Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation
Wednesday, July 7, 1999
Transcript of Panel Two
9 MAYOR MENINO: Thank you very much and
10 thank you for allowing me to testify this morning.
11 In my remarks I want to focus on the impact that the
12 proposed merger would have on my city and ask you to
13 consider that impact in your deliberations.
14 This merger comes at a time when the local
15 and national economies are on a roll. The
16 consolidation of firms into larger institutions is
17 happening in many industries. This evolution is not
18 only fueling the stock market, it's also changing
19 the way we do business and the way companies can
20 grow within a region and even across international
21 borders.
22 Boston's banks can't hide from this trend.
23 They must go out and compete in these expanding
24 markets like any others. But the consolidation of
25 capital in this merger will take Fleet to a position
0046
1 where the banking needs of ordinary citizens will
2 seem insignificant compared to the attraction of
3 foreign markets and bigger deals, including
4 additional mergers.
5 As fewer banks survive and grow into bigger
6 players on the national and international stage, the
7 fundamental question we face is this: Who will care
8 whether a community grows or dies? The number of
9 banks whose fates are tied to the fate of Boston is
10 shrinking. The Bank of New England is gone.
11 Shawmut Bank is gone. BayBank is gone. With this
12 merger BankBoston will also be gone. Gone, too,
13 will be more local jobs and BankBoston's spirit of
14 dedication to every segment of our community.
15 In banking, the idea of fair service to all
16 is a result of the Community Investment Act. It was
17 written into law because Americans saw what happened
18 when banks ignored some of our neighborhoods and
19 wrote off credit-worthy neighborhoods. The
20 Community Reinvestment Act has brought people on the
21 margins into the mainstream of American life.
22 Without it, Boston would not be a city of come-back
23 neighborhoods. It would see fewer first-time home
24 buyers, more abandoned houses, and whole
25 neighborhoods rotting from disinvestment.
0047
1 Take Blue Hill Avenue, for example. For
2 years it was little more than a depressing
3 collection of vacant lots and boarded-up buildings.
4 Since I became mayor we've invested over $65 million
5 up and down the avenue. By building new homes and
6 businesses, we're rebuilding a whole community. And
7 soon we'll start construction on the Grove Hall
8 Mall. And some people said that would never happen.
9 A new shopping center with a supermarket, a
10 drugstore, a Dunkin' Donuts and other shops.
11 Our partner on this deal is BankBoston. We
12 ended up with BankBoston because they could handle
13 the financing. The bank wants to do this deal.
14 Chad Gifford knew this was important to the city, so
15 he put a good team on it, and today we have a deal.
16 Some banks are better than others. In
17 spite of generous ratings from regulators, Fleet has
18 a troubled lending history in our community and
19 Fleet's approach to this merger leads me to believe
20 it will adopt a take-it-or-leave-it approach to
21 lending in our neighborhoods. That troubles me, and
22 it should trouble every business leader in Greater
23 Boston, because the health of a city sets the tone
24 for investing throughout the wider region.
25 Some big banks believe the Community
0048
1 Reinvestment Act gets in the way of their growth
2 strategy. They see it as a nuisance. They have
3 enlisted the help of their friends in Congress to do
4 away with it, people like Senator Phil Gramm of
5 Texas, who is no friend of the people in America's
6 cities. For years Phil Gramm has been telling
7 government to get out of the business of rebuilding
8 communities. Now he's telling business to get out
9 of that business, too.
10 Here in Boston the two banks have told us
11 their merger would mean a 20 percent reduction in
12 combined lending to our community. If you want to
13 know what happens to a community when lending
14 disappears, try to remember the conditions of our
15 neighborhoods in the early 1970s. Or follow
16 President Clinton's trip across the country with
17 business leaders this week. Whether in Boston or
18 East St. Louis or Los Angeles, one stubborn fact
19 remains the same: Capitalism does not work in a
20 community when that community is denied access to
21 capital.
22 As the mayor of this city I am concerned by
23 any merger that would deny my capital city in favor
24 of expanding markets somewhere else. I am concerned
25 about a reduction in home mortgage loans, a
0049
1 reduction in community development loans and small
2 business loans, and I'm concerned that the new bank
3 will not act as if it's life depended on the health
4 of our neighborhoods.
5 I ask you, how can any bank call itself a
6 local bank with pride if the bank is less than fully
7 committed to the local economy?
8 I am sorry to say that I have yet to hear
9 why this merger is a forward step for my community.
