Public Meeting Regarding First Chicago and Banc One
Thursday, August 13, 1998
Transcript of Panel Sixteen
3 MR. ELLIS: Ladies and gentlemen, my name is
4 Walter Ellis. I'm the Director of an organization,
5 United Affirmative Action Development Corporation.
6 In 1995, UAD began negotiations with
7 the then Premier Bank in Ruston and Baton Rouge,
8 Louisiana, to expand banking opportunities for our
9 underserved communities.
10 The discussions specifically focused upon
11 creating more employment opportunities for African
12 Americans within the bank and making more loan
13 capital available to support African American
14 entrepreneurship.
15 Thus, the discussion with Premier began,
16 raising the issue of whether it was meeting the
17 needs of Grambling, clearly an underserved
18 community.
19 Discussions continued over a period of
20 months with UAD and Premier Bank attempting to
21 effect an agreement that would result in a
22 consulting relationship, wherein Premier would
23 provide capital for commercial loans, create an
24 internship program for Grambling University
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1 students and graduates, and UAD would assist in
2 providing applicants for each.
3 Through the course of events, UAD worked
4 with Grambling University and community officials
5 toward bringing the internship program to
6 fruition.
7 Following what initially appeared to be
8 an interest, the bank began to stonewall under
9 the pretext of its acquisition by Banc One,
10 subsequently breaking off all discussions.
11 During this same period, UAD also
12 presented to what has become Banc One of Louisiana
13 several commercial loan applications. None of
14 these, at least one of which has been pending more
15 than a year, have been funded, nor has an averse
16 action been taken upon them.
17 Though Banc One acknowledges an agreement
18 between Premier, its predecessor in interest, and
19 UAD, it now says that it, Banc One, is not bound by
20 this agreement, refusing to honor same.
21 It appears now that Banc One, first in
22 anticipation of the Premier Bank acquisition, then
23 the First Chicago merger, continued insincere
24 dialogue with UAD to minimize the possibility of
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1 UAD filing a complaint pursuant to the Community
2 Reinvestment Act or existing FDIC Federal Reserve
3 Regulations.
4 I, therefore, respectfully request that my
5 testimony be made part of the record of these
6 proceedings and that the Federal Reserve approval
7 of the subject merger with First Chicago be
8 withheld until such time as a complete and thorough
9 audit of Banc One's compliance with the spirit of
10 the reverent acts and regulations in view of its
11 behavior in African American communities throughout
12 the nation generally and in Louisiana particularly
13 can be completed.
14 My first approach to Premier Bank was to
15 close my account because I thought I had been
16 treated in an unfair manner, racially discriminated
17 against. And from that, I was invited to sit down
18 to talk to the manager at the bank.
19 And at that time, Premier was in the
20 process of merging with Banc One and they didn't
21 want any racial complaints, in particular, to be
22 lodged against them apparently.
23 I didn't know what process was taking
24 place, but I approached the local bank manager and
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1 told him that I was working with a bank in
2 California and that we believe we could help them
3 with some of their solutions under the Community
4 Reinvestment Act as we were working with banks in
5 California.
6 And from there, we began to sit down and
7 negotiate an agreement that later led to some
8 things in writing and some back and forth
9 communications between Premier Bank and Banc One.
10 Things seemed like they fell apart for a
11 while. And then when these other mergers started
12 taking place, in particular the one in Louisiana,
13 we were again negotiating with Banc One and
14 appearing that it was done in good faith.
15 Once this merger took place in Louisiana,
16 then the negotiations fell apart again. And now,
17 Banc One officials are saying that there is no such
18 thing as an agreement; and if it is, it's between
19 premier and UAD; and that Banc One don't intend and
20 never have and never will sign any type of
21 agreement. And I think they should.
22 MS. SMITH: Thank you very much.
23 Ms. Hain, you've been around a long time
24 waiting for this.
