Public Meeting Regarding NationsBank and BankAmerica - Panel 2
Thursday, July 9, 1998
Transcript of Panel Two
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6 MS. SMITH: Any other questions? Fine. Thank
7 you very much for coming today and we will go on to the
8 next panel. I might mention that this is a very large
9 panel as you will see on the agenda, however, the time
10 allocations have all been made to fit within a 50 minute
11 period.
12 Mr. Gamboa.
13 MR. GAMBOA: Yes, thank you. Before I start, I
14 want to also express my appreciation for you for holding
15 these hearings. And I have a procedural matter I'd like
16 to raise before my timed testimony takes place. I know
17 from reading up about you that you are attempting to do
18 the best job you can in making a determination on this
19 bank merger. And to do that job, I know you want to get
20 as much fair testimony balanced as possible. So I'm going
21 to make a procedural request. I'm not an attorney, so
22 bear with me, please.
23 And the procedural request is, since you're only
24 having one hearing, that limits grassroots community
25 organizations who don't have the resources to come here
26 today to give testimony. I think you should weigh that in
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1 when you hear from other organizations that are supported
2 by Bank of America who pay their travel. That will give
3 you good information, the kind of information to give a
4 balanced approach to make a decision.
5 The other thing that's critical is information
6 that you should use in determining this merger is there
7 are numerous, I understand, outstanding discrimination
8 complaints against NationsBank. That information and
9 those should be resolved and you should have that
10 information before you make a determination. I think that
11 would be critical information for you in coming to a
12 conclusion. Or a decision.
13 And, also, there is a CRA review being made now.
14 I think that also will provide you with critical
15 information. I don't think any decision should be made
16 until you're able to assess that CRA review of these
17 financial institutions. That kind of information I think
18 would be extremely helpful for you to coming to a fair
19 decision that I know you will come to.
20 MS. SMITH: Thank you for your comments and
21 observations. And then if we may go to your presentation.
22 MR. GAMBOA: Certainly. I agree with Mr. McColl
23 in one statement he made, that this hearing is not about a
24 bank merger. I think it's a little bit more than what he
25 said than community investment. I think it's about what
26 kind of a country we want to be. It's about a fair chance
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1 for the underserved community, the poor minority, recent
2 immigrants to achieve the dream that most of us here today
3 enjoy, the ownership of a home, and a safe neighborhood
4 with good schools for the children, a chance for
5 employment that provides a fair wage and health insurance
6 for the family. I think that's what we're discussing
7 today.
8 This dream is not being realized for far too many
9 people, far too many people today. We're involved right
10 now in probably the most unprecedented booming economy
11 ever in this country, and yet that economy is not being
12 equally shared across this country.
13 For instance, every day you see in the newspaper,
14 you read the rich are getting richer and the poor are
15 getting poorer. This economy is not being balanced out
16 and spread out evenly. For instance, the national child
17 poverty rate grew BY 26 percent from 1970 to 1997. Entry
18 level wages for male high school graduates fell 28 percent
19 from 1973 to 1998 in real dollars. 80 percent of white
20 families in this country own their own homes. 40 percent
21 of minorities do. 71 million low-income children have no
22 health insurance, yet most of their parents are working.
23 In the richest nation ever in the history of the world,
24 over one million children will not have an adequate meal
25 the day before their parents are made. You may ask what
26 does this have to do with a bank merger? I think it has
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1 everything to do with a bank merger. In the first place,
2 it's not a merger, it's an acquisition.
3 You heard today Hugh McColl make a commitment of
4 $350 billion, a CRA commitment. Well, I can state that
5 that commitment is hollow. It's hollow because CRA,
6 itself, has -- is weak. CRA does not -- will allow
7 financial institutions to receive outstanding ratings, and
8 have before in the past, that have made zero, and I mean
9 zero, not one loan to an African American family, that's
10 what CRA can do. And the reason that we have requested
11 definitive commitments in that CRA commitment is because
12 the track record of the financial institution is not good.
13 For instance, you heard Hugh McColl speak about
14 the millions of dollars. I was impressed when I sat in
15 that chair right there and when I heard him talk about
16 these millions of dollars. What you did not hear him
17 speak about is the percentage of the billions of dollars
18 they have. That is much more meaningful. We can get
19 swayed when people talk about a million dollars because
20 that's a lot of money to me and to most people in this
21 room. But it's not a lot of money when you look at the
22 amount of money they have.
23 For instance, less than one percent of the total
24 dollar amount of NationsBank loans went to African
25 American owned businesses. Less than two percent of the
26 total dollar amount of the NationsBank business loan went
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1 to African American owned businesses. Less than two
2 percent of the dollar amount of BofA's home lending
3 dollars went to African American households. And adjusted
4 for differences in population, BofA has a similar report
5 lending record among Latinos and Asian Americans. And
6 neither bank has goals for minority business contracts.
7 That's the kind of record that this financial institution
8 has.
9 What we are asking them to do is not to do any
10 precedent setting but to match the CRA commitments that
11 other good financial institutions have done. Wells Fargo,
12 NationsBank -- Wells Fargo and WaMu, Home Savings, Union
13 Bank, CoAmerica and others have all made specific
14 commitments because they're not afraid to make those kind
15 of commitments because they know they will meet them. But
16 NationsBank is the only large bank and Bank of America who
17 have refused to make these commitments to our community.
18 Why? If they're sincere about making them, they should
19 put them down and put it into the record. I can only
20 guess that they're not sincere about doing it.
21 We have met with CEO of NationsBank and BofA a
22 couple of times and they have said, "We're against
23 quotas." Well, our community is against quotas, too,
24 because quotas have always frozen us out. But every
25 single business organization sets goals. The commitments
26 we're asking are goals, not quotas. It's not any
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1 different than any part of the working business. You set
2 goals in sales, you set goals in marketing, you set goals
3 in service. We're telling them to set goals in the CRA,
4 it's no different.
