Public Meeting Regarding NationsBank and BankAmerica
Transcript of Friday, July 10, 1998
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Public Meeting Regarding NationsBank and BankAmerica |
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4 PUBLIC MEETING
5 NATIONSBANK/BANKAMERICA PROPOSED MERGER
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11 SAN FRANCISCO, CALIFORNIA
12 FRIDAY, JULY 10, 1998
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1 JULY 10, 1998 8:37 A.M.
2 P R O C E E D I N G S
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4 MS. SMITH: Good morning. Let me start by
5 welcoming you to the second day of this important public
6 meeting on the application of NationsBank Corporation to
7 acquire BankAmerica Corporation.
8 I'm Dolores Smith the Director of Division of
9 Consumer and Community Affairs of the Federal Reserve
10 Board in Washington D.C. I'm the presiding officer for
11 this public meeting.
12 Our other panelists are: To my left, bob
13 Freirson, who is Associate Secretary of the Board, and
14 to my right, Ken Binning, who is Director for
15 Applications and Financial Analysis, Division of Banking
16 Supervision from the Federal Reserve Bank of San
17 Francisco; and to his right Trish Nunnley, Assistant
18 Counsel from the Federal Reserve Bank of Richmond.
19 We are here today because NationsBank
20 Corporation of Charlotte, North Carolina, has applied
21 for approval to acquire BankAmerica Corporation in San
22 Francisco, California.
23 When the Federal Reserve system considers one
24 of these applications, we look at a number of factors
25 under the Bank Holding Company Act, these include
26 financial issues, managerial issues, competitive issues
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1 and the convenience and needs of the communities
2 affected. In doing so, we particularly look at the
3 record of performance of the parties under the Community
4 Reinvestment Act.
5 The Community Reinvestment Act requires the
6 board to take into account an institution's record of
7 meeting the credit needs of its entire community.
8 The NationsBank application also involves the
9 proposed acquisition or retention of non-banking
10 companies engaged in activities permissible for bank
11 holding companies.
12 The board must determine whether the proposed
13 non-banking activities can reasonably be expected to
14 produce benefits to the public that outweigh possible
15 adverse effects such as undue concentration of
16 resources, decreased or unfair competition, conflicts of
17 interest or unsound banking practices.
18 The purpose of the public meeting is to
19 receive information regarding these factors. We will be
20 seeking to elicit this information and to clarify
21 factual issues related to the application.
22 We are very pleased that so many have been
23 willing to come and testify at this public meeting. We
24 will have altogether about 200 groups and individuals
25 represented during the two-day session.
26 I'll make a few remarks about the procedures.
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1 This is what is called an informal public meeting.
2 Members of the panel may ask those who are testifying
3 about their testimony. This is not a formal
4 administrative hearing, so we are not bound by the rules
5 regarding evidence, cross-examination and some of the
6 formal trappings of that kind of proceeding.
7 As you can see from the agenda, we do need to
8 stick to the schedule very carefully so that everyone
9 who has asked to offer oral testimony will have a chance
10 to say what they would like to say.
11 We are going to ask the witnesses today to be
12 mindful of the needs of others and to help us stay on
13 schedule.
14 The panels will be expected to stay within
15 their allotted times. We have a signal system with
16 regard to timing. We have two timekeepers, Ariel
17 Andress and Jessica Abehr. They will give a signal when
18 the witness has two minutes left to speak and another
19 signal when the time is up.
20 Occasionally the timekeeper may be unable to
21 get someone's attention when the time has expired. At
22 that point -- I forgot. There are actually two signals.
23 There is one given when there is one minute remaining,
24 so she will hold up a card. And then, when the time has
25 expired, she will hold up another card initially, but
26 when she is unable to give someone's attention, shell
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1 give a gentle, musical nudge (indicating). Something
2 like that.
3 There also have been some individuals who are
4 unable to sign up in advance, and, to the extent
5 possible, we are going to give them a chance to speak as
6 well. That will take place at the end of the meeting
7 this afternoon when we will make the mike available to
8 anyone who would want to make a presentation, time
9 permitting.
10 Witnesses may submit a written supplement to
11 their oral testimony by next Friday, July 17th, and then
12 the record will be closed.
13 Any written supplements should be directed to
14 Jennifer J. Johnson, Secretary of the Board, Board of
15 Governors of the Federal Reserve system Washington D.C.,
16 20551.
17 This is information that has been provided to
18 the witnesses already, and, if someone needs to have it
19 in writing, it can be obtained from the registration
20 desk.
21 These written supplements must be received by
22 5:00 p.m. Eastern Daylight Time next Friday. They can
23 be faxed to area code 202 452-3462.
24 The July 17 date applies only to these
25 supplements to oral testimony. The general public
26 comment period closed yesterday.
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1 Also, for witnesses, if you haven't turned in
2 copies of your written testimony, or, if you have any
3 other written statements to put into the record, please
4 leave them with the Federal Reserve staff at the
5 registration table. It's important that we get this
6 information for the record.
7 A transcript of the meeting will be available
8 by July 14th through the Federal Reserve Bank of San
9 Francisco and the board.
10 In addition, the official transcript will be
11 available by close of business on July 15th on the
12 board's public web site, which is www.bog.frb.fed.u.s.
13 Technology willing, it might be ready on July the 14th.
14 With that, we will begin with our first panel.
15 This morning we have -- if I can find it --
16 the Honorable Rosemary Corbin, Mayor of the City of
17 Richmond, who is representing the West County Mayors and
18 Supervisors Association, and then we also will have
19 Michelle Fadelli, standing in for the Honorable Mary
20 King, Supervisor for Alameda County.
21 I think we were scheduled to start with
22 Ms. Fadelli.
23 MS. FADELLI: Good morning. My name is
24 Michelle Fadelli, and I'm the Manager of Communications
25 and Governmental Affairs for the Association of Bay Area
26 Governments, and I'm speaking today on behalf of
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1 Supervisor Mary King from Alameda County who regrets she
2 was not able to join you this morning.
3 Mary and I both would be representing the
4 Association of Bay Area Governments, which is an
5 affiliation of the nine counties and 97 cities in the
6 San Francisco Bay Area. I'll be just reading from a
7 letter that we submitted on June 16th, which is a
8 summary of comments that we heard at a much smaller
9 regional hearing that we held last month.
10 Number one, job losses. We are concerned
11 about the large number of jobs being eliminated and
12 particularly concerned about the number that will be
13 eliminated, not just in San Francisco but throughout the
14 Bay Area. We ask that employees receive reasonable
15 notice of any layoffs and that the new bank make a
16 commitment to job training and placement.
17 Number two, community development. We are
18 concerned about the recent community development
19 commitment that fails to provide specifics about
20 distribution throughout various states, regions and
21 communities; in addition, reference to small business
22 fails to provide specific commitments to minorities and
23 low-income and populations.
24 We are concerned about the preservation of B
25 of A's Community Development Bank and ask that the new
26 bank not compete with nonprofit housing developers in
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1 the Bay Area.
2 Number three, consumer protection. We are
3 concerned about branch closures, fee increases, ATM
4 availability and ATM fees and honoring commitments to
5 current customers.
6 If the new bank plans to save over a billion
7 dollars by 1999, we can only suspect that it is the
8 customers will feel the impact. The merger announcement
9 boasted that the new bank will have $570 billion in
10 assets. We ask how with this giant maintain hits
11 connection to the hometown customers.
12 Number four, fairness to minority and
13 low-income populations. It is stated that the
14 NationsBank has a reputation for generic lending, and
15 California is not a generic state. As an aside, our
16 association has forecast significant changes in regional
17 demographics. The Asian population will grow from 16
18 percent of the population in 1990 to 20 percent in the
19 year 2020.
20 The Hispanic population will grow from 14
21 percent to 24 percent by 2020 and the Caucasian
22 population will no longer be a majority at 47 percent.
23 We are concerned that NationsBank is not prepared to
24 deal with the diversity in California and especially the
25 Bay Area.
26 We are concerned with reports that
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1 NationsBank has a very poor record of lending to
2 minorities and low-income populations, lending only a
3 reported 6.3 percent to low-income households and even
4 lower percentages to minorities.
5 The new bank must not be dragged down by the
6 poor standards established by NationsBank. Similar
7 performance with minority and low-income lending will
8 not pass muster in the Bay Area.
9 We are concerned about the closure of San
10 Francisco BofA headquarters and the transfer of
11 decision-making to Charlotte. North Carolina is a long
12 way from California in miles and light years away, we
13 believe, in attitude.
14 Our concerns are not relieved by word that
15 global operations will be based in San Francisco. Such
16 operations will be looking west to the Pacific Rim and
17 will not be concerned about jobs and customer relations
18 in the rest of the Bay Area.
19 More generally, we are concerned about the
20 reduction of competition in this merger as well as other
21 proposed mergers in banking. With fewer banks, who will
22 be compelled to offer free checking, free ATMs, and true
23 customer service?
24 Mergers don't tend to favor consumers and
25 don't tend to favor small businesses. BofA customers
26 are our constituents and we voice our concerns on their
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1 behalf.
