Public Meeting Regarding First Chicago and Banc One
Thursday, August 13, 1998
Transcript of Panel Eighteen
11 MR. GOLDSTEIN: Hello. My name is Ken
12 Goldstein. I am an associate at Krislov and
13 Associates. And Ken Krislov regrets that he can't
14 attend. He was drawn out of town unexpectedly.
15 We have made submissions to the Board, a
16 public comment, and to which we had attached a
17 complaint that we had filed in Federal court, a
18 class action complaint on behalf of Meleia
19 Robinson, which we have voluntarily dismissed
20 pending this administrative process. All of those
21 submissions, I take, are incorporated by
22 reference.
23 My purpose now is to highlight and
24 summarize some of the points in our testimony that
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1 I've submitted today.
2 The first point I'd like to make is that
3 there's no benefit for consumers generally in this
4 merger, only the elimination of competition and the
5 certainty of increased fees and charges.
6 This morning I heard the CEOs talk about
7 the merger of equals, but we see this as a
8 combination of competitors.
9 The persons -- the people who are most
10 injured by this merger, while CRA aspects are
11 terribly important, are the general average banking
12 customers, middle class consumers who are going to
13 be affected by the lack of competition and by the
14 combination of lack of choices.
15 The concentration for -- of the
16 marketplace is bad for average, middle class
17 consumers and bank customers.
18 We also have a problem with the
19 divestiture plans, which we feel are incomplete.
20 And lastly, we would request that the Board look
21 closely at the relevant market areas and the
22 antitrust standards in the bank merging -- Bank
23 Holding Company Act and the merging -- and the
24 antitrust laws.
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1 First of all, this merger is not based
2 only on CRA grounds and a poor record of lending
3 patterns, which has been evident this whole
4 afternoon.
5 This merger hurts middle class average
6 bank customers, the core depositors who make the
7 bank's fortunes rise and fall.
8 This merger eliminates the competition for
9 most consumers, average middle class depositors,
10 based on antitrust laws. And we see this based on
11 the shrinking number of banks over time, which
12 causes less bank choices where people have nowhere
13 else to go.
14 In the past six years alone, we've seen
15 the number of banks reduced from around 12,000 to
16 around 9,000. In some places, the merger will have
17 the practical effect and literally be one-bank
18 towns.
19 In this way, average consumers lose
20 because there's nothing to be gained in having a
21 lack of competition.
22 We have not heard this morning from the
23 banks say any reason why this combination will have
24 a positive effect on interest rates for savings or
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1 how they would reduce bank fees or create better
2 service at all because we've seen in every case
3 where banks have merged and competition lessened,
4 increased fees and market -- monopoly power market
5 exercised.
6 My next point is that the combination of
7 these banks is that in the Federal Reserve Board of
8 Boston's most recent article, we've seen that
9 banking is local. Consumers travel only two to
10 five miles to their local bank. With the
11 elimination of branches, there will be less
12 competition and we'll see an increase in fees.
13 These banks are already leaders in
14 generating fees and have been padding their bottom
15 lines in just their last month's report and
16 their -- and in the number of the amount that
17 they've been collecting in fees.
18 The last issue is on divesture. We have
19 not heard a full public disclosure of what the
20 divestiture will be in Indiana or at all in
21 northern Illinois.
22 It has not been made fully public. In
23 fact, there's been speculation that the sale of the
24 new banks will be to someone without a local
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1 presence, which will only serve to strengthen the
2 incumbent bank's position.
3 In Illinois, we have not heard about any
4 divesture and specifically in the time of -- in the
5 towns of Evanston and Wilmette where banks are
6 literally across the street from one another.
7 To conclude, in short we ask that this
8 merger be rejected unless and until these concerns
9 to preserve competition and protect middle class
10 core depositors are fully addressed. Thank you.
11 MS. SMITH: Thank you very much.
12 Mr. Harrington.
13 MR. HARRINGTON: My name is Bill Harrington,
14 and I work in Gary, Indiana.
15 I suppose I would be one of the people
16 that would be the least thought to be here and
17 express concerns over a merger because I probably
18 am one of those people that's considered to be
19 rather privileged.
20 Had a great career, started a firm called
21 Harrington Properties in Gary, Indiana, really with
22 the idea of taking some areas that are rather
23 depressed and through private industry rehabbing
24 some houses and creating some in-fill housing to
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1 create a neighborhood.
2 In 1994, I happened to, as a favor to my
3 parent company that I ran then as president and
4 CEO, bought some commercial property.
5 NBD had been my bank since -- or Gainer
6 Bank had been my bank since 1984. And I went to
7 NBD Bank. And they were very gracious and loaned
8 me the money.
