Public Meeting Regarding Norwest Corporation and Wells Fargo & Company
Thursday, September 17, 1998
Transcript of Panel Seven
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1 (Hearing resumed after lunch break.)
2
3 CHAIRPERSON SMITH: Okay. We are
4 ready with Panel Number 7. And we are going to
5 start with Dana Wise.
6
7 MR. WISE: Thank you, Miss Smith and
8 the Federal Reserve.
9 My name is Dana Wise, and I do bank
10 research for the Strategic Projects Department
11 of the United Steelworkers of America. I'm also
12 a member of a community-based coalition of
13 nonprofit housing and community developers in
14 New Mexico. And as part of that coalition, I
15 was party to the development of a 1.3 billion
16 dollar community lending initiative recently
17 announced by Norwest and Wells Fargo for New
18 Mexico. The Steelworkers Union praises this and
19 the recent California commitment for increased
20 lending to working families and their
21 communities. The Wells Fargo has questioned our
22 motives and involvement in pushing for this
23 review of their treatment of working families in
24 their communities. Wells Fargo should not
25 underestimate the union's commitment to defend
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1 the interests and needs of its members, their
2 families and their neighborhoods. The
3 Steelworkers Union has more than 700,000 members
4 nationwide. Our members are a part of families,
5 and these families are a part of their
6 communities. These communities pay taxes. They
7 support our country's financial system. And our
8 members are also part of communities that make
9 deposits at Well Fargo. It is the union's duty
10 to insure that these resources are used in a
11 manner that promotes decent living-wage jobs,
12 affordable housing and community economic
13 development. The union will continue to work
14 hard to support the efforts of allies here in
15 Minnesota, in Iowa, in Wisconsin, in Texas, in
16 Washington and Los Angeles to improve the
17 performance of Wells Fargo in serving the best
18 interests of working families and their
19 neighborhoods.
20 Last month we published research on the
21 recent community lending performance of Wells
22 Fargo. We've shared this research broadly with
23 CRA advocates, local government officials and
24 the media. The research on Wells Fargo's CRA
25 performance showed a bank hungry for fees from
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1 retail customers, a bank that was especially
2 unfocused on serving the needs of its primary
3 service area, especially low-income areas and
4 rural areas, and a bank that promotes high-tech
5 marketing over traditional banking, even when it
6 appears that these methods make the bank less
7 able to serve low-income and minority
8 communities.
9 I'm speaking here about Wells Fargo's
10 published commitments that it is leading world
11 communities, its heavy reliance on borrow or
12 profarming data bases for its small business
13 lending and small farm lending and its heavy
14 reliance on the Internet and high technology for
15 the delivery of financial services.
16 Among the principal findings of our study
17 were over the past three years following the
18 takeover of First Interstate by Wells Fargo, in
19 the majority of cities and towns where Wells
20 Fargo pursued its branch consolidation and
21 restructuring, these changes negatively affected
22 low-income Spano and other minority
23 communities. Also, Wells Fargo closed a
24 disproportionate number of branches in
25 nonmetropolitan areas. And in 70 percent of
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1 counties where Wells Fargo made small business
2 and small farm loans, the bank failed to match
3 its competitors in its relative level of service
4 to low-income communities. Wells Fargo's
5 primary response to our research has been to
6 question the appropriateness of a union showing
7 concern about a bank's lending to low-income and
8 minority families. Predictably, Wells Fargo
9 also challenges the study's methodology. But
10 it's clear from their response that they never
11 bothered to read past the executive summary.
12 The union stands by the findings of its study.
13 And we ask that this document be included as
14 part of the written record of this testimony.
15 Furthermore, we urge Wells Fargo to get to
16 work with community-based fair lending and CRA
17 coalitions in the 19 other states that will be
18 impacted by this merger. Wells Fargo must agree
19 to address the charges that the bank's practices
20 hurt the working families and their
21 communities. The union will join its resources
22 with those of its allies in the community
23 development movement. And those are the 13.2
24 million member AFL/CIO to bring Wells Fargo to
25 justice. Until that happens, the AFL/CIO has
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1 asked its 73 international unions, their 30,000
2 local unions and individual members in every
3 state to close any institutional or personal
4 accounts that they have with Wells Fargo.
