Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas August 13, 1998
Public Meeting Transcripts
Public Meeting Regarding Banc One and First Chicago
Thursday, August 13, 1998
Transcript of Panel Sixteen
3 MR. ELLIS: Ladies and gentlemen, my name is 4 Walter Ellis. I'm the Director of an organization, 5 United Affirmative Action Development Corporation. 6 In 1995, UAD began negotiations with 7 the then Premier Bank in Ruston and Baton Rouge, 8 Louisiana, to expand banking opportunities for our 9 underserved communities. 10 The discussions specifically focused upon 11 creating more employment opportunities for African 12 Americans within the bank and making more loan 13 capital available to support African American 14 entrepreneurship. 15 Thus, the discussion with Premier began, 16 raising the issue of whether it was meeting the 17 needs of Grambling, clearly an underserved 18 community. 19 Discussions continued over a period of 20 months with UAD and Premier Bank attempting to 21 effect an agreement that would result in a 22 consulting relationship, wherein Premier would 23 provide capital for commercial loans, create an 24 internship program for Grambling University 325 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 students and graduates, and UAD would assist in 2 providing applicants for each. 3 Through the course of events, UAD worked 4 with Grambling University and community officials 5 toward bringing the internship program to 6 fruition. 7 Following what initially appeared to be 8 an interest, the bank began to stonewall under 9 the pretext of its acquisition by Banc One, 10 subsequently breaking off all discussions. 11 During this same period, UAD also 12 presented to what has become Banc One of Louisiana 13 several commercial loan applications. None of 14 these, at least one of which has been pending more 15 than a year, have been funded, nor has an averse 16 action been taken upon them. 17 Though Banc One acknowledges an agreement 18 between Premier, its predecessor in interest, and 19 UAD, it now says that it, Banc One, is not bound by 20 this agreement, refusing to honor same. 21 It appears now that Banc One, first in 22 anticipation of the Premier Bank acquisition, then 23 the First Chicago merger, continued insincere 24 dialogue with UAD to minimize the possibility of 326 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 UAD filing a complaint pursuant to the Community 2 Reinvestment Act or existing FDIC Federal Reserve 3 Regulations. 4 I, therefore, respectfully request that my 5 testimony be made part of the record of these 6 proceedings and that the Federal Reserve approval 7 of the subject merger with First Chicago be 8 withheld until such time as a complete and thorough 9 audit of Banc One's compliance with the spirit of 10 the reverent acts and regulations in view of its 11 behavior in African American communities throughout 12 the nation generally and in Louisiana particularly 13 can be completed. 14 My first approach to Premier Bank was to 15 close my account because I thought I had been 16 treated in an unfair manner, racially discriminated 17 against. And from that, I was invited to sit down 18 to talk to the manager at the bank. 19 And at that time, Premier was in the 20 process of merging with Banc One and they didn't 21 want any racial complaints, in particular, to be 22 lodged against them apparently. 23 I didn't know what process was taking 24 place, but I approached the local bank manager and 327 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 told him that I was working with a bank in 2 California and that we believe we could help them 3 with some of their solutions under the Community 4 Reinvestment Act as we were working with banks in 5 California. 6 And from there, we began to sit down and 7 negotiate an agreement that later led to some 8 things in writing and some back and forth 9 communications between Premier Bank and Banc One. 10 Things seemed like they fell apart for a 11 while. And then when these other mergers started 12 taking place, in particular the one in Louisiana, 13 we were again negotiating with Banc One and 14 appearing that it was done in good faith. 15 Once this merger took place in Louisiana, 16 then the negotiations fell apart again. And now, 17 Banc One officials are saying that there is no such 18 thing as an agreement; and if it is, it's between 19 premier and UAD; and that Banc One don't intend and 20 never have and never will sign any type of 21 agreement. And I think they should. 