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Public Meeting Transcripts

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

Wednesday, July 7, 1999

Transcript of Panel Fourteen

        6            MAYOR ALBANO:  Good afternoon.  Thank you 
          7   for the opportunity.  My name is Michael Albano.  
          8   I'm the Mayor of Springfield, Massachusetts, a city 
          9   90 miles to the west of about 156,000 citizens. 
         10            I am here to testify not necessarily in 
         11   opposition nor in favor, but to ask the Board to be 
         12   considerate of cities like Springfield in developing 
         13   a policy on approving of this merger.  One of the 
         14   common complaints I have received as Mayor of 
         15   Springfield is that decisions on business concerns 
         16   and Community Reinvestment Act dollars have to be 
         17   done either in Boston or some other major city. 
         18            What we are looking for in western 
         19   Massachusetts is that we do not divide the economy 
         20   into two areas, one east of 495 and one west of 495.  
         21   And it's important that we have decisions that are 
         22   made on the local level to encourage investment as 
         23   we try to rebuild a city such as Springfield.  And 
         24   with that in mind, I would ask you to consider these 
         25   recommendations, should this merger be approved. 
  0358
          1            First, we ask that the new bank name a 
          2   regional CEO to the Springfield bank who is 
          3   knowledgeable about the challenges that our city 
          4   faces, understands the needs of our business 
          5   community and the community at large, and most 
          6   important of all, has the capability to make 
          7   decisions regarding lending and community 
          8   reinvestment policy. 
          9            Now, while I am being parochial in my 
         10   comments today, I would say that mayors across the 
         11   region that this merger would impact would have 
         12   similar comments as mine as the Mayor of 
         13   Springfield. 
         14            Second, we ask that within the new 
         15   Springfield bank structure that a full-time 
         16   community reinvestment office be created, and that 
         17   it will be charged with the responsibility of 
         18   working with various community-based groups as well 
         19   as the City, in its efforts that are aimed at 
         20   creating new neighborhood housing and economic 
         21   development opportunities. 
         22            Third, in an effort to help the very small 
         23   entrepreneur, we ask that the new bank create a 
         24   microbusiness fund in the amount of $500,000, that 
         25   this fund could be modeled after the highly 
  0359
          1   successful ACORN fund which has generated thousands 
          2   of new jobs particularly within the low-income 
          3   neighborhoods. 
          4            Fourth, we ask that the new bank establish 
          5   a pool of funds in the amount of $5 million that 
          6   could be used as seed capital for new businesses 
          7   locating to Springfield.  This more venture-oriented 
          8   fund would be used for both product development and 
          9   working capital by start-up companies. 
         10            Fifth, to enhance our City's home ownership 
         11   efforts, we ask that the new bank create a pool of 
         12   funds in the amount of $2 million that could be used 
         13   for soft second mortgages and closing costs. 
         14            Sixth, to make home ownership a reality for 
         15   a greater number of people, we ask that the bank 
         16   commit to making $10 million in low-interest loans 
         17   to first-time home buyers. 
         18            Seventh, to assist present homeowners we 
         19   ask that the new bank increase their participation 
         20   by adding another $1 million to our very successful 
         21   home improvement program. 
         22            These are general comments about what my 
         23   City's needs are, and I think they are reflective of 
         24   cities, as I said, like Springfield across the 
         25   region which would be impacted by this merger. 
  0360
          1            In conclusion, I would say that cities like 
          2   Springfield can be rebuilt, and we are doing that in 
          3   my City, but we need assistance in the form of 
          4   private investment. 
          5            This merger, if done with guarantees like I 
          6   have outlined, can truly make a difference in  the 
          7   Cities like Springfield, Massachusetts.  And I thank 
          8   you for your consideration.  Thank you. 
          9            HEARING OFFICER SMITH:  Thank you very 
         10   much. 