2 And this letter was signed by Mary King, the
3 ABAG, and Alameda County Supervisor.
4 MS. SMITH: Thank you. Ms. Corbin.
5 MS. CORBIN: Yes, thank you. I am here
6 representing West Contra Costa County. I am Rosemary
7 Corbin, the Mayor of Richmond. I want to thank you for
8 allowing me to testify this morning.
9 Located on the east shore of San Francisco
10 and San Pablo Bays, West Contra Costa is comprised of
11 the cities of El Cerrito, Hercules, Pinole, Richmond and
12 San Pablo and the unincorporated areas of El Sobrante
13 Kensington, Rodeo and Crockett. West County has
14 approximately a population of 200,000. The City of
15 Richmond, with a population of 93,000, is the largest,
16 oldest and most urbanized city in the area.
17 West County is a diverse community with
18 minority population of over 52 percent. While it
19 contains approximately 22 percent of the county
20 population, over 40 percent of the county's AFDC
21 recipients reside in West County and has many of the
22 largest low and moderate income neighborhoods in the
23 county.
24 However, it has some of the oldest
25 communities where the banks that are now moving to the
26 suburbs got their start.
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1 West County is a community where a majority
2 of its population live and work in the area or in
3 communities very close by. The West County Mayors and
4 the city staffs meet on a regular basis and act
5 collaboratively on issues such as transportation, waste
6 disposal, public safety and economic issues such as the
7 subject of this hearing.
8 Our West County chambers of commerce, cities
9 and institutional institutions and nonprofit
10 organizations collaborate through a variety of
11 organizations.
12 Finally, we are an effective lending
13 territory as described by the Federal Reserve Bank of
14 San Francisco and believe that the Bank of America and
15 NationsBank, should this merger go forward, have an
16 obligation to develop a plan with West County business
17 government and community leaders for addressing the
18 community reinvestment needs in our area.
19 Bank of America has nine branches in West
20 County and, with over $425 million in business and
21 household deposits, is the second largest bank in our
22 community.
23 In terms of banking services, while BofA has
24 not closed any branches in West County, it has downsized
25 and relocated, which had been freestanding bank
26 branches, to cramped in-store branches, particularly in
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1 low-income areas such as Richmond's Iron Triangle
2 neighborhood.
3 While we applaud BofA's innovative
4 initiatives in reinvestment lending, they appear to have
5 had little visible impact in West County. One bright
6 spot was a $625,000 loan and assistance with welfare-
7 to-work-planning to Rubicon programs, a job and housing
8 development nonprofit agency serving special needs
9 populations.
10 Should this merger go through, we want to see
11 the continuation and strengthening of the BofA's
12 Community Development Bank, and we are requesting that
13 BofA begin a process of assisting West County for
14 developing a plan for meeting our community reinvestment
15 needs.
16 I often describe West County as being in a
17 money shadow. You probably know what a rain shadow is.
18 Well, when money floats down from the federal
19 government, we tend to be behind this rain shadow where
20 the money goes to Oakland and San Francisco, and we
21 think that community, as defined under the Community
22 Reinvestment Act, should include the whole community.
23 West County's specific needs in terms of
24 community economic development are:
25 Financing for commercial rehabilitation and
26 facade improvements in conjunction with redevelopment
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1 and other public financing in the older retail and
2 commercial areas of Richmond, El Cerrito, Pinole, San
3 Pablo, Rodeo and Crockett;
4 better access to financing for young small
5 businesses, particularly minority and women-owned
6 businesses through collaboration with business
7 development organizations such as the West County
8 Business Development Center and the local chambers of
9 commerce;
10 financing for various major development
11 projects in West County, including the Richmond Transit
12 Village, Ford Assembly Building rehabilitation, Point
13 Molate reuse and the business incubator for bioscience
14 business;
15 In terms of housing, we need new affordable
16 development such as Richmond Transit Village, a 52-unit
17 senior housing project, Cortez and Woods school sites
18 and Pinole commercial properties owned by a subsidiary
19 of BofA which the city would like to develop for senior
20 housing;
21 In-fill new construction and rehabilitation
22 throughout older developed neighborhoods throughout West
23 County.
24 Vacant closed branches for a are a problem
25 for all of us. The bank needs to work with cities and
26 economic organizations to develop commercially viable
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1 reuse programs for branch facilities at closes such as
2 the Richmond Ninth street branch.
3 And, finally, we have a relatively high
4 unemployment rate. The bank needs to mitigate the loss
5 of jobs from this merger and commit to the hiring and
6 promotion of women and minorities.
7 In summary, West Contra Costa is concerned
8 about how you define community and how you can ensure
9 that all of the bank's community will be served. We do
10 not believe that the proposed CRA plan contains enough
11 specific goals or the monitoring necessary to enforce
12 them.
13 We need area-specific community reinvestment
14 plans with community input. Also, the potential loss of
15 CRA leaders within the Bank of America causes us to
16 worry about commitment.
17 We applaud BofA's history of innovation
18 regarding community reinvestment and its ability to work
19 with all segments of the community, including nonprofit
20 organizations.
21 We are looking to the Federal Reserve Bank to
22 ensure the continuance of a commitment to the innovation
23 from the merged bank and that commitment will extend to
24 all parts of the community.
25 Thank you.
26 MS. SMITH: Any questions of Ms. Corbin?
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1 MR. FRIERSON: Mayor Corbin, could I ask you
2 a question, please?
3 MS. CORBIN: Yes.
4 MR. FRIERSON: You mentioned that one of the
5 things you were advocating was the continuation of the
6 strengthening of the Bank of America Community
7 Redevelopment Bank, and we've heard quite a lot about
8 that organization yesterday, and I expect we'll hear
9 more today.
10 Could you elaborate a little bit on your
11 relationship with the bank and it's projects or any
12 types of developments they have done in the City of
13 Richmond?
14 MS. CORBIN: That's what I referred to in
15 terms of the money shadow we are in. The Bank of
16 America has funded the Rubicon program, which we are
17 very grateful for, but we think that in defining
18 community, too often Oakland is seen as taking care of
19 the whole -- the Oakland area is seen as taking care of
20 the whole of the East Bay, and we're saying that
21 community has to include West Contra Costa County as
22 well.
23 I used to live in San Francisco, and I was a
24 librarian at San Francisco Public and used to get in
25 arguments about the fact that Richmond is not in Alameda
26 County and it's not a suburb of Oakland.
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1 I think too often people don't understand
2 what we are. They should come. I'll give him a tour
3 and they can see that it's a lot -- the East Bay is a
4 large area and we're probably -- this is probably just
5 one example of others throughout the Bay Area where, if
6 you sit in an office in San Francisco or, God help us,
7 in North Carolina, and you think that because you are
8 doing something in Oakland you are doing it for the
9 whole East Bay, you are wrong, and we're very concerned
10 about that because we have suffered from that.
11 I don't want to take anything away from
12 Oakland. I just want to be sure we get our fair share.
13 Any other questions?
14 MS. SMITH: Thank you.
15 MS. CORBIN: Thank you.
16 MS. SMITH: Thank you very much.
17 We are ready for Panel 18.
18 (Pause in proceedings.)
19 MS. SMITH: We'll start with Mr. Hewett.
20 MR. HEWETT: Thank you. My name is Conrad W.
21 Hewett. For over the last three years I served as the
22 State Superintendent of Banks and Commissioner of
23 Financial Institutions for the State of California. My
24 term ended this past June 30th.
25 My prior to my position for the State of
26 California, I was a managing partner at Ernst & Young.
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1 For over 33 years I specialized in financial
2 institutions. Consequently, I have been involved in
3 many mergers and acquisitions of financial institutions.
4 During my past three years in my capacity as
5 State Superintendent of Banks and Commissioner, I have
6 approved a number of bank mergers and acquisitions. The
7 largest acquisition was Wells Fargo Bank acquiring first
8 Interstate Bank.
9 The California laws concerning the sale,
10 merger and conversion of depository corporation are very
11 similar to the federal agency laws such as the Federal
12 Reserve Bank.
13 As a regulator, I had several standards to
14 consider under California banking law before I could
15 approve or deny such a transaction. Some of the
16 elements of the law included:
17 One, the transaction would not result in a
18 monopoly;
19 two, competition would be not lessened or be
20 anti-competitive;
21 three, the convenience and needs of the
22 community will be served;
23 fourth, the shareholders equity will be
24 adequate, and the financial condition of the combined
25 banks will be satisfactory;
26 fifth, directors and executive officers will
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1 be satisfactory;
2 and, last, the surviving entity will afford
3 reasonable promise of successful operation and operate
4 in a safe and sound manner.
5 In my opinion, this proposed merger meets all
6 the standards to be considered under the Bank Holding
7 Company Act.
8 I note that the proposed transaction does not
9 result in the largest bank in the United States. Also,
10 this merger will operate in only 25 of our 50 states.
11 I publicly stated over three years ago that
12 there would be a large consolidation in the banking
13 industry. I had many reasons for this statement and I
14 believe that this trend will continue.
