Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation
Wednesday, July 7, 1999
Transcript of Panel Fourteen
6 MAYOR ALBANO: Good afternoon. Thank you
7 for the opportunity. My name is Michael Albano.
8 I'm the Mayor of Springfield, Massachusetts, a city
9 90 miles to the west of about 156,000 citizens.
10 I am here to testify not necessarily in
11 opposition nor in favor, but to ask the Board to be
12 considerate of cities like Springfield in developing
13 a policy on approving of this merger. One of the
14 common complaints I have received as Mayor of
15 Springfield is that decisions on business concerns
16 and Community Reinvestment Act dollars have to be
17 done either in Boston or some other major city.
18 What we are looking for in western
19 Massachusetts is that we do not divide the economy
20 into two areas, one east of 495 and one west of 495.
21 And it's important that we have decisions that are
22 made on the local level to encourage investment as
23 we try to rebuild a city such as Springfield. And
24 with that in mind, I would ask you to consider these
25 recommendations, should this merger be approved.
0358
1 First, we ask that the new bank name a
2 regional CEO to the Springfield bank who is
3 knowledgeable about the challenges that our city
4 faces, understands the needs of our business
5 community and the community at large, and most
6 important of all, has the capability to make
7 decisions regarding lending and community
8 reinvestment policy.
9 Now, while I am being parochial in my
10 comments today, I would say that mayors across the
11 region that this merger would impact would have
12 similar comments as mine as the Mayor of
13 Springfield.
14 Second, we ask that within the new
15 Springfield bank structure that a full-time
16 community reinvestment office be created, and that
17 it will be charged with the responsibility of
18 working with various community-based groups as well
19 as the City, in its efforts that are aimed at
20 creating new neighborhood housing and economic
21 development opportunities.
22 Third, in an effort to help the very small
23 entrepreneur, we ask that the new bank create a
24 microbusiness fund in the amount of $500,000, that
25 this fund could be modeled after the highly
0359
1 successful ACORN fund which has generated thousands
2 of new jobs particularly within the low-income
3 neighborhoods.
4 Fourth, we ask that the new bank establish
5 a pool of funds in the amount of $5 million that
6 could be used as seed capital for new businesses
7 locating to Springfield. This more venture-oriented
8 fund would be used for both product development and
9 working capital by start-up companies.
10 Fifth, to enhance our City's home ownership
11 efforts, we ask that the new bank create a pool of
12 funds in the amount of $2 million that could be used
13 for soft second mortgages and closing costs.
14 Sixth, to make home ownership a reality for
15 a greater number of people, we ask that the bank
16 commit to making $10 million in low-interest loans
17 to first-time home buyers.
18 Seventh, to assist present homeowners we
19 ask that the new bank increase their participation
20 by adding another $1 million to our very successful
21 home improvement program.
22 These are general comments about what my
23 City's needs are, and I think they are reflective of
24 cities, as I said, like Springfield across the
25 region which would be impacted by this merger.
0360
1 In conclusion, I would say that cities like
2 Springfield can be rebuilt, and we are doing that in
3 my City, but we need assistance in the form of
4 private investment.
5 This merger, if done with guarantees like I
6 have outlined, can truly make a difference in the
7 Cities like Springfield, Massachusetts. And I thank
8 you for your consideration. Thank you.
9 HEARING OFFICER SMITH: Thank you very
10 much.
11 Representative Barrios.
12 REPRESENTATIVE BARRIOS: Good afternoon.
13 My name is Jarrett Thomas Barrios. I'm the State
14 Representative from Cambridge, Massachusetts.
15 By way of background, I am on the Banks and
16 Banking Committee for the House of Representatives.
17 I'm also a member of the Housing and Urban
18 Development Committee. I also used to work at the
19 Federal Trade Commission in the Division of Credit
20 Practices, doing Equal Credit Opportunity Act work.
21 I'm also a real estate lawyer, and I want to talk to
22 you today about a very specific issue, and that
23 deals with home mortgage lending as an impact of the
24 merger.
25 We have been assured throughout this in the
0361
1 press and privately that this merger will be a one
2 plus one is greater than two. You have heard that a
3 lot today. But I would point you to some of the
4 evidence as to Fleet's past behavior in mergers
5 which would give us a cause for some concern.
