Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation
Wednesday, July 7, 1999
Transcript of Panel Thirteen
20 MS BODINGTON: I'm Susan Bodington. I am
21 director of housing policy at Rhode Island Housing
22 and speaking on behalf of Rhode Island Housing and
23 Mortgage Finance Corporation.
24 Rhode Island Housing is the state's housing
25 finance agency in Rhode Island. We're a
0338
1 self-supporting quasi-public corporation. We offer
2 over two dozen housing-related programs targeted to
3 low- and moderate-income families. We administer
4 more than 13,000 federally subsidized apartments.
5 Our home ownership division provides counseling,
6 down-payment and closing cost assistance, and
7 low-interest loans to first-time home buyers. We
8 purchase loans from participating lenders and
9 originate and service loans ourselves.
10 Since 1973, Rhode Island Housing has
11 financed the purchase, construction or
12 rehabilitation of more than 65,000 homes and
13 apartments.
14 We have several concerns regarding the
15 merger of Fleet and BankBoston. BankBoston,
16 compared to Fleet, has a much better record of
17 community lending in Rhode Island and provides more
18 responsive service to lower-income customers and to
19 community groups. Rhode Island is a small state
20 with limited resources and cannot afford to lose the
21 services provided by BankBoston.
22 We are also concerned that the lack of
23 competition in Rhode Island will severely limit
24 access to financial resources unless efforts are
25 made to maintain at least the current level of
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1 investment by the combined banks and attract new
2 financial interests which will be required to
3 provide financial services to lower-income
4 communities.
5 Low- and moderate-income communities in
6 Rhode Island depend on financial institutions to
7 invest in their neighborhoods, their businesses, and
8 to offer financial services to first-time home
9 buyers.
10 Rhode Island Housing has experienced a
11 dramatic decline in Fleet's commitment to first-time
12 home buyers in the past five years. In 1994 Fleet
13 was our top lender, closing nearly $32 million in
14 mortgages. By 1998 Fleet had dropped to fifth among
15 lenders offering Rhode Island Housing mortgages and
16 closed only $6.6 million, a decrease in investment
17 of over $25 million.
18 And this, by the way, does not include the
19 Shawmut portfolio, where Rhode Island Housing saw a
20 decline of an additional $16 million through the
21 loss of Shawmut.
22 This is an 80 percent decline, which
23 indicates to us that there's been a shift in focus
24 from the needs of our low-income customers. Fleet's
25 share of the total mortgage market in Rhode Island
0340
1 fell during that same period from 8.8 percent of the
2 total mortgage market to only 3.3 percent in 1998.
3 During that same period, between 1994 and
4 1998, BankBoston's mortgages decreased as well, from
5 $25 million to $14 million, a 44 percent decline.
6 But they did maintain their overall effort in
7 offering Rhode Island Housing programs, and they're
8 our third most productive lender.
9 Our concern is that the Fleet trend will
10 prevail and will similarly impact BankBoston
11 participation in investing in low- and
12 moderate-income communities.
13 We have also witnessed a similar pattern in
14 the lack of attention to customer service provided
15 to low- and moderate-income borrowers. Fleet does
16 not provide the local contact that low- and
17 moderate-income customers needs to work out their
18 problems. Instead, nontraditional loans are
19 frequently sold on the secondary market and are then
20 treated as standard loans.
21 Lack of responsive servicing for first-time
22 home buyers' loans has resulted in a very high
23 delinquency rate for Fleet loans, 12 percent, as
24 compared to 6.5 percent that we see for similar
25 loans in the Rhode Island Housing portfolio.
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1 Financial services for lower-income
2 communities requires a commitment to training new
3 home buyers and providing the housing counseling
4 services necessary to help them succeed. Without a
5 local contact, you cannot effectively serve lower-
6 income communities.
7 We feel that Fleet should be required to
8 adopt BankBoston's community lending practices as a
9 condition of the merger. Rhode Island Housing
10 depends on the banks as partners to implement our
11 mission to provide safe, affordable, healthy
12 housing. Through consolidations there are now only
13 three major banks in the State of Rhode Island to
14 assist us with that mission.