10 So until the Federal Reserve Board can convince me
11 otherwise, I cannot offer the City of Boston's
12 support for this merger.
13 You as regulators hold great power over the
14 future of banking in America. You hold great power
15 over the economy of our communities and you have a
16 responsibility to protect the public interest. So I
17 respectfully request that you remember the interests
18 of my constituents whose banking needs rest upon
19 your shoulders while you deliberate and decide the
20 merits of this merger.
21 In closing, let me say, my office would be
22 happy to supply you with some of the facts of my
23 detailed statement. Also -- let me just finish up.
24 This might be a good deal for the stockholders, but
25 I don't believe this is a good deal for the
0050
1 stakeholders. Thank you very much.
2 (Applause)
3 PRESIDING OFFICER SMITH: And we will not
4 exactly follow the order. We'll go next to
5 Congressman Capuano.
6 CONGRESSMAN CAPUANO: Thank you. First of
7 all, I'd like to thank the Federal Reserve for
8 having this hearing because it wasn't on the
9 original schedule when this merger was announced,
10 and I know that the Federal Reserve listened to the
11 requests of many people in this community to have
12 this. I also know you have a very long day ahead of
13 you and I respectfully send my regrets for that, but
14 my thanks for having me here nonetheless.
15 As each of you know, the Congressional
16 delegation of Massachusetts has sent several letters
17 on this matter to the Federal Reserve and to others.
18 We have another one in the record today that
19 basically reiterates what we have said in the past,
20 naming four points that we've tried to focus on.
21 The fact that we want our community banks to have a
22 fair opportunity to bid and then purchase a fair
23 portion of the divested parts of this merger if and
24 when it happens; that we want both the remaining
25 bank of this particular item and whoever wins the
0051
1 divestitures to continue and to expand their
2 neighborhood investment.
3 We want the Federal Reserve to make sure
4 that all employees are fairly treated and honestly
5 treated, and, of course, we want local charities to
6 continue the relationship they've had with the banks
7 in the past. That's what the delegation has said.
8 For myself, for the last four months as a
9 member of the banking community and a new member of
10 Congress I've actually worked a little harder on
11 this than most because I've had a lot of catching up
12 to do on these kinds of matters. And when this
13 merger was announced, right from the beginning I
14 asked for several pieces of information -- I think
15 pretty easy pieces of information -- such as the
16 details of charitable giving, some statistics on low
17 and moderate income loans, things like that.
18 Since then we've had a study done by a
19 professor at UMass-Boston that's come out that's
20 raised some serious questions on the lending
21 practices of these institutions. We've had comments
22 from a group called Inner City which has raised
23 serious questions. We've had the bank itself come
24 out with a 14.6 billion dollar community investment
25 proposal that has virtually no detail to it.
0052
1 Those are serious issues and I believe they
2 have been seriously presented. However, not until
3 yesterday at three o'clock in the afternoon did any
4 representative from the bank have anything to say
5 about any of those matters.
6 Now, I'll tell you that I do think that
7 both Fleet and the Bank of Boston have done a good
8 job going out and listening and I do think it's
9 important to maintain a strong regional bank in
10 Boston. I think that's fine. And I congratulate
11 the banks for going out to listen. But listening is
12 only one half of the equation. The second half of
13 the equation is then responding to what you have
14 heard. Not necessarily agreeing with it, not
15 necessarily disagreeing with it, but simply
16 responding. Do you agree? Don't you agree? Let's
17 work this out. There has been none of that until
18 three o'clock yesterday.
19 Today has been an extended period of time
20 for public comment. I don't think that less than 24
21 hours for people to respond or to react to the
22 response is a fair amount of time. I think it's an
23 inappropriate amount of time. (Applause) And I
24 think it could raise any number of questions. I
25 know that this is a difficult merger. I understand
0053
1 that and I respect the fact that the bank has been
2 busy. If that's the case, okay; great. It also
3 raises potential questions that the bank is being
4 insensitive to community input. If that's the case,
5 that's the worst possible scenario.
6 The whole reason we're doing this is to
7 make sure that the successful bidders and the merged
8 entity are responsive to community needs. If there
9 wasn't a community component to that, we wouldn't be
10 here. If it was simply banking, bottom-line
11 banking, you wouldn't do this, you wouldn't need our
12 input, we wouldn't have a whole lot to offer.
13 We're not bankers. We're here representing
14 the community, and if the community is not listened
15 to, not necessarily agree with them on every point,
16 what have we done? You're wasting your entire day.