15 There is too much capacity in the banking
16 industry, too many banks and too much competition from
17 outside the banking industry, thus, the need to
18 consolidate.
19 Even our largest United States banks face
20 tremendous competition from companies such as Merrill
21 Lynch, GE Capital, General Motor Acceptance
22 Corporations, all of the mutual funds, such as Fidelity
23 and T. Rowe Price and the many consumer finance
24 companies such as Household Finance and now the
25 internet. Many of these companies are not subject to
26 the same state and federal regulatory laws such as the
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1 bank's presently are.
2 Other reasons I see for this merger are:
3 First, the high cost of investment in
4 technology helps drive these mergers and consolidations.
5 The non-bank competitors have invested heavily in
6 technology and banks must invest as heavily, if not
7 more, in order to compete and to survive. This
8 investment requires a very large capital base, and one
9 way to create this base is through consolidation;
10 secondly, our largest U.S. banks are still
11 small compared to the other banks in the world which
12 comprise mainly of the Japanese, German and French
13 banks.
14 as you know, the U.S. is rapidly becoming a
15 globally player and world trader. Our banks must be
16 large enough to provide the financing and capital
17 necessary for our businesses to compete worldwide;
18 third, because there is very little overlap
19 in this merger concerning the consumer, the consumer
20 need and convenience should be satisfied. Branch
21 banking has changed dramatically in the past five years
22 because of ATM usage, banking by phone, computer banking
23 and banking by mail. The consumer has dictated this
24 shift in the delivery system of banks. The consumer has
25 a wide choice in availability of financial institutions
26 from which to choose. As I said earlier, the
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1 competition is fierce. This transaction should enhance
2 the service and products available to the customers of
3 the new bank. This is truly an interstate bank merger
4 as contemplated by the federal Riegle-Neal Interstate
5 Banking and Branching and Efficiency Act of 1994, which
6 congress passed, and the law became effective September
7 29th, 1994. As I see, as a result, the consumer will be
8 the benefactor of one of the first truly interstate
9 banks in our country.
10 Concerning the other facts of this merger,
11 both companies are financially strong as indicated by
12 their financial statements, capital ratios, operating
13 ratios and market capitalization.
14 If this transaction is approved by the
15 Federal Reserve Board, in my opinion it should be, then
16 a nationwide franchise will be delivered which has the
17 potential to deliver financial service to millions upon
18 millions of families and businesses.
19 Thank you.
20 MS. SMITH: Thank you. Mr. Collette.
21 MR. COLLETTE: Is it on?
22 MS. SMITH: Yes, if you just bring it a
23 little closer.
24 MR. COLLETTE: Thank you. I appreciate the
25 opportunity of expressing -- addressing this very
26 important topic before the Federal Reserve.
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1 My name is Craig Collette. I am a member of
2 the Board of Directors of the California Independent
3 Bankers and president of a small bank in Southern
4 California called Marathon National Bank, it's a $75
5 million institution.
6 As an independent banker with 33 years of
7 experience, I would like to give you my views on the
8 impact of this gigantic merger between NationsBank and
9 Bank of America. I am speaking this morning also on
10 behalf the California Independent Bankers, which
11 represents some 200 banks throughout our state.
12 Let me first address you, though, as a
13 concerned citizen of the State of California. When
14 legislation was debated in Sacramento three years ago,
15 this legislation enabled this kind of merger, and the
16 California Independent Bankers raised an important
17 issue: What will the tax impact be when we permit out-
18 of-state institutions to own California banks and their
19 headquarters are moved out of state? Little attention
20 was given to this critical question. As a concerned
21 taxpayer in the state, I would like to raise this issue
22 again.
23 I would recommend that those that are
24 reviewing this application for merger derive estimates
25 and projections of what this merger will mean to
26 California taxpayers when the headquarters of the
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1 combined institutions shift to Charlotte, North
2 Carolina.
3 Matter of fact, all of California's three
4 largest financial institutions are now or about to be
5 moved out of state or the headquarters moved out of
6 state from these entities.
7 Now, as an independent bank president, I have
8 additional views. The United States, with the passage
9 of the Riegle-Neal bill, is moving from a diversified
10 financial system to one characterized by a lopsided
11 barbell with just a very few large banks at one end and
12 a large number of independent banks at the other.
13 To quote Hugh McColl, Chief Executive of
14 NationsBank, U.S. banking will be quote "...a
15 barbell-shaped industry with a dozen or a half dozen
16 very large players at one end and four or five thousand
17 boutiques on the other," unquote. On this issue we
18 agree, but what are the implications of such a
19 structure? I feel strongly that increased financial
20 concentration means less competition.
21 NationsBank and Bank of America's merger at
22 60 billion is the largest between two American banks.
23 The bank created by this merger will have 8.2 percent of
24 the Nations deposits. Dangerously close to the ten
25 percent limit set by the Riegle-Neal bill.
26 Unfortunately, this trend towards
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1 mega-mergers will probably continue given the overvalued
2 asset base our own stock market has created. The trend
3 toward mega-mergers, this includes this merger, is not
4 healthy for Main Street, where I come from, is very
5 risky for Wall Street and it is bad for the Federal
6 Reserve and other regulators who will have the
7 responsibility to examine and possibly to even bail out
8 these mega-giants when they are mismanaged, over
9 speculate or reach too far in risky ventures. These
10 banks are the new super-sized, too-big-to-fail
11 varieties.
12 The evidence shows that increased the
13 concentration in the banking industry has not benefited
14 bank customers. The economies of scale that supposedly
15 justify large bank mergers either do not materialize or
16 are not passed on to the customers. In addition, large
17 interbank mergers reduce competition in ATM network
18 markets as well as credit card markets.
19 Consider five points:
20 First, larger banks charge higher fees.
21 According to Bank Rate Monitor, none of the top 50 banks
22 in the U.S. offer the least expensive checking accounts.
23 In fact, those offering the most expensive checking
24 accounts are banks involved in the latest mega mergers,
25 Citibank and NationsBank. The best deals are offered by
26 smaller regional and community banks. In a 1997 study
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1 found a widening gap between large and small bank fees;
2 the Federal Reserve study found the average
3 fees charged by multi-state banks are significantly
4 higher than those charged by single state banks, even
5 accounting for location and other factors that might
6 explain the differences;
7 two, banks mergers have an adverse effect on
8 consumer pricing. A Boston Federal Bank study of 499
9 bank mergers found the combined banks lowered interest
10 rates paid on deposits regardless of the amount of
11 competition in the market;
12 three, economies of scale. It is
13 interesting, the evidence suggests that the optimal size
14 of a bank in terms of economies of scale, profitability
15 and efficiency is between $100 and $1 billion, quite a
16 bit smaller than the 300 to 600 billion loss that will
17 be created from the latest mergers. A Harvard study
18 showed that instances of improved operating results
19 after a merger were due primarily to higher repricing,
20 not economies of scale, suggesting the use of increased
21 market power to raise prices. Given sufficient market
22 power, large banks can price smaller competitors out of
23 the market with below market rate loans or above market
24 rate deposits;
25 four, large interbank mergers also have
26 negative effects on competitive ATM network markets;
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1 and, five, large bank mergers are creating an
2 oligopoly of credit card issuers led by Citibank, Bank
3 One and NationsBank.
4 It is also indicated by the Rand Research
5 organization that when the pending mergers are
6 consummated the top ten credit card issuers will control
7 72 percent of the credit card market.
8 In conclusion, as an independent bank
9 president, I am fully aware that in the beginning
10 community banks will prosper from the fallout of
11 customers from big bank mergers. After these giants
12 consolidate, however, there will be no longer a fair and
13 equitable competitive environment in independent banks
14 in the areas that I have pointed out in my testimony.
15 Bank customers and small businesses will suffer as a
16 result.
17 Thank you very much.
18 MS. SMITH: Thank you. Kurmel.
19 MR. KURMEL: My name is Larry Kurmel. I am
20 Executive Director of the California Bankers
21 Association. I'll just make a few points. I've offered
22 some testimony on some things that you can have for the
23 records,
24 Much has been made over the increased
25 dominance of the banking marketplace resulting from BofA
26 and NationsBank merger. Our view to the contrary is the
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1 merger will do no more harm to the banking industry in
2 California, in fact, it will create market
3 opportunities. I base that on statements with
4 interviews with community bankers throughout this state
5 and the western United States. Obviously Craig Collette
6 was not among them.
7 But there is a very different view, as
8 evidence, there were ten new bank charters in California
9 in the last year. In Nevada, which concluded in 1997
10 with 21 community bank charters, now has 31 community
11 bank charters. I understand that's soon to be 32 or 33.
12 Frankly, there is more threat to the
13 community banking business by unrestrained tax-exempt
14 from credit unions than it will from the combined merger
15 of BankAmerica and NationsBank, which has very little
16 overlap in their marketplace, as you are all aware.
