Public Meeting Regarding J. P. Morgan Chase & Company,
and Bank One Corporation
Held on Friday, April 23, 2004, at the Federal Reserve Bank of Chicago
Unedited Transcript
|
Public Meeting Regarding J. P. Morgan Chase & Company,
and Bank One Corporation |
1
2 PUBLIC MEETING
3 J. P. MORGAN CHASE AND BANK ONE CORPORATION
4 CHICAGO, ILLINOIS
5
6 STENOGRAPHIC REPORT OF PROCEEDINGS had in
7 the above-entitled matter held on April 23, 2004,
8 at the Federal Reserve Bank, 230 South LaSalle
9 Street, Chicago, Illinois, MS. SANDRA BRAUNSTEIN,
10 presiding, commencing at 8:30 o'clock a.m.
11 PRESENT:
12 MS. SANDRA BRAUNSTEIN, Director, Board of
13 Governors of the Federal Reserve
14 System
15 MR. JAY BERNSTEIN, Bank Supervision
16 Officer, Federal Reserve Bank of New
17 York
18 MR. WALTER McEWEN, Senior Counsel, Board
19 of Governors of the Federal Reserve
20 System
21 MS. ALICIA WILLIAMS, Vice President,
22 Federal Reserve Bank of Chicago
23 Reported By: Anna M. Morales, CSR, RMR
24 License No: 084-002854
1
1 MS. BRAUNSTEIN: Good morning, everybody.
2 We're going to get started. We have a tight
3 timetable today, so we're going to try to stick to
4 that. Good morning, everyone, and I'm pleased to
5 welcome you to Chicago and to this important public
08:31:04
6 meeting on the application by J. P. Morgan Chase to
7 acquire Bank One Corporation.
8 Let me first introduce myself. I'm
9 Sandra Braunstein, and I'm the Director of the
10 Division of Consumer and Community Affairs at the
08:31:18
11 Board of Governors of the Federal Reserve System in
12 Washington, D.C.
13 Our other panelists are to my left is
14 Alicia Williams, who's Vice President at the
15 Federal Reserve Bank of Chicago for Consumer and
08:31:34
16 Community Affairs. To my immediate right is
17 Walter McEwen, who is a senior legal counsel at the
18 Board of Governors in Washington, D.C.; and to his
19 right is Jay Bernstein, who is the Bank Supervision
20 Officer in Banking Applications and Analysis for
08:31:52
21 the Federal Reserve Bank of New York.
22 We are here today because J. P. Morgan
23 Chase and Company in New York has applied for
24 approval to acquire Bank One Corporation here in
2
1 Chicago, Illinois. When the Federal Reserve System
2 considers one of these applications, we look at a
3 number of factors under the Bank Holding Company
4 Act. These factors include financial issues,
5 managerial issues, competitive issues and the
08:32:24
6 convenience and needs of the communities affected.
7 In doing so, we particularly look at the record of
8 performance of the parties under the Community
9 Reinvestment Act. The CRA requires the Board to
10 take into account an institution's record of
08:32:44
11 meeting the credit needs of its entire community.
12 The purpose of this public meeting today
13 is to receive information regarding these factors.
14 We will be seeking to elicit this information and
15 to clarify factual issues related to the
08:33:00
16 application. We're very pleased that so many
17 witnesses have signed up to testify today. In
18 fact, we have, I think, a little over 85 groups
19 that will -- and individuals that will be
20 represented.
08:33:16
21 Let me make a few comments about what the
22 procedures will be; and, for those of you who are
23 here for the long haul for the entire day, some of
24 these things you're going to hear me repeat again
3
1 and again for each panel because I know we have a
2 lot of traffic flow, people coming in and out.
3 Basically this is called an informal
4 public meeting. Members of this panel may ask
5 those who are testifying about their testimony.
08:33:44
6 However, this is not a formal administrative
7 hearing, so we're not bound by rules regarding
8 evidence, cross-examinations and some of the formal
9 trappings of that kind of procedure.
10 Because we have so many witnesses today,
08:34:00
11 we are really going to need to stick to the
12 timetable so that everyone who is here and has
13 signed up has a chance to offer their testimony.
14 And so we're going to ask the witnesses to please
15 be mindful of the needs of other panelists and to
08:34:14
16 help us stay on schedule. And we're going to ask
17 the witnesses to please keep within their allotted
18 time.
19 We have a time-keeping system, and each
20 panelist -- by the way, for most of the panels the
08:34:30
21 way it's done is each panelist will have five
22 minutes to present their testimony. After three
23 minutes, we have timekeepers over here -- raise
24 your hands, Sherry and Helen -- they're our
4
1 timekeepers, and we have several systems here. We
2 have the systems and back-up systems and fail-safe
3 systems for timing.
4 For one thing, after the first three
5 minutes of your testimony, a yellow light will
08:34:54
6 flash in that little box, and then a red light will
7 flash, and I understand a sound -- there will be a
8 sound when the five minutes are up. In addition,
9 we also have as a back-up system signs which tell
10 you when you have two minutes left and when you are
08:35:08
11 finished. So we would ask people to please not
12 just ignore the timekeepers and to pay attention to
13 them and that will be helpful.
14 Also if anyone has a copy with them of
15 their statement, it would be helpful if you could
08:35:24
16 leave a copy of that with our court reporter who is
17 in the center of the room. And with regards to
18 that, I just want to let people know, we are being
19 taped -- we're being taped in terms of sound
20 system. We are not being videotaped. You see, the
08:35:42
21 cameras are on just to have the big screens to make
22 it easier for the people in the back to see the
23 panelists, but it is not being videotaped. We're
24 being audiotaped only.
5
1 The last thing, one more comment, is that,
2 witnesses, if you can't finish your testimony in
3 five minutes, that's okay. Your time will be up
4 for speaking, but you may submit a written
5 supplement to your oral testimony, but you must do
08:36:10
6 this by next Friday, April 30th, and then the
7 record will be closed.
8 Written supplements should be directed to
9 Jennifer Johnson, Secretary of the Board of
10 Governors of the Federal Reserve Bank in
08:36:24
11 Washington, D.C. They must be received by 5 p.m.,
12 5 p.m. Eastern Standard Time on April 30th. You
13 may also fax your submissions to 202-452-3462.
14 If you haven't turned in copies of your
15 written testimony or if you have other written
08:36:46
16 statements to put in the record, please leave them,
17 as I said, with the court reporter or with the
18 Federal Reserve staff that are at the registration
19 desk.
20 We are doing a transcript for this
08:36:58
21 meeting. The hard copy of the transcript for the
22 meeting will be available by April 30th through the
23 Federal Reserve Bank of Chicago and through the
24 Board of Governors. In addition, the official
6
1 transcript will be up on the Web site, on the
2 Board's public Web site at
3 www.FederalReserve.gov/events/public meetings.
4 And with that we're going to begin the
5 proceedings. I would ask that everyone who is
08:37:26
6 speaking to please state your name and organization
7 at the beginning of your remarks for the record.
8 And also with our first panel, we do have a little
9 bit difference in time. You have one-half hour.
10 You won't be signaled until the end of your half
08:37:42
11 hour, till the last five minutes of your half hour.
12 With that, Mr. Harrison, would you like to
13 begin?
14 MR. HARRISON: Thank you, Sandra.
15 Good morning. I'm Bill Harrison, Chairman
08:37:52
16 and CEO of J. P. Morgan Chase. It's my pleasure to
17 address you, the distinguished members of the
18 panel, today. I'm here with Jamie Dimon, Chairman
19 and CEO of Bank One Corporation; Mark Willis,
20 Executive Vice President, head of J. P. Morgan
08:38:06
21 Chase's Community Development Group; and Byron
22 Reed, First Vice President and Managing Director of
23 Bank One's Community Investment Group.
24 First, I want to thank the Federal Reserve
7
1 for convening this public meeting, giving us the
2 opportunity to discuss the proposed merger of
3 J. P. Morgan Chase and Bank One. I would like to
4 explain why we believe our merger will benefit our
5 customers, our employees, our shareholders and the
08:38:32
6 important communities in which we do business and
7 in which we live.
8 In January, J. P. Morgan Chase and
9 Bank One announced an agreement to merge in a
10 strategic business combination which based on total
08:38:46
11 assets will establish the second largest banking
12 franchise in the United States. We'll have assets
13 of $1.1 trillion; a strong capital base; over 2300
14 branches in 17 states and employees in 50 countries
15 around the world. We will have top-tier positions
08:39:04
16 in retail banking and lending, which includes small
17 business and home finance, as well as top-tier
18 positions in credit cards; investment banking;
19 asset management; private banking; treasury and
20 security services; middle-market banking and
08:39:20
21 private equity.
22 With balanced earnings contributions from
23 retail and wholesale banking, we believe we will be
24 well positioned to achieve strong and long-term
8
1 stable financial performance and to increase
2 shareholder value. We'll have a more diverse
3 business mix, greater scale, and enhanced
4 efficiencies and competitiveness.
5 I will be Chairman and CEO; Jamie Dimon,
08:39:44
6 Bank One's current Chairman and CEO, will be the
7 President and Chief Operating Officer. Jamie will
8 succeed me as CEO in 2006 and I will continue as
9 Chairman.
10 Our corporate headquarters will be in
08:39:56
11 New York, and both our middle market and retail
12 businesses will be headquartered here in Chicago.
13 You probably also know that J. P. Morgan
14 Chase has had just a small presence in this great
15 City of Chicago, primarily serving government
08:40:12
16 entities and large corporations, and that
17 Chase Mortgage has been growing its business of
18 helping families achieve the American dream of home
19 ownership in this area. That's why we're so
20 excited that the merger joins us with Chicago's
08:40:28
21 biggest, most convenient bank, a bank that's been
22 here for more than 140 years.
23 We believe this merger will be a great
24 benefit to our communities. Making banking
9
1 services widely available and continuing to help
2 develop affordable housing and revitalize
3 neighborhoods are integral to our business goals
4 and corporate values. They always have been.
5 J. P. Morgan Chase has always been both a
08:40:54
6 major home mortgage lender nationwide and a major
7 small business lender throughout our local
8 communities providing innovative products to meet
9 the credit needs of first-time homeowners and small
10 businesses.