15 Rhode Island would be losing its second
16 largest bank, a good originator with high quality
17 production as a participant in our programs, with
18 the loss of BankBoston. In return, we need Fleet to
19 assume new policies to benefit consumers and to
20 increase the level of investment in lower-income
21 communities in Rhode Island.
22 We recommend that the Federal Reserve Bank
23 require the maintenance of at least the current
24 level of investment represented by the two
25 institutions. In addition, we recommend that the
0342
1 Federal Reserve require entities acquiring the
2 assets of BankBoston in Rhode Island to make similar
3 commitments to investment in lower-income
4 communities and assure improved customer service by
5 providing local contacts who can resolve problems
6 and address customers' needs.
7 HEARING OFFICER SMITH: Thank you.
8 Ms. Clement.
9 MS. CLEMENT: My name is Brenda Clement,
10 and I'm the executive director of the Housing
11 Network, which is the state association of CDCs or
12 Community Development Corporations in Rhode Island.
13 Our member organizations work throughout the state
14 developing affordable housing, working on a number
15 of community economic development projects including
16 home repair loan programs, Main Street
17 revitalization programs, and home buyer education
18 and counseling programs.
19 We are here to express our concern and
20 opposition to the merger of Fleet and BankBoston
21 because of our concern of the lack of resources or
22 the dwindling number of resources that are available
23 in Rhode Island to address our affordable housing
24 and community economic development needs.
25 The needs are indeed great. You have
0343
1 already heard from many other states about the
2 concerns of housing needs in the Northeast, and
3 Rhode Island is no exception to that. We have one
4 of the lease affordable states in the country. We
5 have one of the lowest home ownership rates in the
6 country. We have also one of the oldest housing
7 stocks in the country, which leads to numerous
8 problems, including a major lead problem.
9 The problem is not going to be solved by
10 one entity. Government alone can't solve it,
11 nonprofits alone can't solve it, private foundations
12 and institutions alone can't solve it, but together
13 we can. If our private industry in terms of bank
14 investment and bank dollars disappear, then we are
15 indeed in serious problems in Rhode Island.
16 Over 20 years ago now, I set up my first
17 savings account with then Industrial National Bank,
18 which was Fleet's earlier beginning origins in Rhode
19 Island, setting up my savings account for my first
20 job, ironically at a bank, one of the branches that
21 will be closed as part of the divestiture plan in
22 downtown Pawtucket, another blow to a downtown
23 environment, unfortunately, that needs no other
24 blows.
25 But consequently, I've watched Fleet all my
0344
1 adult life as it's grown and developed into the
2 institution that it is, and have seen it grow and
3 develop into a way where bigger is not necessarily
4 better, particularly im my last five years here, in
5 my role as executive director of the Housing
6 Network.
7 If you will excuse the metaphor, in some
8 ways Fleet has sailed its way out of the Ocean State
9 and has left behind numerous needs and numerous
10 concerns, at least in the neighborhoods and the
11 communities that our members work in.
12 We are very concerned about the continued
13 regionalization and growth of the bank and very
14 concerned, as are other advocates in other
15 communities, about the need for a formal written
16 agreement and formal promises.
17 My old high school principal used to say,
18 "What is not said is not understood," and that is
19 very true and very clear to me, unless we see it in
20 writing, and unless we have commitments for us to
21 continue to grow as partners.
22 Even after -- Fleet certainly hasn't left
23 Rhode Island, and certainly won't leave Rhode Island
24 even after this divestiture, but we need to make
25 sure that they continue to provide services and
0345
1 resources to all Rhode Islanders. And that is one
2 of the reasons why we're here today to express our
3 concerns and to make sure the low- to moderate-
4 income individuals that we serve are continued to be
5 served and maintained.
6 We want to make sure that any agreement or
7 any promises or proposals that are made are fair to
8 Rhode Islanders, and are fair to the low- to
9 moderate-income Rhode Islanders, and that the
10 agreement is clear and broken down by state.
