Public Meeting Regarding Norwest Corporation and Wells Fargo & Company
Thursday, September 17, 1998
Transcript of Panel One
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10
11 CHAIRPERSON SMITH: Any other questions? 09:32:08
12 If not, thank you very much for being here this 09:32:10
13 morning. 09:32:12
14 And we'll move on to Panel No. 1. We're going 09:32:12
15 to start with Mr. Jacobson. 09:33:20
16
17 MR. JACOBSON: Thank you, and good 09:33:36
18 morning. My name is Jim Jacobson, and I'm assistant 09:33:38
19 attorney general appearing this morning on behalf of 09:33:42
20 Attorney General Hubert Humphrey. I'd like to begin 09:33:44
21 today by thanking the Federal Reserve Board for 09:33:48
22 holding this public meeting and for giving our 09:33:50
23 office and other interested parties an opportunity 09:33:52
24 to comment on the proposed merger between Norwest 09:33:54
25 and Wells Fargo. I would also like to thank Norwest 09:33:56
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1 for its letter to Attorney General Humphrey 09:34:00
2 responding to some of the concerns addressed in our 09:34:04
3 written comments to the Board. Since time is 09:34:06
4 limited, I will get right to the point. 09:34:08
5 I'm here today because the Attorney General's 09:34:12
6 concerned that this proposed merger has the 09:34:14
7 potential to affect Minnesota consumers, small 09:34:16
8 businesses and communities on all three factors 09:34:20
9 considered under the Community Reinvestment Act: 09:34:22
10 lending, investment, and service. Our concerns on 09:34:26
11 these three points are heightened in view of Wells 09:34:28
12 Fargo's record following its recent merger with 09:34:32
13 First Interstate. For example, according to a study 09:34:38
14 conducted by the steelworkers, Wells Fargo closed or 09:34:42
15 sold all of its branches in 129 locations following 09:34:44
16 its merger, thereby reducing services to low income 09:34:46
17 and rural communities. 09:34:52
18 Specifically with regard to customer service, 09:34:52
19 Wells Fargo's post-merger record is not encouraging. 09:34:56
20 According to reports, Wells Fargo encountered 09:34:58
21 extensive service problems following its merger and 09:35:02
22 cut back on certain customer services. For example, 09:35:04
23 according to a recent report in the San Jose 09:35:08
24 newspaper, Wells Fargo discontinued First 09:35:12
25 Interstate's practice of providing free checking to 09:35:16
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1 seniors and now imposes a $9 per month charge unless 09:35:18
2 seniors maintain a significant minimum balance. For 09:35:24
3 seniors on fixed incomes and limited budgets, $9 per 09:35:26
4 month, or 108 per year, can be a significant burden. 09:35:30
5 The Board indicated in its recent order 09:35:34
6 approving another merger that "the CRA does not 09:35:38
7 impose any limitation on the fees or other charges 09:35:42
8 that banks may assess for their services." We 09:35:46
9 believe, however, that fees and charges for banking 09:35:50
10 and deposit services are a highly important factor 09:35:52
11 that the Board should be taking into account under 09:35:56
12 its CRA analysis. 09:35:58
13 In addition to our concerns about Wells Fargo's 09:36:02
14 CRA record, I would like to acknowledge the concerns 09:36:04
15 raised by ACORN in its submission regarding 09:36:08
16 Norwest's lending practices in low and moderate 09:36:12
17 income communities. The statistics cited by ACORN 09:36:16
18 create additional grounds for concern about the 09:36:20
19 possible effects of a merger which would relocate 09:36:24
20 the headquarters to California. As Congressman 09:36:26
21 Vento points out in his comments, there already is 09:36:30
22 a "growing bi-coastal concentration of financial 09:36:32
23 services companies in the United States." 09:36:36
24 Relocation of Norwest's headquarters to 09:36:40
25 California only exacerbates concerns about its 09:36:42
