Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation
Wednesday, July 7, 1999
Transcript of Panel Sixteen
18 MR. COFIELD: Good afternoon to members of
19 the Federal Reserve Bank of Boston and the larger
20 community. I'm Juan Cofield, treasurer of the
21 NAACP, Boston branch. The NAACP is the oldest civil
22 rights organization in the country. It was founded
23 in 1909, almost a century ago. The Boston branch
24 was the first branch being established in 1911.
25 The NAACP is credited with being one of the
0412
1 organizations to make contributions -- the most
2 significant contributions to the goals of the
3 founding fathers of this great country, and we are
4 pleased to be credited with such.
5 The Boston branch is gravely concerned
6 about the proposed acquisition of BankBoston
7 Corporation by Fleet Financial Corporation. And I
8 want to make it clear, and there has been a misnomer
9 a lot. This is not a merger. It's an acquisition.
10 The application before the Federal Reserve is as an
11 acquisition and not a merger. That's very
12 important, and I will get to that in a minute,
13 because one of the entities is taking control of the
14 other. And what we have witnessed is a varied
15 difference in the philosophy of the two as it
16 relates to low-income communities and communities of
17 color.
18 Major differences have been exhibited by
19 the two institutions in serving the needs of
20 communities of color and low-income communities.
21 Fleet's lending and investment activities in
22 communities of color is significantly worse than
23 BankBoston. In fact, if the acquisition were
24 reversed, there probably would be far less
25 opposition than there is today.
0413
1 Much of the opposition is because of what
2 is perceived to be the policies and the philosophy
3 and certainly the activities of Fleet as opposed to
4 BankBoston. We believe that the two -- we believe
5 that the activities of the two institutions are
6 quite different because of the philosophies and
7 policies.
8 We are concerned because we feel that we
9 will be losing a bank that's philosophically
10 committed to serving communities of color and low-
11 and moderate-income communities.
12 As it relates to employees and the expected
13 layoffs, people of color are employed at Fleet in a
14 proportion -- in a disproportion to the population
15 of people of color in this area, and that's
16 throughout the ranks of Fleet. The percentages get
17 worse as we move up in higher echelons of the bank.
18 As Fleet has the expectation of laying off
19 as many as 5,000 employees, the potential for
20 disproportionate layoffs certainly exist. Such
21 disproportionate layoffs would be devastating to
22 such communities of color who have -- who already
23 suffer significantly higher unemployment rates, and
24 higher underemployment rates.
25 We believe that the Federal Reserve Bank
0414
1 must take action to see that people of color are not
2 disproportionately laid off. This is clearly a need
3 of the community to see that they are treated
4 equally, and it's -- and we believe that it's the
5 responsibility of the Federal Reserve Bank of Boston
6 as it looks at the needs of the community to address
7 this issue.
8 Further, we think that what needs to happen
9 is that there needs to be a firm legal commitment to
10 the Federal Reserve to ensure that that doesn't
11 happen. And that needs to come after a negotiation
12 between Fleet and the communities of color that
13 we're talking about.
14 We further think that all of the employees
15 that will be laid off should be given generous
16 severance packages, and Fleet should make a
17 commitment to retrain those employees. If in fact
18 there is no commitment and people throughout the
19 system -- not just people of color, but all of the
20 employees -- if there is not a commitment to retrain
21 and/or give a severance package, it will be harmful
22 to the communities of -- throughout the area where
23 they are coming from.
24 HEARING OFFICER SMITH: Thank you very
25 much. We would be happy to have additional comments
0415
1 submitted later, or would you like to take about ten
2 seconds to wrap-up?
3 MR. COFIELD: Yes, I would. I didn't
4 realize that I was that close to the end.
5 There has been a very different -- there
6 are very significant differences in the activities,
7 the lending practices and the investment in
8 communities of color that have been demonstrated
9 between Fleet and BankBoston. The problem is, Fleet
10 is the acquirer; and the management of Fleet is --
11 will be at the top after this is over, and we think
12 that will bode very negatively for the new
13 institution and for communities of color and low-
14 and moderate-income communities.
15 Lastly, let me say that we believe that
16 there -- well, two other things quickly. The
17 proposed commitment of 14.6 billion in a community
18 commitment by Fleet is woefully inadequate. That
19 commitment level does not meet the current level of
20 the combination of Fleet and BankBoston. It is
21 woefully inadequate.
