing that could not be 5 relocated easily and the kind of thing that put 6 us into technical training in the deals that 7 we're in. 8 Effectively, those technical training 9 programs are viewed as breakthrough. They're 10 copied in the United States from Los Angeles 11 through St. Louis to Philadelphia. And we now have 12 a clone coming up in Port Elizabeth, South Africa. 13 In those programs, high school graduates, 14 who in the United States come out with Sixth Grade 15 math and Eighth Grade reading functionally, can end 16 up with a Bachelor's of Manufacturing Engineering 17 and human experience time. 18 We take people from Eighth Grade math and 19 Eighth Grade reading in seven weeks to be able to 20 do technical training; that is, Eleventh Grade math 21 and about Tenth Grade reading in the seven weeks, 22 all in human time. 23 These are all poor folks. 80 percent of 24 the population is African American, 45 percent in 316 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 a nontraditional field of manufacturing and 2 machining and engineering are female, 80 percent 3 are low income. 4 The place in which we live is 5 a low-income section of Detroit. We see poverty 6 day in and day out. We don't like it. We want to 7 change it. That is our mission, to eliminate 8 poverty, racism and adjust it. 9 To -- I've heard a number of concerns 10 about housing care. By the way, our bias on that 11 is, if you create the human skills so that people 12 are productive, you draw jobs. Jobs create money. 13 Money creates housing. I don't need Federal 14 Legislation to create housing. I need jobs, okay? 15 We have had, for the last 20 years -- we 16 looked at it last year -- fiduciary responsibility 17 for over one-half billion of Federal dollars alone, 18 500 million Federal dollars. The departments that 19 have put their confidence in us are Agriculture, 20 HHS, DOD, DOL, DOE, DOC, HUD, to name a few. Okay? 21 I say all this because bona 22 fese (phonetic) are important. And I've 23 listened in the audience for a while to my brother 24 and sister colleagues who are in community and 317 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 economic development who are on the other side of 2 this issue. 3 We've known NBD -- and I'll refer to them 4 as NBD because it's the old name. I don't change 5 that easily. 6 We've known NBD since we had $110.48 to 7 put in the bank. In the 30 years of history, one 8 sees both good times and bad times as a civil human 9 rights organization. NBD was always there. 10 As I said, we had a fiduciary 11 responsibility for a lot of Federal money, State 12 money, local money, foundation money all over the 13 place. And in each of those cases, particularly on 14 the Federal Government, the State side and the 15 local governmental side, it is extremely, extremely 16 slow pay. NBD has been there with a line of 17 credit. 18 I only have one minute left, so I'll take 19 on the two objections. One is Banc One, who I 20 don't know, has a bad history of lending, possibly 21 discriminatory. You guys need to look into that. 22 I'm a civil and human rights guy. You need to look 23 into that. 24 The second is that consolidation may lead 318 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 to disinvestment. I don't believe that's true. My 2 experience with NBD and Bank -- First of Chicago 3 NBD since the merger is that there has been more 4 re-investment and not less re-investment in 5 Detroit. And thank you for your time. 6 MS. SMITH: Thank you. Ms. Ratner. 7 MS. RATNER: I'm Hedy Ratner, and I'm 8 Co-President of the Women's Business Development 9 Center. 10 Thank you for the opportunity to present 11 my response to the proposed merger of Banc One with 12 First Chicago NBD in support for Chicago NBD and 13 Banc One's merger and commitment to both the letter 14 and spirit of the Community Reinvestment Act. 15 Representing thousands of women and 16 minority business owners in the Chicagoland area, 17 the WBDC is involved in First Chicago NBD's 18 continuing investment into low and moderate income 19 families, business and neighborhoods and 20 specifically in its efforts to provide access to 21 credit in those communities. 22 The Women's Business Development Center 23 has a positive first-time experience with First 24 Chicago NBD since the inception of our organization 319 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 in 1986. 2 The WBDC provides counselling, 3 entrepreneurial training, financial assistance, 4 business and strategic planning, marketing and 5 procurement assistance and assistance with loans to 6 start-up, emerging and mature businesses. 7 Our organization is now the oldest and one 8 of the largest and most comprehensive women's 9 business assistance centers in the United States. 10 First Chicago has been our partner in 11 economic development providing support for our 12 organization, loans to our client, funds for our 13 collateral pool to collateralize small business 14 loans, program-related investments for microlending 15 to women and minority start-up businesses, involved 16 with our Board of Directors, participation as a 17 lender in our women's business bank loan program 18 and participation in our annual events at 19 conferences and marts, and is committed to vendor 20 development and purchasing from minority and women 21 business owners, one of our major missions. 22 Recently, the Women's Business Development 23 Center and First Chicago NBD began a wonderful new 24 partnership to provide business development, 320 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 financial assistance and banking services to low 2 and moderate income communities. 3 First Chicago NBD and the WBDC are taking 4 our programs and services on the road with the 5 Wheels of Business mobile van to make our programs 6 and services more available and accessible in 7 low-income communities. 8 This innovative new business program will 9 bring information and services, counselling and 10 entrepreneurial training, banking services, credit 11 advice and counselling, financial assistance, 12 Internet training and access to that technology, as 13 well as self-employment opportunities to 14 economically disadvantaged communities. 15 Women, and specifically those in 16 low-income communities, have been left out of 17 economic opportunities. Women face numerous 18 barriers to economic self-sufficiency because of 19 lack of affordable child care and access to 20 transportations, quality education and jobs. 21 The First Chicago NBD Worlds -- Wheels 22 of Business -- First Chicago NBD-WBDC-Wheels of 23 Business approach helps us provide resources, 24 information and support to those who need -- 321 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 most need help. 2 The WBDC is also a partner with Banc One. 3 It has been part of the Women's Business Bank Loan 4 Program, participated in our annual conferences and 5 supports the WBDC and provides loans to our 6 clients. 7 WBDC is also partnering with ACCION, a 8 neighborhood microlender which has received 9 considerable support and encouragement from First 10 Chicago NBD. 11 With ACCION providing loans and WBDC 12 providing business assistance, the small businesses 13 in economically disadvantaged neighborhoods have a 14 better chance for success in the communities and 15 increased opportunities neighborhood 16 revitalization. 17 CANDO, a microlender and a neighborhood 18 development organization, has also been our partner 19 and a partner of First Chicago NBD for many years, 20 lending, developing and supporting Chicago's 21 economic strength. 22 The partnership of private and public 23 sector, nonprofit and for-profit entities is 24 also evident in First Chicago's involvement with 322 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the Illinois Capital Access Program, a 2 state-based small business loan initiative begun 3 in early 1997. CAP is now one of the most 4 successful programs for access to capitals for 5 small businesses. 6 First Chicago NBD is the most active 7 lender in this successful program. CAP's incentive 8 program provides more ways for First Chicago to 9 approve loans for small business. 10 For the WBDC and other community 11 development organizations, to truly understand the 12 issues of small business lending in low and 13 moderate income communities, gender and race based 14 lender data that has been available for housing is 15 not available for small business. 16 With good research, gender and race based 17 data, we can develop the successful policies and 18 programs for small business lending in the next 19 century. We, therefore, look to First Chicago with 20 Banc One to be the precedent-setter and to lead 21 national efforts in changing Regulation B. 22 This is a tiny window of opportunity. 23 The Federal agencies are requesting comment and 24 recommendations on Reg B from the general public. 323 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Although our organization and hundreds 2 of community and economic development organizations 3 agree that the requirement of gender and race 4 based commercial lending data is necessary for 5 policy and appropriate development, we would like 6 to see the participation of major banks in this 7 effort as well. 8 The WBDC and many of our colleagues across 9 the nation are also very concerned about the effect 10 bank mergers will have on small business lending. 11 The standardization of underwriting 12 criteria, the removal of lending decision-making 13 from the first-line banker, which is the continuing 14 trend in larger and merged banks, is detrimental 15 to the growth of small businesses in the inner 16 cities. 17 Although intermediaries like ours -- oops, 18 am I off? I'm off. Well, I'm done, I guess. 19 MS. SMITH: Thank you very much. We will 20 keep -- we will put your entire statement into the 21 record. 22 MS. RATNER: Thank you. 23 MS. SMITH: Any questions? All right. We're 24 ready for Panel 16. 324 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 All right. We're going to start with 2 Mr. Ellis, if someone will give him the mike. 3 MR. ELLIS: Ladies and gentlemen, my name is 4 Walter Ellis. I'm the Director of an organization, 5 United Affirmative Action Development Corporation. 6 In 1995, UAD began negotiations with 7 the then Premier Bank in Ruston and Baton Rouge, 8 Louisiana, to expand banking opportunities for our 9 underserved communities. 10 The discussions specifically focused upon 11 creating more employment opportunities for African 12 Americans within the bank and making more loan 13 capital available to support African American 14 entrepreneurship. 15 Thus, the discussion with Premier began, 16 raising the issue of whether it was meeting the 17 needs of Grambling, clearly an underserved 18 community. 19 Discussions continued over a period of 20 months with UAD and Premier Bank attempting to 21 effect an agreement that would result in a 22 consulting relationship, wherein Premier would 23 provide capital for commercial loans, create an 24 internship program for Grambling University 325 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 students and graduates, and UAD would assist in 2 providing applicants for each. 3 Through the course of events, UAD worked 4 with Grambling University and community officials 5 toward bringing the internship program to 6 fruition. 7 Following what initially appeared to be 8 an interest, the bank began to stonewall under 9 the pretext of its acquisition by Banc One, 10 subsequently breaking off all discussions. 11 During this same period, UAD also 12 presented to what has become Banc One of Louisiana 13 several commercial loan applications. None of 14 these, at least one of which has been pending more 15 than a year, have been funded, nor has an averse 16 action been taken upon them. 17 Though Banc One acknowledges an agreement 18 between Premier, its predecessor in interest, and 19 UAD, it now says that it, Banc One, is not bound by 20 this agreement, refusing to honor same. 21 It appears now that Banc One, first in 22 anticipation of the Premier Bank acquisition, then 23 the First Chicago merger, continued insincere 24 dialogue with UAD to minimize the possibility of 326 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 UAD filing a complaint pursuant to the Community 2 Reinvestment Act or existing FDIC Federal Reserve 3 Regulations. 4 I, therefore, respectfully request that my 5 testimony be made part of the record of these 6 proceedings and that the Federal Reserve approval 7 of the subject merger with First Chicago be 8 withheld until such time as a complete and thorough 9 audit of Banc One's compliance with the spirit of 10 the reverent acts and regulations in view of its 11 behavior in African American communities throughout 12 the nation generally and in Louisiana particularly 13 can be completed. 14 My first approach to Premier Bank was to 15 close my account because I thought I had been 16 treated in an unfair manner, racially discriminated 17 against. And from that, I was invited to sit down 18 to talk to the manager at the bank. 19 And at that time, Premier was in the 20 process of merging with Banc One and they didn't 21 want any racial complaints, in particular, to be 22 lodged against them apparently. 