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 Five
8 MR. BUSH: Ms. Smith, other parties and 9 concerned citizens, I'm speaking on behalf of the 10 Woodstock institute, a non-profit that promotes 11 reinvestment and economic development in lower 12 income communities and as a member of the Chicago 13 CRA Coalition. I'm also a member of the National 14 Community Reinvestment Coalition. 15 The proposed merger of two large companies 16 that would constitute the largest bank in the 17 Midwest raises serious concerns for residents of 18 low income communities and the organizations that 19 work with them. 20 The Community Reinvestment Act in its 21 21-year history has been much more honored in the 22 breach than in the observance, a fact that has 23 contributed to the economic decline of huge areas 24 of urban, small town and rural America. 90 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 In the last few years, however, because of 2 a variety of pressures and opportunities, the Act 3 has produced very important improvements in home 4 lending to lower income and minority borrowers and 5 communities. 6 In Chicago, in many ways, the hometown of 7 community reinvestment activity, one of those 8 pressures and opportunities has been the practice 9 dating from 1983 of community organizations 10 requesting and persuading banks, small and large, 11 to commit to significant community reinvestment 12 goals for specific periods of time and then 13 monitoring the bank's progress towards those goals 14 on a regular basis. 15 On the announcement of this proposed 16 merger, the Chicago CRA Coalition which Woodstock 17 convenes, entered a dialogue with First Chicago NBD 18 to set new CRA commitments in the Chicago region 19 for the new bank. We believe that if implemented, 20 the provisions of the CRA agreement will constitute 21 a good CRA program for the new bank in the Chicago 22 region by improving the bank's record in lending 23 investments and services to the benefit of the 24 regions's lower income communities. 91 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 My colleagues from the Chicago CRA 2 Coalition on this panel will speak to some of the 3 details of this agreement. 4 In my view, the highlights of the 5 agreement include the following items. 6 The bank committed to small business and 7 home loan goals based on a measure of its size and 8 market presence, namely a specific ratio of its 9 market share in lower income communities to its 10 market share in other communities. These ratios to 11 be achieved at stated rates from 1999 are 1.10 for 12 home loans and 1.15 for small business loans, and 13 this will result in massively increased lending. 14 The bank committed to open four full 15 service branches in lower income neighborhoods. 16 These neighborhoods are seriously underbranched on 17 a per capita basis compared to other 18 neighborhoods. 19 The bank committed to a high level 20 feasibility study of an affordable retail banking 21 account for lower income households which currently 22 do not have banking relationship with the goal of 23 establishing such an account. 24 The CEOs of both banks personally assured 92 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 the Coalition that the new bank will have a 2 vigorous home mortgage operation in all its 3 markets. The agreement will be monitored like 4 other Chicago CRA agreements in regular meetings. 5 Unfortunately, Banc One has not negotiated 6 similar agreements in its current markets which 7 leaves it without a detailed and adequate CRA 8 plan. Absent such an agreement, we do not 9 understand how the Federal Reserve Board can 10 evaluate whether the merged institution will in 11 fact meet the convenience and needs of its 12 communities. 13 We note that the recent spate of so-called 14 mega commitments by such institutions as Nation's 15 Bank, Bank America, Travelers and Citicorp raises 16 precisely the same problem. 17 In the case of both those mergers, more 18 than half the dollar commitment so proudly 19 announced were for products not targeted to lower 20 income communities. The commitments were not 21 broken down by market area nor established with 22 reference to such concrete objective measures as 23 market share ratios. 24 Detailed CRA plans and sound community 93 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 agreements should be a necessary part of an 2 adequate bank merger application. Agreements 3 between citizens and their institutions is after 4 all a hallmark of a Democratic society. 5 The First Chicago NBD agreement for the 6 Chicago region contains community reinvestment 7 details that should be standard for all bank 8 applications as Congressman Davis argued this 9 morning. The bank regulators should demand such 10 details as a matter of course. 