Public Meeting Regarding Fleet Financial Group, Inc., and
BankBoston Corporation
Wednesday, July 7, 1999
Transcript
|
Public Meeting Regarding Fleet Financial Group, Inc., and
BankBoston Corporation |
0001
Volume I
Pages 1 to 543
Public Meeting Regarding the Proposed
Merger of Fleet Financial Group, Inc.
and BankBoston Corporation
PRESIDING: Dolores Smith, Director, Division of
Consumer and Community Affairs,
Federal Reserve Board
Held at: Federal Reserve Bank,
600 Atlantic Avenue, Boston, Massachuetts, on
Wednesday, July 7, 1999, at 9:00 a.m.
(Anne H. Bohan and
Carol H. Kusinitz,
Court Reporters)
* * * *
0002
I N D E X
SPEAKER PAGE
Dolores Smith 10
Terrence Murray 15
Chad Gifford 24
Gail Snowden 30
Agnes Bundy Scanlan 38
Terrence Murray 42
Mayor Thomas Menino 45
Congressman Michael Capuano 50
Senator Dianne Wilkerson 54
Jeanette Boone (for Sen. John Kerry) 64
Larry Ferguson (for Congressman
Patrick Kennedy) 72
Attorney General Thomas Reilly 79
Attorney General Richard Blumenthal 84
Denise L. Nappier 90
Joyce Campbell (for Maude Hurd) 102
Angie Wilkerson (for Matthew Christian) 107
Lunita Mustafa (for Elnora Thompson) 108
Jennifer Carter 110
Gwendolyn Jacobs 113
Lori Brown 118
Eddie Collazo (for Lucy Mateo) 122
Karen Miller (for Rose Blain) 124
0003
I N D E X
SPEAKER PAGE
Reverend Norvel Goff 127
Margo Strom 129
Nancy Korman 131
Tandeka Guilderson 132
Deborah Deceatis 134
Greg Williams 136
Romney Resney 139
Richard Lord 141
Martha Jones 142
William Gillison 145
Ruth Scott 147
Peter Cuenca 149
Lyndia Downie 151
Susan Rodgerson 152
Robert Regan 153
Rosa Minayo Durado 155
Lynn Swann 156
Tripp Jones 158
Michael Brown 160
Manuel Mirabal 163
Frank Moy 165
Stephen Dickerman 166
Reverend Al Sharpton 168
0004
I N D E X
SPEAKER PAGE
Martha Yager (for Matthew Lee) 172
Abdul Jabbar Muhammad 176
Ellen Feingold 181
Ken Guscott 186
Ruhi Maker 190
Ruhi Maker (for Rashmi Rangan) 194
Joan Wallace-Benjamin 199
Martha Yager 205
Mr. Albert 207
Bruce Marks 213
John C. Anderson 221
Carol Aranjo 227
Marc Draisen 230
Jeanne DuBois 234
Andrew Morehouse 238
Michael Westgate 243
Susan Worgaftik 246
David Young 250
Elizabeth Webster 258
Denise Flynn 259
Linda Whitlock 260
Jane Smith 262
Paul Guzzi 263
0005
I N D E X
SPEAKER PAGE
Peter Meade 264
Alan Macdonald 265
Robert Justis 266
James Brett 268
Ron Machtley 269
Felix Soto 271
Felix Torres 272
Douglas Johnson 273
Dennis Langley 274
Cherylyn Satterwhite 275
Jeff Campbell 277
Eric Schwartz 278
Aaron Lieberman 279
Carl Axelrod 281
Michael Widmer 282
Edward Lane Reicker 283
David Brown 284
William Farrell 285
Congressman Barney Frank 286
Congressman William Delahunt 295
Sonia Alleyne 305
Thomas Callahan 310
John Lozada 311
0006
I N D E X
SPEAKER PAGE
Rita Gonzales Levine 317
Mossik Hacobian 321
Ozell Hudson, Jr. 323
Cathy Malmstrom 327
Susan Pearson 332
Susan Bodington 337
Brenda Clement 342
Reverend Joseph Washington 345
Ray Neirinckx 352
Mayor Michael Albano 357
Representative Jarrett Thomas Barrios 360
Vermelle Parks 365
Councilor Gareth Saunders 369
John Wilson 377
Samuel C. Hamilton 378
Henry Thomas 380
Sol Soskin 382
Peter A. Gagliardi 385
Richard Kumro 386
Christopher Sikes 388
F. Carlisle Towery 390
Jim Morgo 392
Karen Phillips 394
0007
I N D E X
SPEAKER PAGE
Phillip Morrow 396
Timothy Marshall 397
Keith W. Stokes 400
Jeffrey Pollock 402
David Crowley 404
Anne S. Habiby 405
Jose Champagne 407
Fernando Comulada 408
Peter Fellenz 409
Hierberto Flores 410
Juan Cofield 411
Reverend Frank Kelly 417
Drew Astolfi 421
James T. Haskell 424
Wayne M. Burton 428
Marcia Peters 430
Gail Pisacane 433
Leo Sarkissian 440
Robert Van Meter 445
Andrew Grainger 450
John O'Connor 455
Ned Brown 461
Larry Raff 465
0008
I N D E X
SPEAKER PAGE
James Campen 469
Robert Davis 477
Donald Glass 480
Frank Carvalho 487
Roger Colton 491
Pat Cusick 496
David Harris 500
Reverend William Barnwell 506
Bruce Bolling 509
Alvin Porter 513
Luz Santana 515
Greg Vickers 517
Roger Garvin 522
Vickie Hurewitz 524
Greg Timilty 529
R. K. Schwartz 533
Dennis Flynn 538
0009
1 P R O C E E D I N G S
2 MR. WALKER: Good morning, ladies and
3 gentlemen. If you'll be seated, we'll try to get
4 these proceedings started. My name is Richard
5 Walker. I'm the Vice President for Public and
6 Community Affairs here at the bank. Just a few
7 announcements. If you are a speaker, please
8 register at the speaker's desk if you want to give
9 remarks today.
10 Also if you're a member of the press,
11 please register at the press table. Once you've
12 registered as speakers, please be in the speaker
13 assembly area at least 15 minutes before you are
14 about to come on.
15 Also, the use of cellular or portable
16 phones in the auditorium is prohibited. We want to
17 have these proceedings move as quickly as possible
18 without the distractions of the cellular phones.
19 Thank you.
20 In terms of the restrooms, they're out the
21 door and to your left, and if you have any
22 questions, please see me or any of the staff with
23 the tags on them during the course of the day.
24 Now I will turn the proceedings over to the
25 Presiding Officer, Dolores Smith, who is the
0010
1 Director of Consumer and Community Affairs at the
2 Federal Reserve Board of Governors. Dolores.
3 PRESIDING OFFICER SMITH: Thank you,
4 Richard. I am pleased to welcome you to this
5 important public meeting on the application by Fleet
6 Financial Group to acquire BankBoston Corporation.
7 Richard has already done so, but for the record I'll
8 go ahead and introduce myself. I am Dolores Smith,
9 Director of the Division of Consumer and Community
10 Affairs at the Federal Reserve Board in Washington,
11 D.C. I'll be the Presiding Officer for this
12 meeting.
13 Other members of our panel include two from
14 the Federal Reserve Bank of Boston and two from the
15 Board. First, Boston, we have Bill McDonough on my
16 extreme right, the bank's General Counsel. Then at
17 my extreme left Lynn Browne, Senior Vice President,
18 Research and Statistics.
19 From the Board on my left, Myron Kwast, who
20 is the Associate Director for the Division of
21 Research and Statistics, and to my right Scott
22 Alvarez, who is the Associate General Counsel.
23 We are here today because Fleet Financial
24 Group, Boston, Massachusetts, has applied for
25 approval to acquire BankBoston Corporation, Boston,
0011
1 Massachusetts. When the Federal Reserve considers
2 one of these applications, we look at a number of
3 factors under the Bank Holding Company Act. These
4 include financial issues, managerial issues,
5 competitive issues, and the convenience and needs of
6 the communities affected. In doing so, we
7 particularly look at the record of performance of
8 the parties under the Community Reinvestment Act.
9 The Community Reinvestment Act requires the
10 Board to take into account an institution's record
11 of meeting the credit needs of its entire community.
12 The Fleet-BankBoston application also
13 involves the proposed acquisition or retention of
14 nonbanking companies engaged in activities
15 permissible for bank holding companies. The Federal
16 Reserve Board must determine whether the proposed
17 nonbanking activities can reasonably be expected to
18 produce benefits to the public that outweigh
19 possible adverse effects such as undue concentration
20 of resources, decreased or unfair competition,
21 conflicts of interest or unsound banking practices.
22 The purpose of the public meeting today is
23 to receive information regarding these factors. We
24 will be seeking to elicit this information and to
25 clarify factual issues related to the application.
0012
1 We are very pleased that so many people
2 have been willing to come and testify at the public
3 meeting today. We expect to have more than 160
4 groups and individuals represented during the course
5 of the meeting.
6 And I want to tell you a little bit about
7 the procedures. This is what is called an informal
8 public meeting. Members of this panel may ask those
9 who are testifying about their testimony. This is
10 not a formal administrative hearing, so we are not
11 bound by rules regarding evidence,
12 cross-examination, and some of the formal trappings
13 of that kind of proceeding.
14 As you can see from the agenda, we have a
15 very long day ahead of us and we will need to stick
16 to the schedule closely so that everyone who has
17 asked to offer oral testimony will have a chance to
18 do so at the appointed time. We ask the witnesses
19 to be mindful of the needs of others and to help us
20 stay on schedule.
21 The witnesses on each panel will be
22 expected to stay within their allotted times. We
23 have a signal system that we will be using. We have
24 two timers seated at -- two timekeepers seated at
25 the table, and we will also have panels that are of
0013
1 varying sizes, so that for most of the panels the
2 witnesses will have between three and five minutes
3 to present their oral statements. In a few
4 instances the witnesses have been allotted slightly
5 longer times. The timekeeper will give you a signal
6 generally when there is one minute remaining to
7 speak and another -- do you want to hold that up in
8 both directions so that the people in back can see
9 you. And then there is a second card that they will
10 hold up when the time is up.
11 And sometimes it's hard for the witnesses
12 to be looking at the panel, the Federal Reserve
13 panel, and also to be minding the timekeeper, so
14 there may be times when the witness doesn't notice
15 that the "Please Finish" sign has been held up, in
16 which case the timekeeper will give an audio signal,
17 and we'll try to call your attention to that.
18 You will also see from the schedule that we
19 in several cases do have a rather large number of
20 persons on a given panel, and they will each have
21 about one minute at the microphone. This we have
22 done so that we can provide an opportunity for all
23 of these persons individually to have their say
24 before this public meeting.
25 Finally, there may be some persons who were
0014
1 unable to sign up in advance, so to the extent
2 possible we want to give them a chance to speak as
3 well. We have scheduled toward the end of today's
4 meeting an open-mike period when we will make the
5 microphone available to any member of the public who
6 wants to make an oral presentation, time permitting.
7 Witnesses at this public meeting also may
8 submit a written supplement to their oral testimony,
9 but they must do so by next Wednesday, July 14th,
10 and then the record will be closed. Any written
11 supplements should be directed to Jennifer J.
12 Johnson, Secretary of the Board, Federal Reserve
13 Board, Washington, D.C. 20551. They must be
14 received by 5:00 p.m. Eastern Daylight Time on the
15 14th. Submissions also could be faxed to Area Code
16 202-452-3462.
17 Witnesses, if you have not turned in copies
18 of your written testimony or if you have any other
19 written statement to put into the record, please
20 leave it with the Federal Reserve staff at the
21 registration table. It is important that we get
22 this information for the record. A transcript of
23 the meeting will be available by probably Monday,
24 July the 12th, through the Federal Reserve Bank of
25 Boston and through the Federal Reserve Board.
0015
1 In addition, the official transcript will
2 be available by the close of business July the 14th
3 on the Board's public Web site at
4 www.bog.frb.fed.us.
5 And with that, let's begin the proceedings
6 and have members of our first panel.
7 In the interest of time, what I'll ask is
8 that you each state your name, organization, and
9 then we'll start with that.
10 MR. MURRAY: I'm Terry Murray, Chairman of
11 Fleet Bank Group.
12 MR. GIFFORD: I'm Chad Gifford, Chairman,
13 BankBoston.
14 MS. SNOWDEN: Gail Snowden, Managing
15 Director, BankBoston.
16 MS. SCANLAN: Agnes Bundy Scanlan, Managing
17 Director of Fleet Financial Group.
18 PRESIDING OFFICER SMITH: Mr. Murray.
19 MR. MURRAY: Thank you. I'd like to begin
20 by thanking the Federal Reserve Board for inviting
21 me to speak on behalf of Fleet on our proposed
22 merger. Since the months since we announced our
23 proposal, it has been a very proud and challenging
24 time for all of us at Fleet and Bank of Boston. I
25 would particularly like to thank our employees, many
0016
1 of whom have been working very hard this summer to
2 ensure that our company gets off on the right foot.
3 I know there are many questions and
4 concerns about this merger and we hope to address
5 them today. All of us, employees and citizens
6 alike, are on the verge of ensuring that New England
7 will enter the 21st century with a hometown bank,
8 headquartered in this city, committed to serving our
9 customers and our community.
10 Four years ago when I testified before this
11 Board about Fleet's merger with Shawmut, I spoke
12 about the banking industry's trend towards
13 consolidation and how it affected our relations with
14 our customers and our communities. Chad talked
15 about the same issues when it came time to discuss
16 BankBoston's merger with BayBanks. We took steps
17 then to keep our institutions strong and
18 independent. Neither of us expected to be here
19 today talking about a merger between our banks, but
20 we recognize that this merger is another necessary
21 step to ensure that New England continues to have a
22 major locally-based banking presence.
23 In the past few years we've seen a number
24 of bank megamergers like NationsBank and Bank
25 America, First Chicago and Bank One. The number of
0017
1 commercial banks in the U.S. decreased by a third
2 between 1987 and 1997. The number of bank branches
3 increased by a third over the same period, as fewer
4 banks worked to expand access to service.
5 We've seen consolidation spill across
6 national borders as Deutsche Bank acquired Bankers
7 Trust, and we've seen it in France with Banque
8 Nationale de Paris' attempt to take over Sogen
9 Paribas to create a bank with a trillion dollars in
10 assets.
11 Already in Europe there are far fewer banks
12 than in the U.S., possessing far greater assets and
13 ability with which to compete in the global
14 financial markets. In the U.S. we've also seen
15 interindustry mergers between Citicorp and
16 Travelers, and E-trade and Telebank, as new
17 technologies help to break down archaic barriers
18 between banking and other financial service
19 providers.
20 By increasing in size, banks achieve
21 economies of scale that allow us to invest more in
22 technology and in people so that we can develop
23 superior products and services like banking,
24 brokerage and investment services. With products
25 such as these, we can match the increasingly
0018
1 sophisticated needs of both the businesses and
2 consumers we serve.
3 Our merger also addresses the challenges
4 offered by new kinds of competitors. We no longer
5 compete with just other banks. We now compete with
6 institutions such as Fidelity, Merrill Lynch and
7 more recently with on-line banks. More importantly,
8 this is a merger that seeks to strengthen our
9 national and international competitiveness while
10 making a deep local commitment.
11 Fleet-Boston brings together two of
12 America's oldest and most prestigious banks to
13 create one of the world's premier financial
14 institutions and financial providers right here in
15 the City of Boston.
16 When we announced the merger in mid-March,
17 our slides used the tag line, "One Plus One Equals
18 Greater Than Two." This slide illustrated the idea
19 that our combined institution could do more in total
20 for our customers, communities and stockholders than
21 what the two premerger banks have done separately.
22 This was not a statistical assertion, but rather a
23 broad statement about how the new bank's synergies
24 would make Fleet-Boston more competitive than either
25 bank would be by itself. The merger would enhance
0019
1 our geographic diversification and our role as the
2 premier financial service provider from Bangor to
3 Brazil and from Cape May to Cape Cod.
4 This diversification will help reduce our
5 vulnerability to economic downturns. Those of us
6 who went through the regional banking crisis of the
7 early '90s understand how important both geographic
8 and operating diversity are, and we don't want to be
9 at risk in the event of another economic downturn in
10 a particular region or industry sector.
11 This is indeed a very important time for
12 all of us who live in New England. It is the time
13 for us to secure our economic future by responding
14 to the competitive challenge raised by world-wide
15 banking financial services, consolidation and
16 mergers.
17 While there are many opportunities and
18 benefits to this merger, at the same time there are
19 many concerns being voiced, and I'd like to address
20 them right now.
21 One of the compelling reasons for this
22 merger and why we know it will work is that each
23 company brings certain strengths to the table.
24 Right from the beginning Chad and I understood that
25 we must leverage the advantages of each company. In
0020
1 that spirit we will have BankBoston lead the way in
2 the area of community development. They've done a
3 great job in this area for which they have been
4 rightly recognized.
5 Maintaining our outstanding CRA ratings
6 will continue to be a corporate goal for
7 Fleet-Boston. We will use the BankBoston community
8 development approach, including First Community Bank
9 and the BankBoston Development Corporation.
10 Together we look forward to setting a new standard
11 of community development.
12 We have an outstanding CRA rating in
13 Massachusetts. We have enormous successes and
14 successful partnerships that have worked to create
15 thousands of new homeowners that have invigorated
16 communities. Moving forward, we plan to continue
17 these efforts.
18 We will also sustain our support of
19 neighborhood-oriented banking services, community
20 development programs and the charitable giving that
21 makes this commitment a reality.
22 Gail will speak about these initiatives in
23 detail, but I wanted to state that we strongly
24 believe that our recently announced commitment of
25 14.6 billion dollars is a realistic and achievable
0021
1 plan and one that will increase affordable housing,
2 strengthen small business, and stabilize
3 neighborhoods in our footprint.
4 Moving forward with the new commitment,
5 we'll have an oversight board that will measure our
6 progress in serving community needs, a board with
7 representatives from many of the 125 community
8 groups we consulted when developing this plan.
9 Addressing antitrust concerns, it is
10 important to realize that the proposed merger is
11 more about combining the complementary businesses of
12 Fleet and BankBoston and not about combining
13 competing businesses. In this regard Fleet's retail
14 branch operations extend to many Northeastern states
15 in which BankBoston has no branches, whereas,
16 BankBoston's large corporate banking business
17 extends across the nation, in 23 foreign countries
18 where Fleet has no presence.
19 The merger will also bring together
20 complementary nonbanking lines of businesses such as
21 Fleet's Quick & Reilly retail brokerage franchise
22 and BankBoston's Robertson Stephens, an investment
23 banking business. Where the two banks do overlap,
24 we have proposed a divestiture plan that was
25 intended to preempt any conceivable competitive
0022
1 concerns. With more than 290 branches and
2 approximately 12-1/2 billion dollars in deposits,
3 the proposed divestitures are far and away the
4 largest ever made in the history of U.S. bank
5 mergers. As a stand-alone entity, the divestiture
6 would rank among the top 50 bank holding companies
7 in the nation in terms of small business loans and
8 total assets.
9 Chad and I both grew up with banks
10 headquartered here in our home region, banks managed
11 by people who cared about New England and its
12 people. I don't want my children or my
13 grandchildren living in a New England whose economic
14 fate is dictated from outside the region. I want
15 them to have local institutions that are strong and
16 sophisticated, but that make decisions locally with
17 New Englanders in mind. So many American cities
18 have lost that. There's no longer a major
19 indigenous bank in Los Angeles, none in Miami,
20 Denver, Dallas, Philadelphia or Houston.
21 Panelists, I mentioned at the outset how
22 excited all of us at Fleet and BankBoston are about
23 this merger. I'd like to finish by telling you how
24 much this merger means to me personally. I grew up
25 in New England, went to school here, and I've worked
0023
1 in banking here for almost four decades. This is my
2 home and this is home to Fleet and BankBoston and
3 our tens of thousands of dedicated employees. Our
4 legacy will be a large global institution domiciled
5 in New England with deep community commitments.
6 The financial system that is now taking
7 shape in which the Federal Reserve Board has done so
8 much to make possible is one that reflects the
9 vision and innovation that has made our nation the
10 world's financial leader.
11 I'm also pleased that the House of
12 Representatives last week passed the Financial
13 Services Act of 1999. With the House and Senate
14 both voting to appeal the outdated Glass-Steagal
15 Act, we're a step closer to ensuring that this
16 nation's financial institutions can thrive and
17 compete in the next century.
18 Thank you for the opportunity to speak, and
19 let me also thank the concerned citizens of all
20 viewpoints who cared enough to join us today and
21 share their thoughts.
22 PRESIDING OFFICER SMITH: Thank you. I'd
23 like to remind witnesses that they can submit their
24 full written statement for the record, so that to
25 the extent you can abbreviate your comments, that
0024
1 would be helpful and help us stay within the
2 allotted time for the panel.
3 Mr. Gifford?
4 MR. GIFFORD: That's one heck of an
5 introduction. Thank you. I'll move quickly in my
6 mind. But thank you, Terry. Thanks all for
7 participating with us. I, too, welcome this
8 opportunity to discuss some of the reasons behind
9 and benefits of BankBoston's proposed merger with
10 Fleet. I feel strongly, strongly that this merger
11 is in the best interests of all our stakeholders,
12 our employees, our customers, our communities, not
13 just shareholders. I do not want to pick out any
14 one of those as being more important than any other,
15 but it's no secret -- and we said this in March when
16 we announced it -- the opportunity to preserve a
17 financial service powerhouse in New England was
18 important, and you heard Terry comment on that. I
19 clearly share his passion for preserving the
20 hometown banks in the region, serving the individual
21 cities and communities that make up this great
22 fabric.
23 I, too, am a New Englander. I'm a son of a
24 former New England bank chairman, so the importance
25 of a strong, locally-based banking organization has
0025
1 been with me for a long, long time, and surely, as
2 Terry also referenced, all of us learned a very
3 painful lesson about the importance of a strong
4 banking organization about a decade ago.
5 As Terry has described, the consolidation
6 and convergence are the hallmarks, the realities of
7 financial services today. BankBoston is no stranger
8 to that tradition, having participated in the
9 purchase of BayBanks in '95, Robertson Stephens, an
10 investment bank, in 1998 as part of a continued
11 consolidation in convergence of financial services.
12 I'm moving faster now, Madam Chairwoman.
13 But our proposed merger is not just about size and
14 strength, of course, but quality and commitment.
15 Our first principle from our first conversation has
16 been to preserve the best of Fleet and the best of
17 BankBoston, to build a new company that leverages on
18 respective strengths as well as honors and reaffirms
19 our shared commitments.
20 We will take the best talent and best
21 practices and make them one of everyday standards
22 and go on to build one of the premier financial
23 service organizations in the world and surely one
24 this region will be proud of.
25 The new Fleet-Boston will be one of the top
0026
1 two employers in the region. After the merger,
2 divestitures and consolidations, we will employ some
3 25,000 New Englanders and infuse into this company
4 no less than a billion-five in purchasing power and
5 tax dollars.
6 Acknowledging the painful impact of job
7 loss on some employees, we have pledged to treat
8 affected employees fairly and compassionately. We
9 will provide a generous severance program and a
10 cutting-edge transition assistance program of
11 support for career retraining, starting a business,
12 or doing bank-subsidized community work. At the
13 same time, and I think very importantly, we envision
14 career opportunities for tens of thousands of local
15 residents in a dynamic growth company.
16 The new Fleet-Boston will be a leader in
17 many markets around the world, able to meet the full
18 financial service needs of consumers, businesses of
19 all sizes, large and small, public sector entities
20 and nonprofit organizations. We will be the premier
21 banking franchise in the Northeast, serving eight
22 million households through nearly 6,000 branches and
23 ATMs. Nationwide the new company will serve more
24 than 20 million consumers and will have 450,000
25 small business customers and more than 100 billion
0027
1 dollars in assets under management.
2 When our wholesale banking capabilities are
3 combined, the results will be equally valuable for
4 commercial customers. We're talking about a bank in
5 CNI lending in the top three, the number one bank in
6 commercial field, premier investment bank, top five
7 in cash management provider, the top tier leader in
8 private equity, a strong company based here in
9 Boston.
10 BankBoston's unique Latin America
11 franchise, formed more than 80 years ago, of the
12 commercial needs of New England merchants will
13 continue to put Boston on the world map, helping to
14 forge links between businesses and nations in our
15 hemisphere. The new Fleet-Boston will be able to
16 leverage this connection even further.
17 Finally, Fleet-Boston will have the
18 resources that Terry also referenced to be a major
19 player in E-banking, leveraging, for example,
20 BankBoston's base of a half million on-line banking
21 customers and Fleet's quarter million electronic
22 sure trade customers, again assuring that Boston
23 will participate in this very important growth
24 industry.
25 In short, a local financial service
0028
1 company, competitive across the country and around
2 the world, will be a valuable asset to individuals
3 and communities and an invaluable partner to New
4 England businesses seeking to operate in today's and
5 tomorrow's global economy.
6 But again, this is not about size alone.
7 It's ironic, just as we're on the verge of an
8 industry that will conduct more and more of its
9 business electronically, without walls and without
10 boundaries, without bricks and mortar, without paper
11 or passbooks. Our determination also to be grounded
12 in our local communities is greater than ever.
13 For me, this merger would not be effective,
14 would not be right if we were only able to build a
15 powerful regional, national, global business, if we
16 were only a large and strong employer, and if we
17 left behind the communities that have nurtured both
18 companies for a few centuries. As we are poised to
19 become one of the leading financial institutions, we
20 have also pledged to remain a local partner and one
21 that will -- he took all the time. (Laughter) I'm
22 not sure how the system works.
23 I want to emphasize we remain a local
24 partner, continuing the development of our
25 communities. We look at community development very
0029
1 broadly as a strategic -- as a business opportunity.
2 We see as part of it the access by minority and
3 women-owned businesses, to the purchasing power of
4 Fleet-Boston. We intend to continue and strengthen
5 our minority vendor programs.
6 We see as part of community development the
7 support we offer employee volunteers. Between Team
8 Fleet and Eagle Core almost 20,000 of our employees
9 devote 150,000 hours making our community stronger
10 and healthier. We see as part of community
11 development the embracing of individuals of all
12 races, genders, sexual orientations, customers and
13 employees.
14 Diversity will be an integral part of the
15 management of Fleet-Boston reporting directly to me.
16 We will continue to add to the very strong record we
17 are trying to achieve.
18 Terry has been explicit about the intention
19 to proceed with the BankBoston model for community
20 investment and very complimentary about our record.
21 To say that I am proud of First Community Bank and
22 BankBoston Development Company is an understatement,
23 but it is very important that we will continue to
24 play a leadership role in our new company.
25 Therefore, I ask you all to look at these
0030
1 pledges in light of the very strong community
2 leadership records of Fleet and BankBoston, and
3 driven by our shared New England values, operating
4 in a global economy, grounded in the local
5 community, Terry and I will be supported and aided
6 by the 25,000 employees who, like us and our
7 company, call this region home. We will preserve
8 and enhance the best of our two approaches and
9 records. We will commit our honor and we will honor
10 our commitments.
11 Two months ago I was privileged to
12 represent BankBoston at a White House ceremony where
13 we were given the Ron Brown award for corporate
14 leadership. BankBoston was cited for its community
15 banking group which has successfully served the
16 urban population as an emerging market. I was
17 joined on that day, as I have been joined throughout
18 this effort, by the woman who is most singly
19 responsible for the success of our community banking
20 efforts at BankBoston and who will become the leader
21 of Fleet-Boston's community banking investment
22 initiatives, a daughter of a community activist, a
23 product of the community, a 30-year veteran of
24 BankBoston and by friend, Gail Snowden.
25 MS. SNOWDEN: Thank you, Chad, and thank
0031
1 you to the Board for the opportunity to present our
2 viewpoints and vision for the new bank now taking
3 shape. It's extremely gratifying to me to have
4 heard from both Terry and Chad on the strong
5 position that community investment and in particular
6 BankBoston's model of development will take in the
7 new entity.
8 Nine years ago BankBoston began to redefine
9 the mission and objectives of its retail business in
10 the inner city. By taking a more holistic approach
11 to economic development, we acknowledged that
12 economic growth must evolve from job creation to
13 wealth creation if sustainable growth was to happen.
14 We knew we had to prove we were willing to take
15 risks and to truly invest in community growth in a
16 more direct way.
17 We have learned much along the way,
18 receiving national recognition for our efforts in
19 urban banking through First Community Bank and the
20 BankBoston Development Company, both of which will
21 become part of the new company.
22 Like BankBoston, Fleet has been a leader in
23 small business and mortgage lending, helping to
24 revitalize entire neighborhoods and create new
25 enterprises, particularly those owned by minorities
0032
1 and women. Continuing these records going forward,
2 Fleet-Boston Corp. intends to be the number one
3 small business bank in New England, maintaining its
4 strong ties to keep partnerships with organizations
5 such as the SBA.
6 We believe the key to our success has been
7 our commitment to strong partnerships in the
8 community, whether with individuals, community
9 groups, governments or private organizations. They
10 provide us with essential ties to the fabric of the
11 community. These relationships have helped Fleet
12 and BankBoston to be more responsive to the unique
13 needs of our diverse communities by providing the
14 customer focus that did not exist before.
15 Over these last few months I have joined
16 with my colleagues at both banks in listening to the
17 frank discussions that took place with
18 representatives from over 125 community
19 organizations throughout New England. Our goal was
20 to gain maximum insight into the needs of emerging
21 low to moderate income markets and to develop a
22 comprehensive investment plan that was both business
23 minded and community minded. These discussions have
24 underscored the tremendous gains that our banks have
25 made in helping to revitalize entire neighborhoods
0033
1 within our New England communities such as Codman
2 Square and Egleston Square.
3 The key themes that surfaced provided the
4 framework for our community investment commitment.
5 The result is a 14.6 billion dollar commitment over
6 five years which incorporates the best of our banks'
7 programs while establishing a leadership role of
8 continuing to earn an outstanding CRA rating. This
9 dollar commitment represents a continuation and in
10 most cases an enhancement of LMI lending activities
11 by Fleet and BankBoston when adjusted for divested
12 branches and deposits. We view the plan as
13 responsive and affirmative and continuing to enhance
14 those programs that support wealth creation and
15 economic development.
16 In the past, particularly during merger
17 discussions, various banks have reached agreements
18 with community organizations that may have been too
19 narrowly focused with regard to issues or geography.
20 Fleet-Boston has chosen to create a broad-based plan
21 for its entire marketplace that effectively responds
22 to critical community issues and will offer
23 significant opportunities for multi-state
24 partnerships with organizations as committed as we
25 are to the revitalization of urban and rural areas.
0034
1 I would now like to spend some time
2 outlining the five-year 14.6 billion dollar
3 strategy. Because we believe entrepreneurs are the
4 engine for growth creation and job creation that
5 transform entire communities, over half of this
6 entire commitment, 17.5 billion, is earmarked for
7 the support of small business lending. We will
8 continue our strong support of small business
9 development in LMI communities, with special
10 consideration given to minority and women-owned
11 businesses.
12 In addition, we will go beyond the
13 traditional role of lending to small businesses by
14 providing 100 million in equity investment over five
15 years to help new business development. We also
16 foresee an enhanced SDA partnership in addition to
17 our conventional loan activity. With affordable
18 housing in the forefront of community concerns, we
19 are committing four billion over the next five years
20 to provide additional options for low and moderate
21 income homebuyers in need of home purchase mortgages
22 and refinancing.
23 Additionally, it provides sufficient
24 product flexibility to continue our existing
25 mortgage program partnerships such as the soft
0035
1 second mortgage program to first-time home buyers in
2 Massachusetts.
3 The bank will continue its leadership in
4 community development lending, including at a
5 minimum 1.5 billion in CRA-eligible loans in LMI
6 areas. In addition, the bank will invest 500
7 million in low-income housing tax credit investments
8 in support of the development of much needed
9 affordable housing.
10 We will continue to meet basic consumer
11 borrowing needs with the commitment of one billion
12 for consumer lending in LMI areas.
13 Finally, the bank will expand its technical
14 assistance and support with the commitment of 15
15 million. Interwoven throughout this commitment is
16 what I view as a precedent-setting partnership that
17 we are announcing between Fleet-Boston and Fannie
18 Mae over the next five years. The
19 Fleet-Boston/Fannie Mae communities initiative will
20 commit much needed resources to home ownership and
21 affordable housing and is projected to create
22 affordable housing options for tens of thousands of
23 families in the communities we serve.
24 Affordable home ownership, loans to LMI
25 home borrowers through a variety of innovative and
0036
1 flexible programs such as a new women head of
2 household mortgage initiative, affordable
3 multifamily rental housing, a comprehensive plan to
4 preserve and accelerate the production of affordable
5 rented housing units. We heard this so many times
6 from community groups.
7 And finally, neighborhood revitalization.
8 Fleet-Boston and Fannie Mae will stimulate new
9 housing and community development activity through
10 an innovative, comprehensive, strategic neighborhood
11 investment initiative.
12 What I have presented is a framework of the
13 partnership with Fannie Mae, and we will be
14 announcing more details in the next month or so.
15 Accountability. We see community
16 organizations as critical partners in implementing
17 our commitment for capital access, outreach and
18 education. Key to this approach is the issue of
19 accountability, and we are prepared to be held
20 publicly accountable for meeting all the commitments
21 laid out today. An oversight board comprised of
22 community leaders will be formed and will meet twice
23 a year to receive information and to give us
24 feedback. A community investment subcommittee of
25 the Fleet-Boston board will meet regularly during
0037
1 the year to monitor the corporation's accountability
2 for community initiatives. And in addition, a
3 business line steering committee will meet regularly
4 to monitor business line performance against our
5 commitments and our goals.
6 In conclusion, I look upon this new
7 organization, Fleet-Boston, with the same enthusiasm
8 and excitement as when we undertook the challenge of
9 building a profitable business in New England's
10 underserved urban markets nine years ago. We enter
11 our alliance with Fleet Financial Group with a
12 blueprint for success in this emerging market in
13 which everyone benefits: Our shareholders, our
14 customers and the communities we serve.
15 My colleagues at BankBoston and I are
16 gratified by this opportunity that Terry and Chad
17 are giving us to continue our work within a larger,
18 stronger community. I believe in their commitment
19 to community investment and neighborhood
20 revitalization and that's why I'm sitting here today
21 committed to realizing upon this initiative.
22 At this point I would like to pass the
23 microphone to my colleague, Agnes Bundy Scanlan, who
24 has been instrumental in developing and managing
25 Fleet's community development program since 1994 and
0038
1 who has worked tirelessly over the past few months
2 in meeting with community groups to help develop
3 this community investment commitment.
4 MS. SCANLAN: Thank you, Gail. Good
5 morning. I'm pleased to be here today speaking on
6 behalf of the Fleet-BankBoston merger. Fleet and
7 BankBoston are committed to working toward improving
8 the quality of life and the overall vitality of our
9 communities. I would like to reiterate the pledge
10 expressed by Terry, Chad and Gail. We stand
11 committed to continue to meet the needs of
12 communities we serve through a wide range of
13 financial services and products.
14 We enthusiastically embrace our role in
15 fostering job creation, promoting home ownership,
16 enhancing economic growth and providing education
17 and support to individuals and businesses in urban,
18 rural and suburban communities. This is without
19 question the most rewarding part of my job.
20 Understandably there have been concerns
21 expressed about this merger in terms of its effect
22 upon communities, businesses, and consumers. Terry,
23 Chad, Gail and I have addressed some of them here
24 and in other meetings with concerned parties.
25 Nonetheless, apprehension and misapprehensions
0039
1 remain, fueled in part by incomplete and in some
2 instances incorrect information.
3 In fact, we have some very good stories to
4 tell which have not been noted to date. Affordable
5 housing. In our 125 community meetings, and indeed
6 in everyday conversations, it becomes clear that
7 affordable housing is of great importance to all of
8 us. When Professor James Campen released his study
9 on mortgage lending, it garnered a great deal of
10 attention. He noted that Fleet cut back on its
11 lending following the Shawmut merger and concluded
12 that bank mergers mean less mortgage lending for LMI
13 and minority borrowers.
14 Fleet did experience a decline in mortgage
15 lending overall. It is important to note that Fleet
16 did not intentionally cut back on its loan volume or
17 cede market share willingly. Rather, several
18 factors contributed to reductions in overall
19 mortgage lending, including increased competition
20 within the marketplaces, particularly from
21 non-banks, merger-related branch divestitures and
22 significant management turnover and operational
23 changes at Fleet Mortgage.
24 Despite these developments, Fleet has
25 remained the leader in affordable housing. For the
0040
1 six-state region cited in the study, Fleet held the
2 number one market share for home purchase loans to
3 LMI borrowers in 1995 and 1996, and held the number
4 two market share to these borrowers in 1997,
5 exceeding industry averages.
6 In Massachusetts, a primary area
7 highlighted in the Campen study, Fleet held the
8 number one market share for LMI black and Hispanic
9 borrowers for the period 1995 through 1997. In this
10 regard, even though our combined bank will only be
11 65 percent of its predivestiture size in
12 Massachusetts, today we have announced a commitment
13 commensurate with 100 percent of our predivestiture
14 size for affordable housing lending in this state.
15 In the City of Boston Fleet also held the
16 number one market share for LMI and minority
17 borrowers for the three-year period 1995 through
18 1997. I believe these statistics confirm our
19 commitment to LMI minority borrowers. Fleet and
20 BankBoston are doing the heavy lifting here.
21 Perhaps we should consider the point that
22 as other lenders increase market share, they have an
23 obligation to increase their share of lending to
24 these traditionally underserved markets. Even if
25 they do not have CRA requirements as the banks do,
0041
1 the combined voices of community groups, opinion
2 leaders and the public generally can raise this
3 imperative.
4 Small business lending. In the course of
5 our meetings we heard concerns about the
6 availability of credit to small business. But I
7 think one should consider the fine record of both
8 companies in working with small businesses as an
9 indication of our commitment moving forward. In
10 fact, the largest component of our commitment to
11 small businesses at 7.5 billion over five years,
12 coupled with technical assistance support, is large.
13 At Fleet we serve more than 320,000 small business
14 customers in eight states.
15 Today Fleet is the largest provider of
16 financial services to small businesses in New
17 England. According to the latest industry data, as
18 of June 1998, Fleet is ranked 10th among bank
19 holding companies for small businesses. We are a
20 leading SBA lender. In 1997 Fleet was the top SBA
21 lender in New England with more than 70 million in
22 total SBA volume.
23 I have some more remarks that I would like
24 to submit for the record, but in deference to time
25 I'd like to submit my time and yield to Terry Murray
0042
1 to close.
2 MR. MURRAY: Thank you, Agnes. And that
3 concludes our remarks. We'll be happy to respond to
4 the panel.
5 PRESIDING OFFICER SMITH: Thank you.
6 Questions from the panel?
7 MR. ALVAREZ: I have a question. There are
8 a number of commenters who have referred to the
9 study that Ms. Scanlan discussed, suggesting that
10 Fleet's lending in LMI areas in particular, in home
11 mortgage lending in particular, has declined after
12 each of the last two major mergers Fleet has been
13 involved in, and that has caused some folks to be
14 concerned that one plus one does not equal greater
15 than two in low and moderate income neighborhoods.
16 I understand that the program that you have
17 discussed, the CRA plan, is going forward. I was
18 interested in how the 14.6 billion dollar plan
19 compares to the amount of lending that the two
20 organizations are doing now and whether there are
21 any special steps that Fleet proposes to take to
22 ensure that lending will not decline after this
23 merger if this is approved.
24 MS. SNOWDEN: I'll take that one. In terms
25 of how we got to the number, particularly on
0043
1 affordable mortgage lending, we took a look at the
2 past three years, and the projected combined annual
3 average amount was 820 million dollars a year. We
4 then took an 80 percent divestiture factor, which
5 would give you a number of 736 million.
6 However, our plan commits on an average
7 annual amount of 800 million. So we feel that we
8 are maintaining the same level, and in fact this one
9 is an enhanced level. How you make sure you meet
10 your goals, you have goals, you have tracking at the
11 line of business level. You have the oversight
12 committee, you have the CRA Council that reports to
13 Chad. And so we'll be monitoring this initiative,
14 as we do most business initiatives, to make sure
15 that we stay on track.
16 PRESIDING OFFICER SMITH: Other questions?
17 MR. KWAST: I have a question regarding
18 proposed divestitures. As I think Mr. Murray
19 pointed out, you are proposing to divest a large
20 amount of offices and dollars of deposits. My
21 question is, when considering who to divest your
22 offices to, what are the major factors that you
23 consider in deciding who the winning bidders are.
24 MR. MURRAY: Well, to a large degree
25 Justice has certain ground rules. They are
0044
1 obviously looking for a major new competitor in this
2 marketplace. Subject to that, however, we've been
3 fortunate in that there's been a great deal of
4 interest in the pieces as well as the whole of the
5 divested package. And we have received enormous
6 amounts of interest. And I guess from an ideal
7 point of view we can address Justice's concerns in
8 terms of viable competitors as well as some of the
9 local concerns, and that is something the community
10 banks and local banks participated in these
11 purchases.
12 Over the next two or three weeks we
13 collectively will be looking at the various bids.
14 Obviously it is an auction, and price is a
15 consideration, but not the sole consideration. And
16 I think it's a balance. It's balancing factors
17 between community bank expansion possibilities as
18 well as satisfying Justice's issues of viable
19 competition.
20 The major divestiture is in the State of
21 Massachusetts, which is 8 to $9 billion of the 12
22 billion dollar package; the others being in Rhode
23 Island and Connecticut. But there have been dozens
24 of bids on the packages.
25 PRESIDING OFFICER SMITH: Other questions?
0045
1 If not, thank you very much for coming this morning.
2 And we'll go on to panel number two.
3 Thank you very much.
4 (At this point there was a chant from some
5 members of the audience, saying "Shame on you")
6 PRESIDING OFFICER SMITH: We're going to
7 call on the panelists in the order in which they are
8 listed. So we'll start with Mayor Menino.
9 MAYOR MENINO: Thank you very much and
10 thank you for allowing me to testify this morning.
11 In my remarks I want to focus on the impact that the
12 proposed merger would have on my city and ask you to
13 consider that impact in your deliberations.
14 This merger comes at a time when the local
15 and national economies are on a roll. The
16 consolidation of firms into larger institutions is
17 happening in many industries. This evolution is not
18 only fueling the stock market, it's also changing
19 the way we do business and the way companies can
20 grow within a region and even across international
21 borders.
22 Boston's banks can't hide from this trend.
23 They must go out and compete in these expanding
24 markets like any others. But the consolidation of
25 capital in this merger will take Fleet to a position
0046
1 where the banking needs of ordinary citizens will
2 seem insignificant compared to the attraction of
3 foreign markets and bigger deals, including
4 additional mergers.
5 As fewer banks survive and grow into bigger
6 players on the national and international stage, the
7 fundamental question we face is this: Who will care
8 whether a community grows or dies? The number of
9 banks whose fates are tied to the fate of Boston is
10 shrinking. The Bank of New England is gone.
11 Shawmut Bank is gone. BayBank is gone. With this
12 merger BankBoston will also be gone. Gone, too,
13 will be more local jobs and BankBoston's spirit of
14 dedication to every segment of our community.
15 In banking, the idea of fair service to all
16 is a result of the Community Investment Act. It was
17 written into law because Americans saw what happened
18 when banks ignored some of our neighborhoods and
19 wrote off credit-worthy neighborhoods. The
20 Community Reinvestment Act has brought people on the
21 margins into the mainstream of American life.
22 Without it, Boston would not be a city of come-back
23 neighborhoods. It would see fewer first-time home
24 buyers, more abandoned houses, and whole
25 neighborhoods rotting from disinvestment.
0047
1 Take Blue Hill Avenue, for example. For
2 years it was little more than a depressing
3 collection of vacant lots and boarded-up buildings.
4 Since I became mayor we've invested over $65 million
5 up and down the avenue. By building new homes and
6 businesses, we're rebuilding a whole community. And
7 soon we'll start construction on the Grove Hall
8 Mall. And some people said that would never happen.
9 A new shopping center with a supermarket, a
10 drugstore, a Dunkin' Donuts and other shops.
11 Our partner on this deal is BankBoston. We
12 ended up with BankBoston because they could handle
13 the financing. The bank wants to do this deal.
14 Chad Gifford knew this was important to the city, so
15 he put a good team on it, and today we have a deal.
16 Some banks are better than others. In
17 spite of generous ratings from regulators, Fleet has
18 a troubled lending history in our community and
19 Fleet's approach to this merger leads me to believe
20 it will adopt a take-it-or-leave-it approach to
21 lending in our neighborhoods. That troubles me, and
22 it should trouble every business leader in Greater
23 Boston, because the health of a city sets the tone
24 for investing throughout the wider region.
25 Some big banks believe the Community
0048
1 Reinvestment Act gets in the way of their growth
2 strategy. They see it as a nuisance. They have
3 enlisted the help of their friends in Congress to do
4 away with it, people like Senator Phil Gramm of
5 Texas, who is no friend of the people in America's
6 cities. For years Phil Gramm has been telling
7 government to get out of the business of rebuilding
8 communities. Now he's telling business to get out
9 of that business, too.
10 Here in Boston the two banks have told us
11 their merger would mean a 20 percent reduction in
12 combined lending to our community. If you want to
13 know what happens to a community when lending
14 disappears, try to remember the conditions of our
15 neighborhoods in the early 1970s. Or follow
16 President Clinton's trip across the country with
17 business leaders this week. Whether in Boston or
18 East St. Louis or Los Angeles, one stubborn fact
19 remains the same: Capitalism does not work in a
20 community when that community is denied access to
21 capital.
22 As the mayor of this city I am concerned by
23 any merger that would deny my capital city in favor
24 of expanding markets somewhere else. I am concerned
25 about a reduction in home mortgage loans, a
0049
1 reduction in community development loans and small
2 business loans, and I'm concerned that the new bank
3 will not act as if it's life depended on the health
4 of our neighborhoods.
5 I ask you, how can any bank call itself a
6 local bank with pride if the bank is less than fully
7 committed to the local economy?
8 I am sorry to say that I have yet to hear
9 why this merger is a forward step for my community.
10 So until the Federal Reserve Board can convince me
11 otherwise, I cannot offer the City of Boston's
12 support for this merger.
13 You as regulators hold great power over the
14 future of banking in America. You hold great power
15 over the economy of our communities and you have a
16 responsibility to protect the public interest. So I
17 respectfully request that you remember the interests
18 of my constituents whose banking needs rest upon
19 your shoulders while you deliberate and decide the
20 merits of this merger.
21 In closing, let me say, my office would be
22 happy to supply you with some of the facts of my
23 detailed statement. Also -- let me just finish up.
24 This might be a good deal for the stockholders, but
25 I don't believe this is a good deal for the
0050
1 stakeholders. Thank you very much.
2 (Applause)
3 PRESIDING OFFICER SMITH: And we will not
4 exactly follow the order. We'll go next to
5 Congressman Capuano.
6 CONGRESSMAN CAPUANO: Thank you. First of
7 all, I'd like to thank the Federal Reserve for
8 having this hearing because it wasn't on the
9 original schedule when this merger was announced,
10 and I know that the Federal Reserve listened to the
11 requests of many people in this community to have
12 this. I also know you have a very long day ahead of
13 you and I respectfully send my regrets for that, but
14 my thanks for having me here nonetheless.
15 As each of you know, the Congressional
16 delegation of Massachusetts has sent several letters
17 on this matter to the Federal Reserve and to others.
18 We have another one in the record today that
19 basically reiterates what we have said in the past,
20 naming four points that we've tried to focus on.
21 The fact that we want our community banks to have a
22 fair opportunity to bid and then purchase a fair
23 portion of the divested parts of this merger if and
24 when it happens; that we want both the remaining
25 bank of this particular item and whoever wins the
0051
1 divestitures to continue and to expand their
2 neighborhood investment.
3 We want the Federal Reserve to make sure
4 that all employees are fairly treated and honestly
5 treated, and, of course, we want local charities to
6 continue the relationship they've had with the banks
7 in the past. That's what the delegation has said.
8 For myself, for the last four months as a
9 member of the banking community and a new member of
10 Congress I've actually worked a little harder on
11 this than most because I've had a lot of catching up
12 to do on these kinds of matters. And when this
13 merger was announced, right from the beginning I
14 asked for several pieces of information -- I think
15 pretty easy pieces of information -- such as the
16 details of charitable giving, some statistics on low
17 and moderate income loans, things like that.
18 Since then we've had a study done by a
19 professor at UMass-Boston that's come out that's
20 raised some serious questions on the lending
21 practices of these institutions. We've had comments
22 from a group called Inner City which has raised
23 serious questions. We've had the bank itself come
24 out with a 14.6 billion dollar community investment
25 proposal that has virtually no detail to it.
0052
1 Those are serious issues and I believe they
2 have been seriously presented. However, not until
3 yesterday at three o'clock in the afternoon did any
4 representative from the bank have anything to say
5 about any of those matters.
6 Now, I'll tell you that I do think that
7 both Fleet and the Bank of Boston have done a good
8 job going out and listening and I do think it's
9 important to maintain a strong regional bank in
10 Boston. I think that's fine. And I congratulate
11 the banks for going out to listen. But listening is
12 only one half of the equation. The second half of
13 the equation is then responding to what you have
14 heard. Not necessarily agreeing with it, not
15 necessarily disagreeing with it, but simply
16 responding. Do you agree? Don't you agree? Let's
17 work this out. There has been none of that until
18 three o'clock yesterday.
19 Today has been an extended period of time
20 for public comment. I don't think that less than 24
21 hours for people to respond or to react to the
22 response is a fair amount of time. I think it's an
23 inappropriate amount of time. (Applause) And I
24 think it could raise any number of questions. I
25 know that this is a difficult merger. I understand
0053
1 that and I respect the fact that the bank has been
2 busy. If that's the case, okay; great. It also
3 raises potential questions that the bank is being
4 insensitive to community input. If that's the case,
5 that's the worst possible scenario.
6 The whole reason we're doing this is to
7 make sure that the successful bidders and the merged
8 entity are responsive to community needs. If there
9 wasn't a community component to that, we wouldn't be
10 here. If it was simply banking, bottom-line
11 banking, you wouldn't do this, you wouldn't need our
12 input, we wouldn't have a whole lot to offer.
13 We're not bankers. We're here representing
14 the community, and if the community is not listened
15 to, not necessarily agree with them on every point,
16 what have we done? You're wasting your entire day.
17 I'm wasting an awful lot of time and most of the
18 people in this audience have wasted an awful lot of
19 time. (Applause)
20 To my way of thinking, I want this merger
21 to end up in one plus one is greater than two. I
22 really do. Not just for the shareholders; also for
23 the communities and, as the mayor put it, for the
24 stakeholders. That's why today the written
25 testimony that I've given, which is a little bit
0054
1 more detailed than the verbal comments, I'm asking
2 for a couple of things:
3 If the Federal Reserve finds it in the
4 interest of the community, which I think it is
5 obviously, I ask that the Federal Reserve delay any
6 decision-making and extend the public comment period
7 of time to at least 30 days after these responses
8 have been given by the bank, because we need a fair
9 amount of time to see whether their responses are
10 fair or not fair, reasonable or not reasonable.
11 Absent that extension of time, then I have to
12 strongly oppose this merger at this time.
13 (Applause) And I have to oppose it not because I
14 have made a final decision in my own mind as to
15 whether this merger serves the needs of the
16 community, but because I haven't been allowed the
17 time to do that. So I respectfully ask the Federal
18 Reserve to extend the period of time to 30 days
19 after receipt of responses by the banks, and if they
20 can't do that, then I have to oppose this merger.
21 Thank you.
22 (Applause)
23 PRESIDING OFFICER SMITH: Senator
24 Wilkerson.
25 SENATOR WILKERSON: Good morning to you,
0055
1 Presiding Officer, members of the Board. For the
2 record, my name is Dianne Wilkerson and I currently
3 serve as State Senator in Massachusetts and I have
4 done so for seven years. Prior to that I practiced
5 law in Massachusetts and was a member of the
6 Community Investment Coalition which negotiated with
7 Fleet Bank in 1990 when it took over the Bank of New
8 England. The CIC also negotiated again in 1994 the
9 Shawmut-Fleet merger, and I represented as a lawyer
10 over 600 individuals who were victims of the
11 infamous second mortgage scam, one of the most
12 devastating financial scandals that destabilized
13 both the Boston and Springfield Afro-American home
14 ownership communities.
15 I also was a member of the team that
16 negotiated the second mortgage scam settlement with
17 BayBank, the former BayBank and the former Shawmut
18 Bank. And I have previously testified before this
19 Board where I have raised serious issues and
20 concerns to this body.
21 However, I have never testified in
22 opposition to a merger until now, and I do so with
23 sadness and disappointment. (Applause) Since April
24 of this year I have served as the convener of what
25 is called the Community Advisory Committee for the
0056
1 Fleet Bank-BankBoston merger. The committee is a
2 40-plus member group comprised of racial, gender and
3 professional, university, government and religious
4 areas from across the Commonwealth who came together
5 to solicit comments and concerns from interested and
6 impacted parties across the state. The committee
7 hosted a statewide town meeting in May. Over 200
8 persons turned out to offer testimony, and we have
9 provided the videotape of that meeting to the banks
10 and to this Board.
11 The committee met with members of our
12 Congressional delegation. We met with officials
13 from the Department of Justice Antitrust Division,
14 the Federal Reserve Bank of Boston, the Attorney
15 General of the Commonwealth of Massachusetts, and
16 the Massachusetts Division of Banks. We've had the
17 unprecedented support and collegiality from our
18 entire Congressional delegation from the mayor of
19 our City of Boston and it's never happened before,
20 and I think that that unified position ought to tell
21 you something, because this is different.
22 We also met with the bank principals early
23 in June and at that meeting we transmitted to them a
24 lengthy written document in addition to other
25 information that the committee had gathered. It was
0057
1 our hope and expectation that those concerns would
2 be taken into account as the proposal was developed.
3 The committee waited for some time to offer public
4 comment because we were optimistic that the
5 committee would be able to engage in a productive
6 dialogue with bank principals to ensure that the
7 banking needs and the needs of the Massachusetts
8 communities, in particular women and people of color
9 in low and moderate income communities would be met.
10 I'm sorry to say that that June 4th communication
11 and the detailed concerns and issues that have been
12 raised have never had the courtesy of a response.
13 On June 24th we received the bank's
14 proposal and have spent a considerable amount of
15 energy reviewing this plan. In sum, the proposal
16 does not meet the regulatory standards that the
17 Federal Reserve Bank must have satisfied in order to
18 approve this merger application. There is much that
19 I could offer, but I will focus my testimony on two
20 pieces of the criteria of review for this Board
21 under the Bank Holding Company Act. That is,
22 competition and convenience and needs of the
23 community.
24 As to competition, among other things, this
25 application would involve the largest branch
0058
1 divestiture in the history of the United States.
2 However, even if a large bank were to purchase all
3 the branches, the most it could represent would be
4 six percent of the Massachusetts market share. The
5 merged institution would be at least 30 percent,
6 leaving its next closest competitor about five times
7 smaller, hardly an encouraging picture for
8 competition.
9 The divestment discussion to date has
10 ignored an important and serious issue for the
11 communities which I represent, and that is that many
12 of the branches on the divestment list were cited
13 specifically to fill a void in urban and rural
14 markets which until the last five years were
15 woefully underserved by banks and saturated with
16 check-cashing stores. The citing of many of the
17 branches on the sale list were negotiated in the
18 aftermath of the last two mergers. Several of the
19 branches were cited based on an acknowledgment and a
20 determination that the convenience and needs of a
21 certain segment of our community were not being met.
22 Special care must be taken by this Board to
23 ensure that we don't go backwards. It would be our
24 position that no grant cited in an urban market to
25 fill a void should be sold to anyone who does not
0059
1 intend at least to keep the branch open. Who gets
2 these branches is also of critical importance to us.
3 We have been fortunate in the Greater Boston
4 community of color to have a bank that is certified
5 with the United States Treasury as the only bank
6 community development finance institution in the
7 state and whose focus market is urban, the urban and
8 LMI communities, and especially people of color,
9 African-American, Latino.
10 Local and community banks should be
11 strengthened by this merger, not weakened. You must
12 pay special attention to the Boston Bank of Commerce
13 and the market that they serve.
14 Lastly, much has been made about the
15 expectation of the applicant banks that there would
16 be competition in the market to pick up market share
17 in areas where the applicant will decrease lending
18 and spending; for example, in mortgage lending. It
19 is our contention that there is simply no basis for
20 such an assumption, and in fact history tells us
21 different. With the slim pickings to be left in the
22 bank market for mortgage seekers, there is no
23 rational expectation that the purchasing bank or the
24 remaining Massachusetts banks soon to be but one, if
25 the next merger is approved, could pick up the slack
0060
1 with the merged bank to continue the double-digit
2 decreases in mortgages that have been made to
3 African-Americans and Latinos that we have been
4 sustaining every year for the past four years.
5 Oddly enough, the biggest hits have come
6 post merger of BankBoston and BayBank and even
7 bigger decreases in the post Fleet-Shawmut Bank
8 merger, and unless the Federal Reserve takes special
9 consideration of the need to ensure contingent
10 competition for the low and moderate income market,
11 there will be little or none available.
12 And please note that we do not consider
13 second-mortgage companies charging 20-plus percent
14 interest competition for the LMI and minority income
15 market.
16 I know that Professor Campen is going to be
17 testifying later, but I think that the analysis that
18 he has done is uncontroverted and would hope that
19 this Board would take some special note to look at
20 those numbers, and not only the numbers for Boston,
21 but for the Commonwealth of Massachusetts as a
22 whole. The loans to black borrowers decreased 52
23 percent. From 1997, 1998, the loan to
24 Latin-American, Latino borrowers decreased 49
25 percent and the loan to LMI borrowers decreased by
0061
1 fifty percent as a result of both the BayBank-
2 BankBoston merger and the Fleet-Shawmut merger. And
3 we accept this concept that there would be some
4 decrease, but the double-digit decreases that we
5 have sustained in these two particular communities
6 are irrational, inexplicable, and can only be
7 explained by racial factors. And even the
8 Massachusetts Banking Council has supported that
9 position.
10 This Federal Reserve did a study which set
11 off a whole litany of similar studies across this
12 country, and I think that it's important to note
13 that the Federal Reserve Bank of Boston led the way
14 nationally on what became a higher standard and
15 reported for tons of data.
16 Given what we understand to be the standard
17 of review for the Federal Reserve in assessing
18 merger applications, we believe in order for the
19 Federal Reserve to recommend approval of this
20 merger, the bank would have to find that the bank's
21 proposal of June 24th which provides for a 14.6
22 billion dollar commitment for six states over five
23 years meets the convenience and needs of the
24 community, although the figure represents less
25 resources from the combined bank than the two banks
0062
1 provided separately in 1998.
2 For the record, I never expected one plus
3 one to equal greater than two. I was prepared to
4 declare victory of one plus one equal to one and a
5 half. It doesn't. Apparently the comments from
6 Fleet-BankBoston suggest even they acknowledge that
7 the formula has changed. On July 1st there were two
8 statements issued that said, one, it was never our
9 intention when we made that statement in March to
10 suggest that between us we would be greater than the
11 two. What we really meant was that the divestiture
12 bank would be responsible with us and we would hold
13 them accountable to the community.
14 Also, this proposal represents 80 percent
15 of what we have been doing because we are divesting
16 20 percent of our branches, so we're going to be
17 smaller. In some categories it's more than 80
18 percent. We haven't found them yet.
19 Various members of the committee have run
20 the numbers in different variations and we all keep
21 getting the same results. The numbers simply don't
22 support the bank's representation of this equaling
23 even 80 percent, the current activity, let alone
24 100.
25 Meeting the needs of the convenience and
0063
1 needs of the community is not just about CRA. One
2 of the best indicators of future performance is past
3 history. That being the measure, the Federal
4 Reserve Bank must look very carefully not only at
5 the recent data it studied on the bank's
6 performance, but also on the compliance or lack
7 thereof to prior commitments and agreements. The
8 history is substantial. I have included some
9 information that attests to this history, which we
10 will submit to you for the record, including the
11 committee's June 4th letter to the bank, which never
12 received the courtesy of a response.
13 We believe there's at least a segment of
14 the community; namely, the LMI urban and rural
15 communities and women whose needs are not being
16 adequately served. There is a fear that with
17 another merger history suggests these communities
18 will sustain yet another decrease.
19 PRESIDING OFFICER SMITH: Thank you very
20 much, and we'll be glad to have your full statement
21 for the record.
22 SENATOR WILKERSON: If I could end by
23 making a request to you, as the Congressman and the
24 Mayor have done, and that would be that you would
25 use your regulatory powers to do the right thing by
0064
1 the communities who depend on the regulatory
2 authority for protection. Whatever this proposal
3 is, it's not complete. Even the bank principals
4 referred to it yesterday afternoon as a work in
5 progress. You can say no. You can say go back to
6 the drawing board. You can say you need more
7 information. You can say to the banks, respond to
8 the questions that have been asked. But whatever
9 you say, don't say that this is enough to meet the
10 standard, because it's not, and the community has
11 nowhere else to go but to you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much. (Applause) Now we have Ms. Boone on behalf
14 of Senator Kerry.
15 MS. BOONE: My name is Jeanette Boone, and
16 I currently serve as senior issues manager in the
17 Boston office of Senator John Kerry. On behalf of
18 Senator John Kerry I want to thank you for the
19 opportunity to express the Senator's views on the
20 Fleet-BankBoston merger. While Senator Kerry is
21 unable to give this testimony in person, I want to
22 thank you for the opportunity to place his full
23 testimony in the record today.
24 As a member of the Senate Banking
25 Committee, I have witnessed an unprecedented amount
0065
1 of consolidation in the banking and financial
2 services industry. The Fleet-BankBoston merger is
3 further proof that the continued consolidation of
4 financial services markets is one of the
5 inevitabilities of the new global economy.
6 Today there are 30 percent fewer banks in
7 the United States than there were just 10 years ago.
8 Our banks are competing beyond city limits and
9 neighborhood borders, competing against banks across
10 the country and literally across the world. To do
11 so effectively they must have the strength, the
12 market share and the ability to deliver high-quality
13 service.
14 This proposed merger will make the planned
15 Fleet-Boston Corporation the eighth largest bank in
16 the country and one of the most significant
17 financial presence in New England. I believe it is
18 imperative to maintain a strong and robust financial
19 services industry based in New England. To this
20 end, it is critical that we take the appropriate
21 steps to ensure that Boston remains a hub of
22 financial services in the new century and that New
23 England-based banks will continue to be available to
24 depositors in New England.
25 We must move forward in that process in a
0066
1 careful and measured way with government, business,
2 and community leaders working together to ensure
3 that high standards of customer service and
4 corporate community engagement are maintained.
5 Corporate citizenship should be a part of a
6 redefined bottom line in banking. Everyone
7 understands the importance of capital in developing
8 our low-income neighborhoods. Access to credit,
9 along with education, healthcare and decent housing,
10 is one of the most important tools working Americans
11 need to compete successfully in this country.
12 Massachusetts banks, large and small, have
13 the responsibility, the very real responsibility of
14 providing access to capital to our underserved
15 communities. They are integral partners in our
16 effort to lead the transition to a new economy where
17 no one is left behind. Through the Community
18 Reinvestment Act, Congress set standards for the
19 private sector in building an economy in which we
20 can all participate. CRA has been extremely
21 successful in Massachusetts where financial
22 institutions have made more than 1.6 billion in
23 commitments to assist low-income neighborhoods.
24 It's making a difference in Boston's inner city
25 neighborhoods from Roxbury and Jamaica Plain to the
0067
1 South End and has increased home ownership,
2 affordable housing development and minority small-
3 business lending across Massachusetts.
4 However, even at this time of record
5 economic growth, there is much work left to be done.
6 The Boston Federal Reserve showed conclusively that
7 African-Americans get turned down on mortgage
8 applications 1.6 times more often than whites, even
9 after taking into account many economic, income and
10 creditworthiness differences.
11 More than 35 million Americans still live
12 in poverty. Almost one in five children lives in
13 poverty. We must continue to expand the winner's
14 circle to empower every community to participate in
15 this economic expansion. We must not allow any
16 community to be denied access to credit or new
17 banking facilities and services. It is with these
18 principles in mind that together with the entire
19 Mass. Congressional delegation I signed a letter to
20 the new Fleet-Boston Corporation to stress the
21 importance of maintaining a vigorous community
22 reinvestment effort.
23 I am pleased that the new Fleet-Boston
24 Corporation has begun a dialogue with the major
25 organizations in Massachusetts that are dedicated to
0068
1 housing and community reinvestment. I am hopeful
2 that this dialogue will continue and that this
3 merger will result in progress toward the goals of
4 the Community Reinvestment Act and not an
5 opportunity to pass this responsibility to others.
6 I have also sent a letter with Senator
7 Kennedy to Assistant Attorney General Joel Klein
8 requesting that the Justice Department consider
9 allowing a small portion of the new Fleet-Boston
10 Corporation's assets to be sold to a Massachusetts
11 minority-owned community development financial
12 institution that has been providing access to
13 capital to many of our low-income neighborhoods and
14 working families. With your approval I would like
15 to make both letters part of the record.
16 We have other responsibilities as well,
17 particularly the responsibility of meeting the
18 immediate challenges of work force dislocations
19 caused by this merger. Any time two large firms are
20 combined, restructuring can be expected. Layoffs
21 seem to be an inevitability in the reshuffling to
22 maximize cost efficiencies. The Boston Globe has
23 estimated we expect to see the loss of 4,000 to
24 5,000 jobs as a result of this latest decision.
25 Every effort must be taken to minimize job loss and
0069
1 provide sufficient retraining and job placement
2 assistance to workers displaced by this decision.
3 I believe the best way to minimize the
4 anticipated job loss resulting from this merger is
5 to see that the required divested deposits, branches
6 and ATMs of the Fleet-Boston Corporation are sold to
7 banks based in New England. Back in April I wrote
8 to Assistant Attorney General Joel Klein to express
9 my opposition to any decision to sell all divested
10 funds to a single financial institution based
11 outside of Massachusetts. Any divestiture related
12 to this merger must encourage local competition and
13 expand consumer choice.
14 In that letter I also asked that every bank
15 in Massachusetts be given the opportunity to bid on
16 the assets that the merged banks will be required to
17 divest. I am pleased that the Justice Department
18 has taken my advice and will not insist that all
19 assets be acquired by a single buyer, so long as
20 there is a buyer in the mix that will preserve
21 competitive conditions in middle-market lending.
22 I am hopeful that the new Fleet-Boston
23 Corporation will seriously consider any competitive
24 bids from all New England-based banks. Small,
25 medium sized and independent banks have been an
0070
1 important source for financial services to small
2 businesses and low-income communities in
3 Massachusetts. This will also help ensure that
4 Boston remains a hub of financial services in the
5 next century and that Boston-based banks will
6 continue to be available to depositors in New
7 England.
8 Finally, it is the best way to minimize the
9 job loss related to the merger. Over the last years
10 in the Senate Banking Committee I have come to
11 realize that economic change, particularly in the
12 financial service industry, is an inevitability that
13 must be wisely managed. We cannot lull ourselves
14 into believing that we are powerless to shape the
15 contours of this new economy. We know the New
16 England banking industry can provide economic
17 leadership, but we also expect and demand that our
18 banks demonstrate leadership in customer service and
19 corporate citizenship as well.
20 I know that from our efforts on the Banking
21 Committee to your work here, we will be watching to
22 ensure that those goals are merged into one unifying
23 vision of banking in New England.