08:41:08
11 We've also distinguished ourselves in the
12 community development field as a lead lender for
13 large, complex transitions resulting in affordable
14 housing for low- and moderate-income households and
15 for economic development transactions that create
08:41:20
16 new jobs and help revitalize communities.
17 In fact, I am very proud to note that
18 J. P. Morgan Chase Bank again earned the highest
19 rating, outstanding, on its most recent CRA
20 performance examination from the Federal Reserve
08:41:38
21 Bank of New York. This is the seventh consecutive
22 time spanning 14 years that our lead bank has
23 earned the highest rating in the CRA category. And
24 all three of our subsidiary banks also have current
10
1 outstanding CRA ratings.
2 We had determined that our new firm will
3 maintain the highest possible CRA ratings.
4 Since the merger was announced, community
5 investment offices of both firms have already
08:42:06
6 reached out to more than 700 of our community
7 partners across the country seeking innovative ways
8 for banks to work with strategic local and national
9 partners. That's because the local leaders know
10 the needs of their communities. Based on responses
08:42:20
11 from the community groups, we are creating new
12 initiatives and redoubling our efforts on existing
13 ones.
14 On that note, I am proud of our
15 unprecedented nationwide $800 billion community
08:42:30
16 investment commitment that will span an entire
17 decade. I'm especially proud because this is the
18 biggest such commitment ever made by any financial
19 services company.
20 This pledge which includes mortgages,
08:42:44
21 small business lending and community development
22 lending reaffirms our national leadership position
23 in community and economic development. It also
24 underscores our efforts to support the credit and
11
1 capital needs of underserved markets, efforts that
2 will involve much of our new firm ranging from our
3 market-leading home finance business to our
4 municipal finance team.
5 Our commitment includes $675 billion in
08:43:10
6 mortgages nationwide for both minority and lower
7 income communities and borrowers and an expansion
8 of credit and mortgage counseling programs;
9 $90 billion in loans and investments to assist
10 small business and community-based, not-for-profit
08:43:26
11 organizations; $35 million of the 800 in loans and
12 investments for affordable housing and commercial
13 and economic development in low- and
14 moderate-income communities; and a new financial
15 education partnership office that will sponsor
08:43:42
16 financial education and social entrepreneurial
17 programs; work with mortgage counseling groups;
18 develop new anti-predatory lending programs; work
19 with our branches to develop bank programs designed
20 to serve recent immigrants; and teach credit
08:43:58
21 fundamentals to not-for-profit personnel. This
22 $800 billion pledge reaffirms our commitment to
23 outstanding CRA ratings and strong, fair lending
24 programs.
12
1 But we can't do this alone. We are
2 relying on many of the groups who are in this room
3 today, our partners who are here in support of us
4 and those who have come to raise reasonable
5 concerns.
08:44:26
6 Our new firm will strive to reach all
7 segments of our markets. We value the leadership
8 and innovation of our community development group,
9 confident that they, with the help of community
10 partners, will continue to deliver outstanding
08:44:38
11 results.
12 Before I hand the microphone over to
13 Jamie, I want to thank you again for this
14 opportunity to speak at today's meeting; and though
15 Jamie and I will only be able to stay for the first
08:44:50
16 panel's presentations, Mark Willis, who will head
17 the combined firms' Community Development Group and
18 Byron Reed from Bank One will be here for the
19 entire session and will address any follow-up
20 questions you may have regarding CRA.
08:45:06
21 Jamie.
22 MR. DIMON: Thank you very much. Good morning,
23 everyone. I'm Jamie Dimon, Chairman and Chief
24 Executive Officer of Bank One. I have been in this
13
1 role for four years, after joining the company in
2 March of 2000 and moving to Chicago with my family
3 at that time.
4 After the merger, as Bill said, I will
5 serve as President and Chief Operating Officer of
08:45:24
6 the combined company and become CEO in 2006. I,
7 too, would like to talk about the benefits of our
8 proposed merger.
9 I understand the important role Bank One
10 and its predecessors have played in their
08:45:36
11 communities across the country for well over
12 100 years and, in fact, more than 140 years here in
13 Chicago. Like all major banks in the country
14 today, Bank One has grown through acquisitions and
15 mergers, gaining scale, strength and breadth to
08:45:48
16 serve our customers, our employees, our
17 shareholders and our communities in even better
18 ways.
19 Over the last four years, we have faced
20 some very tough challenges at Bank One; and through
08:45:58
21 diligence, discipline and hard work, our employees
22 have created a strong, healthy company that has
23 begun to expand again. In 2003, we opened 58 new
24 branches for a total of 1,841 in 14 states. We've
14
1 already had 14 more this year as we continue to
2 expand. We've also added 175 ATMs so far this
3 year, and we are in the process of replacing every
4 one of the 4,300 ATMs in the nation. We're
5 investing millions more in refurbishing our
08:46:24
6 branches and we've added more than 1,000 additional
7 salespeople to help customers with everything from
8 checking accounts and mortgages to investments and
9 college savings plans. As we open additional
10 branches in 2004, we will continue to add
08:46:36
11 salespeople to help our customers.
12 The proposed merger with J. P. Morgan
13 Chase and Company will begin another exciting
14 chapter in our company's history. We know the
15 consolidation will continue in the banking
08:46:46
16 industry, and we believe this combined, stronger
17 company will have more control over our future than
18 we would having grown separately. We now have the
19 unique opportunity to create one of the world's
20 truly great global financial institutions.
08:46:58
21 We believe that each business in the
22 combined enterprise will be strengthened by the
23 efficiencies that come with scale and that the
24 businesses that complement each other, providing
15
1 substantial competitive advantage. For current and
2 prospective customers, the combined company will
3 provide access to a broader offering of products
4 and services more competitively priced.
5 For each of our communities, a vibrant,
08:47:18
6 healthy company is the prerequisite for responsible
7 corporate citizenship, a value deeply held by both
8 companies. For employees, a stronger company
9 ultimately results in expanded opportunities for
10 career growth and development, even though in the
08:47:30
11 beginning there will be, unfortunately, some
12 painful staff reductions.
13 We will treat our employees fairly and
14 respectfully as we plan to integrate the companies.
15 Soon after the merger announcement, we instituted a
08:47:40
16 hiring freeze at both companies so we can take
17 advantage of attrition and can move displaced
18 employees into the new positions. We also will
19 have a severance program that gives employees
20 advanced notice as well as a generous severance
08:47:52
21 pay.
22 While the combined company will be
23 headquartered in New York, the merger provides that
24 the retail and middle-market business will be
16
1 headquartered here in Chicago. Those businesses,
2 which serve everyone from consumers and small
3 businesses to companies with annual revenues of
4 $500 million or more, are expected to generate
5 nearly one-third of the company's combined
08:48:10
6 earnings. To put that in context, in 2003, those
7 businesses generated pro forma $6 billion of
8 pre-tax earnings.
9 This merger also will afford the combined
10 company a more diversified earnings stream, a
08:48:20
11 larger capital base, stronger capital generation
12 capabilities, and increased capacity to invest in
13 our businesses. All of these we believe should
14 ultimately lead to a lower cost of capital and the
15 ability to better withstand difficult times in the
08:48:32
16 economic cycle.
17 The combined strength of our retail
18 business will be crucial serving our communities
19 because it includes not only the branch and ATM
20 network but also mortgage lending and small
08:48:42
21 business banking. The company, new company, will
22 have 2,300 branches in 17 states, and we plan to
23 add more than 100 branches annually for at least
24 the next three years. We will open them in low-
17
1 and moderate-income neighborhoods as well as the
2 fast-growing suburban areas. In fact, in Chicago
3 alone, we'll open 12 branches in LMI areas by the
4 end of next year.
5 Equally important, J. P. Morgan Chase's
08:49:02
6 large mortgage business will be good news for
7 consumers in Chicago and across Bank One's
8 14 footprint states. While Bank One has provided
9 excellent banking services, the merger will provide
10 our customers with a wider range of mortgage
08:49:16
11 products, helping them to achieve the American
12 dream of home ownership.
13 Small business owners, too, will benefit
14 from this merger. Small businesses need banking
15 services, especially credit, to grow, and we will
08:49:26
16 offer the best products and services of both
17 companies to help our small business companies do
18 just that.
19 Mortgage lending and small business
20 lending are two of the most important factors in
08:49:34
21 evaluating a bank's Community Reinvestment Act
22 performance. Bank One's lending has helped it earn
23 outstanding and satisfactory ratings in its markets
24 across the country.
18
1 We are proud that our merger partner's
2 lead bank, headquartered in New York, has earned an
3 outstanding CRA rating, the highest possible, for
4 its mortgage, small business and community
5 development lending and community development
08:49:54
6 investments and services. In fact, it has received
7 outstanding CRA ratings for the last seven
8 consecutive periods covering more than 14 years.
9 It is even more important to know that the combined
10 company will strive to maintain that outstanding
08:50:04
11 record.
12 Bank One has been a terrific civic leader
13 and major contributor in our markets across the
14 country, contributing more than $40 million
15 annually to economic empowerment, youth education,
08:50:14
16 and arts and culture. In Chicago alone, we have
17 contributed more than $65 million over the last
18 decade. In Chicago and across our market,
19 Bank One's senior executive officers and other
20 employees serve on the boards of civic, community
08:50:26
21 development, educational and cultural institutions
22 across our markets. And our employees volunteer in
23 their neighborhoods, in religious organizations and
24 in community-wide efforts throughout the country.
19
1 We will continue that kind of support
2 after the companies merge, and we can link our
3 community partners and their cutting-edge ideas
4 with those of J. P. Morgan Chase's markets.
5 On the night the merger was announced, I
08:50:48
6 and Bill reaffirmed our commitment to Chicago's
7 community leaders. And last week, we went even
8 further when Bill Harrison announced our
9 $800 billion pledge for mortgages, small business
10 loans, and community investments and loans over the
08:51:00
11 next ten years. That unprecedented commitment will
12 be delivered one family, one small business and one
13 apartment building at a time across America.