22 Lastly, let me say that the bank -- the
23 Boston Bank of Commerce figures into this. They
24 are -- maybe a few of you who may know that I was
25 the founder of the Boston Bank of Commerce. I am
0416
1 speaking in an official position as the treasurer of
2 the NAACP, expressing the position of the NAACP and
3 not mine personally; but I assure you that you I
4 have no formal association with the Boston Bank of
5 Commerce today, neither am I a director or officer
6 or receive any compensation from the Boston Bank of
7 Commerce.
8 When the Boston Bank of Commerce was
9 founded, it had -- in addition to all the kinds of
10 missions that other banks have, it had a special
11 mission. And that special mission was to serve the
12 needs of the Roxbury and Dorchester communities, in
13 essence, the communities of color. The Boston Bank
14 of Commerce, I believe, has done a very good job in
15 fulfilling that commitment, certainly with its level
16 of capital and level of assets.
17 The community needs a strong and viable
18 institution with a special commitment if it is going
19 to serve the economic development of that community.
20 It is absolutely essential. The NAACP firmly
21 believes and supports the Boston Bank of Commerce in
22 its attempt to acquire 18 of the 293 branches that
23 Fleet is proposing to divest itself of. And I
24 think, given the mission of the Boston Bank of
25 Commerce, that they should get it. It will allow
0417
1 the Boston Commerce to continue that special
2 commitment, to spread it further, and to be
3 competitive in the environment that we are facing
4 today.
5 Thank you very much.
6 HEARING OFFICER SMITH: Reverend Kelly.
7 REV. KELLY: Thank you.
8 My name is Frank Kelly. I am the senior
9 pastor of the Way of the Cross Church in Dorchester
10 bordering Mattapan, Morton Street. I'm also the
11 economic chair for the Black Ministerial Alliance.
12 My voice is one of many faith-based
13 organizations representing a constituency of over
14 200 strong, and they will be sent a press release
15 along with a copy of my request to testify here, as
16 well as the statement.
17 In greater Boston, over 200 faith-based
18 organizations -- or FBOs as they are popularly
19 known -- service over a hundred thousand people.
20 And that includes 25,000 plus families.
21 My affiliation with these FBOs grew out of
22 my early career of 20 years in a major Boston bank.
23 By the way, that was merged in 1995.
24 From there, I was called out into full-time
25 community service in 1987 and then into the pastoral
0418
1 ministry in 1990, founding and chairing the United
2 Christian Financial Services Association, a broad
3 based nonprofit corporation, open doors for
4 networking and relationship building.
5 The concern is obvious. Questionable
6 resources and options. There are questionable
7 resources for our people. There are questionable
8 facilities and options for the community in our
9 neighborhoods and the FBOs that serve them. There
10 are significant gaps, and we have heard them,
11 potentially 5,000 jobs lost, over 270 branch
12 closings which introduce barriers to service access.
13 Two banks will become one. Those two banks
14 committed monies separately. These commitments will
15 probably be withdrawn or significantly changed.
16 The resulting need, however, is viable
17 programs written into the plans of the new megabank
18 if this passes to address these gaps. A community
19 voice is needed now as a necessary tool in program
20 planning to be present at the planning tables, to
21 provide input on specifics of programs to address
22 these gaps, and to link the community with the
23 approval process. The necessary tool, Boston's
24 network of faith-based organizations, the FBOs, the
25 faith-based organizations are continually being
0419
1 challenged to grow, challenged by the community, and
2 lately by government and other sectors; and they
3 have grown up.
4 Under the IRS guidelines of 501(c)(3)s and
5 (c)(4)s, related nonprofit structures, a diverse
6 representation of the city having increasingly taken
7 on responsibility for the prosperity of their
8 neighborhoods and surrounding communities resulting
9 in corporate financial accountability as never
10 before.
11 I have a list of twelve of many who edify
12 our urban communities which includes the Black
13 Church Capacity Building Project, Black Ministerial
14 Alliance, Greater Boston Interfaith Organization,
15 Mattapan and Dorchester Action, Churches in Action,
16 United Christian Financial Services, Ten Point
17 Coalition, and United Pentecostal Ministers'
18 Conference.
19 Since dismantling of the welfare system and
20 proposing more local solutions, the federal
21 government and others are looking to the FBOs for
22 proven expertise in service delivery at the
23 community level. The City of Boston Empowerment
24 Enterprise Zone, Initiative Rounds 1 and 2, a
25 Baystate organization initiative tied to the Boston
0420
1 Empowerment Zone Center.
2 Interest has been heightened among
3 university academic admissions towards the
4 faith-based organization in recent years, which
5 include Harvard University, Kennedy School of
6 Government, Brandeis University, Yale University,
7 and others. Several colleges and universities have
8 been recognizing and working together developing
9 curriculum through the experience participation and
10 leadership of the FBOs.