24 Over the past several months I have worked
25 with the Community Advisory Committee and a large
0071
1 number of groups involved with housing and economic
2 development from across Massachusetts. It is my
3 strong hope that you will listen carefully to the
4 testimony that representatives from these groups
5 will be making today and give serious consideration
6 to the level of need in the community. This merger
7 cannot deal a devastating blow to underserved
8 communities by undercutting the current programs by
9 BankBoston and Fleet, especially those in the areas
10 of small business lending, affordable housing and
11 mortgage lending to low and moderate income
12 homeowners, community development and consumer
13 lending and equity investment and technical
14 assistance and support.
15 I urge you to weigh and evaluate this
16 testimony as you reach decisions regarding this
17 proposed merger. Ultimately it will be our
18 responsibility to ensure that this process moves
19 forward with a fair and competitive merger and
20 divestiture process that encourages local
21 competition and investment while expanding consumer
22 choice.
23 PRESIDING OFFICER SMITH: Thank you very
24 much, Ms. Boone. We'll take it all and put it all
25 into the record.
0072
1 Mr. Ferguson on behalf of Congressman
2 Kennedy.
3 MR. FERGUSON: Thank you, Madam Presiding
4 Officer and members of the Board. For the record my
5 name is Larry Ferguson. I'm the District Director
6 for Congressman Patrick Kennedy of Rhode Island, and
7 I'm here today on his behalf.
8 Congressman Kennedy has a strong interest
9 in the financial industry of New England and most
10 notably his concern that integrity and competition
11 is upheld in the everchanging marketplace. He feels
12 strongly that the upcoming merger of Fleet Bank and
13 BankBoston will uphold the goals of integrity and
14 consumer choice through competition.
15 What I would like to do now is to read into
16 the record a letter that he sent to the Board dated
17 June 29th. "Dear Mr. Johnson: I write in support
18 of the proposed merger between Fleet Financial Group
19 and BankBoston and urge that the Board move
20 expeditiously to approve the merger. To comply with
21 the requisite regulatory and antitrust aspect of
22 this transaction, the two institutions have done an
23 excellent job in reaching out to a large number of
24 community-based organizations throughout its market
25 area. They have also reached out to elected
0073
1 officials on the state and local level and those of
2 us in Congress. As a consequence I believe that an
3 effective job has been done in explaining the
4 rational behind the merger, the plans for
5 restructuring the combined organizations in a most
6 efficient and effective way possible and in
7 anticipating and dealing with the impact of the
8 merger on customers of the institutions and the
9 communities impacted.
10 I am very pleased to learn that an issue of
11 major concern to me that local and regional
12 institutions be allowed to bid on some or all of the
13 assets being divested was clarified recently by the
14 Department of Justice. Furthermore, it is
15 reassuring to learn Fleet and BankBoston will soon
16 announce a major community reinvestment program
17 valued at more than fourteen million dollars over
18 the next five years. This plan will be designed to
19 deal with affordable housing, small business
20 lending, urban renewal and consumer education
21 programming.
22 I believe that the successful bidders on
23 the Fleet and BankBoston branches to be divested
24 will provide effective competition and enhanced
25 choices for consumers. I therefore urge the Board
0074
1 to approve this merger which should produce both
2 substantial short- and long-term public benefits.
3 Sincerely, Patrick Kennedy, member of Congress."
4 Again, I want to thank you for allowing me
5 the opportunity to submit this letter for the record
6 and allowing me to testify here today.
7 PRESIDING OFFICER SMITH: Thank you very
8 much. Questions from the panel?
9 MS. BROWNE: I have a question for Mayor
10 Menino. You expressed some deep concern about the
11 loss of BankBoston. Perhaps you might elaborate a
12 little bit more about what makes BankBoston special
13 from your perspective, what distinguishes it perhaps
14 from other institutions.
15 MAYOR MENINO: Well, my dealings in the
16 last six years with BankBoston have been on a
17 continual basis. We had an issue in the
18 neighborhoods that we developed a neighborhood or
19 needed money for housing, they were there. They
20 were the first ones out willing to work with us to
21 fashion different programs to our needs, and they
22 were very helpful to what we did on the
23 revitalization of a lot of the neighborhoods of the
24 City of Boston.
25 MR. KWAST: I have a question for Mayor
0075
1 Menino and Senator Wilkerson. Could you explain a
2 little bit more whether you think a bank
3 headquartered out of Boston could or could not enter
4 the Boston market and become an effective competitor
5 for the banks that are already in Boston?
6 SENATOR WILKERSON: I don't believe I ever
7 said I didn't believe that they could. I suggested
8 that if a large bank bought all the branches, the
9 best they could do is 6 percent of the market and
10 that I don't consider that competition in the
11 literal sense of the word because this resulting
12 merged bank would be 30 percent, and they're going
13 to be the eighth largest in the country, not just in
14 Massachusetts. So it depends on what your
15 definition of "competition" is.
16 Our concern is that there will be no one
17 competing for the business of my constituents unless
18 this Board takes a special look at that and looks at
19 banks who have had track records in doing business
20 and believe that our communities are about business.
21 It's not about charity, and that's a very -- it's an
22 offensive discussion. We always get to that. We're
23 not asking for people to give us money, you know.
24 This is about mortgages. This is about if I present
25 the same kind of indicators as everyone else, that I
0076
1 shouldn't be denied. And the records are just
2 overwhelmingly supportive of the notion that that's
3 what's happening, and we don't think there's any
4 other competition outside of large banks like this
5 that are going to be picking up that market unless
6 you take that into consideration and are looking at
7 our small and local banks who see us as business and
8 are making money in ways.
9 So if you just talk about selling to a big
10 bank, we don't think that that particular sector and
11 segment of our community's banking needs are going
12 to be met. But I have no opposition to an outside
13 bank. I actually for the record also want to say, I
14 think we'd be better off having a bank that -- you
15 know, I want to keep Fleet-BankBoston here. We're
16 not opposed to that. Given the choice, I'd rather
17 have a Massachusetts headquartered bank. But that
18 doesn't mean I don't then get to raise questions
19 about this proposal and the plan that they put on
20 the table, because I don't think it's going to
21 satisfy what I understand to be your regulatory
22 standards in its present form. We could get there
23 with your help, but we're not there.
24 MAYOR MENINO: I agree with the Senator on
25 the fact that Fleet-BankBoston merged. No big
0077
1 problem. But what's the commitment? What's the
2 future? We can't talk about the past. I think
3 we're talking about the past. I'm talking about the
4 future. When this merger happens, what does the
5 future look like for the community that I represent
6 as Mayor of Boston, Senator Wilkerson, Congressman
7 Capuano. And sometimes, I'll tell you, having a
8 homegrown institution headquarters doesn't mean a
9 lot to you, but sometimes a foreign bank who might
10 have an office or an operation in the city will do
11 more for you. I have several world headquarters in
12 our city, and I get more out of some other
13 corporations that aren't home based.
14 So it's the attitude, and it's the attitude
15 of the folks. Do they really want to get involved
16 in the community or are they saying we're Boston
17 based. You have to love us. We don't have to love
18 you. We have to tolerate you, but you have to love
19 us.
20 CONGRESSMAN CAPUANO: I want to make it
21 clear that the delegation as a whole has opposed
22 bringing in someone from the outside. We feel that
23 bank competition is good. We understand what the
24 general goal is, but bank competition doesn't have
25 to be from the outside. There has been nothing that
0078
1 has stopped an outside bank from coming in for
2 several years now. You know as well as I do -- in
3 fact, better than I do -- Citicorp already had
4 several hundred people in Boston for years, for
5 years. It's not new. Most of the large banks do
6 business in Boston right now. Right now. It's not
7 new. Nothing could stop them at all -- well, not
8 nothing. You could. But theoretically you wouldn't
9 stop them from buying small branches today over the
10 last several years.
11 That's not the issue. The issue is what do
12 you want to do with the divested branches if this
13 merger is allowed now, and our argument has been,
14 build from the inside. Help your own family to get
15 stronger as opposed to giving it away to the
16 outside. The outside is going to come in. There's
17 nobody here trying to create a Chinese wall along
18 the borders of New England. They're here now. They
19 will continue to grow. When they grow, where's the
20 competition going to be?
21 And I just want to go back historically.
22 It strikes me that many of you were probably around
23 the last time, well before Tom Menino was mayor,
24 when Boston was in serious trouble back in the late
25 '70s. No bank in the world should have loaned them
0079
1 a nickel, but the Bank of Boston did because they
2 understood the benefits of having a strong City of
3 Boston instead of having the City of Boston go
4 bankrupt. That is the benefit of a regional --
5 strong, locally based regional bank. And that's
6 what we're trying to keep and that's what we're
7 trying to grow. (Applause)
8 PRESIDING OFFICER SMITH: Thank you very
9 much. We'll go on to Panel Three. We will start
10 with Mr. Reilly.
11 MR. REILLY: Good morning. My name is Tom
12 Reilly. I'm the Attorney General for Massachusetts.
13 I want to thank you for the opportunity to offer
14 comments to this panel today on the proposed merger.
15 I know you have a long day ahead of you and I will
16 certainly do my best to not make that day any
17 longer.
18 There are a number of important issues that
19 you have to consider. We've heard a lot about CRA
20 issues. They certainly are important. I have
21 submitted a letter, and I would ask with your
22 permission on those issues to have that letter be
23 made part of the record.
24 I would like to focus my attention and my
25 comments on competition, the need to replace the
0080
1 competition that will be caused by this merger.
2 By way of background, my office has done an
3 extensive investigation that is not yet complete on
4 this proposed merger. We've done it along with the
5 Department of Justice. We've administered several
6 investigative demands, market surveys, retained the
7 services of a respected economist, Dr. Kalamaris,
8 from Columbia University. We've conducted scores of
9 interviews with all the affected communities and
10 businesses and people that are involved in this
11 process. Now, that investigation, as I said, is
12 still ongoing, but we have identified certain
13 problems and certain major concerns that I would
14 like to share with you today.
15 First, as you well know, this is
16 unprecedented in terms of this merger. The one and
17 two major players for key sectors of our economy are
18 merging, and the key sector I want to focus on today
19 is the middle market. And that creates problems
20 whenever that competition is lost.
21 Secondly, this merger has national
22 implications, because there are other markets
23 throughout this country that are looking at this in
24 order to determine and foresee what the rules are
25 going to be. So I think this is important that we
0081
1 take the time in terms of doing it right.
2 Now, the problem, and the major problem
3 that we have identified, is the problem that this
4 merger creates risk, and I believe that risk is
5 unnecessary and I believe that that risk can be
6 avoided and perhaps prevented if this is done right.
7 Now, the major area that is at risk as a
8 result of this merger is the middle market, the
9 so-called middle market, and that's not some elusive
10 term. I mean, these are real companies. These are
11 real people. A textile manufacturer in Fall River,
12 maybe 30 million in revenues, maybe 250 employees.
13 Real people that depend upon the success of this
14 company. Metal fabrications plant maybe in the
15 central part of the state, Worcester, with 200
16 people, $60 million in revenues, does business in
17 the Far East, needs sophisticated banking services,
18 international letters of credit. A paper
19 manufacturer in the western part of the state or the
20 trucking companies throughout the state.
21 This is a major part of our economy.
22 Perhaps at least 1,000 companies that are affected
23 by this merger. A hundred thousand people that are
24 impacted. They have a stake in this, too, and they
25 need to be heard as well.
0082
1 Right now in the current state of our
2 economy, they're doing well. They're benefitting
3 because of the competition between BankBoston and
4 Fleet. They have a demand for credit. As I said,
5 letters of credit, international letters of credit,
6 currency centers. They're getting all that and
7 they're getting it at a price that they can afford,
8 a competitive price, and certainly we are all the
9 better for that. And I just want that to continue
10 and I want a major competitor to come in and replace
11 this competition.
12 Now, it's going well now, but what happens,
13 even in good times, if the price of credit goes up
14 and the price of borrowing goes up? I don't care
15 whether it's a quarter or a half a point or a full
16 point. What happens? It effects an increase in the
17 cost of doing business in this state and this
18 region. We don't need any more of that. We want to
19 keep competitive pricing.
20 What happens in a downturn? What are the
21 protections there? What about the loss of jobs if
22 there's a credit squeeze and a tightening of credit
23 and the job growth is lost? What's the impact that
24 has? What is the impact of putting all our eggs in
25 one basket? There's no other competitor. What
0083
1 happens to our economy? Certainly these are good
2 institutions and strong institutions and wise
3 institutions, but if there's only one of them and a
4 series of mistakes happens, what happens next?
5 I believe that all this can be avoided. I
6 believe that this merger can be done, and it can be
7 done right. It can be done by playing by the rules.
8 In my opinion, the way to do that is to bring in --
9 that all of the assets that are going to be divested
10 go to one buyer for the entire region. One buyer
11 comes in and picks up this package, it ensures
12 competition. It ensures that there's going to be
13 regional competition in Massachusetts and throughout
14 this region. That is what I believe should happen.
15 Now, there are those -- and certainly I
16 respect their opinions and I value their opinions --
17 that we should carve out for some community banks.
18 I support community banks. Everyone supports
19 community banks. They don't service the middle
20 market. And they won't service the middle market
21 when this is all said and done.
22 If a major competitor picks up this piece
23 and someone with the size and scope and scale and
24 the expertise to service this middle market, it is
25 my opinion they will divest. They will not need all
0084
1 these branches, particularly some of the smaller
2 branches, and that divestiture will occur in an
3 orderly fashion and they'll be making good business
4 decisions as to what they can divest, and that is
5 the way that I certainly would urge and recommend
6 that the Board adopt the direction that I think we
7 should go.
8 In the end this is about preserving
9 competition and maintaining the competition that
10 exists and filling that gap and filling that void
11 that is in that middle market. If we do that, and
12 we do it right, we'll set the standard to make sure
13 the flow of affordable credit and competitive credit
14 flows to the businesses of Massachusetts and this
15 region that depend upon them for their survival and
16 the economic future and health of this region.
17 Thank you very much.
18 My colleague Richard Blumenthal from
19 Connecticut is next. (Applause)
20 PRESIDING OFFICER SMITH: Mr. Blumenthal?
21 MR. BLUMENTHAL: Thank you very much. I
22 want to join my colleague, Attorney General Tom
23 Reilly, in thanking you for this opportunity and say
24 that I also join in sympathizing with the arduous
25 day you're devoting to this subject. I want to make
0085
1 it clear I think you need to devote another day, if
2 you choose to do so, in Hartford, which we've asked
3 you to do, and you're always welcome, as you were
4 some years ago.
5 I want to say that my comments have been
6 submitted formally in writing, and I will just
7 briefly summarize them. And I want to say that
8 we've appreciated the cooperation and the help that
9 we've received from the Commonwealth of
10 Massachusetts, General Reilly and his staff, who
11 have done excellent work. We've done much the same
12 kind of investigation and ours, too, is ongoing
13 involving documents that we've subpoenaed from the
14 banks, which are in confidential form and submitted
15 to you in excerpt.
16 We've also spoken to customers,
17 competitors, other banks that will be affected. We
18 have reviewed the complaints that we've received
19 over the years, not only in my office, but the
20 banking department, and we have benefitted from the
21 economic analysis done by Charles Cavanaros.
22 And today's situation brings me to somewhat
23 different conclusions than my colleague, General
24 Reilly, but we share a similar view of the enormous
25 peril and threat to competition and consumer
0086
1 interests that are inherent in this merger.
2 You will remember that four years ago I
3 spoke to you in Hartford regarding the proposed
4 merger of the Fleet Financial Group and the Shawmut
5 National Corporation, and we had high expectations
6 at that time that Fleet Bank would provide superior
7 services to consumers and small businesses as well
8 as to larger customers and that its community
9 investment commitment would be a model to the
10 nation. In fact, we negotiated a package of
11 divestiture and community commitments that we
12 believed offered tremendous promise for our region
13 and for the nation.
14 The record since 1995, I say regrettably,
15 offers warning for grave caution. The record has
16 been at best mixed. I expressed concern then that
17 large banks often do not give sufficient priority to
18 smaller customers, and we've seen throughout the
19 industry a limitation in competition, unceasing ATM
20 litigation and voluminous consumer complaints.
21 At least in 1995 one of the reassuring
22 thoughts was that Fleet would still face meaningful
23 competition and BankBoston was a viable remaining
24 rival. Now Fleet is again before this Board seeking
25 approval to acquire its largest New England
0087
1 competitor, BankBoston. And this proposed merger
2 would create a behemoth of more than 200 billion
3 dollars in assets, dwarfing its next largest New
4 England competitor by more than ten fold.
5 To counter this economic and competitive
6 threat, Fleet offers to sell less than one half of
7 BankBoston's Connecticut presence; really an offer
8 that would create a mere shadow of the competitive
9 force that premerger BankBoston offered.
10 Essentially talking about the rules as
11 General Reilly did, talking about the antitrust
12 rules that I am bound to enforce as Connecticut's
13 chief antitrust official, Fleet and BankBoston have
14 attempted to justify this result with an antitrust
15 argument that is simply out of touch with those
16 rules and with economic reality. They divided New
17 England into numerous artificial municipal and
18 metropolitan markets and they have argued that even
19 the smallest of banks and credit unions compete on
20 an equal footing, despite the fact that they have
21 recognized themselves in other contexts, the
22 importance of size and scale in economies that drive
23 down costs.
24 The key flaw in this case is that it
25 persists in mistakenly using the same incorrect
0088
1 formula in antitrust terms to determine that
2 competition won't be harmed. Artificially defining
3 those markets with municipal boundaries rather than
4 seeing them as statewide or regional.
5 I urge that there be a package of larger,
6 more extensive divestiture, a more satisfactory sale
7 of assets that is necessary to counter the
8 anti-competitive effects of this merger. In a sense
9 that kind of larger-scale divestiture would enable
10 various kinds of purchasers to use those assets to
11 increase themselves as competitive, pro consumer
12 forces in the marketplace.
13 A sufficient number of branch banks,
14 deposits, ATMs, other assets must be made available
15 to our growing regional financial institutions,
16 including the community bank, so that they will grow
17 from the ground up.
18 At the same time I urge that a substantial
19 block of assets -- not all, but a block -- from all
20 three states that are affected be sold on a combined
21 basis to a strong major purchaser that has economies
22 of scale and scope to directly and immediately
23 compete with Fleet-Boston.
24 In contrast to this approach, what Fleet
25 offers is what it has called a clean sweep of
0089
1 BankBoston assets. But their broom, it seems to us,
2 is really a worn-out brush applied to one or two
3 cities; not to the relevant market as a whole.
4 BankBoston doesn't operate out of Hartford alone or
5 out of Torrington alone in the State of Connecticut.
6 It has a statewide presence. The mid market is key
7 and will be the victim of less competition, tighter
8 credit, higher rates and lower quality service if
9 this merger is permitted to go forward as it is
10 structured now.
11 And as General Reilly has said so well,
12 this mid market really is the engine that fuels our
13 economic growth in the State of Connecticut and
14 throughout the region. These are small and middle-
15 sized businesses that employ tens of thousands of
16 our citizens and, most importantly, most critically,
17 even in good times, they are the economic forces
18 that employ new workers and create new jobs.
19 Let me just say finally that I urge the
20 Board to require Fleet-Boston to make good on the
21 commitments that it has articulated more
22 specifically this morning by further defining them,
23 by stating them even more specifically, but most
24 important, saying explicitly what it will do to make
25 sure that the community investment commitments are
0090
1 actually realized. What we found in the last
2 go-around on community investment is that they are
3 completely dependent on community outreach and
4 promoting aggressively the kind of opportunities
5 that are made available. The numbers mean nothing
6 unless they are backed by a solid, aggressive
7 program of community outreach. (Applause) And that
8 is what I urge the Federal Reserve Board to require.
9 I very much appreciate this opportunity to
10 be with you this morning and for you to give me this
11 chance to talk to you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much. Ms. Nappier.
14 MS. NAPPIER: Good morning. My name is
15 Denise Nappier and I am treasurer of the State of
16 Connecticut. I am pleased to join with Attorney
17 General Richard Blumenthal from my State of
18 Connecticut and his counterpart here in
19 Massachusetts to share with you some serious
20 concerns about the proposed merger as it stands
21 today. I would also like to thank you for the
22 opportunity to testify, although I must express my
23 disappointment in your decision not to hold a
24 hearing in Connecticut on a matter that will
25 effectively remake the financial landscape in
0091
1 Connecticut.
2 The Connecticut State Treasurer's interest
3 in the proposed merger are substantial. We are a
4 shareholder and a major customer of both banks. The
5 combined shares of both banks held by the state
6 treasury is in excess of 630,000. For the past two
7 years the state treasury has spent nearly $6 million
8 on banking service fees, of which 90 percent has
9 been spent or paid to Fleet and BankBoston, Fleet
10 representing the lion's share of roughly 77 percent
11 of all fees paid, and BankBoston 15 percent.
12 I believe that a sense of responsibility
13 for the well-being of the citizens of Connecticut
14 can and must go hand in hand with the fiduciary
15 responsibilities of the state treasurer's office,
16 and it's within that context that I express my
17 concern.
18 Let me say from the onset that I believe
19 that this merger could be a tremendous opportunity
20 for Connecticut and New England. There could be
21 great promise in the establishment of a strong
22 regional bank, a great player on the national stage,
23 but that's not the blueprint we see today.
24 My office is taking a look at Fleet's track
25 record in lending in the communities, and I am
0092
1 concerned. Fleet has claimed that the merger will
2 generate greater capacity for the bank to provide
3 superior services to customers. It sounds good, but
4 I believe in checking the record, and so far the
5 record tells a different story.
6 For example, Fleet's history of post-merger
7 performance demonstrates a declining level of
8 commitment in providing better access to banking
9 services, home mortgage and small business loans, as
10 well as other forms of community investments.
11 (Applause) Now, I do understand the art of
12 statistics, but the facts speak for themselves and
13 as a fiduciary, I don't typically engage in those
14 forms of tactics. So I am here to say to you that
15 in Connecticut we know that the amount of loans to
16 low and moderate income households before the merger
17 of Fleet and Shawmut was twice the level it is
18 today. (Applause) I understand that the CEO of
19 Fleet was recently quoted as saying that the merged
20 bank will be for everyone. Well, my concern is over
21 just who is being left out here. (Applause) I am
22 generally concerned that the big losers in the
23 merger, the people being left out, may be the
24 consumers and businesses of Connecticut. That is,
25 people who are trying to get a small business up and
0093
1 running or expand a growing business and need a
2 reasonable loan. Or the low or moderate income
3 family living in our rural communities or in the
4 inner city trying to afford their first home and
5 need a mortgage at an affordable rate. And
6 consumers depend on reasonable rates, healthy
7 competition and banking parties that respond to
8 their needs.
9 Let me briefly highlight nine critical
10 areas of concern. First, due in large part to the
11 competition for business between Fleet and
12 BankBoston, the state treasurer's office here in
13 Connecticut has saved nearly $1 million reduction in
14 banking service fees from 1994 to 1998. While I can
15 speak only for the business relationship of the
16 state treasury, it would not be unreasonable to
17 assume that Fleet may possess substantial
18 competitive control over other business
19 relationships in our state.
20 We are concerned that the savings achieved
21 by my office may well be eroded as competition is
22 eliminated. Adequate capital is frequently cited as
23 the major barrier to growth and development of small
24 businesses. Undercapitalization is the largest
25 contributor to business venture failure. Therefore,
0094
1 the economic stability and well-being of small
2 businesses in our state is directly tied to the
3 availability of choices of banking services and the
4 fair lending practices of the financial institutions
5 serving our state. That's why reduction in
6 competition is of concern here. (Unintelligible)
7 bank is a program that helps small Connecticut
8 businesses that are unable to obtain conventional
9 financing with an emphasis on minority and women-
10 owned businesses.
11 As part of the Fleet-Shawmut merger Fleet
12 was required three years ago to maintain a high
13 level of urban loans. Once meeting its obligations,
14 under the agreement Fleet's participation with
15 (unintelligible) dwindled considerably, from 1.2
16 million in fiscal 1998 to 295,000 in fiscal 1999.
17 That track record is cause for serious concern.
18 The Community Reinvestment Act has fought
19 discrimination in lending practices and increased
20 access to capital for home mortgages and business
21 start-up for more than two decades. Any entity
22 emerging from a merger between Fleet and BankBoston
23 should be a leader obligated to formulate, promote
24 and implement unfolding principles of community
25 investment.
0095
1 We have seen just the opposite. For
2 example, the 1998 CRA rating report showed that
3 Fleet made nine community development loans totaling
4 just over $16 million in Connecticut while they made
5 19 community development loans totaling nearly 157
6 million dollars in Massachusetts. Of the 200
7 million in community development loans,
8 Massachusetts received 72 percent of the loans to
9 Connecticut's 7.5 percent, even though Connecticut
10 has 25 percent of the bank's branches to
11 Massachusetts' 33 percent.
12 Obviously every potential borrower in
13 Connecticut is concerned about those stats. In
14 Connecticut we understand the value of community
15 banking, where the bankers know all the
16 businesspeople and are aware of potential business
17 problems before they become critical. BankBoston
18 has developed an internationally recognized model
19 for community banking. Fleet has not. And even the
20 BankBoston model has worked more effectively in
21 Massachusetts than in Connecticut.
22 Any approved merger plan should include the
23 preservation of the banking relationships developed
24 by First Community Bank and a commitment to the
25 continued success of the First Community Bank. Now,
0096
1 we're concerned that won't happen. Connecticut's
2 urban and rural communities have traditionally been
3 underserved by financial institutions. Yet nearly
4 half of the branches targeted for sale in connection
5 with the proposed merger are located in the rural or
6 urban areas of our state. Location is particularly
7 important to low and moderate income families where
8 transportation is frequently limited. We're
9 concerned that service to these communities will be
10 disrupted at best and perhaps in some cases will be
11 eliminated.
12 Fleet and BankBoston have recently
13 announced a $14.6 billion commitment for
14 lower-income borrowers, small businesses, community
15 development programs over a five-year period of
16 time. Our internal analysis indicates this is only
17 a slight increase from the current lending patterns
18 and we have no idea from Fleet how this will affect
19 our state. Given the uneven distribution of Fleet's
20 attention to community development efforts in the
21 past, it would not be unreasonable to assume that
22 Connecticut would not fare as well as Massachusetts.
23 We remain concerned about that and would much prefer
24 that Fleet show leadership in all jurisdictions in
25 which it operates. Thank you very much. (Applause)
0097
1 PRESIDING OFFICER SMITH: Thank you.
2 Questions from the panel?
3 MR. McDONOUGH: I have a question for Mr.
4 Reilly. Your remarks today have centered around the
5 antitrust implications of this merger, particularly
6 your concern about middle market lending, and you're
7 advocating a solution where a large institution
8 would come in and acquire all the assets in all
9 three states?
10 MR. REILLY: Yes.
11 MR. McDONOUGH: Whereas, Mr. Blumenthal was
12 suggesting that maybe a large institution could
13 acquire some assets, a sufficient number, toehold or
14 whatever, to meet the middle market. Is that a
15 potential solution to this issue or do you still
16 believe -- obviously you believe -- but would it be
17 sufficient if a large institution acquired
18 sufficient assets in the three states rather than
19 acquiring everything?
20 MR. REILLY: I think the key for me would
21 be whether or not the bank that acquired the new
22 buyer was sufficient in size and scope and expertise
23 to meet the competitive demands or competitive needs
24 of that middle market. That's the focus. Once that
25 was satisfied, certainly I'm open to other
0098
1 considerations. But that's the main focus. That's
2 the main consideration. And I am concerned about in
3 terms of carving out a piece, who's going to do the
4 carving out? Is it going to be Fleet-Boston? Isn't
5 that a conflict? What about the inevitable
6 cherrypicking that's going to go on? It's going to
7 make it all the more difficult for a new, viable,
8 strong competitor that I'm looking for to come in
9 here and be willing to come in here under those
10 circumstances, if there are going to be carveouts in
11 the first stage regionally or carveouts individually
12 within the states.
13 I think it makes it more complex. It makes
14 it more difficult. Is it impossible? No, but I
15 think it's a real challenge to put on the table.
16 It's a problem that I think can be solved by the
17 solution that I'm proposing. Are there other
18 solutions? Perhaps, but we need to be very, very
19 careful here and proceed with caution. This can be
20 done I believe, but it has to be done right and I
21 believe that complicates it the more layers of
22 carving out that there are. But it could be solved.
23 If there is one strong competitor, wherever that
24 competitor comes from or evolves that can meet the
25 competitive needs of have middle market, I'll be
0099
1 satisfied, and I think this merger would ultimately
2 be a good thing for this region and for the state.
3 MR. McDONOUGH: Thank you.
4 MR. ALVAREZ: I have a question for Mr.
5 Blumenthal and Mr. Reilly. Do you find, in looking
6 at the middle market, that there is much competition
7 from banks or other lenders outside the market in
8 the contiguous area? The middle market tends to be
9 a larger geographic market than some retail markets,
10 and I'm wondering what kind of competition you're
11 finding outside the particular State of Connecticut
12 or the State of Massachusetts.
13 MR. REILLY: In Massachusetts we're finding
14 that there is some competition, but there is no
15 question that the two major competitors are
16 BankBoston and Fleet. At the lower end of that
17 middle market you'll find some competition at the
18 very higher ends. Obviously there are already more
19 options. But right smack in the middle there, these
20 are the two major competitors, and essentially the
21 only major competitors, and that's the void that
22 certainly I'm very concerned about. There's a
23 little bit of competition, but these are the primary
24 players here, and they're competing, and it's a good
25 thing. I just want to keep it going.
0100
1 MR. BLUMENTHAL: Much the same is true in
2 Connecticut. There is now competition, we find,
3 talking to customers, between BankBoston and Fleet
4 for mid-market business, and one of the key
5 differences, disagreement between ourselves and
6 Fleet-BankBoston, is on precisely that point. They
7 have in essence said they are doing enough now in
8 terms of divestiture, and going to the first
9 question that was asked, I think the focus ought to
10 be on the clean sweep. Let's really use a broom.
11 Let's sell more of those assets so that they can be
12 made available not only to a major purchaser who can
13 offer competition in the mid market, but also to
14 community banks and regional financial institutions
15 that are grown from the ground up and can also begin
16 to offer competition for that mid market.
17 These solutions are by no means mutually
18 exclusive. If the broom sweeps clean and hard
19 enough and assets are really made available, both
20 can be done. But the competition that now exists is
21 very much on a regional and statewide basis, and
22 ought not to be defined artificially and
23 unrealistically and inaccurately by municipal
24 boundaries or metropolitan areas, as the submission
25 from Fleet-BankBoston essentially does.
0101
1 PRESIDING OFFICER SMITH: Other questions?
2 MR. KWAST: A follow-up with Attorney
3 General Blumenthal for a moment. Do you have a feel
4 for how large a bank needs to be to serve
5 effectively the middle market in Connecticut or the
6 rest of New England?
7 MR. BLUMENTHAL: I can't put a precise
8 number on its assets. I would be glad to get back
9 to the Board with that kind of estimate. Part of
10 what we're doing now essentially is working with our
11 economist on exactly that question, which obviously
12 is an core one for you as it is for all of us. But
13 our feeling is that the sale of assets can be done
14 realistically and aggressively so as to enable a
15 major competitor, a large purchaser and at the same
16 time the community banks to both be involved. And
17 what exactly the size is I would be happy to submit
18 in further written testimony if the Board will
19 permit me to do so.
20 MR. REILLY: I thought a little bit about
21 that, and I don't have a hard figure, but the
22 starting point is that this merged bank is going to
23 have what? 170 billion dollars in terms of assets,
24 and certainly the closer you get to that figure, the
25 better off you're going to be. I don't know whether
0102
1 it's 30, 40, 80, 100, but the closer you get to that
2 figure, certainly the more comfortable I think we're
3 all going to be if we reach that kind of competitive
4 size and dimension that's going to provide real deep
5 pockets, real competition.
6 PRESIDING OFFICER SMITH: Thank you very
7 much for coming this morning.
8 MR. BLUMENTHAL: Thank you.
9 PRESIDING OFFICER SMITH: We'll move on to
10 Panel Four. We're ready to start and we have Ms.
11 Campbell reading a part of the statement from Ms.
12 Hurd, and I have assured her that the entire
13 statement will be part of the record.
14 MS. CAMPBELL: My name is Joyce Campbell.
15 I am going to be reading Maude's testimony. As you
16 know, Maude Hurd is the National President of the
17 community organization ACORN. She couldn't be here
18 today because she had to work, as does a lot of our
19 members. She had asked, though, that maybe in the
20 future we could have this in the evening so that we
21 could better represent our membership.
22 Anyway, as you know, ACORN members have
23 fought redlining and mortgage discrimination all
24 across the country. We use the Home Mortgage
25 Disclosure Act and Community Reinvestment Act to
0103
1 negotiate innovative agreements with banks that
2 remedy past discrimination. Since we signed the
3 first of these agreements in 1985, the ACORN Housing
4 Program has worked with banks to put over 21,000
5 families into their own homes, valued at 1.53
6 billion dollars. ACORN's program has also generated
7 an additional $4 billion in low-income community
8 investment.
9 ACORN's housing program has won awards for
10 its success in helping low-income minority borrowers
11 successfully get and pay their mortgages. Our
12 agreements with banks include progressive
13 underwriting standards, intensive one-on-one housing
14 counseling and, whenever possible, below-market
15 interest rates.
16 Fleet signed an agreement to participate in
17 the ACORN Housing Program in 1995 when it bought
18 Shawmut Bank. The agreement covered Massachusetts
19 and Connecticut and has produced over 1,000
20 successful home buyers and more than $120 million in
21 mortgages. The program has also increased access to
22 home ownership for single parents, recent
23 immigrants, lower-income buyers and people who don't
24 qualify for traditional mortgage underwriting,
25 although they still pay their bills and they pay
0104
1 them on time.
2 The Fleet-ACORN partnership program and
3 programs like it have been crucial in bringing
4 capital and credit into low-income minority
5 neighborhoods. For most American homeowners it's
6 the single biggest source of wealth. It means the
7 difference between living paycheck to paycheck and
8 building equity for yourself and your family.
9 Home ownership is even more crucial for the
10 stability and economic growth of minority
11 communities. Minority homeowners hold 75 percent of
12 their wealth in home equity. The difference between
13 owning and renting is staggering for African-
14 Americans. The average black homeowner's net worth
15 is $48,300, while for the average renter it's only
16 $500. Home ownership helps the homeowner, but it
17 also helps the community. Homeowners are much more
18 likely than renters or landlords to protect and
19 improve their property. There's more stability and
20 less crime in neighborhoods of homeowner-occupied
21 homes and greater involvement in community and civil
22 activities of all kinds.
23 With the ACORN-Fleet agreement and others
24 like it, we were really starting to see a positive
25 shift in the rate of minority home ownership. In
0105
1 early and mid-'90s the percentage of growth of
2 minority home buyers was greater than that of whites
3 for the first time ever. These deals were helping
4 our Massachusetts and Connecticut neighbors achieve
5 the American dream of home ownership, while helping
6 Fleet gain significant market share in minority
7 lending.
8 But as the '90s draw to a close, we are
9 starting to see a downward trend in lending to
10 minority and low-income census tracts. As banks
11 like Fleet get bigger and less accountable to the
12 local communities, they walk away from innovative
13 programs and begin to use cookie-cutter formulas
14 that try to fit everyone into a white middle-class
15 ideal credit situation.
16 Sometimes they even get encouragement from
17 Washington, like the conservative Congress that's
18 trying to dismantle the Community Reinvestment Act.
19 If this merger proceeds, Fleet will be the
20 biggest mortgage player by far in Boston and
21 Bridgeport and many other cities across the
22 Northeast. When they turn their backs on the
23 programs that brought in 30 to 80 percent of their
24 minority lending business in recent years, they are
25 turning their backs on our communities. And let me
0106
1 tell you, without these kinds of programs, our
2 neighborhoods don't stand a chance.
3 If Fleet turns their back on the ACORN
4 program, their record in Boston is likely to go as
5 low as it has in other cities. Over the last ten
6 years Fleet has been showing an alarming trend.
7 Each time the bank merges, it decreases its
8 community reinvestment work. Fleet's CRA ratings
9 have been going down in recent years, even when the
10 banks they have acquired have a grade of
11 "Outstanding." It happened with Northstar in 1991
12 and NatWest in 1994. These banks were high-quality
13 community lenders, but since being acquired by
14 Fleet, they have gone down to "Satisfactory" to "Low
15 Satisfactory" range and slipping.
16 Our community cannot afford to have history
17 repeat itself, as Fleet swallows up yet another bank
18 without making concrete commitments, continue
19 lending in low income and minority neighborhoods. I
20 call upon the Federal Reserve to delay this merger
21 until Fleet can prove that it will meet its
22 investment obligations to our communities. Thank
23 you. (Applause) I did it all.
24 PRESIDING OFFICER SMITH: Ms. Wilkerson on
25 behalf of Mr. Christian.
0107
1 MS. WILKERSON: Good morning. My name is
2 Angie Wilkerson and I am speaking on behalf of
3 Matthew Christian.
4 PRESIDING OFFICER SMITH: Can you bring the
5 mike closer to you?
6 MS. WILKERSON: Good morning. I'm speaking
7 on behalf of Matthew Christian, and I'd just like to
8 put some things into proper perspective for myself.
9 As a member of ACORN, as a member of the community,
10 we began the program with Fleet many years ago. We
11 were the ones who implemented the lifeline banking.
12 We were the first to implement the first-time home
13 buyers program, and if Fleet walks away from this
14 program, it would be devastating to the community.
15 I'm asking Fleet to stand by your
16 commitment that you originated with us and step up
17 to the plate and do what you're supposed to do. If
18 you walk away, it will be so devastating for our
19 community, we will have more homeless people in
20 Massachusetts than we ever had. So please continue
21 your commitment and give us the commitment that we
22 need in our community. Thank you. (Applause)
23 PRESIDING OFFICER SMITH: Thank you very
24 much. Then we have Ms. Mustafa on behalf of Ms.
25 Thompson.
0108
1 MS. MUSTAFA: My name is Lunita Mustafa.
2 I'm a mother of six children and like Ms. Elnora
3 Thompson, I am divorced and I am a single parent.
4 I'd like to say on her behalf and on my behalf that
5 the struggle of raising children by yourself is not
6 easy, as we all know. But for the past five years
7 parents like myself have had ACORN Housing
8 Authority. We have had Massachusetts Affordable
9 Housing Alliance. We have had Mayor Menino. We
10 have had the CRA, Community Reinvestment Act.
11 Five years ago parents like myself were
12 coming out before people like yourself. We were
13 carrying pictures, and we were crying. We were
14 weeping for the death of our children to gangs, to
15 violence in our streets as the result of an unstable
16 community, of moving every year from place to place.
17 The burden on the children is every other
18 year you're the new kid on the block. Every other
19 year there's a new gang or there's a new territory
20 that you have to deal with or a new school that you
21 have to settle into. But for the past five years
22 we've had a chance to rest. And today I don't have
23 a picture of dead children. No. I have a picture
24 of my two oldest children out of my six, and I'd
25 like to show it to you. This is my daughter that
0109
1 just graduated from Bentley College. (Applause)
2 And this is my son, my 18-year-old that I have been
3 in fear when I see other parents bury their children
4 on the streets, and he just joined the U.S. Navy and
5 he's a medic. He just graduated boot camp and is
6 starting a school, his first year in medical school.
7 (Applause) This is what ACORN Housing,
8 Massachusetts Affordable Housing Alliance and Mayor
9 Menino have stood by me and supported me to help me
10 to bring this about.
11 And I am crying today because five years
12 ago there was a wild beast in our community and it
13 was devouring our children. And then today I hear
14 that they're going to unleash him and send him back
15 out there, and I still have four young children. I
16 have my home, I have my CRA home, but what about the
17 rest of the people around me? What if it becomes a
18 fast rental area again?
19 This is Fleet. My son is supporting this
20 flag. This is what the investment is bringing about
21 for Boston. This is what house Boston is bringing
22 about. This is the safe Boston. This is the
23 result. These are live children, and five years ago
24 somebody would have been crying for dead children.
25 I ask you, the Federal Reserve Board,
0110
1 you're a family. Please don't release the beast on
2 my community, on my children. That's what the
3 merger represents to us. That's what the merger
4 represents to Boston. Without the support of the
5 CRA, without ACORN Housing Corporation, without
6 Massachusetts Affordable Housing Alliance and all
7 the people that supported us, we don't stand a
8 chance. There is no muzzle for that beast. Thank
9 you. (Applause)
10 PRESIDING OFFICER SMITH: Ms. Carter.
11 MS. CARTER: Can everyone hear me?
12 PRESIDING OFFICER SMITH: Yes.
13 MS. CARTER: I just hope this morning that
14 God's will be done in this hearing, and before I
15 start, I can ask for his help. So Lord, let the
16 words of my mouth and the meditation of my heart be
17 acceptable in your sight, in Jesus' name, amen.
18 Praise the Lord.
19 My name is Jennifer Carter. I have been
20 banking with BankBoston for many moons, over 20
21 years. I am very concerned about the aftermath of
22 the merger between Fleet and BankBoston. I'm
23 worried that they will cancel ACORN. After meeting
24 with them yesterday, they said that they will be
25 sitting down again with ACORN. But I am more
0111
1 concerned that this is just lip service. And that's
2 lip service. By turning their back on ACORN
3 program, Fleet is turning their back on our low-
4 income and minority community.
5 Have they forgotten that the ACORN Housing
6 Corporation borrowers made up over 30 percent of
7 Fleet's loans to low and moderate income
8 neighborhoods in 1996? Have they forgotten that
9 ACORN Housing helped Fleet increase their lending in
10 low-income neighborhoods by almost 90 percent
11 between 1995 and 1997? Have they forgotten ACORN
12 Housing is responsible for more than 50 percent of
13 BankBoston's loans to black and Latino borrowers in
14 1998 and responsible for 20 percent of BankBoston's
15 overall lending in that year?
16 I think that Fleet has forgotten that ACORN
17 has been -- has done -- excuse me. I think that
18 Fleet has forgotten what ACORN has done to help them
19 meet their obligation to the low-income and minority
20 community. But I would like to remind them again
21 today. If this merger goes forward and Fleet does
22 not renew its lending agreement with ACORN by August
23 1st, I, Jennifer Carter, will be closing my account
24 at BankBoston, and I will also be encouraging my son
25 to close his account at Fleet. And we, the members
0112
1 of ACORN -- raise your hands, ACORN. Praise the
2 Lord. And we, the members of ACORN, have already
3 collected several dozen letters from other community
4 residents in that they are going to close their
5 account as well. We will continue to collect these
6 letters throughout the summer. And I have some
7 letters here if you'd like us to submit that to you.
8 PRESIDING OFFICER SMITH: Yes, please do
9 so.
10 MS. CARTER: So if Fleet is planning to
11 keep taking deposits from our community but stop
12 giving us loans, then we are going to cut their
13 credit line, too. (Applause) This is our way of
14 expressing our dissatisfaction with Fleet's
15 decision. They cannot continue to keep profiting
16 from our deposits without putting back into our
17 community. So that's why I'm here today, to bring
18 to the Federal Reserve's attention the urgency and
19 the dire need for this program, because it's all
20 about helping the low-income community to accomplish
21 the American dream.
22 Please do not rush your decision by
23 allowing this merger. I believe extra time is
24 needed for Fleet to meet with ACORN again as they
25 have promised. You cannot let this merger go
0113
1 forward if it means that Fleet is allowed to walk
2 away from its community reinvestment responsibility.
3 I realize that nothing can be accomplished
4 unless God allows it, so I'm praying for you that
5 the Lord will lead and guide you. Praise God. And
6 I want to encourage Fleet, gather up the frogmen.
7 Let nothing be lost. (Applause)
8 PRESIDING OFFICER SMITH: Ms. Jacobs.
9 MS. JACOBS: Hello. My name is Gwendolyn
10 Jacobs and I am president of ACORN's New York
11 chapter. New York City has every bank there is.
12 There are so many corporate headquarters and there
13 are so much money changing hands, but not where I
14 live in Brownsville in Brooklyn. Where I live it is
15 hard to find a good bank. There weren't too many to
16 start with, and since they all started merging,
17 there are even fewer. Because of this, people in
18 neighborhoods like Brownsville don't have checking
19 accounts. They go to check-cashing stores. There's
20 no local branch of a respectable commercial bank to
21 ask for a loan, so instead we're prey to B and C
22 lenders.
23 Fleet has had dialogue with ACORN about the
24 banking problems faced by low and moderate income
25 people in New York, but they have not helped us
0114
1 address them. Before we had discussed doing any
2 programs with Fleet, we had a valuable relationship
3 with NatWest which gave good loans to minority
4 residents of New York.
5 ACORN had a highly successful underwriting
6 program and then we negotiated a mortgage program
7 offering loans at 1 percent below the market
8 interest rate. We were helping NatWest target
9 populations that were new to them, break into a
10 large, underserved Latino community and build
11 relationships with other community groups and with
12 local minority churches.
13 Then Fleet acquired them and it all ended.
14 We in the New York office were led on to believe
15 that these programs and our relationships would be
16 unaffected. At the time of the merger, they told us
17 that all that would change was the stationery. What
18 a lie. But after the acquisition was complete, we
19 were told that they didn't need our product; that
20 they were covered.
21 Well, we followed Fleet since then, and in
22 fact, they don't have coverage that matched the
23 NatWest programs that were in place. Fleet has been
24 terrible about providing communities with the
25 services prescribed by CRA. It's hard to provide
0115
1 services to a community when you don't have a branch
2 there.
3 In New York Fleet has 39 branches and four
4 of them are in predominantly Afro-American or Latino
5 communities.
6 New York State has a law that requires
7 banks to offer lifeline or basic banking accounts.
8 A few months ago when ACORN members went to these
9 four branches to ask about opening accounts, which
10 one of them happened to be my branch. They acquired
11 it from NatWest. When ACORN members went to these
12 four branches to ask about opening accounts, none of
13 them were told about the lifeline account. When
14 members asked about lifeline accounts, they were met
15 with blank stares. They were instead offered
16 accounts with a higher opening balance requirement
17 and unreasonable fees.
18 So ACORN went to Fleet so we could get this
19 fixed. The New York State law was on our side and
20 Fleet claimed to be on our side, too. We met with
21 them and asked them about their lifeline account.
22 We knew they offered it because it was in their
23 pamphlets. So why didn't the employees working in
24 their banks know about it? Why don't they advertise
25 it more, especially in the branches that serve the
0116
1 people who need it, like the law says they have to?
2 That was when Fleet told us about their
3 merger with BankBoston. They said they would make
4 sure that their employees knew before the basic
5 banking accounts and offered it more to customers.
6 They also said they would make posters for these
7 branches so people would not have to find mention of
8 the account in Fleet's pamphlet. They would know
9 about it just from standing in the bank.
10 Well, our members went back about one month
11 ago, and I went last Thursday, and still they were
12 not offering the lifeline account. Still you don't
13 find any posters either. Fleet has become an
14 example of the rich getting richer from the poor
15 getting poorer. With every merger they have made,
16 they have lost more interest in serving individuals.
17 People like me can't bring Fleet the money
18 that its corporate customers can, but we're not
19 making them lose money either. We pay our bills and
20 we pay our rent, in the same way we could pay a
21 mortgage that we can keep a checkbook. So I am
22 asking the Federal Reserve to carefully consider
23 Fleet's current merger. For every employee they
24 will lay off and every bank branch that will be
25 closed, there are hundreds of consumers who will
0117
1 have less access to banking services. In low and
2 moderate income neighborhoods we need more banks,
3 not richer ones.
4 If Fleet -- the only way I believe Fleet
5 will do anything, it would have to be memorialized.
6 They would have to put it in writing before the
7 merger and they would have to put the money where
8 their mouth is. (Applause) Put the money where
9 their mouth is. Saying it is not doing it, and
10 bigger does not necessarily mean better. Time has
11 proven that to me.
12 When they took over NatWest, the little
13 card they have for the ATM has little things like
14 little ships. Well, their ships are leaving out
15 lower and ours is coming back and we're filling them
16 up and we're getting poorer and they're sailing off
17 into the blue to the twin towers with the money.
18 (Applause) Financial Services Corporation, that's
19 where it's going. We're getting poorer and they're
20 getting richer.
21 That's unconscionable for them to merge and
22 get richer at the expense of the poor. And we are
23 the most underserved, deprived, non-served people
24 you ever saw, and they're using -- they talk about
25 they don't get anything from our money. Yes, they
0118
1 do. They get our money. They're using our money
2 while we're sleeping and we're leaving it in their
3 bank. We are their partners. They should think of
4 us as partners because they're using our money.
5 While we sleep our money is in their bank and
6 they're doing something with it overnight. Thank
7 you very much. (Applause)
8 PRESIDING OFFICER SMITH: Ms. Brown.
9 MS. BROWN: My name is Lori Brown and I
10 live in Bridgeport, Connecticut. I recently
11 purchased my home through the Fleet-ACORN program.
12 Before that I was living in a small three-room
13 apartment as a single mother; couldn't really afford
14 to get a larger place with the income that I was
15 making, but I knew if I could purchase a two-family
16 home I would be able to use the rental income to
17 bring down my housing payment to a level I could
18 handle. But since I didn't have perfect credit and
19 I had recently become self-employed, even though I
20 made decent money, it wasn't possible to get a bank
21 to actually look at me seriously at that time.
22 The only one who really would look at my
23 situation was the Fleet program with ACORN. Thanks
24 to that program my child and I are living together
25 in our new home on a quiet street where lots of
0119
1 people are homeowners and really care about keeping
2 up their neighborhood. I own my own home today and
3 my daughter has a safe place to grow up because
4 Fleet agreed to look at my loan application when no
5 one else would. Through the ACORN Housing Program
6 Fleet didn't try to fit me into a cookie-cutter
7 pattern of what I was supposed to be. Fleet took a
8 closer look.
9 I also used to work for ACORN Housing
10 Corporation as a loan counselor and now I work very
11 closely with ACORN Housing Corporation as a realtor.
12 I have worked with them for several years and I have
13 experienced how Fleet takes a closer look.
14 Most banks these days are using credit
15 scoring to decide if they want to make a loan. They
16 ask everyone the same questions and run the same
17 credit report, send all these numbers to someplace
18 to compute them and they come back with a yes or no.
19 In our low and moderate income neighborhoods,
20 especially in Bridgeport, it was mostly no. But the
21 ACORN and Fleet partnership took a closer look.
22 They looked at things that don't go into a credit
23 score, but that make a world of difference in your
24 application. They looked at my plan to use the
25 income for my renting out one apartment in a
0120
1 two-family home to help me pay my mortgage. They
2 looked at how I had a great record of paying my rent
3 and paying my other bills on time and how I had
4 cleaned up my credit issues.
5 Through the ACORN Housing Program Fleet
6 took a closer look at why a lot of other people from
7 Connecticut in low and moderate-income communities
8 weren't able to get loans. For example, there's a
9 lot of people who were paying very high rents. If
10 you can afford to pay your rent and afford to pay
11 your bills and put food on the table, but not
12 necessarily have a whole lot of money left over to
13 put into the bank, and with Fleet they had all types
14 of flexibility with how much money you had to come
15 up with, and they really took a closer look at
16 having non-traditional credit issues, among other
17 things.
18 And when they worked with the ACORN
19 program, Fleet also took a closer look at being a
20 team player, which is something you really don't see
21 today with a lot of things. While they're
22 processing the mortgage applications and
23 underwriting them, the people who are processing
24 them will call if there are any problems. So if it
25 looked like a problem with an application, instead
0121
1 of just denying it and not looking further into it,
2 they will call ACORN and work with them to work
3 through the issues and get people the mortgages that
4 they were seeking.
5 They took a closer look at my community and
6 we needed the help and we were glad to get it.
7 That's why ACORN Housing did almost 300 loans with
8 Fleet in 1996 in Connecticut. These loans have
9 worked. I know I am paying my mortgage payment
10 every month and on time and almost every one of the
11 clients that I counseled during that time period is
12 doing the same. We haven't heard any complaints
13 from Fleet about the loans or about our clients.
14 So when I heard that Fleet was going to
15 walk away from the partnership, I was very
16 surprised. I am asking Fleet to stop and take a
17 closer look now. Fleet's partnership with ACORN
18 Housing accounted for more than 66 percent of the
19 loans to blacks and Latinos in Bridgeport in 1996
20 and almost 80 percent of the loans to blacks and
21 Latinos in Stamford and Norwalk. In other words,
22 out of a total of 142 loans to blacks and Latinos in
23 Bridgeport in 1996, ACORN Housing's partnership with
24 Fleet was responsible for 94 loans. Once more,
25 ACORN Housing accounted for 50 percent of Fleet's
0122
1 conventional loans to all buyers in each of these
2 cities, 50 percent of all buyers, and in 1997 ACORN
3 Housing Program was responsible for over 60 percent
4 of Fleet's lending to blacks and Latinos, again in
5 Bridgeport, and 55 percent of lending to blacks and
6 Latinos.
7 PRESIDING OFFICER SMITH: Could you wrap
8 up, Ms. Brown?
9 MS. BROWN: Yes. I would like to wrap up
10 by saying, please take a closer look. Fleet should
11 not be allowed to increase their size without
12 increasing their community commitment, and I'm
13 asking that you oppose the merger. (Applause)
14 PRESIDING OFFICER SMITH: Next we have Mr.
15 Collazo on behalf of Ms. Mateo.
16 MR. COLLAZO: Yes. Hi. How are you doing?
17 I'm here on behalf of Mrs. Mateo. I happen to be
18 her counselor. I worked with her for quite a while
19 before she became a homeowner. Just last week she
20 managed to close the deal. So she's basically a
21 homeowner thanks to the Fleet-ACORN Program.
22 She always wanted to be a homeowner and she
23 worked hard to save the few bucks that she had
24 extra. She budgeted herself and finally she reached
25 the point where she managed to save enough money for
0123
1 a downpayment. Her husband was struggling with
2 illness which required surgery.
3 Basically what has happened after that,
4 after the surgery, other bills started accumulating
5 and Ms. Mateo was left with the responsibility of
6 paying all the finances and basically paying all the
7 bills.
8 When Ms. Mateo came to our program I worked
9 very hard with her to get her ready for the
10 responsibilities of home ownership. I knew there
11 was Fleet available for her, so I started working
12 with her to make sure she was ready to meet all the
13 criteria. No other bank would touch this loan by
14 looking at all the other issues that took effect
15 after the incident with her husband. So after
16 carefully taking care of all the outstanding debts
17 and all the bills that were left over from the
18 incident, Ms. Mateo managed to basically regain her
19 own funds and come up with a downpayment.
20 So basically what it comes down to is
21 because of Fleet and ACORN Housing, the partnership
22 that we had, they managed to become first-time home
23 buyers. You have to keep in mind without this
24 program, there will be no more Ms. Mateos around to
25 basically take advantage of such a great program
0124
1 like ours.
2 I am asking you please do not approve this
3 merger without requiring Fleet to come to some
4 agreement that they're still going to help these low
5 and moderate income people that ordinarily would not
6 be able to go elsewhere. This program was her only
7 chance and it was the only chance for many others as
8 well. Thank up (Applause)
9 PRESIDING OFFICER SMITH: Then we have Ms.
10 Miller for Ms. Blain.
11 MS. MILLER: Okay. I'm speaking for Rose
12 Blain. She lives in Mattapan and she says, "I am
13 working with ACORN and Fleet to buy my own home in
14 Brockton. For a long time I wanted to buy a house,
15 but I didn't believe that I could. I got
16 information about ACORN from a meeting in Fields
17 Corner in Dorchester and I decided to participate in
18 the program. The ACORN loan counselor, Robert
19 Davis, helped me to check my husband's credit, my
20 pay stub, my income tax and my bills. I work
21 full-time and many night shifts as a nursing
22 assistant in a hospital pediatric ward. Even though
23 my income is only $22,000 a year, ACORN's program
24 with Fleet Bank gave me the flexibility to have a
25 low downpayment and a good mortgage rate.
0125
1 I was able to get a prequalifying letter
2 for a house based partly on my plan to rent out a
3 floor to another family. The house I am trying to
4 buy is in Brockton. I will be living there with my
5 husband and four kids. It is my dream to own my own
6 home and be my own boss.
7 Even with ACORN's program it has taken me
8 two years to be ready to buy a home. Without this
9 program a lot of people will miss the opportunity to
10 have their dream. To me it is horrible that Fleet
11 is hurting so many people who would like to get a
12 house. I want many families to get the same
13 opportunity that we did working with ACORN and
14 Fleet. There's an old saying: If it ain't broke,
15 don't fix it. Well, this program ain't broke, so
16 please don't take it away from the people who need
17 it. I urge you to renew the ACORN Housing Program
18 because it works and to stop the merger.
19 On a personal note, six years ago I lost my
20 home due to a bad loan and a bad house; okay? I had
21 no credit. But a good income, and the original loan
22 that I tried to obtain from a regular bank, I got
23 turned down, so I had to go to a shyster loan
24 company. My loan was 16 percent interest and my
25 note was $2,000 a month. After a few years I lost
0126
1 everything.
2 But a sister program to ACORN helped me to
3 rebuild my life and start over again. Without the
4 program and the training to give me the tools that I
5 wouldn't run into the same problems again and the
6 loan through the CRA Act, I would not have been able
7 to get another home for my family for at least
8 another 10 or 15 years; okay?
9 So ACORN works. Megamergers do not. And
10 we urge you today to please stop the merger, renew
11 ACORN and help us to keep our community going and
12 our cities on line. Thank you. (Applause)
13 PRESIDING OFFICER SMITH: Thank you very
14 much. Any questions from the panel?
15 MS. BROWNE: I was a little unclear. Has
16 Fleet said they will not renew their relationship
17 with ACORN? Is it just up in the air? If they have
18 said that they will not renew, have they given any
19 indication why? Is it because BankBoston is sort of
20 handling community affairs? I was a little unclear
21 whether this is something that's up in the air or
22 you have some reason to believe --
23 MS. CAMPBELL: No, it's not up the air at
24 all. They said as of July 1st the program ends.
25 They walked away from the negotiation table. They
0127
1 have said since then a week ago at a meeting that
2 Marge was at and I was at, they said, oh, yeah, we
3 plan on setting up a meeting, you know, we have such
4 a good partnership. But we haven't heard from them.
5 They had a meeting yesterday, a community
6 meeting that we weren't invited to, but we found out
7 about, so we went anyway, and they said, oh, yeah,
8 we're going to meet with you next week. But I doubt
9 if that's anything concrete that we can -- you know,
10 it's up to you guys to make sure that they sit down
11 with us. I mean, if you just let them say I will
12 and wait for them to do it, I don't think it's going
13 to happen. (Applause)
14 PRESIDING OFFICER SMITH: Thank you very
15 much. We are going to take a five-minute break
16 instead of a ten-minute break. So I'll see you here
17 very soon.
18 (Short recess)
19 PRESIDING OFFICER SMITH: Would you
20 identify yourself, please, for the record.
21 REV. GOFF: My name is Reverend Norvel
22 Goff, Sr., Pastor of Baber African Methodist
23 Episcopal Church and president of the Greater
24 Rochester NAACP and Chairman of the Black Ministers
25 Alliance. I come here today to support the merger
0128
1 of Fleet-BankBoston, and I'm doing it for a number
2 of reasons:
3 One, based on their commitment to Western
4 New York and other communities in that area.
5 Two, because of their commitment to
6 faith-based lending institutions, which is inclusive
7 of the church.
8 Three, the partnership that has been
9 developed by Fleet Bank as a leader not only in
10 Western New York but New York City and New Jersey
11 and other parts of the country, where they have been
12 very proactive in committing themselves to improving
13 the quality of life.
14 In addition to that, I would like to state
15 here for the record that Fleet Bank in Upstate New
16 York has been a leader in commitment to a program
17 that is called Footprints to Home Ownership, which
18 has allowed first-time homeowners to own their own
19 home and to promote seminars and to teach them the
20 value of owning a home and also to pay the mortgage.
21 I think the relationship as president of the Greater
22 Rochester NAACP, as we look at demographics of the
23 employment track record of Fleet Bank, it shows an
24 inclusive niche of all colors.
25 And finally, let me say this, that Fleet
0129
1 Bank is not about just giving out money, but we have
2 developed a partnership, a partnership where the
3 black church comes with economic stability to
4 provide stability in our various communities. And
5 for that reason, I come on behalf of more than
6 several thousand individuals who are participants in
7 our various organizations to say we support the
8 merger because we think it's good business, good
9 business not only for the churches but good business
10 for the community in which Fleet Bank finds itself.
11 Thank you so much, and I thank my
12 colleagues for letting me cut in line, because I
13 have a one o'clock flight. Thank you so much.
14 (Applause)
15 PRESIDING OFFICER SMITH: Our panelists on
16 this panel have about one minute, which isn't a very
17 long time, but we welcome you.
18 MS. STROM: Thank you. My name is Margo
19 Strom, I am the executive director of Facing History
20 and Ourselves, a national nonprofit educational
21 organization.
22 As you well know, individuals and groups
23 and corporations and communities develop character,
24 they have identities, and they are defined by the
25 choices they make. These choices shape our
0130
1 democratic space. The democratic activity that lies
2 somewhere between government and business is the
3 independent sector, it is the home for nonprofits,
4 and it is that that I represent.
5 It is also the arena where people volunteer
6 and associate, they practice the First Amendment,
7 and it is the avenue for advocacy and outrage, as
8 you have seen here today. It is where we educate
9 people to be democratic to others. We teach about
10 this sector. It focuses on the choices individuals
11 and groups make in history either to promote social
12 justice and tolerance in inclusive democratic
13 societies or to destroy them.
14 For 20 years we have been reaching students
15 across this country, now reaching annually a
16 million. The corporate philanthropy of both
17 BankBoston and Fleet Bank represents a deep
18 commitment to the nonprofit sector. We have not
19 only been a beneficiary of their leadership but
20 witness to the extraordinary impact of their
21 stewardship and investment that has been paid off in
22 the health and vitality and education of the New
23 England community.
24 They lend not only financial backing but
25 time and advice to help leverage their investments.
0131
1 Their support lends credibility, because their
2 reputation as caring corporate partners for
3 nonprofits has become legendary. Our future depends
4 on the commitment the corporate community has to the
5 partnerships with nonprofits.
6 Thank you for this opportunity.
7 PRESIDING OFFICER SMITH: Thank you.
8 (Applause).
9 MS. KORMAN: My same is Nancy Korman, and I
10 chair the Massachusetts Service Alliance. This year
11 we distributed $13 million, $8 million from the
12 federal government and $5 million from the state
13 government. However, we do not operate on
14 government funds alone. We are required by law to
15 develop partnerships with the corporate community.
16 In other words, our success depends upon raising a
17 percentage of matching dollars.
18 So I have gone knocking on the doors of
19 both banks, and if only other corporations were as
20 generous and responsive as both BankBoston and Fleet
21 Bank have been. The money that we raise goes to
22 programs such as Americorps, Youth Build, Jump
23 Start, City Year, ROCA. These are the programs
24 which are the obvious antidote to Littleton,
25 Colorado, to alienated youth, to people who are not
0132
1 on teams. These programs put kids on teams helping
2 other kids.
3 We as an organization are committed to
4 community and the ethic of community service, and we
5 have always had equal and generous help from
6 BankBoston and Fleet. After Colin Powell's
7 Presidential Summit, the two banks equally funded
8 the Massachusetts Summit. This summit helped the
9 Alliance focus attention on the value of community
10 service, particularly as impacts on our youth. I am
11 confident that in the future both banks will not
12 just strengthen their visibility and their financial
13 capabilities but will strengthen their commitment to
14 the entire community. Thank you. (Applause)
15 MS. GUILDERSON: Good morning. My name is
16 Tandeka Guilderson. I'm the director of the Center
17 for Women and Enterprise, Boston office. I am
18 speaking on behalf of Andrea Silbert, the founder
19 and chief executive officer of the Center for Women
20 and Enterprise who has acute laryngitis.
21 The center is a regional nonprofit economic
22 development agency which provides education,
23 training, technical assistance, and access to debt
24 and equity capital to women business owners. The
25 Center For Women and Enterprise is the only women's
0133
1 business development center in the State of
2 Massachusetts. We provide our assistance to women
3 from all socioeconomic backgrounds in all stages of
4 business development spanning the range of women
5 transitioning from public assistance to women who
6 are launching and growing high-tech ventures.
7 We have been very fortunate to have been
8 supported since our founding in 1995 by BankBoston
9 and one year later by Fleet. BankBoston provided
10 CWE with a three-year $150,000 seed grant in 1995 to
11 open our doors. They have since increased that
12 amount to $75,000 per year to include our Worcester
13 office. In addition, last year at the BankBoston
14 Charitable Trust through their new economic
15 development initiative provided us with a three-year
16 grant of $225,000 to develop a special program
17 targeting very low-income women living in Boston's
18 inner city environments.
19 Finally, BankBoston launched their own
20 initiative, the Women Entrepreneurs Connection, to
21 serve as a very important and often neglected
22 market.
23 Fleet has also been a good partner to CWE.
24 Two years ago CWE found a gap in the market
25 assisting women to access equity capital to launch
0134
1 and expand high growth businesses. Fleet provided
2 us with $50,000 to conduct the research on this
3 initiative and then launched the CWE Venture Center
4 at a conference held right here at the Federal
5 Reserve Bank in November of 1998.
6 Since then Fleet has committed another
7 $100,000 to the CWE center. Fleet and BankBoston
8 have shown true interest in the women-owned business
9 market, they have committed to continuing and
10 expanding the Women Entrepreneurs Connection and
11 working with WEC to develop more programs and
12 products to assist this market. In particular, we
13 are eager to work with them to increase seed equity
14 capital and nonconventional loans to women-owned
15 businesses.
16 It is critical that we keep a super bank
17 headquartered in Boston and look forward to working
18 with Fleet Boston to see that the needs of the
19 community are met once these banks merge. Thank you
20 for your time. (Applause)
21 MS. DECEATIS: I am Deborah Deceatis, I am
22 the associate director for Patriots Trail Girl
23 Scouts. Patriots Trail Girl Scouts supports the
24 merger of Fleet Bank and BankBoston. The Girl
25 Scouts, who have 65 cities and towns which provide
0135
1 the jurisdiction served by Patriots Trail and serve
2 over 30,000 girls yearly with the help of 10,000
3 adult volunteers, benefit from a variety of support,
4 resources, and funding provided by both Fleet and
5 BankBoston.
6 Just to mention a few, collaboration and
7 development of a Financial Literacy Program for
8 young girls five years old to 18, to investigate
9 money issues, including savings, investment, loans,
10 and basic money management, as well as career
11 exploration in the financial world. We call that
12 program Smart About Money.
13 Employees of Fleet and BankBoston have been
14 encouraged to provide community service as
15 volunteers. The employees serve on our board of
16 directors, finance, and fund development committees,
17 as well as working directly as positive role models
18 to girls serving as troop leaders, trainers, program
19 support, and our ever-popular community care days of
20 service.
21 Fleet has supported our efforts to
22 recognize achievements and accomplishments of Boston
23 women who serve as positive role models for the
24 youth of our communities. In addition, they have
25 served as advocates for girls and youth in the
0136
1 neighborhoods through an ongoing partnership to make
2 it possible for girls whose families may not be able
3 to afford summer camp, to make it possible for those
4 girls to attend one of our day or resident camps by
5 funding camper shifts. Funding from Fleet has
6 helped to promote our Girls Eye View Program where
7 girls throughout New England were provided with
8 tools to express their view and perspective on the
9 world, their community, or the neighborhood, through
10 photography, poetry, and writing of stories.
11 Currently a traveling exhibit is on view throughout
12 New England.
13 Lastly, but very significantly, there has
14 been a strong commitment from Fleet to our
15 communities to support our 2500 Girl Scout troops by
16 accessing free banking services so that the funds
17 earned by these young girls are safeguarded in
18 checking accounts.
19 We have a strong partnership with Fleet and
20 BankBoston, and we look forward to the merger as
21 expanding new services, resources, and opportunities
22 for the youth in our communities that we serve.