         11            Representative Barrios. 
         12            REPRESENTATIVE BARRIOS:  Good afternoon.  
         13   My name is Jarrett Thomas Barrios.  I'm the State 
         14   Representative from Cambridge, Massachusetts. 
         15            By way of background, I am on the Banks and 
         16   Banking Committee for the House of Representatives.  
         17   I'm also a member of the Housing and Urban 
         18   Development Committee.  I also used to work at the 
         19   Federal Trade Commission in the Division of Credit 
         20   Practices, doing Equal Credit Opportunity Act work.  
         21   I'm also a real estate lawyer, and I want to talk to 
         22   you today about a very specific issue, and that 
         23   deals with home mortgage lending as an impact of the 
         24   merger. 
         25            We have been assured throughout this in the 
  0361
          1   press and privately that this merger will be a one 
          2   plus one is greater than two.  You have heard that a 
          3   lot today.  But I would point you to some of the 
          4   evidence as to Fleet's past behavior in mergers 
          5   which would give us a cause for some concern. 
          6            I'm one of the founding members of the 
          7   Latino Caucus in the Legislature.  I have been sort 
          8   of particularly paying attention to Fleet's behavior 
          9   in the Latino community, and I want to just cite a 
         10   couple of statistics for you. 
         11            Prior to Fleet's mergers with NatWest and 
         12   Shawmut, the total banks, those three banks lending 
         13   in 1995, there was, I guess, 1575 home mortgages 
         14   underwritten by the three banks.  Post-merger in 
         15   1997, only 600 loans were underwritten.  That's a 
         16   decline of 62 percent. 
         17            I understand that part of this perhaps has 
         18   something to do with divestiture post-merger.  
         19   However, I would just ask you to contrast that with 
         20   the BayBank-BankBoston merger.  Post-merger, there 
         21   was actually an increase of 83.3 percent lending in 
         22   the Latino community. 
         23            These statistics matter because what they 
         24   tell us is how post-merger we might expect Fleet to 
         25   behave, as Fleet is the ultimate inheritor and 
  0362
          1   director of how the lending is going to continue. 
          2            Fleet's takeover of BankBoston is a cause 
          3   of concern for us because 63 percent of loans to 
          4   low- and moderate-income people, to Latinos, 
          5   African- Americans and other minorities, come right 
          6   now in Massachusetts from Fleet and BankBoston. 
          7            What that's going to be post-merger we're 
          8   not sure, but nonetheless, we can be sure that Fleet 
          9   in large part is going to be the only game in town.  
         10   And for us, who are concerned about home mortgages 
         11   and home ownership, in advancing those goals in the 
         12   minority communities, we must be concerned by what 
         13   we see in Fleet's behavior in the past. 
         14            These numbers give some statistical context 
         15   to my community's anxiety over this merger.  I want 
         16   to give you a little bit of business and policy 
         17   context as well.  As a member of the Housing 
         18   Committee, we see a lot of legislation which 
         19   attempts to advance the goal of home ownership, 
         20   which is a policy initiative both Republicans and 
         21   Democrats seem to embrace. 
         22            Recently, we were able to secure increase 
         23   in funding for the soft second mortgage program, but 
         24   no matter what we do in the Legislature, it only 
         25   gets around the edges.  For example, the soft second 
  0363
          1   mortgage only is a 20 percent second mortgage.  We 
          2   still have to have a first mortgager, someone to 
          3   underwrite that initial loan, somebody which is 
          4   usually Fleet or BankBoston if we're in 
          5   Massachusetts. 
          6            The private market really must participate 
          7   in our efforts if we're going to make an impact at a 
          8   policy level in advancing home ownership as a goal 
          9   throughout Massachusetts. 
         10            So I guess in this context the statistical 
         11   anxiety that many of the people have been testifying 
         12   today, I think, reproduces itself a little bit as a 
         13   suspicion:  How is it that the number of loans has 
         14   declined so much?  What is it about the business 
         15   behavior of Fleet which should give us concern?