6 I'm one of the founding members of the
7 Latino Caucus in the Legislature. I have been sort
8 of particularly paying attention to Fleet's behavior
9 in the Latino community, and I want to just cite a
10 couple of statistics for you.
11 Prior to Fleet's mergers with NatWest and
12 Shawmut, the total banks, those three banks lending
13 in 1995, there was, I guess, 1575 home mortgages
14 underwritten by the three banks. Post-merger in
15 1997, only 600 loans were underwritten. That's a
16 decline of 62 percent.
17 I understand that part of this perhaps has
18 something to do with divestiture post-merger.
19 However, I would just ask you to contrast that with
20 the BayBank-BankBoston merger. Post-merger, there
21 was actually an increase of 83.3 percent lending in
22 the Latino community.
23 These statistics matter because what they
24 tell us is how post-merger we might expect Fleet to
25 behave, as Fleet is the ultimate inheritor and
0362
1 director of how the lending is going to continue.
2 Fleet's takeover of BankBoston is a cause
3 of concern for us because 63 percent of loans to
4 low- and moderate-income people, to Latinos,
5 African- Americans and other minorities, come right
6 now in Massachusetts from Fleet and BankBoston.
7 What that's going to be post-merger we're
8 not sure, but nonetheless, we can be sure that Fleet
9 in large part is going to be the only game in town.
10 And for us, who are concerned about home mortgages
11 and home ownership, in advancing those goals in the
12 minority communities, we must be concerned by what
13 we see in Fleet's behavior in the past.
14 These numbers give some statistical context
15 to my community's anxiety over this merger. I want
16 to give you a little bit of business and policy
17 context as well. As a member of the Housing
18 Committee, we see a lot of legislation which
19 attempts to advance the goal of home ownership,
20 which is a policy initiative both Republicans and
21 Democrats seem to embrace.
22 Recently, we were able to secure increase
23 in funding for the soft second mortgage program, but
24 no matter what we do in the Legislature, it only
25 gets around the edges. For example, the soft second
0363
1 mortgage only is a 20 percent second mortgage. We
2 still have to have a first mortgager, someone to
3 underwrite that initial loan, somebody which is
4 usually Fleet or BankBoston if we're in
5 Massachusetts.
6 The private market really must participate
7 in our efforts if we're going to make an impact at a
8 policy level in advancing home ownership as a goal
9 throughout Massachusetts.
10 So I guess in this context the statistical
11 anxiety that many of the people have been testifying
12 today, I think, reproduces itself a little bit as a
13 suspicion: How is it that the number of loans has
14 declined so much? What is it about the business
15 behavior of Fleet which should give us concern?
16 A demonstrated record by Fleet in the past
17 of inflexible lending criteria through mortgage
18 scoring and other practices really is a cause for
19 some of this concern. Diminished number of loans
20 originated by Fleet suggests that business practices
21 inherent in the loan origination process of Fleet
22 are not the same practices of BankBoston and other
23 victims of the mergers, if you will, of past mergers
24 by Fleet, that these business practices by Fleet are
25 somehow toxic to low- and moderate-income
0364
1 communities, to minority communities, communities
2 which would like to advance as a policy goal that of
3 home ownership.
4 And now the Community Reinvestment Act of
5 course doesn't require any bank to lend more to low-
6 and moderate-income neighborhoods, to minority
7 communities, but it does allow you, as those who
8 review, through the merger process, their track
9 records, it does allow you to ask questions which I
10 am not able to as a legislator, which communities
11 activists aren't able to, as representatives from
12 their bully pulpits in their communities.
13 So I guess I would ask you, as a
14 representative of the 450,000 Latinos in this
15 Commonwealth, and the 2 million people who are low
16 and moderate income in this Commonwealth who don't
17 own homes but perhaps hope to one day, to ask hard
18 questions and be mindful of Fleet's past practices,
19 and respect the community's request for a written
20 agreements from Fleet, because I think their
21 suspicions really are well placed, and I think the
22 past practices of Fleet really are cause for grave
23 concern for all of us as to the future practices of
24 Fleet going forward.
25 Thank you very much.
0365
1 HEARING OFFICER SMITH: Thank you.
2 Vermelle Parks.
3 MS. PARKS: Good afternoon. My name is
4 Vermelle Parks, and I am a here on behalf of the
5 chairwoman of the Federal Financial Assistance
6 Committee, the House of Representatives,
7 Representative Shirley Owens-Hicks, who is also
8 serving the 6th Suffolk District.