17 I'm wasting an awful lot of time and most of the
18 people in this audience have wasted an awful lot of
19 time. (Applause)
20 To my way of thinking, I want this merger
21 to end up in one plus one is greater than two. I
22 really do. Not just for the shareholders; also for
23 the communities and, as the mayor put it, for the
24 stakeholders. That's why today the written
25 testimony that I've given, which is a little bit
0054
1 more detailed than the verbal comments, I'm asking
2 for a couple of things:
3 If the Federal Reserve finds it in the
4 interest of the community, which I think it is
5 obviously, I ask that the Federal Reserve delay any
6 decision-making and extend the public comment period
7 of time to at least 30 days after these responses
8 have been given by the bank, because we need a fair
9 amount of time to see whether their responses are
10 fair or not fair, reasonable or not reasonable.
11 Absent that extension of time, then I have to
12 strongly oppose this merger at this time.
13 (Applause) And I have to oppose it not because I
14 have made a final decision in my own mind as to
15 whether this merger serves the needs of the
16 community, but because I haven't been allowed the
17 time to do that. So I respectfully ask the Federal
18 Reserve to extend the period of time to 30 days
19 after receipt of responses by the banks, and if they
20 can't do that, then I have to oppose this merger.
21 Thank you.
22 (Applause)
23 PRESIDING OFFICER SMITH: Senator
24 Wilkerson.
25 SENATOR WILKERSON: Good morning to you,
0055
1 Presiding Officer, members of the Board. For the
2 record, my name is Dianne Wilkerson and I currently
3 serve as State Senator in Massachusetts and I have
4 done so for seven years. Prior to that I practiced
5 law in Massachusetts and was a member of the
6 Community Investment Coalition which negotiated with
7 Fleet Bank in 1990 when it took over the Bank of New
8 England. The CIC also negotiated again in 1994 the
9 Shawmut-Fleet merger, and I represented as a lawyer
10 over 600 individuals who were victims of the
11 infamous second mortgage scam, one of the most
12 devastating financial scandals that destabilized
13 both the Boston and Springfield Afro-American home
14 ownership communities.
15 I also was a member of the team that
16 negotiated the second mortgage scam settlement with
17 BayBank, the former BayBank and the former Shawmut
18 Bank. And I have previously testified before this
19 Board where I have raised serious issues and
20 concerns to this body.
21 However, I have never testified in
22 opposition to a merger until now, and I do so with
23 sadness and disappointment. (Applause) Since April
24 of this year I have served as the convener of what
25 is called the Community Advisory Committee for the
0056
1 Fleet Bank-BankBoston merger. The committee is a
2 40-plus member group comprised of racial, gender and
3 professional, university, government and religious
4 areas from across the Commonwealth who came together
5 to solicit comments and concerns from interested and
6 impacted parties across the state. The committee
7 hosted a statewide town meeting in May. Over 200
8 persons turned out to offer testimony, and we have
9 provided the videotape of that meeting to the banks
10 and to this Board.
11 The committee met with members of our
12 Congressional delegation. We met with officials
13 from the Department of Justice Antitrust Division,
14 the Federal Reserve Bank of Boston, the Attorney
15 General of the Commonwealth of Massachusetts, and
16 the Massachusetts Division of Banks. We've had the
17 unprecedented support and collegiality from our
18 entire Congressional delegation from the mayor of
19 our City of Boston and it's never happened before,
20 and I think that that unified position ought to tell
21 you something, because this is different.
22 We also met with the bank principals early
23 in June and at that meeting we transmitted to them a
24 lengthy written document in addition to other
25 information that the committee had gathered. It was
0057
1 our hope and expectation that those concerns would
2 be taken into account as the proposal was developed.
3 The committee waited for some time to offer public
4 comment because we were optimistic that the
5 committee would be able to engage in a productive
6 dialogue with bank principals to ensure that the
7 banking needs and the needs of the Massachusetts
8 communities, in particular women and people of color
9 in low and moderate income communities would be met.
10 I'm sorry to say that that June 4th communication
11 and the detailed concerns and issues that have been
12 raised have never had the courtesy of a response.
13 On June 24th we received the bank's
14 proposal and have spent a considerable amount of
15 energy reviewing this plan. In sum, the proposal
16 does not meet the regulatory standards that the
17 Federal Reserve Bank must have satisfied in order to
18 approve this merger application. There is much that
19 I could offer, but I will focus my testimony on two
20 pieces of the criteria of review for this Board
21 under the Bank Holding Company Act. That is,
22 competition and convenience and needs of the
23 community.