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1 lending policies and creates a real concern that low 09:36:46
2 and moderate income communities in Minnesota could 09:36:50
3 be overlooked following the merger. In its 09:36:52
4 application to the Board, Norwest recognizes the 09:36:56
5 importance of its CRA responsibilities and states 09:37:00
6 the merger will provide enhanced lending investment 09:37:02
7 and service to low and moderate income communities. 09:37:06
8 At this point, however, details as to how this will 09:37:08
9 be accomplished are lacking. 09:37:12
10 We recognize and appreciate the fact that the 09:37:14
11 Board already has requested and obtained from 09:37:16
12 Norwest additional information regarding its CRA 09:37:20
13 programs and future plans, and we know that the 09:37:24
14 Board will carefully review this information. 09:37:26
15 However, in light of the concerns set forth above, 09:37:28
16 Attorney General Humphrey also requests that the 09:37:32
17 Board, before it acts on the merger, require Norwest 09:37:34
18 to submit a detailed commitment for reinvestment in 09:37:38
19 small businesses and in low and moderate income 09:37:42
20 communities in Minnesota along the lines of the 09:37:44
21 recent Nations Bank/Bank America plan for $350 09:37:48
22 billion in community lending over ten years. 09:37:52
23 Moreover, Norwest should be required to make a 09:37:56
24 commitment that it will prevent branch closings in 09:37:58
25 low income and rural areas and prevent increases in 09:38:02
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1 banking fees and decreases in banking services. 09:38:06
2 Finally, the Board should provide the 09:38:08
3 opportunity for public comment on Norwest's 09:38:12
4 commitments on these issues to ensure that the 09:38:14
5 convenience and the needs of the community truly 09:38:18
6 will be satisfied following the proposed merger. 09:38:20
7 Thank you very much for your time this morning. 09:38:24
8
9 CHAIRPERSON SMITH: Thank you. Ms. Clark. 09:38:26
10
11 MS. CLARK: Good morning. And I'd also 09:38:32
12 like to thank you for this opportunity to make some 09:38:34
13 public comments. My name is Karen Clark, and I am 09:38:36
14 state representative for five inner city 09:38:40
15 neighborhoods in south Minneapolis, and also the 09:38:42
16 chair of the Housing -- Housing and Finance 09:38:44
17 Committee of the Minnesota House of Representatives, 09:38:44
18 and also a member of the House Financial 09:38:46
19 Institutions and Insurance Committee. 09:38:50
20 I'm worried that the proposed merger between 09:38:52
21 Norwest and Wells Fargo will negatively affect my 09:38:54
22 constituents in their access to banking and to 09:38:56
23 credit. The Phillips neighborhood, in particular, 09:39:00
24 where I both live and represent, has suffered from a 09:39:02
25 history of neglect by banks. With 17,000 residents, 09:39:04
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1 we are the largest neighborhood in Minneapolis, and 09:39:10
2 I might add, more populous than 35 of Minnesota's 09:39:12
3 counties, and yet we do not have a single major 09:39:16
4 banking facility located there. What does that tell 09:39:20
5 you about the banking industry's relationship to the 09:39:22
6 lowest income district in the state? 09:39:24
7 As you may know, the State of Minnesota is in 09:39:26
8 the throes of a serious crisis in affordable 09:39:30
9 housing. It's extremely hard to find an affordable 09:39:32
10 unit of housing to rent or even to buy in the many
11 areas throughout the state, but particularly in the 09:39:36
12 inner city where the vacancy rate in rental housing 09:39:38
13 is 1.3 to 1.8 percent. That's critically below the 09:39:42
14 7 percent that's considered a healthy rental market. 09:39:46
15 It's estimated that we are lacking 38,000 units 09:39:50
16 of affordable housing in the metropolitan area 09:39:52
17 alone. The problem is both one of not producing 09:39:56
18 enough new affordable housing and of not preserving 09:39:58
19 what affordable housing we already have.