11 In conclusion, there are three steps.
12 There is a three-step call to action. There needs
13 to be intentional and inclusiveness when addressing
14 the above-mentioned gaps and needs. There needs to
15 be a seat provided at the table for representation
16 and representatives of the organized faith-based
17 organized community to contribute their knowledge
18 and expertise and networking resources to the
19 research and proposal-writing process.
20 Finally, call upon the faith-based
21 organizations to issue support for the merger
22 approval process from the needs assessment through
23 the program writing and approval sign-off.
24 Thank you for this time to speak and to
25 provide a voice for the faith-based organizations.
0421
1 Continuous community input is welcome through the
2 faith-based organization voice mailbox at (617)
3 929-0352, and I have come copies of my testimony.
4 HEARING OFFICER SMITH: Thank you very
5 much.
6 MR. ASTOLFI: Hi. Thanks for having me.
7 My name is Drew Astolfi. I'm with at
8 Anti-Displacement Project out of Springfield, Mass.;
9 and I guess I'm here to say that I know that you
10 won't, but I wish that you would refuse to accept
11 this merger. Since you probably aren't going to do
12 that, I guess I'm going to ask you to extend the
13 comment period two weeks after Fleet has
14 disclosed -- fully disclosed what it plans to do to
15 meet its CRA obligations.
16 My organization is a coalition of tenant
17 associations in western Mass., 950 units of which
18 are low-income cooperative housing, 300 of which
19 would not have been developed and converted into
20 low-income co-op without the assistance of the
21 Federal Home Loan Bank, which Fleet has still
22 refused to say whether or not the new entity is
23 going to be a member of the Federal Home Loan Bank.
24 And I just feel it is outrageous that they're saying
25 that they're not going to do it until the charter
0422
1 issues are worked out. I'm very suspicious of that
2 and so are the people that I represent who couldn't
3 come here today because they're at work.
4 But there's an overarching attitude of sort
5 of, I don't know, of arrogance that Fleet has
6 approached, at least western Mass. from what I here
7 today, other groups, other parts of the New England
8 region as well; and that arrogance is characterized
9 a couple of different ways. One is just in their
10 refusal to say whether this is a part of the Federal
11 Home Loan Bank or not, and when they don't say it, I
12 kind of think they're not going to do it.
13 I'm just going to give you two stories
14 really quickly about sort of smaller examples of
15 that arrogance as well. And I just say if they
16 can't negotiate with ACORN and MAHA and the Mass.
17 Association of CDCs, then a group like mine, which
18 is a much smaller group, has got no chance. So
19 without sort of your intervention, I know we're not
20 going to get their attention; and I hope you guys
21 will consider that when you make your decision.
22 Just to give you two stories. There
23 there's group called Friends of the Homeless which
24 operates the only supportive services SRO in
25 Springfield or in the greater Springfield area. It
0423
1 also operates the only homeless shelter in the
2 Springfield area, and the only one that's open all
3 year-round in the whole sort of Southern Pioneer
4 Valley. And this shelter has -- was created by a
5 consortium of local banks, and their mortgage was
6 later taken over by Fleet. And it had been at 8
7 percent; and the State subsidies increased, and
8 Fleet raised the interest rates to 10 percent, and
9 that place is now in danger of foreclosure.
10 Two years ago when the foreclosure became
11 sort of a visible reality to Friends of the
12 Homeless, they tried to get a meeting from Fleet;
13 and they have been trying for two years, and Fleet
14 still hasn't talked to them. They won't even meet.
15 I just find that kind of behavior to be outrageous.
16 It is not fair.
17 A second example sort of closer to home for
18 me is that our own neighborhood of Liberty Heights
19 in Springfield, which has been mentioned here
20 earlier, in which Fleet does not have a good lending
21 record according to their own HMDA data, we have the
22 ongoing participation of BankBoston in the
23 neighborhood. They have been going to meetings.
