Public Meeting Regarding NationsBank and BankAmerica - Panel 1
Thursday, July 9, 1998
Transcript of Panel One
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1 MS. SMITH: Thank you very much for your
2 presentation and we will move on to the first panel.
3 MS. ORR-SMITH: Madam Chairman, I'd like to
4 address this letter to Mr. McColl and Mr. Coulter
5 requesting a meeting with some of the protestors to
6 discuss the specific issues raised. Thank you.
7 MS. SMITH: I think the first panel is mostly up
8 but if there's anyone who hasn't made it up. And if you
9 will just introduce yourselves to the audience as you are
10 seated and let's start with the person on the extreme
11 right.
12 MR. MARTIN: Good morning, my name is DeWayne
13 Martin, I'm Chief of Staff for the City of Atlanta,
14 Georgia.
15 MS. BROOKS: Did you want us to introduce
16 ourselves?
17 MS. SMITH: No, please, just continue to speak.
18 MR. MARTIN: Thank you. Members of the panel,
19 I'm DeWayne Martin, Chief of Staff to Mayor Bill Campbell.
20 MS. SMITH: Can you pull the mike closer?
21 MR. MARTIN: Mayor Campbell regrets that he's
22 unable to be here today but I have come on behalf of the
23 City of Atlanta because we believe that the issue before
24 this panel is very important.
25 Seven years ago Atlanta, Georgia was in the same
26 place San Francisco is today, a major merger between
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1 Georgia's leading bank and North Carolina National Bank
2 was before the country. This merger was the formation of
3 NationsBank.
4 From the onset, NationsBank showed its commitment
5 to corporate leadership. And at that time our city was
6 vying to attract the world's most watched event, the 1996
7 centennial Olympic games. NationsBank stepped to the
8 table from the onset extending a $300 million line of
9 credit to the Atlanta Organizing Committee at a critical
10 juncture in that process.
11 At that point in our nation's history when many
12 corporations were accused of disinterest in the
13 communities in which they lived and do business,
14 NationsBank has shown and continues to show by example
15 that good business still means community responsibility
16 and commitment. Certainly economic development,
17 affordable housing and expanding employment opportunities
18 are all important issues for any city.
19 Through its broad array of financial services,
20 NationsBank has served all levels of Atlanta's community,
21 whether helping small businesses expand or supporting
22 efforts to retain or attract large corporations to our
23 area. NationsBank plays a fundamental role in the
24 economic vitality of our city and our region. This has,
25 in turn, helped create jobs which is extremely important
26 to our city.
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1 The capacity and positive effect of economic
2 development in Atlanta to develop affordable housing and
3 create jobs can only be enhanced by the combination of
4 resources of NationsBank and the Bank of America.
5 The most visible, in fact, of the NationsBank
6 community commitment in Atlanta is in the neighborhoods of
7 Atlanta through neighborhood development initiatives.
8 During the past five years, the City of Atlanta
9 has worked in partnership with NationsBank to create the
10 availability of affordable housing and reinvigorate
11 Atlanta's once forgotten neighborhoods. And for the first
12 time in over 25 years, Atlanta, Georgia has experienced an
13 increase in housing and in population in the inner city, a
14 trend that reverses a trend in many major cities where
15 populations have decreased over the past 25 years.
16 I will simply touch on three projects which block
17 by block are making a difference and are evidence of
18 Nationsbank's commitment to cities and communities.
19 First, the Historic Development -- Redevelopment
20 Partnership is revitalizing the Martin Luther King
21 District in Atlanta. When completed next year, the
22 district will have 67 new or historically re-habbed houses
23 representing an investment of four and a half million
24 dollars. This project has increased property values in
25 the area and is attracting more homeowners and businesses
26 to the inner city. Additional phases are being planned
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1 with the help of NationsBank.
2 Another public/private partnership is the $5.9
3 million to replace at Summerhill which includes 70
4 single-family homes constructed along the neighbor
5 traditional designs. In Summerhill, this development has
6 been a catalyst for additional development, continuing
7 development in the inner city.
8 And the park at Lakewood, a $6.8 million project,
9 represents complete overhaul of a multi-family complex.
10 More than 200 units have been provided. An additional $10
11 million of indirect investment is furthering neighborhood
12 and economic development efforts in Atlanta.
13 NationsBank has established itself as a leader in
14 the community because of its commitment to involvement and
15 investment in the crucial parts of our city and across the
16 country through effective public and private partnerships.