5 AFL/CIO President John Sweeny said, "Our resolve
6 in this matter will send a clear signal not only
7 to Wells Fargo, but to other banks that would
8 use our own deposits against working families
9 and our unions."
10 Thank you.
11 CHAIRPERSON SMITH: Thank you.
12 Miss Gallardo?
13
14 MS. GALLARDO: Hello. I'm Joyce
15 Gallardo. And I'm here from Pueblo, Colorado on
16 behalf of the United Steelworkers of America and
17 our local union, 3267. I appreciate the
18 opportunity to testify today.
19 And I would like to voice my objection to
20 the merger of Norwest and Wells Fargo and
21 introduce you in a personal manner to my
22 struggle and personal nature in which my union
23 brothers and sisters are being affected by the
24 refusal of Oregon Steel Mill to bargain in good
25 faith with our union and allow us to return to
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1 work.
2 A few months prior to staff forcing us out
3 on strike, October 3rd, 1997, I purchased a
4 small hotel in a town 35 miles west of Pueblo.
5 I planned to refurbish it and have it ready to
6 open by December of 1997. The main purpose in
7 undergoing this project was a means of
8 supplementing what would be a very meager
9 retirement income and to get it up and running
10 and well-established before my retirement. The
11 building now sits empty except for one room in
12 the back of the hotel that I occupy. Because of
13 the mortgage payments on this empty building, I
14 am forced to live in extreme uncomfortable
15 conditions. And after 32 years with one
16 company, I'm only one step above the homeless.
17 The winter of 1977 began with a strike of
18 October 3rd and a denial of unemployment
19 compensation. After being out of work a month
20 and a half, I accepted a position with a
21 telemarketing firm where I earned a whopping $6
22 per hour. Working for this wage, I knew I could
23 make the mortgage payment, put gas in my car and
24 drive the 35 miles back and forth to work, but
25 all other expenses would have to be kept to a
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1 minimum. I knew I could not afford to fire up
2 the boiler in this 6,000 square foot building,
3 so I attempted to survive the winter using two
4 space heaters. And once a week, I would turn on
5 the convection oven in the kitchen -- quotes --
6 and prepare enough food for an entire week, then
7 just reheating in the microwave as I wanted to
8 eat, all in an attempt to keep my expenses
9 down. I thought I was home free. I thought I'd
10 made it through the winter with my space heaters
11 when one night in late February I arrived home
12 after dark. And when I opened the door, I
13 stepped into water up to my ankles. I thought I
14 had all the pipes upstairs turned off and
15 draining, but the old plumbing had played a
16 terrible trick on me. Water was pouring through
17 the ceiling in the lobby. Now I had more to do
18 to the building, no money, no hope of being able
19 to qualify for another loan to do any
20 construction, no place to turn. Another
21 winter's coming up, and I'm going to be in the
22 same predicament that I was last year; no money
23 to fire up the boiler, no way to get out of this
24 situation that I am in. Even though interest
25 rates have dropped almost two percent below what
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1 my mortgage is set at, I can't qualify to
2 refinance my loan, which, if I could, would drop
3 my payments considerably.
4 Many of my union brothers and sisters are
5 going through at least as desperate a situation
6 as I am, and some have it much worse. One of
7 our union brothers took his own life at the
8 beginning of summer. This rocked all of us,
9 thinking that we saw this brother several times
10 a week and didn't realize what pain he was in.
11 He had lost his wife to cancer ten months
12 earlier. And that is when we worried about
13 him. He was in his early middle years, had no
14 children at home, and his whole life revolved
15 around his wife. But he made it through those
16 months and now we lost him to this. I know of
17 at least four couples personally that are going
18 through a divorce even though before this work
19 stoppage they seemed to have a very stable
20 marriage. Quite a few of our brothers and
21 sisters have had to find work in other cities
22 and are now trying to support two households on
23 top of being separated from their families at
24 least during the week. And many of them are not
25 even close enough to come home on weekends.