23 Thank you. (Applause)
24 MR. WILLIAMS: Good morning. My name is
25 Greg Williams, I'm the president and owner of GW
0137
1 Enterprises, Inc., which is an information
2 technology consulting firm. And I am also the
3 president of the Mercer County Business Association,
4 which is a not-for-profit organization of more than
5 200 small and minority-owned businesses. We are an
6 advocacy group representing the interests of small
7 businesses and their owners in Mercer County and
8 throughout the State of New Jersey.
9 I'm here this morning to speak in favor of
10 the proposed merger of Fleet Bank and BankBoston.
11 The Mercer County Business Association has worked
12 very hard to make sure that small, women, and
13 minority-owned businesses are afforded the same
14 opportunities to grow and develop as larger
15 majority-owned businesses in the State of New Jersey
16 and in the country.
17 We have found a ready partner towards
18 meeting that objective in Fleet Bank, particularly
19 since Joyce Harley has become the head of the New
20 Jersey Community Development Group. Fleet and Ms.
21 Harley have shown by word and deed that there is a
22 real commitment to financing and supporting small
23 business in New Jersey. Fleet has exceeded that
24 commitment, the commitment it made when it entered
25 the state through its acquisition of NatWest Bank
0138
1 three years ago to put over $200 million in small
2 business loans on the books.
3 The Mercer County Business Association
4 meets with Ms. Harley and her staff on a regular
5 basis to monitor the commitment, and we are pleased
6 with the results. The goal has been exceeded by
7 more than 73 percent to date. Fleet has
8 particularly reached out to small, women, and
9 minority-owned businesses in our urban and poor
10 areas, offering training seminars on how to borrow
11 money and how to write business plans that, in Ms.
12 Harley's own words, tell our story so that bankers
13 understand.
14 Fleet has been the leading bank in forming
15 a partnership with the state's Entrepreneurial
16 Training Institute. That institute is a project of
17 the New Jersey Development Authority of which I am a
18 board member. Of the 10 classes offered statewide,
19 six were staffed by Fleet Bankers, including the
20 entire community development staff. Fleet has
21 worked with the Mercer County Business Association
22 to offer small businesses an opportunity to do
23 business with Fleet and other large businesses in
24 the state, many of whom are Fleet commercial
25 customers.
0139
1 In conclusion, the Mercer County Business
2 Association supports this merger because we are well
3 aware of BankBoston's fine reputation. We believe
4 that their commitment, combined with Fleet's
5 actions, will serve the interests of the small and
6 minority business community in the State of New
7 Jersey even better than it's being served today.
8 Thank you. (Applause)
9 MS. RESNEY: Good morning. I'm Romney
10 Resney, director of Mass Insight Education and
11 Research Institute. Since 1989 Mass Insight has
12 worked in developing initiatives to create a strong
13 and competitive Massachusetts economy for all
14 Massachusetts citizens. More recently, Mass Insight
15 Education is working with 47 school districts,
16 public school districts throughout Massachusetts on
17 raising student achievement.
18 It's crucial for Massachusetts community
19 groups like Mass Insight to have a strong nationally
20 competitive local bank based in New England. I
21 could, like many of my peers here, discuss the many
22 contributions BankBoston has made to our efforts,
23 but I'd like to spend some time discussing the
24 alternatives to the merger.
25 Current banking industry trends and recent
0140
1 experience show that it's unrealistic for Fleet and
2 BankBoston to remain independent and nationally
3 competitive locally based banks. We need these
4 banks in this community. Banks nationwide are
5 facing a rapidly changing competitive environment.
6 They're facing the threat of national consolidation.
7 We see this all across the country with different
8 bank mergers, facing industry convergence where
9 nontraditional banking institutions are moving into
10 the banking sector. We're also seeing the threat of
11 e-banking and e-commerce which is rapidly increasing
12 the speed with which all of this is taking place and
13 also reducing some of the implications for the local
14 branch office.
15 Fleet and BankBoston are facing these
16 competitive threats, and I honestly believe they can
17 face them stronger together. In the new banking
18 environment there are basically three options on the
19 table as I see it:
20 First, Fleet-BankBoston remain independent
21 and one or both are bought by a large, outside bank.
22 This takes away from the resources available to
23 community groups like ours.
24 Second, Fleet and BankBoston remain
25 independent, and if by some small chance they are
0141
1 not bought by an outside bank, they'll lose market
2 share to new entrants, national players, and some of
3 these other industry players who are moving into the
4 banking sector.
5 And third, and I believe the best of all
6 options, is the Fleet-BankBoston merger will create
7 a nationally competitive, locally based bank that
8 will continue to invest in the strength of the New
9 England economy. We at Mass Insight support this
10 third option and believe in the long-term interest
11 of Massachusetts community groups. Thank you.
12 (Applause)
13 MR. LORD: For the record my name is
14 Richard Lord, I'm executive vice president of
15 Legislative Policy for Associated Industries of
16 Massachusetts. Associated Industries is the
17 Commonwealth's principal statewide employer
18 organization representing 5300 businesses and
19 nonprofit entities across Massachusetts engaged in
20 virtually every economic sector.
21 This merger represents an important,
22 positive step to assure that Massachusetts and New
23 England businesses will benefit from a banking
24 system that offers both stable financial resources
25 and the increasingly sophisticated banking services
0142
1 that are essential to success of the modern economy.
2 In the first years of this decade when the
3 New England banking system was in turmoil, AIM and a
4 number of member companies consistently reported
5 serious difficulties in obtaining bank loans. We
6 have heard few, if any, such reports of such lack of
7 access to capital for more than five years now.
8 BankBoston and Fleet have been the leaders, along
9 with a group of outstanding community banks, not
10 only in restoring the financial stability of our
11 regional banking system but also in re-establishing
12 and greatly extending the range of banking services
13 available to local companies. The proposed merger
14 is vital because it will safeguard those gains.
15 Thank you for the opportunity to testify.
16 (Applause)
17 MS. JONES: Thank you. My name is Martha
18 Jones, and I'm the executive director of the
19 BankBoston Celebrity Series. The Celebrity Series
20 is New England's premier performing arts presenting
21 organization who for the past 10 years has enjoyed a
22 fruitful partnership with BankBoston; BankBoston, of
23 course, which is regarded throughout New England as
24 the premier corporate philanthropist of cultural
25 organizations.
0143
1 Since 1989, BankBoston has been the
2 Celebrity Series title sponsor and has been
3 steadfast in its commitment to our growth and
4 independence as a non-for-profit organization. Of
5 significance, the Bank's sponsorship has provided
6 the resources necessary to enhance our education and
7 community service program Project Discovery, which
8 this past season served more than 23,000 young
9 people in the Greater Boston vicinity through master
10 classes, workshops in the schools, performance
11 tickets at little or no cost, to over 40
12 performances at Symphony Hall, the Wang Center,
13 Shubert Theater, all of this as a result of
14 BankBoston's continued ongoing sponsorship.
15 I am here today to speak in support of the
16 merger between BankBoston Corporation and Fleet
17 Financial Group. Both institutions have made public
18 their intentions to continue to support community
19 cultural and healthcare charitable organizations at
20 or above current individual levels of support. I
21 believe this to be an honorable and true statement.
22 Through a previous merger with BayBanks, BankBoston
23 continued its high level of charitable giving and
24 in fact increased their support, not only of the
25 Celebrity Series but of other organizations.
0144
1 BankBoston and Fleet Financial Group are
2 already woven into the fabric of Boston's cultural
3 community, and with a new banking entity based here
4 in Boston, I would look forward and expect their
5 charitable commitments to play an even greater role
6 in strengthening that fabric. The Celebrity Series
7 is pleased to move into the next millennium with
8 this new Fleet-BankBoston Corporation. Thank you
9 for your time. (Applause)
10 MR. BESSIRE: Good afternoon, I'm Paul
11 Bessire from the Museum of Fine Arts, Boston. I am
12 also pleased to testify on behalf of the museum in
13 support of the merger of Fleet Financial Group and
14 BankBoston. Fleet and BankBoston are close partners
15 of the MFA, as well as long-time and generous
16 supporters. On an annual basis both companies have
17 led the MFA's Corporate Partners Program by giving
18 at its highest levels for many years, enabling the
19 MFA to enhance its role as a community resource.
20 Important senior executives from both banks are
21 involved with the MFA in a significant capacity as
22 overseers, volunteers, and patrons. In the past
23 several years Fleet and BankBoston have made several
24 major acquisitions possible at the MFA. In addition
25 to enriching the city's cultural life, these
0145
1 exhibitions generate significant economic activity
2 in the region by attracting large numbers of
3 visitors.
4 For example, during Monet, The 20th Century
5 sponsored by Fleet, more than 40 percent of the
6 560,000 visitors came from outside of Boston
7 providing an economic impact of over $34 million.
8 We were also particularly impressed by Fleet's
9 commitment to making Monet accessible to children
10 and seniors by creating extensive education
11 materials and by providing over 8,000 free tickets
12 to community groups.
13 BankBoston is also currently sponsoring the
14 John Singer Sargent at the MFA. This is the third
15 major exhibition sponsored by BankBoston in the last
16 four years. We have also been impressed by their
17 leadership in creating the groundbreaking program
18 Museums On Us, an innovative program featuring 21
19 New England museums. Given these track records, we
20 have full confidence that the new Fleet-Boston will
21 continue to be a good neighborhood and strong
22 supporter of Boston's museums and cultural
23 organizations. Thank you. (Applause)
24 PASTOR GILLISON: Good morning. My name is
25 William Gillison, I'm pastor of the Mt. Olive
0146
1 Baptist Church.
2 My relationship with Fleet Bank began
3 approximately 19 years ago when one of their branch
4 managers Mr. Roger Richardson and I served on a
5 community board together. At that time we shared
6 with him that Mt. Olive was experiencing growing
7 pains, and we were looking for a bank that would
8 assist us in seeing that our vision would come to
9 fruition. Even though we had no banking
10 relationship with Fleet Bank at the time, Fleet was
11 the bank that responded first to our business
12 proposal. And at that time no other lending
13 institution would even speak with us.
14 Fleet's bank managers -- Fleet assigned a
15 vice president to our particular plan, and we are
16 glad to say that Fleet was the first in our area to
17 lend any African-American bank over a million -- a
18 church, that is, over a million and a half dollars
19 based upon a fair look at our business plan and our
20 record. We do believe we stand today to ask this
21 commission if they would grant Fleet this
22 opportunity to continue expressing this type of
23 leadership in the industry. (Applause)
24 MR. PARROTT: I'm Charles Parrott, I'm vice
25 chairman of the YMCA of Greater Boston. The YMCA of
0147
1 Greater Boston is the largest childcare provider in
2 the Greater Boston area. It has a number of other
3 programs for inner city children. Those programs
4 could not exist without the support of corporate
5 Boston. Over the years BankBoston has been a
6 substantial contributor, it goes back as far as the
7 YMCA does, and that's almost 150 years. In recent
8 years Fleet has become a substantial contributor to
9 the programs of the YMCA.
10 It is our hope that should this merger go
11 through, that the combined bank will be able to
12 continue that support. We have every reason to
13 believe that it will through what we read in the
14 press. I thank you for this opportunity.
15 PRESIDING OFFICER SMITH: Thank you.
16 MS. SCOTT: My name is Ruth Scott and I'm
17 president and CEO of Scott Consulting Associates. I
18 come to this question from an interesting
19 perspective, a broad-based one. I started out in
20 the '70s as the president of an organization that
21 did the initial research on the redline issue, and
22 then over the years I've been involved with Fleet
23 and with other banking institutions across the
24 country, as well as neighborhood Reinvestment
25 Corporation and neighborhood groups in trying to
0148
1 figure out how these organizations could speak
2 effectively with each other and form collaborations
3 that work.
4 I come in favor of the merger between Fleet
5 and BankBoston because I see things there that make
6 me understand that they know what it's all about and
7 they will do the thing that is right in terms of
8 these partnerships and community development. I
9 want to just give an example of a leveraging that
10 Fleet often does in its marketplace.
11 I was involved with a community development
12 organization, a faith- based organization, three
13 years ago which wanted to build a complex as the
14 first African-American organization in Rochester,
15 New York, to do such a thing. We went to Fleet and
16 asked them for $5,000 originally as seed money to
17 establish a corporation, and they gave us that.
18 That commitment grew over time to $100,000. It
19 wasn't just that, though. That commitment grew in
20 addition to a $500,000 commitment for building, and
21 it grew in addition with other organizations giving
22 over $500,000 to the organization and HUD giving a
23 $3 1/2 million grant. It is that kind of leveraging
24 that Fleet understands as we go into the 21st
25 century.
0149
1 As I have looked at banks across the
2 country, what I have found is these kind of mergers
3 work when you have three things: a solid and an
4 active commitment to community building; a mission
5 engaged in understanding of a changing landscape and
6 its imperative to merge and collaborate with
7 like-minded corporations; and a solid organizational
8 profit base which allows for the keeping of those
9 commitments. I believe that this merger would give
10 all of those things.
11 There is a saying that "When certain people
12 whisper, everybody listens." I think that's true in
13 our communities. As Fleet has grown stronger, when
14 it whispers, other corporations and governments also
15 listen. And in addition, when the community speaks,
16 Fleet listens. And I believe that the
17 Fleet-BankBoston merger will continue to do that.
18 Thank you.
19 PRESIDING OFFICER SMITH: Thank you very
20 much. (Applause)
21 MR. CUENCA: Good afternoon. My name is
22 Peter Cuenca, I'm the president of CuencaVision,
23 WCA-T.V., it's a Spanish television station. I am
24 also the editor and the publisher of the newspaper
25 Las Manos, which is a weekly Spanish newspaper in
0150
1 the New England area.
2 I am here to tell you about my experience
3 with Fleet Bank. I was in need of financial
4 assistance of a loan from the bank, and I went to
5 them, to the community development department, and I
6 found there people that would listen to me. They
7 did help me, they gave me a loan, and thanks to them
8 I am able to have new equipment, to expand our
9 services to the community.
10 And I find that they have a corporate
11 responsibility, that they have listened to many
12 people like me in the community, they are committed
13 for the future to do that, and if that is the case,
14 based on my experience, obviously this merger is a
15 good thing for our community. It's important to
16 face the fact that our global economy today, there
17 is a need for a strong financial institutions.
18 And based on that, we also have to think in
19 terms there is enough turning the forces around to
20 keep them with the proper commitment to our
21 communities. Banks are not only local banks now,
22 they are national banks, they are international
23 banks. And those commercial or competitive forces
24 will be strong enough, I believe, to maintain a good
25 relationship between the community and the banking
0151
1 system. Thank you.
2 PRESIDING OFFICER SMITH: Thank you.
3 (Applause)
4 MS. DOWNIE: I'm Lyndia Downie, I'm the
5 Acting President of the Pine Street Inn. We're an
6 agency that provides shelter, job training, and
7 affordable housing to homeless individuals and most
8 recently homeless families. And I too am here to
9 support the merger of Fleet and BankBoston.
10 Fleet has been a strong, responsive, and
11 good corporate citizen. They have been supporting
12 the Inn's work for many, many years since they have
13 been in Boston. Last year they helped us put an
14 outreach van on the street that provides
15 transportation, blankets, and referrals to homeless
16 people living on the street. In previous years they
17 helped us start a program for homeless elderly woman
18 focused on finding them housing.
19 We have been developing affordable housing
20 for over 10 years, and Fleet has consistently
21 offered support, both corporate support and lending
22 support, for those affordable housing projects. And
23 they have been very responsive to all the issues
24 around homelessness. In fact, last winter when a
25 number of people died on the street, Fleet was the
0152
1 first to call and say, "Is there anything we can do
2 to help?" We hope that they will continue this and
3 have every expectation they will continue to be good
4 and strong corporate citizens and they will continue
5 to be in support of homeless issues. Thank you.
6 (Applause)
7 PRESIDING OFFICER SMITH: Thank you very
8 much.
9 MS. RODGERSON: Hi. My name is Susan
10 Rodgerson, and I'm the founder and director of
11 Artists for Humanity, which is a grass-roots
12 organization here in Boston that serves urban teens
13 in an after-school program.
14 Fleet and BankBoston both have been very
15 supportive from the corporate philanthropy
16 departments of their institutions. But more
17 importantly, we provide products and services for
18 the business community that are performed by teens,
19 and Fleet Bank has hired us very often to do jobs
20 that are professional and performed by teenagers.
21 And I really believe that their commitment
22 to the inner city through working with youth is an
23 important one, and I also think that this is a great
24 opportunity for two strong institutions that are
25 local, that have been here for a long time, to merge
0153
1 and to increase their level of support and
2 commitment through their shared history in Boston.
3 So I support the merger and hope that they will
4 maximize this opportunity for both of them to
5 succeed. Thank you.
6 PRESIDING OFFICER SMITH: Thank you very
7 much.
8 MR. REGAN: My name is Bob Regan, and I'm
9 president and CEO of New England College of Finance.
10 New England College of Finance is a unique
11 educational resource founded in Boston in 1909.
12 This organization has evolved into an accredited,
13 degree-granting college, the only banking institute
14 in America ever to achieve full collegiate status
15 with 250-member institutions and annual enrollments
16 in excess of 7500, this is a very important resource
17 to our financial industry.
18 Fleet Financial Group is a member of the
19 college and is the highest participating bank in our
20 programs. It is extremely generous in encouraging
21 its employees to pursue their education. This
22 generosity is especially important to lower-paid
23 employees and to minorities, the latter population
24 comprising nearly 40 percent of our total annual
25 enrollments. Fleet also provides the college with
0154
1 extraordinary support in the form of governance and
2 faculty leadership and free use of classroom space
3 at several of their locations throughout New
4 England.
5 Simply put, without the support of Fleet
6 Financial Group, the financial services industry in
7 this area would have great difficulty sustaining
8 this important educational resource and many
9 individuals would be denied access to a college
10 education.
11 In addition to its dominant role in the
12 college, Fleet is a founding member of the Financial
13 Services Academy, a newly created service of the
14 college, working with CBOs like Urban League, ABCD,
15 and Stride, the mission of the academy is to recruit
16 and train diverse inner city populations for
17 entry-level jobs in the industry. During the first
18 three months of operation the academy has trained 77
19 individuals, many of whom have already been placed
20 in good-paying jobs. Of these graduates, more than
21 90 percent are ethnic minorities and recent
22 immigrants and 75 percent identified English as
23 their second language.
24 In short, I personal cannot say enough good
25 things about Fleet Financial Group. As
0155
1 consolidation creates ever-larger banking
2 institutions, I believe we are very fortunate in New
3 England that a responsible powerhouse is being
4 formed. Thank you.
5 PRESIDING OFFICER SMITH: Thank you.
6 MS. DURADO: Good afternoon. My name is
7 Rosa Minayo Durado, I am here as a board member of
8 the Latino Professional Network. Latino
9 Professional Network is an organization that links
10 Boston's Latino professionals with employment and
11 business opportunities.
12 The Latino Professional Network is here to
13 support the merger with Fleet for many reasons. One
14 of them is that Fleet has followed and continues to
15 support the mission of the Latino Professional
16 Network, which is to give access information and
17 business opportunity to the Latino professionals.
18 Fleet has given to individuals and also to different
19 businesses credit opportunity. It has helped
20 technical assistance to some of the small Latino
21 businesses, and also the Community Development Group
22 of the Fleet works very closely with many of the
23 members that run nonprofit agencies.
24 So as a board member of the LPN, I would
25 like to support the Fleet merger. Thank you.
0156
1 (Applause)
2 PRESIDING OFFICER SMITH: Thank you very
3 much.
4 MR. SWANN: My name is Lynn Swann, and I
5 come to this by way of being a member of the Fleet
6 In-City Advisory Board. We make suggestions and
7 comments and discussions, debates on Fleet's policy
8 to low- to moderate-income families and mortgages,
9 small business loans, existing loans, loans to
10 existing businesses, so that they can serve the
11 community, even as far as small farm equipment for
12 Fleet.
13 But I really come here because I've been a
14 volunteer for more than 19 years, starting with Big
15 Brothers and Big Sisters of America as a board
16 member, as a national board president and chair of a
17 national capital campaign. And it's this area I'd
18 like to talk to you about in terms of Fleet's
19 involvement with the community.
20 In 1998, there were 17,000 employees who
21 were volunteers in the Fleet program. 95,000
22 volunteer hours in 1998 alone. These were made
23 possible because Fleet's policy is to give their
24 employees two days off with pay to volunteer in the
25 community. That translated into 39,000 kids
0157
1 participating in 450 community projects. Since
2 1996, 82,000 children and young adults have been
3 involved in over 1,000 community service projects
4 and more than $850,000 awarded to winning teams in
5 the Fleet All Star Program.
6 You don't have those kinds of programs
7 unless you're committed to a program, unless you're
8 committed to building a community, because these
9 aren't your traditional people who are banking in
10 your institute, these are people who are going to be
11 making deposits somewhere down the road. And if
12 you're committed to the community, these are the
13 kinds of involvements you have. Fleet has created
14 20 tutorial centers, their commitment is to have 25
15 by the year 2000 throughout the Northeast, and
16 mentoring is an important component in growing a
17 community and building that infrastructure. If you
18 don't think so, let me just give you a couple of
19 quick numbers.
20 Through Big brothers and Big Sisters, here
21 is what mentoring has done: 52 percent, in a
22 scientific study, 52 percent of the kids in a
23 mentoring relationship are less likely to skip
24 school, 46 percent are less likely to use drugs, 27
25 percent are less likely to use alcohol, 33 percent
0158
1 are less likely to use physical force to resolve
2 conflicts. As the woman who testified earlier about
3 programs at Fleet through ACORN having saved her
4 family's life, this is the kind of involvement that
5 builds the infrastructure of a community, where
6 young people grow, feel safe, and can be productive
7 citizens.
8 PRESIDING OFFICER SMITH: Thank you very
9 much. (Applause)
10 MR. JONES: My name is Tripp Jones, and I'm
11 the cofounder and executive director of The
12 Massachusetts Institute for a New Commonwealth, also
13 known as MassInc., a nonprofit, nonpartisan public
14 policy think-tank based here in Boston. MassInc.
15 was established four years ago to develop public
16 policy approaches that result in a flourishing
17 middle class in Massachusetts.
18 I will refrain from elaborating more on
19 MassInc., but I do want to use this opportunity to
20 testify that the encouragement and support we have
21 received from BankBoston and Fleet made an enormous
22 contribution to our success. I have witnessed first
23 hand the determination of both institutions, not
24 only to provide vital financial support to community
25 organizations like MassInc. but to develop strong
0159
1 give-and-take dialogues with local groups borne out
2 of sheer commitment to the civic life of our
3 Commonwealth.
4 At a time when many corporations are
5 myopically devoted to bottom-line considerations,
6 these two institutions have shown the kind of
7 leadership, a willingness to take risks, like
8 supporting a small, start-up think-tank, that puts
9 them in the front rank of our very best corporate
10 citizens in Massachusetts.
11 The economic vitality of our state as a
12 whole, and to some degree the vitality of our
13 community organizations like MassInc., depend on the
14 ability of our banking industry to retain its
15 independence in the midst of extremely competitive
16 national and international pressures to the extent
17 that Fleet and BankBoston have found common ground
18 in a way to sustain that gain, I support their
19 efforts.
20 It is often argued that as the Internet and
21 other technologies continue to shrink the world in
22 which we live, circumstances of geography and place
23 are less important in our lives. Today I want to
24 argue that the opposite is often true. Geography
25 matters. In this case it matters a great deal that
0160
1 the banking decisions affecting the lives of New
2 Englanders be made by New Englanders whenever
3 possible. It's not to say that regional industries
4 don't have to operate within larger economic
5 realities, but it does suggest that we should jump
6 at opportunities to bolster our regional economic
7 independence and to secure our long-term health.
8 I want to applaud the holding of this
9 public hearing ensuring that the Fleet-BankBoston
10 merger results in equally shared benefits for
11 shareholders, customers, and all citizens who
12 require a great deal of judgment, compromise, and
13 trust building among all parties involved, and I am
14 pleased to have had the opportunity to participate.
15 PRESIDING OFFICER SMITH: Thank you very
16 much.
17 MR BROWN: My name is Michael Brown, I'm
18 the president and cofounder of the City Year
19 organization, a national service organization
20 founded in Boston that engages over 1,000 young
21 adults ages 17 to 24 in the area of full-time
22 community service. I appreciate this opportunity to
23 testify on behalf of City Year on behalf of the
24 proposed merger between BankBoston and Fleet
25 Financial Group.
0161
1 We know from direct experience that it is
2 critically important for Massachusetts to remain a
3 headquarters for a major national financial
4 institution. Indeed, were it not for BankBoston
5 and the active leadership of Chad Gifford and Ira
6 Jackson, City Year would not exist today. 10 years
7 ago when City Year was no more than words on paper,
8 BankBoston stepped forward and provided the seed
9 capital for our launch. And along with that initial
10 funding came an extraordinary commitment to the
11 young people of Greater Boston. Through their
12 direct involvement, BankBoston has helped to grow
13 City Year's 54 members in Boston to 1,000 across the
14 country.
15 BankBoston leads our efforts here and
16 around the country to now engage over 300
17 corporations, and Chad and Ira have testified before
18 Congress and have helped to build the Americorps
19 program nationwide. Recently BankBoston, which
20 sponsored the first team in our history 10 years
21 ago, permanently endowed a team of young people in
22 service to City Year Boston. This is the first
23 endowed community service positions for young people
24 in America history.
25 Fleet Bank has also been essential to our
0162
1 organization, partnering with us since 1990 and
2 cofounding with BankBoston our Rhode Island program.
3 Fleet Bank executives now serve on our local
4 advisory board, contributing their time, energy, and
5 vision and make possible our annual celebrations of
6 Dr. Martin Luther King's holiday and our Black
7 History Month celebrations. Over the past 10 years
8 these two banks combined have ensured that 260 young
9 people have provided a year of full-time service.
10 That means 442,000 hours of service tutoring and
11 mentoring children.
12 Our relationship with both institutions has
13 been one of integrity and purpose based on shared
14 values and deep wonder of the power of young people.
15 Our support for the merger is based on a decade of
16 partnership and belief. I am confident that the
17 banks' firmly established traditions of community
18 partnership and involvement will continue in the
19 decade to come. Thank you.
20 PRESIDING OFFICER SMITH: Thank you.
21 (Applause)
22 I'd like to remind the witnesses that they
23 may submit their statements for the record, and the
24 sooner you get them to our registration table the
25 better it will be for our court reporters. Thank
0163
1 you.
2 MR. MIRABAL: My name is Manuel Mirabal,
3 I'm the president and CEO of the National Puerto
4 Rican Coalition, a nonprofit public policy
5 organization out of Washington, D.C. and I am also
6 the chair of the Hispanic Association on Corporate
7 Responsibility out of washington, D.C.
8 Since 1994, NPRC and Fleet have been
9 working in partnership on issues of community
10 economic development and neighborhood
11 revitalization, affordable housing development, home
12 mortgage lending, and consumer banking issues. In
13 the New England states where Fleet has a major
14 presence, the Puerto Rican community makes up more
15 than 50 percent of all of the Latino population. In
16 New York and New Jersey, it is 1.5 million of the 3
17 million Hispanics who live in those states.
18 We have had many opportunities to meet with
19 the senior officials of Fleet and have found them to
20 be always accessible, including Mr. Terry Murray,
21 Fleet CEO, and Agnes Bundy Scanlan, the managing
22 director of Fleet's Community Development
23 Department. And we have had several opportunities
24 to discuss the needs of the Latino community with
25 them and other banking officials. We have seen a
0164
1 steady improvement in the bank's investments to
2 support community housing development projects.
3 We have also targeted corporate and
4 foundation resources to support the work of
5 organizations serving our communities. Throughout
6 our partnership, this has increased to a level which
7 now approaches, we believe, an equitable
8 distribution of these funds to the growing Latino
9 community. Fleet has also created one of the most
10 flexible, affordable loan programs and has as a
11 result helped many Latino low-income families get
12 their dream of buying a home.
13 Fleet has also responded to our concerns
14 over the hiring of more Latinos in their structure,
15 and they have done so throughout their system
16 through recruitment and hiring. Based on their
17 commitment to neighborhood reinvestment and
18 investment in our projects and the corporate
19 responsibility which Fleet has demonstrated in
20 working`with NPRC over the last six years I
21 encourage the Federal Reserve Bank to approve the
22 merger between Fleet Group and BankBoston. Thank
23 you.
24 PRESIDING OFFICER SMITH: Thank you very
25 much. (Applause)
0165
1 MR. MOY: My name is Frank Moy, and I'm the
2 chairman of the Boston Chamber of Neighborhood
3 Commerce. The Boston Chamber of Neighborhood
4 Commerce was formed in 1991 during a very difficult
5 recession period by a group of small business owners
6 and representatives from every neighborhood business
7 district in Boston representing several thousand
8 neighborhood businesses. Recently the Boston
9 Chamber Neighborhood Commerce became an affiliate
10 member of the Greater Boston Chamber of Commerce.
11 The primary mission of the BCNC is to
12 enhance the vitality of Boston's neighborhood
13 commercial districts. The Boston Chamber
14 Neighborhood Commerce supports the Fleet-BankBoston
15 merger because both banks have New England roots and
16 have been active participants in promoting small
17 business lending and banking services. Fleet and
18 BankBoston provide financial and staff support to
19 the Boston Chamber Neighborhood Commerce.
20 Staff from Fleet and BankBoston have and
21 continue to serve on the BCNC Board of Directors and
22 have participated in numerous workshops on small
23 business lending procedures, including the 5 C's of
24 Credit, Small Business Administration Low Doc
25 Program, second look program if a loan is denied,
0166
1 and the Community Reinvestment Act. Fleet and
2 BankBoston have participated in business support
3 programs on marketing, public relations, community
4 and public review process, e-commerce, retail
5 security, One Stop Program at the Empowerment
6 Center, and small business management.
7 In closing, we support the Fleet and
8 BankBoston merger because both organizations have
9 demonstrated their commitment to Boston's small
10 business community during good and bad economic
11 times. Thank you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much.
14 MR. DICKERMAN: Hello. I'm Stephen
15 Dickerman, the executive director of Friends of New
16 England Holocaust Memorial. I've held this position
17 for 11 years. Since our earliest days it's been our
18 dream to build a memorial to the Holocaust on
19 Boston's Freedom Trail, and I am pleased to share
20 with you the legacy of community leadership that we
21 at the memorial have experienced with BankBoston.
22 While the idea of the memorial was
23 conceived by a group of survivors to the Holocaust
24 and encouraged by a small group of their supporters,
25 it could not have been realized without the
0167
1 leadership from Boston's corporate and philanthropic
2 community. I have witnessed BankBoston making such
3 a leadership happen.
4 In 1991, the head of the Boston
5 Redevelopment Authority invited business leaders to
6 learn more about the potential impact that Message
7 of Memory could have on this important American
8 site. It was at that meeting that the crucial
9 relationship between the Memorial and BankBoston
10 began.
11 BankBoston participated in that meeting and
12 responded to our plans and saw in it the opportunity
13 to remember the historical tragedies of European
14 Jews in a way that would speak to the universal
15 issues of danger of bigotry, intolerance, and racial
16 hatred. BankBoston began a relationship with the
17 Memorial providing us with financial resources as
18 well as a wide range of support. Most importantly,
19 BankBoston provided leadership to enlist other
20 institutions and individuals in support of the
21 project.
22 BankBoston's influence on our project has
23 been extraordinary. The bank has supported our
24 capital campaign in a wide range of special projects
25 that help bring universal lessons to young people
0168
1 and visitors from all backgrounds. I'm very proud
2 of the Memorial, its critical success, and its
3 ability to speak to hundreds of thousands of
4 visitors. Simply put, the Memorial could not have
5 been built and would not have sustained its
6 operations and extraordinary and educational
7 programs without BankBoston's remarkable leadership.
8 I also think the experience with the
9 Memorial told us a lot in support of a Boston-based
10 institution. BankBoston, Fleet, and all of our
11 corporate supporters were Boston based. I'm pleased
12 to speak in support of the merger.
13 PRESIDING OFFICER SMITH: Thank you very
14 much. (Applause)
15 We are ready for the next panel.
16 (A pause)
17 PRESIDING OFFICER SMITH: Panel Six will
18 start with the Reverend Sharpton.
19 REV. SHARPTON: I'm Reverend Al Sharpton,
20 President of National Action Network, and we have
21 members throughout the area that if this merger were
22 to go forward would cover much of that area. I come
23 as president of the Network with the vice chair,
24 Senator Ephraim Gonzalez, who heads the National
25 Coalition of Hispanic State Legislators, to express
0169
1 our unilateral concern and at this hearing objection
2 to the merger that is proposed today for several
3 reasons.
4 I think that first you must distinguish
5 between business policy and philanthropy. It is
6 very admirable that Fleet Bank gives away a lot of
7 money to certain charities. That has nothing to do
8 with its business policies and the policies that
9 will service or not service the community. You can
10 find I'm sure if you check in history slave masters
11 were good contributors to certain charities, but
12 their business was slavery. We're not here to talk
13 about their philanthropy; we're here to talk about
14 their policy, and their policy has left a lot
15 wanting.
16 The proposal that they give you, the CRA
17 proposal, the $14.6 billion, is just about what they
18 spend in Massachusetts alone. For you to approve a
19 merger where they would have more range, more states
20 for the same amount of money, in fact allows them to
21 reduce their commitment to borrowing and lending in
22 the community. They would argue because of certain
23 disvestments this is what figure they could best
24 come up with, yet with their divestments they have
25 an opportunity with the Boston Bank of Commerce to
0170
1 let a black bank that would service the communities
2 pick up some of those branches. They have not
3 chosen to make that arrangement.
4 So it seems that there is a situation here
5 where they want it all on their side and not on the
6 side of the community that needs development, that
7 needs fair borrowing and lending practices, that
8 needs policies that are fair for the people that the
9 federal government, and therefore the Federal
10 Reserve, are sworn to protect.
11 If they had made the effort to try and work
12 out some equation, certainly many of us would not
13 take that position. But clearly when you hear what
14 they have done with ACORN housing, when you hear the
15 problems that you have in mortgages and borrowing,
16 and when you hear their own proposal, which I think
17 falls far short of what is fair and equitable, we
18 have no choice but to appeal to you to block this
19 merger. We have no problem dealing with a Fleet
20 Bank, but we do have a problem dealing with being
21 fleeced by Fleet Bank. (Applause)
22 As they expand into other states, if this
23 merger is approved, clearly we have the right to be
24 concerned. The chairman, who the last panelist said
25 is such a nice guy, questioned why we would even
0171
1 want to deal with this hearing. Why would we be
2 here? He's coming in our house with a record from
3 allies that gives us a lot to be desired. It's like
4 me knocking on your door asking you "Why are you
5 answering it?" You answer it because you live
6 there. We live in New Jersey; we live in
7 Connecticut; we live in Massachusetts.
8 So, Mr. Chairman, all of us are not on your
9 payroll or your charity roll. Some of us don't want
10 a donation. We want fairness; we want equity; we
11 want parity. (Applause) We want to see loans to
12 those that seek mortgages and business loans that
13 are not at rates that are unbearable and not set up
14 with clauses that are unachievable. We want to see
15 an amount of money there that is representative of a
16 commitment toward development. If the Federal
17 Reserve passes this merger, where you have no real
18 commitment, with the dollar figures where they are
19 now, you have in effect already undone the purpose
20 of having CRA.
21 CRA is to have some redevelopment, not to
22 have bankers set their own bar, something they could
23 easily make, make all the profit they want and the
24 people be damned. And we would encourage you to
25 block this merger until a respectable proposal has
0172
1 been put forth on the divestment side, as I said,
2 with the Boston Bank of Commerce. And clearly they
3 should increase what they propose in the borrowing
4 and lending department, and their policies around
5 loans, and their policies around what they do with
6 their housing money.
7 I would hope that you will not ignore the
8 will of many people. Many say these hearings are
9 formality. I would hope that as we are on the brink
10 of a new millennium that people's wishes will not be
11 just listened to, patted on the head, and you go
12 forward with business as usual, because we in other
13 parts of New England will resist being policed by
14 any means necessary. Thank you. (Applause)
15 PRESIDING OFFICER SMITH: Ms. Yager, on
16 behalf of Mr. Lee.
17 MS. YAGER: Good afternoon. Matthew Lee,
18 the executive director of Inner City Press/
19 Community on the Move and Inner City Public Interest
20 Law Center was unable to attend today and asked me
21 to read his comments into is the record.
22 I see he is opposed to this
23 anti-competitive merger proposal. After each of its
24 previous mergers, Fleet has dramatically reduced
25 lending to low- and moderate-income neighborhoods.
0173
1 Fleet's lending record in New York reveals a bank
2 with a troubled history of discriminatory lending.
3 For example, in May 1996, Fleet settled
4 discrimination charges with the U.S. Department of
5 Justice that it systematically overcharged
6 minorities from its two New York City area mortgage
7 offices. Fleet's record has not improved. Fleet
8 acquired Shawmut in 1995 and NatWest in 1996. In
9 New York State in 1995, Fleet made 4,994 home
10 purchase loans, NatWest made 2,995 such loans, and
11 Shawmut before being taken over made 70 such loans,
12 for a three-institution total in New York State of
13 8,059.
14 In 1996, in New York State the combined
15 entities made only 4,300 such loans, and by 1997
16 this number had declined to 2,415 loans. The
17 combined Fleet's 1997 total was less than NatWest
18 alone in 1995. Particularly troubling is that
19 Fleet's lending volumes have declined even more to
20 minorities and low income and moderate income census
21 tracts in communities overall. The details are
22 included in the written testimony.
23 Fleet's combined entities home purchase
24 lending volume and LMI census tracts declined 76.6
25 percent between 1995 and 1997. An even steeper
0174
1 decline went to New York State communities overall.
2 Fleet's mergers have hurt entire communities. They
3 have disproportionately harmed low and moderate
4 income neighborhoods and communities of color as
5 well.
6 For example, in the New York city
7 metropolitan statistical area, in 1997, for home
8 improvement loans, Fleet Bank NA in New Jersey
9 denied 74 percent of applications from African-
10 Americans and Latinos versus only 44 percent
11 applications for whites.
12 This proposed merger would be
13 anti-competitive. Fleet proposes to acquire
14 BankBoston through consolidation of the four
15 previous competitors into a single institution. The
16 proposal should not be approved. Even since it has
17 been announced, it has triggered further
18 consolidation. For example, People's Heritage
19 Corporation from Maine has proposed acquiring Bank
20 North of Burlington, Vermont, and Citizens Bank has
21 proposed acquiring U.S. Trust, and in Connecticut
22 Websters has made a recent proposal.
23 Even where Fleet claims to be proposing a
24 clean sweep in its divestiture, it discloses in
25 footnotes that it would be retaining a number of
0175
1 Fleet's or BankBoston's operations. For example,
2 see Fleet's antitrust memo, Page 15, stating in a
3 footnote that, quote, "The parties proposed to
4 retain certain special industry customers in Boston
5 and other New England markets, some of which may
6 have revenues less than $100 million."
7 This is not a clean sweep proposal. It is
8 imperative that Fleet calculate and disclose the
9 amounts by which the proposed divestiture would be
10 reduced by the withdrawal and retention of deposits
11 associated with these retained lines of business.
12 Fleet would also gain an anti-competitive
13 share and market power in ATMs. The Providence
14 Journal on May 21st wrote, "After its takeover of
15 BankBoston, Fleet would control about 36 percent of
16 all ATMs operated by banks and credit unions in
17 Massachusetts up from 12 percent." This issue is
18 not addressed in Fleet's antitrust memo. The
19 comment period should not close until Fleet reveals
20 more of the nature of its divestiture proposal and
21 until Fleet completes the proposal by naming the
22 banks that would buy the assets it proposes to
23 divest.
24 His last comment is that he requests that
25 the -- he asserts that the community commitment is
0176
1 entirely inadequate and the details of that are in
2 the written testimony.
3 PRESIDING OFFICER SMITH: Thank you very
4 much. (Applause)
5 MR. MUHAMMAD: Greetings. My name is Abdul
6 Jabbar Muhammad, and I'm here on behalf of the
7 Nation of Islam under the leadership of the
8 Honorable Mr. Louis Farrakhan.
9 When Fleet merged with the Bank of New
10 England, we, the Nation of Islam, supported the move
11 based on a commitment to help the community, its
12 organizations, and its businesses. However, Fleet
13 did not honor this commitment. And the community,
14 its organizations, and businesses have paid the
15 price. We have seen documents that show unfair and
16 unethical lending practices by Fleet Bank. Are we
17 going to relive the mortgage scandal with this new
18 merger? Will we see our seniors losing homes
19 because of unethical lending practices?
20 The merger at issue with Fleet Bank and
21 Bank of Boston has successfully created a scenario
22 of infighting within the community. Your customers
23 are not sure what this merger will bring. A survey
24 conducted by Survey USA asked the following
25 question: What kind of service do you think
0177
1 customers of the new bank will receive? 44 percent
2 don't think the merger will have an impact on
3 service while 42 percent think things will get
4 worse.
5 The banking and insurance business is the
6 most lucrative business in this country. This
7 merger will serve your interests. Bigger is not
8 necessarily better. A nickel is bigger and weighs
9 more than a dime, but it is less in value. When
10 airlines merged we were told to expect better
11 service, and we received peanuts and half a
12 beverage. (Applause)
13 Hospitals merged with the vision of better
14 service and healthcare for minority communities.
15 Division has been lost. Minority communities have
16 not experienced better service or healthcare. Will
17 this merger bring more personalized service to the
18 community? We no longer have the word "trust"
19 within banking institutions, we need the word
20 "trust" reflected within the practices of banks,
21 your bank.
22 The only thing we have in our best interest
23 is the Community Reinvestment Act. The Nation of
24 Islam has a suggestion on how you could honor the
25 CRA. We want a letter of commitment to the
0178
1 community. You have an obligation to offer more
2 than lip service. The letter should detail what you
3 propose to do for minority communities.
4 How can you, Fleet Bank, assure us that
5 things will not get worse? William Sands wrote a
6 paper entitled "Proper Attitude is Key to Successful
7 Community Lending." He states the CRA was one of a
8 series of laws passed by Congress to address
9 problems of unequal access to credit. The CRA
10 emphasizes the continuing and affirmative obligation
11 of lending institutions to meet the deposit and
12 credit needs of the entire community, including low-
13 and moderate-income areas, consistent with safe and
14 sound lending practice.
15 What is your attitude towards minority
16 communities? How will you ensure that the spirit
17 and intent of the CRA be met? One way is for Fleet
18 to support the Boston Bank of Commerce. The Boston
19 Bank of Commerce understands our needs and is
20 committed to fostering economic and social
21 development.
22 Yes, Fleet should make it a project to aid
23 and support this community by aiding and supporting
24 the Boston Bank of Commerce. They're not your
25 competitor; they're the only African-American-owned
0179
1 bank and the only minority-owned community
2 development financial institution in New England.
3 It is the right and moral thing to do. It is good
4 business practice. In fact, it is right in line
5 with the spirit of serving the convenience and needs
6 of the community.
7 I don't know what this merger will bring to
8 Boston, do you? How will this merger, creating the
9 third largest lender in the nation, handle the
10 individual? The small businesses? The not-for-
11 profit businesses in minority communities?
12 I do know that the Boston Bank of Commerce
13 is in the best position to handle the needs within
14 minority communities. They have provided over 15
15 years of community development and support. They
16 have not lost sight of the individual. They have
17 not lost sight of the small businesses. They have
18 not lost sight of the not-for-profit businesses in
19 our communities. Support the community by
20 supporting the Boston Bank of Commerce. Anything
21 less than Fleet will leave us banking while black,
22 banking while brown. Thank you. (Applause)
23 PRESIDING OFFICER SMITH: Questions from
24 the panel?
25 MR. ALVAREZ: Reverend Sharpton and
0180
1 Honorable Muhammad, you both mentioned the Boston
2 Bank of Commerce. Do you know, has the Boston Bank
3 of Commerce made a bid for any of the branches in
4 the Fleet package?
5 REV. SHARPTON: It is my understanding that
6 they have made a bid. I understand that the
7 thinking was that they wanted in the divestment
8 phase of this merger a major bank to take over most
9 of it and some 10 to 15 percent would be left. I
10 think the Boston Bank of Commerce, if I'm not
11 mistaken, had only made a bid for like 18 branches
12 out of 280, which I think is clearly, as Minister
13 Muhammad said, not dealing with the competitiveness.
14 The fact that nothing has been made concrete there
15 shows to me an arrogance and an insensitivity on not
16 even trying to work with the community.
17 I don't think that's a reasonable proposal,
18 given the fact you're talking about 280 branches
19 will become available and the bid for the only black
20 bank in the region is only for about less than 10
21 percent of that.
22 MR. ALVAREZ: But as far as you know, a bid
23 has been made.
24 REV. SHARPTON: A bid has been made.
25 MR. ALVAREZ: Bids haven't yet been
0181
1 announced.
2 REV. SHARPTON: It might be while we're
3 here today.
4 MR. ALVAREZ: Yes.
5 PRESIDING OFFICER SMITH: If there are no
6 further questions, we thank you very much for coming
7 this morning and afternoon.
8 (A pause)
9 PRESIDING OFFICER SMITH: We are ready to
10 start with Panel Seven, and we have about five
11 different organizations with five minutes total
12 each.
13 So where we have Ms. Feingold and Mr.
14 Gornstein, is one of you speaking?
15 MS. FEINGOLD: Just one.
16 PRESIDING OFFICER SMITH: Thank you very
17 much.
18 MS. FEINGOLD: My name is Ellen Feingold,
19 and I'm president of Citizens' Housing and Planning
20 Association. Thank you for providing us with the
21 opportunity to testify today. I'm also here as the
22 developer and manager of a large nonprofit
23 organization that provides housing for very
24 low-income elderly and another that provides housing
25 for homeless elderly. I am on the ground as well as
0182
1 being representing a large organization.
2 CHAPA was established in 1967. It's a
3 nonprofit organization that advocates for the
4 production and preservation of affordable housing
5 for low-income people. Our membership of 1500 is
6 made up of a broad range of interests, including
7 housing providers and developers, tenants, advocacy
8 organizations, government officials, local planners,
9 lenders, and many others. We are one of the largest
10 and most diverse housing coalitions in the area.
11 The proposed merger between Fleet and
12 BankBoston is especially important to the affordable
13 housing community for three reasons:
14 Number one, to date we are facing an
15 enormous and growing housing crisis. Low- and
16 middle-income residents in New England are being
17 priced out of home ownership and rental markets in
18 record numbers.
19 Number two, government cutbacks at the
20 state and federal levels have meant that affordable
21 housing developers must rely on private financial
22 institutions like BankBoston and Fleet to a much
23 greater extent than ever before.
24 Third, in recent years the housing
25 community has worked closely with both Fleet and
0183
1 BankBoston to craft solutions to the housing
2 affordability problem. This merger provides an
3 important opportunity to build and expand on this
4 recent progress. But, on the other hand, without
5 certain specific lending commitments that will
6 directly benefit low and moderate income people,
7 this merger poses a real danger because community
8 investment could fall dramatically in the areas that
9 need it the most.
10 We take the banks' commitments to make one
11 plus one equal more than two as genuine, but there
12 need to be details behind that commitment. Since
13 the merger was announced, Fleet and BankBoston have
14 submitted a general proposal to commit $4 billion in
15 affordable housing mortgages and $2 billion in
16 community development lending over the next five
17 years. As part of your consideration of this
18 merger, the Federal Reserve should require that
19 Fleet and BankBoston do the following:
20 Number one, provide details, details on how
21 this overall commitment compares with the combined
22 lending of the two banks over the past three years
23 with a breakdown for each New England state. Their
24 proposed level of commitment can't be evaluated with
25 that information.
0184
1 Number two, provide specific programmatic
2 details for each lending area. For example, it's
3 not enough to say that a certain amount of money
4 will go towards rental housing development. The
5 proposal must specify what will be the terms, how
6 will it be achieved, what are the delivery systems,
7 and, most important, what income groups will be
8 served.
9 Third and finally, Fleet and BankBoston
10 should enter into a written agreement with the
11 appropriate housing and community development
12 organizations similar to previous CRA agreements
13 that both banks have entered into. It is absolutely
14 essential that a sound mechanism be developed to
15 ensure that these commitments will be upheld and
16 monitored, and the Federal Reserve must assure
17 continuing performance under these commitments.
18 In order for the banks to fulfill these
19 requirements, we ask that the Federal Reserve extend
20 its public comment period for an additional two
21 weeks after the banks submit a revised and more
22 detailed community investment proposal.
23 Now, CHAPA's particular focus is on
24 affordable housing, and we therefore would like to
25 see the following five priorities addressed as a
0185
1 condition of the merger:
2 Number one, Fleet and BankBoston should
3 expand their commitment to the Soft Second Mortgage
4 Program statewide. The Soft Second Program has been
5 one of the most effective programs for helping low-
6 income families become homeowners. A statewide
7 expansion is necessary.
8 Second, the banks should convert their
9 required Massachusetts Housing Partnership Fund
10 commitment to equity, similar to that which
11 BankBoston did during the merger between BankBoston
12 and BayBanks. While there are many sources of
13 permanent financing to build rental housing, it's
14 very difficult to obtain the equity so that
15 developers of low-income housing can provide more
16 affordable apartments.
17 Third, the merged bank should expand its
18 commitment to funding and sustaining home buyer
19 education and counseling throughout the region. As
20 banks move towards more flexible underwriting, it's
21 critical to support the network of homebuyer
22 counseling agencies for both pre-purchase, post-
23 purchase, and foreclosure prevention.
24 Four, the merged bank should continue its
25 membership in the Federal Home Loan Bank of Boston
0186
1 over the long term -- now, Fleet is a member now;
2 BankBoston is not -- to ensure access to the Federal
3 Home Loan Bank's affordable housing and community
4 investment programs.
5 Five, the combined bank should expand its
6 commitment to foundation giving. Many groups which
7 receive funds from both banks believe that they will
8 see reduced foundation funding as a result of this
9 merger. We heard in Panel Five many groups who are
10 supported by both banks. This kind of support must
11 continue at at least this level, and the Federal
12 Reserve needs to ensure that no reduction in
13 foundation-giving occurs.
14 We look forward to receiving more details
15 on the ways in which the merged bank will maintain
16 and expand its commitment to investing in low and
17 moderate income neighborhoods. Thank you very much.
18 I appreciate the opportunity to testify. (Applause)
19 PRESIDING OFFICER SMITH: You may stay
20 seated at the table. You just pull the mike close
21 to you.
22 MR. GUSCOTT: My name is Ken Guscott, I am
23 president of the Minority Developers Association of
24 Boston. This is an association that consists of 35
25 minority builders, contractors, and developers, and
0187
1 we're the ones that supply and can find minority
2 people to build the houses, whether they're low
3 income or commercial houses, within the Greater
4 Boston area. And that's what I'm going to speak
5 about today.
6 We thank you for this public opportunity to
7 express our views on the impact of the proposed
8 merger of BankBoston and Fleet Bank upon our
9 community's minority and women-owned businesses.
10 As you know, small businesses employ over
11 53 percent of this nation's work force, and they
12 produce over half of the nation's gross domestic
13 product, and they provide virtually all of the new
14 Net jobs added to the economy.
15 Financial institutions have an obligation
16 to provide vital financial services to the
17 communities which they are located in. In today's
18 growing economy, we have an opportunity to grow
19 productive, stable businesses, particularly within
20 the minority-owned business sector, that will
21 continue to provide job opportunities for community
22 residents.
23 Consolidation within the banking and real
24 estate industries makes access to capital for small
25 and midsized real estate companies difficult.
0188
1 Smaller sized and mixed-use projects cannot be
2 financed through the public capital markets and
3 often rely on federal, state, and local programs
4 combined with creative, flexible, and innovative
5 bank financing in order to be successfully
6 completed.
7 Companies and customers located in inner-
8 city neighborhoods know that the untapped market
9 potential in their neighborhoods is enormous. The
10 challenges for these businesses are also great.
11 Having a relationship with a bank which knows the
12 market and is experienced with the technical aspects
13 of public/private partnership financing enables
14 companies to spend less time trying to find capital
15 and more time growing their business.
16 BankBoston Development Corporation LLC, a
17 part of the BankBoston Community Banking Group, has
18 pioneered in meeting the financial needs of the
19 minority and women-owned business enterprises by
20 providing just such vital financial service: equity
21 investments that grow minority businesses.
22 As part of the regulatory and community
23 review and approval of the proposed merger of
24 BankBoston and Fleet Bank, it is vital that an
25 equity investment fund, consisting initially of $500
0189
1 million, be dedicated to continue providing
2 substantial equity investments in viable minority
3 and women-owned businesses.
4 I bring to your attention that yesterday
5 the President of the United States and the Chairman
6 of the Bank of America pledged that they would put
7 $500 to $600 million to serve these communities
8 because it's good business.
9 The emerging market, minority, and
10 women-owned businesses is the fastest-growing
11 segment of the business community. These businesses
12 are also a tremendous growing business opportunity
13 for the new bank. By building upon the successful
14 track record of BankBoston Development Corporation
15 and by expanding its capacity for direct equity
16 investment in minority and women-owned businesses,
17 this new financial institution will make a great and
18 lasting contribution to our community.
19 With substantial financial equity
20 investment focused on our community's MBE and WBE
21 businesses, the new bank will empower the
22 productive, economic capacity of our community's
23 businesses. The hard work, long hours, and personal
24 sacrifices of the owners of these MBE/WBE
25 businesses, properly capitalized, will then generate
0190
1 new jobs, security for the working families of our
2 community, and successful role models for our
3 children.
4 I thank you for the opportunity to appear
5 before you. (Applause)
6 PRESIDING OFFICER SMITH: Thank you very
7 much. Ms. Maker, speaking on behalf of Rashmi
8 Rangan and yourself?
9 MS. MAKER: Right. I'm going to be myself.
10 I have overheads. Is this on now?
11 I am Ruhi Maker, and I'm coconvenor of the
12 Greater Rochester Community Reinvestment Coalition
13 and a senior attorney with the Public Interest Law
14 Office of Rochester.
15 I am a data freak, I have to confess to
16 that, and therefore I will spare you some of the
17 anecdotes and share some data with you. We've been
18 analyzing data since 1993. I just released my fifth
19 lending analysis which is included as part of these
20 comments. And I think really the data says many of
21 the points I want to make. I'll turn this on and
22 hope you people can see.
23 Essentially -- and this is included in my
24 comments -- essentially what's happened with Fleet
25 in the last three years and really in the last five
0191
1 years is lending has declined. You know, in the MSA
2 they're down 20 percent. In the city they're down
3 53 percent. Black/Hispanic households they're down
4 66 percent. They only made 41 loans in 1997, and
5 the trend continues.
6 Earlier there was an indication that, well,
7 of course we all know that market share has changed
8 really dramatically in the last five years, much of
9 my report speaks to that, and we go into great
10 detail as to who is doing the lending now.
11 Unfortunately, some of that lending has gone to some
12 primes.
13 But we need to put the context of Fleet
14 along with their peers, and I think that's extremely
15 important. And I'm going to do that for a minute
16 and show you what some of the other banks have done,
17 because we have been working very closely with a
18 number of other banks, and we have commitments from
19 them and, for one reason or another, they have
20 managed to do a better job than Fleet. And this is
21 just comparing the top eight banks, and I'll show
22 you a market share in a minute.
23 When you look at 3 percent of Fleet's total
24 loans were to Black/Hispanic households, when you
25 compare their total MSA lending, whereas looking at
0192
1 their competitors, the top eight area banks, 7
2 percent was to Black and Hispanic households.
3 Going on, 26 percent low-moderate income
4 households in the MSA, that's Fleet, everyone else,
5 their peers were doing better, 30 percent. It
6 continues. I think particularly the minority census
7 tracts, 1 percent of Rochester MSA loans Fleet were
8 minority tracts compared with 4 percent of the top
9 eight area banks.
10 I know this is a lot of data, I asked for
11 20 minutes, but I'll try and condense it into five.
12 Bear with me. And I think this little market share
13 chart, it really is all in there, so you don't have
14 to try and absorb it all. I don't know how well you
15 can see, but if you look down Fleet's column, and if
16 you look at the middle column where it says "Market
17 Share," 5 percent of the market share in Rochester,
18 and the market share in all its other communities,
19 communities we care about, the city, Black/Hispanic,
20 low-mod household, is less than its MSA market
21 share. And that is only true for Fleet. All of the
22 other competitors do at least as well in the
23 underserved communities as they do in the MSA, and
24 Fleet is the only bank that shows that.
25 To lighten things up a little bit and show
0193
1 you a little color map of small business lending --
2 I'll trying to wake you guys up since it's
3 lunchtime, and I know I've been up since 5:30.
4 There we go. This I think -- I'll show you the rest
5 of the map.
6 As you know, small business loans, we don't
7 know which census tracts, the data isn't available
8 by census tract. However, we do know where a bank
9 made no loan at all. And the little blue map in the
10 corner shows the minority neighborhoods, and the
11 little Fleet map up there shows that they had
12 absolutely no small business loans in predominant
13 areas of the City of Rochester and a large
14 correlation with the minority.
15 And their small business lending, by the
16 way, it is just about the only bank that managed to
17 decrease its small business lending and lost to some
18 of its competitors, who I know I've been critical of
19 in the past. If you look at Marine and M&T, a
20 pretty good spread. Fleet's small business lending
21 goes down. I know a colleague of mine -- well, a
22 colleague of somebody's earlier spoke about how well
23 they do in Rochester, New York.
24 I had a coalition member come and tell me
25 when I was here in Boston last fall talking to some
0194
1 of the CRA corporate officers, and we were trying to
2 get, you know, some investments, and essentially I
3 was told, "Well, Fleet doesn't have a CRA problem in
4 New York, why should we do anything for you?" And
5 I'm here to say, "Hey, guys. Fleet does have a CRA
6 program in New York, a big problem."
7 This is my eighth merger in about five
8 years. I testified last year at City Group. And
9 essentially City Group went through -- maybe I'm
10 being cynical, I assume this will go through, but
11 what can you do?
12 What you can do, what we have found works
13 is, when you have written commitments, you can
14 condition this merger on specific lending
15 commitments by region. So what are they going to do
16 in Rochester? What are they going to do in New
17 York, not just Massachusetts? Much was said of New
18 England and we care about New York. (Applause) So
19 I conclude now.
20 PRESIDING OFFICER SMITH: Ms. Yager, will
21 you be speaking?
22 MS. MAKER: I'm doing Rashmi's.
23 So now let's pretend we're in sci-fi, I
24 don't know, whatever, 21st century, and I'm now
25 Rashmi Rangan, into a quick switch. Actually, she
0195
1 is the same size as me in brown, I think, slightly
2 different accent.
3 My name is Rashmi Rangan, I'm the executive
4 director of the Delaware Community Reinvestment
5 Action Council, or DCRAC. For over 12 years our
6 organization has advocated for fair and equal access
7 to credit and capital for the underserved
8 Delawareans.
9 We are opposed to the merger proposal of
10 Fleet Financial Group (Fleet) and BankBoston Corp.
11 (BankBoston). This application should be denied.
12 The merger proposal does not serve the convenience
13 and needs of the community, nor does the merger
14 proposal have a positive market impact.
15 The Federal Reserve cannot approve any
16 proposal under Section 3 of the Bank Holding Company
17 Act which would substantially lessen competition in
18 any banking market, unless the anti-competitive
19 effects are clearly outweighed in the public
20 interest by the convenience and needs of the
21 community. This propose merged merger is
22 anti-competitive. Public convenience and needs are
23 not served through this merger. The Federal Reserve
24 Board should deny this application. By reference,
25 DCRAC introduces the June 6, 1999, comments of Inner
0196
1 City Press and its analysis of the anti-competitive
2 effects of this merger.
3 Again, DCRAC submits, by reference, ICP's
4 analysis on the same Fleet's Troubling Fair Lending
5 Record Calls for Denial. Fleet acquired Shawmut in
6 1995, and NatWest in 1996. Fleet's combined
7 entities' lending volume declined 70 percent between
8 '95 and '97. The decline is greater in lending to
9 minorities and in LMI census tracts. Fleet's past
10 mergers have not only hurt communities, but an
11 adverse factor under the CRA, they have
12 disproportionately harmed low and moderate income
13 communities.
14 Fleet's Predatory Lending Abuses Call for a
15 Denial. In May 1996, Fleet settled discrimination
16 charges with the U.S. Department of Justice, charges
17 that it systematically overcharged minorities from
18 its two New York City area mortgage offices. In
19 1999, Fleet continues abusive lending practices.
20 By reference I enter the Boston Globe
21 article "Easy Loan Program Nothing but a Headache
22 for Some Consumers" by Patricia Wen and Bruce Mohl,
23 June 6, 1999. The article reports that Fleet's
24 "fast-loan check" program delivered an easy-to-cash
25 check of $10,000 to a 74-year-old mentally impaired
0197
1 man whose sole residence and mailing address in the
2 past 18 years was a veterans' hospital in Bedford.
3 Fleet sees no shame in it.
4 Fleet's Poor Record of Serving the
5 Convenience and Needs of the Community calls for a
6 Denial. A bank which treats its long-term customers
7 the way Fleet treats its elderly says much about the
8 bank's efforts at not meeting the convenience and
9 needs of its community. By reference, I enter the
10 Providence Journal article of May 29, 1999, "A
11 Really Big Bank Leaves Little Room for the Small
12 Stuff," by Bob Kerr, who reports that the elderly
13 customer, slapped with fines for insufficient funds,
14 was told he could get $25 back, but only if he
15 purchased overdraft protection for $24. Then he
16 "was told he could get $37.50 back, but only if he
17 purchased overdraft protection and signed up for
18 direct deposit of Social Security checks."
19 Fleet in Delaware. It has been our
20 practice to approach Delaware's non-profit status
21 providing community such small business lenders and
22 counselors and home ownership counseling agencies to
23 learn about a bank's direct involvement in our
24 community. Consistently, each agency maintained
25 with Fleet's acquisition of NatWest in 1996, Fleet
0198
1 has done nothing in Delaware. They do not even have
2 a CRA officer? Vindicating charges of Fleet's bad
3 performance after each of its past acquisitions.
4 Fleet's HMDA Analysis for Delaware. The
5 following Fleet entities conducted mortgage lending
6 business: Fleet Funding Corp. and Fleet Home Equity
7 USA. Between the two, they received 63 applications
8 for mortgage, home improvement, and refinance loans.
9 Fleet did not collect data by race for 40
10 of these applications, or 63.4. This is a violation
11 of the Home Mortgage Disclosure Act (HMDA). HMDA
12 was enacted with the goal of assessing who is and
13 who is not having access to the credit system. By
14 eliminating fully 64 percent of data from review,
15 Fleet violates the intent and spirit of the law.
16 Fleet's approval rate for whites was 65
17 percent compared with 50 percent for African
18 Americans. Fleet's denial rate for whites was 23
19 percent compared with 25 percent for African
20 Americans. Fleet received 18 applications from
21 white applicants and three from African Americans.
22 Relative to applicant incomes, from
23 applicants with median incomes below 50 percent,
24 Fleet received two applications and denied both, a
25 denial rate of 100 percent. From applicants with
0199
1 median incomes 50 to 79 percent, there's a little
2 more, they basically conclude, you know, it says
3 what we've been saying, that there's a problem, and
4 let's try and do something about it. Thank you.
5 PRESIDING OFFICER SMITH: Fine. We'll have
6 the complete statement. Ms. Wallace.
7 MS. WALLACE: Good morning. My name is
8 Joan Wallace-Benjamin, and I am the president and
9 CEO of the Urban League of Eastern Massachusetts.
10 The Urban League of Eastern Massachusetts an
11 82-year-old civil rights, direct service, and
12 advocacy organization in the City of Boston. We are
13 part of a large national organization of 114 Urban
14 League affiliates across the country.
15 On behalf of the Urban League and the
16 communities we serve, I am here to express our
17 concerns about and make recommendations about the
18 proposed merger and the accompanying bank branch
19 divestiture. I am also here to speak to Fleet
20 Boston's proposed Community Investment Plan as well
21 as its likely negative impact, if care is not taken,
22 on minority, low and moderate income people, small
23 businesses, and community development programs.
24 Before I begin my comments, I would like to
25 take a moment to thank you for granting me this
0200
1 opportunity to testify before you.
2 The proposed merger is a clear example that
3 "the big are getting bigger." Currently Fleet and
4 BankBoston are the number one and number two largest
5 banks in New England. If they merge, the newly
6 combined Fleet-Boston Bank will not only be the
7 dominant lender in the New England region, it will
8 be the eighth largest bank in the United States. In
9 other words, Fleet Boston is about to become a
10 megabank.
11 As we enter the new millennium, banks
12 should be expanding access to credit/capital and
13 affordable investment opportunities to minorities
14 and women and in low- and moderate-income
15 communities. We are not asking Fleet-Boston to do
16 this alone. We are asking, however, as a leading
17 lending institution and increasingly powerful bank
18 that it do its reasonable and fair share. This
19 includes, at the very least, maintaining its
20 premerger lending level. Such an institution would
21 have a widely disseminated community investment
22 strategy, with accountability features built in,
23 that incorporates specific written standards to
24 document and measure progress and success.
25 Under the circumstances, Fleet-Boston's
0201
1 proposed community commitment to set aside $14.6
2 billion over five years for low-income borrowers,
3 small businesses, and community development programs
4 is woefully inadequate. No community investment
5 plan with measurable and verifiable indices of
6 progress and success has been disseminated for
7 review and/or comment.
8 $14.6 billion sounds like a lot of money;
9 however, a closer look clearly demonstrates that it
10 is not so much. In fact, this amount is
11 significantly less than Fleet Bank and BankBoston's
12 premerger combined lending in the small business,
13 affordable housing/mortgages to low and moderate
14 income borrowers, and the community development
15 investment categories.
16 More specifically, the analysis of
17 Fleet-Boston's proposed commitments regarding
18 Fleet's and BankBoston's current lending levels by
19 Inner City Press, for example -- and that analysis
20 was presented by Inner City press to the Federal
21 Reserve as part of its June 7th protest -- using
22 Fleet's proposed methodology shows large shortfalls
23 in the aforementioned small business, affordable
24 housing/mortgages to low- and moderate-income
25 borrowers, and the community development lending/
0202
1 investment categories.
2 Rather than creating a lending shortfall,
3 we believe that, at the very least, the overall
4 volume of business currently done by the banks
5 should also be maintained after the merger.
6 The banks do business in eight states. The
7 Community Investment Plan, as currently designed, is
8 to be dispersed in those states. The fairness or
9 the unfairness of the proposed set aside cannot be
10 adequately judged because the banks have failed to
11 date to provide sufficient or detailed information
12 as to how they came up with this $14.6 billion
13 figure or how it would be dispersed among or between
14 the eight states in which it will operate. Simple
15 mathematical averaging, however, demonstrates that
16 $14.6 billion spread over six categories: small
17 business lending; affordable housing/mortgages to
18 low- and moderate-income borrowers; community
19 development lending/investment; community lending in
20 LMI areas; equity investments; and technical
21 assistance and support, divided by eight over five
22 years will not go very far.
23 On the issue of the 250-bank branch
24 divestiture, we are opposed to one or more large
25 banks being allowed to purchase all of the divested
0203
1 bank branches. Fair competition and community
2 service concerns demand that small to midsized
3 community and minority banks should be allowed to
4 purchase the divested branches. In fact, we
5 strongly suggest that, as a minority-owned and
6 -managed community bank in the City of Boston, the
7 only bank that is a Community Development Financial
8 Institution (CFDI) in New England, the Boston Bank
9 of Commerce receive a sufficient base of branches to
10 secure its position as a primary lender and a major
11 minority business.