23 I didn't know what process was taking 24 place, but I approached the local bank manager and 327 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 told him that I was working with a bank in 2 California and that we believe we could help them 3 with some of their solutions under the Community 4 Reinvestment Act as we were working with banks in 5 California. 6 And from there, we began to sit down and 7 negotiate an agreement that later led to some 8 things in writing and some back and forth 9 communications between Premier Bank and Banc One. 10 Things seemed like they fell apart for a 11 while. And then when these other mergers started 12 taking place, in particular the one in Louisiana, 13 we were again negotiating with Banc One and 14 appearing that it was done in good faith. 15 Once this merger took place in Louisiana, 16 then the negotiations fell apart again. And now, 17 Banc One officials are saying that there is no such 18 thing as an agreement; and if it is, it's between 19 premier and UAD; and that Banc One don't intend and 20 never have and never will sign any type of 21 agreement. And I think they should. 22 MS. SMITH: Thank you very much. 23 Ms. Hain, you've been around a long time 24 waiting for this. 328 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. HAIN: My name is Nancy Hain. I'm the 2 Secretary/Treasurer of the Paul A. Stradtman 3 Construction Company in Cleveland, Ohio. I'm also 4 Mrs. Paul A. Stradtman. 5 We're a customer with an 18-year 6 relationship with Banc One. We're an underground 7 utility contractor in a very high-risk business 8 that had several extremely bad years and have been 9 in a rough situation with the bank as a result of 10 those bad years. 11 I recently -- with the news that were in 12 the papers of the Banc One merger, I saw references 13 to their interest in small business and how they're 14 pursuing the small business lending. 15 As a result of that article that I read, I 16 contacted some of the senior people in the Banc One 17 of Columbus. And I've had a series of letters 18 going back and forth, which have taken the 19 situation that was not good to start with. Each 20 letter, the response gets worse. 21 My most recent communication, which I'm 22 going to read because it presents our position and 23 the -- it gives a look at where a small business 24 person is at if the world isn't a great and 329 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 wonderful place and if the bank doesn't happen to 2 like your numbers. 3 This is responding to a letter from the 4 legal department. And it says, I received your 5 letter in response to my correspondence dated 6 July 22nd. We appreciate the review of the issues 7 raised by my letter, but it appears that the 8 purpose of the letter has been overlooked. 9 This letter was asking for intervention or 10 someone in the community reinvestment area to put 11 me in contact with someone that could intervene in 12 the situation we're in. 13 The relentless collection methods and 14 scorched Earth policy being followed by the bank 15 representative and outside counsel representing 16 Banc One against our business is what is at issue. 17 The letter was an appeal for someone in 18 the policy-making area of the bank to review our 19 situation and hopefully intervene on our behalf. 20 Contrary to your statement, I want to say 21 that Paul Stradtman Construction always has and is 22 honoring its commitments to Banc One. The fact is 23 evidenced by the uninterrupted payment history over 24 the preceding 80 months, which totals $1,442,742.50 330 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 in principal and interest. 2 PASCO's financial performance was severely 3 impacted by three very bad municipal sewer projects 4 undertaken during the '95 and '96 construction 5 seasons, all of which we -- apparently were 6 subsequently completed and were accepted by the 7 municipalities. 8 In spite of the severe losses incurred on 9 these jobs, PASCO has and continues to live up to 10 commitments to Banc One to retire the subject 11 indebtedness. 12 I would like to point out, once again, 13 that PASCO began repayment of the $400,000 line of 14 credit on its own volition at the rate of $10,000 15 per month plus interest before Banc One demanded 16 repayment in full. 17 The obligation was reduced from 18 the original $400,000 to $190,000 between 19 February 1997 and July 1998, a period of 20 18 months. All of the payments included interest 21 accrued to date on the outstanding balance. 22 Although you've stated that we have failed 23 to yield a satisfactory payment of debt, we feel we 24 have made considerable progress under the 331 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 circumstances. 2 In order to reassure the bank of our 3 intent and ability to repay our obligation, we 4 offer your representative, in addition to the 5 collateral already held by the bank consisting of 6 $2 million of construction equipment, a life 7 insurance policy of $300,000 of Mr. Stradtman and 8 our personal guarantees, to provide Banc One with a 9 second mortgage on our piece of industrial real 10 estate valued at over $3 million or a second 11 mortgage on our piece of land zoned multifamily and 12 valued at approximately a millions dollars. 13 Our only request to Banc One through your 14 representative was that PASCO be permitted to repay 15 the line through the normal course of business at 16 the rate of $10,000 per month and interest until 17 paid in full. 18 Your representative refused all of our 19 offers to further secure the bank's position, 20 demanded immediate repayment and, once again, 21 pushed forward with legal action. 22 The balance of the company's obligation -- 23 the balance of the loan is a company obligation. 24 And the company is not able to repay the $190,000 332 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 demanded at this time. The company has been 2 hindered in securing a new banking relationship for 3 a number of reasons. 4 One of those reasons is the ongoing legal 5 actions taken by Banc One against PASCO and Paul 6 and I personally and their demands for immediate 7 repayment. 8 We are currently using personal assets for 9 working capital until the company is strong enough 10 to run on its own. Large amounts of working 11 capital are required to fund our construction 12 projects before cash flow begins. To repay the 13 obligation from personal funds would leave us 14 unable to meet the day-to-day operating needs of 15 the company. 16 We have good jobs in progress with almost 17 all equipment working on job sites. Our volume is 18 ahead of last year. We have every reason to expect 19 a good year. 20 For the bank to take the equipment, in 21 lieu of our offers of additional security, would be 22 disastrous to our company and the developers for 23 whom we are working. 24 It would mean the loss of jobs for our 333 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 24 employees, most of whom are highly-paid Local 18 2 operating engineers and Local 860 laborers, many of 3 whom have been with the company since it started 4 business in 1980. 5 I need another few seconds to wrap 6 this up. 7 We appreciate your commiseration with the 8 unfortunate circumstances in which we find 9 ourselves, but what we do not understand is why 10 Banc One has chosen to relentlessly pursue the 11 liquidation of PASCO's construction equipment and 12 the ultimate destruction of the construction 13 company and the life's work of the owners when: 14 One, Banc One holds $2 million in 15 construction equipment as collateral for a $190,000 16 obligation. 17 The original $400,000 obligation has been 18 reduced every month since February, 1997, by at 19 least $10,000 per month plus interest from the 20 operating proceeds of the business, $210,000 in 21 18 months. 22 PASCO's original business checking 23 accounts, both general and payroll, are with Banc 24 One, as they have been for over 18 years. 334 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One is collecting interest every 2 month on the declining balance. PASCO is paying 3 fringe benefits to union welfare funds administered 4 by Banc One. 5 In spite of what Mr. Sanford says, PASCO, 6 by its actions, has demonstrated integrity, 7 commitment and its intent and ability to meet 8 obligations under extremely difficult and adverse 9 conditions. It would seem that these should be 10 desirable qualities in a human or business 11 relationship. 12 PASCO's asking only for consideration that 13 is totally within the power of the policy-makers of 14 Banc One to grant that the company be permitted to 15 repay the remaining balance of the line of credit 16 of $190,000 at the rate of $10,000 per month plus 17 interest until paid in full. 18 The response to this is that we will be in 19 court a week from tomorrow to be held in contempt 20 for not turning our equipment over to the bank. 21 So I think that in view of this situation 22 with the small business, as this merger goes 23 forward, I think the practices of the bank and 24 their handling of small business accounts should be 335 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 examined because there -- small businesses are 2 risky by their very nature. And it's not a pretty 3 picture when you end up creating a bad situation 4 with them. 5 MS. SMITH: Thank you. 6 MS. HAIN: Thank you for your listening. 7 MS. SMITH: Mr. Hawthorne. 8 MR. HAWTHORNE: Hello, and thank you for 9 allowing me to speak today. 10 My name is Robert Hawthorne. I am the 11 Executive Director of Martindale Bright Community 12 Development Corporation, a grassroots development 13 corporation in Indianapolis. 14 And I represent today Indianapolis 15 Coalition for Neighborhood Developers, whose 16 membership organization represents 15 grassroots 17 community operations in Indianapolis who serve over 18 200,000 people residing in low-income neighborhoods 19 in Indianapolis. 20 I'm here today, I guess, not to speak 21 directly against the merger, but to ask for an 22 extension of the comment period to allow for 23 additional negotiations or conversations to take 24 place with Banc One and NBD and hopefully, 336 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 subsequently, the new bank which will be a result 2 of this merger. 3 ICND -- I'm going to read from a prepared 4 statement of the organization. 5 ICND is extremely concerned about the 6 pending merger of Banc One and NBD, particularly as 7 it relates to the future development and leadership 8 of the banking industry in Indianapolis community 9 development with Indianapolis community development 10 movement. 11 All ICND members have enjoyed a strong and 12 committed relationship with NBD, many for nearly 13 20 years. The relationship between ICND members 14 and Banc One -- excuse me, and NBD have resulted in 15 general operating support for our members, various 16 financing mechanisms for projects, technical 17 assistance and affordable housing products that are 18 critical in our efforts to revitalize our inner 19 city neighborhoods. 20 In addition, NBD Bank has provided a 21 community leadership within the banking industry, 22 brought the necessary attention to community 23 development and, most importantly, clearly values 24 the work of our members from both a business 337 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 perspective as well as a philanthropic 2 perspective. 3 For this reason, it's critical that the 4 comment period be extended to allow the community 5 time to delineate precisely what Banc One's 6 commitment will be to community development 7 corporations in Indianapolis. 8 One aspect of this merger which will be 9 unique to Indianapolis is the divestiture that Banc 10 One will have to complete. 11 This divestiture will result in the 12 introduction of a new, likely unknown bank who will 13 immediately capture the third largest market share 14 in Indianapolis, as well as the first and second 15 largest market share among African American people, 16 of which the community development corporation 17 represent a great deal. 18 ICND requests that this new bank be 19 required to fill the same commitment to community 20 development corporations as NBD has and articulate 21 these comment -- these commitments in a five-year 22 CRA plan. 23 I'll just briefly take time to just go 24 through the items. One, we're looking to -- for 338 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One and the new bank to increase the number of 2 types of mortgage project products which are for 3 low-income people with special circumstances. 4 We also look for Banc One to increase its 5 commitment to retail development in Indianapolis, 6 as well as small minority business development. 7 We look for ICND members to have a direct 8 relationship with NBD Bank over the last years. 9 And cooperating support has been a part of that 10 relationship. 11 ICND requests that Banc One commit to 12 creating endowment fund with the proceeds of 13 divesture for the purpose of providing cooperating 14 support to ICND and our members who serve to 15 eliminate deterioration in inner city communities. 16 In closing, both Banc One and NBD have 17 been excellent Indianapolis corporate citizens 18 supporting the business community, as well as the 19 African American community. 20 In a city where many of the low-income -- 21 low- and moderate-income communities are seeing a 22 resurgence in quality housing, it is extremely 23 important that both Banc One and the new bank 24 commit to furthering the development of 339 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Indianapolis inner city community and 2 neighborhoods. 