11 It also contains in our opinion 12 commitments that reflect the size of the bank and 13 that will promote significant, safe and sound 14 community reinvestment in the Chicago regions's 15 lower income communities. 16 Thank you. 17 MS. SMITH: Thank you very much. 18 Mr. Wysocki, are you next or have we 19 changed the order. 20 MR. WYSOCKI: Good morning. 21 In 1977, over 20 years ago, I introduced a 22 community lending resolution at that year's 23 shareholder's meeting of the First National Bank of 24 Chicago. 94 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 The resolution was based on the bank's 2 poor performance at that time that was documented 3 by the first year of the Home Mortgage Disclosure 4 Act data. The resolution was defeated by 98 5 percent of the shareholders in 1977. 6 I start with this point because I think it 7 exemplified the corporate arrogance of this time 8 that required Congress to pass the Community 9 Reinvestment Act that same year. 10 Now over 20 years and three First Chicago 11 mergers later, we are here to discuss this morning 12 the need for continued regulatory vigilance and 13 community advocacy on behalf of neighborhood 14 reinvestment and in this era of financial 15 modernization and merger mania. 16 I'm also here today to share with you the 17 strength of bank partnerships that have grown as a 18 result of CRA and are now providing access to 19 affordable credit and financial services to 20 revitalize local communities. 21 At the end of 1983 was when First Chicago 22 applied to acquire American National Bank, itself 23 proclaimed intent to be the premiere bank in the 24 Midwest. In staffing those CRA negotiations, they 95 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 led to become the largest CRA lending agreement at 2 that time of 100 million over five years. That's a 3 million. Now we're talking billions. 4 We have progressed over the last 20 5 years. That commitment was renewed in 1989, and in 6 1990 a five-year evaluation of the Chicago's 7 lending program was conducted, and I wish to quote 8 from a conclusion. 9 "The fundmental test of the success of 10 neighborhood lending programs and of investment in 11 general is whether lenders, community groups and 12 community based development organizations can 13 develop and implement loan programs together in 14 partnership." 15 From my years of experience, the key 16 element to fostering and furthering such 17 partnerships is regular monitoring and reviewing of 18 progress so that continued dialogue can lead to 19 further product innovation and market penetration. 20 The key for both sides is learning to deal. 21 One example of product development through 22 our work with First Chicago is the financing of 23 mixed use real estate. 24 Chicago's neighborhoods are built around 96 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 main streets with block after block of properties 2 with apartments above store fronts. Back in 1983, 3 no conventional lender offered financing for such 4 properties. 5 At the urging of the Chicago Association 6 of Neighborhood Development Organization, 7 First Chicago was the first lender to offer 20-year 8 fully amortized mortgages for the purchase and 9 rehab of such mixed use real estate. 10 In 1995, with the merger of First Chicago 11 and NBD, this neighborhood lending program was 12 renegotiated and it is part of the new commitment 13 of two billion dollars in community lending. 14 First Chicago agreed to do a pilot program of ten 15 percent down for mixed use buildings. 16 We all know that the affordable housing 17 has developed a variety of low down payment 18 programs for residential lending. This was an 19 effort to do this for mixed use real estate. 20 Now as part of our recent agreement, the 21 bank has found this to be good business and they're 22 committed to doing this as an ongoing loan product 23 in their portfolio and now they are willing to 24 pilot a low down payment mortgage for commercial 97 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 real estate. 2 This new commitment will provide a wide 3 range of local ownerhsip, I want to emphasize local 4 ownership, not absentee ownership, and will extend 5 investment opportunities to to a whole generation 6 of other businesses. 7 My point is here this community credit 8 need was being addressed now by the private market 9 because the bank was willing to sit down and 10 jointly hammer out the design of this product. 11 It's good reinvestment, it's an example of the 12 value of CRA agreements. 13 Now, his testimony talked about the market 14 share analysis that Woodstock had done that is now 15 leading to aggressive goals for small business 16 lending. The purpose of these observations is to 17 make this final point. 