Public Meeting Transcripts
Public Meeting Regarding Norwest Corporation and Wells Fargo & Company
Thursday, September 17, 1998
Transcript
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7 NORWEST CORPORATION AND WELLS FARGO & COMPANY
8 PROPOSED MERGER
9 PUBLIC MEETING
10 September 17, 1998
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13 The Norwest Corporation and Wells Fargo & Company
14 public meeting, taken before Holly J. Nordahl, a Notary
15 Public in and for the County of Rice, State of
16 Minnesota, on the 17th day of September, 1998, at the
17 Federal Reserve Bank of Minneapolis, 90 Hennepin Avenue,
18 in the City of Minneapolis, Minnesota, commencing at
19 approximately 9:00 a.m.
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1 APPEARANCES:
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3 Board of Governors: Dolores Smith, presiding
4 Niel Willardson
5 Kenneth Binning
6 Deborah Awai
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8
9 * * *
10 WHEREUPON, the following proceedings were duly had:
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14 CHAIRPERSON SMITH: Well, I'm pleased to 08:59:58
15 welcome you to this important public meeting on the 09:00:00
16 application by Norwest Corporation to acquire Wells 09:00:04
17 Fargo & Company. I'll start by introducing myself. 09:00:08
18 I'm Dolores Smith, Director of the Division of 09:00:10
19 Consumer and Community Affairs at the Federal 09:00:14
20 Reserve Board in Washington, D.C. I'll be the 09:00:18
21 presiding officer for this public meeting. Our 09:00:20
22 other panelists are, starting from my extreme right, 09:00:24
23 Niel Willardson, vice president in charge of banking 09:00:28
24 supervision from the Federal Reserve Bank of 09:00:32
25 Minneapolis. Next to him, Kenneth Binning, director 09:00:34
3
1 of applications and financial analysis from the 09:00:38
2 Federal Reserve Bank of San Francisco. To my right, 09:00:40
3 Deborah Awai, senior counsel legal division from the 09:00:46
4 Federal Reserve Board. 09:00:50
5 We're here today because Norwest Corporation, 09:00:54
6 Minneapolis, Minnesota, has applied for approval to 09:00:58
7 acquire Wells Fargo & Company, San Francisco, 09:01:02
8 California. When the Federal Reserve system 09:01:06
9 considers one of these applications, we look at a 09:01:10
10 number of factors under the Bank Holding Company 09:01:12
11 Act. These include financial issues, managerial 09:01:16
12 issues, competitive issues, and the convenience and 09:01:22
13 needs of the communities affected. In doing so, we 09:01:26
14 particularly look at the record of performance of 09:01:30
15 the parties under the Community Reinvestment Act. 09:01:34
16 The CRA requires the Board to take into account an 09:01:38
17 institution's record of meeting the credit needs of 09:01:42
18 its entire community. 09:01:46
19 The Norwest-Wells Fargo application also 09:01:50
20 involves the proposed acquisition or retention of 09:01:54
21 nonbanking companies engaged in activities 09:02:00
22 permissible for bank holding companies. The Board 09:02:02
23 must therefore determine whether the proposed 09:02:06
24 nonbanking activities can reasonably be expected to 09:02:10
25 produce benefits to the public that outweigh 09:02:14
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1 possible adverse effects such as undue concentration 09:02:16
2 of resources, decreased or unfair competition, 09:02:22
3 conflicts of interest, or unsound banking practices. 09:02:28
4 The purpose of the public meeting today is to 09:02:32
5 receive information regarding these factors. We 09:02:36
6 will be seeking to elicit this information and to 09:02:40
7 clarify factual issues related to the application. 09:02:44
8 I'll make a few remarks about our procedures 09:02:50
9 today. This is what we call an informal public 09:02:54
10 meeting. Members of the panel may ask those who are 09:02:58
11 testifying about their testimony. This is not a 09:03:02
12 formal administrative hearing, so we are not bound 09:03:08
13 by the rules regarding evidence, cross examination, 09:03:12
14 and some of the more formal trappings for that kind 09:03:16
15 of proceeding. 09:03:20
16 We will have about 70 groups and individuals 09:03:22
17 represented today at this public meeting. We are 09:03:26
18 pleased that so many people have been willing to 09:03:30
19 come and testify, but we do have a full schedule and 09:03:32
20 we will be trying to stay to the timed agenda pretty 09:03:36
21 closely so that everyone who has asked to offer oral 09:03:42
22 testimony will have the opportunity to do so. We 09:03:46
23 will ask witnesses to be mindful of the needs of 09:03:48
24 others and to stay within their allotted times. 09:03:52
25 We're using a signal system with regard to timing. 09:03:58
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1 We have two timekeepers over here to the right, just 09:04:02
2 right in front of the panels that will be 09:04:06
3 testifying. There will also be some individuals who 09:04:10
4 were unable to sign up in advance to testify at this 09:04:16
5 meeting, and so to the extent possible, we will give 09:04:18
6 them a chance to speak. At the end of the meeting 09:04:22
7 today, we will make the microphone available to 09:04:26
8 anyone who would like to make a presentation, time 09:04:28
9 permitting. Also, if witnesses have not yet turned 09:04:34
10 in copies of your written testimony, or if you have 09:04:38
11 any other written statements to put into the record, 09:04:42
12 please leave them with the Federal Reserve staff at 09:04:44
13 the registration table because it's important that 09:04:48
14 we get all of this information for the record. 09:04:52
15 A transcript of the meeting will be available 09:04:56
16 by next Tuesday, September 22nd, through the Federal 09:04:58
17 Reserve Bank of Minneapolis and also from the Board. 09:05:04
18 In addition, the official transcript will be 09:05:06
19 available by close of business on September 23rd on 09:05:10
20 the Board's public web site, which is 09:05:16
21 www.bog.frb.fed.us.
22 One more comment about the testimony. 09:05:28
23 Witnesses may submit a written supplement to their 09:05:30
24 oral testimony, but they must do so by next 09:05:34
25 Thursday, September the 24th. Then the record will 09:05:38
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1 be closed. Any written supplements should be 09:05:40
2 directed to Jennifer J. Johnson, Secretary of the 09:05:44
3 Board, Board of Governors of the Federal Reserve 09:05:48
4 System, Washington, D.C. 20551. They must be 09:05:52
5 received by 5 p.m. eastern daylight time on 09:05:58
6 September the 24th. Submissions may be faxed to 09:06:02
7 202-452-3462. This is information that I believe as 09:06:08
8 witnesses you have already been given in writing. 09:06:14
9 So with that I think we're ready to begin the 09:06:18
10 proceedings. I will be calling on the witnesses, 09:06:20
11 but please, and this goes not only for the first 09:06:24
12 panel but also for succeeding panels, start by 09:06:28
13 stating your name and the name of your organization 09:06:32
14 for the record. So with that, let's begin. And I 09:06:34
15 believe, Mr. Hazen, that you are first. 09:06:40
16
17 APPLICANT PRESENTATION:
18
19 MR. HAZEN: Thank you very much. Good 09:06:44
20 morning. I'm Paul Hazen. I'm the chairman of Wells 09:06:46
21 Fargo. Les Biller is here, and Les is the president 09:06:48
22 of Norwest. He and I have coordinated our remarks 09:06:54
23 so that we believe that between us we will have 09:06:58
24 covered everything that's relevant with regard to 09:07:02
25 the proposed merger between our two companies. 09:07:04
7
1 I'm going to divide my remarks this morning 09:07:06
2 into two parts. First, I'll describe what the 09:07:10
3 Norwest-Wells Fargo merger will mean for the 09:07:12
4 communities where we do business, specifically what 09:07:14
5 values will guide the new company as we move 09:07:20
6 forward. And, secondly, I'll also describe Wells 09:07:22
7 Fargo's record since 1852 of keeping its promises to 09:07:24
8 the communities where it does business, and assure 09:07:30
9 you that we'll continue to use best practices with 09:07:32
10 respect to CRA lending, services, and investments. 09:07:36
11 The new Wells Fargo & Company will have one of 09:07:40
12 the most widely known brand names in the financial 09:07:42
13 services industry, a name that has endured for 146 09:07:46
14 years. Since the gold rush, Westerners have relied 09:07:50
15 on Wells Fargo for honest, reliable banking service. 09:07:54
16 It may surprise you to know that Minnesotans, too, 09:07:58
17 once counted on Wells Fargo for express delivery 09:08:02
18 services. 09:08:04
19 If I may, I'd like to give you a one-minute 09:08:04
20 history of Wells Fargo. In 1852, Henry Wells and 09:08:08
21 William Fargo founded Wells Fargo & Company to 09:08:12
22 provide reliable banking and express services to 09:08:16
23 Western pioneers, and they opened their first office 09:08:18
24 in San Francisco. 09:08:22
25 By 1858, as Minnesota became a state, Wells 09:08:22
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1 Fargo had established 78 offices. These offices and 09:08:28
2 stage coaches linked mining camps and towns all over 09:08:32
3 the West. In May 1869, the completion of the 09:08:34
4 transcontinental railroad allowed Wells Fargo 09:08:38
5 express messengers to ride the rails. By April 1, 09:08:42
6 1897, Wells Fargo was operating in the upper Midwest 09:08:46
7 aboard the trains of the Chicago Great Western 09:08:50
8 Railroad, and had 31 offices in Minnesota. The Twin 09:08:52
9 Cities locations became part of Wells Fargo's ocean 09:08:56
10 to ocean express network of offices around the 09:09:00
11 country and around the world. By 1910, Wells Fargo 09:09:02
12 had offices in 194 Minnesota communities, from Adams 09:09:06
13 to Zumbrota. 09:09:10
14 In 1918, Wells Fargo changed abruptly when as a 09:09:12
15 wartime measure due to the first world war, the 09:09:18
16 federal government took over all of the 10,000 then 09:09:22
17 Wells Fargo offices throughout the U.S. as our 09:09:24
18 express operations, and the Wells Fargo name 09:09:28
19 disappeared from depots and storefronts throughout 09:09:30
20 Minnesota. However, Wells Fargo's banking 09:09:34
21 operations continued in the West, carrying on the 09:09:36
22 most famous name in Western banking. 09:09:40
23 This year our history adds a new chapter with 09:09:42
24 our merger with Norwest. We want to build a strong 09:09:44
25 foundation for the new Wells Fargo that will last a 09:09:48
9
1 long time. We pledge to make the transition as 09:09:52
2 smooth as possible, and I can assure you that we 09:09:54
3 will take the time to do it right. 09:09:58
4 In bringing Norwest and Wells Fargo together, 09:10:00
5 we find that our cultures have much in common. 09:10:06
6 These similarities include high performance 09:10:08
7 orientation, commitments to customer service, high 09:10:12
8 quality of team member talent, and strong records of 09:10:14
9 community involvement. 09:10:18
10 One value that we find that Norwest and Wells 09:10:18
11 Fargo share is our belief that people are the best 09:10:22
12 competitive advantage we have. At Wells Fargo, our 09:10:24
13 employees do whatever it takes to come through for 09:10:28
14 the customer. 09:10:30
15 Both Wells Fargo and Norwest believe in the 09:10:32
16 strong linkage between a diverse work force and 09:10:36
17 business success in an increasingly competitive 09:10:38
18 global economy. For Wells Fargo, nowhere is this 09:10:44
19 more evident than in California, a state that is a 09:10:48
20 true mosaic of ethnicities. The new Wells Fargo 09:10:50
21 will continue in its effort to recruit, retain and 09:10:54
22 promote women and minority employees in key 09:10:58
23 positions throughout the company in all of our 09:11:02
24 combined markets, just as we have since the 09:11:04
25 company's founding in 1852. 09:11:08
10
1 It is true that our banks do have different 09:11:12
2 business models, based on our geographic origins and 09:11:14
3 the different types of businesses we are in. For 09:11:18
4 example, Norwest grew up here in the Midwest with 09:11:20
5 more community banks than Wells Fargo's 09:11:24
6 predominantly urban markets. But that does not mean 09:11:26
7 that the new Wells Fargo would adopt an urban model 09:11:30
8 in areas where a community banking model would work 09:11:32
9 better. Both banks have been looking for a model to 09:11:36
10 cultivate the other's marketplace. We'll gain by 09:11:38
11 sharing our different business models that fit each 09:11:42
12 type of community in combining them into a common 09:11:44
13 operating philosophy. 09:11:48
14 Our commitment to all of the communities in 09:11:48
15 which we do business is to take best practices, 09:11:50
16 those things that work well in both organizations, 09:11:54
17 and apply them to the new Wells Fargo. 09:11:56
18 First, let me emphasize that the new Wells 09:12:02
19 Fargo will honor all of Wells Fargo's and Norwest's 09:12:04
20 previous CRA commitments. Wells Fargo is a leader 09:12:06
21 in outreach to women and minority-owned small 09:12:10
22 businesses in the West, if not the nation. These 09:12:14
23 commitments include a $10 billion, ten-year goal for 09:12:16
24 women-owned small businesses, a $1 billion, six-year 09:12:22
25 goal for providing loans to Latino-owned small 09:12:26
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1 businesses, and a recently announced one billion, 09:12:28
2 12-year goal for loans to African-American-owned 09:12:34
3 small businesses. The new Wells Fargo will continue 09:12:36
4 to aggressively market its products to low income 09:12:38
5 and minority communities to ensure equal access to 09:12:42
6 credit and banking services to all citizens. 09:12:44
7 It is worth noting that in 1990, Wells Fargo 09:12:48
8 was the first major bank in the country to announce 09:12:50
9 a multi-year CRA lending goal, and the first bank to 09:12:54
10 exceed its goal. Our CRA goals and lending results 09:12:58
11 are shared with the communities we serve on an 09:13:02
12 ongoing basis. You can find state-by-state results 09:13:04
13 of our lending, service, and investment programs at 09:13:08
14 our web site, which is www.wellsfargo.com. 09:13:12
15 Some have asked, how can the new Wells Fargo 09:13:18
16 set goals when no one knows what will happen ten 09:13:22
17 years from now? Well, we can't predict the future, 09:13:24
18 but we do know that we'll be there to meet the 09:13:28
19 credit needs of communities and consumers, however 09:13:30
20 those needs change. We know that from our past 09:13:34
21 experience with our CRA program. It is flexible and 09:13:36
22 can accommodate new or special local programs as 09:13:40
23 needed. 09:13:42
24 Wells Fargo's most current CRA lending goal, 09:13:44
25 which is $45 billion over ten years, was announced 09:13:48
12
1 in December 1995, at the time of our merger with 09:13:50
2 First Interstate. This goal is a public commitment 09:13:52
3 to provide community lending and investments through 09:13:58
4 a comprehensive and focused CRA strategy that 09:14:00
5 capitalizes on the bank's unique small business and 09:14:04
6 community development lending strengths. We will 09:14:08
7 continue to honor this commitment. 09:14:10
8 To date, Wells Fargo has accomplished over 16 09:14:14
9 billion of this goal, resulting in the creation of 09:14:16
10 over 340,000 jobs and over 13,000 affordable living 09:14:18
11 spaces. 09:14:26
12 Wells Fargo and Norwest intend, through our 09:14:26
13 current and future community reinvestment programs, 09:14:28
14 to be the unrivaled banking leader in CRA lending 09:14:32
15 throughout our new 21-state territory. Wells Fargo 09:14:36
16 has achieved outstanding CRA ratings from its 09:14:38
17 primary regulator and will continue to do so. 09:14:42
18 Let me give you examples from two areas, small 09:14:46
19 business and community development lending, where 09:14:48
20 Wells Fargo has exemplified community reinvestment 09:14:50
21 best practices. 09:14:54
22 Since 1996, Wells Fargo has lent over $11 09:14:56
23 billion to small businesses and small farms. 09:15:00
24 According to the most current public data available, 09:15:02
25 Wells Fargo provided more small business loan 09:15:06
13
1 dollars to low and moderate income communities in 09:15:08
2 the U.S. than any other bank in both 1996 and 1997. 09:15:10
3 With Norwest's expertise in small farm lending, 09:15:16
4 Wells Fargo expects to outlocal the nationals and 09:15:20
5 become the premier small business and small farm 09:15:22
6 bank in the nation. 09:15:26
7 Wells Fargo is already a national leader in 09:15:28
8 community development financing for both the 09:15:32
9 construction of multi-family housing units and 09:15:32
10 financing to middle market businesses for job 09:15:36
11 creation. We believe that the creation of a 09:15:38
12 community development corporation, CDC, will further 09:15:40
13 enhance our community programs. Through the 09:15:44
14 creation of a new national CDC, Wells Fargo will 09:15:46
15 lend to nonprofit organizations that develop 09:15:50
16 affordable houses or provide technical assistance to 09:15:52
17 micro and very small businesses in low income 09:15:56
18 communities.
19 Additionally, Wells Fargo has developed a 09:16:00
20 portfolio of diverse and innovative CRA investments 09:16:04
21 to meet local community financing needs. Currently 09:16:08
22 Wells Fargo has a CRA investment portfolio of $213 09:16:10
23 million towards its $500 million, ten-year CRA 09:16:16
24 investment goal. 09:16:20
25 A significant portion of Wells Fargo's 09:16:20
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1 investments are focused on rural markets. Wells 09:16:22
2 Fargo is the largest bank investor in the Rural 09:16:24
3 Community Assistance Corporation, RCAC, a nonprofit 09:16:28
4 agency dedicated to improving the lives of low 09:16:32
5 income, rural Americans. RCAC provides technical 09:16:36
6 assistance, loans, grants, and operational support 09:16:40
7 for organizations in rural communities. 09:16:44
8 When it comes to CRA contributions, both Wells 09:16:46
9 Fargo and Norwest have solid records of making 09:16:46
10 grants throughout their markets. In 1995, Wells 09:16:50
11 Fargo pledged that 75 percent of our contributions 09:16:52
12 would support credit counseling, affordable housing, 09:16:56
13 job training programs, schools serving low to 09:17:00
14 moderate income students, and programs that provide 09:17:04
15 social services in low income and rural communities. 09:17:08
16 Last year 78 percent of our contribution dollars 09:17:08
17 funded such activities. 09:17:10
18 We intend to continue to be a leader in a wide 09:17:12
19 range of cultural (sic) community reinvestment in 09:17:16
20 contribution-related issues. 09:17:18
21 Now to the business aspects of the merger. The 09:17:20
22 new Wells Fargo will have nine of the ten fastest 09:17:24
23 growing state economies in our markets. To serve 09:17:28
24 our customers, the new Wells Fargo will have a 09:17:30
25 strong delivery system across the new 21-state 09:17:34
15
1 territory, including traditional branches, 09:17:36
2 supermarket branches, business centers, ATMs, 09:17:38
3 24-hour telephone service, Internet banking, and PC 09:17:42
4 banking. These choices cover all income segments. 09:17:46
5 In our major metropolitan areas approximately 09:17:50
6 half of Wells Fargo's branches are located within a 09:17:54
7 mile of low income communities. In fact, to be 09:17:58
8 where our customers want or need us, we expanded our 09:18:00
9 network. In the past two years, we added 506 new 09:18:02
10 staffed offices, which include 353 supermarket 09:18:06
11 branches. 09:18:10
12 Just as Wells Fargo historically expanded its 09:18:10
13 delivery system from the stagecoach to the railroad 09:18:14
14 lines, we are embracing new banking technology and 09:18:16
15 new formats for branch offices. We will continue to 09:18:20
16 be a leader in community banking. 09:18:22
17 So, in a sense, today we are where we started 09:18:24
18 in 1852 - we are spanning the Western territories 09:18:26
19 and back to serving Minnesota communities. 09:18:30
20 Wells Fargo looks forward to merging with a 09:18:34
21 strong partner, Norwest, and continuing our historic 09:18:36
22 role as a leader under the Community Reinvestment 09:18:38
23 Act. We pledge to become the best financial 09:18:40
24 institution in this marketplace and in every 09:18:44
25 community we serve. Thank you. 09:18:46
16
1
2 CHAIRPERSON SMITH: Thank you. Mr. 09:18:50
3 Biller.
4
5 MR. BILLER: Thank you, and good morning. 09:18:52
6 I'm Les Biller, president of Norwest Corporation, 09:18:54
7 and I'm pleased to represent Norwest at this 09:18:58
8 important meeting. Our chairman, Dick Kavosovich, 09:19:00
9 very much wanted to be here today. Unfortunately, 09:19:02
10 he had a commitment in Washington, D.C., that's been 09:19:04
11 on his calendar for approximately a year, which he 09:19:06
12 was unable to change. But with me today is Jim 09:19:08
13 Campbell, president of our Minnesota bank, and the 09:19:12
14 person responsible for all of our Minnesota 09:19:14
15 marketplace. 09:19:16
16 The benefits to this merger for our team 09:19:18
17 members, our shareholders, and importantly for our 09:19:20
18 customers and our communities are clear and 09:19:24
19 compelling. We would not have entered into this 09:19:26
20 merger with Wells Fargo if we did not believe it was 09:19:28
21 in the best interests of all our stakeholders, our 09:19:32
22 shareholders, our 60,000 team members, our almost 09:19:36
23 ten million customers, and our communities. 09:19:38
24 For our customers, it means more convenience, 09:19:40
25 more products, and more service than ever before. 09:19:42
17
1 For our team members, it means more opportunities 09:19:44
2 for growth, both personally and professionally. For 09:19:46
3 our communities, it means a continued commitment to 09:19:50
4 investing in every single one of them with our 09:19:52
5 dollars, our resources, and our team members, not 09:19:56
6 because we're a charity, but because it's good 09:19:58
7 business. When our communities succeed, we succeed, 09:20:00
8 and it's impossible to have a healthy bank in a 09:20:04
9 struggling community. For our shareholders it means 09:20:06
10 the prospects of creating an even greater value for 09:20:10
11 their investment with a combined company. 09:20:12
12 I'd like to respond point by point to the six 09:20:14
13 primary concerns that I've heard about this merger. 09:20:18
14 Those concerns are job losses, branch closings, 09:20:20
15 fees, the conversion of our computer systems, 09:20:26
16 community lending and contributions, and the move of 09:20:28
17 corporate headquarters to San Francisco and its 09:20:30
18 effect on local decision-making. Let's take them 09:20:34
19 one at a time. 09:20:38
20 First, job losses. Some are concerned this 09:20:38
21 merger will result in significant job losses for the 09:20:40
22 Twins Cities and Minnesota. There will not be 09:20:42
23 significant job losses. I can pledge here, as I've 09:20:46
24 pledged to our own team members on several 09:20:48
25 occasions, the merger's effect on job losses here in 09:20:52
18
1 the Twin Cities, and indeed across all of Norwest, 09:20:54
2 will not be significant. The largest group of 09:20:58
3 Norwest people directly affected by this merger is 09:21:00
4 our headquarters staff here in Minneapolis. These 09:21:04
5 830 team members are approximately 1.4 percent of 09:21:08
6 our total work force of 60,000. Yes, a number of 09:21:10
7 these 830 jobs will go away, but that does not mean 09:21:14
8 that all of the people go away. We take seriously 09:21:18
9 the loss of even one job. However, we've already 09:21:22
10 proven in the recent consolidation of our banking 09:21:24
11 operation centers that we can eliminate jobs and 09:21:28
12 become more efficient, but there's still a way to 09:21:30
13 keep most of the people. We call it retain and 09:21:34
14 retrain. 09:21:36
15 We're being faithful to our retain and retrain 09:21:36
16 process in this transition. Our goal is to offer as 09:21:40
17 many opportunities as we can to our effective team 09:21:44
18 members for comparable positions in the new company. 09:21:46
19 Now thanks to technology, we'll keep some corporate 09:21:50
20 functions right here in Minneapolis by using virtual 09:21:54
21 offices. We're going to take our time. Our retain 09:21:56
22 and retrain process allows us to overstaff 09:22:00
23 temporarily in some areas so we can keep good 09:22:02
24 people. We're going to do it right. 09:22:04
25 Second, some have expressed concern that the 09:22:08
19
1 merger will result in a disproportionate share of 09:22:10
2 closing of banking stores in the low to moderate 09:22:14
3 income neighborhoods. That is not true. We expect 09:22:16
4 this merger will not result in any loss of services 09:22:20
5 in any of our markets. The only exception is a few 09:22:22
6 communities in Arizona and Nevada where our banking 09:22:26
7 stores overlap with Wells Fargo, and in those 09:22:28
8 communities, government regulators will require us 09:22:32
9 to sell certain assets to be consistent with federal 09:22:34
10 anti-trust rules. Even in those two states, 09:22:38
11 however, we'll continue to serve the vast majority 09:22:40
12 of those overlapping markets either through our 09:22:42
13 stores or through Wells Fargo's stores. 09:22:46
14 Third is fees. We're in a competitive 09:22:50
15 business. Our fees are and will remain competitive 09:22:52
16 in every market in which we do business. If our 09:22:54
17 customers don't believe they're getting value for 09:22:58
18 our fees, they'll take their business elsewhere. 09:23:00
19 They do have plenty of choices. And if our fees 09:23:02
20 aren't competitive, we'll lose customers. Our goal 09:23:06
21 is to grow and prosper with our communities. We 09:23:08
22 know that to do this, our fees must be competitive. 09:23:12
23 Fourth, the conversion of our computer systems. 09:23:16
24 Now here we're taking the time to do it right. 09:23:18
25 We're beginning every discussion during this 09:23:20
20
1 transition by asking, what's in the best interest of 09:23:22
2 the customer? We're committed to the goal of 09:23:24
3 flawless execution, and if we do have some problems, 09:23:28
4 we'll fix them. Courteous service people will be 09:23:32
5 available to help customers through this transition. 09:23:34
6 Also, both companies are on schedule to meet 09:23:38
7 their year 2000 plan, and the merger will not change 09:23:40
8 this course. We will not combine any systems until 09:23:44
9 we believe we're year 2000 compliant. 09:23:46
10 Fifth, community lending and contributions. 09:23:50
11 Norwest has been and will continue to be, as part of 09:23:52
12 the combined company, a leader in community lending 09:23:56
13 in each of the markets in which we serve. We're 09:24:00
14 proud of our performance. Two years ago Norwest 09:24:02
15 Banks, holding more than three quarters of our 09:24:04
16 banking assets, were rated outstanding for their 09:24:08
17 performance under the Community Reinvestment Act by 09:24:10
18 the office of the controller of the currency, and 09:24:12
19 the remaining office has received satisfactory 09:24:16
20 ratings. Last year we loaned and invested almost 09:24:18
21 $12 billion in qualified community development loans 09:24:22
22 and investments to low and moderate income families, 09:24:26
23 to small businesses or small farms. Our banks in 09:24:28
24 North and South Dakota, Iowa, Colorado, the Twin 09:24:32
25 Cities, greater Minnesota and Nebraska, are the 09:24:36
21
1 number one S.B.A. lenders in their states. Our 09:24:38
2 Arizona bank, for example, is number one among all 09:24:40
3 banks in that state in the percent of loans made to 09:24:44
4 small businesses with gross annual revenues of less 09:24:46
5 than one million dollars. We're the number one ag 09:24:50
6 lender in the Midwest, the Rocky Mountains, and the 09:24:52
7 Southwest, and number three nationally, and will 09:24:56
8 become the number one nationally when we do combine 09:24:58
9 with Wells Fargo. Thirteen and a half percent of 09:25:02
10 Norwest's assets are invested in qualified community 09:25:06
11 development loans and investments. There are few 09:25:10
12 other large financial services companies that can 09:25:12
13 even come close to that performance. 09:25:14
14 Now, our goal is to continue to be a national 09:25:16
15 leader in community lending and development. We 09:25:20
16 want to make sure these loans and investments for 09:25:22
17 where they'll deliver the greatest value that is in 09:25:26
18 the individual local communities. One by one, we've 09:25:30
19 been asked by some to make large, nationwide 09:25:32
20 commitments. Our total lending and investment in 09:25:34
21 any state where we have banks already is large, but 09:25:38
22 it is also local. Our practice has been to set 09:25:40
23 local goals rather than corporate-wide goals because 09:25:44
24 we believe the best community investment decisions 09:25:46
25 are made in local communities by community bankers 09:25:50
22
1 working with local community groups. We believe our 09:25:52
2 philosophy of local community decision-making has 09:25:56
3 served our communities and our customers very well. 09:26:00
4 For example, over the past seven years our community 09:26:04
5 home ownership program has provided more than $670 09:26:06
6 million in mortgage loans to nearly 13,000 low to 09:26:10
7 moderate income home buyers in 15 states. Each of 09:26:14
8 these programs is designed and managed locally. Due 09:26:18
9 to the Norwest Housing Foundation, Norwest Mortgage 09:26:22
10 has pledged $16 1/2 million over the next five
11 years, one of the largest donations ever, to Habitat
12 for Humanity.
13 We've also reached out to underserved 09:26:34
14 communities. One example is the Navajo nation. 09:26:36
15 Between 1994 and 1996, we invested $4 million to 09:26:40
16 build four new banking stores in the Navajo nation, 09:26:42
17 each designed by a Navajo architect. Over 90 09:26:46
18 percent of the staff of these banks are Navajo; so 09:26:50
19 are the consumer managers of all of these stores. 09:26:54
20 Our consumer loans on the Navajo nation tripled in 09:26:56
21 four years to almost $6 million. We created a $22 09:27:00
22 million partnership with Norwest Mortgage and the 09:27:02
23 federal government to build almost 300 homes in the 09:27:04
24 Navajo nation. We also created a program to loan up 09:27:08
25 to $25 hundred each to Navajos with little or no 09:27:10
23
1 credit history who take courses in personal money 09:27:14
2 management. 09:27:18
3 Another example is right here in the Midwest. 09:27:18
4 Norwest Mortgage has launched a program in South 09:27:20
5 Dakota, North Dakota, and Nebraska, to reduce loan 09:27:22
6 approval time for American Indians living on 09:27:24
7 allotted trust land. 09:27:28
8 Six is local decision-making, the role of our 09:27:30
9 corporate headquarters. The decision to move our 09:27:34
10 corporate headquarters was the most difficult 09:27:36
11 decision we had to make. This decision was driven 09:27:38
12 by the need to locate our headquarters closest to 09:27:40
13 the highest concentration of banking deposits, which 09:27:42
14 is in California, by a factor of almost four times 09:27:46
15 that of Minnesota. But I can assure you, the 09:27:48
16 decision to move our corporate headquarters will 09:27:52
17 have absolutely no effect on our commitment to local 09:27:54
18 decision-making in each of our communities. Our 09:27:58
19 business philosophy in the combined company will 09:28:00
20 continue to be based on this principle. Local 09:28:02
21 decision-making is the key to serving our 09:28:06
22 communities effectively because we believe the best 09:28:08
23 decisions are local decisions. Decisions at the 09:28:10
24 local level at Norwest are made by people we trust, 09:28:12
25 people who know our communities better than anyone 09:28:16
24
1 else, the people who live and work in their 09:28:18
2 communities and who have firsthand knowledge of what 09:28:20
3 really matters there. And to a centralized company 09:28:22
4 such as Norwest, what matters is not where our 09:28:28
5 corporate headquarters is but how we serve our 09:28:30
6 customers locally one at a time when they walk into 09:28:32
7 any one of our 4,000 stores, half of which, by the 09:28:36
8 way, are located in smaller communities, many with 09:28:38
9 less than 50,000 people in them. 09:28:40
10 Let me give you an example. We bought United 09:28:44
11 Banks of Colorado in 1991. It was the state's 09:28:46
12 largest bank. We closed its corporate headquarters, 09:28:50
13 but as we do in all of our banking states, we kept 09:28:50
14 local decision-making in each of our Colorado 09:28:54
15 markets. Today we're the number one bank in 09:28:56
16 Colorado, an outstanding corporate citizen, a leader 09:28:58
17 in the community, and the generous supporter of 09:29:00
18 hundreds of nonprofit organizations in that state. 09:29:04
19 The president of Colorado Bank, John Nelson, is 09:29:06
20 chairman of the board of the Denver United Way, and 09:29:08
21 his bank has been named Colorado's best by the 09:29:12
22 Colorado Business Journal. It is only one of five 09:29:14
23 businesses in the nation recognized by the U.S. 09:29:18
24 Labor Department for hiring, training and promoting 09:29:20
25 women and people of color. Here in Minnesota, Jim 09:29:24
25
1 Campbell, who's been with Norwest 34 years, who has 09:29:26
2 run our Twin Cities market for over a decade, is 09:29:28
3 staying here. He and his team will continue to call 09:29:32
4 the shots here. Jim is the chairman of the United 09:29:34
5 Way Campaign for the Minneapolis area this year. 09:29:38
6 These are just two examples of what we see across 09:29:40
7 Norwest. 09:29:42
8 I want to thank you for the opportunity to 09:29:44
9 speak on behalf of Norwest this morning. I also 09:29:46
10 want to thank all of the concerned citizens on both 09:29:48
11 sides of this proposed merger who took the time to 09:29:52
12 attend this meeting today. Thank you. 09:29:54
13
14 CHAIRPERSON SMITH: Questions from the 09:29:58
15 panel?
16
17 MS. AWAI: Thank you. As you know the 09:29:58
18 Board is required to consider the effects of the 09:30:00
19 proposal on the convenience and needs of the 09:30:02
20 communities to be affected. This consideration will 09:30:04
21 take into effect both Wells' and Norwest's record of 09:30:08
22 performance on the Community Reinvestment Act. 09:30:12
23 You've alluded to a best practices approach in 09:30:14
24 determining which types of program will be retained. 09:30:20
25 At this point are you able to identify any of these 09:30:22
26
1 programs? 09:30:24
2 The other question that I had has been raised 09:30:26
3 by many of the written commentors, which we have had 09:30:28
4 an opportunity to review. Those commentors are 09:30:32
5 concerned that the proposed merger may result in a 09:30:34
6 decrease in services in rural communities. Could 09:30:38
7 you address both of those? 09:30:42
8
9 MR. HAZEN: I'll start off with the first 09:30:46
10 one. In terms of best practices, we obviously have 09:30:46
11 exchanged information and looked at the things that 09:30:50
12 both of our companies have done in terms of programs 09:30:52
13 that we can reach, and I, in my comments, spoke 09:30:58
14 specifically, for example, in the fact that in small 09:31:02
15 farming communities, Norwest has done a lot more 09:31:04
16 than Wells Fargo, whereas still Wells Fargo does 09:31:08
17 serve a lot of farming communities throughout its 09:31:12
18 geographic territories. So we will adopt a lot of 09:31:16
19 things that Norwest has been able to do there. 09:31:18
20 I think our small business programs for 09:31:22
21 specific groups which I mentioned, for example women 09:31:26
22 and Latinos and African-Americans, is something that 09:31:30
23 Norwest has been less focused, and we can continue 09:31:36
24 to combine that. Those would be examples of best 09:31:40
25 practices across both companies where we can share 09:31:42
27
1 it in the combined company. 09:31:48
2
3 MR. BILLER: Regarding the question about 09:31:50
4 rural communities, we don't see any reduction in 09:31:50
5 services in rural communities. It's been kind of a 09:31:54
6 hallmark of Norwest to be operating in smaller 09:31:58
7 communities. We think we know how to do that well 09:32:00
8 and profitably, and we would expect to continue to 09:32:02
9 do that. 09:32:04
10
11 CHAIRPERSON SMITH: Any other questions? 09:32:08
12 If not, thank you very much for being here this 09:32:10
13 morning. 09:32:12
14 And we'll move on to Panel No. 1. We're going 09:32:12
15 to start with Mr. Jacobson. 09:33:20
16
17 MR. JACOBSON: Thank you, and good 09:33:36
18 morning. My name is Jim Jacobson, and I'm assistant 09:33:38
19 attorney general appearing this morning on behalf of 09:33:42
20 Attorney General Hubert Humphrey. I'd like to begin 09:33:44
21 today by thanking the Federal Reserve Board for 09:33:48
22 holding this public meeting and for giving our 09:33:50
23 office and other interested parties an opportunity 09:33:52
24 to comment on the proposed merger between Norwest 09:33:54
25 and Wells Fargo. I would also like to thank Norwest 09:33:56
28
1 for its letter to Attorney General Humphrey 09:34:00
2 responding to some of the concerns addressed in our 09:34:04
3 written comments to the Board. Since time is 09:34:06
4 limited, I will get right to the point. 09:34:08
5 I'm here today because the Attorney General's 09:34:12
6 concerned that this proposed merger has the 09:34:14
7 potential to affect Minnesota consumers, small 09:34:16
8 businesses and communities on all three factors 09:34:20
9 considered under the Community Reinvestment Act: 09:34:22
10 lending, investment, and service. Our concerns on 09:34:26
11 these three points are heightened in view of Wells 09:34:28
12 Fargo's record following its recent merger with 09:34:32
13 First Interstate. For example, according to a study 09:34:38
14 conducted by the steelworkers, Wells Fargo closed or 09:34:42
15 sold all of its branches in 129 locations following 09:34:44
16 its merger, thereby reducing services to low income 09:34:46
17 and rural communities. 09:34:52
18 Specifically with regard to customer service, 09:34:52
19 Wells Fargo's post-merger record is not encouraging. 09:34:56
20 According to reports, Wells Fargo encountered 09:34:58
21 extensive service problems following its merger and 09:35:02
22 cut back on certain customer services. For example, 09:35:04
23 according to a recent report in the San Jose 09:35:08
24 newspaper, Wells Fargo discontinued First 09:35:12
25 Interstate's practice of providing free checking to 09:35:16
29
1 seniors and now imposes a $9 per month charge unless 09:35:18
2 seniors maintain a significant minimum balance. For 09:35:24
3 seniors on fixed incomes and limited budgets, $9 per 09:35:26
4 month, or 108 per year, can be a significant burden. 09:35:30
5 The Board indicated in its recent order 09:35:34
6 approving another merger that "the CRA does not 09:35:38
7 impose any limitation on the fees or other charges 09:35:42
8 that banks may assess for their services." We 09:35:46
9 believe, however, that fees and charges for banking 09:35:50
10 and deposit services are a highly important factor 09:35:52
11 that the Board should be taking into account under 09:35:56
12 its CRA analysis. 09:35:58
13 In addition to our concerns about Wells Fargo's 09:36:02
14 CRA record, I would like to acknowledge the concerns 09:36:04
15 raised by ACORN in its submission regarding 09:36:08
16 Norwest's lending practices in low and moderate 09:36:12
17 income communities. The statistics cited by ACORN 09:36:16
18 create additional grounds for concern about the 09:36:20
19 possible effects of a merger which would relocate 09:36:24
20 the headquarters to California. As Congressman 09:36:26
21 Vento points out in his comments, there already is 09:36:30
22 a "growing bi-coastal concentration of financial 09:36:32
23 services companies in the United States." 09:36:36
24 Relocation of Norwest's headquarters to 09:36:40
25 California only exacerbates concerns about its 09:36:42
30
1 lending policies and creates a real concern that low 09:36:46
2 and moderate income communities in Minnesota could 09:36:50
3 be overlooked following the merger. In its 09:36:52
4 application to the Board, Norwest recognizes the 09:36:56
5 importance of its CRA responsibilities and states 09:37:00
6 the merger will provide enhanced lending investment 09:37:02
7 and service to low and moderate income communities. 09:37:06
8 At this point, however, details as to how this will 09:37:08
9 be accomplished are lacking. 09:37:12
10 We recognize and appreciate the fact that the 09:37:14
11 Board already has requested and obtained from 09:37:16
12 Norwest additional information regarding its CRA 09:37:20
13 programs and future plans, and we know that the 09:37:24
14 Board will carefully review this information. 09:37:26
15 However, in light of the concerns set forth above, 09:37:28
16 Attorney General Humphrey also requests that the 09:37:32
17 Board, before it acts on the merger, require Norwest 09:37:34
18 to submit a detailed commitment for reinvestment in 09:37:38
19 small businesses and in low and moderate income 09:37:42
20 communities in Minnesota along the lines of the 09:37:44
21 recent Nations Bank/Bank America plan for $350 09:37:48
22 billion in community lending over ten years. 09:37:52
23 Moreover, Norwest should be required to make a 09:37:56
24 commitment that it will prevent branch closings in 09:37:58
25 low income and rural areas and prevent increases in 09:38:02
31
1 banking fees and decreases in banking services. 09:38:06
2 Finally, the Board should provide the 09:38:08
3 opportunity for public comment on Norwest's 09:38:12
4 commitments on these issues to ensure that the 09:38:14
5 convenience and the needs of the community truly 09:38:18
6 will be satisfied following the proposed merger. 09:38:20
7 Thank you very much for your time this morning. 09:38:24
8
9 CHAIRPERSON SMITH: Thank you. Ms. Clark. 09:38:26
10
11 MS. CLARK: Good morning. And I'd also 09:38:32
12 like to thank you for this opportunity to make some 09:38:34
13 public comments. My name is Karen Clark, and I am 09:38:36
14 state representative for five inner city 09:38:40
15 neighborhoods in south Minneapolis, and also the 09:38:42
16 chair of the Housing -- Housing and Finance 09:38:44
17 Committee of the Minnesota House of Representatives, 09:38:44
18 and also a member of the House Financial 09:38:46
19 Institutions and Insurance Committee. 09:38:50
20 I'm worried that the proposed merger between 09:38:52
21 Norwest and Wells Fargo will negatively affect my 09:38:54
22 constituents in their access to banking and to 09:38:56
23 credit. The Phillips neighborhood, in particular, 09:39:00
24 where I both live and represent, has suffered from a 09:39:02
25 history of neglect by banks. With 17,000 residents, 09:39:04
32
1 we are the largest neighborhood in Minneapolis, and 09:39:10
2 I might add, more populous than 35 of Minnesota's 09:39:12
3 counties, and yet we do not have a single major 09:39:16
4 banking facility located there. What does that tell 09:39:20
5 you about the banking industry's relationship to the 09:39:22
6 lowest income district in the state? 09:39:24
7 As you may know, the State of Minnesota is in 09:39:26
8 the throes of a serious crisis in affordable 09:39:30
9 housing. It's extremely hard to find an affordable 09:39:32
10 unit of housing to rent or even to buy in the many
11 areas throughout the state, but particularly in the 09:39:36
12 inner city where the vacancy rate in rental housing 09:39:38
13 is 1.3 to 1.8 percent. That's critically below the 09:39:42
14 7 percent that's considered a healthy rental market. 09:39:46
15 It's estimated that we are lacking 38,000 units 09:39:50
16 of affordable housing in the metropolitan area 09:39:52
17 alone. The problem is both one of not producing 09:39:56
18 enough new affordable housing and of not preserving 09:39:58
19 what affordable housing we already have.