5 Lastly, I'll conclude, Dave Coulter said that
6 BofA was The Movie Bank. I guess it should be something
7 to be proud of, I wouldn't be. I think what we're asking
8 for Bank of America and NationsBank to be is a moving
9 bank, moving to reach out to our communities, to make
10 money by providing new services and products and doing
11 good in our community. It will be a win-win solution, a
12 win for them, they'll receive income and profits, and
13 certainly a win for our community, but they cannot do that
14 without creating a work force that matches the diversity
15 of the marketplace they want to reach. Both banks have
16 refused to provide us with the data of their top
17 management.
18 And one other thing, too, is that they talked
19 about their charitable contributions and how they should
20 get lots of credit for their charitable contributions.
21 But if you look at their charitable contributions, they're
22 doing about one-half of what the banks I have previously
23 mentioned in percentages. And if you look at their
24 charitable contributions, I think the total for one of the
25 banks was $77 million, it looks real impressive. But when
26 you look at the income of just a few, a handful of those
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1 executives who make those decisions, it was $88 million.
2 That's not much of a charitable contribution. Thank you.
3 MR. FISHER: Good morning. I'm Alan Fisher from
4 the California Reinvestment Committee. We're a statewide
5 coalition of more than 190 nonprofits and public agencies
6 that advocate for increased access to banking for
7 low-income communities and communities of color. We've
8 negotiated CRA agreements with all the major California
9 financial institutions over the last decade.
10 I was interested in listening to Mr. McColl talk
11 about some of the fine things that the bank has done.
12 Many of those things has come out of discussions with CRC
13 members and other community organizations, Greenlining, et
14 cetera, that has really moved the bank on. And I think
15 that's one of the worrisome things that I'll get to about
16 the press release that talks about $350 billion. That's
17 preemptive of community discussion.
18 You'll hear CRC members speak on this panel and
19 other panels today representing their community and
20 community development organization because CRA is about
21 local neighborhoods, it's not about 22 states all at one
22 shot, it's about what happens in particular neighborhoods.
23 We have concerns about this, and clearly as you've heard
24 today, the majority of the California Congress people on
25 the Banking Committee, the L.A. City Council, the
26 San Francisco Board of Supervisors and other elected
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1 officials have, as well.
2 It worries us, not only because it's the sale of
3 a great California bank, because from our point of view
4 it's not a merger, it's an acquisition of Bank of America.
5 But the loss of that headquarters to a bank that's
6 headquartered 3,000 miles away and to a bank that has
7 refused to make a specific CRA commitment to California
8 and its diverse communities, therefore, we oppose this
9 acquisition.
10 More than 300 of our members and other California
11 organizations and individuals joined with us writing in to
12 the Federal Reserve calling for hearings and we are
13 pleased that you are holding hearings in at least this one
14 location of the 22 states. But, again, we call on you to
15 hold hearings throughout California and in the other
16 states affected because CRA is about what happens in local
17 communities.
18 Anyone can see by the amount of response to this
19 hearing that one hearing alone is tokenism. We all know
20 that a hearing itself is not the same as the sort of
21 regulatory oversight that you'll have to have over these
22 22 states. So we hope that this one hearing is not a
23 portent of the level of oversight that there will be.
24 I'm going to try and just hit on a few specific
25 points today and our letter will go into more detail. I
26 mean, our concerns are such that I could probably talk all
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1 day.
2 I'm not a lawyer, either, I didn't know that John
3 and Bob were going to raise this issue about people
4 traveling here, but I have a somewhat different suggestion
5 in terms of speakers. I know you're going to hear a great
6 many people. In the interest of a clear record, I would
7 recommend the following. That if grantees of either bank
8 testify against the merger, their testimony should be
9 given a plus 2. If grantees of either bank have been paid
10 expenses to testify, they're testimony should receive a
11 minus 2 and so forth.
12 So, again, community reinvestment is about access
13 to banking for neighborhoods. It's about a bank
14 affirmatively meeting the local needs of low-income people
15 and people of color. So we worry when NationsBank
16 preemptively sums up 22 states in a three-page big dollar
17 press release with nice phrases and little substance. It
18 presumes that they know better than the communities about
19 what the needs are.
20 We've met several times with the bank and would
21 sum up the last meeting and the ones before as saying that
22 they say no very nicely. This is particularly worrisome
23 because, as far as we're concerned, California came into
24 this takeover with, one, a 1992 commitment letter from
25 Richard Rosenberg, CEO of Bank of America, that was a very
26 good specific commitment which is still in effect, as far
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1 as we're concerned, it has no ending date.
2 Secondly, last year Bank of America upped its
3 1992 goal to 140 billion of which the bank has stated that
4 70 billion is for California communities.
5 Thirdly, the commitment for $40 billion -- $40
6 million, all these big numbers, 40 million dollars in 1998
7 charitable contributions of which, from our calculations,
8 roughly 25 million was for California and 25 percent for
9 community economic development and housing development.
10 Bank of America also, as you've heard, has made
11 commitments around the economic development and rural
12 initiatives that were just beginning to be defined and are
13 still being defined. There needs to be a specific CRA
14 commitment by NationsBank to California that addresses the
15 diverse needs of California's communities, retains the
16 Community Development Bank with its mission to build a
17 nonprofit infrastructure and not compete with it, gives
18 clear dollar amounts and objectives for the economic
19 development and rural initiatives, honors the written
20 commitments and practices of BofA and targets those most
21 in need.
22 Your own studies cast doubt on the real value for
23 sharholders and customers in such mega-mergers. From the
24 altitude of $570 billion in assets, will such a monolithic
25 bank even see local neighborhoods? Without a specific
26 measurable commitment, NationsBank can ignore all but the
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1 most profitable customers. Bigger is not better, as far
2 as we're concerned, and less neighborhoods are affected.
3 We think that this merger will -- this merger, acquisition
4 will decrease competition.
5 After all, this is a bank, as was said before,
6 that has a worse record in 1996 making home loans to
7 African Americans in its home state than Bank of America
8 did in North Carolina.
9 Every major bank merger in California has
10 included a specific commitment since Richard Rosenberg's
11 1992 letter. BofA set a standard that NationsBank is
12 undercutting and obliterating.