18 The Federal Reserve Board should exercise 19 its regulatory authority to assure that Banc One 20 adopts the First Chicago NBD approach to community 21 reinvestment throughout its service area. 22 As Mayor Goldsmith said this morning, this 23 is an issue of attitude, and the corporate 24 arrogance or refusing to negotiate CRA agreements 98 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 whether in Indian or Ohio in this case or in the 2 case of the Nation's Bank's merger with Bank of 3 America should be unacceptable as a matter of 4 Federal Reserve Board policy. 5 So while endorsing our agreement with 6 First Chicago NBD and being pleased that Banc One 7 is willing to honor it, I am disappointed that 8 Banc One is unwilling to engage themselves in 9 designing similar agreements in other markets. 10 As Vice Chair of the Bank Regulation 11 Committee of the Federal Reserve Board's Consumer 12 Advisory Council I challenge the Federal Reserve 13 Board to only grant conditional approval, 14 conditioned on parity and market shares of specific 15 geographical markets. Let the market work. Use 16 your regulatory authority to make sure it works in 17 every market. 18 Thank you. 19 MS. SMITH: Thank you very much. 20 Mr. Jackson. 21 MR. JACKSON: Good morning. Good morning, 22 Ms. Smith, Ms. Williams and Mr. Alvarez. 23 My name is Kevin Jackson. I'm Executive 24 Director of the Chicago Rehab Network, a 99 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 20-year-old coalition of 43 non-profit housing 2 development organizations in Chicago. We are a 3 member of the steering committee of the CRA 4 Coalition here and the Chair of the Housing Task 5 Force. 6 Financial institution's responsiveness to 7 individuals and families in local neighborhoods is 8 at the heart of the importance of the Community 9 Reinvestment Act. Recognition of this is clear 10 from the proceedings today. Public involvement in 11 the decisions that impact communities, regions in 12 the country is fundmental to the Democratic process 13 and and ultimately despite its difficulties at 14 times, a good thing. 15 We congratulate the Federal Reserve Board 16 Bank for calling this hearing and acknowledging the 17 importance of all the people gathered here today. 18 We would also congratulate ACORN helping to create 19 the momentum item that resulted in this hearing in 20 the first place. 21 And finally, we congratulate First Chicago 22 NBD on demonstrating the utility and possibility of 23 CRA agreements that mean good business for the 24 institution and our communities. 100 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 The Chicago Rehab Network has a long 2 history with the First National Bank of Chicago. 3 In 1984 when First Chicago acquired American 4 National Bank, we were a part of that coalition 5 that negotiated the first neighborhood lending 6 agreement. 7 Since then, we have sat on the quarterly 8 Review Board, packaged hundreds of multi-family 9 loans and provided detailed input on community 10 credit needs. 11 When First Chicago merged with NBD three 12 years ago, we were a part of that CRA Coalition 13 that negotiated a detailed CRA agreement. 14 As I stated in my opening, CRA is vital. 15 The process that led to our present CRA agreement 16 with First Chicago NBD and Banc One if it continues 17 occurred because CRA strengthens our government's 18 mediating role between the private sector and the 19 common good. 20 The CRA agreement reached by and the 21 proposed merger of First Chicago NBD and Banc One 22 is a model for CRA agreements in both its process 23 and substance. 24 After the merger was announced, the CRA 101 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Coalition moved to hold a public meeting and had 2 task force meetings to gather substantive input 3 from community organizations throughout the 4 region. 5 The Housing Task Force met three times to 6 develop the framework. We then met many times with 7 the First Chicago NBD and Banc One staff from the 8 highest levels on down. 9 For the first time in CRA negotiations, we 10 were able to use a market share analysis to develop 11 mortgage lending targets. As a result, over the 12 next six years, First Chicago NBD has committed to 13 increasing their residential lending by more than 14 8,200 loans over current levels. 15 In 1995, First Chicago established a 16 $100,000 downpayment pool for home buyers in 17 Chicago's empowerment zones. With this agreement, 18 the pool has been increased to 900,000 and extended 19 to more low and moderate income areas. 20 In discussing credit needs with 21 organizations in Chicago, there was a sense that 22 particularly in this time of mega mergers and 23 predatory lending, simply establishing lending 24 targets is barely adequate. 