20 If you would walk with me around my 09:40:02
21 neighborhood, as I recently have been doing a lot 09:40:04
22 lately, you would count at least 200 units of 09:40:06
23 boarded or vacant houses in need of repair. Some of 09:40:10
24 these are scheduled for demolition, but many of 09:40:12
25 these homes could be repaired and purchased by our 09:40:14
33
1 hard-working, low income families that often pay 09:40:16
2 twice as much in rent as they would for a mortgage 09:40:18
3 with renovation rolled in for the same house or 09:40:22
4 similar house. 09:40:24
5 We need Norwest's help to develop better home 09:40:26
6 mortgage products that would be more responsive to 09:40:30
7 the particular credit needs of many of our 09:40:32
8 hard-working, low income families in order to allow 09:40:32
9 that to happen. 09:40:36
10 Last year in the state legislature, we had an 09:40:36
11 opportunity to both help rehabilitate and construct 09:40:38
12 more affordable housing and had an unprecedented 09:40:40
13 alliance with the private sector to do so. We 09:40:44
14 proposed that the state invest $40 million in a 09:40:46
15 combination of state housing and finance agency 09:40:48
16 funds and tax credits, and the private sector, with 09:40:52
17 strong leadership provided by the Minnesota Family 09:40:54
18 Housing Funds, proposed to match that with $20 09:40:58
19 million. Together that would have leveraged another 09:41:00
20 $180 million in private and federal funding for a 09:41:02
21 total of $200 million in housing rehabilitation and 09:41:04
22 new construction dollars for both home ownership and 09:41:08
23 rental housing. What you need to know is the result 09:41:10
24 would have created about 3,000 affordable housing 09:41:14
25 units. Unfortunately, Governor Carlson vetoed all 09:41:16
34
1 but $5 million for construction and rehabilitation.
2 My understanding is that Wells Fargo recently 09:41:20
3 pledged that if the merger is approved, they will 09:41:24
4 lend $5 billion a year in California to minority and 09:41:26
5 low income customers for home mortgages, small 09:41:30
6 businesses, and community development. Before 09:41:32
7 Norwest moves its headquarters out of Minnesota to 09:41:36
8 California, we need them to make a similar 09:41:40
9 commitment to the people of the Phillips 09:41:44
10 neighborhood, the people of Minneapolis and St. 09:41:44
11 Paul, and to all Minnesotans. With their new 09:41:46
12 savings and combined wealth, they should become a 09:41:48
13 major private sector leader to match the public 09:41:50
14 commitment the legislature has already shown it 09:41:52
15 could provide.
16 Norwest and Wells Fargo have announced that 09:41:54
17 this merger will save them $630 million a year on 09:41:58
18 top of the already large profits these banks make. 09:42:02
19 We clearly need them to put more money back into our 09:42:04
20 community in the way that I've mentioned. 09:42:08
21 One other significant approach to increasing 09:42:10
22 home ownership opportunities is that the merged 09:42:14
23 Wells Fargo-Norwest Bank could provide would be to 09:42:14
24 raise the wages of its front-line workers. My 09:42:16
25 information is that the average wages of the workers 09:42:20
35
1 who work in the banking industry are such that they 09:42:22
2 can't afford housing in today's market without 09:42:24
3 public subsidy. For example, a bank teller at 09:42:26
4 Norwest-Wells Fargo would need to earn $12.38 an 09:42:30
5 hour just to be able to afford the fair market rent 09:42:36
6 for a two-bedroom home here, which is $644 a month, 09:42:38
7 or would need to earn $18.98, almost $19 an hour, to 09:42:42
8 rent a four-bedroom housing unit. My understanding 09:42:46
9 is that many of Norwest-Wells Fargo's bank employees 09:42:50
10 don't earn that kind of wage. Raising their wages 09:42:54
11 would be one significant way to help with the 09:42:54
12 housing crisis and community reinvestment. 09:42:58
13 I am concerned that even though Norwest is the 09:43:00
14 largest mortgage company in the country, they are 09:43:02
15 behind other Twin Cities banks in their lending to 09:43:04
16 people of color and in low income neighborhoods like 09:43:08
17 those I represent, according to their 1997 records 09:43:10
18 for conventional and FHA loans. What is Norwest 09:43:16
19 doing to address this? 09:43:16
20 On the House Financial Institutions Committee, 09:43:18
21 I fought for fairer bank fees for low income 09:43:22
22 consumers and senior citizens. Many of my 09:43:24
23 constituents have complained about exorbitant 09:43:26
24 bounced check fees and how hard that is on a fixed 09:43:30
25 income. We've heard testimony in particular from 09:43:32
36
1 many of our military veterans and pensioners. Now 09:43:34
2 Norwest just raised their bank check fee from $21 to 09:43:38
3 $25. Norwest is one of the biggest depositories of 09:43:44
4 state funds. In the 1998 legislature, I authored 09:43:46
5 legislation that in order for a bank to have the 09:43:50
6 privilege of being a state depository for Minnesota, 09:43:50
7 they would have to offer a life-line checking 09:43:54
8 account. Norwest fought this legislation. 09:43:58
9 I'm concerned in general that the Norwest-Wells 09:44:00
10 Fargo merger will make banking even less affordable 09:44:04
11 to low income people. And I understand, as was 09:44:06
12 mentioned earlier, that Wells Fargo stopped honoring 09:44:08
13 the free checking for seniors, and that was 09:44:12
14 described earlier. 09:44:14
15 Since my time is up, I just wanted to say that 09:44:16
16 I really would appreciate some assurances from the 09:44:18
17 Board in addressing these questions. My 09:44:20
18 constituents need to know, and I hope that you need 09:44:24
19 to know before you approve the merger. 09:44:24
20
21 CHAIRPERSON SMITH: Thank you. 09:44:26
22 Mr. Curley. 09:44:28
23
24 MR. CURLEY: Thank you, Ms. Smith. Thank 09:44:30
25 you for this opportunity to testify before the Board 09:44:30
37
1 this morning. I bring greetings from the -- from a 09:44:34
2 nation within a nation, and that is the Navajo 09:44:38
3 nation. My presentation will cover a few 09:44:40
4 experiences the Navajos have had with Norwest Bank, 09:44:44
5 Arizona, but before I move into these experiences, 09:44:50
6 let me express the fact that the Navajo nation is 09:44:52
7 pleased and honored to have four Norwest banks 09:44:54
8 located within the boundaries of our reservation. 09:44:58
9 Furthermore, we are proud to have gainfully employed 09:45:02
10 qualified Navajos within these banks. 09:45:06
11 In late 1993, Norwest Bank of Arizona made 09:45:10
12 commitments over a ten-year period, and there are 09:45:16
13 four commitments that they made that I want to cover 09:45:20
14 this morning. The first one is to open two 09:45:22
15 full-service banking facilities on the Navajo nation 09:45:26
16 and improve the two existing banking locations. 09:45:30
17 Second, to originate 60 million in loans over a 09:45:34
18 ten-year period. Third, an annual contribution of 09:45:38
19 $5,000 to the Navajo Nation College Scholarship 09:45:44
20 Fund. Four, establish a community advisory board 09:45:48
21 comprised of seven members representative of the 09:45:52
22 Navajo nation, and I'm one of those community 09:45:54
23 representatives. 09:45:58
24 Norwest's record against this commitment so far 09:45:58
25 has demonstrated the bank's sincerity and good faith 09:46:04
38
1 concerning the people of the Navajo nation. 09:46:08
2 Norwest's performance on each of the above 09:46:10
3 commitments through June 1998 is as follows. Number 09:46:14
4 one, Norwest Bank-Arizona has invested 4 million, as 09:46:18
5 Mr. Biller has said, to build its four full-service 09:46:24
6 bank branches within the boundaries of the Navajo 09:46:28
7 nation. These offices make up the Norwest Northeast 09:46:30
8 Bank. These branches are located in small towns 09:46:36
9 within the reservation. One is in Window Rock -- I 09:46:40
10 know you can't identify with this -- one is in Tubac 09:46:44
11 City, one is in Kayenta, and one is in Chinle. All 09:46:48
12 four branch managers are of Navajo descent, and the 09:46:54
13 remaining 35 employees all but two are of Navajo 09:46:56
14 decent. 09:47:02
15 Number two, over the first four and a half 09:47:02
16 years of the ten-year lending commitment, Norwest 09:47:04
17 has lent almost $35 million to the Navajo people. 09:47:10
18 And there's another side to this. Norwest has been 09:47:14
19 working directly with the Navajo nation government, 09:47:16
20 and they have lent to one of our enterprises out 09:47:20
21 there called the Navajo Agricultural Products 09:47:24
22 Corporation, a credit line -- or a loan of $7 09:47:28
23 million, a line of credit of $3 million. We also 09:47:34
24 have a Navajo Arts and Crafts Guild up there, and 09:47:38
25 they've loaned them $129,000,998.77. And then to 09:47:42
39
1 the Navajo nation itself, we have two term loans of 09:47:50
2 $1,640,000, $7,500,000. We also have a Navajo 09:48:00
3 Housing Authority, and there is a credit line of 09:48:04
4 $1,395,000. As I mentioned earlier, there's a $60 09:48:10
5 million commitment that Norwest made to the Navajo 09:48:14
6 nation. Part of this $60 million commitment was a 09:48:18
7 commitment of approximately 28 million in mortgage 09:48:20
8 loans on the reservation. 09:48:24
9 In order to help ensure that the mortgage 09:48:26
10 lending goal is achieved, Norwest has obtained the 09:48:28
11 approval offering the HUD 184 Loan Program to the 09:48:32
12 Navajo nation; has already closed seven mortgage 09:48:36
13 loans under the program. 09:48:40
14 Norwest has contributed to the Navajo Nation 09:48:42
15 Scholarship Fund each year, in addition to other 09:48:46
16 charitable contributions, to Navajo nation events 09:48:52
17 and organizations $5,000 plus, each and every year. 09:48:54
18 Number four, Norwest has had an active 09:49:00
19 Community Advisory Board in place within the Navajo 09:49:02
20 nation since 1994, and I've been on that board since 09:49:08
21 1994, the members of which are Navajo business and 09:49:10
22 community leaders. The Community Advisory Board 09:49:14
23 works with the local bank to provide input and to 09:49:16
24 ensure that the bank stays in touch with the local 09:49:20
25 needs and is able to be responsive to those needs. 09:49:24
40
1 Now, in conclusion, and from our perspective of 09:49:28
2 the Navajo nation, this is very critical. Norwest 09:49:32
3 has taken a bold step in banking with the Navajo 09:49:36
4 nation in that it is a pioneer from the financial 09:49:40
5 community which has truly invested in our nation and 09:49:44
6 has respected our sovereignty along this journey of 09:49:48
7 developing our economic basis. Thank you. 09:49:56
8
9 CHAIRPERSON SMITH: Thank you very much. 09:49:58
10 Questions from the panel? Thank you very much for 09:50:00
11 coming this morning. We appreciate hearing from 09:50:04
12 you. And I'll say both for your benefit and for the 09:50:06
13 benefit of subsequent panels that five minutes is a 09:50:10
14 very short time, and please, we do want to have your 09:50:14
15 full statements in the record. So if you have not 09:50:18
16 already given them to us, please leave them with the 09:50:22
17 Federal Reserve staff and we will make sure that 09:50:24
18 they all get into the official transcript. 09:50:28
19 I also will remind -- I don't know whether this 09:50:30
20 is a reminder or I'm saying it for the first time -- 09:50:34
21 if the next panel could come on up -- but we -- our 09:50:38
22 timekeepers will be holding up cards that let the 09:50:42
23 witness know when there is one minute remaining and 09:50:46
24 then another one when the time has expired. As a 09:50:50
25 last resort, if you happen not to be looking up at 09:50:56
41
1 them to get the signals, we do have a little bell 09:51:00
2 that we will ring -- or they will ring. 09:51:02
3 We're going to start with Mr. Bryant. We don't 09:51:24
4 have Mr. Bryant. Mr. Bansen -- Ms. Bansen. 09:51:30
5
6 MS. BANSEN: Good morning, Ms. Smith and 09:51:44
7 Members of the Board. Thank you for the opportunity 09:51:46
8 to be here this morning. My name is Kirsten Bansen. 09:51:48
9 I'm with the Minnesota Housing Partnership. We're a 09:51:52
10 state-wide nonprofit organization, and one of our 09:51:54
11 major roles is to support the nonprofit housing 09:51:58
12 sector in its work, particularly in greater 09:52:02
13 Minnesota. Before expressing our concerns related 09:52:04
14 to the merger, we'd like to make note of the value 09:52:08
15 of Norwest Corporation to Minnesota nonprofits 09:52:12
16 working in the field of affordable housing. 09:52:14
17 Norwest has been a generous and consistent 09:52:16
18 supporter of nonprofit developers and housing 09:52:20
19 agencies in many Minnesota communities. For 09:52:22
20 example, Norwest has committed five years of funding 09:52:24
21 at an interest rate of one percent to 27 Minnesota 09:52:26
22 based affiliates of Habitat for Humanity. Norwest 09:52:30
23 was an initial sponsor and has been a constant 09:52:34
24 supporter of the Home Ownership Center, the
25 organization funding and assisting nonprofit housing
42
1 counseling programs in the Twin Cities. Norwest has 09:52:42
2 also been a major contributor to the Twin Cities and 09:52:44
3 Duluth programs of the Local Initiatives Support 09:52:48
4 Corporation (LISC). This provides technical and 09:52:52
5 financial support to community development 09:52:54
6 corporations operating in these cities. Through its 09:52:56
7 affiliate, the National Equity Fund, Norwest has 09:53:02
8 invested 8 million in nonprofit-sponsored low income 09:53:04
9 housing tax credit projects. Norwest was one of the 09:53:10
10 founding members and is a continuing supporter of 09:53:10
11 the Greater Minneapolis Housing Corporation, a 09:53:14
12 nonprofit innovator of homeowner assistance 09:53:16
13 programs. 09:53:20
14 And, finally, Norwest has been a major 09:53:20
15 contributor to nonprofit housing agencies in smaller 09:53:22
16 metropolitan communities, such as Rochester, where 09:53:26
17 it was the first significant funder of the Community 09:53:28
18 Housing Partnership, a development agency serving 09:53:32
19 two southeastern Minnesota counties. 09:53:34
20 In addition to the direct financial support 09:53:36
21 provided to nonprofit housing agencies, Norwest 09:53:38
22 indirectly supports the work of these agencies in 09:53:42
23 two important ways. First, it has been a major 09:53:44
24 supplier of capital to the State Housing Finance 09:53:46
25 Agency, whose programs are utilized by nonprofits 09:53:50
43
1 across the state. 09:53:54
2 Second, and most importantly, Norwest, through 09:53:54
3 its many branches in Minnesota, particularly in 09:53:56
4 smaller towns, provides a source of community 09:54:00
5 leadership. Frequently Norwest branch managers and 09:54:02
6 loan officers contribute their financial expertise 09:54:06
7 and advocate on behalf of community development 09:54:10
8 projects, thereby enabling nonprofit agencies to 09:54:12
9 make Minnesota communities more viable. 09:54:16
10 It is because Norwest has been so significant 09:54:18
11 to this industry in Minnesota that we ask for a 09:54:22
12 concrete assurance that the merged corporation, once 09:54:24
13 headquartered in California, will not forget its 09:54:26
14 reinvestment obligations in this state. We agree 09:54:30
15 with Minnesota's U.S. Representative Bruce Vento 09:54:32
16 that there's a risk that the bi-coastal 09:54:34
17 concentrations of financial services may lead to 09:54:38
18 diminished community involvement and investment in 09:54:42
19 the nation's heartland. 09:54:44
20 In the September 10 letter to the Federal 09:54:44
21 Reserve Bank of San Francisco, Stanley Stroup, the 09:54:50
22 Executive Vice President and General Counsel of the 09:54:50
23 Norwest Corporation, addressed many of our concerns. 09:54:52
24 Mr. Stroup wrote that, post-merger, the strong ties 09:54:56
25 to Minnesota will remain, branch locations will not 09:55:00
44
1 be changed, and the bank will remain a member of the 09:55:02
2 Des Moine Federal Home Loan Bank. It is vital to 09:55:06
3 Minnesota that the merged institution follow through 09:55:08
4 on Mr. Stroup's assurances. 09:55:10
5 In addition to what he wrote, however, we 09:55:12
6 believe that it is equally important that as a part 09:55:14
7 of this merger, Wells-Norwest, the new Wells Fargo, 09:55:16
8 make a commitment to an investment pledged to 09:55:20
9 Minnesota and other states in its service region 09:55:22
10 that is similar to the multi-billion dollar 09:55:26
11 commitment that was made to California. The new 09:55:28
12 Norwest should make parallel pledges to these states 09:55:30
13 proportionate to that one made in California based 09:55:34
14 on the relative amounts of deposits obtained by the 09:55:36
15 bank from the respective states. 09:55:40
16 In conclusion, we appreciate what has been done 09:55:42
17 and what has been promised by Norwest Corporation 09:55:44
18 and Wells Fargo & Company, but we also believe that 09:55:46
19 the risks are very high for our state. Minnesota is 09:55:50
20 losing one of its most important corporate 09:55:52
21 headquarters. In addition to the general 09:55:56
22 commitments made by these banks to Minnesota, 09:55:58
23 Norwest-Wells should identify a dollar amount that 09:56:00
24 they can commit that will enable Minnesota and like 09:56:04
25 states to meet their needs for community 09:56:08
45
1 reinvestment. 09:56:10
2 Thank you for your time. 09:56:10
3
4 CHAIRPERSON SMITH: Thank you very much. 09:56:12
5 We'll go next to Mr. Bryant. 09:56:12
6
7 MR. BRYANT: Good morning. 09:56:14
8
9 CHAIRPERSON SMITH: Good morning.
10
11 MR. BRYANT: In an effort to keep my 09:56:16
12 remarks within the lines of your time line, I'm 09:56:16
13 going to abridge my remarks. The full text of the 09:56:20
14 testimony is available outside for anyone who wants 09:56:24
15 a copy. 09:56:26
16 Allow me to begin my prepared remarks by 09:56:26
17 reminding us all that CRA is not a government 09:56:30
18 mandated corporate give-away program or that 09:56:34
19 minority thing that a company does, nor the 09:56:38
20 loss-leader activity a financial institution engages 09:56:40
21 in in order to simply continue to conduct its normal 09:56:44
22 or traditional business practices. In short, CRA 09:56:48
23 simply means new markets. 09:56:52
24 Former U.S. Comptroller Ludwig often referred 09:56:56
25 to the democratization of credit America as it 09:56:56
46
1 relates to the historic evolution of credit 09:56:58
2 availability and access to credit in this country. 09:57:02
3 Bless you. In fact, in the year 1901, most 09:57:04
4 middle-aged, middle income Caucasians -- arguably 09:57:10
5 the underwriting standard that modern day criteria 09:57:12
6 has been fashioned around -- could not themselves 09:57:14
7 obtain credit, precisely because the only credit 09:57:16
8 available in 1901 was a commercial credit. 09:57:20
9 Continuing along this line of thought, one of the 09:57:22
10 safest and most acceptable forms of credit 09:57:26
11 collateral during this time was in fact inventory, 09:57:28
12 one of the least perceived safe forms of collateral 09:57:30
13 today. The point here is that CRA is not about some 09:57:32
14 new form of social subsidy, but a serious new, 09:57:36
15 substantial and permanent evolution in the 09:57:40
16 democratization of credit process. Low to moderate 09:57:42
17 income communities are growing segments of our 09:57:44
18 larger national economy and community, and, as such, 09:57:46
19 should represent a substantial component of any 09:57:50
20 bank's future business strategy. 09:57:52
21 Turning my attention to this new merger 09:57:54
22 proposal, let me say that the company I know best 09:57:56
23 here is Wells Fargo & Company, or as we say in 09:57:58
24 California, Wells Fargo. It is, of course, no 09:58:02
25 secret that Wells Fargo has moved aggressively away 09:58:04
47
1 from their traditional branch network that most of 09:58:08
2 us grew up on, and they have likewise moved toward 09:58:10
3 the technology and information based system on 09:58:12
4 banking. It is also fairly common within the bank 09:58:16
5 that I have sparred with officials from Wells Fargo 09:58:18
6 on occasion concerning their inner city strategy. 09:58:20
7 This said, from a business perspective, I happen to 09:58:24
8 believe that the bank's overall strategy is a smart 09:58:28
9 one. Branch banking as we know it is a memory of 09:58:32
10 the past, but our communities are not. 09:58:36
11 Wells Fargo's general success with this new
12 approach to banking over the past few years is 09:58:40
13 precisely why Wells Fargo loves their stock. The 09:58:40
14 downside to this general strategy, unfortunately, is 09:58:44
15 that relationship based communities were less than 09:58:46
16 thrilled. Wall Street is a left brain thinker, and 09:58:48
17 communities tend to be more contextual in their 09:58:52
18 understanding, or as I would call right brain 09:58:54
19 thinkers. In short, communities were saying we want 09:58:56
20 high-touch, too, Wells Fargo. 09:58:58
21 To the bank's credit, in time they began to 09:59:00
22 realize there was a true win-win business strategy 09:59:04
23 here in marrying high tech and high touch. Our 09:59:06
24 recent $1.4 million partnership between Operation 09:59:10
25 HOPE and Wells Fargo to build and operate an 09:59:12
48
1 Operation HOPE banking center in the low income 09:59:16
2 Watts/Willowbrook area of Los Angeles, is in our 09:59:18
3 opinion one of the many examples of how the bank has 09:59:20
4 successfully moved to bridge the gap. This new 09:59:22
5 banking center, like the two we currently operate in 09:59:26
6 black and Latino communities, will focus on economic 09:59:28
7 education, borrower readiness, and credit 09:59:32
8 availability, in that order. Our $32 million in 09:59:34
9 performing loans and investments in over 20,000 09:59:36
10 adults educated in economic education suggest it's a 09:59:38
11 strategy that works. 09:59:42
12 We are pleased that Wells Fargo was able to see 09:59:42
13 the bigger picture, and then adapt their business 09:59:46
14 model to include this make-sense strategy. 09:59:48
15 I also want to note, for the record, we do 09:59:50
16 business with people and not companies. And without 09:59:52
17 a doubt, I know that one of the reasons that the 09:59:54
18 bank decided to ultimately move on this proposal and 09:59:56
19 others like it was the organizational focus and 09:59:58
20 leadership provided by the Wells Fargo Community 10:00:02
21 Development Group and the Wells Fargo Foundation. 10:00:04
22 Our communities know these people, and, more 10:00:06
23 importantly, they know and understand our 10:00:10
24 communities. It's called mutual respect. 10:00:10
25 Yes, Norwest is known for its successful high 10:00:14
49
1 touch community banking approach to doing business, 10:00:18
2 but with great respect, generalized strategies and 10:00:20
3 approaches used successfully in the past in other 10:00:22
4 regions of the country simply will not fly in 10:00:26
5 California, which I might remind everyone is the 10:00:28
6 largest banking market in the continental United 10:00:30
7 States. Just like the City of Minneapolis requires 10:00:34
8 that all new buildings in downtown Minneapolis 10:00:34
9 connect to neighboring businesses by way of a 10:00:38
10 secondary walkway called a skyway, community 10:00:40
11 development organizations in California and other 10:00:42
12 cutting edge regions have a different type of 10:00:44
13 relationship with their banks. 10:00:48
14 As an example, you have the $18 million Urban 10:00:48
15 League in Los Angeles, or the 17,000 member First 10:00:52
16 A.M.E. Church, with 180 full-time employees, or 10:00:56
17 TELACU with $200 million in annual revenues, or the 10:01:00
18 Church of God in Christ was building a $50 million 10:01:02
19 cathedral in South Central, creating a hundred 10:01:08
20 million dollars in spin-off economic activity, or 10:01:08
21 take Operation HOPE, with three quarters of a 10:01:10
22 million dollars on deposit at any time in a bank in 10:01:14
23 Los Angeles. These organizations will not respond 10:01:18
24 well if their local decision-making capacity is 10:01:20
25 taken away. 10:01:24
50
1 I did hear the bell. Thank you. 10:01:24
2
3 CHAIRPERSON SMITH: By all means, make 10:01:30
4 sure that we have a copy of your full statement and 10:01:32
5 we'll enter it into the record. 10:01:34
6
7 MR. BRYANT: Seventy-five copies are 10:01:44
8 available in your lobby.