3 We ask that the comment period be extended 4 to allow for community -- more community input in 5 this matter. Thank you. 6 MS. SMITH: Thank you very much. Ms. Haste. 7 MS. HASTE: Good afternoon. My name is 8 Bridgette Haste. I'm the chairperson for a local 9 community group, ACORN in Milwaukee. I'm here 10 today to tell you about my experience with Banc 11 One's lending group. 12 Back in 1991, I applied for a home loan 13 with Banc One and was denied. I had been on my 14 present job for over five years. I had deposits of 15 over $16,000 in Banc One. 16 Once they checked my credit record, I was 17 told that would probably take me a couple of years 18 to fix my credit to the position that would qualify 19 me for a loan with Banc One. 20 They told me that I could request a copy 21 of my credit report from the local credit bureau. 22 When I received it, the only thing that I could see 23 on my credit record that would disqualify me was a 24 doctor bill that was minimum in amount and that had 340 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 been paid. 2 They could not tell me the reason why I 3 was denied, only that I would need to contact my 4 local credit bureau. 5 Since then, in the same year I received 6 several loan -- other type of loans, major credit 7 cards, a credit line of $10,000 and a home loan 8 with no questions asked and my credit report was 9 submitted to them through factual data. 10 I am now the proud owner of a duplex 11 home on the north side of Milwaukee in which I have 12 been living there for seven years, no thanks to 13 Banc One. 14 My loan denial was not an isolated 15 incident. In 1996, Banc One's own lending 16 practices and data shows the rejection rate for 17 African American and Latinos in the city of 18 Milwaukee of 54 percent. This is not acceptable. 19 I am recommending that the proposed merger 20 between Banc One and First Chicago NBD Corporation 21 be denied. Thank you very much. 22 MS. SMITH: Thank you. Ms. Howard. 23 MS. HOWARD: Good afternoon. My name is 24 Minnie Howard, and I'm a member of Wisconsin ACORN 341 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 also. I will testify today on the racial and 2 discriminatory lending practices of Banc One in 3 Milwaukee. 4 The statistics that I will be using were 5 taken from Banc One's own HMDA data. I will also 6 point out that Banc One is not making an effort to 7 provide services that match the needs of minority 8 communities. 9 In light of these practices, I will also 10 recommend that the proposed merger between Banc One 11 Corporation and First Chicago NBD Corporation be 12 denied. 13 Banc One is holding over $1.16 billion in 14 deposits from its central city branches, where the 15 majority of African American and Latinos live. 16 However, in 1996, only 2 single-family 17 conventional mortgages went to African Americans 18 and only 3 to Latinos, as compared to 79 for 19 Whites. 20 Furthermore, 57 percent of African 21 American applicants were denied mortgages, more 22 than 5 times the rate of denial for White 23 applicants. 24 Rates of home ownership among African 342 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Americans and Latinos are drastically below home 2 ownership rates for Whites. 3 Banc One is contributing to a tremendous 4 disparity and actually increasing it by providing 5 such a disparate proportion of its mortgages to 6 Whites. 7 As home ownership rates among African 8 Americans continued to decrease in Milwaukee, 9 Banc One should be responding by increasing 10 mortgage loans. 11 However, at a meeting with Connie 12 McDonald, CRA, Officer for the Eastern Region, and 13 Milwaukee's CRA representative, Gwen Dansby, they 14 said that rather than responding to the community 15 needs, they will be putting even less emphasis on 16 mortgage loans. 17 The Banc One CRA representative that we 18 met with claimed that mortgages were not their 19 specialty. So we looked at their record for home 20 improvement loans and refined loans in Milwaukee, 21 I'm going to say, which is approximately 20 percent 22 minority. 23 Banc One provided an incredible 3,596 24 refinancing loans in 1996 to Whites and only 165 to 343 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Blacks and 59 to Latinos. In this case, 523 Blacks 2 applied for refinancing loan and more than half or 3 54 percent were rejected. 4 Even though Milwaukee is one of the most 5 segregated cities in the country, other banks do 6 not approach Banc One's rejection rate for Blacks. 7 For all banks in the market area, 8 34 percent of Black African Americans were denied. 9 For all banks in the market area, 10 34 percent of Black applicants were denied 11 refinance loans, but at Banc One the rejection rate 12 for Blacks topped 50 percent, an almost incredible 13 figure. 14 In home improvement loans, the pattern 15 holds. In 1996, Banc One made 1,176 home 16 improvement loans to Whites and only 147 to Blacks 17 and 28 to Latinos. 18 Banc One's record of lending in Milwaukee 19 is one of the most racially discriminatory lending 20 records of any bank in any city in the country. 21 We have had meetings with CRA 22 representatives over the past several years where 23 they have promised to improve, yet their own data 24 shows no improvement. 344 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Furthermore, they are ignoring the very -- 2 they're ignoring the minority community's needs for 3 access to home ownership by turning their focus 4 away from mortgage loans. 5 In light of this information, it is the 6 recommendation of Wisconsin ACORN that the proposed 7 merger between Banc One Corporation with First 8 Chicago NBD Corporation be denied. Thank you. 9 MS. SMITH: Thank you very much. Any 10 questions? Thank you very much for coming this 11 afternoon. We've been through a very long day. 12 And we will move on to Panel 17 now. 13 Ms. Johns, if you'll grab the mike, we'll start 14 with you. 15 MS. JOHNS: I thank the Federal Reserve Bank 16 for the opportunity to come and talk about this 17 pending merger. 18 I am CEO of Capital Across America and 19 also President-Elect of the National Association of 20 Women Business Owners and Board member of the 21 National Foundation for Women Business Owners. 22 And I'm here today to address Banc One's 23 investment in Capital Across America as the first 24 SBIC in the history of the Small Business 345 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Investment Corporation Program that focuses on 2 investments in women-owned businesses. 3 Capital Across America is an investment 4 fund created to provide growth capital to 5 women-owned firms who are growing their companies. 6 We are located in Tennessee, but we intend to serve 7 businesses nationwide. 8 In the beginning, however, we are limited 9 to the areas in which we have financial partners or 10 states contiguous to Tennessee. With Banc One's 11 investment in our fund, we're able to go into areas 12 in which Banc One is located. 13 So we're very excited about the 14 opportunity for this pending merger to occur so 15 that we can go into some dynamic areas, such as 16 Chicago, Detroit and Indianapolis, to name some of 17 the larger cities in this area. 18 We are -- in the SBIC program, which is 19 administered by the Small Business Administration, 20 we had to raise a minimum amount of capital in 21 order to become a licensed SBIC. 22 We were able to raise approximately 23 $7 million, but our largest investor and our first 24 institutional investor was Banc One. 346 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 And I would say they came to the table not 2 only with money, but also with resources behind 3 that money and talented people who have become 4 involved with Capital Across America. 5 Having gone through the process of trying 6 to raise money for the first fund of its kind in 7 the country, I can tell you it was rather difficult 8 in approaching the financial institutions. And 9 Banc One was a very receptive institution and was 10 the first, in my opinion, to make a significant 11 investment in the fund of our type. 12 Their $3 million investment is the 13 largest of its kind in the country in a fund that 14 focuses on women business owners that has been 15 licensed as an SBIC. 16 Banc One has a division of -- let's see, 17 it's called the Women's Entrepreneur Initiatives 18 Division, which I believe is directly responsible 19 for their interest in a fund such as ours. It's 20 through Vanessa Freytag's efforts that she became 21 aware of Capital Across America and made the bank 22 known of the opportunity to invest in us. 23 Through their community development 24 corporation and Lynn Gellermann, the bank made a 347 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 decision to make that investment. And they've 2 allowed Lynn Gellermann the opportunity to serve on 3 our Board of Directors, which is a great asset for 4 a fund such as ours. 5 Since Banc One has become involved with 6 our fund, other banks have followed suit. And I 7 think that Banc One has been a role model as far as 8 approaching the underserved market of women 9 business owners who have growing companies in this 10 country. 11 And a little bit about that, there are 12 approximately 8 million women business owners in 13 the United States, which is approximately 14 40 percent of all businesses now in this country. 15 They employ 18 and a half million people, which is 16 one out of every four U.S. workers. That's 17 35 percent more than the Fortune 500 employees 18 worldwide. 19 So women business ownership is an 20 important part of our economy and one reason why I 21 think our economic cycle has continued to remain 22 very strong in this day and age. 23 And it is very important that we continue 24 to provide growth capital to the women business 348 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 owner community so that they can continue to add 2 employees to their companies and grow their 3 companies and be community leaders within where 4 their businesses are located. 5 So this potential or pending merger is 6 very important to us in Capital Across America so 7 that we can reach more women business owners in 8 this part of the country. There's this dynamic 9 opportunity for us as the first debenture SBIC in 10 the country to focus on women business owners. So 11 thank you. 12 MS. SMITH: Thank you very much. 13 Ms. Paycheaud. 14 MS. PAYCHEAUD: You having fun with that? 15 Phonetically, it's Paysho, P-A-Y-S-H-O. It doesn't 16 look like that, but then I'm from Louisiana, so 17 everything that you see in Louisiana does not 18 always look the way it actually is. 19 And I think that that -- my name is 20 Rosalyn Paycheaud. I'm Executive Director of the 21 Neighborhood Development Foundation. 22 And the Neighborhood Development 23 Foundation is a program that was established in 24 1986 on the belief that decent, safe, affordable 349 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 housing is essential to an individual's 2 well-being. 3 And to that end, that is what we do. 4 We don't develop houses. We empower people to go 5 out and get the money that they need in order to 6 buy a house. 7 I want to tell you a little bit about 8 NDF because I think that credibility is very 9 important. 10 We were established, again, in 1986. We 11 have a pristine Board of Directors that includes 12 representatives from Banc One on our Board. We're 13 well-respected in the community. We're certified 14 housing counselling agency by HUD, by Fannie Mae, 15 by Freddie Mac, by our local lending authority. 16 We own a list of organizations to provide 17 home buyers training for our local funding 18 authority. We prepare a minimum of 150 first-time 19 home buyers each year to own their own piece of 20 New Orleans. 21 We're a 501(c)3 nonprofit organization 22 that believes that, even though we're nonprofit, we 23 ought to be able to operate like a business. We 24 are identified as a national model by the 350 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Enterprise Foundation, which was involved in our 2 establishment in 1986. 3 We think that we're good at what we do. 4 We work with our clients, we say, from the 5 beginning to the end. We provide pre-purchase 6 counselling, budget planning, a 12-hour home 7 training class. And we're a little rigid about 8 that class because you're either there 15 minutes 9 into the class and you're there when it ends or you 10 take the class over. And that's part of our 11 commitment to prepare people for home ownership. 12 We believe that education is the key. 13 And if an individual knows what's expected of them, 14 then they'll be able to achieve. We don't train 15 anyone that's not bankable to us. We can't do it 16 because you can't buy a house if you don't have 17 any money. 18 And when we were established in 1986, 19 First NBC, who now Banc One owns, or First NBC 20 is -- and Banc One, in my mind, are one. They were 21 pioneers for us. And we don't anticipate any 22 change in that. 23 First NBC put money in an affordable 24 marketing pool that our clients were able to access 351 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 when no one else did that. 2 So, you know, we're looking forward to 3 change. We're not intimidated by change. We 4 welcome the opportunity to have products that 5 Banc One is bringing into our state. 