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Public Meeting Transcripts

Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation

Wednesday, July 7, 1999

Transcript of Panel Thirteen

       20            MS BODINGTON:  I'm Susan Bodington.  I am 
         21   director of housing policy at Rhode Island Housing 
         22   and speaking on behalf of Rhode Island Housing and 
         23   Mortgage Finance Corporation. 
         24            Rhode Island Housing is the state's housing 
         25   finance agency in Rhode Island.  We're a 
  0338
          1   self-supporting quasi-public corporation.  We offer 
          2   over two dozen housing-related programs targeted to 
          3   low- and moderate-income families.  We administer 
          4   more than 13,000 federally subsidized apartments.  
          5   Our home ownership division provides counseling, 
          6   down-payment and closing cost assistance, and 
          7   low-interest loans to first-time home buyers.  We 
          8   purchase loans from participating lenders and 
          9   originate and service loans ourselves. 
         10            Since 1973, Rhode Island Housing has 
         11   financed the purchase, construction or 
         12   rehabilitation of more than 65,000 homes and 
         13   apartments. 
         14            We have several concerns regarding the 
         15   merger of Fleet and BankBoston.  BankBoston, 
         16   compared to Fleet, has a much better record of 
         17   community lending in Rhode Island and provides more 
         18   responsive service to lower-income customers and to 
         19   community groups.  Rhode Island is a small state 
         20   with limited resources and cannot afford to lose the 
         21   services provided by BankBoston. 
         22            We are also concerned that the lack of 
         23   competition in Rhode Island will severely limit 
         24   access to financial resources unless efforts are 
         25   made to maintain at least the current level of 
  0339
          1   investment by the combined banks and attract new 
          2   financial interests which will be required to 
          3   provide financial services to lower-income 
          4   communities. 
          5            Low- and moderate-income communities in 
          6   Rhode Island depend on financial institutions to 
          7   invest in their neighborhoods, their businesses, and 
          8   to offer financial services to first-time home 
          9   buyers. 
         10            Rhode Island Housing has experienced a 
         11   dramatic decline in Fleet's commitment to first-time 
         12   home buyers in the past five years.  In 1994 Fleet 
         13   was our top lender, closing nearly $32 million in 
         14   mortgages.  By 1998 Fleet had dropped to fifth among 
         15   lenders offering Rhode Island Housing mortgages and 
         16   closed only $6.6 million, a decrease in investment 
         17   of over $25 million. 
         18            And this, by the way, does not include the 
         19   Shawmut portfolio, where Rhode Island Housing saw a 
         20   decline of an additional $16 million through the 
         21   loss of Shawmut. 
         22            This is an 80 percent decline, which 
         23   indicates to us that there's been a shift in focus 
         24   from the needs of our low-income customers.  Fleet's 
         25   share of the total mortgage market in Rhode Island 
  0340
          1   fell during that same period from 8.8 percent of the 
          2   total mortgage market to only 3.3 percent in 1998. 
          3            During that same period, between 1994 and 
          4   1998, BankBoston's mortgages decreased as well, from 
          5   $25 million to $14 million, a 44 percent decline.  
          6   But they did maintain their overall effort in 
          7   offering Rhode Island Housing programs, and they're 
          8   our third most productive lender. 
          9            Our concern is that the Fleet trend will 
         10   prevail and will similarly impact BankBoston 
         11   participation in investing in low- and 
         12   moderate-income communities. 
         13            We have also witnessed a similar pattern in 
         14   the lack of attention to customer service provided 
         15   to low- and moderate-income borrowers.  Fleet does 
         16   not provide the local contact that low- and 
         17   moderate-income customers needs to work out their 
         18   problems.  Instead, nontraditional loans are 
         19   frequently sold on the secondary market and are then 
         20   treated as standard loans. 
         21            Lack of responsive servicing for first-time 
         22   home buyers' loans has resulted in a very high 
         23   delinquency rate for Fleet loans, 12 percent, as 
         24   compared to 6.5 percent that we see for similar 
         25   loans in the Rhode Island Housing portfolio.  
  0341
          1            Financial services for lower-income 
          2   communities requires a commitment to training new 
          3   home buyers and providing the housing counseling 
          4   services necessary to help them succeed.  Without a 
          5   local contact, you cannot effectively serve lower- 
          6   income communities. 
          7            We feel that Fleet should be required to 
          8   adopt BankBoston's community lending practices as a 
          9   condition of the merger.  Rhode Island Housing 
         10   depends on the banks as partners to implement our 
         11   mission to provide safe, affordable, healthy 
         12   housing.  Through consolidations there are now only 
         13   three major banks in the State of Rhode Island to 
         14   assist us with that mission. 