17 BankAmerica has long been a leader within the
18 ranks of the industry in California. And the California
19 Banks Association, in particular, a past Chairman or
20 president of our organization is Don Mulane, the current
21 President of the California Bankers Association is Vice
22 Chairman of the Bank of America, Kathy Burke.
23 The question we had is the commitment of
24 NationsBank to the continued leadership role
25 demonstrated by BankAmerica in California. And Hugh
26 McColl was a keynote speaker at our convention in May to
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1 personally provide that assurance and provide the
2 assurance of his commitment to assuring healthy
3 competition between large banks and community banks in
4 the State of California.
5 Much has been made about combining and what
6 happens with people and that sort of thing. I should
7 note the combined employee base of the two organizations
8 is about 200,000 people. That's larger than the City of
9 Fresno. Out of that they anticipate somewhere around
10 2,000 to 2,500 jobs will actually be lost. In relative
11 terms, according to any business study I've seen, that's
12 a relatively insignificant amount.
13 Let me talk a little bit, there is a lot of
14 speculation about what do the commitments of these banks
15 mean. Let me focus for a moment, if I may, just on the
16 $250 billion commitment. I don't know about you, but
17 that's a big number to me.
18 I started my career as a housing expert in
19 the Department of Housing and Community Development in
20 the State of California. I was a deputy secretary to
21 the Business Transportation Housing Agency in
22 California.
23 MS. SMITH: Would you move your mike a little
24 to the left?
25 MR. KURMEL: Sure. Better?
26 MS. SMITH: Yes.
441
1 MR. KURMEL: I am reluctant to move to the
2 left too much, but I appreciate it.
3 I was a deputy secretary to the Business
4 Housing Transportation Agency under then Governor Jerry
5 Brown and was part of the creation of the California
6 Housing Finance Agency.
7 Bank of America was one of the instrumental
8 entitles in providing a consortium of banks to provide
9 low and very low multi-family housing financing in the
10 State of California. The consortium today, which
11 includes, I believe, over 60 banks, mostly community
12 banks, has opportunities for investment in CRA
13 activities they would not have had on their own.
14 CCRC in California, in its ten years of
15 existence, has done more multi-family, low and very
16 low-income housing financing than has the California
17 Housing Finance Agency in its 20 years of operation.
18 So, when it comes to commitment, you have to look at the
19 record, it seems to me.
20 I testified in this very room about the
21 Security Pacific and BankAmerica merger. At that time a
22 ten-year commitment was made by the bank of the
23 surviving organization to CRA lending. They met that
24 requirement, met that threshold within three years and
25 went on to fully exceed that. Last year they started --
26 established I believe it was $140 billion target and
442
1 they were moving briskly towards fulfilling that public
2 obligation they had created for themselves, I might add.
3 I would add one note of caution. In my
4 experience in housing and economic development, I am
5 very cautious of throwing too much money at a problem.
6 For one reason, you don't want to throw out or denigrate
7 the experience or exercise of experience of other
8 players in that market.
9 For example, Mayor Corbin might note, that
10 the largest community bank in Richmond is the Mechanics
11 Bank of Richmond, an organization that had been there
12 for over 90 years who had a substantial commitment to
13 financing and improvement in that community.
14 You don't want BankAmerica/NationsBank
15 commitment to go in there and blow through the ability
16 of Mechanics Bank to participate in the restructuring
17 and rebuilding of its communities.
18 So, in my view, you have to be real careful
19 about being too specific with this large batch of
20 dollars for fear of disrupting those processes that are
21 already in place. But, if you are looking at the track
22 record of both NationsBank and BankAmerica as exercised
23 through people like Don Mulane who have chaired the
24 Community Bank of Bank of America, they have met every
25 public goal they have established for themselves and
26 exceeded that performance. The same has been true in
443
1 NationsBank in those market areas where it has been
2 performing.
3 So I would just urge some caution playing
4 with $350 billion dollars. You don't want to end up
5 tantamount to offering a drunk a bottle of Tokay. Thank
6 you.
7 MS. SMITH: Thank you. Mr. Koppe.
8 MR. KOPPE: Thank you, and good morning. My
9 name is Bruce Koppe. I am Executive Director of the
10 Washington Bankers Association, located in Seattle,
11 Washington.
12 The Washington Bankers Association represents
13 substantially all of the commercial banks in our state,
14 almost all of which fit the generally accepted
15 definition of community bank.
16 Prior to assuming my present position, I
17 spent over ten years as General Counsel to Rainier
18 National Bank in Seattle, later Security Pacific Bank
19 Washington. Where my duties included responsibility for
20 community affairs and social policy.
21 My time in Washington includes the period
22 covering Bank of America's acquisition of Sea First Bank
23 in which Bank of America had a significant interest and
24 the relatively recent conversion of Sea First into
25 branches of Bank of America.
26 During all of these periods and events, I
444
1 have had significant contact with the Sea First/Bank of
2 America Corporation in collaborative community affairs
3 projects, as a representative of both donor and donee
4 groups, as a competitor and in promotion of collective
5 efforts on behalf of the banking industry in our state
6 working with and through the bankers association.
7 My purpose today is to support the merger
8 application and record of Bank of America, particularly
9 its Sea First operation in the State of Washington.
10 Sea First has been and continues to be a
11 leader in the community especially in community
12 reinvestment.
13 I don't intend to recite specific
14 accomplishments because those are known to the Federal
15 Reserve through the Sea First/Bank of America CRA exams
16 which for several years have resulted in ratings of
17 outstanding. Rather, I want to emphasize what I believe
18 are important indicators of future conduct.
19 Much of the controversy surrounding mergers
20 of institutions involves an attempt to determine what
21 the future holds for the communities to be served. The
22 best indicators of that are how the institutions have
23 behaved in the past. And, in order to help determine
24 that, my presentation focuses on four specific points.
25 First, when bank of America acquired Sea
26 First Bank in the early 1980s, there was a great deal of
445
1 apprehension in Washington State the control of the
2 entity would shift to San Francisco and that Sea First
3 community involvement would suffer. That did not happen
4 much to the credit of both parent and subsidiary.
5 More recently, when Sea First's operations
6 were converted to branches of Bank of America, albeit
7 operating under the Sea First name, the same
8 apprehensions were expressed. In fact, the apprehension
9 began when the BofA Sea First organization began
10 functionalizing its operation sometime prior to
11 conversion to branches.
12 Again, those apprehensions have proved
13 groundless. In each case we have seen no diminution in
14 the Sea First commitment to all aspects of community
15 affairs and community service.
16 Moreover, I understand that the head of the
17 Bank of America presence in the State of Washington,
18 Mr. John Renlove has been given broad authority and
19 autonomy over community activities. Certainly that's
20 been borne out by the company's performance to date, a
21 continuation of its broad and significant involvement in
22 all aspects of community development, philanthropy and
23 service to its customers.
24 As Sea First/Bank of America has gone through
25 each of these transitions its past performance has
26 accurately predicted its future performance.
446
1 Second, banking customers are extremely
2 sensitive to mergers and acquisitions even among our
3 smaller community banks, but particularly with respect
4 to the large bank mergers. This has been demonstrated
5 most notably in the key bank acquisition of Puget Sound
6 Bank and Wells Fargo's acquisition of First Interstate
7 Bank in our state. Each acquisition has seen some
8 outpouring of customers to local community banks known
9 for excellence of personal service.
10 Sea First has a great reputation for customer
11 service as well as an aware management team. They know
12 as well as anyone that to dilute their community
13 activities and service at this time or any time in the
14 future would be the height of folly. As stated earlier,
15 their record through similar events has demonstrated not
16 only their awareness of that fact but their continued
17 commitment to their customers and their communities
18 generally.
19 Third, I think it's important to know at
20 least in our state that our community banks do not see
21 the merger of BofA and NationsBank as a threat. If
22 anything, it's an opportunity to gain customers. I'm
23 not saying anything that BofA isn't keenly aware of and
24 I don't think Sea First/BofA will let that challenge go
25 unanswered.
26 Finally, I've worked with Sea First on
447
1 community outreach including fairly extensive activity
2 over the past year, much of which was very innovative.
3 The organization has willingly committed its time and
4 resources and continues to do so. I can attest
5 personally to their commitment.
6 In summary, the Sea First/Bank of America
7 record of community support and customer service in the
8 State of Washington has been first rate and has not been
9 diminished through corporate change.
10 We believe their past performance totally
11 supports the presentation application. We also believe
12 that their past performance through periods of
13 significant corporate change is a reliable predictor of
14 what will happen in the future. In our view,
15 speculation and conclusions to the contrary are not only
16 totally unwarranted, but very unfair.
17 Thank you.
18 MS. SMITH: Thank you, questions.
19 MR. FRIERSON: I have two questions. First
20 for Mr. Hewett, as a former state banking supervisor and
21 decision-maker, I would be interested in your views on
22 the comments that we have heard at this public meeting
23 and in the comment period that a bank with a
24 headquarters on the east coast would be less successful
25 in understanding the credit needs of California
26 communities.
448
1 MR. HEWETT: That's a good question. I do
2 believe that California is such a tremendous economic
3 market, not only in the United States but in this world,
4 that if there is any void of consumer availability to do
5 banking of any kind, that the bank from the east coast
6 or from the southeast will come into this state and
7 establish a headquarters if that means that will help
8 that particular institution financially in the future
9 and so forth.