9
10 CHAIRPERSON SMITH: Thank you very much.
11 We'll go to Ms. Haines.
12
13 MS. HAINES: Thank you. I'd like to thank 10:01:46
14 the Federal Reserve Board for this opportunity to 10:01:46
15 speak. My name is Anne Haines Yatskowitz, and I'm 10:01:48
16 the president and CEO of ACCION New Mexico, which is 10:01:52
17 an Albuquerque based micro-lending organization. I 10:01:54
18 wish to comment today on the positive impact that 10:01:58
19 support from both Norwest Bank and Wells Fargo Bank 10:02:02
20 has had on ACCION New Mexico's ability to serve 10:02:06
21 disenfranchised and emerging entrepreneurs and also 10:02:12
22 to strengthen the economies of Albuquerque's low and 10:02:16
23 moderate income neighborhoods. 10:02:20
24 I'd like to first begin by giving you just a 10:02:20
25 little background about ACCION New Mexico. ACCION 10:02:24
51
1 New Mexico was created four and a half years ago in 10:02:28
2 response to the escalating poverty conditions in New 10:02:32
3 Mexico. And, unfortunately, New Mexico is the state 10:02:36
4 now that has the highest poverty rate in the 10:02:38
5 country. An associate of ACCION International, 10:02:42
6 ACCION New Mexico is a local private nonprofit 10:02:48
7 organization that extends a life-line to very small 10:02:50
8 or micro businesses in New Mexico by offering tools 10:02:52
9 of economic self-reliance; namely, business credit 10:02:58
10 and business training. It is these hard-working 10:03:02
11 entrepreneurs, home-based mechanics, seamstresses, 10:03:08
12 artists, woodworkers and others, who make up a 10:03:12
13 growing sector of self-employed families and 10:03:14
14 individuals in New Mexico. 10:03:18
15 And because of a lack of collateral, credit 10:03:20
16 history or the need for only a small loan amount, 10:03:24
17 many emerging entrepreneurs do not have access to 10:03:28
18 business credit from traditional sources. Yet, 10:03:34
19 capital is an essential ingredient in helping boost 10:03:36
20 a small business from subsistence to 10:03:42
21 self-sufficiency and to success. 10:03:44
22 Today ACCION New Mexico, since we started 10:03:48
23 lending about four and a half years ago, has made 10:03:52
24 over 760 micro loans of an average size of $12 10:03:54
25 hundred to over 400 businesses in the Albuquerque 10:04:00
52
1 area. The organization has written off less than 10:04:04
2 two percent of the slightly less than $1 million 10:04:06
3 that we've lent. Nearly two thirds of our client 10:04:10
4 base is minority, and the median yearly household 10:04:14
5 income of our borrowers is about $21,000, which is 10:04:18
6 substantially lower than the area median income for 10:04:24
7 Albuquerque, which is approximately $33,000. 10:04:28
8 By June of 1996, ACCION New Mexico had enough 10:04:32
9 multiple loan clients to analyze certain changes 10:04:36
10 entrepreneurs experienced over time. And in a 10:04:40
11 sample size of some of our clients who had received 10:04:44
12 at least three consecutive loans, we have found an 10:04:46
13 average increase of 71 percent in business assets, 10:04:50
14 61 percent in business revenues, 87 percent in 10:04:54
15 take-home income from the business, 21 percent in 10:05:00
16 overall household income, and 21 percent in 10:05:04
17 full-time jobs. 10:05:06
18 The reason I wanted to touch on some of these 10:05:08
19 statistics is because I do believe that we would not 10:05:12
20 have achieved some of these successes and already 10:05:16
21 seen some of these economic changes had it not been 10:05:20
22 from the tremendous support that both Norwest and 10:05:24
23 Wells Fargo have provided to ACCION New Mexico. 10:05:28
24 When ACCION New Mexico was first created, 10:05:32
25 Norwest was one of the few banks that stepped 10:05:36
53
1 forward in the Albuquerque area to support the 10:05:38
2 program, and Norwest supported us in a number of 10:05:42
3 different ways. One way was by providing office 10:05:46
4 space and furniture, leadership support, strategic 10:05:50
5 thinking, marketing support, and a line of credit to 10:05:54
6 enable us to launch the program. We used the line 10:05:58
7 of credit to turn around and make loans to our 10:06:02
8 borrowers. Norwest has provided considerable fund 10:06:06
9 raising support by offering challenge grants which 10:06:10
10 have enabled us to catalyze and challenge the 10:06:14
11 surrounding community and business community to 10:06:18
12 support the program as well. 10:06:20
13 Last year Wells Fargo made a $200,000 10:06:22
14 investment in ACCION New Mexico. Wells Fargo did 10:06:26
15 not have a very visible presence at the time in 10:06:30
16 Albuquerque, there were no branches in Albuquerque, 10:06:34
17 and yet Wells Fargo took a very proactive role in 10:06:38
18 supporting our program. And with a $200,000 10:06:42
19 investment, which was a loan, Wells Fargo also 10:06:44
20 helped change the playing field. 10:06:48
21 My time is up. I would like to say that I do 10:06:52
22 not think this program would exist without the 10:06:54
23 support of both banks. Thank you. 10:06:58
24
25 CHAIRPERSON SMITH: Thank you very much. 10:07:00
54
1 Mr. Rainey. 10:07:02
2
3 MR. RAINEY: Yes. Thank you. My name is 10:07:04
4 Clive Rainey, and I'm here to represent Willard 10:07:06
5 Fuller, the founder and president of Habitat for
6 Humanity. As Mr. Biller has already testified, 10:07:10
7 Norwest has a tremendous leadership commitment to 10:07:14
8 Habitat for Humanity, and I'm simply going to read 10:07:18
9 from Mr. Fuller's letter to Ms. Levert. 10:07:18
10 I'm pleased to write you regarding the 10:07:22
11 partnership between Norwest Mortgage and Habitat for 10:07:24
12 Humanity. This partnership reflects real leadership 10:07:26
13 I know as (inaudible), most significantly through 10:07:30
14 the partnership in the Rebuilding Our Communities 10:07:32
15 Campaign. The Rebuilding Our Communities Campaign 10:07:34
16 is an effort to raise 250 million of additional 10:07:36
17 money for Habitat's work by our 25th anniversary in 10:07:40
18 September of 2001. Norwest committed in October of 10:07:44
19 1996 to be the lead sponsor in this effort. This 10:07:48
20 commitment of 16.5 million over five years includes 10:07:52
21 seasonal construction loans of $2 million interest 10:07:56
22 free each year for materials. 10:07:58
23 Norwest's contribution here has encouraged 10:08:00
24 others. For example, Fannie Mae has matched this 10:08:02
25 two million seasonal construction loan for the past 10:08:06
55
1 two years, investments in home loan pools of a 10:08:08
2 million dollars annually at nominal or no interest 10:08:12
3 to accelerate more construction. 10:08:14
4 Norwest is also recruiting other lenders to 10:08:16
5 come in so that the total should exceed $1 million a 10:08:20
6 year, matching Norwest employee contributions to 10:08:22
7 Habitat with a guaranteed minimum of $100,000 a 10:08:26
8 year. Site participation grants to Habitat 10:08:28
9 affiliates in cities where ten or more of Norwest 10:08:34
10 corporation's 53,000 employees volunteer, these 10:08:36
11 grants, a minimum of $100,000 a year, will fund 10:08:40
12 volunteer Habitat projects. Grants of up to $2,000 10:08:44
13 to help Habitat homeowners with closing and related 10:08:48
14 costs, the minimum is a hundred thousand dollars per 10:08:52
15 year. 10:08:54
16 As you can see, leadership on the part of 10:08:54
17 Norwest has not been limited to their own 10:08:56
18 commitment. They have encouraged and challenged 10:08:58
19 other members of their industry to match their 10:09:00
20 efforts. Norwest Mortgage has demonstrated 10:09:02
21 exemplary corporate citizenship and Habitat for 10:09:06
22 Humanity is proud to call them our partners. 10:09:10
23 Habitat for Humanity International is a 10:09:14
24 nonprofit, ecumenical, Christian housing 10:09:14
25 organization dedicated to the elimination of 10:09:16
56
1 substandard housing. Habitat works in partnership 10:09:18
2 with people in need to build simple, decent houses 10:09:20
3 that are sold at no profit through no interest 10:09:22
4 mortgages. 10:09:26
5 Founded in 1976 in Americus, Georgia, Habitat 10:09:26
6 has more than 1,450 U.S. affiliates, and together 10:09:30
7 with affiliates in 59 other countries, has built 10:09:32
8 over 70,000 homes. Thank you very much. 10:09:36
9
10 CHAIRPERSON SMITH: Thank you. We'll go 10:09:38
11 to Ms. Saweuyer-Parks. 10:09:40
12
13 MS. SAWEUYER-PARKS: Distinguished members 10:09:46
14 and staff of the Federal Reserve, good morning. I'm 10:09:48
15 Deborah Saweuyer-Parks, CEO of the Oregon 10:09:52
16 Corporation for Affordable Housing in Portland, 10:09:56
17 Oregon. We are a nonprofit syndicator of federal 10:09:58
18 low-income housing tax credits, and invest 10:10:02
19 exclusively in affordable housing throughout the 10:10:08
20 State of Oregon, and now in Washington State and 10:10:10
21 soon to enter into Idaho. 10:10:12
22 I am here this morning to testify in support of 10:10:14
23 the merger between Norwest Corporation and Wells 10:10:18
24 Fargo & Company. My remarks are designed to 10:10:22
25 illustrate what can be done when a local nonprofit 10:10:26
57
1 corporation partners with a large financial 10:10:30
2 institution new to the Oregon market. Specifically, 10:10:34
3 I'm talking about Wells Fargo & Company. 10:10:38
4 I founded OCAH five years ago. Our aim was to 10:10:42
5 raise capital from Oregon's corporate and financial 10:10:46
6 community to reinvestment that capital in 10:10:50
7 multi-family housing throughout the state, initially 10:10:52
8 the State of Oregon. It was our hope to demonstrate 10:10:54
9 that it was realistic to merge social objectives 10:10:58
10 with business goals and to create an opportunity 10:11:02
11 that was worthwhile for both the public and private 10:11:06
12 sectors. Oregon's economy was quite robust, so we 10:11:08
13 at OCAH planned to help eliminate a social need in 10:11:14
14 our state, which was to finance a portion of the 10:11:18
15 projected 50,000 affordable housing units needed to 10:11:22
16 house over 125,000 working poor and their families. 10:11:26
17 The vehicle we created was the Oregon Equity 10:11:34
18 Fund, a limited partnership designed to provide 10:11:36
19 equity to developers of affordable housing. I 10:11:40
20 raised $20 million in Fund I -- for Fund I. The 10:11:46
21 first -- no. Because of time, I crossed so much of 10:11:52
22 this out, so I'm having trouble following. 10:11:54
23 Since Fund I was so successful, we proceeded 10:11:56
24 with Fund II. Raising equity this time was 10:12:02
25 extremely difficult. Former Fund I commercial banks 10:12:04
58
1 created their own hundred million dollar plus funds 10:12:08
2 and left OCAH, or either they merged with other 10:12:12
3 financial institutions and retreated from their 10:12:16
4 local community promises. 10:12:20
5 I had some trepidation approaching Wells Fargo, 10:12:26
6 but at the urgence of a friend, I called Karen 10:12:30
7 Wegman. Karen, in turn, referred me to another 10:12:32
8 Wells Fargo staffer, and much like John said a few 10:12:38
9 minutes ago, it's about the people at Wells Fargo 10:12:42
10 that makes the difference in our business. Six 10:12:44
11 weeks after that call, I had a $4 million commitment 10:12:48
12 from Wells Fargo. One year later I approached Wells 10:12:52
13 Fargo again for Fund III, asked for $10 million. It 10:12:58
14 was not only granted -- or not granted, invested, 10:13:02
15 but they also agreed to provide me with a $10 10:13:04
16 million line of credit for the partnership. 10:13:08
17 For my Board and those of us who manage the 10:13:12
18 fund, this level of commitment that Wells Fargo 10:13:14
19 demonstrated was unparalleled. 10:13:18
20 The following are a few examples of the results 10:13:24
21 that were achieved because of Wells Fargo's 10:13:26
22 investment in the Oregon Equity Fund. In Medford, 10:13:30
23 southern Oregon, in a rural community, we developed 10:13:34
24 80 units of affordable housing for families, one, 10:13:38
25 two, three and four-bedroom units, and four bedrooms 10:13:42
59
1 are extremely difficult to locate. 10:13:46
2 In far eastern Oregon, Sierra Vista, largely an 10:13:48
3 Hispanic community, we developed housing for farm 10:13:54
4 workers. 10:13:56
5 In Cannon Beach, Twelfth Avenue Terrace -- I'm 10:13:56
6 speeding up because I saw that minute -- there were 10:14:02
7 housing projects developed, in Bend, the Bill Healy 10:14:04
8 Family Center for previously homeless families who 10:14:08
9 are gainfully employed, in Eugene and other 10:14:12
10 communities throughout our state. 10:14:14
11 Wells Fargo has done much in Oregon. Through 10:14:18
12 its foundation, countless grants were given, 600,000 10:14:22
13 to Portland Public Schools, a hundred thousand 10:14:28
14 dollars to Umpqua Community Development, over 10:14:30
15 400,000 to United Way, and a hundred thousand 10:14:34
16 dollars to Albina Community Bank. It was the only 10:14:36
17 bank in the state of Oregon that did not -- that 10:14:38
18 received an investment from a large commercial bank, 10:14:42
19 and it was established to serve a population 10:14:46
20 formerly denied access to capital for homeowners or 10:14:48
21 small businesses. 10:14:54
22 My time's up. Thank you very much. I did 10:14:54
23 prepare a record of my comments for the record. 10:14:56
24
25 CHAIRPERSON SMITH: Thank you, and we'll 10:15:00
60
1 go to Ms. Wheeler. 10:15:02
2
3 MS. WHEELER: Thank you, and thank you for 10:15:04
4 this opportunity to be here as well. My name is 10:15:04
5 Suzy Wheeler, and I work for an organization called
6 Consumer Credit Counseling Services of Minnesota. 10:15:10
7 We're a private nonprofit agency. We have about six 10:15:10
8 offices around the metro area. We provide four main 10:15:14
9 programs: budget counseling, debt management, 10:15:18
10 housing counseling, and community education. 10:15:20
11 We've been very pleased with the relationship 10:15:22
12 we've had with Norwest Bank over the last few years, 10:15:26
13 especially in the area of community education. We 10:15:28
14 find that there's much a very big need for education 10:15:32
15 regarding money management out in the community. 10:15:36
16 I'm an education coordinator, and I spend all 10:15:38
17 my time in the community talking to people about 10:15:40
18 managing their money, how to manage it better, how 10:15:42
19 to take care of credit problems. I talk to high 10:15:46
20 school kids about using credit wisely, and that's 10:15:48
21 starting to become a very needed issue because high 10:15:52
22 school kids are starting to get credit cards, and 10:15:54
23 that's very scary. So as part of our mission at the 10:15:56
24 agency is we try to go out and provide education to 10:16:00
25 the community about money management. 10:16:02
61
1 Our relationship with Norwest Bank has 10:16:04
2 primarily been with community education focusing on 10:16:08
3 bringing education into places where they have not 10:16:10
4 had the opportunity to get education about money 10:16:14
5 management. One particular example is my work with 10:16:16
6 the treatment centers in the cities, the Twin 10:16:18
7 Cities. One particular organization comes to mind 10:16:22
8 is the Wayside House, and this is a treatment 10:16:24
9 facility for women for drugs and alcohol. And what 10:16:26
10 we've developed is a four-part workshop on money 10:16:28
11 management. And I go out into the center, and the 10:16:32
12 Norwest bankers join me as well, and we provide 10:16:36
13 topics on money management so that these women can 10:16:38
14 get their financial life under control before they 10:16:42
15 actually leave the center. So we discuss topics 10:16:44
16 such as basic banking, credit, money management, 10:16:48
17 housing issues, as well as student loan default. So 10:16:50
18 we spend a lot of time with the women, and we've had 10:16:54
19 a lot of support with Norwest Bank to provide the 10:16:58
20 information to these individuals so when they leave 10:17:00
21 the center, at least they have a pretty good idea on 10:17:02
22 how to tackle some of these issues that come up. So 10:17:04
23 we've been very pleased and we hope to see that 10:17:08
24 relationship continue. 10:17:10
25 Other organizations that we're very involved 10:17:10
62
1 with, we also do the same thing at a men's treatment 10:17:12
2 center called the Eden Programs, and we do the same 10:17:16
3 sort of thing: we go out and provide the education 10:17:18
4 so that these folks at least have a better handle on 10:17:22
5 how to start tackling some of the financial issues 10:17:24
6 that they encounter prior to going into treatment, 10:17:26
7 as well as trying to get things under control so 10:17:30
8 that when they get out of treatment they can start 10:17:30
9 rebuilding their life, find an apartment, try to 10:17:34
10 deal with credit problems that come up, and start to 10:17:36
11 get things under control. 10:17:38
12 So we have been very, very excited, and the 10:17:40
13 people are very positive as far as how they have 10:17:42
14 been responding to the program because this is 10:17:44
15 information that they have not received other 10:17:46
16 places. So this is something we've been very, very 10:17:48
17 pleased with. 10:17:50
18 Other organizations that we go out to, we also 10:17:52
19 go to visit a -- been to a program called the Step 10:17:54
20 Program, which is a self-sufficiency program in St. 10:17:58
21 Paul, and this is a program for people that are 10:18:00
22 living in public housing that need to get things 10:18:02
23 under control so they can become self-sufficient. 10:18:04
24 We go out and talk to the folks about credit. 10:18:06
25 The Norwest bankers have been very positive. 10:18:08
63
1 We usually have a Norwest banker join us at these 10:18:12
2 workshops, and it really helps for the participants 10:18:16
3 to be able to talk to a banker and actually feel 10:18:18
4 like they can connect a person at the bank. They 10:18:22
5 get the business card of the banker; then they know 10:18:24
6 that they can go down and talk to that particular 10:18:28
7 banker. It takes a lot of the intimidation out, and 10:18:30
8 we've found that that really works well. So that 10:18:34
9 way they can say okay, I'm going to go down and talk 10:18:36
10 to this banker and deal with my issues that I've had 10:18:38
11 with my checking account. I've had checking account 10:18:42
12 problems in the past, maybe I've bounced a few 10:18:44
13 checks, but what happens is is sometimes there's a 10:18:46
14 barrier that gets developed and people don't -- they 10:18:48
15 don't feel comfortable actually calling the bank up 10:18:50
16 because they're embarrassed. So what we've done is 10:18:54
17 developed information so that people -- take the -- 10:18:56
18 the intimidation is gone, they can feel like they 10:19:00
19 can now go down and talk to the banker, and feel 10:19:02
20 like okay, now I can address some problems because I 10:19:04
21 feel a lot more comfortable: I've actually met the 10:19:08
22 banker. So we really found that that's been 10:19:10
23 successful, and we hope to see that kind of 10:19:12
24 relationship continue. Thank you. 10:19:16
25
64
1 CHAIRPERSON SMITH: Thank you. Any 10:19:16
2 questions? If not, we had tentatively scheduled a 10:19:18
3 break, but if we have the witnesses for the next 10:19:20
4 panel, then I'd like to go forward with Panel No. 3. 10:19:26
5 We're going to start with Ms. Erickson. 10:20:48
6
7 MS. ERICKSON: Thank you. I appreciate 10:20:54
8 the opportunity to speak with you today. I think 10:20:54
9 it's unfortunate that the meeting is only a daytime 10:20:58
10 meeting. We do have an awful lot of low income 10:21:02
11 people who are affected by banking activities and 10:21:04
12 mergers such as this. It would have been nice if we 10:21:08
13 could have had potentially more participation from 10:21:12
14 them with later hours. 10:21:14
15 This merger will create the seventh largest 10:21:18
16 bank in the country. They will have banking 10:21:22
17 operations in 21 states, and yet this is the only 10:21:24
18 hearing. I frankly wonder, where are the anti-trust 10:21:30
19 forces in this? I see a terrible, terrible trend in 10:21:34
20 this country of mergers in the consolidation of 10:21:38
21 power over all sorts of very basic needs for people, 10:21:42
22 banking being only one of them. Medicine, food, 10:21:46
23 communications, everything is becoming very 10:21:48
24 consolidated and it's to the detriment of the 10:21:52
25 people. 10:21:54
65
1 We have a number of members who are not able to 10:21:56
2 be with us here today, representatives from Chicago, 10:21:58
3 from Denver, Colorado, our national president Maude 10:22:02
4 Hearn, from Boston. The airline pilots' strike has 10:22:10
5 prevented their making it here; however, I would 10:22:14
6 like to say that we support the airline pilots' 10:22:16
7 strike in their principles of having their 10:22:20
8 concessions made back and compensated for now that 10:22:22
9 the company is thriving. 10:22:26
10 Mega-mergers destroy competition and foster 10:22:28
11 collusion and price fixing in an endless spiral 10:22:30
12 upwards. This is great for greedy shareholders 10:22:32
13 salivating over stock market gains. Their gains are 10:22:38
14 consumers' losses. Is this rewardable behavior? 10:22:40
15 Someone mentioned earlier competitive fees. 10:22:46
16 That's kind of an odd phrase, I think. What is a 10:22:50
17 competitive fee? Now to me as a consumer, a person 10:22:52
18 who has to pay fees, I think a competitive fee is a 10:22:56
19 low fee, and when a bounced check costs $2.68 for 10:23:00
20 the bank, I think a competitive fee for bounced 10:23:06
21 checks would be five bucks -- that's a hundred 10:23:08
22 percent almost profit -- but the bounced check fees 10:23:10
23 keep going up and up. What's this competitive 10:23:16
24 market for, is it consumers or is it shareholders? 10:23:20
25 Who profits from these activities? 10:23:24
66
1 The Federal Reserve has a responsibility to 10:23:26
2 protect the American people, to stop the unchecked 10:23:30
3 and unconditional urge to merge. While HR-10 is 10:23:32
4 giving banks the freedom to diversify and therefore 10:23:38
5 control even more of our economic activities, 10:23:40
6 mergers at the same time remove diversity of choice 10:23:44
7 from consumers. If that's not enough, they also 10:23:48
8 have attacked credit unions, trying to regain what 10:23:52
9 paltry six percent of the market they control. 10:23:56
10 We demand that their performance improve in our 10:24:00
11 neighborhoods. Norwest is the largest mortgage 10:24:04
12 company in the United States, and yet they are 10:24:06
13 behind the national average in their loans to people 10:24:08
14 of color. To African-Americans, Asians, Latinos, 10:24:10
15 and Native Americans, Norwest made a smaller 10:24:14
16 percentage of its loans than the national averages. 10:24:18
17 Almost 16 percent of all home loans made by all 10:24:22
18 lenders in the country were made to people of color, 10:24:24
19 but Norwest made only 10.5 percent of their loans to 10:24:26
20 people of color, way below the national average. 10:24:32
21 Even in the Twin Cities, where Norwest Corporation's 10:24:34
22 headquartered and where they are by far the largest 10:24:36
23 mortgage lender, they are below the average of all 10:24:40
24 lenders. Norwest made a similar percentage of loans 10:24:44
25 to people of color than the average of all other 10:24:48
67
1 lenders in the cities. 10:24:50
2 When we look at where Norwest made their loans, 10:24:52
3 they are once again below the average of all Twin 10:24:54
4 Cities lenders in the percentages of their loans 10:24:58
5 made to low to moderate income neighborhoods, and 10:25:00
6 the percentages of their loans made in integrated 10:25:02
7 and minority neighborhoods. 10:25:06
8 A representative earlier said something to the 10:25:08
9 effect that banks will not be healthy when 10:25:10
10 communities are struggling. Isn't this a little bit 10:25:12
11 of a cart before the horse argument? Is this why 10:25:14
12 it's hard for us to get banks to be operating in 10:25:16
13 neighborhoods like Phillips? When it comes to 10:25:20
14 rejecting minorities, Norwest is way above other 10:25:22
15 lenders in the Twin Cities. Norwest rejected 10:25:26
16 African-Americans almost three and a half times as 10:25:30
17 often as they rejected whites. 10:25:32
18 In the Twin Cities Norwest is especially bad 10:25:34
19 compared to other major banks here. US Bank, 10:25:36
20 formerly First Bank, and Twin City Federal. US Bank 10:25:40
21 and TCF each made more 5.5 percent of their home 10:25:44
22 purchase loans to African-Americans, while Norwest 10:25:48
23 made only two percent of their loans to 10:25:50
24 African-Americans. US Bank and TCF each made more 10:25:54
25 than 13 percent of their home purchase loans to 10:25:58
68
1 people of color, but Norwest only made six percent 10:26:00
2 of their loans to people of color. US Bank and TCF 10:26:02
3 each made more than -- each made more, about 18 10:26:06
4 percent of their home purchase loans, to low and 10:26:12
5 moderate income neighborhoods, but Norwest made only 10:26:14
6 nine percent of its loans in these neighborhoods. 10:26:16
7 Why reward this racist, classist performance? 10:26:20
8 Is no one accountable? What is exactly your 10:26:24
9 responsibility toward the American people? Have you 10:26:26
10 any? 10:26:36
11
12 CHAIRPERSON SMITH: Thank you very much. 10:26:38
13 We will go to Ms. Whitfield. 10:26:38
14
15 MS. WHITFIELD: My name is Marilyn 10:26:42
16 Whitfield. I'm a board member of Minnesota ACORN, 10:26:44
17 and the co-chair for North Minneapolis Chapter of 10:26:46
18 ACORN. 10:26:48
19 In city after city we find the same pattern 10:26:48
20 that Norwest, the largest mortgage company in the 10:26:52
21 country, is below other lenders in their loans to 10:26:54
22 minorities and in low income neighborhoods, but 10:26:58
23 above other lenders in their denials of 10:27:00
24 African-Americans, Latinos, and Asians, in Austin, 10:27:02
25 Texas, Albuquerque, Atlanta, Chicago, Dallas, 10:27:08
69
1 Denver, Des Moines, Duluth, Minnesota, Houston, Las 10:27:12
2 Vegas, Los Angeles, Milwaukee, Newark, New Orleans, 10:27:18
3 Oakland, Philadelphia, Phoenix, St. Louis, and in 10:27:22
4 Washington, D.C. What is Norwest going to do about 10:27:28
5 this? 10:27:30
6 Wells Fargo just announced that if the merger 10:27:32
7 is approved, it is going to lend $5 billion a year 10:27:34
8 in California to minorities and low income customers 10:27:38
9 for small businesses, mortgages and community 10:27:42
10 development. Why can't Norwest do the same thing in 10:27:44
11 Minnesota and other states? Other communities need 10:27:48
12 to be developed just as in California. People in 10:27:50
13 Minnesota also need help with small businesses and 10:27:54
14 community development. 10:27:58
15 In another recent merger, Nations Bank/Bank of 10:28:00
16 America committed to lend $35 billion a year to 10:28:02
17 minority and low income customers. Why can't 10:28:06
18 Norwest do the same thing? 10:28:10
19 After all these years of being here, Norwest is 10:28:10
20 moving their headquarters to California. They're 10:28:14
21 going to lay off a lot of employees and pocket huge 10:28:16
22 savings. What do the people of Minnesota get out of 10:28:22
23 it? We want Norwest to put some money back into the 10:28:24
24 community. 10:28:28
25
70
1 MR. ASH: Thank you. My name is Jordan
2 Ash, the loan counseling director for ACORN. I 10:28:34
3 apologize, my testimony is sitting on my kitchen 10:28:34
4 table, so I frantically was trying to reconstruct 10:28:36
5 it. I apologize if I stumble a little bit. 10:28:40
6 I'm the director of the loan counseling program 10:28:46
7 for Minnesota ACORN. The home buyer education 10:28:46
8 counseling program, there's a couple components to 10:28:52
9 it. One is that we work with banks to help them 10:28:52
10 improve their lending records by developing loan 10:28:56
11 products that are more realistic to help low and 10:28:58
12 moderate income people buy a house, such as lower 10:29:02
13 down payment closing costs, more flexible credit 10:29:04
14 guidelines, using alternative credit, counting -- 10:29:08
15 being more flexible in counting income. We also 10:29:10
16 promote home ownership by going out every day into 10:29:14
17 low income neighborhoods and talking to renters 10:29:16
18 about the benefits of home ownership, and that it is 10:29:18
19 possible. And, finally, that we have provided 10:29:20
20 one-on-one counseling to people to help them qualify 10:29:24
21 for loans, address credit problems, help them 10:29:26
22 understand that -- the process, and also have some 10:29:30
23 seminars and classes to help people understand the 10:29:32
24 general process of buying a house. 10:29:36
25 Because it's known in the community that 10:29:36
71
1 through ACORN and the programs that we work with and 10:29:38
2 the banks that we work with, which is four of the 10:29:42
3 five major banks in the Twin Cities, except for 10:29:44
4 Norwest, because it's known that you can buy a house 10:29:46
5 through ACORN with a thousand to $15 hundred total 10:29:50
6 for your down payment and closing costs, people call 10:29:52
7 us up a few times a week and say don't you help with 10:29:54
8 down payment and closing costs? I'm closing next 10:29:58
9 week; I need $3,000 to buy a house. I heard that 10:30:00
10 you help with that. We say no, we don't help with 10:30:04
11 it. We've negotiated with banks, developed programs 10:30:04
12 where the banks provide the assistance. And in 10:30:06
13 talking and trying to figure out about their 10:30:08
14 situation, you might ask, well, who are you going 10:30:10
15 through? And invariably they'll say, Norwest. 10:30:14
16 As was said earlier, Norwest is the largest 10:30:16
17 mortgage company in the country. They're the 10:30:18
18 largest in the Twin Cities with 20 percent of all 10:30:20
19 loans. So most people are going through Norwest, 10:30:24
20 but they're calling us saying can you help with the 10:30:26
21 down payment? And why is that? Because Norwest 10:30:28
22 provides less assistance for down payment and 10:30:30
23 closing costs than all the other major banks in the 10:30:34
24 Twin Cities. TCF, US Bank, Firstar, and Marquette 10:30:36
25 all provide much more assistance than Norwest. 10:30:40
72
1 There's some other problems with Norwest's 10:30:44
2 underwriting guidelines, which are -- to the problem 10:30:46
3 when they're, again, the biggest mortgage company in 10:30:48
4 the country and in the Twin Cities. Their debt 10:30:50
5 ratio is only 34 percent when all the other programs 10:30:52
6 are 41 percent. If you have what they count as 10:30:56
7 long-term debt, if you have a car payment, in order 10:31:00
8 to look at it and you're qualifying, they count 10:31:02
9 long-term debt as anything less than two months. 10:31:06
10 All the other programs count long-term debt as 10:31:08
11 anything less than ten months. It's ironic that 10:31:12
12 Norwest would penalize people that have large debts 10:31:14
13 because one of the reasons that they have these 10:31:16
14 large debts is because they've got car payments, 10:31:18
15 very high interest car payments through Norwest 10:31:22
16 subsidiaries. 10:31:24
17 It was mentioned earlier about Norwest's 10:31:26
18 helping -- working and helping people fix their 10:31:28
19 credit. Well, we believe that Norwest actually 10:31:30
20 profits more from people's bad credit and does more 10:31:32
21 damage to people's credit than any of the seminars 10:31:36
22 that they can hold. Norwest has contributed to the 10:31:38
23 existence in the United States of two separate and 10:31:42
24 very unequal financial systems: one for the rich and 10:31:46
25 one for the poor. As mainstream banks shut out low 10:31:48
73
1 income blue collar and minority customers, a fringe 10:31:52
2 economy has emerged of pawn shops, check cashing 10:31:54
3 stores and finance companies to fill the credit 10:31:58
4 void. With their high interest rates and 10:32:00
5 unnecessary credit insurance fees, these shadow 10:32:02
6 banks have generated greater profit margins than 10:32:04
7 even the largest banks. 10:32:06
8 In 1994, Norwest purchased a company called 10:32:10
9 Community Credit, so don't confuse it with Consumer 10:32:14
10 Credit Counseling, which is a very fine 10:32:16
11 organization. Community Credit is exactly the 10:32:18
12 opposite. It's a consumer loan company that targets 10:32:22
13 people with low incomes or bad credit. Community 10:32:24
14 Credit has 79 offices in 15 states. Soon after they 10:32:26
15 bought Community Credit, Norwest acquired two other 10:32:30
16 companies: City Side Savings, which doesn't help 10:32:32
17 people save any money, and Fidelity Acceptance,
18 which is not at all loyal, doesn't have any fidelity
19 to its customers.
20 According to a St. Paul Pioneer Press article 10:32:40
21 last year, Norwest is no stranger to the boom in big 10:32:42
22 risk, big reward consumer lending. It's Norwest's 10:32:46
23 financial unit, of which Fidelity will soon be a
24 part, was doing sub-prime net lending long before
25 Wall Street and several big banks bet on it in 10:32:54
74
1 recent years. So Norwest saw it, they saw the money 10:32:56
2 that could be made from taking advantage of people's 10:32:58
3 bad credit, and they jumped on it. They're smart. 10:33:02
4 That's why they make over a billion dollars' profit 10:33:04
5 a year. 10:33:04
6 According to -- again to quote the article, 10:33:06
7 they discovered what Norwest has known for years: 10:33:10
8 lending money to riskier borrowers can yield big 10:33:10
9 profits. Norwest Financial is consistently 10:33:14
10 Norwest's most profitable unit without suffering 10:33:16
11 ugly buildup of bad loans. It's a myth that there's 10:33:20
12 a higher risk in lending to -- that they are losing 10:33:22
13 money. They routinely, these consumer finance 10:33:26
14 companies that Norwest owns, routinely make more 10:33:28
15 profits and have a larger return on their assets 10:33:32
16 than the banks do. The average rate on Norwest 10:33:34
17 Financial's consumer loans was 21.22 percent in 10:33:38
18 1996. Compare this to what it would cost you if you 10:33:40
19 had a loan from Norwest Bank, which is right now 10:33:44
20 around 8 percent, can be more than double from just 10:33:46
21 another Norwest subsidiary. 10:33:50
22 And when Norwest turns someone down for a car 10:33:50
23 loan, they don't refer them to Consumer Credit 10:33:54
24 Counseling, they don't tell them about a seminar on 10:33:56
25 debt management or on money management. What they 10:34:00
75
1 do is refer them to Community Credit, and they've 10:34:02
2 acknowledged that they do this. They give customers 10:34:04
3 the number for Community Credit to get a car loan at 10:34:06
4 21 percent. We've even had instances where somebody 10:34:08
5 got a call at home, unsolicited, from Community 10:34:12
6 Credit, saying I heard you need a loan. Do you have 10:34:16
7 any collateral that you could use for it? 10:34:18
8 While Norwest has acknowledged this is a common 10:34:22
9 practice, they have failed to reply to our requests 10:34:26
10 about if there is a reciprocal relation; that is, 10:34:28
11 why can't customers be referred from Community 10:34:30
12 Credit to Norwest? They're the same company. If it 10:34:32
13 works one way, why can't it work the other? 10:34:36
14 Especially if they pay their car loan on time, why 10:34:38
15 can't it be refinanced through Norwest? Why can't 10:34:40
16 there be a program set up like that? 10:34:42
17 Well, Norwest actually keeps people trapped in 10:34:44
18 the fringe economy by thwarting customers' efforts 10:34:48
19 to re-establish their credit. As a general policy, 10:34:50
20 Community Credit does not report its loans to a 10:34:52
21 credit bureau. So even if a customer is making 10:34:54
22 their payments on time on that car, thinking well, I 10:34:58
23 need a car to get to work, I'll take the 21 percent 10:35:00
24 interest, I'll pay it on time, and eventually I will 10:35:02
25 be able to build up my credit better, they're not 10:35:04
76
1 building the new credit that they think they are, 10:35:06
2 which would allow them to eventually refinance or 10:35:08
3 receive a more favorable interest rate from a bank. 10:35:12
4 And Community Credit is, however -- it's not that 10:35:14
5 they don't work with the credit bureaus ever, 10:35:16
6 because they're very quick to report it to the 10:35:18
7 credit bureau if you default on a loan. The only 10:35:20
8 explanation for this that we can think of is that 10:35:22
9 the companies, Community Credit and other companies 10:35:24
10 in Norwest Financial, want to keep a captive 10:35:28
11 customer base. They don't want people to be able to 10:35:30
12 get lower interest rates, they don't want people to 10:35:32
13 be able to pay off their balance early, and they 10:35:34
14 want them to have to return to them again and again 10:35:38
15 for financing, repeat customers. And, in fact, when 10:35:38
16 Norwest acquired City Side Savings just last year, 10:35:42
17 which did report customers' on-time payments to the 10:35:44
18 credit bureau, they merged it into Community Credit, 10:35:48
19 and all of a sudden, the reporting of City Side's 10:35:50
20 customers' on-time payments abruptly stopped. 10:35:52
21 When we are doing our loan counseling and we 10:35:54
22 meet with somebody and we do their credit report, 10:35:56
23 we'll see they have a loan from City Side Savings, 10:35:58
24 and all of a sudden it says 10-97, and that's just a 10:36:02
25 date of last activity -- what are we now, 8-98 -- 10:36:06
77
1 just ends. All of a sudden on the credit report it 10:36:08
2 just ends. Thank you very much. 10:36:10
3
4 CHAIRPERSON SMITH: Mr. Bennett. 10:36:16
5
6 MR. ASH: We have a transparency, first of 10:36:22
7 all, to this.
8
9 CHAIRPERSON SMITH: Thank you.
10
11 MR. ASH: Where do we do that? 10:36:24
12
13 CHAIRPERSON SMITH: If you'll hand it to 10:36:26
14 Cassandra, and we'll put it into the record. 10:36:28
15 Mr. Bennett, if you'll start. 10:36:36
16
17 MR. BENNETT: My name is Alton Bennett, 10:36:38
18 and I'm the chair of the Banking and Housing Chapter 10:36:40
19 of Minnesota ACORN. I'm also a member of Minnesota 10:36:42
20 ACORN Board, I'm association board member, and I'm 10:36:44
21 the national treasurer. 10:36:50
22 A couple occasions Congress has expressed its 10:36:52
23 concern about the credit needs of low and moderate 10:36:56
24 income people in low and moderate income 10:36:58
25 neighborhoods. As a matter of fact, they've even 10:37:02
78
1 gone as far as to say that banking services are 10:37:04
2 essential for these types of neighborhoods to 10:37:06
3 survive. That is generally what leads the spirit of 10:37:06
4 CRA, the Community Reinvestment Act, that says that 10:37:12
5 banks must meet the credit needs of their entire 10:37:14
6 service area, specifically low and moderate income 10:37:18
7 people, not just the wealthy. 10:37:20
8 I wonder about products that take advantage of 10:37:22
9 low and moderate income people, and one of those 10:37:24
10 things is the checking accounts. I think everybody 10:37:26
11 can understand the importance of having a checking 10:37:30
12 account in your day-to-day activities, but we have 10:37:32
13 an example here that really truly brings the 10:37:34
14 experience of most of the people that we have dealt 10:37:38
15 with when it comes to Norwest. Norwest has raised 10:37:40
16 its bounced check fees twice -- at twice the rate of 10:37:46
17 inflation. In 1996, Norwest charged $12 for a 10:37:50
18 bounced check. In 1995, it had gone up to $21, and 10:37:52
19 this summer Norwest increased the fee again up to 10:37:58
20 $25, making it the highest bounced check fee in the 10:38:00
21 Twin Cities. 10:38:04
22 We have figures from the banking industry that 10:38:04
23 show that the real cost of a bounced check is about 10:38:06
24 $2.68. Norwest has denied this figure. They say 10:38:10
25 they have no idea how much it costs, but I wonder, 10:38:12
79
1 since they've raised it from 21 to 25 and they have 10:38:16
2 no idea how much it costs, how do they make the 10:38:20
3 decision to determine whether it should go up from 10:38:22
4 21 to 25? That's just always been curious. But, 10:38:24
5 anyway, they don't know how much it costs. 10:38:28
6 With us they can make so much money from 10:38:30
7 bounced checks, Norwest does things to get people to 10:38:34
8 bounce even more checks. They're the only major 10:38:36
9 bank in the Twin Cities that clears customers' 10:38:40
10 largest checks first. We have an article here that 10:38:42
11 shows that this is a practice among banks designed 10:38:44
12 solely to increase profit. Norwest says that they 10:38:48
13 do it because the customers' preference in a survey. 10:38:52
14 But Norwest refused to show us the survey. How was 10:38:54
15 the questions asked? Who were the customers that 10:38:58
16 they surveyed? I find it very difficult that they 10:39:00
17 would -- to believe that they would ask a customer 10:39:04
18 would you rather us charge you much more money to 10:39:06
19 process your largest check so that we can make a lot 10:39:10
20 more money off of it in order -- than do it the 10:39:14
21 other way in processing things as they come in? I 10:39:18
22 just can't believe that that would be the case. I'd 10:39:22
23 like to see a real-life example of a Norwest 10:39:26
24 customer who was affected by the policy clearing the 10:39:28
25 largest check first. 10:39:30
80
1 In this case, on April 30th -- and that 10:39:32
2 transparency is up there -- there were four checks 10:39:36
3 that come through. By putting the biggest check 10:39:38
4 through first, the one for $20.72, Norwest caused 10:39:40
5 three smaller checks to bounce. The customer was 10:39:44
6 then charged $63 for the overdraft -- for 10:39:48
7 overdrafts, each of which was under $10. If Norwest 10:39:50
8 had cleared them by check number or from smallest to 10:39:54
9 largest, the three smaller checks which totaled 10:39:58
10 $19.73, would have been paid instead, and only the
11 largest check would have bounced. 10:40:02
12 It is also worth noting that on May 1st, the 10:40:04
13 same day that she was charged $63, the customer had 10:40:08
14 two SSI checks directly deposited in her accounts 10:40:12
15 that regularly happened at the first of the month. 10:40:14
16 Now, Norwest says that people can avoid those 10:40:18
17 charges simply by getting overdraft protection. 10:40:22
18 Well, there's two problems with that. Number one, 10:40:26
19 people don't know about the overdraft protection 10:40:28
20 because Norwest doesn't advertise it, and when they 10:40:30
21 do apply for it, if they know about it, they get 10:40:32
22 turned down. The woman in this example had just
23 been turned down for overdraft protection the same 10:40:36
24 month that she was approved by our housing 10:40:38
25 counseling program for a loan. I think that's 10:40:44
81
1 pretty particularly interesting. 10:40:48
2 Two years ago we met with Norwest about this 10:40:50
3 problem. We proposed a program that would make it 10:40:52
4 easier for low income people to qualify for 10:40:54
5 overdraft protection. Norwest refused to do 10:40:58
6 anything about it. We have found that when people 10:41:00
7 bounce a check, it is not something that they did 10:41:02
8 deliberately. Most of the time it is an honest 10:41:04
9 mistake or it happened in a narrow period of time 10:41:06
10 between when the person's -- when people deposit a 10:41:10
11 check and when they credit that deposit to that 10:41:12
12 account. So there is no real overdraft protection. 10:41:16
13 Norwest has said that the customers shouldn't 10:41:20
14 be surprised when they have bounced checks because 10:41:22
15 customers are told about these fees and policies. 10:41:26
16 In fact, the federal law requires the bank to give 10:41:28
17 new customers information about bank fees and funds 10:41:30
18 available policy, but that is not the case in 10:41:32
19 Norwest. Last summer we did a testing program. We 10:41:36
20 sent in 28 people to open checking accounts at 10:41:38
21 Norwest. Of those 28 people, six people were given 10:41:42
22 the information required by law, six were given some 10:41:44
23 but not all the information, and a larger majority, 10:41:48
24 16, were given nothing at all. We currently have a 10:41:52
25 lawsuit against Norwest over these violations. 10:41:54
82
1 There are other bank fees that are of concern 10:41:58
2 to us. One thing -- one of these things we want to 10:42:00
3 know is what happens to Norwest's checking account 10:42:04
4 and savings account, what will happen to them this 10:42:06
5 summer? Wells Fargo stopped honoring checks, free 10:42:10
6 checking accounts for senior citizens who have been 10:42:14
7 customers at First Interstate, Wells Fargo's last 10:42:16
8 merger. Now these seniors must either use Wells 10:42:22
9 Fargo basic ATM checking account, which has a 10:42:24
10 five-fifty a month fee and requires customers to do 10:42:28
11 all their banking at ATM, or Wells Fargo's 10:42:30
12 Stagecoach checking account, which costs $9 a 10:42:34
13 monthly fee. What protection will there be for 10:42:36
14 senior citizens in the future? 10:42:40
15
16 CHAIRPERSON SMITH: Thank you very much. 10:42:42
17 Are there any questions from the panel? If not, 10:42:44
18 thank you very much for coming this morning. We are 10:42:48
19 scheduled for a ten-minute break, and I would remind 10:42:52
20 attendees that if you happen to go outside the 10:42:58
21 building, you will need your badge to get back 10:43:02
22 inside and will need to go through the security 10:43:06
23 check-in once more. So we'll see you in about ten 10:43:08
24 minutes. 10:43:14
25
83
1 (Recess taken.)