17 We've seen that this commitment can make a difference and
18 we believe that it will continue to. Thank you very much.
19 MS. BROOKS: Good morning. My name is Roberta
20 Brooks and I'm Assistant District Director for
21 Congresswoman Barbara Lee representing the 9th District,
22 California. Thank you for providing -- I'm quoting her.
23 Thank you for providing this opportunity to me and my
24 representative, Ms. Roberts Brooks to address the issue of
25 the merger of Bank of America with NationsBank. I very
26 much regret not being here personally to talk with you but
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1 I only learned about this meeting accidentally and not in
2 time to rearrange my schedule.
3 The first issue I will raise is the regulatory
4 role of the Federal Reserve Board relative to the ability
5 of these two banks to merge. Congress, through the 1956
6 Bank Holding Company Act, gave the Federal Reserve System
7 the responsibility to review such mergers and to
8 specifically consider the likely affects of the
9 acquisition on competition and the convenience and needs
10 of the community to be served. Due to the increasing
11 number of mergers in the 1950s, Congress reinforced the
12 1956 Act by passing the Bank Merger Act in 1960.
13 The Bank Merger Act strengthened the language of
14 the Federal Reserve Board's responsibility. It stated
15 that the Federal Reserve may not approve any merger that
16 could substantially reduce competition. It also was
17 concerned that a merger not create a monopoly unless it
18 finds that the anticompetitive effects of the transaction
19 are outweighed by the transaction's probable beneficial
20 effects regarding the convenience and needs of the
21 community served.
22 The second issue I wish to address is that of the
23 scale of the banks that are merging. The planned merger
24 of BankAmerica with NationsBank would make it the second
25 largest bank in the United States with assets of $580
26 billion. This merger must be placed in the context not of
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1 a single event but as the first of a series of announced,
2 planned mergers, Citcorp's $72 billion merger with
3 Travelers Corp., and First Chicago Corp's $30 billion deal
4 with Bank One Corp. Another merger with similar
5 significance to California as BankAmerica is that of
6 California Wells Fargo with Norwest Corp. The
7 consolidation of Wells Fargo with Norwest Corp will make
8 it the seventh largest bank in the nation with assets of
9 190 billion.
10 This leads me to my third point. Given the
11 regulatory responsibilities of the Federal Reserve System
12 and the size of the banks under consideration, I would
13 expect, as many of my constituents and colleagues on the
14 House Banking Committee do, that the Federal Reserve would
15 consider this merger with appropriate gravity. One
16 measure of the seriousness of the Federal Reserve would be
17 its willingness -- is its willingness to listen and the
18 respect it will give to the testimony from people who
19 would be affected by such a merger.
20 It was, therefore, suprising to learn that only
21 one session was to be held on a single day in all of
22 California. You have undoubtedly received a great volume
23 of mail on the subject of your willingness to listen. I
24 understand that, as a consequence of the extent of the
25 mail, we the public now have two days instead of the
26 original single day.
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1 I run the risk of stating the obvious, that a
2 two-day hearing in one part of California on the loss of
3 the largest bank in California is totally inadequate. And
4 with the risk of being rude by being clear, it's
5 unacceptable behavior from a government agency.
6 My colleagues on the House Banking Committee,
7 Congresswoman Lucille Roybal-Allard and Maxine Waters,
8 representing constituents in Southern California share my
9 concern with the negligible time that's being given by the
10 Federal Reserve to the public and to elected
11 representatives to hold the appropriate discourse on this
12 merger. Although, I am pleased that my representative did
13 not have to travel to Los Angeles to voice our concerns, I
14 am dismayed that so serious a matter should be given such
15 short attention.
16 This is a merger that affects the entire nation,
17 just as Microsoft's practices affects the whole nation. I
18 strongly recommend that the Federal Reserve hold hearings
19 in every state in which either BankAmerica or NationsBank
20 has assets of $1 billion or more.
21 I ask that a letter signed by myself,
22 Representative Roybal-Allard and Waters to Hugh McColl,
23 Chairman and CEO of NationsBank, and David Coulter,
24 Chairman and CEO of Bank of America, be accepted as part
25 of my testimony. We will fax that at a later time.
26 So I have one minute left. I need to move on.
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1 The major concerns that we have are loss of
2 service. There is a great anxiety expressed by our
3 constituents very directly over the steady decline in the
4 last 20 years or so of banking services and the
5 accompanying tariffs for even the smallest services, such
6 as using the ATM. The pattern of less service and more
7 cost is so clear as to make this proposed merger a crisis
8 point. By delegation from Congress, the Federal Reserve
9 System has the responsibility for responding to these
10 concerns. How are you executing this responsibility?