14 There is no doubt that the combined
15 J. P. Morgan Chase will be a national and
08:51:12
16 international leader in banking. And there should
17 be no doubt that the combined J. P. Morgan Chase
18 will also be a civic leader in Chicago and every
19 other market it serves.
20 Now let me turn it over to my colleague,
08:51:22
21 Byron Reed, Managing Director of Bank One's
22 Community Investment Group, and Byron will provide
23 more detail of how Bank One has been a leader in
24 our communities across the country and especially
20
1 in Chicago.
2 MR. REED: Thank you, Jamie. Good morning. I
3 am Byron Reed, Managing Director of Bank One's
4 Community Investment Management Group. I
5 appreciate the chance to speak about Bank One's
08:51:40
6 proud tradition of how we serve our communities and
7 how this merger can help us do even more.
8 Bigger, better, stronger. You have heard
9 it from Bill Harrison and Jamie Dimon. Certainly,
10 it's exciting for our customers, employees and
08:51:56
11 shareholders; but, for me, the most exciting aspect
12 of the merger is what a bigger, stronger bank can
13 do for our communities.
14 Sometimes community development is
15 headline news, attracting local dignitaries and the
08:52:10
16 media. For example, On North Halsted Street in
17 Chicago, Bank One's construction loan helped
18 replace the Cabrini-Green public housing units with
19 mixed-income townhomes at the North Town Village,
20 creating the prototype for the country.
08:52:24
21 In West Dallas, Bank One helped welcome
22 the first family in Casa Rio, the first affordable
23 single-family development in that part of town.
24 And in Denver, Bank One helped to create a
21
1 170-acre master plan community, Belle Creek, with
2 over 900 units of affordable and market rate
3 housing, a charter school, a community and retail
4 commercial space.
5 In Tulsa, Bank One's investment in
08:52:50
6 historical credits and our construction funding
7 helped remake the Tulsa Tribune Building into
8 housing while the city worked to redevelop and
9 revitalize the Brady Arts District.
10 Most often, however, community development
08:53:02
11 takes place quietly with a biggest impact coming in
12 small, steady increments. Knowing that small
13 businesses are a mainstay of our U.S. economy,
14 Bank One has made the SBA Community Express program
15 a core component of its outreach to small
08:53:18
16 businesses. In 2003 alone, Bank One closed nearly
17 200 Community Express loans totaling almost
18 $22 million, including 16 loans in the Chicago area
19 totaling $1.5 million.
20 Since 2000, Bank One has fueled thousands
08:53:34
21 of affordable multi-family units for low-income
22 families in communities across the nation by
23 investing more than $1.9 billion in low-income tax
24 credit projects either directly or through funds.
22
1 While a relatively small player in overall
2 mortgage origination, Bank One has focused on some
3 areas of greatest need because it recognizes the
4 vital role home ownership plays in low- and
5 moderate-income families and their neighborhoods.
08:54:00
6 Let me share a few examples.
7 Bank One has already made loans of nearly
8 $5 billion from a five-year $12.5 billion
9 commitment with Fannie Mae for single-family and
10 multi-family homes across Bank One footprint
08:54:14
11 states. We announced that plan here at Chicago 17
12 months ago.
13 Bank One was the first large national bank
14 to offer a Section 8 mortgage product for very
15 low-income families moving from welfare and public
08:54:26
16 assistance to self-sufficiency home ownership.
17 Bank One's HUD 184 financing, including
18 Apache Dawn project in Arizona, has provided over
19 300 families safe, decent and affordable housing on
20 Native American tribal lands.
08:54:42
21 As Jamie noted, we can do much when we
22 pair J. P. Morgan Chase's extensive mortgage
23 origination business and Bank One's 1800-plus
24 branch network. And we plan to add at least
23
1 100 branches a year for the next three years in all
2 communities, including low- and moderate-income
3 neighborhoods. In Chicago, that means 30 more
4 branches this year, including 12 in low- and
5 moderate-income neighborhoods by the end of 2005.
08:55:06
6 Bank One also has established itself as a
7 leader in financial education and in helping
8 families take advantage of financial opportunities.
9 There are many examples.
10 In Chicago, Bank One just made a
08:55:18
11 $1 million five-year commitment to LISC to create
12 comprehensive financial education centers across
13 the city. Also in Chicago, Bank One contributed
14 $100,000 each year from 1999 through 2003 to
15 support the National Housing Service's education,
08:55:34
16 community building and neighborhood lending and
17 real estate development efforts.
18 Bank One has underwritten The Money Farm,
19 a public television program in which children teach
20 children about money, savings and other aspects of
08:55:46
21 banking. It started at WTTW-Channel 11 here in
22 Chicago and it airs in multiple communities across
23 the United States.
24 Bank One employees, as well as Bank One
24
1 grants, help families in a number of cities,
2 including Dallas, Phoenix and other cities, to take
3 advantage of the complicated Earned Income Tax
4 Credit, putting real dollars in their pockets. In
5 Chicago, Bank One employees volunteer through the
08:56:12
6 Tax Counseling Project, a ten-year-old program that
7 just surpassed the $100 million mark in federal
8 funds to Illinois families.
9 In Illinois, Indiana, Texas, Wisconsin,
10 Arizona, Bank One has sponsored financial literacy
08:56:28
11 "train the trainer" programs for directors and
12 employees of multiple nonprofits.
13 In Arizona, a Bank One grant helped launch
14 Arizona Saves, a savings and wealth-building
15 program focused on low-income families.
08:56:42
16 At Bank One, we are proud of what we have
17 done with our partners to serve our communities.
18 And we are very excited about the opportunity that
19 this merger brings to our communities. I know my
20 future colleague, Mark Willis, head of J. P. Morgan
08:56:54
21 Chase's Community Development, shares this
22 excitement with me. Thank you.
23 MR. WILLIS: Thank you, Byron -- that was
24 great -- for sharing your examples of the
25
1 responsive and meaningful work that Bank One has
2 been doing throughout its footprint.
3 Good morning. My name is Mark Willis. I
4 manage J. P. Morgan Chase's Community Development
5 Group and I have been asked to head it after the
08:57:22
6 merger. Thank you for giving us the opportunity to
7 discuss our unique and innovative community
8 development program, outline our $800 billion
9 public commitment, and talk a little bit about
10 creating a compact with our communities, an
08:57:36
11 initiative driven by the J. P. Morgan Chase
12 Community Advisory Board.
13 We are proud that our Community
14 Development Group is a leader in creating new
15 approaches to financing community development
08:57:46
16 projects. As J. P. Morgan Chase has grown, our
17 Community Development Group has designed new
18 capabilities to deliver a far more sophisticated
19 array of products and services. We are also
20 retaining the J. P. Morgan Chase Community
08:58:00
21 Development Group model that allows us to bring
22 together, in a single organization, community
23 development experts from both banks.
24 We have also helped incubate the
26
1 affordable mortgage business by providing mortgages
2 with flexible underwriting criteria, and we have
3 seen this business grow and mature.
4 In the early 1990s, we held tens of
5 millions of dollars in such mortgages in our
08:58:22
6 portfolio because they did not conform to secondary
7 market credit criteria. All of these mortgages
8 have developed into a seasoned portfolio. The
9 secondary market has learned from our experience
10 and created some new affordable products that all
08:58:38
11 lenders could provide. It is a great success when
12 we can mainstream a product because it has become
13 both ubiquitous and profitable.
14 Our Community Development Group's
15 entrepreneurial spirit and willingness to focus on
08:58:50
16 our customers' unique banking needs has
17 distinguished J. P. Morgan Chase as a cutting-edge
18 leader for innovation. While we recently announced
19 a ten-year $800 billion program, we will continue
20 to celebrate those small, tangible, day-to-day
08:59:04
21 successes that make such a difference for our
22 customers and community partners.
23 Let me now lay out the ten-year plan in a
24 little more detail. The components of the plan are
27
1 a set of key performance measurements against which
2 the public can assess our annual results. Bill has
3 talked about the top-line members that comprise the
4 plan, and I would like to touch on the major
5 components again and then discuss some new
08:59:28
6 initiatives.
7 The vast majority of this ten-year plan,
8 $675 billion, is comprised of mortgages which are
9 so vitally important to cities and neighborhoods in
10 every market across the country. These loans will
08:59:40
11 be made to households with incomes at or below the
12 median household income, minority borrowers and on
13 properties located in predominantly minority
14 communities and in LMI communities.
15 Second, we will make more than $90 billion
08:59:54
16 in loans to small businesses and not-for-profit
17 organizations in the 17 markets served by the
18 combined banks' branches. Finally, we anticipate
19 $35 billion in community development loans and
20 investments.
09:00:08
21 Let me now talk about the initiatives that
22 grew from our discussions with literally hundreds
23 of community leaders and advocates, including some
24 who oppose the merger.
28
1 We are creating a new Home Ownership
2 Preservation Office at Chase Home Finance that will
3 work with community groups helping victims of fraud
4 or other abusive mortgage practices and
5 restructure, when possible, their mortgages to help
09:00:30
6 them keep their homes. We will work with the
7 mortgage industry and HUD on FHA foreclosure policy
8 and work with community groups to sell or donate
9 certain REO properties to help minimize any
10 negative impact on their neighborhoods.
09:00:44
11 We're also creating a national community
12 mortgage-lending unit to serve the home-buying
13 needs of low- and moderate-income consumers looking
14 to buy their first homes in inner cities and other
15 historically underserved communities. In large
09:00:56
16 markets, we will use salaried loan officers who
17 will have both lending goals and outreach goals.
18 In other markets, we will have incentives for
19 commissioned loans officers to serve the needs of
20 mortgage counseling agencies and their clients.
09:01:10
21 We will provide $1 billion in loans and
22 investments to CDFIs, Community Development and
23 Financial Institutions, across our markets as part
24 of our $800 billion plan.
29
1 We will create a new Financial Education
2 Partnership Office to focus on the basic financial
3 education needs of consumers so that they can make
4 more informed choices about borrowing, investing,
5 saving and selecting the right banking account for
09:01:34
6 their needs. We already have developed a basic
7 banking curriculum which we obviously will be
8 expanding.