9 I ended up with a $312,000 mortgage and
10 also later a line of credit of $50,000, which they
11 secured with a second mortgage on a house that the
12 company owned and that I paid rent in excess of
13 market value for.
14 We had an agreement that when -- I asked
15 when the release of this mortgage on the house
16 would be, and that would be whenever the $50,000
17 note was paid.
18 And when the primary note was below
19 $285,000, the formula was that they wanted to see
20 the loan to the point that the developed land, the
21 three acres with the buildings on it, were -- the
22 debt was less than 80 percent of appraised value
23 and 50 percent on the vacant land, which sounded
24 reasonable.
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1 1996, 97, our line of credit was
2 established for 50,000 and later increased to
3 $100,000, obviously secured by inventories,
4 equipment, receivables, as well as a personal
5 guarantee, which I have never had a problem
6 giving.
7 I guess my point is that when I was
8 renewing the last line of credit in 1997 and I'm
9 looking at the documents which are given to me to
10 review, I happen to get one document I wasn't
11 supposed to get, and that's the bank's internal
12 document. And that document said, CRA, yes.
13 Now, the bank on a hundred thousand
14 dollar line of credit when they had collateralized
15 everything in the company and me personally
16 guaranteed with a personal financial statement well
17 in excess of a million dollars, it started to
18 trigger me why we have difficulty in Gary, Indiana,
19 in attracting capital to the inner city if the bank
20 can satisfy its needs through nonrisk loans being
21 qualified for Community Reinvestment Act credits.
22 I guess if you really want to find out
23 where the heart of your bank is, go ask them for a
24 $250,000 nonrecourse line of credit to rehab a city
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1 block that today looks like Beirut, Lebanon, which
2 I did in writing, submitted a letter to NBD, who
3 was at one time Gary National Bank, Gainer Bank,
4 now NBD, and was pretty flatly rejected.
5 They said, you know, if you want to
6 come in and borrow some money and tie up your
7 corporation and personally endorse the note, we'll
8 loan you some money to do some work, but, you know,
9 we want to be collateralized.
10 I guess my point is this. Six months ago
11 through a developer that wanted to partner with me,
12 I decided I would approach the bank to release the
13 vacant land since by then the mortgage was well
14 below $200,000, which certainly left them in an
15 oversecured position.
16 And, you know, they told me they'd be just
17 more than happy to do that if I, again, would give
18 them my house as collateral, which by then had no
19 mortgage on it at all.
20 And that's okay. I'm not here to complain
21 about the treatment that I've had with NBD Bank. I
22 guess my concern is Gary, Indiana, and all of the
23 little people.
24 And that is, if I have the kinds of
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1 problems in -- with a lot of resources in
2 attracting some capital into a city like Gary,
3 Indiana, that people like Bennie Simmons, like
4 other businesspeople that have little resources
5 that want to reach out and rebuild a community, it
6 really is a struggle.
7 I don't know Banc One well. And Jim
8 Danduran called me one day from Merrillville.
9 And I had a breakfast meeting, and he bought
10 breakfast. So I'm sure they're a pretty good bank
11 and he's a pretty good guy. I've never had any
12 other dealings with Banc One.
13 I guess I'm not saying that I'm totally
14 opposed to the merger, but I would sure like to see
15 a commitment, as those that we've read about in the
16 paper to Chicago and to other communities, that the
17 bank that at one time was Gary's bank, who now has
18 at least partially abandoned Gary, would make a
19 commitment to Gary, Indiana.
20 And the one thing I would say not only to
21 NBD and Banc One, but to every other bank, great
22 community on the rebound and, you know, with
23 everybody leaving it would be a great place to
24 open a bank. Thank you.
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1 MS. SMITH: Mr. Simmons, please.
2 MR. SIMMONS: Yes. My name is Bennie
3 Simmons. I'm president, founder, CEO of the
4 Marshall Plan for Gary. I have some major problems
5 with the merger, just some incidents.
6 Number one is that I went into Banc One to
7 request a CRA report. And what they gave me was a
8 report of the city of Indianapolis and not Gary.
9 Reason why is because Banc One
10 consolidated several years ago. And when they
11 consolidated, they moved a lot of their operations
12 down in Indianapolis. So when I make a phone call
13 for help, I have to dial a 1-(800) number and talk
14 to someone down in Indianapolis. So I couldn't get
15 a proper CRA report on what's happening inside of
16 Gary, Indiana.
17 Millions of dollars are deposited into
18 Banc One and First Chicago NBD in Gary, Indiana;
19 the City government money, the school City money,
20 unions, churches every Monday, Gary residents. And
21 those millions of dollars are being used to finance
22 the communities outside of Gary.