2
3 CHAIRPERSON SMITH: We have both the 11:01:32
4 witness panel and the Federal Reserve panel, so I 11:01:32
5 think we'll go ahead and start, and our first 11:01:36
6 speaker is Mr. Gnaizda. 11:01:38
7
8 MR. GNAIZDA: Good morning. I'm the 11:01:42
9 policy director with the Greenlining Institute. To 11:01:44
10 put background on the Greenlining Institute, in the 11:01:46
11 last year we have been involved in opposing six 11:01:50
12 major mergers, including the City Corp merger, which 11:01:52
13 we believe is illegal, and the Bank of 11:01:58
14 America/Nations Bank merger, and opposition to State 11:02:00
15 Farm becoming a thrift institution. 11:02:06
16 Historically Greenlining is also opposed to 11:02:06
17 many Wells Fargo mergers, including one as early as 11:02:10
18 1971, before there was a CRA, and we were 11:02:14
19 successful, and we opposed a Wells Fargo merger in 11:02:16
20 1989 as well. 11:02:22
21 I'd like to offer five preliminary observations 11:02:24
22 that will put our remarks in context. First, we 11:02:26
23 strongly support hearings by the Federal Reserve. 11:02:32
24 We believe, however, there should be many more 11:02:34
25 hearings, and we believe that the Federal Reserve 11:02:38
84
1 should change its policy and permit community groups 11:02:40
2 to cross examine banks when there are mergers, and 11:02:44
3 to secure information in advance. This will help 11:02:46
4 your task as well. 11:02:52
5 Secondly, this merger that's before you 11:02:52
6 probably would not have occurred were it not for 11:02:56
7 Federal Reserve policies that we consider quite 11:02:58
8 reckless; that is, the green light to the City 11:03:02
9 Corp/Travelers merger and the B of A/Nations Bank 11:03:06
10 merger. You have forced other banks into an unfair 11:03:10
11 competitive position into which they, too, must 11:03:14
12 merge. 11:03:18
13 Third, we oppose the trend of high risk 11:03:20
14 investments in foreign nations at the cost of 11:03:24
15 investing in the inner city. Our motto is invest in 11:03:26
16 Minnesota, not Moscow, invest in Los Angeles, not 11:03:30
17 Leningrad. And we're pleased to observe that 11:03:34
18 neither Wells Fargo nor Norwest has invested in 11:03:38
19 Russia, unlike some of their competitors such as 11:03:40
20 City Corp, Chase Manhattan, and Bank of America. 11:03:44
21 Fourth, we believe when you have a mega-merger, 11:03:48
22 there have to be unique circumstances to permit the 11:03:54
23 merger. There must be a very strong CRA commitment, 11:03:56
24 as we believe you have here with Wells Fargo. This 11:04:00
25 is especially important because the Federal Reserve 11:04:04
85
1 and the office of the controller of the currency 11:04:08
2 have engaged in an epidemic of great inflation where 11:04:10
3 every bank that's large gets an outstanding. So 11:04:14
4 when a bank is outstanding, such as Wells Fargo, it 11:04:18
5 cannot be distinguished from any of its competitors 11:04:20
6 that are not outstanding but receive the same grade. 11:04:26
7 The last preliminary point, Wells has made 11:04:28
8 pledges in '90, '93 and '95 to the community. In 11:04:32
9 each case it has met its pledge, in each case it has 11:04:36
10 exceeded its pledge, and it has exceeded it in less 11:04:40
11 than half the time in many cases. 11:04:44
12 These are the brief facts I want to wish -- I 11:04:46
13 wish to provide to you. They are provided in our 11:04:48
14 August 27th letter to Chairman Greenspan, and we 11:04:52
15 have provided you with a copy. I make these eight 11:04:56
16 points to contrast this merger from our point of 11:05:00
17 view from some of the other mergers that you have 11:05:04
18 routinely approved, such as the Nations Bank/B of A 11:05:06
19 one. 11:05:10
20 One, unlike Nations Bank's hollow pledge, this 11:05:10
21 is an enforceable pledge by Wells Fargo. The key 11:05:16
22 community groups involved in developing the pledge 11:05:18
23 will meet with the CEO on a semi-annual basis and 11:05:20
24 will be given all necessary data in advance, as we 11:05:24
25 have been for many years. 11:05:26
86
1 Two, unlike Nations Bank, this pledge is 11:05:28
2 geographically specific to California. We know 11:05:34
3 exactly what it is. 11:05:36
4 Third, unlike Nations Bank, this pledge had 11:05:38
5 very substantial and widespread community input 11:05:40
6 before being finalized. 240 groups were represented 11:05:46
7 in developing the pledge. 11:05:50
8 Four, unlike Nations Bank, this pledge is 11:05:50
9 specific as to assisting the most underserved; for 11:05:56
10 example, specific minority and low income goals for 11:05:58
11 business and home lending. You will learn more 11:06:02
12 about it from other panelists. 11:06:04
13 Five, unlike Nations Bank, the philanthropic 11:06:06
14 investment commitments of Wells Fargo are toward the 11:06:10
15 underserved and represent a substantial percent of 11:06:14
16 pre-tax income. Wells' motto is to the barrio, not 11:06:18
17 the ballet, and we hope that will be the standard 11:06:22
18 for all banks. 11:06:26
19 Unlike Nations Banks, CRA-related commitments 11:06:30
20 have been made for women and minority contracts for 11:06:34
21 small inner city businesses. And unlike Nations 11:06:38
22 Bank, Wells Fargo has committed itself to an 11:06:42
23 important principle Chairman Greenspan has spoken so 11:06:46
24 eloquently on in his Wall Street address in January 11:06:50
25 of '98. It is committed to diversity, and 11:06:54
87
1 specifically so. 11:06:58
2 Unlike Nations Bank, Wells has had a policy of 11:07:00
3 not investing abroad, instead investing in the inner 11:07:04
4 city, contrast that with B of A's 600 million at 11:07:08
5 risk in Russia. 11:07:12
6 And, lastly, unlike Nations Bank, Wells has had 11:07:14
7 a long history of securing community input and 11:07:18
8 meeting long-term CRA commitments. 11:07:20
9 There's one other point that is not so tangible 11:07:24
10 but is perhaps more important, and that's the 11:07:30
11 leadership. We in California have been able to 11:07:32
12 count on Paul Hazen, Karen Wegman, and Wells Fargo 11:07:34
13 to be a leader. The Hmong community's going to tell 11:07:38
14 you about one of the greatest experiments in moving 11:07:42
15 70,000 people from welfare to work, something the 11:07:46
16 United States government has been under -- to do. 11:07:48
17 Wells took the leadership and in effect convinced 11:07:52
18 nine other major institutions to join it. 11:07:56
19 And lastly, Wells is a founder of an exciting 11:07:58
20 new partnership that I believe Chairman Greenspan 11:08:02
21 will be very excited about; we hope to have him 11:08:06
22 address. Twelve major corporations will be joining 11:08:10
23 community groups in developing a diversity business 11:08:14
24 partnership to discuss how investing in the merging 11:08:18
25 markets at home can be highly profitable and produce 11:08:24
88
1 safety and soundness everywhere. 11:08:26
2 I thank you very much. We do hope you will 11:08:28
3 closely question us when we are all finished. Thank 11:08:32
4 you. 11:08:36
5
6 CHAIRPERSON SMITH: Thank you. Mr. Dean. 11:08:38
7
8 MR. DEAN: Thank you very much, Governor 11:08:40
9 Smith and the rest of the members of the panel. 11:08:44
10 Good morning. My name is George Dean, and for the 11:08:44
11 past six years I have been president and CEO of the 11:08:46
12 greater Phoenix, Arizona Urban League, a leading 11:08:50
13 provider of human services in the valley of the sun. 11:08:54
14 Prior to relocating to Arizona, for 13 years I was 11:08:56
15 president and CEO of the Sacramento, California 11:08:58
16 Urban League, and president of the California 11:09:02
17 Council of Urban Leagues, which include Urban League 11:09:06
18 affiliates in Los Angeles, San Diego, Riverside, San 11:09:10
19 Francisco, Oakland, and, of course, Sacramento. 11:09:12
20 Our mission in the Urban League is to assist 11:09:16
21 African-Americans, other minorities and the 11:09:18
22 disadvantaged in achieving economic and social 11:09:20
23 equality. While serving as president of the Urban 11:09:24
24 League, I have also been a founding member and 11:09:26
25 co-chair of the Greenlining Institute. 11:09:30
89
1 Let me begin by saying that the Urban League, 11:09:32
2 as well as the Greenlining Institute, has been 11:09:36
3 generally opposed to mega-mergers, as we believe it 11:09:40
4 decreases the number of institutions that can 11:09:44
5 provide substantial commitments through CRA to our 11:09:46
6 communities. I hasten to add that we have been 11:09:50
7 active in CRA protests for a number of years, 11:09:52
8 including the Wells Fargo and First Interstate Bank 11:09:56
9 merger, as well as Bank One and another bank, and 11:10:00
10 others, as well as the Norwest acquisition of both 11:10:04
11 Citibank and Caliber Bank in Arizona. 11:10:08
12 I am pleased to state that Norwest Bank-Arizona 11:10:10
13 has been an excellent corporate citizen and has 11:10:12
14 performed well in its CRA commitments. Wells 11:10:16
15 Fargo's primary entree into the Arizona market came 11:10:20
16 about with its acquisition of First Interstate, and 11:10:24
17 I am pleased to say that the Wells Fargo people hit 11:10:26
18 the ground running and has been second to none in 11:10:30
19 fulfilling the CRA commitments they made at the time 11:10:34
20 of the acquisition. 11:10:36
21 Wells' position on affirmative action awarded 11:10:38
22 to vendor contracts to minority and females 11:10:42
23 businesses, lending goals, both generally and 11:10:44
24 specifically for minorities and women, and its 11:10:48
25 commitment to focus the majority of their charitable 11:10:50
90
1 contributions to underserved communities are all 11:10:54
2 reasons why they are held in such high esteem and 11:10:56
3 why we don't see this particular merger as being a 11:11:00
4 hindrance or a detriment to the progress being made 11:11:04
5 in our communities. 11:11:04
6 In the case of Norwest-Arizona, much of the 11:11:06
7 same can be said. In 1994, shortly after they 11:11:10
8 became the fourth largest bank in Arizona, they 11:11:14
9 established a five-year, $50 million community 11:11:18
10 lending initiative for a community home buyers 11:11:20
11 program. This program was designed specifically to 11:11:24
12 help increase home ownership opportunities for 11:11:26
13 creditworthy families earning 80 percent or less of 11:11:30
14 the areas's median family income, and who did not 11:11:34
15 typically qualify for mortgages under the 11:11:38
16 conventional financing terms, with lower down 11:11:40
17 payment requirements, higher loan-to-value ratio, 11:11:44
18 higher debt-to-income ratios, and a requirement for 11:11:46
19 prepurchase housing counseling. 11:11:50
20 This program has, through July of this year, 11:11:52
21 reached 90 percent of its five-year goals, and of 11:11:54
22 those -- and 70 percent of those loans have been 11:12:00
23 made to people of color. 11:12:02
24 It has been especially meaningful to have 11:12:04
25 direct access to similar management with both banks. 11:12:06
91
1 Karen Wegman, the executive vice president with 11:12:10
2 Wells Fargo, and John Campbell, the president and 11:12:14
3 CEO of Norwest-Arizona, can both be accessed 11:12:16
4 directly. And, in addition, there has been 11:12:20
5 semi-annual meetings with Paul Hazen, the chairman 11:12:22
6 and CEO of Wells, since the First Interstate 11:12:26
7 acquisition. 11:12:28
8 Based on the follow-through of the CRA 11:12:30
9 commitments of the two merging institutions in 11:12:32
10 California and Arizona, and the commitments of the 11:12:34
11 new institution once the merger is complete, it is 11:12:38
12 without hesitation that I support the merger of 11:12:40
13 Norwest-Wells Fargo. I am pleased that the proposed 11:12:44
14 new bank has made many commitments to California's 11:12:48
15 low income communities and communities of color, and 11:12:50
16 I look forward to working with the new bank to have 11:12:54
17 similar type commitments in Arizona. Thank you. 11:12:56
18
19 CHAIRPERSON SMITH: Thank you. We'll go 11:13:00
20 to Mr. Correlejo. 11:13:02
21
22 MR. CORRELEJO: Hello. My name is Jorge 11:13:04
23 Correlejo. I'm the owner of Mecunda Leasing 11:13:06
24 Company, and for 15 years I'm on the board of 11:13:08
25 directors, with the Latin Business Association for 11:13:12
92
1 14 years, and I've been a strong advocate on behalf 11:13:14
2 of business advocacy with all of the financial 11:13:20
3 institutions over the last several years. I've had 11:13:24
4 the responsibility, along with the individuals up 11:13:26
5 here, of monitoring Wells Fargo and the agreements 11:13:28
6 that they have made, and I do want to state that I'm 11:13:32
7 very proud of the fact that they have committed and 11:13:36
8 kept to their commitments far and above what any 11:13:40
9 other financial institution has achieved to date. 11:13:42
10 What has been their experience in the Latino 11:13:44
11 community? Well, they have recently opened a 11:13:48
12 billion dollar Latino loan line, as they have done 11:13:54
13 with other minority groups as well. They have made 11:13:56
14 commitments in terms of accessibility with the 11:14:02
15 members of the Latino community. I can tell you 11:14:04
16 this: we've met with several institutions about the 11:14:08
17 -- what does it take to make more members of our 11:14:10
18 community bankable? And they seem to be -- have 11:14:14
19 been to date the only ones that have listened. 11:14:18
20 We've spoken about the need for some technical 11:14:22
21 assistance. You can go with any group -- many years 11:14:26
22 ago I used to provide business training technical 11:14:30
23 assistance -- any group you're going to do all right 11:14:34
24 by approaching them and get a -- small numbers that 11:14:36
25 are eligible for loans that can be approved today. 11:14:38
93
1 Most institutions aren't interested in any 11:14:42
2 longer term commitments to business people to see 11:14:44
3 about their longer term needs. I think it's a great 11:14:48
4 opportunity certainly, but this is something that 11:14:50
5 we've discussed, and Wells Fargo has been the only 11:14:54
6 one who's had an interest in funding an institute 11:14:56
7 that would provide business training technical 11:15:00
8 assistance to business owners that, one, either have 11:15:02
9 no credit, or have blemishes on their credit, or 11:15:04
10 some other problems that would not enable them to be 11:15:08
11 eligible for a loan. They have taken this step 11:15:10
12 forward and made a long-term commitment to providing 11:15:14
13 business training technical assistance to minority 11:15:18
14 members and are seeing, I think, some good success. 11:15:20
15 I think over the past six months that that 11:15:26
16 program, in particular, has been able to fund to 11:15:30
17 well over $2 million to Wells Fargo, but other banks 11:15:32
18 as well, providing one-on-one technical assistance. 11:15:36
19 I don't recall the exact numbers, but it's up and 11:15:40
20 running since about the beginning of the year. So 11:15:44
21 this is the kind of initiative that Wells Fargo has 11:15:46
22 certainly demonstrated to our community. We're 11:15:50
23 working very closely, they meet regularly with the 11:15:52
24 leaders of the community, and it seems like they 11:15:56
25 have a sincere commitment, and I'm here to offer my 11:15:58
94
1 respects to their commitment to date and let you 11:16:02
2 know that certainly in California, Wells Fargo has 11:16:04
3 been achieving its goals. 11:16:08
4
5 CHAIRPERSON SMITH: Thank you very much. 11:16:12
6 Ms. Borromeo. 11:16:12
7
8 MS. BORROMEO: Good morning. My name is 11:16:16
9 Gelly Borromeo. I'm the publisher of Asian 11:16:16
10 Enterprise Magazine, the largest circulated Asian 11:16:18
11 American business focus magazine in the United 11:16:22
12 States. Thank you for giving us the opportunity to 11:16:24
13 testify. 11:16:26
14 I'm here today because I am going to stress and 11:16:28
15 underscore the fact that the specific goal for 11:16:32
16 utilization of minority and women business 11:16:36
17 enterprises by Wells Fargo, 40 percent, I think is 11:16:38
18 very significant. As we all know, small business 11:16:42
19 enterprise is largely responsible for the economic 11:16:44
20 renaissance of the United States, which we have been 11:16:48
21 enjoying in the last five years. A large percentage 11:16:50
22 of small businesses consist of women and 11:16:52
23 minority-owned businesses, yet industries across the 11:16:56
24 United States -- across the United States still 11:16:58
25 utilize and spend very marginally within the 11:17:02
95
1 minority and women business enterprise sector. 11:17:04
2 Of 21 banks surveyed nationwide, which was 11:17:08
3 conducted in December of '97, the average percentage 11:17:12
4 of minority business utilization was 2.9 percent and 11:17:16
5 2.5 percent for women business enterprises, which is 11:17:20
6 lower than the average of all industries across the 11:17:24
7 nation. 11:17:26
8 A total of 485 companies in a cross-industry 11:17:28
9 comparison of standard benchmarks -- a copy of which 11:17:32
10 I will be leaving for the record -- indicates that 11:17:34
11 the average percentage of MBE utilization across the 11:17:38
12 United States was only 3.4 percent for MBEs, and 2.8 11:17:42
13 percent for WBEs. Municipal government's rated 11:17:48
14 highest at 8 percent average for MBEs and 6.3 11:17:52
15 percent for WBEs. So, again, I'd like to underscore 11:17:54
16 the fact that the 40 percent minority and women 11:17:56
17 business enterprise goals that Wells Fargo has 11:17:58
18 committed to our community is very, very 11:18:02
19 significant. 11:18:04
20 Two years ago during the First Interstate Bank 11:18:06
21 and Wells Fargo merger, the combined banks were 11:18:08
22 under five percent of their MBE/WBE utilization; 11:18:12
23 however, today, after two years, they're a little 11:18:16
24 over or slightly over 15 percent. I think that's a 11:18:18
25 significant change, and I think this is really the 11:18:22
96
1 spirit of the commitment that they have done. Many 11:18:26
2 would say it's far from the 40 percent, but you must 11:18:26
3 remember the 40 percent was to be achieved over ten 11:18:30
4 years. If they go with the acceleration of what 11:18:32
5 they've done with the utilization of minority and 11:18:34
6 women business enterprises, I think they're going to 11:18:38
7 achieve well beyond the 40 percent they have done. 11:18:40
8 How have we accomplished this in California? 11:18:42
9 Well, first of all, we have not only held them 11:18:44
10 accountable by meeting and dialoguing with -- at 11:18:46
11 least twice other year with Paul Hazen and all of 11:18:50
12 the senior management of Wells Fargo, but I think it 11:18:54
13 truly has to do with the personal engagement and 11:18:56
14 commitment that Paul and Karen Wegman and their 11:18:58
15 staff within Wells Fargo have. 11:19:02
16 We have a developed a personal relationship 11:19:04
17 with them, and we have the personal access to them. 11:19:06
18 As a matter of fact, I think what all of you should 11:19:10
19 do here, trying to do today is talk to them after 11:19:12
20 this or, you know, when you have a chance to, ask 11:19:14
21 them for their telephone numbers, and I'm sure 11:19:16
22 they're going to provide that for you so you can 11:19:20
23 have the same access -- personal access that you 11:19:22
24 have. And I understand that Leslie would also do 11:19:24
25 the same for all of us. Thank you. 11:19:26
97
1
2 CHAIRPERSON SMITH: Mr. Bivins. 11:19:28
3
4 MR. BIVINS: Yes, good morning. I want to 11:19:30
5 thank the Board of Governors for this opportunity 11:19:32
6 that they have afforded with this public hearing. 11:19:34
7 My name is George Bivins. I'm the chairman of the 11:19:38
8 Black Business Association in Los Angeles. I'm also 11:19:40
9 a businessman; I'm an insurance agent. I've been in 11:19:44
10 the business 25 years. I advised the State of 11:19:46
11 California on insurance when Juanita 11:19:50
12 Millener-McDonald was the chair of the state 11:19:56
13 assembly. I'm also a board member of the 11:19:58
14 Greenlining Institute. 11:20:00
15 And basically I want to make just a couple 11:20:02
16 observations about this proposed merger because my 11:20:04
17 colleagues have made some finer points, but I'm 11:20:10
18 going to give you some personal observations that I 11:20:14
19 have with regards to Wells Fargo. 11:20:16
20 The Black Business Association supports the 11:20:20
21 merger. Wells has went out of their way to serve 11:20:22
22 our community. Wells has targeted the inner cities 11:20:28
23 with a $2.5 billion mortgage commitment for low 11:20:32
24 income and minority home buyer. Wells-Norwest has 11:20:34
25 committed $1 billion over 12 years specifically for 11:20:40
98
1 African-American loan program. 11:20:44
2 Bank of America moved to North Carolina with no 11:20:48
3 regard for California, the state that made it what 11:20:50
4 it was. And most of the base in that merger, most 11:20:54
5 of the income, comes from California, yet still, 11:20:58
6 they moved to North Carolina and they became 11:21:04
7 absentee owners -- absentee landlords. Bank of 11:21:06
8 America has reluctantly announced, due to the global 11:21:14
9 market conditions and the swings, their third 11:21:16
10 quarter, which was just reported yesterday, they 11:21:22
11 lost $33 million in red ink in their third quarter. 11:21:24
12 If the red ink keeps coming each quarter, and it 11:21:30
13 will, can you spell bailout? 11:21:32
14 Wells loans no monies outside of the borders of 11:21:36
15 the United States. $600 million at risk in Russia, 11:21:40
16 $3.1 billion at risk in South Korea. 11:21:42
17 The BBA has had a long, positive relationship 11:21:48
18 with Wells Fargo, and so have many of our members 11:21:52
19 have their accounts at Wells Fargo. 11:21:56
20 The other point I want to make, because I am in 11:21:58
21 the insurance business I do represent the National 11:22:00
22 Equity Fund, which purchases tax credits in the 11:22:04
23 State of California. Wells Fargo is a customer or 11:22:06
24 has relationships with many of these community 11:22:12
25 development agencies, one of which is the Tenderloin 11:22:14
99
1 neighborhood agency is one of my newest clients, 11:22:18
2 spoke very highly of Wells Fargo two weeks ago when 11:22:22
3 I was in San Francisco. This is the type of 11:22:26
4 outreach that this organization provides. 11:22:28
5 They do have access -- you do have access to 11:22:30
6 their management, but I would like to say there's 11:22:32
7 been some gracious words. Mr. Hazen is always 11:22:36
8 available, so is Karen Wegman, but her staff under 11:22:40
9 her, Brenda Ross-Dulin some of the staff, Gladys 11:22:42
10 Ross in Los Angeles, is always available, so I urge 11:22:48
11 you, no matter what you've heard, this organization 11:22:52
12 is accessible, and I do recommend the merger. Thank 11:22:56
13 you very much. 11:23:00
14
15 CHAIRPERSON SMITH: Mr. Lee. 11:23:02
16
17 MR. LEE: Thank you for the Federal 11:23:06
18 Reserve by allowing me to take this opportunity to 11:23:10
19 speak. My name is Pheng Lee. I'm the Secretary of 11:23:12
20 the Hmong American Political Organization. I'm here 11:23:18
21 to speak on behalf of our president, Mr. Toulu Thao, 11:23:20
22 who has other prior commitment and cannot be here 11:23:22
23 today. 11:23:26
24 May I tell you a little bit of what Wells Fargo
25 has helped create, something that inspired many 11:23:30
100
1 other leaders to follow, something that no one, no 11:23:32
2 corporation, has done in American history, something 11:23:38
3 that will make major economic impact on the life of 11:23:40
4 many thousands of Hmong residents throughout the 11:23:46
5 United States. 11:23:48
6 In America, the Hmong, who have little or no 11:23:48
7 marketable skill, receive no more than a minimum 11:23:52
8 wage and cannot support a large family. 11:23:54
9 While searching for opportunity, Hmong found 11:23:58
10 Fresno one of the richest agricultural land in 11:24:04
11 California, and began moving there since 1980. For 11:24:04
12 almost 20 years, Hmong in Fresno work very hard and 11:24:08
13 farm almost every vacant lot or land they can find 11:24:12
14 in and around the outskirt of Fresno. Despite their 11:24:16
15 great effort, Hmong have not been able to support 11:24:20
16 themself. 11:24:22
17 By recognizing Hmong's struggle, hardship and 11:24:24
18 their strong desire to become economically 11:24:30
19 independent, Wells Fargo, under the leadership of 11:24:32
20 Karen Wegman, Executive Vice President, and Sharon 11:24:34
21 Gerber, Vice President of Community Development, 11:24:42
22 began looking for way to invest in the Hmong 11:24:44
23 community and to help them become economically 11:24:48
24 self-sufficient. While Wells Fargo was doing that, 11:24:52
25 many other corporate leaders view Hmong as risky 11:24:56
101
1 investment and would have no consideration at all 11:25:00
2 due to many reasons, such as the Hmong community is 11:25:02
3 not well-known to average American and corporation, 11:25:06
4 and we have no credit history, and many do not read 11:25:10
5 and write and speak English, and also they do not 11:25:18
6 have business plan, and a number of reasons. But 11:25:22
7 Karen Wegman, Sharon Gerber, and the leaders of 11:25:26
8 Wells Fargo are not afraid to be involved with the 11:25:30
9 Hmong. They see something beyond ordinary leaders 11:25:34
10 can see; that is, Hmong who once was very loyal to 11:25:38
11 our ally U.S. will once again, when they are ready, 11:25:42
12 be loyal customers. Therefore, investing in the 11:25:46
13 Hmong is not a one-way street, but rather, it will 11:25:52
14 be a two-way street and a great opportunity that 11:25:54
15 will mutually be beneficial.
16 In finding ways to help Hmong, Wells Fargo 11:25:58
17 funded an in-depth study of Hmong community and paid
18 for an agribusiness expert design of the business 11:26:06
19 plan with step-by-step layout to take the Hmong from 11:26:08
20 poverty to economic self-sufficiency. 11:26:14
21 It takes a very special leadership; it takes a 11:26:16
22 strong commitment; it takes a lot of caring; and it 11:26:20
23 takes a lot of courage as a leader, as a corporation 11:26:22
24 to do what Wells have done. 11:26:26
25 The leadership taken by Wells Fargo in the 11:26:30
102
1 Hmong community inspired many other corporations. 11:26:32
2 Soon after Wells Fargo made its first step, nine 11:26:36
3 other corporations follow and give their support to 11:26:38
4 the Hmong project. 11:26:42
5 I proudly testify on behalf of Mr. Toulu Thao 11:26:42
6 and the Hmong American community, who proudly show 11:26:48
7 our full support to Wells Fargo. 11:26:50
8 Special thanks to Karen Wegman, Sharon Gerber, 11:26:52
9 and the other leaders of Wells Fargo who have made 11:26:56
10 this difference in our life. I'd like to thank you. 11:26:58
11
12 CHAIRPERSON SMITH: Thank you. Mr. Thao. 11:27:04
13
14 MR. THAO: Thank you. My name is Cheng 11:27:06
15 Thao. I am a cooperative marketing assistant of 11:27:10
16 Hmong American community of Fresno, California. I 11:27:12
17 am so happy to be here, part of Hmong farmer in 11:27:16
18 Fresno.
19 I would like you to know that because of Wells 11:27:20
20 Fargo, we were able to start a Hmong Farmers 11:27:26
21 Cooperative. Wells Fargo helped us plant the seeds 11:27:28
22 to help hundred of Hmong farmer and their family 11:27:32
23 achieve their dream as Americans. Because of Wells 11:27:38
24 Fargo, we will be able to some day buy our own cold 11:27:40
25 storage/packing house to help Hmong farmers in the 11:27:44
103
1 Central Valley. Wells Fargo has made a tremendous 11:27:48
2 impact on the life of the Hmong, and they help give 11:27:50
3 back to the communities and invest in not only money 11:27:56
4 but care and love to the Hmong people of Fresno. 11:28:00
5 As a Hmong farmer, I know how much of a 11:28:02
6 difference Wells Fargo has make in my life and their 11:28:06
7 life. I visit every day. They thank me for helping 11:28:10
8 them, but I want you to know that Wells Fargo 11:28:18
9 helping and supporting Hmong farmer. 11:28:22
10 I am very proud to say that Hmong farmer and 11:28:26
11 their family, Hmong American Community, Inc., and 11:28:28
12 Toulu Thao are very proud of Wells Fargo to help us 11:28:34
13 understand what it means to be an American. 11:28:38
14 We are honored to come today to support Wells 11:28:40
15 Fargo. Thank you. 11:28:44
16
17 CHAIRPERSON SMITH: Thank you very much. 11:28:48
18 Any questions from the panel? We thank you for 11:28:48
19 coming. You came a long way and we appreciate your 11:28:54
20 being here to present your testimony. 11:28:58
21 With that, we'll go on to the next panel, Panel 11:29:02
22 5. We'll start with Ms. Kalant. 11:30:30
23
24 MS. KALANT: My name is Amelia Kalant, and 11:30:40
25 I'm a member of the New Mexico Community 11:30:42
104
1 Reinvestment and Development Task Force or Credit. 11:30:44
2 Credit is a coalition of nonprofit housing and 11:30:48
3 community development organizations. 11:30:50
4 Today I want to briefly address two issues. 11:30:52
5 The first is a recently announced community lending 11:30:56
6 initiative by Norwest and Wells Fargo Banks, and the 11:31:00
7 second is an increasingly serious failure in the 11:31:02
8 CRA. 11:31:08
9 First, Credit is pleased that Wells Fargo and 11:31:10
10 Norwest have just made a $1.3 billion community 11:31:12
11 lending commitment in New Mexico. This resulted 11:31:18
12 from a series of meetings between our organizations 11:31:22
13 and the following bank officers: Norwest-New 11:31:24
14 Mexico's president, Larry Willard, and CRA officer 11:31:28
15 Patricia Nye, Karen Wegman, and Sharon Gerber of 11:31:32
16 Wells Fargo, and Karen Olnus of Norwest Corporation, 11:31:36
17 as well as several others. 11:31:40
18 The $1.3 billion commitment includes 11:31:42
19 $90 million for mortgage lending for low or moderate 11:31:44
20 income or minority borrowers, and $850 million for 11:31:50
21 loans to small businesses and small farms. In 11:31:54
22 addition, the banks made other specific commitments. 11:31:58
23 They will make a $10 million investment in a special 11:32:02
24 mortgage program designed to meet the needs of low 11:32:04
25 and moderate income first-time home buyers. 11:32:08
105
1 The bank's foundations will continue their 11:32:12
2 commitments to funding home buyer training and 11:32:14
3 counseling programs sponsored by not-for-profit 11:32:18
4 community development organizations. And, they 11:32:20
5 promise that there will be no changes in the bank's 11:32:24
6 New Mexico branch network as a result of the merger, 11:32:28
7 except in the City of Santa Fe. 11:32:32
8 President Willard of Norwest-New Mexico 11:32:34
9 affirmed the bank's continued commitment to serving 11:32:38
10 rural communities and to relationship banking. 11:32:40
11 These are extremely important to New Mexico, which 11:32:44
12 is largely rural and majority minority population. 11:32:46
13 Credit looks forward to working out with the banks a 11:32:52
14 detailed plan for accomplishing the CRA objectives 11:32:58
15 and to helping the banks improve their capacity to 11:33:00
16 meet the needs of Native Americans in Native 11:33:04
17 American communities. 11:33:06
18 Credit specifically commends the work of Larry 11:33:10
19 Willard and Patricia Nye. Both from New Mexico, 11:33:14
20 they have shown sensitivity to and awareness of the 11:33:16
21 unique needs of the New Mexico communities, and have 11:33:20
22 demonstrated respect for community leaders. 11:33:22
23 We urge the banks to continue to entrust 11:33:26
24 decision-making to local officials who are best 11:33:30
25 suited to identify and respond to local needs. 11:33:32
106
1 Credit also very strongly urges the banks to make 11:33:36
2 similar specific appropriate CRA commitments in all 11:33:40
3 other states where the banks do business. 11:33:44
4 Now a word about the CRA. With the increasing 11:33:48
5 number of bank mergers, nationwide banking has 11:33:52
6 become the norm. The policy of assigning to each 11:33:56
7 bank a single CRA rating when the bank's CRA 11:33:58
8 performance can vary widely from state to state is 11:34:02
9 thoroughly untenable. It renders the rating 11:34:06
10 meaningless. In cases where a bank receives a high 11:34:08
11 rating in California, for example, but a low rating 11:34:12
12 in New Mexico, it is awarded an overall high rating. 11:34:16
13 For New Mexico and other rural, less populated 11:34:20
14 states, this is unacceptable. 11:34:24
15 In conclusion, we thank the Federal Reserve for 11:34:26
16 holding these hearings, but feel that the federal 11:34:28
17 banking regulators must address this serious flaw in 11:34:30
18 the CRA. And to reiterate, we urge the banks to 11:34:34
19 negotiate appropriate community lending initiatives 11:34:36
20 in every state where they do business. Thank you. 11:34:40
21
22 CHAIRPERSON SMITH: Thank you. Mr. Kamp. 11:34:44
23
24 MR. KAMP: My name is Marv Kamp. On 11:34:46
25 behalf of the Wisconsin Rural Development Center, 11:34:48
107
1 the following comments are submitted in opposition 11:34:50
2 to the application of Norwest Bank to acquire Wells 11:34:54
3 Fargo Bank. 11:34:58
4 On August 3, 1998, our organization submitted 11:35:00
5 comments on this proposed application. Specific 11:35:02
6 concerns cited in those comments included Norwest's 11:35:08
7 low level of originations to low to moderate income 11:35:10
8 conventional home buyers, its lack of participation 11:35:14
9 in state and federal guarantee programs designed to 11:35:18
10 assist LMI first-time home buyers, small businesses 11:35:20
11 and small farms, and its inadequate reinvestment of 11:35:26
12 deposit dollars back into low income communities in 11:35:30
13 underserved rural areas. 11:35:32
14 Based on asset share, Norwest is the fifth 11:35:34
15 largest commercial institution in Wisconsin with 11:35:40
16 over two billion in assets. Clearly, how it 11:35:42
17 conducts business and meets its reinvestment 11:35:46
18 obligations has a substantial impact on our state's 11:35:48
19 economy and, in particular, the communities it 11:35:52
20 serves. Changes in lending policies and practices 11:35:54
21 can often have devastating consequences, especially 11:35:58
22 for our state's poor. 11:36:02
23 In our initial comments we raised concerns 11:36:04
24 about Norwest's low level of reinvestment dollars 11:36:08
25 back into the community, not only in Wisconsin but 11:36:10
108
1 nationally. Norwest has -- currently has a 56.6 11:36:12
2 percent loan to deposit ratio in Wisconsin, the 11:36:18
3 lowest loan to deposit ratio of any of the largest 11:36:22
4 financial institutions serving the state, or any 11:36:24
5 state bank, for that matter. The average loan to 11:36:28
6 deposit ratio of similar institutions of similar 11:36:30
7 size and resources is over 97 percent in Wisconsin. 11:36:34
8 In 22 of the 28 markets served by Norwest 11:36:40
9 nationally, the bank is below average in their 11:36:44
10 reinvestment of deposit dollars back into these 11:36:46
11 markets, let's face it, when a number of our state's 11:36:48
12 community credit needs are going unmet and over 40 11:36:52
13 percent investments and securities is clearly 11:36:54
14 unacceptable. These are dollars which are 11:36:58
15 desperately needed to revitalize low income inner 11:37:02
16 city neighborhoods and rural communities. 11:37:04
17 Also in our comments we attempted to raise 11:37:08
18 concerns about Norwest's lack of participation in 11:37:10
19 state and federal credit enhancement programs which 11:37:12
20 are designed to meet the needs of low to moderate 11:37:16
21 income borrowers. We find their participation in 11:37:18
22 these programs substantially lacking. Of the 236 11:37:20
23 million in conventional home mortgages originated by 11:37:24
24 Norwest in 1996, less than one percent were under 11:37:28
25 Wisconsin Housing Economic Development Home 11:37:32
109
1 Guarantee, a highly successful state program which 11:37:34
2 is designed to assist first-time LMI conventional 11:37:38
3 home buyers. 11:37:44
4 This morning Mr. Hazen talked about Wells 11:37:44
5 Fargo' commitment to rural lending. However, we 11:37:50
6 find Norwest investment in rural areas of our state 11:37:52
7 abysmal. Despite the fact that rural branch 11:37:56
8 deposits represent over ten percent of the system's 11:38:00
9 total deposit base, few loans are being originated 11:38:02
10 to LMI borrowers. 11:38:06
11 In rural Wisconsin, the percentage of low 11:38:08
12 income families often exceeds rates found in central 11:38:10
13 cities. The bank's lack of participation in 11:38:16
14 programs which serve this population excludes large 11:38:18
15 numbers of LMI and limited resource borrowers. 11:38:20
16 Regarding rural credit enhancement programs, 11:38:24
17 Norwest originated no farm service agency guarantees 11:38:28
18 in 1995, 1996 or 1997. Also, for the Credit Relief 11:38:32
19 Outreach Program, which is a highly successful state 11:38:40
20 program for farm production loans, they originated 11:38:44
21 no loans in 1995, 1996 or 1997. No S.B.A. loans 11:38:48
22 were originated in 1996 or 1997. 11:38:56
23 This morning Mr. Biller talked about Norwest 11:39:00
24 development programs in the Navajo nation. In 11:39:02
25 Wisconsin, Norwest has drawn a big red line around 11:39:06
110
1 the Ojibwe tribal lands of Menomonie County. 11:39:08
2 Given both banks' market presence in rural 11:39:14
3 areas, the merger will make Norwest the nation's 11:39:18
4 number one agricultural lender. The lack of any 11:39:20
5 specific mention by the bank relating to 11:39:24
6 reinvestment plans for rural areas is especially 11:39:28
7 troubling. To date no disclosure of CRA or 11:39:30
8 community development plans has been made. The only 11:39:34
9 commitment we are currently aware of is the 11:39:36
10 mega-pledge for mostly urban areas of California. 11:39:38
11 Although we have met several times with Norwest in 11:39:40
12 Wisconsin to discuss reinvestment plans, there has 11:39:44
13 been no specific disclosure of how this merger will 11:39:46
14 affect our state or a willingness to pledge any 11:39:50
15 similar commitments to Wisconsin. 11:39:54
16 We believe that the lack of any CRA community 11:39:56
17 development plans, any application, is not only a 11:40:00
18 violation of the Federal Reserve rules and grounds 11:40:02
19 for denial of the application by itself, but an 11:40:06
20 insult to the citizens of Wisconsin and our nation. 11:40:08
21 Thank you. 11:40:12
22
23 CHAIRPERSON SMITH: Thank you. Ms. 11:40:14
24 LaBlanc will be wearing two hats today. She's 11:40:16
25 speaking on her own behalf, and then will be 11:40:18
111
1 speaking on behalf of the Washington Reinvestment 11:40:20
2 Alliance.
3
4 MS. LA BLANC: Right. Iowa Citizens for 11:40:24
5 Community Improvement is a state-wide grassroots 11:40:26
6 community organization, including both rural and 11:40:30
7 urban chapters, that has been working on lending 11:40:32
8 since 1977 and on rural lending since 1981 during 11:40:34
9 the farm crisis. These efforts have focused on the 11:40:38
10 policies and practices of the Farmers Home 11:40:42
11 Administration, Farm Credit Services, commercial 11:40:46
12 banks, and bank regulatory agencies. 11:40:46
13 We got our first family farm lending program 11:40:48
14 with Norwest in January 1989. By 1991, we had 11:40:50
15 agreements with Firstar and Brenton Banks. 11:40:56
16 Currently our three farm loan programs cover 27 11:40:58
17 banks in 26 communities across Iowa, and we estimate 11:41:04
18 that these programs have helped over 12 hundred 11:41:06
19 small and mid-sized farmers obtain nearly $27 11:41:08
20 million in credit for annual operating and crop 11:41:12
21 input expenses, machinery, and real estate 11:41:14
22 purchases, and other agricultural needs. 11:41:18
23 We have also used the CRA to help farmers set 11:41:20
24 up debt restructuring agreements which -- and during 11:41:24
25 the farm crisis kept a lot of farmers on the farm 11:41:26
112
1 and kept them from losing everything they had. 11:41:30
2 Our concerns about this merger include customer 11:41:32
3 service, commitment to communities, and rural 11:41:36
4 service. On customer service. Wells Fargo has a 11:41:38
5 poor customer service reputation. A web site was 11:41:42
6 set up by and for unhappy customers that has been so 11:41:46
7 well visited that several magazine articles have 11:41:52
8 been written about it. 11:41:54
9 According to a study done by United 11:41:56
10 Steelworkers of America, between June 1996 and March 11:41:58
11 1998, there was a disproportionate decline in the 11:42:02
12 relative share of branches in nonmetropolitan areas. 11:42:02
13 For example, in Nevada, Wells Fargo increased its 11:42:06
14 metropolitan branches by 29 percent while its 11:42:08
15 nonmetropolitan branches declined by five percent. 11:42:12
16 And in California, the decline was 34 percent in 11:42:16
17 nonmetropolitan areas and only nine percent in 11:42:18
18 metropolitan areas. 11:42:22
19 On rural service. In response to Question 4 of 11:42:22
20 the Federal Reserve Board's August 21st letter, 11:42:26
21 Wells Fargo's rural programs and initiative were all 11:42:30
22 contributions in investments in other people's 11:42:34
23 programs. Wells Fargo showed no initiative on their 11:42:38
24 own. While the states that they are in include 11:42:40
25 rural areas, they could show nothing that they were 11:42:42
113
1 doing to serve the needs in those areas except 11:42:44
2 giving money to other people to do something for 11:42:48
3 them. Rural people should be able to expect to use 11:42:50
4 banks like everyone else, not nonprofits and special 11:42:54
5 programs. Remember, CRA is about lending and doing 11:42:58
6 business with people. It's not about charity and 11:43:00
7 philanthropy.