102 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Without a thorough analysis of the credit 2 needs of low and moderate income communities on 3 which to base lending targets, there will continue 4 to be unmet needs and borrowers who are forced to 5 get inferior high cost credit products. 6 First Chicago NBD has committed to 7 participate in the design and development of an 8 analysis of credit that serves needs in low and 9 moderate income communities and to contribute to 10 its implementation. 11 They further agreed to work with the 12 Chicago Rehab Network to expand the impact of the 13 City of Chicago Department of Housing second 14 Five-Year Affordable Housing Plan approved by the 15 City Council this past July. 16 We were particularly concerned to read in 17 the merger application that Banc One had 18 discontinued its mortgage lending business except 19 for the convenience of its customers and its CRA 20 division. 21 We believe that mortgage lending at all 22 income levels is the foundation of community 23 development and a bank's investment in a 24 community. 103 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 After discussion with both bank's CEOs and 2 many of the senior staff, the bank announced that 3 through their best practices evaluation of the 4 bank's business, they would resume full mortgage 5 lending throughout the Banc One system. 6 This is one of two system-wide commitments 7 we see from Banc One. The second is that the bank 8 will conduct a credit analysis on all am applicants 9 to the subprime lending unit and refer them to 10 appropriate loan products. 11 The process I have described created a CRA 12 agreement that is responsive to the service and 13 credit needs of low to moderate income communities, 14 businesses and households in Chicago and the 15 region. 16 With this agreement, we have a solid 17 foundation to build on for the next six years. The 18 same type of commitment must be made to low or 19 moderate income people in communities throughout 20 the Banc One system. 21 In the end, the communities in which the 22 members of the Chicago Rehab Network operate are 23 not unlike communities throughout this country 24 starting to build better neighborhoods through 104 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 affordable housing and economic development and 2 fighting the growing tide of an ever growing 3 economic disparity. 4 Our mission at the Chicago Rehab Network 5 is to promote community development without 6 displacement in our communities requires us to 7 stand in solidarity with communities across this 8 country in their relationship to financial 9 institutions. 10 We believe that First Chicago NBD's 11 leadership here should be replicated throughout the 12 country, and we call on the Federal Reserve Board 13 to ensure that same type of commitments and process 14 is made to all low and moderate income people and 15 communities. 16 Thank you. 17 MS. SMITH: Thank you very much. 18 MS. RAND: Dory Rand. I'm a staff attorney 19 with the National Clearinghouse for Legal Services, 20 a non-profit organization based here in Chicago. 21 We represent tens of thousands of low 22 income people on welfare and housing policy issues 23 through our poverty law project, and we also 24 provide support to the poverty law community and 105 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 others through our Web site, our printed 2 publications, our library and our training and 3 information services. 4 I'd like to focus my comments this morning 5 on something that Congresswoman Carson mentioned 6 earlier, and that is the advent of electronic 7 benefit transfer of government benefits and what 8 banks can and should do to serve the community 9 needs of low income people who receive government 10 benefits and who do not have bank accounts. 11 As a staff attorney with the Poverty Law 12 Project and editor of its Welfare News, I've been 13 monitoring the development and implementation of 14 electronic delivery systems both, EFT and EBT. 15 Illinois Link is the Illinois electronic 16 benefit transfer program for the delivery of cash 17 and food benefits in Illinois. EFT is the federal 18 program that are for electronic fund transfer of 19 government benefits such as Social Security, 20 Supplemental Security Income or SSI, Veteran's 21 benefits and Railroad Retirement benefits. 22 These EBT and EFT programs produce 23 tremendous cost savings for the federal and state 24 governments, and they also help to reduce misuse of 106 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 benefits and they provide some security and 2 convenience advantages for clients, but their 3 advantages could be multiplied if people who 4 receive government benefits had their benefits 5 directly deposited into bank accounts. 