24 And when the merger was announced, we tried to get
25 Fleet to say that after the merger, they would
0424
1 continue to attend sort of meetings with the local
2 community groups there and to make some loans in a
3 more aggressive way in the neighborhood. And we
4 also said, you know -- "Will we have, you know, sort
5 of a permanent CRA officer to service the
6 Springfield area?" which I think our mayor, Mayor
7 Albano, asked about earlier today. And in the same
8 way that they have refused to meet with the Friends
9 of the Homeless, they haven't answered the question.
10 If fact, we haven't heard anything from them.
11 And just -- it has sort of come down to
12 the wire for us, and so we're hoping that you will,
13 at least, if not deny the merger, give us the extra
14 two weeks after the Fleet makes its announcement
15 which we feel like has not been fully disclosed.
16 Thank you very much.
17 HEARING OFFICER SMITH: Thank you very
18 much.
19 Mr. Haskell.
20 MR. HASKELL: Good evening. My name is Jim
21 Haskell, and I come here today in my dual capacity
22 as the executive director of the Salem Harbor
23 Community Development Corporation and as the
24 chairperson of the Mass. Association of Community
25 Development Corporations, MACDC.
0425
1 During its 20-year history, Salem Harbor
2 CDC has developed affordable housing. We've
3 assisted small businesses, helped families obtain
4 their first homes, and allowed people to get a job
5 by helping them with their English skills. And we
6 have done much of our work in an immigrant Latino
7 neighborhood that most people had simply written off
8 20 years ago.
9 As the chair of MACDC, I represent 68 such
10 organizations across this Commonwealth; and we are
11 but a small part of 3500 CDCs nationwide, and all of
12 us do the same thing, help turn areas that were
13 previously considered beyond repair into thriving
14 working class communities. And we have accomplished
15 this impossible feat by bringing a lot of parties
16 together into a partnership to try to figure out how
17 best to affect this turnaround, because the solution
18 has often been different in different communities.
19 And, frankly, it's very difficult for me to
20 sit here today and oppose this merger, because,
21 frankly, we're much better at building bridges than
22 we are at burning them. But we feel that we have no
23 alternative but to oppose the merger of Fleet and
24 BankBoston since it appears that the resulting
25 institution will be one where this partnership will
0426
1 not be respected.
2 Pronouncements from corporate headquarters
3 will take the place of thoughtful, effective, and
4 meaningful determinations of how best to meet the
5 credit needs of low- and moderate-income
6 communities.
7 The recent decision by major banks to merge
8 has resulted in significant community reinvestment
9 agreements being negotiated which resulted in the
10 development of community reinvestment products to
11 benefit a wide range of low-income communities. In
12 all of these instances, it would have been
13 impossible for the bank to promulgate a
14 one-size-fits-all approach to community development.
15 On the other hand, it would have equally
16 been impossible for the community-based
17 organizations to have developed the types of
18 products that the bank did in order to meet those
19 needs. In the truest sense of partnership, each
20 side depended on the other.
21 Unfortunately, our recent experience with
22 Fleet has shown us that this sense of partnership
23 has not been taken to heart. Once the three-year
24 term of the Fleet-Shawmut agreement, MACDC and MAHA
25 attempted to extend this agreement. After a year of
0427
1 futile meetings at which I was personally in
2 attendance, we were told that no such agreement
3 would occur.
4 Similarly, a large group of community
5 organizations and public officials has attempted to
6 begin negotiations about an agreement concerning
7 this proposed merger. Once more to no avail.
8 Most distressing of all, we have found that
9 Fleet's actual performance in mortgage lending to
10 low- and moderate-income families and small business
11 lending is significantly less in the absence of
12 agreements than when they are required to reach
13 performance targets within the framework of an
14 agreement.
15 The merger of Fleet Bank-Boston threatens
16 to become a monolithic force that will unilaterally
17 determine how its community development resources
18 will be allocated in low- to moderate-income
19 communities.
20 We have seen far too many examples where
21 lots of dollars have effectively destroyed our
22 communities. We only need to look at urban renewal
23 to see that. Dollars alone are not the answer.
24 Thoughtful solutions and effective partnerships are.
25 Several colleagues of mine have outlined or
0428
1 will outline specific reasons why their
2 organizations are deeply concerned about this
3 merger, as well the chair of the Board of Salem
4 Harbor CDC, Wayne Burton.
5 Although we will express our opposition,
6 please be mindful of what I initially said. This is
7 not an action we relish nor a decision we have come
8 to lightly; however, on behalf of the communities we
9 serve, we believe it is the only one we can make.