10 I don't see any -- in today's age of
11 technology, wherever it's headquartered, could be
12 headquartered in Hawaii and still operate in California
13 and still provide services to the consumer and still be
14 competitive. I don't see that as a real significant
15 issue in terms of where the headquarters -- the
16 headquarters are usually only made up of a few, in this
17 case probably only a few hundred people. It's not the
18 headquarters, it's the service that's provided to the
19 customer by the representative of that bank, wherever
20 that community may be.
21 MR. FRIERSON: And a question for
22 Mr. Collette. Does your bank operate an ATM network?
23 MR. COLLETTE: We don't have our own ATMs.
24 We utilize networks provided by larger institutions.
25 MR. FRIERSON. Could you give us your bank's
26 experience with the competitive impact of the
449
1 consolidation of ATM networks, specifically how it
2 affects your clients:
3 MR. COLLETTE: Yes. On a pricing basis, we
4 have had experience where we have been -- where our
5 customers have been charged for the use of another
6 institution's ATM, even though we were a member of the
7 network. And that did do some harm to the customer base
8 of our institution.
9 MR. FRIERSON: Thank you. I don't have any
10 more questions.
11 MS. SMITH: There are no other questions,
12 then we thank you very much for coming this morning.
13 (Pause in proceedings.)
14 MS. SMITH: We'll go ahead and start with
15 Ms. Supinski substituting for Mr. Lee.
16 MS. SUPINSKI: Yes, thank you.
17 Good morning, Ms. Smith and members of the
18 panel. This is the testimony of Matthew Lee, Executive
19 Director of Inner City Press Community on the Move and
20 of the Inner City Public Interest Law Center, together
21 known as ICP, which the California Reinvestment
22 Committee has been kind enough to present.
23 ICP on May 6th filed a 54-page protest to
24 this application along with the Black Citizen for
25 Justice Law and Order of Dallas, Texas and the New
26 Mexico Alliance, two of its whose members, Gilbert
450
1 Sanchez and Robert Wells, you heard from yesterday.
2 We are opposed to this proposed merger
3 primarily due to NationsBank's continued predatory and
4 discriminatory practices through its finance companies,
5 NationsCredit and EquiCredit, and due to the
6 anti-competitive and branch-closing effects the proposed
7 merger would have in New Mexico and in Dallas, Texas.
8 NationsBank's ill-defined community
9 reinvestment pledge does nothing to address these
10 issues. In fact, as explained in a moment,
11 NationsBank's failure to live up to its commitment with
12 regard to NationsCredit, calls into question whether the
13 board could rely on NationsBank's press release pledge.
14 In 1996, when NationsBank announced its
15 proposal to acquire Boatmen's Bank shares, including its
16 subsidiary Sunwest, the larger bank in New Mexico, ICP
17 and the New Mexico Alliance filed comments with the
18 Federal Reserve Board. We critiqued the lending of
19 NationsBank and its higher than normal interest rate
20 finance company, NationsCredit, and documented that
21 NationsBank was referring applicants who were
22 disproportionately African Americans and Hispanics from
23 its banks to NationsCredit which offers higher than
24 normal interest rate credit, but that NationsCredit had
25 no policy or program to refer up to NationsBank
26 applicants who were entitled to normal interest rate
451
1 credit.
2 We showed that NationsBank has been closing
3 branches in low-income communities of color and has been
4 opening NationsCredit offices in these communities.
5 The board has refused to conduct an
6 examination of NationsCredit but did ask NationsBank how
7 many lawsuits were pending against NationsCredit.
8 NationsBank submitted a skeletal list of 119 lawsuits
9 then pending against NationsCredit. We showed that the
10 list was incomplete, but, even if it were not, it would
11 seem that volume of litigation would trigger some
12 examination by the Federal Reserve.
13 During that protest, NationsBank CRA officer
14 was quoted in U.S. News and World Report to the effect
15 that NationsCredit would institute a practice referring
16 applicants who were entitled to normal interest rate
17 loans up to NationsBank banks from NationsCredit and
18 that this would be done by February of 1997.
19 NationsBank refused thereafter to provide
20 information about NationsCredit or this promise to
21 change. In January of this year, we were informed by
22 the Office of the Comptroller of the Currency that
23 NationsCredit still has not instituted any referral-up
24 program. NationsBank has since confirmed this,
25 proffering as its excuse that there has been a lot of
26 turnover at NationsCredit.
452
1 Most recently, the Federal Reserve itself
2 asked NationsBank to describe all current and planned
3 referral programs between its banks, mortgage company
4 and finance companies. NationsBank's response has been
5 that everything is in flux.
6 Simply put, NationsBank's 350 billion
7 community reinvestment commitment is not credible since
8 NationsBank has not lived up to its previous
9 commitments. It is also important to note that
10 NationsBank has refused to make any more specific
11 geographic commitments even at the state, much less the
12 county, level. But the key point to us is that
13 NationsBank promises of future improvements do not in
14 fact take place.
15 After NationsBank bought Boatmen's and
16 Sunwest, NationsBank quickly closed eight branches in
17 New Mexico, even though there was not overlap between
18 NationsBank and Sunwest.
19 The Federal Reserve has said in its
20 NationsBank/Boatmen's conditional approval order that it
21 would monitor NationsBank's branch closing, but this has
22 had little to no effect.
23 More recently, after gaining approval to
24 acquire Barnett Banks of Florida, NationsBank has moved
25 to close over 200 branches in Florida.
26 In this proposal NationsBank and Bank of
453
1 America overlap in Mexico -- in New Mexico and in
2 Dallas. NationsBank has refused to disclose how many or
3 which branches it would close. It has also put forth a
4 laughable low divestiture proposal that would allow them
5 to predominate and raise prices in Dallas and a number
6 of New Mexico markets.
7 NationsBank has apparently paid numerous
8 group to come and testify in its support at this public
9 meeting, but the facts, as they say, are the facts.
10 NationsBank said it would institute a
11 referral-up program from NationsCredit to its banks by
12 February of 1997, and NationsBank did not do so. This
13 proposed merger would be anti-competitive in Dallas and
14 numerous New Mexico markets and NationsBank's
15 divestiture proposal is sorely insufficient.
16 NationsBank has refused to disclose what the
17 actual effects of the merger would be, including branch
18 closings.
19 There are other adverse issues including the
20 foreseeable loss of various Bank of America programs
21 ably raised by the California Reinvestment Committee and
22 others. For all reasons stated, this proposed merger
23 should be denied.
24 Thank you for your attention and we will be
25 submitting further written comments. Thank you.
26 MS. SMITH: Thank you very much.
454
1 Ms. Kurudisha.
2 MS. KURUDISHA: Thank you for the opportunity
3 to testify.
4 I am Program Director of the West Contra
5 Costa Business Development Center. I'm also owner of a
6 small business called Associates for Community Change
7 and Development. In the two capacities, I have worked
8 with the West Contra Costa Community for the last nine
9 years.
10 The president, the current president of the
11 board of the West Contra Costa Business Development
12 Center is Mr. Robert Leet, who is Executive Vice
13 President of the Mechanics Bank and the chief lending
14 officer of that bank.
15 The West Contra Costa Business Development
16 Center is a result of years of effort by the West Contra
17 Costa community to work with the banking community to
18 develop an approach to economic development and
19 community development in the West Contra Costa
20 community.
21 We have worked with all of the regulatory
22 agencies and as many as 22 banks in our effort to put
23 together a community reinvestment plan for our
24 community. The years of effort have resulted in the
25 development of the West Contra Costa Business
26 Development Center as an intermediary for community
455
1 development and economic development in the West Contra
2 Costa community.
3 When we look at our efforts to work with Bank
4 of America, we applaud their participation in the
5 community meetings that have been held on banking in
6 West Contra Costa. We also applaud their contribution
7 to the West Contra Costa Business Development Center
8 which has been $25,000.
9 We, however, point out that, while this has
10 supported our effort, it has not matched the request for
11 a five-year commitment on the part of the bank to the
12 community development effort of the West Contra Costa
13 Business Development Center.
14 We would like an opportunity to develop, as
15 an intermediary for our community and give the small
16 cities that we represent an opportunity to develop an
17 urban core process and strategy that allows us to
18 resolve some of the problems that are centered in the
19 low-income and moderate-income communities that we
20 represent.
21 The community bank, which is Mechanics Bank,
22 strongly endorses and calls for additional banking
23 meetings to be held in West Contra Costa where large
24 banks, like BofA, make real contributions to community
25 reinvestment.
26 When the bank sees in the inner core, urban
456
1 inner core of our community, lines that extend out the
2 door of minorities who come in to do checking and other
3 banking services, and downsize their branch so that
4 those lines now extend out into the rain, we do not
5 believe that they are responding to the interests of the
6 community.
7 When they downsize their branch so that
8 merchants in the inner core cannot have change to
9 continue business, we do not view that as contributing
10 to economic development or listening to the needs of the
11 community.