23 The majority of the citizens will tell
24 you -- just ask them -- that there is racial
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1 discrimination in Banc One's banking system. I
2 think we need to adhere to what Matthew Lee
3 was saying.
4 Economic blight; I have some pictures here
5 that my friend, Darryl Curie, kind of helped me
6 with on Gary, Indiana. And I think the panel has a
7 copy and there's a copy out in the hallway there.
8 And if you could see this, here's the
9 beginning of Gary from Merrillville, but here is a
10 senior citizen's building here, NBD and Banc One in
11 a couple of blocks. That's only about two
12 businesses. The rest of that area is nothing but
13 blight, boarded-up buildings.
14 Here is another picture here of a
15 building, three and a half blocks, okay? There's
16 nothing but blight. A picture here of two doors
17 from -- one, it's a lady digging in the abandoned
18 building looking for garbage, okay, right almost
19 adjacent to Banc One.
20 That's the reality of what is happening in
21 my community. I've been there all my life. My
22 father has too. He's 75 years old.
23 Senior citizens; there's a large senior
24 citizens building right across the street from Banc
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1 One. The first of the month, the senior citizens,
2 you know, they get their checks and they go down
3 to -- across the street to the bank.
4 They have seven teller windows and
5 there's two windows being manned, operated. So my
6 grandparents have to stand in that line, sick and
7 old. And we complain and nothing is done.
8 That's the relation. There's almost an
9 adversary relationship between Banc One NBD, First
10 Chicago and Gary, Indiana, against our community.
11 And that's a reality.
12 So there's been a tale of two cities
13 here. I like to call it the doughnut. You've
14 heard people -- there's a part of the nourishing
15 part of the doughnut.
16 They've been telling you that Banc One is
17 great. And they're telling the truth. Oh, they
18 helped build our community. It's wonderful.
19 But then there's other areas like Lorraine
20 area of Ohio and Gary, Indiana, and Milwaukee where
21 there's nothing there. There's a doughnut hole.
22 So you cannot base your decisions to
23 approve this merger based on the nutrition outside
24 the doughnut hole.
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1 I'm not saying that this merger should be
2 denied because I imagine no bank mergers have been
3 denied. What I'm asking is that for this bank
4 merger to be delayed until Banc One and NBD First
5 Chicago make the same commitments that they made
6 with Woodstock here in Chicago, to places like Gary
7 that is right next door. In fact, we got an
8 airport called Gary-Chicago Airport. So this is
9 what we ask you for.
10 Now, why is that the doughnut hole? Is it
11 because that is John McCoy's intentions? No, I
12 don't believe that.
13 But what I believe is this. I believe
14 there's been a lack of managerial responsibility.
15 So if you got a racist bank president or racist
16 bank managers, they do what they want to to these
17 communities. And we complain, you know, but
18 nothing's done.
19 So I'm asking -- they had an advertisement
20 in northwest Indiana saying, we want to give
21 $2 billion. Well, I'm asking John McCoy to commit
22 $1 billion to Gary, Indiana, over the next eight
23 years to rebuild that community in loans, in
24 grants, business loans, mortgages to Gary, Indiana,
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1 and then do the same to those other doughnut holes
2 across the country. And if you do that, Banc One
3 would be a great bank.
4 Lastly, Citibank; the mayor of
5 South Dakota went to Citibank and said, look, we
6 need help. We think that we can handle your
7 database and your credit cards at one-third the
8 cost. And whoever is in the leadership of Citibank
9 said okay. So you know when you get your statement
10 back, it says South Dakota.
11 I think there's ways in which creatively
12 Banc One and places like Gary and Milwaukee can --
13 we can barter together. We can sit down and reason
14 together, you know, and not paint a glowing picture
15 like everything is okay because it's not.
16 So it is my recommendation that this
17 merger be not denied, but delayed until such
18 commitments can be made, just like they did with
19 Woodstock here in Chicago. Thank you.
20 MS. SMITH: Thank you very much. We appreciate
21 your being here this afternoon.
22 And we will go onto, I think, another
23 panel.
24 MR. ALVAREZ: Mr. Simmons, you left a copy of
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1 the pictures?
2 MR. SIMMONS: They out there, yeah. I left two
3 copies. One's on the desk and then --
4 MR. ALVAREZ: Thank you very much.
5 MR. SIMMONS: Yes, thank you.
6 MS. SMITH: We'll start with Mr. Reyes.