20 If you would walk with me around my 09:40:02
21 neighborhood, as I recently have been doing a lot 09:40:04
22 lately, you would count at least 200 units of 09:40:06
23 boarded or vacant houses in need of repair. Some of 09:40:10
24 these are scheduled for demolition, but many of 09:40:12
25 these homes could be repaired and purchased by our 09:40:14
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1 hard-working, low income families that often pay 09:40:16
2 twice as much in rent as they would for a mortgage 09:40:18
3 with renovation rolled in for the same house or 09:40:22
4 similar house. 09:40:24
5 We need Norwest's help to develop better home 09:40:26
6 mortgage products that would be more responsive to 09:40:30
7 the particular credit needs of many of our 09:40:32
8 hard-working, low income families in order to allow 09:40:32
9 that to happen. 09:40:36
10 Last year in the state legislature, we had an 09:40:36
11 opportunity to both help rehabilitate and construct 09:40:38
12 more affordable housing and had an unprecedented 09:40:40
13 alliance with the private sector to do so. We 09:40:44
14 proposed that the state invest $40 million in a 09:40:46
15 combination of state housing and finance agency 09:40:48
16 funds and tax credits, and the private sector, with 09:40:52
17 strong leadership provided by the Minnesota Family 09:40:54
18 Housing Funds, proposed to match that with $20 09:40:58
19 million. Together that would have leveraged another 09:41:00
20 $180 million in private and federal funding for a 09:41:02
21 total of $200 million in housing rehabilitation and 09:41:04
22 new construction dollars for both home ownership and 09:41:08
23 rental housing. What you need to know is the result 09:41:10
24 would have created about 3,000 affordable housing 09:41:14
25 units. Unfortunately, Governor Carlson vetoed all 09:41:16
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1 but $5 million for construction and rehabilitation.
2 My understanding is that Wells Fargo recently 09:41:20
3 pledged that if the merger is approved, they will 09:41:24
4 lend $5 billion a year in California to minority and 09:41:26
5 low income customers for home mortgages, small 09:41:30
6 businesses, and community development. Before 09:41:32
7 Norwest moves its headquarters out of Minnesota to 09:41:36
8 California, we need them to make a similar 09:41:40
9 commitment to the people of the Phillips 09:41:44
10 neighborhood, the people of Minneapolis and St. 09:41:44
11 Paul, and to all Minnesotans. With their new 09:41:46
12 savings and combined wealth, they should become a 09:41:48
13 major private sector leader to match the public 09:41:50
14 commitment the legislature has already shown it 09:41:52
15 could provide.
16 Norwest and Wells Fargo have announced that 09:41:54
17 this merger will save them $630 million a year on 09:41:58
18 top of the already large profits these banks make. 09:42:02
19 We clearly need them to put more money back into our 09:42:04
20 community in the way that I've mentioned. 09:42:08
21 One other significant approach to increasing 09:42:10
22 home ownership opportunities is that the merged 09:42:14
23 Wells Fargo-Norwest Bank could provide would be to 09:42:14
24 raise the wages of its front-line workers. My 09:42:16
25 information is that the average wages of the workers 09:42:20
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1 who work in the banking industry are such that they 09:42:22
2 can't afford housing in today's market without 09:42:24
3 public subsidy. For example, a bank teller at 09:42:26
4 Norwest-Wells Fargo would need to earn $12.38 an 09:42:30
5 hour just to be able to afford the fair market rent 09:42:36
6 for a two-bedroom home here, which is $644 a month, 09:42:38
7 or would need to earn $18.98, almost $19 an hour, to 09:42:42
8 rent a four-bedroom housing unit. My understanding 09:42:46
9 is that many of Norwest-Wells Fargo's bank employees 09:42:50
10 don't earn that kind of wage. Raising their wages 09:42:54
11 would be one significant way to help with the 09:42:54
12 housing crisis and community reinvestment. 09:42:58
13 I am concerned that even though Norwest is the 09:43:00