         15            Rhode Island would be losing its second 
         16   largest bank, a good originator with high quality 
         17   production as a participant in our programs, with 
         18   the loss of BankBoston.  In return, we need Fleet to 
         19   assume new policies to benefit consumers and to 
         20   increase the level of investment in lower-income 
         21   communities in Rhode Island. 
         22            We recommend that the Federal Reserve Bank 
         23   require the maintenance of at least the current 
         24   level of investment represented by the two 
         25   institutions.  In addition, we recommend that the 
  0342
          1   Federal Reserve require entities acquiring the 
          2   assets of BankBoston in Rhode Island to make similar 
          3   commitments to investment in lower-income 
          4   communities and assure improved customer service by 
          5   providing local contacts who can resolve problems 
          6   and address customers' needs.
          7            HEARING OFFICER SMITH:  Thank you. 
          8            Ms. Clement.   
          9            MS. CLEMENT:  My name is Brenda Clement, 
         10   and I'm the executive director of the Housing 
         11   Network, which is the state association of CDCs or 
         12   Community Development Corporations in Rhode Island.  
         13   Our member organizations work throughout the state 
         14   developing affordable housing, working on a number 
         15   of community economic development projects including 
         16   home repair loan programs, Main Street 
         17   revitalization programs, and home buyer education 
         18   and counseling programs. 
         19            We are here to express our concern and 
         20   opposition to the merger of Fleet and BankBoston 
         21   because of our concern of the lack of resources or 
         22   the dwindling number of resources that are available 
         23   in Rhode Island to address our affordable housing 
         24   and community economic development needs. 
         25            The needs are indeed great.  You have 
  0343
          1   already heard from many other states about the 
          2   concerns of housing needs in the Northeast, and 
          3   Rhode Island is no exception to that.  We have one 
          4   of the lease affordable states in the country.  We 
          5   have one of the lowest home ownership rates in the 
          6   country.  We have also one of the oldest housing 
          7   stocks in the country, which leads to numerous 
          8   problems, including a major lead problem. 
          9            The problem is not going to be solved by 
         10   one entity.  Government alone can't solve it, 
         11   nonprofits alone can't solve it, private foundations 
         12   and institutions alone can't solve it, but together 
         13   we can.  If our private industry in terms of bank 
         14   investment and bank dollars disappear, then we are 
         15   indeed in serious problems in Rhode Island. 
         16            Over 20 years ago now, I set up my first 
         17   savings account with then Industrial National Bank, 
         18   which was Fleet's earlier beginning origins in Rhode 
         19   Island, setting up my savings account for my first 
         20   job, ironically at a bank, one of the branches that 
         21   will be closed as part of the divestiture plan in 
         22   downtown Pawtucket, another blow to a downtown 
         23   environment, unfortunately, that needs no other 
         24   blows. 
         25            But consequently, I've watched Fleet all my 
  0344
          1   adult life as it's grown and developed into the 
          2   institution that it is, and have seen it grow and 
          3   develop into a way where bigger is not necessarily 
          4   better, particularly im my last five years here, in 
          5   my role as executive director of the Housing 
          6   Network. 
          7            If you will excuse the metaphor, in some 
          8   ways Fleet has sailed its way out of the Ocean State 
          9   and has left behind numerous needs and numerous 
         10   concerns, at least in the neighborhoods and the 
         11   communities that our members work in. 
         12            We are very concerned about the continued 
         13   regionalization and growth of the bank and very 
         14   concerned, as are other advocates in other 
         15   communities, about the need for a formal written 
         16   agreement and formal promises. 
         17            My old high school principal used to say, 
         18   "What is not said is not understood," and that is 
         19   very true and very clear to me, unless we see it in 
         20   writing, and unless we have commitments for us to 
         21   continue to grow as partners. 
         22            Even after -- Fleet certainly hasn't left 
         23   Rhode Island, and certainly won't leave Rhode Island 
         24   even after this divestiture, but we need to make 
         25   sure that they continue to provide services and 
  0345
          1   resources to all Rhode Islanders.  And that is one 
          2   of the reasons why we're here today to express our 
          3   concerns and to make sure the low- to moderate- 
          4   income individuals that we serve are continued to be 
          5   served and maintained. 
          6            We want to make sure that any agreement or 
          7   any promises or proposals that are made are fair to 
          8   Rhode Islanders, and are fair to the low- to 
          9   moderate-income Rhode Islanders, and that the 
         10   agreement is clear and broken down by state. 