11 You have heard that several different times
12 already from other speakers, but to us it is
13 critical. And to us it is critical, as Susan has
14 already mentioned, because there are not many banks
15 in town in Rhode Island. It's a small state and
16 it's a small population, and when a merger of this
17 size happens, it has significant impacts on the
18 quality of life and the quality of programs in the
19 neighborhoods and communities that we serve.
20 So we urge you to consider that when you
21 are looking at and reviewing this application.
22 Thank you.
23 HEARING OFFICER SMITH: Reverend
24 Washington.
25 REVEREND WASHINGTON: I'm Reverend Joseph
0346
1 E. Washington, Chairman of the Board of Directors
2 and CEO of the Organization for a New Equality,
3 which our national headquarters are based here in
4 Boston, Massachusetts. And I am also the senior
5 minister at Brooks Memorial United Methodist Church
6 in Jamaica Queens, New York.
7 ONE is a national economic and civil rights
8 organization that works to advance economic
9 empowerment for minorities and women and others who
10 have traditionally been locked out of the economic
11 mainstream of life. ONE has labored over its
12 14-year history to encourage banks and other
13 financial institutions to do well by doing good, to
14 invest in communities and individuals that have
15 traditionally been overlooked.
16 We have been part of great strides that
17 have been made over the past decades on the part of
18 banks seeking to forge productive relationships with
19 minority and low-income communities. And we have
20 continually stressed the overwhelming importance of
21 access to credit and capital in developing the
22 economic infrastructure in our communities
23 throughout this country.
24 I would be remiss if I did not acknowledge
25 the support that ONE has received through Agnes
0347
1 Bundy from Fleet, as well as BankBoston, Ira Jackson
2 and Gail Snodis, as we tried to advocate for the
3 least of these in the United States of America.
4 The proposed merger of Fleet and BankBoston
5 represents a part of bigger is better attitude in
6 American culture and particularly in the modern
7 financial services industry.
8 Why not add one and one together and get
9 something even greater than two? This was the
10 optimistic philosophy of our CEOs Murray and Gifford
11 on March 15th. We are insisting that one plus one
12 must be greater than two, not only for the
13 shareholders who benefit financially from the
14 merger, but also for low- and moderate-income and
15 minority communities for whom bigger does not
16 necessarily mean better, and which historically have
17 not benefited from these large mega-mergers.
18 This merger, by combining the two largest
19 banks in New England into a leviathan that will
20 dwarf any regional competitor even after divestiture
21 is of serious concerns to us. The significant
22 reduction of competition that will result from the
23 proposed merger makes it especially critical that
24 Fleet and BankBoston take specific steps to ensure
25 that the new bank's ability to meet the needs of
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1 low- and moderate-income minority communities is not
2 jeopardized.
3 The proposed Fleet-Boston corporation will
4 be the eighth largest commercial bank in the United
5 States. It will have an opportunity to emerge as a
6 leader in the industry, not only through financial
7 services and products it offers, but also through
8 its commitment to and investment in its communities.
9 In order to make this happen, ONE, along
10 with several other community organizations who you
11 have heard from this morning and afternoon, has
12 urged the banks to make specific commitments to
13 expand successful programs and products and to
14 partner with community groups in designing and
15 implementing community investment plans throughout
16 the new bank's service areas.
17 Both banks have made significant strides in
18 community investment. Through its First Community
19 Bank, BankBoston has pioneered a delivery model for
20 banking services to inner-city and lower-income
21 communities. BankBoston Community Development
22 Corporation, the first urban investment bank in
23 America to be chartered by a commercial bank,
24 committed well over $20 million in equity
25 investments in Massachusetts alone. Fleet Community
0349
1 Development Corporation has worked to build capacity
2 in institutions that are involved in community
3 economic development in low- and moderate-income
4 areas.
5 These are real accomplishments, and the
6 point of our concern is not to diminish them, but
7 rather to assert the bank's need to tell us
8 specifically how programs like these will be
9 maintained and enhanced through the merger.
10 In the area of small business lending, for
11 example, Fleet and BankBoston have distinct records
12 and have reached different markets, and if we could
13 get the overhead on, we have a little graph for you.