14 largest mortgage company in the country, they are 09:43:02
15 behind other Twin Cities banks in their lending to 09:43:04
16 people of color and in low income neighborhoods like 09:43:08
17 those I represent, according to their 1997 records 09:43:10
18 for conventional and FHA loans. What is Norwest 09:43:16
19 doing to address this? 09:43:16
20 On the House Financial Institutions Committee, 09:43:18
21 I fought for fairer bank fees for low income 09:43:22
22 consumers and senior citizens. Many of my 09:43:24
23 constituents have complained about exorbitant 09:43:26
24 bounced check fees and how hard that is on a fixed 09:43:30
25 income. We've heard testimony in particular from 09:43:32
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1 many of our military veterans and pensioners. Now 09:43:34
2 Norwest just raised their bank check fee from $21 to 09:43:38
3 $25. Norwest is one of the biggest depositories of 09:43:44
4 state funds. In the 1998 legislature, I authored 09:43:46
5 legislation that in order for a bank to have the 09:43:50
6 privilege of being a state depository for Minnesota, 09:43:50
7 they would have to offer a life-line checking 09:43:54
8 account. Norwest fought this legislation. 09:43:58
9 I'm concerned in general that the Norwest-Wells 09:44:00
10 Fargo merger will make banking even less affordable 09:44:04
11 to low income people. And I understand, as was 09:44:06
12 mentioned earlier, that Wells Fargo stopped honoring 09:44:08
13 the free checking for seniors, and that was 09:44:12
14 described earlier. 09:44:14
15 Since my time is up, I just wanted to say that 09:44:16
16 I really would appreciate some assurances from the 09:44:18
17 Board in addressing these questions. My 09:44:20
18 constituents need to know, and I hope that you need 09:44:24
19 to know before you approve the merger. 09:44:24
20
21 CHAIRPERSON SMITH: Thank you. 09:44:26
22 Mr. Curley. 09:44:28
23
24 MR. CURLEY: Thank you, Ms. Smith. Thank 09:44:30
25 you for this opportunity to testify before the Board 09:44:30
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1 this morning. I bring greetings from the -- from a 09:44:34
2 nation within a nation, and that is the Navajo 09:44:38
3 nation. My presentation will cover a few 09:44:40
4 experiences the Navajos have had with Norwest Bank, 09:44:44
5 Arizona, but before I move into these experiences, 09:44:50
6 let me express the fact that the Navajo nation is 09:44:52
7 pleased and honored to have four Norwest banks 09:44:54
8 located within the boundaries of our reservation. 09:44:58
9 Furthermore, we are proud to have gainfully employed 09:45:02
10 qualified Navajos within these banks. 09:45:06
11 In late 1993, Norwest Bank of Arizona made 09:45:10
12 commitments over a ten-year period, and there are 09:45:16
13 four commitments that they made that I want to cover 09:45:20
14 this morning. The first one is to open two 09:45:22
15 full-service banking facilities on the Navajo nation 09:45:26
16 and improve the two existing banking locations. 09:45:30
17 Second, to originate 60 million in loans over a 09:45:34
18 ten-year period. Third, an annual contribution of 09:45:38
19 $5,000 to the Navajo Nation College Scholarship 09:45:44
20 Fund. Four, establish a community advisory board 09:45:48
21 comprised of seven members representative of the 09:45:52
22 Navajo nation, and I'm one of those community 09:45:54
23 representatives. 09:45:58
24 Norwest's record against this commitment so far 09:45:58
25 has demonstrated the bank's sincerity and good faith 09:46:04
38
1 concerning the people of the Navajo nation. 09:46:08
2 Norwest's performance on each of the above 09:46:10
3 commitments through June 1998 is as follows. Number 09:46:14
4 one, Norwest Bank-Arizona has invested 4 million, as 09:46:18
5 Mr. Biller has said, to build its four full-service 09:46:24
6 bank branches within the boundaries of the Navajo 09:46:28
7 nation. These offices make up the Norwest Northeast 09:46:30
8 Bank. These branches are located in small towns 09:46:36
9 within the reservation. One is in Window Rock -- I 09:46:40
10 know you can't identify with this -- one is in Tubac 09:46:44