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1 MS. HAIN: My name is Nancy Hain. I'm the
2 Secretary/Treasurer of the Paul A. Stradtman
3 Construction Company in Cleveland, Ohio. I'm also
4 Mrs. Paul A. Stradtman.
5 We're a customer with an 18-year
6 relationship with Banc One. We're an underground
7 utility contractor in a very high-risk business
8 that had several extremely bad years and have been
9 in a rough situation with the bank as a result of
10 those bad years.
11 I recently -- with the news that were in
12 the papers of the Banc One merger, I saw references
13 to their interest in small business and how they're
14 pursuing the small business lending.
15 As a result of that article that I read, I
16 contacted some of the senior people in the Banc One
17 of Columbus. And I've had a series of letters
18 going back and forth, which have taken the
19 situation that was not good to start with. Each
20 letter, the response gets worse.
21 My most recent communication, which I'm
22 going to read because it presents our position and
23 the -- it gives a look at where a small business
24 person is at if the world isn't a great and
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1 wonderful place and if the bank doesn't happen to
2 like your numbers.
3 This is responding to a letter from the
4 legal department. And it says, I received your
5 letter in response to my correspondence dated
6 July 22nd. We appreciate the review of the issues
7 raised by my letter, but it appears that the
8 purpose of the letter has been overlooked.
9 This letter was asking for intervention or
10 someone in the community reinvestment area to put
11 me in contact with someone that could intervene in
12 the situation we're in.
13 The relentless collection methods and
14 scorched Earth policy being followed by the bank
15 representative and outside counsel representing
16 Banc One against our business is what is at issue.
17 The letter was an appeal for someone in
18 the policy-making area of the bank to review our
19 situation and hopefully intervene on our behalf.
20 Contrary to your statement, I want to say
21 that Paul Stradtman Construction always has and is
22 honoring its commitments to Banc One. The fact is
23 evidenced by the uninterrupted payment history over
24 the preceding 80 months, which totals $1,442,742.50
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1 in principal and interest.
2 PASCO's financial performance was severely
3 impacted by three very bad municipal sewer projects
4 undertaken during the '95 and '96 construction
5 seasons, all of which we -- apparently were
6 subsequently completed and were accepted by the
7 municipalities.
8 In spite of the severe losses incurred on
9 these jobs, PASCO has and continues to live up to
10 commitments to Banc One to retire the subject
11 indebtedness.
12 I would like to point out, once again,
13 that PASCO began repayment of the $400,000 line of
14 credit on its own volition at the rate of $10,000
15 per month plus interest before Banc One demanded
16 repayment in full.
17 The obligation was reduced from
18 the original $400,000 to $190,000 between
19 February 1997 and July 1998, a period of
20 18 months. All of the payments included interest
21 accrued to date on the outstanding balance.
22 Although you've stated that we have failed
23 to yield a satisfactory payment of debt, we feel we
24 have made considerable progress under the
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1 circumstances.
2 In order to reassure the bank of our
3 intent and ability to repay our obligation, we
4 offer your representative, in addition to the
5 collateral already held by the bank consisting of
6 $2 million of construction equipment, a life
7 insurance policy of $300,000 of Mr. Stradtman and
8 our personal guarantees, to provide Banc One with a
9 second mortgage on our piece of industrial real
10 estate valued at over $3 million or a second
11 mortgage on our piece of land zoned multifamily and
12 valued at approximately a millions dollars.
13 Our only request to Banc One through your
14 representative was that PASCO be permitted to repay
15 the line through the normal course of business at
16 the rate of $10,000 per month and interest until
17 paid in full.
18 Your representative refused all of our
19 offers to further secure the bank's position,
20 demanded immediate repayment and, once again,
21 pushed forward with legal action.
22 The balance of the company's obligation --
23 the balance of the loan is a company obligation.
24 And the company is not able to repay the $190,000
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1 demanded at this time. The company has been
2 hindered in securing a new banking relationship for
3 a number of reasons.