         16            A demonstrated record by Fleet in the past 
         17   of inflexible lending criteria through mortgage 
         18   scoring and other practices really is a cause for 
         19   some of this concern.  Diminished number of loans 
         20   originated by Fleet suggests that business practices 
         21   inherent in the loan origination process of Fleet 
         22   are not the same practices of BankBoston and other 
         23   victims of the mergers, if you will, of past mergers 
         24   by Fleet, that these business practices by Fleet are 
         25   somehow toxic to low- and moderate-income 
  0364
          1   communities, to minority communities, communities 
          2   which would like to advance as a policy goal that of 
          3   home ownership. 
          4            And now the Community Reinvestment Act of 
          5   course doesn't require any bank to lend more to low- 
          6   and moderate-income neighborhoods, to minority 
          7   communities, but it does allow you, as those who 
          8   review, through the merger process, their track 
          9   records, it does allow you to ask questions which I 
         10   am not able to as a legislator, which communities 
         11   activists aren't able to, as representatives from 
         12   their bully pulpits in their communities. 
         13            So I guess I would ask you, as a 
         14   representative of the 450,000 Latinos in this 
         15   Commonwealth, and the 2 million people who are low 
         16   and moderate income in this Commonwealth who don't 
         17   own homes but perhaps hope to one day, to ask hard 
         18   questions and be mindful of Fleet's past practices, 
         19   and respect the community's request for a written 
         20   agreements from Fleet, because I think their 
         21   suspicions really are well placed, and I think the 
         22   past practices  of Fleet really are cause for grave 
         23   concern for all of us as to the future practices of 
         24   Fleet going forward. 
         25            Thank you very much.  
  0365
          1            HEARING OFFICER SMITH:  Thank you.
          2            Vermelle Parks. 
          3            MS. PARKS:  Good afternoon.  My name is 
          4   Vermelle Parks, and I am a here on behalf of the 
          5   chairwoman of the Federal Financial Assistance 
          6   Committee, the House of Representatives, 
          7   Representative Shirley Owens-Hicks, who is also 
          8   serving the 6th Suffolk District. 
          9            Thank you for allowing me to talk about the 
         10   things she has entered already as testimony.  Given 
         11   the fact that this merger will result in the closing 
         12   of over 200 branches, the loss of approximately 
         13   5,000 jobs, and the renegotiation of critically 
         14   important programs that address home ownership and 
         15   rental housing, we respectfully urge that prior to 
         16   the approval of this merger, the Federal Reserve 
         17   Bank of Boston mandate that Fleet Bank Boston offer 
         18   a significant written and measurable commitment that 
         19   will provide the loans, investments and services 
         20   needed for low- and moderate-income communities as 
         21   well as people of color. 
         22            We believe that flexibility and 
         23   underwriting guidelines is absolutely necessary in 
         24   order to make home ownership a reality for low- and 
         25   moderate-income populations.  In the past ACORN 
  0366
          1   offered a very successful first-time home buyer's 
          2   program in collaboration with Fleet Mortgage 
          3   Corporation, BankBoston and Citizens Mortgage 
          4   Corporation. 
          5            This program allowed loan applicants to 
          6   certify funds including Social Security, WIC, food 
          7   stamps, unemployment benefits, foster care money and 
          8   other entitlements as part of their income in order 
          9   to qualify for loans.  The program focused on income 
         10   continuity rather than job continuity, and only one 
         11   year of good credit was required. 
         12            ACORN informs us that over the life of 
         13   their program with Fleet, only three mortgages were 
         14   foreclosed and that the delinquency rate was 6 
         15   percent.  Clearly this delinquency rate is lower 
         16   than that of conventional loan delinquencies.  
         17   Therefore, we encourage Fleet to renegotiate this 
         18   program and similar community lending programs.  In 
         19   fact, collaboration with local partners must be 
         20   expanded rather than dissolved. 
         21            Home ownership fosters community stability.  
         22   Families who have a vested interest in the 
         23   neighborhoods where they live become involved in 
         24   neighborhood improvement activities, maintain their 
         25   properties, thus eliminating blight in vacant 
  0367
          1   buildings and add to the safety and economic 
          2   viability of our their cities. 
