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Public Meeting Transcripts

Public Meeting Regarding Norwest Corporation and Wells Fargo & Company

Thursday, September 17, 1998

Transcript of Panel One

                                                          27

         10        

         11                  CHAIRPERSON SMITH:  Any other questions?    09:32:08

         12        If not, thank you very much for being here this       09:32:10

         13        morning.                                              09:32:12

         14             And we'll move on to Panel No. 1.  We're going   09:32:12

         15        to start with Mr. Jacobson.                           09:33:20

         16        

         17                  MR. JACOBSON:  Thank you, and good          09:33:36

         18        morning.  My name is Jim Jacobson, and I'm assistant  09:33:38

         19        attorney general appearing this morning on behalf of  09:33:42

         20        Attorney General Hubert Humphrey.  I'd like to begin  09:33:44

         21        today by thanking the Federal Reserve Board for       09:33:48

         22        holding this public meeting and for giving our        09:33:50

         23        office and other interested parties an opportunity    09:33:52

         24        to comment on the proposed merger between Norwest     09:33:54

         25        and Wells Fargo.  I would also like to thank Norwest  09:33:56



     
     



                                                                     28

          1        for its letter to Attorney General Humphrey           09:34:00

          2        responding to some of the concerns addressed in our   09:34:04

          3        written comments to the Board.  Since time is         09:34:06

          4        limited, I will get right to the point.               09:34:08

          5             I'm here today because the Attorney General's    09:34:12

          6        concerned that this proposed merger has the           09:34:14

          7        potential to affect Minnesota consumers, small        09:34:16

          8        businesses and communities on all three factors       09:34:20

          9        considered under the Community Reinvestment Act:      09:34:22

         10        lending, investment, and service.  Our concerns on    09:34:26

         11        these three points are heightened in view of Wells    09:34:28

         12        Fargo's record following its recent merger with       09:34:32

         13        First Interstate.  For example, according to a study  09:34:38

         14        conducted by the steelworkers, Wells Fargo closed or  09:34:42

         15        sold all of its branches in 129 locations following   09:34:44

         16        its merger, thereby reducing services to low income   09:34:46

         17        and rural communities.                                09:34:52

         18             Specifically with regard to customer service,    09:34:52

         19        Wells Fargo's post-merger record is not encouraging.  09:34:56

         20        According to reports, Wells Fargo encountered         09:34:58

         21        extensive service problems following its merger and   09:35:02

         22        cut back on certain customer services.  For example,  09:35:04

         23        according to a recent report in the San Jose          09:35:08

         24        newspaper, Wells Fargo discontinued First             09:35:12

         25        Interstate's practice of providing free checking to   09:35:16



     
     



                                                                     29

          1        seniors and now imposes a $9 per month charge unless  09:35:18

          2        seniors maintain a significant minimum balance.  For  09:35:24

          3        seniors on fixed incomes and limited budgets, $9 per  09:35:26

          4        month, or 108 per year, can be a significant burden.  09:35:30

          5             The Board indicated in its recent order          09:35:34

          6        approving another merger that "the CRA does not       09:35:38

          7        impose any limitation on the fees or other charges    09:35:42

          8        that banks may assess for their services."  We        09:35:46

          9        believe, however, that fees and charges for banking   09:35:50

         10        and deposit services are a highly important factor    09:35:52

         11        that the Board should be taking into account under    09:35:56

         12        its CRA analysis.                                     09:35:58

         13             In addition to our concerns about Wells Fargo's  09:36:02

         14        CRA record, I would like to acknowledge the concerns  09:36:04

         15        raised by ACORN in its submission regarding           09:36:08

         16        Norwest's lending practices in low and moderate       09:36:12

         17        income communities.  The statistics cited by ACORN    09:36:16

         18        create additional grounds for concern about the       09:36:20

         19        possible effects of a merger which would relocate     09:36:24

         20        the headquarters to California.  As Congressman       09:36:26

         21        Vento points out in his comments, there already is    09:36:30

         22        a "growing bi-coastal concentration of financial      09:36:32

         23        services companies in the United States."             09:36:36

         24             Relocation of Norwest's headquarters to          09:36:40

         25        California only exacerbates concerns about its        09:36:42



     
     