10 HEARING OFFICER SMITH: Thank you.
11 Are you going to take about a minute or --
12 MR. BURTON: Can I restart and take one
13 minute?
14 HEARING OFFICER SMITH: One minute.
15 MR. BURTON: Very quickly. By day, I'm the
16 dean of the School of Business at Salem State
17 College and teach capitalism and the joys of the
18 capitalist system. By night, as president of the
19 Salem Harbor CDC, I try to find that capital to fund
20 development projects and housing in Salem. It has
21 been an eye-opening experience for me. I wouldn't
22 have been here seven years ago. There is a
23 desperate need for capital that has to be available
24 to meet the needs of Salem and the other low-income
25 communities.
0429
1 The very existence of our organization is
2 proof that the capitalist system does not work for
3 everyone. It takes human intervention.
4 Let me make one last point. My presence
5 here today is inspired by the words of Ira Jackson,
6 the vice-president of BankBoston who he had the
7 privilege of hearing on four separate occasions this
8 year, because he is the only business leader I could
9 find that spoke from conscience about the value of
10 community service. He made two points I would like
11 to just reiterate today. I'm sure we came to
12 different conclusions on the merger, but I would
13 like to reiterate the points that he made.
14 One is that BankBoston became renowned for
15 its community service by making community service a
16 core strategy of the bank for its success. It has
17 to become part of the culture. They call that
18 managing value with values.
19 The second point he made is he made such an
20 impression on people in Salem that he was invited to
21 be our commencement speaker in May. Now, most
22 commencement speakers are the only thing standing
23 between parents and ending their child's tuition
24 bills. He had people spellbound. His point was
25 very simple. He said that capitalism has no
0430
1 conscience. Capitalism distributes goods and
2 service in ways that leave people out. It's only
3 through the intervention of people like yourselves
4 who are in a position to introduce conscience into
5 this debate that we get a public good advanced.
6 And the conclusion I have reached is that
7 on balance, the MACDC position as outlined by Jim
8 Haskell, executive director of our agency, is the
9 appropriate one to take; and I fully support it.
10 Thank you.
11 HEARING OFFICER SMITH: Thank you very
12 much.
13 Miss Peters.
14 MS. PETERS: Thank you. My name is Marcia
15 Peters. I have a small community-based law practice
16 in Jamaica Plain. I was asked to come here today
17 when I let it be known that I had seen specific
18 examples in my law practice of overappraisals by
19 Fleet. I understand that that issue has been put to
20 this panel by at least two speakers today and I
21 don't have to introduce it as an issue.
22 I didn't really understand what I was
23 seeing at the beginning, but I now do; and I really
24 found it quite shocking.
25 Family A was an African-American couple who
0431
1 were buying a house in Roxbury which needed a gut
2 rehab. They were going through UNAC. They put down
3 $1500. Fleet loaned them $207,140 on a sale price
4 of 125,000 because the difference was needed for
5 rehab.
6 I -- from my knowledge of the market, I
7 thought the place would be worth about a $135,000
8 when it was all fixed up. I called some experts I
9 knew, and they said I was absolutely on the money,
10 that it couldn't possibly be worth more than
11 135,000; and yet -- after the work, and yet Fleet
12 was loaning 207.
13 I asked to see the appraisal because I had
14 learned from my other example -- which I guess I
15 should have given you first that I should be looking
16 at these things -- I found it to be totally
17 dishonest. The way they got the value up so high
18 was to go an entire mile to a completely different
19 neighborhood of Boston for one of their comps. They
20 called it in better condition and adjusted it by
21 only $11,200. An honest adjustment would have been,
22 I would think. $60,000, $70,000. That faraway
23 mansion in a completely different neighborhood was
24 so uncomparable. It was just flagrantly dishonest
25 to put it into the average and come up with a
0432
1 justification for lending this family $207,000.
2 The other one which I actually saw earlier
3 was a Haitian couple buying on the
4 Dorchester-Mattapan line, probably close to Reverend
5 Kelly's church. It was a City-foreclosed property.
6 Boarded up. Shell. Needed everything.
7 I talked to two people in the Boston city
8 government who told me that the place should not
9 have gone for more than $20,000 in the shape that it
10 was in. They said that contractors and people who
11 knew what they were doing came to the auction and
12 dropped out at $20,000 because they knew that 20
13 plus what it needed would equal what it would then
14 be worth.