11 Loss of jobs. How many jobs will be lost when
12 Bank of America moves from the Bay Area to North Carolina?
13 Job holders, families and the public need to have an
14 answer to this.
15 Community development and reinvestment, we have
16 heard a strong commitment from the bank with that but we
17 are concerned about it.
18 I don't have time to finish. I'll submit the
19 written testimony but I just want to indicate that we
20 trust that the Federal Reserve does remember its birth in
21 the republic and its true loyalties will be with the
22 people and give time for people to really give their
23 opinions throughout the country. Thank you very much.
24 MS. SMITH: Thank you. Mr. Brown.
25 MR. BROWN: Thank you, I'm Lee Brown, I'm the
26 Mayor of Houston, Texas which is the fourth largest city
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1 in America and I want to express my appreciation for the
2 opportunity to provide testimony here today.
3 I've been a customer of NationsBank or one of its
4 predecessor banks for several years. Currently I hold
5 several accounts with the bank plus a mortgage loan. But
6 today I want to talk about NationsBank as a corporate
7 citizen in our city. NationsBank has been an excellent
8 corporate citizen, but most important, it has been a
9 partner with our efforts to improve the quality of life
10 for our citizens in Houston.
11 There are staff in Houston led by Joe Mosellino
12 (phonetic) who is the vice-chairman of NationsBank. They
13 have engaged in hundreds of hours of volunteer work. They
14 have supported many major philanthropic endeavors. And
15 often they've taken the lead in those efforts. Joe has
16 been very active in our Houston Chamber of Commerce which
17 is known as the Greater Houston Partnership and, thus,
18 worked very closely with the city on numerous economic
19 development efforts.
20 NationsBank has been a strong supporter of
21 affirmative action for many years. It was Hugh McColl,
22 the CEO of NationsBank, who called the press conference in
23 Washington, D.C. several years ago to champion affirmative
24 action at a time when the issue is being debated on
25 Capitol Hill. I would like to point out that he did not
26 have to do that, but he did it because he believed in what
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1 our country, America, stands for, equal opportunity for
2 all. And that philosophy is reflected in the culture of
3 the organization.
4 Last year in Houston when this issue was being
5 voted on in our city, NationsBank lenders were out front
6 supporting this cause. And although I wasn't mayor at the
7 time, I'm told that NationsBank or its predecessors have
8 supported community development programs launched by the
9 City of Houston since 1980.
10 The $350 billion commitment announced by
11 NationsBank and BankAmerica is intended to address the
12 major concerns that I, as mayor of my city, and many other
13 mayors across the country have. Concerns such as how can
14 we get more affordable housing in our cities? This
15 commitment has $150 billion for affordable housing.
16 Concerns such as how can we assist small businesses which
17 provides jobs and economic opportunity to our cities? The
18 NationsBank/BankAmerica commitment will provide $180
19 million for small businesses.
20 This commitment, I'm told, and as we heard
21 earlier from Mr. McColl, is a floor, not a ceiling. So we
22 can expect more to happen.
23 During the past few years, the NationsBank has
24 provided a report to communities which documented the
25 progress they made on previous $10 billion commitments.
26 In 1993, NationsBank committed to spending $10 billion
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1 within ten years to help build urban communities. They
2 exceeded that goal in four years. We expect they will
3 continue this practice with the $350 billion commitment.
4 I've been pleased with what I've observed about
5 NationsBank, pleased both on a personal basis and as a
6 leader of our city. Our cities throughout America need
7 responsible corporate leaders and community development
8 needs strong private sector commitments to make it a
9 reality.
10 And that's why I'm here today, to give support to
11 the proposal by NationsBank Corporation of Charlotte,
12 North Carolina to acquire BankAmerica Corporation of
13 San Francisco, California. And thank you for allowing me
14 the opportunity to speak before you today.
15 MS. SMITH: Thank you.
16 MS. TAVANLAR: Hello, ladies and gentleman, my
17 name is Katrina Tavanlar and I'm representing
18 Congresswoman Lucille Roybal-Allard from the 33rd District
19 of California.