                                                                     30

          1        lending policies and creates a real concern that low  09:36:46

          2        and moderate income communities in Minnesota could    09:36:50

          3        be overlooked following the merger.  In its           09:36:52

          4        application to the Board, Norwest recognizes the      09:36:56

          5        importance of its CRA responsibilities and states     09:37:00

          6        the merger will provide enhanced lending investment   09:37:02

          7        and service to low and moderate income communities.   09:37:06

          8        At this point, however, details as to how this will   09:37:08

          9        be accomplished are lacking.                          09:37:12

         10             We recognize and appreciate the fact that the    09:37:14

         11        Board already has requested and obtained from         09:37:16

         12        Norwest additional information regarding its CRA      09:37:20

         13        programs and future plans, and we know that the       09:37:24

         14        Board will carefully review this information.         09:37:26

         15        However, in light of the concerns set forth above,    09:37:28

         16        Attorney General Humphrey also requests that the      09:37:32

         17        Board, before it acts on the merger, require Norwest  09:37:34

         18        to submit a detailed commitment for reinvestment in   09:37:38

         19        small businesses and in low and moderate income       09:37:42

         20        communities in Minnesota along the lines of the       09:37:44

         21        recent Nations Bank/Bank America plan for $350        09:37:48

         22        billion in community lending over ten years.          09:37:52

         23             Moreover, Norwest should be required to make a   09:37:56

         24        commitment that it will prevent branch closings in    09:37:58

         25        low income and rural areas and prevent increases in   09:38:02



     
     



                                                                     31

          1        banking fees and decreases in banking services.       09:38:06

          2             Finally, the Board should provide the            09:38:08

          3        opportunity for public comment on Norwest's           09:38:12

          4        commitments on these issues to ensure that the        09:38:14

          5        convenience and the needs of the community truly      09:38:18

          6        will be satisfied following the proposed merger.      09:38:20

          7             Thank you very much for your time this morning.  09:38:24

          8        

          9                  CHAIRPERSON SMITH:  Thank you.  Ms. Clark.  09:38:26

         10         

         11                  MS. CLARK:  Good morning.  And I'd also     09:38:32

         12        like to thank you for this opportunity to make some   09:38:34

         13        public comments.  My name is Karen Clark, and I am    09:38:36

         14        state representative for five inner city              09:38:40

         15        neighborhoods in south Minneapolis, and also the      09:38:42

         16        chair of the Housing -- Housing and Finance           09:38:44

         17        Committee of the Minnesota House of Representatives,  09:38:44

         18        and also a member of the House Financial              09:38:46

         19        Institutions and Insurance Committee.                 09:38:50

         20             I'm worried that the proposed merger between     09:38:52

         21        Norwest and Wells Fargo will negatively affect my     09:38:54

         22        constituents in their access to banking and to        09:38:56

         23        credit.  The Phillips neighborhood, in particular,    09:39:00

         24        where I both live and represent, has suffered from a  09:39:02

         25        history of neglect by banks.  With 17,000 residents,  09:39:04



     
     



                                                                     32

          1        we are the largest neighborhood in Minneapolis, and   09:39:10

          2        I might add, more populous than 35 of Minnesota's     09:39:12

          3        counties, and yet we do not have a single major       09:39:16

          4        banking facility located there.  What does that tell  09:39:20

          5        you about the banking industry's relationship to the  09:39:22

          6        lowest income district in the state?                  09:39:24

          7             As you may know, the State of Minnesota is in    09:39:26

          8        the throes of a serious crisis in affordable          09:39:30

          9        housing.  It's extremely hard to find an affordable   09:39:32

         10        unit of housing to rent or even to buy in the many 

         11        areas throughout the state, but particularly in the   09:39:36

         12        inner city where the vacancy rate in rental housing   09:39:38

         13        is 1.3 to 1.8 percent.  That's critically below the   09:39:42

         14        7 percent that's considered a healthy rental market.  09:39:46

         15             It's estimated that we are lacking 38,000 units  09:39:50

         16        of affordable housing in the metropolitan area        09:39:52

         17        alone.  The problem is both one of not producing      09:39:56

         18        enough new affordable housing and of not preserving   09:39:58

         19        what affordable housing we already have.