          3            Programs that serve this basic need must 
          4   acknowledge the reality that families who are 
          5   currently forced to pay exorbitant amounts of rental 
          6   money have the ability to pay reasonable mortgages.  
          7   Therefore, relaxed underwriting guidelines together 
          8   with community home ownership programs are crucial 
          9   to the revitalization of our cities. 
         10            With the potential loss of jobs that this 
         11   merger will precipitate, we are concerned that last 
         12   hired not become first fired.  Approximately 5,000 
         13   individuals will soon find themselves without 
         14   paychecks to support their families, unless the 
         15   institutions that purchase these branches decide to 
         16   hire them, and we sincerely hope that this occurs. 
         17            In the event that these employees are not 
         18   hired, we urge the Federal Reserve to use its power 
         19   to assure that these employees have access to a 
         20   combination of private and public resources that 
         21   will enable them to secure transitional income, 
         22   training and access to other employment. 
         23            Additionally, we ask that our concerns 
         24   about the potential loss of bilingual employees, and 
         25   how this will affect the needs of Latina, Asian and 
  0368
          1   other population who depend upon this assistance in 
          2   order to transact banking business, be addressed so 
          3   that the critical needs of non-English speaking 
          4   populations will not be negatively impacted. 
          5            The location of the merged entities' 
          6   branches is also of concern.  Residents and 
          7   community-based organizations representing various 
          8   underserved neighborhoods have worked long and hard 
          9   to negotiate the opening of branches in low- and 
         10   moderate-income neighborhoods.  We feel that 
         11   limiting access to banking services will negatively 
         12   impact individuals who need to establish credit 
         13   histories, who wish to cash checks, or who wish to 
         14   access any other service that banks offer in other 
         15   neighborhoods. 
         16            Finally, we believe that the nation is 
         17   looking at this merger and how Fleet-BankBoston will 
         18   respond to the needs of low- and moderate-income 
         19   communities as well as how they intend to honor the 
         20   commitments that they have made in the past. 
         21            This is an excellent opportunity for Fleet- 
         22   BankBoston to set the standard for community 
         23   investment practices.  We sincerely hope that they 
         24   will accept this challenge and turn this to a win- 
         25   win situation for all concerned. 
  0369
          1            Thank you very much. 
          2            HEARING OFFICER SMITH:  Thank you. 
          3            Mr. Saunders. 
          4            COUNCILOR SAUNDERS:  Good evening.  I'm 
          5   Boston City Councilor Gareth Saunders.  I represent 
          6   approximately 70,000 residents in Roxbury and parts 
          7   of Dorchester, the South End, Mission Hill and the 
          8   Fenway.  I am a member of the City of Boston's 
          9   Linked Deposit Commission and have worked in the 
         10   banking industry in Boston in various positions.  As 
         11   a manager of a loan office, I worked as a mortgage 
         12   originator and business development officer. 
         13            My duties as the business development 
         14   officer included assisting the bank with outreach to 
         15   the Boston community concerning the Community 
         16   Reinvestment Act. 
         17            I ask the Federal Reserve Bank of Boston to 
         18   listen carefully to what the people are saying 
         19   today.  As a regulatory agency, we look to you for 
         20   guidance as relates to the formulation of monetary 
         21   policy and overseeing many aspects of the New 
         22   England banking system. 
         23            What is true from my experiences is that 
         24   the people, the customers, the affected communities 
         25   of New England must get a clearly spelled-out 
  0370
          1   commitment from the proponents of this proposed 
          2   merger in writing prior to any approvals. 
          3            First and foremost, a strong commitment 
          4   must come from the top, Terry Murray and Chad 
          5   Gifford, accompanied with an aggressive plan of 
          6   implementation.  This plan should include a 
          7   comprehensive marketing plan of the actual and 
          8   potential customer base with a strong emphasis on 
          9   low- to moderate-income earners and specifically 
         10   tailored programs that ensure equitable credit 
         11   availability to traditionally underserved borrowers, 
         12   because they unfortunately will be 
         13   disproportionately and adversely affected by this 
         14   proposed merger. 