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1 This has been a few of the many problems brought
2 on by this company's refusal to bargain in good
3 faith. And although the company has suffered a
4 tremendous loss and continues to lose money
5 daily, much to our dismay, Wells Fargo Bank and
6 some other smaller banks continue to bankroll
7 CF&I. They've now changed their name to Rocky
8 Mountain Steel, and I'm not sure of the real
9 purpose in that. But as long as this practice
10 continues of Wells Fargo bankrolling CF&I, the
11 longer CF&I will remain in a position to keep us
12 off of our jobs. This is a union town. The
13 economy of Pueblo was built around CF&I and the
14 steelworkers.
15 When we began this strike, our local banks
16 worked with our union brothers and sisters on
17 their personal loans and mortgages, allowing
18 them to pay only the interest in some instances
19 and giving them deferred payments in other
20 cases. As far as I can determine, Norwest Bank
21 did not offer any leniency for any type of
22 payments. A bank has an obligation to help the
23 communities they move into. And I cannot even
24 imagine Wells Fargo being a part of this
25 community after turning their backs on the union
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1 workers to help finance CF&I in their efforts to
2 break our union. And what is worse, even though
3 they know how it's affecting our people, they
4 continue this practice.
5 On behalf of the membership of Locals 2102
6 and 3267, I want to thank you all for listening
7 to me. I appreciate the opportunity.
8 CHAIRPERSON SMITH: Thank you. And
9 would you make sure that our -- that our Federal
10 Reserve staff have a copy of your statements? I
11 know yours is in writing so --
12 MR. WISE: Okay.
13 CHAIRPERSON SMITH: -- if we can make
14 a copy? And then we'll go to Miss Pacheco.
15 MS. GALLARDO: Certainly. Whatever
16 works.
17
18 MR. PACHECO: My name is Howard
19 Pacheco. I would like to thank this board for
20 allowing me this opportunity to speak on behalf
21 of my Local 2102 and 3267.
22 For 31 years I worked as a steelworker.
23 Working in the steel mill is not easy work.
24 It's hot, it's dirty, and it's dangerous. It
25 takes teamwork. Because of this, your fellow
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1 employees become family. My extended family and
2 I have been through a lot. In order to keep the
3 Pueblo plant productive, we made sacrifices. We
4 took wage cuts, combined jobs, gave up our
5 incentive rate, which was one-third of our pay,
6 increased health care premiums and much more.
7 We as a family thought the worst was behind us.
8 We were forced out on strike because of unfair
9 labor practices by the company, Oregon Steel
10 Mill. October 3rd, 1997, we offered to return
11 to our jobs. The company said no to 1,100 and
12 took back only 27 employees. Wells Fargo bailed
13 out the company twice, possibly three times.
14 This is not the first time Wells Fargo has lent
15 money to a company in the mist of -- in the
16 midst of a labor dispute. The undue hardships
17 caused by Wells Fargo can never be mended. We
18 have had numerous divorces and separations, and
19 one of the other brothers committed suicide.
20 Many of my fellow brothers and sisters have
21 cashed in their 401K plans to sustain themselves
22 and their families. Some have had their autos
23 repossessed. The list of hardships goes on and
24 on.
25 I have been on the picket line and seen
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1 replacement workers flash $100 bills or their
2 paychecks and then flip us off as they drive by
3 with their new cars. Let me tell you, it hurts
4 when you know it's Wells Fargo who is financing
5 all this misery. Heaven only knows what it
6 would be like if Wells Fargo were allowed to
7 merge with Norwest Bank. There are no Wells
8 Fargo Banks in Pueblo, but there are Norwest
9 Banks in our town. I have seen with my own eyes
10 what Wells Fargo has done to my family and from
11 a thousand miles away and heard with my own ears
12 what they have done to the people in
13 San Francisco. I'm afraid of what they might do
14 to my family next.
15 Thank you.
16 CHAIRPERSON SMITH: Go ahead.
17
18 MS. PACHECO: I'd like to thank the
19 board for allowing me to testify today. My name
20 is Jan Pacheco. I'm the wife of Howard
21 Pacheco. We're here today representing the
22 Unites Steelworkers of America and 1,100
23 families in Pueblo, Colorado.