6 One of the things that I've learned today 7 in this room is that there's a lot of fear and a 8 lot of resistance to change. And a lot of it has 9 to do with the misinformation and the fact that 10 people don't really understand what's going on 11 with them. 12 We needed to have Banc -- we need to have 13 Banc One involved in what we do because we can't do 14 it without having financial support. We're used to 15 having the kind of technical assistance that we 16 need and expertise that we need in order for our 17 organization to continue doing what we do. 18 We need the resources as well. Our 19 clients need to have access to affordable housing 20 dollars. We also prepare them to recognize when 21 they're being discriminated against. It's a part 22 of our training. 23 Everyone that's involved in that mortgage 24 process comes to our class and teaches a segment of 352 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 that class, so that when our clients go into any 2 bank looking for a loan, they know what -- they're 3 prepared when they go in. And they know when an 4 insurance company is red-lining them and they know 5 when they're being discriminated against and they 6 know we'll be there for them. 7 So I'm here today to let you know that we 8 work with Banc One. We look forward to continuing 9 to work with Banc One and encourage you to, like, 10 do what you do in terms of monitoring the process. 11 And this open forum is very important, 12 but look at it for what it is, because not 13 everyone has had the same type of experience that 14 I've heard described in this room today. Thank you 15 very much. 16 Oh, one more thing. I brought you 17 some visuals because I'm a visual person. We do 18 an annual fund-raiser every year. And I'm in 19 Chicago, okay? This is Mike Ditka in an issue. I 20 have Banc One on here. I have the clergy. I have 21 Fannie Mae, Freddy Mac. I have Arial Lenders. I 22 have my clients. 23 That's what it's about, building 24 coalitions. And that's what Banc One does for the 353 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 community. These are yours. 2 MS. SMITH: Thank you very much. 3 Mr. Pritscher. 4 MR. PRITSCHER: Thank you, and thank you. 5 Hello. I'm John Pritscher, the President 6 of Community Investment Corporation in Chicago. 7 Like I know other people travelled long distances, 8 it took me about a two-minute walk, and for which I 9 am very grateful. 10 I'm here, though -- I would have gone long 11 distances, though, to support this merger because 12 of my experience, predominantly with First Chicago 13 NBD, but also in a lesser way with NBD because 14 they're not as big in Chicago. 15 The Community Investment Corporation is a 16 not-for-profit mortgage lender. We're the largest 17 multifamily rehab lender in Chicago. This year 18 we'll do about 45 to $50 million in multi-family 19 rehab loans, about 85 or 90 loans with about 20 over 2,000 apartment units. So we're a good-sized 21 lender. 22 I've been with them for 14 years. We were 23 founded by the banking community to make sure that 24 funds were accessible in all parts of the city. 354 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 And we've really come a long way, thanks, 2 in part, to the Community Reinvestment Act, thanks 3 also to the fact that I think banks have gotten 4 religioned by being involved with neighborhoods and 5 communities and seeing that it's a profit center 6 and that it works, that it's good business, and 7 that they can't let their cities go to hell around 8 them and still have a good source. That's been my 9 experience in Chicago, at least. 10 In today's world of bank mergers, the real 11 world we're in, I think it's very important that in 12 strengthening the Midwest that this merger move 13 forward and that First Chicago and NBD stay and be 14 controlled as a Midwest entity. 15 First Chicago is extraordinarily important 16 to Chicago. And they're the largest bank. I could 17 perhaps give some -- an example of the role they've 18 played with Community Investment Corporation. 19 We have a 525 million revolving loan pool 20 that we were happily in this very room on July 8th 21 celebrating the fact that this pool was extended 22 from the year 2000 to the year 2010 and that a 23 hundred million of this pool was set aside to do 24 loans that nobody else could do. 355 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 And I'll go into that briefly, but that a 2 pool risk lender that specialized in apartment 3 rehab lending could sensibly do and that maybe an 4 individual bank might not be able to do. 5 CIC was encouraged by First Chicago to 6 move forward and to take this step to do loans that 7 nobody else could possibly do, plus to extend the 8 pool through 2010 with the same revolving basis so 9 that, in fact, we'll have, like, close to a billion 10 dollars lent by the end of that period because the 11 money revolves. As we pay it back -- someone pays 12 back a loan, it's as if the loan was never made and 13 we can use it again. 14 When we work -- we've worked with First 15 Chicago NBD and Banc One over these 14 years that I 16 have been with them. And we worked with 17 predecessor banks that were absorbed, if you will, 18 by the merger process. 19 And First Chicago has -- and NBD both, but 20 especially First Chicago in Chicago, has always 21 taken on and accepted the responsibilities of 22 American National, Gary Wheaton, NBD, you know, all 23 of the others that have come on. 24 And we asked -- the only thing that we 356 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 asked of NBD was that they had only a $1 million 2 commitment, where we have $120 million through the 3 First Chicago entities, that they extend this. 4 They volunteered a loan committee member. 5 And they've both been active in that. 6 They're also -- when we started to look at what we 7 can do to beat MMBs (phonetic), First Chicago 8 shared the information of what they were doing in 9 their own neighborhood lending program. 10 They were doing -- they are doing -- 11 they do aggressive lending. They've worked in 12 partnership with us as aggressive lenders over 13 the years. 14 And I think that if the merger doesn't 15 take place, I'm fearful that some other type of a 16 merger will take place without the Midwest control, 17 without the local commitment that both -- that 18 First -- certainly that First Chicago has shown in 19 the Chicago Metropolitan area. 20 MS. SMITH: Thank you very much. We'll go to 21 Mr. Roberts. 22 MR. ROBERTS: Thank you for the opportunity to 23 be here today to speak in favor of this merger. My 24 name is John Roberts. I am president of Mezzanine 357 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Capital Management, which is the administrator of 2 the Ohio Mezzanine Fund. 3 The Ohio Mezzanine Fund is a multi-bank 4 community development corporation organized and 5 funded in February of 1996. 6 The fund was organized and is owned by 7 eight Ohio banks, who invested nearly $10 million 8 for the purpose of providing creative and flexible 9 financing that otherwise would not be available to 10 small and mid-sized businesses. 11 This financing is provided in the form of 12 subordinated debt in amounts from $100,000 up to 13 $750,000, again to small and mid-sized businesses 14 who are young and growing rapidly, but which are 15 not yet fully bankable. 16 While equity in mezzanine debt sources are 17 plentiful for large companies that need $1 million 18 or more, there are very few organized sources for 19 this type of risk capital under $1 million for 20 small businesses. This is a niche on which the 21 Ohio Mezzanine Fund focuses. 22 The Ohio Mezzanine Fund is unique in 23 that the fund is actively managed by its investor 24 banks at the board of managers and investment 358 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 committee levels. 2 In addition, the Fund relies on referrals 3 for investment opportunities from the investor 4 banks and each investment that the fund makes in a 5 smaller mid-sized business must be matched at least 6 dollar for dollar by a new senior loan from one of 7 the investor banks. 8 This allows the Fund and each of its 9 investor banks to form a unique partnership to 10 provide complete financing packages which otherwise 11 would not be available to small and mid-sized 12 businesses. 13 To date, in a little over two years, the 14 Ohio Mezzanine Fund has invested over $5.5 million 15 in 11 Ohio businesses. This investment has 16 leveraged over $15 million of senior bank financing 17 from the Fund's investment banks. 18 That financing would not have been 19 available to those 11 businesses without the 20 participation of the Ohio Mezzanine Fund. 21 This financing has made possible the 22 expansion of these businesses, which has led to job 23 growth and other economic benefits for the Ohio 24 communities where they are located. 359 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Also in its first two years, the Fund has 2 enjoyed several success stories in the form of 3 three businesses that have improved their operating 4 and financial track records to the point that 5 their bank has increased its financing with the 6 business to allow the business to prepay the Ohio 7 Mezzanine Fund and become fully bank financed at a 8 lower cost. 9 This partnership between banks and the 10 multi-bank community development corporation format 11 is important in delivering flexible higher-risk 12 capital that otherwise would not be available to 13 small and mid-sized businesses in Ohio. 14 From the beginning, Banc One has been an 15 active and supportive partner and has taken the 16 leadership role in the formation and operation of 17 the Fund. Banc One was the first bank to verbally 18 commit to providing capital to the Fund and 19 subsequently invested $1.75 million in the form of 20 $250,000 of equity and a $1,500,000 line of 21 credit. 22 In addition, Banc One hosted several 23 organizational meetings in which other banks in 24 Ohio were invited to attend and considered 360 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 investing in the Fund. Banc One personnel also 2 talked with other bank decision-makers to influence 3 their involvement in the Fund. 4 Once the Fund was organized, Banc One 5 again assumed the leadership role by providing 6 senior level management to serve on the Board of 7 Managers and on the investment committee. 8 For example, the initial representatives 9 from Banc One to the Board of Managers and the 10 investment committee were an executive vice 11 president and senior vice president respectively. 12 Their management and credit experience has been 13 instrumental in the Fund's success to date. 14 Banc One has also played an important role 15 in sponsoring investment opportunities to the Ohio 16 Mezzanine Fund. 17 Banc One lenders have referred many deals 18 over the Fund's two-year period and Banc One has 19 provided senior financing along with subordinate 20 financing from the fund in two deals totaling over 21 $5.8 million. 22 In April of this year, the Fund's Board of 23 Managers determined that the Fund was working very 24 well and should expand its territory to include the 361 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Columbus, Ohio, market area. 2 Banc One assumed a leadership role in 3 assisting the Fund's personnel in making contacts 4 within the financial and small business community 5 in the Columbus area and Banc One also facilitated 6 communication within the bank with its lenders and 7 the Fund's personnel and issued a press release 8 introducing the Fund and advocating the Fund to the 9 Columbus area. 10 In summary, the Ohio Mezzanine Fund and 11 its $10 million of risk capital pool available to 12 small and mid-sized businesses in Ohio would not 13 exist today had it not been for the support and 14 leadership of Banc One. 15 We have every reason to believe that 16 that support and leadership will continue in the 17 future. Thank you. 18 MS. SMITH: Thank you very much. Mr. Traylor. 19 MR. TRAYLOR: Ms. Williams, Mr. Alvarez, 20 Ms. Smith, thanks very much for allowing me to be 21 here today to share the story of the Southern 22 Indiana Rural Development Project and the 23 partnership -- the strong partnership that we've 24 developed with Banc One over the past five years. 362 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 The Southern Indiana Rural Development 2 Project or SIRDP is a not-for-profit organization, 3 501(c)3 organization that represents the 34 4 counties of southern Indiana. 5 We primarily focus our efforts in 6 southern Indiana on rural communities. And we seek 7 to basically improve the economies of those rural 8 communities through a number of different 9 mechanisms. 10 We were originally set up through an 11 initiative by Congressman Lee Hamilton in response 12 to a study by the Hudson Institute, a think tank in 13 Indianapolis, which basically had done a study on 14 rural communities and came back with the report 15 that primarily focused on all the bad things. 16 If you were to read the report, you would 17 look at yourself. And if you were living in 18 southern Indiana, you were wondering what the heck 19 you were doing there. And if you weren't living 20 there, you would certainly say I'm never going to 21 live there. 