15 But naive first-time home buyers stayed in
16 the bidding. It was their chance at the American
17 dream. They just didn't know what they were doing.
18 This family bid it up to $58,400. Fleet came up
19 with an appraisal which justified that sale price.
20 Fleet was not lending for rehab. Fleet was
21 not even asking if anybody was lending for rehab or
22 where the work was going to be financed. They
23 simply lent $58,000 on a shell will that was worth
24 $20,000 and have a nice day. That was really all
25 there was to that transaction.
0433
1 The result of this is manyfold. I would
2 hope that you as regulators would be concerned that
3 when Fleet tells you that their portfolio is worth
4 X, that maybe it really isn't. They are not
5 appraising honestly; and, therefore, their books are
6 not really telling you the picture of what their
7 assets are.
8 On a human level, these people cannot ever
9 have equity in their homes. They will work for
10 years and all they will do is pay down on that
11 difference between their large loan and their small
12 real value.
13 In closing, I would ask that you make a
14 condition of this acquisition -- not merger -- that
15 there be spot checks of appraisals, that there be
16 funding set aside for professional appraisers to
17 pull random files and check the honesty of
18 appraisers that are working for this merged entity.
19 Fleet is going to set the culture for the
20 new entity, and I'm concerned that it will not be a
21 culture of honesty.
22 Thank you.
23 HEARING OFFICER SMITH: Miss Pisacane.
24 MS. PISACANE: My name is Gail Pisacane,
25 and I'm deputy director of Valley Opportunity
0434
1 Council, the federally-designated community action
2 agency in Chicopee and Holyoke.
3 With an annual budget of approximately $9
4 million, we provide services to all 24 community
5 cities and towns of Hampden County, including
6 Westfield, Ludlow, West Springfield, and on
7 occasion, Springfield. Last year, we provided
8 direct services to over 26,000 low income and
9 disadvantaged residents of our service areas.
10 I testify today on behalf of the Valley
11 Opportunity Council and the low-income residents we
12 represent, addressing some of the very basic banking
13 issues that all of us must face on a daily basis.
14 John Rubins, author of Main Street, not
15 Wall Street, writing in the July-August 1999 edition
16 of Consumers Digest writes, "With few exceptions,
17 big banks have traditionally been inhospitable
18 places for small savers; and their penchant for
19 combining into bigger entities does not seem to be
20 changing that. The recent mergers are producing
21 higher fees, fewer branches, fewer ATMs, and fewer
22 tellers."
23 He cites Brian O'Connor, managing editor of
24 Bank Rate Monitor. "Our experiences suggest that
25 low-income individuals cannot be expected to
0435
1 maintain minimum balances which might qualify them
2 for lower or no-cost services within the bank. They
3 need inexpensive checking and ways to access their
4 minimal savings without accruing service charges.
5 They need bank branches and/or ATMs located in their
6 neighborhood. Few, if any, banks seem willing to
7 accommodate these needs."
8 According to O'Connor, we are seeing banks
9 charging $25 to $35 to print a couple of hundred
10 checks when a customer can get that done for $5
11 dollars by mail.
12 Some banks hit the customer for $20, $25,
13 or even $30 for a bounced check when returning the
14 check costs approximately $2.
15 When you open a checking account with a
16 large bank, you're inviting it to find every way it
17 can to rake you over the coals.
18 Why, then, should we, or any organization
19 that serves the poor and low-income, support this
20 merger? Without some assurances that the needs of
21 those whom we represent will be addressed, we would
22 be remiss in our duty as an advocate for the poor to
23 do so.
24 In human services, there is an expectation
25 that as the number of clients increases, the costs
0436
1 per client decrease. Economy of scale is a mantra
2 of those who espouse the bigger is better theory of
3 service provision.
4 In the private sector, however, the
5 elimination of competition through merger frequently
6 serves as the prelude to increased costs to the
7 consumer.
8 In addition to the effect of the merger on
9 clients, we must consider the effects on Valley
10 Opportunity Council itself. As an agency that has
11 been involved in housing development,
12 rehabilitation, and management, we have had cordial
13 relationships with the local banking community. As
14 the merger takes place and decision making is
15 centralized, our ability to deal with decision
16 makers on a local level is impaired. Currently, the
17 only way to call Fleet Bank located across the
18 street from our office is to call Boston.