9 We will open new business resource centers
10 and expand the SBA Community Express program Byron
09:01:44
11 just talked about across all our retail banking
12 franchises.
13 Also we have heard community groups'
14 concerns about our consumer and small business
15 products and services, and we are looking closely
09:01:56
16 at ways we might help address those concerns.
17 Let me now turn to our Community Advisory
18 Board which is comprised of 46 community leaders.
19 At our last two meetings, we spent a great deal of
20 time discussing whether to announce a ten-year
09:02:10
21 plan. The Board voiced its confidence in our
22 commitment to community development and to
23 outstanding CRA performance. They did not feel
24 that a large dollar goal would add incremental
30
1 value. However, they wanted us to expand the
2 debate beyond dollars to values in impact. Their
3 idea was to create a compact with our communities.
4 A Board subcommittee has started to
5 outline principles to guide the compact, including
09:02:38
6 the following:
7 Partner with the community; listen to all
8 perspectives; execute locally; strive for economic
9 sustainability; share knowledge; invest in
10 innovation; go beyond regulatory requirements; lead
09:02:56
11 with best practices in fair and responsible
12 lending; and deliver the full resources of this
13 great, new firm.
14 We value our Community Advisory Board
15 because the members keep us focused on the really
09:03:10
16 important issues. We also learn from the
17 perspectives and experiences of members from around
18 the country as they, too, learn from each other.
19 We look forward to expanding the Board to include
20 community leaders from throughout the Bank One
09:03:22
21 footprint.
22 The merger will have great benefits for
23 the communities we serve. We are very excited
24 about the challenges, the opportunities and the
31
1 responsibility. Thank you for your time.
2 MS. BRAUNSTEIN: Thank you very much. If I
3 may, I just have one question for the panel.
4 J. P. Morgan Chase is primarily known as
5 an urban bank, and I was wondering if you could
09:03:46
6 just take a couple minutes and address what your
7 plans are for serving some of the needs of the
8 rural areas especially that you will be getting
9 with the Bank One footprint out in the Midwest?
10 MR. HARRISON: We are primarily in the largest
09:04:04
11 cities as a retail branch manager, but we do
12 business across the country and so it's not a big
13 leap of knowledge or expertise. Bank One would
14 have more than us; but we think the combination, if
15 we do it right, will add a lot of value.
09:04:22
16 The key issue here for us -- and it's
17 beyond just doing a great job in the communities --
18 is also doing a great job in middle-market lending
19 and private banking in the local communities. And
20 we are a great believer of making sure the local
09:04:38
21 communities have enough authority and power to go
22 execute it off of a basic architecture that's at
23 the top of the house. And we look at Chicago, for
24 example, as having the biggest financial presence
32
1 of any bank in Chicago with great global
2 capabilities. And if we execute that well, I think
3 we can add tremendous value whether it's community
4 activities or anything else that we're doing, and
5 that's our goal.
09:05:04
6 MS. BRAUNSTEIN: Okay.
7 MR. HARRISON: Is there anything else?
8 MS. BRAUNSTEIN: Okay. Thank you very much for
9 your time. Could we have the next panel come
10 forward.
09:05:16
11 MR. HARRISON: Thank you.
12 MS. BRAUNSTEIN: Good morning, gentlemen. As
13 with the previous panel, I am told that this panel
14 also has one-half hour and you'll be signaled at
15 the end of that. Please be mindful of your fellow
09:06:26
16 speakers in terms of the time you take
17 individually; and, with that, we'll get started.
18 HON. QUINN: My name is Pat Quinn. I am the
19 Lieutenant Governor of Illinois. I was elected by
20 the voters in 2002. Prior to that, I was elected
09:06:44
21 State Treasurer of Illinois in 1990, served as
22 Illinois State Treasurer from 1991 to 1995. I
23 dealt with probably 4 or 500 banks in Illinois,
24 large, middle-sized and small. Prior to that, I
33
1 was elected Commissioner of the Cook County Board
2 of Property Tax Appeals.
3 On behalf of the people of Illinois, I
4 think it's important that we, in considering this
5 merger, realize that we're today across the street
09:07:18
6 from one of the biggest bank failures in the
7 history of the United States.
8 Continental Bank was once deemed one of
9 the best banks in the country. Unfortunately, they
10 made imprudent loans, and they were so imprudent
09:07:34
11 that the bank collapsed, and they were so big that
12 the regulators decided that the only way to resolve
13 the problems of credit access and regulation was to
14 have the taxpayers bail out Continental Bank.
15 That history, I think, should be on the
09:07:58
16 minds of regulators today that in putting together
17 these megamergers, first -- I think the first issue
18 should be whether or not the taxpayers and the
19 public is protected from failure of these
20 institutions. I don't want to see Illinois
09:08:16
21 taxpayers or American taxpayers some time down a
22 few years from now or ten years from now or
23 whenever be forced to have to pay millions and
24 millions of taxpayer dollars to bail out an
34
1 ill-conceived merger.
2 I think the American economic system works
3 best where there's competition; and when you have
4 too many entities becoming too large and
5 consolidating, oftentimes the customer, the
09:08:44
6 consumer, is the one who suffers in the
7 marketplace.
8 As State Treasurer, I put together
9 literally hundreds of access-to-credit initiatives.
10 We called them link deposits. I would say the
09:08:58
11 predecessor bank of Bank One, then known as First
12 National Bank of Chicago, was a reluctant
13 participant in our programs of access to credit
14 that I was involved in. And, indeed, when they
15 merged with Bank One from Columbus, Ohio, it got
09:09:14
16 even worse. It was difficult for the Treasurer of
17 Illinois, one of the largest customers of these
18 large banks, to communicate with the bank.
19 So some of the proposals we heard earlier
20 this morning sound good when you say them fast, but
09:09:32
21 I can tell you from real experience, we used to
22 refer to First National Bank of Chicago, then
23 Bank One, as having big bank disease; the syndrome
24 of not listening enough to their customers,
35
1 including the State of Illinois that not only put
2 deposits in the bank but also had numerous
3 processing contracts with the bank, very difficult
4 to speak to them.
5 Now, at that time, the bank management was
09:10:00
6 located here in the City of Chicago, State of
7 Illinois. Under this proposal, major decisions
8 about the merged bank, a trillion-dollar bank, will
9 be made in New York City. And I consider that an
10 ominous development for the people of our state.
09:10:16
11 We're particularly concerned also about
12 the jobs of the people who work at Bank One, one of
13 the largest employers in Chicago and the State of
14 Illinois. According to some of the news reports,
15 as many as 10,000 people are going to lose their
09:10:28
16 jobs. The record is that J. P. Morgan Chase is an
17 aggressive outsourcer of jobs, American jobs to
18 other parts of the world, and we do not want to see
19 hard-working Illinois citizens who take their
20 deposits and put them in Bank One or J. P. Morgan
09:10:48
21 Bank One Chase, whatever it's called, end up seeing
22 their neighbors losing their jobs as the bank
23 develops call centers in some foreign part of this
24 world.
36
1 I think it's important when a depositor
2 puts a deposit in the bank that they have the kind
3 of personal service, neighborhood service,
4 eye-to-eye service that we've become accustomed to
5 over the long history of customer banking
09:11:18
6 relationships; but in recent years, it's a much
7 more distant relationship. And if it means
8 Illinois citizens losing their jobs to outsourcing
9 because of this merger, that's not good for our
10 state or for the public interest or I don't think
09:11:34
11 it's good for our country. We have to have a
12 middle class in order to have a growing economy,
13 and this development could be very bad for
14 middle-class jobs in our state.
15 Now dealing with a very important issue
09:11:46
16 which the previous speakers talked about is access
17 to credit. I think the word credit -- I took Latin
18 in high school. It means "to believe" in Latin,
19 and we need to believe in the pledges made by the
20 proposed merger.
09:12:04
21 But one thing that leads to skepticism is
22 we have in Illinois more payday loan stores than we
23 have McDonald's restaurants. Now this development
24 has occurred in recent years. What has the biggest
37
1 bank of Illinois, Bank One, done about that? Not
2 enough. That's for sure. They have stood there by
3 the side of the road as payday lenders multiply
4 like topsy all over the place.
5 I was at Great Lakes Naval Air Base last
09:12:30
6 Friday at a funeral of a soldier, and I noticed
7 driving there all these payday loan stores outside
8 the base gates. And they're all over our state. I
9 think there's 8 or 900. And these are working
10 people who oftentimes can't get in the door of a
09:12:46
11 bank to get the loans that they need in order to
12 live from paycheck to paycheck.
13 And we find that the Bank One and
14 J. P. Morgan Chase may be involved in financing the
15 payday lenders instead of being on the front line
09:13:02
16 making the consumer loans to these working people
17 who today are paying very, very high usurious
18 interest rates which aren't fair. They don't help
19 access to credit. They don't recycle money through
20 the neighborhood. They're predatory. They're the
09:13:18
21 kind of loans that make -- the banker should be
22 ashamed of themselves if they watch a market
23 developing out there and they're willing to consign
24 a lot of working people to this payday loan
38
1 industry.
2 It seems to me that if this has occurred
3 in recent years, how is the merger going to help
4 remedy the problem of access to credit for people
5 with respect to payday lending? Nothing has been
09:13:44
6 said about that. That's a very disturbing
7 development.
8 In closing, one thing that is of concern I
9 think to me and to every single American is a
10 recent book, Power Failure, The Inside Story of the
09:13:58
11 Collapse of Enron. It indicates that J. P. Morgan
12 Chase was a tax and financial advisor for Enron in
13 many of their questionable transactions. What is
14 this all about? Are we going to see this continue
15 where a major megabank is consulting with a
09:14:14
16 corporation on very questionable deals that end up
17 causing the collapse of a major firm, thousands of
18 people losing their jobs, and perhaps the bank goes
19 belly up.
20 So I think before rushing into this, we've
09:14:30
21 got to hear I think a lot more information from the
22 financial institutions involved. We would like to
23 have a quarterly report from them on exactly what
24 they're doing with respect to outsourcing of jobs.