13 If the Federal Reserve wants to maintain
14 progress, it must condition any approval on a specific and
15 enforcible commitment. In addition, this bank has a
16 concentration that is extremely worrisome from our point
17 of view. It has almost nine percent of the national
18 market share but it's only in 22 states. In those 22
19 states, it has a one percent market share in almost every
20 state, and we think that's of grave concern in terms of
21 competition and access for those who are, quote,
22 "unprofitable."
23 So, again, thank you for the opportunity to
24 speak.
25 MR. BIVINS: Good morning, my name is George
26 Bivins, I'm the Chairman of the Black Association of
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1 Los Angeles. We have over 850 African American business
2 owners. Many of those business owners are customers of
3 the Bank of America.
4 Take any statistics compiled by local, state or
5 federal government regarding banking, including the many
6 statistical reports compiled by independent surveys, and
7 you will find African American -- African Americans are
8 consistently benefiting less from banks, S&Ls and thrifts.
9 Government regulators must take action to protect us.
10 My colleagues and I would not be here today if
11 Bank of America and NationsBank were good corporate
12 citizens. The Black Business Association shares the lack
13 of confidence of this merger along with the National Black
14 Business Council and the National Black Chambers of
15 Commerce. These three organizations nationwide represent
16 over 75,000 black businesses nationwide. We are prepared
17 to prove that less than one percent of the dollar value of
18 all business loans lent by these two banks went to African
19 American businesses. What we have here is a clear case of
20 white wealth built on minorities' labor. We have a clear
21 case of white wealth built on minority labor. Regulators
22 hear are plea.
23 The black community demands inclusion, inclusion
24 leads to growth, exclusion leads to poverty for all our
25 communities. Regulators, hear our plea.
26 Less than two percent of the Bank of America and
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1 NationsBank vendor contracts are awarded to African
2 Americans. Unlike its competitors of Wells Fargo, Union
3 Bank and Sanwa Bank.
4 I will give you an example, a clear example of
5 this. I am in the insurance business and I am the
6 insurance agent for Sanwa Bank which is the fourth largest
7 bank in this state. Bank of America will not even give me
8 an appointment to come in and present my product to them.
9 I have tried for five years. This is a personal
10 experience that I can tell you. And I'm a very good
11 insurance agent, I've been in the business 26 years, I
12 compete with the same insurance agents for business of
13 Bank of America as I did with Sanwa Bank and I beat the
14 price. So what does this tell you? I am just as
15 qualified or even more qualified than some of the vendors
16 that call on Bank of America, but they choose not to even
17 give me an appointment.
18 Inclusion leads to growth, exclusion leads to
19 poverty. Regulators, please hear our plea.
20 They are willing to set goals of any kind. They
21 throw out large numbers such as $350 billion CRA
22 commitment. How do we monitor this? Regulators, hear our
23 plea.
24 There are many pending race discrimination cases
25 which were brought out earlier before the Justice
26 Department. While these cases are waiting to be heard,
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1 the large number of cases filed would suggest there is a
2 definite problem with the validity of these cases. Some
3 of these cases must be valid. Regulators, hear our plea.
4 Bank of America lost millions of dollars overseas
5 but were bailed out by the IMF but minorities can't get a
6 small business loan. Regulators, please hear our plea.
7 Is this the outline of a good corporate citizen?
8 This is how Bank of America and NationsBank represent
9 themselves to you, but they can't fool us. We have had
10 the opportunity to deal with them on a firsthand basis.
11 This merger brings capitalism to our communities but
12 without capital.
13 During the civil rights movement, we won
14 everything we fought for but we don't have what we need.
15 Regulators, please hear our plea. Thank you very much.
16 MS. ORR-SMITH: Good morning, my name is Gayle
17 Orr-Smith and I'm here representing the San Francisco
18 chapter of National Association of Negro Business and
19 Professional Women.
20 My focus today would be to introduce to Bank of
21 America some data about minority women in business. And I
22 offer this testimony and this information because of the
23 dismal record that NationsBank and Bank of America have
24 with providing loans to minority women business owners.
25 Also, there's a caution in my remarks that, when you
26 target women, you're targeting majority women, white
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1 women, non-minority women in their outreach for small
2 business loans. When you target minorities, you target
3 minority women, as well. Very often, that segment of the
4 target group is really underrepresented and underfocused
5 on as a target group.
6 Bank of America and Nations have said they don't
7 need specific goals. But I think after hearing some of
8 this data you might agree with me that there should be
9 some targets for this particular segment.
10 One in eight or 13 percent of nearly eight
11 million women owned businesses in the United States is
12 owned by a woman of color. These 1.2 million minority
13 owned firms employ 1.2 million people and generate nearly
14 $200 billion in sales annually. Over one-third or 37
15 percent of minority owned business firms are owned by
16 blacks, roughly 400,000 firms. 35 percent are owned by
17 Hispanic women, roughly 380,000. And 28 percent are owned
18 by women of Asian, American Indian or Alaskan native
19 heritage, 300,000 firms.
20 Between 1987 and 1996, the number of minority
21 owned women firms has increased about 153 percent. It has
22 increased by 206 percent among Hispanic women owned firms,
23 by 138 percent among Asian and other women owned firms,
24 and by 135 percent by black or African American women
25 owned firms.
26 Between 1987 and 1996, employment, that is jobs,
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1 within these firms, among all minority firms, has
2 increased nearly fourfold or roughly 300 percent. It has
3 grown by 487 percent among Hispanic women owned firms, by
4 319 percent among Asian and other Native American firms
5 and by 70 percent among black women owned firms.
6 Between 1987 and 1986, sales, that is revenues
7 generated, by all minority women owned firms has increased
8 fourfold as well, up to 318 percent. It has jumped by 534
9 percent among Hispanic women owned firms and by 430
10 percent among Asian and others, and 55 percent among black
11 women owned firms. And it will be interesting to know the
12 top ten states for minority businesses, based on the
13 average ranking of the number of firms, employment and
14 sales, are number one, guess, California. Number two,
15 Texas, Florida, New York, Illinois, Virginia, Maryland,
16 New Jersey, Hawaii, and Washington, D.C.
17 Now, just think what the bank could accomplish if
18 it were targeting small business loans to minority
19 business women. This data is provided by the National
20 Foundation of Women Business Owners in Washington, D.C.
21 who extrapolate such data, and this data has been used by
22 many corporations to market and target women owned
23 businesses as a market group because their revenues and
24 their sales and their growth demonstrates that they need
25 this kind of attention. And I think this would be a key
26 opportunity for Bank of America and Nations to look at an
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1 entirely new market segment and recognize these women as
2 contributing to the national economy.