4 One of those reasons is the ongoing legal
5 actions taken by Banc One against PASCO and Paul
6 and I personally and their demands for immediate
7 repayment.
8 We are currently using personal assets for
9 working capital until the company is strong enough
10 to run on its own. Large amounts of working
11 capital are required to fund our construction
12 projects before cash flow begins. To repay the
13 obligation from personal funds would leave us
14 unable to meet the day-to-day operating needs of
15 the company.
16 We have good jobs in progress with almost
17 all equipment working on job sites. Our volume is
18 ahead of last year. We have every reason to expect
19 a good year.
20 For the bank to take the equipment, in
21 lieu of our offers of additional security, would be
22 disastrous to our company and the developers for
23 whom we are working.
24 It would mean the loss of jobs for our
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1 24 employees, most of whom are highly-paid Local 18
2 operating engineers and Local 860 laborers, many of
3 whom have been with the company since it started
4 business in 1980.
5 I need another few seconds to wrap
6 this up.
7 We appreciate your commiseration with the
8 unfortunate circumstances in which we find
9 ourselves, but what we do not understand is why
10 Banc One has chosen to relentlessly pursue the
11 liquidation of PASCO's construction equipment and
12 the ultimate destruction of the construction
13 company and the life's work of the owners when:
14 One, Banc One holds $2 million in
15 construction equipment as collateral for a $190,000
16 obligation.
17 The original $400,000 obligation has been
18 reduced every month since February, 1997, by at
19 least $10,000 per month plus interest from the
20 operating proceeds of the business, $210,000 in
21 18 months.
22 PASCO's original business checking
23 accounts, both general and payroll, are with Banc
24 One, as they have been for over 18 years.
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1 Banc One is collecting interest every
2 month on the declining balance. PASCO is paying
3 fringe benefits to union welfare funds administered
4 by Banc One.
5 In spite of what Mr. Sanford says, PASCO,
6 by its actions, has demonstrated integrity,
7 commitment and its intent and ability to meet
8 obligations under extremely difficult and adverse
9 conditions. It would seem that these should be
10 desirable qualities in a human or business
11 relationship.
12 PASCO's asking only for consideration that
13 is totally within the power of the policy-makers of
14 Banc One to grant that the company be permitted to
15 repay the remaining balance of the line of credit
16 of $190,000 at the rate of $10,000 per month plus
17 interest until paid in full.
18 The response to this is that we will be in
19 court a week from tomorrow to be held in contempt
20 for not turning our equipment over to the bank.
21 So I think that in view of this situation
22 with the small business, as this merger goes
23 forward, I think the practices of the bank and
24 their handling of small business accounts should be
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1 examined because there -- small businesses are
2 risky by their very nature. And it's not a pretty
3 picture when you end up creating a bad situation
4 with them.
5 MS. SMITH: Thank you.
6 MS. HAIN: Thank you for your listening.
7 MS. SMITH: Mr. Hawthorne.
8 MR. HAWTHORNE: Hello, and thank you for
9 allowing me to speak today.
10 My name is Robert Hawthorne. I am the
11 Executive Director of Martindale Bright Community
12 Development Corporation, a grassroots development
13 corporation in Indianapolis.
14 And I represent today Indianapolis
15 Coalition for Neighborhood Developers, whose
16 membership organization represents 15 grassroots
17 community operations in Indianapolis who serve over
18 200,000 people residing in low-income neighborhoods
19 in Indianapolis.
20 I'm here today, I guess, not to speak
21 directly against the merger, but to ask for an
22 extension of the comment period to allow for
23 additional negotiations or conversations to take
24 place with Banc One and NBD and hopefully,
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1 subsequently, the new bank which will be a result
2 of this merger.
3 ICND -- I'm going to read from a prepared
4 statement of the organization.
5 ICND is extremely concerned about the
6 pending merger of Banc One and NBD, particularly as
7 it relates to the future development and leadership
8 of the banking industry in Indianapolis community
9 development with Indianapolis community development
10 movement.