39
1 We would like to hear pledges that they're not
2 going to get involved in these questionable
3 corporate schemes. We would like to have a payday
4 loan alternative in Illinois so working people,
5 when they need a loan, don't have to go to a payday
09:14:56
6 loan store and pay 520 percent interest, or
7 military person goes outside the gate of their base
8 and ends up getting fleeced by the local payday
9 loan store.
10 Let's have a Bank One, J. P. Morgan Chase
09:15:10
11 initiative to help people who are helping defend
12 our country. Thank you very much.
13 ALDERMAN FLORES: My name is Manuel Flores.
14 I'm an alderman for the 1st Ward in the City of
15 Chicago. I want to thank the Federal Reserve Bank
09:15:28
16 and the members of the panel for your time and
17 preparation for this hearing.
18 Today as we all know, we'll be hearing --
19 we've heard some testimony already considering the
20 proposed merger of J. P. Morgan Chase and Bank One.
09:15:42
21 Given the enormous impact that a merger of this
22 magnitude would have, I am pleased that a public
23 review process, such as this one, has been made
24 available so that we all may have an opportunity to
40
1 discern the possible effects of this merger as I
2 believe all members, all constituents of our
3 communities deserve.
4 On February 11, 2004, the City Council of
5 Chicago passed a resolution urging the Federal
09:16:10
6 Reserve Bank to proceed with caution in review of
7 this merger application. The resolution also
8 called for the City of Chicago's Corporation
9 Counsel to attend and monitor this hearing and to
10 report to the City Council's Committee on Finance
09:16:24
11 the process and the outcome of the public hearing.
12 We are pleased that this proceeding was scheduled.
13 Public scrutiny through a public hearing
14 process is necessary to address concerns of job
15 loss, outsourcing, predatory lending, foreclosure
09:16:38
16 practices, and also just to in general explain to
17 the public how this type of merger is going to
18 impact them. The most local of issues when you're
19 dealing with availability and access to credit, how
20 is it going to impact their service, how is it
09:16:54
21 going to be -- how is it going to change their
22 lives. I mean, are we going to be losing banks?
23 Are we going to be creating more banks on the
24 retail level to provide better services?
41
1 We have a vested interest in both the
2 intended effects and unintended consequences that a
3 merger of this enormity would have on the City of
4 Chicago and the region. To date, Bank One is the
5 largest municipal depository with anywhere between
09:17:20
6 $35 to $50 million on hand to cover payroll and
7 vendor invoices while also handling a large portion
8 of transactions processing for the City of Chicago.
9 Bank One and the City of Chicago have
10 created and maintained and enjoyed a working
09:17:36
11 relationship, a positive working relationship,
12 through these transactions and this should all
13 continue. Frankly, that's why I have taken such a
14 level of interest in this. We do applaud Bank One
15 for its history, for its track record with regards
09:17:52
16 to the CRA credit rating, and we want that to
17 continue here in the City of Chicago.
18 But I believe that and many of the
19 residents of the City of Chicago believe that when
20 you have a merger of this size, there are some
09:18:08
21 questions and issues that need to be addressed.
22 We want to ensure that not only residents
23 and businesses have access to fair and equitable
24 credit but that our local employment will also not
42
1 be negatively impacted. What safeguards are in
2 place to ensure that Bank One will stay across the
3 street and not go across the state line or even
4 farther to other countries, decreasing our access
5 and also available to services -- availability to
09:18:38
6 services?
7 With the creation of a merger of a
8 megabank encompassing multi-national markets,
9 products and service sectors, it is crucial to
10 maintain the rapport that encourages local
09:18:50
11 relationships, employment and open lines of
12 communication.
13 The purpose of the Federal Community
14 Reinvestment Act is to encourage depository
15 institutions to assist in meeting the credit needs
09:19:02
16 of the communities in which they serve.
17 J. P. Morgan Chase and Bank One have made
18 agreements with community-based nonprofits in the
19 Chicago area and other communities to outline their
20 community -- excuse me, their commitment to
09:19:16
21 community reinvestment, lending practices and
22 foreclosure controls.
23 However, structural remedies rather than
24 promises are required to maintain accountability to
43
1 the communities that these banks serve. How will
2 the proposed merged banks provide equal access to
3 credit for both residents and businesses in Chicago
4 and throughout Illinois?
5 We must not only inquire about the
09:19:42
6 outsourcing of employment but also the availability
7 of payday loan monies. A market of hard-working
8 and loyal customers await the availability of
9 short-term affordable loans but instead is offered
10 quick fixes at astronomical interest rates with
09:19:58
11 inadequate regulatory oversight. Banking
12 institutions have quietly observed and, at times,
13 funded these operations and operators themselves,
14 practices that break the backs of hard-working men
15 and women. How will the megabank be held
09:20:16
16 accountable to all the people it serves and offer
17 community solutions to problems like this?
18 I ask that we remain vigilant in
19 monitoring the creation and structure of an
20 institution such as the one that is being proposed
09:20:32
21 before us. Now, not later, is the time to insist
22 that the leadership in this institution maintain
23 the character and corporate culture of Bank One.
24 Their corporate giving, municipal depository
44
1 responsibilities, and provision of many jobs are
2 due in part to the City of Chicago itself.
3 I also ask that the Federal Reserve Bank
4 of Chicago carefully consider the testimony that we
5 bear witness today and to truly analyze how this
09:20:56
6 merger will impact the residents and businesses of
7 our great city and continue to be responsible and
8 vigilant in your oversight of corporate actions.
9 It is your regulatory control that will be vital to
10 maintaining a robust banking marketplace in
09:21:12
11 Chicago.
12 Finally, I ask that we continue to be
13 proactive in creating an environment in Chicago
14 that encourages positive corporate behavior that
15 demonstrates responsibility to consumers, employees
09:21:26
16 and our great City of Chicago.
17 Now I also want to commend the earlier
18 individual -- the individuals that provided earlier
19 testimony in particular with their $800 billion
20 commitment which there have been a number of bullet
09:21:42
21 points and issues that were raised as to how the
22 $800 billion were going to be spent.
23 Now I also want to commend Bank One and
24 J. P. for being as accessible as possible to the
45
1 elected officials. We have met with them on a
2 number of occasions, and I want to commend them for
3 that. However, I do ask that with the fact that
4 they demonstrated here a willingness with an
5 $800 billion commitment over a ten-year period to
09:22:12
6 the communities, to our communities, that they sign
7 a CRA agreement; that they also provide a report
8 for outsourcing; that they take a hard look at the
9 payday loans.
10 Here we have an opportunity with an
09:22:26
11 $800 billion commitment to actually take a look at
12 what alternative products our banks can provide our
13 communities in greatest need. Predatory loans
14 should also be taken a hard look at and be
15 incorporated in this $800 billion commitment.
09:22:46
16 Thank you.
17 MS. BRAUNSTEIN: Thank you. Reverend Jackson.
18 REVEREND JACKSON: Good morning. My name is
19 Reverend Jesse Jackson, Senior, President and
20 Founder of Rainbow/Push Coalition, the Citizenship
09:22:58
21 Education Fund and its initiatives, the Wall Street
22 and LaSalle Street projects.
23 I'm going to begin my comments by stating
24 that presently we are neither opposed to nor in
46
1 favor of J. P. Morgan Chase's application for
2 merger with Bank One. Mergers are not inherently
3 wrong, but too much power in the hands of too few
4 is beyond checks and balances.
5 Our mission is to green-line, red-line
09:23:26
6 America, connectable process of access to capital
7 industry and technology. Our rule at this time is
8 to provide research and counsel as to the
9 importance of inclusion while you review this
10 merger. We feel it's essential that safeguards be
09:23:44
11 put in place to assure that any gains in diversity
12 must be protected.
13 Further, there must be a greater call for
14 disclosure. The joining of J. P. Morgan Chase and
15 Bank One support an establishment that enable
09:23:58
16 payday loans, red-lining, predatory and subprime
17 lending.
18 Matthew Lee, in part, will share with you
19 today some of the initial findings of his
20 organization. I encourage you to listen closely to
09:24:12
21 his testimony. I also encourage you to listen
22 closely to the pleas of nearly 40 farmers who
23 travel here today from Central and Southern
24 Illinois.
47
1 There are several items I will address
2 during the brief time allotted. Historical
3 patterns and present-day practices of race
4 discrimination is prevalent. These issues must be
5 resolved while the merger is on the ground. Once
09:24:40
6 it takes off, it will be out of sight. This
7 merger, to have community values, must break from a
8 history of race-based lending, gerrymandering,
9 schemes invested that will hurt the poor and limit
10 growth of the middle class. Structural
09:24:56
11 dislocations perish whole communities, undermine
12 the tax base, the education base and ultimately to
13 a jail's for-profit industrial complex.
14 Number one, this $60 billion transaction
15 will create the second largest financial services
09:25:14
16 institution in the world. These two will control
17 approximately $600 billion in assets. The fees
18 alone to facilitate this merger will range between
19 $30 and $100 million, just the fees in the
20 transaction. Our findings indicate that not one
09:25:34
21 dime will be spent with diverse brokerage firms.
22 We need to clarify as to the linkages that
23 exist between both of these banks and payday loan
24 centers, check-cashing facilities, gun shops,
48
1 predatory lenders and subprimers.
2 While we commend J. P. Morgan Chase for
3 the $800 billion commitment to reinvestment, we
4 cannot accept the system and the process of
5 providing loans for low- and moderate-income
09:26:02
6 housing while in the same neighborhood providing
7 support for modern-day loan sharks. You can't farm
8 the house and then farm a termite factory next
9 door.
10 Let me put it for you in this context:
09:26:16
11 National estimates on a four-day payday loan can
12 reach 1,825 percent. The average percentage on a
13 37-day loan is approximately 3395 percent.
14 Colorado, one of the few states that keeps close
15 tabs on payday loans, indicates that from 1996 to
09:26:34
16 '97, payday loans had an average APR of 485.26
17 percent. The recent Associated Press article
18 concerning the victimization of soldiers and their
19 families by payday lenders in Fort Stewart,
20 Georgia, reported that interest rates ranging from
09:26:54
21 340 to 592 percent were being charged to these
22 soldiers' families.