         15            Below, I'm just going to give you a brief 
         16   list of what I see as some of the general types of 
         17   commitments that we must see in writing prior to any 
         18   regulatory approval. 
         19            No. 1, it is important that we are 
         20   diversity of the work force, both racial diversity, 
         21   gender, as well as geographical diversity.  And we 
         22   must emphasize that we have diversity as it relates 
         23   to the decision-makers within the new institution. 
         24            No. 2, mortgage products, home improvement 
         25   and other consumer loans, loan products targeting 
  0371
          1   underserved communities and populations. 
          2            We must look at the small business lending 
          3   programs of the new entity. 
          4            We must maintain and enhance programs like 
          5   BankBoston's First Community Banking and Community 
          6   Development Bank.  These are very successful models 
          7   that we must keep and enhance. 
          8            And fifthly, there must be a comprehensive 
          9   approach to this proposed merger that still provides 
         10   consumer choices.  For example, there is still a 
         11   niche for smaller banks like the Boston Bank of 
         12   Commerce.  This bank has submitted a proposal to 
         13   purchase 18 branches that would make it the largest 
         14   minority-owned bank in New England. 
         15            And with regards to some of the other banks 
         16   that are looking to buy some of the assets that the 
         17   bank, Fleet Bank and other banks must sell off, we 
         18   must look to make sure that we have a banking entity 
         19   that is committed to this region, that has a strong 
         20   presence in this region and that will be willing to 
         21   locate its headquarters in this region.  That is 
         22   very important, that we can go right into the 
         23   president's or the CEO's office and not have to jump 
         24   on a plane, you know, and travel thousands of miles 
         25   to get that type of access.
  0372
          1            I would like to use this example.  I sat in 
          2   this room with some of the supporters out here more 
          3   than ten years ago when the Federal Reserve Bank 
          4   came out with a study that showed that there was 
          5   discriminatory lending based on race, with mortgage 
          6   lending the city.  And what did you do?  And what 
          7   did the community do?  And what did the banks do? 
          8            We all came together, and I was there with 
          9   many of the activists in this room.  We came 
         10   together.  We worked out a plan, and we aggressively 
         11   attacked the problem. 
         12            New branches were opened in communities 
         13   where we have not seen branches for years.  ATMs 
         14   were instituted in certain neighborhoods.  People of 
         15   color and women were hired into decision-making 
         16   positions. 
         17            When we look at the underwriters for the 
         18   mortgages and other lending products, it is 
         19   important to have people who understand the local 
         20   economy making these decisions.  And it worked. 
         21            From 1990 to 1994, look at the mortgage 
         22   rates in the minority community, particularly in the 
         23   African-American and the Latino communities.  That 
         24   is a successful model that worked.  And I hope, if, 
         25   in fact, this Board and other regulatory entities 
  0373
          1   approve this merger, that part of that statement 
          2   would be that there must be a commitment, a strong 
          3   commitment from the top down through the ranks of 
          4   the bank in writing prior to any approval.  That 
          5   way, you ensure that the underserved communities 
          6   will not be left out to dry. 
          7            Thank you very much for listening to my 
          8   testimony, and I hope that you would really consider 
          9   what I had to say and share with you this evening.
         10            Thank you.
         11            HEARING OFFICER SMITH:  Any questions? 
         12            HEARING OFFICER KWAST:  I have a question.  
         13   Mr. Saunders addressed this point, but I would be 
         14   interested in what Mr. Barrios and Mayor Albano had 
         15   to say. 
         16            In your experience, what has been the role 
         17   of smaller and medium-sized banks in the economic 
         18   development of a city like Springfield or in the 
         19   granting of housing and other kinds of loans to low- 
         20   and moderate-income communities?
         21            MR. SAUNDERS:  The question is -- who is 
         22   the question --
         23            HEARING OFFICER KWAST:  You addressed the 
         24   issue.  I'm interested in the role of small and 
         25   medium-sized banks in meeting the kinds of concerns 
  0374
          1   that you expressed. 