         11            You have heard that several different times 
         12   already from other speakers, but to us it is 
         13   critical.  And to us it is critical, as Susan has 
         14   already mentioned, because there are not many banks 
         15   in town in Rhode Island.  It's a small state and 
         16   it's a small population, and when a merger of this 
         17   size happens, it has significant impacts on the 
         18   quality of life and the quality of programs in the 
         19   neighborhoods and communities that we serve. 
         20            So we urge you to consider that when you 
         21   are looking at and reviewing this application. 
         22            Thank you. 
         23            HEARING OFFICER SMITH:  Reverend 
         24   Washington. 
         25            REVEREND WASHINGTON:  I'm Reverend Joseph 
  0346
          1   E. Washington, Chairman of the Board of Directors 
          2   and CEO of the Organization for a New Equality, 
          3   which our national headquarters are based here in 
          4   Boston, Massachusetts.  And I am also the senior 
          5   minister at Brooks Memorial United Methodist Church 
          6   in Jamaica Queens, New York. 
          7            ONE is a national economic and civil rights 
          8   organization that works to advance economic 
          9   empowerment for minorities and women and others who 
         10   have traditionally been locked out of the economic 
         11   mainstream of life.  ONE has labored over its 
         12   14-year history to encourage banks and other 
         13   financial institutions to do well by doing good, to 
         14   invest in communities and individuals that have 
         15   traditionally been overlooked. 
         16            We have been part of great strides that 
         17   have been made over the past decades on the part of 
         18   banks seeking to forge productive relationships with 
         19   minority and low-income communities.  And we have 
         20   continually stressed the overwhelming importance of 
         21   access to credit and capital in developing the 
         22   economic infrastructure in our communities 
         23   throughout this country. 
         24            I would be remiss if I did not acknowledge 
         25   the support that ONE has received through Agnes 
  0347
          1   Bundy from Fleet, as well as BankBoston, Ira Jackson 
          2   and Gail Snodis, as we tried to advocate for the 
          3   least of these in the United States of America.
          4            The proposed merger of Fleet and BankBoston 
          5   represents a part of bigger is better attitude in 
          6   American culture and particularly in the modern 
          7   financial services industry. 
          8            Why not add one and one together and get 
          9   something even greater than two?  This was the 
         10   optimistic philosophy of our CEOs Murray and Gifford 
         11   on March 15th.  We are insisting that one plus one 
         12   must be greater than two, not only for the 
         13   shareholders who benefit financially from the 
         14   merger, but also for low- and moderate-income and 
         15   minority communities for whom bigger does not 
         16   necessarily mean better, and which historically have 
         17   not benefited from these large mega-mergers. 
         18            This merger, by combining the two largest 
         19   banks in New England into a leviathan that will 
         20   dwarf any regional competitor even after divestiture 
         21   is of serious concerns to us.  The significant 
         22   reduction of competition that will result from the 
         23   proposed merger makes it especially critical that 
         24   Fleet and BankBoston take specific steps to ensure 
         25   that the new bank's ability to meet the needs of 
  0348
          1   low- and moderate-income minority communities is not 
          2   jeopardized. 
          3            The proposed Fleet-Boston corporation will 
          4   be the eighth largest commercial bank in the United 
          5   States.  It will have an opportunity to emerge as a 
          6   leader in the industry, not only through financial 
          7   services and products it offers, but also through 
          8   its commitment to and investment in its communities. 
          9            In order to make this happen, ONE, along 
         10   with several other community organizations who you 
         11   have heard from this morning and afternoon, has 
         12   urged the banks to make specific commitments to 
         13   expand successful programs and products and to 
         14   partner with community groups in designing and 
         15   implementing community investment plans throughout 
         16   the new bank's service areas. 
         17            Both banks have made significant strides in 
         18   community investment.  Through its First Community 
         19   Bank, BankBoston has pioneered a delivery model for 
         20   banking services to inner-city and lower-income 
         21   communities.  BankBoston Community Development 
         22   Corporation, the first urban investment bank in 
         23   America to be chartered by a commercial bank, 
         24   committed well over $20 million in equity 
         25   investments in Massachusetts alone.  Fleet Community 
  0349
          1   Development Corporation has worked to build capacity 
          2   in institutions that are involved in community 
          3   economic development in low- and moderate-income 
          4   areas. 
          5            These are real accomplishments, and the 
          6   point of our concern is not to diminish them, but 
          7   rather to assert the bank's need to tell us 
          8   specifically how programs like these will be 
          9   maintained and enhanced through the merger. 
         10            In the area of small business lending, for 
         11   example, Fleet and BankBoston have distinct records 
         12   and have reached different markets, and if we could 
         13   get the overhead on, we have a little graph for you.  