22 It was a very negative report. And the 23 Congressman did come back to us to form this group 24 to basically try to come up with action plans that 363 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 address some of those negative aspects and at the 2 same time which tries to highlight some of the 3 positive things, which there's certainly plenty of 4 them in southern Indiana. 5 SIRDP accomplishes its mission through a 6 series of task forces, all of which are focused on 7 a particular issue ranging from telecommunications 8 and technology to leadership development to 9 education work force development as well as 10 housing. 11 It was through the housing task force that 12 I had my first working relationship with Banc One. 13 Early in 1996, SIRDP's Board of Directors was 14 trying to figure out a way to diversify our Board 15 and to bring in a lot of different membership 16 representing various factions, which we currently 17 at that time did not have representation from. 18 The financial institution was one that 19 was very lacking. And at that time the community 20 affairs director from the Fed out of St. Louis, 21 the Louisville branch, came to us with some 22 recommendations as to some firms, some financial 23 institutions that we might want to bring on board. 24 One of those firms was Banc One. And to 364 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 this date, Banc One and PNC have maintained a very 2 strong involvement with our organization, while 3 several of the other organizations -- many of them 4 were smaller, but some of them were quite large 5 institutions -- have fallen to the wayside and have 6 not maintained that involvement. 7 And we certainly appreciate Banc One's 8 willingness to get involved from the onset and 9 since then to basically jump in on a number of 10 different issues that we've been focusing on in the 11 area of housing. 12 Banc One continues to this day to work 13 diligently with our task force, our housing task 14 force, to set housing need priorities for southern 15 Indiana. 16 Banc One has also supported SIRDP in a 17 financial manner as well. Through their 18 contributions, we've been able to leverage funds 19 from the Indiana Department of Commerce, the 20 Indiana Housing Finance Authority, Indiana 21 Department of Environmental Management and also 22 from the local endowment out of Indianapolis. 23 Quite honestly, without Banc One's support 24 and other organizations like them, our organization 365 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 would not exist. As a not-for-profit, we rely upon 2 private contributions to maintain our existence. 3 And they've been very supportive of that. 4 Wow, time up, one minute already. One of 5 the most important initiatives that we focused on 6 over the past year is a program which is a home 7 buyer education assistance program. 8 It's called Live The Dream, Own A Home. 9 We've just created this. Banc One and their 10 representatives have been very involved with our -- 11 with helping us to create the program, which is 12 modeled after a program in the state of Kentucky. 13 And without their assistance, we would not have 14 been able to do this. 15 This is a program that the Indiana Housing 16 Finance Authority has also adopted and which is 17 supported by organizations, community housing 18 development organizations, CDCs, community groups 19 and a number of different groups all over the state 20 of Indiana, not just within southern Indiana. 21 And we appreciate Banc One's assistance in that 22 respect. 23 We thank them for their willingness to 24 assist us and we support them in their endeavors in 366 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 this respect as well. Thank you. 2 MS. SMITH: Thank you very much. 3 Mr. Wilkinson, thank you especially for 4 taking this later time and giving up your slot 5 earlier. 6 MS. WILKINS: No problem. 7 Good afternoon or, as the case will soon 8 be, good evening. My name is Tony Wilkinson. I am 9 the president and CEO of the National Association 10 of Government Guaranteed Lenders, Inc. And I like 11 to use our shorter name, which is NAGGL. It sure 12 is a lot easier. 13 We are headquartered in Stillwater, 14 Oklahoma. NAGGL represents those members of the 15 lending community who are active participants in 16 the Small Business Administration's 7(a) loan 17 program. 18 And during the last fiscal year, our 19 membership accounted for approximately 80 percent 20 of all of the SBA 7(a) loans made. 21 I appreciate the opportunity to appear 22 before you today and discuss Banc One's 23 participation in the SBA 7(a) loan program and with 24 our association. 367 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 For the last few years, I have had the 2 privilege of working with Brian Burke, the national 3 SBA program manager for Banc One, and with other 4 Banc One representatives across the country. 5 Mr. Burke currently serves on the NAGGL 6 board of directors as our corporate secretary and, 7 as such, is a member of the NAGGL executive 8 committee. 9 I applaud the commitment Banc One has 10 made to SBA lending programs. In particular in 11 the 7(a) program, the bank has taken a leadership 12 role in two specific areas that I'd like to talk 13 about today. 14 First, Banc One was one of the limited 15 number of institutions chosen by SBA to pilot the 16 Fast Track loan program, a loan program 17 specifically designed to make smaller-sized loans. 18 That program has deemed to be highly -- was deemed 19 highly successful by the SBA. And the agency is 20 now in the process of expanding that program. 21 Banc One representatives have been 22 actively involved in the discussions with the SBA 23 on how to expand the Fast Track program and do so 24 in an efficient and responsible manner. 368 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Banc One has also been actively involved 2 in the special NAGGL committee, our task force on 3 lending to the underserved. This committee has 4 worked diligently with the SBA over the last 5 several months. 6 And we have come to a conclusion that 7 there are a number of markets with underserved 8 financing needs. These markets would include 9 businesses that; A, are owned by African Americans, 10 Hispanic Americans, Asian Americans, Native 11 Americans, other minority groups, women, veterans 12 or handicapped individuals; B, those small 13 businesses that need financing for exporting; or, 14 C, are located in distressed urban and rural 15 areas. 16 An announcement on both the Fast Track 17 expansion and initiatives to increase the lending 18 to the underserved markets is tentatively scheduled 19 for September, so unfortunately I cannot go into 20 greater detail just yet, but let me reiterate that 21 Banc One representatives have played a major role 22 in development of both the Fast Track and 23 underserved lending initiatives. 24 Regarding post-merger SBA lending 369 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 activity, Banc One's track record has been to turn 2 less than active SBA lending operations into higher 3 volume operations. 4 For instance, Banc One has taken recently 5 an Arizona bank's SBA lending operation which was 6 nowhere to be found in the top ten in lending 7 volume in the state to the number one SBA bank 8 lender in that state. 9 So in conclusion, Banc One has been a 10 valuable participant in the 7(a) loan program. 11 Banc One is also a valuable member of our 12 association. And Mr. Burke is held in high regard 13 amongst the NAGGL leadership and membership. 14 Banc One has made a long-term commitment 15 to the program and they have shown how to be 16 innovative with the SBA loan product. 17 Even at a time when SBA loan volume was 18 down nationally due to the nature of direct bank 19 lending, Banc One still aggressively participates 20 in SBA and NAGGL programs and activities. 21 I believe that in the markets where Banc 22 One operates, small businesses can expect to find a 23 professional committed SBA 7(a) lender ready to 24 help meet their long-term financing needs. 370 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Thank you for the opportunity to comment 2 today. 3 MS. SMITH: Thank you very much. Any 4 questions? We thank you again. 5 MR. ALVAREZ: Thank you very much for coming. 6 MS. SMITH: And look forward to your submitting 7 any written -- any additional comments by next 8 Thursday, the sooner the better. 9 And we're ready for Panel 18. We'll start 10 with Mr. Goldstein. 11 MR. GOLDSTEIN: Hello. My name is Ken 12 Goldstein. I am an associate at Krislov and 13 Associates. And Ken Krislov regrets that he can't 14 attend. He was drawn out of town unexpectedly. 15 We have made submissions to the Board, a 16 public comment, and to which we had attached a 17 complaint that we had filed in Federal court, a 18 class action complaint on behalf of Meleia 19 Robinson, which we have voluntarily dismissed 20 pending this administrative process. All of those 21 submissions, I take, are incorporated by 22 reference. 23 My purpose now is to highlight and 24 summarize some of the points in our testimony that 371 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I've submitted today. 2 The first point I'd like to make is that 3 there's no benefit for consumers generally in this 4 merger, only the elimination of competition and the 5 certainty of increased fees and charges. 6 This morning I heard the CEOs talk about 7 the merger of equals, but we see this as a 8 combination of competitors. 9 The persons -- the people who are most 10 injured by this merger, while CRA aspects are 11 terribly important, are the general average banking 12 customers, middle class consumers who are going to 13 be affected by the lack of competition and by the 14 combination of lack of choices. 15 The concentration for -- of the 16 marketplace is bad for average, middle class 17 consumers and bank customers. 18 We also have a problem with the 19 divestiture plans, which we feel are incomplete. 20 And lastly, we would request that the Board look 21 closely at the relevant market areas and the 22 antitrust standards in the bank merging -- Bank 23 Holding Company Act and the merging -- and the 24 antitrust laws. 372 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 First of all, this merger is not based 2 only on CRA grounds and a poor record of lending 3 patterns, which has been evident this whole 4 afternoon. 5 This merger hurts middle class average 6 bank customers, the core depositors who make the 7 bank's fortunes rise and fall. 8 This merger eliminates the competition for 9 most consumers, average middle class depositors, 10 based on antitrust laws. And we see this based on 11 the shrinking number of banks over time, which 12 causes less bank choices where people have nowhere 13 else to go. 14 In the past six years alone, we've seen 15 the number of banks reduced from around 12,000 to 16 around 9,000. In some places, the merger will have 17 the practical effect and literally be one-bank 18 towns. 19 In this way, average consumers lose 20 because there's nothing to be gained in having a 21 lack of competition. 22 We have not heard this morning from the 23 banks say any reason why this combination will have 24 a positive effect on interest rates for savings or 373 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 how they would reduce bank fees or create better 2 service at all because we've seen in every case 3 where banks have merged and competition lessened, 4 increased fees and market -- monopoly power market 5 exercised. 6 My next point is that the combination of 7 these banks is that in the Federal Reserve Board of 8 Boston's most recent article, we've seen that 9 banking is local. Consumers travel only two to 10 five miles to their local bank. With the 11 elimination of branches, there will be less 12 competition and we'll see an increase in fees. 13 These banks are already leaders in 14 generating fees and have been padding their bottom 15 lines in just their last month's report and 16 their -- and in the number of the amount that 17 they've been collecting in fees. 18 The last issue is on divesture. We have 19 not heard a full public disclosure of what the 20 divestiture will be in Indiana or at all in 21 northern Illinois. 22 It has not been made fully public. In 23 fact, there's been speculation that the sale of the 24 new banks will be to someone without a local 374 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 presence, which will only serve to strengthen the 2 incumbent bank's position. 3 In Illinois, we have not heard about any 4 divesture and specifically in the time of -- in the 5 towns of Evanston and Wilmette where banks are 6 literally across the street from one another. 7 To conclude, in short we ask that this 8 merger be rejected unless and until these concerns 9 to preserve competition and protect middle class 10 core depositors are fully addressed. Thank you. 11 MS. SMITH: Thank you very much. 12 Mr. Harrington. 13 MR. HARRINGTON: My name is Bill Harrington, 14 and I work in Gary, Indiana. 15 I suppose I would be one of the people 16 that would be the least thought to be here and 17 express concerns over a merger because I probably 18 am one of those people that's considered to be 19 rather privileged. 20 Had a great career, started a firm called 21 Harrington Properties in Gary, Indiana, really with 22 the idea of taking some areas that are rather 23 depressed and through private industry rehabbing 24 some houses and creating some in-fill housing to 375 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 create a neighborhood. 