          2            MR. ALBANO:  Just on the issue of dealing 
          3   with a bank such as Fleet and BankBoston, as mayor 
          4   of Springfield, we have to get decisions from Boston 
          5   to major economic development projects, major 
          6   housing projects; and that takes time.  And 
          7   sometimes those decision makers at the top are 90 
          8   miles away and are not sensitive to the needs in 
          9   cities like Springfield.  And we have to be cautious 
         10   about that, make sure that any type of merger 
         11   guarantees that there is accountability and that 
         12   there is investment. 
         13            The second part I would respond to is that 
         14   under the Community Reinvestment Act, I'm not sure 
         15   how the ratings are done statewide.  I can see that 
         16   some banks have great ratings, but I don't know what 
         17   they're doing for cities like Springfield.  So I 
         18   would like to have more of a regional Community 
         19   Reinvestment Act grading so that we can be sure that 
         20   there is investment in cities like mine.  And I'm 
         21   not sure that we're receiving that.
         22            So between the two, I mean, having to get 
         23   certification or approval from 90 miles away or not 
         24   being sure of what the grade is for the Community 
         25   Reinvestment Act in my particular community, I would 
  0375
          1   hope in this Board would do something to offset that 
          2   so that we can have guarantees on these types of 
          3   decisions and these types of investments in cities 
          4   like Springfield. 
          5            MR. SAUNDERS:  Can I just address -- in 
          6   this decade of mergers, it is important that we have 
          7   different size banks because the larger banks and 
          8   some of the mid-sized banks have no interest in 
          9   serving some of the small and poorer communities; 
         10   but there are smaller banks who have an interest. 
         11            So that's important that we have a clear 
         12   balance of the big -- from the biggest megabanks to 
         13   the mid-size banks to smaller banks that can really 
         14   give a tailored approach to the specific 
         15   neighborhoods needs. 
         16            MR. BARRIOS:  I would just say as a part of 
         17   getting my testimony together, I took the time to 
         18   speak to a number of leaders both in my community 
         19   and Cambridge, in the Latino community in Chelsea, 
         20   in the greater Boston area and Jamaica Plain and 
         21   Roxbury; and there is generally a level of anxiety 
         22   about the mergers of the banks because it seems as 
         23   if, as Mayor Albano has said, it is sort of further 
         24   away, not just geographically but sort of 
         25   psychologically further away from the access that 
  0376
          1   you might like to see. 
          2            It is always the case that -- at least in 
          3   my community in Cambridge -- that the community 
          4   banks are seen as friendlier places to go, and I 
          5   think that is in large part a function of size. 
          6            I know that Fleet has been generous to some 
          7   local nonprofits in Cambridge, but the perception of 
          8   the average person as to the accessibility of credit 
          9   or to community development corporations -- 
         10   locally-based grass roots community development 
         11   corporations that want to do either economic 
         12   development or do an affordable housing project, the 
         13   perception is we first go to the community bank.  
         14   Cambridgeport Bank or Cambridge Trust are the two 
         15   big ones in my community. 
         16            Chelsea, I guess there was a bank, which 
         17   was recently acquired which was sort of the one 
         18   everybody went to.  Now it is U.S. Trust, but now 
         19   U.S. Trust is becoming Citizens so nobody really 
         20   knows where they were going in Chelsea at this 
         21   point. 
         22            Smaller, at that level, I guess, induces 
         23   more confidence. 
         24            I don't know if that answers directly. 
         25            HEARING OFFICER SMITH:  Thank you very 
  0377
          1   much. 
          2            We're now going to take a five-minute break 
          3   and then continue with Panel 15, which is not even 
          4   halfway through the agenda. 
          5            (Recess)
          6            HEARING OFFICER SMITH:  Why don't we get 
          7   started, and the way we're -- okay.  We'll do it the 
          8   same way as before, which is we have, what, 30 
          9   minutes?  And we'll get as many people through as we 
         10   can in that time.  And if anybody is left, then we 
         11   will move them toward the end of the day, which is 
         12   an encouragement to take a minute. 
       

	
Last update: December 3, 2010