23 Predatory lending and payday loans are the
24 new forces continuing to dismantle our communities.
49
1 We must closely monitor and end the support given
2 to these entities by these banks.
3 The top 50 to 100 executives for both of
4 these banks command salaries in the multi-millions,
5 yet their faces do not look like the faces of the
09:27:22
6 community. Bank One's officer team, executive
7 planning group is mostly one of multi-culture and
8 diversity. J. P. Morgan Chase's executive
9 leadership team has nominal representation, if any.
10 This leadership team of this merger is beginning to
09:27:36
11 look like Mount Everest with an unhappy merging
12 entity with a black and brown base of short trees
13 reaching to the heights of a snow-capped mountain.
14 This is America.
15 The newly established Board of Directors
09:27:52
16 may not just have one or two diverse candidates.
17 And as I was parenting on the playing field, we saw
18 a role for everyone. We must duplicate this in the
19 board room. There's a historical context that must
20 not be trivialized as being past the legal statute
09:28:06
21 of limitations. You must not forget nor will we
22 only ask you to remember that slavery is the
23 predecessor to the established problems of
24 red-lining, employment discrimination, sexual
50
1 harassment and the predatory lending we see in our
2 communities.
3 It is alleged that J. P. Morgan Chase was
4 a part of a consortium of financial services
5 institutions to help maintain slavery through an
09:28:30
6 insurance syndicate. With or without reparations,
7 our forebearers cry out to us for equality and
8 justice.
9 Remember that before CRA, the sons and
10 daughters of inheritance and privilege, Salt and
09:28:42
11 steel seek to keep the sons and daughters of
12 disenfranchisement and exploitation beneath them.
13 This serves as a primary force continuing to widen
14 the gap in our ability to access capital and
15 financing to open and expand the business,
09:28:58
16 obtaining a mortgage or a loan, or asking for a
17 seat at this table in managing the capital of our
18 financial markets.
19 African-Americans and other underserved
20 groups pay more for less -- pay more for less, live
09:29:10
21 under stress, die early with less, and don't live
22 as long because we're targets of immoral business
23 practices.
24 Predatory lending costs Americans over
51
1 $9 billion annually. Minorities, farmers and the
2 elderly in urban communities continue to be
3 targeted for subprime loans regardless of their
4 credit history based upon their race and geographic
5 location.
09:29:36
6 The federal government has yet to
7 substantively define predatory lending, let alone
8 create a federal regulatory system that protects
9 the rights of consumers.
10 It is our desire, lastly, that as you
09:29:46
11 carry out your defined role of educating these
12 institutions about CRA programs, that you
13 incorporate the importance of diversity and
14 inclusion in the context of suppliers, employees,
15 executive leadership, corporate board
09:30:00
16 representation, and capital investment; a 5 percent
17 minimum increase in outsourcing of opportunities
18 that comes to the investment banking and brokerage;
19 appointing African-American and Hispanics and other
20 underserved groups and offer positions; employing a
09:30:16
21 more grass-roots approach, literally putting these
22 predators out of business.
23 Commitment is now on the way, lastly, to
24 employ the last-tide-first-flight strategy and
52
1 layoffs. Bank of America is shedding 12,500 jobs,
2 rural ones, part of a move to justify the
3 $48 billion that is spent buying Fleet Falls and
4 Financial. This must not be duplicated.
5 The Federal Reserve must not bless this
09:30:48
6 merger until the community-added value of
7 inclusion, diversity, expansion and
8 nondiscrimination is agreed and honored.
9 In using this example, if banks are
10 willing to green-line our communities, change the
09:31:04
11 historic discriminatory lending patterns, break
12 from the practice of funding termites next to
13 CRA-built homes, then the merger will be of value.
14 Thank you for this opportunity to be
15 heard. I hope to work with you as an advisor in
09:31:18
16 the area of inclusion. Thank you.
17 MS. BRAUNSTEIN: Thank you. Mayor Coleman.
18 HON. COLEMAN: Good morning.
19 My name is Mayor Mike Coleman, mayor of
20 the City of Columbus, the 15th largest city in the
09:31:28
21 nation, the largest city in the State of Ohio, and
22 the fastest growing city in the Midwest. I am
23 pleased to be here today even with my broken ankle.
24 Today represents another step in
53
1 Bank One's evolution; and there are some very
2 important points I would like to make as it relates
3 to the City of Columbus because it is in the City
4 of Columbus where Bank One was created originally
5 and where it still maintains a significant
09:32:00
6 presence. And we know Bank One the longest and we
7 know Bank One the best.
8 First, let me tell you that Bank One
9 continues with the significant economic presence in
10 the City of Columbus and continues to be a major
09:32:14
11 and significant employer.
12 Secondly, Bank One has had a history of
13 supporting our community as it relates to
14 community-development initiatives.
15 And, thirdly, we view this merger as a new
09:32:32
16 season by which neighborhood development, economic
17 development, community empowerment can take place,
18 and increased employment can take place in the City
19 of Columbus as a result of this merger.
20 But let me point out some things. First
09:32:50
21 is that Bank One is, in Columbus, the largest
22 retail bank in the city with over $9 billion in
23 deposits. They have 68 branches in Central Ohio.
24 They have 9500 employees; and they have paid more
54
1 than $3 million in City of Columbus income tax in
2 the year 2002.
3 Bank One also owns more than $3 million
4 square feet of office and retail space and paid
5 over $2.4 million of property taxes in the City of
09:33:28
6 Columbus. Bank One has also invested in many of
7 our most important community initiatives, and they
8 have invested in charity $3 million in our
9 community in the year 2003 alone.
10 J. P. Morgan Chase is also a significant
09:33:48
11 employer in the City of Columbus where they have
12 located mortgage servicing headquarters with 2700
13 employees and represents the 13th largest
14 private-sector employer in the City of Columbus.
15 So with these two banks merging, it
09:34:06
16 represents about 12,000 employees in the City of
17 Columbus. And you can see that this merger -- the
18 City of Columbus has a great deal at stake with
19 respect to this merger.
20 In 2002, I started an initiative called
09:34:28
21 The Partnership for America's 21st Century City,
22 and it has resulted in $3.5 billion commitments in
23 the central city neighborhoods and neglected
24 neighborhoods in the City of Columbus of which
55
1 Bank One is an active and contributing partner. I
2 am surprised that it did not come up in the
3 presentation this morning.
4 Bank One also has been very active with
5 new market tax credits to spur development in our
09:35:00
6 central city communities, and they have been very
7 involved with the low-income housing tax credit
8 program.
9 But I believe that it is critical that
10 this merged entity build upon the history of
09:35:12
11 Bank One in the City of Columbus and not only
12 continue what they have done but to expand upon
13 this commitment.
14 I am encouraged to hear what has happened
15 with Chase in other communities around the country,
09:35:28
16 with homes and jobs and business opportunities,
17 community development, and this $800 billion
18 commitment. I'm here to say as the Mayor of the
19 City of Columbus that a lot of that should be spent
20 right in the City of Columbus, and we'll talk about
09:35:44
21 that.
22 It is my hope that a merged Bank One,
23 J. P. Morgan Chase will be actively involved and
24 continue to be involved as Bank One has in the
56
1 past, not just for our community which is
2 important, but it is a sound investment for the
3 merged bank. Is it a good business practice.
4 Several areas that we want them to
5 continue in is affordable housing and residential
09:36:12
6 development where in the City of Columbus we have
7 built 6,000 residential units in our city for the
8 past four years, many of which Bank One has been
9 involved in, but needs to continue and up their
10 commitment to our city under the merged entity
09:36:26
11 whether or not it merges in the City of Columbus;
12 downtown development which is critical;
13 neighborhood development which is critical to our
14 community; West Edge Business Park north of the
15 mall.
09:36:42
16 And, finally, it is in the best interest
17 of the merged bank and the City of Columbus that
18 they retain the job base of 12,000 employees in the
19 City of Columbus but also expand it for good, sound
20 financial and business reasons.
09:37:02
21 We have the work force, and that work
22 force is skilled. Columbus was recently ranked as
23 one of the lowest cost cities in the country for
24 doing business, among all cities, in the nation.
57
1 So a skilled work force, plus low cost of doing
2 business in our community, equals, hopefully, a
3 formula of success where everybody can win in this
4 regard.
5 The city, Chase and Bank One could each
09:37:32
6 benefit by this merger if the following shall
7 occur:
8 Continued investment in our community in
9 many of the ways that was discussed here this
10 morning; job expansion in our community for sound
09:37:48
11 business reasons and sound business practices; and
12 ongoing community engagement.
13 I submit to you that the future of this
14 merger and the City of Columbus are intertwined.
15 Thank you very much.
09:38:08
16 MS. BRAUNSTEIN: Thank you very much. And
17 could we have the next panel please come forward.
18 We'll get started with the next panel. I
19 would just like to for the record state -- welcome
20 you and also to state the ground rules again. Each
09:39:32
21 speaker has five minutes. Please keep your eye on
22 the timekeepers who will signal you. You will see
23 the little lights light up. The yellow light
24 lights up when there's two minutes left.
58
1 I would also ask if you have a printed
2 copy of your testimony that you can leave with us,
3 please leave that with our court reporter here at
4 the center table. And, lastly, when you begin
5 speaking, please state your name and organization
09:40:00
6 at the beginning for the record.
7 And with that, Brenda, do you want to lead
8 us off -- and, hi, it's nice to see you.
9 MS. LaBLANC: My name is Brenda LaBlanc. I'm a
10 board member of the National Training and
09:40:12
11 Information Center and Co-Chair Person of National
12 People's Action. I have been one of three women
13 elected to fill the role of our late chairperson,
14 Gale Cincotta.
15 Many of you know of Gale Cincotta as the
09:40:24
16 mother of the Community Reinvestment Act. She has
17 a long history in other parts of the country as
18 well as here in Chicago. I worked with Gale on CRA
19 issues for more than two decades. I was on the
20 leadership team when National People's Action hit
09:40:38
21 the Federal Reserve building in 1980.