9 Thank you for allowing me to talk about the
10 things she has entered already as testimony. Given
11 the fact that this merger will result in the closing
12 of over 200 branches, the loss of approximately
13 5,000 jobs, and the renegotiation of critically
14 important programs that address home ownership and
15 rental housing, we respectfully urge that prior to
16 the approval of this merger, the Federal Reserve
17 Bank of Boston mandate that Fleet Bank Boston offer
18 a significant written and measurable commitment that
19 will provide the loans, investments and services
20 needed for low- and moderate-income communities as
21 well as people of color.
22 We believe that flexibility and
23 underwriting guidelines is absolutely necessary in
24 order to make home ownership a reality for low- and
25 moderate-income populations. In the past ACORN
0366
1 offered a very successful first-time home buyer's
2 program in collaboration with Fleet Mortgage
3 Corporation, BankBoston and Citizens Mortgage
4 Corporation.
5 This program allowed loan applicants to
6 certify funds including Social Security, WIC, food
7 stamps, unemployment benefits, foster care money and
8 other entitlements as part of their income in order
9 to qualify for loans. The program focused on income
10 continuity rather than job continuity, and only one
11 year of good credit was required.
12 ACORN informs us that over the life of
13 their program with Fleet, only three mortgages were
14 foreclosed and that the delinquency rate was 6
15 percent. Clearly this delinquency rate is lower
16 than that of conventional loan delinquencies.
17 Therefore, we encourage Fleet to renegotiate this
18 program and similar community lending programs. In
19 fact, collaboration with local partners must be
20 expanded rather than dissolved.
21 Home ownership fosters community stability.
22 Families who have a vested interest in the
23 neighborhoods where they live become involved in
24 neighborhood improvement activities, maintain their
25 properties, thus eliminating blight in vacant
0367
1 buildings and add to the safety and economic
2 viability of our their cities.
3 Programs that serve this basic need must
4 acknowledge the reality that families who are
5 currently forced to pay exorbitant amounts of rental
6 money have the ability to pay reasonable mortgages.
7 Therefore, relaxed underwriting guidelines together
8 with community home ownership programs are crucial
9 to the revitalization of our cities.
10 With the potential loss of jobs that this
11 merger will precipitate, we are concerned that last
12 hired not become first fired. Approximately 5,000
13 individuals will soon find themselves without
14 paychecks to support their families, unless the
15 institutions that purchase these branches decide to
16 hire them, and we sincerely hope that this occurs.
17 In the event that these employees are not
18 hired, we urge the Federal Reserve to use its power
19 to assure that these employees have access to a
20 combination of private and public resources that
21 will enable them to secure transitional income,
22 training and access to other employment.
23 Additionally, we ask that our concerns
24 about the potential loss of bilingual employees, and
25 how this will affect the needs of Latina, Asian and
0368
1 other population who depend upon this assistance in
2 order to transact banking business, be addressed so
3 that the critical needs of non-English speaking
4 populations will not be negatively impacted.
5 The location of the merged entities'
6 branches is also of concern. Residents and
7 community-based organizations representing various
8 underserved neighborhoods have worked long and hard
9 to negotiate the opening of branches in low- and
10 moderate-income neighborhoods. We feel that
11 limiting access to banking services will negatively
12 impact individuals who need to establish credit
13 histories, who wish to cash checks, or who wish to
14 access any other service that banks offer in other
15 neighborhoods.
16 Finally, we believe that the nation is
17 looking at this merger and how Fleet-BankBoston will
18 respond to the needs of low- and moderate-income
19 communities as well as how they intend to honor the
20 commitments that they have made in the past.
21 This is an excellent opportunity for Fleet-
22 BankBoston to set the standard for community
23 investment practices. We sincerely hope that they
24 will accept this challenge and turn this to a win-
25 win situation for all concerned.