         20             If you would walk with me around my              09:40:02

         21        neighborhood, as I recently have been doing a lot     09:40:04

         22        lately, you would count at least 200 units of         09:40:06

         23        boarded or vacant houses in need of repair.  Some of  09:40:10

         24        these are scheduled for demolition, but many of       09:40:12

         25        these homes could be repaired and purchased by our    09:40:14



     
     



                                                                     33

          1        hard-working, low income families that often pay      09:40:16

          2        twice as much in rent as they would for a mortgage    09:40:18

          3        with renovation rolled in for the same house or       09:40:22

          4        similar house.                                        09:40:24

          5             We need Norwest's help to develop better home    09:40:26

          6        mortgage products that would be more responsive to    09:40:30

          7        the particular credit needs of many of our            09:40:32

          8        hard-working, low income families in order to allow   09:40:32

          9        that to happen.                                       09:40:36

         10             Last year in the state legislature, we had an    09:40:36

         11        opportunity to both help rehabilitate and construct   09:40:38

         12        more affordable housing and had an unprecedented      09:40:40

         13        alliance with the private sector to do so.  We        09:40:44

         14        proposed that the state invest $40 million in a       09:40:46

         15        combination of state housing and finance agency       09:40:48

         16        funds and tax credits, and the private sector, with   09:40:52

         17        strong leadership provided by the Minnesota Family    09:40:54

         18        Housing Funds, proposed to match that with $20        09:40:58

         19        million.  Together that would have leveraged another  09:41:00

         20        $180 million in private and federal funding for a     09:41:02

         21        total of $200 million in housing rehabilitation and   09:41:04

         22        new construction dollars for both home ownership and  09:41:08

         23        rental housing.  What you need to know is the result  09:41:10

         24        would have created about 3,000 affordable housing     09:41:14

         25        units. Unfortunately, Governor Carlson vetoed all     09:41:16



     
     



                                                                     34

          1        but $5 million for construction and rehabilitation. 

          2             My understanding is that Wells Fargo recently    09:41:20

          3        pledged that if the merger is approved, they will     09:41:24

          4        lend $5 billion a year in California to minority and  09:41:26

          5        low income customers for home mortgages, small        09:41:30

          6        businesses, and community development.  Before        09:41:32

          7        Norwest moves its headquarters out of Minnesota to    09:41:36

          8        California, we need them to make a similar            09:41:40

          9        commitment to the people of the Phillips              09:41:44

         10        neighborhood, the people of Minneapolis and St.       09:41:44

         11        Paul, and to all Minnesotans.  With their new         09:41:46

         12        savings and combined wealth, they should become a     09:41:48

         13        major private sector leader to match the public       09:41:50

         14        commitment the legislature has already shown it       09:41:52

         15        could provide.

         16             Norwest and Wells Fargo have announced that      09:41:54

         17        this merger will save them $630 million a year on     09:41:58

         18        top of the already large profits these banks make.    09:42:02

         19        We clearly need them to put more money back into our  09:42:04

         20        community in the way that I've mentioned.             09:42:08

         21             One other significant approach to increasing     09:42:10

         22        home ownership opportunities is that the merged       09:42:14

         23        Wells Fargo-Norwest Bank could provide would be to    09:42:14

         24        raise the wages of its front-line workers.  My        09:42:16

         25        information is that the average wages of the workers  09:42:20



     
     



                                                                     35

          1        who work in the banking industry are such that they   09:42:22

          2        can't afford housing in today's market without        09:42:24

          3        public subsidy.  For example, a bank teller at        09:42:26

          4        Norwest-Wells Fargo would need to earn $12.38 an      09:42:30

          5        hour just to be able to afford the fair market rent   09:42:36

          6        for a two-bedroom home here, which is $644 a month,   09:42:38

          7        or would need to earn $18.98, almost $19 an hour, to  09:42:42

          8        rent a four-bedroom housing unit.  My understanding   09:42:46

          9        is that many of Norwest-Wells Fargo's bank employees  09:42:50

         10        don't earn that kind of wage.  Raising their wages    09:42:54

         11        would be one significant way to help with the         09:42:54

         12        housing crisis and community reinvestment.            09:42:58

         13             I am concerned that even though Norwest is the   09:43:00

         14        largest mortgage company in the country, they are     09:43:02

         15        behind other Twin Cities banks in their lending to    09:43:04

         16        people of color and in low income neighborhoods like  09:43:08

         17        those I represent, according to their 1997 records    09:43:10

         18        for conventional and FHA loans.  What is Norwest      09:43:16

         19        doing to address this?                                09:43:16

         20             On the House Financial Institutions Committee,   09:43:18

         21        I fought for fairer bank fees for low income          09:43:22

         22        consumers and senior citizens.  Many of my            09:43:24

         23        constituents have complained about exorbitant         09:43:26

         24        bounced check fees and how hard that is on a fixed    09:43:30

         25        income.  We've heard testimony in particular from     09:43:32



     
     