22 MS. SMITH: Thank you very much. 23 Ms. Hain, you've been around a long time 24 waiting for this. 328 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 MS. HAIN: My name is Nancy Hain. I'm the 2 Secretary/Treasurer of the Paul A. Stradtman 3 Construction Company in Cleveland, Ohio. I'm also 4 Mrs. Paul A. Stradtman. 5 We're a customer with an 18-year 6 relationship with Banc One. We're an underground 7 utility contractor in a very high-risk business 8 that had several extremely bad years and have been 9 in a rough situation with the bank as a result of 10 those bad years. 11 I recently -- with the news that were in 12 the papers of the Banc One merger, I saw references 13 to their interest in small business and how they're 14 pursuing the small business lending. 15 As a result of that article that I read, I 16 contacted some of the senior people in the Banc One 17 of Columbus. And I've had a series of letters 18 going back and forth, which have taken the 19 situation that was not good to start with. Each 20 letter, the response gets worse. 21 My most recent communication, which I'm 22 going to read because it presents our position and 23 the -- it gives a look at where a small business 24 person is at if the world isn't a great and 329 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 wonderful place and if the bank doesn't happen to 2 like your numbers. 3 This is responding to a letter from the 4 legal department. And it says, I received your 5 letter in response to my correspondence dated 6 July 22nd. We appreciate the review of the issues 7 raised by my letter, but it appears that the 8 purpose of the letter has been overlooked. 9 This letter was asking for intervention or 10 someone in the community reinvestment area to put 11 me in contact with someone that could intervene in 12 the situation we're in. 13 The relentless collection methods and 14 scorched Earth policy being followed by the bank 15 representative and outside counsel representing 16 Banc One against our business is what is at issue. 17 The letter was an appeal for someone in 18 the policy-making area of the bank to review our 19 situation and hopefully intervene on our behalf. 20 Contrary to your statement, I want to say 21 that Paul Stradtman Construction always has and is 22 honoring its commitments to Banc One. The fact is 23 evidenced by the uninterrupted payment history over 24 the preceding 80 months, which totals $1,442,742.50 330 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 in principal and interest. 2 PASCO's financial performance was severely 3 impacted by three very bad municipal sewer projects 4 undertaken during the '95 and '96 construction 5 seasons, all of which we -- apparently were 6 subsequently completed and were accepted by the 7 municipalities. 8 In spite of the severe losses incurred on 9 these jobs, PASCO has and continues to live up to 10 commitments to Banc One to retire the subject 11 indebtedness. 12 I would like to point out, once again, 13 that PASCO began repayment of the $400,000 line of 14 credit on its own volition at the rate of $10,000 15 per month plus interest before Banc One demanded 16 repayment in full. 17 The obligation was reduced from 18 the original $400,000 to $190,000 between 19 February 1997 and July 1998, a period of 20 18 months. All of the payments included interest 21 accrued to date on the outstanding balance. 22 Although you've stated that we have failed 23 to yield a satisfactory payment of debt, we feel we 24 have made considerable progress under the 331 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 circumstances. 2 In order to reassure the bank of our 3 intent and ability to repay our obligation, we 4 offer your representative, in addition to the 5 collateral already held by the bank consisting of 6 $2 million of construction equipment, a life 7 insurance policy of $300,000 of Mr. Stradtman and 8 our personal guarantees, to provide Banc One with a 9 second mortgage on our piece of industrial real 10 estate valued at over $3 million or a second 11 mortgage on our piece of land zoned multifamily and 12 valued at approximately a millions dollars. 13 Our only request to Banc One through your 14 representative was that PASCO be permitted to repay 15 the line through the normal course of business at 16 the rate of $10,000 per month and interest until 17 paid in full. 18 Your representative refused all of our 19 offers to further secure the bank's position, 20 demanded immediate repayment and, once again, 21 pushed forward with legal action. 22 The balance of the company's obligation -- 23 the balance of the loan is a company obligation. 