8 We're also concerned about a statement made by 11:43:04
9 Tom Unger in a newspaper report announcing Wells 11:43:06
10 Fargo's closure of 14 branches in Washington, 26 in 11:43:10
11 Oregon, 10 in Idaho, and 12 in other western rural 11:43:12
12 areas that "urban areas provide better growth 11:43:16
13 prospects. We want to offer a complete network of 11:43:20
14 services in our locations, but that was not possible 11:43:24
15 in rural communities where there is simply not 11:43:26
16 enough people." We have no reason to believe that 11:43:30
17 this philosophy will not carry over into the new 11:43:32
18 company. 11:43:36
19 On mortgage lending. In our urban chapters 11:43:36
20 mortgage lending has been a key issue, and Wells 11:43:40
21 Fargo has not been doing mortgage lending. In the 11:43:42
22 documents sent by Norwest and Wells Fargo in 11:43:44
23 response to Question 2 in the August 21st letter 11:43:46
24 from the Board of Governors, Norwest and Wells Fargo 11:43:50
25 did not adequately explain their plans for mortgage 11:43:52
114
1 lending products post-merger. Mortgage lending is 11:43:56
2 the backbone of CRA. It was the driving force 11:43:58
3 behind the CRA legislation and is vital to community 11:44:02
4 development. Wells Fargo's lack of mortgage lending 11:44:04
5 in low-mod income areas, originating only 253 loans 11:44:10
6 in low-mod income census tracts in 1997 nationwide, 11:44:16
7 is a clear violation of CRA. 11:44:20
8 In contrast, Norwest Bank made 85 loans in 11:44:20
9 low-mod income census tracts in Des Moines alone in 11:44:24
10 1997. That's 34 percent of Wells Fargo's nationwide 11:44:28
11 total. That's the Iowa CCI testimony. 11:44:32
12 I know nothing about this, but I'm reading it 11:44:38
13 for Washington Reinvestment Alliance. 11:44:42
14 Honorable Governors of the Federal Reserve: 11:44:46
15 The Washington Reinvestment Alliance (WRA) offers 11:44:48
16 testimony regarding the merger of Wells Fargo and 11:44:50
17 Norwest Mortgage. The WRA is concerned that 11:44:52
18 Norwest's poor record of mortgage lending to low- 11:44:56
19 and mod income communities within Washington State 11:44:58
20 will result in this merger's negative effect on 11:45:00
21 these communities. 11:45:04
22 Wells Fargo's presence in Washington has been 11:45:04
23 marked by honest efforts to expand services to 11:45:08
24 low-mod income communities. When the bank acquired 11:45:10
25 First Interstate in 1996, Wells made contact with 11:45:14
115
1 the WRA to discuss the merger's impact. In addition 11:45:20
2 Wells has made investments and contributions that 11:45:22
3 First Interstate had previously avoided, 11:45:24
4 concentrating on corporate giving and investments 11:45:26
5 for community economic development. 11:45:30
6 Norwest's mortgages performance has not been so 11:45:32
7 praiseworthy. This subsidiary of Norwest Bank makes 11:45:34
8 only nominal corporate contributions within the 11:45:38
9 state. Unlike its mortgage branches in states with 11:45:42
10 Norwest Bank branches, Norwest Mortgage does not 11:45:44
11 widely offer mortgage products to Washington 11:45:48
12 borrowers that help the bank earn credit under the 11:45:52
13 CRA. In 1997, the company made 50 percent more down 11:45:54
14 payment assistance programs in loans in South 11:45:58
15 Dakota -- where it originated at least six times 11:46:00
16 fewer loans to low and moderate income borrowers -- 11:46:04
17 than in Washington. 11:46:08
18 Analysis conducted by the Freemont Public 11:46:08
19 Association, a HUD-certified agency that provides 11:46:10
20 mortgage default counseling to at risk borrowers in 11:46:14
21 the Seattle area, shows that Norwest's default rate 11:46:18
22 is much higher than area lenders in proportion with 11:46:22
23 its market share. The FPA concludes that Norwest 11:46:26
24 borrowers are much more likely to lose their homes 11:46:28
25 than customers of nearly any other mortgage company. 11:46:30
116
1 Norwest's unsatisfactory record is replicated on a 11:46:32
2 state-wide level. Norwest originated 2,223 11:46:36
3 FHA-insured mortgage loans in the Spokane 11:46:42
4 jurisdiction in the year 1997, ranking second in the 11:46:46
5 number of FHA loans made; yet, Norwest's default 11:46:48
6 rate on these loans was higher than 12 of the 24 11:46:52
7 lenders surveyed. In Seattle the record is worse. 11:46:56
8 Norwest Mortgage ranked 34th out of 43 lenders in 11:46:58
9 loss mitigation performance in 1997. 11:47:02
10 Based on these facts, the WRA can only conclude 11:47:04
11 that Norwest is using its giant market share and its 11:47:06
12 plentiful supply of HUD-insured mortgages to 11:47:12
13 originate loans without supporting its low and 11:47:14
14 moderate income borrowers. 11:47:16
15 To ensure that mortgage lending becomes more 11:47:18
16 supportive of the community in the wake of the 11:47:22
17 merger, the WRA recommends the following measures be 11:47:22
18 taken by the combined company. 11:47:26
19 One, lending officers and loan servicing agents 11:47:28
20 employed by Norwest Mortgage-Washington State 11:47:32
21 branches receive training to provide more customer 11:47:36
22 centered servicing of their loans, including 11:47:38
23 specific instruction in preparing loss mitigation 11:47:42
24 plans in cooperation with borrowers at risk in 11:47:44
25 mortgage default. 11:47:48
117
1 Two, the combined company make a significant 11:47:48
2 new lending target on single-family home loans to 11:47:52
3 low and mod income individuals and census tracts and 11:47:56
4 minority home buyers. The commitment should 11:47:58
5 anticipate Norwest's expanded market share due to 11:48:00
6 customers that currently shop for home loans through 11:48:04
7 Wells Fargo. 11:48:08
8 Three, the combined company contribute $1.25 11:48:08
9 million to home pre-purchase and mortgage default 11:48:12
10 counseling agencies over the next five years. Thank 11:48:16
11 you for your consideration. 11:48:18
12
13 CHAIRPERSON SMITH: Thank you. We'll go 11:48:20
14 to Ms. Wegner.
15
16 MS. WEGNER: Good morning. My name is 11:48:24
17 Ferol Wegner. I'm a board member of the Citizens 11:48:26
18 for Community Improvement of Des Moines, Iowa. 11:48:30
19 Citizens for Community Improvement of Des Moines has 11:48:32
20 been working on the CRA in Des Moines' neighborhoods 11:48:36
21 since 1977. Our work has resulted in over $50 11:48:38
22 million in loans and grant money being brought into 11:48:42
23 our low and moderate income neighborhoods. 11:48:44
24 Citizens for Community Improvement of Des 11:48:46
25 Moines has three main concerns with the merger of 11:48:50
118
1 Wells Fargo and Norwest Bank. These concerns are 11:48:52
2 customer service, mortgage lending, and commitment 11:48:54
3 to communities. 11:48:58
4 There's a real concern that services will be 11:49:00
5 drastically reduced in low to moderate income 11:49:02
6 neighborhoods as well as in smaller urban and rural 11:49:06
7 communities. Norwest stresses people are their 11:49:08
8 greatest asset for growth, while Wells Fargo closed 11:49:10
9 hundreds of branches, eliminated 7,000 jobs in the 11:49:14
10 hostile takeover of First Interstate Bank, slashing 11:49:18
11 a total of 12,600 jobs to date. This can and 11:49:20
12 probably will occur again with this proposed merger. 11:49:24
13 Wells Fargo uses ATM machines and other 11:49:26
14 technology where there are fewer flesh and blood 11:49:28
15 bankers. People like to see and talk to a friendly 11:49:32
16 face, someone they can trust and feel comfortable 11:49:34
17 with, knowing their concerns can be addressed by the 11:49:36
18 bank's president or CEO. They still want 11:49:38
19 old-fashioned customer service with ATMs and 11:49:42
20 Internet banking services as an extra amenity. 11:49:44
21 We all know that technology plays a major role 11:49:48
22 in our daily lives today. What's wrong with 11:49:50
23 traditional banking made better? It appears to me 11:49:54
24 that it all boils down to the bottom line: profits 11:49:56
25 versus the human factor. Where does that leave the 11:49:58
119
1 other part of the equation, the human factor, and 11:50:02
2 when does the steamroller stop? 11:50:04
3 In the documents sent by Norwest and Wells 11:50:08
4 Fargo in response to Question 2 in the August 21st 11:50:10
5 letter from the Board of Governors, Norwest and 11:50:12
6 Wells Fargo did not explain their plans for mortgage 11:50:16
7 lending products post-merger. Mortgage lending is 11:50:18
8 the backbone of CRA. It was the driving force 11:50:22
9 behind the CRA legislation, and is vital to 11:50:26
10 community development. Wells Fargo's lack of 11:50:28
11 mortgage lending in low to mod income areas, 11:50:32
12 originating only the 253 loans in low to moderate 11:50:36
13 income census tracts in 1997, is a clear violation 11:50:40
14 of the CRA. 11:50:44
15 CCI is very concerned and uncomfortable in 11:50:50
16 regard to the response from -- in from Norwest and 11:50:54
17 Wells Fargo. We are not satisfied that they 11:50:58
18 neglected to explain their plans for mortgage 11:51:04
19 lending products after the proposed merger. We and 11:51:06
20 other groups across the nation have worked and 11:51:08
21 fought too long and hard to abandon our CRA efforts 11:51:10
22 and the impact that CRA has done in our 11:51:14
23 neighborhoods. None of us want to return to the 11:51:16
24 days of red lining. Our low and moderate income 11:51:20
25 areas in our communities will suffer, and our 11:51:22
120
1 struggling inner cities will surely die. 11:51:24
2 This issue is a serious one and it must be 11:51:28
3 addressed in this merger and subsequent proposed 11:51:30
4 mergers. Citizens of Community Improvement Des 11:51:32
5 Moines has been working with lenders on reinvestment 11:51:36
6 since 1977. We have lending agreements with several 11:51:38
7 local lenders. While we have worked with Norwest 11:51:42
8 since 1992, when we asked for a meeting and written 11:51:44
9 commitment with Norwest that would include national 11:51:48
10 decision-makers, we were offered a meeting with 11:51:52
11 local people only during the day when many of our 11:51:54
12 task force members are at work. We were also told 11:51:58
13 that there was no need for a written, signed 11:52:02
14 agreement. There is no reason not to sign a 11:52:04
15 commitment unless you have no intention of honoring 11:52:06
16 it. 11:52:10
17 Our task force must ensure that the positive 11:52:10
18 things that have happened in our communities 11:52:14
19 continue to happen. And with banks merging and 11:52:16
20 decisions made farther and farther away, we need 11:52:18
21 written commitments from lenders more than ever so 11:52:22
22 we can be sure that our communities continue to 11:52:24
23 grow. 11:52:28
24 Local banking institutions should be able to 11:52:30
25 make their own decisions locally, not by those 11:52:32
121
1 decision-makers in another state halfway across the 11:52:36
2 country. The financial needs in Iowa, which is an 11:52:38
3 agricultural state, is much more different than in 11:52:40
4 North Carolina or California. We have been 11:52:44
5 monitoring our local lenders and note that as 11:52:46
6 mergers continue, it has become increasingly 11:52:48
7 difficult to obtain written agreements with them; 11:52:52
8 however, our local banks have no qualms about this. 11:52:56
9 They want to do this. This indicates to us that as 11:53:00
10 banks merge, becoming larger and not locally owned, 11:53:02
11 written agreements are crucial for our continued 11:53:06
12 community growth in cities such as Des Moines, Iowa. 11:53:10
13 Thank you very much for your time. 11:53:14
14
15 CHAIRPERSON SMITH: Thank you. If there 11:53:16
16 are no questions, then we thank you again for being 11:53:16
17 here this morning, and we'll move on to the next 11:53:20
18 panel, which is Panel 6. We'll start with 11:53:22
19 Mr. Brantley. 11:54:02
20
21 MR. BRANTLEY: Thank you, Madame Chair. 11:54:06
22 I'd like to take this opportunity to express my 11:54:10
23 appreciation on behalf of the metropolitan Denver 11:54:12
24 community to testify before the Federal Reserve in 11:54:16
25 regards to the merger between Norwest and Wells 11:54:18
122
1 Fargo. 11:54:22
2 I'd like to start off by saying not only do I 11:54:24
3 express my appreciation to the Federal Reserve 11:54:26
4 panel, but I'd like to express my appreciation to 11:54:30
5 those individuals who have testified as well. And I 11:54:32
6 have to share with you that based upon that 11:54:34
7 testimony, my testimony has changed somewhat. And I 11:54:36
8 think that certainly what I'll be taking back to my 11:54:40
9 community will reflect some of those changes. I 11:54:44
10 really do feel that individuals who come and 11:54:48
11 participate in testimony such as this should not 11:54:52
12 only testify but should listen very carefully to the 11:54:56
13 individuals who are bringing information to share 11:54:58
14 with them. I have heard some outstanding, 11:55:00
15 outstanding comments that I think will benefit my 11:55:04
16 community and certainly plan to take it back to the 11:55:08
17 metropolitan Denver community for hopefully sharing, 11:55:10
18 and even more so, implementation. But I've also 11:55:14
19 heard some concerns, some concerns that I hadn't 11:55:18
20 heard before, and I need to share with you that 11:55:22
21 basically I will also be addressing those concerns 11:55:24
22 as I go back to my community. 11:55:28
23 First of all, let me share with you, though, 11:55:30
24 some of the very basic things that I had prior to 11:55:32
25 hearing some of the comments today. I really do 11:55:34
123
1 feel that one of the primary factors of business 11:55:36
2 mergers and concepts related to concepts of business 11:55:40
3 within our community relate to the quality of life. 11:55:44
4 I have to share with you that in the Denver 11:55:46
5 metropolitan community, I feel that we have an 11:55:48
6 outstanding quality of life. The individuals that 11:55:52
7 will also be sharing some of our comments related to 11:55:54
8 our community, I think, are enviable throughout the 11:55:58
9 rest of the country. The quality of life is 11:56:02
10 extremely important to me and, I'm sure, to you. As 11:56:04
11 we move throughout this community, as we take jobs 11:56:08
12 and as we raise families, one of the primary things 11:56:10
13 that we're looking for is an increase in the quality 11:56:12
14 of life for our children and for our families. 11:56:14
15 In relationship to quality of life, quality of 11:56:18
16 life relates to the participation of individuals, 11:56:20
17 those individuals who are in the three sectors of 11:56:24
18 our economy. We have the private sector, we have 11:56:28
19 the governmental sector, and we have the nonprofit 11:56:30
20 sector.
21 I represent the nonprofit sector. I'm 11:56:34
22 executive director of a private, nonprofit 11:56:36
23 organization serving children within the 11:56:40
24 metropolitan Denver area. We have been very 11:56:42
25 fortunate over the past several years to have the 11:56:44
124
1 involvement of Norwest Bank within the development 11:56:48
2 of our programs in early childhood education. We 11:56:50
3 have started some new programs within our 11:56:54
4 metropolitan area. One of them which our agency has 11:56:56
5 initiated has been one which seeks out gifted 11:57:00
6 children within the inner city. 11:57:02
7 I have to share with you a very small, almost 11:57:04
8 joke, but it's not a joke. When we first started 11:57:08
9 looking for supporters of this program and shared 11:57:10
10 with a couple of potential funders that we were 11:57:14
11 looking for support for children -- for our program 11:57:16
12 for gifted children within the inner city, one of 11:57:20
13 our potential funders said, where do you expect to 11:57:22
14 find them? I asked the gentleman to leave my office 11:57:24
15 because our discussion was over at that time. 11:57:28
16 I think that -- that certainly, you know, the 11:57:30
17 attitude that came forth from our Norwest Bank 11:57:34
18 community was much, much different, and certainly 11:57:36
19 exemplifies the concept of support that we have 11:57:40
20 received for new projects and programs like our 11:57:44
21 program for inner city gifted children. 11:57:46
22 Once we heard the concept about the 11:57:50
23 presentation to be shared with you today, we began 11:57:54
24 to look at what CRA was specifically looking for. 11:57:56
25 We heard the concepts of lending, we heard the 11:57:58
125
1 concepts of investment, and we heard the concepts of 11:58:02
2 service. 11:58:04
3 One of the things that has changed today that I 11:58:06
4 will certainly be going back to my community will be 11:58:08
5 looking at the concept of lending. I have heard 11:58:10
6 some very, very disturbing concepts in regards to 11:58:14
7 lending, and I think that basically there is a 11:58:16
8 concept of CRA that not only relates to the business 11:58:18
9 community, there's a concept of CRA that relates 11:58:22
10 back to individuals, and that is community 11:58:24
11 responsibility activities. And that will be the CRA 11:58:28
12 that I'll be taking back to our community because I 11:58:32
13 think that if indeed there are responsibilities and 11:58:34
14 concerns related to lending, then I feel that we 11:58:38
15 have a responsible role to play in that. 11:58:40
16 The second is investment. You've heard and 11:58:44
17 reviewed some outstanding statistical numbers 11:58:48
18 related to investment. And to be very frank with 11:58:52
19 you, that's what I was going to share with you 11:58:54
20 today, too, statistical numbers, but they were 11:58:56
21 certainly outclassed by the individuals that are 11:58:58
22 represented to you today in the formal documentation 11:59:02
23 that you've received from both major CEOs of these 11:59:04
24 corporations. But, indeed, within our community I 11:59:08
25 think that investment with the community has not 11:59:10
126
1 only meant dollar and cent investment; it has meant 11:59:12
2 the investment of the time and effort of the 11:59:16
3 individuals within our community. 11:59:18
4 Our organization is a very small organization 11:59:22
5 in comparison to many of the others in our 11:59:24
6 community, and I think that was one of the reasons 11:59:26
7 that I was asked to come and present to you today. 11:59:28
8 But in the relationship to it being a small 11:59:32
9 organization, I can list for you outstanding members 11:59:34
10 of our community, such as John Nelson, David Bailey, 11:59:38
11 David Jones, Chuck Henderson, Patricia Cortez, who 11:59:42
12 have been outstanding members of our community and 11:59:46
13 have served our community and the community has 11:59:48
14 benefited from it, thus improving our quality of 11:59:52
15 life. And it is with those concepts in mind that I 11:59:54
16 support the merger between the Norwest Bank and 11:59:58
17 Wells Fargo. Thank you very much. 12:00:00
18
19 CHAIRPERSON SMITH: Thank you. 12:00:02
20 Mr. Garcia. 12:00:02
21
22 MR. GARCIA: My name is Pete Garcia. I'm 12:00:04
23 the president of Chicanos Por la Causa in Phoenix. 12:00:06
24 We're a state-wide community development corporation 12:00:08
25 having 46 offices in 22 cities, and we see over 12:00:12
127
1 66,000 people annually. There are over one million 12:00:16
2 Hispanics in Arizona that we consider ourselves to 12:00:20
3 be a niche market that both of these institutions 12:00:24
4 are interested in and have been interested. 12:00:26
5 Our organization has had an extensive 12:00:28
6 partnership with Wells Fargo Bank and Norwest Bank. 12:00:32
7 As a personal member of the Norwest Bank Minority 12:00:36
8 Advisory Council, we have provided input and set 12:00:42
9 goals with the other John Campbell from Arizona, and 12:00:44
10 top management on a number of key issues and factors 12:00:48
11 that affect our communities in Arizona. These 12:00:50
12 include mortgages, affordable housing, small 12:00:54
13 business lending, minority contracting, and 12:00:56
14 contracting with vendors. 12:01:00
15 Our small business and S.B.A. micro-loan 12:01:02
16 program have received loan loss reserve funds from 12:01:06
17 Norwest Bank and Wells Fargo Bank, which has helped 12:01:12
18 us lend over $2 million to over 225 companies, small 12:01:14
19 businesses, in Arizona in the last three years. 12:01:18
20 Norwest's deposit and Wells Fargo's $100,000 deposit 12:01:22
21 in our federal credit union has enabled us to lend 12:01:28
22 over $1.7 million to 16 hundred members of our 12:01:34
23 credit union. This is a real interesting concept 12:01:36
24 here of a bank lending to a credit union. 12:01:40
25 Most of these borrowers are first-time 12:01:44
128
1 borrowers and bilingual Spanish speaking. Norwest 12:01:46
2 and Wells Fargo's investment of CPLC small business 12:01:50
3 incubator has started the opportunity for small 12:01:56
4 businesses in south central Phoenix to access 12:01:58
5 affordable work space. A second business incubator 12:02:02
6 in Phoenix is currently under construction, and a 12:02:04
7 rural, small business incubator will go to 12:02:06
8 construction in Nogales, Arizona, along the 12:02:10
9 Arizona/Mexican border in early 1999. 12:02:10
10 Other investments and grants that we have 12:02:14
11 worked with with both institutions have targeted our 12:02:14
12 special events and organizational capacity building 12:02:18
13 in Phoenix and Tucson and other rural communities 12:02:22
14 that we serve. Our affordable housing programs in 12:02:24
15 Somerton, Nogales, Tucson, South Tucson, Guadalupe,
16 and Phoenix have also benefited. We have mortgages, 12:02:30
17 mortgage write-downs for closing costs, funds to 12:02:34
18 make housing affordable, investments of Norwest 12:02:36
19 staff. As board member of the Latino community for 12:02:40
20 Norwest, our organization and our subsidiary, boards 12:02:44
21 also contribute to the sound managements of our 12:02:48
22 organization.
23 Our expanding partnership with Karen Wegman, 12:02:54
24 Alonzo Morale, Edmundo Givalgo, with Wells Fargo 12:02:58
25 Bank has also been rewarding, in many instances very 12:03:00
129
1 creative and challenging, in that they have come to 12:03:02
2 us and asked us what kind of mortgage products do 12:03:04
3 our communities need, what kind of business 12:03:08
4 investments do we need to make our communities work? 12:03:10
5 Our purchase of a Wells Fargo Bank -- yes, we 12:03:14
6 purchased one of your banks in south central Phoenix 12:03:18
7 -- has enabled us to double the space of the Federal 12:03:22
8 Credit Union. We also maintain Wells Fargo as a 12:03:24
9 presence in this particular facility in the Grant 12:03:28
10 Park neighborhood, and it also provides incubator 12:03:30
11 space for small businesses and minority 12:03:34
12 entrepreneurs.
13 Wells Fargo's bank investment of $1,250,000 at 12:03:40
14 zero percent interest for five years with an 12:03:44
15 additional two percent over the next ten years, is 12:03:46
16 way beyond the cutting edge. These are the kind of 12:03:50
17 partnerships that we're interested in developing 12:03:54
18 with both institutions and continuing. This 12:03:56
19 investment expands our ability to lend to 12:03:58
20 micro-borrowers, create a venture capital pool, a 12:04:00
21 revolving line for new construction in Tucson for 12:04:06
22 our for-profit construction company, and it enables 12:04:10
23 us to leverage $600,000 to build a new office 12:04:14
24 building in Tucson and pay off an office complex 12:04:18
25 mortgage in a small rural town in southwestern 12:04:22
130
1 Arizona that leases office space from the state of 12:04:24
2 Arizona. 12:04:28
3 Funding of special projects, community 12:04:28
4 celebrations has made Wells Fargo a new power in the 12:04:32
5 Arizona bank market. Grants to organizations has 12:04:34
6 involved small business lending, social work, arts, 12:04:38
7 that round out a true concept of partnering in our 12:04:40
8 community: not just taking our deposits but actually 12:04:44
9 putting something back. 12:04:48
10 We would point to the exemplary record of staff 12:04:48
11 involvement and outreach in how community 12:04:52
12 reinvestment is truly done in America. Management 12:04:54
13 of both institutions still needs to work on board 12:04:56
14 membership. Upper level executives are still 12:05:00
15 lacking, but through our ongoing efforts, these are 12:05:04
16 problems we can solve together. Branching 12:05:08
17 duplication can be solved through partnership with 12:05:10
18 nonprofits that benefits the total community as well 12:05:12
19 as my first example of the Wells Fargo branch in 12:05:14
20 south central Phoenix. 12:05:16
21 Our community meetings with citizens and 12:05:18
22 organizations, community leaders in the upcoming 12:05:20
23 follow-up meeting state-wide leaves us with a strong 12:05:24
24 indication that more progress will occur with the 12:05:26
25 merged institution, and we encourage your positive 12:05:28
131
1 confirmation of this merger and invite you to visit 12:05:32
2 and seek community reinvestment at work in Arizona. 12:05:34
3 Thank you. 12:05:36
4
5 CHAIRPERSON SMITH: Ms. Gold.
6
7 MS. GOLD: My name is Autumn Gold, and I'm 12:05:42
8 from Denver, Colorado. I work for Atlantis
9 Community. I'd just like to thank you for giving me 12:05:48
10 this opportunity to speak today. Atlantis 12:05:50
11 Community, Incorporated is a 23-year old Colorado 12:05:52
12 not-for-profit corporation providing services to 12:05:56
13 people with disabilities in metro Denver, and, when 12:05:58
14 necessary, throughout Colorado. Atlantis services 12:06:04
15 include home health, housing benefits advocacy, 12:06:06
16 independent living skills training, basic education 12:06:10
17 and home ownership counseling and education. 12:06:16
18 Atlantis is recognized nationally for its work in 12:06:16
19 disability rights and for creating new and 12:06:20
20 innovative programs. 12:06:22
21 In 1992, Atlantis Community, Incorporated 12:06:22
22 brought to Norwest Bank a unique concept that became 12:06:26
23 the first home ownership mortgage program for people 12:06:28
24 with disabilities in America. In conjunction with 12:06:32
25 Atlantis, Norwest created the Disability Community 12:06:34
132
1 Home Mortgage Program, known as DCHOP. The DCHOP 12:06:38
2 home mortgage program for people with disabilities 12:06:44
3 was the first to offer an opportunity to participate 12:06:46
4 in the American dream of home ownership. 12:06:48
5 Norwest, at Atlantis's direction, developed a 12:06:50
6 program that accepts alternative income such as 12:06:54
7 social security, food stamps, tax credits, and much 12:06:56
8 more. High debt to income ratios play a large part 12:07:00
9 in success of the program as well as reduced closing 12:07:04
10 costs and only a two percent down payment. 12:07:08
11 The American dream of owning your own home was 12:07:10
12 just that, a dream for people with disabilities, 12:07:12
13 until Norwest introduced the DCHOP program in 1993. 12:07:14
14 Prior to the DCHOP program, people with disabilities 12:07:18
15 and their families' only choice was to rent an 12:07:20
16 apartment or someone else's home. That apartment or 12:07:24
17 home was most likely not accessible, either. With a 12:07:26
18 population that is 80 percent unemployed and living 12:07:30
19 on a fixed income from social security of $700 a 12:07:34
20 month or less, they had little chance to even dream 12:07:36
21 of home ownership. The DCHOP program offers more 12:07:40
22 than just a dream. It offers but does not guarantee 12:07:46
23 the reality of home ownership. People with 12:07:50
24 disabilities still must qualify for a home loan just 12:07:52
25 as everybody else. Norwest simply leveled the 12:07:54
133
1 playing field. 12:07:58
2 Norwest was bold to move to create the 12:07:58
3 Disability Home Ownership Program when no other 12:08:04
4 lending institution had the courage to take the 12:08:06
5 first step. They must be applauded. Had not 12:08:10
6 Norwest taken that step, people with disabilities 12:08:14
7 still today would be excluded from the American 12:08:16
8 dream. Those first steps designed a program that 12:08:18
9 has proved that people with disabilities could be 12:08:22
10 homeowners without high foreclosure rates and 12:08:24
11 without high delinquency rates. The DCHOP program 12:08:28
12 encouraged US Banks to create their Disability 12:08:32
13 Advantage Program because another lending 12:08:36
14 institution, Norwest, had taken the initial risk. 12:08:38
15 Norwest's success with the DCHOP program 12:08:42
16 brought Fannie Mae to Denver to learn about and to 12:08:46
17 study its workings. From that visit came Fannie 12:08:48
18 Mae's home choice program: 16 states, $50 million 12:08:52
19 pilot project modeled after the DCHOP program. 12:08:58
20 Fannie Mae's pilot project and US Bank's Disability 12:09:00
21 Home Advantage Program validates Norwest's wisdom in 12:09:06
22 1992. 12:09:06
23 After five years of providing home ownership 12:09:08
24 counseling, there is no doubt that these potential 12:09:12
25 home buyers have the ability and the desire to own 12:09:14
134
1 homes. Atlantis's home ownership program aspires to 12:09:16
2 increase awareness and availability of home 12:09:22
3 ownership opportunities for people with 12:09:26
4 disabilities. Atlantis's commitment is to assist 12:09:28
5 potential buyers in understanding the complex 12:09:32
6 process by providing them with the information that 12:09:34
7 along with their own determination will prepare them 12:09:38
8 to become homeowners and improve their quality of 12:09:42
9 life, like you said. 12:09:44
10 My goal is to see people feel confident about 12:09:46
11 the home buying process and comfortable with home 12:09:48
12 ownership, comfortable as homeowners armed with the 12:09:52
13 knowledge and empowered to make the important 12:09:54
14 decisions to undertake their responsibility of home 12:09:56
15 ownership. I personally and strongly believe in 12:10:00
16 home ownership counseling and education. And 12:10:02
17 partnered with the DCHOP program, Atlantis and 12:10:04
18 Norwest have pioneered home ownership for 12:10:08
19 individuals with disabilities. 12:10:12
20 It is Atlantis's hope that with the merger of 12:10:12
21 Norwest and Wells Fargo that the commitment to the 12:10:16
22 DCHOP not only continue but the size of the program 12:10:20
23 increase to reflect the size of the merger. To date 12:10:22
24 Norwest has provided 955 mortgages to people with 12:10:24
25 disabilities and families in Colorado, valued in 12:10:30
135
1 excess of $64 million. Norwest has made it possible 12:10:34
2 for people with disabilities to dream the impossible 12:10:38
3 dream of home ownership. Thank you. 12:10:40
4
5 CHAIRPERSON SMITH: Thank you. 12:10:42
6 Mr. Jimenez. 12:10:42
7
8 MR. JIMENEZ: Thank you, Governor Smith, 12:10:46
9 Board of Governors, and Federal Reserve staff. My 12:10:50
10 name is Pierre Jimenez. I'm the director of Denver 12:10:52
11 Community Television, but that's not why I'm here 12:10:54
12 today. I was originally solicited to become a 12:10:56
13 member of the Norwest community forum because of my 12:11:00
14 community activism. And when we were coming up in 12:11:02
15 the shuttle today, I felt a sense of ambivalence 12:11:08
16 seeing the demonstrators sitting on the side of the 12:11:10
17 sidewalk, because I think after hearing a lot of the 12:11:14
18 testimony today, you have to give validity to many 12:11:16
19 of the comments that were made, and so I would ask 12:11:18
20 the executives of Norwest and Wells Fargo to please 12:11:22
21 keep in mind what these people are saying because 12:11:24
22 much of this testimony comes from the heart. It's 12:11:28
23 what they believe to be true. Now we can quarrel 12:11:30
24 about the degree and the magnitude, but we can't 12:11:32
25 quarrel about the fact that it exists. Because, for 12:11:36
136
1 example, I can recall back in 1950, my father 12:11:40
2 returned from World War II and decided to become 12:11:44
3 part of the American dream as a Mexican American in 12:11:46
4 Denver, Colorado, first by becoming a licensed 12:11:50
5 electrician, the second one in the state, but more 12:11:54
6 importantly, trying to borrow $10,000 from a bank to 12:11:58
7 build a house, to begin building the foundation of 12:12:00
8 becoming part of the stakeholders in America. He 12:12:04
9 was denied that opportunity. Fortunately for him, 12:12:08
10 he had the opportunity to borrow from friends, and 12:12:10
11 they built this house. 12:12:14
12 In the same spirit that my father built that 12:12:16
13 house back 1950, 48 years ago, we are here today 12:12:20
14 discussing what CRA means to the American public. 12:12:24
15 And at the heart of that is loans to people to 12:12:28
16 become stakeholders in the American dream. 12:12:30
17 Now, it's been my experience with Norwest Banks 12:12:34
18 for the past several years that I've been on the 12:12:36
19 community forum that they have listened, often times 12:12:40
20 not very well, but they have changed their behavior, 12:12:42
21 sometimes reluctantly. And as one of them said, 12:12:46
22 well, if you drag us kicking and screaming into the 12:12:50
23 21st century, maybe it will do some good, and it 12:12:52
24 has, because what it's done, it's created an 12:12:56
25 opportunity for, one, more loans to low to moderate 12:13:00
137
1 income families seeking loans for mortgages since 12:13:04
2 I've been on the forum. 12:13:06
3 Secondly, what it's done is gone into other 12:13:08
4 areas where traditional banks have refused to go. 12:13:12
5 Several years ago we talked about a concept of urban 12:13:14
6 banking, which was creating branches, either loan 12:13:18
7 offices or full service branches, in inner city 12:13:22
8 neighborhoods. Some in the banking community said 12:13:28
9 it won't work. Poor people don't take advantage of 12:13:30
10 banking services or products. Well, today the 12:13:34
11 bottom line is -- and that's why we're here -- the 12:13:36
12 bottom line is banks are in the business to make 12:13:40
13 money. We know that, we're not going to argue that 12:13:42
14 point, but the fact of the matter is in Denver, 12:13:46
15 Colorado, they are making money in the inner city, 12:13:50
16 and they're meeting their bottom line. And when you 12:13:52
17 meet your bottom line that means then you can move 12:13:54
18 on to other areas. So they've expanded loans to 12:13:56
19 small businesses, and I speak specifically about 12:14:00
20 people of color. 12:14:02
21 Beyond that, they're taking a look now about 12:14:04
22 micro loans, smaller amounts to people who really 12:14:06
23 have an idea. The concept of entrepreneurship, 12:14:10
24 especially in the Latino community, is huge. What 12:14:16
25 they need is the opportunity to find a way to make 12:14:20
138
1 it happen. Norwest Banks in Denver is making that 12:14:22
2 happen. 12:14:26
3 Now you had an earlier speaker that talked 12:14:26
4 about how wonderful Wells Fargo was, and they may 12:14:28
5 be. You know, the agreements to provide billions of 12:14:34
6 dollars of loans to people of color I think is 12:14:34
7 important. At the same time, let's not forget that 12:14:38
8 banking is more about personal relationships than 12:14:40
9 products or services. It's about the one-to-one 12:14:44
10 personal contact. I really don't care if the bank 12:14:50
11 president comes down to greet me in the lobby. 12:14:52
12 However, I do care if somebody treats me with 12:14:54
13 dignity and respect as an individual, and I think 12:14:58
14 the people that I represent or that I consider to be 12:15:02
15 constituents are those type of individuals. 12:15:06
16 Otherwise, one fourth of the American public would 12:15:08
17 be taking advantage of banking services. 12:15:12
18 So I would say to you at the point in this 12:15:14
19 discussion that we asked about this merger, I would 12:15:16
20 have us keep in mind if we're providing a service to 12:15:20
21 the American public that will make us a stronger 12:15:24
22 country and still meet the bottom line, then let's 12:15:26
23 add that final bid of compassion that people talked 12:15:30
24 about earlier and will talk about this afternoon so 12:15:34
25 that we can become the country that we have always 12:15:38
139
1 been and can become even greater than we know. 12:15:40
2 Thank you. 12:15:44
3
4 CHAIRPERSON SMITH: Thank you. We'll go 12:15:46
5 to Ms. Tingerthal. 12:15:46
6
7 MS. TINGERTHAL: That's correct. Thank 12:15:50
8 you. 12:15:50
9 Good afternoon. My name is Mary Tingerthal, 12:15:50
10 and I'm the president and chief executive officer of 12:15:52
11 the National Equity Fund, commonly referred to as 12:15:56
12 NEF. I'm also here speaking on behalf of National 12:16:00
13 Equity Fund's parent organization, the Local 12:16:02
14 Initiatives Support Corporation, commonly referred 12:16:06
15 to as LISC. 12:16:08
16 To understand our long-term relationship with 12:16:10
17 Wells Fargo and Norwest, let me first explain who 12:16:14
18 LISC and NEF are. LISC is the nation's largest 12:16:18
19 community development intermediary and is a 12:16:22
20 certified community development financial 12:16:24
21 institution. In that role LISC often serves as an 12:16:26
22 intermediary for banks like Norwest and Wells Fargo 12:16:30
23 to invest in low income communities. 12:16:32
24 Since its founding 19 years ago, LISC has 12:16:36
25 helped nearly 18 hundred community development 12:16:38
140
1 corporations, like many of those that you've heard 12:16:42
2 from today, in more than a hundred cities and rural 12:16:44
3 areas across 39 states and Puerto Rico. In this 12:16:48
4 work, LISC has attracted the support of almost 2,000 12:16:50
5 donors and investors, including Norwest and Wells 12:16:56
6 Fargo. 12:17:00
7 Through that support, LISC has raised $3.1 12:17:00
8 billion in grants, loans, and equity investments, 12:17:06
9 and an additional $3.5 billion of public and private 12:17:08
10 support has been leveraged by those dollars. That's 12:17:12
11 meant 80,000 affordable homes and over 12 million 12:17:14
12 square feet of community facilities, commercial and 12:17:18
13 industrial space. 12:17:22
14 Both Norwest and Wells Fargo have been 12:17:24
15 instrumental in their support of LISC in bringing 12:17:26
16 about revitalized neighborhoods in the cities where 12:17:28
17 they operate by working with LISC and NEF. NEF is 12:17:32
18 the largest nonprofit syndicator of the federal 12:17:38
19 government's low income housing tax credits. 12:17:40
20 For 11 years now we've used that program to 12:17:44
21 stimulate investment in affordable housing built and 12:17:46
22 operated exclusively by nonprofit organizations that 12:17:50
23 work exclusively within their communities. 12:17:54
24 To date, we've raised nearly $2 1/2 billion 12:17:56
25 from 140 investors, which has resulted in over 12:18:00
141
1 44,000 rental homes targeted to low income families. 12:18:04
2 LISC and NEF are national organizations, but we 12:18:10
3 operate very much on a local level, and we rely on 12:18:14
4 local decision-making and local leadership such as 12:18:18
5 that that's been provided by numerous individuals in 12:18:22
6 our local programs by executives from Wells Fargo 12:18:26
7 and Norwest. 12:18:30
8 I can point to Norwest and Wells Fargo being 12:18:32
9 instrumental in community development because of 12:18:34
10 their historical core contributions to LISC and 12:18:36
11 their continuing investments in NEF, as well as 12:18:40
12 their long-term active involvement in the local 12:18:44
13 communities on a first-hand basis. 12:18:48
14 From 1989 through today, Norwest has invested 12:18:52
15 almost $14 1/2 million in LISC and NEF, with $14 12:18:56
16 million of that being NEF investments since 1990, 12:19:00
17 and about 350,000 in grants to LISC since 1989, 12:19:04
18 which supports six of our local programs, in 12:19:10
19 Minneapolis, Duluth, Las Vegas, Milwaukee, Phoenix 12:19:14
20 and St. Paul. 12:19:18
21 From 1983 through today, Wells Fargo Bank has 12:19:20
22 invested over $120 million with LISC and NEF. This 12:19:24
23 total includes approximately $117 million in equity 12:19:30
24 investments in our national fund and our California 12:19:34
25 fund, with Wells Fargo serving as one of our very 12:19:38
142
1 first investors when the low income housing tax 12:19:42
2 credit was created. It also includes almost $3 12:19:46
3 million in grants to LISC since 1983, which supports 12:19:48
4 seven local programs, which include the San 12:19:54
5 Francisco bay area, Houston, Las Vegas, Los Angeles, 12:19:56
6 again Phoenix, San Diego, and Puget Sound, as well 12:20:00
7 as LISC's national rural program. 12:20:06
8 The financial support from Norwest and Wells 12:20:10
9 Fargo over the years has been matched in many places 12:20:14
10 by the people leadership as bank executives serve on 12:20:16
11 our advisory committees in eight of our local 12:20:20
12 programs and also with our rural LISC program. 12:20:24
13 I heard a comment earlier today from someone 12:20:28
14 indicating that they were disappointed at the use of 12:20:30
15 intermediaries by these banks in providing services, 12:20:34
16 particularly in rural areas. I can understand that 12:20:36
17 there's some disappointment at the loss of banking 12:20:40
18 presence, but I do applaud these organizations for 12:20:44
19 reaching out in ways that may be unconventional to 12:20:46
20 continue to serve these important organizations. 12:20:50
21 We do urge that as the bank executives approach 12:20:54
22 the merger that they consider not stepping away from 12:20:58
23 the level of investment that they've shown to LISC 12:21:02
24 and NEF in the past, but to continue those levels 12:21:04
25 and to continue their support of community 12:21:08
143
1 development. Thank you. 12:21:10
2
3 CHAIRPERSON SMITH: Thank you. Any 12:21:14
4 questions? Okay. If not, then we thank you very 12:21:14
5 much, and we were scheduled to reconvene at 1:30. 12:21:22
6 We are hoping to -- we were scheduled to reconvene 12:21:32
7 at 1:30. We would like to reconvene at 1:15. It 12:21:36
8 will depend on whether we can assemble the 1:30 12:21:42
9 panel to be here at that time. So you might try to 12:21:44
10 be back here by 1:15. 12:21:50
11
12 VOICE: We will be here at 1:15. 12:21:54
13
14 CHAIRPERSON SMITH: Great. Then we'll 12:21:56
15 start at 1:15 and see you then. 12:21:56
16
17 (Recess taken.)
