Public Meeting Regarding Fleet Financial Group, Inc., and BankBoston Corporation
Wednesday, July 7, 1999
Transcript of Panel Nine
9 MS. ARANJO: Good afternoon. My name is
10 Carol Aranjo, and I am the CEO of D.E. Wells Federal
11 Credit Union in Springfield, Massachusetts, and also
12 a member of the African-American Executive
13 Leadership Council of Springfield, Massachusetts.
14 The African-American community of western
15 Massachusetts has not benefited from any of the bank
16 mergers or new banks entries into the State of
17 Massachusetts. We often say that people in Boston
18 think the state ends at 128.
19 We have seen the press releases, and we
20 have also been part of the bank community group that
21 started about five years ago, and we have not seen
22 any of the dollar amounts that the banks have
23 pledged to be lent in the low- and moderate-income
24 communities drift into Springfield, Massachusetts.
25 Very little dollars are in there for the business
0228
1 community.
2 The banks do lend to the nonprofits. They
3 do give charitable giving. But as every civilized
4 individual knows, it is the business community that
5 drives the community's progress.
6 The African-American business community has
7 been starved for capital and loans from the
8 beginning of time, since slavery. Our community
9 seems to be the fertile ground for other ethnic
10 groups to come in and get their economic starts.
11 Banks loaned to everyone to come into the
12 African-American community to start businesses
13 except the African-Americans. This is outrageous.
14 I am here to say that people who have
15 mortgages also need jobs with which to pay the
16 mortgages. If they are not able to create jobs
17 within their community, if they are not able to
18 establish a credible business community, if they are
19 not able to provide for the needs of their citizens,
20 then that community becomes a ghetto, it becomes a
21 starved plantation.
22 The banks of America treat the
23 African-American community as a plantation. They
24 are the owners. They are the wealth of the
25 community. They control it. They choose an
0229
1 overseer. When I use the word "overseer," I'm not
2 talking about Uncle Tom. Those are different. I am
3 talking about someone that the bank will determine,
4 "We will allow you to become successful. We will
5 loan to you, but only to you." It is a method of
6 pitting members of the community against one
7 another.
8 This is stock and trade of the American way
9 in the African-American community. For the
10 government, for entities of the government to
11 continue to allow it is to take part in it. Racism,
12 the stigma of what happens in our community, will
13 not change until the government takes responsibility
14 for what it sees happening and its part in it.
15 Banks must be able to put these dollars that they're
16 talking about into community controlled
17 organizations.
18 We are recommending that the banks, if they
19 are committing $14 billion, that these dollars not
20 stay within the banks to be given out piecemeal, but
21 to be placed into community loan funds, community
22 credit unions, community CDCs that have loan pools.
23 The money should be placed within them over a
24 five-year period and allow them to loan to the
25 businesses in the community so that they can develop
0230
1 their community.
2 Communities cannot be developed without
3 real capital, and real capital cannot be used in the
4 community if it is given to people outside of the
5 community to come in, build on their wealth and take
6 the wealth from the community. So we recommend that
7 unless the banks are willing to put these dollars
8 into the hands of community lenders and allow them
9 to loan, then they should not be allowed to merge.
10 HEARING OFFICER SMITH: Thank you very
11 much.
12 Mr. Draisen.
13 MR. DRAISEN: Thank you very much. It's a
14 little easier for me standing for some reason. I'm
15 not quite sure why.
16 My name is Marc Draisen, and I'm president
17 and CEO of the Massachusetts Association of
18 Community Development Corporations.
19 Just for purposes of explaining a little
20 bit more about who I am and what I've done, I've
21 worked in the community development field for the
22 last 18 years, and I have also served for four years
23 as a member of the Massachusetts House of
24 Representatives, representing Boston and Brookline.
25 We represent the 68 community development
0231
1 corporations of Massachusetts. Banks play critical
2 roles in the work of CDCs. They provide financing
3 for the construction of affordable housing, capital
4 for loan pools that fund small businesses or home
5 improvements, direct credit to entrepreneurs and
6 home buyers, basic banking services to consumers and
7 critical grant support to a host of CDC efforts.