24 As to competition, among other things, this
25 application would involve the largest branch
0058
1 divestiture in the history of the United States.
2 However, even if a large bank were to purchase all
3 the branches, the most it could represent would be
4 six percent of the Massachusetts market share. The
5 merged institution would be at least 30 percent,
6 leaving its next closest competitor about five times
7 smaller, hardly an encouraging picture for
8 competition.
9 The divestment discussion to date has
10 ignored an important and serious issue for the
11 communities which I represent, and that is that many
12 of the branches on the divestment list were cited
13 specifically to fill a void in urban and rural
14 markets which until the last five years were
15 woefully underserved by banks and saturated with
16 check-cashing stores. The citing of many of the
17 branches on the sale list were negotiated in the
18 aftermath of the last two mergers. Several of the
19 branches were cited based on an acknowledgment and a
20 determination that the convenience and needs of a
21 certain segment of our community were not being met.
22 Special care must be taken by this Board to
23 ensure that we don't go backwards. It would be our
24 position that no grant cited in an urban market to
25 fill a void should be sold to anyone who does not
0059
1 intend at least to keep the branch open. Who gets
2 these branches is also of critical importance to us.
3 We have been fortunate in the Greater Boston
4 community of color to have a bank that is certified
5 with the United States Treasury as the only bank
6 community development finance institution in the
7 state and whose focus market is urban, the urban and
8 LMI communities, and especially people of color,
9 African-American, Latino.
10 Local and community banks should be
11 strengthened by this merger, not weakened. You must
12 pay special attention to the Boston Bank of Commerce
13 and the market that they serve.
14 Lastly, much has been made about the
15 expectation of the applicant banks that there would
16 be competition in the market to pick up market share
17 in areas where the applicant will decrease lending
18 and spending; for example, in mortgage lending. It
19 is our contention that there is simply no basis for
20 such an assumption, and in fact history tells us
21 different. With the slim pickings to be left in the
22 bank market for mortgage seekers, there is no
23 rational expectation that the purchasing bank or the
24 remaining Massachusetts banks soon to be but one, if
25 the next merger is approved, could pick up the slack
0060
1 with the merged bank to continue the double-digit
2 decreases in mortgages that have been made to
3 African-Americans and Latinos that we have been
4 sustaining every year for the past four years.
5 Oddly enough, the biggest hits have come
6 post merger of BankBoston and BayBank and even
7 bigger decreases in the post Fleet-Shawmut Bank
8 merger, and unless the Federal Reserve takes special
9 consideration of the need to ensure contingent
10 competition for the low and moderate income market,
11 there will be little or none available.
12 And please note that we do not consider
13 second-mortgage companies charging 20-plus percent
14 interest competition for the LMI and minority income
15 market.
16 I know that Professor Campen is going to be
17 testifying later, but I think that the analysis that
18 he has done is uncontroverted and would hope that
19 this Board would take some special note to look at
20 those numbers, and not only the numbers for Boston,
21 but for the Commonwealth of Massachusetts as a
22 whole. The loans to black borrowers decreased 52
23 percent. From 1997, 1998, the loan to
24 Latin-American, Latino borrowers decreased 49
25 percent and the loan to LMI borrowers decreased by
0061
1 fifty percent as a result of both the BayBank-
2 BankBoston merger and the Fleet-Shawmut merger. And
3 we accept this concept that there would be some
4 decrease, but the double-digit decreases that we
5 have sustained in these two particular communities
6 are irrational, inexplicable, and can only be
7 explained by racial factors. And even the
8 Massachusetts Banking Council has supported that
9 position.
10 This Federal Reserve did a study which set
11 off a whole litany of similar studies across this
12 country, and I think that it's important to note
13 that the Federal Reserve Bank of Boston led the way
14 nationally on what became a higher standard and
15 reported for tons of data.
16 Given what we understand to be the standard
17 of review for the Federal Reserve in assessing
18 merger applications, we believe in order for the
19 Federal Reserve to recommend approval of this
20 merger, the bank would have to find that the bank's
21 proposal of June 24th which provides for a 14.6
22 billion dollar commitment for six states over five
23 years meets the convenience and needs of the
24 community, although the figure represents less
25 resources from the combined bank than the two banks
0062
1 provided separately in 1998.