3 They say that their programs of goal setting
4 doesn't need specifics, they say that their minimum goals
5 and commitments are a floor. Well, I tell you without a
6 clear plan and strategy, a floor can quickly become a
7 ceiling. And if you're looking at local versus national,
8 at least here in California we've had the benefit of
9 working closely with BofA. They've been able to listen
10 and we can work with them. There's still room for growth,
11 but I don't know how much more effective they will be and
12 how effective we'll be talking to North Carolina, so we
13 think local is better.
14 And without clear goals, many things can affect
15 your commitment or the corporate commitment over time,
16 there's erosion as a result of personnel changes. How do
17 we know that McColl and Coulter are going to stay at the
18 helm and, in fact, their legacy or their commitment to
19 minority outreach, as they stated, will, in fact, stay in
20 place when personnel changes occur.
21 And then a leadership philosophy is more than
22 just words, it means that it has to be communicated
23 throughout the organization and enforced and incentives
24 provided within the corporation to ensure that all of the
25 local affiliates and associates of the branch and of the
26 bank adhere to the goals and standards that are set at the
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1 highest level.
2 Targets and measurable data help us to know where
3 we've been, where we're going and can focus us to be
4 effective in targeting where the greatest need is and the
5 greatest opportunity for economic gain by the banks,
6 themselves. We're seeking a win-win relationship and we
7 believe that targets, established goals with clear
8 strategies where minorities and others can work with the
9 bank to achieve these goals will be the maximum benefit
10 for everybody concerned. Thank you.
11 MS. ADAMS: Members of the Federal Reserve, my
12 name is Stella Addams and I'm the Executive Director of
13 the North Carolina Fair Housing Center and I bring you
14 greetings today on behalf of the people from the woods and
15 the hoods of North Carolina. Our state motto is to be
16 rather than to seem.
17 The people of North Carolina want to be
18 homeowners. The people of North Carolina want to be
19 entrepreneurs and business owners. The people of North
20 Carolina want to be residents in safe and healthy
21 neighborhoods. The people of North Carolina want to
22 reside in communities that are economically and socially
23 integrated. The people of North Carolina want to be
24 catalysts for positive change in their communities.
25 By contrast, NationsBank seems to be a leader in
26 lending to minorities. NationsBank seems to be a leader
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1 in lending to small minority business people. NationsBank
2 seems to be a leader in community reinvestment.
3 But I can honestly say to you that Nations
4 expansion west has reduced its commitment at home. When
5 NationsBank first merged with C&S/Sovran, it was the
6 number one bank in North Carolina. Now, it is the number
7 five bank in our state. It used to be the best bank in
8 the neighborhood. You ask any native tarheel whose slogan
9 that was and they will readily tell you it was NCNB. But
10 now that it has a focus on being the best bank in the
11 world, our neighborhoods in North Carolina have become
12 insignificant. We are worried about our future with this
13 bank. How long will it be profitable to remain
14 headquartered in a state in which you are not competitive?
15 Nations certainly shows no interest in obtaining
16 greater market share in our state. When we shared our
17 concerns with them about their sixth place placement in
18 small business lending in North Carolina, they had a sort
19 of "What do you expect? We're not the biggest bank in the
20 state" attitude. Well, when I share with their
21 competitors where they're missing the mark, they have a
22 "What can we do together to improve" attitude.
23 NationsBank's commitment to community
24 reinvestment is all smoke and mirrors. This is easy to do
25 when one has no set targets, no set goals. Who then can
26 question whether or not you have done enough? Who then
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1 can say that you've accomplished anything long standing?
2 I enter into the record a community needs assessment for
3 North Carolina. I expect you to do your job and analyze
4 whether a demand based solution is sufficient to meet this
5 need.
6 I understand that Mr. McColl is a great military
7 straegist and he has certainly carried out his campaign to
8 become the first coast-to-coast bank with a determination
9 and brilliance of Patton, or maybe it's closer to
10 Sherman's march to the sea.
11 He has developed a clear vision and a strategy
12 and a strategic plan of action for every stage of this
13 merger except one and that is the community investment
14 program. Instead of precision planning and targeting to
15 get the biggest bang for the buck, he has opted for a
16 scattershot approach. And I know you all don't know much
17 about shotguns out here. But you're sure to hit something
18 but you are not necessarily going to make an impact.
19 We want a strategic plan of action. We want
20 quantifiable goals and objectives to meet the credit needs
21 of our communities. Here's to the land of the long leaf
22 pine, the summer land where the sun doeth shine, where the
23 wheat grows strong and the strong grow great, here's to
24 down home, the old North State.
25 The people of North Carolina helped its financial
26 institutions grow great through our deposits, our loyalty
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1 and our visionary banking laws. NationsBank is honor
2 bound to serve the people of North Carolina and the other
3 underserved communities throughout the franchise. We are
4 not unprofitable customers. We ask only for access to
5 capital and the opportunity to prosper and to grow strong.
6 Thank you.
7 MR. LUI: Madam Chair and members of the panel,
8 my name is Earl Lui, I'm a staff attorney with the west
9 coast office of Consumers Union. Consumers Union is the
10 nonprofit publisher of Consumer Reports Magazine and our
11 magazine regularly writes on banking and other financial
12 services issues. Our office has also been involved in CRA
13 activities for over ten year and was a founding member of
14 the California Reinvestment Committee.
15 Our basic concern or position is that the lack of
16 specific commitments with this plan of acquisition and our
17 belief that the Fed cannot accomplish its goal or mission
18 of examining the convenience and needs of local
19 communities without having those specific commitments in
20 place.