20 As a member of the Banking Committee and Chair of
21 the California Democratic Congressional Delegation, I'm
22 writing to express my concern ith the proposed merger of
23 Bank of America and NationsBank. I'm especially concerned
24 about its impact on lending, investing, employment and
25 other financial services for low-income and minority
26 Californians.
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1 This merger will no doubt have a greater impact
2 on California than any other state in the country. The
3 relocation of the headquarters of California's largest
4 financial institution to North Carolina particularly
5 concerns me, and the merger activity that has occurred in
6 California to date reinforces this concern.
7 In California alone, more than 80 banks and
8 thrifts have been acquired by other institutions since
9 1996. In 1992, when Bank of America purchased Security
10 Pacific Bank, they closed over 400 branches. In 1996,
11 Wells Fargo closed hundreds of branches throughout the
12 state after purchasing First Interstate Bank. While we
13 cannot fully anticipate the long-term effects of these and
14 future mergers, the obvious and the immediate impact has
15 been fewer branches and escalating bank fees.
16 I commend Bank of America for its prior and
17 current community reinvestment commitments to our
18 California communities.
19 However, I would appreciate receiving details on
20 how this pledge will benefit California's consumers and
21 communities. In requesting this information, I would
22 respectfully point out that these specific requests are
23 not unprecedented and reflect commitments that other
24 California institutions have made in the past. Therefore,
25 I am confident that NationsBank and Bank of America will
26 continue the good faith efforts to meet the needs of our
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1 California communities.
2 Specifically, I would appreciate your response to
3 the following questions. One, does the bank intend to
4 earmark a portion of the 350 billion to California? Given
5 Bank of America's dominance in California, it's critical
6 that the community reinvestment commitment be California
7 specific and commensurate with the proportion of the
8 bank's deposits and activities originating in the state.
9 How will the institution fulfill regional
10 commitments within California given the geographical,
11 social and ethnic diversity of our communities? What
12 culturally appropriate products and services will be
13 available to consumers considering the various credit,
14 investment and economic development needs of our state's
15 communities?
16 Second, how will the new bank maintain and expand
17 Bank of America's present programs and commitments in
18 California such as the Community Development Bank, Rural
19 2000 Initiative, Economic Development Initiative, the
20 BankAmerica Foundation and affordable housing activities?
21 It is vital that these programs be distinct entities
22 within the merged bank and continue to be based in
23 California, given the tremendous need in our state and the
24 collective expertise Bank of America has acquired in
25 serving our communities.
26 Third, what will be the bank's specific goals on
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1 the type and amounts of loan for minority or women-owned
2 businesses -- small businesses and home loans?
3 Fourth, how will the new bank minimize branch
4 closings and increase branch openings in regions and
5 communities that are presently underserved by traditional
6 banking institutions.
7 And finally, does the new bank intend to lower or
8 stabilize ATM and bank fees? I am very concerned about
9 rising bank fees and their adverse impact on financially
10 underserved and low-income communities.
11 A dedicated commitment to California is an
12 exciting and challenging opportunity for banks. This
13 merger has the potential to create mutually beneficial
14 outcomes for both consumers and banks, given ever growing
15 entrepreneurial immigrant communities, expanding small
16 business markets and the booming economy.
17 I look forward to working with you to meet these
18 above-mentioned goals and anticipate your prompt reply.
19 Sincerely, Lucille Roybal-Allard, Member of Congress.
20 MS. SMITH: Thank you.
21 MR. LENO: Good morning and thank you very much
22 for your warm welcome. My name is Mark Leno and I'm a
23 member of the Board of Supervisors for the City and County
24 of San Francisco.
25 Since NationsBank announced in April that it
26 would acquire Bank of America, the San Francisco Board of
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1 Supervisors has been very concerned about the potential
2 decline and community reinvestment that could result from
3 the proposed merger. We, the undersigned, believe that
4 the proposed Bank of America/NationsBank $350 billion
5 community reinvestment commitment should be included in
6 the bank's intermerger application to make it binding on
7 the new bank.
8 Also, we have asked NationsBank/Bank of America
9 to provide specific commitments to California and the
10 San Francisco Bay Area and its small businesses, minority
11 businesses, minority and low-income neighborhoods and
12 nonprofit organizations. We have concern that consumer
13 services, small business lending, low-income housing and
14 charitable giving may all be negatively affected by the
15 NationsBank acquisition.
16 There is cause for concern that the new bank may
17 not be as responsive to the needs of San Francisco and the
18 Bay Area. In general, larger banks mean higher fees,
19 fewer bank branches, fewer product options and fewer
20 banking options for consumers. A Federal Reserve survey
21 of bank fees and interest rates reveals that, on average,
22 large banks charge higher fees than small banks with an
23 average monthly fee on interest-bearing checking accounts
24 of $10.12 at large banks and $6.13 at small banks. By
25 contrast, the average yield on interest-bearing accounts
26 is 1.1 percent at large banks and 1.58 percent at small
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1 ones.