22 From this action, we had a meeting with
23 Paul Volcker, who was then Chairman of the Federal
24 Reserve Board. Leaders from around the country
59
1 persuaded Volcker that regulators should be
2 monitoring the banks for CRA performance which they
3 have not done since CRA had been passed. He agreed
4 and bank monitoring happened after that.
5 In fact, in the 1980s, NTIC held hearings
09:41:00
6 throughout the country with banks, community groups
7 and regulators about the enforcement of the CRA.
8 In fact, Kenneth H. Thomas, Ph.D., noted CRA
9 scholar wrote, "The National Training and
10 Information Center has been involved with the
09:41:16
11 largest number of CRA challenges and agreements."
12 In his book called, Community Reinvestment
13 Performance, "In Chicago, NTIC still sits on
14 several bank review boards as part of CRA
15 agreements that were negotiated in 1984."
09:41:30
16 I am testifying on behalf of NTIC and
17 community organizations throughout the country that
18 have been urging J. P. Morgan Chase to make a CRA
19 commitment with our affiliates. These are Central
20 Illinois Organizing Projects: Springfield,
09:41:46
21 Bloomington, Normal, Decatur, Champaign/Urbana,
22 Danville, Peoria, and rural Logan County;
23 Communities United for Action in Cincinnati;
24 Creston Neighborhood Association, Grand Rapids,
60
1 Michigan; East Side Organizing Project, Cleveland,
2 Ohio; Iowa Citizens For Community Improvement,
3 Des Moines, Iowa; Pittsburgh Community Reinvestment
4 Group, Pittsburgh, Pennsylvania; Syracuse United
5 Neighborhoods of Syracuse, New York; South Austin
09:42:12
6 Coalition Community Council, Chicago; Lawndale
7 Neighborhood Organization, Chicago; and Sunflower
8 Community Action, Wichita, Kansas.
9 When we met with officials from
10 J. P. Morgan Chase/Bank One on March 5th to suggest
09:42:26
11 solutions to the banks' problems in meeting the
12 communities' credit needs, the banks told us that
13 they would not agree to any accountable measures to
14 achieve these solutions. J. P. Morgan Chase did
15 not announce a CRA commitment until the public
09:42:38
16 comment period was extended by the Federal Reserve.
17 The commitments they announced and the agreement
18 they signed with the group here in Chicago are not
19 strong commitments. J. P. Morgan Chase is trying
20 to get away with doing the least amount of work as
09:42:52
21 possible.
22 We submitted comments to the Federal
23 Reserve that outlines our concerns with high denial
24 rates for minorities; lack of specific programs in
61
1 dealing with the foreclosed properties, considering
2 that both banks are tops on the list of foreclosed
3 properties in many of the cities in which we work;
4 Bank One's attempts to evade state legislation on
5 predatory lending; how Bank One's lending fuels the
09:43:18
6 growth of corporate farmers at the expense of
7 family farmers.
8 We invite everyone in the room to review
9 our comments on the details.
10 We cannot overstate how important CRA is
09:43:30
11 to our neighborhoods. We were originally left out
12 of the process that enables people to become
13 homeowners, and our neighborhoods were devastated
14 because of this. J. P. Morgan Chase wants to leave
15 us out of the process again by not signing the CRA
09:43:44
16 agreement.
17 We have had a great success at the local
18 level with groups like ours that have used CRA
19 making friends eventually of local bankers. Though
20 at first they thought we were trying to get them to
09:43:56
21 make bad loans, they found that we had, in fact,
22 opened up a new market for them which has been a
23 profitable market. And we have seen our
24 neighborhoods improve as a result. It's been a
62
1 win-win situation.
2 But as our banks are morphed into huge
3 nationals, our efforts have become impaired.
4 Though our local president may be understanding, he
5 has to take orders and go by policy set at higher
09:44:22
6 levels with more geographic distance.
7 If J. P. Morgan Chase wants to be a leader
8 in community development throughout the country,
9 they have to do more than cherry-pick a few groups
10 from New York City with whom to work. They need to
09:44:34
11 live up to the spirit of the Community Reinvestment
12 Act and not be a contributing factor in killing the
13 law. The law has not outlived its purpose. With
14 megamergers such as these, the CRA is needed now
15 more than ever.
09:44:50
16 We'd also like to leave a copy of the new
17 report that we released today about J. P. Morgan's
18 record in lending in our neighborhoods. And I
19 would like to hear from William Harrison why he is
20 so afraid of signing a CRA agreement with community
09:45:02
21 groups. Thank you.
22 MS. RAMSEY: Good morning. My name is
23 Jane Ramsey, and I'm the Executive Director of the
24 Jewish Council on Urban Affairs. I am honored
63
1 today to join you and appreciate the opportunity to
2 express our deep reservations about this proposed
3 merger. We ask Federal Reserve to require that an
4 approval process for this merger be based on the
5 banks' compliance with four specific conditions as
09:45:28
6 I will share in a moment.
7 Since 1964, the Jewish Council on Urban
8 Affairs has worked to combat poverty, racism and
9 anti-Semitism in partnership with diverse
10 communities in the greater Chicago area. Drawing
09:45:44
11 on Judaism's commitment to care for people of all
12 faiths, races and ethnic groups for the past four
13 decades, we have dedicated our time, energy and
14 resources to ensuring that low-income communities
15 have access to capital and credit on equal terms as
09:45:56
16 all other Chicagoans.
17 We've also fought for a holistic approach
18 to regional economic development that promotes
19 balanced investment, expanded job training, and the
20 targeting of promising industries for aggressive
09:46:10
21 support by the city and state. Chicago has an
22 unfortunate history of witnessing countless
23 instances where low-income communities, often
24 minorities and immigrants, have been denied access
64
1 to appropriate, fair financial services.
2 So throughout the past four decades we
3 have fought against predatory lending practices by
4 financial institutions in the city. We have also
5 fought against payday loan abuses. We have urged
09:46:34
6 that these adverse and, at times, illegal practices
7 must be studied and strictly regulated to protect
8 our state's most vulnerable citizens from
9 unscrupulous practices that can place homes,
10 families, communities at risk and that do.
09:46:52
11 In this situation before us today, we see
12 several red flags of particularly grave concern.
13 We note the research conducted in part by our
14 colleagues from the National Training and
15 Information Center and applaud their work, and by
09:47:06
16 the Inner City Press in New York suggesting that
17 J. P. Morgan Chase has a problematic history when
18 it comes to lending to individuals in minority
19 communities who want to purchase homes.
20 We are also disturbed by memories of
09:47:20
21 recent bank failed mergers in our city, including
22 the Continental Illinois National Bank and the
23 burden on the public to bail out these failed
24 institutions. More information upfront about the
65
1 proposed merger under consideration today would go
2 a long way obviating both of these concerns.
3 The size of this merger, if approved, will
4 have tremendous impact on our regional economy.
5 We, therefore, ask that four conditions be
09:47:48
6 fulfilled before this merger is approved.
7 First, we ask the Federal Reserve to
8 require that Bank One and J. P. Morgan Chase
9 provide complete records of their lending policies
10 in this city for the past 40 years. This
09:48:04
11 information should be disaggregated by race, ethnic
12 group and neighborhood and should be made public
13 for review and comment.
14 Second, we ask the Federal Reserve to
15 require that Bank One and J. P. Morgan Chase hold a
09:48:20
16 series of open meetings in neighborhoods that have
17 historically suffered from the banks' -- most from
18 the banks' discriminatory practices. These
19 community meetings should include discussion on the
20 two banks' records of providing access to capital
09:48:36
21 and credit in these neighborhoods where applicable.
22 For a start we would recommend these hearings take
23 place in Lawndale, Englewood, Woodlawn, Humboldt
24 Park, South Shore, Uptown, Albany Park and Pilsen,
66
1 among the city's most -- representing most
2 disadvantaged citizens.
3 Third, we ask the Federal Reserve to
4 require that both banks make an explicit written
5 promise to keep jobs in the area. We share the
09:49:02
6 Lieutenant Governor's concerns on outsourcing.
7 They must publicly affirm their commitment to
8 keeping workers in Illinois and not allow
9 good-paying positions to slip away.
10 Fourth, we ask the Federal Reserve to
09:49:20
11 require the two banks to issue a detailed
12 memorandum explaining how this merger will help
13 preserve and develop affordable housing in
14 Illinois. In particular, we need information which
15 includes access to credit and alternative models
09:49:34
16 that do not exploit as do predatory lending and
17 payday loan shops. This memorandum should be
18 circulated widely to community leaders and housing
19 developers for comments. The banks must then
20 respond publicly to these comments before seeking
09:49:52
21 the fed's approval of the merger.
22 Our tradition teaches, "It is not wreckers
23 we need but builders." We ask this honorable
24 committee and the entire Federal Reserve Bank to
67
1 heed these words and to demand much greater
2 production of information from these banks to allow
3 low-income Chicagoans to be able to preserve and
4 build their homes and their communities through
5 access to credit and capital when needed.
09:50:20
6 In closing, the Jewish Council on Urban
7 Affairs thanks you for providing us with the
8 opportunity to testify this morning on this most
9 critical issue, and please let us know if we can be
10 of any further assistance.
09:50:34
11 MS. BRAUNSTEIN: Thank you very much.
12 MR. VAN TOL: Thank you for this opportunity.
13 My name is Hubert Van Tol, Executive Director of
14 Fairness and Rural Lending as part of Wisconsin,
15 and my comments represent the position fairness and
09:50:50
16 rural lending.
17 Fairness in Rural Lending is also a member
18 of the National Community Reinvestment Coalition as
19 are a number of your other commenters today, and we
20 also give our support to the concerns raised by all
09:51:00
21 of the members of NCRC and their testimony.
22 As you know, I also serve as a member of
23 the Federal Reserve's Consumer Advisory Council;
24 and, if you wish at any time to assign me the task
68
1 of articulating the Federal Reserve's official
2 position on this merger, I will be happy to take
3 that job.