14 (Overhead shown)
15 In the area of the small business lending,
16 for example, Fleet and BankBoston have distinct
17 records and have reached different markets. Data
18 reported to the Federal Financial Institution
19 Examination Council for 1997 demonstrates that Fleet
20 made a slightly greater percentage of its small
21 business loans in LMI areas that BankBoston did.
22 Actually Fleet made 22.6 percent of its
23 small business loans in LMI areas within assessment
24 areas in Connecticut, Massachusetts, Rhode Island
25 and New York State, while it made only 15 percent of
0350
1 small business loans in these areas within New
2 Jersey and New York City. This raises an additional
3 concern about the consistency of the merged
4 institution's commitment to making affordable
5 products available to minority and low- and
6 moderate-income communities.
7 At the same time, BankBoston made a
8 significantly greater percentage of smaller loans
9 than Fleet did, thereby meeting the needs of
10 business owners who require smaller amounts of
11 capital and who have often difficulty obtaining low-
12 cost bank loans for these small amounts.
13 Fleet made a higher percentage of its loans
14 to smaller businesses, those with annual revenues of
15 less than $1 million. The banks' proposed community
16 commitment to make $7.5 billion in small business
17 loans does not tell us how these different markets
18 will continue to be served.
19 ONE and other community organizations have
20 asked the banks to commit to specific percentage
21 goals in each of these areas, as well as to make
22 specific small business equity commitments and
23 commitments to investment in community-based
24 alternative loans. The specifics of what we have
25 proposed are outlined in our written testimony
0351
1 today.
2 And in closing, there are two primary steps
3 to be taken. First, the banks must engage in
4 respectful give-and-take partnership with community
5 groups who know the needs of different cities,
6 towns, and states best. These partnerships need to
7 play an active role in determining both the design
8 and the implementation of the proposed Fleet-Boston
9 Corporation's community investment commitments.
10 The second and related step is putting
11 substance behind its numbers. Fleet and BankBoston
12 must enable community groups and concerned citizens
13 to judge the adequacy of their proposed commitments
14 to low- and moderate-income and minority communities
15 by giving us detailed descriptions of what money
16 will be allocated and to which programs where.
17 Without such details, the commitments will be
18 meaningless, because they will be neither verifiable
19 or enforceable.
20 ONE therefore requests that the Federal
21 Reserve Board extend the public comment period on
22 the proposed Fleet-Bank Boston merger and withhold
23 any approval of the merger until such time as the
24 banks' community investment commitments may be
25 completed and adequately reviewed.
0352
1 Thank you very much.
2 HEARING OFFICER SMITH: Thank you.
3 Now our last speaker, whose name I will not
4 try to pronounce.
5 MR. NEIRINCKX: My name is Ray Neirinckx,
6 and I'm the coordinator of the Rhode Island
7 Community Reinvestment Association.
8 There is a wonderful quote from the
9 Tennessee William play Cat on a Hot Tin Roof that I
10 think best describes a number of the panelists that
11 have raised objections and outright opposition to
12 the merger: "We have to distrust each other. It's
13 our only defense against betrayal." And I think
14 that describes the ongoing relationship many of us
15 have with Fleet.
16 The Rhode Island Community Reinvestment
17 Association is a 13-year statewide organization
18 working to encourage public and private reinvestment
19 in the housing and community economic development of
20 low- and moderate-income neighborhoods in Rhode
21 Island.
22 Back in 1985, I was part of a group of 21
23 protestants that opposed Fleet's acquisition of
24 First Connecticut Bank Corp. 14 years later RICRA
25 again finds itself protesting another merger of
0353
1 Fleet with BankBoston.
2 RICRA has worked hard with a number of
3 organizations in the region to call for a series of
4 public hearings on this merger. Therefore, we are
5 extremely disappointed that the Board of Governors
6 of the Federal Reserve has granted only one public
7 hearing that is two weeks after the comment period
8 ended and just two days after the 4th of July long
9 holiday weekend and the beginning of prime vacation
10 time. Clearly July 7th must be bankers independence
11 day with this one-time public hearing.