2 For the record, I never expected one plus
3 one to equal greater than two. I was prepared to
4 declare victory of one plus one equal to one and a
5 half. It doesn't. Apparently the comments from
6 Fleet-BankBoston suggest even they acknowledge that
7 the formula has changed. On July 1st there were two
8 statements issued that said, one, it was never our
9 intention when we made that statement in March to
10 suggest that between us we would be greater than the
11 two. What we really meant was that the divestiture
12 bank would be responsible with us and we would hold
13 them accountable to the community.
14 Also, this proposal represents 80 percent
15 of what we have been doing because we are divesting
16 20 percent of our branches, so we're going to be
17 smaller. In some categories it's more than 80
18 percent. We haven't found them yet.
19 Various members of the committee have run
20 the numbers in different variations and we all keep
21 getting the same results. The numbers simply don't
22 support the bank's representation of this equaling
23 even 80 percent, the current activity, let alone
24 100.
25 Meeting the needs of the convenience and
0063
1 needs of the community is not just about CRA. One
2 of the best indicators of future performance is past
3 history. That being the measure, the Federal
4 Reserve Bank must look very carefully not only at
5 the recent data it studied on the bank's
6 performance, but also on the compliance or lack
7 thereof to prior commitments and agreements. The
8 history is substantial. I have included some
9 information that attests to this history, which we
10 will submit to you for the record, including the
11 committee's June 4th letter to the bank, which never
12 received the courtesy of a response.
13 We believe there's at least a segment of
14 the community; namely, the LMI urban and rural
15 communities and women whose needs are not being
16 adequately served. There is a fear that with
17 another merger history suggests these communities
18 will sustain yet another decrease.
19 PRESIDING OFFICER SMITH: Thank you very
20 much, and we'll be glad to have your full statement
21 for the record.
22 SENATOR WILKERSON: If I could end by
23 making a request to you, as the Congressman and the
24 Mayor have done, and that would be that you would
25 use your regulatory powers to do the right thing by
0064
1 the communities who depend on the regulatory
2 authority for protection. Whatever this proposal
3 is, it's not complete. Even the bank principals
4 referred to it yesterday afternoon as a work in
5 progress. You can say no. You can say go back to
6 the drawing board. You can say you need more
7 information. You can say to the banks, respond to
8 the questions that have been asked. But whatever
9 you say, don't say that this is enough to meet the
10 standard, because it's not, and the community has
11 nowhere else to go but to you.
12 PRESIDING OFFICER SMITH: Thank you very
13 much. (Applause) Now we have Ms. Boone on behalf
14 of Senator Kerry.
15 MS. BOONE: My name is Jeanette Boone, and
16 I currently serve as senior issues manager in the
17 Boston office of Senator John Kerry. On behalf of
18 Senator John Kerry I want to thank you for the
19 opportunity to express the Senator's views on the
20 Fleet-BankBoston merger. While Senator Kerry is
21 unable to give this testimony in person, I want to
22 thank you for the opportunity to place his full
23 testimony in the record today.
24 As a member of the Senate Banking
25 Committee, I have witnessed an unprecedented amount
0065
1 of consolidation in the banking and financial
2 services industry. The Fleet-BankBoston merger is
3 further proof that the continued consolidation of
4 financial services markets is one of the
5 inevitabilities of the new global economy.
6 Today there are 30 percent fewer banks in
7 the United States than there were just 10 years ago.
8 Our banks are competing beyond city limits and
9 neighborhood borders, competing against banks across
10 the country and literally across the world. To do
11 so effectively they must have the strength, the
12 market share and the ability to deliver high-quality
13 service.
14 This proposed merger will make the planned
15 Fleet-Boston Corporation the eighth largest bank in
16 the country and one of the most significant
17 financial presence in New England. I believe it is
18 imperative to maintain a strong and robust financial
19 services industry based in New England. To this
20 end, it is critical that we take the appropriate
21 steps to ensure that Boston remains a hub of
22 financial services in the new century and that New
23 England-based banks will continue to be available to
24 depositors in New England.
25 We must move forward in that process in a
0066
1 careful and measured way with government, business,
2 and community leaders working together to ensure
3 that high standards of customer service and
4 corporate community engagement are maintained.
5 Corporate citizenship should be a part of a
6 redefined bottom line in banking. Everyone
7 understands the importance of capital in developing
8 our low-income neighborhoods. Access to credit,
9 along with education, healthcare and decent housing,
10 is one of the most important tools working Americans
11 need to compete successfully in this country.