12 No divestiture of a bank branch in a
13 low-income or minority community should be made to a
14 bank that does not intend to keep the bank branches'
15 doors open. People who live or work in these
16 communities should not have to travel long distances
17 or be forced to go into unfamiliar or unwelcoming
18 communities. We need banks that will aggressively
19 market their products in low- and moderate-income
20 minority communities. This reality is compounded by
21 the fact that past and present patterns of
22 discrimination have created an environment where
23 members of these communities have not been well
24 served. We need to ensure that women, low- and
25 moderate-income people are not left post-merger with
0204
1 less access to fulfill individual and community
2 specialized banking needs.
3 In our view, in spite of the fact that
4 Fleet-BankBoston representatives have indicated
5 their CEO's goal of having this new "big"
6 divestiture buyer pick up the 20 percent share of
7 community investment obligations that Fleet Boston
8 plans to relinquish, we want to ensure that this
9 buyer is obligated to meet CRA goals. We know that
10 the Fleet-Boston divestiture plan is not altruistic.
11 It is being done to make the bank more profitable
12 and to increase shareholder and senior officer
13 wealth.
14 Therefore, as stated earlier, they must as
15 a combined entity maintain the investment level each
16 bank has currently achieved. Knowing that they will
17 be successful, as their asset size grows, a
18 proportionate share of those increases must be
19 committed to the community into the future and make
20 achieving these goals a part of their CRA rating.
21 PRESIDING OFFICER SMITH: Thank you very
22 much.
23 MS. WALLACE: We hope you carefully
24 consider these recommendations. Thank you.
25 PRESIDING OFFICER SMITH: Thank you very
0205
1 much. (Applause)
2 MS. YAGER: My name is Martha Yager, I am
3 program coordinator for the Granite State Community
4 Reinvestment Association in New Hampshire, which is
5 a project of the New Hampshire program American
6 Friends Services Committee. Appearing with me is
7 Arnold Albert, chair of GSCRA.
8 GSCRA was formed six years ago in response
9 to the Shawmut and Dartmouth merger. Our mission is
10 to assist local community groups, especially low
11 income and minority groups, in assessing local and
12 credit service needs and to promote public
13 involvement to influence the policies and practices
14 of financial institutions that are practicing in New
15 Hampshire. The association includes religious
16 groups, civil rights, and social justice advocacy
17 organizations and is staffed by the American Friends
18 Services Committee.
19 The Fleet-BankBoston merger does not serve
20 the convenience and needs of the communities of New
21 Hampshire and poses significant potential loss of
22 lending and services. In April we met with Fleet
23 and BankBoston community development teams. We
24 followed that with a letter reiterating the need for
25 the bank to make specific commitments to lending for
0206
1 affordable housing, small business, and community
2 development. We also asked for an explanation of
3 the unusually high denial rates by Fleet Bank in its
4 mortgage lending. We have had no response to these
5 matters from Fleet other than form letters saying
6 that it will make no local commitments.
7 Community development lending does not
8 happen easily at Fleet. The bank prefers large
9 deals with big customers, cookie-utter loans that
10 require little or no human interaction, and
11 guaranteed loan programs. Fleet's highly
12 centralized structure makes it a difficult partner
13 in putting together deals. This is not behavior
14 that lends itself to building community trust that
15 the bank will create a functional community
16 development lending strategy. Quite the contrary.
17 This lack of performance has been documented by
18 federal regulators in the steadily decreasing CRA
19 ratings throughout the Fleet system outside of
20 Massachusetts.
21 One plus one was to equal at least two.
22 The nation market area has paid a high price for
23 bank consolidation. We have documented dramatic
24 decline in mortgage lending in this area in other
25 documents and will not repeat that information here.
0207
1 Since banks are the source of many of the loan
2 products designed for lower-income borrowers, this
3 decline has been particularly punishing for low-
4 income people wanting to buy their own home.
5 Community groups across the region have
6 harped on the theme of one plus one is at least
7 equal to two, meaning simple arithmetic, in loan
8 volumes for affordable housing, community
9 development, small business lending, and charitable
10 giving. And yet Fleet doesn't get it. In a letter
11 dated June 8th over the signature of Agnes Bundy
12 Scanlan and Gail Snowden, the bank says that they
13 understand, quote, that "one plus one equals two
14 means retaining the best of both institutions and
15 improving on them."
16 No. That's not what we mean. We are
17 talking simple arithmetic as well as programs.
18 Since Fleet's mortgage lending is below its market
19 share relative to other banks in the area, one plus
20 one is an absolute minimum. Please see our
21 correspondence from the Federal Reserve for those
22 details.
23 MR. ALBERT: One of the problems with this
24 merger the way it's been handled has been the
25 divestiture aspect. You've heard today references
0208
1 to there being three states from which Fleet will
2 have to divest. Actually there are four. The
3 fourth state is New Hampshire. New Hampshire is a
4 separate state. It has its own unique tax system,
5 different levels of state support for affordable
6 housing and economic development, different local
7 economic profile and, for better or worse, its own
8 political climate.
9 Now, Terry Murray when he started out this
10 morning, he said something, I don't have the exact
11 quote, but I believe he said he wants children and
12 grandchildren to have local institutions. And he
13 said that so many of our nation's cities have lost
14 that. He talked about the need for a hometown bank.
15 Well, in Nashua, as Martha has mentioned, there is
16 no longer such a thing as the hometown bank. The
17 hometown bank, NFS, was lost to BayBanks, which was
18 lost to BankBoston. Indian Head became part of
19 Fleet.
20 From the beginning of this process, public
21 statements have indicated that the Massachusetts
22 divestiture would go to a single large bidder in the
23 effort to create a strong competitor for Fleet in
24 the Boston area. The problem with this is that New
25 Hampshire in need of small banks in this affected
0209
1 market was listed as part of the Massachusetts sale.
2 When it began to appear that small banks could apply
3 in the bidding process, there was nowhere near
4 enough time for small banks to put together a bid.
5 Small banks don't have a mergers department that's
6 doing this all the time.
7 The complete disregard for the market needs
8 of an entire metropolitan area is unacceptable. If
9 this application is to proceed toward approval, we
10 request that the bidding process be reopened for 90
11 days allowing small banks to bid on individual
12 branches. Governor Jean Shaheen and the New
13 Hampshire Banking Commissioner will be making a
14 similar request which you will receive by letter
15 today.
16 There are a host of reasons why this merger
17 should not be approved. It's a classic case of
18 business done solely for the benefit of the
19 stockholders at the expense of the rest of the
20 stakeholders. It is anti-competitive even with the
21 divestiture. A bank with a steadily declining CRA
22 record is buying a bank that does a better job of
23 listening to and responding to community credit and
24 service needs. That performance should not be
25 rewarded. A bank that has redlined rural markets,
0210
1 as was the case with Fleet in New Hampshire, should
2 not be rewarded with its next merger request.
3 There is no specific plan for how the bank
4 will meet community development needs addressing the
5 needs of different markets. Given the dismal record
6 of decreased lending following other mergers
7 involving these banks, simplistic plans are simply
8 not enough. We urge the Board of Governors to deny
9 this application. Thank you. (Applause)
10 PRESIDING OFFICER SMITH: Thank you very
11 much.
12 Please be sure your statements have been
13 submitted for the record. And do we have any
14 questions?
15 MS. BROWNE: I guess I have a question.
16 Perhaps several of the panelists might want to
17 respond. The attorneys general from Massachusetts
18 and Connecticut made the case that they were very
19 eager to see a large player enter the market because
20 of the concerns of middle market businesses. Yet
21 several of you emphasize the importance of smaller
22 banks having a role here. Are you concerned about
23 the entry of a large player? You would like to see
24 small entities, smaller banks as well, or perhaps
25 you could clarify? Is this a conflict, or is it you
0211
1 would just like to see an opportunity for smaller
2 banks as well? Or do you feel the middle market
3 issue is not a real one?
4 MR. GUSCOTT: I'd be glad to take a stab at
5 that question. We have met with the Attorney
6 General and discussed his point of view. And as we
7 explained to the Attorney General of Massachusetts,
8 you have an emerging local market of MBEs and WBEs,
9 minorities and women, and it takes a special type of
10 structure to deal with them. You have to be very
11 sensitive to what their needs are. And it's our
12 feeling that you should have a local smaller bank
13 that understands the community that they're in to
14 provide services to this need -- for this group of
15 people.
16 That's why -- he understood what we
17 requested. But that's our reason why we wanted to
18 see not just one big bank but some local banks
19 involved in this, to better service the community.
20 MS. WALLACE: We made special reference to
21 the Boston Bank of Commerce, because we believe
22 this is an opportunity to build and strengthen a
23 historically owned, African-American-owned
24 and -operated financial institution. When you do
25 that, like you do that with other minorities/small
0212
1 business, you build the security and stability of
2 the community, as well as the customer service
3 affinity that a bank like BBOC would have.
4 And so I think that if there were a large
5 player, which would not be our preference, there are
6 some real preconditions that must exist in the way
7 they interact with the community in order for that
8 to be possible. But our preference would be that it
9 would be small and community-based financial
10 institutions.
11 MS. YAGER: The New Hampshire situation is
12 a little bit different. In this particular market
13 area it has proven the theory wrong. When
14 interstate banking was being passed about five years
15 ago, there was almost a mantra, there will always be
16 small community banks around. Well, in this area
17 there are no small community banks remaining. There
18 are none serving an area of over 150,000 people.
19 That's a very different situation than you have in
20 Massachusetts. There are community banks around in
21 many of the towns there. We have a need to have
22 some of these branches broken out and sold to the
23 very small little banks that are in the area that
24 could move into that market, if given the amount of
25 time they need to put a bid together.
0213
1 PRESIDING OFFICER SMITH: Thank you very
2 much for coming.
3 MR. MARKS: I wonder if there are others
4 who oppose this merger and if you'd be willing to
5 stand up at this time in the room. (People stand)
6 PRESIDING OFFICER SMITH: We're going to
7 start with Mr. Anderson.
8 MR. MARKS: We would like to start only
9 because there have been a lot of people waiting here
10 for the half hour.
11 PRESIDING OFFICER SMITH: That will be
12 fine, Mr. Marks. We'll start. And we have a total
13 of 10 minutes for Mr. Marks's speakers total, 10
14 minutes among the three people who I understand will
15 be speaking. So you may start.
16 MR. MARKS: We are going to translate what
17 we're saying into Spanish.
18 My name is Bruce Marks, I am the executive
19 director of the Neighborhood Assistance Corporation
20 of America. (Remarks translated into Spanish)
21 And with me are some of the homeowners and
22 some of the people who are in the process who have
23 taken advantage of the best mortgage product in the
24 country. Because what was happening, over five
25 years ago, we said that people work hard, people
0214
1 here work hard. It's tough to save. People should
2 be able to buy with no downpayment with no closing
3 costs.
4 What I would like to start off with is to
5 have Reverend Hagler, who is the development
6 director of NATCA, he is going to say a few words,
7 and then we're going to make some other comments
8 about Fleet's acquisition of the Bank of Boston.
9 REV. HAGLER: I am Reverend Grayland Scott
10 Hagler. And I want to just start off by saying,
11 like was said, in 1991 Fleet was ripping off the
12 poor and elderly communities, stealing homes, and
13 destroying neighbors. And every single soul in the
14 communities knew this to be true, and yet, and yet,
15 basically the Federal Reserve shirked in their
16 duties and disregarded the law and expeditiously
17 approved Fleet's acquisition of the Bank of New
18 England. And NATCA had to spend the next four years
19 doing the job which should have been done here,
20 monitoring Fleet and holding it accountable to its
21 predatory and discriminatory lending practices.
22 In 1994 it was the Neighborhood Assistance
23 Corporation of America, and unfortunately not the
24 Federal Reserve, that paved the way for the new and
25 innovative mortgage products that have helped to
0215
1 create thousands of new homeowners in previously
2 destabilized communities and therefore is a major
3 participant in revitalizing inner cities like Boston
4 and Lawrence, Massachusetts. Fleet's community
5 initiatives moved from an institution which had a
6 total disregard for low- and moderate-income
7 communities to one with a satisfactory lending
8 record.
9 Now we have before us the Fleet acquisition
10 of Bank of Boston. We are at the crossroads again.
11 On one hand, we have Fleet, with a better community
12 lending record than it had five years ago, only
13 because of community pressure, and the Bank of
14 Boston, with a much better institutionalized
15 community lending program. But the differences,
16 they are very significant.
17 Fleet categorizes its branches as tier one,
18 two, or three. The tier three branches are the
19 least staffed and with the fewest resources. The
20 Fleet branch, for example, on Gallivan Boulevard
21 with $40 million in assets has four staff people.
22 It used to have nine when it was a Shawmut branch.
23 A similarly sized branch of U.S. Trust also located
24 in Dorchester has nine staff members.
25 Why is it that the majority of the tier
0216
1 three branches are in low- and moderate-income
2 communities serving a primarily of color base?
3 Isn't this discriminatory on the surface? Surely
4 when you look at the numbers, it is.
5 Fleet still sees community lending as a
6 necessary evil. This is what is reflected in the
7 current community proposals. They have made the
8 absolute minimum commitment. They have taken each
9 bank's community lending commitment, downsized it,
10 and combined the two. This does not demonstrate a
11 genuine commitment to community lending, and we
12 cannot afford, and you cannot afford, to allow Fleet
13 to backslide into their previous posture of over
14 five years ago.
15 The Federal Reserve must not sit back and
16 ignore its obligations in this case and its
17 obligations under the law. Surely the Neighborhood
18 Assistance Corporation of America will not sit back
19 and allow Fleet to backslide. And the Federal
20 Reserve cannot do anything less than this. It must
21 hold them accountable, it must hold their feet to
22 the fire, and as Reverend Al Sharpton said, "Don't
23 let Fleet fleece the community." (Remarks
24 translated into Spanish)
25 MR. MARKS: Let me add a few more comments.
0217
1 That we're not just concerned about Fleet's low- and
2 moderate-income community lending. Fleet is loved
3 by Wall Street. The stockholders, the investors
4 love Fleet because of the low cost of doing
5 business. But the consequence of that is some of
6 the worst services of any lending institution in the
7 country.
8 So what we've done is we've taken the name
9 and address and gotten the information on every
10 customer within New England, within Rhode Island,
11 Massachusetts, Connecticut, who has gotten a
12 mortgage from Fleet, from '94 forward, over 74,000
13 people. And we commit to the record the names of
14 the 74,000 people, names and addresses of those
15 people, and expect that to be put into the
16 Congressional record -- into the record.
17 Those 74,000 people are going to receive a
18 Fleet customer service questionnaire to ask what
19 type of business they've done with Fleet. How would
20 they rate their services with Fleet? Where one is
21 excellent; two, good; three, satisfactory; four,
22 poor; or five, very poor; or six, not applicable.
23 We constantly, because we've been known to
24 have some issues with Fleet, get calls from people
25 who are fed up with doing business with Fleet. And
0218
1 those people come from throughout New England. They
2 cross geographic/racial/income barriers. It seems
3 like everybody hates working with Fleet. But maybe
4 that's just anecdotal, but we need a comprehensive
5 survey. So we want to know from people, and we want
6 to know from other people who bank at the branches
7 who might not have a mortgage, what they think of
8 Fleet.
9 So we're requesting that the Federal
10 Reserve open up the process, to keep it open, to
11 take those 74,000 names, so that they can submit
12 their comments, so you're hearing more than just
13 from the activists, from the politicians, from the
14 union leaders, you're hearing from people who have
15 an everyday experience with Fleet. So you can judge
16 whether Fleet, as the feudal landlord, because
17 they're going to be the one institution within New
18 England, whether they're going to be the feudal
19 landlord that's going to be held accountable or the
20 feudal landlord that's going to stamp on the
21 customer needs for everybody.
22 So we think that this is fundamental.
23 These are the names. We would like that to be put
24 into the record. (Documents submitted to Board)
25 (Remarks translated into Spanish)
0219
1 MR. MARKS: And now as part of the survey,
2 we are going to ask people to give us the authority,
3 to give NATCA the authority, to submit all their
4 complaints to the appropriate bank -- to the
5 appropriate bank regulators. So as an ex-Federal
6 Reserve employee, I understand I had to spend, and a
7 lot of the Federal Reserve staff has to spend, a lot
8 of time investigating every one of the complaints
9 that someone sends in.
10 So we hope and expect that you're going to
11 take all those 74,000 names there and do your own
12 output, but we're doing ours just to make sure you
13 don't do the same thing you did in 1991. When Fleet
14 Finance was documented as being a predatory loan-
15 sharking operation, you ignored that, and you
16 approved Fleet's acquisition of the Bank of New
17 England, even though they used blood money to do
18 that, because 55 percent of the profits were from
19 Fleet Bank.
20 So we hope you're going to take it more
21 seriously. We don't have a lot of confidence you're
22 going to do that, so we're going to be out there
23 doing that, to get these surveys to submit the
24 information and expect that you're going to
25 investigation every one of what we anticipate being
0220
1 thousands of people who have had concerns but no
2 vehicle to address their issues about Fleet.
3 (Remarks translated into Spanish)
4 We hope that you're going to join us with
5 the Fleet accountability project. Let me make two
6 more comments, two things that should be responded
7 to.
8 All this stuff how Fleet is so thrilled to
9 deal with Fannie Mae, well, certainly they are,
10 because Fannie Mae will buy the loans, Fleet has no
11 risks. That's just another pullback from the
12 community. They have to take some responsibility,
13 they have to assume some of the risk, not just push
14 that off on Fannie Mae.
15 The argument that says the combined
16 Fleet-BankBoston is going to be good for New
17 England, we're going to have a New England-based
18 institution here, I'm sure the First Unions, the
19 Bank of Americas, the Bank Ones, the Wells Fargos
20 are all looking there and saying, "We can't wait for
21 you to lay off 5,000 people to make this institution
22 so that we can come back in a year or two and
23 swallow the new Fleet up." So that idea that
24 somehow we're creating a New England-based
25 institution for the long term just doesn't carry
0221
1 water, just is not real. And we all know it but no
2 one will say that publicly.
3 So with that, the fact of the matter is,
4 Fleet should be better than these two single parts
5 of BankBoston and Fleet and try to backslide to
6 where they were, become the old Fleet. The Fleet
7 accountability project will ensure the people here,
8 and with the thousands of people who have benefitted
9 from the NATCA program and others involved in the
10 NATCA program, to help keep Fleet's feet to the fire
11 so Fleet cannot fleece our community. (Applause)
12 If you have any questions before we leave.
13 PRESIDING OFFICER SMITH: Yes? I don't
14 think so, but thank you very much.
15 (Applause)
16 PRESIDING OFFICER SMITH: Now we will go to
17 Mr. Anderson.
18 MR. ANDERSON: What's the line in
19 vaudeville? I have to follow them? I find it
20 ironic that Bruce uses the analogy about holding
21 Fleet's feet to the fire. When we tried doing that
22 back in '96, Bruce and NATCA protested us.
23 I sat down and started preparing about 15
24 different drafts of what I wanted to do today, none
25 of which I liked, so I threw them away and figured
0222
1 I'd come in here and wing it. So I'll apologize in
2 advance if I'm redundant and if I ramble.
3 PRESIDING OFFICER SMITH: Just so you do it
4 in four and a half minutes.
5 MR. ANDERSON: I sat on this very stage
6 during the Fleet-Shawmut merger hearings and tried
7 to summarize the work of myself and Adam Moser at
8 the time at the Codman Square Development
9 Corporation on work that we had done in revealing
10 mortgage irregularities involving first-time
11 homebuyers -- the First-Time Homebuyer Program at
12 Fleet Bank. And there was reference made to my
13 comments, and Fleet said that they'd address the
14 situation, and the Federal Reserve Board made them
15 promise to work with community groups to fix the
16 problems.
17 Unfortunately the problems were never
18 fixed. I handed federal -- I handed the Board on
19 that day in August a list of 100 properties flipped
20 by two people, two individuals in Dorchester, using
21 Fleet's financing. The sales of the properties was
22 financed by Fleet. The Codman Square group gave
23 them a list of 29. Fleet conveniently ignored my
24 list of 100 and decided to work with the Codman
25 Square group's list of 29.
0223
1 According to Kimberly Boyaton, a reporter
2 at the Boston Globe, Fleet will admit to having
3 fixed three of those loans. There were seven
4 condominiums that were mentioned in that list, Hale
5 Terrace and East Street and Capen Street. I've
6 included them in some of the information that I've
7 given you. Of those seven that were included, four
8 were foreclosed. So, in other words, Fleet fixed
9 them by foreclosing on more than they say that they
10 fixed.
11 The other argument at the time was that
12 these speculators were flipping properties and
13 charging grossly more than the market value of the
14 properties. Unfortunately, we had to wait for what
15 we were warned were going to be the foreclosures,
16 and the foreclosures are happening, to determine
17 what the value of the properties is. And one of
18 those condominiums on Hale Terrace, Unit No. 4, just
19 was foreclosed about a month ago, Unit 4.
20 In 1994, Fleet told everybody it was worth
21 $90,000, and the Fed certainly didn't make them fix
22 the problem, because they foreclosed. I think they
23 got $44,000 at the auction. None of the properties
24 in these condominiums that Fleet said were worth
25 $90,000 have gone for anything more than $75,000,
0224
1 despite a booming real estate market, the market in
2 Dorchester is up 60 percent.
3 These properties just didn't lose value,
4 they were grossly overpriced at the time, and the
5 Federal Reserve Bank did not make Fleet fix them,
6 and Fleet did not fix them. And these are low-
7 income, almost overwhelming blank homeowners who
8 were screwed in the process.
9 On this stage I mentioned when Fleet under
10 pressure cut off certain developers, they turned
11 around and they started flipping properties through
12 Shawmut. We had Shawmut foreclosures on these same
13 properties, one on Speedwell Street, in which I
14 asked the woman, "Did you have the downpayment?"
15 "No, I didn't have the downpayment." "How did you
16 get the downpayment?" "Well, this church I didn't
17 belong to, that I never heard of before, gave me
18 part of the downpayment." Who? "Well, did you have
19 the rest of the downpayment?" "No, we didn't have
20 the downpayment."
21 In this particular loan program, a family
22 member is able to give up to $2,000 to the
23 homebuyer. The homebuyer -- the seller gave the
24 homebuyer's sister the $2,000, who then gave it to
25 her.
0225
1 So we have lots of examples -- and we have
2 four examples of this -- of outright fraud going on
3 in these mortgage programs, and nothing has been
4 done about them. Now, this isn't just old news,
5 this continues to happen. And I'll be quick.
6 These are flips that took place in the last
7 year, financed by Fleet Bank: 2 Wyoming Street in
8 Roxbury which was foreclosed on for $103,000. It
9 was flipped a couple of months later for $180,000, a
10 $77,000 profit. There's no work permits listed in
11 the Inspectional Services for any work having been
12 done. 58 Leyland Way in Dorchester was foreclosed
13 for $123,000 by Fleet Bank. It was flipped a couple
14 of months later for $190,000 financed by Fleet Bank.
15 And 11 Vesta Road in Dorchester, which Fleet
16 foreclosed for $80,000, flipped it a couple of
17 months later for $187,000. Now, this one had about
18 $8,000 worth of work done. So, in other words, a
19 quick $100,000 profit.
20 I'll finish very quickly. But we also
21 discovered more irregularities. We have discovered
22 a series of non-owner-occupied investors using Fleet
23 loans -- ironically by NATCA; I informed Bruce of
24 this -- all of which we would not have noticed,
25 because they looked pretty normal, but they're all
0226
1 being foreclosed by Fleet.
2 Before you approve of the merger, which
3 you're going to do anyway, find out what is going on
4 in these programs. We had a woman speak eloquently
5 earlier about getting a mortgage through ACORN, and
6 how she has stability and how her kids are doing
7 well. That's wonderful. This is the other side of
8 the equation.
9 This isn't old news. This continues to
10 happen, as we speak, and the Federal Reserve Board
11 has not addressed it. The blood, the financial
12 blood of low-income homeowners is on the hands of
13 these speculators who prey on them. It's also on
14 the hands of the Fleet executives who finance them.
15 And unfortunately, it's increasingly on the hands of
16 the Federal Reserve Board who refuses to make the
17 banks accountable. (Applause)
18 PRESIDING OFFICER SMITH: Thank you very
19 much for coming. We're going to take our lunch
20 break now, and we'll reconvene in 30 minutes.
21 (Whereupon, at 2:00 p.m. the hearing
22 was adjourned for luncheon recess)
23
24
25
0227
1 AFTERNOON SESSION
2 HEARING OFFICER SMITH: We'll go ahead and
3 start. On our next panel, the witnesses have four
4 minutes each, and we truly would appreciate it if
5 you would keep an eye on the timekeeper and get the
6 signal for the one minute remaining, and when your
7 time's up, please close.
8 So we'll start with Ms. Aranjo.
9 MS. ARANJO: Good afternoon. My name is
10 Carol Aranjo, and I am the CEO of D.E. Wells Federal
11 Credit Union in Springfield, Massachusetts, and also
12 a member of the African-American Executive
13 Leadership Council of Springfield, Massachusetts.
14 The African-American community of western
15 Massachusetts has not benefited from any of the bank
16 mergers or new banks entries into the State of
17 Massachusetts. We often say that people in Boston
18 think the state ends at 128.
19 We have seen the press releases, and we
20 have also been part of the bank community group that
21 started about five years ago, and we have not seen
22 any of the dollar amounts that the banks have
23 pledged to be lent in the low- and moderate-income
24 communities drift into Springfield, Massachusetts.
25 Very little dollars are in there for the business
0228
1 community.
2 The banks do lend to the nonprofits. They
3 do give charitable giving. But as every civilized
4 individual knows, it is the business community that
5 drives the community's progress.
6 The African-American business community has
7 been starved for capital and loans from the
8 beginning of time, since slavery. Our community
9 seems to be the fertile ground for other ethnic
10 groups to come in and get their economic starts.
11 Banks loaned to everyone to come into the
12 African-American community to start businesses
13 except the African-Americans. This is outrageous.
14 I am here to say that people who have
15 mortgages also need jobs with which to pay the
16 mortgages. If they are not able to create jobs
17 within their community, if they are not able to
18 establish a credible business community, if they are
19 not able to provide for the needs of their citizens,
20 then that community becomes a ghetto, it becomes a
21 starved plantation.
22 The banks of America treat the
23 African-American community as a plantation. They
24 are the owners. They are the wealth of the
25 community. They control it. They choose an
0229
1 overseer. When I use the word "overseer," I'm not
2 talking about Uncle Tom. Those are different. I am
3 talking about someone that the bank will determine,
4 "We will allow you to become successful. We will
5 loan to you, but only to you." It is a method of
6 pitting members of the community against one
7 another.
8 This is stock and trade of the American way
9 in the African-American community. For the
10 government, for entities of the government to
11 continue to allow it is to take part in it. Racism,
12 the stigma of what happens in our community, will
13 not change until the government takes responsibility
14 for what it sees happening and its part in it.
15 Banks must be able to put these dollars that they're
16 talking about into community controlled
17 organizations.
18 We are recommending that the banks, if they
19 are committing $14 billion, that these dollars not
20 stay within the banks to be given out piecemeal, but
21 to be placed into community loan funds, community
22 credit unions, community CDCs that have loan pools.
23 The money should be placed within them over a
24 five-year period and allow them to loan to the
25 businesses in the community so that they can develop
0230
1 their community.
2 Communities cannot be developed without
3 real capital, and real capital cannot be used in the
4 community if it is given to people outside of the
5 community to come in, build on their wealth and take
6 the wealth from the community. So we recommend that
7 unless the banks are willing to put these dollars
8 into the hands of community lenders and allow them
9 to loan, then they should not be allowed to merge.
10 HEARING OFFICER SMITH: Thank you very
11 much.
12 Mr. Draisen.
13 MR. DRAISEN: Thank you very much. It's a
14 little easier for me standing for some reason. I'm
15 not quite sure why.
16 My name is Marc Draisen, and I'm president
17 and CEO of the Massachusetts Association of
18 Community Development Corporations.
19 Just for purposes of explaining a little
20 bit more about who I am and what I've done, I've
21 worked in the community development field for the
22 last 18 years, and I have also served for four years
23 as a member of the Massachusetts House of
24 Representatives, representing Boston and Brookline.
25 We represent the 68 community development
0231
1 corporations of Massachusetts. Banks play critical
2 roles in the work of CDCs. They provide financing
3 for the construction of affordable housing, capital
4 for loan pools that fund small businesses or home
5 improvements, direct credit to entrepreneurs and
6 home buyers, basic banking services to consumers and
7 critical grant support to a host of CDC efforts.
8 In March, we began to assess the impact of
9 the proposed merger of Fleet and BankBoston. We
10 looked at the various factors to assess whether this
11 merger would keep the promise that the leaders of
12 the banks had indicated of one plus one equaling
13 greater than two.
14 We examined Fleet and BankBoston's past
15 records of serving the community reinvestment needs
16 of low- and moderate-income communities after
17 previous mergers. We asked the banks to develop a
18 comprehensive, detailed and publicly verifiable
19 series of benefits to the communities we serve, and
20 we asked them to formalize these commitments through
21 signed agreements.
22 Unfortunately, to date, the banks have
23 failed to negotiate a CRA agreement with any
24 legitimate community organization or elected
25 official. In fact, they have flatly said they would
0232
1 not do so.
2 Furthermore, they have failed to provide
3 any detailed commitments either by state or by
4 program area in such a way that we can determine
5 whether the convenience and needs of low- and
6 moderate-income people are being served.
7 Please allow me to be clear. We have
8 worked for years with both of these institutions.
9 We know them well. We respect their staffs. Each
10 one of them has good programs and some programs that
11 could be improved.
12 However, we are also aware, I might note,
13 of the value of having a financial institution
14 headquartered in New England, although I would note
15 that no one knows who the next merger will be headed
16 by, and that remaining in New England could not last
17 for long.
18 Nonetheless, despite our relationships with
19 these two banks, we are not able at this time to
20 lend our support to this merger. We do not take
21 this action lightly. MACDC has never opposed a
22 merger in the five years that I've been president
23 and CEO.
24 But there are three reasons why we take
25 that position today: First, the failure to
0233
1 negotiate an agreement; second, we remain
2 unconvinced that the regionwide commitment as
3 promised by the bank truly meets the tests of one
4 plus one equals two; and finally, and perhaps the
5 most importantly, because the bank's statement lacks
6 specifics. Gross numbers in broad categories across
7 six states are not good enough.
8 We were very precise in our requests, and
9 we hope the bank will be precise as well. Yet in a
10 host of areas -- soft second affordable home
11 mortgages; rental housing production through the
12 Mass. Housing Partnership Fund; membership in the
13 Federal Home Loan Bank; basic banking, checking, and
14 savings accounts for unbanked households; targets
15 for small business lending -- we have only heard,
16 "We are still studying your proposal."
17 Therefore, without those specifics, we
18 cannot be supportive today. The Fed, however, does
19 have the ability to turn this around. You clearly
20 have the authority to establish conditions over any
21 approval of this merger under your regulations. We
22 know you tend not to do this, but we hope that you
23 will do so at this time.
24 We hope that you will require Fleet and
25 BankBoston to develop a detailed and publicly
0234
1 verifiable CRA plan negotiated with community
2 organizations and elected officials. We hope you
3 will extend the public comment period for at least
4 two weeks after such a plan is developed and release
5 to the public and take into account the public's
6 reaction to the plan in making any decision to
7 approve or deny the merger. And, finally, we hope
8 that you will incorporate these commitments into any
9 approval that the Federal Reserve might issue.
10 In the written testimony that we have
11 handed in, we have detailed -- and I might say in
12 great detail -- the five reasons why we believe that
13 in the case of this merger, there are unprecedented
14 conditions why you should establish these
15 conditions, even though you may not have established
16 CRA conditions in the past.
17 We hope you will take these recommendations
18 seriously, and please do what you can to make sure
19 that Fleet and BankBoston's commitments going
20 forward in fact are equal to or greater than the
21 activities of the two banks in the past.
22 Thank you for your attention.
23 HEARING OFFICER SMITH: Thank you very
24 much.
25 MS. DuBOIS: My name is Jeanne DuBois. I'm
0235
1 the director of the Dorchester Bay Economic
2 Development Corporation in Upham's Corner, North
3 Dorchester, and East Roxbury. We're a 20-year-old
4 CDA, one of the larger ones in Boston. And we have
5 three branches in Upham's Corner -- Fleet,
6 BankBoston and Citizens -- all within about 50 yards
7 of each other.
8 I think we would be considered one of what
9 BankBoston and Fleet call their neighborhood
10 development partners. So there are many positives
11 over the years that we have experienced with them,
12 and we have some concerns.
13 They have supported our Small Business
14 Microloan Program. We have our own in-house loan
15 program right in Upham's Corner. We work with 400
16 entrepreneurs/microlenders right in the
17 neighborhood. We have made over half a million
18 dollars of our own direct loans to small start-ups
19 and small businesses. They have invested in over
20 500 units of rental housing through Mass. Housing
21 Investment Corp.
22 They have supported our home improvement
23 loan program to unbankable homeowners. We have many
24 people living in -- 80 percent of the housing stock
25 is owner occupied in North Dorchester, so our home
0236
1 improvement lending is important.
2 We have many deals in the works.
3 BankBoston and we are working on a manufacturing
4 plant to go into Savin Hill Industrial Park that
5 will create 70 jobs. We have had gap financing that
6 we have done with Little Brazil Restaurant in
7 Allston-Brighton. Through our community business
8 network, we were able to complete a deal. There is
9 an elevator company now. We are starting to do
10 bigger and bigger deals where we are packaging them,
11 and the banks can make loans as these smaller
12 entrepreneurs graduate.
13 We have also worked positively with the CDC
14 divisions of both BankBoston and Fleet. People are
15 on our boards and committees. So these are all the
16 positives I wanted to give you as a background while
17 I raise some concerns so you know this is not just
18 going one way.
19 Our anchor supermarket in Upham's Corner is
20 called America's Food Basket. I think many people
21 have heard of it. We have 16,000 shoppers a week.
22 They have 200 workers in the market. It pays
23 $36,000 a week in local salaries. This has been a
24 Fleet loan for many years with a $280,000 City
25 guarantee behind it.
0237
1 When Mr. Medina, the owner, expanded his
2 very successful market to Hyde Park, he got into
3 some management problems -- often businesses will
4 have these kind of problems when they grow -- and
5 had some losses in his first year. Fleet called the
6 loan.
7 We wound up, with the help of Fleet CDC
8 staff, getting some extensions. But it's an example
9 where now we're working with U.S. Trust and the CDC
10 Tax Credit Collaborative to try to cover this loan.
11 It should never have happened. This is our
12 anchor market. This is our jewel in the crown.
13 This is what is turning the Upham's Corner business
14 district around. It is one of our key businesses,
15 and we think that the relationship banking should
16 have been more operative in this case. We think
17 BankBoston has acted more like a partner, and we
18 hope that that culture will prevail.
19 The second business is Kasmeric Elevator.
20 This is a Caucasian man who had been 20 years in the
21 elevator business, went out on his own, and Fleet
22 did a $30,000 line of credit and term loan with him.
23 And again, he needed $70,000 to meet the kind of
24 contracts that he was hoping for, and they were not
25 able to do it. We had to take it to BankBoston, who
0238
1 successfully made the loan, and his business is
2 growing.
3 We are finding a lot of our small
4 entrepreneurs don't want to go to Fleet. There is a
5 real problem here. There is a culture problem, an
6 attitude problem. Our Board also, last night, said
7 there is a customer service problem in our local
8 branch -- too few staff, long lines, and little
9 participation in local business activities.
10 The attitude is important. The community
11 banking and relationship banking is important. I've
12 said this to other friends in other divisions of
13 Fleet. We need some specific commitments, and there
14 are some specific statements in the MACDC position
15 paper about loan size and loan volume and the size
16 of businesses. We would like those specifics
17 incorporated. We are concerned that it won't happen
18 otherwise.
19 HEARING OFFICER SMITH: Mr. Morehouse.
20 MR. MOREHOUSE: Thank you. Good afternoon.
21 Thank you for the opportunity to testify at this
22 hearing.
23 My name is Andrew Morehouse. I'm the
24 executive director of the Greater Holyoke Community
25 Development Corporation and the chair of the
0239
1 Community Reinvestment Committee of the
2 Massachusetts Association of CDCs.
3 By helping the constituency that I serve in
4 greater Holyoke specifically, we are able to build
5 the incomes, assets and human capital. And through
6 that, in my role as a member and the chair of the CR
7 committee, other CDCs are able to do the same in
8 their respective communities.
9 In turn, these individuals, low-income and
10 minority individuals, generate income demand for
11 goods, services, and, yes, even financial services.
12 However, community development organizations, the
13 banking community, and public officials have learned
14 that financial services must be adapted to these
15 underserved communities and markets.
16 Only by investing in innovative financial
17 products and services can economic activity be
18 stimulated, generating profitable opportunities for
19 business lending, home mortgages, and community
20 development projects. Yet it takes all three of
21 these institutions working together to revitalize
22 our nation's underserved communities.
23 In Massachusetts, Fleet Bank and BankBoston
24 are major partners in innovative financing. Past
25 commitments and contributions of Fleet and
0240
1 BankBoston are critical to the success of regional
2 intermediaries of community development, to
3 community organizations and to state programs like
4 the Massachusetts Housing Investment Corporation and
5 the Massachusetts Housing Partnership.
6 Small community banks generally just do not
7 have the assets and economies of scale to be able to
8 afford innovative financial products and the volume
9 of lending that Fleet and BankBoston have the
10 capacity to offer as a result of their respective
11 mergers with smaller banks.
12 I would like to share with you, however, a
13 different picture, one that is quite disturbing. As
14 both banks have merged with other banks over the
15 past decade, amassing greater financial assets and
16 profits for shareholder, their lending overall to
17 minorities and low-income census tracts has fallen
18 precipitously. HMDA data show that in the
19 Springfield MSA, the percentage decline in mortgage
20 lending is even greater than that of the
21 Commonwealth.
22 Focusing on Fleet and Shawmut lending
23 before and after the merger, from 1994 to 1998,
24 loans to low- and moderate-income borrowers dropped
25 83 percent; to Latino borrowers, 90 percent; and to
0241
1 black borrowers, 96 percent. Total lending for the
2 same period dropped 71 percent.
3 These figures represent a significant
4 retreat from underserved communities in particular
5 and home mortgages in general. It also raises the
6 specter that BankBoston's far better track record of
7 home mortgage lending will cease to exist after the
8 merger.
9 Further declines of the proposed banks'
10 combined home mortgage lending, especially to low-
11 income and minority individuals and census tracts,
12 will seriously impair the revitalization efforts of
13 these communities. The proposed divestitures and
14 likely branch closings will certainly be cited as a
15 justification for further reductions in home
16 mortgage lending.
17 The public must have guarantees that the
18 proposed bank will reserve this trend in home
19 mortgage lending to underserved communities. In
20 other words, the public should be assured that the
21 proposed FleetBank will uphold its commitment to one
22 plus one is greater than two in these communities.
23 If fact, this should hold true in all of western
24 Massachusetts, where no divestitures are reportedly
25 going to take place.
0242
1 I'm here to request that if the merger is
2 approved -- and it seems likely -- it be contingent
3 on the two banks negotiating in good faith a
4 detailed and measurable community reinvestment plan
5 with community organizations and elected officials.
6 As publicly insured institutions, these
7 banks have an obligation to serve the communities
8 whose savings are being entrusted in them. This is
9 nowhere more crucial than in low-income and minority
10 communities that are traditionally underserved.
11 Without a negotiated community reinvestment
12 plan, there is every reason to believe that their
13 home mortgage lending will continue to spiral
14 downward. Moreover, there is no guarantee that the
15 banks will even sustain, much less increase, their
16 current commitments to affordable rental housing,
17 basic banking services, and accessible branches and
18 ATM sites.
19 Community organizations and public
20 officials from across the Commonwealth have
21 painstakingly reached out to each other to debate
22 the impact of the proposed merger on community
23 reinvestment in underserved communities. Coalitions
24 representing diverse constituencies have come
25 together to formulate a realistic and measurable
0243
1 plan that the banks have steadfastly refused to
2 negotiate in good faith.
3 I respectfully call upon the Federal
4 Reserve Bank to break the impasse by requiring the
5 banks to negotiate a community reinvestment plan,
6 plain and simple. Moreover, I urge the Federal
7 Reserve to extend the comment period after a
8 negotiated plan can be reached so that all affected
9 parties have an opportunity to respond to it.
10 In my humble opinion, I think we should
11 expect no less from the Federal Reserve.
12 Thank you again for inviting me to testify
13 before you.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 Mr. Westgate.
17 MR. WESTGATE: My name is Michael Westgate
18 from Chelsea Neighborhood Housing Services. We've
19 been around for 20 years. We do about 1.2 million a
20 year in rehab of buildings in Chelsea for low- and
21 moderate-income people, almost all of it -- I would
22 say all of it in fact in partnership with banks.
23 And the resulting benefits to the community include
24 about a half million dollars in wages paid to
25 Chelsea residents.
0244
1 About two years ago a Cambodian family came
2 into my office. They had recently bought a house
3 for $150,000. This was a duplex. They had a
4 $127,000 mortgage from Fleet. The bankers on my
5 Loan Committee said that the building was only worth
6 $120,000, and it needed $20,000 worth of work. It
7 needed a new roof, it had no second means of egress,
8 the furnace was completely busted.
9 It was a Cambodian family, as I mentioned.
10 They were unwilling to stick their necks out. We
11 wanted to go to bat for them, but they came from a
12 culture where if you stick your neck out too far, it
13 was literally blown off. And there were a lot of
14 people that are not willing to step forward.
15 I wanted to do something more than
16 anecdotal, because we did have some other anecdotes
17 like that. When we started with a 120 percent
18 loan-to-value ratio before they even came in for a
19 home improvement loan, there wasn't much we could do
20 for them.
21 Did I ask NCRC, the National Coalition --
22 the National Community Reinvestment Coalition, and
23 they did a study of all of the loans made by all of
24 the banks in Chelsea during the period of comment on
25 Fleet's application for review. And while the
0245
1 numbers were high, in gross numbers, numbers when
2 you picked them apart were rather startling, that if
3 you took as a common denominator the average price
4 in Chelsea, Asian applicants had paid 120 percent --
5 excuse me -- their mortgages were 120 percent of
6 average value, Hispanics were 130 percent, and
7 African-Americans were 140 percent.
8 I presented that to the OCC a year ago. It
9 took months to get an acknowledgment. I gave it to
10 the head of their CRA office when I was down in
11 Washington in March of this year.
12 I know OCC is not FRB, but just to explain
13 the difficulty that we see in having regulators take
14 responsibility for regulating, it was particularly
15 insulting to see Fleet get an outstanding review
16 from Massachusetts when we -- and I know people in
17 Dorchester and elsewhere -- had similar experiences.
18 What we're seeing today is a violent
19 escalation of prices. Where during the downtrend
20 prices in Chelsea went down 1 percent a month, they
21 are now going up 1.5 percent, and unfortunately,
22 Fleet is among the leaders in giving excessive
23 loans, and it's the banks that are the determinants
24 of value rather than the buyers.
25 We oppose the merger. We see that there
0246
1 has been irresponsible lending in Chelsea and
2 elsewhere. We see dollar headlines for millions of
3 dollars, but the devil is in the details.
4 We have seen millions of dollars languish
5 at Mass. Housing Partnership. We were given loans
6 by Mass. Housing Partnership. The terms were too
7 onerous for us to use, so we went elsewhere.
8 The solution, I believe, is enforceable
9 agreements with regional groups that take full
10 advantage of our knowledge of the communities, the
11 regulators' ability to regulate, and the banks
12 stepping forward with programs that will work.
13 CRA today is being gutted in Congress, and
14 I think it's incumbent on the people in this room to
15 come up with a new tripartite agreement that would
16 apply to this or any other major merger where the
17 goals are spelled out, we can all agree to them,
18 they're transparent, they're enforceable.
19 And I thank you for your attention.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 MS. WORGAFTIK: My name is Susan Worgaftik.
23 I'm chair of the Massachusetts Micro-Enterprise
24 Coalition and director of This Neighborhood Means
25 Business!, a micro-entrepreneurship education and
0247
1 technical assistance program in Dorchester,
2 Massachusetts. I would like to thank the Federal
3 Reserve for this opportunity to present my views.
4 The announcement of the merger of Fleet
5 Bank and BankBoston foreshadows a change of great
6 concern to micro-enterprise training, technical
7 assistance and loan programs.
8 The micro-enterprise programs of the
9 Commonwealth serve entrepreneurs with businesses of
10 five employees or fewer and low and moderate
11 individuals who are in the process of creating their
12 own businesses. Most of these businesses are
13 located in the Commonwealth's inner cities and rural
14 areas. The development of new micro-enterprises has
15 been an important element in the recent economic
16 improvements in urban neighborhoods and rural
17 communities throughout the Commonwealth.
18 In the last decade, we've been able to work
19 very closely with both BankBoston and Fleet Bank to
20 create loan products designed specifically for the
21 smallest of Massachusetts entrepreneurs. In the
22 early days of micro-entrepreneurship, the
23 development of these programs in Massachusetts was
24 very difficult. The large banks did not want to
25 involve themselves in these types of small loans.
0248
1 Competition between both BankBoston and Fleet Bank
2 was very helpful to us in the development of the
3 kinds of loan products we need, and today we have
4 many loan products that are available to our
5 smallest entrepreneurs that were not available to us
6 ten years ago.
7 In addition, the foundation and corporate
8 support that micro-entrepreneurship programs have
9 received from BankBoston and Fleet Bank have been
10 essential to the development of the technical
11 assistance and entrepreneurship education programs
12 that are crucial to making micro-enterprises
13 succeed. Without those programs, we have found that
14 many of our entrepreneurs fail very early in their
15 business life.
16 So, clearly, BankBoston and Fleet Bank
17 believe that the synergy that's created by the
18 merger will be beneficial in the development of
19 their business. We believe that the same should be
20 true for the communities, the businesses, and the
21 individuals which the banks serve. If one plus one
22 equals more than two for the banks, it should also
23 equal that for the businesses and the individuals in
24 our communities.
25 It's my hope that this merger will mean an
0249
1 increase in the number of loans available to micro
2 and small community entrepreneurs in urban and rural
3 communities, and that there will be a significant
4 increase in the technical assistance and education
5 support grants essential for making those loans
6 successful. Anything less is a direct step backward
7 from the commitments that these two banks have made
8 to our communities for micro-entrepreneurs in the
9 past.
10 As a partner in the efforts of the
11 Massachusetts Association for Community Development
12 Corporations, Massachusetts Affordable Housing
13 Alliance, and the Organization for a New Equality, I
14 had hoped that we would be able to have a verifiable
15 agreement with the new Fleet-Boston by now.
16 I had hoped that such an agreement would
17 ensure that the number and availability of funds for
18 loans to micro-entrepreneurs would expand much the
19 same way that the expectations for the new
20 Fleet-Boston would forecast their future. I had
21 hoped that this agreement would recognize the
22 importance of entrepreneurship training and
23 technical assistance to the success of micro loans
24 and that there would be funds available for that
25 purpose. At this time, no such agreement exists.
0250
1 As we move into a new era of banking, it's
2 essential that all aspects of the economy benefit
3 from the progress and the projections that are put
4 forward. At this time, the projections that we
5 have -- that have been presented publicly -- don't
6 mention the needs and the concerns of the
7 micro-entrepreneurs of the Commonwealth.
8 I urge you to recommend that the new
9 Fleet-Boston resume discussions with MACDC, MAHA and
10 ONE to develop a balanced plan for the future which
11 will make this merger a success in everyone's eyes,
12 a merger which benefits all of us.
13 Thank you.
14 HEARING OFFICER SMITH: Thank you.
15 Mr. Young.
16 MR. YOUNG: I'm here representing a rural
17 perspective. Our CDC works in nine towns, 300
18 square miles, about 25,000 people. To personalize
19 it, if my septic system fails, and you drink water
20 in Boston, you get it. North Quabbin Region is the
21 place I'm representing.
22 We have got to be mindful that the CRA,
23 coupled with strong compliance on the part of
24 financial institutions and regulatory agencies,
25 makes stronger communities. Communities of the
0251
1 North Quabbin Region are concerned over the proposed
2 merger, and the concerns thus far raised by the
3 North Quabbin Community Reinvestment Coalition are,
4 first, diminished local autonomy.
5 This has had a profound negative impact on
6 institution involvement in our community, as, for
7 instance, the role of Fleet, formerly known as
8 Shawmut, formerly known to us as Franklin County
9 Trust, formerly known as Orange National Bank, has
10 been diminished to the point that the Orange -- that
11 the Fleet Bank in Orange is jokingly referred to as
12 a manned ATM. But it is not really a joking matter,
13 and regulators should look with a keen eye on the
14 possible outcomes of this merger on rural
15 communities.
16 The second concern is the increased
17 reliance of credit scoring. We understand the needs
18 of the bank to meet the community's credit needs
19 consistent with safe and sound lending practices.
20 Small businesses in our region face difficulties
21 obtaining credit, and they warrant special
22 consideration. The use of credit scoring continues
23 to increase the difficulty.
24 With every merger, more and more of our
25 small and micro-businesses are no longer
0252
1 creditworthy. This diminished creditworthiness
2 comes, in many instances, after decades of hard
3 work, decades of prior credit having been repaid as
4 agreed. Our small and rural and sometimes
5 unconventional businesses fall through the cracks in
6 national and regional credit scoring models.
7 Thirdly, financial institutions need to
8 participate in educational and social service
9 support. Fourthly, banks need to provide portfolio
10 lending in our region, especially for renovation of
11 owner-occupied one- to four-family properties. The
12 portfolio aspect is critical, that they be held and
13 not resold.
14 The merged bank needs to be responsive to
15 community leaders and members of our area. We
16 suggest an advisory Board be made up of members of
17 respective regions to ensure that all community
18 concerns are addressed by the management of the
19 combined bank.
20 A little more than a year ago, our CDC went
21 through this with Family Bank. We raised concerns
22 about local lending authority, loan funds, mortgage
23 outreach, portfolio lending, and in the end we
24 signed an agreement. The agreement provided for
25 various commitments by Family Bank to enhance its
0253
1 community development activities. In the end, I
2 think Family Bank appreciated our concerns. The
3 needs were addressed. Community development banking
4 is good business.
5 Please extend the comment period. Don't
6 approve this merger without a signed agreement,
7 because it's in our mutual interest.
8 HEARING OFFICER SMITH: Thank you very
9 much.
10 Questions from the panel?
11 HEARING OFFICER KWAST: I have a question.
12 Mr. Morehouse, I think touched on this, but
13 I wonder if some of the other panel members might
14 comment on the role of smaller and medium-sized
15 banks in serving the needs of the organizations and
16 needs of your customers.
17 MR. DRAISEN: We've had a lot of
18 discussions internally, Mr. Kwast, among our CDCs
19 about the divestiture issue and the different sized
20 banks. And I think the sense among our CDCs is that
21 there's a role for everyone.
22 Very frequently, we have individual CDCs
23 that have a very close relationship with a local
24 bank that really knows the customers in that
25 community, the entrepreneurs that the CDC is dealing
0254
1 with, and their presence is invaluable. So the loss
2 of those community banks is a severe problem. Or,
3 conversely, the possibility of those community banks
4 picking up a few additional branches would be a very
5 good thing.
6 From another perspective, however, if we
7 have a very large bank that comes into the area,
8 sometimes it has greater overall CDC -- overall CRA
9 capacity, it knows how to work with some of the
10 bigger programs, it has experience from other parts
11 of its portfolio with doing some of the more
12 complicated deals that sometimes involve three
13 government programs and six different funding
14 programs and things like that.
15 I think the summary is that we want to make
16 sure that it's not just one big bank, that gets to
17 deal here. We do want to see more competition. We
18 understand the value of that. We sense that that's
19 going to be the direction that the divestiture goes
20 in. But there's also a very important role for the
21 small or the medium-sized banks, and we work with
22 them very closely, and they should not be shut out.
23 MS. WORGAFTIK: In relationship to
24 micro-entrepreneurs, I would second that. And I
25 would also point out that in some ways, the size of
0255
1 the bank relates to programmatic issues, but the
2 availability of the bank is something that the
3 micro-entrepreneurs need.
4 We often find that we don't have banks
5 staffed well enough to be -- and some of the larger
6 banks -- in terms of their real recognition of the
7 micro-entrepreneurs to really give them the kind of
8 attention that they need. It is kind of -- so I
9 would be looking for the kind of staffing from any
10 sized bank that would really be able to say, "We are
11 serious about the work that is done with the
12 community and just not simply that we have an
13 outpost here."
14 So regardless of whether it is a larger
15 bank or a smaller bank, that question of taking the
16 time to really work through issues of
17 entrepreneurship is extremely important to our
18 members.
19 MR. YOUNG: The smaller banks are critical
20 to our success. For example, the most recent real
21 estate deal we did involved -- we were attempting to
22 purchase a building from Fleet which was a
23 foreclosure. While we were trying to borrow money
24 from Fleet's community development side, it couldn't
25 hold back the asset management or foreclosure side,
0256
1 and they sold the building to Bob Fader.
2 Ultimately, it was a local bank that financed the
3 deal, and we had to renegotiate it with somebody who
4 bought the sold-off paper.
5 So in my region, Fleet's branch is really a
6 nonplayer. Although BankBoston and Fleet have been
7 important supporters to my organization in terms of
8 banking services, they are only going for the
9 highest cut, which is really not our CDC strategy in
10 economic revitalization.
11 MS. ARANJO: In the African-American
12 community -- and as you can see, there are not many
13 of us here testifying -- I run a credit union. I
14 just had a gentleman who has a million dollars worth
15 of orders from J.C. Penney and the U.S. Army. These
16 are not people who won't pay. They needed a credit
17 line of $348,000 for their merchandise to be made.
18 Fleet Bank turned them down even after getting a
19 guaranty from the business association in Washington
20 who guarantees minority loans, and they were still
21 turned down.
22 This happens too often in the
23 African-American community. They will give you
24 loans of all types except those which allow us to
25 develop credible businesses which allow us to
0257
1 develop our community. And I would like to say that
2 it is important to the African-American community
3 that there are local, community-driven banks or
4 financial institutions which take the time to know
5 the community and understand that color is not
6 character.
7 MR. WESTGATE: It's the competition that we
8 all need, both for our own agencies and for the
9 people we serve. Just to illustrate it, we had an
10 unsecured line of credit with a local bank at prime
11 plus 2. Another bank came in, and now we have an
12 unsecured line of $400,000 of prime minus a half.
13 If you have competition, both the
14 homeowners and the businesses and the nonprofits can
15 profit from that. If you have no competition, then
16 we all have to live with some of the stories you've
17 heard today.
18 HEARING OFFICER BROWNE: I have a question
19 for Mr. Westgate.
20 In talking about the high value -- well,
21 high loan-to-value lending in Chelsea, was that
22 unique to Fleet, or did you see that in other
23 institutions as well?
24 MR. WESTGATE: I won't say it is absolutely
25 unique to Fleet, but in the NCRC data, it was the
0258
1 only banking institution that showed up that way.
2 HEARING OFFICER SMITH: Thank you very much
3 for coming this afternoon, and I'm sorry you all had
4 to wait so long, as other panels also are having to
5 do.
6 (Pause)
7 HEARING OFFICER SMITH: Thank you. With
8 this next group, we again have very brief
9 presentations; but what we are also doing is setting
10 a time limit, so that at a certain point, if people
11 haven't made it through, we will have to move them
12 to later in the day in order to not have our other
13 panels running quite so late. So --
14 MS. WEBSTER: What is our time limit?
15 HEARING OFFICER SMITH: One minute.
16 MS. WEBSTER: Good afternoon. My name is
17 Elizabeth Webster. I'm here from Ithaca, New York,
18 which is the true upstate region of New York State.
19 I'm here without statistics or media or
20 T-shirts or a group behind me. I have a story of a
21 phone call from a community development corporation
22 -- to a community development corporation from an
23 economic opportunity corporation.
24 We asked the absurd. We asked Fleet Bank
25 to think as a philanthropist. In fact, they were
0259
1 able to do that at every turn. We need to become
2 self-sufficient in our community so we can continue
3 to serve the 5,000 clients or consumers who we are
4 guiding on their road to self-sufficiency.
5 Fleet Bank came to the table. Then they
6 got on a plane, they came to Tompkins County, they
7 listened to the real people that are the statistics
8 that have been quoted today, the people who need
9 help with their heat bill, the people who need to
10 use a food pantry, people who are learning the
11 skills to save money for their own home.
12 They met what we like to consider reality,
13 and then they went back to their bottom line, and
14 they tried it again and again and again. And the
15 bottom line finally was able to satisfy us and them.
16 And now because of that, we have $1.5 million that
17 will enable an institution to become completely
18 self-sufficient.
19 HEARING OFFICER SMITH: Thank you very
20 much.
21 MS. FLYNN: My name is Denise Flynn. I'm
22 the vice-president of Junior Achievement for
23 Northern New England.
24 For several decades, BankBoston and Fleet
25 have worked together to support our organizations
0260
1 which teaches kids in grades K through 12 about
2 business and how business works.
3 Although BankBoston has been one of our
4 largest supporters, we have also received support
5 from Fleet. Together, the banks have helped JA to
6 grow from serving 5,000 students ten years ago to
7 over 50,000 students this month.
8 We're an organization that serves all kinds
9 of students. In the past few years, we've tried to
10 focus our efforts on programs and schools where
11 students have least access to business people. In
12 Boston alone, we serve more than 6,000 students who
13 were able to meet a business person this year.
14 In addition, volunteers from Fleet and
15 BankBoston have enabled Junior Achievement to extend
16 its reach to areas like Lynn, Lawrence, Lowell,
17 Quincy, Worcester and Springfield. In short, the
18 banks have actively supported volunteers in schools
19 throughout New England.
20 We at Junior Achievement hope that the
21 merger will solidify our presence in New England,
22 and we hope that the combined banks will help us to
23 build a critical mass of volunteers at the new
24 larger bank that will enable us to reach 20 percent
25 of the student population by the year 2005.
0261
1 This may or may not have been possible
2 without the merger, but clearly would have been
3 impossible if a non-New England bank had assumed
4 control of either bank.
5 Thank you.
6 HEARING OFFICER SMITH: Thank you.
7 MS. WHITLOCK: Hello. My name is Linda
8 Whitlock, and I'm speaking as president and CEO of
9 Boys and Girls Clubs of Boston. And I speak on
10 unabashedly in support of the merger.
11 I'm speaking on behalf of nearly 7,000
12 citizens, some of the poorest neighborhoods in
13 Boston and Chelsea, citizens whose voices are absent
14 today because they are children and teens who are
15 doing what children and teens should be doing on a
16 hot day in July. They're at our clubs learning to
17 swim, to surf the Net safely, to cooperate with
18 peers, to confide in a trusted adult, all because of
19 the notable generosity of donors like BankBoston and
20 Fleet Bank. Stellar corporate citizens, these two
21 banks, and BankBoston in particular, are peerless in
22 their charitable giving to inner-city programs like
23 ours.
24 Since 1978 BankBoston has given our
25 organization in excess of $800,000 for program and
0262
1 building needs. Similarly, Fleet has provided us
2 with nearly $300,000. Maintaining the corporate
3 headquarters in Boston will ensure that there is no
4 diminution of civic and philanthropic involvement on
5 the part of the new merged entity.
6 I'm honored to endorse the merger on behalf
7 of our courageous, worthy and very grateful boys and
8 girls.
9 Thank you for letting me speak today.
10 HEARING OFFICER SMITH: Thank you.
11 DR. SMITH: Good afternoon. My name is
12 Jane Smith, and I am a member of the Fleet INCITY
13 Advisory Board. I'm also president and CEO of the
14 National Council of Negro Women, with a membership
15 of over 450,000 women of African descent.
16 Previously, I directed the Atlanta Project at the
17 Carter Presidential Center, which was about
18 neighborhoods and corporations being partners to
19 improve our citizens' lives.
20 I endorse the merger. I endorse the merger
21 because my job has a simple job description, which
22 is to be the watchdog for African-American women in
23 terms of commerce and banking. I have thoroughly
24 enjoyed as a member of the INCITY Board seeing the
25 balance and response to change that Fleet offers as
0263
1 they look in the inner city to see what women need
2 to have wholesome families with or without a partner
3 in the same household.
4 I have appreciated the support systems that
5 have been given to women in terms of training that
6 the banks have offered, guidance by the appropriate
7 kinds of staff being hired, even those who speak
8 other languages, so that the women do not have
9 difficulty in making their way through the services
10 of the particular banks.
11 It is important that BankBoston and Fleet
12 have the opportunity to continue their work and to
13 continue it together. Thank you.
14 HEARING OFFICER SMITH: Thank you.
15 MR. GUZZI: Good afternoon. My name is
16 Paul Guzzi, and I'm president and CEO of the Greater
17 Boston Chamber of Commerce.
18 Boston is a vibrant, world-class city with
19 important cultural, education, and medical
20 institutions, as well as an innovative economy. A
21 great city like Boston should have a world-class
22 bank located within its borders to meet our unique
23 regional needs. This merger ensures that result.
24 But we should also judge this merger by whether
25 Fleet-Boston can meet very high standards in terms
0264
1 of customer service, community outreach, and
2 investment in corporate citizenship.
3 I am convinced that Fleet-Boston is
4 committed to maintain high performance standards in
5 each of these areas; and for those reasons, we
6 encourage you to support this merger.
7 MR. MEADE: Good afternoon. Thank you for
8 this opportunity to testify.
9 My name is Peter Meade. I come to you as
10 an individual who is a customer of Fleet Bank and as
11 an individual who ran an organization, a regional
12 business organization, that had been supported by a
13 line of credit from Fleet Bank.
14 I want to say to you that the leadership of
15 both banks and their contribution to this community
16 range from laudable to singularly extraordinary
17 kinds of contributions that many times businesses
18 don't make. They have played an important part as
19 the pillars of this community.
20 I also believe that if this merger had not
21 taken place, the man you talk to at the bank would
22 be answering the phone in Atlanta or North Carolina,
23 in New York or San Francisco. And so I strongly
24 urge you to approve this merger.
25 HEARING OFFICER SMITH: Thank you very
0265
1 much.
2 MR. MACDONALD: My name is Alan Macdonald,
3 and I'm the executive director of the Massachusetts
4 Business Roundtable, which is a group of 75
5 executives from leading institutions in the state,
6 leading by nature of their size and activity in the
7 economy. We really exist to help those large
8 institutions be involved in channeling their public
9 involvement for the improvement of the quality of
10 life in Massachusetts, and we have existed for 20
11 years in doing that kind of service.
12 We work very closely with headquartered
13 businesses in Massachusetts, and we find that the
14 effectiveness of the public involvement really is
15 helped tremendously by the headquarters in
16 Massachusetts, and by the fact that the leading
17 executives are here, part of the community, part of
18 the life, and that they are able to see the needs of
19 the community in helping the institutions to support
20 those needs.
21 As a practical matter, what is happening in
22 the banking industry as we see it, around the world
23 in fact, is that it takes some financial size to
24 remain independent. And to be headquartered in
25 Massachusetts, we want to have a bank that has the
0266
1 financial size to provide the very resources that we
2 note today that we worry about losing and not having
3 administered in a proper way.
4 We think that the kinds of problems we hear
5 today, whether they're CRA or otherwise directed,
6 are the kinds that we have public officials to worry
7 about regardless of size. And we really favor this
8 combination of Fleet Financial Group and BankBoston
9 so that we will have the resources in our community
10 to be placed in the very spots that we worry about
11 losing those resources. So we support, and hope you
12 will, the combination.
13 Thank you very much.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 MR. JUSTIS: My name is Robert Justis. I'm
17 here to speak in support of the merger. I prepared
18 15 minutes worth of comments, and I have submitted
19 them for the record. I can't speak that fast, so
20 I'll just excerpt a couple of the comments.
21 I'm presently the economic development
22 director for the Central Vermont Public Service
23 Corporation and also a member of the Fleet INCITY
24 Advisory Board.
25 Immediately prior to my present job, I was
0267
1 for over four years the CEO of a nonprofit community
2 development corporation -- Northern Community
3 Investment Corporation -- that serves the Northeast
4 Kingdom and the North Country of New Hampshire, six
5 counties having as many square miles as the State of
6 Connecticut and some of the highest concentrations
7 of poverty in northern New England.
8 It was at NCIC that I first came to know
9 well and develop great respect for Fleet Financial
10 Group. During the time I spent with NCIC between
11 1990 and 1994, Fleet was an active partner with us
12 in our housing development and business lending
13 activities.
14 You will recall that the early '90s were
15 especially difficult economic times in northern New
16 England. Both Fleet and NCIC had our share of
17 troubled clients and projects together. Throughout
18 this difficult period, Fleet was diligent and fair
19 in working with NCIC, and both organizations
20 survived intact and continued to do good work.
21 I sincerely hope that you will approve the
22 merger in the interests of the communities of our
23 service area.
24 Thank you very much for the opportunity to
25 speak.
0268
1 HEARING OFFICER SMITH: Thank you very
2 much, and we appreciate having your longer statement
3 for the record.
4 MR. BRETT: Former Congressman Mo Udall
5 once said, "Everything has been said, but not by
6 everyone," so I'll be extremely brief here.
7 My name is Jim Brett, and I'm the president
8 and CEO of the New England Council. New England
9 Council is the oldest regional business organization
10 in the United States. It is made up of large and
11 small companies, academic and health institutions,
12 nonprofit and for-profit; and our purpose is to
13 promote economic growth and high quality of life in
14 New England.
15 If we were giving out a gold medal this
16 year, it would go to Fleet Bank for the work that
17 they have done on behalf the New England economy
18 promoting economic vitality.
19 I am here in support of a combination of
20 Fleet Financial and BankBoston. The Chamber of
21 Commerce here in Boston did a study last year, and
22 they talked about one of the leading industries here
23 in greater Boston area, financial services, in
24 particular the banking industry.
25 With this new combination of two major
0269
1 banks, it will be a major player here in the city
2 and the state and the region. It has already been
3 alluded to about this could have been a worst-case
4 scenario of an outside bank coming in and bringing
5 about a merger. This merge makes sense for the
6 city, it makes sense for the region. So I think
7 there are tremendous benefits here.
8 They have been an outstanding neighbor, a
9 citizen. You have heard the testimony this morning
10 about all of the volunteer hours that they give. I
11 think this is good news for our region. I look
12 forward to the merger being enacted.
13 Thank you very much for your attention.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 MR. MACHTLEY: Hello. My name is Ron
17 Machtley. I've been a lifelong resident of Rhode
18 Island. During my adult years, I've been a naval
19 officer, a lawyer, for six years a United States
20 Congressman, and now I'm president of Bryant College
21 in Smithfield, Rhode Island.
22 From these various vantage points I have
23 observed both BankBoston and Fleet Financial. They
24 have been wonderful corporate citizens of our state,
25 taking care of our citizens.
0270
1 I believe, as a college which has
2 instituted the first financial service program in
3 New England, that banking is going to change
4 dramatically just as the telecommunications industry
5 has. If we do not have a large regional bank, we
6 will be taken over by an out-of-region bank or a
7 bank out of this country. It is absolutely
8 important to our region that we have CEOs who are
9 New Englanders, who are here to take care of us.
10 There are those who testified today that
11 there is need for capital to low, medium, moderate,
12 and minority populations. I agree with that. But
13 where Fleet has excelled and BankBoston has excelled
14 is not just in capital, but ensuring that the people
15 in our state and our region have education.
16 They have provided a Women's Resource
17 Summit in which over 600 women came to Bryant
18 College at no cost to learn the fundamentals of
19 business entrepreneurship, financial resource and
20 management. They've provided capital for our joint
21 venture Bryant School of Design. BankBoston funded
22 our World Trade Day where 600 businesses learned.
23 This is an organization, both at BankBoston
24 and Fleet Financial, which is committed to our
25 region. And for that reason, I strongly support the
0271
1 merger and hope that you will support it as well.