2 In 1994, I happened to, as a favor to my 3 parent company that I ran then as president and 4 CEO, bought some commercial property. 5 NBD had been my bank since -- or Gainer 6 Bank had been my bank since 1984. And I went to 7 NBD Bank. And they were very gracious and loaned 8 me the money. 9 I ended up with a $312,000 mortgage and 10 also later a line of credit of $50,000, which they 11 secured with a second mortgage on a house that the 12 company owned and that I paid rent in excess of 13 market value for. 14 We had an agreement that when -- I asked 15 when the release of this mortgage on the house 16 would be, and that would be whenever the $50,000 17 note was paid. 18 And when the primary note was below 19 $285,000, the formula was that they wanted to see 20 the loan to the point that the developed land, the 21 three acres with the buildings on it, were -- the 22 debt was less than 80 percent of appraised value 23 and 50 percent on the vacant land, which sounded 24 reasonable. 376 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 1996, 97, our line of credit was 2 established for 50,000 and later increased to 3 $100,000, obviously secured by inventories, 4 equipment, receivables, as well as a personal 5 guarantee, which I have never had a problem 6 giving. 7 I guess my point is that when I was 8 renewing the last line of credit in 1997 and I'm 9 looking at the documents which are given to me to 10 review, I happen to get one document I wasn't 11 supposed to get, and that's the bank's internal 12 document. And that document said, CRA, yes. 13 Now, the bank on a hundred thousand 14 dollar line of credit when they had collateralized 15 everything in the company and me personally 16 guaranteed with a personal financial statement well 17 in excess of a million dollars, it started to 18 trigger me why we have difficulty in Gary, Indiana, 19 in attracting capital to the inner city if the bank 20 can satisfy its needs through nonrisk loans being 21 qualified for Community Reinvestment Act credits. 22 I guess if you really want to find out 23 where the heart of your bank is, go ask them for a 24 $250,000 nonrecourse line of credit to rehab a city 377 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 block that today looks like Beirut, Lebanon, which 2 I did in writing, submitted a letter to NBD, who 3 was at one time Gary National Bank, Gainer Bank, 4 now NBD, and was pretty flatly rejected. 5 They said, you know, if you want to 6 come in and borrow some money and tie up your 7 corporation and personally endorse the note, we'll 8 loan you some money to do some work, but, you know, 9 we want to be collateralized. 10 I guess my point is this. Six months ago 11 through a developer that wanted to partner with me, 12 I decided I would approach the bank to release the 13 vacant land since by then the mortgage was well 14 below $200,000, which certainly left them in an 15 oversecured position. 16 And, you know, they told me they'd be just 17 more than happy to do that if I, again, would give 18 them my house as collateral, which by then had no 19 mortgage on it at all. 20 And that's okay. I'm not here to complain 21 about the treatment that I've had with NBD Bank. I 22 guess my concern is Gary, Indiana, and all of the 23 little people. 24 And that is, if I have the kinds of 378 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 problems in -- with a lot of resources in 2 attracting some capital into a city like Gary, 3 Indiana, that people like Bennie Simmons, like 4 other businesspeople that have little resources 5 that want to reach out and rebuild a community, it 6 really is a struggle. 7 I don't know Banc One well. And Jim 8 Danduran called me one day from Merrillville. 9 And I had a breakfast meeting, and he bought 10 breakfast. So I'm sure they're a pretty good bank 11 and he's a pretty good guy. I've never had any 12 other dealings with Banc One. 13 I guess I'm not saying that I'm totally 14 opposed to the merger, but I would sure like to see 15 a commitment, as those that we've read about in the 16 paper to Chicago and to other communities, that the 17 bank that at one time was Gary's bank, who now has 18 at least partially abandoned Gary, would make a 19 commitment to Gary, Indiana. 20 And the one thing I would say not only to 21 NBD and Banc One, but to every other bank, great 22 community on the rebound and, you know, with 23 everybody leaving it would be a great place to 24 open a bank. Thank you. 379 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 MS. SMITH: Mr. Simmons, please. 2 MR. SIMMONS: Yes. My name is Bennie 3 Simmons. I'm president, founder, CEO of the 4 Marshall Plan for Gary. I have some major problems 5 with the merger, just some incidents. 6 Number one is that I went into Banc One to 7 request a CRA report. And what they gave me was a 8 report of the city of Indianapolis and not Gary. 9 Reason why is because Banc One 10 consolidated several years ago. And when they 11 consolidated, they moved a lot of their operations 12 down in Indianapolis. So when I make a phone call 13 for help, I have to dial a 1-(800) number and talk 14 to someone down in Indianapolis. So I couldn't get 15 a proper CRA report on what's happening inside of 16 Gary, Indiana. 17 Millions of dollars are deposited into 18 Banc One and First Chicago NBD in Gary, Indiana; 19 the City government money, the school City money, 20 unions, churches every Monday, Gary residents. And 21 those millions of dollars are being used to finance 22 the communities outside of Gary. 23 The majority of the citizens will tell 24 you -- just ask them -- that there is racial 380 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 discrimination in Banc One's banking system. I 2 think we need to adhere to what Matthew Lee 3 was saying. 4 Economic blight; I have some pictures here 5 that my friend, Darryl Curie, kind of helped me 6 with on Gary, Indiana. And I think the panel has a 7 copy and there's a copy out in the hallway there. 8 And if you could see this, here's the 9 beginning of Gary from Merrillville, but here is a 10 senior citizen's building here, NBD and Banc One in 11 a couple of blocks. That's only about two 12 businesses. The rest of that area is nothing but 13 blight, boarded-up buildings. 14 Here is another picture here of a 15 building, three and a half blocks, okay? There's 16 nothing but blight. A picture here of two doors 17 from -- one, it's a lady digging in the abandoned 18 building looking for garbage, okay, right almost 19 adjacent to Banc One. 20 That's the reality of what is happening in 21 my community. I've been there all my life. My 22 father has too. He's 75 years old. 23 Senior citizens; there's a large senior 24 citizens building right across the street from Banc 381 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 One. The first of the month, the senior citizens, 2 you know, they get their checks and they go down 3 to -- across the street to the bank. 4 They have seven teller windows and 5 there's two windows being manned, operated. So my 6 grandparents have to stand in that line, sick and 7 old. And we complain and nothing is done. 8 That's the relation. There's almost an 9 adversary relationship between Banc One NBD, First 10 Chicago and Gary, Indiana, against our community. 11 And that's a reality. 12 So there's been a tale of two cities 13 here. I like to call it the doughnut. You've 14 heard people -- there's a part of the nourishing 15 part of the doughnut. 16 They've been telling you that Banc One is 17 great. And they're telling the truth. Oh, they 18 helped build our community. It's wonderful. 19 But then there's other areas like Lorraine 20 area of Ohio and Gary, Indiana, and Milwaukee where 21 there's nothing there. There's a doughnut hole. 22 So you cannot base your decisions to 23 approve this merger based on the nutrition outside 24 the doughnut hole. 382 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I'm not saying that this merger should be 2 denied because I imagine no bank mergers have been 3 denied. What I'm asking is that for this bank 4 merger to be delayed until Banc One and NBD First 5 Chicago make the same commitments that they made 6 with Woodstock here in Chicago, to places like Gary 7 that is right next door. In fact, we got an 8 airport called Gary-Chicago Airport. So this is 9 what we ask you for. 10 Now, why is that the doughnut hole? Is it 11 because that is John McCoy's intentions? No, I 12 don't believe that. 13 But what I believe is this. I believe 14 there's been a lack of managerial responsibility. 15 So if you got a racist bank president or racist 16 bank managers, they do what they want to to these 17 communities. And we complain, you know, but 18 nothing's done. 19 So I'm asking -- they had an advertisement 20 in northwest Indiana saying, we want to give 21 $2 billion. Well, I'm asking John McCoy to commit 22 $1 billion to Gary, Indiana, over the next eight 23 years to rebuild that community in loans, in 24 grants, business loans, mortgages to Gary, Indiana, 383 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 and then do the same to those other doughnut holes 2 across the country. And if you do that, Banc One 3 would be a great bank. 4 Lastly, Citibank; the mayor of 5 South Dakota went to Citibank and said, look, we 6 need help. We think that we can handle your 7 database and your credit cards at one-third the 8 cost. And whoever is in the leadership of Citibank 9 said okay. So you know when you get your statement 10 back, it says South Dakota. 11 I think there's ways in which creatively 12 Banc One and places like Gary and Milwaukee can -- 13 we can barter together. We can sit down and reason 14 together, you know, and not paint a glowing picture 15 like everything is okay because it's not. 16 So it is my recommendation that this 17 merger be not denied, but delayed until such 18 commitments can be made, just like they did with 19 Woodstock here in Chicago. Thank you. 20 MS. SMITH: Thank you very much. We appreciate 21 your being here this afternoon. 22 And we will go onto, I think, another 23 panel. 24 MR. ALVAREZ: Mr. Simmons, you left a copy of 384 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 the pictures? 2 MR. SIMMONS: They out there, yeah. I left two 3 copies. One's on the desk and then -- 4 MR. ALVAREZ: Thank you very much. 5 MR. SIMMONS: Yes, thank you. 6 MS. SMITH: We'll start with Mr. Reyes. 7 MR. REYES: I'm a politician. I was going to 8 borrow some time from some of the panel members, 9 but this is a full panel. I'm not saying that to 10 gain any more credibility. I'm just saying that. 11 Actually, it works against me, I think. We're 12 ready? 13 Well, my name is Tony Reyes, and I am the 14 executive director of a not-profit group called 15 Comite De Bienestar. Comite De Bienestar is a 16 nonprofit that dedicates itself to providing 17 housing opportunities for low-income minority farm 18 workers. 19 It's located in a city called San Luis, 20 Arizona. It's the border with Mexico. So, I mean, 21 we've got a lot of people there to help. 22 We've been doing that for the last fifteen 23 years. We have developed five subdivisions so far 24 with over 1,700 lots for the same number of 385 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 families. There's over a thousand homes built out 2 in that area. 3 We have worked with Banc One over the 4 last few years, but essentially we started a 5 relationship with that bank when it was still Bally 6 National Bank in Arizona. 7 And as I was trying to get myself moved up 8 here in the panel system here, I was thinking about 9 the times that I was mayor and I had to testify 10 against the bank mergers. 11 And I remember testifying in the Senate 12 Committee for red -- you know, in red-lining of 13 banks. And I was saying, maybe I'm a little 14 confused, I should be in the other group. 15 But, no, this time I don't want to leave 16 any trace of doubt. I am testifying in favor of 17 this merger. You know, I've had my reservations. 18 And we can go on and bore you with details. 19 Suffice it to say that when Bally National 20 Bank and Banc One were going through the merger 21 process, I was really concerned that a lot of the 22 fears that past panel members have expressed 23 regarding the fact that a bank becomes so big that 24 it loses touch with its constituencies or, in this 386 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 case, with its clients, that's going to happen 2 now and then. 3 But I'm happy to report, it didn't happen 4 in San Luis, Arizona. I don't know about other 5 areas, but in San Luis, Arizona, we've got nothing 6 but support and help from Banc One and its 7 officers. 8 Over the last couple of years, they 9 have loaned us over $10 million. Our last 10 subdivision is a 495-lot subdivision. We're 11 in construction now. 12 They've also loaned us money to begin a 13 multi-family development project for over a hundred 14 families, low income and very low income people. 15 So I'm really proud to say that that has been a 16 very, very good working relationship. On top of 17 that, I've actually gotten more support now than I 18 ever did before. 19 So I can sum this up by telling you we're 20 highly in support of this merger and we think and 21 hope that this will continue to be the case when 22 Banc One merges with First Chicago. 