12 Massachusetts banks, large and small, have
13 the responsibility, the very real responsibility of
14 providing access to capital to our underserved
15 communities. They are integral partners in our
16 effort to lead the transition to a new economy where
17 no one is left behind. Through the Community
18 Reinvestment Act, Congress set standards for the
19 private sector in building an economy in which we
20 can all participate. CRA has been extremely
21 successful in Massachusetts where financial
22 institutions have made more than 1.6 billion in
23 commitments to assist low-income neighborhoods.
24 It's making a difference in Boston's inner city
25 neighborhoods from Roxbury and Jamaica Plain to the
0067
1 South End and has increased home ownership,
2 affordable housing development and minority small-
3 business lending across Massachusetts.
4 However, even at this time of record
5 economic growth, there is much work left to be done.
6 The Boston Federal Reserve showed conclusively that
7 African-Americans get turned down on mortgage
8 applications 1.6 times more often than whites, even
9 after taking into account many economic, income and
10 creditworthiness differences.
11 More than 35 million Americans still live
12 in poverty. Almost one in five children lives in
13 poverty. We must continue to expand the winner's
14 circle to empower every community to participate in
15 this economic expansion. We must not allow any
16 community to be denied access to credit or new
17 banking facilities and services. It is with these
18 principles in mind that together with the entire
19 Mass. Congressional delegation I signed a letter to
20 the new Fleet-Boston Corporation to stress the
21 importance of maintaining a vigorous community
22 reinvestment effort.
23 I am pleased that the new Fleet-Boston
24 Corporation has begun a dialogue with the major
25 organizations in Massachusetts that are dedicated to
0068
1 housing and community reinvestment. I am hopeful
2 that this dialogue will continue and that this
3 merger will result in progress toward the goals of
4 the Community Reinvestment Act and not an
5 opportunity to pass this responsibility to others.
6 I have also sent a letter with Senator
7 Kennedy to Assistant Attorney General Joel Klein
8 requesting that the Justice Department consider
9 allowing a small portion of the new Fleet-Boston
10 Corporation's assets to be sold to a Massachusetts
11 minority-owned community development financial
12 institution that has been providing access to
13 capital to many of our low-income neighborhoods and
14 working families. With your approval I would like
15 to make both letters part of the record.
16 We have other responsibilities as well,
17 particularly the responsibility of meeting the
18 immediate challenges of work force dislocations
19 caused by this merger. Any time two large firms are
20 combined, restructuring can be expected. Layoffs
21 seem to be an inevitability in the reshuffling to
22 maximize cost efficiencies. The Boston Globe has
23 estimated we expect to see the loss of 4,000 to
24 5,000 jobs as a result of this latest decision.
25 Every effort must be taken to minimize job loss and
0069
1 provide sufficient retraining and job placement
2 assistance to workers displaced by this decision.
3 I believe the best way to minimize the
4 anticipated job loss resulting from this merger is
5 to see that the required divested deposits, branches
6 and ATMs of the Fleet-Boston Corporation are sold to
7 banks based in New England. Back in April I wrote
8 to Assistant Attorney General Joel Klein to express
9 my opposition to any decision to sell all divested
10 funds to a single financial institution based
11 outside of Massachusetts. Any divestiture related
12 to this merger must encourage local competition and
13 expand consumer choice.
14 In that letter I also asked that every bank
15 in Massachusetts be given the opportunity to bid on
16 the assets that the merged banks will be required to
17 divest. I am pleased that the Justice Department
18 has taken my advice and will not insist that all
19 assets be acquired by a single buyer, so long as
20 there is a buyer in the mix that will preserve
21 competitive conditions in middle-market lending.
22 I am hopeful that the new Fleet-Boston
23 Corporation will seriously consider any competitive
24 bids from all New England-based banks. Small,
25 medium sized and independent banks have been an
0070
1 important source for financial services to small
2 businesses and low-income communities in
3 Massachusetts. This will also help ensure that
4 Boston remains a hub of financial services in the
5 next century and that Boston-based banks will
6 continue to be available to depositors in New
7 England.
8 Finally, it is the best way to minimize the
9 job loss related to the merger. Over the last years
10 in the Senate Banking Committee I have come to
11 realize that economic change, particularly in the
12 financial service industry, is an inevitability that
13 must be wisely managed. We cannot lull ourselves
14 into believing that we are powerless to shape the
15 contours of this new economy. We know the New
16 England banking industry can provide economic
17 leadership, but we also expect and demand that our
18 banks demonstrate leadership in customer service and
19 corporate citizenship as well.
20 I know that from our efforts on the Banking
21 Committee to your work here, we will be watching to
22 ensure that those goals are merged into one unifying
23 vision of banking in New England.