6 Some of the examples include funds 7 deposited in bank accounts would be protected by 8 the Federal Consumer Protection Regulation E. EBT 9 funds are not protected by Regulation E. 10 Funds deposited in bank accounts have the 11 protection and insurance of the FDIC. EBT funds do 12 not. 13 People who deposit their government 14 benefits or employee checks can pay their bills. 15 People who don't have bank accounts have to pay 16 very high fees for check cashiers. They can be 17 used as references with landlords, utility 18 companies. People without bang accounts cannot use 19 banks as references. 20 People who deposit their money in bank 21 accounts that earn interest, can increase their 22 assets. And also people who establish a good 23 relationship with a bank can possibly build on that 24 relationship later as their income increases when 107 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 they go to establish a home mortgage, a car loan. 2 They can save money in savings accounts to buy a 3 car, to get further education to help them escape 4 poverty. 5 But despite these many advantages of 6 having bank accounts, many low income individuals 7 do not have bank accounts, and there are a lot of 8 reasons for that. 9 Some of those reasons are that there are 10 not enough branches in low income communities, 11 there is not sufficient financial literacy among 12 many communities, there are not enough low cost and 13 free bank accounts. And also, bank practices of 14 screening applicants' credit histories further 15 limit access. 16 I think that banks can and should play a 17 major role in helping to address these problems by 18 ing more full service bank accounts and ATMs in 19 underserved communities, low income communities, by 20 conducting and funding financial literacy and 21 credit counseling programs and by developing and 22 marketing low cost and free checking accounts that 23 do not have credit screening. 24 To that end, I did participate as a member 108 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 of the Chicago CRA Coalition Steering Committee in 2 the negotiations that led to the recent agreement 3 with First Chicago and Banc One, and I'm 4 particularly pleased that the banks agreed to open 5 at least four new full service bank branches in low 6 and moderate income communities, that they have 7 agreed to allocate $50,000 a year towards financial 8 literacy programs and that they're conducting a 9 high level feasibility study to develop low cost 10 bank accounts to serve the needs of individuals 11 with limited or poor credit histories or limited 12 experience in dealing with banks. 13 Financial chairman and CEO Verne Istock 14 sent a letter to the CRA Coalition expressing his 15 personal recognition of the need for these 16 financial services, his commitment to working on 17 developing an account that will serve those needs 18 and his willingness to continue to work with the 19 CRA Coalition on this. 20 I look forward to that, however, I have to 21 add that I am very troubled by Banc One's failure 22 to enter into similar agreements through all its 23 markets. If they really want to serve the needs of 24 the community, they must do that, and they could 109 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 use our agreement here as an example. 2 Thank you. 3 MS. SMITH: Thank you very much. 4 Ms. Durban. 5 MS. DURBAN: Good morning. My name is Kate 6 Monter Durban. I am the Assistant Director of the 7 Cleveland Housing Network. 8 The Cleveland Housing Network is a 9 coalition of 17 CDCs spread across the city of 10 Cleveland, and our primary focus is affordable 11 housing development in those communities. 12 I am here to let you know that Banc One 13 and Banc One CDC have been a strong and consistent 14 partner in our work. 15 The Cleveland Housing Network to date has 16 rehabilitated about 2,000 houses across the city, 17 and we believe that that investment has absolutely 18 made a difference in turning the -- stemming the 19 tide of disinvestment in many of those 20 communities. 21 To date, Banc One has invested over four 22 million dollars in equity investments in the lease 23 purchase program which is the program that I'm here 24 to speak about today in part. 110 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 The average income of lease to purchase 2 residents is about $12,000. The majority are 3 minority single moms with two to three kids, so 4 what we know as developers is the equity investment 5 in those partnerships are absolutely critical to 6 our ability to produce an affordable monthly 7 payment. So, you know, that kind of investment has 8 made our work possible. 