12 We have had Bank of America at the table with
13 us over the last eight years and we applaud the things
14 that they have done in the large urban areas of
15 California. However, most of America is not large urban
16 areas. It is small cities that often, like West Contra
17 Costa, have urban problems to resolve that are growing.
18 We would like an opportunity to take
19 advantage of the open land that remains in our area to
20 develop small businesses that include indigenous
21 population. We call on the Federal Reserve Board to
22 develop a fair and open process for community planning
23 that includes the interest of small cities and economic
24 development and small business development.
25 MS. SMITH: Thank you very much.
26 Mr. Thompson.
457
1 MR. THOMPSON: Yes. Thank you very much.
2 My name is David Thompson. I am the City of
3 Richmond Redevelopment Director.
4 Our Mayor, Rosemary Corbin gave most of the
5 testimony that I would like to give this morning, so I'm
6 not going to burden you with repeating that. A number
7 of the comments that Ms. Kurudisha has provided are also
8 my thoughts.
9 I would, though, like to comment on some of
10 the issues that I see as the Redevelopment Director with
11 regard to relationship with banking institutions
12 generally and with the Bank of America and the possible
13 merger with NationsBank and the acquisition by
14 NationsBank in terms of its impact in our community.
15 The most effective relationships that we have
16 had have been ones where we have been able to develop a
17 personal relationship working with banking officers and
18 where there is a corporate commitment to doing that and
19 to making things happen in communities. Our concern is
20 that through this merger the decision-makers are going
21 to be remote and that the products are going to be more
22 generic and are going to be more difficult to work with.
23 In many cases in our community it is going to
24 take a combination of financing to make projects work
25 including our redevelopment agency and other public
26 funding. Our needs are for revitalizing our older
458
1 commercial neighborhoods.
2 We know that in many cases the bank by itself
3 cannot do that. We have to have a vehicle for sitting
4 down with somebody and saying, "This is the program that
5 we need for this community and we're prepared to do this
6 much, can you do the other?"
7 Let me say that the example that Mayor Corbin
8 noted with regard to Rubicon programs was in fact a
9 situation like that that happened with the bank. Out of
10 the Community Development Bank, it was a very aggressive
11 senior loan officer who came to the city and said,
12 "We're interested in doing business in your city," and
13 we put together a deal with Rubicon programs that
14 involved our city and involved the Bank of America.
15 Our concern, quite frankly, is that with this
16 merger we are not going to be able to have that kind of
17 relationship. So, whether it goes through or doesn't go
18 through, we want to preserve a relationship here in
19 California, particularly in Northern California, so that
20 we can continue that kind of relationship.
21 Earlier the question of the independent banks
22 and the case, this case, the Mechanics Bank, which
23 started in 1906 in Richmond, and it's role in the
24 relationship. I point out over the last -- well, from
25 1994 to 1996, they had a significant growth in their
26 deposit base from the household business sector, while,
459
1 in fact, in West Contra Costa County the Bank of
2 America's deposit base declined.
3 I am concerned about that because, while the
4 community bank has ability to do certain kind of
5 lending, and, quite frankly, they're reasonably
6 effective on the small business side of things, when it
7 comes to the larger transactions, such as the Ford
8 Building, which will be a $70 million project in the
9 City of Richmond, a 500,000 square foot Ford assembly
10 building, that Mechanics Bank is not going to be able to
11 be a serious player in that kind of a project. We've
12 talked with them about it.
13 There are other real estate transactions like
14 that where it is going to be more appropriate for a
15 larger bank.
16 Our concern is, again, as this goes forward,
17 that we preserve the ability to be able to have a
18 relationship and to enter into a real process of
19 discussing West Contra Costa County's community
20 development reinvestment needs.
21 Again, I want to thank you for the
22 opportunity to present here. This is unusual and we
23 appreciate it.
24 MS. SMITH: Thank you very much. Mr. Henry.
25 MR. HENRY: Good morning. Excuse me, I've
26 got a small cold, on my way down here, by the way.
460
1 Thank you once again for allowing me to come
2 before you to state the problem that we have with Bank
3 of America in our area. It's called OMI. Ocean
4 View/Merced/Ingelside District. It's in the southern
5 part of the city where most of everybody that goes
6 through there goes right through our area; however, if
7 you go down the main street over there, which is called
8 Ocean Avenue, you'll find that it also runs, Ocean
9 Avenue, runs all the way out to the ocean.
10 But, when you look at the businesses that's
11 in that corridor, you'll find that for years, years,
12 many, many years, that there was only one bank on that
13 corridor and that was Bank of America. Everything that
14 Bank of America got out of that neighborhood came from
15 that corridor.
16 Now, what I'm alluding to right here right
17 now is Bank of America up and pulled out. We contacted
18 them on many occasions to try to get them to keep that
19 branch open. Why? For the simple reason, this area is
20 an area where most of low-income families are retired.
21 We have many, many seniors that has medical problems,
22 and they closed the bank. They don't have access to a
23 bank in that area within a half a mile. That would be
24 the closest.
25 Now, in this area also, transportation is
26 fairly good, I wouldn't say excellent, but the seniors
461
1 can't use the bank to get to the AMT [sic] machines.
2 That's what they left there, they left the AMT machines,
3 and they expect those people to go there and use those
4 machines. I tell you, that's not a very good idea,
5 because those machines and that bank that they left
6 there was ripped off. The machines was ripped off. So
7 it's not safe for seniors to be in that area at that
8 machine.
9 Now, I would also like to say I disagree with
10 this merger simply because the first of next year all
11 government checks will automatically be electronically
12 transmitted. Now, what does that mean to a senior
13 citizen that has to use an AMT machine? Can't speak to
14 anyone, most of them are afraid to use the machines. I
15 don't like to use them myself and I'm much younger than
16 they are.
17 I'll give you a little example of what
18 happened to me. I used AMT machine, put in the amount
19 of money that I wanted to withdraw, it went through the
20 transaction, I'm looking for my money to come out, lo
21 and behold, no money. So, it was the weekend. So what
22 happened? I had no one to talk to, had no place to go.
23 So, finally, Monday morning came around, I
24 went to the bank and I told them what happened. Well,
25 these things happen. There is no one there to talk to.
26 We need a bank in our area, we need tellers, so that the
462
1 senior citizens can talk to and get service through.
2 I would only ask that this merger not be
3 accepted. Thank you.
4 MS. SMITH: Thank you very much.
5 Ms. Blosser.
6 MS. BLOSSER: Yes. I'm Regina Blosser, and
7 I'm from the Ocean View Merced Heights Neighbors in
8 Action. Ceasar and I are both members of this public
9 safety and neighborhood improvement organization in the
10 Ocean View District of San Francisco.
11 The Federal Reserve sent me a copy of the
12 Bank of America closure policy adopted by the Social
13 Policy Committee of BofA on September 14th, 1993. I
14 wish to read it to you in as much time as I am allowed
15 item by item and then tell you how we believe that the
16 BofA did not follow its own closure policy when it
17 closed our bank on Ocean Avenue.
18 Item, bit by bit, every sentence, "Bank of
19 America is committed to providing access to banking
20 services to all members." Well, obviously it's not
21 committed to providing access to banking to us, because
22 it closed our branch.
23 Number two, "Furthermore, the bank will
24 reasonably strive to minimize any negative impact on the
25 community." BofA didn't strive to minimize any negative
26 impact on our community, in fact, when we make phone
463
1 calls to community development department that wrote
2 this little document, they are never returned. We call,
3 they don't call back. We leave an answer on the
4 answering machine.
5 Number three, "Review and concurrence by
6 corporate community development must be an integral part
7 of the California retail banking branch closure decision
8 process." Well, we would like to see this review
9 because we have not received any justification for
10 closing our branch through any sort of document. We
11 would like to see the review of this policy when it had
12 to do with closing our bank.
13 Number four -- again, we wish to see a review
14 of these closure recommendations.
15 Number four states, "Once a bank has been
16 identified for potential closure, a representative from
17 Corporate Community Development will review corporate
18 recommendations to be sure any negative impacts on the
19 community and its serving area are identified and
20 included in subsequent considerations." Well, we
21 certainly wrote them a lot of letters stating the
22 negative impact we knew would be created in our
23 commercial district.
24 Merchants can't make change anymore, they
25 depend on this. They have to have a secure place to put
26 their deposits. They no longer have this because the
464
1 branch closed. Business has gone down. They have to
2 spend their time going to another bank by car. They
3 cannot simply walk down the street to use banking
4 services that merchants need.
5 These things you would think would have to do
6 with potential negative impacts. The decision was
7 already made to close our bank before any of these
8 impacts were considered. On and on and on.
9 I'll submit the rest to you on a point-by-
10 point basis. This is their own branch closure policy.
11 I don't know how beholden they are to follow this
12 policy. I'll tell you item by item they did not follow
13 it. You can ask anyone of our residents in the OMI if
14 they realize or know they followed this closure policy.