12 RICRA contends that not only should the
13 comment period be extended, but a series of public
14 hearings should be held on the $14.6 billion pledge
15 that Fleet has proposed without any public written
16 program being made available for review.
17 RICRA opposes the merger for several
18 reasons, including Fleet's poor performance in the
19 areas of mortgage servicing, high consumer product
20 fees, lending activity, commitment to previous
21 agreements with RICRA. And I'm not going to go
22 through all of them, because they're presented in
23 the written testimony, but I do want to highlight
24 sort of Fleet's reincarnations, which has to do with
25 their performance with us.
0354
1 In 1995, we protested the Shawmut merger,
2 and after that we saw INCITY, Fleet Focus, and the
3 more recent 2020 Vision, which we believe in and of
4 itself, if you look at those performances, is
5 judgment enough to deny this merger.
6 Fleet Bank signed an agreement with us in
7 1986 and then amended it successfully in 1989.
8 RICRA has enjoyed a positive yet contentious
9 relationship to improve programs, practices and
10 products in the state.
11 However, since the changes within Fleet
12 since the mergers, RICRA has not been able to agree
13 to any improvements, changes, deletions or
14 extensions to our agreement. And we have to be
15 clear about this, we have no financial benefit to
16 any of the agreements we have. We don't receive
17 contributions. There is no contract with us. It is
18 just to provide the best programs and products for
19 the people of Rhode Island.
20 So what difference does it make to sign
21 another agreement with us? It is our position that
22 Fleet's failure to receive nothing higher than the
23 "satisfactory" CRA rating since breaking our
24 agreement is proof that Fleet INCITY is puff and
25 fluff. In Fleet's 2020 Vision they chose not to
0355
1 invite RICRA to their PC CRA love-fest.
2 That was fine. RICRA did not choose to
3 participate -- excuse me. However, we did choose to
4 participate in the Rhode Island follow-up meeting.
5 RICRA found nothing of substance in that event
6 either. However, in the spirit of Fleet's remarks
7 that the bank wanted input, RICRA presented a nine-
8 point program with some specific recommendations.
9 Just so Fleet cannot accuse us of being
10 unrealistic or that it was a radical plan, we'll
11 give you just a brief outline of some of those
12 proposals: Agree to apply to the Affordable Housing
13 Program of the Federal Home Loan Bank Board of
14 Boston. Agree to explore a securitization pool for
15 the refinancing of multifamily development of
16 at-risk, expiring-use products of HUD subsidies.
17 Agree to seek from the Office of the Controller of
18 the Currency approval to track small business
19 lending by race and gender, and to not charge an
20 EBT, electronic benefit transfer, ATM surcharge for
21 five years.
22 This letter was hand-delivered on May 21st
23 1998. RICRA is still awaiting a written reply.
24 All of this relates to the pledge, which
25 has not been made available in writing to us. $14.6
0356
1 billion is a promise of what, the failure of INCITY,
2 the failure of 2020?
3 If we take Fleet at its word in a
4 conversation that RICRA had on June 25th of this
5 year, that Fleet is looking to achieve an
6 outstanding CRA rating going forward, then clearly
7 the $14.6 billion, should be closer to $60 billion.
8 Finally, Fleet has announced their
9 sponsorship and affiliation with Major League
10 Baseball. In looking at the Office of the
11 Controller of the Currency's summary of state and
12 multistate MSA ratings for their CRA performance,
13 Fleet would have a .500 batting average for its
14 performance in the three test ratings for the six
15 states, a guarantee of being inducted into the Hall
16 of Fame, but deplorable for a bank. In fact, if
17 you apply a community credit scoring model, then
18 your answer is very simple: 9 low satisfactories
19 out of 18 blocks, merger denied.
20 And I would like to leave you with a little
21 bank that says "Fleet Boston" -- you press it down,
22 and it runs away -- because we think that's what
23 Fleet is going to do if you approve this merger.
24 Thank you.
25 HEARING OFFICER SMITH: We're going to take
0357
1 the next panel, and then we will take a five-minute
2 break.
3 (Pause)
4 HEARING OFFICER SMITH: We'll start with
5 Mayor Albano