11 City, one is in Kayenta, and one is in Chinle. All 09:46:48
12 four branch managers are of Navajo descent, and the 09:46:54
13 remaining 35 employees all but two are of Navajo 09:46:56
14 decent. 09:47:02
15 Number two, over the first four and a half 09:47:02
16 years of the ten-year lending commitment, Norwest 09:47:04
17 has lent almost $35 million to the Navajo people. 09:47:10
18 And there's another side to this. Norwest has been 09:47:14
19 working directly with the Navajo nation government, 09:47:16
20 and they have lent to one of our enterprises out 09:47:20
21 there called the Navajo Agricultural Products 09:47:24
22 Corporation, a credit line -- or a loan of $7 09:47:28
23 million, a line of credit of $3 million. We also 09:47:34
24 have a Navajo Arts and Crafts Guild up there, and 09:47:38
25 they've loaned them $129,000,998.77. And then to 09:47:42
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1 the Navajo nation itself, we have two term loans of 09:47:50
2 $1,640,000, $7,500,000. We also have a Navajo 09:48:00
3 Housing Authority, and there is a credit line of 09:48:04
4 $1,395,000. As I mentioned earlier, there's a $60 09:48:10
5 million commitment that Norwest made to the Navajo 09:48:14
6 nation. Part of this $60 million commitment was a 09:48:18
7 commitment of approximately 28 million in mortgage 09:48:20
8 loans on the reservation. 09:48:24
9 In order to help ensure that the mortgage 09:48:26
10 lending goal is achieved, Norwest has obtained the 09:48:28
11 approval offering the HUD 184 Loan Program to the 09:48:32
12 Navajo nation; has already closed seven mortgage 09:48:36
13 loans under the program. 09:48:40
14 Norwest has contributed to the Navajo Nation 09:48:42
15 Scholarship Fund each year, in addition to other 09:48:46
16 charitable contributions, to Navajo nation events 09:48:52
17 and organizations $5,000 plus, each and every year. 09:48:54
18 Number four, Norwest has had an active 09:49:00
19 Community Advisory Board in place within the Navajo 09:49:02
20 nation since 1994, and I've been on that board since 09:49:08
21 1994, the members of which are Navajo business and 09:49:10
22 community leaders. The Community Advisory Board 09:49:14
23 works with the local bank to provide input and to 09:49:16
24 ensure that the bank stays in touch with the local 09:49:20
25 needs and is able to be responsive to those needs. 09:49:24
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1 Now, in conclusion, and from our perspective of 09:49:28
2 the Navajo nation, this is very critical. Norwest 09:49:32
3 has taken a bold step in banking with the Navajo 09:49:36
4 nation in that it is a pioneer from the financial 09:49:40
5 community which has truly invested in our nation and 09:49:44
6 has respected our sovereignty along this journey of 09:49:48
7 developing our economic basis. Thank you. 09:49:56
8
9 CHAIRPERSON SMITH: Thank you very much. 09:49:58
10 Questions from the panel? Thank you very much for 09:50:00
11 coming this morning. We appreciate hearing from 09:50:04
12 you. And I'll say both for your benefit and for the 09:50:06
13 benefit of subsequent panels that five minutes is a 09:50:10
14 very short time, and please, we do want to have your 09:50:14
15 full statements in the record. So if you have not 09:50:18
16 already given them to us, please leave them with the 09:50:22
17 Federal Reserve staff and we will make sure that 09:50:24
18 they all get into the official transcript. 09:50:28
19 I also will remind -- I don't know whether this 09:50:30
20 is a reminder or I'm saying it for the first time -- 09:50:34
21 if the next panel could come on up -- but we -- our 09:50:38
22 timekeepers will be holding up cards that let the 09:50:42
23 witness know when there is one minute remaining and 09:50:46
24 then another one when the time has expired. As a 09:50:50
25 last resort, if you happen not to be looking up at 09:50:56
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1 them to get the signals, we do have a little bell 09:51:00
2 that we will ring -- or they will ring. 09:51:02
3 We're going to start with Mr. Bryant. We don't 09:51:24
4 have Mr. Bryant. Mr. Bansen -- Ms. Bansen. 09:51:30