2 Thank you very much.
3 HEARING OFFICER SMITH: Thank you very
4 much.
5 MR. SOTO: Good afternoon. My name is
6 Felix Soto. I'm the owner of J&M Auto Sales located
7 at 235 Hyde Park Avenue in Jamaica Plain.
8 I am in favor of this merger because three
9 years ago I came to Fleet Bank from another banking
10 institution, and Fleet really took a serious look at
11 my situation and where I wanted to go.
12 Ever since, I have been growing. Fleet has
13 supported me 100 percent. They have given me
14 several lines of credit and loans, and also they
15 have approved loans to buy property where my
16 business is, which other banking institutions didn't
17 do. And also they have given me a piece of the
18 American dream, to own my own house, and I'm very
19 thankful for that.
20 I thank Ron Walker that was the person who
21 really introduced me to the Fleet CDC, Grant
22 Patterson and Mark Hartunian, who helped me in every
23 way possible. I really thank you, Fleet Bank, and I
24 am in favor of the merger.
25 Thank you very much.
0272
1 HEARING OFFICER SMITH: Thank you very
2 much.
3 MR. TORRES: My name is Felix Torres. I'm
4 the executive director of Manchester Neighborhood
5 Housing Services in New Hampshire. We're the
6 largest community-based, nonprofit housing developer
7 in the State of New Hampshire. I'm here to support
8 the merger, and that should come as no surprise.
9 We provide affordable housing. We do home
10 ownership lending and counseling, and we do
11 community advocacy. Fleet and BankBoston have been
12 partners of ours from the very beginning, and I'm
13 not here to dwell on the past. But it is important
14 to say that their commitment has been total, it has
15 been innovative, it has been creative, and it has
16 been substantial.
17 We believe the merger is important, one,
18 because we need a large bank in New England. I
19 don't want to call Columbus. I don't want to go to
20 New York. I don't want to go to Charlotte. Boston
21 is about as far as I want to travel to talk to a
22 banker.
23 Second, we think that the sum of the whole
24 ought to be greater than the individual parts. Our
25 history, we have gone through mergers before with
0273
1 both BankBoston and Fleet. In each case in
2 Manchester, they have put more resources on the
3 street to help low-income families and low-income
4 neighborhoods.
5 Finally, we have a long relationship with
6 Fleet and BankBoston. We know how to work with
7 them, and we look forward to continuing to work with
8 them as a unified entity.
9 HEARING OFFICER SMITH: Thank you very
10 much.
11 MR. JOHNSON: Good afternoon. My name is
12 Douglas Johnson. I'm president of Heritage
13 Consulting Group, a Providence-based firm, a
14 management consulting firm that has the privilege
15 over the last ten years of working with Fleet
16 Financial Group.
17 We were first engaged by Fleet back in 1989
18 with the opportunity to support the development of
19 its initial Community Reinvestment Act statement.
20 Since that time, we have grown as a firm, as a
21 little, small business in Rhode Island, to the point
22 where now we have a wide variety of clients that are
23 based both here in New England and elsewhere in the
24 United States.
25 We're here today to support this merger
0274
1 because we believe it provides an opportunity for
2 small businesses such as ours to interact and to
3 obtain important business from major corporations
4 such as Fleet, BankBoston.
5 It has been a great relationship for our
6 firm. We have, over the years, managed to grow our
7 business to the point where we believe that if other
8 businesses follow a similar pattern, they too will
9 benefit enormously from this proposed merger.
10 We thank you for this opportunity and
11 certainly endorse what is being proposed before you.
12 Thank you.
13 HEARING OFFICER SMITH: Thank you very
14 much.
15 MR. LANGLEY: My name is Dennis Langley,
16 the executive director for the Urban League of Rhode
17 Island.
18 The global society means more than
19 geographical location to us. It requires
20 organizations and businesses to position themselves
21 for survival. The mega-society sees distance as no
22 obstacle in transacting businesses; therefore,
23 innovative thinking and concepts must be developed.
24 Fleet Bank, in conjunction with Boston,
25 recognizes the need to readjust and to position
0275
1 itself for survival within our society. We need
2 that within the Northeast Region. Failing to do
3 that, someone else will take the task and move on
4 with the system, which obviously would leave it to
5 be noncompliant to many of the concerns you have
6 heard earlier on. We are, therefore, in support of
7 this merger.
8 Two concerns: one, that they continue
9 their CRA policies; two, we look at the downsizing
10 and the employment of those individuals that will be
11 laid off. We are concerned with that, because if
12 they do that, that will be to the demise of our
13 society.
14 Finally, please, Fleet needs us. We need
15 Fleet and BankBoston. We wholeheartedly support
16 this venture. The merger is important. It is
17 productive to our community. Please don't let
18 another agency or another business come in to take
19 over. Grant them the opportunity to do what is
20 prudent for us in this community.
21 Thank you.
22 HEARING OFFICER SMITH: Thank you very
23 much.
24 MS. SATTERWHITE: Good afternoon. My name
25 is Cherylyn Satterwhite. I'm the executive director
0276
1 of the Dunbar Community Center in Springfield,
2 Mass., and I am speaking I guess for western
3 Massachusetts, I do believe.
4 I have a stack of cards, and I'm trying to
5 figure out how to summarize these cards for you.
6 I thought I might speak to Fleet in an
7 instance or perspective that has not been spoken to,
8 since I've been here at least, and that is Fleet's
9 commitment to youth development.
10 Fleet and BankBoston I've had very
11 favorable experiences with over the past several
12 years. Like most banks, they maintain seats on our
13 board of directors, contributing annually to
14 operating expenses, but show some flexibility and
15 are able to respond additionally in times of
16 expenses, Fleet keeping children warm when boilers
17 burn in the middle of the winter.
18 Fleet, through Agnes Scanlon, helped to
19 move the agency's technology to the 21st century,
20 assuring that inner-city kids will have equal
21 opportunity and access to computer literacy and to
22 the wonderful world of the Web.
23 The Center has embarked on a $4.5 million
24 capital campaign. Fleet again has taken a major
25 role in leadership of developing young children.
0277
1 The campaign is chaired by the Western Mass.
2 regional president, Richard Bilowitz. The New
3 Building Steering Committee is co-chaired by a Fleet
4 officer, Neal McBride, who has shared resources for
5 many years to the Center.
6 Through the efforts of Glenn Davis and
7 Martin Guiten, the Fleet CDC has extended a
8 significant line of credit to help us move forward
9 toward developing young people and producing
10 productive citizens.
11 So we speak in favor of this merger and
12 Fleet's demonstration of support for developing
13 youth. Thank you.
14 MR. CAMPBELL: Good afternoon. My name is
15 Jeff Campbell. I'm president and CEO of Cuts and
16 Creations, Inc. We were founded in 1994. We're a
17 unisex hair salon, barber shop. We have one store
18 in the Westgate Mall in Brockton. That's our
19 headquarters store. We have a brother store in the
20 Mystic Mall in Chelsea called Just Cuts.
21 Cuts and Creations is a growing company.
22 We have about 37 employees now. We just recently
23 signed a ten-year lease with the Arsenal Mall in
24 Watertown Massachusetts for an expansion store
25 called Cuts and Creation II.
0278
1 We would like to thank Fleet and the CDC
2 and also the SBA for the opportunity for us to grow.
3 We both employ about 20 to 25 more employees in the
4 community. And I signed a lease, I didn't have the
5 funds, but we went to Fleet, and they granted us the
6 funds, and they have been working with me strong.
7 Mark Hartunian, Grant Patterson, and a
8 mixture of Fleet CDC and the SBA have been good to
9 Cuts and Creations, Inc. And I think it's a help
10 and a good help to the community, and the merger
11 would help the community also.
12 I'd also like to say thanks, from Jeff
13 Campbell who is here from the company, to Fleet, and
14 I hope you guys grant the merger.
15 Thank you.
16 HEARING OFFICER SMITH: Thank you very
17 much.
18 MR. SCHWARTZ: Good afternoon. My name is
19 Eric Schwartz. I'm the cofounder and president of
20 Citizens Schools.
21 Our mission at Citizens Schools is to help
22 educate children and strengthen the community
23 through a network of ten after-school and summer
24 school programs spread across the City of Boston.
25 We have had a chance to work closely with both Fleet
0279
1 Bank and, particularly in the last year, BankBoston
2 in developing really a network of adults who can get
3 involved in kids' lives.
4 I have here the course catalogues
5 representing 124 different courses are being offered
6 to 9-to-14-year-old children this summer, all led by
7 volunteers in this community, ranging from
8 seamstresses who work out of their home, to small
9 funeral home operators in Roslindale, to employees
10 of large institutions like BankBoston and Fidelity.
11 I guess the message that I would leave you
12 with is that when it comes to corporate citizenship,
13 bigger can be better. And in the case of
14 BankBoston, they have really worked with us in a
15 very hand-tailored way. We have had an opportunity
16 to work with employees in this very large
17 organization and have them provide very hand-
18 tailored and wonderful personalized support to
19 children in Boston.
20 So thank you, and I do support the merger.
21 HEARING OFFICER SMITH: Thank you very
22 much.
23 MR. LIEBERMAN: Hi. I'm Aaron Lieberman,
24 president and CEO and one of the founders of
25 Jumpstart. Thank you very much for letting me
0280
1 speak, especially before this cutoff.
2 I am here because five years ago, when I
3 first wanted to start Jumpstart as a 22-year-old
4 right out of college, I had a dream and absolutely
5 no hope of getting anyone to support us in the City
6 of Boston, but two local institutions really
7 responded.
8 The Fleet trust officer met with us,
9 figured out what could work, and provided one of our
10 first grants to get Jumpstart up and going.
11 BankBoston shortly followed with becoming one of our
12 first real corporate sponsors to support all of our
13 aspects.
14 I think that just tells part of the story
15 of how they have helped us build Jumpstart into a
16 national organization, now based in Boston, but
17 touching the lives of over 1,000 preschoolers this
18 summer. There have been so many different ways, but
19 the involvement has really been quite deep.
20 In New Haven BankBoston has been one of our
21 lead corporate sponsors. Kim Alene, a BankBoston
22 staff person, has served on our Boston Board of
23 Advisors. Volunteers from both banks have served
24 regularly at our service days. Even the little
25 stuff, the furniture that we all sit on in our
0281
1 headquarters was donated through BankBoston, and
2 they have even provided countless conference space
3 and things like that. For us it has been an
4 important partnership on all levels, and they have
5 really helped us make change.
6 Thanks.
7 HEARING OFFICER SMITH: Thank you very
8 much.
9 MR. AXELROD: Good afternoon, ladies and
10 gentlemen. My name is Carl Axelrod, and I chair the
11 New England Regional Board of the Anti-Defamation
12 League. As chairman I have the honor of delivering
13 to you the remarks -- or excerpts from the remarks,
14 given the one-minute limitation -- of Lenny Zakim,
15 our esteemed executive director who could not be
16 with us today.
17 We at the New England Office of the ADL are
18 pleased to be here today to support this merger and
19 to participate in this important hearing. We were
20 founded as a Jewish civil rights organization in
21 1913 to combat anti-Semitism and all forms of
22 bigotry and to secure equal justice for all.
23 To translate those democratic ideals into
24 action, we have utilized public advocacy, education,
25 coalition building, and programmatic initiatives
0282
1 that connect people of different racial, religious
2 and ethnic groups and economic classes with each
3 other and our community.
4 We have been fortunate at ADL in New
5 England in having Fleet participate with us in many
6 creative and new programs, including Black Jewish
7 Seder, the Catholic Jewish Seder, Team Harmony in
8 particular, and A World of Difference. The A World
9 of Difference program was supported initially by
10 Fleet and by one other major corporation. They have
11 been fantastic in terms of the financial support as
12 well as in the volunteer help that they have given
13 to us.
14 And with your permission, I would like to
15 submit the remarks of Lenny Zakim to the Board.
16 HEARING OFFICER SMITH: Yes. Please do.
17 MR. WIDMER: My name is Michael Widmer.
18 For the past seven years, I've been president of the
19 Massachusetts Taxpayers Foundation, a nonprofit
20 organization dealing with fiscal, tax and economic
21 issues in Massachusetts.
22 Both Fleet and BankBoston are strong
23 supporters of the Foundation and have taken an
24 active part in our activities. Most recently, for
25 example, BankBoston underwrote a major study of the
0283
1 Massachusetts economy which we released last week.
2 I want to emphasize two points. The first
3 is that having a corporate headquarters in Boston
4 makes a huge difference in terms of that company's
5 commitment to the community, whether that commitment
6 takes the form of leadership, dollars, volunteer
7 support, or an overall level of energy.
8 Secondly, financial services institutions
9 headquartered here have been particularly
10 conscientious in meeting their public
11 responsibilities, including both BankBoston and
12 Fleet.
13 In contrast, when local corporations are
14 bought by out-of-state entities, a sharply reduced
15 commitment to this community inevitably follows.
16 Given these facts, the merger of Fleet and
17 BankBoston with headquarters in Boston is especially
18 important for this city, state, and region.
19 Thank you.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 MR. REICKER: My name is Edward Lane
23 Reicker. I've been a banking lawyer for nearly 40
24 years and a banking law teacher for about 20. I
25 will leave some remarks with the panel.
0284
1 But in brief, it seems to me that if the
2 past 20 years teaches us anything, it is that
3 mergers of this magnitude are inevitable. So the
4 only real question is whether this merger is
5 superior to some of the other kinds of mergers that
6 might come along if this merger is not approved.
7 And it seems to me that the banking public
8 and borrowers will be better served by dealing with
9 bankers that they know in Boston, rather than
10 bankers in perhaps San Francisco or New York or
11 Frankfurt. I think that would even be true for
12 community activists who would rather negotiate their
13 demands with bankers they know.
14 And, finally, it seems to me that as a
15 citizen of Massachusetts and a resident of Boston,
16 both Massachusetts and Boston will be better places
17 if they are the home of a major global banking
18 organization.
19 Thank you.
20 HEARING OFFICER SMITH: Thank you.
21 MR. BROWN: I'm David Brown, the CFO and
22 part owner of the Purple Cactus, which a burrito and
23 wrap bar. We have two locations, one in the South
24 End and one now in Jamaica Plain. I have menus if
25 anybody is hungry.
0285
1 This winter we were at a critical juncture.
2 We had eroded a lot of our capital. We had lost
3 some money through mistakes. We had one really
4 strong store, and we found a great location.
5 We went around to talk to banks. I heard a
6 lot of "We don't do restaurants. You're not making
7 money. Come back in a year." But we found a bank,
8 Fleet, that really believed in us. They came, Grant
9 Patterson, others came. They met with us, they ate
10 the food, they saw our lines. They took our
11 financials, and three weeks later we had conditional
12 approval.
13 A lot of work went on from there, but they
14 really made us turn the business around, and we're
15 very grateful. And if that's what they are going to
16 do for small businesses as a combined entity, the
17 area will be better off.
18 Thank you.
19 HEARING OFFICER SMITH: And, last.
20 MR. FARRELL: My name is William Farrell.
21 I'm general counsel to the Rhode Island Bankers
22 Association. The RIBA is the major trade banking
23 association for the banking community in Rhode
24 Island. Bank of Boston, through its former
25 subsidiary The Rhode Island Hospital Trust, and
0286
1 Fleet have been active members in our association
2 since its inception in 1915.
3 One of the major objectives of our
4 association has been to develop the legal and
5 regulatory environment that would foster the
6 development of a major national banking association
7 located here in New England. I believe that this
8 proposed merger goes a long way in accomplishing
9 that objective.
10 I have also had numerous opportunities to
11 work with both institutions on community issues, and
12 I believe the initiatives that have been approved in
13 the past will continue with this new merger.
14 Thank you.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 At the Presiding Officer's prerogative, we
18 are going to skip for the moment Panels 11 and 12
19 and go to Panel 13, which includes Congressman
20 Barney Frank and Congressman Delahunt. If you would
21 come on up.
22 (Pause)
23 HEARING OFFICER SMITH: I'm pleased to
24 welcome you, and if you would start.
25 CONGRESSMAN FRANK: Thank you very much. I
0287
1 appreciate being taken at this point. And I, thanks
2 to the Massachusetts Legislature's whims, have a
3 district that goes from about a mile away from here
4 down to Wareham, and I was in parts of it today, in
5 Fall River and New Bedford, and wasn't able to get
6 in earlier. I appreciate your accommodating me now.
7 This decision that the federal regulators
8 will be making is very important both in itself and
9 as an example of the most important public policy
10 issue, I believe, facing this country today. I feel
11 similarly today the way I did when we passed the
12 banking bill last week, a very important piece of
13 legislation that will be soon going to a
14 House-Senate conference. And I expect to be a
15 conferee, and I want to make the same point in that
16 venue that I want to make here.
17 We have been doing an excellent job in
18 America in fostering the conditions in which
19 capitalism can flourish, and that's a good thing.
20 We all benefit when capitalism flourishes. Wealth
21 is created, and that wealth is available for
22 satisfying our needs.
23 We have not done nearly as well in seeing
24 to the equity with which that wealth is distributed.
25 And in some cases, we're not simply talking about
0288
1 the rich getting richer and the rest being left
2 behind. In some cases, the very process by which
3 capitalism flourishes erodes the condition of some
4 other people.
5 There are elements of that in the
6 international competition in technological advance.
7 And what we have got to do is to find a better way
8 to go forward with setting the rules by which the
9 capitalist system advances, but we do better by the
10 people who are not automatically going to benefit.
11 Let me say this is not simply a matter of
12 equity, it is a matter of self-interest. A country
13 in which a substantial number of the population sees
14 itself more threatened than advanced by economic
15 measures of the sort we talked about in the Congress
16 last week or this merger represents will block that
17 from happening.
18 People who are in the financial community
19 ought to understand, if they don't do a better job
20 of dealing with these equity and fairness issues,
21 they will generate resistance to those measures
22 which they believe, and which I often agree with
23 them, are in our overall interest. People will not
24 sit idly by and be left behind.
25 And in deference to the chairman of this
0289
1 august system, the Federal Reserve System, Mr.
2 Greenspan, I have to differ with him. He gave a
3 speech a couple of months ago. This is really very
4 relevant. He was talking about trade, but it has to
5 do with the whole process of technical and economic
6 advance. He said, "Yes, sometimes some people will
7 get hurt, but they should understand that this is
8 part of the process of creative destruction
9 described by Joseph Schumpeter, and it leads in the
10 end to better results."
11 Perhaps he would like to come to Fall River
12 and New Bedford and preach Schumpeter to people who
13 are losing their jobs. I have not found it
14 fruitful, and it is not a process that I wish to
15 pursue.
16 Instead, what I want to do is to say we
17 will understand that there is an element of creative
18 destruction. It's very important for us to
19 understand this. Progress overall will mean some
20 pain for some people, and we have a responsibility
21 to alleviate that. That's what I'm talking about
22 here today, because unlike some others who may be
23 critical of this merger, I think it's inevitable,
24 and therefore a good thing, because I think it is a
25 bad thing to object to the inevitable.
0290
1 Technology is clearly driving the market.
2 Clearly, a merger was called for. Having it
3 headquartered in our area, I think, is a good thing.
4 So I am in favor of this merger. I think it is a
5 recognition of economic reality, just as I was in
6 favor of many of the pieces of legislation we voted
7 on last week that would relax restrictions on banks
8 and allow banks and other financial institutions to
9 come together more. I think that's where the
10 technology and the market take us.
11 But just as I voted against that bill last
12 week, I would vote against this merger, if I had to
13 vote on it today, under the conditions that have
14 been presented to us. That is, it does a good job
15 of advancing the functioning of the capitalist
16 system in our region. I do believe the
17 intermediation function will do well.
18 Having these two institutions merge has a
19 great deal of promise and was probably driven by
20 market forces, but it is not enough just to do that.
21 It is not enough to say, to the significant
22 percentage of our people who will be left behind,
23 that that's all we're going to do.
24 We recently had a very good report issued
25 by Ed Muscovitch about the 495 dividing line in
0291
1 Massachusetts, about our two economies, about an
2 economy where technological change and globalization
3 are very good news. People who are in the
4 information industry, people who are in software, in
5 biotechnology, in financial services, they do very
6 well.
7 But I just left a lot of people who used to
8 be fishermen, people who did basic manufacturing,
9 people in industries where America is not advancing
10 as much. And they're being left behind, and there
11 is no reason for that. That's a failure of will;
12 it's not a failure of capacity. So that's the model
13 that I hope you will insist on in this case.
14 Yes, the merger should go forward, as long
15 as, as part of that merger, the legal and moral
16 obligations represented by the Community
17 Reinvestment Act are fully supported, and it is very
18 important that the Community Reinvestment Act be
19 seen both as a legal and a moral obligation.
20 Those who are wealthy and will get
21 wealthier, those who will prosper, those who will
22 progress, have an absolute obligation to extend a
23 helping hand to the people who would otherwise be
24 left behind. And it's not just their obligation,
25 it's common sense, because if they don't, they will
0292
1 build up resistance.
2 Now, let me say I have been talking to CEOs
3 of banks for some time. I have urged them to meet
4 with a variety of groups that are interested in
5 affordable housing and economic development. They
6 have begun the process of meeting.
7 But I must tell you that, watching them
8 deal with various aspects of this, it is clear to me
9 that meeting the moral and legal obligations of the
10 Community Reinvestment Act have not been highest on
11 their agenda.
12 We have some substantive promises that look
13 reasonable, but they are at this point only promises
14 with very little in the way of specifics, either as
15 to what actually is going to happen in the housing
16 and economic development area in particular
17 regions -- you can't build housing in general, you
18 can't help economic development in general; it has
19 got to be specific as to where it's going to happen,
20 and you have to be talking about organizations you
21 are going to work with. We have to know that
22 they're going to be monitoring operations.
23 So I will be strongly urging -- I am doing
24 this now -- the Federal Reserve to hold off on
25 approval of this merger until we get from the two
0293
1 institutions specific, reasonable statements of what
2 they plan to do to meet their community reinvestment
3 obligations in conjunction with the very responsible
4 organizations that have a great deal of experience
5 in doing this. That is, I think the merger is a
6 good thing on its own terms, but I voted against the
7 bill last week, as I said, not because of what it
8 did, but because of what it didn't do. I approved
9 of what it did, but it didn't do enough.
10 The merger taking these two important New
11 England institutions and giving them a chance to
12 work together, that's a good thing, but it is not a
13 sufficient thing. I guess that's the answer. The
14 merger of these two institutions is a necessary but
15 not a sufficient set of actions for what we need in
16 our region.
17 Yes, I want to see a strengthened
18 institution, but I want to see as well specific
19 actions promised and described that are going to
20 help the people who otherwise get left behind.
21 I should add finally that I was very
22 pleased with the Justice Department statement that
23 among the things we will have is a bidding process
24 for the assets to be divested. That will allow
25 community banks to be strengthened. Efficiency is a
0294
1 good thing, large institutions do good work, but
2 having locally based institutions are a part of the
3 kind of overall picture we want.
4 So I urge you very strongly, as I said --
5 and I will be continuing this view in other
6 forums -- I know the Federal Reserve will have a
7 great deal of interest in the outcome of the
8 Conference Committee. And as a member of that
9 Conference Committee, my view on the speed with
10 which we can pass a banking bill will be somewhat
11 colored by how well we do with the current process.
12 And I hope that we will have some -- I hope you will
13 show me that the Fed is capable of enforcing the
14 Community Reinvestment Act.
15 Let me just close with a quotation. Some
16 people have argued that the Community Reinvestment
17 Act is kind of a nuisance and an interference and it
18 detracts from the ability of the capitalist
19 institutions to perform their important function,
20 and it is very important function.
21 I received a letter from the Governor of
22 the Federal Reserve Board a few years ago whose
23 responsibility it was on the Board to monitor the
24 Community Reinvestment Act, the Home Mortgage Act,
25 and other social elements. And he wrote me a long
0295
1 letter amplifying testimony which said, "There is no
2 evidence that any of these laws have caused us any
3 harm whatsoever. They have not raised safety or
4 soundness issues. They have no way interfered with
5 the main function of banks."
6 The author of that letter is a man named
7 Lawrence Lindsey. He is no longer the Fed Governor
8 in charge of this. He is now the chief economic
9 advisor to Governor George W. Bush. So I think we
10 have a pretty good pedigree here to say that there
11 is no reason for capitalists to fear this. Indeed,
12 in their own self-interest, I hope they will embrace
13 it with more enthusiasm than they have shown so far.
14 Thank you.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 CONGRESSMAN DELAHUNT: Thank you. I think
18 I'll just associate myself with the remarks of my
19 colleague on the Banking Committee. I do share a
20 lot of his sentiments.
21 He referred to substantive promises
22 combined with a lack of specificity and a lack of
23 detail. That causes me a similar concern.
24 I think what would be appropriate here is a
25 thoughtful conversation, negotiations if you will,
0296
1 among the stakeholders to design a plan with
2 specificity memorialized in writing to be reviewed
3 by the Board.
4 And I'd go beyond what Barney just
5 articulated in terms of the CRA. I would suggest
6 that the resulting entity has clearly a legal
7 obligation but also truly, as he indicated, a moral
8 obligation far in excess of the CRA.
9 He and others have talked about the fact
10 that it's a good merger because it's inevitable.
11 There is this aura of, well, inevitability: "We're
12 here. Truly, the economy has changed. We are now
13 in a different world." It's true that the economy
14 is global in nature. Competition has changed. We
15 now compete on an international level.
16 Now, I don't know whether that's good or
17 bad. I have serious reservations about it. I only
18 hope that someday we will not rue the consequences
19 of not having done something positively and
20 constructively and thoughtfully and reflectively
21 until we reach that time that everybody predicts we
22 will have two or three large megabanks in this
23 nation.
24 I daresay I would hope that they would not
25 err and make the same mistakes as we all witnessed
0297
1 back in the late '80s and in the early '90s. It
2 clearly had a devastating impact here in the
3 Northeast. But I also, too, recognize that the
4 world is change and it is inevitable.
5 I would like to address -- I'm not going to
6 get into the specifics, but what I would like to
7 address is the broader transformation of the
8 financial services industry of which this particular
9 transaction is really only the latest manifestation,
10 and to the extent to which what is happening in this
11 industry is part of an avalanche, if you will, of
12 mergers taking place on an unprecedented scale,
13 again, not just domestically but internationally.
14 And I also clearly recognize your role in
15 reviewing this transaction is a narrow one, and your
16 task is to examine the effects of this particular
17 merger on competition and on the convenience and
18 needs of the communities served by these
19 institutions. Yet I suggest that you cannot carry
20 out this mandate without taking into account the
21 competitive environment in which this merger is
22 taking place.
23 It was just about a year ago that the House
24 Judiciary Committee held an antitrust hearing on
25 consolidation and competition in the financial
0298
1 services industry. At that hearing -- and I'm
2 quoting here -- Governor Lawrence Meyer of the
3 Federal Reserve Board testified that over 7,000 bank
4 mergers had taken place since 1980 and that the pace
5 was continuing to accelerate.
6 At that time, nearly 75 percent of domestic
7 banking assets were held by the 100 largest banks,
8 25 percent by the top ten banks alone. I guess this
9 is what we talk about when we use the term
10 "inevitability."
11 That was before, by the way, this past
12 year's string of colossal mergers, including the
13 acquisition of the Bank of America by NationsBank,
14 which I understand placed 8 percent of all U.S. bank
15 deposits under the control of the resulting entity.
16 And I'll acknowledge that this phenomenon is not
17 unique to the financial sector.
18 Again, having served on the Judiciary
19 Committee, we have had the opportunity to review the
20 impact of mergers and acquisitions on many sectors
21 of our economy. And it seems to me that whether one
22 looks at banking or aerospace, health care or
23 telecommunications, the ultimate question ought to
24 be the same: What is the effect of these
25 transactions on the life of our communities and the
0299
1 well-being of our workers, consumers, and the
2 neighborhoods that sustain them?
3 I would suggest that this is the concept of
4 moral responsibility that my colleague referred to
5 earlier.
6 Now, some mergers will create some economic
7 efficiencies that are and will be in the interests
8 of both shareholders and the public. Now, some may
9 be consolidation mergers dictated by genuine
10 business necessity as opposed to proxy fights and
11 leveraged buyouts and hostile takeovers that we saw
12 in the 1980s.
13 But even where this is the case, most of us
14 would agree, hopefully, that economic efficiencies
15 are not the only values at stake. And whether your
16 preferred metaphor is the demise of the independent
17 drugstore with its soda fountain or the Bailey
18 Building and Loan Company immortalized by Frank
19 Harper, the displacement of local institutions
20 represents a loss of much of the glue that binds us
21 together as communities through the hard times. And
22 that's what we're really talking about.
23 There is great prosperity right now. We
24 all know that this is not going to last forever.
25 And it was only 30 years ago that Justice Douglas on
0300
1 the Supreme Court warned that economic control was
2 being transferred from local communities to distant
3 cities where men on the 54th floor with only balance
4 sheets and profit-and-loss statements before them
5 decide the fates of communities with which they have
6 little or no relationship.
7 It seems to me that the sheer pace and
8 volume of today's merger mania suggests that the
9 danger that Douglas was describing is at least as
10 great now as it was back then.
11 Again, we all recognize that change is an
12 irreducible fact of life, this sense of
13 inevitability. But to me, it isn't mere nostalgia
14 or being sentimental to worry about the damage that
15 may be done to local economies when a giant bank
16 merger closes scores of branches and wipes out
17 thousands of jobs.
18 It's not naive to ask what happens to lower
19 and middle class families struggling to afford a
20 home, what happens to neighborhood businesses that
21 need fresh capital to expand or simply to stay
22 afloat, what happens to the local tax base when
23 these businesses go under, and what happens to local
24 charities that depend on corporate support to make
25 their payroll.
0301
1 Now, I know that such concerns are unlikely
2 to prevent this merger from going forward, and it
3 will proceed like thousands have before it.
4 According to Governor Meyer's testimony last year,
5 the Board has only denied some four merger
6 applications during the entire decade.
7 But I think it's important, and
8 Representative Frank indicated, there is unanimity
9 among the Congressional delegation, I think it is
10 important to state, at least members of the House,
11 to ask that the Board require the parties, as a
12 condition of approval, to enter into clear and
13 enforceable undertakings that will mitigate these
14 concerns. Get it in writing. Let's have it in
15 writing after a negotiated process with the
16 stakeholders in the community.
17 Now, these commitments should provide for
18 increased lending in underserved communities, new
19 investments to revitalize older, lower-income
20 neighborhoods, and assistance to the some 5,000 --
21 that's what I read in the newspapers -- 5,000
22 workers and their families who will lose their
23 livelihoods as a result of this transaction.
24 And I thought it was interesting to note --
25 and, again, I'm quoting here -- a spokesman for
0302
1 Fleet Bank, Mr. Mahoney, who stated severance
2 packages for laid-off workers will be among the most
3 generous in any merger. Well, let's get it in
4 writing, and let's hope that that is the case.
5 And as, again, Representative Frank
6 indicated, a divestiture plan that makes adequate
7 provisions for bids by smaller and medium-sized
8 institutions with roots in the communities they
9 serve.
10 I would also suggest and submit that these
11 commitments, once they have been entered into, the
12 Board and the Department of Justice carefully
13 monitor their implementation to assure they are
14 fully carried out once the merger has been
15 consummated.
16 And while I don't have a specific remedy in
17 mind, I believe the Board should exercise its
18 authority to fashion significant sanctions to be
19 applied if full compliance is not achieved. If it's
20 not achieved, there ought to be a sanction imposed
21 upon the resulting entity.
22 Now, this is especially important in light
23 of a study that was presented by economists and
24 community organizations regarding Fleet's conduct
25 following previous mergers. Let me cite this one
0303
1 study done by a professor from the University of
2 Massachusetts. Clearly, I can't verify its
3 accuracy, its methodology, but this is what was
4 said.
5 He looked at mortgage lending by Fleet and
6 Shawmut in 1995 and compared those figures to
7 Fleet's lending levels in 1997 following its
8 acquisition of Shawmut. According to Professor
9 Campen, Fleet's 1997 lending, both overall and to
10 traditionally underserved borrowers, was
11 approximately half of what Fleet and Shawmut had
12 done jointly in 1995.
13 Well, if such statistics are to be
14 believed, they suggest that binding commitments are
15 important. I also recognize that the Bank of Boston
16 in a different way had a much different record and
17 was very positive.
18 But let me conclude by daresaying that I
19 would hope that the Board would take these
20 suggestions and reflect on them. And to sum it up,
21 I guess it's get it in writing, and if there is not
22 full compliance, that there be a mechanism to impose
23 sanctions on the resulting entity.
24 Thank you.
25 HEARING OFFICER SMITH: Thank you very
0304
1 much.
2 Any questions?
3 Thank you very much for coming this
4 afternoon. And now we will move back to Panel 11.
5 (Pause)
6 HEARING OFFICER SMITH: Thank you very much
7 for your patience.
8 Now, where we have two people from the
9 organization, is one of you making the presentation?
10 MS. ALLEYNE: Both of us.
11 HEARING OFFICER SMITH: Are you sharing
12 your five minutes?
13 MS. ALLEYNE: Yes.
14 MR. CALLAHAN: We're actually told we had
15 five minutes each. I am planning to take one
16 minute.
17 HEARING OFFICER SMITH: And then she will
18 have four.
19 MR. CALLAHAN: Can she have five? We have
20 been here since nine.
21 HEARING OFFICER SMITH: Can we start with
22 Mr. Callahan.
23 MR. CALLAHAN: Sonia is going to start.
24 HEARING OFFICER SMITH: Okay. Fine.
25 MS. ALLEYNE: First of all, I would like to
0305
1 thank you for the opportunity --
2 HEARING OFFICER SMITH: Would you say your
3 name and organization, please.
4 MS. ALLEYNE: My name is Sonia Alleyne.
5 I'm the director of community investment for the
6 Massachusetts Affordable Housing Alliance.
7 Our question for you today isn't should the
8 Federal Reserve Board approve the merger of
9 BankBoston and Fleet. Everyone in this auditorium
10 knows that the Fed will approve this merger. The
11 Fed almost always approves mergers whether or not
12 they benefit consumers, so let us suggest a
13 different question:
14 Will the Fed use its power to require an
15 aggressive, detailed Community Reinvestment Act
16 agreement from Fleet and BankBoston? Will the Fed
17 insist that low-income communities be better served
18 after this merger than they are now?
19 The Massachusetts Affordable Housing
20 Alliance is a statewide nonprofit organization
21 working to increase public and private sector
22 investment in affordable housing. Our campaigns
23 since 1985 have resulted in over $2.2 billion in
24 commitments to lower-income neighborhoods throughout
25 the Commonwealth. Our Grass-Roots Home Buyers Union
0306
1 based in Dorchester negotiated CRA agreement with
2 ten area banks, including Fleet and BankBoston, for
3 over $500 million in below-market mortgages,
4 mortgage commitments, since 1990.
5 Fleet and BankBoston have a tremendous
6 opportunity to create the best urban community bank
7 in the country, and the Federal Reserve can help
8 them get there. In Massachusetts, Fleet has a
9 chance to go much further in developing a model for
10 a true bank-community partnership.
11 Fleet's history in Massachusetts has been
12 decidedly mixed. Fleet has demonstrated an ability
13 to pump out low-cost mortgages to lower-income,
14 first-time home buyers. Indeed, Fleet and
15 BankBoston have been the leading lenders in the
16 state's most affordable mortgage program, the soft
17 second, first-time home buyers program.
18 On May 12 of this year, Fleet and
19 BankBoston pledged to make 1100 of these mortgages
20 in Boston before 1200 people, community residents at
21 a MAHA meeting in the athletic center in Roxbury.
22 But yet, as UMass Professor Jim Campen points out in
23 his recent study, Fleet has fallen far short of
24 meeting the goal of one plus one equals two in
25 mortgage lending to minority and low- and
0307
1 moderate-income borrowers after their merger with
2 Shawmut Bank in 1995.
3 We have asked Fleet to commit another 1500
4 soft second mortgages outside of Boston over the
5 next five years. If they do this, one plus one will
6 be greater than two in this program, which has both
7 lower than normal delinquency rates and saves home
8 buyers up to $200 a month.
9 Fleet should build on the success of
10 BankBoston, which has shown the country how to make
11 an urban branch network profitable through its First
12 Community Bank. Fleet must challenge all of its
13 executives to add innovation and flexibility to
14 their game plan in urban neighborhoods.
15 BankBoston, during its merger with BayBank,
16 made an impressive statement about innovation when
17 they agreed to convert the $90 million loan
18 commitment to the Massachusetts Housing Partnership
19 to $10 million in equity contribution.
20 For the past year and a half, Fleet has
21 looked at this possibility but ultimately rejected
22 it. Now Fleet has another chance. This merger will
23 result in a loan commitment of somewhere between
24 $300 million and $600 million to MHP. In today's
25 market, developers need more equity. Fleet can help
0308
1 solve the equity gap, and the Federal Reserve can
2 help them get there. Fleet and BankBoston can
3 welcome lower-income customers instead of driving
4 them into the greedy arms of check cashers.
5 The Massachusetts Community and Banking
6 Council has developed a Basic Banking for
7 Massachusetts Program which established minimum
8 criteria for qualifying low-cost checking and
9 savings accounts. Both Fleet and BankBoston
10 participate in the program, but more needs to be
11 done. It is not just enough to have an account; you
12 must market it.
13 Fleet should build on the success of the
14 marketing campaign done by BayBank in 1994 and 1995
15 and make a commitment to open 42,000 new basic
16 banking accounts for low-income consumers in
17 Massachusetts over the next two years. Fleet can do
18 this, and the Federal Reserve can help them get
19 there. Fleet and BankBoston can create a new model
20 for megamergers.
21 Fleet did not use its press conference on
22 March 14, 1999, to hype a multibillion dollar CRA
23 plan that would have been meaningless and hopelessly
24 short on details as other banks have done. Fleet
25 then decided to meet with 125 groups in 30 days to
0309
1 listen to suggestions from community banks and
2 organizations.
3 Last week, however, Fleet unveiled to the
4 community groups a $14.6 billion plan that was short
5 on details. Yesterday, Fleet filled in some but not
6 all of these details. It is still a work in
7 progress. Fleet has listened to some of our
8 concerns, but Fleet's work is not done.
9 We join other groups throughout the
10 Northeast in asking the Federal Reserve Bank to
11 extend the comment period for a period of two weeks,
12 or as Congressman Capuano says, for 30 days, fine
13 with us, from the date on which Fleet delivers its
14 final plan to the community groups. Fleet needs to
15 made make a statement to the community and others
16 that bigger can be better.
17 This agreement should push Fleet to do
18 more. Fleet should assure that one plus one is
19 greater than two, as stated by Terry Murray and Chad
20 Gifford when they announced the megamerger. And
21 Fleet and the community groups should demand and
22 expect mutual accountability, and you can help us
23 get there.
24 Do not approve this merger until or unless
25 Fleet agrees to sign a detailed, verifiable CRA
0310
1 agreement that meets the needs identified by
2 community organizations throughout the Northeast.
3 And with your help, we can get there.
4 Thank you.
5 MR. CALLAHAN: Thank you. My name is
6 Thomas Callahan. I'm from the Mass. Affordable
7 Housing Alliance. I will be very brief.
8 Fleet has told us -- Fleet and BankBoston
9 told us this morning a lot about the merger, what
10 will happen after this merger, but there is a lot
11 more that we don't know about this merger.
12 Some of the questions we still have are:
13 What is Fleet's commitment? What will Fleet's
14 commitment to the statewide soft second mortgage
15 program that Sonia talked about, what will it be?
16 Will they convert the MHP loan commitment to an
17 equity commitment as is needed by rental housing
18 developers? How many basic banking accounts will
19 Fleet open in Massachusetts over the next two years?
20 Will Fleet continue to fund post-purchase
21 homeowner counseling and foreclosure prevention that
22 is so needed in this era of trying to create
23 sustainable home ownership? How many loans and
24 housing tax credits in Massachusetts will Fleet
25 invest in? Will they be members of the Federal Home
0311
1 Loan Bank?
2 I could go on and on. There are too many
3 unanswered questions for the Federal Reserve Board
4 to approve this measure at this time.
5 One last comment I would have is we have
6 seen a couple of large panels with one minute each
7 talking about supporting this merger. It is
8 interesting to watch those panels as they come up
9 and speak. By my observation, most of those folks
10 talked about grants and charitable contributions.
11 In 1977, CRA was not passed because
12 community groups complained they couldn't get a
13 grant from a bank. I respectfully submit to those
14 organizations that this is not about charity, this
15 is not about grants. This is about investments, and
16 we should keep the focus, and hopefully the Federal
17 Reserve will keep the focus, on loans and
18 investments that the banks can make, not about
19 charitable contributions.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 Mr. Lozada.
23 MR. LOZADA: Thank you for your
24 consideration and having me speak today. Good
25 afternoon. My name is John Lozada, and I'm an
0312
1 attorney in private practice with a law firm called
2 Sessa Glick Quiroga & Hibbard in Boston,
3 Massachusetts, where I serve clients on small
4 business matters, employment discrimination,
5 education law, real estate law, and general legal
6 concerns.
7 My focus as an attorney has been to use the
8 legal profession to help build infrastructure
9 principally within the Latino community in
10 Massachusetts. And I have been fortunate to join a
11 law firm that both respects my career choices and
12 plays a major role in community economic development
13 in the field of affordable housing.
14 By way of background, I was raised in
15 public housing in East Harlem, New York, by a
16 single-parent mother. I'm of Puerto Rican and
17 Mexican heritage and reflect the third generation of
18 my family to live in the United States. I have
19 studied, worked and lived in eastern and western
20 Massachusetts for over 24 years, during which time
21 I've come to know much of the infrastructure of
22 Massachusetts and the Latino community of this
23 Commonwealth.
24 I have been president of the Massachusetts
25 Association of Hispanic Attorneys and have served on
0313
1 the Board of the Massachusetts Chapter of the
2 National Congress of Puerto Rican Rights, a
3 statewide grass-roots network. My experience has
4 taught me to value, respect and encourage diversity,
5 achievement, and ethics across dimensions of
6 difference, poverty, wealth, power, humility and
7 integrity.
8 I am here today to speak against the
9 proposed measure of the Fleet Bank and BankBoston as
10 it is currently before the Federal Reserve Bank. My
11 reasons for opposing this merger are fourfold.
12 First, I am deeply troubled by the overall
13 lack of cultural competency and commitment of Fleet
14 Bank and of the proposed merged bank and the Fleet
15 Bank's lack of vision into the multicultural
16 character, potential, and needs of the Latino
17 community.
18 Second, based on my experience and the
19 experience my law firm, the lack of lending done by
20 Fleet Bank in the area of affordable housing
21 development causes grave concern for the future.
22 And, frankly, billion dollar promises without
23 substantive written commitments should not suffice
24 for the Fed to approve this merger, based on Fleet
25 Bank's track record on similar promises, which are
0314
1 well documented.
2 Third, based on my experience and belief,
3 Fleet Bank and BankBoston must be challenged by the
4 Federal Reserve Bank to quantify and revise their
5 proposed $15 million investment towards technical
6 assistance in low- and moderate-income areas,
7 because that figure, spread across the states
8 Fleet-Boston will serve, will not meet the needs of
9 the Latino community to sustain technical support in
10 the area of business development.
11 Fundamentally, it is the lack of
12 understanding about how businesses function in this
13 country which poses the most daunting challenge to
14 the development of effective Latino businesses and
15 communities in Massachusetts.
16 Fourth, it is my perception and belief that
17 Fleet Bank and BankBoston have presented no position
18 on how their commitment to community reinvestment
19 will help to combat the reluctance of Latinos to use
20 commercial banking services and reduce our
21 communities' excessive reliance on check-cashing
22 institutions.
23 Finally, while I am in opposition to the
24 proposed merger of Fleet Bank and BankBoston as
25 currently presented, I see great potential for this
0315
1 merger to make a major positive difference for many
2 citizens and residents in Massachusetts,
3 particularly among Latinos, who have the gift of
4 their multiculturalism but have been most left out
5 of the economic boom that is shaping Massachusetts
6 and this nation.
7 Unfortunately, it is certain that the Fleet
8 Bank and BankBoston merger seeks, in Fleet Chairman
9 Terry Murray's words today, to be able to meet the
10 sophisticated needs of consumers. How does CEO
11 Murray respond to the question of the needs of
12 Latino borrowers who may not be as sophisticated as
13 he might like, but who are in dire need of access to
14 the resources that his megabank has to offer?
15 How many Latinos own a computer, how many
16 have achieved high school or college educations, and
17 how many have dared to dream of careers or
18 professions? In Massachusetts, a state with an
19 estimated 500,000 Latino population, the Latino
20 community is the largest minority population in this
21 Commonwealth.
22 Our numbers are explosive, as is our need
23 for education, leadership development, mentorship,
24 and finances. These are the needs that must be met
25 for the Latino community to become self-reliant,
0316
1 visionary and successful in this society, and the
2 Fleet Bank-BankBoston merger fails to address any of
3 these questions.
4 What has Fleet Bank done with respect to
5 the Latino community along the lines I have
6 mentioned? It is hard to say. I know that they
7 have supported parties and cultural events, as have
8 many other banks and institution in this state. I
9 know that they have promised $25 million in
10 charitable contributions upon the merger. And this
11 appears to be a large figure, but based on what
12 economy of scale?
13 The Latino community needs service,
14 assistance and meaningful access to resources, not
15 simply charity. How many small business loans has
16 Fleet Bank made within the Latino community? What
17 is the experience of Latino borrowers in seeking
18 loans from Fleet Bank? How difficult is it for
19 Latino businesspeople to meet the lending
20 requirements of Fleet Bank? What flexibility
21 commitment has Fleet demonstrated in its lending
22 practices? How many among the 500,000 Latinos in
23 this Commonwealth even realize that this merger is
24 pending, and what has Fleet Bank's outreach to the
25 Latino community been?
0317
1 There was apparently an outreach to 125
2 community groups. How many of those groups were
3 within the Latino community and how many Latino
4 leaders are reflected in these hearings today?
5 The fundamental reality is that the Latino
6 community must be included as a player. If we are
7 ignored, if we are not brought into these decisions
8 and processes that affect our lives, then as a
9 community, we will never be a fully contributing
10 member of this society. Fleet Bank and BankBoston
11 have the power, if not the will, to accomplish 150
12 billion times what I could ever achieve in my
13 lifetime.
14 I respectfully implore the Federal Reserve
15 Bank, please delay your approval. Make these banks
16 account to my community. Make them answer to the
17 questions I have posed. And make them put their
18 commitment into writing.
19 Thank you.
20 HEARING OFFICER SMITH: Now, Mr. Hacobian,
21 Ms. Gonzales Levine, are you sharing your time, or
22 is just one of you speaking?
23 MR. HACOBIAN: We're sharing our time.
24 MS. GONZALES LEVINE: Good afternoon. My
25 name is Rita Gonzales Levine. I'm the chairman of
0318
1 Urban Edge Housing Corporation, a nonprofit housing
2 development and economic development corporation in
3 Jamaica Plain and Roxbury sections of Boston. Thank
4 you for the opportunity to testify regarding the
5 proposed merger.
6 This testimony is informed by recent
7 meetings and conversations with representatives of
8 the two banks and includes our initial reactions to
9 a document entitled "Community Commitment: A
10 Proposal for the Fleet Boston Transaction," dated
11 June 22, 1999.
12 As we will detail later, both Fleet and
13 BankBoston have been strong partners for Urban Edge
14 during the past several years. In fact, Urban
15 Edge's history goes back nearly 25 years with both
16 banks, if we include banks that have merged with or
17 been acquired by Fleet and BankBoston. Urban Edge's
18 success of the past 10 to 15 years would have been
19 impossible without the strong partnership with Fleet
20 and BankBoston.
21 We ask you for your support for the
22 following four requests that we have already made to
23 Fleet and BankBoston in our recent meetings with
24 their representatives.
25 No. 1: We must monitor the impact of the
0319
1 Fleet-Boston merger on Boston's neighborhoods and
2 ensure that the City and its neighborhoods gain and
3 not lose ground. We must work together to determine
4 the best indicators for this effort, and we must
5 have a way of measuring and reporting the impact
6 credibly and consistently over time.
7 We urge, secondly, that there be a written
8 agreement between Fleet Boston and coalitions of
9 community groups and public sector entities. Urban
10 Edge is a signatory to the proposal submitted to
11 Fleet and BankBoston by the MACDC, the Massachusetts
12 Affordable Housing Alliance, and the Organization
13 for a New Equality.
14 An agreement or comparable written
15 statement is important for several reasons. First,
16 an agreement will clearly articulate the commitments
17 being made by the banks. Second, it will provide
18 details to be monitored and, if necessary, adjusted
19 over time. Third, with the possibility that the new
20 bank may itself merge with another bank in the
21 future, commitments contained in a written agreement
22 have a greater likelihood of surviving future bank
23 consolidations.
24 We urge that the commitment of the merged
25 bank to the Mass. Housing Partnership Fund be
0320
1 converted to equity. There is a critical need for
2 resources to produce and preserve affordable rental
3 housing in Boston and throughout Massachusetts.
4 With reductions in federal and state rent subsidies,
5 we find it difficult to use loan capital for
6 affordable rental housing production. The estimated
7 $30 million to $50 million in equity that the
8 proposed merger could yield would go a long way to
9 help meet the urgent affordable housing needs of
10 Boston and its neighborhoods.
11 Lastly, we ask that the Eggleston Square
12 branch of Fleet Bank remain with Fleet-Boston and be
13 exempt from divestiture. We urge that Fleet and
14 BankBoston branches that were established as a
15 result of negotiations with the Community Investment
16 Coalition be considered in a special category of
17 branches. Two of these branches are located in the
18 Urban Edge service area. We are pleased that the
19 BankBoston branch in Hyde Square will continue to
20 operate as part of the Fleet-Boston system.
21 The Fleet branch in Eggleston Square is the
22 first bank branch ever in this neighborhood and was
23 opened as part of the commitment to take over Bank
24 of New England. The Eggleston Center development
25 was made possible by the Fleet commitment to open
0321
1 this branch and led to considerable economic
2 development in the Eggleston Square area.
3 With the sale of this branch, Fleet-Boston
4 risks sending a message to the community that its
5 needs are not as important anymore. We believe this
6 is not the intention of either bank. We are told
7 that it is a regulatory requirement.
8 If the branch must be sold, we urge that
9 the purchasing bank be required to commit to
10 continue to operate the branch and continue the
11 important position the Fleet branch has gained in
12 the community during the past seven years.
13 HEARING OFFICER SMITH: Would you take
14 about a minute.
15 MR. HACOBIAN: Yes. I'll wrap up.
16 I'm Mossik Hacobian, also from Urban Edge.
17 In response to the package that we received
18 a couple of weeks ago, we understand there's a new
19 interpretation of the initial statement of one plus
20 one equals greater than two.
21 As we understand, we are to measure that by
22 the performance of the BankBoston-Fleet merger, the
23 merged entity, plus the incoming bank. This is a
24 more practical, perhaps, interpretation of what was
25 initially announced, but it requires a much more
0322
1 complicated monitoring process and implementation,
2 which we urge the Fed to require both the merging
3 banks and the incoming bank to commit to monitor and
4 implement.
5 I would like to stress that, as Rita said
6 earlier, a great deal of success has been achieved
7 in our neighborhood with Fleet and BankBoston's
8 commitments. The Eggleston branch -- the Fleet Bank
9 branch in Eggleston Square started the whole
10 revitalization effort that continues.
11 BankBoston was the major contributor to the
12 CDC Tax Rate Collaborative Fund with a $625,000
13 grant, which with Fleet's $200,000 grant and the
14 former BayBank $200,000 loan together make up more
15 than half of this $2 million fund which we're using
16 to invest in the growth of existing businesses and
17 incoming new businesses. Both banks have
18 contributed to production of thousands of units of
19 affordable housing.
20 We think all of this can continue, but it
21 can be achieved better and monitored more
22 effectively with a written agreement that we can all
23 follow over the years to come.
24 Thank you.
25 HEARING OFFICER SMITH: Thank you very
0323
1 much.
2 Staying with the order on the agenda, I
3 would like to go to Mr. Hudson.
4 MR. HUDSON: Good afternoon. My name is
5 Ozell Hudson, Jr. I am the executive director of
6 the Boston Lawyers Committee for Civil Rights. I am
7 here on behalf of my client, the client of the
8 Lawyers Committee, the Fair Housing Center of
9 Greater Boston.
10 Fist of all, I want to thank you for this
11 opportunity and thank many of the other panelists
12 who spoke earlier, especially those who urged some
13 study, some conditions be considered by the Federal
14 Reserve Board before approving this merger.
15 I want to specifically adopt and affirm
16 both the prior oral and written comments that were
17 offered by Senator Dianne Wilkerson, as well as the
18 written objections of the inner city press regarding
19 Fleet's diminished lending, mortgage lending,
20 especially to communities of color.
21 Now, basically, my theme is this, and we
22 don't have a lot of time: It's basically that due
23 to Fleet's predatory and racially discriminatory
24 mortgage lending practices and history, it is
25 imperative that the Federal Reserve Bank use its
0324
1 regulatory authority under the Community
2 Reinvestment Act to establish the parameters by
3 which the Fleet-BankBoston merger may be approved.
4 I most certainly think that it will probably be
5 approved, but I think that there should be some
6 strong conditions.
7 Now, I'm not here to bury Fleet. I can't
8 do that; it's too big a behemoth. But I am here to
9 praise it. I want to praise it for all its
10 charitable contributions, and I want to give it all
11 the recognition it deserves for its long history and
12 pattern of racial discrimination in communities of
13 color across the Commonwealth, in New England, and
14 in my home state of Georgia.
15 Because I know that in the early '90s, I
16 personally directed attorney friends of mine to
17 proceed with negotiating with Michael Bowers, the
18 Attorney General in Georgia, to take up the case
19 against Fleet, to solicit Michael Bowers' help. And
20 sure enough, as reported right here in the Federal
21 Reserve's own publication, Fleet settled the case,
22 home improvement fraud of what, $120 million, 18,000
23 borrowers.
24 That was just only one case. There was
25 another case in Augusta. Then later on, they
0325
1 settled one with the Department of Justice for
2 multimillion dollars, and that's how Bruce Marks got
3 his money. I was surprised to see him standing up
4 here this morning, but welcome on board the
5 struggle.
6 I'm here to praise Fleet for its long
7 history of doing it in very legal ways, doing it in
8 ways through its subsidiary, Fleet Investment
9 Mortgage Company -- I'll get it right eventually in
10 terms of the name, but they know who I'm talking
11 about -- and after Fleet made billions of dollars
12 through this company, then they sold it off, got rid
13 of that dirty laundry. They made billions of
14 dollars. They settled those cases. What's the
15 price of doing discrimination in America today?
16 What's the risk?
17 In other words, Fleet made a conscious
18 choice, I believe, that is, how much can we get away
19 with, and how much are we willing to pay for it?
20 And then it got to the point that they felt they
21 paid enough, they unloaded that baggage, and that
22 was that subsidiary.
23 So let's not be here to bury Fleet. No,
24 we're here to praise them for all their racially
25 discriminatory practices.
0326
1 Now, moving forward, where we need to get
2 to on this thing is the Federal Reserve Board
3 definitely needs to set some parameters, not only to
4 guide this merger, but any of the other megamergers
5 that are going to come forward in the future that
6 will speak to mergers in this area.
7 So, basically, my theme is that, and I want
8 to say this: Not only was it the mortgage lending
9 discrimination, it was the home improvement fraud,
10 because Fleet is saying, "Let the mortgage companies
11 take up the slack."
12 But these mortgage companies are predators.
13 They wouldn't stay in business unless they were
14 getting lines of credit from the banks. And we have
15 dealt with the cases where there was one mortgage
16 company -- well, it was nine of them, Resource,
17 Incorporated, each one of them set up to get a
18 different line of credit from a specific bank. And
19 Fleet settled cases in that regard as well.
20 Also more importantly, why we need this
21 written agreement, Fleet, when it acquired the Bank
22 of New England, the Bank of New England had $100
23 million offered to the community to resolve the
24 Community Reinvestment Act services. Fleet acquired
25 it. It rejected that $100 million commitment,
0327
1 walked away from it, had a side deal with Mayor
2 Flynn over some $11 million.
3 Yes, we need a written, enforceable,
4 specific agreement broken down by geographical area,
5 types of financial services that will be offered,
6 who is to benefit, what is to be the vehicle for the
7 delivery of those services, how it's to be
8 structured. And that's the important theme in order
9 to bring this matter to some type of wholesome,
10 conclusive end.
11 Thank you very much.
12 HEARING OFFICER SMITH: Ms. Malmstrom.
13 MS. MALMSTROM: Tough act to follow.
14 My name is Cathy Malmstrom. I'm the
15 banking and housing organizer for New Jersey Citizen
16 Action, which is New Jersey's largest consumer
17 watchdog coalition with 90 affiliate organizations
18 and 60,000 individual and family members. A
19 sampling of the names of our organizations is
20 included in the written testimony. I won't list
21 them here.
22 In the last 13 years, Citizen Action has
23 negotiated written CRA agreements with 28 banks
24 across the state, including the largest and smallest
25 institutions. As a result of these agreements, more
0328
1 than $8 billion has been set aside for below-market
2 interest mortgages and home improvement loans for
3 low- and moderate-income families, loans to
4 nonprofit developers for construction and permanent
5 financing, and loans to small businesses owned by
6 women and minorities in low- and moderate-income
7 areas.
8 Through 16 loan counseling offices located
9 in urban areas throughout New Jersey, Citizen Action
10 offers free loan counseling to low- and
11 moderate-income, first-time home buyers, as well as
12 home improvement counseling. Two of these offices,
13 by the way, are cosponsored by Fleet Bank.
14 In order to help banks reach targeted
15 populations, Citizen Action has worked to develop
16 and help market special products such as loans for
17 lead abatement and disabilities access remodeling.
18 Because Fleet Bank has not been
19 particularly forthcoming with regard to its overall
20 CRA pledge, and has given absolutely no indication
21 of what portion of its overall pledge will be
22 allocated to the State of New Jersey, Citizen Action
23 is requesting that the public comment period on this
24 merger be extended at least two weeks from the day
25 that Fleet submits a final and specific pledge.
0329
1 Moreover, we request that the merger
2 approval be denied unless the CRA loan and
3 investment commitment of the merged bank is greater
4 than the current level of CRA loans and investments
5 of the two separate banks.
6 When two powerful banks merge, the
7 resulting synergy creates an entity more powerful
8 than the sum of its parts. Nevertheless, the record
9 has shown that big bank mergers often result in
10 lower levels of lending to low- and moderate-income
11 communities than before a merger.
12 To assure that low- and moderate-income
13 communities are not harmed by this merger, there
14 must be a public pledge to increase the commitment
15 to the community by more than the sum of the two
16 entities' previous investments. One plus one must
17 equal more than two.
18 Fleet Bank rose to prominence in New Jersey
19 with the 1996 acquisition of NatWest, a bank with an
20 excellent record of commitment to low- and
21 moderate-income communities in our state. Fleet is
22 currently the fourth largest bank in the state, but
23 has had to struggle to bring up its level of lending
24 to low- and moderate-income communities.
25 In 1995, Fleet, Shawmut and NatWest were
0330
1 all actively lending to single-family borrowers in
2 New Jersey. Combined, they issued a total of 5,344
3 loans. By the end of 1997, more than a year after
4 Fleet had acquired both banks, Fleet Bank made only
5 3,572 loans to single families in New Jersey.
6 Lending to black and Hispanic households had
7 decreased by 32 percent and 29 percent respectively,
8 and loans to low- and moderate-income borrowers and
9 census tracts had decreased about 40 percent.
10 During that time, communication between New
11 Jersey and Fleet's home bases in Boston and in
12 Providence had more static and was less frequent
13 than that between the planet Naboo and the Imperial
14 City on the planet Corescat. We sent out signals
15 but got no help.
16 Fleet's New Jersey CRA staff had little
17 authority of their own, and lines between our
18 outpost and home base often seemed to be down.
19 Since September 1996, New Jersey Citizen Action has
20 had a letter of understanding with Fleet, which we
21 considered to be an agreement, as it contains
22 specific loan products and lending goals for New
23 Jersey.
24 Fleet Bank has already indicated to us --
25 and this is at one face-to-face meeting and at least
0331
1 two phone calls -- that it will not renew this
2 letter when it expires in September, because the
3 expiration would probably occur before the merger is
4 completed.
5 During the past year, the bank has made
6 some progress in meeting goals of this agreement,
7 but only with lots of hard work, guidance, and
8 direct participation of community organizations.
9 The bank put together a new team and seems to be
10 moving forward, but it took almost two years to get
11 a strong program underway.
12 Because there was a New Jersey plan up and
13 running, we were finally able to get Fleet to pay
14 attention to the people in our state and figure out
15 how to serve them. Considering the history, we are
16 very uneasy about Fleet's unwillingness to define
17 its pledge to New Jersey before this merger.
18 Admittedly, if you look at raw numbers,
19 Fleet's 1998 lending throughout the state has almost
20 tripled its 1997 record. We're not going to hide
21 that. But much of this activity may be attributed
22 to the flurry of refinancing activity, more than
23 four times the level of 1997.
24 Let me skip to the end. We respectfully
25 request that the Federal Reserve extend the public
0332
1 period at least two weeks from the time the bank
2 makes its detailed CRA pledge public and further
3 request that, before any merger is approved, Fleet-
4 BankBoston's total commitment be required to exceed
5 the sum of the individual banks' previous
6 commitments.
7 Please keep in mind that each affected
8 state must know what the monetary pledge to that
9 state will be. Our Fleet contacts keep telling us
10 that the bank will be doing, quote, business as
11 usual, unquote. Considering the troublesome record
12 of Fleet's activities in New Jersey, that may not be
13 an entirely comforting promise.
14 And there are details with regard to some
15 things in Jersey City and other figures that are in
16 the written testimony.
17 HEARING OFFICER SMITH: Thank you very
18 much. We appreciate it.
19 Ms. Pearson. If you can just pull the mike
20 to you.
21 MS. PEARSON: My name is Susan Pearson.
22 I've worked as a program developer and
23 psychotherapist for 25 years, ten of them in the
24 Action Center in South Boston.
25 In my work, I've been profoundly moved by
0333
1 the courage and generosity of those whom I've known.
2 I've seen people struggle to stretch too limited
3 funds in the hope that their children might thrive.
4 I've seen them conduct these tasks with dignity and
5 spirit, despite the undermining messages around them
6 which measure worth by wealth and blame them for
7 their economic status as being too lazy, too
8 unworthy, or too inadequate to pull themselves up by
9 their presumably accessible bootstraps.
10 I am here today to advocate for affordable
11 housing, and more precisely, I am here to advocate
12 for affordable housing which is affordable for
13 people of low income. Much affordable housing
14 requires an income of at least $30,000 to $60,000.
15 Very few of those I know in South Boston earn this
16 much money.
17 The circumstance of poverty makes
18 everything more difficult. Neighborhood grocery
19 stores, often the only option for those without a
20 car or cab fare, charge more money for food. Public
21 transportation can be slow and unpredictable, and
22 often child care, schools, workplaces, and homes are
23 located far from one another. And now rent is
24 becoming more costly than people can even consider
25 paying. There is no way that careful budgeting or
0334
1 fiscal counseling can alter the fact that there is
2 not enough money to cover a family's needs for food
3 and shelter.
4 I hear that we in this country are in the
5 midst of an exceptional economic surge. Business
6 Week reports that the annual salary of top U.S.
7 executives is now 419 times the annual wages of
8 their company's lowest paid workers. I do not see
9 this income trickling down as has been anticipated.
10 I can assure you that our country's lowest
11 paid workers do not work 400 times less hard, nor do
12 they perform functions which are 400 times less
13 valuable, nor do they love and want to provide their
14 children 400 times less than do the highest paid
15 workers.
16 According to National Low-Income Housing
17 Coalition figures, the hourly wage necessary for a
18 two-bedroom apartment in Boston is $16.82. This is
19 326 percent of the federal minimum wage. At minimum
20 wage, a worker would have to work 130 hours per week
21 to afford the 1998 fair market rent of $822.
22 Assuming a person worked seven days per week, that
23 would leave five hours per day to divide among such
24 activities as sleep, quality time with children,
25 errands, appointments, and transportation.
0335
1 If we are the most prosperous country in
2 the world, experiencing one of the most prosperous
3 times in our history, what does it say about us as a
4 people that so many of our citizens are being forced
5 into homelessness or abysmally substandard housing,
6 not only despite that prosperity but to a large
7 extent because of it.
8 Money is flowing into South Boston as
9 waterfront development plans progress. Three-family
10 houses are being purchased for $300,000, broken up
11 into condominiums, and sold for $300,000 for each
12 condominium. This will ultimately eliminate
13 middle-income residents as tax rates soar.
14 And now those with the lowest incomes are
15 facing homelessness. Apartments in the lowest
16 rental sections of town are listed for such rents as
17 $1200 per month for a one-bedroom apartment. Most
18 people in this area do not bring home that amount in
19 a month, and many are in need of more than one
20 bedroom. People who have lived in their apartments
21 for decades are being advised by landlords that
22 their rents will double.
23 Many public housing residences already
24 underfunded, and, as a consequence, in great
25 disrepair, are vacant and await demolition. Some of
0336
1 the remaining public housing buildings are scheduled
2 to become mixed-income residences, again, decreasing
3 the number of available low-income residences
4 available.
5 Not only are people despairing at the
6 fragmentation of their communities brought on by
7 this phenomenon, but those who resign themselves to
8 relocating to another area are discovering a similar
9 upsurge in rental prices elsewhere.
10 I cannot imagine where people are going to
11 live. For those in our culture who cannot afford
12 affordable housing, I am asking for equity so they
13 might create homes which are safe, healthy, and
14 nurturant sources of strength for meeting their
15 tasks in the larger world.
16 Over the past several months, organizations
17 have tried to develop plans for community investment
18 with banks, and the banks have refused to spell out
19 their intentions. I urge you to require banks to
20 develop precise plans and to do so in close
21 consultation with community organizations. I am
22 asking that if this merger is approved, that the
23 Federal Reserve require a dollar commitment per city
24 for low-cost housing and mortgages before it
25 approves the merger.
0337
1 In the long term, such investment is good
2 for the bottom line. Beyond the bottom line and the
3 self-interest, it is our caring and our generosity
4 which will create a world we want to live in and
5 model the image of humanity our children will
6 follow.
7 In South Boston, the same people --
8 HEARING OFFICER SMITH: Wrap up, Ms.
9 Pearson.
10 MS. PEARSON: I'll stop there.
11 HEARING OFFICER SMITH: Thank you very
12 much.
13 Thank you very much for coming to share
14 your views with us. We appreciate it. And make
15 sure that we have your written statements for the
16 record.
17 On this next panel, we have five minutes
18 with each organization. Are we starting with Ms.
19 Bodington?
20 MS BODINGTON: I'm Susan Bodington. I am
21 director of housing policy at Rhode Island Housing
22 and speaking on behalf of Rhode Island Housing and
23 Mortgage Finance Corporation.
24 Rhode Island Housing is the state's housing
25 finance agency in Rhode Island. We're a
0338
1 self-supporting quasi-public corporation. We offer
2 over two dozen housing-related programs targeted to
3 low- and moderate-income families. We administer
4 more than 13,000 federally subsidized apartments.
5 Our home ownership division provides counseling,
6 down-payment and closing cost assistance, and
7 low-interest loans to first-time home buyers. We
8 purchase loans from participating lenders and
9 originate and service loans ourselves.
10 Since 1973, Rhode Island Housing has
11 financed the purchase, construction or
12 rehabilitation of more than 65,000 homes and
13 apartments.
14 We have several concerns regarding the
15 merger of Fleet and BankBoston. BankBoston,
16 compared to Fleet, has a much better record of
17 community lending in Rhode Island and provides more
18 responsive service to lower-income customers and to
19 community groups. Rhode Island is a small state
20 with limited resources and cannot afford to lose the
21 services provided by BankBoston.