23 See, that was pretty cut and dry. And 24 thank you very much for allowing me to go first. 387 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I've got to catch a flight. I love Chicago, it's 2 been fun, but I've got to get back and it's a long 3 ways home. Thank you very much. 4 MS. SMITH: Thank you very much. 5 Mr. Gigerich. 6 MR. GIGERICH: Yes. I'd like to thank the 7 Federal Reserve Board for today's opportunity to 8 speak with all of you. 9 My name is Larry Gigerich. I'm president 10 of Indianapolis Economic Development Corporation. 11 We are a 501(c)6 in Indianapolis structured with a 12 Board of Directors of about 50 members. 13 Our primary mission in Indianapolis is to 14 serve the residents and businesses of our region. 15 Our primary responsibility is to foster the 16 creation of new jobs, the retention of existing 17 jobs and attraction of new business and, most 18 importantly, capital investment into our area. 19 One of the things that is important to 20 us and has been throughout the history of our 21 organization is the relationship that we've had 22 with Banc One and First Chicago NBD. 23 Previous to those organizations, their 24 predecessors, American Fletcher National Bank and 388 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Indiana National Bank, were also very active in our 2 economic development efforts in Indianapolis. 3 One of the things that has been of 4 particular importance is their support on the 5 Center City Economic Development projects. 6 They have helped us finance some of the 7 most complicated economic development projects in 8 the Center City. They have helped us significantly 9 with Brownfield Redevelopment Projects in some of 10 our most challenged neighborhoods. 11 And they've also worked with us on a 12 number of projects in our downtown core that have 13 provided significant number of job opportunities 14 for the residents of the Center City. 15 One of the things that we've been doing 16 with them in particular recently is looking at 17 opportunities to bring high technology businesses 18 into our community. And it's important to note 19 that both banks have been active supporters of us 20 launching this effort. 21 We have taken the approach in Indianapolis 22 under the Mayor's leadership of utilizing high 23 technology as the vehicle for our Center City 24 residents to be able to move into jobs that provide 389 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 good pay but, most importantly, family wage jobs 2 that they can raise their families. 3 And we view technology as the key for the 4 Center City residents to move up economically in 5 our community. And that's something that we think 6 has been a unique approach. And the banks have 7 been very supportive both financially and with 8 their volunteer and staffing efforts for this 9 project. 10 One of the things also that has occurred 11 with the bank's strong support and leadership, 12 we've reversed the trend in Indianapolis of a 13 number of businesses fleeing our inner city, moving 14 out to our suburbs. 15 In fact, we have brought a number of 16 businesses from our suburbs into our downtown and 17 Center City area. And that's been of particular 18 importance to our economy. 19 And I would note that our unemployment 20 rate currently is about 2.4 percent, but in our 21 Center City it is down to about 6 percent. And 22 just a few years ago, it was much higher. It was 23 close to 20 percent in our Center City. 24 And as a result of the bank's strong 390 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 support of our efforts, we've been able to really 2 tackle some of the most difficult areas of our 3 community for redevelopment purposes. 4 Just a couple other things I'd like to 5 note. One of Indianapolis' greatest strengths has 6 been the public private partnership philosophy that 7 we've had in Indianapolis. 8 And the predecessors at Banc One and 9 First Chicago NBD were original founders of our 10 organization in 1983, over 15 years ago. Since 11 that time and even with those acquisitions, their 12 support has been even stronger in Indianapolis. 13 But in particular, I'd like to note two 14 statistics. In those 15 years, we've been able to 15 attract $10 billion of investment to our city and 16 create and retain over 150,000 jobs. 17 The banks and their leaders have served as 18 the -- on our executive committee for Indianapolis 19 Economic Development Corporation, but have been 20 very strong leaders with all of our initiatives 21 and, in particular, with our organization. 22 A couple final things I'd like to touch 23 on. One of them is we had a project in downtown 24 Indianapolis, the Circle Center Mall Project, that 391 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 had been on the books for about 15 years. 2 And four years ago, the Mayor and the 3 leaders of Banc One and First Chicago NBD and a 4 handful of other businesses were able to pull that 5 complicated project and its financing together. 6 And as a result, we now have a 7 $300 million mall and about a thousand jobs that 8 are there, many of which have been provided for 9 Center City residents. 10 So I appreciate the opportunity to be here 11 today. We fully believe the support will continue 12 from these banks. And we had the same concerns in 13 our community fifteen years ago that have been 14 voiced today. And not only had those concerns been 15 unfounded, but the support of those banks after the 16 acquisitions of the original entities have been 17 even stronger in our community. Thank you very 18 much. 19 MS. SMITH: Thank you. Mr. Lewis. 20 MR. LEWIS: My name is Cornelius Lewis. I'm 21 one of the founders and the president of a company 22 called Gulf Coast BIDCO, located in Baton Rouge, 23 Louisiana. The acronym, BIDCO, B-I-D-C-O, stands 24 for Business and Industrial Development 392 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Corporation. 2 Some people are familiar with them. There 3 are not that many of us around. BIDCO is very, 4 very prominent in the state of Michigan. Well, 5 we're in Louisiana. 6 We also happen to be a certified community 7 development financial institution. In fact, we're 8 the only CDFI certified in Louisiana as of today to 9 the best of our knowledge. 10 Gulf Coast BIDCO is a minority-owned, 11 for-profit financial institution, nondepository 12 financial institution. And we are engaged in 13 the business of providing mezzanine or growth 14 capital to small businesses in Louisiana in need of 15 such financing for be it expansion, modification or 16 growth purposes. Periodically, we will do a 17 start-up too. 18 We're designed to basically fill the 19 moderate-risk moderate-return void or capital void 20 that exists between bank financing and what is 21 historically high-risk high-return capital that's 22 generally provided by venture capitalists around 23 the country. 24 We've been in business and began 393 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 operations in September of 19 -- I'm sorry, in 2 January of 1995, and we've been doing quite well. 3 The thing that makes Gulf Coast BIDCO 4 unique -- and I'm not going to dwell too much on 5 what we do, but I think it has a lot of bearing on 6 how Banc One fits into this -- we are very, very 7 flexible or have the ability to exercise a great 8 deal of flexibility in the types of financing 9 structures or methods that we can employ to 10 accommodate the needs of small businesses in 11 Louisiana, including, as I think the gentleman 12 Mr. Reid from the Southern Dallas CDC mentioned, 13 subordinated debt and equity that is direly needed 14 by small businesses so that they can, in fact, 15 become bankable in dealing with traditional 16 lending sources. 17 Gulf Coast BIDCO raises money, its own 18 capital, to reinvest in small businesses through 19 one of two means. One is either through equity, 20 individuals as well as institutions and others 21 investing in Gulf Coast BIDCO by buying stock in 22 our company or debt. 23 In terms of our relationship with Banc 24 One, Banc One is today the largest nongovernment 394 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 institutional investor in Gulf Coast BIDCO. 2 We initially approached Banc One back in, 3 I think it was 94, 1994, when its predecessor bank 4 in Louisiana was Premier Bank. 5 We spent the time and the money in 6 developing a private placement memorandum or an 7 offering and a very, very sound business plan and 8 what we believed to be a sound management team and 9 approached the Banc One or Premier Bank at the 10 time. 11 And they were our initial institutional 12 investor and led the charge of assisting us in 13 enticing other institutional investors. 14 Today, as I mentioned, they are the 15 largest nongovernmental institution investor in 16 Gulf Coast BIDCO with approximately $1.8 million in 17 our company. 18 The reason they invested is because they 19 realized that there were a substantial number of 20 small businesses in Louisiana that have weathered 21 the -- that had weathered the storm of the 22 recession in the 1980s that Louisiana experienced 23 as a result of a decline in oil prices and that 24 these companies were still poised -- or they were 395 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 poised and mature and ready to go and were in need, 2 dire need, of growth capital. 3 But the bank also realized that in many 4 instances the type of capital that these types of 5 companies needed, banking institutions 6 traditionally don't provide. So, therefore, 7 there was a need for an alternative financing 8 vehicle to accommodate this need. And Gulf Coast 9 BIDCO exercised the wisdom and foresight to 10 invest in us. 11 I've got one minute left. Well, I was 12 going to cite some examples. 13 We invest in rural as well as urban 14 communities. I think the problems in Louisiana 15 have been well, well documented. We are all -- 16 most of the time 49th and 50th in the wrong 17 categories. 18 But as a result of Gulf Coast BIDCO and as 19 a result of our partnership with Banc One, we've 20 been able to accommodate and make some serious end 21 roads in assisting small businesses in Louisiana, 22 which ultimately will reduce the unemployment 23 levels and poverty levels throughout the state of 24 Louisiana. 396 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 So with that, I'm here for the record to 2 endorse and strongly support this merger and 3 hopefully it will go through. I cannot see where 4 it can be of any harm to the state of Louisiana 5 and, in particular, Gulf Coast BIDCO. Thank you. 6 MS. SMITH: Okay. Next, I have Ms. Vaughn. 7 MS. VAUGHN: Thank you. I'm Vicky Vaughn. I'm 8 the vice president of Enterprise Social Investment 9 Corporation. I'm here today representing the 10 Enterprise Foundation, which is our parent 11 organization. 12 The Enterprise Foundation is here today to 13 testify in support of Banc One's proposed merger 14 with First Chicago NBD. 15 I'm pleased to have this opportunity to 16 talk about our partnership with Banc One, which we 17 feel has been very productive in producing 18 thousands of units of affordable housing across the 19 country. 20 The Enterprise Foundation is a national 21 nonprofit housing and community development 22 organization launched in 1982 by Jim and Patty 23 Rous. Enterprise works with more than a thousand 24 community-based organizations in more than 300 397 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 locations to make America's low-income communities 2 a better place to live and to work. 3 Our mission is to see that all low income 4 people in the United States have the opportunity -- 5 can you hear me -- for fit and affordable housing 6 and to move up and out of poverty into the 7 mainstream of American life. 8 Through the use of the Federal low-income 9 housing tax credit, our subsidiary, the Enterprise 10 Social Investment Corporation, or ESIC, has raised 11 more than $2.5 billion in equity, which is helping 12 to produce approximately 55,000 units of affordable 13 housing nationwide. 14 Besides investing directly in affordable 15 housing through their subsidiary bank, the Banc One 16 CDC and Banc One Capital as examples, Banc One has 17 been an important partner of the Enterprise 18 Foundation's work, investing nearly 37 and a half 19 million dollars in national and regional equity 20 funds managed by ESIC. 21 To date, Banc One's equity commitments in 22 their marketplace, including Texas, Illinois, Ohio, 23 Colorado, are greater than $15 million and will 24 play a part in producing nearly 5,000 units of 398 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 affordable housing in 61 different projects. 2 These funds target a variety of project 3 investments within Banc One's market, including 4 housing for senior, for families and for persons 5 with special needs and projects located in 6 disadvantaged neighborhoods. 7 Banc One has been particularly supportive 8 of ESIC's work with nonprofit organizations that 9 sponsor and develop special needs housing and 10 provide innovative services to communities. 11 For example, Banc One invested in the 12 Renaissance at Concord Plaza Project, which is 13 located in Lakewood, Colorado. This is a project 14 that was developed by a nonprofit called the 15 Colorado Coalition for the Homeless. 