19 We would hope that prior to approval of
20 this merger, the Federal Reserve will require that
21 Fleet and BankBoston develop a detailed and
22 publicly-verifiable reinvestment plan which has been
23 negotiated with community organizations and elected
24 officials with specific commitments ensuring a net
25 benefit to low- and moderate-income in minority
0437
1 communities.
2 We also ask that the public comment period
3 be extended for two weeks after such a plan has been
4 released.
5 It is essential that this merger be
6 approved and that the stipulations regarding
7 lifeline banking services for the poor, access to
8 branches and ATMs, and economies of scale for
9 service fees are attached to said approval.
10 We would also hope that some allocation in
11 of money to support local nonprofit needs and
12 committed bank involvement in the local community is
13 considered.
14 Thank you for this opportunity.
15 HEARING OFFICER SMITH: Thank you very
16 much.
17 Are there any questions?
18 HEARING OFFICER McDONOUGH: I have a brief
19 question for Marcia Peters.
20 You gave two examples of inappropriate
21 loan-to-value ratios, and I think one of those you
22 cited as being a UNAC loan. And I don't recall
23 whether the other loan was a UNAC loan.
24 MS. PETERS: No.
25 HEARING OFFICER McDONOUGH: What role did
0438
1 you play in the process to allow such disparate
2 loan-to-value ratio?
3 MS. PETERS: I'm not sure that I can answer
4 that. There was a work write-up which I think was
5 done by UNAC staff person that said the property
6 would need -- I think it was $82,000 worth of work.
7 But UNAC isn't doing the appraisals. They're doing
8 the first-time home buyer counseling and getting
9 people to understand the process, et cetera.
10 But when the thing goes into Fleet, Fleet
11 is hiring its own appraiser to justify the huge
12 price. So I'm not sure.
13 If UNAC had something to do with getting
14 the numbers up so high and getting the hopes up so
15 high, I would still have hoped that Fleet's
16 appraiser would have said, "Whoa. No can do."
17 HEARING OFFICER BROWNE: My I ask a
18 follow-up question?
19 Ms. Peters, when did these -- when were
20 these properties purchased? Is this something that
21 happened fairly recently or several years ago?
22 MS. PETERS: The first one that I talked
23 about where there was the purchase plus rehab loan
24 was less than a year ago.
25 The City foreclosure one was approximately
0439
1 two years ago.
2 HEARING OFFICER ALVAREZ: I have a question
3 for Mr. Haskell.
4 You said that you were beginning some
5 discussions with Fleet about an agreement --
6 renewing an agreement that your group had or other
7 groups had. I would like to you speculate for a
8 minute, if you would, feel comfortable about what
9 kind of reasons you might think -- what was actually
10 going on with Fleet's decision not to enter into an
11 agreement. And what I'm looking for is for a sense
12 of whether you had the sense that Fleet was
13 withdrawing its support from the community or was
14 Fleet more changing its approach to dealing with
15 communities to become more like some other banks
16 that we have seen where they still have a commitment
17 to the community but they choose not to have formal
18 agreements in implementing their programs.
19 MR. HASKELL: When I know what Terry Murray
20 is thinking, I'm sure I will be much richer.
21 Sorry.
22 HEARING OFFICER ALVAREZ: No. I appreciate
23 that.
24 MR. HASKELL: I wouldn't want to speculate
25 what is in Fleet's thought process.
0440
1 Overall, in my experience in negotiations
2 with Fleet, the approach to community groups is that
3 everything that is given by the bank is viewed
4 somewhat as a net loss to the bank, that they do not
5 see -- they do not see their commitments to the
6 community as somehow figuring out a way to make the
7 investment in the community; and our experience,
8 frankly, with BankBoston through its mergers was the
9 exact opposite, that the bank was, in fact,
10 attempting to find a way that they could, in fact,
11 do banking in low-income communities and by that
12 certainly making a profit.
13 And that attitude hasn't been evident in
14 several different forums with Fleet.
15 HEARING OFFICER SMITH: Thank you very
16 much, and especially for waiting so long into the
17 afternoon and evening to make your appearance. We
18 really do appreciate it.
19 (Pause)
20 HEARING OFFICER SMITH: We are starting
21 with Mr. Sarkissian.