9 And the other way that Banc One has 10 partnered with us is they have lent us technical 11 assistance in areas when we have asked for their 12 help. 13 For example, in 1990, the Federal Low 14 Income House Tax Credit was changed in such a way 15 that jeopardized our ability to transfer title to 16 our low income residents at the end of the 15-year 17 lease purchase period. Needless to say, we were 18 very concerned about the change in the federal law 19 and immediately began to mobilize trying to change 20 the law. We were unsuccessful and ultimately 21 turned to Banc One and Banc One CDC, specifically 22 Joe Hagen, and asked him if he couldn't help us 23 based on the relationships that he had built at the 24 IRS. 111 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 So Joe, being the absolutely great guy 2 that he is, jumped into the fight with us, 3 established dialogue with the IRS, and in the 4 Summer of 1995, the IRS published a ruling 5 clarifying the law and once again clarifying our 6 ability to transfer title and home ownership to 7 families at the end of 15 years. 8 So for us, that was just an example of the 9 willingness of Banc One CDC to step in and use 10 their time and expertise to help us in a way that's 11 very critical to our organization's goals. 12 You know, undoubtedly, the work that we do 13 in Cleveland and our partnership with Banc One has 14 benefitted from the CRA agreement that has been 15 negotiated with the City of Cleveland. 16 The Mayor of the City of Cleveland through 17 these agreements has established a platform for 18 investment, and our work has absolutely benefitted 19 from that platform. 20 So for us, the bottom line is as 21 non-profit developers with the goal of affordable 22 housing development, we can't do it without 23 significant equity investment in our work, and 24 we've seen that from Banc One and Banc One CDC. 112 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Thank you. 2 MS. SMITH: Thank you. 3 Mr. McDaniel. 4 MR. McDANIEL: Thank you. 5 Good morning. I'm Mark McDaniel, and I'm 6 the President of the Michigan Capital Fund for 7 Housing. 8 The Capital Fund is a non-profit housing 9 corporation that was founded in 1993 for the 10 purpose of raising and providing investment equity 11 to create affordable housing in Michigan. 12 The fund's mission in providing equity is 13 to invest in projects that meet at least one of the 14 follow criteria: The development is located in a 15 distressed community, smaller-sized projects, 16 non-profit involvement as sponsors and serving 17 special needs populations. 18 With that mission, the fund has raised and 19 invested over $80 dollars in equity since 1993 20 creating over 2,000 units of affordable housing. 21 79 percent of those funds have gone into distressed 22 communities. 23 Through our relationship with the 24 Enterprise Social Investment Corporation, the 113 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Enterprise Foundation, and our financial 2 institution investors, the fund now offers a 3 multitude of financial resources to the development 4 community in Michigan. This includes permanent 5 debt financing, construction lending, technical 6 assistance, predevelopment loans and grants and 7 charitable activities contributions. As a result 8 of our growth and structure, we have come to 9 understand the banking industry much clearer. 10 I'm here today to tell you very simply 11 that the merger between Banc One and First Chicago 12 NBD is the best news that we've had in a long time 13 as an organization. 14 I know this is good news because this is 15 the first time that a merger has got the bankers on 16 our board grumbling. This is indicative that 17 Banc One will be very competitive and push other 18 banks to become more aggressive and more innovative 19 than they're used to being. That is in my view 20 what Banc One is bringing to Michigan, and that's 21 good. 22 Based on my 21 years of experience in 23 planning, housing development and community 24 development, I'm convinced that Banc One has a 114 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 social and financial commitment to revitalizing and 2 supporting community investment and development 3 through its market area. This is true in our case 4 even when they weren't in the Michigan market. 5 In the formative stages of the fund, Joe 6 Hagan, the President of Banc One CDC, advised us on 7 how to structure the fund and selecting our board 8 members and working with developers as we started. 9 They have provided me with input whenever I've 10 faced -- have been faced with complex issues, which 11 I've found very unusual when compared to other 12 banks. 13 Banc One has invested $125 million in 14 several national equity funds managed by 15 Enterprise. They have invested $20 million in 16 funds managed by the Ohio Capital Corporation for 17 Housing. In addition, Banc One is providing bridge 18 financing to Ohio Capital. Their commitment to 19 Illinois, to Chicago, Cleveland, Delaware, Texas 20 and Milwaukee equity funds has been similar. 