22 We are also concerned that the lack of
23 competition in Rhode Island will severely limit
24 access to financial resources unless efforts are
25 made to maintain at least the current level of
0339
1 investment by the combined banks and attract new
2 financial interests which will be required to
3 provide financial services to lower-income
4 communities.
5 Low- and moderate-income communities in
6 Rhode Island depend on financial institutions to
7 invest in their neighborhoods, their businesses, and
8 to offer financial services to first-time home
9 buyers.
10 Rhode Island Housing has experienced a
11 dramatic decline in Fleet's commitment to first-time
12 home buyers in the past five years. In 1994 Fleet
13 was our top lender, closing nearly $32 million in
14 mortgages. By 1998 Fleet had dropped to fifth among
15 lenders offering Rhode Island Housing mortgages and
16 closed only $6.6 million, a decrease in investment
17 of over $25 million.
18 And this, by the way, does not include the
19 Shawmut portfolio, where Rhode Island Housing saw a
20 decline of an additional $16 million through the
21 loss of Shawmut.
22 This is an 80 percent decline, which
23 indicates to us that there's been a shift in focus
24 from the needs of our low-income customers. Fleet's
25 share of the total mortgage market in Rhode Island
0340
1 fell during that same period from 8.8 percent of the
2 total mortgage market to only 3.3 percent in 1998.
3 During that same period, between 1994 and
4 1998, BankBoston's mortgages decreased as well, from
5 $25 million to $14 million, a 44 percent decline.
6 But they did maintain their overall effort in
7 offering Rhode Island Housing programs, and they're
8 our third most productive lender.
9 Our concern is that the Fleet trend will
10 prevail and will similarly impact BankBoston
11 participation in investing in low- and
12 moderate-income communities.
13 We have also witnessed a similar pattern in
14 the lack of attention to customer service provided
15 to low- and moderate-income borrowers. Fleet does
16 not provide the local contact that low- and
17 moderate-income customers needs to work out their
18 problems. Instead, nontraditional loans are
19 frequently sold on the secondary market and are then
20 treated as standard loans.
21 Lack of responsive servicing for first-time
22 home buyers' loans has resulted in a very high
23 delinquency rate for Fleet loans, 12 percent, as
24 compared to 6.5 percent that we see for similar
25 loans in the Rhode Island Housing portfolio.
0341
1 Financial services for lower-income
2 communities requires a commitment to training new
3 home buyers and providing the housing counseling
4 services necessary to help them succeed. Without a
5 local contact, you cannot effectively serve lower-
6 income communities.
7 We feel that Fleet should be required to
8 adopt BankBoston's community lending practices as a
9 condition of the merger. Rhode Island Housing
10 depends on the banks as partners to implement our
11 mission to provide safe, affordable, healthy
12 housing. Through consolidations there are now only
13 three major banks in the State of Rhode Island to
14 assist us with that mission.
15 Rhode Island would be losing its second
16 largest bank, a good originator with high quality
17 production as a participant in our programs, with
18 the loss of BankBoston. In return, we need Fleet to
19 assume new policies to benefit consumers and to
20 increase the level of investment in lower-income
21 communities in Rhode Island.
22 We recommend that the Federal Reserve Bank
23 require the maintenance of at least the current
24 level of investment represented by the two
25 institutions. In addition, we recommend that the
0342
1 Federal Reserve require entities acquiring the
2 assets of BankBoston in Rhode Island to make similar
3 commitments to investment in lower-income
4 communities and assure improved customer service by
5 providing local contacts who can resolve problems
6 and address customers' needs.
7 HEARING OFFICER SMITH: Thank you.
8 Ms. Clement.
9 MS. CLEMENT: My name is Brenda Clement,
10 and I'm the executive director of the Housing
11 Network, which is the state association of CDCs or
12 Community Development Corporations in Rhode Island.
13 Our member organizations work throughout the state
14 developing affordable housing, working on a number
15 of community economic development projects including
16 home repair loan programs, Main Street
17 revitalization programs, and home buyer education
18 and counseling programs.
19 We are here to express our concern and
20 opposition to the merger of Fleet and BankBoston
21 because of our concern of the lack of resources or
22 the dwindling number of resources that are available
23 in Rhode Island to address our affordable housing
24 and community economic development needs.
25 The needs are indeed great. You have
0343
1 already heard from many other states about the
2 concerns of housing needs in the Northeast, and
3 Rhode Island is no exception to that. We have one
4 of the lease affordable states in the country. We
5 have one of the lowest home ownership rates in the
6 country. We have also one of the oldest housing
7 stocks in the country, which leads to numerous
8 problems, including a major lead problem.
9 The problem is not going to be solved by
10 one entity. Government alone can't solve it,
11 nonprofits alone can't solve it, private foundations
12 and institutions alone can't solve it, but together
13 we can. If our private industry in terms of bank
14 investment and bank dollars disappear, then we are
15 indeed in serious problems in Rhode Island.
16 Over 20 years ago now, I set up my first
17 savings account with then Industrial National Bank,
18 which was Fleet's earlier beginning origins in Rhode
19 Island, setting up my savings account for my first
20 job, ironically at a bank, one of the branches that
21 will be closed as part of the divestiture plan in
22 downtown Pawtucket, another blow to a downtown
23 environment, unfortunately, that needs no other
24 blows.
25 But consequently, I've watched Fleet all my
0344
1 adult life as it's grown and developed into the
2 institution that it is, and have seen it grow and
3 develop into a way where bigger is not necessarily
4 better, particularly im my last five years here, in
5 my role as executive director of the Housing
6 Network.
7 If you will excuse the metaphor, in some
8 ways Fleet has sailed its way out of the Ocean State
9 and has left behind numerous needs and numerous
10 concerns, at least in the neighborhoods and the
11 communities that our members work in.
12 We are very concerned about the continued
13 regionalization and growth of the bank and very
14 concerned, as are other advocates in other
15 communities, about the need for a formal written
16 agreement and formal promises.
17 My old high school principal used to say,
18 "What is not said is not understood," and that is
19 very true and very clear to me, unless we see it in
20 writing, and unless we have commitments for us to
21 continue to grow as partners.
22 Even after -- Fleet certainly hasn't left
23 Rhode Island, and certainly won't leave Rhode Island
24 even after this divestiture, but we need to make
25 sure that they continue to provide services and
0345
1 resources to all Rhode Islanders. And that is one
2 of the reasons why we're here today to express our
3 concerns and to make sure the low- to moderate-
4 income individuals that we serve are continued to be
5 served and maintained.
6 We want to make sure that any agreement or
7 any promises or proposals that are made are fair to
8 Rhode Islanders, and are fair to the low- to
9 moderate-income Rhode Islanders, and that the
10 agreement is clear and broken down by state.
11 You have heard that several different times
12 already from other speakers, but to us it is
13 critical. And to us it is critical, as Susan has
14 already mentioned, because there are not many banks
15 in town in Rhode Island. It's a small state and
16 it's a small population, and when a merger of this
17 size happens, it has significant impacts on the
18 quality of life and the quality of programs in the
19 neighborhoods and communities that we serve.
20 So we urge you to consider that when you
21 are looking at and reviewing this application.
22 Thank you.
23 HEARING OFFICER SMITH: Reverend
24 Washington.
25 REVEREND WASHINGTON: I'm Reverend Joseph
0346
1 E. Washington, Chairman of the Board of Directors
2 and CEO of the Organization for a New Equality,
3 which our national headquarters are based here in
4 Boston, Massachusetts. And I am also the senior
5 minister at Brooks Memorial United Methodist Church
6 in Jamaica Queens, New York.
7 ONE is a national economic and civil rights
8 organization that works to advance economic
9 empowerment for minorities and women and others who
10 have traditionally been locked out of the economic
11 mainstream of life. ONE has labored over its
12 14-year history to encourage banks and other
13 financial institutions to do well by doing good, to
14 invest in communities and individuals that have
15 traditionally been overlooked.
16 We have been part of great strides that
17 have been made over the past decades on the part of
18 banks seeking to forge productive relationships with
19 minority and low-income communities. And we have
20 continually stressed the overwhelming importance of
21 access to credit and capital in developing the
22 economic infrastructure in our communities
23 throughout this country.
24 I would be remiss if I did not acknowledge
25 the support that ONE has received through Agnes
0347
1 Bundy from Fleet, as well as BankBoston, Ira Jackson
2 and Gail Snodis, as we tried to advocate for the
3 least of these in the United States of America.
4 The proposed merger of Fleet and BankBoston
5 represents a part of bigger is better attitude in
6 American culture and particularly in the modern
7 financial services industry.
8 Why not add one and one together and get
9 something even greater than two? This was the
10 optimistic philosophy of our CEOs Murray and Gifford
11 on March 15th. We are insisting that one plus one
12 must be greater than two, not only for the
13 shareholders who benefit financially from the
14 merger, but also for low- and moderate-income and
15 minority communities for whom bigger does not
16 necessarily mean better, and which historically have
17 not benefited from these large mega-mergers.
18 This merger, by combining the two largest
19 banks in New England into a leviathan that will
20 dwarf any regional competitor even after divestiture
21 is of serious concerns to us. The significant
22 reduction of competition that will result from the
23 proposed merger makes it especially critical that
24 Fleet and BankBoston take specific steps to ensure
25 that the new bank's ability to meet the needs of
0348
1 low- and moderate-income minority communities is not
2 jeopardized.
3 The proposed Fleet-Boston corporation will
4 be the eighth largest commercial bank in the United
5 States. It will have an opportunity to emerge as a
6 leader in the industry, not only through financial
7 services and products it offers, but also through
8 its commitment to and investment in its communities.
9 In order to make this happen, ONE, along
10 with several other community organizations who you
11 have heard from this morning and afternoon, has
12 urged the banks to make specific commitments to
13 expand successful programs and products and to
14 partner with community groups in designing and
15 implementing community investment plans throughout
16 the new bank's service areas.
17 Both banks have made significant strides in
18 community investment. Through its First Community
19 Bank, BankBoston has pioneered a delivery model for
20 banking services to inner-city and lower-income
21 communities. BankBoston Community Development
22 Corporation, the first urban investment bank in
23 America to be chartered by a commercial bank,
24 committed well over $20 million in equity
25 investments in Massachusetts alone. Fleet Community
0349
1 Development Corporation has worked to build capacity
2 in institutions that are involved in community
3 economic development in low- and moderate-income
4 areas.
5 These are real accomplishments, and the
6 point of our concern is not to diminish them, but
7 rather to assert the bank's need to tell us
8 specifically how programs like these will be
9 maintained and enhanced through the merger.
10 In the area of small business lending, for
11 example, Fleet and BankBoston have distinct records
12 and have reached different markets, and if we could
13 get the overhead on, we have a little graph for you.
14 (Overhead shown)
15 In the area of the small business lending,
16 for example, Fleet and BankBoston have distinct
17 records and have reached different markets. Data
18 reported to the Federal Financial Institution
19 Examination Council for 1997 demonstrates that Fleet
20 made a slightly greater percentage of its small
21 business loans in LMI areas that BankBoston did.
22 Actually Fleet made 22.6 percent of its
23 small business loans in LMI areas within assessment
24 areas in Connecticut, Massachusetts, Rhode Island
25 and New York State, while it made only 15 percent of
0350
1 small business loans in these areas within New
2 Jersey and New York City. This raises an additional
3 concern about the consistency of the merged
4 institution's commitment to making affordable
5 products available to minority and low- and
6 moderate-income communities.
7 At the same time, BankBoston made a
8 significantly greater percentage of smaller loans
9 than Fleet did, thereby meeting the needs of
10 business owners who require smaller amounts of
11 capital and who have often difficulty obtaining low-
12 cost bank loans for these small amounts.
13 Fleet made a higher percentage of its loans
14 to smaller businesses, those with annual revenues of
15 less than $1 million. The banks' proposed community
16 commitment to make $7.5 billion in small business
17 loans does not tell us how these different markets
18 will continue to be served.
19 ONE and other community organizations have
20 asked the banks to commit to specific percentage
21 goals in each of these areas, as well as to make
22 specific small business equity commitments and
23 commitments to investment in community-based
24 alternative loans. The specifics of what we have
25 proposed are outlined in our written testimony
0351
1 today.
2 And in closing, there are two primary steps
3 to be taken. First, the banks must engage in
4 respectful give-and-take partnership with community
5 groups who know the needs of different cities,
6 towns, and states best. These partnerships need to
7 play an active role in determining both the design
8 and the implementation of the proposed Fleet-Boston
9 Corporation's community investment commitments.
10 The second and related step is putting
11 substance behind its numbers. Fleet and BankBoston
12 must enable community groups and concerned citizens
13 to judge the adequacy of their proposed commitments
14 to low- and moderate-income and minority communities
15 by giving us detailed descriptions of what money
16 will be allocated and to which programs where.
17 Without such details, the commitments will be
18 meaningless, because they will be neither verifiable
19 or enforceable.
20 ONE therefore requests that the Federal
21 Reserve Board extend the public comment period on
22 the proposed Fleet-Bank Boston merger and withhold
23 any approval of the merger until such time as the
24 banks' community investment commitments may be
25 completed and adequately reviewed.
0352
1 Thank you very much.
2 HEARING OFFICER SMITH: Thank you.
3 Now our last speaker, whose name I will not
4 try to pronounce.
5 MR. NEIRINCKX: My name is Ray Neirinckx,
6 and I'm the coordinator of the Rhode Island
7 Community Reinvestment Association.
8 There is a wonderful quote from the
9 Tennessee William play Cat on a Hot Tin Roof that I
10 think best describes a number of the panelists that
11 have raised objections and outright opposition to
12 the merger: "We have to distrust each other. It's
13 our only defense against betrayal." And I think
14 that describes the ongoing relationship many of us
15 have with Fleet.
16 The Rhode Island Community Reinvestment
17 Association is a 13-year statewide organization
18 working to encourage public and private reinvestment
19 in the housing and community economic development of
20 low- and moderate-income neighborhoods in Rhode
21 Island.
22 Back in 1985, I was part of a group of 21
23 protestants that opposed Fleet's acquisition of
24 First Connecticut Bank Corp. 14 years later RICRA
25 again finds itself protesting another merger of
0353
1 Fleet with BankBoston.
2 RICRA has worked hard with a number of
3 organizations in the region to call for a series of
4 public hearings on this merger. Therefore, we are
5 extremely disappointed that the Board of Governors
6 of the Federal Reserve has granted only one public
7 hearing that is two weeks after the comment period
8 ended and just two days after the 4th of July long
9 holiday weekend and the beginning of prime vacation
10 time. Clearly July 7th must be bankers independence
11 day with this one-time public hearing.
12 RICRA contends that not only should the
13 comment period be extended, but a series of public
14 hearings should be held on the $14.6 billion pledge
15 that Fleet has proposed without any public written
16 program being made available for review.
17 RICRA opposes the merger for several
18 reasons, including Fleet's poor performance in the
19 areas of mortgage servicing, high consumer product
20 fees, lending activity, commitment to previous
21 agreements with RICRA. And I'm not going to go
22 through all of them, because they're presented in
23 the written testimony, but I do want to highlight
24 sort of Fleet's reincarnations, which has to do with
25 their performance with us.
0354
1 In 1995, we protested the Shawmut merger,
2 and after that we saw INCITY, Fleet Focus, and the
3 more recent 2020 Vision, which we believe in and of
4 itself, if you look at those performances, is
5 judgment enough to deny this merger.
6 Fleet Bank signed an agreement with us in
7 1986 and then amended it successfully in 1989.
8 RICRA has enjoyed a positive yet contentious
9 relationship to improve programs, practices and
10 products in the state.
11 However, since the changes within Fleet
12 since the mergers, RICRA has not been able to agree
13 to any improvements, changes, deletions or
14 extensions to our agreement. And we have to be
15 clear about this, we have no financial benefit to
16 any of the agreements we have. We don't receive
17 contributions. There is no contract with us. It is
18 just to provide the best programs and products for
19 the people of Rhode Island.
20 So what difference does it make to sign
21 another agreement with us? It is our position that
22 Fleet's failure to receive nothing higher than the
23 "satisfactory" CRA rating since breaking our
24 agreement is proof that Fleet INCITY is puff and
25 fluff. In Fleet's 2020 Vision they chose not to
0355
1 invite RICRA to their PC CRA love-fest.
2 That was fine. RICRA did not choose to
3 participate -- excuse me. However, we did choose to
4 participate in the Rhode Island follow-up meeting.
5 RICRA found nothing of substance in that event
6 either. However, in the spirit of Fleet's remarks
7 that the bank wanted input, RICRA presented a nine-
8 point program with some specific recommendations.
9 Just so Fleet cannot accuse us of being
10 unrealistic or that it was a radical plan, we'll
11 give you just a brief outline of some of those
12 proposals: Agree to apply to the Affordable Housing
13 Program of the Federal Home Loan Bank Board of
14 Boston. Agree to explore a securitization pool for
15 the refinancing of multifamily development of
16 at-risk, expiring-use products of HUD subsidies.
17 Agree to seek from the Office of the Controller of
18 the Currency approval to track small business
19 lending by race and gender, and to not charge an
20 EBT, electronic benefit transfer, ATM surcharge for
21 five years.
22 This letter was hand-delivered on May 21st
23 1998. RICRA is still awaiting a written reply.
24 All of this relates to the pledge, which
25 has not been made available in writing to us. $14.6
0356
1 billion is a promise of what, the failure of INCITY,
2 the failure of 2020?
3 If we take Fleet at its word in a
4 conversation that RICRA had on June 25th of this
5 year, that Fleet is looking to achieve an
6 outstanding CRA rating going forward, then clearly
7 the $14.6 billion, should be closer to $60 billion.
8 Finally, Fleet has announced their
9 sponsorship and affiliation with Major League
10 Baseball. In looking at the Office of the
11 Controller of the Currency's summary of state and
12 multistate MSA ratings for their CRA performance,
13 Fleet would have a .500 batting average for its
14 performance in the three test ratings for the six
15 states, a guarantee of being inducted into the Hall
16 of Fame, but deplorable for a bank. In fact, if
17 you apply a community credit scoring model, then
18 your answer is very simple: 9 low satisfactories
19 out of 18 blocks, merger denied.
20 And I would like to leave you with a little
21 bank that says "Fleet Boston" -- you press it down,
22 and it runs away -- because we think that's what
23 Fleet is going to do if you approve this merger.
24 Thank you.
25 HEARING OFFICER SMITH: We're going to take
0357
1 the next panel, and then we will take a five-minute
2 break.
3 (Pause)
4 HEARING OFFICER SMITH: We'll start with
5 Mayor Albano
6 MAYOR ALBANO: Good afternoon. Thank you
7 for the opportunity. My name is Michael Albano.
8 I'm the Mayor of Springfield, Massachusetts, a city
9 90 miles to the west of about 156,000 citizens.
10 I am here to testify not necessarily in
11 opposition nor in favor, but to ask the Board to be
12 considerate of cities like Springfield in developing
13 a policy on approving of this merger. One of the
14 common complaints I have received as Mayor of
15 Springfield is that decisions on business concerns
16 and Community Reinvestment Act dollars have to be
17 done either in Boston or some other major city.
18 What we are looking for in western
19 Massachusetts is that we do not divide the economy
20 into two areas, one east of 495 and one west of 495.
21 And it's important that we have decisions that are
22 made on the local level to encourage investment as
23 we try to rebuild a city such as Springfield. And
24 with that in mind, I would ask you to consider these
25 recommendations, should this merger be approved.
0358
1 First, we ask that the new bank name a
2 regional CEO to the Springfield bank who is
3 knowledgeable about the challenges that our city
4 faces, understands the needs of our business
5 community and the community at large, and most
6 important of all, has the capability to make
7 decisions regarding lending and community
8 reinvestment policy.
9 Now, while I am being parochial in my
10 comments today, I would say that mayors across the
11 region that this merger would impact would have
12 similar comments as mine as the Mayor of
13 Springfield.
14 Second, we ask that within the new
15 Springfield bank structure that a full-time
16 community reinvestment office be created, and that
17 it will be charged with the responsibility of
18 working with various community-based groups as well
19 as the City, in its efforts that are aimed at
20 creating new neighborhood housing and economic
21 development opportunities.
22 Third, in an effort to help the very small
23 entrepreneur, we ask that the new bank create a
24 microbusiness fund in the amount of $500,000, that
25 this fund could be modeled after the highly
0359
1 successful ACORN fund which has generated thousands
2 of new jobs particularly within the low-income
3 neighborhoods.
4 Fourth, we ask that the new bank establish
5 a pool of funds in the amount of $5 million that
6 could be used as seed capital for new businesses
7 locating to Springfield. This more venture-oriented
8 fund would be used for both product development and
9 working capital by start-up companies.
10 Fifth, to enhance our City's home ownership
11 efforts, we ask that the new bank create a pool of
12 funds in the amount of $2 million that could be used
13 for soft second mortgages and closing costs.
14 Sixth, to make home ownership a reality for
15 a greater number of people, we ask that the bank
16 commit to making $10 million in low-interest loans
17 to first-time home buyers.
18 Seventh, to assist present homeowners we
19 ask that the new bank increase their participation
20 by adding another $1 million to our very successful
21 home improvement program.
22 These are general comments about what my
23 City's needs are, and I think they are reflective of
24 cities, as I said, like Springfield across the
25 region which would be impacted by this merger.
0360
1 In conclusion, I would say that cities like
2 Springfield can be rebuilt, and we are doing that in
3 my City, but we need assistance in the form of
4 private investment.
5 This merger, if done with guarantees like I
6 have outlined, can truly make a difference in the
7 Cities like Springfield, Massachusetts. And I thank
8 you for your consideration. Thank you.
9 HEARING OFFICER SMITH: Thank you very
10 much.
11 Representative Barrios.
12 REPRESENTATIVE BARRIOS: Good afternoon.
13 My name is Jarrett Thomas Barrios. I'm the State
14 Representative from Cambridge, Massachusetts.
15 By way of background, I am on the Banks and
16 Banking Committee for the House of Representatives.
17 I'm also a member of the Housing and Urban
18 Development Committee. I also used to work at the
19 Federal Trade Commission in the Division of Credit
20 Practices, doing Equal Credit Opportunity Act work.
21 I'm also a real estate lawyer, and I want to talk to
22 you today about a very specific issue, and that
23 deals with home mortgage lending as an impact of the
24 merger.
25 We have been assured throughout this in the
0361
1 press and privately that this merger will be a one
2 plus one is greater than two. You have heard that a
3 lot today. But I would point you to some of the
4 evidence as to Fleet's past behavior in mergers
5 which would give us a cause for some concern.
6 I'm one of the founding members of the
7 Latino Caucus in the Legislature. I have been sort
8 of particularly paying attention to Fleet's behavior
9 in the Latino community, and I want to just cite a
10 couple of statistics for you.
11 Prior to Fleet's mergers with NatWest and
12 Shawmut, the total banks, those three banks lending
13 in 1995, there was, I guess, 1575 home mortgages
14 underwritten by the three banks. Post-merger in
15 1997, only 600 loans were underwritten. That's a
16 decline of 62 percent.
17 I understand that part of this perhaps has
18 something to do with divestiture post-merger.
19 However, I would just ask you to contrast that with
20 the BayBank-BankBoston merger. Post-merger, there
21 was actually an increase of 83.3 percent lending in
22 the Latino community.
23 These statistics matter because what they
24 tell us is how post-merger we might expect Fleet to
25 behave, as Fleet is the ultimate inheritor and
0362
1 director of how the lending is going to continue.
2 Fleet's takeover of BankBoston is a cause
3 of concern for us because 63 percent of loans to
4 low- and moderate-income people, to Latinos,
5 African- Americans and other minorities, come right
6 now in Massachusetts from Fleet and BankBoston.
7 What that's going to be post-merger we're
8 not sure, but nonetheless, we can be sure that Fleet
9 in large part is going to be the only game in town.
10 And for us, who are concerned about home mortgages
11 and home ownership, in advancing those goals in the
12 minority communities, we must be concerned by what
13 we see in Fleet's behavior in the past.
14 These numbers give some statistical context
15 to my community's anxiety over this merger. I want
16 to give you a little bit of business and policy
17 context as well. As a member of the Housing
18 Committee, we see a lot of legislation which
19 attempts to advance the goal of home ownership,
20 which is a policy initiative both Republicans and
21 Democrats seem to embrace.
22 Recently, we were able to secure increase
23 in funding for the soft second mortgage program, but
24 no matter what we do in the Legislature, it only
25 gets around the edges. For example, the soft second
0363
1 mortgage only is a 20 percent second mortgage. We
2 still have to have a first mortgager, someone to
3 underwrite that initial loan, somebody which is
4 usually Fleet or BankBoston if we're in
5 Massachusetts.
6 The private market really must participate
7 in our efforts if we're going to make an impact at a
8 policy level in advancing home ownership as a goal
9 throughout Massachusetts.
10 So I guess in this context the statistical
11 anxiety that many of the people have been testifying
12 today, I think, reproduces itself a little bit as a
13 suspicion: How is it that the number of loans has
14 declined so much? What is it about the business
15 behavior of Fleet which should give us concern?
16 A demonstrated record by Fleet in the past
17 of inflexible lending criteria through mortgage
18 scoring and other practices really is a cause for
19 some of this concern. Diminished number of loans
20 originated by Fleet suggests that business practices
21 inherent in the loan origination process of Fleet
22 are not the same practices of BankBoston and other
23 victims of the mergers, if you will, of past mergers
24 by Fleet, that these business practices by Fleet are
25 somehow toxic to low- and moderate-income
0364
1 communities, to minority communities, communities
2 which would like to advance as a policy goal that of
3 home ownership.
4 And now the Community Reinvestment Act of
5 course doesn't require any bank to lend more to low-
6 and moderate-income neighborhoods, to minority
7 communities, but it does allow you, as those who
8 review, through the merger process, their track
9 records, it does allow you to ask questions which I
10 am not able to as a legislator, which communities
11 activists aren't able to, as representatives from
12 their bully pulpits in their communities.
13 So I guess I would ask you, as a
14 representative of the 450,000 Latinos in this
15 Commonwealth, and the 2 million people who are low
16 and moderate income in this Commonwealth who don't
17 own homes but perhaps hope to one day, to ask hard
18 questions and be mindful of Fleet's past practices,
19 and respect the community's request for a written
20 agreements from Fleet, because I think their
21 suspicions really are well placed, and I think the
22 past practices of Fleet really are cause for grave
23 concern for all of us as to the future practices of
24 Fleet going forward.
25 Thank you very much.
0365
1 HEARING OFFICER SMITH: Thank you.
2 Vermelle Parks.
3 MS. PARKS: Good afternoon. My name is
4 Vermelle Parks, and I am a here on behalf of the
5 chairwoman of the Federal Financial Assistance
6 Committee, the House of Representatives,
7 Representative Shirley Owens-Hicks, who is also
8 serving the 6th Suffolk District.
9 Thank you for allowing me to talk about the
10 things she has entered already as testimony. Given
11 the fact that this merger will result in the closing
12 of over 200 branches, the loss of approximately
13 5,000 jobs, and the renegotiation of critically
14 important programs that address home ownership and
15 rental housing, we respectfully urge that prior to
16 the approval of this merger, the Federal Reserve
17 Bank of Boston mandate that Fleet Bank Boston offer
18 a significant written and measurable commitment that
19 will provide the loans, investments and services
20 needed for low- and moderate-income communities as
21 well as people of color.
22 We believe that flexibility and
23 underwriting guidelines is absolutely necessary in
24 order to make home ownership a reality for low- and
25 moderate-income populations. In the past ACORN
0366
1 offered a very successful first-time home buyer's
2 program in collaboration with Fleet Mortgage
3 Corporation, BankBoston and Citizens Mortgage
4 Corporation.
5 This program allowed loan applicants to
6 certify funds including Social Security, WIC, food
7 stamps, unemployment benefits, foster care money and
8 other entitlements as part of their income in order
9 to qualify for loans. The program focused on income
10 continuity rather than job continuity, and only one
11 year of good credit was required.
12 ACORN informs us that over the life of
13 their program with Fleet, only three mortgages were
14 foreclosed and that the delinquency rate was 6
15 percent. Clearly this delinquency rate is lower
16 than that of conventional loan delinquencies.
17 Therefore, we encourage Fleet to renegotiate this
18 program and similar community lending programs. In
19 fact, collaboration with local partners must be
20 expanded rather than dissolved.
21 Home ownership fosters community stability.
22 Families who have a vested interest in the
23 neighborhoods where they live become involved in
24 neighborhood improvement activities, maintain their
25 properties, thus eliminating blight in vacant
0367
1 buildings and add to the safety and economic
2 viability of our their cities.
3 Programs that serve this basic need must
4 acknowledge the reality that families who are
5 currently forced to pay exorbitant amounts of rental
6 money have the ability to pay reasonable mortgages.
7 Therefore, relaxed underwriting guidelines together
8 with community home ownership programs are crucial
9 to the revitalization of our cities.
10 With the potential loss of jobs that this
11 merger will precipitate, we are concerned that last
12 hired not become first fired. Approximately 5,000
13 individuals will soon find themselves without
14 paychecks to support their families, unless the
15 institutions that purchase these branches decide to
16 hire them, and we sincerely hope that this occurs.
17 In the event that these employees are not
18 hired, we urge the Federal Reserve to use its power
19 to assure that these employees have access to a
20 combination of private and public resources that
21 will enable them to secure transitional income,
22 training and access to other employment.
23 Additionally, we ask that our concerns
24 about the potential loss of bilingual employees, and
25 how this will affect the needs of Latina, Asian and
0368
1 other population who depend upon this assistance in
2 order to transact banking business, be addressed so
3 that the critical needs of non-English speaking
4 populations will not be negatively impacted.
5 The location of the merged entities'
6 branches is also of concern. Residents and
7 community-based organizations representing various
8 underserved neighborhoods have worked long and hard
9 to negotiate the opening of branches in low- and
10 moderate-income neighborhoods. We feel that
11 limiting access to banking services will negatively
12 impact individuals who need to establish credit
13 histories, who wish to cash checks, or who wish to
14 access any other service that banks offer in other
15 neighborhoods.
16 Finally, we believe that the nation is
17 looking at this merger and how Fleet-BankBoston will
18 respond to the needs of low- and moderate-income
19 communities as well as how they intend to honor the
20 commitments that they have made in the past.
21 This is an excellent opportunity for Fleet-
22 BankBoston to set the standard for community
23 investment practices. We sincerely hope that they
24 will accept this challenge and turn this to a win-
25 win situation for all concerned.
0369
1 Thank you very much.
2 HEARING OFFICER SMITH: Thank you.
3 Mr. Saunders.
4 COUNCILOR SAUNDERS: Good evening. I'm
5 Boston City Councilor Gareth Saunders. I represent
6 approximately 70,000 residents in Roxbury and parts
7 of Dorchester, the South End, Mission Hill and the
8 Fenway. I am a member of the City of Boston's
9 Linked Deposit Commission and have worked in the
10 banking industry in Boston in various positions. As
11 a manager of a loan office, I worked as a mortgage
12 originator and business development officer.
13 My duties as the business development
14 officer included assisting the bank with outreach to
15 the Boston community concerning the Community
16 Reinvestment Act.
17 I ask the Federal Reserve Bank of Boston to
18 listen carefully to what the people are saying
19 today. As a regulatory agency, we look to you for
20 guidance as relates to the formulation of monetary
21 policy and overseeing many aspects of the New
22 England banking system.
23 What is true from my experiences is that
24 the people, the customers, the affected communities
25 of New England must get a clearly spelled-out
0370
1 commitment from the proponents of this proposed
2 merger in writing prior to any approvals.
3 First and foremost, a strong commitment
4 must come from the top, Terry Murray and Chad
5 Gifford, accompanied with an aggressive plan of
6 implementation. This plan should include a
7 comprehensive marketing plan of the actual and
8 potential customer base with a strong emphasis on
9 low- to moderate-income earners and specifically
10 tailored programs that ensure equitable credit
11 availability to traditionally underserved borrowers,
12 because they unfortunately will be
13 disproportionately and adversely affected by this
14 proposed merger.
15 Below, I'm just going to give you a brief
16 list of what I see as some of the general types of
17 commitments that we must see in writing prior to any
18 regulatory approval.
19 No. 1, it is important that we are
20 diversity of the work force, both racial diversity,
21 gender, as well as geographical diversity. And we
22 must emphasize that we have diversity as it relates
23 to the decision-makers within the new institution.
24 No. 2, mortgage products, home improvement
25 and other consumer loans, loan products targeting
0371
1 underserved communities and populations.
2 We must look at the small business lending
3 programs of the new entity.
4 We must maintain and enhance programs like
5 BankBoston's First Community Banking and Community
6 Development Bank. These are very successful models
7 that we must keep and enhance.
8 And fifthly, there must be a comprehensive
9 approach to this proposed merger that still provides
10 consumer choices. For example, there is still a
11 niche for smaller banks like the Boston Bank of
12 Commerce. This bank has submitted a proposal to
13 purchase 18 branches that would make it the largest
14 minority-owned bank in New England.
15 And with regards to some of the other banks
16 that are looking to buy some of the assets that the
17 bank, Fleet Bank and other banks must sell off, we
18 must look to make sure that we have a banking entity
19 that is committed to this region, that has a strong
20 presence in this region and that will be willing to
21 locate its headquarters in this region. That is
22 very important, that we can go right into the
23 president's or the CEO's office and not have to jump
24 on a plane, you know, and travel thousands of miles
25 to get that type of access.
0372
1 I would like to use this example. I sat in
2 this room with some of the supporters out here more
3 than ten years ago when the Federal Reserve Bank
4 came out with a study that showed that there was
5 discriminatory lending based on race, with mortgage
6 lending the city. And what did you do? And what
7 did the community do? And what did the banks do?
8 We all came together, and I was there with
9 many of the activists in this room. We came
10 together. We worked out a plan, and we aggressively
11 attacked the problem.
12 New branches were opened in communities
13 where we have not seen branches for years. ATMs
14 were instituted in certain neighborhoods. People of
15 color and women were hired into decision-making
16 positions.
17 When we look at the underwriters for the
18 mortgages and other lending products, it is
19 important to have people who understand the local
20 economy making these decisions. And it worked.
21 From 1990 to 1994, look at the mortgage
22 rates in the minority community, particularly in the
23 African-American and the Latino communities. That
24 is a successful model that worked. And I hope, if,
25 in fact, this Board and other regulatory entities
0373
1 approve this merger, that part of that statement
2 would be that there must be a commitment, a strong
3 commitment from the top down through the ranks of
4 the bank in writing prior to any approval. That
5 way, you ensure that the underserved communities
6 will not be left out to dry.
7 Thank you very much for listening to my
8 testimony, and I hope that you would really consider
9 what I had to say and share with you this evening.
10 Thank you.
11 HEARING OFFICER SMITH: Any questions?
12 HEARING OFFICER KWAST: I have a question.
13 Mr. Saunders addressed this point, but I would be
14 interested in what Mr. Barrios and Mayor Albano had
15 to say.
16 In your experience, what has been the role
17 of smaller and medium-sized banks in the economic
18 development of a city like Springfield or in the
19 granting of housing and other kinds of loans to low-
20 and moderate-income communities?
21 MR. SAUNDERS: The question is -- who is
22 the question --
23 HEARING OFFICER KWAST: You addressed the
24 issue. I'm interested in the role of small and
25 medium-sized banks in meeting the kinds of concerns
0374
1 that you expressed.
2 MR. ALBANO: Just on the issue of dealing
3 with a bank such as Fleet and BankBoston, as mayor
4 of Springfield, we have to get decisions from Boston
5 to major economic development projects, major
6 housing projects; and that takes time. And
7 sometimes those decision makers at the top are 90
8 miles away and are not sensitive to the needs in
9 cities like Springfield. And we have to be cautious
10 about that, make sure that any type of merger
11 guarantees that there is accountability and that
12 there is investment.
13 The second part I would respond to is that
14 under the Community Reinvestment Act, I'm not sure
15 how the ratings are done statewide. I can see that
16 some banks have great ratings, but I don't know what
17 they're doing for cities like Springfield. So I
18 would like to have more of a regional Community
19 Reinvestment Act grading so that we can be sure that
20 there is investment in cities like mine. And I'm
21 not sure that we're receiving that.
22 So between the two, I mean, having to get
23 certification or approval from 90 miles away or not
24 being sure of what the grade is for the Community
25 Reinvestment Act in my particular community, I would
0375
1 hope in this Board would do something to offset that
2 so that we can have guarantees on these types of
3 decisions and these types of investments in cities
4 like Springfield.
5 MR. SAUNDERS: Can I just address -- in
6 this decade of mergers, it is important that we have
7 different size banks because the larger banks and
8 some of the mid-sized banks have no interest in
9 serving some of the small and poorer communities;
10 but there are smaller banks who have an interest.
11 So that's important that we have a clear
12 balance of the big -- from the biggest megabanks to
13 the mid-size banks to smaller banks that can really
14 give a tailored approach to the specific
15 neighborhoods needs.
16 MR. BARRIOS: I would just say as a part of
17 getting my testimony together, I took the time to
18 speak to a number of leaders both in my community
19 and Cambridge, in the Latino community in Chelsea,
20 in the greater Boston area and Jamaica Plain and
21 Roxbury; and there is generally a level of anxiety
22 about the mergers of the banks because it seems as
23 if, as Mayor Albano has said, it is sort of further
24 away, not just geographically but sort of
25 psychologically further away from the access that
0376
1 you might like to see.
2 It is always the case that -- at least in
3 my community in Cambridge -- that the community
4 banks are seen as friendlier places to go, and I
5 think that is in large part a function of size.
6 I know that Fleet has been generous to some
7 local nonprofits in Cambridge, but the perception of
8 the average person as to the accessibility of credit
9 or to community development corporations --
10 locally-based grass roots community development
11 corporations that want to do either economic
12 development or do an affordable housing project, the
13 perception is we first go to the community bank.
14 Cambridgeport Bank or Cambridge Trust are the two
15 big ones in my community.
16 Chelsea, I guess there was a bank, which
17 was recently acquired which was sort of the one
18 everybody went to. Now it is U.S. Trust, but now
19 U.S. Trust is becoming Citizens so nobody really
20 knows where they were going in Chelsea at this
21 point.
22 Smaller, at that level, I guess, induces
23 more confidence.
24 I don't know if that answers directly.
25 HEARING OFFICER SMITH: Thank you very
0377
1 much.
2 We're now going to take a five-minute break
3 and then continue with Panel 15, which is not even
4 halfway through the agenda.
5 (Recess)
6 HEARING OFFICER SMITH: Why don't we get
7 started, and the way we're -- okay. We'll do it the
8 same way as before, which is we have, what, 30
9 minutes? And we'll get as many people through as we
10 can in that time. And if anybody is left, then we
11 will move them toward the end of the day, which is
12 an encouragement to take a minute.
13 MR. WILSON: I'm John Wilson. I work at
14 MIT. I'm assistant professor and director of
15 foundation relations but more importantly, I'm head
16 of the Greater Boston Morehouse Alumni Association.
17 I want to make a simple point, and it is
18 less in the realm of Fleet's wallet -- that is, the
19 investment lending policies and financial services
20 and all these economic politics -- and more in the
21 realm of their heart. I want to highlight a
22 relationship that suggests that Fleet has been a
23 good citizen and will be a better citizen after the
24 merger.
25 I think most people are aware that the
0378
1 African-American male is worse off in any number of
2 social ills. And Morehouse College is the only
3 higher ed. institution devoted to educating
4 African-American males; and we, as an alumni
5 association in the greater Boston area, are trying
6 to address the problems as well.
7 Fleet has been a great partner with us in
8 generating scholarships. Every year, we have a Mo'
9 Better Gala, an annual glee club concert, and we
10 partner with Spike Lee. Fleet has been the flagship
11 organization. We also have a community agency
12 called Bridging Bridges, and Fleet has come not only
13 with their money but also with their presence.
14 So amidst all the voices, I want to be one
15 that says that Fleet can do the right thing, has
16 done the right thing, and will continue to do the
17 right thing.
18 And as I close, I ask you to support them
19 and also the Boston Bank of Commerce. I think Fleet
20 can do the right thing by them as well.
21 Thank you.
22 HEARING OFFICER SMITH: Thank you very
23 much.
24 MR. HAMILTON: Good evening. My name is
25 Sam Hamilton. I'm the executive director of the
0379
1 Hartford Economic Development Corporation and the
2 Greater Hartford Business Development Center.
3 HEDCo and GHBDC are private, local
4 development corporations which pride technical
5 assistance and loans to small business in the metro
6 Hartford area. We manage a pool of more than $20
7 million of which Fleet and BankBoston have been
8 substantial contributors to over the course of time.
9 Fleet also, and BankBoston, provided to us
10 support that makes our services -- both technical
11 assistance and loan packaging services -- free to
12 all who come forth looking to provide or to seek
13 lending opportunities within the city and the metro
14 area of Hartford.
15 During of the course of our 25-year
16 existing, both Fleet and BankBoston have been active
17 supporters of small business development with
18 respect to access to capital and technical
19 assistance to support, sustain, and grow businesses.
20 I have experienced firsthand the continuation of
21 their strong commitment during and after previous
22 mergers and acquisitions. In my opinion, I believe
23 the same will be true with this proposed merger.
24 I have found both Fleet and BankBoston to
25 be especially sensitive to the needs of the
0380
1 community. The creation of Fleet Community
2 Development Corporation, and First Community Bank
3 are prime examples of each institution's initiative
4 to provide means for greater access to the bank's
5 products.
6 In closing, in my capacity as chairman of
7 the Board of directors of the United Way of the
8 Capitol Area, Past Chairman of the Hartford
9 Neighborhood Housing Support Collaborative, and a
10 member of the local initiative support corporation
11 local advisory committee, I am also able to confirm
12 Fleet and BankBoston's involvement and support of
13 innumerable programs and activities that empower
14 people, provides comprehensive youth development,
15 enhances educational opportunity and performance,
16 strengthens families, and creates a strong healthy
17 community for all.
18 Thank you.
19 HEARING OFFICER SMITH: Thank you very
20 much.
21 MR. THOMAS: I am Henry Thomas, I am
22 president and CEO of the Urban League of
23 Springfield, Massachusetts, and former police
24 commissioner for the City of Springfield.
25 On behalf of the Urban League of
0381
1 Springfield, we are in support of the merger between
2 BankBoston and Fleet. The Urban League has enjoyed
3 a long working relationship with both banks and has
4 been an excellent -- it has been an excellent
5 experience in both cases.
6 Further, we have witnessed their work in
7 the western part of the state; and their CRA records
8 are commendable. More specifically, over the last
9 five years, the Urban League has had an opportunity
10 to work with Fleet Bank on local and regional
11 issues.
12 While serving as vice-president of the
13 national Urban League on the special assignment for
14 two years, I had privy to the extraordinary work of
15 Fleet Bank in the area of community development.
16 Through Agnes Bundy Scanlan's leadership
17 and foresight, Fleet Bank funded Urban League
18 throughout its footprint to levels over one million
19 and a half dollars. This funding was for the
20 purpose of building capacity to deliver economic and
21 work fair development -- work force development
22 services throughout the northeast region.
23 In addition, Ms. Scanlon has forged a
24 partnership with the national Urban League to
25 produce conferences aimed at improving Fleet Bank's
0382
1 understanding of multidimensional needs in the
2 marketplace and to effectively communicate their CRA
3 strategies.
4 In closing, the only caveat the Urban
5 League would offer is that whatever economic
6 business benefit accruing to these two institutions
7 should be shared with consumers to some extent.
8 Additional capacity and equity programs, mortgage
9 loan products, and philanthropic giving should all
10 be reasonable expectations resulting from this
11 merger.
12 Thank you.
13 HEARING OFFICER SMITH: Thank you very
14 much.
15 MR. SOSKIN: I'm Sol Soskin, director of
16 Procurement Technical Assistance Program, Long
17 Island Development Corporation, a not-for-profit
18 501(c)(3) membership organization in Long Island,
19 New York.
20 In business since 1980, Long Island
21 Development is a certified development company under
22 the U.S. Small Business Administration 504 Loan
23 Program, as well as the branch bank of New York Job
24 Development Authority.
25 In addition to its loan programs, Long
0383
1 Island Development Corporation is a designated
2 Department of Defense procurement technical
3 assistance center for Long Island; and Fleet has
4 been a long-time supporter of the various programs
5 of Long Island Development Corporation, has
6 partnered with allied LIDC to help small business,
7 including small disadvantaged business,
8 minority-owned and women-owned businesses.
9 Currently, the president of LIDC is John
10 Dawvy, senior vice-president of Fleet Bank.
11 Fleet Bank has been a leading first
12 mortgage lender on Long Island under the SBA 504
13 Loan Program for the past five years. With Fleet's
14 assistance, LIDC has been able to make over one
15 thousand small business loans totaling approximately
16 $350 million to Long Island companies.
17 Fleet Bank is a financial supporter for Kim
18 Technical Assistance Program which provides free
19 counseling to all small businesses -- chiefly small
20 disadvantaged, women-owned, and minority-owned
21 businesses -- to obtain and perform on government
22 and private sector contracts.
23 PTAP is supported by grants from the
24 Department of Defense matched by private sector.
25 Fleet Bank has been providing matching funds for
0384
1 PTAP since 1996.
2 Thanks to Fleet's participation, the Long
3 Island Procurement Technical Assistance Program has
4 successfully helped over 2,000 Long Island small
5 businesses obtain approximately $275 million in
6 government and other contracts.
7 In connection with the procurement program,
8 LIDC, and Fleet coventure initiative, Black Women
9 Enterprises, a New York Statewide coalition of black
10 women-owned businesses led by BWE, have partnered
11 with National Women Business Owner's Corporation to
12 help companies be certified as women-owned
13 corporations.
14 Fleet has been an active advocate for small
15 business on Long Island for many years. Fleet's
16 activities with Long Island Development Corporation
17 have been instrumental in helping LIDC become one of
18 the leading SBA 504 certified development companies
19 in the nation, as well as helping LIDC become one of
20 the most active DOD procurement technical assistance
21 program.
22 The proposed merger will bring additional
23 resources to the table which will benefit our small
24 business customers. The sheer size of the Bank of
25 Boston will amplify the financial abilities of Fleet
0385
1 Financial Corporation, which will make more products
2 and services available to our Long Island and Boston
3 small business markets.
4 HEARING OFFICER SMITH: Mr. Soskin, can you
5 wrap it up.
6 MR. SOSKIN: Thank you. And we strongly
7 urge that the Reserve Board approve this merger.
8 Thank you.
9 HEARING OFFICER SMITH: Thank you very
10 much.
11 MR. GAGLIARDI: Hello. My name is Peter
12 Gagliardi. I'm the executive director of the
13 Hampden/Hampshire Housing Partnership, a nonprofit
14 organization that is the major provider of housing
15 services in the 43 cities and towns in Hampden and
16 Hampshire County.
17 Fleet Bank and BankBoston have both been
18 significant partners in our efforts to provide
19 affordable housing and to revitalize neighborhoods
20 and communities.
21 In my written testimony, you will see a
22 list of very positive achievements in which one or
23 both of these banks have been a partner with us.
24 Perhaps premier of those is our First Home Program
25 through which over 3,000 households have been
0386
1 educated in becoming first-time home buyers, and 500
2 of those have purchased their first homes.
3 While citing very significant achievements,
4 I also want to raise a couple of cautions. We are
5 concerned as we see banks merge and become larger
6 about them becoming distant and harder to access
7 from cities the size of Springfield, the central
8 city in our region. We are hopeful that the
9 commitments that are made will ultimately be
10 committed to writings so that in the event we're
11 talking about a successor bank some day, that we
12 will be able to look back and have some benchmarks
13 by which to compare the performance.
14 Thank you very much.
15 HEARING OFFICER SMITH: Thank you.
16 MR. KUMRO: My name is Richard Kumro. I'm
17 vice-president and general counsel of the Community
18 Preservation Corporation, a nonprofit community
19 lender in New York City that serves the states of
20 New York and New Jersey. You would refer to us as a
21 lending consortium or an intermediary in all
22 likelihood.
23 We have a wonderful 25-year track record
24 that I was looking forward to regaling you with;
25 but, obviously, I won't do that now. Suffice it to
0387
1 say that our success in the last 25 years would not
2 have been possible without the support of financial
3 institutions in the New York area that have been
4 providing us with financing. And among that group,
5 which now numbers in the 80s or 90s, Fleet stands
6 out for the breadth and depth of its support of our
7 programs. When we solicit a bank to join our -- to
8 join participation in our programs, we essentially
9 require that they participate in two and then offer
10 them a bit of a smorgasbord of other programs to
11 take a look at.
12 Fleet has been doing everything. They do
13 not simply take the easy way out and provide us with
14 warehousing line of credit and participate in the
15 specialized secondary market that we ask our banks
16 to do. They have been helping us create new
17 programs. They have been providing all sorts of
18 technical assistance. And they've really just
19 supported -- they are essentially unique among our
20 large group of banks in doing everything in
21 supporting us in all of our lending areas.
22 Beyond their money, they also provide us
23 with great leadership in serving on our boards and
24 committees. We have a long-standing relationship
25 with them. They are very, very strong supporters of
0388
1 affordable housing.
2 Thank you.
3 HEARING OFFICER SMITH: Thank you.
4 MR. SIKES: Good evening. It's been a
5 beautiful day out there. If you missed it, take my
6 word for it, it's really nice out there.
7 I am Chris Sikes, and I am the executive
8 director of the Western Massachusetts Enterprise
9 Fund. We are a community development financial
10 institute making micro-enterprise and small business
11 loans throughout that vast, vast subcontinent of
12 western Massachusetts.
13 I'm here basically to say that we have had
14 an excellent working relationship with Fleet and
15 BankBoston, and that is described more fully in my
16 written testimony.
17 I would just like to highlight the fact
18 that Fleet has made significant capital and
19 operating grants to us, as well as BankBoston; and
20 they have been -- Fleet has been the underwriter of
21 our small business loan program of a $500,000 line
22 of credit.
23 Of particular note, I would like just to
24 mention Neal McBride from Fleet, Agnes Bundy Scanlan
25 of Fleet, and Martin Geitz from Fleet CDC, as well
0389
1 as Mike Glavin from BankBoston, all of whom work
2 quite closely with us to have the successful loan
3 fund that we are.
4 I would also like to say that although we
5 make fun of being this vast subcontinent in western
6 Mass., it is very critical for us when a merger
7 takes place, that we know that the bank that is
8 being merged or the merging is headquartered in
9 Massachusetts; and, therefore, we feel that this is
10 the best that -- in a merging situation that could
11 happen for us in western Mass.
12 Just two cautions if I could. One is there
13 are no divestitures scheduled for western
14 Massachusetts so that we really do hope that one
15 plus one equals two.
16 And, finally, the other caution is that --
17 or concern is that we hope that after all this is
18 over, that there is a very clear partnership
19 agreement made with the community groups because
20 their well-being is absolutely integral to our
21 well-being.
22 And I'd just also like to say many, many
23 thanks to Fleet CDC, because I really think they are
24 taking a lead in understanding what it means to
25 invest in the financial intermediaries, which I
0390
1 think is the wave of economic development in the
2 future.
3 Thank you.
4 HEARING OFFICER SMITH: Thank you.
5 MR. TOWERY: I'm Carlisle Towery, president
6 of Greater Jamaica Development Corporation in
7 Queens, New York City. Our mission is the economic
8 recovery and revitalization of that older downtown.
9 Jamaica underwent some severe economic
10 trauma in a short period of time; and since then, it
11 has advanced considerably, and a great deal of that
12 advancement I can attribute to the involvement of
13 banks and the support of banks. And, certainly,
14 Fleet has been there in the forefront. In fact,
15 our -- my conclusion says -- which I will say first
16 in the interest of time -- that for us, Fleet has
17 been a serious-committed, exceptionally good
18 corporate citizen.
19 They've provided strong and ongoing
20 leadership for our corporation itself. Two senior
21 executives from Nat West served as our chairmen.
22 They have contributed to our Board and staff's
23 activities in special events and retreats, including
24 chairing the fund-raiser. But most important, they
25 have underwritten or they have provided construction
0391
1 and permanent financing for several projects we have
2 initiated, and we have with them a very flexible
3 line of credit that's enabled us to undertake
4 numerous strategic small developments. And that's
5 an instrument that has been essentially in our
6 operations.
7 They participated in the provision of small
8 business loans through our revolving loan fund which
9 is capitalized by USEDA and by the City with its
10 community development block grant funds.
11 Just last month, two senior Fleet
12 executives hosted a working session with York
13 College which is a centerpiece of our development
14 which is going to get hooked to Kennedy Airport with
15 a new air train. We think there are economic and
16 academic opportunities, and Fleet is helping us
17 think that through.
18 Working with Fleet's people is inevitably a
19 pleasant and productive process for us. They are
20 thoroughly professional, responsive, and
21 responsible, and eager to facilitate results to get
22 things done.
23 I've learned at conferences that -- of
24 Fleet's impressive community development and
25 reinvestment roles in numerous places, and I just
0392
1 repeat for us they've been an exceptionally good
2 corporate citizen.
3 Thank you.
4 HEARING OFFICER SMITH: Thank you very
5 much.
6 MR. MORGO: Good evening. My name is Jim
7 Morgo. I'm president of the Long Island Housing
8 Partnership. I'm up from Long Island, New York, for
9 my four o'clock testify. But you folks have been --
10 you folks have been here since about eight so you
11 have my condolences. I'll now switch to 78 rpms.
12 The Long Island Housing Partnership is a
13 private, not-for-profit initiative that invests
14 private and public funds to create housing which in
15 turn spurs economic development and neighborhood
16 revitalization in low- and moderate-income
17 neighborhoods. And, yes, there are low- and
18 moderate-income neighborhoods out on Long Island out
19 to the Hamptons.
20 The Housing Partnership was the first
21 not-for-profit public private housing development
22 company based solely in the suburbs. It was our
23 nation's first. It is a consortium of fitness,
24 religious, civic, professional, and labor
25 organizations.
0393
1 The Housing Partnership has enabled more
2 than 2500 low- and moderate-income families to
3 obtain home ownership in high-priced Long Island.
4 The Housing Partnership's success is due in great
5 part to the support of private sector partners, and
6 one of our most involved partners is Fleet.
7 In 1988, Fleet was one of the founding
8 members of the Housing Partnership. Fleet has
9 cosponsored educational seminars in mortgage
10 counseling and financing for our first-time home
11 buyers. And most importantly, Fleet has made
12 investments, the kind of investments envisioned by
13 CRA in our low-income neighborhoods, in construction
14 financing both for us as a developer and for our
15 contractors, and has made inroads to our first-time
16 buys that had -- that have very flexible
17 underwriting criteria.
18 In short, Fleet has been a dedicated
19 Housing Partnership member. Fleet is a responsible
20 financial institution that is committed to community
21 service, and the Housing Partnership supports the
22 proposed merger.
23 But I am compelled to add after listening
24 to a lot of the testimony and particularly because
25 of the incredible urge to merge among financial
0394
1 institutions, that the Long Island Housing
2 Partnership certainly supports the concept of one
3 plus one has to equal more than two.
4 We have lost many members and much support
5 because of the merging of financial institutions;
6 and while we support this merger, we want to make
7 sure that the provisions of CRA are followed by
8 their intent and in their spirit.
9 Thank you very much.
10 HEARING OFFICER SMITH: Thank you.
11 MS. PHILLIPS: Good afternoon. I'm Karen
12 Phillips. I represent the -- I'm president and CEO
13 of the Abyssinian Development Corporation, a
14 comprehensive community building initiative that was
15 started by the Abyssinian Baptist Church to help the
16 revitalization of the community of Harlem. And I'm
17 here today to give you examples of our interaction
18 with Fleet and the support that they have given our
19 ten-year-old community-based organization.
20 The one that Fleet has been supportive of
21 is ADC operations. And we have seen this
22 organization -- Fleet grow with its merger with
23 other banks in the New York City market, and with
24 that, their support to ADC's operations grow.
25 One of the best examples of the stand that
0395
1 they've taken in community development is a project
2 that we currently have underway which is that
3 redevelopment, complete gut and rehabilitation of 33
4 brownstones in the Harlem community, buildings that
5 were previously owned by the City of New York and
6 vacant, and this is the first time that the City of
7 New York has embarked on housing that is market rate
8 and not subsidized.
9 We have gone to four of the major banks in
10 the New York City market, and Fleet is the one that
11 aggressively stepped up to the plate, and even
12 though the project was not perfect, have worked with
13 us to close and will now be providing the
14 construction financing as well as the end loans for
15 our buyers, houses that will bring in
16 moderate-income families who will help in our
17 community building. And these houses range in
18 prices from 325 to 450. It is a very important
19 stand that they have taken with our development and
20 other private developers. They are being a good
21 banking citizen.
22 The other is that their staff has
23 participated and served on our boards and other
24 activities in the community, and that with
25 additional resources, we think that they can do more
0396
1 in communities like Harlem where there is
2 economic-disadvantaged communities.
3 Thank you.
4 HEARING OFFICER SMITH: Thank you very
5 much.
6 MR. MORROW: We have a hook. We have this
7 beeper here.
8 My name is Phillip Morrow. I'm the
9 president of the South Bronx Overall Economic
10 Development Corporation, which is an economic
11 development, industrial development work force,
12 CEFI, all of those things.
13 Fleet has been involved with us, and we
14 have a director, Phil Grossman, who is on our Board
15 of Directors. They're involved with industrial
16 financial and commercial financing in the South
17 Bronx. They have provided us with corporate
18 support, and they have worked with us on almost
19 everything that we do.
20 And that's -- one of the things about the
21 bank in the territory of Chase and Citibank, Fleet
22 has been a major competitor and has been keeping up
23 with the major bank, with Chase having 70 percent of
24 the business in the Bronx, providing us with support
25 that's comparable to what we get from Chase
0397
1 Manhattan Bank. And I think that's laudable when we
2 consider how these banks now with their -- after
3 their mergers have provided support for
4 organizations like ours.
5 Ours is a very low-income community. We
6 need everything. And Fleet has helped us across
7 broad range of activities in which we're engaged in
8 from financing housing and commercial and industrial
9 activities to providing support for our events and
10 activities that we run in our community.
11 Thank you.
12 HEARING OFFICER SMITH: Thank you.
13 MR. MARSHALL: Good afternoon. My name is
14 Timothy Marshall, and I'm president of the Jamaica
15 Business Resource Center. And by way of background,
16 Jamaica Business Resource Center was designated in
17 1994 through presidential authorization to become
18 the national model and pilot for President Clinton's
19 One-Stop Capital Shop Small Business Program. And
20 since our inception in 1995, we have provided
21 technical assistance to over 2800 businesses,
22 secured capital financing of over $30 million, and
23 have trained over 800 businesses in the fundamentals
24 of business management. And part of this has become
25 possible because of strategic partnerships that we
0398
1 have with private sector partners, including Fleet
2 Bank which has been in a very, very key leadership
3 role.
4 First of all, let me just share a couple of
5 things. While credit scoring remains a reality
6 especially in our community, Fleet Bank has taken an
7 enlightened posture relative to understanding,
8 serving, and aggressively marketing to the small
9 business sector. And while some banks are extremely
10 reluctant to even considering start-ups or in some
11 cases, manufacturing businesses, we have had real
12 successes with Fleet especially in these areas
13 because they're willing to at least look at these
14 deals before making a determination on their
15 disposition.
16 And in my document that will come to you
17 following, I'm going to give you some specific
18 examples of businesses that Fleet Bank has helped.
19 But not only have they worked with
20 businesses. There was a very special initiative
21 that we were involved with with the Southeast Queens
22 clergy to teach churches how to engage in community
23 economic development, and there had been a West
24 Indian congregation that had been meeting in the
25 gymnasium of the YMCA for several years, and their
0399
1 dream was to have their own church and to open a day
2 care center.
3 And we went to a couple of banks, but when
4 we went to Fleet, they worked with us in providing
5 technical assistance to that congregation.
6 Ultimately, they were successful in securing a
7 $1.1 million mortgage to both house the
8 congregation, as well as to open a day care center.
9 There are many other things that I can say.
10 One of the concerns that we would like to raise, not
11 so much with Fleet, but the trend towards
12 consolidation in the banking industry does cause
13 real concerns in communities such as the ones that
14 we serve especially as it relates to the loss of
15 jobs, potentially reduced services and branches, and
16 possibly increased rates.
17 Our experience with Fleet, however, has
18 been a very strong commitment at the community
19 level, with a branch network that listens to the
20 concerns raised by the community and has been
21 responsive to those concerns in what we believe to
22 be a very fair manner.
23 So it is for these reasons that we believe
24 that Fleet will continue to be an excellent
25 corporate citizen that is concerned with the plight
0400
1 of those who are most disenfranchised in the
2 communities that we serve.
3 Thank you very much.
4 HEARING OFFICER SMITH: Thank you.
5 MR. STOKES: Good afternoon. My name is
6 Keith W. Stokes. I'm currently the executive
7 director of the Newport County Chamber of Commerce
8 in Newport, Rhode Island.
9 My testimony before you today is in strong
10 support of the prosed merger. My support is based
11 upon my many years of professional experience in
12 affordable housing community development, business
13 development, and urban planning.
14 From my personal professional viewpoint,
15 this merger represents a key opportunity for
16 advocates of community reinvestment and development
17 to create new strategic partnerships that will
18 stimulate innovation and enhance investment
19 opportunities for our urban and rural communities.
20 Some community leaders might worry that one
21 less major bank may reduce the amount of community
22 reinvestment activities in the regional marketplace.
23 It has been my personal experience that both Fleet
24 and Bank of Boston which have historically
25 demonstrated the highest level of community
0401
1 reinvestment initiative and involvement will meet
2 these needs.
3 It is also my belief that this level of
4 involvement would not only enhance -- with the
5 combined financial resources of a larger merger
6 enhance the opportunities for local community, but
7 it will also create innovative ways to meet even
8 additional needs in our most greatest communities of
9 need.
10 In closing, as you can continue to hear
11 testimony and collect information relating to the
12 merger, I ask that you seriously consider that this
13 unification of two highly-regarded banks is an
14 opportunity to not only create the strongest
15 financial institution in and for our region but a
16 means to create more community reinvestment
17 opportunities for our urban and rural communities.
18 Plainly speaking, the newly created Fleet Boston
19 will be able to increase its level of business and
20 charitable contributions throughout their northeast
21 market. This is good for business. This is good
22 for our community.
23 Thank you.
24 HEARING OFFICER SMITH: Thank you very
25 much.
0402
1 MR. POLLOCK: Good evening. My name is
2 Jeff Pollock. I'm the president of the New
3 Hampshire Business Development Corporation, and I'm
4 here to offer my strong support for the merger of
5 Fleet Financial Group and BankBoston Corp.
6 New Hampshire Business Development
7 Corporation exists to promote economic development
8 in the state by addressing underserved market
9 segments with financial services both directly and
10 in partnership with the banking community.
11 As evidenced and in light of our strong
12 commitment to the small business community, I'm very
13 pleased to note that the U.S. Small Business
14 Administration recently recognized us as the
15 Financial Services Advocate of the Year for 1999.
16 We have worked very closely with Fleet over
17 the years. They have invested in three of our
18 partnerships which have helped us stimulate over
19 $125 million of investment capital with higher risk
20 lending in New Hampshire.
21 BankBoston is a later entrant to New
22 Hampshire and was very quick to participate, as did
23 Fleet, in our new venture capital fund in hopes of
24 supporting their more direct investment strategy by
25 partnering with us in this fund.
0403
1 I'm in support of the merger because I see
2 synergy rather than redundancy in the combination of
3 these two institutions. From the community
4 development perspective, it's quite exciting to
5 envision the potential of Fleet CDC's partnership
6 model in combination with BankBoston's direct
7 investment strategy.
8 On the flip side, I believe New England
9 will suffer a tremendous loss of community
10 commitment in the event that it doesn't mean home to
11 one of the banking leaders after the industry
12 consolidates. To this end, I ask you to witness the
13 mayor of San Francisco threatening to remove City
14 funds BankAmerica after the headquarters moved to
15 Charlotte, North Carolina, and decisions became made
16 from there.
17 In closing, I want to point out that it is
18 my good fortune to serve on the Fleet Inner City
19 Advisory Board in representation of New Hampshire's
20 interests. In this regard, the bank -- I recognize
21 that the bank sees that the best interests of the
22 community are best served by helping its citizens to
23 create wealth. Some people confuse this market
24 orientation with a lack of interest in community
25 affairs.
0404
1 From my part, I share the view of renowned
2 Harvard professor Michael Porter that such an
3 approach to the market is the only sustainable means
4 of community support in a market-oriented economy.
5 This, in fact, is the philosophy with which we
6 approach our business in NHBDC. I hope will you
7 give due weight to these factors.
8 Thank you.
9 MR. CROWLEY: Hi. My name's David Crowley,
10 and I'm the executive director of a nonprofit called
11 Generations, Incorporated, that brings together
12 1,000 Boston area youth and seniors in
13 intergenerational programs each year.
14 I just want to say that at this time, when
15 government is shrinking its services, calling upon
16 nonprofits to do more in terms of human service and
17 education, and we have to turn to the private sector
18 increasingly to be able to deliver those vital
19 services, that Fleet has been a shining example of a
20 company that's really stepped up to the plate, not
21 just to provide charitable funding, which of course
22 we value and is critical to our work; but they
23 really role up their sleeves and work with
24 nonprofits like us to make sure that we can serve
25 the community effectively.
0405
1 And over the past couple of years with
2 Fleet's help, we have been able to roll out new
3 programs that they have helped us with where senior
4 citizens have helped raise kids' reading scores by
5 an average of over three grade levels a year, and
6 also provide documented impact for seniors who are
7 isolated in nursing homes who we're able to serve
8 thanks to Fleet and touch their lives at the end of
9 their day.
10 I really just appreciate Fleet's attitude
11 of really seeing holistic partnerships with
12 nonprofits and with communities to make things a
13 better place. And so I really feel it's critical
14 that we continue to have Fleet as a major player in
15 the Boston area to have that continue to happen.
16 Thanks.
17 HEARING OFFICER SMITH: Thank you very
18 much.
19 I understand our 30 minutes are up;
20 however, Mr. Herbie Flores is at the tail end of the
21 panel, so I hope you will bear with us, and if you
22 will do your one minute very quickly, each of you.
23 MS. HABIBY: My name is Anne Habiby. I'm
24 the director of research at the Initiative for
25 Competitive Inner City. ICIC is a national
0406
1 not-for-profit organization established by Harvard
2 Business School professor Michael Porter.
3 One of the most important things clearly
4 that anyone can do for the inner city is provide
5 access to capital. And as Walter Riskin says,
6 "Capital goes where it is invited and stays where it
7 is welcome."
8 BankBoston's Community Development Bank
9 under Chad Gifford and Gail Snowden's exemplary
10 leadership has proven that it is committed to this
11 premise. In fact, ICIC has been outspoken in our
12 support of BankBoston's community bank model and
13 strong inner city franchise, and often cited to the
14 media as the preeminent community bank in the
15 country.
16 Over the past year, ICIC has chronicled the
17 competitive advantage of inner cities; and, in fact,
18 in a recent study we will release, in fact, this
19 week, shows that BankBoston and Fleet have been the
20 leaders in making SBA 7A loans to inner city
21 businesses.
22 In fact, in 1996, BankBoston led all banks
23 in Boston's inner city in inner city lending; and in
24 1997, if was Fleet. Significantly, 7A lending
25 dramatically increased from 2 million to 7 million
0407
1 in 1997 and in great part due to the lending
2 practices of BankBoston and Fleet.
3 We would urge both banks to sustain and
4 extend these lending practices, lending as much as
5 possible profitably.
6 HEARING OFFICER SMITH: Thank you very
7 much.