15 This is their own document.
16 This is a map. I put a half-mile circle
17 around every branch in San Francisco that I could find
18 listed in the phone book. You can see it's all covered
19 in green. This obviously is downtown where a lot of
20 branches are needed to serve people. This is industrial
21 district. This is residential -- this little blank spot
22 here is residential area where there are no commercial
23 corridors to locate a bank. It's hilly country with
24 sparsely located houses. All of this is green in the
25 city. This red is our neighborhood. Do you see any
26 green half-mile radius circles going to our
465
1 neighborhood?
2 Now, we've been told that it's only a
3 three-minute drive to the next branch. But every other
4 neighborhood in this city is not required to make -- and
5 it's not a three-minute drive, let me tell you. It's
6 more like 15 or 20 minutes after you've found a parking
7 spot or you've been transferred to another bus to get
8 there. It is certainly not a three-minute ride to the
9 next branch.
10 Anyway, you see my point. I had to show you
11 this in color. This area is the only area that does not
12 have a green half-mile distance to the next nearest
13 branch. A lot of these overlap, lot of branches are
14 less than a half-mile in other neighborhoods, Bank of
15 America branches.
16 The yellow are what we call banker's rows.
17 There is a banker's row here, they passed resolution at
18 the planning department stating they wanted no more
19 banks on their commercial district because all they had
20 were banks and no practical places like grocery markets
21 or shoe stores, nothing but banks. And we can't even
22 find one bank. And we have tried, we have tried to find
23 Sterling.
24 The Mayor's Office of Economic Development
25 asked Sterling Bank to come to our neighborhood. When
26 they met with Bank of America representatives to take
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1 over the old bank building and to use as a Sterling
2 Bank, Bank of America refused to remove its ATMs. So
3 Sterling did not want to locate there.
4 We have tried looking for, you know,
5 consumers unions, credit unions, that might expand their
6 field of membership. But you might know that the
7 American Bankers Association brought a lawsuit against
8 credit unions and presently credit unions cannot expand
9 its fields of membership to neighborhoods like ours that
10 need some kind of service, banking service.
11 Presently there is a bill in the house, and
12 perhaps it will be passed, and we will be able to find a
13 credit union, but right now we're stymied. We want a
14 bank and we can't get one.
15 Numerous non-profits have come to you to
16 state their satisfaction with these bank's financing of
17 their programs. This is fine, but the only thing our
18 neighbors and merchants want is a bank. We feel no
19 desire for charitable giving.
20 That's what we want, we want to take care of
21 ourselves and we want to be independent, self-sufficient
22 and prosperous, and we need a bank. That has been
23 denied us, and our attempts to get a bank have been
24 sabotaged by the Bank of America by not allowing ATMs
25 for a new bank, by the Bankers Association by not
26 allowing us to pursue a credit union as an alternative.
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1 We think that we really must talk about this
2 merger and how they comply with the Community
3 Reinvestment Act.
4 MS. SMITH: Thank you very much. Please do
5 submit your complete statement and your map that you
6 have outlined in color as well.
7 Do you have questions?
8 MR. FRIERSON: Mr. Thompson, could I ask you,
9 do you work with both in-state and out-of-state banks as
10 a redevelopment director.
11 MR. THOMPSON: We work primarily with
12 in-state banks.
13 MR. FRIERSON: Could you just elaborate a
14 little bit, contrast your experiences working with
15 in-state versus out of state banks?
16 MS. SMITH: Would you move the mike closer to
17 you?
18 MR. THOMPSON: Sure. We haven't had much
19 experience to out-of-state banks. They don't market to
20 us. Where we do run into -- where we do work with them
21 is a result generally of a developer bringing the
22 out-of-state financing in toW. Sometimes it is banks,
23 sometimes it's insurance companies and other financial
24 institutions. But, for the most part, we rely on
25 working with the institutions that are here that are
26 headquartered here and with whom we can develop
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1 relationships and with whom our non-profits develop
2 working relationships.
3 I have to tell you a brief story. I was
4 working with Bridge Housing on a housing development
5 project, and we were negotiating and I said, "Well,
6 what's in your commitment letter?" And they said, "What
7 commitment letter? We just call them up and tell them
8 what we need." Now, it would be nice for all of us to
9 have that kind of relationship and Bridge is a very
10 large and experienced housing development group.
11 But what it said was that the corporate
12 relationship that existed between Bridge Housing and
13 that financial institution, it's the other big one in
14 town, was such that they were able to do things to make
15 projects move and get done that you wouldn't be able to
16 do if you didn't have those kinds of senior executive
17 kinds of relationships that are both formal and
18 informal.
19 MS. SMITH: Thank you very much for coming
20 this morning and do submit your complete statements for
21 the record. You have until next Friday to do so, but
22 the sooner you can do it the better. Thank you.
23 (Recess taken.)
24
25
26
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1 MS. SMITH: I think we're ready for Panel 20.
2 And my notes say that I should start with -- is it
3 Mr. Serpan?
4 MR. SERPAN: Yes. You want me to start?
5 MS. SMITH: Please.
6 MR. SERPAN: My name is Rhea Serpan and I'm the
7 President and CEO of the San Francisco Chamber of
8 Commerce. And I appreciate this opportunity to speak on
9 behalf of the Chamber regarding the merger of BankAmerica
10 and NationsBank.
11 Since its founding in 1904 in the city here,
12 BankAmerica has been integral to the development of the
13 business community in San Francisco. The Bank has been a
14 long-standing member of the San Francisco Chamber of
15 Commerce. In fact, A.P. Giannini was on its board and
16 that involvement continues to this day. BankAmerica has
17 generously supported the Chamber's many activities,
18 including providing resources to our business development
19 programs and contributing both expertise and funding. For
20 instance, BankAmerica has contributed $250,000 over three
21 years to SF Works, the welfare-to-work initiative created
22 by the Chamber and the Committee on Jobs and United Way
23 here in the city.
24 BankAmerica has been a generous contributor to
25 economic development projects, including a multi-year
26 commitment to investment in the San Francisco Partnership,
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1 a public-private partnership launched by the Chamber to
2 attract and retain business and jobs in San Francisco.
3 And BankAmerica has been a strong supporter and
4 contributor to the Bay Area Sports Hall of Fame Youth
5 Fund, Business Arts Council, Business Volenteers for the
6 Arts and Leadership San Francisco, all chamber programs.
7 And throughout its history, BankAmerica has been
8 involved and a responsible corporate participant in the
9 San Francisco community. BankAmerica recognizes that
10 small businesses are the job creation engine here in our
11 city and drive the economy and has made a substantial
12 investment in San Francisco area firms, and currently the
13 bank has small business loan commitments in the Bay Area
14 that total $708 million. And since 1990, the Bank has
15 loaned 235 and a half million dollars to support the
16 construction of 4,500 affordable housing units in the
17 region. And the bank has contributed 14 million in the
18 past three years to arts, education and health and human
19 services, including a $5 million commitment to the United
20 Way.
21 The Chamber fully expects BankAmerica to continue
22 to play an important leadership role in our community. We
23 believe that as their business grows, and it will, that
24 their corporate involvement will also expand.
25 BankAmerica's merger with NationsBank along with
26 the announced merger of Wells Fargo and Northwest Bank
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1 will reaffirm San Francisco as a national and global
2 banking center. BankAmerica is expected to take advantage
3 of and fully participate in our region's growth and to
4 benefit from the strategic advantages of doing business in
5 San Francisco. San Francisco is the center of a strong
6 and growing Bay Area economy, and is the gateway to the
7 Asian marketplace and the place where Silicon Valley does
8 its banking.
9 While there will undoubtedly be some job
10 dislocation, new job opportunities are going to be created
11 as a result of this merger. And, of course, it's too
12 early to tell and estimate with any accuracy exactly what
13 the net effect might be on jobs, but I'm convinced that
14 the combined strengths of the two institutions as they
15 come together creates the potential for job growth that
16 may not have otherwise been possible. It is significant,
17 I think, that the banks' combined corporate and investment
18 banking headquarters are going to be here in
19 San Francisco, that's an important part of the banking
20 institution.
21 The Chamber is proud of the strengths of our
22 community and we're confident in the continued growth of
23 our economy and we strongly believe that BankAmerica will
24 continue to be a major contributor to both. Thank you.
25 MS. SMITH: Thank you very much. We'll go to
26 Ms. Ferniza.
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1 MS. FERNIZA: Thank you. Good morning, my name
2 is Sandra Ferniza and I'm President and CEO of the Arizona
3 Hispanic Chamber of Commerce located in Phoenix, Arizona.
4 The Chamber of Commerce is pleased to have the
5 opportunity to testify on behalf of the proposed Bank of
6 America and NationsBank merger. In an era of decreasing
7 public assistance to individuals of low and moderate
8 income and small, women or minority-owned businesses,
9 banks, with the encouragment of the Community Reinvestment
10 Act and the conscious of its board members, are a major
11 source of hope to those who dream of home or small
12 business ownership.
13 Institutions such as Bank of America have been a
14 source, both directly and indirectly, of credit and
15 capital to those who lack access to conventional financial
16 services through innovative projects and community
17 partnerships. The current industry trend of bank
18 consolidation poses serious questions for those of us who
19 work with financial institutions in an effort to encourage
20 investment, leveraging, financing and creation or
21 preservation of jobs in less affluent communities.