8 In March, we began to assess the impact of
9 the proposed merger of Fleet and BankBoston. We
10 looked at the various factors to assess whether this
11 merger would keep the promise that the leaders of
12 the banks had indicated of one plus one equaling
13 greater than two.
14 We examined Fleet and BankBoston's past
15 records of serving the community reinvestment needs
16 of low- and moderate-income communities after
17 previous mergers. We asked the banks to develop a
18 comprehensive, detailed and publicly verifiable
19 series of benefits to the communities we serve, and
20 we asked them to formalize these commitments through
21 signed agreements.
22 Unfortunately, to date, the banks have
23 failed to negotiate a CRA agreement with any
24 legitimate community organization or elected
25 official. In fact, they have flatly said they would
0232
1 not do so.
2 Furthermore, they have failed to provide
3 any detailed commitments either by state or by
4 program area in such a way that we can determine
5 whether the convenience and needs of low- and
6 moderate-income people are being served.
7 Please allow me to be clear. We have
8 worked for years with both of these institutions.
9 We know them well. We respect their staffs. Each
10 one of them has good programs and some programs that
11 could be improved.
12 However, we are also aware, I might note,
13 of the value of having a financial institution
14 headquartered in New England, although I would note
15 that no one knows who the next merger will be headed
16 by, and that remaining in New England could not last
17 for long.
18 Nonetheless, despite our relationships with
19 these two banks, we are not able at this time to
20 lend our support to this merger. We do not take
21 this action lightly. MACDC has never opposed a
22 merger in the five years that I've been president
23 and CEO.
24 But there are three reasons why we take
25 that position today: First, the failure to
0233
1 negotiate an agreement; second, we remain
2 unconvinced that the regionwide commitment as
3 promised by the bank truly meets the tests of one
4 plus one equals two; and finally, and perhaps the
5 most importantly, because the bank's statement lacks
6 specifics. Gross numbers in broad categories across
7 six states are not good enough.
8 We were very precise in our requests, and
9 we hope the bank will be precise as well. Yet in a
10 host of areas -- soft second affordable home
11 mortgages; rental housing production through the
12 Mass. Housing Partnership Fund; membership in the
13 Federal Home Loan Bank; basic banking, checking, and
14 savings accounts for unbanked households; targets
15 for small business lending -- we have only heard,
16 "We are still studying your proposal."
17 Therefore, without those specifics, we
18 cannot be supportive today. The Fed, however, does
19 have the ability to turn this around. You clearly
20 have the authority to establish conditions over any
21 approval of this merger under your regulations. We
22 know you tend not to do this, but we hope that you
23 will do so at this time.
24 We hope that you will require Fleet and
25 BankBoston to develop a detailed and publicly
0234
1 verifiable CRA plan negotiated with community
2 organizations and elected officials. We hope you
3 will extend the public comment period for at least
4 two weeks after such a plan is developed and release
5 to the public and take into account the public's
6 reaction to the plan in making any decision to
7 approve or deny the merger. And, finally, we hope
8 that you will incorporate these commitments into any
9 approval that the Federal Reserve might issue.
10 In the written testimony that we have
11 handed in, we have detailed -- and I might say in
12 great detail -- the five reasons why we believe that
13 in the case of this merger, there are unprecedented
14 conditions why you should establish these
15 conditions, even though you may not have established
16 CRA conditions in the past.
17 We hope you will take these recommendations
18 seriously, and please do what you can to make sure
19 that Fleet and BankBoston's commitments going
20 forward in fact are equal to or greater than the
21 activities of the two banks in the past.
22 Thank you for your attention.
23 HEARING OFFICER SMITH: Thank you very
24 much.
25 MS. DuBOIS: My name is Jeanne DuBois. I'm
0235
1 the director of the Dorchester Bay Economic
2 Development Corporation in Upham's Corner, North
3 Dorchester, and East Roxbury. We're a 20-year-old
4 CDA, one of the larger ones in Boston. And we have
5 three branches in Upham's Corner -- Fleet,
6 BankBoston and Citizens -- all within about 50 yards
7 of each other.