                                                                     36

          1        many of our military veterans and pensioners.  Now    09:43:34

          2        Norwest just raised their bank check fee from $21 to  09:43:38

          3        $25.  Norwest is one of the biggest depositories of   09:43:44

          4        state funds.  In the 1998 legislature, I authored     09:43:46

          5        legislation that in order for a bank to have the      09:43:50

          6        privilege of being a state depository for Minnesota,  09:43:50

          7        they would have to offer a life-line checking         09:43:54

          8        account.  Norwest fought this legislation.            09:43:58

          9             I'm concerned in general that the Norwest-Wells  09:44:00

         10        Fargo merger will make banking even less affordable   09:44:04

         11        to low income people.  And I understand, as was       09:44:06

         12        mentioned earlier, that Wells Fargo stopped honoring  09:44:08

         13        the free checking for seniors, and that was           09:44:12

         14        described earlier.                                    09:44:14

         15             Since my time is up, I just wanted to say that   09:44:16

         16        I really would appreciate some assurances from the    09:44:18

         17        Board in addressing these questions.  My              09:44:20

         18        constituents need to know, and I hope that you need   09:44:24

         19        to know before you approve the merger.                09:44:24

         20        

         21                  CHAIRPERSON SMITH:  Thank you.              09:44:26

         22        Mr. Curley.                                           09:44:28

         23        

         24                  MR. CURLEY:  Thank you, Ms. Smith.  Thank   09:44:30

         25        you for this opportunity to testify before the Board  09:44:30



     
     



                                                                     37

          1        this morning.  I bring greetings from the -- from a   09:44:34

          2        nation within a nation, and that is the Navajo        09:44:38

          3        nation.  My presentation will cover a few             09:44:40

          4        experiences the Navajos have had with Norwest Bank,   09:44:44

          5        Arizona, but before I move into these experiences,    09:44:50

          6        let me express the fact that the Navajo nation is     09:44:52

          7        pleased and honored to have four Norwest banks        09:44:54

          8        located within the boundaries of our reservation.     09:44:58

          9        Furthermore, we are proud to have gainfully employed  09:45:02

         10        qualified Navajos within these banks.                 09:45:06

         11             In late 1993, Norwest Bank of Arizona made       09:45:10

         12        commitments over a ten-year period, and there are     09:45:16

         13        four commitments that they made that I want to cover  09:45:20

         14        this morning.  The first one is to open two           09:45:22

         15        full-service banking facilities on the Navajo nation  09:45:26

         16        and improve the two existing banking locations.       09:45:30

         17        Second, to originate 60 million in loans over a       09:45:34

         18        ten-year period.  Third, an annual contribution of    09:45:38

         19        $5,000 to the Navajo Nation College Scholarship       09:45:44

         20        Fund.  Four, establish a community advisory board     09:45:48

         21        comprised of seven members representative of the      09:45:52

         22        Navajo nation, and I'm one of those community         09:45:54

         23        representatives.                                      09:45:58

         24             Norwest's record against this commitment so far  09:45:58

         25        has demonstrated the bank's sincerity and good faith  09:46:04



     
     