2 With bank mergers comes the possibility of bank
3 closures. The National Community Reinvestment Coalition
4 has noted that mergers lead to fewer branches in
5 underserved communities. A 1997 Federal Reserve study
6 found that from 1980 through 1995 branches in middle and
7 moderate income neighborhoods increased eight percent
8 while branches in low- and moderate-income neighborhoods
9 decreased 14 percent. The closure of a branch in a
10 low-income neighborhood could reduce lending in the area,
11 and in turn, spur the decline of the neighborhood. In
12 addition, when bank branches close, teller and other bank
13 jobs disappear.
14 Small business lending is also affected by
15 mergers. A study by Federal Reserve economists predict
16 that small business lending will continue to decline in
17 the next three to five years at the rate of 33 percent.
18 This is the same rate of decline as that of the last five
19 years. A February '98 study of the Federal Reserve Bank
20 of San Francisco found subtle discrimination in lending
21 against minority businesses in the Bay Area. If community
22 reinvestment is diminished in the Bay Area, minority
23 businesses will be the first to suffer.
24 A decline in lending to small and minority-owned
25 businesses would also affect the city's ability to meet
26 our welfare-to-work mandate. The city is counting on
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1 small businesses to play a significant role in providing
2 jobs for those moving from welfare to work. Small
3 businesses are creating more jobs than larger businesses
4 in the Bay Area and, therefore, more opportunities for
5 welfare recipients. King Security, a local small
6 business, was the first to hire welfare-to-work recipients
7 in San Francisco.
8 NationsBank's record of community reinvestment
9 raises additional concerns. For example, Bank of
10 America's level of lending for low-income households in
11 California is 21.3 percent, but NationsBank's level of
12 lending for low-income households in North Carolina is
13 only 6.3 percent compared to an average for all lenders of
14 8.4 percent.
15 There is a litany of additional questions
16 regarding the activities of NationsBank. As of March
17 1998, NationsBank offered one of the most expensive
18 checking accounts in the country. NationsBank was
19 recently fined $7 million by Wall Street regulators for
20 illegally selling high risk mutual funds to unwary, and
21 mostly elderly, investors. NationsBank is in the process
22 of closing 205 branches in Florida since its purchase of
23 Barnett Bank in 1997. State regulators in Texas are
24 examining NationsBank's transfer of almost half of the
25 bank's Dallas deposits to its corporate headquarters in
26 Charlotte, North Carolina in April to determine if the
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1 transfer was an attempt to circumvent the state's merger
2 rules.
3 Given that California will suffer the most with
4 the acquisition and loss of Bank of America, we believe a
5 major proportion of the $350 billion community
6 reinvestment pledge should be committed to California. To
7 date, we have not received any commitments, and we
8 understand that the bank will not establish specific goals
9 until after the completion of the merger. The bank merger
10 should be -- the bank should be directed to outline
11 specific community reinvestments in their intermerger
12 application. Our communities deserve a stronger show of
13 commitments to the specific needs of the San Francisco Bay
14 Area. The possible loss of Bank of America, a bank with a
15 proven record of community reinvestment would be
16 devastating and specific commitments are necessary.
17 This is cosigned by my colleagues on the board
18 Michael Yaki, Tom Ammiano, Sue Bierman, Amos Brown, Leslie
19 Katz and Jose Medina. I thank you very much.
20 MS. SMITH: Thank you very much. Are there any
21 questions?
22 MR. FRIERSON: I'd like to thank all of the
23 panelists for coming and sharing your views with us this
24 morning.
25 Mr. Leno, I just have one question from you.
26 Could you provide us with a little more detail on this
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1 February 1998 study showing the subtle discrimination?
2 And you can just provide that to us. We can proceed to
3 track down that stuff.
4 MR. LENO: I certainly will.
5 MR. FRIERSON: Thank you very much.
6 MS. SMITH: Any other questions? Fine. Thank
7 you very much for coming today and we will go on to the
8 next panel. I might mention that this is a very large
9 panel as you will see on the agenda, however, the time
10 allocations have all been made to fit within a 50 minute
11 period.