8 MR. CHAMPAGNE: I would like to have an
9 interpreter, please.
10 HEARING OFFICER SMITH: Interpreter from
11 what?
12 MR. CHAMPAGNE: Hispanic.
13 UNIDENTIFIED AUDIENCE MEMBER: There was no
14 special request for an interpreter.
15 HEARING OFFICER SMITH: Can we -- okay.
16 See, I knew there was a purpose to this.
17 MR. CHAMPAGNE (through Hierberto Flores):
18 My name is Jose Champagne, president of Sofri El
19 Coqui. I'd like to thank you for the privilege of
20 being here to express to you the work that Fleet
21 Bank is doing in the Spanish community.
22 Everybody knows the Spanish community is
23 growing very fast. And to the year 2010, 2015, the
24 Hispanic community will be the largest minority.
25 I would like to thank Fleet for making a
0408
1 dream of mine come true. For six years, we had a
2 project or factory. In 1997, we were able to make
3 that a reality by Fleet Bank. I would like you to
4 consider this kind of project for a Spanish
5 community. It's a great potential in the Spanish
6 community, and we know that we can count on Fleet
7 Bank.
8 I would like to thank Fleet Development
9 Bank for all their support they have given us.
10 Thank you very much for the support.
11 MR. COMULADA: Good afternoon. My name is
12 Fernando Comulada. I'm vice-president for finance
13 and administration for InterAmerica Wholesalers.
14 It's a small distributor of Spanish products in
15 Waterbury, Connecticut. And until recently, I was
16 also a financial advisor for Universal Financial
17 Services in Hartford, Connecticut.
18 I'm here today to express my support for
19 this merger of Fleet Bank and Bank of Boston.
20 During my tenure with the Universal Financial
21 Services, I was able to do business planning for
22 Hispanic local business in Hartford, Connecticut;
23 and I am pleased to say -- to report to you that of
24 six projects that we presented to Fleet Bank in the
25 last year and a half, all six -- to Bank of Boston,
0409
1 all six were approved. I think there is -- they
2 have shown a sensitivity and the need to the
3 community and to economic development in the
4 neighborhoods.
5 Even those these loans were not big
6 amounts, they were significant to the business
7 people that applied for them. More significant, it
8 was a contribution that less than half a million
9 dollars in funds created over twenty jobs.
10 I want to encourage the Federal Reserve
11 Bank to approve this merger. And I just caution --
12 I would like to see that Fleet Bank and Bank of
13 Boston continue to give access of capital to
14 minorities and to small business, that they keep the
15 diversity among all ranks in the organization, and
16 to keep bicultural and bilingual lending officers.
17 Thank you.
18 HEARING OFFICER SMITH: Thank you very
19 much.
20 MR. FELLENZ: Good evening. I'm Peter
21 Fellenz, executive director of Worcester Community
22 Housing Resources. We do lending, first-time home
23 buyer services, and property development. Sometimes
24 small; sometimes larger. It is all meant to put a
25 smile back on older neighborhoods that have good
0410
1 enough history to deserve the revitalization, both
2 as individuals and as neighborhoods.
3 We work very well with the entire banking
4 community and are very proud with our relationship
5 with both Fleet and BankBoston. That goes for local
6 staff in Worcester and central Mass., and also for
7 the number of corporate people. Meeting yesterday
8 with corporate leadership included many people who
9 have walked our neighborhoods, in fact, made it
10 quite clear that their credit is available anytime
11 we can tee up the deals. So let's go ahead.
12 I feel a little bit like I've been invited
13 to two people who have decided to get married, in
14 this case, two institutions. I'm ready to be at the
15 wedding and say just stay active right here in the
16 middle of New England. We need your combined
17 assets, both human and financial.
18 So I speak strongly in favor of the merger
19 as proposed.
20 HEARING OFFICER SMITH: Thank you.
21 MR. FLORES: My name is Hierberto Flores,
22 resident of Springfield, Massachusetts, Brightwood
23 Development Corporation, and also Planning for
24 Community.
25 We have over 360 employees from Manchester,
0411
1 New Hampshire, to Fairfield County, human services.
2 We have a lot of minorities that work for us in the
3 work force. So, again, the two banks, Fleet and
4 Bank of Boston, I have done business with them, very
5 supportive to our organization, to our community.
6 I'm here to support this merger.
7 And, again, I would like to thank you for
8 the privilege of being able to be a member of your
9 Board, Federal Consumer Advisory Counsel, for the
10 past three years. And, again, I think that the work
11 you are doing today here is one work that all of us
12 as citizens have to say thank you for the work that
13 you are doing and keep up the good work.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 HEARING OFFICER SMITH: Panel 16.
17 Mr. Cofield.
18 MR. COFIELD: Good afternoon to members of
19 the Federal Reserve Bank of Boston and the larger
20 community. I'm Juan Cofield, treasurer of the
21 NAACP, Boston branch. The NAACP is the oldest civil
22 rights organization in the country. It was founded
23 in 1909, almost a century ago. The Boston branch
24 was the first branch being established in 1911.
25 The NAACP is credited with being one of the
0412
1 organizations to make contributions -- the most
2 significant contributions to the goals of the
3 founding fathers of this great country, and we are
4 pleased to be credited with such.
5 The Boston branch is gravely concerned
6 about the proposed acquisition of BankBoston
7 Corporation by Fleet Financial Corporation. And I
8 want to make it clear, and there has been a misnomer
9 a lot. This is not a merger. It's an acquisition.
10 The application before the Federal Reserve is as an
11 acquisition and not a merger. That's very
12 important, and I will get to that in a minute,
13 because one of the entities is taking control of the
14 other. And what we have witnessed is a varied
15 difference in the philosophy of the two as it
16 relates to low-income communities and communities of
17 color.
18 Major differences have been exhibited by
19 the two institutions in serving the needs of
20 communities of color and low-income communities.
21 Fleet's lending and investment activities in
22 communities of color is significantly worse than
23 BankBoston. In fact, if the acquisition were
24 reversed, there probably would be far less
25 opposition than there is today.
0413
1 Much of the opposition is because of what
2 is perceived to be the policies and the philosophy
3 and certainly the activities of Fleet as opposed to
4 BankBoston. We believe that the two -- we believe
5 that the activities of the two institutions are
6 quite different because of the philosophies and
7 policies.
8 We are concerned because we feel that we
9 will be losing a bank that's philosophically
10 committed to serving communities of color and low-
11 and moderate-income communities.
12 As it relates to employees and the expected
13 layoffs, people of color are employed at Fleet in a
14 proportion -- in a disproportion to the population
15 of people of color in this area, and that's
16 throughout the ranks of Fleet. The percentages get
17 worse as we move up in higher echelons of the bank.
18 As Fleet has the expectation of laying off
19 as many as 5,000 employees, the potential for
20 disproportionate layoffs certainly exist. Such
21 disproportionate layoffs would be devastating to
22 such communities of color who have -- who already
23 suffer significantly higher unemployment rates, and
24 higher underemployment rates.
25 We believe that the Federal Reserve Bank
0414
1 must take action to see that people of color are not
2 disproportionately laid off. This is clearly a need
3 of the community to see that they are treated
4 equally, and it's -- and we believe that it's the
5 responsibility of the Federal Reserve Bank of Boston
6 as it looks at the needs of the community to address
7 this issue.
8 Further, we think that what needs to happen
9 is that there needs to be a firm legal commitment to
10 the Federal Reserve to ensure that that doesn't
11 happen. And that needs to come after a negotiation
12 between Fleet and the communities of color that
13 we're talking about.
14 We further think that all of the employees
15 that will be laid off should be given generous
16 severance packages, and Fleet should make a
17 commitment to retrain those employees. If in fact
18 there is no commitment and people throughout the
19 system -- not just people of color, but all of the
20 employees -- if there is not a commitment to retrain
21 and/or give a severance package, it will be harmful
22 to the communities of -- throughout the area where
23 they are coming from.
24 HEARING OFFICER SMITH: Thank you very
25 much. We would be happy to have additional comments
0415
1 submitted later, or would you like to take about ten
2 seconds to wrap-up?
3 MR. COFIELD: Yes, I would. I didn't
4 realize that I was that close to the end.
5 There has been a very different -- there
6 are very significant differences in the activities,
7 the lending practices and the investment in
8 communities of color that have been demonstrated
9 between Fleet and BankBoston. The problem is, Fleet
10 is the acquirer; and the management of Fleet is --
11 will be at the top after this is over, and we think
12 that will bode very negatively for the new
13 institution and for communities of color and low-
14 and moderate-income communities.
15 Lastly, let me say that we believe that
16 there -- well, two other things quickly. The
17 proposed commitment of 14.6 billion in a community
18 commitment by Fleet is woefully inadequate. That
19 commitment level does not meet the current level of
20 the combination of Fleet and BankBoston. It is
21 woefully inadequate.
22 Lastly, let me say that the bank -- the
23 Boston Bank of Commerce figures into this. They
24 are -- maybe a few of you who may know that I was
25 the founder of the Boston Bank of Commerce. I am
0416
1 speaking in an official position as the treasurer of
2 the NAACP, expressing the position of the NAACP and
3 not mine personally; but I assure you that you I
4 have no formal association with the Boston Bank of
5 Commerce today, neither am I a director or officer
6 or receive any compensation from the Boston Bank of
7 Commerce.
8 When the Boston Bank of Commerce was
9 founded, it had -- in addition to all the kinds of
10 missions that other banks have, it had a special
11 mission. And that special mission was to serve the
12 needs of the Roxbury and Dorchester communities, in
13 essence, the communities of color. The Boston Bank
14 of Commerce, I believe, has done a very good job in
15 fulfilling that commitment, certainly with its level
16 of capital and level of assets.
17 The community needs a strong and viable
18 institution with a special commitment if it is going
19 to serve the economic development of that community.
20 It is absolutely essential. The NAACP firmly
21 believes and supports the Boston Bank of Commerce in
22 its attempt to acquire 18 of the 293 branches that
23 Fleet is proposing to divest itself of. And I
24 think, given the mission of the Boston Bank of
25 Commerce, that they should get it. It will allow
0417
1 the Boston Commerce to continue that special
2 commitment, to spread it further, and to be
3 competitive in the environment that we are facing
4 today.
5 Thank you very much.
6 HEARING OFFICER SMITH: Reverend Kelly.
7 REV. KELLY: Thank you.
8 My name is Frank Kelly. I am the senior
9 pastor of the Way of the Cross Church in Dorchester
10 bordering Mattapan, Morton Street. I'm also the
11 economic chair for the Black Ministerial Alliance.
12 My voice is one of many faith-based
13 organizations representing a constituency of over
14 200 strong, and they will be sent a press release
15 along with a copy of my request to testify here, as
16 well as the statement.
17 In greater Boston, over 200 faith-based
18 organizations -- or FBOs as they are popularly
19 known -- service over a hundred thousand people.
20 And that includes 25,000 plus families.
21 My affiliation with these FBOs grew out of
22 my early career of 20 years in a major Boston bank.
23 By the way, that was merged in 1995.
24 From there, I was called out into full-time
25 community service in 1987 and then into the pastoral
0418
1 ministry in 1990, founding and chairing the United
2 Christian Financial Services Association, a broad
3 based nonprofit corporation, open doors for
4 networking and relationship building.
5 The concern is obvious. Questionable
6 resources and options. There are questionable
7 resources for our people. There are questionable
8 facilities and options for the community in our
9 neighborhoods and the FBOs that serve them. There
10 are significant gaps, and we have heard them,
11 potentially 5,000 jobs lost, over 270 branch
12 closings which introduce barriers to service access.
13 Two banks will become one. Those two banks
14 committed monies separately. These commitments will
15 probably be withdrawn or significantly changed.
16 The resulting need, however, is viable
17 programs written into the plans of the new megabank
18 if this passes to address these gaps. A community
19 voice is needed now as a necessary tool in program
20 planning to be present at the planning tables, to
21 provide input on specifics of programs to address
22 these gaps, and to link the community with the
23 approval process. The necessary tool, Boston's
24 network of faith-based organizations, the FBOs, the
25 faith-based organizations are continually being
0419
1 challenged to grow, challenged by the community, and
2 lately by government and other sectors; and they
3 have grown up.
4 Under the IRS guidelines of 501(c)(3)s and
5 (c)(4)s, related nonprofit structures, a diverse
6 representation of the city having increasingly taken
7 on responsibility for the prosperity of their
8 neighborhoods and surrounding communities resulting
9 in corporate financial accountability as never
10 before.
11 I have a list of twelve of many who edify
12 our urban communities which includes the Black
13 Church Capacity Building Project, Black Ministerial
14 Alliance, Greater Boston Interfaith Organization,
15 Mattapan and Dorchester Action, Churches in Action,
16 United Christian Financial Services, Ten Point
17 Coalition, and United Pentecostal Ministers'
18 Conference.
19 Since dismantling of the welfare system and
20 proposing more local solutions, the federal
21 government and others are looking to the FBOs for
22 proven expertise in service delivery at the
23 community level. The City of Boston Empowerment
24 Enterprise Zone, Initiative Rounds 1 and 2, a
25 Baystate organization initiative tied to the Boston
0420
1 Empowerment Zone Center.
2 Interest has been heightened among
3 university academic admissions towards the
4 faith-based organization in recent years, which
5 include Harvard University, Kennedy School of
6 Government, Brandeis University, Yale University,
7 and others. Several colleges and universities have
8 been recognizing and working together developing
9 curriculum through the experience participation and
10 leadership of the FBOs.
11 In conclusion, there are three steps.
12 There is a three-step call to action. There needs
13 to be intentional and inclusiveness when addressing
14 the above-mentioned gaps and needs. There needs to
15 be a seat provided at the table for representation
16 and representatives of the organized faith-based
17 organized community to contribute their knowledge
18 and expertise and networking resources to the
19 research and proposal-writing process.
20 Finally, call upon the faith-based
21 organizations to issue support for the merger
22 approval process from the needs assessment through
23 the program writing and approval sign-off.
24 Thank you for this time to speak and to
25 provide a voice for the faith-based organizations.
0421
1 Continuous community input is welcome through the
2 faith-based organization voice mailbox at (617)
3 929-0352, and I have come copies of my testimony.
4 HEARING OFFICER SMITH: Thank you very
5 much.
6 MR. ASTOLFI: Hi. Thanks for having me.
7 My name is Drew Astolfi. I'm with at
8 Anti-Displacement Project out of Springfield, Mass.;
9 and I guess I'm here to say that I know that you
10 won't, but I wish that you would refuse to accept
11 this merger. Since you probably aren't going to do
12 that, I guess I'm going to ask you to extend the
13 comment period two weeks after Fleet has
14 disclosed -- fully disclosed what it plans to do to
15 meet its CRA obligations.
16 My organization is a coalition of tenant
17 associations in western Mass., 950 units of which
18 are low-income cooperative housing, 300 of which
19 would not have been developed and converted into
20 low-income co-op without the assistance of the
21 Federal Home Loan Bank, which Fleet has still
22 refused to say whether or not the new entity is
23 going to be a member of the Federal Home Loan Bank.
24 And I just feel it is outrageous that they're saying
25 that they're not going to do it until the charter
0422
1 issues are worked out. I'm very suspicious of that
2 and so are the people that I represent who couldn't
3 come here today because they're at work.
4 But there's an overarching attitude of sort
5 of, I don't know, of arrogance that Fleet has
6 approached, at least western Mass. from what I here
7 today, other groups, other parts of the New England
8 region as well; and that arrogance is characterized
9 a couple of different ways. One is just in their
10 refusal to say whether this is a part of the Federal
11 Home Loan Bank or not, and when they don't say it, I
12 kind of think they're not going to do it.
13 I'm just going to give you two stories
14 really quickly about sort of smaller examples of
15 that arrogance as well. And I just say if they
16 can't negotiate with ACORN and MAHA and the Mass.
17 Association of CDCs, then a group like mine, which
18 is a much smaller group, has got no chance. So
19 without sort of your intervention, I know we're not
20 going to get their attention; and I hope you guys
21 will consider that when you make your decision.
22 Just to give you two stories. There
23 there's group called Friends of the Homeless which
24 operates the only supportive services SRO in
25 Springfield or in the greater Springfield area. It
0423
1 also operates the only homeless shelter in the
2 Springfield area, and the only one that's open all
3 year-round in the whole sort of Southern Pioneer
4 Valley. And this shelter has -- was created by a
5 consortium of local banks, and their mortgage was
6 later taken over by Fleet. And it had been at 8
7 percent; and the State subsidies increased, and
8 Fleet raised the interest rates to 10 percent, and
9 that place is now in danger of foreclosure.
10 Two years ago when the foreclosure became
11 sort of a visible reality to Friends of the
12 Homeless, they tried to get a meeting from Fleet;
13 and they have been trying for two years, and Fleet
14 still hasn't talked to them. They won't even meet.
15 I just find that kind of behavior to be outrageous.
16 It is not fair.
17 A second example sort of closer to home for
18 me is that our own neighborhood of Liberty Heights
19 in Springfield, which has been mentioned here
20 earlier, in which Fleet does not have a good lending
21 record according to their own HMDA data, we have the
22 ongoing participation of BankBoston in the
23 neighborhood. They have been going to meetings.
24 And when the merger was announced, we tried to get
25 Fleet to say that after the merger, they would
0424
1 continue to attend sort of meetings with the local
2 community groups there and to make some loans in a
3 more aggressive way in the neighborhood. And we
4 also said, you know -- "Will we have, you know, sort
5 of a permanent CRA officer to service the
6 Springfield area?" which I think our mayor, Mayor
7 Albano, asked about earlier today. And in the same
8 way that they have refused to meet with the Friends
9 of the Homeless, they haven't answered the question.
10 If fact, we haven't heard anything from them.
11 And just -- it has sort of come down to
12 the wire for us, and so we're hoping that you will,
13 at least, if not deny the merger, give us the extra
14 two weeks after the Fleet makes its announcement
15 which we feel like has not been fully disclosed.
16 Thank you very much.
17 HEARING OFFICER SMITH: Thank you very
18 much.
19 Mr. Haskell.
20 MR. HASKELL: Good evening. My name is Jim
21 Haskell, and I come here today in my dual capacity
22 as the executive director of the Salem Harbor
23 Community Development Corporation and as the
24 chairperson of the Mass. Association of Community
25 Development Corporations, MACDC.
0425
1 During its 20-year history, Salem Harbor
2 CDC has developed affordable housing. We've
3 assisted small businesses, helped families obtain
4 their first homes, and allowed people to get a job
5 by helping them with their English skills. And we
6 have done much of our work in an immigrant Latino
7 neighborhood that most people had simply written off
8 20 years ago.
9 As the chair of MACDC, I represent 68 such
10 organizations across this Commonwealth; and we are
11 but a small part of 3500 CDCs nationwide, and all of
12 us do the same thing, help turn areas that were
13 previously considered beyond repair into thriving
14 working class communities. And we have accomplished
15 this impossible feat by bringing a lot of parties
16 together into a partnership to try to figure out how
17 best to affect this turnaround, because the solution
18 has often been different in different communities.
19 And, frankly, it's very difficult for me to
20 sit here today and oppose this merger, because,
21 frankly, we're much better at building bridges than
22 we are at burning them. But we feel that we have no
23 alternative but to oppose the merger of Fleet and
24 BankBoston since it appears that the resulting
25 institution will be one where this partnership will
0426
1 not be respected.
2 Pronouncements from corporate headquarters
3 will take the place of thoughtful, effective, and
4 meaningful determinations of how best to meet the
5 credit needs of low- and moderate-income
6 communities.
7 The recent decision by major banks to merge
8 has resulted in significant community reinvestment
9 agreements being negotiated which resulted in the
10 development of community reinvestment products to
11 benefit a wide range of low-income communities. In
12 all of these instances, it would have been
13 impossible for the bank to promulgate a
14 one-size-fits-all approach to community development.
15 On the other hand, it would have equally
16 been impossible for the community-based
17 organizations to have developed the types of
18 products that the bank did in order to meet those
19 needs. In the truest sense of partnership, each
20 side depended on the other.
21 Unfortunately, our recent experience with
22 Fleet has shown us that this sense of partnership
23 has not been taken to heart. Once the three-year
24 term of the Fleet-Shawmut agreement, MACDC and MAHA
25 attempted to extend this agreement. After a year of
0427
1 futile meetings at which I was personally in
2 attendance, we were told that no such agreement
3 would occur.
4 Similarly, a large group of community
5 organizations and public officials has attempted to
6 begin negotiations about an agreement concerning
7 this proposed merger. Once more to no avail.
8 Most distressing of all, we have found that
9 Fleet's actual performance in mortgage lending to
10 low- and moderate-income families and small business
11 lending is significantly less in the absence of
12 agreements than when they are required to reach
13 performance targets within the framework of an
14 agreement.
15 The merger of Fleet Bank-Boston threatens
16 to become a monolithic force that will unilaterally
17 determine how its community development resources
18 will be allocated in low- to moderate-income
19 communities.
20 We have seen far too many examples where
21 lots of dollars have effectively destroyed our
22 communities. We only need to look at urban renewal
23 to see that. Dollars alone are not the answer.
24 Thoughtful solutions and effective partnerships are.
25 Several colleagues of mine have outlined or
0428
1 will outline specific reasons why their
2 organizations are deeply concerned about this
3 merger, as well the chair of the Board of Salem
4 Harbor CDC, Wayne Burton.
5 Although we will express our opposition,
6 please be mindful of what I initially said. This is
7 not an action we relish nor a decision we have come
8 to lightly; however, on behalf of the communities we
9 serve, we believe it is the only one we can make.
10 HEARING OFFICER SMITH: Thank you.
11 Are you going to take about a minute or --
12 MR. BURTON: Can I restart and take one
13 minute?
14 HEARING OFFICER SMITH: One minute.
15 MR. BURTON: Very quickly. By day, I'm the
16 dean of the School of Business at Salem State
17 College and teach capitalism and the joys of the
18 capitalist system. By night, as president of the
19 Salem Harbor CDC, I try to find that capital to fund
20 development projects and housing in Salem. It has
21 been an eye-opening experience for me. I wouldn't
22 have been here seven years ago. There is a
23 desperate need for capital that has to be available
24 to meet the needs of Salem and the other low-income
25 communities.
0429
1 The very existence of our organization is
2 proof that the capitalist system does not work for
3 everyone. It takes human intervention.
4 Let me make one last point. My presence
5 here today is inspired by the words of Ira Jackson,
6 the vice-president of BankBoston who he had the
7 privilege of hearing on four separate occasions this
8 year, because he is the only business leader I could
9 find that spoke from conscience about the value of
10 community service. He made two points I would like
11 to just reiterate today. I'm sure we came to
12 different conclusions on the merger, but I would
13 like to reiterate the points that he made.
14 One is that BankBoston became renowned for
15 its community service by making community service a
16 core strategy of the bank for its success. It has
17 to become part of the culture. They call that
18 managing value with values.
19 The second point he made is he made such an
20 impression on people in Salem that he was invited to
21 be our commencement speaker in May. Now, most
22 commencement speakers are the only thing standing
23 between parents and ending their child's tuition
24 bills. He had people spellbound. His point was
25 very simple. He said that capitalism has no
0430
1 conscience. Capitalism distributes goods and
2 service in ways that leave people out. It's only
3 through the intervention of people like yourselves
4 who are in a position to introduce conscience into
5 this debate that we get a public good advanced.
6 And the conclusion I have reached is that
7 on balance, the MACDC position as outlined by Jim
8 Haskell, executive director of our agency, is the
9 appropriate one to take; and I fully support it.
10 Thank you.
11 HEARING OFFICER SMITH: Thank you very
12 much.
13 Miss Peters.
14 MS. PETERS: Thank you. My name is Marcia
15 Peters. I have a small community-based law practice
16 in Jamaica Plain. I was asked to come here today
17 when I let it be known that I had seen specific
18 examples in my law practice of overappraisals by
19 Fleet. I understand that that issue has been put to
20 this panel by at least two speakers today and I
21 don't have to introduce it as an issue.
22 I didn't really understand what I was
23 seeing at the beginning, but I now do; and I really
24 found it quite shocking.
25 Family A was an African-American couple who
0431
1 were buying a house in Roxbury which needed a gut
2 rehab. They were going through UNAC. They put down
3 $1500. Fleet loaned them $207,140 on a sale price
4 of 125,000 because the difference was needed for
5 rehab.
6 I -- from my knowledge of the market, I
7 thought the place would be worth about a $135,000
8 when it was all fixed up. I called some experts I
9 knew, and they said I was absolutely on the money,
10 that it couldn't possibly be worth more than
11 135,000; and yet -- after the work, and yet Fleet
12 was loaning 207.
13 I asked to see the appraisal because I had
14 learned from my other example -- which I guess I
15 should have given you first that I should be looking
16 at these things -- I found it to be totally
17 dishonest. The way they got the value up so high
18 was to go an entire mile to a completely different
19 neighborhood of Boston for one of their comps. They
20 called it in better condition and adjusted it by
21 only $11,200. An honest adjustment would have been,
22 I would think. $60,000, $70,000. That faraway
23 mansion in a completely different neighborhood was
24 so uncomparable. It was just flagrantly dishonest
25 to put it into the average and come up with a
0432
1 justification for lending this family $207,000.
2 The other one which I actually saw earlier
3 was a Haitian couple buying on the
4 Dorchester-Mattapan line, probably close to Reverend
5 Kelly's church. It was a City-foreclosed property.
6 Boarded up. Shell. Needed everything.
7 I talked to two people in the Boston city
8 government who told me that the place should not
9 have gone for more than $20,000 in the shape that it
10 was in. They said that contractors and people who
11 knew what they were doing came to the auction and
12 dropped out at $20,000 because they knew that 20
13 plus what it needed would equal what it would then
14 be worth.
15 But naive first-time home buyers stayed in
16 the bidding. It was their chance at the American
17 dream. They just didn't know what they were doing.
18 This family bid it up to $58,400. Fleet came up
19 with an appraisal which justified that sale price.
20 Fleet was not lending for rehab. Fleet was
21 not even asking if anybody was lending for rehab or
22 where the work was going to be financed. They
23 simply lent $58,000 on a shell will that was worth
24 $20,000 and have a nice day. That was really all
25 there was to that transaction.
0433
1 The result of this is manyfold. I would
2 hope that you as regulators would be concerned that
3 when Fleet tells you that their portfolio is worth
4 X, that maybe it really isn't. They are not
5 appraising honestly; and, therefore, their books are
6 not really telling you the picture of what their
7 assets are.
8 On a human level, these people cannot ever
9 have equity in their homes. They will work for
10 years and all they will do is pay down on that
11 difference between their large loan and their small
12 real value.
13 In closing, I would ask that you make a
14 condition of this acquisition -- not merger -- that
15 there be spot checks of appraisals, that there be
16 funding set aside for professional appraisers to
17 pull random files and check the honesty of
18 appraisers that are working for this merged entity.
19 Fleet is going to set the culture for the
20 new entity, and I'm concerned that it will not be a
21 culture of honesty.
22 Thank you.
23 HEARING OFFICER SMITH: Miss Pisacane.
24 MS. PISACANE: My name is Gail Pisacane,
25 and I'm deputy director of Valley Opportunity
0434
1 Council, the federally-designated community action
2 agency in Chicopee and Holyoke.
3 With an annual budget of approximately $9
4 million, we provide services to all 24 community
5 cities and towns of Hampden County, including
6 Westfield, Ludlow, West Springfield, and on
7 occasion, Springfield. Last year, we provided
8 direct services to over 26,000 low income and
9 disadvantaged residents of our service areas.
10 I testify today on behalf of the Valley
11 Opportunity Council and the low-income residents we
12 represent, addressing some of the very basic banking
13 issues that all of us must face on a daily basis.
14 John Rubins, author of Main Street, not
15 Wall Street, writing in the July-August 1999 edition
16 of Consumers Digest writes, "With few exceptions,
17 big banks have traditionally been inhospitable
18 places for small savers; and their penchant for
19 combining into bigger entities does not seem to be
20 changing that. The recent mergers are producing
21 higher fees, fewer branches, fewer ATMs, and fewer
22 tellers."
23 He cites Brian O'Connor, managing editor of
24 Bank Rate Monitor. "Our experiences suggest that
25 low-income individuals cannot be expected to
0435
1 maintain minimum balances which might qualify them
2 for lower or no-cost services within the bank. They
3 need inexpensive checking and ways to access their
4 minimal savings without accruing service charges.
5 They need bank branches and/or ATMs located in their
6 neighborhood. Few, if any, banks seem willing to
7 accommodate these needs."
8 According to O'Connor, we are seeing banks
9 charging $25 to $35 to print a couple of hundred
10 checks when a customer can get that done for $5
11 dollars by mail.
12 Some banks hit the customer for $20, $25,
13 or even $30 for a bounced check when returning the
14 check costs approximately $2.
15 When you open a checking account with a
16 large bank, you're inviting it to find every way it
17 can to rake you over the coals.
18 Why, then, should we, or any organization
19 that serves the poor and low-income, support this
20 merger? Without some assurances that the needs of
21 those whom we represent will be addressed, we would
22 be remiss in our duty as an advocate for the poor to
23 do so.
24 In human services, there is an expectation
25 that as the number of clients increases, the costs
0436
1 per client decrease. Economy of scale is a mantra
2 of those who espouse the bigger is better theory of
3 service provision.
4 In the private sector, however, the
5 elimination of competition through merger frequently
6 serves as the prelude to increased costs to the
7 consumer.
8 In addition to the effect of the merger on
9 clients, we must consider the effects on Valley
10 Opportunity Council itself. As an agency that has
11 been involved in housing development,
12 rehabilitation, and management, we have had cordial
13 relationships with the local banking community. As
14 the merger takes place and decision making is
15 centralized, our ability to deal with decision
16 makers on a local level is impaired. Currently, the
17 only way to call Fleet Bank located across the
18 street from our office is to call Boston.
19 We would hope that prior to approval of
20 this merger, the Federal Reserve will require that
21 Fleet and BankBoston develop a detailed and
22 publicly-verifiable reinvestment plan which has been
23 negotiated with community organizations and elected
24 officials with specific commitments ensuring a net
25 benefit to low- and moderate-income in minority
0437
1 communities.
2 We also ask that the public comment period
3 be extended for two weeks after such a plan has been
4 released.
5 It is essential that this merger be
6 approved and that the stipulations regarding
7 lifeline banking services for the poor, access to
8 branches and ATMs, and economies of scale for
9 service fees are attached to said approval.
10 We would also hope that some allocation in
11 of money to support local nonprofit needs and
12 committed bank involvement in the local community is
13 considered.
14 Thank you for this opportunity.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 Are there any questions?
18 HEARING OFFICER McDONOUGH: I have a brief
19 question for Marcia Peters.
20 You gave two examples of inappropriate
21 loan-to-value ratios, and I think one of those you
22 cited as being a UNAC loan. And I don't recall
23 whether the other loan was a UNAC loan.
24 MS. PETERS: No.
25 HEARING OFFICER McDONOUGH: What role did
0438
1 you play in the process to allow such disparate
2 loan-to-value ratio?
3 MS. PETERS: I'm not sure that I can answer
4 that. There was a work write-up which I think was
5 done by UNAC staff person that said the property
6 would need -- I think it was $82,000 worth of work.
7 But UNAC isn't doing the appraisals. They're doing
8 the first-time home buyer counseling and getting
9 people to understand the process, et cetera.
10 But when the thing goes into Fleet, Fleet
11 is hiring its own appraiser to justify the huge
12 price. So I'm not sure.
13 If UNAC had something to do with getting
14 the numbers up so high and getting the hopes up so
15 high, I would still have hoped that Fleet's
16 appraiser would have said, "Whoa. No can do."
17 HEARING OFFICER BROWNE: My I ask a
18 follow-up question?
19 Ms. Peters, when did these -- when were
20 these properties purchased? Is this something that
21 happened fairly recently or several years ago?
22 MS. PETERS: The first one that I talked
23 about where there was the purchase plus rehab loan
24 was less than a year ago.
25 The City foreclosure one was approximately
0439
1 two years ago.
2 HEARING OFFICER ALVAREZ: I have a question
3 for Mr. Haskell.
4 You said that you were beginning some
5 discussions with Fleet about an agreement --
6 renewing an agreement that your group had or other
7 groups had. I would like to you speculate for a
8 minute, if you would, feel comfortable about what
9 kind of reasons you might think -- what was actually
10 going on with Fleet's decision not to enter into an
11 agreement. And what I'm looking for is for a sense
12 of whether you had the sense that Fleet was
13 withdrawing its support from the community or was
14 Fleet more changing its approach to dealing with
15 communities to become more like some other banks
16 that we have seen where they still have a commitment
17 to the community but they choose not to have formal
18 agreements in implementing their programs.
19 MR. HASKELL: When I know what Terry Murray
20 is thinking, I'm sure I will be much richer.
21 Sorry.
22 HEARING OFFICER ALVAREZ: No. I appreciate
23 that.
24 MR. HASKELL: I wouldn't want to speculate
25 what is in Fleet's thought process.
0440
1 Overall, in my experience in negotiations
2 with Fleet, the approach to community groups is that
3 everything that is given by the bank is viewed
4 somewhat as a net loss to the bank, that they do not
5 see -- they do not see their commitments to the
6 community as somehow figuring out a way to make the
7 investment in the community; and our experience,
8 frankly, with BankBoston through its mergers was the
9 exact opposite, that the bank was, in fact,
10 attempting to find a way that they could, in fact,
11 do banking in low-income communities and by that
12 certainly making a profit.
13 And that attitude hasn't been evident in
14 several different forums with Fleet.
15 HEARING OFFICER SMITH: Thank you very
16 much, and especially for waiting so long into the
17 afternoon and evening to make your appearance. We
18 really do appreciate it.
19 (Pause)
20 HEARING OFFICER SMITH: We are starting
21 with Mr. Sarkissian.
22 MR. SARKISSIAN: Thank you.
23 In the first place, I appreciate the
24 opportunity to testify on behalf of ARC
25 Massachusetts. Our organization's mission is to
0441
1 enhance the quality of life for persons with
2 specific developmental disabilities, and we
3 accomplish this mission by promoting quality
4 community services and advocating for enlightened
5 public policy. Our former name is the Massachusetts
6 Association for Retarded Citizens.
7 My comments are going to focus -- my short
8 comments -- on the needs of people with
9 disabilities. And, basically, there have been
10 others here to speak about community reinvestment
11 which is also what I'm going to focus on in the
12 general sense. And I presume the Board will be
13 looking at some objective figures in terms of what's
14 been realistic in the past, the community banks
15 versus larger institutions around the issue of
16 community reinvestment.
17 If it was any other time, and if things
18 were great for people with disabilities in terms of
19 affordable, accessible housing, I think this
20 wouldn't be an issue for me to come in front of this
21 Board; and it is pretty unusual for us to be present
22 in front of this Board. But, in fact, only in 1998,
23 there was a report published; and it was called
24 "Priced Out in 1998." I don't know if you are
25 familiar with it, but it was a report published by
0442
1 the Consortium for Citizens with Disabilities and
2 the Technical Assistance Collaborative which is its
3 main office is actually housed in Boston.
4 And what that showed is the severity and
5 nature of the housing crisis for people with
6 disabilities, and it cited in the report that the
7 most evident part of this crisis was in the
8 affordability of efficiency or studio and
9 one-bedroom apartments. On a national average, the
10 cost of such housing is 60 percent of the average
11 monthly income of people with disabilities who are
12 living primarily on SSI and related income. For
13 many people, that's the situation, especially those
14 with cognitive or intellectual disabilities. SSI
15 and related income is the primary source.
16 In Massachusetts, this income is under 17
17 percent of the one-person median income; and that's
18 a direct statistic from "Opening Doors" published in
19 May 1999. And people with disabilities often end up
20 in the category of very low income. HUD studies
21 estimate that 70 percent of households with incomes
22 below 30 percent of median income who are not
23 receiving any assistance in housing from HUD or
24 elsewhere, they have priority housing problems.
25 In Massachusetts, the percentage of that
0443
1 income to rent an efficiency unit alone is 95
2 percent of income. So just to give you the flavor
3 of how -- such a price it is, another piece,
4 families aren't much better off that are working
5 class, and, again, even lower income. When they're
6 looking for affordable apartments that are also
7 accessible, it can be an impossible process. We
8 hear from local advocates of people that work on a
9 local level, whether it's Boston or the South Shore;
10 and you hear about situations where people end up
11 renting apartments on the second floor, the third
12 floor. They have to bring their child up, and they
13 go have to go back and bring the wheelchair up.
14 A great story, because we also happen to
15 have a wait list for people with disabilities who
16 are adults. A gentleman and his wife who were in
17 their 70s. Every day he would carry his daughter up
18 three flights of stairs and only three years ago was
19 he able to get housing for his daughter and some
20 State-supported funding program.
21 So, anyway, it is a crisis; and I won't --
22 I have other statistics that I have handed in. I
23 won't repeat them publicly.
24 But what we need, we have a megamerger here
25 so it is a great opportunity for some kind of
0444
1 standard around megacommunity reinvestment; and I
2 would suggest that there be some kind of standard
3 developed around that. Use this as an opportunity
4 to raise the stakes and take a look at what would be
5 reasonable given the scope of this merger, and let's
6 include housing for people with disabilities
7 affordable as part of the low-income piece.
8 We're not asking for set aside or anything,
9 you know? We want to be part of the main stream of
10 this.
11 When you think about affordable housing, we
12 need to think about an accessible housing. And
13 there are two types in this community reinvestment
14 aspect that I want to encourage. One is, really, we
15 need to subsidize some heavy development of
16 apartments across metropolitan areas. We really
17 need a dearth of those, again, accessible ones. So
18 that's one area that community reinvestment can play
19 a role in low-cost mortgage financing for people who
20 are willing to develop such affordable housing.
21 And the second is for home ownership. You
22 heard about that earlier for people with low income.
23 It is important for people with disabilities, too,
24 and something around community reinvestment where we
25 would have mortgage programs and downpayment
0445
1 programs to enhance what is there already such as
2 soft second and programs that already exist.
3 One of the big programs for people with
4 disabilities is really the Fannie Mae program, and I
5 am embarrassed to tell them how many people -- it's
6 a great program. I'm glad Fannie Mae's doing it,
7 bur really in terms of Massachusetts with 90,000
8 people with specific developmental disabilities
9 alone, not counting the physical disability world,
10 it really falls far short of what we need.
11 So we're going to have to come up with a
12 private partnership. We're going to have to make a
13 merger. And I really encourage the Board to think
14 in these lines of some kinds of standards
15 surrounding community reinvestment.
16 Thank you very much for this opportunity.
17 HEARING OFFICER SMITH: Thank you.
18 Mr. Van Meter.
19 MR. VAN METER: Thank you for the
20 opportunity to testify today. My name is Bob Van
21 Meter, and I'm executive director of the Allston
22 Brighton Community Development Corporation and an
23 active member of the Massachusetts Association of
24 Community Development Corporations.
25 The Allston Brighton CDC is a 19-year-old
0446
1 nonprofit, community-based organization in the
2 Allston-Brighton section of Boston, a neighborhood
3 of 70,000 people. Our organization has worked
4 closely with both BankBoston and Fleet Bank for
5 several years and values the relationships we have
6 with each institution. We view them both as
7 partners in community development.
8 However, we come to this hearing
9 disappointed at the stands taken by the two banks.
10 They have so far opposed making specific commitments
11 would give us confidence that one plus one is more
12 than two. We, therefore, must oppose the proposed
13 merger unless and until the banks make specific
14 commitments to the community.
15 Past experience with bank mergers and the
16 track record of community lending post merger makes
17 it necessary to look for specific commitments.
18 Moreover, those commitments should be negotiated
19 with the community, not made unilaterally by press
20 release.
21 The Federal Reserve Bank should require
22 that Fleet and BankBoston develop a detailed and
23 verifiable community investment plan that assures
24 this merger is a net benefit to our communities.
25 We urge the Federal Reserve to extend the
0447
1 public comment on the mergers as my colleagues
2 before have urged, and we urge that the Federal
3 Reserve not approve this merger until such a plan is
4 developed.
5 We also would look to the Federal Reserve
6 to ensure that consumer and worker interests are
7 interested. Reduction of competition in
8 Massachusetts that will result from this merger is a
9 serious concern for all of us in the commonwealth.
10 I'd like to talk a little bit about the
11 area of small business lending and work in
12 commercial revitalization efforts in urban
13 communities. I know that the hour is late, and I am
14 not going to talk about other aspects of community
15 development.
16 While both banks have some important
17 successes in small business lending and assistance
18 to commercial revitalization efforts, we see at the
19 neighborhood level a clear difference in the two
20 banks in that area; and we want to urge that if the
21 merger goes forward, that the merged bank build on
22 BankBoston's example of engagement.
23 We're active in Main Street's commercial
24 revitalization efforts in both of the major
25 commercial zones of our neighborhoods and also in
0448
1 Brighton and are participating in the community
2 business network which provides technical assistance
3 and loan packaging to smaller micro-businesses in
4 our communities.
5 BankBoston has been a more consistent
6 presence and ally in local revitalization efforts.
7 Fleet's corporate policies on branch staffing mean
8 that rarely, if ever, are Fleet branch managers
9 able to play a leadership role in local
10 revitalization efforts, while BankBoston branch
11 managers are active in leadership roles. If Fleet's
12 corporate culture and policies dominate the new
13 bank, we will see a further draining of energy and
14 leadership from neighborhoods.
15 BankBoston's First Community Bank has been
16 a welcome addition to the banking scene in our
17 neighborhood. First Community Bank lenders have
18 gone the extra mile to work with immigrant
19 businesses in our community. We have not yet seen a
20 similar commitment from Fleet to small business
21 lending in our community.
22 Within the past three years, our
23 neighborhood business districts have seen the loss
24 of several banks as Greater Boston Bank was acquired
25 by Grove, and Grove was acquired by Citizens. Now
0449
1 Allston and Brighton's major commercial districts
2 could each see the loss of one additional bank
3 because we don't think that after the sale of
4 branches, branches will continue necessarily. We
5 haven't seen that evidence in the past with past
6 mergers. We will he will also see additional branch
7 loss with the Citizens-U.S. Trust merger possibly.
8 Maintaining healthy community business
9 districts is part of maintaining healthy vital urban
10 communities. Increasingly, banks which have been
11 the mainstays of these districts are a smaller
12 presence in the business districts.
13 The emphasis on banking electronically
14 means that resources are siphoned away from staffing
15 of branches. Bankers who know the community are
16 becoming increasingly rare. And the new emphasis on
17 mini branches in supersized grocery stores also
18 hurts the vitality of local business districts by
19 pulling people away from community business areas.
20 We hope that bank regulators will consider these
21 issues carefully.
22 Finally, it's important to note that
23 philanthropic support for community revitalization
24 is an essential complement to community
25 reinvestment. It's important to maintain
0450
1 community-based organizations with strong capacity.
2 Both banks have supported community development with
3 philanthropy. But with the increasing pace of
4 change in the corporate world and the emphasis on
5 strategic high visibility, philanthropy by
6 corporations, including the banks, support by
7 financial institutions becomes increasingly
8 precarious; and it's very difficult to replace.
9 We urge a $5 million commitment to
10 community development in Massachusetts from the
11 merged bank in the next calendar year, and that
12 commitment would go to local and statewide
13 organizations and community development
14 intermediaries.
15 Thank you for the opportunity to testify
16 today.
17 HEARING OFFICER SMITH: Thank you very
18 much.
19 We'll go to Mr. Grainger.
20 MR. GRAINGER: Thank you. My name is
21 Andrew Grainger, and I'm appearing here today as
22 president of the New England Legal Foundation. New
23 England Legal Foundation is a not-for-profit public
24 interest law firm which has as its mission a
25 balanced economic growth throughout our six-state
0451
1 region and support of our system of free enterprise.
2 We are represented by a board of directors
3 which is comprised of general counsel and senior
4 partners from leading businesses and law firms
5 throughout New England.
6 In addition to that, we have an advisory
7 counsel network, one in each New England state,
8 which provides a foundation with an ear to the
9 ground so to speak on issues affecting business, the
10 economy, and property rights in the state and local
11 level.
12 Generally, what we do is engage in
13 courtroom advocacy on behalf of our constituents in
14 filing amicus briefs in the U.S. Supreme Court and
15 state and federal courts, mostly in New England. We
16 also engage in advocacy outside the courtroom from
17 time to time when it's an important issue affecting
18 business interests and free enterprise; and in that
19 context, I'm here today to speak in support of the
20 proposed merger or acquisition, whichever it's
21 called. It doesn't matter. I think we know what
22 we're talking about.
23 The inescapable fact from our perspective
24 is that the economic well-being of New England, and
25 the best interests of individuals and companies
0452
1 doing business here, and I would include in that all
2 the community groups that have testified here today,
3 are all better served if we can preserve a large,
4 strong, regionally-based commercial lender in New
5 England, which is what this merger contemplates. It
6 is simply -- cannot be denied that institutions the
7 size of Fleet and BankBoston are vulnerable to
8 out-of-region acquirers many times their size.
9 I heard Mayor Albano from Springfield refer
10 to the problem of perhaps having to get approval
11 from 90 miles away. That is probably what is
12 happening in the marketplace today, but it pales
13 compared with the problem of going to Charlotte or
14 San Francisco. This merger may help to prevent
15 that.
16 Large, national, and international
17 businesses based in New England can select on a
18 national and international basis to meet capital
19 requirements. Middle market, smaller companies are
20 hurt when deposit and credit decisions are moved to
21 other parts of the country. In particular, the
22 branch system and cash management services that New
23 England-based lenders can provide are important to
24 New England businesses.
25 If the proposed merger does preserve a
0453
1 local regional presence, Boston and the rest of New
2 England and everyone here will benefit.
3 Because New England Legal Foundation
4 represents business interests in all the New England
5 states, I have in the past week specifically
6 discussed this proposed merger with Board and
7 counsel members from my foundation throughout the
8 region. I have got a list in my written remarks
9 which have been filed with you; and I won't go
10 through all of them, but I will note that sort of in
11 echoing what I think you heard in Panel 15, the
12 Connecticut Business and Industry Association, which
13 represents many, many, many businesses large and
14 small in that state; the New Hampshire Business and
15 Industry Association, are both among the
16 constituencies that I talked to, as well as
17 Jefferson Pilot Financial in Concord, New Hampshire;
18 the Maine Medical Center in Portland, Maine; IDX
19 Systems in Vermont; every state large and small, the
20 overwhelming consensus among the foundations,
21 participants, and supporters is that this merger in
22 the very least is necessary and in most cases
23 desirable in view of the consolidation we're seeing
24 today.
25 We do share the concern raised in some
0454
1 quarters that competitive environment should not be
2 sacrificed to retain what we view as the important
3 economic advantages of local control. We are in
4 favor of free enterprise and competition.
5 As I understand the divestiture proposal
6 that's been put forward today, it is really designed
7 to avoid any material change in market
8 concentration. In that context, we believe further
9 that a competitive environment includes the right
10 and the ability of businesses to make and execute
11 management and strategic decisions which their own
12 thinking and which the market brings them to.
13 Businesses that have taken at least
14 reasonable steps to comply with the myriad of legal
15 and regulatory requirements that are imposed on them
16 by so many agencies and so many statutes should be
17 free to pursue their business plans and react to
18 market forces, which is what these two institutions
19 are seeking to do today.
20 I want to throw one slight curve ball at
21 you which is to say that I also served as chairman
22 of Arts Boston which is a local, not-for-profit
23 organization that serves as an umbrella group for
24 150 local and regional arts organizations.
25 In Copley Square today, there is a very
0455
1 nice half-price ticket booth that helps us support
2 arts organizations, that helps us take inner city
3 school children to cultural events. That booth
4 would not be there today except that Fleet stepped
5 forward and gave us financing for it. I went to
6 many other banks to try to get that money first.
7 Thank you for your consideration.
8 HEARING OFFICER SMITH: We'll go to Mr.
9 O'Connor and then to Mr. Brown.
10 MR. O'CONNOR: Good afternoon. I guess I
11 should say good evening. My name is John O'Connor.
12 I'm a longtime community organizer with substantial
13 experience in consumer and urban department issues.
14 I also run a small business incubator, and I proudly
15 serve on State Senator Dianne Wilkerson's Community
16 Advisory Committee. For all these reasons, I have
17 followed with great interest and growing concern the
18 planned merger of Fleet Bank and BankBoston.
19 I speak today to express my strong
20 opposition to that proposal. This merger would
21 substantially lessen competition in Massachusetts
22 and around New England, nor would there be
23 sufficient, if any, net positive benefits to the
24 public interest to justify its approval.
25 Put simply, this is a deal that made
0456
1 greenline the pockets of Fleet and BankBoston
2 shareholders, but it redlines the needs of -- but it
3 redlines the needs and concerns of Massachusetts
4 consumers, small businesses, and urban communities.
5 Let me start by stating the obvious.
6 Although what's being proposed here is
7 usually described as a merger of two, Fleet and
8 BankBoston, it in fact represents the consolidation
9 of what had been just a few short years ago four of
10 the largest banks in Massachusetts into a single
11 entity. Surely going from four to two and now to
12 one cannot be a recipe for robust, healthy
13 competition, the heart of free enterprise.
14 Not surprisingly, even after divestiture,
15 this new Fleet Boston entity would utterly dominate
16 regional markets, commanding a roughly one-third
17 share across Massachusetts, and possibly more in
18 greater Boston.
19 In other areas, like Worcester, Hartford,
20 Rhode Island, Fleet's -- Hartford and Rhode Island,
21 Fleet Boston's overwhelming presence would even be
22 more dramatic. Ironically, many of these markets
23 are already overconcentrated in the hands of Fleet
24 alone at its current site.
25 Likewise, the new Fleet Boston would be by
0457
1 far the biggest holder of ATMs in Massachusetts.
2 Again, even after divestiture, Fleet Boston is
3 likely to control upwards of half of all the
4 bank-owned ATM machines in our state, many times the
5 number held by any other institution.
6 Some say the solution lies in recruiting
7 some financial behemoth from Charlotte or San
8 Francisco to come up to New England and compete with
9 Fleet Boston on its own terms, while others favor
10 helping our existing smaller banks do more.
11 Let's be clear. This is a no-win
12 situation.
13 If history is the guide, small banks
14 probably will better serve their customers in our
15 communities than megabanks like the proposed Fleet
16 Boston, but they cannot effectively compete with the
17 super-heavyweight division occupied by a Fleet
18 Boston. Eventually, many of these smaller banks
19 will be acquired, squeezed out, or just plain run
20 over.
21 So I for one cannot see how this proposed
22 merger, no matter how it's handled, can do anything
23 other than substantially lessen competition. At
24 best, it pushes us further in the direction of a
25 market oligarchy, which is not an acceptable
0458
1 substitute for true competition.
2 The question then becomes will consumers
3 and communities see sufficient new benefits from
4 Fleet Boston in terms of convenience or service to
5 offset the bad side effects of diminished
6 competition. Again, the answer is a clear no.
7 BankBoston and Fleet are both plenty big
8 enough now to be able in theory, anyway, if not
9 always in practice, to offer the full range of
10 services and products needed by our consumers and
11 our economy.
12 This isn't a case of two little community
13 banks teaming up to be able to do more lending to
14 mid-sized businesses. Nor is there any reason to
15 think that when it comes to banks, bigger inherently
16 means better for consumers. Just the opposite in
17 fact. A recent study pointed out that as banks get
18 bigger, they charge an average of about 15 percent
19 higher fees in terms of checking accounts and ATM
20 charges and the like.
21 Significantly, Fleet and BankBoston have
22 been very quiet on the subject of customer fees and
23 consumer issues. So unless and until they make some
24 public commitments to the contrary, I see no
25 evidence to assume the outcome here will be any
0459
1 different. More money for less services.
2 Fleet and BankBoston may consider that
3 perfectly convenient, but consumers and small
4 businesses will probably think otherwise.
5 Finally, there is the vital issue of how to
6 deal -- of how this deal meets or fails to meet the
7 needs of all communities and whether the proposed
8 merger in the component banks are truly in
9 compliance with the purposes of the Community
10 Reinvestment Act.
11 A couple of weeks ago, Fleet and BankBoston
12 unveiled what they're touting as a 14-billion-plus
13 CRA commitment that allegedly addresses some of
14 these concerns. Having examined it closely, I
15 concur totally with the many others who have
16 criticized it as both woefully insufficient in
17 funding, lacking in forward-looking innovations that
18 anticipate likely changes in the financial services
19 landscape, and critically missing an enforcement
20 mechanism.
21 Parse the numbers, and you find that the
22 Fleet-BankBoston CRA proposal fails short of
23 representing what the two institutions have achieved
24 separately. The CRA plan will constitute a 12
25 percent decline in small business lending and a
0460
1 whopping 46 percent drop in lending and investment
2 for community development.
3 Let me close by going back to the
4 beginning. Fleet and BankBoston kicked off this
5 process some months ago with now famous phrase that
6 one plus one is greater than two. Asked to attach
7 some specifics to that promise, Fleet officials soon
8 asserted their statement was meant to apply only to
9 supposed business synergies, a synonym, I take it,
10 for shareholder profits.
11 But I suggest today that Fleet must be held
12 to its word, and that the merits of this proposed
13 merger must be tested against the same benchmark
14 Fleet has set for itself. Does Fleet plus
15 BankBoston really add up to more than the sum of its
16 part for all of our people and all of our
17 communities? In short, it doesn't work for us; and
18 it doesn't work for all of us.
19 Or is it actually the case that
20 Fleet-BankBoston's deal asks us to work for them
21 through higher fees, fewer choices, and less
22 attention to the pressing needs of so many
23 communities?
24 I respectfully submit to you that this
25 proposal does not and will not pass these tests and,
0461
1 therefore, should be rejected.
2 Thank you.
3 HEARING OFFICER SMITH: Mr. Brown.
4 MR. BROWN: Thank you very much for this
5 opportunity. I'm here today to speak as a partner
6 of RDR Properties, and our company is based in
7 Asbury Park, New Jersey.
8 RDR is a low-income, single-family housing
9 developer. A substantial part of our business is
10 also buying abandoned, boarded-up properties in
11 Asbury -- which are plentiful if any of you have
12 ever been down there -- and turning them into the
13 highest quality rentals in the area.
14 We have a for-profit side to our business
15 and a not-for-profit or 501(c)(3) side as well,
16 which I will explain as I go along the necessity of
17 doing that.
18 I want to touch briefly on three areas --
19 an overview of Asbury Park so you get a feeling for
20 what we're up against and the banks in dealing
21 there; the focus and growth of our business; and,
22 finally, our relationship with Fleet Bank.
23 Asbury Park is a uniquely blighted area
24 from the top of Maine clear down the eastern
25 seaboard to Key West. Thirty years ago, it was the
0462
1 jewel and economic hub of the northern Jersey shore.
2 At one time, there were over 200 hotels in the area.
3 Now there is one. Surrounding real estate prices on
4 the shore are at an all-time high. In Asbury, the
5 total value of taxable property has shrunk each year
6 since 1993. The downtown area is virtually deserted
7 and boarded up, but hopefully showing some signs of
8 life.
9 This recent article with a page and a half
10 in the New York Times a couple of months ago is
11 called "Blocks of Oceanfront Property in Asbury Park
12 Once a Magical Result Have Been Festering for 15
13 Years." And the headline is "Caught in the
14 Undertow." It kind of gets into more detail about
15 the problems in Asbury.
16 But the article described the waterfront as
17 looking like Beirut. It's totally desolate. The
18 city's population is 60 percent African-American,
19 and the unemployment rate is in the high teens.
20 Compared economically to Asbury, Bridgeport,
21 Connecticut, looks like the Silicon Valley.
22 RDR Properties, our company, is a unique
23 company; and here are a few reasons why. We buy
24 almost exclusively abandoned, boarded-up properties
25 and rehab them for sale or rent. We have our own
0463
1 construction and management companies that are also
2 based in Asbury Park. RDR is the only property
3 developer with a major physical presence in the
4 downtown Asbury area.
5 Our goal is to move our best renters from
6 the rental status to homeowners. And we work very
7 closely with the faith-based organizations in the
8 area. We have no local community home buyer
9 assistance programs, so we serve in that role
10 ourselves, hence, the nonprofit part of our
11 business.
12 In fact, we can put a family into a brand
13 new three-bedroom, bath-and-a-half home, built by a
14 modular builder for less than $50,000; and that's
15 with State assistance. We also have our own
16 construction company, and a year ago that was almost
17 all white. Today, it is more than 50 percent
18 minority, whether it is blacks, Latinos, and Asians.
19 And by next year, we expect that number to exceed 70
20 percent, with many of the minorities moving into
21 management positions. We have our own skilled
22 training program because none of that exists in the
23 area.
24 What's been Fleet's role in all of this?
25 Three months ago, our company owned eight properties
0464
1 comprising about 53 rental units. By Labor Day of
2 this year, we will own and be converting at least
3 another 150 new abandoned units in the area. We
4 have an existing three million line with Sovereign
5 Bank, which is LTS regulated; and we have a new line
6 of $2 million with First Union. By the way, PNC and
7 Summit Bank are also in the area.
8 But I want to say that Fleet is by far and
9 away becoming our lead lender, not just in dollars,
10 but in creativity, flexibility, understanding, and
11 response. When we need to move on a deal, they have
12 somebody who is there immediately; and they work
13 very closely with us. It is a very competitive
14 situation. They've done a very fine job.
15 We also want to give particular thanks to
16 Joyce Harley. She is the senior VP and community
17 development officer for all of New Jersey for Fleet,
18 Bill Grossman who is the senior VP and head of
19 community lending for the head of the real estate
20 division, and, of course, our own representative
21 down there, Jim Maloney. Of the five banks we deal
22 with, they are by far and away the most expert.
23 And, finally, let me just say we look
24 forward to staying in touch with Gail Snowden and
25 Agnes Bundy Scanlon. I've known Gail for five years
0465
1 in our work with the National Community Reinvestment
2 Coalition; and I've worked with Agnes since she
3 first arrived in Fleet from her former position in
4 the Senate Budget Committee.
5 And I want to thank Fleet for being part of
6 our company's success, and we look forward to an
7 even stronger relationship with them as a Boston
8 combination.
9 Thanks very much.
10 HEARING OFFICER SMITH: Mr. Raff.
11 MR. RAFF: Thank you. First, let me say I
12 admire your stamina.
13 My name is Larry Raff. I'm vice-president
14 of development and external affairs for Morgan
15 Memorial/Goodwill Industries, which is located in
16 lower Roxbury and in the heart of the recently
17 designated empowerment zone in Boston.
18 Goodwill provides a variety of job training
19 and other services to people with disabilities and
20 other barriers to work to help them maintain
21 self-sufficiency. Goodwill is also an important
22 participant in the revitalization of the
23 economically-challenged communities in Boston.
24 I'm here this evening to speak to the issue
25 of philanthropy. I'm a -- Goodwill is a
0466
1 representative on the Community Advisory Committee
2 initiated by Senator Wilkerson and have hosted
3 several of these meetings. We're very involved with
4 the Advisory Committee because we're deeply
5 concerned for the well-being of the physically- and
6 economically-challenged residents of our service
7 area which encompasses all of eastern and central
8 Massachusetts.
9 Access to affordable, user-friendly banking
10 services is especially important to people with
11 physical and educational challenges and to those
12 with limited and fragile financial resources. Any
13 reduction in services in affordability as a result
14 of this merger would be an assault on an array of
15 public and philanthropic initiatives that have
16 sought to better and assimilate this population into
17 the mainstream and into the economic mainstream.
18 Many of these programs are supported by Fleet Bank
19 and BankBoston.
20 I want to share with you the support that
21 Fleet Bank has provided Goodwill. Especially in the
22 last year, it has been quite generous.
23 Fleet has committed nearly a quarter of a
24 million dollars to Goodwill over the next three
25 years for a few programs that address job training
0467
1 to help people acquire computer skills, to acquire
2 competitive employment, as well as to help them put
3 clothing on their backs for job interviews and for
4 being on the job so they can maintain their
5 employment.
6 Fleet's also been our banker for many years
7 and has supported and underwritten $4 million in
8 bonds to help us purchase our main headquarters
9 building in Roxbury.
10 In terms of corporate charitable giving,
11 both Fleet and BankBoston have been very generous to
12 Goodwill; and for that I thank them very much.
13 However, it's incumbent upon me to also
14 look at the larger picture; and I want to do that
15 now.
16 Fleet has clearly been generous to Goodwill
17 and many other organizations in Boston and in
18 Massachusetts; and this is emblematic of why it's
19 important to preserve the integrity and the level of
20 Fleet Boston's corporate philanthropy in
21 Massachusetts, which is what I want to speak to
22 directly.
23 It's my concern, however, that this merger,
24 the proportion of Fleet Bank's combined corporate
25 giving that goes to Massachusetts will diminish
0468
1 significantly and in favor of those marketplaces
2 where the new Fleet BankBoston or new Fleet Boston
3 will be expanding its business operations. It's no
4 secret that corporate philanthropy in general is
5 based on enlightened self-interest for the benefit
6 of the business operations and for the community.
7 It is certainly understandable.
8 Given this reality, however, it is also
9 understandable for Fleet Boston to maximize its
10 charitable giving programs in those areas where the
11 bank is expanding its business operations. Unless
12 precautions are taken by this body and the other
13 regulatory agencies addressing this merger, the
14 result will be a significant decline in charitable
15 giving in Massachusetts. This will further diminish
16 the ability of human service organizations to
17 effectively benefit their constituencies and
18 assimilate them into the economic and social
19 mainstream, which benefits everyone.
20 In closing, I want to make an observation.
21 If I as a philanthropic or as a charitable
22 organization, a community-based organization were to
23 make application to Fleet Bank or BankBoston with a
24 proposal reflecting the integrity of the proposal
25 that has been put forth by the bank to you on behalf
0469
1 of this merger, I can assure you Goodwill would not
2 receive a grant and would not receive a loan based
3 on the facts, figures, promises, and measurable
4 outcomes that have been provided by this proposal to
5 you.
6 I would suggest you apply the same
7 standards to this proposal for merger as Fleet Bank
8 and BankBoston would apply to their own
9 philanthropic program in your own considerations.
10 Thank you very much.
11 HEARING OFFICER SMITH: Any questions?
12 Thank you very much for taking the time to
13 share your views with us.
14 (Pause)
15 HEARING OFFICER SMITH: Mr. Campen.
16 MR. CAMPEN: My name's Jim Campen. I an
17 associate professor of economics at the University
18 of Massachusetts in Boston. I'll focus my comments
19 today on the issue of mortgage lending to
20 traditionally underserved borrowers. This is an
21 issue on which I've done a number of studies in the
22 last several years.
23 In early June, I released a report entitled
24 "Does One Plus One Equal More Than Two or Less Than
25 One? A Study of Mortgage Lending Before and After
0470
1 Recent Mergers by Fleet and BankBoston." A copy of
2 that report is attached to my written testimony.
3 The main finding of this study, which has
4 been referred to frequently today, was that both in
5 the city of Boston and in all of Massachusetts,
6 lending to black, Latino, and low- and
7 moderate-income LMI borrowers by Fleet in 1998 was
8 approximately half of the total lending to these
9 borrowers by Fleet and Shawmut combined in 1995;
10 that is, the result of the most recent Fleet merger
11 was one plus one equals one.
12 In contrast, I find that lending to these
13 borrowers by BankBoston in 1998 was approximately
14 equal to the total lending to these borrowers by
15 Bank of Boston and BayBanks combined in 1995; that
16 is, the result of the most recent BankBoston merger
17 was one plus one equals two.
18 These findings were very robust. The same
19 general pattern exists whether one looks at Boston
20 or at the entire state at loans to blacks, to
21 Latinos, or to LMI borrowers and starting dates of
22 1994, 1995, ending dates of 1997 or 1998.
23 In the findings reported for New York, New
24 Jersey, New Hampshire, and Connecticut in Table 3 of
25 my report are even stronger than those for Boston in
0471
1 Table 1 and Massachusetts in Table 2.
2 Fleet's principal response to my findings
3 was stated in a June 29 letter from William
4 Mutterperl to Boston Fed CRA officer Richard Walker.
5 The same general response was articulated this
6 morning by Agnes Bundy Scanlan on today's first
7 panel, and it's presented in a 15-page document that
8 I received today from Fleet.
9 Fleet points out that it has ranked first
10 in market share in lending to blacks, Latinos, and
11 LMI borrowers; and that the percentage of its total
12 loans that go to these borrowers is substantially
13 above the industry average. This, of course, is not
14 a refutation of my findings. Fleet does not dispute
15 my findings.
16 Rather, Fleet's response, perhaps
17 unwittingly, underlines exactly why the substantial
18 drop in Fleet's mortgage lending to these borrowers
19 following its merger to Shawmut is so important. It
20 is precisely because Fleet and Shawmut had such
21 strong performance in lending to traditionally
22 underserved borrowers that the decline matters so
23 much.
24 When a major lender cuts back its lending
25 to middle- and upper-income households, there is no
0472
1 reason for public policy concern, because there are
2 plenty of other lenders aggressively seeking to lend
3 to these borrowers. But when the largest lenders to
4 traditionally underserved borrowers cut back
5 substantially, there is a shorter of other lenders
6 who will step in and take up the slack.
7 Fleet's cutback in lending to minorities
8 and LMI borrowers was approximately proportional to
9 its cutback in overall lending. However, by total
10 lenders -- by all lenders -- to all borrowers rose
11 by 29 percent between 1995 and 1997. Total lending
12 by all lenders to black and Latino borrowers fell by
13 1 percent during that period.
14 When the two largest lenders -- LMI to
15 minority and LMI borrowers -- merge, it is possible
16 for the subsequent lending of the surviving
17 institution to fall to the level of the merger
18 partner which had the lower level; that is, to fall
19 by more than 50 percent so that one plus one is
20 equal to less than one and still have it be the case
21 that the surviving institution retains the position
22 of the largest single lender to blacks, Latinos, and
23 LMI borrowers.
24 Indeed, Fleet and Shawmut were by far the
25 largest such lenders in 1995; and Fleet remains, as
0473
1 I emphasize, the largest lender. In fact, at this
2 time, Fleet and BankBoston are the two largest
3 lenders to minority and LMI borrowers.
4 I doubt that Mr. Mutterperl or Agnes
5 Scanlon means to suggest it would be all right if
6 the lending to these borrowers by the institution
7 resulting from the proposed merger were to fall by
8 50 percent, as long as that institution retains a
9 No. 1 market share and continued to make a high
10 percentage of its loans to these borrowers.
11 I have attached to the written version of
12 my testimony, six newly-completed tables for -- that
13 replicate for six Massachusetts metropolitan areas,
14 the MSA, the analysis previously done for the city
15 of Boston and the state of Massachusetts.
16 These were done for the Boston, Worcester,
17 and Springfield MSAs, as well as for the three MSAs
18 in the southeastern part of the state. I
19 particularly call your attention to the tables for
20 Springfield, which is Table 5, and to New Bedford,
21 Table 7.
22 In Springfield, the state's second most
23 populous MSA, between 1995 and 1998, Fleet's home
24 purchase loans to blacks fell from 46 loans to just
25 2; to Latinos, from 99 loans to 10; and to LMI
0474
1 borrowers, from 226 loans to just 38. Of course,
2 money percentage declines, so on the right-hand
3 column of that table, were 97 -- 95.7 percent, 90
4 percent, and 83 percent.
5 In New Bedford, the state's poorest MSA,
6 total lending by both Fleet and BankBoston dropped
7 precipitously. Total loans to blacks and Latinos
8 fell from 23 loans to 3. While total lending to LMI
9 borrowers by the two banks combined fell from 127
10 loans to 11.
11 Fleet and BankBoston suggested that the
12 criterion of one plus one greater than two should be
13 modified to take into account the fact that post
14 merger -- post divestiture institutions will be only
15 about 80 percent as large as the combined size of
16 the two current banks; that is, that the appropriate
17 criterion should be one plus one is greater than
18 1.6.