24 And the company is not able to repay the $190,000 332 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 demanded at this time. The company has been 2 hindered in securing a new banking relationship for 3 a number of reasons. 4 One of those reasons is the ongoing legal 5 actions taken by Banc One against PASCO and Paul 6 and I personally and their demands for immediate 7 repayment. 8 We are currently using personal assets for 9 working capital until the company is strong enough 10 to run on its own. Large amounts of working 11 capital are required to fund our construction 12 projects before cash flow begins. To repay the 13 obligation from personal funds would leave us 14 unable to meet the day-to-day operating needs of 15 the company. 16 We have good jobs in progress with almost 17 all equipment working on job sites. Our volume is 18 ahead of last year. We have every reason to expect 19 a good year. 20 For the bank to take the equipment, in 21 lieu of our offers of additional security, would be 22 disastrous to our company and the developers for 23 whom we are working. 24 It would mean the loss of jobs for our 333 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 24 employees, most of whom are highly-paid Local 18 2 operating engineers and Local 860 laborers, many of 3 whom have been with the company since it started 4 business in 1980. 5 I need another few seconds to wrap 6 this up. 7 We appreciate your commiseration with the 8 unfortunate circumstances in which we find 9 ourselves, but what we do not understand is why 10 Banc One has chosen to relentlessly pursue the 11 liquidation of PASCO's construction equipment and 12 the ultimate destruction of the construction 13 company and the life's work of the owners when: 14 One, Banc One holds $2 million in 15 construction equipment as collateral for a $190,000 16 obligation. 17 The original $400,000 obligation has been 18 reduced every month since February, 1997, by at 19 least $10,000 per month plus interest from the 20 operating proceeds of the business, $210,000 in 21 18 months. 22 PASCO's original business checking 23 accounts, both general and payroll, are with Banc 24 One, as they have been for over 18 years. 334 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Banc One is collecting interest every 2 month on the declining balance. PASCO is paying 3 fringe benefits to union welfare funds administered 4 by Banc One. 5 In spite of what Mr. Sanford says, PASCO, 6 by its actions, has demonstrated integrity, 7 commitment and its intent and ability to meet 8 obligations under extremely difficult and adverse 9 conditions. It would seem that these should be 10 desirable qualities in a human or business 11 relationship. 12 PASCO's asking only for consideration that 13 is totally within the power of the policy-makers of 14 Banc One to grant that the company be permitted to 15 repay the remaining balance of the line of credit 16 of $190,000 at the rate of $10,000 per month plus 17 interest until paid in full. 18 The response to this is that we will be in 19 court a week from tomorrow to be held in contempt 20 for not turning our equipment over to the bank. 21 So I think that in view of this situation 22 with the small business, as this merger goes 23 forward, I think the practices of the bank and 24 their handling of small business accounts should be 335 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 examined because there -- small businesses are 2 risky by their very nature. And it's not a pretty 3 picture when you end up creating a bad situation 4 with them. 5 MS. SMITH: Thank you. 6 MS. HAIN: Thank you for your listening. 7 MS. SMITH: Mr. Hawthorne. 8 MR. HAWTHORNE: Hello, and thank you for 9 allowing me to speak today. 10 My name is Robert Hawthorne. I am the 11 Executive Director of Martindale Bright Community 12 Development Corporation, a grassroots development 13 corporation in Indianapolis. 14 And I represent today Indianapolis 15 Coalition for Neighborhood Developers, whose 16 membership organization represents 15 grassroots 17 community operations in Indianapolis who serve over 18 200,000 people residing in low-income neighborhoods 19 in Indianapolis. 20 I'm here today, I guess, not to speak 21 directly against the merger, but to ask for an 22 extension of the comment period to allow for 23 additional negotiations or conversations to take 24 place with Banc One and NBD and hopefully, 336 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 subsequently, the new bank which will be a result 2 of this merger. 3 ICND -- I'm going to read from a prepared 4 statement of the organization. 