21 I disagree with what Mr. McColl said about the
22 problems with creating goals. As others have said
23 already, having goals and targets is a part of any kind of
24 business plan and it should be part of a CRA plan. And
25 without having those agreements and commitments in place,
26 we don't see how the Fed can truly review the impact of
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1 this acquisition on the local communities in all these
2 states in which you're looking at.
3 And so because of the size of this merger and
4 because of the mergers to come, your actions and decisions
5 and any conditions you place on this acquisition will set
6 a crucial precedent and will really help answer what I
7 think is the critical question here, which is will the
8 Federal Reserve take its role of protecting the public
9 interests seriously or will it simply act as a rubber
10 stamp for mergers, for this merger and all mergers to
11 come?
12 So as part of requiring specific commitments, I
13 think that can be done in a number of ways. And our
14 written testimony has talked about them. But one possible
15 solution to that would be to hold up approval of any
16 merger until this new bank reaches CRA commitments with
17 the CRA groups and community groups in each state in which
18 it does business. We think, again, that more time will
19 allow fruitful negotiations to take place and approval of
20 this merger should not be rushed.
21 I think another way to do that is to simply look
22 at the existing CRA commitments that are out there.
23 Particularly in Bank of America's case, as Alan Fisher of
24 CRC has mentioned, Bank of America has a very specific and
25 detailed CRA commitment. And at the very least, the Fed
26 and its staff should review every component of that
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1 commitment and question the bank's management about each
2 and every part of it to see whether or not those parts are
3 retained or not and should receive a definite commitment
4 before deciding on approval of this acquisition.
5 Other people have already focused a little bit on
6 some of the lending and investment activities of these two
7 banks. I'm just going to focus briefly on some of the
8 consumer issues that Consumers Union, in particular, are
9 interested in. Our interests has always been in
10 increasing access to banking services for underserved, low
11 and moderate and communities of color. And again, in our
12 observation, these acquisitions and mergers really haven't
13 benefited those communities in which we're most concerned
14 about.
15 And again, there are several ways in which the
16 Fed can put in some conditions and require some kind of
17 commitments in all of these areas before any approval of
18 this merger. I think, at the very least, the board should
19 require the new bank to make a commitment to serving
20 low-income customers with affordable low cost banking
21 services, savings accounts and checking accounts, for
22 example, as well as access, of course, to credit
23 products. But, as you know, with EFT99 and
24 welfare-to-work initiatives, the access to banking
25 services is even more important now than it has been
26 before.
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1 And again, there should be some kind of
2 commitment about the type of product, the type of account
3 that EFT99 recipients will receive. Obviously, that
4 account should be a low cost account and should be
5 administered through the bank and not through check
6 cashier's or other expensive fringe banking institutions
7 that are out there. And again, no such commitments have
8 yet been made by this new bank.
9 With regard to mergers in general, again, we've
10 seen that the supposed cost savings that the banks incur
11 are not passed on to consumers. And we ask that a portion
12 of the cost savings in this acquisition be dedicated
13 towards increasing access towards banking services for
14 low- and moderate-income consumers. We think a
15 prohibition on new fees or increased fees on products
16 should be instituted. As the Fed's own study and other
17 studies have indicated, fees tend to rise after these
18 kinds of mergers and acquisitions. And again, all those
19 implications need to be looked at by the Fed.
20 There's been no commitment towards branch
21 closures, to retaining the Bank of America's branch
22 closure policy, and no word at all about possibly opening
23 more branches in underserved communities, and again, those
24 are issues that need to be addressed before approval is
25 granted.
26 Finally, I'd like to raise another point which
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1 concerns the non-banking affiliates and subsidiaries of
2 bank holding companies. NationsBank, for example, has a
3 finance company subsidiary, Nations Credit, as do a number
4 of national banks, and Consumers Union is seriously
5 concerned about some of the activities of these sub prime
6 lenders and their involvement in lending activities that
7 aren't beneficial to low-income people.
8 We think it doesn't make sense for the Fed to
9 regulate a bank that has a CRA commitment and then also
10 ignore that same bank holding company's affiliates who
11 basically engage in anti-CRA lending activities. And that
12 issue, I think, is an important one and needs to be
13 addressed, again, because more and more banks are pursuing
14 the sub prime market and are acquiring these types of
15 predatory lenders.
16 In closing, again, this acquisition sets a
17 precedent, and I agree with the comments that were made
18 before about the need to do it right and to have more
19 hearings and to require specific commitments, and we urge
20 you to seriously consider all our concerns. Thank you.
21 MS. SMITH: Next.
22 MR. SKILLERN: I'm Peter Skillern, I'm Executive
23 Director of the Durham Affordable Housing Coalition in
24 Durham, North Carolina, and Chairman of the Community
25 Reinvestment Association of North Carolina, and I
26 appreciate being here today.
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1 Benjamin Franklin said, "Our critics are our
2 friends because they point out our weaknesses so that we
3 can improve ourselves." And certainly NationsBank's
4 friends have turned out in force today. I also consider,
5 actually, myself a friend of NationsBank. I'm one of
6 those organizations that Mr. McColl spoke of in helping to
7 pay for some of our community service work. But as
8 friends, I still have a strong disagreement with
9 NationsBank and have come here to express it to you and
10 ask for a remedy.
11 In 1993, NationsBank acquired First Chrysler and
12 the Charlotte Observer ran an article, which I'll submit
13 to the record, describing how NationsBank promised to
14 clean up First Chrysler's lawsuits and also to make sure
15 that NationsBank in the future would, quote, "follow sound
16 lending policies and practices in full compliance with
17 applicable laws and regulations." The Federal Reserve in
18 approving that acquisition agreed.
19 And yet five years later, we still find instances
20 of predatory lending practices. We still find concerns
21 about approving another merger which still does not
22 address this important issue.
23 I applaud the many good things that NationsBank
24 has done in North Carolina from investments in CDFI's to
25 their charitable contributions to the good loans that
26 they've made. And yet I cannot let go of the fact that
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1 while they're doing well, they're also doing harm.