24 Over the past several months I have worked
25 with the Community Advisory Committee and a large
0071
1 number of groups involved with housing and economic
2 development from across Massachusetts. It is my
3 strong hope that you will listen carefully to the
4 testimony that representatives from these groups
5 will be making today and give serious consideration
6 to the level of need in the community. This merger
7 cannot deal a devastating blow to underserved
8 communities by undercutting the current programs by
9 BankBoston and Fleet, especially those in the areas
10 of small business lending, affordable housing and
11 mortgage lending to low and moderate income
12 homeowners, community development and consumer
13 lending and equity investment and technical
14 assistance and support.
15 I urge you to weigh and evaluate this
16 testimony as you reach decisions regarding this
17 proposed merger. Ultimately it will be our
18 responsibility to ensure that this process moves
19 forward with a fair and competitive merger and
20 divestiture process that encourages local
21 competition and investment while expanding consumer
22 choice.
23 PRESIDING OFFICER SMITH: Thank you very
24 much, Ms. Boone. We'll take it all and put it all
25 into the record.
0072
1 Mr. Ferguson on behalf of Congressman
2 Kennedy.
3 MR. FERGUSON: Thank you, Madam Presiding
4 Officer and members of the Board. For the record my
5 name is Larry Ferguson. I'm the District Director
6 for Congressman Patrick Kennedy of Rhode Island, and
7 I'm here today on his behalf.
8 Congressman Kennedy has a strong interest
9 in the financial industry of New England and most
10 notably his concern that integrity and competition
11 is upheld in the everchanging marketplace. He feels
12 strongly that the upcoming merger of Fleet Bank and
13 BankBoston will uphold the goals of integrity and
14 consumer choice through competition.
15 What I would like to do now is to read into
16 the record a letter that he sent to the Board dated
17 June 29th. "Dear Mr. Johnson: I write in support
18 of the proposed merger between Fleet Financial Group
19 and BankBoston and urge that the Board move
20 expeditiously to approve the merger. To comply with
21 the requisite regulatory and antitrust aspect of
22 this transaction, the two institutions have done an
23 excellent job in reaching out to a large number of
24 community-based organizations throughout its market
25 area. They have also reached out to elected
0073
1 officials on the state and local level and those of
2 us in Congress. As a consequence I believe that an
3 effective job has been done in explaining the
4 rational behind the merger, the plans for
5 restructuring the combined organizations in a most
6 efficient and effective way possible and in
7 anticipating and dealing with the impact of the
8 merger on customers of the institutions and the
9 communities impacted.
10 I am very pleased to learn that an issue of
11 major concern to me that local and regional
12 institutions be allowed to bid on some or all of the
13 assets being divested was clarified recently by the
14 Department of Justice. Furthermore, it is
15 reassuring to learn Fleet and BankBoston will soon
16 announce a major community reinvestment program
17 valued at more than fourteen million dollars over
18 the next five years. This plan will be designed to
19 deal with affordable housing, small business
20 lending, urban renewal and consumer education
21 programming.
22 I believe that the successful bidders on
23 the Fleet and BankBoston branches to be divested
24 will provide effective competition and enhanced
25 choices for consumers. I therefore urge the Board
0074
1 to approve this merger which should produce both
2 substantial short- and long-term public benefits.
3 Sincerely, Patrick Kennedy, member of Congress."
4 Again, I want to thank you for allowing me
5 the opportunity to submit this letter for the record
6 and allowing me to testify here today.
7 PRESIDING OFFICER SMITH: Thank you very
8 much. Questions from the panel?
9 MS. BROWNE: I have a question for Mayor
10 Menino. You expressed some deep concern about the
11 loss of BankBoston. Perhaps you might elaborate a
12 little bit more about what makes BankBoston special
13 from your perspective, what distinguishes it perhaps
14 from other institutions.
15 MAYOR MENINO: Well, my dealings in the
16 last six years with BankBoston have been on a
17 continual basis. We had an issue in the
18 neighborhoods that we developed a neighborhood or
19 needed money for housing, they were there. They
20 were the first ones out willing to work with us to
21 fashion different programs to our needs, and they
22 were very helpful to what we did on the
23 revitalization of a lot of the neighborhoods of the
24 City of Boston.
25 MR. KWAST: I have a question for Mayor
0075
1 Menino and Senator Wilkerson. Could you explain a
2 little bit more whether you think a bank
3 headquartered out of Boston could or could not enter
4 the Boston market and become an effective competitor
5 for the banks that are already in Boston?