16 It will provide 25 units that are targeted 17 as transitional housing for homeless individuals 18 and families and 50 units to working families who 19 earn as little as $10,000 a year. 20 This project will provide supportive 21 services to the tenants, including case management 22 and access to programs such as substance abuse 23 programs, job training programs and child care. 24 As another example, Banc One has played an 399 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 integral part in supporting the work of the 2 Cleveland Housing Network. They have invested 3 through our equity funds more than $4 million in 4 the Cleveland Housing Network's lease purchase 5 program. 6 In this program, single family homes 7 throughout the city of Cleveland are rehabbed using 8 financing from the sale of the low-income housing 9 tax credit. These houses are then rented to 10 families for as little as $175 a month. After the 11 tax credit compliance period, these tenants have 12 the opportunity to buy their home. 13 This opportunity for home ownership could 14 be very difficult to achieve for these tenants but, 15 otherwise, this program does provide that 16 opportunity. 17 In addition, there are more than a 18 thousand units through this lease purchase program 19 that have been rehabilitated, making a substantial 20 difference in neighborhoods throughout the city of 21 Cleveland. 22 Banc One has also provided some grant 23 support to several local offices of the Enterprise 24 Foundation, including the Dallas -- our Dallas and 400 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 Cleveland offices. 2 These offices work closely with local 3 nonprofits providing training and technical 4 assistance to nonprofits that are providing 5 affordable housing in their communities. 6 We greatly value our relationship with 7 Banc One, applaud the bank's commitment to 8 affordable housing, its creativity and approach and 9 their outreach in their communities. 10 We look forward to developing our 11 partnership and building upon the positive impact 12 the partnership between the Enterprise Foundation 13 and Banc One has had on communities. Thank you. 14 MS. SMITH: Thank you very much. 15 Ms. Werkmeister. 16 MS. WERKMEISTER: Good afternoon. My name's 17 Wendy Werkmeister, and I'm the president of the 18 Wisconsin Women's Business Initiative Corporation. 19 And I learned this afternoon that -- oh, 20 it got loud. I learned this afternoon that I have 21 been working in the middle of a doughnut hole for 22 12 years that's the heart of Milwaukee. 23 But the thing that the gentleman failed to 24 comment upon is that now they sell those doughnut 401 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 holes individually and that they cost a lot more 2 and the profit margins are much higher than regular 3 doughnuts. So just food for thought, maybe Banc 4 One wants to jump on a little bit quicker than some 5 of the other banks. 6 What we do at our organization is impact 7 lives. And we do that on an economic basis. We're 8 a statewide economic development corporation. And 9 we started nearly ten years ago with a twofold 10 mission. 11 One is to provide quality business 12 education and training, and the second is to 13 provide access to capital. 14 We're able to deal with anybody in the 15 state of Wisconsin, tall people, short people, big 16 people, little people. However, we focused our 17 efforts specifically on women and on people of 18 color and on the poor. 19 Banc One has been a partner since day 20 one. So in our piece of the world in Wisconsin and 21 my work with them in terms of microenterprise 22 development and entrepreneurship and small business 23 development, they've been a true partner. 24 Banks, I believe, need to do what they 402 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 need to do best and they need to do it 2 resourcefully and then they need to partner with 3 organizations such as ours and many others in the 4 room to do what they do best and allow them with -- 5 to provide resources to enable them to do that. 6 The resources that I'd like to just 7 highlight briefly here for testimony are really 8 three; people, time and money. 9 In terms of money, Banc One has been very 10 significant in helping us fund loan loss reserves 11 that we've been required to fund through SBA 12 microloans programs. 13 They've also provided specific donations 14 and sponsorships of our training programs and other 15 pilot programs that we've tried to develop and have 16 successfully implemented in the state of 17 Wisconsin. 18 More recently, they were one of the very 19 first to become involved in a pilot program through 20 the SBA. We are one of the very first microlenders 21 through the SBA program about seven years ago. 22 Now, it's a permanent program. We've 23 borrowed over $2 million from the SBA. We are one 24 of 10 agencies to be allowed to be in a pilot 403 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 program where you could borrow this money directly 2 from a bank and then SBA would guarantee it. Banc 3 One was first in line. And last year, we closed a 4 loan for about $720,000 with Banc One. That was 5 the very first deal Banc One did and we're very 6 proud to be part of that in Wisconsin. 7 And I think that, knock on wood, all those 8 little deals in Milwaukee from a hundred dollars to 9 25,000 will do well and we'll pay all that money 10 back to Banc One. 11 In terms of time, Banc One has really, in 12 my mind, given unprecedented time in terms of 13 listening to what microcredit is about and 14 fostering programs in the state and providing 15 advocacy on behalf of microcredit and 16 microenterprise development and how their bank can 17 be a part of it. That's not only been locally, but 18 it's been regionally. 19 They've also listened to us and provided 20 guidance and advice on managing our loan portfolio, 21 on utilizing new loan portfolio management systems, 22 and also on providing coverage of how they do 23 things through their loan-by-phone programs and 24 other programs that they have at Banc One. 404 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 In terms of people, they've provided 2 individuals to be speakers at our classes, of which 3 we have approximately 250 every single year and see 4 over 2,500 people throughout the year in different 5 business training classes. 6 They've provided bankers as mentors, 7 mentors as consultants and also loan executives for 8 three-month periods where these individuals are on 9 Banc One payroll but working for us for the sake of 10 the cause. 11 So I'd like to say that I do fully 12 recommend Banc One's merger. I only see with 13 greater capacity that they'll be stronger and be 14 able to do more of what they're already doing. 15 Thank you for letting me share those few words. 16 MS. SMITH: Thank you. And now, we will go to 17 Mr. Pacheco. 18 MR. PACHECO: Thank you, Ms. Smith, 19 Mr. Alvarez, Ms. Williams, for letting me speak 20 today. 21 My name is Leroy Pacheco. I'm president 22 and CEO of ACCION Chicago. We're a nonprofit 23 microlender. We make small business loans from 24 $500 to $25,000 throughout the Chicago area. 405 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 We are an affiliate of ACCION 2 International, who has been lending money in Latin 3 America for over 35 years. Last year alone, they 4 lent out $500 million to 340,000 people. Average 5 loan was $891 with a payment rate of 99 percent. 6 Let me tell you what we're doing here in 7 Chicago thanks to our friends at First Chicago 8 NBD. Since 1993, First Chicago provided the seed 9 money to start ACCION Chicago. 10 Since that time, we have lent close to 11 $2 million throughout the Chicago area to over 300 12 businesses with a payment rate of 98.5 percent. 13 First Chicago Bank has provided us over 14 $200,000 in grants since we began the operations in 15 1993 and currently we have about $175,000 in lines 16 of credit for specific initiatives. 17 We right now have initiatives for the 18 south and west sides of Chicago for African 19 American loans. 20 I can tell you today that we have almost 21 $100,000 in African American loan businesses that 22 are thriving and doing very well. 23 We create jobs. We impact communities. 24 Banc One has also been a very important player for 406 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 our ACCION office in Texas, in San Antonio, Texas. 2 We have been taking people off welfare. 3 We have been creating jobs. If you all know where 4 a little village is, La Vita on the west side, the 5 second highest business revenue generating street 6 in Chicago behind the Magnificent Mile is 26th 7 Street. 8 We are very proud to be there, and thanks 9 to First Chicago, we are very glad that they have 10 made a big impact in that area. 11 We have chocolatiers, tree trimmers, 12 contractors, store owners, medical transcription 13 services, sculptors, artists, bookkeepers. We lend 14 to anybody who has a good idea and is willing to 15 work. And thanks to First Chicago, we've been 16 allowed to do that. 17 The major investment First Chicago has 18 done, I believe, over the last four or five years 19 helping us is their investment in people. 20 ACCION Chicago is chaired by Mary Decker 21 from First Chicago Bank. Our loans are handled by 22 Ed Jacobs from First Chicago Bank, our lines of 23 credit. We have four individuals who mentored in 24 our businesses from First Chicago bank on their own 407 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 time and volunteered hundreds of hours. 2 We have another First Chicago, Dory 3 Flores, who sits on our External Loan Committee. 4 They do it on their own time after hours, before 5 hours and do it because they want to. 6 I always tell people that banks have 7 stockholders, we have stakeholders. And we enjoy 8 our relationship. 9 First Chicago bank, I believe, services 10 the community of Chicago not just by putting up ATM 11 machines. They invest people and they invest 12 money. 13 We are very, very pleased to be a partner 14 with First Chicago, and we think that it makes 15 great sense, and it has attracted other lenders. 16 We now have close to $2 million in our loan fund 17 for small businesses throughout the Chicago area. 18 Facts that are ignored do not cease to 19 exist. First Chicago has been working in this 20 doughnut hole that you heard about for a lot of 21 years. We are very pleased to be a partner with 22 them. 23 It's everybody's job, not just the banks'; 24 community service, activists, aldermen, ourselves 408 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 to donate when we have time to -- I always say 2 healthy businesses can give. If I can provide a 3 business with the money that they need and their 4 equipment isn't broken down, they don't have to 5 worry about their employees, they can donate to the 6 Chamber of Commerce, they can join the YMCA, they 7 can become a mentor, they can become a part of a 8 church. Healthy businesses can give back to the 9 community, and ACCION Chicago is a definite example 10 of that. 11 First Chicago Bank and Banc One are doing 12 something about the business attitude and the 13 climate in Chicago. They're not just talking about 14 it. They're doing something about it. And ACCION 15 Chicago is here to tell you that with partners like 16 this, it makes great sense, good financial sense 17 and good community sense for this merger. 18 Thank you very much. 19 MS. SMITH: Thank you. 20 And I want to take this opportunity to 21 thank you and to thank all of the witnesses who 22 went before you for the views and perspectives that 23 you have shared with our panel and thank you for 24 your patience. 409 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 I believe that is the final panel, unless 2 we had any unscheduled speakers who have indicated 3 that they would like to present testimony. But 4 unless I see some hands going up, I will adjourn 5 this public meeting. And thank you again. 6 (Whereupon, proceedings in 7 this cause were adjourned.) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 410 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 STATE OF ILLINOIS ) 2 ) SS: 3 COUNTY OF W I L L ) 4 5 JEANETTE A. SANDEI, being first duly 6 sworn, on oath says that she is a court reporter 7 doing business in the City of Chicago; and that she 8 reported in shorthand the proceedings of said 9 hearing, and that the foregoing is a true and 10 correct transcript of her shorthand notes so taken 11 as aforesaid, and contains the proceedings given at 12 said hearing. 13 14 ______________________________ 15 Certified Shorthand Reporter 16 17 SUBSCRIBED AND SWORN TO 18 before me this______day 19 of________________1998. 20 21 22 _______________________ 23 Notary Public 24 411 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 . 1 STATE OF ILLINOIS ) 2 ) SS: 3 COUNTY OF K A N E ) 4 5 BRENDA S. TANNEHILL, being first duly 6 sworn, on oath says that she is a court reporter 7 doing business in the City of Chicago; and that she 8 reported in shorthand the proceedings of said 9 hearing, and that the foregoing is a true and 10 correct transcript of her shorthand notes so taken 11 as aforesaid, and contains the proceedings given at 12 said hearing. 13 14 ______________________________ 15 Certified Shorthand Reporter 16 17 SUBSCRIBED AND SWORN TO 18 before me this______day 19 of________________1998. 20 21 22 _______________________ 23 Notary Public 24 412 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052
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