                                                                     38

          1        concerning the people of the Navajo nation.           09:46:08

          2        Norwest's performance on each of the above            09:46:10

          3        commitments through June 1998 is as follows.  Number  09:46:14

          4        one, Norwest Bank-Arizona has invested 4 million, as  09:46:18

          5        Mr. Biller has said, to build its four full-service   09:46:24

          6        bank branches within the boundaries of the Navajo     09:46:28

          7        nation.  These offices make up the Norwest Northeast  09:46:30

          8        Bank.  These branches are located in small towns      09:46:36

          9        within the reservation.  One is in Window Rock -- I   09:46:40

         10        know you can't identify with this -- one is in Tubac  09:46:44

         11        City, one is in Kayenta, and one is in Chinle.  All   09:46:48

         12        four branch managers are of Navajo descent, and the   09:46:54

         13        remaining 35 employees all but two are of Navajo      09:46:56

         14        decent.                                               09:47:02

         15             Number two, over the first four and a half       09:47:02

         16        years of the ten-year lending commitment, Norwest     09:47:04

         17        has lent almost $35 million to the Navajo people.     09:47:10

         18        And there's another side to this.  Norwest has been   09:47:14

         19        working directly with the Navajo nation government,   09:47:16

         20        and they have lent to one of our enterprises out      09:47:20

         21        there called the Navajo Agricultural Products         09:47:24

         22        Corporation, a credit line -- or a loan of $7         09:47:28

         23        million, a line of credit of $3 million.  We also     09:47:34

         24        have a Navajo Arts and Crafts Guild up there, and     09:47:38

         25        they've loaned them $129,000,998.77.  And then to     09:47:42



     
     



                                                                     39

          1        the Navajo nation itself, we have two term loans of   09:47:50

          2        $1,640,000, $7,500,000.  We also have a Navajo        09:48:00

          3        Housing Authority, and there is a credit line of      09:48:04

          4        $1,395,000.  As I mentioned earlier, there's a $60    09:48:10

          5        million commitment that Norwest made to the Navajo    09:48:14

          6        nation.  Part of this $60 million commitment was a    09:48:18

          7        commitment of approximately 28 million in mortgage    09:48:20

          8        loans on the reservation.                             09:48:24

          9             In order to help ensure that the mortgage        09:48:26

         10        lending goal is achieved, Norwest has obtained the    09:48:28

         11        approval offering the HUD 184 Loan Program to the     09:48:32

         12        Navajo nation; has already closed seven mortgage      09:48:36

         13        loans under the program.                              09:48:40

         14             Norwest has contributed to the Navajo Nation     09:48:42

         15        Scholarship Fund each year, in addition to other      09:48:46

         16        charitable contributions, to Navajo nation events     09:48:52

         17        and organizations $5,000 plus, each and every year.   09:48:54

         18             Number four, Norwest has had an active           09:49:00

         19        Community Advisory Board in place within the Navajo   09:49:02

         20        nation since 1994, and I've been on that board since  09:49:08

         21        1994, the members of which are Navajo business and    09:49:10

         22        community leaders.  The Community Advisory Board      09:49:14

         23        works with the local bank to provide input and to     09:49:16

         24        ensure that the bank stays in touch with the local    09:49:20

         25        needs and is able to be responsive to those needs.    09:49:24



     
     



                                                                     40

          1             Now, in conclusion, and from our perspective of  09:49:28

          2        the Navajo nation, this is very critical.  Norwest    09:49:32

          3        has taken a bold step in banking with the Navajo      09:49:36

          4        nation in that it is a pioneer from the financial     09:49:40

          5        community which has truly invested in our nation and  09:49:44

          6        has respected our sovereignty along this journey of   09:49:48

          7        developing our economic basis.  Thank you.            09:49:56

          8        

          9                  CHAIRPERSON SMITH:  Thank you very much.    09:49:58

         10        Questions from the panel?  Thank you very much for    09:50:00

         11        coming this morning.  We appreciate hearing from      09:50:04

         12        you.  And I'll say both for your benefit and for the  09:50:06

         13        benefit of subsequent panels that five minutes is a   09:50:10

         14        very short time, and please, we do want to have your  09:50:14

         15        full statements in the record.  So if you have not    09:50:18

         16        already given them to us, please leave them with the  09:50:22

         17        Federal Reserve staff and we will make sure that      09:50:24

         18        they all get into the official transcript.            09:50:28

         19             I also will remind -- I don't know whether this  09:50:30

         20        is a reminder or I'm saying it for the first time --  09:50:34

         21        if the next panel could come on up -- but we -- our   09:50:38

         22        timekeepers will be holding up cards that let the     09:50:42

         23        witness know when there is one minute remaining and   09:50:46

         24        then another one when the time has expired.  As a     09:50:50

         25        last resort, if you happen not to be looking up at    09:50:56



     
     



                                                                     41

          1        them to get the signals, we do have a little bell     09:51:00

          2        that we will ring -- or they will ring.               09:51:02

          3             We're going to start with Mr. Bryant.  We don't  09:51:24

          4        have Mr. Bryant.  Mr. Bansen -- Ms. Bansen.           09:51:30
 

	
Last update: December 3, 2010