8 I think we would be considered one of what
9 BankBoston and Fleet call their neighborhood
10 development partners. So there are many positives
11 over the years that we have experienced with them,
12 and we have some concerns.
13 They have supported our Small Business
14 Microloan Program. We have our own in-house loan
15 program right in Upham's Corner. We work with 400
16 entrepreneurs/microlenders right in the
17 neighborhood. We have made over half a million
18 dollars of our own direct loans to small start-ups
19 and small businesses. They have invested in over
20 500 units of rental housing through Mass. Housing
21 Investment Corp.
22 They have supported our home improvement
23 loan program to unbankable homeowners. We have many
24 people living in -- 80 percent of the housing stock
25 is owner occupied in North Dorchester, so our home
0236
1 improvement lending is important.
2 We have many deals in the works.
3 BankBoston and we are working on a manufacturing
4 plant to go into Savin Hill Industrial Park that
5 will create 70 jobs. We have had gap financing that
6 we have done with Little Brazil Restaurant in
7 Allston-Brighton. Through our community business
8 network, we were able to complete a deal. There is
9 an elevator company now. We are starting to do
10 bigger and bigger deals where we are packaging them,
11 and the banks can make loans as these smaller
12 entrepreneurs graduate.
13 We have also worked positively with the CDC
14 divisions of both BankBoston and Fleet. People are
15 on our boards and committees. So these are all the
16 positives I wanted to give you as a background while
17 I raise some concerns so you know this is not just
18 going one way.
19 Our anchor supermarket in Upham's Corner is
20 called America's Food Basket. I think many people
21 have heard of it. We have 16,000 shoppers a week.
22 They have 200 workers in the market. It pays
23 $36,000 a week in local salaries. This has been a
24 Fleet loan for many years with a $280,000 City
25 guarantee behind it.
0237
1 When Mr. Medina, the owner, expanded his
2 very successful market to Hyde Park, he got into
3 some management problems -- often businesses will
4 have these kind of problems when they grow -- and
5 had some losses in his first year. Fleet called the
6 loan.
7 We wound up, with the help of Fleet CDC
8 staff, getting some extensions. But it's an example
9 where now we're working with U.S. Trust and the CDC
10 Tax Credit Collaborative to try to cover this loan.
11 It should never have happened. This is our
12 anchor market. This is our jewel in the crown.
13 This is what is turning the Upham's Corner business
14 district around. It is one of our key businesses,
15 and we think that the relationship banking should
16 have been more operative in this case. We think
17 BankBoston has acted more like a partner, and we
18 hope that that culture will prevail.
19 The second business is Kasmeric Elevator.
20 This is a Caucasian man who had been 20 years in the
21 elevator business, went out on his own, and Fleet
22 did a $30,000 line of credit and term loan with him.
23 And again, he needed $70,000 to meet the kind of
24 contracts that he was hoping for, and they were not
25 able to do it. We had to take it to BankBoston, who
0238
1 successfully made the loan, and his business is
2 growing.
3 We are finding a lot of our small
4 entrepreneurs don't want to go to Fleet. There is a
5 real problem here. There is a culture problem, an
6 attitude problem. Our Board also, last night, said
7 there is a customer service problem in our local
8 branch -- too few staff, long lines, and little
9 participation in local business activities.
10 The attitude is important. The community
11 banking and relationship banking is important. I've
12 said this to other friends in other divisions of
13 Fleet. We need some specific commitments, and there
14 are some specific statements in the MACDC position
15 paper about loan size and loan volume and the size
16 of businesses. We would like those specifics
17 incorporated. We are concerned that it won't happen
18 otherwise.
19 HEARING OFFICER SMITH: Mr. Morehouse.
20 MR. MOREHOUSE: Thank you. Good afternoon.
21 Thank you for the opportunity to testify at this
22 hearing.