5 ICND is extremely concerned about the 6 pending merger of Banc One and NBD, particularly as 7 it relates to the future development and leadership 8 of the banking industry in Indianapolis community 9 development with Indianapolis community development 10 movement. 11 All ICND members have enjoyed a strong and 12 committed relationship with NBD, many for nearly 13 20 years. The relationship between ICND members 14 and Banc One -- excuse me, and NBD have resulted in 15 general operating support for our members, various 16 financing mechanisms for projects, technical 17 assistance and affordable housing products that are 18 critical in our efforts to revitalize our inner 19 city neighborhoods. 20 In addition, NBD Bank has provided a 21 community leadership within the banking industry, 22 brought the necessary attention to community 23 development and, most importantly, clearly values 24 the work of our members from both a business 337 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 perspective as well as a philanthropic 2 perspective. 3 For this reason, it's critical that the 4 comment period be extended to allow the community 5 time to delineate precisely what Banc One's 6 commitment will be to community development 7 corporations in Indianapolis. 8 One aspect of this merger which will be 9 unique to Indianapolis is the divestiture that Banc 10 One will have to complete. 11 This divestiture will result in the 12 introduction of a new, likely unknown bank who will 13 immediately capture the third largest market share 14 in Indianapolis, as well as the first and second 15 largest market share among African American people, 16 of which the community development corporation 17 represent a great deal. 18 ICND requests that this new bank be 19 required to fill the same commitment to community 20 development corporations as NBD has and articulate 21 these comment -- these commitments in a five-year 22 CRA plan. 23 I'll just briefly take time to just go 24 through the items. One, we're looking to -- for 338 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Banc One and the new bank to increase the number of 2 types of mortgage project products which are for 3 low-income people with special circumstances. 4 We also look for Banc One to increase its 5 commitment to retail development in Indianapolis, 6 as well as small minority business development. 7 We look for ICND members to have a direct 8 relationship with NBD Bank over the last years. 9 And cooperating support has been a part of that 10 relationship. 11 ICND requests that Banc One commit to 12 creating endowment fund with the proceeds of 13 divesture for the purpose of providing cooperating 14 support to ICND and our members who serve to 15 eliminate deterioration in inner city communities. 16 In closing, both Banc One and NBD have 17 been excellent Indianapolis corporate citizens 18 supporting the business community, as well as the 19 African American community. 20 In a city where many of the low-income -- 21 low- and moderate-income communities are seeing a 22 resurgence in quality housing, it is extremely 23 important that both Banc One and the new bank 24 commit to furthering the development of 339 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Indianapolis inner city community and 2 neighborhoods. 3 We ask that the comment period be extended 4 to allow for community -- more community input in 5 this matter. Thank you. 6 MS. SMITH: Thank you very much. Ms. Haste. 7 MS. HASTE: Good afternoon. My name is 8 Bridgette Haste. I'm the chairperson for a local 9 community group, ACORN in Milwaukee. I'm here 10 today to tell you about my experience with Banc 11 One's lending group. 12 Back in 1991, I applied for a home loan 13 with Banc One and was denied. I had been on my 14 present job for over five years. I had deposits of 15 over $16,000 in Banc One. 16 Once they checked my credit record, I was 17 told that would probably take me a couple of years 18 to fix my credit to the position that would qualify 19 me for a loan with Banc One. 20 They told me that I could request a copy 21 of my credit report from the local credit bureau. 22 When I received it, the only thing that I could see 23 on my credit record that would disqualify me was a 24 doctor bill that was minimum in amount and that had 340 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 been paid. 2 They could not tell me the reason why I 3 was denied, only that I would need to contact my 4 local credit bureau. 