24 Have you ever attended a church service and
25 seen the hostility in the eyes of one toward
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1 another or have you ever been the playground
2 monitor for your son's or daughter's elementary
3 school and heard "I can't play with you. You're
4 daddy's a scab." Or even worse, close knit
5 families being destroyed because one in the
6 family chose to not cross the picket line and
7 another did. I have, and it's happening in
8 Pueblo, Colorado. It's happening because Wells
9 Fargo Bank is the key lender to a company my
10 husband works for, Oregon Steel Mill, a company
11 who has illegally replaced him and 1,100 other
12 workers in Pueblo, Colorado, a company who is
13 hell bent on destroying our families and our
14 community.
15 The bank is just as guilty because they are
16 lending the company money to sustain them during
17 this struggle, a bank which has extended the
18 company's credit line twice and just recently a
19 third time, a bank who claims they are not
20 involved in our struggle.
21 During the last year, I have had the honor
22 of standing beside my husband talking to
23 churches, organizations, politicians, union and
24 union members about our struggle. Most
25 recently, Howard and I have been in the City of
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1 San Francisco, the home base of Wells Fargo
2 Bank. We placed an ad in the "Bay Guardian"
3 newspaper. The ad read, "We're unhappy with
4 Wells Fargo. Are you? Have you had problems
5 with poor customer service or hidden fees?
6 We're conducting a study of dissatisfied
7 customers. Tell us your story."
8 We were shocked at the number of responses
9 we received. Hundreds of complaints came in.
10 And here are some direct quotes from those phone
11 calls. These are only a few of the quotes that
12 I have for you today.
13 Number one, "I got the $25 miskeyed entry
14 fee for accidentally putting the wrong amount in
15 the ATM and was absolutely shocked. I can
16 hardly -- I had hardly ever checked my bank
17 statement, but I went back through them and
18 started finding all these ridiculous fees."
19 A second one said, "They closed down the
20 branch in my neighborhood and left ATMs there so
21 that no other bank can move in. They're
22 clearly -- they've clearly cut down their
23 employee staff, increased the amount of time you
24 have to wait, increased their fees. They have
25 done just about everything wrong so far as
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1 keeping up good employees and customer
2 relations, trying to increase their profit
3 margin as much as possible without worrying
4 about customer service."
5 Number three, "In the last four months,
6 Wells Fargo has reneged on their promise of free
7 lifetime checking. Suddenly they are going to
8 charge me $7 a month. They're real sorry about
9 it. And I've written them a letter telling them
10 where to stick their stagecoaches."
11 Number four, "There are fees for just about
12 everything. There are fees to get my checks
13 back. There are fees to keep my checks. There
14 are fees to go into the branch rather than the
15 ATM. There's fees to go to the other ATMs."
16 The list goes on.
17 Our seniors also spoke out. "I was a First
18 Interstate customer before Wells Fargo merged
19 with First Interstate and was grandfathered in
20 on free checking. They changed the rules
21 several times, charging me fees and finally went
22 back on their promise totally."
23 And number six, "I was mistakenly charged a
24 fee for a bounced check. I was supposed to call
25 every day to see what happened to my money, so I
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1 called. They charged me for those calls. I had
2 to take off work three times to be able to speak
3 with the representative. It took me months to
4 get this fee off my account even though they
5 were responsible."
6 If Wells Fargo and Norwest Bank merge, our
7 fear is, what is going to happen next given
8 Wells Fargo's track record?
9 Thank you.
10 CHAIRPERSON SMITH: Thank you.
11 Miss Rosenthal?
12
13 MS. ROSENTHAL: Good afternoon. My
14 name is Mary Rosenthal. And I am the Minnesota
15 State Director for the National AFL/CIO. Thank
16 you very much for this opportunity to testify.