18
19
20
21
22
23
24
25
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1
2 STATE OF MINNESOTA)
) ss. CERTIFICATE
3 COUNTY OF RICE )
4 Be it known that I took the testimony and
proceedings in the matter of Norwest Bank and Wells
5 Fargo Bank, had on the 17th day of September, 1998, at
Minneapolis, Minnesota;
6
7 That I was then and there a Notary Public in and for
the County of Rice, State of Minnesota, and that by
8 virtue thereof, I was duly authorized to administer an
oath;
9
10 That the testimony and proceedings were recorded in
shorthand by me and transcribed into typewriting under
11 my direction and that the transcript is a true record of
the proceedings to the best of my ability;
12
13 That I am not related to any of the parties hereto
nor interested in the outcome of the action.
14
15 WITNESS MY HAND AND SEAL this ____ day
of _______________, 1998.
16
17
18 ______________________________
Holly J. Nordahl
19
20
21
22
23
24
25
145
1 (Hearing resumed after lunch break.)
2
3 CHAIRPERSON SMITH: Okay. We are
4 ready with Panel Number 7. And we are going to
5 start with Dana Wise.
6
7 MR. WISE: Thank you, Miss Smith and
8 the Federal Reserve.
9 My name is Dana Wise, and I do bank
10 research for the Strategic Projects Department
11 of the United Steelworkers of America. I'm also
12 a member of a community-based coalition of
13 nonprofit housing and community developers in
14 New Mexico. And as part of that coalition, I
15 was party to the development of a 1.3 billion
16 dollar community lending initiative recently
17 announced by Norwest and Wells Fargo for New
18 Mexico. The Steelworkers Union praises this and
19 the recent California commitment for increased
20 lending to working families and their
21 communities. The Wells Fargo has questioned our
22 motives and involvement in pushing for this
23 review of their treatment of working families in
24 their communities. Wells Fargo should not
25 underestimate the union's commitment to defend
146
1 the interests and needs of its members, their
2 families and their neighborhoods. The
3 Steelworkers Union has more than 700,000 members
4 nationwide. Our members are a part of families,
5 and these families are a part of their
6 communities. These communities pay taxes. They
7 support our country's financial system. And our
8 members are also part of communities that make
9 deposits at Well Fargo. It is the union's duty
10 to insure that these resources are used in a
11 manner that promotes decent living-wage jobs,
12 affordable housing and community economic
13 development. The union will continue to work
14 hard to support the efforts of allies here in
15 Minnesota, in Iowa, in Wisconsin, in Texas, in
16 Washington and Los Angeles to improve the
17 performance of Wells Fargo in serving the best
18 interests of working families and their
19 neighborhoods.
20 Last month we published research on the
21 recent community lending performance of Wells
22 Fargo. We've shared this research broadly with
23 CRA advocates, local government officials and
24 the media. The research on Wells Fargo's CRA
25 performance showed a bank hungry for fees from
147
1 retail customers, a bank that was especially
2 unfocused on serving the needs of its primary
3 service area, especially low-income areas and
4 rural areas, and a bank that promotes high-tech
5 marketing over traditional banking, even when it
6 appears that these methods make the bank less
7 able to serve low-income and minority
8 communities.
9 I'm speaking here about Wells Fargo's
10 published commitments that it is leading world
11 communities, its heavy reliance on borrow or
12 profarming data bases for its small business
13 lending and small farm lending and its heavy
14 reliance on the Internet and high technology for
15 the delivery of financial services.
16 Among the principal findings of our study
17 were over the past three years following the
18 takeover of First Interstate by Wells Fargo, in
19 the majority of cities and towns where Wells
20 Fargo pursued its branch consolidation and
21 restructuring, these changes negatively affected
22 low-income Spano and other minority
23 communities. Also, Wells Fargo closed a
24 disproportionate number of branches in
25 nonmetropolitan areas. And in 70 percent of
148
1 counties where Wells Fargo made small business
2 and small farm loans, the bank failed to match
3 its competitors in its relative level of service
4 to low-income communities. Wells Fargo's
5 primary response to our research has been to
6 question the appropriateness of a union showing
7 concern about a bank's lending to low-income and
8 minority families. Predictably, Wells Fargo
9 also challenges the study's methodology. But
10 it's clear from their response that they never
11 bothered to read past the executive summary.
12 The union stands by the findings of its study.
13 And we ask that this document be included as
14 part of the written record of this testimony.
15 Furthermore, we urge Wells Fargo to get to
16 work with community-based fair lending and CRA
17 coalitions in the 19 other states that will be
18 impacted by this merger. Wells Fargo must agree
19 to address the charges that the bank's practices
20 hurt the working families and their
21 communities. The union will join its resources
22 with those of its allies in the community
23 development movement. And those are the 13.2
24 million member AFL/CIO to bring Wells Fargo to
25 justice. Until that happens, the AFL/CIO has
149
1 asked its 73 international unions, their 30,000
2 local unions and individual members in every
3 state to close any institutional or personal
4 accounts that they have with Wells Fargo.
5 AFL/CIO President John Sweeny said, "Our resolve
6 in this matter will send a clear signal not only
7 to Wells Fargo, but to other banks that would
8 use our own deposits against working families
9 and our unions."
10 Thank you.
11 CHAIRPERSON SMITH: Thank you.
12 Miss Gallardo?
13
14 MS. GALLARDO: Hello. I'm Joyce
15 Gallardo. And I'm here from Pueblo, Colorado on
16 behalf of the United Steelworkers of America and
17 our local union, 3267. I appreciate the
18 opportunity to testify today.
19 And I would like to voice my objection to
20 the merger of Norwest and Wells Fargo and
21 introduce you in a personal manner to my
22 struggle and personal nature in which my union
23 brothers and sisters are being affected by the
24 refusal of Oregon Steel Mill to bargain in good
25 faith with our union and allow us to return to
150
1 work.
2 A few months prior to staff forcing us out
3 on strike, October 3rd, 1997, I purchased a
4 small hotel in a town 35 miles west of Pueblo.
5 I planned to refurbish it and have it ready to
6 open by December of 1997. The main purpose in
7 undergoing this project was a means of
8 supplementing what would be a very meager
9 retirement income and to get it up and running
10 and well-established before my retirement. The
11 building now sits empty except for one room in
12 the back of the hotel that I occupy. Because of
13 the mortgage payments on this empty building, I
14 am forced to live in extreme uncomfortable
15 conditions. And after 32 years with one
16 company, I'm only one step above the homeless.
17 The winter of 1977 began with a strike of
18 October 3rd and a denial of unemployment
19 compensation. After being out of work a month
20 and a half, I accepted a position with a
21 telemarketing firm where I earned a whopping $6
22 per hour. Working for this wage, I knew I could
23 make the mortgage payment, put gas in my car and
24 drive the 35 miles back and forth to work, but
25 all other expenses would have to be kept to a
151
1 minimum. I knew I could not afford to fire up
2 the boiler in this 6,000 square foot building,
3 so I attempted to survive the winter using two
4 space heaters. And once a week, I would turn on
5 the convection oven in the kitchen -- quotes --
6 and prepare enough food for an entire week, then
7 just reheating in the microwave as I wanted to
8 eat, all in an attempt to keep my expenses
9 down. I thought I was home free. I thought I'd
10 made it through the winter with my space heaters
11 when one night in late February I arrived home
12 after dark. And when I opened the door, I
13 stepped into water up to my ankles. I thought I
14 had all the pipes upstairs turned off and
15 draining, but the old plumbing had played a
16 terrible trick on me. Water was pouring through
17 the ceiling in the lobby. Now I had more to do
18 to the building, no money, no hope of being able
19 to qualify for another loan to do any
20 construction, no place to turn. Another
21 winter's coming up, and I'm going to be in the
22 same predicament that I was last year; no money
23 to fire up the boiler, no way to get out of this
24 situation that I am in. Even though interest
25 rates have dropped almost two percent below what
152
1 my mortgage is set at, I can't qualify to
2 refinance my loan, which, if I could, would drop
3 my payments considerably.
4 Many of my union brothers and sisters are
5 going through at least as desperate a situation
6 as I am, and some have it much worse. One of
7 our union brothers took his own life at the
8 beginning of summer. This rocked all of us,
9 thinking that we saw this brother several times
10 a week and didn't realize what pain he was in.
11 He had lost his wife to cancer ten months
12 earlier. And that is when we worried about
13 him. He was in his early middle years, had no
14 children at home, and his whole life revolved
15 around his wife. But he made it through those
16 months and now we lost him to this. I know of
17 at least four couples personally that are going
18 through a divorce even though before this work
19 stoppage they seemed to have a very stable
20 marriage. Quite a few of our brothers and
21 sisters have had to find work in other cities
22 and are now trying to support two households on
23 top of being separated from their families at
24 least during the week. And many of them are not
25 even close enough to come home on weekends.
153
1 This has been a few of the many problems brought
2 on by this company's refusal to bargain in good
3 faith. And although the company has suffered a
4 tremendous loss and continues to lose money
5 daily, much to our dismay, Wells Fargo Bank and
6 some other smaller banks continue to bankroll
7 CF&I. They've now changed their name to Rocky
8 Mountain Steel, and I'm not sure of the real
9 purpose in that. But as long as this practice
10 continues of Wells Fargo bankrolling CF&I, the
11 longer CF&I will remain in a position to keep us
12 off of our jobs. This is a union town. The
13 economy of Pueblo was built around CF&I and the
14 steelworkers.
15 When we began this strike, our local banks
16 worked with our union brothers and sisters on
17 their personal loans and mortgages, allowing
18 them to pay only the interest in some instances
19 and giving them deferred payments in other
20 cases. As far as I can determine, Norwest Bank
21 did not offer any leniency for any type of
22 payments. A bank has an obligation to help the
23 communities they move into. And I cannot even
24 imagine Wells Fargo being a part of this
25 community after turning their backs on the union
154
1 workers to help finance CF&I in their efforts to
2 break our union. And what is worse, even though
3 they know how it's affecting our people, they
4 continue this practice.
5 On behalf of the membership of Locals 2102
6 and 3267, I want to thank you all for listening
7 to me. I appreciate the opportunity.
8 CHAIRPERSON SMITH: Thank you. And
9 would you make sure that our -- that our Federal
10 Reserve staff have a copy of your statements? I
11 know yours is in writing so --
12 MR. WISE: Okay.
13 CHAIRPERSON SMITH: -- if we can make
14 a copy? And then we'll go to Miss Pacheco.
15 MS. GALLARDO: Certainly. Whatever
16 works.
17
18 MR. PACHECO: My name is Howard
19 Pacheco. I would like to thank this board for
20 allowing me this opportunity to speak on behalf
21 of my Local 2102 and 3267.
22 For 31 years I worked as a steelworker.
23 Working in the steel mill is not easy work.
24 It's hot, it's dirty, and it's dangerous. It
25 takes teamwork. Because of this, your fellow
155
1 employees become family. My extended family and
2 I have been through a lot. In order to keep the
3 Pueblo plant productive, we made sacrifices. We
4 took wage cuts, combined jobs, gave up our
5 incentive rate, which was one-third of our pay,
6 increased health care premiums and much more.
7 We as a family thought the worst was behind us.
8 We were forced out on strike because of unfair
9 labor practices by the company, Oregon Steel
10 Mill. October 3rd, 1997, we offered to return
11 to our jobs. The company said no to 1,100 and
12 took back only 27 employees. Wells Fargo bailed
13 out the company twice, possibly three times.
14 This is not the first time Wells Fargo has lent
15 money to a company in the mist of -- in the
16 midst of a labor dispute. The undue hardships
17 caused by Wells Fargo can never be mended. We
18 have had numerous divorces and separations, and
19 one of the other brothers committed suicide.
20 Many of my fellow brothers and sisters have
21 cashed in their 401K plans to sustain themselves
22 and their families. Some have had their autos
23 repossessed. The list of hardships goes on and
24 on.
25 I have been on the picket line and seen
156
1 replacement workers flash $100 bills or their
2 paychecks and then flip us off as they drive by
3 with their new cars. Let me tell you, it hurts
4 when you know it's Wells Fargo who is financing
5 all this misery. Heaven only knows what it
6 would be like if Wells Fargo were allowed to
7 merge with Norwest Bank. There are no Wells
8 Fargo Banks in Pueblo, but there are Norwest
9 Banks in our town. I have seen with my own eyes
10 what Wells Fargo has done to my family and from
11 a thousand miles away and heard with my own ears
12 what they have done to the people in
13 San Francisco. I'm afraid of what they might do
14 to my family next.
15 Thank you.
16 CHAIRPERSON SMITH: Go ahead.
17
18 MS. PACHECO: I'd like to thank the
19 board for allowing me to testify today. My name
20 is Jan Pacheco. I'm the wife of Howard
21 Pacheco. We're here today representing the
22 Unites Steelworkers of America and 1,100
23 families in Pueblo, Colorado.
24 Have you ever attended a church service and
25 seen the hostility in the eyes of one toward
157
1 another or have you ever been the playground
2 monitor for your son's or daughter's elementary
3 school and heard "I can't play with you. You're
4 daddy's a scab." Or even worse, close knit
5 families being destroyed because one in the
6 family chose to not cross the picket line and
7 another did. I have, and it's happening in
8 Pueblo, Colorado. It's happening because Wells
9 Fargo Bank is the key lender to a company my
10 husband works for, Oregon Steel Mill, a company
11 who has illegally replaced him and 1,100 other
12 workers in Pueblo, Colorado, a company who is
13 hell bent on destroying our families and our
14 community.
15 The bank is just as guilty because they are
16 lending the company money to sustain them during
17 this struggle, a bank which has extended the
18 company's credit line twice and just recently a
19 third time, a bank who claims they are not
20 involved in our struggle.
21 During the last year, I have had the honor
22 of standing beside my husband talking to
23 churches, organizations, politicians, union and
24 union members about our struggle. Most
25 recently, Howard and I have been in the City of
158
1 San Francisco, the home base of Wells Fargo
2 Bank. We placed an ad in the "Bay Guardian"
3 newspaper. The ad read, "We're unhappy with
4 Wells Fargo. Are you? Have you had problems
5 with poor customer service or hidden fees?
6 We're conducting a study of dissatisfied
7 customers. Tell us your story."
8 We were shocked at the number of responses
9 we received. Hundreds of complaints came in.
10 And here are some direct quotes from those phone
11 calls. These are only a few of the quotes that
12 I have for you today.
13 Number one, "I got the $25 miskeyed entry
14 fee for accidentally putting the wrong amount in
15 the ATM and was absolutely shocked. I can
16 hardly -- I had hardly ever checked my bank
17 statement, but I went back through them and
18 started finding all these ridiculous fees."
19 A second one said, "They closed down the
20 branch in my neighborhood and left ATMs there so
21 that no other bank can move in. They're
22 clearly -- they've clearly cut down their
23 employee staff, increased the amount of time you
24 have to wait, increased their fees. They have
25 done just about everything wrong so far as
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1 keeping up good employees and customer
2 relations, trying to increase their profit
3 margin as much as possible without worrying
4 about customer service."
5 Number three, "In the last four months,
6 Wells Fargo has reneged on their promise of free
7 lifetime checking. Suddenly they are going to
8 charge me $7 a month. They're real sorry about
9 it. And I've written them a letter telling them
10 where to stick their stagecoaches."
11 Number four, "There are fees for just about
12 everything. There are fees to get my checks
13 back. There are fees to keep my checks. There
14 are fees to go into the branch rather than the
15 ATM. There's fees to go to the other ATMs."
16 The list goes on.
17 Our seniors also spoke out. "I was a First
18 Interstate customer before Wells Fargo merged
19 with First Interstate and was grandfathered in
20 on free checking. They changed the rules
21 several times, charging me fees and finally went
22 back on their promise totally."
23 And number six, "I was mistakenly charged a
24 fee for a bounced check. I was supposed to call
25 every day to see what happened to my money, so I
160
1 called. They charged me for those calls. I had
2 to take off work three times to be able to speak
3 with the representative. It took me months to
4 get this fee off my account even though they
5 were responsible."
6 If Wells Fargo and Norwest Bank merge, our
7 fear is, what is going to happen next given
8 Wells Fargo's track record?
9 Thank you.
10 CHAIRPERSON SMITH: Thank you.
11 Miss Rosenthal?
12
13 MS. ROSENTHAL: Good afternoon. My
14 name is Mary Rosenthal. And I am the Minnesota
15 State Director for the National AFL/CIO. Thank
16 you very much for this opportunity to testify.
17 The AFL/CIO's member unions represent 400,000
18 working people here in Minnesota and hundreds of
19 thousands more within Northwest -- Norwest's
20 service area. This is a region of farms and
21 small towns, highly vulnerable to capital
22 draining by distant financial institutions. The
23 Wells Fargo/Norwest merger is the takeover of a
24 regional giant with a poor record of serving
25 working people by a giant national bank with a
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1 worse record. Wells Fargo's merger with Norwest
2 will pass control of our region's largest
3 financial institution to a West Coast bank that
4 by its nature and as a result of the business
5 strategies it has chosen to pursue cannot be
6 focused on the financial service needs of our
7 communities. Wells Fargo is 181st out of the
8 top 200 financial institutions in its
9 reinvestment rate in the primary service area
10 communities from which it takes deposits. A
11 study by our affiliate, the United Steelworkers
12 of America, has shown that Wells Fargo's
13 definition of its service areas in the southwest
14 has excluded lower income census tracks. Wells
15 Fargo's loan origination and management programs
16 is data based and Internet driven with a
17 decreasing emphasis on loan officers who know
18 the communities in which they lend.
19 On the consumer side, Wells Fargo is a
20 leader in charging high fees for basic banking
21 fees and in closing branches in low-income
22 communities. Norwest service area includes a
23 variety of communities vulnerable to the
24 withdrawal of financial services. Large cities
25 with substantial low and moderate-income
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1 communities like Minneapolis, St. Paul and
2 Denver where Norwest's record has already been
3 poor, smaller towns and rural areas dependent on
4 agriculture that have been repeatedly devastated
5 by commercial banks' withdrawal from the
6 agriculture credit markets and areas of extreme
7 rural poverty, like the Pine Ridge Indian
8 Reservation in South Dakota, Norwest's record in
9 these communities has already been the subject
10 of prior protests by AFL affiliates -- AFL/CIO
11 affiliates to the Board of Governors. For all
12 these communities, this merger promises more
13 expensive and less accessible financial
14 services. In fact, even before the merger has
15 been approved, Norwest appears to be raising a
16 variety of fees to match levels at Wells Fargo.
17 This merger also promises to create more towns
18 like Pueblo, Colorado, where Wells Fargo has
19 financed a savage campaign to break the
20 Steelworkers Union at Oregon Steel, a campaign
21 that has illegally denied a thousand people the
22 middle class jobs that were a foundation of that
23 community's economic strength.
24 Wells Fargo claims that this is somehow not
25 an issue affecting its treatment of its service
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1 area. We think it exemplifies Wells Fargo's
2 outright hostility to the needs of working
3 families as consumers of financial services and
4 as contributors to the economic well-being of
5 the bank's service. We oppose this merger
6 because it will not benefit the working families
7 of this region and because we believe Wells
8 Fargo has not complied with the Community
9 Reinvestment Act in its current service area.
10 Finally, we urge the Federal Reserve not to
11 accept empty assurances from Wells Fargo. Wells
12 Fargo has a history of mischaracterizing the
13 impact of its merger activities on its
14 constituencies. When Wells Fargo acquired First
15 Interstate, it announced it would destroy
16 only -- in quotes -- 7,200 jobs. And then after
17 the deal was done, Wells Fargo said it would
18 really be 10,000 jobs. And then it turned out
19 it was really 14,000 jobs, almost twice what
20 they told regulators and the public when they
21 were getting approval for the merger. The
22 AFL/CIO would be pleased to work with the
23 Federal Reserve in its further consideration of
24 this merger to insure the Community Investment
25 Act is complied with and that the interests of
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1 the working families in both bank service areas
2 are protected.
3 Thank you.
4 CHAIRPERSON SMITH: Thank you. We
5 have Mr. Kamp speaking on behalf of Mr. Lee.
6
7 MR. KAMP: Okay. Thank you. Now, I
8 get to wear two hats today, so -- good
9 afternoon, Ms. Smith, and other members of the
10 Panel. This is the testimony of Matthew Lee,
11 Executive Director of Inner City Press,
12 Community on the Move of the Inner City Public
13 Interest Law Center. Together, ICP, which Marv
14 Kamp with the Wisconsin Rural Development Center
15 has been kind enought to present. ICP on August
16 21st filed a protest to this application based
17 on Norwest's disparate lending record,
18 particularly of its high interest rate,
19 so-called subprime subsidiaries and based on the
20 Federal Reserve Board's withholding of all
21 information about Norwest's divestiture
22 proposal. The comments that Wells Fargo has
23 made in California -- the commitments that Wells
24 Fargo has made in California does nothing to
25 address this issue.
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1 Norwest, the applicant here, is one of the
2 largest mortgage lenders in the country. The
3 disparities in its mortgage lending record are
4 troubling, particularly but not only in the
5 overlap markets.
6 Some examples: In 1996 Norwest Bank Texas
7 South denied 46 percent of the applications from
8 Hispanics and only 7 percent of the applications
9 from Whites.
10 Norwest Bank, Midland, Texas denied 61
11 percent of the applications from Hispanics and
12 only 13 percent of the applications from
13 Whites. Norwest Bank Texas Kelly Field denied
14 49 percent of the applications from Hispanics
15 and only 14 percent of the applications from
16 Whites. And only 18 -- okay.
17 Norwest Bank Texas denied 46 percent of the
18 applications from African Americans, 40 percent
19 of the applications from Hispanics and only 19
20 percent of the applications from Whites.
21 When ICP raised these issues in 1996,
22 Norwest was acquiring Prudential Home Mortgage.
23 Norwest responded with a letter dated April
24 30th, 1996 to Mr. James Lyon of this Federal
25 Reserve Bank of Minneapolis in which Norwest
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1 acknowledged that, quote, "Norwest Mortgage's
2 record of minority lending is below market
3 average in some markets. To address the needs
4 of the markets with high concentrations of
5 minority populations, Norwest Mortgage has
6 committed to hiring of a community development
7 loan officer to focus on the underserved
8 communities," unquote.
9 Here, however, was Norwest Mortgage's full
10 year 1996 lending record in the New York City
11 MSA. For full year 1996, Norwest Mortgage had
12 more than twice the market share of loans to
13 Whites than to African Americans, as well as a
14 denial rate disparity for African Americans
15 significantly above the industry average in this
16 MSA. It cannot be said that Norwest Mortgage
17 denial rate disparity is explained or justified
18 by greater than average outreach to the
19 minorities given the market share numbers.
20 Question. Did Norwest Mortgage ever take
21 steps it said it would in this April 30th, 1996
22 letter to the Federal Reserve? Was it ever
23 followed up on? Neither Norwest's application
24 nor the Federal Reserve's questions to date
25 address this in any detail. Similarly, were
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1 Norwest's representations about improving
2 Prudential Home Mortgage's lending disparities
3 ever followed up on? Our experience is no.
4 Norwest Funding, Incorporated, nationwide
5 in 1996 made 6,521 loans to Whites and only 228
6 loans to African Americans and only 252 loans to
7 Hispanics. In the New York City MSA in 1996,
8 Norwest funding made 101 loans to Whites, only
9 10 loans to African Americans and eight loans to
10 Hispanics. Meanwhile, in the predominantly
11 minority South Bronx of New York City, Norwest
12 has opened an office of its high interest rate
13 Island Finance subsidiary. ICP members have
14 been informed that Norwest's Island Finance
15 office charges virtually all borrowers for
16 personal loans 25 percent interest, the absolute
17 maximum under New York usury prohibitions.
18 Borrowers, virtually all of them protected
19 class, are charged 25 percent regardless of
20 their credit history.
21 The public has also been denied access to
22 information, assessing and commenting on this
23 proposal. Norwest has sought confidential
24 treatment for all information specifying its
25 divestiture proposal. The public has a right to
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1 review and comment on Norwest's actual proposal,
2 including its divestiture proposal. ICP filed a
3 Freedom of Information Act appeal on August
4 21st, 1998. The information has yet to be
5 released.
6 On the current record, this mega merger
7 proposal, which would expand Norwest's
8 practices, could not legitimately be approved.
9 There are other adverse issues, including
10 Norwest's record in its existing states, ably
11 raised by the Wisconsin Rural Development Center
12 and the other groups represented here today.
13 For all the reasons stated, this proposed merger
14 should be denied. Thank you for your
15 attention. We will be submitting further
16 comments by April -- September 24th, 1998.
17 Thank you.
18 CHAIRPERSON SMITH: Thank you.
19 Questions? Thank you very much for coming
20 here today. And again, be sure to give us a
21 copy of your written comments.
22 MS. GALLARDO: Thank you very much.
23 CHAIRPERSON SMITH: We'll move on to
24 the next panel, Panel Number Eight. And we'll
25 start with Ms. Caplan.
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1
2 MS. CAPLAN: Good afternoon. My name
3 is Karen Caplan. I'm the President and CEO of
4 Fried's, Incorporated. We're the nation's
5 premier marketer of specialty produce. We're
6 located in Los Angeles, California. And we're
7 the company that introduced the kiwi fruit to
8 America 36 years ago. Through our produce
9 companies, we employ about 100 people. We do
10 about 25 million dollars in business and
11 distribute our specialty produce all over the
12 United States to supermarkets and restaurants.
13 We've been in business for 37 years. It's a
14 family-owned business. It was started by my
15 mother in 1962. And my sister and I purchased
16 the company from our parents in 1990.
17 For over 30 years, our banking relationship
18 was with First Interstate Bank. And, of course,
19 about three years ago our bank merged with Wells
20 Fargo. Frankly, at that time I was absolutely
21 disgusted with our relationship with First
22 Interstate and was planning on shopping around
23 for a new bank anyway. Because I had become
24 familiar with Wells Fargo through my association
25 with the National Association of Women Business
170
1 Owners -- NAWBO -- it seemed less trouble to go
2 ahead and try Wells Fargo out.
3 Well, I have to admit, Wells Fargo really
4 impressed us. First, contrary to what you heard
5 today, their transition through the merger was
6 relatively smooth. The things that really stuck
7 out in our office is that we are able to do all
8 of our transactions electronically, wire
9 transfers, all of our international business.
10 We actually speak with our banking officers more
11 frequently than we ever did with our officers at
12 First Interstate. And they've actually worked
13 with us to customize our services and reduce our
14 cost of doing business. But most importantly,
15 for the first time in the history of our company
16 about a year and a half ago, we decided we
17 needed a line of credit. Many of our big
18 supermarket suppliers have slowed down their
19 payments to us, and we wanted to maintain our
20 quick payment with our suppliers.
21 So we worked with Wells Fargo. We did shop
22 other banks at that time. And Wells Fargo was
23 fabulous. They walked us through the process.
24 Two of the banking officers came to our
25 facility, helped us fill out the paperwork, got
171
1 it through very quickly. And actually, their
2 rates were very competitive.
3 Well, the line came up for renewal earlier
4 this year. And sadly, my father had just passed
5 away at the time the application was due. And I
6 was a bit nervous making that time schedule.
7 Well, Sue, our contract rep in Phoenix, was
8 great. She extended our credit line for a
9 couple months. She worked with me on the
10 paperwork, just hand walked everything through.
11 We met the deadline and our credit line was
12 continued.
13 So as a customer and as a merger survivor,
14 I want to compliment Wells Fargo as a bank.
15 They've been extremely service-oriented. And
16 even though our main bank contact is in Phoenix
17 quite a ways away, we've had a better working
18 relationship than we ever had with First
19 Interstate.
20 Now, with my remaining time, I'd like to
21 share with you how Wells Fargo is an excellent
22 corporate citizen. I'm a member of NAWBO, the
23 National Association of Women Business Owners.
24 We represent the over eight million women
25 business owners in the United States. I served
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1 as the president of the LA Chapter of NAWBO from
2 1995 to 1997 with the largest chapter in the
3 world. And I currently serve on the Board of
4 the National Foundation for Women Business
5 Owners, which provides research and publishes
6 statistics on women business owners in the
7 United States and around the world. Wells Fargo
8 is a national corporate partner of NAWBO and
9 also supports many local chapters across the
10 United States, not only with their dollars, but
11 with other resources.
12 According to information from the
13 foundation, there are nearly eight million
14 women-owned businesses in the United States.
15 The number of women business-owned firms has
16 increased by 78 percent between 1987 and 1996,
17 nearly twice the rate of all U.S. firms.
18 Currently over one-third of the businesses in
19 the United States are owned and operated by
20 women. The nearly eight million women-owned
21 firms in the U.S. contribute nearly 2.3 trillion
22 dollars in revenue to the economy, a three-fold
23 increase over 1987 levels. And women-owned
24 businesses employ 18 and a half million people.
25 One in four company workers in the U.S. can pay
173
1 their mortgage, purchase goods and services and
2 send their kids to college thanks to a woman
3 business owner. They are located throughout the
4 United States. The fastest growing states for
5 women-owned firms are the mountain states,
6 southwest and southeastern regions.
7 I realize I have one minute so I'm going to
8 kind of zip through this. The foundation
9 published many of these statistics back in
10 1994. When they were published, they had a
11 profound effect on banking. I don't know if it
12 was a Wells Fargo representative, but when they
13 were published, a banking officer asked "Is it
14 really true that women-owned businesses employ
15 one out of every four workers in the United
16 States?" And actually, women-owned businesses
17 employ 35 percent more people in the United
18 States than all the Fortune 500 companies do
19 worldwide. She commented at that time it would
20 change the way her bank does business.
21 Well, Wells Fargo changed the way they do
22 business in 19 -- I believe it was '95 they
23 created a one billion dollar loan program for
24 women business owners. It was so successful
25 that they increased it after one year to a ten
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1 billion dollar loan fund. They made it
2 incredibly easy for us -- many of us across the
3 United States to get loans. So my thanks to
4 Wells Fargo. They've been a fabulous bank and a
5 very responsible corporate citizen.
6 CHAIRPERSON SMITH: Thank you. And
7 then we'll go to Mr. Reagan. We're not?
8 MR. REAGAN: Let me refer to Mr.
9 McGill.
10
11 MR. McGILL: Good afternoon. And
12 thank you for inviting us to speak on behalf of
13 this merger between our Norwest and Wells Fargo
14 Company. I am from a small nonprofit
15 organization called The Black State Employees
16 Association, which is an agency that is mainly
17 involved in Civil Rights and development
18 issues. We have a long-established relationship
19 with Wells dating back to its acquisition of
20 First Interstate. First Interstate had one of
21 the finest bankers in this country, Lenet
22 Dialy. And we were very concerned when that
23 acquisition was announced, what our relationship
24 with Wells Fargo would become.
25 I'm here to say that not only did Wells
175
1 live up to its commitment to us during hearings
2 similar to these, but they promised during those
3 hearings to expand opportunities in areas that
4 were quite important to us. And one of those
5 areas we are quite concerned and want to urge
6 the consideration for the creation of a bank
7 CDC. We think that bank CDCs is one of the most
8 effective tools that we've found to help with
9 development projects in low and moderate-income
10 areas, and particularly in the area of retail
11 and commercial development. We think that there
12 is a huge, relatively speaking, amount of
13 resources that have been devoted to housing.
14 Two issues that have been of primary concern to
15 us in the area of retail and commercial
16 development is the ability to raise funds for
17 predevelopment costs and equity needs.
18 Quite frankly, we wouldn't be sitting here
19 now saying that we are about to start
20 construction on a retail strip center in
21 southwest Dallas except that Wells, meaning
22 Byron Reid, mainly, and Karen Wegman, had the
23 faith in our leadership, mainly Mr. Reagan, to
24 make a substantial commitment to predevelopment
25 needs. And we -- there just aren't many
176
1 financial institutions or foundations that's
2 willing to express their support at the level
3 that Wells provided to this organization. And
4 because that happened, then we were able to meet
5 other kinds of needs and, more importantly,
6 develop the kind of presentations that really
7 led to the interests and support of other
8 financial institutions and other providers of
9 resources that we needed.
10 So we have been quite pleased to hear that
11 a bank CDC is one of the considerations that the
12 combined institutions is considering. We would
13 certainly urge them to take a close look at the
14 equity and predevelopment needs of
15 organizations, such as the Black State Employees
16 Association's community development corporations
17 and decide what the fair -- and perhaps take the
18 leadership in establishing creative ways to help
19 organizations such as ours meet those kind of
20 needs.
21 Just two other areas that I would like to
22 briefly speak to. And one of the -- one of the
23 issues that we raised in public forums with
24 smaller groups and senior administrators in both
25 institutions is that as opportunities become
177
1 available, particularly in areas of professional
2 services, meaning the merger -- mergers happen.
3 And they often create opportunities -- thank
4 you -- create opportunities for employment for
5 African Americans and others. And certainly in
6 the areas of legal needs, accounting needs and
7 advertising and marketing needs. And certainly
8 as those opportunities become available, we have
9 certainly urged the institutions to consider how
10 they can divide and subdivide those
11 opportunities so that law firms and accounting
12 firms and advertisers, particularly African
13 Americans, can take advantage of those
14 opportunities.
15 Thank you very much.
16
17 MR. REAGAN: I'm Darren Reagan, the
18 Chairman and CEO of the Black State Employees
19 Association of Texas. And I thank Mr. McGill
20 for providing the groundwork. And we also have
21 submitted written comments as well. So we would
22 just simply like to surmise our support for this
23 merger.
24 Now, I, heading up and founding the Black
25 State Employees Association of Texas as a Civil
178
1 Rights organization with critical concerns.
2 Many have been expressed here today. And we are
3 very, very sympathetic and empathetic with those
4 concerns. And we know that based on our
5 experience with Wells Fargo in a recent -- very
6 good and productive conversations, meetings with
7 the presidents and senior officers of Norwest
8 Corporation, that they will follow properly and
9 rectify as many of those concerns as possible.
10 I live in Dallas, Texas. I've lived there
11 for about 38 years now. And I live in a section
12 of town, Southern Dallas, Southeast Oak Cliff in
13 particular, where we have 108,000. If we were
14 to have this conversation about seven years ago,
15 this town of about 108,000 residents, 95 percent
16 African American, we did not have a single bank
17 branch in Southeast Oak Cliff. I was down in
18 Tyler, Texas. And my town of -- hometown of
19 Tyler, Texas is about 90,000 residents. In
20 Tyler, Texas, we have numerous banks. We have
21 the traditional retail shopping experience and
22 dineries that most major cities have. But in
23 Southeast Oak Cliff, this city of 108,000
24 residents, we did not have a single branch.
25 However, nearly one billion dollars of the 2.5
179
1 billion dollars of consumer spending power came
2 out of Southeast Oak Cliff. We took a personal
3 challenge of revitalizing southern Dallas,
4 Southeast Oak Cliff in particular. Now we have
5 about five branches there.
6 First Interstate put up one of their most
7 productive. I believe it is now the top
8 producer in the State of Texas, now Wells
9 Fargo. Nations Bank, one of their top
10 producers, not only in the state, but in the
11 country. Bank of America and Chase. We're not
12 saying that -- and I'm not here to suggest that
13 all is well in southern Dallas and many other
14 urban cities across this United States. But
15 I've come to recognize as a leader in our
16 communities that we have to forge
17 relationships. And much of what we've been able
18 to accomplish by way of this organization has
19 been because of establishing relationships.
20 I don't make it a habit to support banks in
21 these type of forums. As a matter of fact, this
22 is my first. And I consider it an honor to be
23 able to sit here and tell you guys the truth.
24 If it had not been for Wells Fargo following up
25 on their commitment made by First Interstate to
180
1 become leaders in our state, and in our city in
2 particular, much of what we've been able to
3 accomplish would not have come to fruition as it
4 has to date.