6 SENATOR WILKERSON: I don't believe I ever
7 said I didn't believe that they could. I suggested
8 that if a large bank bought all the branches, the
9 best they could do is 6 percent of the market and
10 that I don't consider that competition in the
11 literal sense of the word because this resulting
12 merged bank would be 30 percent, and they're going
13 to be the eighth largest in the country, not just in
14 Massachusetts. So it depends on what your
15 definition of "competition" is.
16 Our concern is that there will be no one
17 competing for the business of my constituents unless
18 this Board takes a special look at that and looks at
19 banks who have had track records in doing business
20 and believe that our communities are about business.
21 It's not about charity, and that's a very -- it's an
22 offensive discussion. We always get to that. We're
23 not asking for people to give us money, you know.
24 This is about mortgages. This is about if I present
25 the same kind of indicators as everyone else, that I
0076
1 shouldn't be denied. And the records are just
2 overwhelmingly supportive of the notion that that's
3 what's happening, and we don't think there's any
4 other competition outside of large banks like this
5 that are going to be picking up that market unless
6 you take that into consideration and are looking at
7 our small and local banks who see us as business and
8 are making money in ways.
9 So if you just talk about selling to a big
10 bank, we don't think that that particular sector and
11 segment of our community's banking needs are going
12 to be met. But I have no opposition to an outside
13 bank. I actually for the record also want to say, I
14 think we'd be better off having a bank that -- you
15 know, I want to keep Fleet-BankBoston here. We're
16 not opposed to that. Given the choice, I'd rather
17 have a Massachusetts headquartered bank. But that
18 doesn't mean I don't then get to raise questions
19 about this proposal and the plan that they put on
20 the table, because I don't think it's going to
21 satisfy what I understand to be your regulatory
22 standards in its present form. We could get there
23 with your help, but we're not there.
24 MAYOR MENINO: I agree with the Senator on
25 the fact that Fleet-BankBoston merged. No big
0077
1 problem. But what's the commitment? What's the
2 future? We can't talk about the past. I think
3 we're talking about the past. I'm talking about the
4 future. When this merger happens, what does the
5 future look like for the community that I represent
6 as Mayor of Boston, Senator Wilkerson, Congressman
7 Capuano. And sometimes, I'll tell you, having a
8 homegrown institution headquarters doesn't mean a
9 lot to you, but sometimes a foreign bank who might
10 have an office or an operation in the city will do
11 more for you. I have several world headquarters in
12 our city, and I get more out of some other
13 corporations that aren't home based.
14 So it's the attitude, and it's the attitude
15 of the folks. Do they really want to get involved
16 in the community or are they saying we're Boston
17 based. You have to love us. We don't have to love
18 you. We have to tolerate you, but you have to love
19 us.
20 CONGRESSMAN CAPUANO: I want to make it
21 clear that the delegation as a whole has opposed
22 bringing in someone from the outside. We feel that
23 bank competition is good. We understand what the
24 general goal is, but bank competition doesn't have
25 to be from the outside. There has been nothing that
0078
1 has stopped an outside bank from coming in for
2 several years now. You know as well as I do -- in
3 fact, better than I do -- Citicorp already had
4 several hundred people in Boston for years, for
5 years. It's not new. Most of the large banks do
6 business in Boston right now. Right now. It's not
7 new. Nothing could stop them at all -- well, not
8 nothing. You could. But theoretically you wouldn't
9 stop them from buying small branches today over the
10 last several years.
11 That's not the issue. The issue is what do
12 you want to do with the divested branches if this
13 merger is allowed now, and our argument has been,
14 build from the inside. Help your own family to get
15 stronger as opposed to giving it away to the
16 outside. The outside is going to come in. There's
17 nobody here trying to create a Chinese wall along
18 the borders of New England. They're here now. They
19 will continue to grow. When they grow, where's the
20 competition going to be?
21 And I just want to go back historically.
22 It strikes me that many of you were probably around
23 the last time, well before Tom Menino was mayor,
24 when Boston was in serious trouble back in the late
25 '70s. No bank in the world should have loaned them
0079
1 a nickel, but the Bank of Boston did because they
2 understood the benefits of having a strong City of
3 Boston instead of having the City of Boston go
4 bankrupt. That is the benefit of a regional --
5 strong, locally based regional bank. And that's
6 what we're trying to keep and that's what we're
7 trying to grow. (Applause)
8 PRESIDING OFFICER SMITH: Thank you very
9 much. We'll go on to Panel Three. We will start
10 with Mr. Reilly.