22 However, our experience with Bank of America has led us to
23 include that the proposed merger will result in a
24 continuation and/or expansion of the bank's commitment to
25 serving poor and diverse communities.
26 Bank of America has been an active member and
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1 strong corporate partner of the Arizona Hispanic Chamber
2 of Commerce since 1980. In addition, it was a founding
3 member of Los Amigos de AHCC, a corporate advisory group
4 that provides both financial and business value to the
5 chamber and its small business members. Bank of America's
6 recognition and understanding and commitment to the
7 growing Hispanic market is borne out in two key areas for
8 our chamber. One, in a publication known as DATOS, Focus
9 on Arizona's Hispanic Market, of which the bank is a
10 premier sponsor, and has reached an audience of
11 non-believers about the potential Hispanic market, we are
12 extremely grateful for that opportunity. And, two,
13 through our Minority Businesses Development Center which
14 the bank has provided both financial and technical
15 assistance to the mission of the greater Phoenix Minority
16 Business Development Center which the chamber operates.
17 Also, a member of the bank staff serves on our board of
18 directors and its bank officers and staff regularly
19 participate in chamber business seminars, host networking
20 mixers to highlight procurement opportunities and serve as
21 speakers and instructors in our business education series
22 known as NxLevel and Su Plan de Negocio. So they've put
23 their money where their mouth is, not only in terms of
24 dollars, but in terms of active participation with the
25 chamber and its memberships.
26 Bank of America has also demonstrated a
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1 commitment to diversity in the board room at all levels of
2 management and in a unique bilingual customer service that
3 has thrived in our valley called CuentaTel. Through
4 partnerships with organizations like others and ours, it
5 supports training to consumers, business owners and others
6 who play a promising and important role in developing the
7 social and economic fabric of America.
8 Most importantly to the chamber, the merger
9 presents new opportunities for the local business
10 community. A nationwide network that has greater access
11 to global financial markets is consistent with the growing
12 presence of mutual customers seeking to retain and expand
13 their business success and it is particularly important in
14 Arizona as a border state. It also presents greater ease
15 of service for individual consumers whose mobility is a
16 vital part of an expanding commodity and economy.
17 The chamber expects the activities previously
18 mentioned to continue after the merger of the two
19 institutions. I want to reiterate that, based on
20 experience, we feel confident that the bank will not only
21 continue its outstanding community service but also seek
22 new ways to efficiently and effectively serve the needs of
23 a diverse customer base, both large and small. That
24 commitment we feel has been assured through the pledge of
25 the $350 billion to serve communities most in need.
26 In addition, let me add that personally my
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1 husband and I have been Bank of America customers since it
2 assumed responsibility for the former Western Savings &
3 Loan Association and its Security Pacific institutions.
4 That transaction convinced me that it's possible to
5 survive and thrive from a change at Bank of America while
6 maintaining a high level of customer service. We are all
7 of us resistant to change but we must look for the new
8 opportunities that change brings us. Thank you for your
9 attention.
10 MS. SMITH: Thank you very much. Mr. Tierney.
11 MR. TIERNEY: Presiding Officer Smith and panel
12 members, thank you for this opportunity to provide
13 testimony at this hearing. My name is James Tierney and I
14 have asked for this time to describe my very positive
15 working experience with Bank of America staff in Portland,
16 Oregon. I'm the Deputy Director of Community Action Team
17 in charge of community development. We're a community
18 based nonprofit anti-poverty agency serving three rural
19 counties in northwest Oregon. Like many community action
20 agencies around the country, we provide a number of
21 coordinated anti-poverty programs such as Head Start,
22 child and family development programs, Low Income Energy
23 Assistance and homeless assistance. In the area of
24 community development, we also assist our communities with
25 the development and rehabilitation of affordable housing,
26 affordable homeownership programs, single-family
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1 rehabilitation and community facilities development.
2 My understanding of the Community Reinvestment
3 Act is that a lender is expected to actively seek ways to
4 meet the credit needs of its community. As a community
5 organizer working in a rural area, I find the communities
6 to find themselves usually at populations no larger than
7 10,000 persons. In our three county service area, two of
8 our communities are served by one bank based in the three
9 county area. All other commercial banking is done with
10 banks which serve all or most of the state, usually many
11 states. Given the realities of the commercial banking
12 industry in the 1990s, each of our communities must look
13 outside the community for some or all of its banking
14 needs.
15 While working in our communities have been
16 approached by local bankers representing several banks,
17 with one exception, these bank officials have understood
18 very little about community development. Rather than
19 offering useful partnerships, they have sought information
20 and offered referral services. Bank of America has been
21 different. In our community development work, no bank,
22 local or otherwise, has supported our community
23 development efforts like Bank of America.
24 In the last eight years, I've arranged three
25 loans with the help of Bank of America staff. I've also
26 arranged one with a statewide nonprofit bank consortium
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477
1 and one with a government agency. The difference in
2 support service is marked. For me, the irony of these
3 experiences is breathtaking. I feel that I have had to
4 fight tooth and nail with the nonprofit government agency
5 to simply get good loans underwritten. In these cases I
6 felt that my lending partner was seeking to underwtie the
7 transaction in a way that reduced my agency's development
8 and operating cushions to such low levels that it would
9 deny us sufficient capacity to continue our work.
10 Working with the Portland Bank of America staff
11 is an entirely different experience. They appear to be
12 actively planning for our future. The bank staff has
13 encouraged us to take on new roles increasing our
14 efficiency and effectiveness. During our campaign to
15 organize and develop the capacity of other nonprofits
16 working in our three county service area, we received bank
17 support in the form of time, expertise and money. The
18 bank staff has taken a personal interest in the
19 development and capacity of my agency and me personally.
20 This has taken the form of scholarships, supportive
21 information and advice.
22 I cannot speak about any of the Bank of America
23 CRA work except that which I've seen in Portland nor do I
24 have any experience with NationsBank. However, I can say
25 the Bank of America and its Portland's staff has made a
26 huge difference in our ability for us to do our work.
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1 Thank you.
2 MS. SMITH: Thank you. I don't know how to
3 pronounce your name.
4 MS. HAUGER: It's Hauger.
5 MS. SMITH: Ms. Hauger.
6 MS. HAUGER: Thank you. Thank you for the
7 opportunity to allow me testify for the Community Housing
8 Resources of Arizona located in Phoenix on behalf of our
9 experience with Bank of America, Arizona. I'm Executive
10 Director of Community Housing Resources of Arizona. We're
11 a small HUD approved housing counseling agency established
12 in 1987 to promote fair housing and equal housing
13 opportunity for residents of Phoenix.
14 In 1990, we expanded our services to include
15 pre-purchase counseling and affordable homeownership
16 programs. In the eight years since then, over 2100 low
17 and moderate income families have completed our one-on-one
18 counseling program and become homeowners. And over 600
19 have received downpayment closing cost grants. On
20 average, 27 families per month become homeowners taking
21 part in our services.
22 In order to make the dream of homeownership a
23 reality for lower income and minority households,
24 Community Housing Resources relies heavily on the support
25 of financial institutions. Over the last six years, Bank
26 of America Arizona has been instrumental in our success by
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1 providing significant funding and management support. We
2 sincerely hope that the mutually beneficial partnership
3 with the bank will continue after the merger is completed.
4 Bank of America has recognized the value of pre-purchase
5 counseling in preparing lower income households for
6 homeownership by contracting with our agency to provide
7 pre-purchase counseling for low income first-time home
8 buyers.
9 BofA has provided first mortgages for our
10 clients, have given us generous grants to support our
11 counseling program. These grants not only have provided
12 operating funds for us but they've also provided the very
13 necessary matching funds needed to secure government
14 grants for downpayment assistance programs and
15 homeownership counseling.
16 In addition to this generous financial support,
17 BofA Arizona employees James Rayburn, Juan Salgado and
18 Darryl Tenenbaum has unselfishly helped and guided our
19 small agency by providing hundreds of hours of management
20 service. They have also served on our board of directors
21 and provided technical assistance which has ensured that
22 we have been able to meet our goals and missions.
23 In addition, as a director since 1990, James
24 Rayburn has saved our organization thousands of dollars by
25 providing countless hours of pro bono legal advice.
26 Community Housing Resources strives to provide
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1 homeownership opportunities for underserved populations,
2 including persons with disabilities and ethnic minority
3 households. Over 60 percent of the clients that we serve
4 are Hispanic and more than one-third of all of our
5 one-on-one counseling sessions are conducted in Spanish.
6 Our main concern with the proposed merger is that
7 our low-income and minority clients will be underserved by
8 the creation of such a large bank. We are, however,
9 encouraged by recent articles describing Nationsbank's
10 increased efforts to serve the growing Hispanic community
11 and we trust that those efforts will extend to all
12 traditionally underserved communities in Arizona.
13 We support the merger with the expectation that
14 the current level of support for our organization,
15 inclu