5 We were able to acquire the first enclosed
6 mall in the City of Dallas, built in 1963, West
7 Cliff Shopping Center. We acquired that center
8 about a year ago and have already demolished the
9 center to construct a power center, which will
10 be anchored by an Abison's grocer and many other
11 national and local regional credit tenants and
12 some small business owners. Wells Fargo was one
13 of our key supporters on the front of this
14 acquisition. And a number of other projects
15 that we have underway right now. Housing
16 development, a joint venture with Centex and
17 Choice Homes. Wells Fargo we know will be
18 actively involved in this process. The new
19 Wells Fargo. We've met, as I say, with the
20 senior team of Norwest Corporation in
21 conjunction with the Wells Fargo senior
22 management.
23 I must tell you that I've been among many
24 merger meetings, president and senior officers,
25 and I can just share with you that our meetings
181
1 with Wells and with Norwest have been very, very
2 cordial. As a matter of fact, it's been the
3 best and most productive meeting we've had in a
4 long time with bankers.
5 Again, we support this -- this merger. And
6 we encourage and we know that Norwest and Wells
7 Fargo -- the new Wells Fargo will do all within
8 its power to make sure that the concerns of all
9 of its community needs are met.
10 Thank you.
11 CHAIRPERSON SMITH: Mr. Reid?
12
13 MR. REID: Yes. Good afternoon. And
14 thank you very much. My name is Jim Reid. I'm
15 the President and Founder of the Southern Dallas
16 Development Corporation. We're what's known in
17 the business as a community development
18 financial institution. We provide an
19 alternative source for financing small
20 business. We're a 501C3 founded in 1989. Our
21 mission is to assist businesses, create jobs and
22 promote investment in southern Dallas, which is
23 a section of our city that has 45 percent of the
24 population and only 13 percent of the commercial
25 tax base. That's a big imbalance in terms of
182
1 jobs and services. And to compare the northern
2 sector of Dallas with the southern sector, the
3 per capita income in the south is about 60
4 percent in terms of the northern section of the
5 city. Southern Dallas is primarily a minority
6 area. It's 50 percent African American and 25
7 percent Hispanic, 25 percent White or other.
8 We started out with one loan program. We
9 now run five loan programs that are funded by
10 the federal government to Treasury, HUD and SBA,
11 by foundation, and by corporate donors. In the
12 last two years, we have loaned money that
13 enabled a thousand people to go to work. And I
14 tell my 12 staff persons that each one of them
15 in the last two years personally is responsible
16 for 85 people being on the payroll. That's the
17 way we look at it.
18 Our borrowers typically -- we've done about
19 300 loans. About 100 of them we've done in
20 participation with banks where we're taken a
21 subordinate debt position. The other 200 we've
22 done directly. They were totally unbankable.
23 We provide our loans in the form of subordinate
24 debt, thereby bringing other dollars to the
25 table. And dealing with an issue in the
183
1 minority community, which is a lack of equity.
2 So this quite a bit of equity helps out. 70
3 percent of our borrowers are minority business
4 persons.
5 We're in favor of this merger because our
6 experience with Wells Fargo and our feeling that
7 into -- in the future, this experience will be
8 realized in a larger form through the merged
9 institutions.
10 We are -- and I want to use this
11 opportunity to talk a little bit to the federal
12 representatives about something -- a real sea of
13 change that's happened in the small business
14 lending the last couple years. We -- now
15 basically small business lending is done by
16 credit scoring. You get a computer score. And
17 the transactions are much faster, much cheaper
18 on behalf of the bank. So you -- it has that
19 advantage. For a number of customers that --
20 that we serve, because of blips in their credit,
21 because their deal doesn't fit the mold, they
22 need special treatment. And I would make a
23 generic plea as you're dealing with compliance
24 and those kind of issues to make sure that
25 the -- all banks have second review processes
184
1 for their loans if they're using credit scoring
2 and that they all establish policies in
3 referring loans that are denied to community
4 development financial institutions, institutions
5 like ours that can take the time with the
6 borrowers and really set up, and as nonprofits,
7 to bridge that gap.
8 In terms of our specific experience with
9 Wells, which has been very positive, they're a
10 major investor in an entity we call the Southern
11 Dallas Development Fund. It's a bank -- a CDC
12 in which 17 bank investors have created this
13 fund. And we manage it on behalf of these
14 banks. And again, we can do things with these
15 funds that banks can't do. We can provide
16 subordinate debt. We can provide equity, things
17 that they can't do as lenders. So that's been
18 an instrument that Wells has invested in and
19 been very useful. They've participated with us
20 in a number of deals. When they take the
21 primary position, we do subordinate debt.
22 They've done innovative outreach with us. One
23 of our problems in that area is the media. Not
24 the particular media over here, but some media
25 who all write about -- all they can write about
185
1 is drug busts and drive-by shootings and that
2 kind of thing. They don't have a positive word
3 about our area of the city. We decided to write
4 our own newspaper. So every year we write an
5 eight-page supplement to the "Dallas Morning
6 News," send it to a million households. And
7 it's positive. And we know it's true because we
8 write it. Anyway, and Wells Fargo has helped us
9 do that.
10 They also helped us -- one of the things
11 facing small businesses is there is a maze in
12 terms of who -- who's providing services. They
13 helped publish a guide that went to 12 -- 25,000
14 businesses in terms of how to service.
15 I'm saving the best for last. Last year we
16 got a -- in September we got a $600,000 grant
17 from the Treasury Department. And we had to
18 match with it $600,000. And Wells had made a
19 four-year pledge of 400 -- a 100,000 a year.
20 And Chase, three years, 100,000 a year. Bank
21 One, 300, 100,000 a year. But I needed 600,000
22 right away. And I called Karen. And I got 100
23 each from Chase and Bank One. And I called
24 Karen Wegman's office and said, "Wells, we need
25 you to accelerate your commitment and deliver us
186
1 500,000 -- 400,000 immediately so we can match
2 this federal money and in the process create
3 about 500 jobs." In one week, those funds were
4 wire transferred to a new branch bank serving
5 our area. And that's what I call service.
6 Thank you.
7 CHAIRPERSON SMITH: Mr. Grovender?
8
9 MR. GROVENDER: Well, my name is Kelby
10 Grovender. And I'm from the American Indian
11 Housing Corporation. And I'm here to talk a
12 little bit about our relationship that we've had
13 with Norwest Bank.
14 First, I'd like to tell you a little bit
15 about who we are. American Indian Housing
16 Corporation started as a task force back in
17 1991, partially in response to the lack of
18 counting of homeless Indian people during that
19 statewide homeless survey of 1990. In that
20 survey, it said that there were 87 homeless
21 Native American people who had been counted. We
22 knew that anybody who walked down Franklin
23 Avenue in South Minneapolis would realize that
24 that was a ludicrous number to use. And so the
25 task force was formed to look into that, as well
187
1 as looking into what really are the housing
2 needs for Indian people primarily in South
3 Minneapolis. Eventually that evolved into the
4 American Indian Housing Corporation.
5 The biggest project that we have completed
6 to date is a project called Anishinabe Wakiagun,
7 which I am the Director of Anishinabe Wakiagun.
8 It is a permanent supportive housing program
9 serving late-stage -- excuse me -- serving
10 late-stage chronic inebriates who have been
11 homeless the majority of the past five years.
12 Oftentimes have been homeless the majority of
13 the past 10 or 15 years. So it is a project
14 that is housing people who are the most
15 difficult to serve, but also who had the
16 greatest need in terms of housing.
17 Norwest applied for us to the Federal Home
18 Loan Bank for $210,000, which helped in the
19 construction of that project. We've finished
20 construction in 1996, opened up our doors
21 September 3rd of that year. Now we have been in
22 operation for two years and have been housing a
23 lot of people who otherwise would have been on
24 the streets. And I think that we have probably
25 saved a lot of lives in the process, especially
188
1 considering our cold winter months and that a
2 lot of these folks do live outside during the
3 wintertime.
4 In -- in addition to the assistance that
5 Norwest gave us in construction of that project,
6 the American Indian Housing Corporation also
7 started a capital campaign two years ago. This
8 has -- up to fairly recently has been a real
9 shoestring budget kind of an organization. It
10 started out officing in the basement of -- of
11 the Native American Educational Services
12 Building, which we didn't pay any rent for.
13 Some of the early staff people were sleeping in
14 those offices. This is just to give you an idea
15 of where we were starting from, a very grass
16 roots kind of an organization.
17 Two years ago, we started a capital
18 campaign to purchase a building that is the
19 offices for the American Indian Housing
20 Corporation. And Norwest was able to give us
21 $40,000 towards that capital campaign. They've
22 supported us in a variety of ways beyond just
23 money. And I think the most important thing
24 that I personally have seen through the
25 involvement of Norwest is having one of their
189
1 staff people, Muffy Gabler, who served on the
2 Board of the American Indian Housing Corporation
3 for the past three years. She has been a
4 dynamic force on our board.
5 Any of you who have sat on the boards of
6 nonprofit organizations know that there are some
7 people who just show up. There are some people
8 who, even though they are on the board, they
9 don't even show up. And then there are those
10 people who are on the board and they are there
11 and they are doing things. And Muffy was always
12 the person who was doing things, who was helping
13 to move the organization forward and who was
14 keeping us fiscally responsible as the Chair of
15 our Finance Committee. I think that we were
16 able to build our capacity at a much faster rate
17 through the assistance of Muffy as a member of
18 our board and as a good driving force.
19 CHAIRPERSON SMITH: Thank you.
20 MR. GROVENDER: You're welcome.
21 CHAIRPERSON SMITH: Any questions? If
22 not, we thank you for coming here today. And
23 again, be sure and give your statements, if you
24 haven't already done so, to the Federal Reserve
25 Bank staff that take it.
190
1 Okay. We're at Panel 9. And we have -- we
2 really have two panelists, one of them
3 representing her organization and another one.
4 If Miss Mendoza will come forward. Yes, she's
5 on her way. And we'll start with Mr. Finn.
6
7 MR. FINN: Good afternoon. It's a
8 pleasure to be here. I will not say that
9 it's -- I appreciate being here or thank you for
10 being here because, frankly, it's my right to be
11 here. And under the laws for citizens of this
12 country and as a member of the community that is
13 affected by these banks -- and the unfortunate
14 piece is that there are not enough public
15 hearings on the public good and public policy
16 regarding these mega mergers that are going on
17 of which we are going to talk about today.
18 I'm going to keep my remarks more in the
19 area of industry concentration and market
20 concentration, which is part and parcel to what
21 is going on with this bank merger. In
22 particular, I'd like to talk about vertical and
23 horizontal integration or conglomeration, the
24 first one being the vertical piece, which is a
25 policy trend that's going on in the banking
191
1 industry which is allowing, for example,
2 insurance and stocks and market portfolios to be
3 integrated with lending and deposits. And while
4 the -- it's been a cautious road for the last
5 two years, it appears that we're going to be
6 making some wholesale decisions regarding this
7 in the next few years which will make a bank to
8 all instances for a community a one-stop
9 shopping center for financial products. This --
10 this vertical integration or conglomeration on
11 policy seems to be going on as a course in the
12 banking industry, which it's basically being
13 ignored in terms of the concept of regional
14 markets and community markets and how that
15 affects it.
16 I'm going to include with that, though, the
17 common measure of integration, which is the HH
18 index, which you are all familiar with. And for
19 this part of my testimony I would like included
20 in my previous testimony on record with the
21 First Bank Marquette merger. So I would like
22 that included, which speaks to this integration
23 problem regarding the HH index and the problems
24 with the index, which I won't talk about today.
25 The HH index, for example, for Norwest and
192
1 First Bank, which is now Bank One in the
2 Minneapolis area, has been basically ignored.
3 And we now have essentially two banks owning
4 more than 70 percent of the market in deposits
5 in the Minneapolis area. We'd also note from
6 testimony that's out there that in certain areas
7 of Nevada and other places where Wells Fargo and
8 Norwest are coming together, they are actually
9 going to be at market percentages well above
10 that, including one community where they are
11 going to own virtually 100 percent of the
12 market.
13 I would like to speak more to this about
14 this, but the bank at this time has agreed with
15 the Norwest argument that they will not disclose
16 divestiture information. And, frankly, I think
17 that's unconscionable. I think -- I think it's
18 illegal. It's unprecedented. And for that
19 reason alone, this decision should be -- should
20 be stopped until that divestiture information
21 can be brought out into the public in a public
22 debate and can happen on it. So in that
23 particular instance, I think -- I think this
24 hearing is important that it raises those
25 critical issues. And that decision of -- a
193
1 major public policy decision like this on
2 divestiture cannot happen in the dark.
3 But in terms of these indexes, we need to
4 be very careful because the HH index has always
5 been used to measure the concentration -- the
6 market concentration of banks in one community.
7 But what is happening with the trends, which I
8 think Wells and Norwest are probably the best
9 example in the country at this time, after the
10 various mergers that they've already brought
11 about is the fact that they are not -- we need
12 to develop a new measure which looks at market
13 concentration across regions. Because, indeed,
14 I don't think it's too hard -- I don't think I'm
15 really overstating myself when I say that the
16 new Wells Fargo will be a market almost
17 monopolist in the midwest, western regions. And
18 particularly, that's true in some markets where
19 I don't think you can quibble about a monopoly
20 when they own 100 percent of the business in
21 those communities.
22 This -- this is disturbing. I like to
23 think about this -- this type of thing as --
24 using a metaphor of -- in Africa, the elephants
25 where they are protected, which all of us
194
1 believe is important and in some communities are
2 actually sacred. But for the villagers in those
3 protected areas where elephants cannot be
4 controlled, an elephant can walk into the
5 village and can eat it or decimate it. And they
6 can be without home or livelihood or whatever.
7 In the same way, Wells Fargo is going to be
8 able to move across the midwest protected by
9 essentially the staking out in communities with
10 ATMs, protected by the fact that their deep
11 pockets make it almost impossible for other
12 banks to compute -- or compete in terms of
13 deposit wars or to cause a competition. And
14 this is -- this is going to be devastating.
15 I'm going to continue because there are
16 only two of us.
17 CHAIRPERSON SMITH: Well, we do
18 have --
19 MR. FINN: Okay. I'll be short,
20 then.
21 CHAIRPERSON SMITH: All right.
22
23 MR. FINN: I'm very concerned that the
24 Federal Reserve is abdicating its responsibility
25 in this area and that it hasn't actually -- as a
195
1 protector of the nation's banking as it's formed
2 under our country's laws, has not been out there
3 in the forefront wondering about these things.
4 And the people from the community have to bring
5 them up to them. I think at the very least,
6 given these trends that are now part of the
7 public testimony, I think we have to look at
8 this model and say, well, a safe course is
9 something like what happened with Nations Bank.
10 I think the people here that are talking about
11 indexes being at a minimal level across and
12 guidelines put into the Wells Fargo agreement
13 that says that Wells Fargo will not essentially
14 breach on the HH index in any of their
15 communities above a certain minimal level is
16 something important and prudent to put into this
17 agreement.
18 And last, I'd like to suggest that while
19 everybody here that has been here today and
20 testified on this has been well-intentioned and
21 has told great stories. I think you should take
22 into account the people who have come here and
23 told the other side, the dark side of banking
24 business, the dark side of Norwest and in the
25 histories, because there are courageous acts
196
1 here. And it's those type of things that you
2 are charged to insure do not happen. And union
3 busting is something that is happening. And I
4 don't think we can turn our backs on them.
5 Thank you.
6 CHAIRPERSON SMITH: Thank you.
7 Ms. Mendoza will be speaking on behalf of her
8 own organization and then also of the Rapid City
9 Housing Coalition. I don't know what order.
10
11 MS. MENDOZA: Thank you. My name is
12 Lilly Mendoza and I'm the CEO of of Earth
13 Walker, which is a consulting business. And
14 what I'm doing today is representing them
15 organizations from Rapid City, South Dakota.
16 And one of the things I'd like to share with
17 you, in listening today, you hear the good and
18 the bad of both. But what I can share with you
19 is what -- what we're -- what's going on in
20 Rapid City and the feelings that are there of
21 the people that I'm representing. Rapid City
22 has a population of 54,000 people. Of that
23 54,000 people, 9,000 are American Indian
24 people. At any one time throughout the year,
25 Rapid City deals with and serves 22,000 Native
197
1 American people. And those individuals are
2 coming in from the surrounding reservations.
3 There is an Indian Health Service there that
4 serves American Indian people. And so that's
5 where we draw that number from. So the American
6 Indian people really do bring a lot of revenue
7 into the Rapid City area.
8 One of the concerns that the people have is
9 their treatment when they walk into banks and
10 the feelings that they get and not feeling
11 comfortable being there, as well with the 60
12 percent denial in loans within the Rapid City
13 area and the surrounding reservations. So
14 that's an issue as well.
15 The organizations that I'm working with are
16 the Rapid City Housing Coalition and an
17 organization that serves young women between the
18 ages of 10 and 24. What's interesting and
19 exciting and what's going on in Rapid City is
20 that this organization -- these two
21 organizations -- the oldest person working
22 within those organizations is 27 years old. And
23 it's real exciting to me to see these young
24 people that are coming out. And they are
25 sharing their concerns about their community
198
1 because they care about their community. And
2 these individuals that work within these
3 organizations come from low-income families and
4 know the barriers and struggles that they need
5 to get through. And so they are willing to take
6 the lead and work hard to make a difference.
7 We have met with Norwest Bank. We had an
8 initial meeting August 14th at which time we
9 began to discuss some possible solutions. We
10 requested some information -- some information
11 from the individual and actually didn't get back
12 to those organizations for about a month. And
13 we had to call the meeting again. At that time
14 then, the organizations met with the president
15 of the bank. And I was the mediator. What's
16 interesting is that when I said the word
17 "mediator," he became very angry because he
18 said, "We are both on the same side." And I
19 said, "That may be, but we both live on
20 different sides of the tracks." And that's the
21 whole issue is that we are -- Rapid City is a
22 city that is divided. There is a west side and
23 there is a north side. And if you travel
24 through our town, you can really tell the
25 difference. You can see where the low-income
199
1 people live. And you can tell the difference in
2 parks. So what we are saying is -- to Norwest
3 is that we would like a commitment from
4 Norwest. And the merger with Wells Fargo, you
5 know, if it's going to happen, it's going to
6 happen and we'll be in support of that. But
7 what we're saying is that we need a commitment
8 from the bank that individuals in the bank
9 serving American Indian people need to really
10 walk their talk and help people as far as going
11 in and getting loans, because there is different
12 circumstances and people deal with different
13 issues coming from different walks of life. So
14 what it's really -- what it's really coming down
15 to is the broken promises and making sure that
16 there is follow-through.
17 We have already discussed putting together
18 a steering committee to work with Norwest Bank.
19 Norwest Bank has stated to the organizations
20 that they will take the lead in this. We've yet
21 to hear from them within the last couple weeks.
22 They were supposed to call a news conference and
23 they haven't done that. So what we need is a
24 commitment to our community. Right now in the
25 community they're doing, you know, a big press
200
1 release and public relations kinds of things and
2 there are billboards and there are TV ads. And
3 it's a really huge show. Okay. And -- but what
4 we really want is commitment. So those are the
5 concerns that the organizations have from Rapid
6 City.
7 Thank you very much.
8 CHAIRPERSON SMITH: Okay. Thank you.
9 And we're going -- we have other members of the
10 panel who have just arrived so we will stay put
11 for a while. We have Ms. Seals from the
12 Minneapolis NAACP.
13
14 MS. SEALS: Good afternoon. Leola
15 Seals, Minneapolis Branch, NAACP President. And
16 I would just like to briefly address that in the
17 bank end with Norwest Bank, we have not been
18 getting the loans from Northwest to the African
19 American communities as we should. Northwest
20 Bank, we are asking that you support this status
21 quo and not the people in poverty. We are not
22 asking for you to continue to do this. We
23 challenged this institution to step up to the
24 plate and meet its community development goals
25 by financially supporting the NAACP and
201
1 endorsing a self-sufficient initiative where we
2 take the lead in solving our own issues. We are
3 fed up with responses that we get that affect
4 our communities. No one knows the struggle,
5 plight and solutions for our community better
6 than we do. No one deserves an opportunity to
7 serve our community more than we do, since we
8 live here. We need solid commitment from the
9 bank to work with us. Remember, in most
10 instances it is not the cash that we are
11 speaking but mortgage commitments. Our office
12 has a large overflow of people in poverty being
13 turned down for loans. We would like for the
14 bank to engage and become a partner with us and
15 the NAACP.
16 Thank you.
17 MS. SMITH: Thank you very much. If
18 there are no questions, then we are going to
19 take a 15-minute break. And so we will see you
20 at a little after 2:45.
21
22 (Whereupon a break was taken.)
23
24 CHAIRPERSON SMITH: We're ready to
25 start with Panel 10. I think you can sit
202
1 anywhere. I'll call you in the order that you
2 appear, but you may sit anywhere.
3 Okay. Again, a reminder that if the five
4 minutes expire before you have finished your
5 statement, we will include the -- your complete
6 statement in the record, if you will make sure
7 that we have a copy of it at the registration
8 desk. So if they don't have one now, make sure
9 that they have one before you leave. And we'll
10 start with Mr. Cody.
11
12 MR. CODY: Well, thank you. I'm Ron
13 Cody, President of Junior Achievement of the
14 Upper Midwest. And I appreciate the opportunity
15 to speak on behalf of Norwest Bank and share our
16 views on the impending merger. Norwest Bank's
17 commitment to youth and education we feel is
18 exemplified by their very extensive involvement
19 with the organization I represent, Junior
20 Achievement, throughout our assigned geographic
21 territory, which includes the States of
22 Minnesota and North Dakota and, incidentally,
23 four boarder counties in Wisconsin.
24 So that you know what we do to refresh you,
25 Junior Achievement's purpose is to educate and
203
1 inspire young people, to value free enterprise,
2 business and economics, to improve the quality
3 of their lives. And Junior Achievement's
4 mission is to insure that every child in America
5 has a fundamental understanding of our free
6 enterprise system. And Norwest Bank is a
7 natural and valued partner in those endeavors.
8 During the school year just underway,
9 partnerships with various sponsoring
10 organizations both in the private and public
11 sector, and including Norwest, will result in
12 75,000 students meeting weekly in their
13 classrooms with over 3,000 volunteers who will
14 transform textbook theory into real-life
15 situations and, in the process, persuade young
16 people of the critical importance of education.
17 And as a very conscientious corporate citizen,
18 Norwest has played a critical role in this area
19 by actively encouraging and supporting
20 employees' weekly visits to area classrooms to
21 work with students and deliver the Junior
22 Achievement curriculum. The primary thrust of
23 Norwest's involvement with JA is financial
24 education. At the elementary, middle and senior
25 high grade levels, Norwest employees make
204
1 personal and business finance come alive for
2 students. And are they making an impact?
3 Absolutely. We know that by not only local
4 surveys and evaluations, but national studies
5 done by outside evaluation firms.
6 Last school year, 146 Norwest Bank
7 Minnesota employees contributed 1,022 hours of
8 time in classrooms teaching finance and
9 economics to approximately 4,370 students K
10 through 12. That took place in 168 Metro area
11 classrooms. Norwest banking officials have
12 indicated to us they fully expect the number of
13 volunteers to increase during the current and
14 subsequent school years.
15 In addition, various Norwest banking sites
16 arrange with Junior Achievement to host
17 approximately 200 area students in a
18 finance-related career-oriented job shadow
19 experience on site in the banks during spring of
20 last year. And we will -- we anticipate they
21 will provide a similar opportunity this year for
22 young people to see what goes on in those tall
23 buildings and encourage them to develop the
24 marketable skills they'll need to work in those
25 buildings.
205
1 In addition to all of this, Norwest Bank
2 Minnesota is a major financial supporter of
3 Junior Achievement. And this financial support
4 provides the funds for the classroom materials,
5 the textbooks, the workbooks that are provided
6 to the schools and the students at no cost. And
7 this is in the seven-county Metro area alone.
8 Norwest Bank Minnesota financially supports JA
9 programs in many communities throughout
10 Minnesota, provides volunteers, financial
11 support and serves on the boards in Duluth,
12 Mankato, Moorhead, Brainerd and in North
13 Dakota -- several communities in North Dakota as
14 well. Norwest Bank Minnesota's management has
15 been represented on the Junior Achievement Board
16 of the Upper Midwest, the corporate board, for
17 45 consecutive years. And Jim Campbell and Pat
18 Donovan have both served on the Junior
19 Achievement Board and have personally
20 volunteered time with the Junior Achievement
21 programs.
22 In closing, I want to -- in speaking for
23 our Board of Directors and our staff, the staff
24 of Junior Achievement of the Upper Midwest, we
25 regard Norwest Bank Minnesota as the ideal
206
1 corporate citizen in light of Norwest's
2 long-term, demonstrated commitment to community,
3 to young people, to education. And we're proud
4 to say to Junior Achievement, "We're absolutely
5 confident of Norwest's continued commitment to
6 this community following a merger regardless of
7 where the headquarters is located. In fact, at
8 Junior Achievement, we view a larger, stronger
9 banking organization as being able to generate
10 additional resources that can, in turn, be
11 reinvested in the local communnities in various
12 ways, and including organizations like Junior
13 Achievement. Again, we appreciate the
14 opportunity to share our views with you.
15 CHAIRPERSON SMITH: Thank you.
16 Mr. Cramer?
17
18 MR. CRAMER: Good afternoon. My name
19 is Steve Cramer. I'm the Executive Director of
20 Project for Pride in Living. We are a Twin
21 Cities area nonprofit working on community
22 redevelopment inner city neighborhoods. I
23 appreciate the opportunity, as well, to express
24 to you our confidence that our long-standing,
25 multifaceted relationship with Norwest in our --
207
1 in helping us accomplish our mission of
2 revitalizing inner city communities will
3 continue and be strengthened in the future under
4 this proposed merger.
5 I'd like to just very briefly reflect on
6 the many ways in which we interact with Norwest
7 to accomplish this mission of inner city
8 revitalization. One way is through the
9 financing that is extended by Norwest to low
10 income buyers of single-family homes that we
11 construct or renovate in inner city
12 neighborhoods. Norwest is a consistent and
13 reliable lender for our buyers, all of whom are
14 low income, 80 percent of whom are people of
15 color, including buyers from emerging ethnic
16 communities in the Twin Cities, new Americans.
17 And their CHOP product in particular extends
18 affordability to very low-income buyers and is a
19 very effective tool for promoting ownership in
20 inner city neighborhoods.
21 Norwest also services loans in programs
22 that we administer in communities and
23 neighborhoods throughout the Twin Cities. And I
24 must say that in many neighborhoods that we work
25 with, the request is specifically that we
208
1 partner with Norwest for loan servicing because
2 of the high degree of customer service that
3 their local branch banks throughout the Twin
4 Cities and neighborhoods that we work in offer
5 to area residents.
6 As Ron indicated, Norwest extends its
7 professional expertise to community development
8 work through their active participation in our
9 board and committees that we have overseeing our
10 various programs in housing, employment and
11 training, education and human services. They
12 provide technical assistance to our staff in
13 areas including residential finance,
14 underwriting of our various development projects
15 and even occasionally helping us work out some
16 of the problems that our projects run into. And
17 as much as is money, whether it's financing or
18 grant funds through the foundation, that
19 extension of professional expertise into the
20 community is extremely valuable in the work that
21 we do.
22 Norwest has also sponsored for us
23 applications to the Federal Home Loan Bank that
24 has resulted in affordable housing program
25 grants to projects that we have been involved
209
1 in; most recently, a project called Anishinabe
2 Wakiagun, which you, perhaps, heard about from
3 an earlier panel, a project that houses homeless
4 chronic inebriates in the poorest neighborhood
5 in the City of Minneapolis. We have partnered
6 with Norwest to our mutual benefit in trying to
7 place hard-to-employ men and women that we work
8 with, especially through our Welfare to Work
9 Program, in their operations center meeting both
10 their employment need, but also providing an
11 effective outlet for our employment placement
12 efforts and then working together to make that
13 employment placement successful. And then also,
14 their foundation has been quite supportive of
15 all of our programming areas; housing,
16 employment training, self-sufficiency services
17 and education. Norwest was the single largest
18 giver to our recently established endowment for
19 our self-sufficiency program. And their most
20 recent gift will support our efforts in
21 improving educational achievement in many of the
22 inner city neighborhoods that we -- that we live
23 in. So across these many dimensions, our
24 partnership with Norwest has been effective,
25 long-standing, focused on the poorest and lowest
210
1 income and most diverse neighborhoods of the
2 Twin Cities. And they have consistently been a
3 reliable partner.
4 I, as well, believe that this mode of
5 operations will continue. It's clear to me that
6 decision-making is decentralized in Norwest,
7 that autonomy flows to the people that we need
8 to work with sort of closest to the action, so
9 to speak. And I am confident that that -- that
10 corporate culture will be maintained and our
11 partnership will -- will flourish into the
12 future.
13 Thank you.
14 CHAIRPERSON SMITH: Thank you.
15 Mr. Cutts?
16
17 MR. CUTTS: My name is Jerry Cutts.
18 I'm the Executive Director of the Development
19 Corporation for Children. We're a state-wide
20 nonprofit organization. We help lower income
21 communities to plan, develop and finance
22 children's facilities, like Headstarts and child
23 care centers.
24 We -- our key activities have been in the
25 area of actual development and construction of
211
1 facilities. And a couple years ago we decided
2 that we were interested in investigating the
3 creation of a loan fund to help participate in
4 these activities. And so what I wanted to do is
5 just very quickly tell you the brief story of
6 Norwest's involvement because I think it's
7 good.
8 We started by working with some funds from
9 a national foundation to coordinate statewide
10 policy round tables to look at the demand for
11 this kind of fund. And Norwest immediately
12 jumped in and played a very critical role in
13 that process. Muffy Gabler in particular was
14 very, very involved with us, not only in
15 participating in the round tables and playing a
16 leadership role, but in giving us advice -- our
17 advice that we settle on along the way about how
18 we might effectively be able to pull in other
19 banks, investors, as well. And over the series
20 of four or five round tables, we were able to
21 come up with recommendations to the Legislature
22 and to the private sector, as well, for
23 potential for their involvement. And we were
24 successful in doing that.
25 I wanted to point out a couple things. One
212
1 is that this fund, which is called First
2 Children's Finance. It's now up and running and
3 make loans left and right. Norwest has a loan
4 officer on our loan committee and continues to
5 provide us with technical assistance. The
6 foundation as well provides us with operating
7 support. And Norwest has made an equity
8 investment into the pool -- revolving pool of
9 financing. So that's all been very, very
10 valuable to us. I'm -- have been very happy
11 with not only the technical assistance, but
12 their collaborative spirit. And I think that's
13 hard to do in a competitive environment where
14 you -- we have a situation where we've got lots
15 of high-profile investors and lenders. And
16 Norwest has done a great job of providing
17 leadership and kind of keeping a quality among
18 the players. So that's the main story that I
19 wanted to tell. I'm very appreciative of all
20 aspects of their support and anticipate that
21 that will continue.
22 CHAIRPERSON SMITH: Mr. Fulton?
23
24 MR. FULTON: Thank you. It is really
25 a privilege to be here today. The Family
213
1 Housing Fund, the organization of which I'm
2 president, was formed back in 1980. And its
3 mission is to sort of rally the private
4 philanthropic sector as a partner for -- with
5 the federal government, the state government,
6 local government in providing for the affordable
7 housing needs of people in our community. So
8 the fund is really an intermediary
9 organization. And one of our responsibilities
10 is to kind of keep track of everything that's
11 going on in the community in terms of knowing
12 exactly where the needs are. We divide our
13 programs up into three general areas,
14 homeownership -- affordable homeownership for
15 lower income working families. Secondary is the
16 production of affordable generic rental housing
17 for people who don't have quite the incomes to
18 get into homeownership. And the third area is
19 what we call special needs housing or more than
20 shelter, which is the combination of housing and
21 human services for very vulnerable people,
22 people who are often homeless. So basically a
23 good community housing policy, good community
24 housing programs, will involve a partnership
25 between the public and private sector and will
214
1 address the housing needs along that entire
2 continuum; homeownership, rental housing,
3 special needs housing.
4 I have worked with Norwest closely for the
5 entire 18 years, just about, that I've been
6 president of the Family Housing Fund. And I can
7 report that they, Norwest, has been extremely
8 active, played critical, decisive roles in each
9 one of those three areas; homeownership, rental
10 housing, special needs housing. Norwest has
11 what I would consider a state-of-the --
12 state-of-the-art mortgage lending program that's
13 targeted to lower income buyers, communities of
14 color, first time home buyers. They have a
15 very -- a very, very successful commitment
16 through the CHOP Program, which Steve has
17 mentioned, in providing flexible financing
18 that's helped, I would say, hundreds of families
19 become homeowners. We have a lot of special
20 programs. For example, programs to help public
21 housing tenants become homeowners, to help
22 people move from rental to ownership, to help
23 people convert their Federal Section VIII
24 certificates to homeownership. Each one of
25 those programs to be successful combines public
215
1 subsidies with a private mortgage. And I can
2 say that Norwest has worked just extraordinarily
3 well with each of those programs to provide
4 those homeownership opportunities for those
5 special populations.
6 One of the things that my experience has
7 been with Norwest is that some organizations and
8 businesses do little, if anything, in the area
9 of housing and community development. Some do
10 it in kind of a token or begrudging way and some
11 do it with genuine commitment and enthusiasm.
12 And that -- my uniform experience with Norwest
13 as an institution and all the people that work
14 there is that there is genuine commitment to
15 affordable housing and community development in
16 this community. It's expressed through their
17 willingness to provide financial resources that
18 are needed both through the normal bank lending
19 programs wherever possible and investment
20 programs and tax credits. The -- in addition to
21 the homeownership programs in the area of rental
22 housing and special needs housing, Norwest Bank
23 has invested in -- as an equity partner in
24 specific rental projects serving low-income
25 people and projects that have combined housing
216
1 with support services for people with special
2 needs. Unusual kinds of loans, but critical in
3 terms of the successful financing of those
4 projects.
5 The other -- the other one thing that I'll
6 mention is that -- the volunteers of Nor --
7 Norwest. We've talked about some of the
8 individual employees. Norwest executives have
9 served on countless boards and organizations
10 with which we've come into contact. Pat Hanson
11 from Norwest serves on the Board of the Family
12 Housing Fund. And everybody I've seen here from
13 Norwest today is -- I have had personal
14 experience with them in terms of their being
15 active volunteers and decision-making bodies.
16 CHAIRPERSON SMITH: Thank you.
17 We'll go on to Mr. Watt.
18
19 MR. WATT: Good afternoon. My name is
20 Jim Watt. I'm Executive Director of Twin Cities
21 Neighborhood Housing Services. And thank you
22 very much for the opportunity to be here and
23 express my views and those of Twin Cities
24 Neighborhood Housing Services and our affiliated
25 partners.
217
1 A brief overview. For more than 20 years
2 Twin Cities NHS has been rebuilding the American
3 dream one home at a time. We help low and
4 moderate-income families purchase a home by
5 arranging financing for families who might not
6 qualify or even know how to get conventional
7 mortgages by providing home buyer education to
8 more than 1,100 first time home buyers in 1997
9 alone and by rehabilitating decaying
10 neighborhoods, resulting in revitalized
11 communities. Yearly we also sponsor Neighbor
12 Works Week, a community beautification program
13 that brings more than 400 volunteers together in
14 various inner city neighborhoods to make their
15 communities better places to live. We couldn't
16 do any of it without partners like Norwest
17 Bank.
18 Our relationship with them goes back 20
19 years. Norwest and its predecessors have been
20 there since the beginning working with us,
21 assisting low and moderate-income families.
22 Norwest plays a significant role in our lending
23 efforts within the inner city. We work together
24 in true partnership to provide homeownership
25 opportunities for families who might not
218
1 otherwise qualify for conventional financing.
2 Norwest also supports us in the form of
3 operating and program grants. They have already
4 contributed more than $500,000 to Twin Cities
5 NHS in operating grants alone. They also
6 support us with a variety of mortgage and rehab
7 loan products designed specifically for our
8 constituents. These products are necessary for
9 the success of our mission. Knowing that grants
10 and loans are decided upon on a regional and
11 local basis is very important to us. We have no
12 concern that philanthropic decision-making will
13 change with either their headquarters or their
14 name. Norwest corporate citizen philosophy and
15 the trust we have in them based on our
16 experience are enough for us to feel very
17 comfortable with the merger.
18 Norwest executives sit on our various
19 boards and get involved. Pat Hanson is
20 treasurer of our Board of Directors. Pat
21 Donovan chairs our campaign. The corporation
22 itself supports employee volunteer efforts
23 throughout the year and is another sign of being
24 a great corporate partner and meeting the
25 additional needs of area nonprofits.
219
1 To reiterate and conclude, we truly believe
2 this merger with Wells Fargo will be a good
3 thing, bringing Norwest corporate citizen
4 philosophy to the merged organization, will
5 enhance the cultural differences with Wells that
6 have been talked about. Because of the
7 leadership roles that it looks like Norwest will
8 be taking with the merger, because of the
9 outstanding CRA rating Norwest has maintained,
10 because of the continuation of regional and
11 local philanthropic decision-making and because
12 of our history with Norwest Corporation, we
13 strongly support their merger.
14 Thank you.
15 CHAIRPERSON SMITH: Thank you very
16 much. If there are no questions, then we thank
17 you again for being here this afternoon. And we
18 will go on to the next panel, Panel 11. Shall
19 we wait for her?
20 Are you going to come closer or -- so that
21 you'll -- so you look like a member of our
22 panel? You'll be recognized as a member of the
23 panel.
24 MS. THEKELSEN: Oh, okay.
25 CHAIRPERSON SMITH: We'll start with
220
1 Miss Nugent, who is speaking on behalf of some
2 of the people listed who were unable to be
3 here. And if you will explain.
4
5 MS. NUGENT: Okay. Well, I just
6 wanted to thank you for allowing me to testify
7 in front of you today. My name is Danielle
8 Nugent, and I'm a senior at the University of
9 Minnesota Duluth. I'm also the Chair of the
10 State Board of Directors for the Minnesota
11 Public Interest Research Group, the group that
12 was listed to testify. They've asked me to
13 testify for them.
14 MPIRG is a student-run and funded
15 nonpartisan nonprofit organization. We work on
16 consumer and environmental issues that students
17 raise as concerns. I'm here today to
18 represented the concerns of MPIRG, its state
19 board, as well as the organization's 45,000
20 student and community members.