11 All ICND members have enjoyed a strong and
12 committed relationship with NBD, many for nearly
13 20 years. The relationship between ICND members
14 and Banc One -- excuse me, and NBD have resulted in
15 general operating support for our members, various
16 financing mechanisms for projects, technical
17 assistance and affordable housing products that are
18 critical in our efforts to revitalize our inner
19 city neighborhoods.
20 In addition, NBD Bank has provided a
21 community leadership within the banking industry,
22 brought the necessary attention to community
23 development and, most importantly, clearly values
24 the work of our members from both a business
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1 perspective as well as a philanthropic
2 perspective.
3 For this reason, it's critical that the
4 comment period be extended to allow the community
5 time to delineate precisely what Banc One's
6 commitment will be to community development
7 corporations in Indianapolis.
8 One aspect of this merger which will be
9 unique to Indianapolis is the divestiture that Banc
10 One will have to complete.
11 This divestiture will result in the
12 introduction of a new, likely unknown bank who will
13 immediately capture the third largest market share
14 in Indianapolis, as well as the first and second
15 largest market share among African American people,
16 of which the community development corporation
17 represent a great deal.
18 ICND requests that this new bank be
19 required to fill the same commitment to community
20 development corporations as NBD has and articulate
21 these comment -- these commitments in a five-year
22 CRA plan.
23 I'll just briefly take time to just go
24 through the items. One, we're looking to -- for
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1 Banc One and the new bank to increase the number of
2 types of mortgage project products which are for
3 low-income people with special circumstances.
4 We also look for Banc One to increase its
5 commitment to retail development in Indianapolis,
6 as well as small minority business development.
7 We look for ICND members to have a direct
8 relationship with NBD Bank over the last years.
9 And cooperating support has been a part of that
10 relationship.
11 ICND requests that Banc One commit to
12 creating endowment fund with the proceeds of
13 divesture for the purpose of providing cooperating
14 support to ICND and our members who serve to
15 eliminate deterioration in inner city communities.
16 In closing, both Banc One and NBD have
17 been excellent Indianapolis corporate citizens
18 supporting the business community, as well as the
19 African American community.
20 In a city where many of the low-income --
21 low- and moderate-income communities are seeing a
22 resurgence in quality housing, it is extremely
23 important that both Banc One and the new bank
24 commit to furthering the development of
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1 Indianapolis inner city community and
2 neighborhoods.
3 We ask that the comment period be extended
4 to allow for community -- more community input in
5 this matter. Thank you.
6 MS. SMITH: Thank you very much. Ms. Haste.
7 MS. HASTE: Good afternoon. My name is
8 Bridgette Haste. I'm the chairperson for a local
9 community group, ACORN in Milwaukee. I'm here
10 today to tell you about my experience with Banc
11 One's lending group.
12 Back in 1991, I applied for a home loan
13 with Banc One and was denied. I had been on my
14 present job for over five years. I had deposits of
15 over $16,000 in Banc One.
16 Once they checked my credit record, I was
17 told that would probably take me a couple of years
18 to fix my credit to the position that would qualify
19 me for a loan with Banc One.
20 They told me that I could request a copy
21 of my credit report from the local credit bureau.
22 When I received it, the only thing that I could see
23 on my credit record that would disqualify me was a
24 doctor bill that was minimum in amount and that had
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1 been paid.
2 They could not tell me the reason why I
3 was denied, only that I would need to contact my
4 local credit bureau.
5 Since then, in the same year I received
6 several loan -- other type of loans, major credit
7 cards, a credit line of $10,000 and a home loan
8 with no questions asked and my credit report was
9 submitted to them through factual data.