         14   (Overhead shown)
         15            In the area of the small business lending, 
         16   for example, Fleet and BankBoston have distinct 
         17   records and have reached different markets.  Data 
         18   reported to the Federal Financial Institution 
         19   Examination Council for 1997 demonstrates that Fleet 
         20   made a slightly greater percentage of its small 
         21   business loans in LMI areas that BankBoston did. 
         22            Actually Fleet made 22.6 percent of its 
         23   small business loans in LMI areas within assessment 
         24   areas in Connecticut, Massachusetts, Rhode Island 
         25   and New York State, while it made only 15 percent of 
  0350
          1   small business loans in these areas within New 
          2   Jersey and New York City.  This raises an additional 
          3   concern about the consistency of the merged 
          4   institution's commitment to making affordable 
          5   products available to minority and low- and 
          6   moderate-income communities. 
          7            At the same time, BankBoston made a 
          8   significantly greater percentage of smaller loans 
          9   than Fleet did, thereby meeting the needs of 
         10   business owners who require smaller amounts of 
         11   capital and who have often difficulty obtaining low- 
         12   cost bank loans for these small amounts. 
         13            Fleet made a higher percentage of its loans 
         14   to smaller businesses, those with annual revenues of 
         15   less than $1 million.  The banks' proposed community 
         16   commitment to make $7.5 billion in small business 
         17   loans does not tell us how these different markets 
         18   will continue to be served. 
         19            ONE and other community organizations have 
         20   asked the banks to commit to specific percentage 
         21   goals in each of these areas, as well as to make 
         22   specific small business equity commitments and 
         23   commitments to investment in community-based 
         24   alternative loans.  The specifics of what we have 
         25   proposed are outlined in our written testimony 
  0351
          1   today. 
          2            And in closing, there are two primary steps 
          3   to be taken.  First, the banks must engage in 
          4   respectful give-and-take partnership with community 
          5   groups who know the needs of different cities, 
          6   towns, and states best.  These partnerships need to 
          7   play an active role in determining both the design 
          8   and the implementation of the proposed Fleet-Boston 
          9   Corporation's community investment commitments. 
         10            The second and related step is putting 
         11   substance behind its numbers.  Fleet and BankBoston 
         12   must enable community groups and concerned citizens 
         13   to judge the adequacy of their proposed commitments 
         14   to low- and moderate-income and minority communities 
         15   by giving us detailed descriptions of what money 
         16   will be allocated and to which programs where.  
         17   Without such details, the commitments will be 
         18   meaningless, because they will be neither verifiable 
         19   or enforceable. 
         20            ONE therefore requests that the Federal 
         21   Reserve Board extend the public comment period on 
         22   the proposed Fleet-Bank Boston merger and withhold 
         23   any approval of the merger until such time as the 
         24   banks' community investment commitments may be 
         25   completed and adequately reviewed. 
  0352
          1            Thank you very much.
          2            HEARING OFFICER SMITH:  Thank you. 
          3            Now our last speaker, whose name I will not 
          4   try to pronounce. 
          5            MR. NEIRINCKX:  My name is Ray Neirinckx, 
          6   and I'm the coordinator of the Rhode Island 
          7   Community Reinvestment Association. 
          8            There is a wonderful quote from the 
          9   Tennessee William play Cat on a Hot Tin Roof that I 
         10   think best describes a number of the panelists that 
         11   have raised objections and outright opposition to 
         12   the merger:  "We have to distrust each other.  It's 
         13   our only defense against betrayal."  And I think 
         14   that describes the ongoing relationship many of us 
         15   have with Fleet. 
         16            The Rhode Island Community Reinvestment 
         17   Association is a 13-year statewide organization 
         18   working to encourage public and private reinvestment 
         19   in the housing and community economic development of 
         20   low- and moderate-income neighborhoods in Rhode 
         21   Island. 
         22            Back in 1985, I was part of a group of 21 
         23   protestants that opposed Fleet's acquisition of 
         24   First Connecticut Bank Corp.  14 years later RICRA 
         25   again finds itself protesting another merger of 
  0353
          1   Fleet with BankBoston. 
          2            RICRA has worked hard with a number of 
          3   organizations in the region to call for a series of 
          4   public hearings on this merger.  Therefore, we are 
          5   extremely disappointed that the Board of Governors 
          6   of the Federal Reserve has granted only one public 
          7   hearing that is two weeks after the comment period 
          8   ended and just two days after the 4th of July long 
          9   holiday weekend and the beginning of prime vacation 
         10   time.  Clearly July 7th must be bankers independence 
         11   day with this one-time public hearing. 