2 I submit to you a letter from Carlene McNolty,
3 Attorney for the North Carolina Justice and Community
4 Development Research Center who reviewed a 1996
5 NationsCredit loan to Audrey and Kenneth Snipes. And in
6 it she finds that a number of law practices were violated.
7 For example, Nationscredit failed to disclose loan terms,
8 including that it was an adjustable rate mortgage. It
9 packed the loan with fees, including over $5,000 in
10 settlement fees for a $110,000 loan, and thus charged
11 usery rates under North Carolina law. NationsCredit then
12 flipped the loan by increasing the adjustable rate by two
13 points in the first year and then explaining to them that
14 they'd be glad to refinance at a fixed rate, but if they
15 took their business elsewhere, there would be thousands of
16 dollars in prepayment penalties.
17 I introduce into the record the case of Beatrice
18 M. Smith from Atlanta, Georgia who is currently in
19 litigation with NationsBank over predatory lending
20 practices. In her case, the loan terms were not fully
21 disclosed. The loan was packed with high fees, including
22 the sale of credit life insurance, and the loan was
23 flipped six times in six years, once again starting with
24 Chrysler First and the last two times with NationsCredit.
25 The practices had not changed in the changing of the hands
26 of who owned Chrysler first. She's now fighting
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1 foreclosure by NationsCredit after rejecting an offer to
2 stop a media story on the issue in exchange for having her
3 loans forgiven.
4 I enter into the record the case of Juanita Smith
5 from Atlanta who was charged over $10,000 in credit
6 insurance which was included in an $85,000 loan.
7 I introduce into the record the concerns of a
8 resident from Morrisville, North Carolina regarding the
9 harassment of NationsCredit. In his protest of this
10 merger, Matthew Lee of Inner City Press does a good
11 analysis of Equicredit's lending to minority households
12 compared to NationsBank and Nations Mortgage. Equicredit
13 is now a subsidiary of NationsBank. It, too, is a sub
14 prime lender with high fees and high points.
15 We question and ask how will NationsBank moving
16 forward reach these two markets, the African American
17 minority market and the majority white market fairly and
18 how will it conduct the practices? We request that the
19 Federal Reserve investigate NationsCredit's lending
20 practices and place conditions on the merger to ensure
21 that these practices are ended and not expanded throughout
22 the country.
23 NationsCredit has grown large from it's
24 acquisition of Chrysler First, it's now over $30 billion.
25 And in addition, according to the Security Exchange
26 Commission, NationsBank is a primary lender to Southland
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1 Associates, Commercial Credit Loans, Moreequity,
2 Incorporated, and American General Finance among other sub
3 prime lenders.
4 The size of NationsBank before the merger makes
5 it an important and dominant player in this parallel
6 banking institutions and it cannot go unquestioned or
7 unregulated by the Federal regulators.
8 I am not yet impressed by Ken Louis' assurances
9 to run NationsCredit right or not at all. Certainly it
10 hasn't taken five years to determine that changes need to
11 be made.
12 I'd like to highlight ten things that we
13 recommend that NationsCredit can do. And I'll submit them
14 as part of the record. But, in general, we want
15 NationsCredit to offer A credit products as well as B and
16 C credits, change the pay and incentive plan of
17 NationsCredit's front line personnel, develop a standard
18 pricing system for risk that provides a range of price
19 over a continuum of risk, develop a loan review process to
20 ensure loans are soundly, fairly and legally underwritten,
21 contract for self-testing for fair housing and consumer
22 protection violations, require the sub prime companies
23 that are financed by NationsBank to meet similar industry
24 standards, provide leadership in calling for legislative
25 and regulatory reforms, have Hugh McColl demonstrate his
26 commitment and leadership to cleaning up the practices and
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1 image of NationsCredit, provide HMDA data for
2 NationsCredit as a separate lender for the public to
3 better analyze its overall lending practices, and 10, make
4 a good faith effort to review loans and make those whole
5 who have been injured by these illegal loans. Thank you.
6 MS. SMITH: Thank you.
7 MR. WILLIAMS: My name is Kevin Williams, I'm a
8 member of the board of directors of the Greenlining
9 Institute, also a professionally employed Human Rights
10 Officer with the City and County of San Francisco Human
11 Rights Commission. And I am here to speak against the
12 merger.
13 This half trillion dollar merger is very
14 reminiscent of the '50s and the '60s when the freedom
15 fighters were getting off the bus, both black and white,
16 and were being beat. Those protestors had the right to
17 assert the cause of freedom and justice for their people.
18 And as the beatings were occurring, the F.B.I. were
19 present standing back on the sidewalk taking notes.
20 And that has been symbolically what the Federal
21 Reserve Board has done, it has been federal, it has been
22 reserved and we are bored with the diet of discrimination
23 that we continue to endure year after year, hearing after
24 hearing. This is not a hearing, per se, it is a ceremony,
25 we know that. It's a ceremony because we know the merger
26 is going to be approved. The merger was approved, not
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1 here in this room, but on the golf course. It was
2 approved in some of the social halls where the elite meet,
3 the deal was cut and we are here to say we know the gig is
4 up. We are watching because the diversity of the State of
5 California is in the room, it's watching the decision that
6 you're going to make. We already know. I don't proclaim
7 to be a prophet, but I know the deal has already been cut.
8 You've been cut in and we've been cut out. We already
9 know that. We're here to say that time, our time, should
10 be now. At this time in history, we need some type of
11 assurance that NationsBank and Bank of America will do
12 what is right.
13 You know, right after a meeting of the
14 Greenlining Institute, I walked over to Hugh McColl and he
15 shook my hand and he said, "You know, Mr. Williams, you
16 have been critical of us but, you know, at 63 I can walk
17 away from this a rich man." I say to Hugh McColl, Kevin
18 Williams is richer than both of you because I know the
19 difference between right and wrong.
20 MR. PEEK: Good afternoon, my name is Ronald Peek
21 and -- well, I'm hopefully going to speak loud enough for
22 everybody. I've come to you from Florida.
23 MS. SMITH: It is working.
24 MR. PEEK: I have come to you from Florida with
25 the Concerned Citizens Political Action Committee and we
26 advocate for the cause of black business development in
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1 the State of Florida.