10 I am now the proud owner of a duplex
11 home on the north side of Milwaukee in which I have
12 been living there for seven years, no thanks to
13 Banc One.
14 My loan denial was not an isolated
15 incident. In 1996, Banc One's own lending
16 practices and data shows the rejection rate for
17 African American and Latinos in the city of
18 Milwaukee of 54 percent. This is not acceptable.
19 I am recommending that the proposed merger
20 between Banc One and First Chicago NBD Corporation
21 be denied. Thank you very much.
22 MS. SMITH: Thank you. Ms. Howard.
23 MS. HOWARD: Good afternoon. My name is
24 Minnie Howard, and I'm a member of Wisconsin ACORN
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1 also. I will testify today on the racial and
2 discriminatory lending practices of Banc One in
3 Milwaukee.
4 The statistics that I will be using were
5 taken from Banc One's own HMDA data. I will also
6 point out that Banc One is not making an effort to
7 provide services that match the needs of minority
8 communities.
9 In light of these practices, I will also
10 recommend that the proposed merger between Banc One
11 Corporation and First Chicago NBD Corporation be
12 denied.
13 Banc One is holding over $1.16 billion in
14 deposits from its central city branches, where the
15 majority of African American and Latinos live.
16 However, in 1996, only 2 single-family
17 conventional mortgages went to African Americans
18 and only 3 to Latinos, as compared to 79 for
19 Whites.
20 Furthermore, 57 percent of African
21 American applicants were denied mortgages, more
22 than 5 times the rate of denial for White
23 applicants.
24 Rates of home ownership among African
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1 Americans and Latinos are drastically below home
2 ownership rates for Whites.
3 Banc One is contributing to a tremendous
4 disparity and actually increasing it by providing
5 such a disparate proportion of its mortgages to
6 Whites.
7 As home ownership rates among African
8 Americans continued to decrease in Milwaukee,
9 Banc One should be responding by increasing
10 mortgage loans.
11 However, at a meeting with Connie
12 McDonald, CRA, Officer for the Eastern Region, and
13 Milwaukee's CRA representative, Gwen Dansby, they
14 said that rather than responding to the community
15 needs, they will be putting even less emphasis on
16 mortgage loans.
17 The Banc One CRA representative that we
18 met with claimed that mortgages were not their
19 specialty. So we looked at their record for home
20 improvement loans and refined loans in Milwaukee,
21 I'm going to say, which is approximately 20 percent
22 minority.
23 Banc One provided an incredible 3,596
24 refinancing loans in 1996 to Whites and only 165 to
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1 Blacks and 59 to Latinos. In this case, 523 Blacks
2 applied for refinancing loan and more than half or
3 54 percent were rejected.
4 Even though Milwaukee is one of the most
5 segregated cities in the country, other banks do
6 not approach Banc One's rejection rate for Blacks.
7 For all banks in the market area,
8 34 percent of Black African Americans were denied.
9 For all banks in the market area,
10 34 percent of Black applicants were denied
11 refinance loans, but at Banc One the rejection rate
12 for Blacks topped 50 percent, an almost incredible
13 figure.
14 In home improvement loans, the pattern
15 holds. In 1996, Banc One made 1,176 home
16 improvement loans to Whites and only 147 to Blacks
17 and 28 to Latinos.
18 Banc One's record of lending in Milwaukee
19 is one of the most racially discriminatory lending
20 records of any bank in any city in the country.
21 We have had meetings with CRA
22 representatives over the past several years where
23 they have promised to improve, yet their own data
24 shows no improvement.
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1 Furthermore, they are ignoring the very --
2 they're ignoring the minority community's needs for
3 access to home ownership by turning their focus
4 away from mortgage loans.
5 In light of this information, it is the
6 recommendation of Wisconsin ACORN that the proposed
7 merger between Banc One Corporation with First
8 Chicago NBD Corporation be denied. Thank you.
9 MS. SMITH: Thank you very much. Any
10 questions? Thank you very much for coming this
11 afternoon. We've been through a very long day.
12 And we will move on to Panel 17 now.
13 Ms. Johns, if you'll grab the mike, we'll start
14 with you.