23 My name is Andrew Morehouse. I'm the
24 executive director of the Greater Holyoke Community
25 Development Corporation and the chair of the
0239
1 Community Reinvestment Committee of the
2 Massachusetts Association of CDCs.
3 By helping the constituency that I serve in
4 greater Holyoke specifically, we are able to build
5 the incomes, assets and human capital. And through
6 that, in my role as a member and the chair of the CR
7 committee, other CDCs are able to do the same in
8 their respective communities.
9 In turn, these individuals, low-income and
10 minority individuals, generate income demand for
11 goods, services, and, yes, even financial services.
12 However, community development organizations, the
13 banking community, and public officials have learned
14 that financial services must be adapted to these
15 underserved communities and markets.
16 Only by investing in innovative financial
17 products and services can economic activity be
18 stimulated, generating profitable opportunities for
19 business lending, home mortgages, and community
20 development projects. Yet it takes all three of
21 these institutions working together to revitalize
22 our nation's underserved communities.
23 In Massachusetts, Fleet Bank and BankBoston
24 are major partners in innovative financing. Past
25 commitments and contributions of Fleet and
0240
1 BankBoston are critical to the success of regional
2 intermediaries of community development, to
3 community organizations and to state programs like
4 the Massachusetts Housing Investment Corporation and
5 the Massachusetts Housing Partnership.
6 Small community banks generally just do not
7 have the assets and economies of scale to be able to
8 afford innovative financial products and the volume
9 of lending that Fleet and BankBoston have the
10 capacity to offer as a result of their respective
11 mergers with smaller banks.
12 I would like to share with you, however, a
13 different picture, one that is quite disturbing. As
14 both banks have merged with other banks over the
15 past decade, amassing greater financial assets and
16 profits for shareholder, their lending overall to
17 minorities and low-income census tracts has fallen
18 precipitously. HMDA data show that in the
19 Springfield MSA, the percentage decline in mortgage
20 lending is even greater than that of the
21 Commonwealth.
22 Focusing on Fleet and Shawmut lending
23 before and after the merger, from 1994 to 1998,
24 loans to low- and moderate-income borrowers dropped
25 83 percent; to Latino borrowers, 90 percent; and to
0241
1 black borrowers, 96 percent. Total lending for the
2 same period dropped 71 percent.
3 These figures represent a significant
4 retreat from underserved communities in particular
5 and home mortgages in general. It also raises the
6 specter that BankBoston's far better track record of
7 home mortgage lending will cease to exist after the
8 merger.
9 Further declines of the proposed banks'
10 combined home mortgage lending, especially to low-
11 income and minority individuals and census tracts,
12 will seriously impair the revitalization efforts of
13 these communities. The proposed divestitures and
14 likely branch closings will certainly be cited as a
15 justification for further reductions in home
16 mortgage lending.
17 The public must have guarantees that the
18 proposed bank will reserve this trend in home
19 mortgage lending to underserved communities. In
20 other words, the public should be assured that the
21 proposed FleetBank will uphold its commitment to one
22 plus one is greater than two in these communities.
23 If fact, this should hold true in all of western
24 Massachusetts, where no divestitures are reportedly
25 going to take place.
0242
1 I'm here to request that if the merger is
2 approved -- and it seems likely -- it be contingent
3 on the two banks negotiating in good faith a
4 detailed and measurable community reinvestment plan
5 with community organizations and elected officials.
6 As publicly insured institutions, these
7 banks have an obligation to serve the communities
8 whose savings are being entrusted in them. This is
9 nowhere more crucial than in low-income and minority
10 communities that are traditionally underserved.
11 Without a negotiated community reinvestment
12 plan, there is every reason to believe that their
13 home mortgage lending will continue to spiral
14 downward. Moreover, there is no guarantee that the
15 banks will even sustain, much less increase, their
16 current commitments to affordable rental housing,
17 basic banking services, and accessible branches and
18 ATM sites.
19 Community organizations and public
20 officials from across the Commonwealth have
21 painstakingly reached out to each other to debate
22 the impact of the proposed merger on community
23 reinvestment in underserved communities. Coalitions
24 representing diverse constituencies have come
25 together to formulate a realistic and measurable
0243
1 plan that the banks have steadfastly refused to
2 negotiate in good faith.