17 The AFL/CIO's member unions represent 400,000
18 working people here in Minnesota and hundreds of
19 thousands more within Northwest -- Norwest's
20 service area. This is a region of farms and
21 small towns, highly vulnerable to capital
22 draining by distant financial institutions. The
23 Wells Fargo/Norwest merger is the takeover of a
24 regional giant with a poor record of serving
25 working people by a giant national bank with a
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1 worse record. Wells Fargo's merger with Norwest
2 will pass control of our region's largest
3 financial institution to a West Coast bank that
4 by its nature and as a result of the business
5 strategies it has chosen to pursue cannot be
6 focused on the financial service needs of our
7 communities. Wells Fargo is 181st out of the
8 top 200 financial institutions in its
9 reinvestment rate in the primary service area
10 communities from which it takes deposits. A
11 study by our affiliate, the United Steelworkers
12 of America, has shown that Wells Fargo's
13 definition of its service areas in the southwest
14 has excluded lower income census tracks. Wells
15 Fargo's loan origination and management programs
16 is data based and Internet driven with a
17 decreasing emphasis on loan officers who know
18 the communities in which they lend.
19 On the consumer side, Wells Fargo is a
20 leader in charging high fees for basic banking
21 fees and in closing branches in low-income
22 communities. Norwest service area includes a
23 variety of communities vulnerable to the
24 withdrawal of financial services. Large cities
25 with substantial low and moderate-income
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1 communities like Minneapolis, St. Paul and
2 Denver where Norwest's record has already been
3 poor, smaller towns and rural areas dependent on
4 agriculture that have been repeatedly devastated
5 by commercial banks' withdrawal from the
6 agriculture credit markets and areas of extreme
7 rural poverty, like the Pine Ridge Indian
8 Reservation in South Dakota, Norwest's record in
9 these communities has already been the subject
10 of prior protests by AFL affiliates -- AFL/CIO
11 affiliates to the Board of Governors. For all
12 these communities, this merger promises more
13 expensive and less accessible financial
14 services. In fact, even before the merger has
15 been approved, Norwest appears to be raising a
16 variety of fees to match levels at Wells Fargo.
17 This merger also promises to create more towns
18 like Pueblo, Colorado, where Wells Fargo has
19 financed a savage campaign to break the
20 Steelworkers Union at Oregon Steel, a campaign
21 that has illegally denied a thousand people the
22 middle class jobs that were a foundation of that
23 community's economic strength.
24 Wells Fargo claims that this is somehow not
25 an issue affecting its treatment of its service
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1 area. We think it exemplifies Wells Fargo's
2 outright hostility to the needs of working
3 families as consumers of financial services and
4 as contributors to the economic well-being of
5 the bank's service. We oppose this merger
6 because it will not benefit the working families
7 of this region and because we believe Wells
8 Fargo has not complied with the Community
9 Reinvestment Act in its current service area.
10 Finally, we urge the Federal Reserve not to
11 accept empty assurances from Wells Fargo. Wells
12 Fargo has a history of mischaracterizing the
13 impact of its merger activities on its
14 constituencies. When Wells Fargo acquired First
15 Interstate, it announced it would destroy
16 only -- in quotes -- 7,200 jobs. And then after
17 the deal was done, Wells Fargo said it would
18 really be 10,000 jobs. And then it turned out
19 it was really 14,000 jobs, almost twice what
20 they told regulators and the public when they
21 were getting approval for the merger. The
22 AFL/CIO would be pleased to work with the
23 Federal Reserve in its further consideration of
24 this merger to insure the Community Investment
25 Act is complied with and that the interests of
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1 the working families in both bank service areas
2 are protected.
3 Thank you.
4 CHAIRPERSON SMITH: Thank you. We
5 have Mr. Kamp speaking on behalf of Mr. Lee.
6
7 MR. KAMP: Okay. Thank you. Now, I
8 get to wear two hats today, so -- good
9 afternoon, Ms. Smith, and other members of the
10 Panel. This is the testimony of Matthew Lee,
11 Executive Director of Inner City Press,
12 Community on the Move of the Inner City Public
13 Interest Law Center. Together, ICP, which Marv
14 Kamp with the Wisconsin Rural Development Center
15 has been kind enought to present. ICP on August
16 21st filed a protest to this application based
17 on Norwest's disparate lending record,
18 particularly of its high interest rate,
19 so-called subprime subsidiaries and based on the
20 Federal Reserve Board's withholding of all
21 information about Norwest's divestiture
22 proposal. The comments that Wells Fargo has
23 made in California -- the commitments that Wells
24 Fargo has made in California does nothing to
25 address this issue.