0369
1 Thank you very much.
2 HEARING OFFICER SMITH: Thank you.
3 Mr. Saunders.
4 COUNCILOR SAUNDERS: Good evening. I'm
5 Boston City Councilor Gareth Saunders. I represent
6 approximately 70,000 residents in Roxbury and parts
7 of Dorchester, the South End, Mission Hill and the
8 Fenway. I am a member of the City of Boston's
9 Linked Deposit Commission and have worked in the
10 banking industry in Boston in various positions. As
11 a manager of a loan office, I worked as a mortgage
12 originator and business development officer.
13 My duties as the business development
14 officer included assisting the bank with outreach to
15 the Boston community concerning the Community
16 Reinvestment Act.
17 I ask the Federal Reserve Bank of Boston to
18 listen carefully to what the people are saying
19 today. As a regulatory agency, we look to you for
20 guidance as relates to the formulation of monetary
21 policy and overseeing many aspects of the New
22 England banking system.
23 What is true from my experiences is that
24 the people, the customers, the affected communities
25 of New England must get a clearly spelled-out
0370
1 commitment from the proponents of this proposed
2 merger in writing prior to any approvals.
3 First and foremost, a strong commitment
4 must come from the top, Terry Murray and Chad
5 Gifford, accompanied with an aggressive plan of
6 implementation. This plan should include a
7 comprehensive marketing plan of the actual and
8 potential customer base with a strong emphasis on
9 low- to moderate-income earners and specifically
10 tailored programs that ensure equitable credit
11 availability to traditionally underserved borrowers,
12 because they unfortunately will be
13 disproportionately and adversely affected by this
14 proposed merger.
15 Below, I'm just going to give you a brief
16 list of what I see as some of the general types of
17 commitments that we must see in writing prior to any
18 regulatory approval.
19 No. 1, it is important that we are
20 diversity of the work force, both racial diversity,
21 gender, as well as geographical diversity. And we
22 must emphasize that we have diversity as it relates
23 to the decision-makers within the new institution.
24 No. 2, mortgage products, home improvement
25 and other consumer loans, loan products targeting
0371
1 underserved communities and populations.
2 We must look at the small business lending
3 programs of the new entity.
4 We must maintain and enhance programs like
5 BankBoston's First Community Banking and Community
6 Development Bank. These are very successful models
7 that we must keep and enhance.
8 And fifthly, there must be a comprehensive
9 approach to this proposed merger that still provides
10 consumer choices. For example, there is still a
11 niche for smaller banks like the Boston Bank of
12 Commerce. This bank has submitted a proposal to
13 purchase 18 branches that would make it the largest
14 minority-owned bank in New England.
15 And with regards to some of the other banks
16 that are looking to buy some of the assets that the
17 bank, Fleet Bank and other banks must sell off, we
18 must look to make sure that we have a banking entity
19 that is committed to this region, that has a strong
20 presence in this region and that will be willing to
21 locate its headquarters in this region. That is
22 very important, that we can go right into the
23 president's or the CEO's office and not have to jump
24 on a plane, you know, and travel thousands of miles
25 to get that type of access.
0372
1 I would like to use this example. I sat in
2 this room with some of the supporters out here more
3 than ten years ago when the Federal Reserve Bank
4 came out with a study that showed that there was
5 discriminatory lending based on race, with mortgage
6 lending the city. And what did you do? And what
7 did the community do? And what did the banks do?
8 We all came together, and I was there with
9 many of the activists in this room. We came
10 together. We worked out a plan, and we aggressively
11 attacked the problem.
12 New branches were opened in communities
13 where we have not seen branches for years. ATMs
14 were instituted in certain neighborhoods. People of
15 color and women were hired into decision-making
16 positions.
17 When we look at the underwriters for the
18 mortgages and other lending products, it is
19 important to have people who understand the local
20 economy making these decisions. And it worked.
21 From 1990 to 1994, look at the mortgage
22 rates in the minority community, particularly in the
23 African-American and the Latino communities. That
24 is a successful model that worked. And I hope, if,
25 in fact, this Board and other regulatory entities
0373
1 approve this merger, that part of that statement
2 would be that there must be a commitment, a strong
3 commitment from the top down through the ranks of
4 the bank in writing prior to any approval. That
5 way, you ensure that the underserved communities
6 will not be left out to dry.
7 Thank you very much for listening to my
8 testimony, and I hope that you would really consider
9 what I had to say and share with you this evening.