4 MS. BRAUNSTEIN: We'll keep that in mind.
5 MR. VON TOL: Fairness in Rural Lending's
09:51:24
6 comment letter on this merger focused on two
7 primary issues. First, our analysis of the
8 foreclosure records in rural Wisconsin counties
9 seem to show that both J. P. Morgan Chase and
10 Bank One were listed as plaintiffs in an unusually
09:51:38
11 high number of foreclosure actions in the rural
12 Wisconsin counties, given the number of home
13 mortgage loans that they actually provide in those
14 counties.
15 Secondly, we are concerned that there's a
09:51:50
16 pattern developing among the largest lenders in
17 which their prime lending, their community
18 development lending and their CRA investments are
19 focused in metropolitan areas, and rural areas get
20 more attention from their subprime subsidiaries and
09:52:04
21 affiliates.
22 On the foreclosure issue, J. P. Morgan
23 Chase's response letter of March 12th argues that
24 the foreclosure percentage is not really as high as
69
1 it seems because Chase Manhattan Mortgage
2 Corporation services many more loans than it
3 originates in rural Wisconsin; and that while both
4 Chase and Bank One's percentage of foreclosures in
5 rural Wisconsin counties are higher than the
09:52:30
6 Wisconsin average, they're nonetheless lower than
7 the "east/north central industry percentage".
8 Since we don't have access to this larger
9 industry in Chase Manhattan databases, we will have
10 to hope that the numbers that they provided are in
09:52:42
11 fact correct. But the larger issue of the adequacy
12 of Chase's policies governing their purchasing
13 servicing and securitizing of subprime mortgages
14 remains.
15 In the various answers that Chase has
09:52:56
16 provided to the Federal Reserve and the comment
17 period on this merger, they seemed to lay out quite
18 different standards for the loans that they
19 originate themselves and for the loans that they
20 purchase, service and securitize.
09:53:08
21 For their own subprime loans, Chase does
22 not offer a single premium credit life. They do
23 not require a mandatory arbitration. Prepayment
24 penalties are not required. Customers who qualify
70
1 for a prime product are offered prime products. In
2 their broker channel, they cap yield spread
3 premiums at 3 points.
4 By these policies that they have
5 established, they acknowledge that abusive loans
09:53:34
6 are not just HOPA loans or those loans that are
7 considered high cost under the various state laws.
8 In terms of their policies, they make some
9 attempt to prevent at least some of the practices
10 that community groups consider abusive. When they
09:53:48
11 purchase loans, Chase avoids purchasing HOPA or
12 high-cost loans and undertakes some due diligence
13 that looks for borrowers' ability to repay,
14 evidence of equity stripping and loan flippings.
15 But when securitizing loans, the "best
09:54:02
16 practices" that Chase adheres to appears to be a
17 commitment to avoid purchasing HOPA loans or loans
18 that meet high cost thresholds. Any due diligence
19 that Chase performs appears to focus on determining
20 whether the issuer followed their own underwriting
09:54:20
21 policies and procedures and whether they broke any
22 of the various consumer laws.
23 Chase asked to keep part of its answer
24 about servicing practices confidential, but nothing
71
1 in the public answer that I have seen indicates
2 that they make any attempt to avoid servicing loans
3 originated by other lenders that might be
4 considered abusive loans by community groups.
5 Here I think we get to the heart of the
09:54:44
6 disagreement between community groups and banks and
7 their regulators. Bankers and their regulators are
8 fond of saying that very little predatory lending
9 originates from the regulating lenders. And if
10 your definition of predatory lending is simply a
09:55:00
11 HOPA loan, then that might be true. And, yet,
12 there are a large number of loans out there
13 carefully priced just under that HOPA threshold for
14 borrowers who may or may not qualify for a prime
15 product that find purchases, servicers and
09:55:14
16 securitizers. Many of them are the large
17 regulatory financial institutions.
18 Without that pipeline to the secondary
19 market, the rogue broker can only do a limited
20 amount of damage; but with an anything-goes
09:55:28
21 pipeline, the rogue broker becomes the rule --
22 closer to the rule rather than the exception. You
23 can do a great deal of good in reviewing these
24 applications, and I'm sorry I don't speak fast
72
1 enough, but I will include the rest of my comments
2 in my written testimony.
3 MS. BRAUNSTEIN: Thank you very much.
4 MS. HAYNESWORTH: Hi. My name is
5 Catherine Haynesworth. I'm a member of East Side
09:55:54
6 Organizing Project, ESOP, from Cleveland, Ohio.
7 ESOP is a community affiliate of the
8 National Training and Information Center, NTIC,
9 located here in Chicago. I'm testifying on behalf
10 of ESOP and community organizations throughout the
09:56:10
11 country that have been urging J. P. Morgan Chase to
12 make a written CRA commitment with our affiliates.
13 These groups are Central Illinois Organizing
14 Project, Springfield, Bloomington, Normal, Decatur,
15 Champaign/Urbana, Danville, Peoria and rural Logan
09:56:28
16 County; Communities Neighborhood Association, Grand
17 Rapids, Michigan; Creston Neighborhood Association,
18 Grand Rapids; Iowa Citizens For Community
19 Improvement; Pittsburgh Community Reinvestment
20 Group; Syracuse United Neighbors; South Austin
09:56:46
21 Coalition Community Council; Sunflower Community
22 Action.
23 ESOP has been leading the charge for fair
24 access to quality credit throughout Northeast Ohio.
73
1 We recently signed a historic CRA agreement with
2 Charter One who agreed to work with us to be among
3 the top three lenders in the minority census tracks
4 over the next few years. Before the agreement,
5 they were near the bottom. In 2003, Charter One
09:57:20
6 increased its lending in the low- to
7 moderate-census tracks by nearly 300 percent.
8 ESOP has been -- I'm sorry, our victory
9 with Charter One has proven that fine CRA
10 agreements with banks are the most effective if not
09:57:36
11 the only way to ensure that our lending and
12 investment needs are fully met.
13 Besides Charter One, ESOP has several
14 other noteworthy accomplishments. Our local
15 organizing campaign against Fairbanks Capital
09:57:52
16 Corporation, the nation's largest subprime loan
17 servicing, led ESOP to spearhead negotiations with
18 NTIC and CEO of Fairbanks Capital, James Ozanne, a
19 written agreement that goes well beyond the FTC
20 settlement that was signed a couple weeks ago.
09:58:14
21 In late 2003, ESOP participated in the
22 creation of the Third Federal Savings and Loan's
23 Home Today Program. This product is designed for
24 first-time homebuyers and/or current homeowners
74
1 with less than perfect credit. This is truly a
2 unique program that does not use credit scores and
3 has rescued dozens of victims of Fairbanks, even
4 those who were in foreclosure.
5 As part of NTIC, ESOP signed an agreement
09:58:42
6 with the nation's largest subprime lender,
7 CitiFinancial that requires CitiFinancial to
8 immediately stop engaging in many abusive lending
9 practices as well as offering prime rate loan
10 products throughout its network of CitiFinancial
09:59:00
11 branches.
12 Be it Charter One, CitiFinancial,
13 Fairbanks or the product created with Third
14 Federal, written agreements make sense, not just
15 for our communities but for the institutions as
09:59:12
16 well.
17 I am here from Ohio. Bank One abandoned
18 our communities when they decided to move their
19 corporate headquarters to Chicago. I'm here to
20 tell you they will do the same thing to Chicago if
09:59:26
21 they do not have a CRA agreement that holds them
22 accountable.
23 ESOP submitted detailed comments to the
24 Federal Reserve that outlines our concerns about
75
1 Bank One's lack of branches in the inner city of
2 Cleveland and Bank One and J. P. Morgan Chase's
3 questionable loan servicing practices. We invite
4 everyone in the room to review our comments from
5 the details or review the NTIC study that you were
09:59:50
6 just showed.
7 Allow me to share my nightmare regarding
8 Fairbanks and J. P. Morgan Chase. Fairbanks, as I
9 noted earlier, is working with NTIC with a written
10 partnership to change their ways. J. P. Morgan,
10:00:08
11 however, refused.
12 I'm sure you know how good it feels when
13 everything appears to be going well in your life.
14 Approximately ten years ago, I was very excited
15 because, as a single parent, I was able to purchase
10:00:22
16 a home. I just knew this was the American dream
17 until what happened in July 2001.
18 Fairbanks Capital, my loan servicing
19 company, totally rocked my world. I received a
20 phone call on my job indicating that my home was
10:00:38
21 going into foreclosure. I immediately wrote them a
22 letter and included copies of my cancelled checks
23 and receipts of my Western Union payments.
24 However, this loan servicing company still insisted
76
1 my payments were late and forced me to file Chapter
2 13.
3 After my involvement with ESOP, I found
4 out why my loan servicing company felt my payments
5 were late. It took Fairbanks Capital two years to
10:01:08
6 explain to me that they did not honor two Western
7 Union payments sent to Conti Mortgage in December
8 1999, even though I had receipts and even though
9 Fairbanks purchased Conti Mortgage.
10 You're probably wondering why I am
10:01:24
11 speaking of Conti Mortgage and Fairbanks and this
12 is about a hearing on J. P. Morgan and Chase? The
13 simple fact is J. P. Morgan owned my loan and so
14 does servicing to Fairbanks. When I received legal
15 documentation indicating my loan was going into
10:01:40
16 foreclosure, it was indicated that J. P. Morgan or
17 its affiliate versus Catherine Haynesworth. It
18 would seem that J. P. Morgan would be happy to
19 originate and purchase garbage loans, but they
20 don't have the guts to service them. Instead, they
10:01:56
21 distance themselves by selling servicing rights to
22 others.
23 When I attempted to contact the actual
24 owner of my mortgage, I was referred back to
77
1 Fairbanks. The problems I have experienced with my
2 loan servicing company has shown me that a national
3 point person needs to be designated by J. P. Morgan
4 and Bank One to resolve complaints with servicing
5 agreements.
6 This experience has affected my life in a
7 negative sense as well as my associates at ESOP of
8 Cleveland. Allow me to say that I know God can do
9 exceedingly and abundantly above anything we can
10 ask or imagine. I say this because in July 2001 I
10:02:40
11 thought I lost my home. However, in March 2004, my
12 home was taken out of foreclosure. It's because of
13 a signed agreement with Fairbanks Capital throug