5 Since then, in the same year I received 6 several loan -- other type of loans, major credit 7 cards, a credit line of $10,000 and a home loan 8 with no questions asked and my credit report was 9 submitted to them through factual data. 10 I am now the proud owner of a duplex 11 home on the north side of Milwaukee in which I have 12 been living there for seven years, no thanks to 13 Banc One. 14 My loan denial was not an isolated 15 incident. In 1996, Banc One's own lending 16 practices and data shows the rejection rate for 17 African American and Latinos in the city of 18 Milwaukee of 54 percent. This is not acceptable. 19 I am recommending that the proposed merger 20 between Banc One and First Chicago NBD Corporation 21 be denied. Thank you very much. 22 MS. SMITH: Thank you. Ms. Howard. 23 MS. HOWARD: Good afternoon. My name is 24 Minnie Howard, and I'm a member of Wisconsin ACORN 341 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 also. I will testify today on the racial and 2 discriminatory lending practices of Banc One in 3 Milwaukee. 4 The statistics that I will be using were 5 taken from Banc One's own HMDA data. I will also 6 point out that Banc One is not making an effort to 7 provide services that match the needs of minority 8 communities. 9 In light of these practices, I will also 10 recommend that the proposed merger between Banc One 11 Corporation and First Chicago NBD Corporation be 12 denied. 13 Banc One is holding over $1.16 billion in 14 deposits from its central city branches, where the 15 majority of African American and Latinos live. 16 However, in 1996, only 2 single-family 17 conventional mortgages went to African Americans 18 and only 3 to Latinos, as compared to 79 for 19 Whites. 20 Furthermore, 57 percent of African 21 American applicants were denied mortgages, more 22 than 5 times the rate of denial for White 23 applicants. 24 Rates of home ownership among African 342 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Americans and Latinos are drastically below home 2 ownership rates for Whites. 3 Banc One is contributing to a tremendous 4 disparity and actually increasing it by providing 5 such a disparate proportion of its mortgages to 6 Whites. 7 As home ownership rates among African 8 Americans continued to decrease in Milwaukee, 9 Banc One should be responding by increasing 10 mortgage loans. 11 However, at a meeting with Connie 12 McDonald, CRA, Officer for the Eastern Region, and 13 Milwaukee's CRA representative, Gwen Dansby, they 14 said that rather than responding to the community 15 needs, they will be putting even less emphasis on 16 mortgage loans. 17 The Banc One CRA representative that we 18 met with claimed that mortgages were not their 19 specialty. So we looked at their record for home 20 improvement loans and refined loans in Milwaukee, 21 I'm going to say, which is approximately 20 percent 22 minority. 23 Banc One provided an incredible 3,596 24 refinancing loans in 1996 to Whites and only 165 to 343 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Blacks and 59 to Latinos. In this case, 523 Blacks 2 applied for refinancing loan and more than half or 3 54 percent were rejected. 4 Even though Milwaukee is one of the most 5 segregated cities in the country, other banks do 6 not approach Banc One's rejection rate for Blacks. 7 For all banks in the market area, 8 34 percent of Black African Americans were denied. 9 For all banks in the market area, 10 34 percent of Black applicants were denied 11 refinance loans, but at Banc One the rejection rate 12 for Blacks topped 50 percent, an almost incredible 13 figure. 14 In home improvement loans, the pattern 15 holds. In 1996, Banc One made 1,176 home 16 improvement loans to Whites and only 147 to Blacks 17 and 28 to Latinos. 18 Banc One's record of lending in Milwaukee 19 is one of the most racially discriminatory lending 20 records of any bank in any city in the country. 21 We have had meetings with CRA 22 representatives over the past several years where 23 they have promised to improve, yet their own data 24 shows no improvement. 344 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Furthermore, they are ignoring the very -- 2 they're ignoring the minority community's needs for 3 access to home ownership by turning their focus 4 away from mortgage loans. 5 In light of this information, it is the 6 recommendation of Wisconsin ACORN that the proposed 7 merger between Banc One Corporation with First 8 Chicago NBD Corporation be denied. Thank you. 9 MS. SMITH: Thank you very much. Any 10 questions? Thank you very much for coming this 11 afternoon. We've been through a very long day. 12 And we will move on to Panel 17 now. 13 Ms. Johns, if you'll grab the mike, we'll start 14 with you.
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