21 Our concerns over the proposed merger of
22 Wells Fargo/Norwest include the decreased
23 competition within the Minnesota marketplace,
24 the rise in banking fees that the merger could
25 cause the consumer, especially in light of Wells
221
1 Fargo's less consumer-friendly fee schedule; the
2 concern that this merger would move the
3 headquarters of Norwest, making the bank less
4 responsive to the Minnesota consumer.
5 I would first like to address my testimony
6 to the lack of competition this merger will
7 create. This lack of competition would mean
8 that the ever-growing emerging banks would be
9 the only ones left for consumers to choose
10 from. The Federal Deposit Insurance Corporation
11 reports this trend is continuing at an even
12 faster pace, showing 146 banks have been
13 absorbed just in the first quarter of 1998
14 alone. This trend is the same in Minnesota.
15 Fewer banks means fewer choices, according to
16 our research, and higher fees. In our report
17 last fall, the big fee squeeze, we showed that
18 bigger banks mean bigger fees. An example,
19 Minnesota, the cost of maintaining a regular
20 checking account is 40 percent -- 46 percent
21 higher in a large bank than a credit union and 4
22 percent higher than in a small bank. A
23 no-frills checking account at a big bank costs
24 54 percent more than at a credit union and 13
25 percent more than a small bank. Bank fees for
222
1 overdraft and ATM withdrawals are also on an
2 average higher at large banks. Large banks are
3 also more likely to charge service fees, which
4 impact low and fixed income consumers, such as
5 students, seniors are especially hit by this
6 fee.
7 On August 1st, 1998, Norwest raised its fee
8 for overdrafts from $21 to $25, almost a 20
9 percent increase. Is this because the new rate
10 is comparable with fees charged by Wells Fargo?
11 Can we expect these type of fee increases and
12 service costs to expand after the merger? Wells
13 Fargo discontinued its free checking for seniors
14 last year. Will we in Minnesota have the same
15 thing happen here?
16 Finally, we are concerned that the merger
17 would cause a lack of responsiveness from the
18 bank to the Minnesota consumer. If this merger
19 goes through, Norwest will be moving its
20 headquarters from Minnesota to San Francisco and
21 we no longer will have that management here.
22 Instead, they'll be on the other side of the
23 country. How will this new entity stay in touch
24 with the needs of the Minnesota consumer?
25 Instead of being a neighbor to Norwest, the
223
1 consumer becomes a number on a computer screen
2 in some far away headquarter.
3 As a student and a leader of a student
4 organization, I must tell you that these mergers
5 are not in our best interest. We do not have
6 disposable income to spend on large fees and
7 charges. We need access and affordability in
8 our financial services. We need banks that are
9 responsive to our credit demands. Lower prices
10 require competition. We are concerned that by
11 allowing more of these banks to take over the
12 marketplace, you are dooming us to a future
13 where banking becomes a luxury only the rich can
14 afford. If two or three large banks are allowed
15 to become the consumers' only choice, then what
16 will stop them from adding service charges to
17 every transaction, slowly taking the money from
18 people who need it the most? Low income
19 individuals, senior citizens, as well as
20 students will suffer from this.
21 Please, we are asking you to deny this
22 merger. Give us a chance to not only have
23 access to but the ability to afford our banking
24 services.
25 Thank you.
224
1 CHAIRPERSON SMITH: Thank you.
2 Mr. Tatum?
3
4 MR. TATUM: Yes. My name is Steve
5 Tatum, and I am the President of New Century I
6 Community Lending Cooperative. And we have a
7 brief statement that we would like to read to be
8 included in the record. New Century I Community
9 Lending Cooperative's mission is to pursue the
10 economic development and well-being of its
11 members. New Century was established to provide
12 lending and borrowing opportunities to
13 individuals and organizations previously
14 excluded from the traditional sources of these
15 services. As a result of these exclusionist
16 practices, a fundamental economic incentive had
17 been created. This incentive joins us together
18 to provide for ourselves the capital that is the
19 economic life blood of our community.
20 Because of the -- our late notice of this
21 public hearing, we haven't had the opportunity
22 to review all the technical aspects of this
23 merger, but our members felt it was important
24 that we attend and participate. Because the
25 Federal Reserve Bank has the mandate to protect
225
1 the interests of all citizens of this country as
2 it pertains to banking and banking practices, we
3 are here to get the assurance of the Federal
4 Reserve that the important issues of
5 discrimination, access to banking services by
6 low-income individuals and the prevailing
7 practices of red lining minority and low-income
8 communities are addressed in this merger.
9 Also, we feel there should be a formal
10 commitment made by both financial institutions
11 involved in this merger that minority and
12 low-income individuals will have equal access to
13 the capital that will insure the continued
14 development of our businesses and communities.
15 In this situation, the standard rhetoric "We
16 will do better" is grossly inadequate. It is
17 our position to insure the fulfillment of this
18 commitment. A specific dollar figure should be
19 designated as investment in traditionally
20 underserved businesses and communities. Our
21 organization feels strongly that these issues
22 are important to a large and growing
23 constituency and be served the same
24 consideration as any other financial element of
25 this merger.
226
1 Lastly, financial institutions that operate
2 at the public trust have a legal, moral, and
3 ethical responsibility to insure equal treatment
4 of all citizens. And it is the responsibility
5 of the Federal Reserve Bank to insure that these
6 institutions are in compliance with this
7 mandate. We plan to collaborate with all
8 interested groups and organizations to monitor
9 this process.
10 Thank you.
11 CHAIRPERSON SMITH: Thank you.
12 Ms. Therkelsen.
13
14 MS. THERKELSEN: Thank you for
15 allowing me to speak. I was under the
16 impression that this had already been decided,
17 that -- that Norwest and Wells Fargo were going
18 to merge. So I appreciate your allowing me to
19 speak at this time.
20 I've been a customer of Norwest Bank since
21 1972. And I was a customer at the Nor --
22 North -- Nor -- well, they call it Nordeast
23 Minneapolis office. And then when I moved to
24 south, I'm still a customer of the northeast
25 office. I'm very pleased with Norwest Bank.
227
1 They're very helpful. And I'm on direct deposit
2 so it goes directly into the bank. But, I mean,
3 joining a bank is not for me a thermos or a
4 blanket or something like that. That's not
5 what's important to me.
6 I understand when you have to pay for
7 checks. That I understand, and overdrafts and
8 things like that. That makes sense to me. But
9 being on direct deposit, I have 50 cents in the
10 bank right now. And I just -- you know,
11 Norwest, as long as I keep the 50 cents there,
12 is not going to be charging me extra money to
13 keep the 50 cents, like if you fall below a
14 certain amount, which is common for most banks.
15 I do miss more ATMs. Norwest doesn't have
16 enough. But I -- I just think that they are
17 known very much for their customer service and
18 their good record. And I'm opposing the merger
19 partly because of that basis. I had heard some
20 concerns about customer service of Wells Fargo.
21 I'm sorry. I can't tell you exactly where I
22 heard it, so I'm not going to quote somebody
23 that I might be wrong about. But it talked
24 about taking away the free checking and things
25 like that, and I can't afford it. And I don't
228
1 think a lot of other people who have the senior
2 rate can, and so I'm opposing it respectfully.
3 CHAIRPERSON SMITH: Thank you very
4 much.
5 If there are no questions from the panel,
6 then I thank you all for coming here this
7 afternoon and presenting your views on this
8 application.
9 And I don't know whether -- is our next
10 panel here? But thank you very much.
11 Yes, please. Do we have one more? Okay.
12 We have one more member of the panel coming, but
13 we'll go ahead and start with Mr. Jensen.
14
15 MR. JENSEN: Thank you. Thank you for
16 allowing me to be here today. I'm here to just
17 talk about our involvement with Norwest over the
18 past 13 years with the Anoka County Economic
19 Development Partnership and the Anoka Sherburne
20 County Capital Fund. I'm the director of the
21 partnership, the Anoka County Economic
22 Development Partnership, which is a 501C3
23 nonprofit corporation that does economic
24 development work in the 21-community Anoka
25 County area. And I'm also the President of the
229
1 Anoka Sherburne County Capital Fund, which is
2 a -- which is the State of Minnesota's first
3 multibank, multiinvestor community development
4 corporation that makes investments in emerging
5 technology-based companies.
6 First, a little bit about the partnership.
7 We were formed in 1985. And I've been Director
8 since we started. Norwest has been involved
9 with us from the beginning. Dave Raider of
10 Norwest Service and our Board of Directors
11 and -- and they have also not only committed
12 their time and their expertise, but also they
13 have contributed financially to the nonprofit,
14 which is -- I'm obviously greatful for. And
15 it's something that, of course, you need that
16 capital.
17 The partnership has focused a little --
18 they've taken a different approach to economic
19 development. And we've focused primarily on
20 emerging technology-based businesses. We don't
21 chase existing companies around as a way of
22 doing economic development, but we look at
23 working with emerging technology-based
24 businesses because they are not just moving
25 companies around. They are new jobs and,
230
1 second, that they are -- also pay the best. And
2 I think that's important to the State.
3 So we decided that we were going to -- if
4 we were going to do that, we found out that
5 entrepreneurs in emerging companies need one
6 thing more than other things, and that was they
7 needed access to capital. Access to capital for
8 the emerging companies is difficult today. Even
9 though we have record stock market activity and
10 there is a lot of dollars and the economy is
11 good, the one area that -- that there is not a
12 lot of money for is emerging companies that are
13 looking for, like, 250,000 to a million
14 dollars. The venture capitalists have so much
15 money under management that they go for the five
16 million dollar and up deals. And so they're --
17 that's a real void, which is a problem because
18 we're also setting records these days for new
19 company startups. So with that background set,
20 we decided that we were going to create our own
21 equity fund to address that need. And so we
22 started, like I said, the multibank,
23 multiinvesting Community Development
24 Corporation. So you can imagine me walking into
25 Norwest and saying, "Have I got a deal for you.
231
1 We're going to -- we're kind of a quasi public
2 sector" -- even though we're not public sector,
3 but we have money coming in from the public
4 sector -- "economic development group. And
5 we're going to invest in high-risk dried up
6 companies." But I guess the reason I was
7 interested in talking to you today is because we
8 had selected Norwest as a bank with a large
9 presence in our area. And even though they
10 didn't grasp this right away, they did think
11 about it. And after awhile, they decided this
12 was a unique way of approaching economic
13 development. So they became our lead investor
14 and took our -- our CDC through the offices that
15 control the currency, made the initial
16 investment. And today we now have 22 investors,
17 ten of which are banks. We have NSP,
18 Minnegasco, Minnesota Power. All the major
19 utility companies are involved. The State of
20 Minnesota has made an investment in our fund.
21 And we've made 22 -- 24 investments to date. A
22 lot of those are in the Urban Initiative Fund
23 target area with our business incubator in
24 Columbia Heights. We have created well over 100
25 very high-paying jobs in this area. We have --
232
1 and with the pro -- you know, the prognosis of
2 many hundreds more as these companies grow and
3 mature. They have also -- Norwest is our
4 largest investor. They jut made a follow-up
5 investment of $50,000. Actually, they
6 approached us on the Banking Enterprise Zone.
7 We happen to be a certified Community
8 Development Financial Institution. Muffy Gabler
9 and -- one day and said, "Hey, we've -- we got a
10 way for us to participate even in a greater
11 extent." And so they've -- they've done that.
12 So I just wanted to be here today to talk
13 about the great experiences that we've had with
14 Norwest and share those with you.
15 Thank you.
16 CHAIRPERSON SMITH: Thank you.
17 Mr. McLean, you're next.
18
19 MR. McLEAN: Excuse me. My name is
20 Warren McLean, and I am the President and CEO of
21 the Metropolitan Economic Development
22 Association.
23 First of all, I want to say thank you for
24 giving me the opportunity to testify at this
25 public meeting about MEDAs relationship with
233
1 Norwest Corporation. For the benefit of the
2 committee, MEDA is a private nonprofit minority
3 business development organization. We provide
4 small business consulting, financing and sales
5 development services to nearly 600 minority
6 entrepreneurs each year. We have been in
7 operation for nearly 27 years. For the record,
8 MEDA's relationship with Norwest has been
9 outstanding. First, Norwest Corporation and its
10 CEO at the time, Phil Harris, was one of four
11 executives who helped start MEDA 27 years ago.
12 An original founder and funder, Norwest remains
13 a leading contributor to MEDA, having
14 contributed over $667,000 in operating funds
15 alone since 1971. In 1989 MEDA spun off a
16 minority venture capital fund called Milestone
17 Growth Fund. Norwest helped capitalize the fund
18 by providing $200,000 in capital. In addition,
19 I consulted regularly with Norwest Venture
20 Capital staff for help in designing, developing
21 and implementing the fund. Norwest Venture
22 Capital President, Dan Haggerty, was one of
23 Milestone Growth Fund's original board members.
24 Further, in 1995 MEDA established a MEDA
25 loan program. It's a 5.3 million dollar working
234
1 capital fund for minority-owned businesses. The
2 fund is a collaboration of six banks, the
3 McKnight Foundation and the State of Minnesota.
4 The banks comprise a consortium. And together
5 they agreed to provide 3.3 million dollars in
6 loanable funds. And Norwest Corporation was one
7 of two banks that agreed to provide one million
8 dollars of that loan fund. Moreover, Wally
9 Drogenmueller, who is Norwest's Vice President
10 and Deputy -- Deputy Senior Credit Officer, took
11 the lead in determining the mechanics of the
12 program. Wally developed the overall lending
13 criteria. He also reviewed and tested the
14 various lending scenarios. Wally crafted a
15 design that was acceptable to all six banks.
16 And for Wally's efforts, he was selected MEDA
17 volunteer of the year.
18 To Norwest Corporation's credit, they have
19 remained vigorous supporters of the program.
20 Either Tom Burke, Terri Banizuski or Lori Powell
21 have attended all the credit committee meetings
22 since the program's inception in 1995. And they
23 meet monthly. They also close and personally
24 administrate each Norwest consortium loan.
25 In 1996 MEDA launched a Vision 2000, which
235
1 is a major expansion of our services. To
2 achieve this expansion, we asked several of our
3 funders to double their financial support. And
4 Norwest Corporation was the first to literally
5 double its support, which they did that very
6 year. Norwest Corporation has also funded and
7 provided training to MEDA clients. Jeff Judy,
8 one of Norwest's top internal trainers, has
9 conducted training sessions for MEDA clients on
10 several occasions. Jerry Gray, who was our
11 Norwest Executive Vice President, continues a
12 long tradition of proactive board leadership on
13 the MEDA board. And he recently proposed a 10
14 million dollar expansion to the MEDA loan
15 program.
16 Finally, Norwest Chairman and CEO, Dick
17 Cobosovich, is a member of the MEDA Advisory
18 Board. And he was the keynote speaker at MEDA's
19 1997 annual meeting. And he's hosted a few MEDA
20 client lunches.
21 This concludes my remarks. And again, I
22 thank you for the opportunity to provide
23 testimony.
24 CHAIRPERSON SMITH: Thank you very
25 much.
236
1 Mr. Milburn?
2
3
4 MR. MILBURN: I have handouts, so you
5 can't hit that button yet because my speech is
6 exactly five minutes long. But if I could pass
7 these around for the group. Thank you.
8 Now, my name is Curt Milburn, and I'm the
9 Project Director of the Phalen Corridor
10 Initiative. I'm also the Executive Director of
11 the East Side Area Business Association in
12 St. Paul, Minnesota.
13 It makes good -- good sense -- good
14 business sense and common sense to help rebuild
15 the inner city. And Norwest Bank, through its
16 house and lending programs, continues to
17 contribute to the urban revitalization of
18 St. Paul. But I think that's a story best told
19 by some of these gentlemen, some other folks. I
20 feel compelled today to give you some background
21 about the community where I work and Norwest
22 Bank's participation with that community.
23 The East Side of St. Paul, once a
24 manufacturing powerhouse, has lost 2,500 jobs in
25 the last 30 years. There are areas of the East
237
1 Side with as high as 17 percent unemployment.
2 Since the 1970's companies like Whirlpool closed
3 plants, throwing hundreds of people out of
4 work. Just last year, Stroh Brewery and Can &
5 Conveyor closed their -- closed their doors with
6 a loss of 500 additional jobs.
7 There has been a number of dreams to
8 redevelop this community, but it wasn't until
9 the City Parks Department brought together
10 business and community members to give input on
11 a proposed bike path that a spark took hold.
12 The community responded with envisioning much
13 more than a bikeway. Craig Johnson, the Branch
14 Manager of two Norwest Banks on the East Side,
15 volunteered to chair a comprehensive initiative,
16 the likes of which -- which had never been tried
17 in the City of St. Paul.
18 I turn your attention to the first article
19 inside the sleeve, which is about Craig Johnson
20 from the "East Side Review." Craig was raised
21 on the East Side and remembered it as a place of
22 opportunity, not a place of despair. The Phalen
23 Corridor Initiative is about reclaiming polluted
24 lands called brown fields to attract
25 manufacturing companies. It's about workforce
238
1 development striving to get East Siders in the
2 jobs we attract. It's about green space. It
3 has the nation's first project that's taking an
4 abandoned shopping center and turning it back
5 into the wetland that it once was. It's also
6 about building a road to get access to these
7 community assets.
8 And I turn your attention to the "City
9 Business" article as well as the sleeve, which
10 is the "PCI Today," that gives you some general
11 background about our project.
12 On his own time, Craig led the initiative,
13 even flying to Washington to secure funding from
14 the federal government to begin construction of
15 this road. But Norwest is not just one banker.
16 The East Side is changing, and our initiative
17 reflects those changes. When Craig was promoted
18 to a new position, Norwest had the foresight to
19 replace him with the first Hmong banker in the
20 country.
21 And I turn your attention to an article in
22 there as well on Kou Vang.
23 Kou Vang is the first Hmong branch manager
24 and bank vice president in the United States.
25 The cash machine at his bank reads in English
239
1 and in Hmong, probably the only one in the
2 country. A visit to that bank is like visiting
3 the world. African Americans, Latino, Hmong and
4 Whites are not only customers, but they are
5 employees as well. I'm proud to report that Kou
6 has been recently made the Vice Chair of the
7 Phalen Corridor Initiative, a position that
8 leads directly to the position of chair of the
9 project.
10 It's not just on the neighborhood level
11 that Norwest has integrated itself with the
12 community, either. Norwest has backed us with
13 this commitment with joining nine other
14 community funders to support the initiative.
15 Also, Larry Hague, a media relations expert with
16 the bank, has provided three separate media
17 trainings for us.
18 Now, you folks should remember the Phalen
19 Corridor Initiative is about community members,
20 local business people, residents, local
21 officials, not slick PR professionals. Most of
22 us had rarely talked to a news person,
23 nonetheless been confronted with the lens of a
24 television camera. Larry helped us communicate
25 our vision. And that's a vision that has
240
1 captured the imagination of national and local
2 leaders.
3 Joan Germinski, President and District
4 Manager of Norwest, sits on what we call our
5 advisory committee. Along with our Mayor,
6 Congressmen and others, Joan helps chart our
7 course, strongly stressing the use of Norwest
8 programs for inner city residents.
9 Another community leader is Pat Donovan.
10 Mr. Donovan is the Norwest Regional President.
11 And he acted as co-chair of the Citywide
12 Community Development Agenda. Pat helped devise
13 the blueprint of how a city can compassionately
14 build its members and its institutions.
15 Mr. Donovan continues to honor us and the
16 employees of Norwest who works with -- who work
17 with us by citing the Phalen Corridor as
18 St. Paul's best example of comprehensive
19 community development. Without the commitment
20 of Norwest Bank and its employees, we would not
21 have the success we have today. Our wetland
22 project is underway. It's actually being
23 built. Our first industrial park has three
24 confirmed tenants, bringing hundreds of jobs to
25 the East Side. And the first funding for our
241
1 roadway is in place. Without the contribution
2 of Norwest Bank in the future, I fear we may not
3 realize our vision of rebuilding the East Side.
4 We have been assured that their commitment will
5 continue. And we've never been misled by this
6 institution or its dedicated employees.
7 I thank you for this opportunity to talk
8 about one of our community partners. And I'm
9 free to answer any questions you might have.
10 Thank you.
11 CHAIRPERSON SMITH: Thank you
12 Mr. Shreffler?
13
14 MR. SHREFFLER: Very good. Thanks.
15 I, too, appreciate the opportunity to speak with
16 you. I also appreciate that there's this
17 process that allows for community input. As --
18 as a member -- or as a part of Northeast
19 Minnesota and living in the Duluth area, I
20 really want to stress that the community
21 involvement really depends on leadership of
22 large agencies and organizations like Norwest
23 Bank to make that community happen. My
24 experience with Norwest is why I'm here. I want
25 to share that with you briefly. The LSS Loan
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1 Fund is a loan fund that was created eight years
2 ago. We loan money to low-income families to
3 purchase vehicles or repair vehicles so they can
4 go to work, continue work and kind of maintain
5 that family stability, really, is the essence of
6 it. Self-sufficiency, family stability is what
7 we're about. We partnered with Norwest Bank
8 eight years ago. It was a unique partnership.
9 No one else that we knew of in the country was
10 doing anything like that. They joined with us
11 to loan money to low-income families to get them
12 to work. In eight years, we've loaned 1.4
13 million dollars to a little -- a little over 800
14 families in the northeast region of Minnesota.
15 Norwest was instrumental in creating the process
16 that we're able to use to loan money to people.
17 The -- five years ago, the loan fund went
18 statewide. The McKnight Foundation supported
19 the loan funds and expanded the concept of the
20 loan funds to a statewide program. The Twin
21 Cities had programs that did not use banks.
22 Northeast Minnesota was the first to use a bank
23 involvement -- Norwest's involvement. And then
24 when they went statewide, McKnight said, "We
25 want the bank process to be a part of that
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1 initiative. So five years ago three other
2 Norwest Banks in the state, southeast, southwest
3 and then west central, got involved in the loan
4 fund, as well, and are -- are currently joining
5 or partnering, as we do with -- as Norwest does
6 in northeast Minnesota, they also do throughout
7 those other three areas of the state. So almost
8 half the state is covered by Norwest's
9 involvement in these loan funds.
10 The other thing that happened about three
11 years ago is that the Family Service America and
12 the McKnight Foundation went nationwide with the
13 loan fund program. One of the things that they
14 stressed was the involvement of the bank in that
15 partnership process so that the banks can do
16 what they do best and that social service
17 agencies can do what they do best. And, really,
18 that's loaning money to people to get them back
19 to work. That program has gone nationwide.
20 It's in ten cities now. It will be in 20 cities
21 as soon as those programs are up and running.
22 What I'm -- my intent and what I'm
23 stressing, really, is that the -- what was
24 created in northeast Minnesota eight years ago
25 has become a model for what banks can do in
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1 relationship to social service and low-income
2 needs. And Norwest in northeast Minnesota took
3 the initiative, got involved. And now it's
4 expanded as a model that's been spread out
5 throughout the nation.
6 So I do expect that with the merger with
7 Wells Fargo, it will help us to move that
8 mission forward and will not hinder us. It will
9 open doors for us. It won't close them. And I
10 certainly expect our relationship in northeast
11 Minnesota to continue to be as strong as it's
12 been.
13 So thank you.
14 CHAIRPERSON SMITH: Thank you very
15 much for coming this afternoon. If there are no
16 questions from the panel, then we will move on
17 to the next panel, assuming that we have some
18 number from them here. Great.
19 Thank you very much for coming. We're
20 going to start with Miss Young. Is that all
21 right?
22 MS. YOUNG: I knew I'd take the wrong
23 seat. This is okay.
24 CHAIRPERSON SMITH: No. You're from
25 the previous panel. That's why thought we would
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1 put you on first.
2
3 MS. YOUNG: Oh, okay. Okay. My name
4 is Zula Young. I work and I live in St. Paul.
5 I'm the Vice President of Rondo Community Land
6 Trust, the Board of Directors. And I wish to
7 thank the Federal Reserve for giving me the
8 opportunity to speak on the proposed merger
9 and -- between North -- Norwest and Wells Fargo
10 Company.
11 I'm a single parent who has had the
12 opportunity to purchase the first completed land
13 trust home in St. Paul. I grew up in the
14 neighborhood where my home is located. I'm very
15 active within my community. I'm also an
16 organize -- organizer of the Community Guidance
17 Project called SAGE. I'm a member of the
18 Summit-University Weed & Seed Project. And I
19 work as a paraprofessional in the public school
20 systems.
21 The land trust model is fairly new to the
22 Twin Cities and Minnesota. And Norwest was the
23 first and to date the only mortgage company
24 willing to take a chance with Rondo Community
25 Land Trust and separating the land from the
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1 building and agreeing to the ground lease
2 documents. The land trust model is unique in
3 its limits -- and it does limit the equity, but
4 it provides a long-term 99-year affordable
5 housing for low and moderate-income families.
6 Norwest was willing to put the extra time in to
7 understand the land trust model that works and
8 the ability to make lending decisions here in
9 the community. They have had the ability to say
10 yes to new ideas at a local level. Norwest has
11 not done land trust mortages before mine, but
12 because of Rondo Community and Norwest, I had
13 that opportunity to own my own home now.
14 Our relationship with Norwest is built
15 around people. And we work on a -- that we work
16 with on a regular basis and also affordable
17 housing. Rondo has developed a trusting working
18 relationship with some individuals at Norwest
19 Corporation. We deal with Carl Swindinberg of
20 Norwest Mortgage; Sally Burke from Norwest Real
21 Estate Management Services; Mary Gabler, Norwest
22 Twin City Community Development; and Bill
23 Canfield, Norwest Mortgage.
24 Rondo would like and hope and expect the
25 Norwest philosophy will continue that allows us
247
1 to work with Carl, Sally, Mary and Bill after
2 the merger. And it's the individual people
3 within an already very large corporation that
4 makes it work now. And these are the people
5 that help it work in the future.
6 Norwest was willing to take a chance with
7 their ground leased. And we hope the Norwest
8 philosophy to continue that allows people within
9 the corporation to listen to new ideas, such as
10 land trust, and act on them also on a local
11 level. While Rondo Community Land Trust is a
12 small housing organization in St. Paul, we are
13 providing affordable housing one house at a
14 time. And so far Norwest has been there one
15 mortgage at a time. When the shortage of
16 affordable housing is better understood at both
17 the local and national level, there is more
18 willingness to provide funds to build and
19 renovate affordable housing. And we all
20 increase our production levels. And when that
21 day comes, we hope the Norwest philosophy of
22 working with neighborhood housing
23 organizations -- organizations -- excuse -- to
24 be there with us. And we want to see Norwest
25 Mortgage expand the use of the land trust and
248
1 affordable mortgages throughout the country.
2 And we believe the philosophy of local
3 decision-making and a regional approach will
4 insure Rondo Community Land Trust will have the
5 same working relationship we now have with
6 Northwest -- I'm sorry -- Norwest. You know I'm
7 nervous. Bear with me.
8 So we hope that as the merger talks
9 continue both here and in Washington that
10 Norwest and Wells would commit to the
11 following: One, a defined regional approach
12 which will be established throughout the
13 country, a regional system that allows real
14 decision-making within each area for -- and,
15 two, Carl, Sally, Mary and Bill should keep
16 their current phone numbers without an 800
17 prefix. While some departments in Norwest are
18 currently centralized, every effort should be
19 made that allows for decision-making at a local
20 level. And, three, to continue to take risks,
21 listen to the ideas within the low-income
22 community because that is where the answers are
23 to solving our housing shortage.
24 And I thank you for your time.
25 CHAIRPERSON SMITH: Thank you very
249
1 much.
2 Mr. Ernest?
3
4 MR. ERNEST: Thank you. I'd like to
5 comment a little bit on Norwest's commitment to
6 agriculture. I'm a grain farmer. I grow corn
7 and soybeans. And, in fact, 24 hours ago I was
8 combining a terrific soybean crop.
9 What I'd like to do is I'd like to talk
10 very briefly about a number of kind of mega
11 trends that's happening in agriculture. And
12 some of the things that I'm going to ask you to
13 consider when you consider the -- the dynamic of
14 the merger between Wells Fargo and Norwest
15 Bank. Many of you have heard of Freedom to
16 Farm. Or now they're talking Freedom to Fail a
17 little bit in the paper. What's happening in
18 our business is we're becoming less dependent on
19 agriculture. And right now we're kind of going
20 through a series of streams of declining
21 payments from the government to get out of
22 agriculture. We don't know where we're
23 ultimately going to end up with Freedom to
24 Farm. What we have learned in the last two
25 years is the business is extremely cyclical.
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1 The highs are very high. The lows are very
2 low. Corn is $1.48 right now. 26 months ago it
3 was $5.08. So we're in a business and an
4 environment where we have to deal with a lot of
5 volatility. We're also in an environment that
6 is speeding up technology -- with technology or
7 having a biotech -- big technical pieces of
8 equipment. And we have extremely high capital
9 needs.
10 We're in a business that's really
11 changing. And being a customer of Norwest for
12 approximately 15 years and looking at
13 agriculture and looking at all these things that
14 are happening, there's a key element that --
15 that I think has become apparent. And that's
16 what I want to speak to today.
17 We in production agriculture, the people
18 that grow the crop and have to endure these
19 cycles, cannot have fair-weather lenders. We
20 need people that are going to be with us in good
21 times and bad. We need people that are
22 committed to agriculture. We need people that
23 agriculture is a very big part of their
24 business. In fact, when the combination of
25 Wells Fargo and Norwest originally was announced
251
1 in our neck of the woods, which is down by
2 Mankato, I was not real comfortable about the
3 whole thing because I knew Norwest's commitment
4 to agriculture. And I knew nothing about Wells
5 Fargo. Well, I was delighted to learn that
6 Wells Fargo is the number one ag lender in the
7 United States. And it seems to me if you put
8 the number one ag lender in the United States
9 and the number two ag lender in the United
10 States together, you're going to have a pretty
11 formidable bank that could really help
12 agriculture. And, in fact, I, for one, will be
13 extremely disappointed if, as a by-product of
14 this merger, if we do not get some new financial
15 services, some innovative financial services.
16 And I believe the combination of these two
17 elements are going to really help production
18 agriculture.
19 There's no way, with the commitment of
20 Wells Fargo and Norwest and how big agriculture
21 is a part of their business, that they can be a
22 fair weather lender. And we cannot endure fair
23 weather lending in these cyclical environments.
24 The other thing that is happening in our
25 business is we no longer grow a generic crop.
252
1 We grow specialty crops. We grow waxy corn. We
2 grow high-oil corn. We grow all these -- these
3 products. What works here does not work 100
4 miles from here. What works 100 miles from
5 there doesn't work beyond the road. What that
6 speaks to is we need local control and we need
7 local decision-making and we need people that
8 can be local and understand our business. And
9 in my judgment working with Norwest over the
10 last 15, 16 years, that's probably been one of
11 their greatest strengths. And I am hopeful that
12 that will continue. And -- and I'm confident it
13 will.
14 So in conclusion, as a producer and a small
15 businessman and a consumer of credit, I'm
16 excited about the merger. And I believe the
17 merger can be very positive for agriculture.
18 And I would encourage you to consider these
19 aspects that I just discussed when you're
20 considering the merger.
21 Thank you.
22 CHAIRPERSON SMITH: Thank you very
23 much.
24 Mr. Koy?
25
253
1 MR. KOY: Thank you, ma'am. My name
2 is Chantha Richard Koy. I'm a mortgate
3 counselor with the Powderhorn Resident Group.
4 Powderhorn Resident Group is a nonprofit
5 corporation -- community corporation. And the
6 relationship with PRT, which is what we call
7 short for Powderhorn Resident Group, PRT, with
8 Norwest is through a variety of thing. One is
9 through the development of multi-family housing
10 for the low-income people in the Southeast Asian
11 community. Norwest has been a great asset for
12 our community and has been blessed for our
13 Southeast Asian people that get -- receive
14 financial -- directly financial support from
15 Norwest. The added relationship that we have
16 with Norwest is the Home Buyer Education Program
17 and Counseling Program for all -- not just for
18 Southeast Asian community, but for all the
19 community at large. We just design for low to
20 moderate-income people to understand the process
21 of buying a home. Beside that, Norwest has been
22 a leader in -- in term of developing and
23 supporting, you know, affordable housing in the
24 community home buying program. Muffy Gabler
25 have spent tremendous of time -- and other
254
1 mortgage counselor and other loan officer and
2 underwriter from Norwest have spent tremendous
3 of time in our community to study what type of
4 program should be created and should be
5 established in term of reaching the goal of
6 affordable housing in our community.
7 So I strongly speak not just on behalf of
8 the Powderhorn Resident Group, but also on
9 behalf of my Cambodian community that we have
10 been -- received a lot of support from Norwest.
11 We hope and I hope that the merger with Wells
12 Fargo will bring more prosperity for our
13 community and more opportunity, more program,
14 you know, in term of affordable housing and home
15 buying education program and establish more --
16 more -- you know, expanding the existing
17 mortgage program that Norwest have with just the
18 CHOP Program, one of the leader in our, you
19 know, mortgage lending community and hold
20 that -- to expand that to our community.
21 And that's all I have to stay today. Thank
22 you.
23 CHAIRPERSON SMITH: Thank you very
24 much.
25 Ms. Vitela?
255
1
2 MS. VITELA: Thank you. My name is
3 Mary Vitela. I have been a realtor going on ten
4 years now. I'm currently with Stevens Realty in
5 St. Paul. I am here to speak on the Community
6 Homeownership Program. This program is
7 available through Norwest in Minneapolis and
8 St. Paul. I support this program strongly
9 because I use it in about 95 percent of my
10 business. The basis of my business is by word
11 of mouth or referrals or past clients. These
12 clients refer their relatives and their
13 coworkers to me. So it is very important that I
14 am able to help these new buyers. My clients
15 are mostly from the West Side of St. Paul. Some
16 of them have a limited understanding of the
17 English language and some of them only speak
18 Spanish. For this reason, and because I am
19 fluent in Spanish, the majority of my business
20 comes from the Hispanic population. They rely
21 very strongly on any information I relate to
22 them. I use the Community Homeownership Program
23 because I feel it is the best for my clients.
24 Some of the most important highlights are
25 it's a conventional mortgage with five percent
256
1 down. And extremely important is that it has no
2 private mortgage insurance payment. This
3 insurance can add an average of 38 to $42 to the
4 mortgage payment. And to some people that are
5 working two jobs, this can -- is a large
6 amount. In over the life of the loan, it can
7 become a considerable amount. Because of the
8 five percent down and no insurance on top of the
9 mortgage, the buyer starts the loan off with
10 some equity. The mortgage being lower, they
11 have lower monthly payments. Also through this
12 program, the seller can contribute to some of
13 the closing costs. And the bank also has
14 special funds available to help with the down
15 payment. And, therefore, the buyers need less
16 of their own money to purchase a home. Also
17 because of the 38 percent qualifying ratios,
18 more low to moderate-income people are able to
19 qualify for a nicer home.
20 The buyers that I help are buying homes for
21 the first time, the majority of them. They
22 basically do not know where to start in the
23 process of owning their own home and feel they
24 cannot afford their own home. They feel they
25 need thousands of dollars to buy and have no
257
1 substantial money saved. These buyers usually
2 can pay for their rent and their household
3 expenses. But they have no credit cards, they
4 have no installment loans, and they have no debt
5 because they can't afford to have any debt.
6 They prefer to pay for cash. I mean, they
7 prefer to pay in cash for items as they need
8 them. Their employment outlook is usually
9 pretty good and constant. They are reliable and
10 extremely responsible and hard-working people.
11 They only need a little direction. They don't
12 understand the process.
13 They -- I feel that these buyers are
14 classic examples of the type of buyers that the
15 CHOP Program is designed to help. This program
16 has enabled me to obtain mortgages for my
17 clients that otherwise might not have been able
18 to buy a house. I have used this particular
19 program since 1991. Through the years, I have
20 developed a relationship with Norwest, and I
21 know their policies toward approve -- approval
22 of obtaining a mortgage. And I prepare my
23 clients to meet these policies. Whether they
24 are quickly approved or even if it takes a year,
25 the buyers have a goal, and they work toward
258
1 it. I have gotten a 99 percent approval for
2 these people. Most of my -- the majority of my
3 buyers are satisfied. Satisfied buyers are very
4 appreciative of being homeowners. And they
5 believe it to be a dream come true. I feel that
6 Norwest has enabled them to establish roots in
7 the community, and all their help throughout the
8 years has been invaluable to me. I will
9 continue to use their services indefinitely,
10 especially if they continue to use this special
11 program, the CHOP Program, Community
12 Homeownership Program.
13 CHAIRPERSON SMITH: Thank you.
14 Mr. Vitela, were you going to make a
15 presentation?
16 MR. VITELA: No. I'm just here for
17 her.
18 CHAIRPERSON SMITH: For moral and
19 other support?
20 MR. VITELA: Right.
21 MS. VITELA: Yes.
22 CHAIRPERSON SMITH: Thank you.
23 If there are no questions from the panel,
24 this may also turn out to be the last panel. I
25 don't know whether we have any other witnesses
259
1 who were coming to testify. Would you like for
2 us to -- should we wait for a couple of
3 minutes?
4 Is there anyone who has not signed up to
5 present testimony who would like to make a
6 statement from the audience? If not, we --
7 there are a couple of people who were scheduled
8 to be on later. We don't know whether they will
9 appear or not. Do you want to stay and --
10 MR. BINNING: I wonder if we should --
11 we should maybe take a quick break?
12 CHAIRPERSON SMITH: We're going --
13 we'll -- what we'll do is we'll take a break.
14 And then if -- and reconvene if they come
15 sometime relatively soon. It's 4:15 so we're
16 not -- we're not rushing off anywhere.
17 But I want to thank you. And thank you, as
18 the representatives of all of the panels who
19 have gone before, in the sense that we
20 appreciate your coming to present your views, to
21 sharing information with us, whether it has been
22 in support of the application that is before the
23 Federal Reserve or opposing the application.
24 The information that you have shared has been
25 important to the process. And we thank you very
260
1 much for coming.
2 And with that, we will take a small
3 recess.
4
5 (Whereupon a break was taken.)
6
7 CHAIRPERSON SMITH: I'm reconvening
8 the meeting long enough to adjourn since no
9 other panelists have shown up and since we are
10 approaching or maybe have hit quarter of 5:00,
11 which is when they were due to be on the panel
12 if they were going to be on a panel. So thank
13 you all again for coming to this public
14 meeting. And we are adjourned.
15
16 (Hearing concluded at 4:45 p.m.)
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Last Update:
March 15, 2017