         12            RICRA contends that not only should the 
         13   comment period be extended, but a series of public 
         14   hearings should be held on the $14.6 billion pledge 
         15   that Fleet has proposed without any public written 
         16   program being made available for review. 
         17            RICRA opposes the merger for several 
         18   reasons, including Fleet's poor performance in the 
         19   areas of mortgage servicing, high consumer product 
         20   fees, lending activity, commitment to previous 
         21   agreements with RICRA.  And I'm not going to go 
         22   through all of them, because they're presented in 
         23   the written testimony, but I do want to highlight 
         24   sort of Fleet's reincarnations, which has to do with 
         25   their performance with us. 
  0354
          1            In 1995, we protested the Shawmut merger, 
          2   and after that we saw INCITY, Fleet Focus, and the 
          3   more recent 2020 Vision, which we believe in and of 
          4   itself, if you look at those performances, is 
          5   judgment enough to deny this merger. 
          6            Fleet Bank signed an agreement with us in 
          7   1986 and then amended it successfully in 1989.  
          8   RICRA has enjoyed a positive yet contentious 
          9   relationship to improve programs, practices and 
         10   products in the state. 
         11            However, since the changes within Fleet 
         12   since the mergers, RICRA has not been able to agree 
         13   to any improvements, changes, deletions or 
         14   extensions to our agreement.  And we have to be 
         15   clear about this, we have no financial benefit to 
         16   any of the agreements we have.  We don't receive 
         17   contributions.  There is no contract with us.  It is 
         18   just to provide the best programs and products for 
         19   the people of Rhode Island. 
         20            So what difference does it make to sign 
         21   another agreement with us?  It is our position that 
         22   Fleet's failure to receive nothing higher than the  
         23   "satisfactory" CRA rating since breaking our 
         24   agreement is proof that Fleet INCITY is puff and 
         25   fluff.  In Fleet's 2020 Vision they chose not to 
  0355
          1   invite RICRA to their PC CRA love-fest. 
          2            That was fine.  RICRA did not choose to 
          3   participate -- excuse me.  However, we did choose to 
          4   participate in the Rhode Island follow-up meeting.  
          5   RICRA found nothing of substance in that event 
          6   either.  However, in the spirit of Fleet's remarks 
          7   that the bank wanted input, RICRA presented a nine- 
          8   point program with some specific recommendations. 
          9            Just so Fleet cannot accuse us of being 
         10   unrealistic or that it was a radical plan, we'll 
         11   give you just a brief outline of some of those 
         12   proposals:  Agree to apply to the Affordable Housing 
         13   Program of the Federal Home Loan Bank Board of 
         14   Boston.  Agree to explore a securitization pool for 
         15   the refinancing of multifamily development of 
         16   at-risk, expiring-use products of HUD subsidies. 
         17   Agree to seek from the Office of the Controller of 
         18   the Currency approval to track small business 
         19   lending by race and gender, and to not charge an 
         20   EBT, electronic benefit transfer, ATM surcharge for 
         21   five years. 
         22            This letter was hand-delivered on May 21st 
         23   1998.  RICRA is still awaiting a written reply. 
         24            All of this relates to the pledge, which 
         25   has not been made available in writing to us.  $14.6 
  0356
          1   billion is a promise of what, the failure of INCITY, 
          2   the failure of 2020? 
          3            If we take Fleet at its word in a 
          4   conversation that RICRA had on June 25th of this 
          5   year, that Fleet is looking to achieve an 
          6   outstanding CRA rating going forward, then clearly 
          7   the $14.6 billion, should be closer to $60 billion. 
          8            Finally, Fleet has announced their 
          9   sponsorship and affiliation with Major League 
         10   Baseball.  In looking at the Office of the 
         11   Controller of the Currency's summary of state and 
         12   multistate MSA ratings for their CRA performance, 
         13   Fleet would have a .500 batting average for its 
         14   performance in the three test ratings for the six 
         15   states, a guarantee of being inducted into the Hall 
         16   of Fame, but deplorable for a bank.   In fact, if 
         17   you apply a community credit scoring model, then 
         18   your answer is very simple:  9 low satisfactories 
         19   out of 18 blocks, merger denied. 
         20            And I would like to leave you with a little 
         21   bank that says "Fleet Boston" -- you press it down, 
         22   and it runs away -- because we think that's what 
         23   Fleet is going to do if you approve this merger. 
         24            Thank you.
         25            HEARING OFFICER SMITH:  We're going to take 
  0357
          1   the next panel, and then we will take a five-minute 
          2   break.
          3            (Pause)
          4            HEARING OFFICER SMITH:  We'll start with 
          5   Mayor Albano
        


	
Last update: December 3, 2010