21 There are some who will say so what. Tell 22 that to the single mother living in a transitional 23 housing development who without Banc One's and 24 others' investments would still be suffering the 115 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 beatings of an abusive boyfriend or be on the 2 street with nowhere to go. The same mother who has 3 got her life together because of this housing 4 opportunity is ready to move into a Habitat for 5 Humanity Home. 6 Tell that to the senior citizen in 7 Cleveland who was living as a hostage in her home 8 in a crime ridden neighborhood who as a result of a 9 Banc One investment was able to move into a new, 10 safe, secure senior community. She now has quality 11 of life in her golden years she never thought she 12 would have. 13 And finally, tell that to the young couple 14 with little ones who are forced to live in a 15 slumlord-owned house with no security, broken 16 plumbing and windows and lack of adequate heat who 17 with the help of Banc One's investment in a 18 national fund was able to find safe and decent 19 housing to raise their family in. 20 There are thousands of stories like this, 21 and I don't think those tens of thousands of people 22 who have benefited who say so what. 23 NBD is represented on our Board of 24 Directors and has as compared to other financial 116 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 institutions been a significant but not as major of 2 a player as they could be. 3 We appreciate the support and effort that 4 they have put into the fund, and we especially 5 appreciate the personal efforts of people like ^ 6 Jack Love whose works in the Detroit bank for what 7 he's been able to do and the rest of the staff in 8 promoting what NBD is able to do in Michigan. 9 There has never been a single bank merger 10 in Michigan where the lead bank has taken the time 11 or made the effort to discuss with the fund or 12 others how they can best get involved in the 13 community development in the state. Banc One is 14 the first one to do that with us, and we appreciate 15 that and believe it is indicative of how Banc One 16 will be committed to working in Michigan. 17 In closing, the Michigan Capital Fund is 18 exited and supportive of the proposed merger 19 between Banc One, First Chicago NBD. We are 20 looking forward to Banc One being one of our major 21 investors and supporters. This merger will not 22 only be good for the fund but most probably for the 23 less fortunate residents in Michigan who need 24 affordable housing. 117 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 Thank you for your time, and I look 2 forward to the significant marriage between these 3 two entities. 4 MS. SMITH: Thank you very much. 5 Any questions from the Panel? 6 MR. ALVAREZ: I have one question. 7 A couple of speakers spoke about the 8 agreement in terms of market share, Banc One 9 bringing up its lending to certain market share in 10 various communities. I was curious what data was 11 used to compute market share and what the benchmark 12 is that you're asking them to bring their level up 13 to. 14 MR. BUSH: We're happy to see that some of your 15 regulators are now using this market share, so you 16 can perhaps talk to them too. It's a very simple 17 notion, and the notion is that if a bank is making 18 equal effort in low income neighborhoods, its 19 market share in low or middle income neighborhoods 20 will approach its market share and indeed exceed 21 its market share in middle and upper income 22 neighborhoods so that ratio will be 1.0 or 23 greater. 24 And we use Mortgage Act Disclosure data in 118 McCORKLE COURT REPORTERS, INC. CHICAGO, ILLINOIS - (312) 263-0052 1 this case for the six-county region in Metropolitan 2 Chicago to calculate market share for 3 First Chicago. 4 MR. ALVAREZ: So it's a comparison of lending 5 in low and moderate income areas to middle and 6 upper income areas or -- 7 MR. BUSH: It's a comparison of a bank's market 8 share in moderate and low neighborhoods to low. 9 Using small business data, same analysis. 10 MS. SMITH: Thank you very much for coming this 11 morning. 12 We are going to take a short break, maybe 13 of the order of five minutes. 14 And unless Panel 6 has appeared in the 15 meantime, we plan to move to Panel 7, but it just 16 depends. My managers will tell me what to do. 17 (Whereupon, a short recess 18 was taken.) 19 MS. SMITH: I think we're ready to reconvene. 20 Could we have Panel 7, please? Six we're skipping 21 because they weren't here. Well, we're ready to 22 start, so why don't we? We'll go to Mr. Hagaman, 23 and the others will join us as they can. 24 Mr. Hagaman, we can start.
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