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1 Norwest, the applicant here, is one of the
2 largest mortgage lenders in the country. The
3 disparities in its mortgage lending record are
4 troubling, particularly but not only in the
5 overlap markets.
6 Some examples: In 1996 Norwest Bank Texas
7 South denied 46 percent of the applications from
8 Hispanics and only 7 percent of the applications
9 from Whites.
10 Norwest Bank, Midland, Texas denied 61
11 percent of the applications from Hispanics and
12 only 13 percent of the applications from
13 Whites. Norwest Bank Texas Kelly Field denied
14 49 percent of the applications from Hispanics
15 and only 14 percent of the applications from
16 Whites. And only 18 -- okay.
17 Norwest Bank Texas denied 46 percent of the
18 applications from African Americans, 40 percent
19 of the applications from Hispanics and only 19
20 percent of the applications from Whites.
21 When ICP raised these issues in 1996,
22 Norwest was acquiring Prudential Home Mortgage.
23 Norwest responded with a letter dated April
24 30th, 1996 to Mr. James Lyon of this Federal
25 Reserve Bank of Minneapolis in which Norwest
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1 acknowledged that, quote, "Norwest Mortgage's
2 record of minority lending is below market
3 average in some markets. To address the needs
4 of the markets with high concentrations of
5 minority populations, Norwest Mortgage has
6 committed to hiring of a community development
7 loan officer to focus on the underserved
8 communities," unquote.
9 Here, however, was Norwest Mortgage's full
10 year 1996 lending record in the New York City
11 MSA. For full year 1996, Norwest Mortgage had
12 more than twice the market share of loans to
13 Whites than to African Americans, as well as a
14 denial rate disparity for African Americans
15 significantly above the industry average in this
16 MSA. It cannot be said that Norwest Mortgage
17 denial rate disparity is explained or justified
18 by greater than average outreach to the
19 minorities given the market share numbers.
20 Question. Did Norwest Mortgage ever take
21 steps it said it would in this April 30th, 1996
22 letter to the Federal Reserve? Was it ever
23 followed up on? Neither Norwest's application
24 nor the Federal Reserve's questions to date
25 address this in any detail. Similarly, were
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1 Norwest's representations about improving
2 Prudential Home Mortgage's lending disparities
3 ever followed up on? Our experience is no.
4 Norwest Funding, Incorporated, nationwide
5 in 1996 made 6,521 loans to Whites and only 228
6 loans to African Americans and only 252 loans to
7 Hispanics. In the New York City MSA in 1996,
8 Norwest funding made 101 loans to Whites, only
9 10 loans to African Americans and eight loans to
10 Hispanics. Meanwhile, in the predominantly
11 minority South Bronx of New York City, Norwest
12 has opened an office of its high interest rate
13 Island Finance subsidiary. ICP members have
14 been informed that Norwest's Island Finance
15 office charges virtually all borrowers for
16 personal loans 25 percent interest, the absolute
17 maximum under New York usury prohibitions.
18 Borrowers, virtually all of them protected
19 class, are charged 25 percent regardless of
20 their credit history.
21 The public has also been denied access to
22 information, assessing and commenting on this
23 proposal. Norwest has sought confidential
24 treatment for all information specifying its
25 divestiture proposal. The public has a right to
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1 review and comment on Norwest's actual proposal,
2 including its divestiture proposal. ICP filed a
3 Freedom of Information Act appeal on August
4 21st, 1998. The information has yet to be
5 released.
6 On the current record, this mega merger
7 proposal, which would expand Norwest's
8 practices, could not legitimately be approved.
9 There are other adverse issues, including
10 Norwest's record in its existing states, ably
11 raised by the Wisconsin Rural Development Center
12 and the other groups represented here today.
13 For all the reasons stated, this proposed merger
14 should be denied. Thank you for your
15 attention. We will be submitting further
16 comments by April -- September 24th, 1998.
17 Thank you.