2 Before I start, I'd just like to ask you all to
3 join us all in Florida in prayer, we're praying for rain.
4 And so we'd appreciate your prayers in that regard.
5 Thank you for the opportunity to testify
6 regarding the concerns of Florida black businesses in
7 terms of this merger application. As NationsBank is the
8 largest bank in the State of Florida, our experience with
9 their lending policies to African American businesses in
10 the State of Florida is important. Florida is
11 historically a state where CRA has yet to come into its
12 own sovereignty. It ranks in the last two percent of all
13 states in terms of all CRA measurements. No bank there is
14 a clear leader in the shift that must occur to bring
15 Florida into parody with at least the mode of the states
16 of the union enjoy.
17 This merger is significant as the largest to date
18 in our country's history. The recent purchase of Barnett
19 Bank by NationsBank gave black businesses the opportunity
20 to open dialogue with NationsBank. This dialogue produced
21 the issues which dictated a trip to San Francisco.
22 The chairman of NationsBank has yet to take a
23 leadership role in negotiations with us to develop a
24 detailed lending commitment plan for the State of Florida
25 concerning black business development. His local manager
26 for CRA in Florida said, "Take whatever they offer or
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1 leave it." A classic monopolist's response.
2 We would also beg the board to hold an additional
3 hearing in the State of Florida and other states so
4 affected -- those directly affected and unable to come
5 here can voice their concerns to this audience without
6 hardship.
7 Chairman Greenspan has stated in his January,
8 1998, Wall Street address along with President Clinton
9 that access to capital for black businesses is important
10 for overall growth and our general economy. Chairman
11 McColl has stated on many occasions in speeches that we
12 all can find on the internet that access to capital is
13 important to black business development.
14 Our concern is that putting these statements into
15 practice involve dedication of resources. Without such
16 dedication, there is no truth to commitment. The
17 infrastructure in place to deliver loans to African
18 American businesses in Florida, the black business
19 investment corporations has almost matched the total
20 effort of all banks in that state in this regard. It's a
21 good model. NationsBank has played some role in this
22 delivery, though not the role of the vanguard or leader as
23 it claims with intoxicating advertisement.
24 We have evidentiary reports from the Small
25 Business Administration that characterize loans made by
26 all banks to black businesses in the State of Florida
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1 clearly indicating that NationsBank is a marginal
2 participant in this market or clearly an institution
3 following the status quo.
4 For instance, in 1993, there were no loans SBA
5 guaranteed to black small businesses. In 1994, there were
6 four loans. In 1995, there were four loans. In 1996, 18
7 loans. In 1997, seven loans. In 1998, three loans.
8 These are all fiscal years. This information is all up to
9 June 30th, 1998, from the Small Business Administration,
10 which in the letter to Betsy Cross, the Assistant Director
11 for the Division of Banking, Exhibit 3, Page 1,
12 NationsBank claims that they are using the SBA criteria as
13 a way to target minority businesses for loans. So I
14 thought that this was important.
15 Out of a total of 470 loans since 1993, 36 loans
16 were to black or African American businesses. We don't
17 know what NationsBank is doing anywhere else. In Florida,
18 it's very apparent that they have great strides to make to
19 live up to promises in the claim of leadership efforts in
20 truly understanding the African American business loan
21 delivery service. We would enjoy, as Chairman McColl
22 says, net import capital coming into the black business
23 economy. Thank you.
24 MS. MAR: Good morning. Can you hear me? My
25 name is Darlene Mar and I'm representing the Council of
26 Asian American Business Association. Today I ask about
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1 this merger and to look at who are the winners and who are
2 the losers. The winners are the shareholders because
3 without -- and then we are -- the community are the
4 losers.
5 McColl says that we're passionate but, you know,
6 you're passionate if it affects your livelihood, your
7 associates, their livelihood and so on.
8 Without a real commitment, without a plan,
9 without targets of culpability, volunteering, then there
10 is no real commitment at all, these are just numbers.
11 The public should be entitled to the information,
12 they're entitled, like shareholders stock reports and
13 portfolios, why are not we entitled to data information?
14 I believe that this is a bank for the people, am I not
15 correct?
16 To talk about CRA and they talk about lending
17 things, like homes and loans to businesses and so on, but
18 who benefits? Who are the winner from that? The banks.
19 Don't they charge interest?
20 You know, it's interesting some of the comments
21 this morning. Coulter said minority business development.
22 How we're talking about vendor contracts. And McColl said
23 the same thing, how they were the leader in the national
24 supplier of the Diversity Council. So today I brought
25 forward -- I had in my backpack the event sponsorship, and
26 these are a big sponsorship, it's in alphabetical order
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1 starting from AT&T to the United States Postal Service and
2 I cannot find NationsBank on here so I would like to
3 submit that. So if there's a doubt, then there should be
4 some doubt in this merger and in some of the comments
5 they're saying because they don't have documentation
6 probably.
7 Another thing about the contracts, okay, that's
8 one way to get very small business loans. Eugene
9 (unintelligible) said that was a great part of CRA. It
10 wasn't until last year that the bank started to get
11 involved, maybe because they knew there was going to be a
12 merger and they wanted to look good, so to raise the
13 market up and the shareholders are happy and again we're
14 the loser.
15 We'd like, as a community, to be also the winner,
16 so they're talking about, like, the Hispanic community,
17 the African American, but they did not mention the Asian
18 community or, if they did, it was kind of like a
19 (unintelligible).
20 What they want from the Asian community is our
21 market. I like the statements and listened to the
22 statements this morning. We do not understand. We don't
23 understand what? You know, about the merger or what's
24 good for us? They want flexibility. Flexibility, what,
25 to juggle their books around and the numbers? They want
26 this -- small business want to be global. Excuse me? I
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1 was a White House conference on small business delegate in
2 1995 and they didn't contact us. In fact, at that
3 conference, the minority delegate caucus, they did not
4 contact us or even sponsor the event in a big way.