19 However, there's no guaranty that a bank
20 acquiring divested branches will engage in mortgage
21 lending will make up for a drop in lending by the
22 divesting institution. In fact, I'm aware of two
23 cases in the last round of mergers where a
24 substantial number of branches and deposits in a
25 single MSA were divested to a single institution;
0475
1 and in neither case, did the acquiring bank make a
2 significant number of mortgage loans.
3 In Worcester, several branches divested in
4 the Fleet-Shawmut merger provided a basis for a new
5 bank, First Massachusetts Bank. Like everywhere
6 else, lending fell substantially there to Latinos,
7 blacks, and the LMI borrowers. To what extent did
8 lending First Massachusetts Bank make up for these
9 lending decreases? Well, in 1997, First
10 Massachusetts Bank made a total of two home purchase
11 loans in Worcester MSA.
12 Similarly, in Boston, U.S. Trust acquired a
13 lot of BayBank/BankBoston branches. They made a
14 total of three home purchase loans in the Boston MSA
15 in 1997.
16 Thus, I would strongly urge that the level
17 of post merger mortgage lending required to be
18 adjusted downward only to the extent that the banks
19 acquiring that divested branches make firm
20 commitments for mortgage lending to traditionally
21 underserved borrowers.
22 I think that the one plus one greater than
23 two criterion emphasized by CEOs Gifford and Murray
24 in their March 15 press conference establishes an
25 appropriate minimum level of post merger home
0476
1 purchase lending to traditionally underserved
2 borrowers and neighborhoods.
3 I urge the Fed to require a firm written
4 commitment to this level of lending as a condition
5 of approving the merger. In light of my earlier
6 comments, I further urge the Fed first to accept a
7 commitment to a lower level of lending by the
8 post-merger institution only to the extent that the
9 bank acquiring divested branches makes a firm
10 commitment to making such loans.
11 Second, to require that the commitment be
12 made not only overall but for individual states and
13 appropriate submarkets to avoid having other areas
14 experience outcomes like that observed in New
15 Bedford. And third, to have the commitment
16 expressed in numbers of home purchase loans rather
17 than dollar amounts.
18 Finally, I want to emphasize that the
19 information so far made available by Fleet and
20 BankBoston is insufficiently detailed to make
21 possible an evaluation of their proposed mortgage
22 lending in light of this criterion.
23 I strongly endorse the call by many other
24 parties testifying in today's hearing that the Fed
25 extend the comment period so that it remains open
0477
1 for a reasonable period of time after Fleet and
2 BankBoston make their detailed final plan
3 available to community groups and other interested
4 parties. Thank you.
5 HEARING OFFICER SMITH: Mr. Davis.
6 MR. DAVIS: Thank you. I am Robert Davis,
7 and I serve as Director of Government Relations for
8 America's Community Bankers. We appreciate the
9 opportunity to present our views today on the
10 acquisition of BankBoston by Fleet Financial.
11 Your day has been pretty long. I promise
12 to be as brief as I possibly can be.
13 America's Community Bankers is a national
14 banking trade association that represents
15 progressive community banks of all sizes. In New
16 England our membership covers a complete range of
17 institutions other than Fleet and BankBoston,
18 consisting of savings banks, cooperative banks,
19 savings associations and commercial banks. We're
20 the only national trade group that represents the
21 entire spectrum of banks in New England other than
22 money center banks.
23 Our statement focuses on the divestiture of
24 branches, ATMs and other assets necessary for the
25 proposed acquisition to comply with the antitrust
0478
1 laws as well as other competitive situations. I
2 should comment that while a good bit of the
3 testimony today is focused on the behavior of the
4 new Fleet-Boston after the acquisition, especially
5 with respect to community development, I think there
6 can be no question that any assets that are acquired
7 through divestiture by the community-based
8 institutions in New England are going to be managed
9 to the benefit of those communities, and I think
10 that is one of the strengths of the community banks
11 in this region.
12 Our concerns really can be summarized in
13 five points. Community banks in New England are
14 fierce and effective competitors, and they should be
15 afforded a significant role in resolving antitrust
16 problems that are inherent in any large acquisition
17 in a concentrated banking market.
18 Two, unlike other regions of the country,
19 savings institutions in particular in New England
20 have well-diversified portfolios and are strong
21 competitors for the business customer, which is one
22 of the concerns.
23 Three, the unprecedented potential
24 concentration of ATM ownership that could result
25 from the proposed acquisition raises special
0479
1 economic concerns that must be addressed in the
2 regulators' anti-trust analysis. The divestiture
3 plan being developed must take into account the
4 unique implications of such a high concentration of
5 ATM ownership that would result from this
6 acquisition, particularly within the 128 corridor.
7 Four, so as not to revisit problems that
8 have emerged in the past, the government should
9 continue to provide careful scrutiny of any
10 restrictive real estate covenants that would hamper
11 future competition.
12 Five, along a similar vein, other contract
13 provisions, such as unreasonable restrictions on
14 communications between potential consortia partners
15 in the bidding process or restrictions on future
16 hiring practices of banks that bid for divested
17 branches, two issues which have been raised and are
18 potentially problematic in this acquisition, should
19 be prohibited.
20 A more detailed analysis of each of these
21 points is in our written statement that is submitted
22 for the record.
23 In conclusion, I want to emphasize that
24 America's Community Bankers has no interest in
25 impeding the BankBoston acquisition by Fleet. To
0480
1 the contrary, we believe the transaction can bring
2 new efficiencies and competition to the marketplace.
3 However, for that to occur, we believe the Federal
4 Reserve and the Justice Department must carefully
5 oversee the divestiture plan to resolve anti-trust
6 concerns, and that divestiture plan should take
7 account of the points that we have raised in
8 particular.
9 We strongly believe that the acquisition
10 and divestitures in question can result in gains for
11 the entire banking community and all of its
12 customers in New England. We're just as strongly
13 convinced that the best solution will be a
14 divestiture that ensures a strong role for
15 competitive community banking throughout the region.
16 Thank you.
17 HEARING OFFICER SMITH: Thank you.
18 Mr. Glass.
19 MR. GLASS: Thank you. For the record, my
20 name is Donald Glass. I'm president of the
21 Community Bank League of New England, which is a
22 regional trade association representing 118
23 community banks located throughout the six New
24 England states. Our members range in size from as
25 small as $9 million to as large as $1.2 billion,
0481
1 with an average asset size of $147 million.
2 We believe that generally this merger will
3 have a very positive impact on the economic vitality
4 of the New England region. It is good for the two
5 companies, and the region as a whole. We advocate a
6 win-win scenario where community banks, small
7 businesses, local communities and consumers win as
8 well, as a consequence of this transaction.
9 Community banks are a vital source of
10 financial services to small businesses, local
11 communities and consumers. Community banks strive
12 to provide quality products and services at
13 affordable prices while demonstrating a strong
14 commitment to and investment in their local
15 communities. A key principle in the League's
16 mission statement is to foster an environment in
17 which community banks can operate in a productive,
18 profitable manner. In line with our mission, we
19 believe it is essential and in the best interest of
20 the banking industry as a whole that this proposed
21 transaction be conducted in a way that allows
22 community banks to play a role in the completion of
23 this merger.
24 We have three key concerns regarding the
25 proposed merger between Fleet Financial Group and
0482
1 BankBoston Corporation, and they are as follows:
2 First, there are a number of antitrust
3 issues such as overall market dominance, state-
4 imposed deposit caps, as well as a concentration of
5 ATM ownership. The latter is of primary concern to
6 our members, since together Fleet and BankBoston own
7 the largest number of bank-owned ATM machines in use
8 today in Massachusetts.
9 In the metropolitan Boston area, their
10 combined ATM ownership is well over 50 percent.
11 This gives them the ability to employ predatory
12 pricing practices, such as surcharging.
13 We strongly urge that these antitrust
14 concerns be thoroughly evaluated and that serious
15 consideration be given to requiring the divestiture
16 of a specific percentage of ATM machines, both those
17 located in branches and freestanding alike.
18 Second, in the past large banks in this
19 region have included noncompete clauses in sale and
20 other documents relating to the divestiture of bank
21 branches and real estate. In this regard, we would
22 urge you to make sure that this practice is
23 prohibited.
24 Finally, we believe that community banks
25 should be allowed to have the opportunity to
0483
1 participate in the purchase of deposits and branches
2 that are to be divested. Their participation in the
3 divestiture process will help ensure that
4 community the community banking industry remains a
5 strong and vibrant player serving local communities
6 in their respective markets.
7 Thank you for consideration of our views.
8 HEARING OFFICER SMITH: Thank you.
9 Questions from the Panel?
10 HEARING OFFICER KWAST: Yes. Thank you.
11 I have a question for Mr. Davis and Mr.
12 Glass. Could you amplify on the role of your banks
13 and so-called middle-market lending. One of the
14 concerns that was expressed earlier today was
15 whether small- and medium-sized banks would be able
16 to compete effectively in the so-called middle
17 market. What role do your banks play in making
18 middle-market-type loans.
19 MR. DAVIS: Let me make the first
20 observation there. Our members range in size from
21 multi-billion dollar regional community banks, like
22 People's Heritage in Webster and People's in
23 Bridgeport, Connecticut, to very small institutions.
24 We have, as Don mentioned, institutions that, with
25 less than $10 million in assets, their assessment
0484
1 areas are literally defined as blocks. So there is a
2 whole range of institutions.
3 And obviously the very small institutions
4 have much less capacity to engage in business
5 lending except for community Mom-and-Pop businesses.
6 But the larger institutions that are still community
7 banks and they're still community oriented, even if
8 they operate regionally, we believe have very
9 substantial capacity to engage in business lending
10 and also can make the jump into middle markets.
11 We recognize that it's important to
12 establish that middle market competitor. We
13 recognize that the government has an interest in
14 establishing a new, large, dominant player. We
15 don't disagree with that objective.
16 And we realize, frankly, also, that the
17 majority of the assets divested are probably going
18 to have to go to that type of player. Frankly,
19 community banks don't have the capital to absorb all
20 the assets that are going to be divested. But we
21 think that a very substantial proportion of the
22 assets that are divested can be effectively deployed
23 in the hands of the community banks, and they can be
24 effective competitors.
25 MR. GLASS: We view this transaction taking
0485
1 place as being in two parts, basically. The first
2 part is the creation of a mid-market competitor,
3 probably an outside financial institution, and
4 another part where community banks will be able to
5 participate in consortia and pick it up in the after
6 market, so-called after market.
7 And there are ways of doing some of the
8 mid-market by participation, with a small bank being
9 the lead and putting together groups of banks that
10 can participate in some of those types of loans. So
11 there is a way of doing it. Certainly they aren't
12 going to be the competitor that either the Justice
13 Department or the Fed would like to have in here,
14 and we view that as probably the reality.
15 MR. DAVIS: I want to add also that we're
16 not looking for Fleet and BankBoston to carve out a
17 segment for sort of a discount sale. In fact, we
18 think that the community -- the highest value usage
19 of a lot of the divested assets are going to be with
20 community banks, and they will often be willing and
21 able to pay the highest premium for some of the
22 divested assets.
23 So I think that the strong participation
24 and an open process that lets community banks bid
25 probably also ultimately benefits the stockholders
0486
1 of Fleet and BankBoston the most in terms of
2 realizing gains from the sale of divested assets.
3 HEARING OFFICER KWAST: I also have a
4 question for Mr. Campen. I was a little unclear,
5 did your study of mortgage lending apply to dollar
6 value of lending as well as the number of loans or
7 is it only the number of loans?
8 MR. CAMPEN: I just looked at the number of
9 loans.
10 HEARING OFFICER KWAST: Thank you.
11 HEARING OFFICER BROWNE: I also have a
12 question for Mr. Campen. If I understood correctly,
13 you were saying that for minorities, that the
14 cutbacks by Fleet resulted in basically a cutback
15 overall or at least no growth overall; whereas for
16 non-minorities, there was overall expansion.
17 Who is picking up the -- or who is doing
18 the expanding in both cases, and is there -- and as
19 a consequence, who is not stepping in as much in
20 terms of lending to minorities? Is there a
21 differential? Is it mortgage banks? Or where is
22 the slack? Who is picking up the slack?
23 MR. CAMPEN: The big lenders -- I could
24 answer this more precisely if I looked at the data.
25 But the big lenders in Massachusetts and Boston
0487
1 overall -- there are a number of out-of-state
2 mortgage companies -- countrywide, NorWest,
3 BankAmerica, just looking at 1997 data -- which have
4 made lots of loans, which are among the five or six
5 biggest lenders statewide and citywide to all
6 borrowers. They made very few loans to minorities.
7 So the big Boston-based banks were
8 disproportionately the lenders -- I mean, in 1995,
9 they had almost two-thirds of the total lending
10 between them. There were four banks then, but they
11 accounted for almost two-thirds of the total lending
12 in the state to minority borrowers. In 1997 that
13 had gone down to slightly below 50 percent.
14 HEARING OFFICER SMITH: Thank you very much
15 for coming to present your views.
16 We'll move on to Panel No. 19. Mr.
17 Carvalho.
18 MR. CARVALHO: Good evening. My name is
19 Frank Carvalho, and I'm the Executive Director of
20 the Coalition for a Better Acre, a community
21 development corporation in Lowell, Mass.
22 I'm here tonight to testify as executive
23 director of a community development corporation that
24 deals with low- to moderate-income residents in the
25 oldest and poorest neighborhood of Lowell, and I'm
0488
1 very concerned about this proposed merger.
2 First, it's hard for me to understand why
3 this new proposed entity refuses to deal with my
4 trade organization, the Massachusetts Association of
5 Community Development Corporation, who we chose to
6 represent our community. Second, why can't they make
7 specific commitments in response to our proposals?
8 I urge you to support us in the following
9 requests: that Fleet and BankBoston develop a
10 detailed and publically verifiable community
11 reinvestment plan negotiated with community
12 organizations and elected officials with specific
13 commitments ensuring the net benefit to low- and
14 moderate-income and minority communities.
15 Two, to extend the public comment period
16 until such brand is developed and released to the
17 public, and to issue no approval unless and until
18 the aforementioned conditions are fully met.
19 This is our hope, that the mergers of the
20 largest banks in New England should benefit low- and
21 moderate-income and minority communities as well as
22 shareholders. One plus one should equal more than
23 two.
24 This is very important because each bank
25 has been a significant part of the solutions for our
0489
1 community through their grant program. I went to
2 BankBoston to help CBA to put 16 low- and
3 moderate-income residents of Lowell into their first
4 houses as homeowners. We are very proud of them.
5 And a grant from Fleet Bank has allowed CBA to
6 develop 50 resident leaders who are researching and
7 addressing community obstacles such as child care,
8 transportation, lack of benefits and other issues
9 relating to the employment issues that affect low-
10 and moderate-income residents of our city to get
11 good and liveable wage jobs.
12 Fleet Bank and BankBoston should ensure
13 that one plus one will be greater than two in
14 charitable contributions for community development.
15 They should include what we propose, which is a $5
16 million statewide charitable budget for the Year
17 2000 and increasing beyond that. It is currently
18 estimated that the merged banks' Chapter 102
19 obligation to the Mass. Housing Partnership fund,
20 MHP, could range hundreds of millions of dollars in
21 net financing.
22 The merged bank could help to meet the
23 critical equity needs in the affordable housing
24 development market by converting all or a majority
25 of the debt to a grant that can be administered by
0490
1 the MHP fund. This would greatly contribute to the
2 development of affordable housing. BankBoston's
3 grant conversion at the time of the last merger
4 yielded approximately one grant dollar for every $9
5 of debt. As a result, MHP was able to capitalize a
6 firm plus program with over 367 affordable rental
7 units financed through firm plus. It also allowed
8 MHP to capitalize the fund resulting in additional
9 241 units.
10 The merged bank should result in Fleet and
11 BankBoston's participation in the Basic Banking for
12 Massachusetts program that offers low-cost checking
13 and savings accounts targeted to low-income
14 consumers who have been discouraged from using the
15 banking system by high transaction fees. The new
16 bank should adopt a program that allows ten checks
17 and ATM transactions per month with a $2.50 fee and
18 75 cents per additional check.
19 In addition, the bank should create an
20 aggressive campaign to market its products in low-
21 to moderate-income and minority communities.
22 Finally, Fleet and BankBoston can best
23 assure that these goals are met by negotiating and
24 signing the Community Investment Agreement with
25 MACDC covering the above-discussed items and others
0491
1 in the proposal previously forwarded to them. The
2 agreement should be for at least five years. It
3 should include a process and commitment to
4 renegotiate an extension of this agreement for an
5 ongoing relationship.
6 It should also include provisions for
7 regular communication among the parties, plus
8 specific mechanisms for reporting and verifying that
9 the goals of the agreements are being met. By
10 agreeing to enter this agreement, the new entity
11 would assure that my community needs are being met,
12 and sending a loud and clear message that one plus
13 one does equal more than two. Thank you for
14 listening.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 Mr. Colton.
18 MR. COLTON: Thank you. My name is Roger
19 Colton. I am an attorney and a member of the
20 Belmont, Massachusetts, Fair Housing Committee. I
21 speak tonight on behalf of the Belmont Fair Housing
22 Committee, an arm of the local government of the
23 Town of Belmont.
24 One question presented to federal
25 regulators by the proposed merger of Fleet Financial
0492
1 Group and the BankBoston Corporation is whether the
2 merged bank will adequately address the credit needs
3 of the community. In assessing whether this will
4 occur, there is a need to differentiate between the
5 urban and the suburban communities. There is a
6 significant focus of attention today on the urban
7 community. Unfortunately, there is much less
8 attention focused on the suburbs. One of the next
9 major steps that must occur in fair housing lending
10 is to facilitate the diversification of suburban
11 communities.
12 My discussion tonight focuses on one slice
13 of Boston suburbia, beginning with Belmont and
14 radiating north and west eventually to capture the
15 communities of Belmont, Waltham, Lexington, Woburn
16 Winchester, Arlington, Burlington, Bedford, Sudbury
17 and Concord. Information on Lincoln was sought but
18 was not available.
19 Unfortunately, it is not only difficult but
20 it is impossible to discuss the data in five
21 minutes. Accordingly, I will present our
22 conclusions to you this evening and commend our
23 written presentation to you for perusal of the
24 supporting data.
25 The first major credit need in the suburban
0493
1 community relevant to tonight involves the promotion
2 of socioeconomic diversity. One lesson found in the
3 available data from the ten study communities is
4 that the affordability of units is not the only
5 barrier to home ownership in the ten communities
6 studied. Home ownership is unavailable even when
7 affordable home ownership opportunities exist.
8 Information was obtained for each of the
9 study communities on the number of units that are
10 affordable at different levels of median income.
11 This information shows that merely because a unit is
12 affordable at a designated income level does not
13 mean that it is actually occupied by a family or
14 household with that income.
15 It is often asserted that Boston's suburban
16 community lacks a greater socioeconomic diversity
17 because of the lack of affordable housing. The data
18 confirms that this is frequently the cause. The
19 data further show, however, that something more
20 stands as a barrier to socioeconomic
21 diversification.
22 The data present a compelling case that
23 when and where affordable home ownership units
24 exist, they are not being purchased by households at
25 lower incomes. To meet the needs of diversifying
0494
1 the suburbs, specific proactive steps are necessary.
2 From a fair housing lending perspective, this need
3 is more than simply to avoid discrimination.
4 The second major credit need in the
5 suburban community, as relevant for purposes
6 tonight, involves the promotion of racial and ethnic
7 diversification. The data from the ten study
8 communities used for our report show a lack of
9 diversification even when controlling for income as
10 measured by percent of median income.
11 Merely because units may be affordable to
12 households of color does not mean that households of
13 color are becoming homeowners in these suburban
14 communities. The lack of racial and ethnic
15 diversity in the ten study communities cannot be
16 attributed exclusively to the lack of affordable
17 housing availability.
18 By definition the price of housing was not
19 the limiting factor in our analysis. The data was
20 limited to housing determined to be affordable at 80
21 percent of median income or more with which to
22 begin. The data was also limited to
23 African-American and Hispanic households who have
24 income of at least that amount.
25 Something more than the mere affordability
0495
1 of home ownership is creating barriers to suburban
2 home ownership for households of color.
3 So why do I present all of this tonight to
4 you folks? Identifying and seeking remedies for
5 barriers to diversity and home ownership is one
6 essential element in fair housing lending. Fair
7 housing lending involves more than merely avoiding
8 discrimination. Fair housing lending has as its
9 ultimate goals the elimination of the effects of any
10 fair housing impediments outside the lender's
11 control and the elimination of any identified
12 impediments within the control of the lender.
13 This proposed merger should not only not
14 impede but should affirmatively promote this
15 construct of fair housing lending.
16 Based on the two credit needs of the
17 suburban communities which I previously identified,
18 it would be appropriate for a Fleet-Boston to commit
19 to working with the Greater Boston fair housing
20 community to develop a plan of action to promote the
21 diversification of the suburbs.
22 This plan should include a stated goal,
23 supported by both short-term and long-term
24 objectives, a written work plan in furtherance of
25 accomplishing those objectives, an evaluation
0496
1 mechanism to determine performance relative to the
2 stated objectives, and a review mechanism charged
3 with utilizing evaluation to formulate
4 recommendations on modifications as needed to the
5 plan of action should the objectives not be
6 achieved.
7 Thank you for providing an opportunity for
8 a representative of local government to speak with
9 you tonight.
10 HEARING OFFICER SMITH: Thank you.
11 And we'll move to Mr. Cusick.
12 MR. CUSICK: My name is Pat Cusick. I'm
13 the Executive Director of the South End Neighborhood
14 Action Program, SNAP, in Boston, and for the record,
15 I reside at 521 Shawmut Avenue in the South End of
16 Boston.
17 I'm departing from my written testimony.
18 It has been noted that something unusual has
19 happened here today. Of the 72 organizations
20 testifying in favor of the acquisition by Fleet in
21 the charitable lending category -- of the 75 that
22 testified here today, 72 are nonprofits.
23 Now, I'm not against nonprofits. I'm the
24 executive director of a nonprofit. But isn't that
25 strange? Where are the small businesses? I would
0497
1 hope that the Fed would be concerned. I mean,
2 really, this is astounding.
3 For most of my professional career, I've
4 been concerned with affordable housing, affordable
5 rental housing. I was the organizer that seized the
6 Harvard commencement in 1970 and held it hostage
7 over the issue of affordable housing.
8 In the 1980s I was the organizer of a
9 coalition in my neighborhood that enabled 360
10 families to live in affordable housing that cost $60
11 million. I myself am the owner/developer of a
12 nonprofit that has won national honors in the South
13 End, 84 units of limited equity co-op housing.
14 But I've shifted my principal concern after
15 all this time from being concerned about rental
16 housing to that of home ownership. Maybe it's
17 because in my neighborhood, in Lower Roxbury, less
18 than 5 percent of the units are home ownership.
19 Now, I'm going to repeat that, because that's the
20 least amount in the city of Boston, less than 5
21 percent are home ownership. And that is in a city
22 which, as you know, has the least amount of home
23 ownership in the United States.
24 Now, this is a terrifying statistic when
25 you think about it, and this is why that
0498
1 neighborhood is so vulnerable to every takeover of
2 any sort.
3 Home ownership is more than shelter. It is
4 more than a psychological support for families.
5 Home ownership is not only part of the American
6 dream, but on a scale that doesn't have anything to
7 do with individual housing, home ownership sinks
8 roots into the communities. And in the low income
9 communities, there are very few roots. And when you
10 have rootless communities, the entire community and
11 then the entire city is at risk. We desperately
12 need more home ownership.
13 Now, at this portion of my testimony, I was
14 going to reiterate Professor Campen's excellent
15 report, but there is no need to do that; you have
16 the report, you have heard from him.
17 I just want to make a plea that we really
18 need home ownership. What's happening in Boston is
19 the tale of two cities: people of affluence and
20 people that are poor. The working class is very
21 fragile in this city. They can't find housing, and
22 we need affordable home ownership for working class
23 families and for the lower middle class. So that is
24 my focus and my plea.
25 I will say that we had hoped that one plus
0499
1 one would equal more than two, but I'm sure you have
2 seen Brian Mooney's column in the Boston newspaper
3 of record, the Globe, on Saturday which iterates the
4 number of banks that have been subsumed by other
5 banks and are now Fleet. There are 450 former
6 independent banks that are now Fleet. So maybe
7 instead of saying one plus one should equal more
8 than two, we should say 451 plus one should equal
9 more than two.
10 I think we need several things. We need
11 mortgage lending that allows families to stay in
12 their own neighborhoods and to invest in their
13 neighborhood. We need home equity lending programs
14 which help ensure that the family homestead can be
15 passed on to the next generation. We need small
16 business lending that ensures that neighborhoods can
17 sustain their local infrastructure, while local
18 entrepreneurs are encouraged to continue investing
19 their own blood, sweat and tears in their
20 communities.
21 And we also need a banking presence in
22 which bank employees look like the people in our
23 neighborhoods and are hired from our neighborhoods
24 with a helping hand in the area of training and
25 education.
0500
1 We are very concerned about this proposed
2 merger, and we very much insist that there be an
3 agreement which is verifiable and accountable, and I
4 think it's the responsibility of the Federal Reserve
5 Bank -- who else can do it -- to ensure that this is
6 a written agreement on the offers that Fleet-Boston
7 is making, and obviously it has to be signed. I
8 mean, no agreement is an agreement unless it is
9 signed. If I go into Fleet and get a loan and I
10 have to pay back $150 a month or something,
11 obviously I can't get away with a local agreement,
12 with an oral agreement.
13 So Fleet-Boston should sign a signed
14 agreement overseen by the Feds, because we must turn
15 to you for any of the benefits that we'll receive.
16 Thank you.
17 HEARING OFFICER SMITH: Thank you very
18 much.
19 Mr. Harris.
20 MR. HARRIS: My name is David Harris, and
21 I'm the Executive Director of the Fair Housing
22 Center of Greater Boston, an organization promoting
23 equal housing opportunities for all people
24 throughout the Greater Boston metropolitan region.
25 I have spent much of the last two days
0501
1 trying to edit my testimony down to five minutes.
2 This morning as I sat gasping for air after reducing
3 my comments to seven minutes, I realized that every
4 second I saved cost substance. I was reminded of a
5 joke I used to tell students to loosen them up
6 before administering exams. A proctor notices a
7 student has sat statue still for two and a half
8 hours of a three-hour exam on the tradition of
9 rhetoric. When she warned the student that time was
10 wasting, the student protested that he had studied
11 for two weeks and reduced the article into a single
12 word. "And now I've forgotten the word," cried this
13 beleaguered fellow. "That's bull," intoned the
14 proctor. "That's the word," exclaimed the student.
15 This is how it feels to peal away substance
16 and come before you with abbreviated arguments.
17 After reading the articles in today's Globe, I
18 realized I should save my breath. The real battle
19 took place in the editorial room to which I do not
20 have access and which bank representatives surely
21 had more than five minutes to make their case. So
22 I've submitted a copy of my expanded version
23 writings, and I offer here only a few highlights and
24 comments on process.
25 I must say, as I looked at you all, I
0502
1 thought of another comment from a professor of mine
2 who used to say that he attended a union meeting at
3 which a speaker stood up and said, "Ladies and
4 gentlemen, the last speaker spoke to you in vague
5 generalities. I, however, am going to speak to you
6 at random." You must feel a bit of that coming on,
7 and I hope that I'm a little bit more focused than
8 that.
9 I should begin by saying that many of the
10 comments that you heard today touch on fair housing
11 issues, from affordable housing to mortgage lending,
12 from diversity of the work force to the location of
13 branches. The Fair Housing Center agrees with those
14 who have come before you to ask the Federal Reserve
15 Bank to closely scrutinize the banks' stated
16 commitment to community.
17 The Fair Housing Center is among a hundred
18 plus community groups with whom the banks have
19 proudly boasted meeting. We had to request that
20 meeting, and while the tone was cordial and
21 discussion open, we were distressed by the
22 suggestion that we return at the end of the year to
23 explore fair housing issues after the merger is
24 complete and the new entity is consolidated.
25 Given the history of housing discrimination
0503
1 in this country and Fleet's chapter in that history,
2 a firm public and detailed commitment to fair
3 housing must precede and not following a merger.
4 The practice of effective fair housing is
5 or certainly should be a basic element of good
6 banking, basic but not simple. The practice
7 requires lasting institutional commitment driven by
8 an honest and ongoing self criticism. Effective
9 practice does not occur in isolation but is by
10 nature cooperative and open. It depends upon
11 developing and maintaining internal mechanisms, as
12 well as partnerships with external organizations
13 across institutional lines.
14 Of course creating these partnerships
15 requires a basic element sorely missing from the
16 proposal that you are considering: Trust. Fair
17 housing involves more than the widely acknowledged
18 commitment to LMI consumers and neighborhoods, and
19 the scope of the Fair Housing Center's mission
20 extends throughout the 150 plus cities and towns
21 which comprise our service area.
22 The Federal Reserve Bank must also look
23 beyond the CRA horizon and condition any approval on
24 specific commitments to fair housing in the broader
25 community as well. A step toward creating that
0504
1 trust and ensuring that any approved bank practices
2 effective fair lending, the Federal Reserve Bank
3 should require two specific commitments.
4 The first is a comprehensive review of the
5 two banks' policies, practices and procedures to
6 identify possible impediments to fair housing. The
7 review should be conducted by internal and external
8 analysts and cover impediments within the lender's
9 control as well as more general impediments in the
10 market. The results of this review should be made
11 public.
12 Second, the Federal Reserve Bank should
13 require the new entity to translate that review by
14 specified date within the first year of operation
15 into a detailed plan of action to increase lending
16 to persons of color and other protected classes
17 throughout the region, rather than merely within LMI
18 census tracts.
19 This plan will include quantifiable,
20 verifiable, short-term and long-term objectives --
21 well, I'm sorry. Roger and I have the same proposal
22 here, so I won't -- in deference to the one minute I
23 won't go on, and it is in my comments.
24 Those of us who come here today have done
25 so in good faith. Our efforts may be characterized
0505
1 variably as begging, extortion or mau-mauing,
2 depending upon the sympathy or the temerity of the
3 critic. But by refusing to enter into enforceable
4 commitments prior to approval, it is the banks who
5 come to you with their hands out. They come, one of
6 them burdened by a history of questionable practices
7 and commitment to fair lending, asking for a free
8 ride.
9 We're not talking about the $14.6 billion,
10 but about formal commitments to certain practices.
11 They refuse to make such commitments and indulge
12 today's spectacle with the arrogant self assurance
13 that you will punch their ticket.
14 The Fair Housing Center believes increased
15 size and power must be accompanied by increased
16 responsibility and accountability. We call upon the
17 Federal Reserve Bank to consider the type of
18 corporate citizen it may be creating by endorsing
19 the proposed merger. Such an entity must accept the
20 leadership role in the area of fair housing and fair
21 lending. It must be expected to do more than its
22 former constituent parts and more than its smaller
23 competitors. It must set the pace for others with
24 fewer resources and less influence in affirmatively
25 furthering fair housing.
0506
1 There's an old saying in the Civil Rights
2 movement that freedom is not free. It is a lesson
3 with which we conduct ourselves, knowing that stands
4 we take may be ridiculed and eventually dismissed by
5 those preoccupied by what they consider the bottom
6 line.
7 But these banks and any new bank must
8 realize that there is a cost to discrimination, not
9 only diminished lives of victims and the community
10 as a whole, but to those who discriminate as well;
11 in other words, a cost to the banks themselves.
12 The Fair Housing Center will be watching
13 and where indicated investigating. But we also
14 stand ready to participate as full partners in the
15 quest to eliminate the practice and effect of
16 discrimination in the housing market. Thank you.
17 HEARING OFFICER SMITH: Thank you very
18 much.
19 Reverend Barnwell.
20 REVEREND BARNWELL: I'm William Barnwell,
21 representing the Greater Boston Interfaith
22 Organization, also a resident, like Pat Cusick, of
23 the South End and Boston.
24 Greater Boston Interfaith Organization,
25 GBIO, is a large and active social reform
0507
1 organization consisting of about 75 faith
2 communities, ten community development corporations,
3 and five other community groups across race, class,
4 denomination, and geographic lines. Over 4,000
5 people attended our founding assembly last November,
6 the first of its kind in many, many years in Boston.
7 I'm here today to represent that
8 organization, which has made affordable housing,
9 especially for low-income people, its top priority.
10 After many small group meetings, my church, Trinity
11 Episcopal Church in Copley Square in Boston, decided
12 to make affordable housing our top outreach concern
13 as well.
14 We at GBIO and at Trinity Church believe
15 that if we are not able to make housing available to
16 all of our citizens, we will rather quickly become a
17 one-class city, forcing most of our church members
18 and other low- to moderate-income people into the
19 distant suburbs. Not only would that make life
20 extremely difficult for them, for those persons,
21 destroying their present communities, it would also
22 have the effect of greatly diminishing the diversity
23 of the city that we cherish so much.
24 Specifically, GBIO urges that you approve
25 the merger only if these six conditions are met:
0508
1 One, as a lot of others have said, that you require
2 a detailed written and signed reinvestment
3 agreement. The idea that such an agreement not be
4 written out in detail and signed is unthinkable to
5 us and we believe should be unthinkable to banks
6 that rely entirely on signed agreements with their
7 customers.
8 Two, that the merger result in at least the
9 same amount of benefits to low income areas that
10 both banks have offered before the merger.
11 Three, that Fleet Bank convert its
12 obligation for a loan pool to the Massachusetts
13 Housing Partnership into an affordable housing
14 grant, that is, equity conversion. Here Fleet would
15 be following the model of the Bank of Boston when
16 they merged with BayBank. By our calculations, $30
17 to $60 million would be available for affordable
18 housing grants. This, we believe, would help many
19 more low- to moderate-income families buy their
20 homes or rent than a small reduction in interest
21 payments would allow.
22 Four, that Fleet Bank and BankBoston meet
23 their commitments to the soft second mortgage
24 programs that they made to the community on May 12th
25 at Roxbury Community College.
0509
1 Five, that the new bank extend the soft
2 second mortgages to other parts of the Commonwealth.
3 Six, that low- to moderate-income
4 neighborhoods continue to have nearby branches of
5 the new bank and that none be closed or sold unless
6 two of the old bank branches are in the same
7 immediate neighborhood. Thank you very much.
8 HEARING OFFICER SMITH: Mr. Bolling.
9 MR. BOLLING: My name is Bruce Bolling. I
10 am the Executive Director of the Massachusetts
11 Alliance for Small Contractors. I am a lifelong
12 resident of the Boston and Roxbury community. I
13 served on the City Council and was President of the
14 City Council. I served on the body for 12 years and
15 have been involved in business development, economic
16 development, particularly for small minority and
17 women business enterprises for quite some time.
18 The Massachusetts Alliance for Small
19 Contractors is a nonprofit corporation that provides
20 business development, capacity building services to
21 small minority and women-owned business enterprises.
22 Mass Alliance helps M/WBEs to acquire the financial
23 resources, the technical capabilities, and
24 management skills needed to successfully compete for
25 projects in the construction industry, including
0510
1 bonding approval, creditworthiness, management and
2 accounting systems, technical expertise, estimating
3 capacity, project experience.
4 We address these needs in businesses
5 through two programs: Our Business Development
6 Support Services Program, our Educational and
7 Training program.
8 The Business Development Support Services
9 Program provides technical assistance and support to
10 M/WBEs through one-on-one management and technical
11 consulting services. We also assist M/WBEs with the
12 financing, tax and insurance issues many contractors
13 face while managing the growth of their companies.
14 These services are provided by construction
15 contracting industry experts, including engineers,
16 estimators, project managers, lawyers and
17 accountants.
18 The various services that we provide, thus
19 far over 350 companies have benefited directly from
20 one or more of MassAlliance's wide range of
21 technical assistance and capacity-building services.
22 Our Education and Training component has
23 served many people in construction management areas.
24 We have provided educational training services to
25 1,753 participants representing 490 companies.
0511
1 MassAlliance engaged in a financial
2 analysis of the clients that we provide services to.
3 That financial analysis was based on our ability to
4 provide programs and tailor programs specifically to
5 meet the needs of minority and women construction
6 contractors. The objective of that profile was to
7 profile the financial position of companies actively
8 receiving services from MassAlliance to determine
9 trends, common characteristics, strong and weak
10 points. The findings will allow us to maximize the
11 delivery of various programs offered to -- and to
12 assist in the design of new programs.
13 One of the major findings of that study,
14 the main financial obstacle that small contractors
15 are experiencing is undercapitalization, resulting
16 in high leverage ratios and lack of liquidity.
17 The more than 50 percent of the
18 participants in our study in fact are rated worse
19 than the industry. And to understand some of the
20 reasons causing this situation, we should start with
21 the high percentage of companies having very low
22 days of cash.
23 What we have been able to determine is
24 that, when you do a comparison of accounts
25 receivable balances compared to sales and accounts
0512
1 payable balances as compared to cost of goods sold,
2 the hidden factor in the accounts receivable numbers
3 is that the retainage is 5 percent. 5 percent of
4 the contract is withheld until the end of the
5 contract. Many contractors start early, which means
6 that they in fact can't get the retainage until a
7 year or two years after the project has been
8 completed.
9 The adverse impact of that is significant
10 to this constituency. What is needed is equity
11 financing, access to capital in ways that
12 traditional financing programs don't commit to.
13 Most of these companies have very low leverages.
14 It's a mature industry. The profit margins usually
15 range from 2 to 5 percent, and it is very difficult
16 for these companies to access capital.
17 My concern with this merger is that what I
18 would like to see for this constituency, and for
19 that matter small businesses, is the ability to
20 access capital based on the real growth needs that
21 these companies have. At present, financial
22 institutions, major financial institutions simply
23 are not doing it.
24 This is a time where the economic expansion
25 should lend itself to innovative, creative
0513
1 approaches to accessing capital. It is not
2 happening for this constituency. Just in
3 Massachusetts, $3 billion a year in construction
4 publicly financed for the next five years, for the
5 next five years. These small businesses are having
6 a difficult time trying to take advantage of those
7 construction opportunities.
8 This merger, if it doesn't address this
9 constituency and other small business
10 constituencies, they will be marginalized forever,
11 and that has been the problem to date.
12 This is an area where major financial
13 institutions have shied away from, and it is
14 something that needs to be done if we're going to
15 bridge this gap to ensure that small businesses in
16 fact get the kind of capital they need in order to
17 stabilize and grow their businesses like anyone
18 else.
19 HEARING OFFICER SMITH: Questions? (No
20 response)
21 We are going to have a one-person panel so
22 that Mr. Porter can catch his flight at 10 o'clock.
23 MR. PORTER: Thank you for allowing us to
24 speak here today. My name is Alvin Porter, and I'm
25 the Executive Director of the New York Mortgage
0514
1 Coalition. The New York Mortgage Coalition is an
2 organization of ten banks and eight community
3 groups, and we provide mortgage counseling services
4 throughout New York, Long Island and Westchester.
5 Fleet Bank has been a member of the New
6 York Mortgage Coalition since its inception five
7 years ago, and last year they were one of the
8 leading lenders. They originated more than $9
9 million in mortgage loans.
10 The New York Mortgage Coalition, since its
11 inception, has been responsible for over $100
12 million dollars in mortgage low. We target low- to
13 moderate-income families throughout New York, Long
14 Island and Westchester. The banks within our
15 organization provide grant money, which supports the
16 counseling efforts by our community groups.
17 Fleet has been an active member of the
18 Mortgage Coalition, and it has supported the
19 Mortgage Coalition since its beginnings. They have
20 been a strong supporter of the Mortgage Coalition.
21 They're in touch with the community, and they're
22 responsive to the community needs. Fleet, as an
23 organization, is supportive of mortgage counseling.
24 I think a lot of the problems that have been
25 expressed here today can be resolved through
0515
1 mortgage counseling, and Fleet has been one of the
2 leaders in helping to provide and support mortgage
3 counseling throughout the past five years. Thank you
4 very much.
5 HEARING OFFICER SMITH: Thank you very much
6 for coming. We will have a two-minute break for the
7 court reporter.
8 (Brief recess)
9 HEARING OFFICER SMITH: We're ready to
10 start with our last panel, starting with Luz
11 Santana.
12 MS. SANTANA: Good evening. My name is
13 Luz Santana. I'm a member of a grass-roots
14 neighborhood organization named Vecinos Unidos,
15 which means in English United Neighbors, and we work
16 with disadvantaged residents to try to improve the
17 economic conditions. And we have been working
18 with -- we have been dealing with issues of Fleet
19 for many years.
20 Back in 1978, '79, I believe the name --
21 the previous name was Connecticut Bank and Trust,
22 and we had to deal with them, you know, with issues
23 like people on public assistance trying to cash
24 their checks and having problems and having the
25 police calling people who had, you know, differences
0516
1 with some of the tellers and things getting kind of
2 out of hand. We had to be involved.
3 And at this point, now, we turned our
4 attention to Fleet back in January, because we saw
5 an article in the paper, in the business section,
6 that they had been given an award from the President
7 because how great they were doing with the welfare
8 work, you know.
9 And we kind of got concerned and we called
10 a meeting. I invited them. However, we had a hard
11 time getting some of the decision-makers from Fleet
12 to come to meet with us. We finally got a recruiter
13 staff to come and talk to us about how welfare was
14 working.
15 It happens to be that what seems to be a
16 successful story, it wasn't successful at all for us
17 in Connecticut, because what ends up to be, that
18 particular recruiter said that out of 20 people that
19 she hired, the person on recruiting, to work for the
20 Welfare to Work, none of the people stayed at the
21 job for, you know, 60 days or 30 days, and there was
22 no reason or explanation of what happened with the
23 person that stayed on the job.
24 And when we offered to -- we wanted to be
25 involved, we wanted to help them retain their
0517
1 employees, and we also want to get people good jobs.
2 And it seems like we have a problem with that. They
3 are not being too cooperative with us.
4 So we're very concerned about how this
5 acquisition will reflect in terms of the people who
6 are looking for jobs, meaningful jobs for them to
7 become self-sufficient. So at this moment we are
8 opposing this acquisition, and hopefully that will
9 put attention, because, as you know, companies are
10 being compensated for hiring people from Welfare to
11 Work, and what we're concerned is that if people are
12 not staying on the job, however, the people who did
13 the recruiting for the company is not necessarily
14 the people who are presenting the tax credits, you
15 know, for the Welfare to Work. So we're kind of
16 concerned that while people are not staying on the
17 job, the possibilities are they still can be able to
18 claim people, you know, for the tax credit. So we
19 would like to ask this Board to look into that, and
20 things will hopefully get better, and we can improve
21 all relations.
22 HEARING OFFICER SMITH: Thank you very
23 much.
24 Mr. Vickers.
25 MR. VICKERS: I'm Greg Vickers. Thank you
0518
1 for having us here today. I work with the Citizens'
2 Research Education Network, which is a small
3 research-oriented nonprofit in Hartford, and
4 representing today 21 organizations who have signed
5 on to our printed report, which we have handed in
6 and filed with you.
7 And I will talk about some of the concerns
8 that the coalition has raised. The coalition is
9 Connecticut Friends of Community Reinvestment, and
10 it is kind of a broad-based coalition of women's
11 organizations, minority groups, small business, and
12 housing interests.
13 The coalition, there are several things
14 that we're concerned about. I guess the three that
15 stand out are the anticompetitive nature of the
16 merger, Fleet's decline or the decline in home
17 mortgage lending of Fleet after the merger with
18 Shawmut, and Fleet's record of small business
19 lending. I'm just going to touch on those.
20 Fleet's acquisition of Shawmut four years
21 ago resulted in the significant concentration of
22 deposits and services in one behemoth institution in
23 Connecticut, yet the increase of size created
24 absolutely the opposite effect desired by the Board:
25 It decreased the availability of services to the
0519
1 Connecticut community.
2 If the merger is accomplished, Fleet Boston
3 will have almost 50 percent of the market share for
4 Hartford and 30 percent of the market share for the
5 state as a whole in terms of deposits. The next
6 closest competitor has only 11 percent of the
7 deposits in Connecticut, and in Hartford, the next
8 two competitors, No. 2 and 3, if combined, would
9 still only be one fifth of the size of Fleet.
10 The sale of the new institution will
11 positively dwarf the remaining independent banks in
12 Connecticut. Sharing the market among institutions
13 of is rarely considered -- rarely meets the
14 definition of competition.
15 With Fleet having already acquired its
16 closest competitor, Shawmut, and BankBoston having
17 acquired its closest competitor, BayBank, the
18 continuing concentration of the market from four
19 competing banks to one megabank constitutes an
20 alarming trend. These mergers may result in gains
21 for stockholders, but they provide little or no
22 benefit to consumers who are to be protected by the
23 Board.
24 Our second concern has been affordable
25 housing lending, and this was the -- looking at the
0520
1 HMDA data is when I was initially interested in this
2 whole issue. I was originally not interested in the
3 merger, and people said, "Well, Greg, you know,
4 let's get together," and I said, "Well, you can meet
5 in my basement, but I'm not all that interested."
6 And when we began to look at the numbers, I began to
7 realize how significant this was.
8 In the Hartford Metropolitan Statistical
9 Area -- we have graphs for all of the statistical
10 areas in Connecticut in the submitted documentation.
11 In the Hartford MSA, the total mortgage lending of
12 both Fleet and Shawmut in minority households in
13 1994 was 469 loans. In 1997 it had plummeted to
14 102, and by 1998 it had dropped to 78. So that it's
15 less than one fifth.
16 And I did some math after Jim Campen's
17 comments about the one plus one equals less than or
18 more than two, and it seemed to me, and my math may
19 be wrong here, but that one plus one is equal to .4
20 when it comes to minority lending and home
21 mortgages.
22 If you look at Hartford again, in the low-
23 to moderate-income loans in the Hartford MSA, they
24 went from '94, in 1994, which was again the year of
25 the merger, from 609 down to 151, or 25 percent. Of
0521
1 the mortgages that Fleet and Shawmut together did,
2 they were doing one quarter of that; Fleet by itself
3 was doing one quarter of that in '98.
4 In Fleet's SBA lending -- there is more
5 documentation on Fleet's small business lending, but
6 just in terms of their SBA lending, even though
7 they're a preferred lender, and they are the largest
8 lender in the state, they ranked, in the first seven
9 months of the '98-'99 fiscal year, Fleet Bank was
10 23rd in the total -- 23rd of all lenders in the SBA
11 lending in this state.
12 And I will conclude, then, quickly. There
13 is more that you will see when you read the
14 documentation. But I want to say one thing. We
15 would love to say see an extension of the public
16 comment period for two weeks after Fleet's published
17 commitment, after it's published and folks have had
18 a chance to look at it.
19 Also we would love to see a public hearing
20 in Connecticut, and while I'm sure at this hour
21 that's not at all what you're interested in hearing,
22 there are a lot of organizations and groups which I
23 have talked to that would love to have an
24 opportunity to address you.
25 And last, we would ask that the Federal
0522
1 Reserve Board deny the merger until and unless there
2 are negotiated, detailed, signed and publicly
3 monitorable CRA agreements, and until there is a
4 more extensive divestiture plan.
5 HEARING OFFICER SMITH: Thank you very
6 much.
7 Mr. Garvin.
8 MR. GARVIN: Good evening, ladies and
9 gentlemen. My name is Roger Garvin. I thank you,
10 Board, for having me speak tonight. I'm here
11 because I'm a businessman in Roxbury. I'm also
12 running for Roxbury District 7 City Councilor. And
13 because I am a businessman in Roxbury, it becomes
14 very important to me to talk to you for just a few
15 minutes.
16 It's very important that the Roxbury
17 community have a stake in Roxbury. It bothers me as
18 a businessman because in this community, more people
19 go to jail than in any other community that I can
20 think of. Because they go to jail, it's a very
21 serious issue. It is because, mostly, economic
22 development, as a businessman, I look at economic
23 development on a very, very broad plan.
24 In order to keep people from going to jail,
25 we need to do something about that. No. 1 is
0523
1 providing monies to existing businesses so that they
2 can improve their businesses, so that they can
3 provide more jobs for the people in the community.
4 We do not have access to the lending institutions.
5 We do not have access to monies that we should have.
6 Believe it or not, if the people in District 7 who
7 are in business already could have access to monies,
8 just the businessmen alone could solve a lot of
9 problems and a lot of issues that are now plaguing
10 District 7.
11 I'm here tonight. I'm not begging, I'm
12 just pleading to you to act on a more positive basis
13 as far as getting and making access and making
14 monies more available to the businesses in Roxbury.
15 I have provided a lot of jobs, but if I cannot
16 provide a lot more jobs, it's because of
17 accessibility to funds.
18 As we approach the beginning of a new
19 millennium, megamergers are the talk of the times.
20 Presently, the merger being discussed is the one
21 with Fleet and BankBoston. If these type mergers
22 are to occur, then it should happen to best benefit
23 the community in which it does its business.
24 I would like to see corporate mergers such
25 as a proposed merger of Fleet and Boston bank have a
0524
1 viable and positive impact on the City of Boston,
2 the fair and equitable lending practices for small
3 businesses, educational programs, citywide programs
4 for the elderly, and continued partnerships with
5 housing programs, such as the ACORN housing program.
6 In closing, I would like to see Fleet and
7 BankBoston be sensitive to the economic needs of
8 lower and moderate income families as well as
9 demonstrating a commitment to invest in the
10 community. I thank you.
11 HEARING OFFICER SMITH: Thank you very
12 much.
13 Ms. Hurewitz.
14 MS. HUREWITZ: Good evening, I would like
15 to thank the Federal Reserve Bank of Boston for
16 holding this public hearing on Fleet and giving me
17 the opportunity to speak here tonight.
18 My name is Vickie Hurewitz. I work for
19 SENSES, a statewide organization in New York State.
20 The acronym stands for the Statewide Emergency
21 Network for Social and Economic Security. We
22 advocate for a variety of issues that affect low-
23 income New Yorkers. I work on community
24 reinvestment matters for SENSES.
25 I am here today to testify about Fleet's
0525
1 lending in New York State, particularly our Capital
2 District and Orange County, two areas that are
3 particularly active in CRA work. On its last CRA
4 exam in New York State, Fleet got a low satisfactory
5 on the lending and service tests.
6 The Capital District of New York State is
7 roughly a six-county area consisting of Albany,
8 Schenectady, Rensselaer, Saratoga, Schoharie and
9 Montgomery Counties. Fleet Bank is the region's
10 largest, with over $3 billion in deposits, and it
11 has branches in all Capital District counties.
12 Within these counties are several declining
13 central cities and pockets of rural poverty. You
14 might have heard of the three cities of Albany,
15 Schenectady and Troy. Those are within our Capital
16 District.
17 Orange County is downstate. Many residents
18 commute to Manhattan to work. However, the county
19 has two distressed central cities, Newburgh and
20 Middletown, and Kiryas Joel, an Hasidic Jewish
21 community that is in need of reinvestment.
22 On Friday, July 2nd, myself and
23 representatives of 17 community organizations met
24 with Fleet representatives, including Mr. Hermes
25 Ames, the president of Fleet National Bank, to
0526
1 discuss Fleet's lending in the Capital District.
2 I'm attaching to this testimony a proposal that was
3 presented to Fleet and served as the focus of our
4 Capital District meeting.
5 I won't belabor the numbers that we've
6 heard several times here today, but during the last
7 several years Fleet has acquired Shawmut Bank and
8 NatWest, both of which had branches that were
9 located in New York State, and their home purchase
10 loans had dropped precipitously, 70 percent
11 statewide, and in low-income census tracts their
12 home purchase loan rate had dropped 76 percent from
13 1995 to 1997 after the mergers.
14 I have also done my own analysis of Fleet's
15 1997 home purchase lending in the Capital District
16 and Orange County, and I had found that the bank had
17 extremely low market shares, no matter whether the
18 geography was the county, the city or the distressed
19 neighborhood. And I didn't find this surprising,
20 given the finding for the state.
21 Prior to the meeting with Fleet, I had
22 called Don Prusak of Fleet Bank and asked him about
23 obtaining the results of Fleet's INCITY program, the
24 megapledge Fleet Bank made when it acquired Shawmut
25 in 1995. He told me the results of INCITY could be
0527
1 found in the HMDA data. When I related to him the
2 poor results of the analysis, he said, "There are
3 some problems with those numbers. You need to look
4 at our 1998 HMDA data." Subsequently, he supplied
5 me with the 1998 data for the Capital District and
6 Orange County.
7 As I mentioned, in 1997, I found that Fleet
8 had very low market shares for home purchase loans,
9 no matter the geography. By 1998 Fleet's home
10 purchase lending had increased by 115 percent in
11 Albany County. However, the bank made no loans in
12 the distressed neighborhoods in the City of Albany.
13 In Rensselaer County the lending was flat.
14 The bank made no loans in the City of Troy in either
15 1997 or 1998. In Schenectady County, lending went
16 down by 41 percent, although the dollar amount in
17 the distressed neighborhoods went from $59,000 to
18 $82,000, a small increase of small dollars.
19 Also I had been speaking to community
20 groups around the Capital District, and they had
21 informed me that Fleet has affordable housing
22 products. However, they felt that the bank was
23 reluctant to use the product and was not out
24 actively seeking mortgage application.
25 During our meeting Fleet related that there
0528
1 had been a problem with their mortgage origination
2 department after the mergers. 60 mortgage
3 originators had left to form their own company.
4 Fleet informed us that it had hired new originators;
5 however, when I mentioned they had still not
6 penetrated the lower-income neighborhoods in our
7 region in 1998, they additionally informed us that
8 they had recently reworked their commission
9 structure that so that each originator got a minimum
10 of $500 per loan.
11 We encouraged them to hire a noncommission
12 community service loan officer like some their
13 competitors to outreach to community organizations
14 and actively seek applications.
15 I belabor these points about home purchase
16 lending because these problems occurred while Fleet
17 had a megapledge in place, the INCITY program I
18 mentioned. Fleet has currently offered another
19 $14.6 billion pledge with very few specifics. I
20 urge the Federal Reserve to ensure that this pledge
21 be made locally specific and locally accountable so
22 that we can be certain that this new pledge does not
23 go the way of INCITY.
24 During our meeting we also spoke about home
25 improvement lending, bank services and investments.
0529
1 A disturbing trend noted in all the distressed
2 neighborhood is that the depository institutions are
3 leaving and the subprime lenders are arriving, which
4 is not good news for low-income households. For
5 example, in Arbor Hill, a low-income neighborhood in
6 Albany, Fleet made no loans. The subprime lenders
7 were the leading lenders there.
8 I'll finish with just saying that even
9 though Fleet has an outstanding record in
10 investments in New York State, I still urge you to
11 make sure that this $14.6 billion pledge, as many of
12 my colleagues up here have said, will be locally
13 specific and locally accountable. It is very
14 important for the future of lending by this bank in
15 our neighborhood.
16 Thank you.
17 HEARING OFFICER SMITH: Mr. Timilty.
18 MR. TIMILTY: My name is Greg Timilty, and
19 I'm a candidate for the City Council, citywide. I'm
20 also an employee of an investment banking firm. I
21 come here to testify tonight as neither. I come
22 here to testify actually as we get on past nine
23 o'clock, I come as a 24-year-old resident of the
24 City of Boston, which probably makes me one of the
25 youngest people to testify today.
0530
1 I remarked to someone as I came in today, I
2 said, "I wonder who's last today." Little did I
3 know. But I think that that also gives me an
4 enviable position because I am going to forgo my
5 remarks now as we get past nine o'clock, and I would
6 like to just leave you with a theme, because it's a
7 theme that was one of the main reasons why I came
8 here to testify tonight, one of the reasons why I
9 stayed, and I applaud everyone in the audience for
10 staying this long. It's been a long day; I know
11 it's been a long day for you.
12 But I think that one of the main reasons
13 why I came today is I represent a growing dynamic in
14 the City of Boston of young people, young men and
15 women who are faced with an uncertain future. As
16 one of the panelists in the previous panel spoke
17 about, housing ownership in the City of Boston is an
18 abysmal failure, I think, for the banking industry.
19 I think that if you look at some of the
20 figures as far as the involvement in local
21 communities, based upon a person who owns their
22 house as opposed to someone who just rents, and you
23 look at how that can change, I think our
24 communities, and the communities that the Fleet Bank
25 and the merged company will serve, are much stronger
0531
1 as a result of housing ownership.
2 I think that my generation is largely an
3 ATM generation, a generation that doesn't have the
4 resources that my parents' generation had, where
5 when you go to look for a loan, whether it be for
6 your child's education or whether it be for your
7 first home, you're looked at as a number and not an
8 individual. And I think especially when you look at
9 low- and moderate-income families, when they go into
10 those banks and they sit across that desk, they're a
11 number, they're not an individual. We've lost
12 banking with a conscience.
13 And it's caused, if you see, as the
14 panelist before, Pat Cusick, mentioned, 5 percent in
15 the area of Roxbury in home ownership. Something
16 has got to be done about that. I think that a lot
17 of it goes to the community, and the community is
18 doing a great job. They need help. They are
19 communities that will bank will represent, and it
20 only makes the bank stronger to have the community
21 stronger that it represents.
22 My generation, as I said, is left in an
23 area where we don't know what's the future. We
24 don't know if we're going to be able to own a home
25 in a neighborhood on a street in the City of Boston
0532
1 or anywhere else in the New England area. We don't
2 know, as we get into the next 10 to 15 years, how
3 we're going to fund our children's education. We
4 don't know what the costs will be. We don't know
5 what the structure, the financing will be.
6 But what we do know, in leaving this room
7 today, and this merger with this bank, is that
8 there's going to be no competition. The bank down
9 the street, the local bank that my family went to to
10 get their loan for their first house, is no longer
11 existent. It has been one of the 450 banks that
12 Fleet now encompasses. And without that type of an
13 outlet, where do these low- and moderate-income
14 family go? Where does my generation go? Without
15 that, we don't have a community, and without a
16 community, you don't have the customers that you
17 want, you don't have the customers that you deserve,
18 and the banks are going to suffer.
19 I just want to leave you with a theme. As
20 you leave here tonight, and as you think this over,
21 and as this -- as this deal is brokered, it's my
22 generation's future that's brokered, because right
23 now it's a transient generation, as I said, it's an
24 ATM generation. It's not a generation that's used
25 to going down the street and knowing their banker
0533
1 and being seen as an individual.
2 If we move away from banks looking at
3 individuals, rather than numbers, if we look at this
4 merger as being good for Wall Street, although it's
5 not good for River Street in Matapan, and if we look
6 at this as enhancing shareholder value, and not
7 enhancing the communities that they serve, then I
8 think that we lose. The shareholders might gain,
9 but I think the communities that this bank serves
10 lose.
11 I just want to thank you for the
12 opportunity to testify today, I know I'm the last.
13 Hopefully, I left with you a high note and something
14 to think about as you go on. Thank you.
15 HEARING OFFICER SMITH: Questions?
16 (No response)
17 HEARING OFFICER SMITH: Thank you very much
18 for coming to testify today. We do have the open
19 mike session following, and I understand that we
20 have at least one person who has signed up. The
21 name is R.K. Schwartz.
22 MS. SCHWARTZ: Well, I would like to
23 address my brothers and sisters from the federal
24 community. I'm with the U.S. Department of
25 Commerce, Minority Business Development Agency. I
0534
1 head the Boston District Office covering New England
2 and my brothers and sisters in the audience who are
3 left.
4 I had not originally planned to share
5 comments, because I had spoken at a community
6 hearing which Congressman Capuano and Senator
7 Wilkerson held at the Roxbury Community College.
8 But inasmuch as I reviewed the presentation agenda,
9 and because I was not absolutely sure that you would
10 incorporate the proceedings of that hearing within
11 your review, which I hope you will, I decided just
12 to share a few comments with you.
13 And this particularly responds to Pat
14 Cusick's comments about the sparsity of business-
15 related comments. So, as Bruce was here, Honorable
16 Bruce Bolling, and I and some other folks, we're
17 advocates in the sense that the business community
18 folks, as you know, are out there earning a living,
19 or trying to, so they might not have been here in
20 large numbers.
21 I want to thank you all for finally
22 scheduling this meeting, because it's very, very
23 important, and I have faith in your sensitivity and
24 openness to hear the comments that we all are
25 making.
0535
1 I would like to say, as you may or may not
2 know, that the Minority Business Development Agency
3 of the United States Department of Commerce is the
4 lead agency in the federal government for minority
5 business development. And we are committed, having
6 survived 30 years, to the development of economic
7 parity for the minority communities in this nation.
8 And therefore, looking at this request or
9 proposal that you're reviewing, to consider allowing
10 the creation of the eighth largest bank in the
11 country, we are particularly concerned that the
12 minority business community be allowed an
13 opportunity for capital access, and in whatever is
14 created, not only in this bank, but in other
15 institutions.
16 As you know very well, the impact of this
17 proposal goes far beyond the New England area, and
18 I'm sure you're aware of that. We've had some
19 testimony here from New York, New Jersey, and I
20 have -- I was away for a few hours, so I'm sure
21 there are other places that Fleet and BankBoston
22 impact. So that becomes very important.
23 I would like to call your attention, when
24 you review the proceedings of that hearing that was
25 held at Roxbury Community College, to the
0536
1 presentation by the district director of the Small
2 Business Administration for the Commonwealth of
3 Massachusetts. She really laid out some very
4 important figures in terms of business lending,
5 lending to small businesses, in the history of these
6 two banks, and I think you might want to review that
7 in your considerations.
8 Now, I would like to say that the
9 cooperative agreement which is being proposed
10 between the financial institution, as you may
11 approve it as it's proposed, and various community
12 groups, is to be considered and respected, and I
13 surely deeply respect the position of the community
14 groups.
15 I would like to point out, however, that
16 I'm aware that in Philadelphia a very large bank
17 acquired another bank, and there was a commitment
18 made to the community groups about the maintenance
19 of neighborhood branches, and as soon as that bank
20 proposal was approved by the regulatory agencies,
21 those bank branches were totally eliminated. At
22 least that's my information.
23 So what I'm really looking at is that it's
24 up to the Fed, if you'll forgive me using that
25 shorthand version, and the Department of Justice,
0537
1 the Oversight Committees of the Congress. I'm sure
2 you're aware from today's testimony and from other
3 things that our Congressional delegation in the
4 Commonwealth of Massachusetts is very concerned
5 about the outcome of this, and the fairness of it,
6 and I'm sure that's joined by Congressional people
7 who are involved in the banking committees from
8 across the country.
9 So I really think that the stipulations
10 that you would add on to any agreement to allow this
11 to happen that can be monitored by the regulatory
12 agencies would be extremely important, because of
13 the history of banks violating their commitments
14 that they've made to community groups.
15 I would also like to recommend to you very
16 strongly that you consider allowing the proposal of
17 the community-based banks such as Boston Bank of
18 Commerce to acquire a number of these branches.
19 As you know, I'm sure, over many, many
20 years, it's been the policy of the Federal
21 Government to nourish and support minority-owned
22 banks, and this would certainly be very important,
23 if you could create language in such a way to assure
24 that the community-based banks, as I say
25 particularly Boston Bank of Commerce, be allowed to
0538
1 acquire these targeted divested branches or proposed
2 divested branches.
3 I guess that I would conclude with that,
4 and we're all, I'm sure, quite exhausted.
5 I have heard the proposal here from at
6 least two or three people to recommend to you that
7 you consider extending the comment period to allow
8 the proposed merging banks to very closely and
9 definitively make a proposal that can be reviewed
10 and hopefully would be fair and then allow for
11 comment period. And I would like to support that,
12 if it's within the realm of your guidelines and
13 possibilities.
14 So I want to thank you for being willing to
15 listen to me. I want to thank you for what I, as I
16 say, trust will be the openness of your
17 considerations, and I would say good evening.
18 HEARING OFFICER SMITH: Thank you.
19 Do we have any other individuals who would
20 like to offer remarks?
21 Mr. Dennis Flynn?
22 MR. FLYNN: First I would like to apologize
23 to the Board for my opening statement. I would like
24 to thank all the panel members, not just the men
25 that are there. I just said "sir" at the beginning.
0539
1 I notice, going through the panel list,
2 that I seem to be the only veteran here. I'm not
3 representing a veterans' group.
4 I just happen to have had a transaction
5 with Fleet Bank which involved a secured government
6 mortgage product that they have. I was denied the
7 right to negotiate a favorable interest rate
8 according to the Veterans Administration guidelines.
9 Fleet Bank did not even take my application at the
10 time of the loan. My mortgage consisted of
11 approximately 40 pages that were faxed, and these
12 were faxed after the closing date.
13 In processing the VA mortgage, they
14 violated their own internal guidelines, according to
15 their own documents. They violated the Veterans
16 Administration's guidelines that I was to be allowed
17 to negotiate a favorable interest rate. And quite
18 possibly, they violated federal law, but I'm not a
19 lawyer, I'm just someone who is trying to get a
20 house on the GI bill.
21 As I say in the statement, I'm just one
22 veteran to went to Fleet back to get a loan under
23 the GI bill, but am I the only one that has had this
24 type of experience with the Fleet Bank? The Federal
25 Reserve, Veterans Administration and the veterans
0540
1 population will never know unless you gentlemen and
2 ladies take the time to send these concerns to the
3 proper authorities.
4 Fleet had assured me that we would close on
5 a certain date, and in the middle of the closing, my
6 mortgage loan officer disappeared and never called
7 me anymore, and I had to call down to Rhode Island
8 and find someone who would assist me, and that's
9 where the 40 pages of faxed documents came from.
10 They had nothing on me, we were past the closing
11 date, and they left me in a very, very difficult
12 position.
13 I'm not a banker, I'm not a lawyer, and I
14 trusted Fleet to do the right thing, to do what they
15 said they would. And it left my family and myself
16 in a very, very difficult position. I know that in
17 the age of deregulation there are less and less
18 people out there to regulate what the banks are
19 doing.
20 It's my concern that, from my experience,
21 Fleet is too big right now. I couldn't imagine it
22 getting any bigger and trying to negotiate the
23 things that I had to, to try to secure housing for
24 my family.
25 I would like to thank you for the time, and
0541
1 I think I am the last one. Thanks very much.
2 MR. ALVAREZ: Mr. Flynn, I have a question
3 for you. Do you know which of the Fleet entities
4 you filed your original application with? Was it
5 the Fleet Bank in Massachusetts?
6 MR. FLYNN: Yes, it was the Fleet Bank in
7 Worcester. I went through the Worcester office, and
8 then again none of the paperwork was ever filed with
9 the people in Rhode Island that needed to process
10 the loan. And, again, all my financial statements,
11 everything had to be faxed to the people that
12 processed the loan.
13 And the thing that troubled me and troubled
14 my family was, not once did the mortgage loan
15 officer call to say he was sorry that there was a
16 problem, that he ever called to apologize.
17 Thank you very much.
18 HEARING OFFICER SMITH: Anyone else?
19 (No response)
20 HEARING OFFICER SMITH: Well, I want to
21 express appreciation on behalf of the Federal
22 Reserve for all of those who remain and those who
23 were here before to offer their views as well as to
24 listen to the views of others.
25 This has been an important meeting. We
0542
1 have had discussion and have been able to ask
2 questions on a lot of significant issues, and you
3 can be assured that that this is information that
4 the Board will take into account as it makes its
5 analysis and reaches a determination on this
6 application.
7 I'll ask my fellow members if there is
8 anything you would like to add.
9 (No response)
10 HEARING OFFICER SMITH: Thank you all very
11 much, and we are adjourned.
12 (Whereupon the meeting was
13 adjourned at 9:30 p.m.)
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1 C E R T I F I C A T E
2 We, Anne H. Bohan and Carol H. Kusinitz,
3 Registered Professional Reporters, do hereby certify
4 that the foregoing transcript, Volume I, is a true
5 and accurate transcription of our stenographic notes
6 taken on July 7, 1999.
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10 ________________________
11 Anne H. Bohan, RMR
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17 ________________________
18 Carol H. Kusinitz, RPR
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