10 Thank you.
11 HEARING OFFICER SMITH: Any questions?
12 HEARING OFFICER KWAST: I have a question.
13 Mr. Saunders addressed this point, but I would be
14 interested in what Mr. Barrios and Mayor Albano had
15 to say.
16 In your experience, what has been the role
17 of smaller and medium-sized banks in the economic
18 development of a city like Springfield or in the
19 granting of housing and other kinds of loans to low-
20 and moderate-income communities?
21 MR. SAUNDERS: The question is -- who is
22 the question --
23 HEARING OFFICER KWAST: You addressed the
24 issue. I'm interested in the role of small and
25 medium-sized banks in meeting the kinds of concerns
0374
1 that you expressed.
2 MR. ALBANO: Just on the issue of dealing
3 with a bank such as Fleet and BankBoston, as mayor
4 of Springfield, we have to get decisions from Boston
5 to major economic development projects, major
6 housing projects; and that takes time. And
7 sometimes those decision makers at the top are 90
8 miles away and are not sensitive to the needs in
9 cities like Springfield. And we have to be cautious
10 about that, make sure that any type of merger
11 guarantees that there is accountability and that
12 there is investment.
13 The second part I would respond to is that
14 under the Community Reinvestment Act, I'm not sure
15 how the ratings are done statewide. I can see that
16 some banks have great ratings, but I don't know what
17 they're doing for cities like Springfield. So I
18 would like to have more of a regional Community
19 Reinvestment Act grading so that we can be sure that
20 there is investment in cities like mine. And I'm
21 not sure that we're receiving that.
22 So between the two, I mean, having to get
23 certification or approval from 90 miles away or not
24 being sure of what the grade is for the Community
25 Reinvestment Act in my particular community, I would
0375
1 hope in this Board would do something to offset that
2 so that we can have guarantees on these types of
3 decisions and these types of investments in cities
4 like Springfield.
5 MR. SAUNDERS: Can I just address -- in
6 this decade of mergers, it is important that we have
7 different size banks because the larger banks and
8 some of the mid-sized banks have no interest in
9 serving some of the small and poorer communities;
10 but there are smaller banks who have an interest.
11 So that's important that we have a clear
12 balance of the big -- from the biggest megabanks to
13 the mid-size banks to smaller banks that can really
14 give a tailored approach to the specific
15 neighborhoods needs.
16 MR. BARRIOS: I would just say as a part of
17 getting my testimony together, I took the time to
18 speak to a number of leaders both in my community
19 and Cambridge, in the Latino community in Chelsea,
20 in the greater Boston area and Jamaica Plain and
21 Roxbury; and there is generally a level of anxiety
22 about the mergers of the banks because it seems as
23 if, as Mayor Albano has said, it is sort of further
24 away, not just geographically but sort of
25 psychologically further away from the access that
0376
1 you might like to see.
2 It is always the case that -- at least in
3 my community in Cambridge -- that the community
4 banks are seen as friendlier places to go, and I
5 think that is in large part a function of size.
6 I know that Fleet has been generous to some
7 local nonprofits in Cambridge, but the perception of
8 the average person as to the accessibility of credit
9 or to community development corporations --
10 locally-based grass roots community development
11 corporations that want to do either economic
12 development or do an affordable housing project, the
13 perception is we first go to the community bank.
14 Cambridgeport Bank or Cambridge Trust are the two
15 big ones in my community.
16 Chelsea, I guess there was a bank, which
17 was recently acquired which was sort of the one
18 everybody went to. Now it is U.S. Trust, but now
19 U.S. Trust is becoming Citizens so nobody really
20 knows where they were going in Chelsea at this
21 point.
22 Smaller, at that level, I guess, induces
23 more confidence.
24 I don't know if that answers directly.
25 HEARING OFFICER SMITH: Thank you very
0377
1 much.
2 We're now going to take a five-minute break
3 and then continue with Panel 15, which is not even
4 halfway through the agenda.
5 (Recess)
6 HEARING OFFICER SMITH: Why don't we get
7 started, and the way we're -- okay. We'll do it the
8 same way as before, which is we have, what, 30
9 minutes? And we'll get as many people through as we
10 can in that time. And if anybody is left, then we
11 will move them toward the end of the day, which is
12 an encouragement to take a minute.