5 Then I address your question as you asked, they
6 can't distinguish between a national nation bank and
7 California. They've already lumped it in their head it's
8 going to be a national bank that takes care of people but
9 these are not our (unintelligible) lords. If there's a
10 doubt in your mind at all, please stop the merger.
11 To show good corporate responsibility -- in fact,
12 corporate responsibility is interesting, that didn't come
13 about until after the CRA. We all know why the CRA
14 assisted. Maybe now we should have CRA Part II. But like
15 yesterday morning I was invited by WaMu to meet and greet
16 the Asian business community. Yet I got a phone call
17 later that night and my name was submitted and there was
18 a -- what do you call? -- focus group on how to market the
19 community, and guess who that was paid for and sponsored
20 by? Bank of America.
21 So it's not so much the testimony and these nice
22 printed documents they're submitting but the action I wish
23 you to look at and please listen to us. Even though we
24 are passionate, they're a reason why we're there, all
25 right. And as I sit on your side in areas, I've sat also
26 on the Small Business Advisory Commission, the Small
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1 Business of Northern California, the Small Business
2 Association, and I also listened to the speakers and I
3 tried to look at the whole picture and tried to understand
4 what's really going on. Thank you very much.
5 MR. THAO: Toule Thao, I'm president of the
6 (unintelligible) Association coming from Fresno,
7 California.
8 As I listened to the testimony this morning from
9 Mr. Hugh Coulter and also David McColl, they decide a
10 great achievement from both banks and unfortunately we
11 still have major, major concerns. The CRA commitment, for
12 example, or the lending practice or the low-income housing
13 for the poor and underserved community and inadequate
14 services outreach to minority and the others served.
15 Let me cite you a few example. I travel
16 throughout the nations serving as commissioner member
17 appointed by U.S.D.A. Agricultural Secretary Dan Glickman
18 (phonetic). I listen to hundreds -- thousands -- not
19 thousands -- several, several testimony from different
20 groups, Asian, black, Hispanic, and in it some of the
21 small farmers are dying and one of the reason is because
22 they are not accessible to these banks.
23 I also remember David mentioning great farming
24 finance, et cetera, but let me share with you. I live in
25 the community and I don't believe that Mr. Hugh McColl and
26 David Coulter serve the community because they surely
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1 don't see what we're struggling through. We are just
2 about to become the majority farmer of this country and
3 yet zero, zero loan was made to a community like ours,
4 Asian, Hispanic and black in our area.
5 I'm here to say a couple more things. I believe
6 that Mr. McColl served as military officer during the war.
7 99.9 percent of our people are war veterans. If no one
8 else understand our struggle, if you do not understand,
9 you have good excuse. But Mr. McColl should understand
10 our struggle. And that is the services provided is not
11 sufficient, it will not be adequate for the minority and
12 the underserved.
13 I'm here to ask you that do not allow this merger
14 to take place until clean, quantifiable plan is acceptable
15 to this community and that this plan will benefit the poor
16 and underserved community in this whole nation. Thank you
17 very much.
18 MS. ABRAMS: Good morning, my name is Leslie
19 Abrams and I will be reading in a statement from Mr. Harry
20 Alford, the President and CEO of the National Black
21 Chamber of Commerce.
22 Despite his objections to the Reserve's decision
23 to hold hearings only in San Francisco, Mr. Alford would
24 have liked to be here. However, the 2,000 members of the
25 National Black Chamber of Commerce are holding their
26 annual convention in Maryland. However, the convention
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1 will be submitting a resolution expressing its concerns
2 about the merger to the Federal Reserve as early as
3 Friday. In fact, a large percentage of the organization's
4 membership would have testified if hearings had been held
5 in any of the other cities where NationsBank or Bank of
6 America has branches.
7 I will now read Mr. Alford's statement which is
8 entitled National Black Chamber of Commerce Not Convinced
9 About the NationsBank/Bank of America Merger.
10 African Americans, as well as other minorities,
11 have yet to obtain their fair share of the American
12 economic enterprise. One thing is quite certain, power
13 will concede nothing without a demand and we cannot expect
14 progress without certain standards and criteria being
15 established.
16 NationsBank wants to throw out a big number with
17 no mechanisms in place to set the pace, to monitor
18 compliance and ascertain what is good performance or fine
19 corporate responsibility. Thus, it is certain that the
20 minority communities who are presently served by Bank of
21 America will regress in community reinvestment.
22 NationsBank should also answer for the serious
23 amount of discrimination complaints from its work force.
24 The lawsuit filed by NationsBank against the Office of
25 Federal Contract Compliance (Department of Labor) to
26 prevent an audit to investigate this mass of
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1 discrimination complaints is shocking. Attorney General
2 Janet Reno has also issued warnings to NationsBank about
3 its performance and equal opportunity hiring. Without
4 proper checks and balances, there is no assurance that the
5 performance previously displayed by Bank of America will
6 endure and it will most likely not improve. This is
7 signed by Harry C. Alford, the President and CEO of the
8 National Black Chamber of Commerce.
9 MR. GAMBOA: That concludes our panel one. I
10 want to express our thanks for your patience and
11 tolerance. We did go over a few minutes but you can
12 understand many of these people have traveled thousands of
13 miles on their own, and so I want to thank you for your
14 tolerance. There is one statement that needs to be made
15 that should be part of the record.
16 Hugh McColl and David Coulter should be part of
17 the process required to hear from the community directly.
18 This was so disrespectful for them to give their talk and
19 then to walk out of the room and not be able to hear what
20 the community feels about them. And that should go on the
21 record. Thank you.
22 MS. SMITH: Again, I realize that there are a lot
23 of witnesses who did not have a chance to present their
24 oral remarks and I encourage you to submit your written
25 statements for the record no later than next Friday but as
26 soon as possible. And we thank you for your participation
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1 today and look forward to receiving your comments. Again,
2 thank you and we'll move on to the next panel.
3 We probably will cut into the break that we had
4 scheduled for 10:35. This next panel will go its alloted
5 time and then we'll just compress the break a little so
6 that we can -- we won't catch up but we will be closer to
7 where we're supposed to be at this point.
8 We have panel three ready to go. If we can start
9 on the right.