Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas July 9-10, 1998
Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Thursday, July 9, 1998
Transcript of Panel Two
53 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 . 54 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 . 55 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 . 56 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 . 57 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 . 58 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 . 59 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 . 60 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 . 61 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 . 62 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 . 63 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 . 64 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 . 65 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, . 66 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 . 67 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, . 68 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 . 69 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 . 70 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 . 71 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 . 72 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 . 73 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 . 74 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 . 75 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. . 76 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 . 77 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. . 78 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 . 79 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 . 80 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 . 81 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 . 82 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 . 83 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 . 84 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 . 85 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 . 86 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 . 87 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 . 88 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 . 89 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 . 90 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 . 91 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 . 92 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 . 93 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 . 94 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.
Last update: December 3, 2010