3 I respectfully call upon the Federal
4 Reserve Bank to break the impasse by requiring the
5 banks to negotiate a community reinvestment plan,
6 plain and simple. Moreover, I urge the Federal
7 Reserve to extend the comment period after a
8 negotiated plan can be reached so that all affected
9 parties have an opportunity to respond to it.
10 In my humble opinion, I think we should
11 expect no less from the Federal Reserve.
12 Thank you again for inviting me to testify
13 before you.
14 HEARING OFFICER SMITH: Thank you very
15 much.
16 Mr. Westgate.
17 MR. WESTGATE: My name is Michael Westgate
18 from Chelsea Neighborhood Housing Services. We've
19 been around for 20 years. We do about 1.2 million a
20 year in rehab of buildings in Chelsea for low- and
21 moderate-income people, almost all of it -- I would
22 say all of it in fact in partnership with banks.
23 And the resulting benefits to the community include
24 about a half million dollars in wages paid to
25 Chelsea residents.
0244
1 About two years ago a Cambodian family came
2 into my office. They had recently bought a house
3 for $150,000. This was a duplex. They had a
4 $127,000 mortgage from Fleet. The bankers on my
5 Loan Committee said that the building was only worth
6 $120,000, and it needed $20,000 worth of work. It
7 needed a new roof, it had no second means of egress,
8 the furnace was completely busted.
9 It was a Cambodian family, as I mentioned.
10 They were unwilling to stick their necks out. We
11 wanted to go to bat for them, but they came from a
12 culture where if you stick your neck out too far, it
13 was literally blown off. And there were a lot of
14 people that are not willing to step forward.
15 I wanted to do something more than
16 anecdotal, because we did have some other anecdotes
17 like that. When we started with a 120 percent
18 loan-to-value ratio before they even came in for a
19 home improvement loan, there wasn't much we could do
20 for them.
21 Did I ask NCRC, the National Coalition --
22 the National Community Reinvestment Coalition, and
23 they did a study of all of the loans made by all of
24 the banks in Chelsea during the period of comment on
25 Fleet's application for review. And while the
0245
1 numbers were high, in gross numbers, numbers when
2 you picked them apart were rather startling, that if
3 you took as a common denominator the average price
4 in Chelsea, Asian applicants had paid 120 percent --
5 excuse me -- their mortgages were 120 percent of
6 average value, Hispanics were 130 percent, and
7 African-Americans were 140 percent.
8 I presented that to the OCC a year ago. It
9 took months to get an acknowledgment. I gave it to
10 the head of their CRA office when I was down in
11 Washington in March of this year.
12 I know OCC is not FRB, but just to explain
13 the difficulty that we see in having regulators take
14 responsibility for regulating, it was particularly
15 insulting to see Fleet get an outstanding review
16 from Massachusetts when we -- and I know people in
17 Dorchester and elsewhere -- had similar experiences.
18 What we're seeing today is a violent
19 escalation of prices. Where during the downtrend
20 prices in Chelsea went down 1 percent a month, they
21 are now going up 1.5 percent, and unfortunately,
22 Fleet is among the leaders in giving excessive
23 loans, and it's the banks that are the determinants
24 of value rather than the buyers.
25 We oppose the merger. We see that there
0246
1 has been irresponsible lending in Chelsea and
2 elsewhere. We see dollar headlines for millions of
3 dollars, but the devil is in the details.
4 We have seen millions of dollars languish
5 at Mass. Housing Partnership. We were given loans
6 by Mass. Housing Partnership. The terms were too
7 onerous for us to use, so we went elsewhere.
8 The solution, I believe, is enforceable
9 agreements with regional groups that take full
10 advantage of our knowledge of the communities, the
11 regulators' ability to regulate, and the banks
12 stepping forward with programs that will work.
13 CRA today is being gutted in Congress, and
14 I think it's incumbent on the people in this room to
15 come up with a new tripartite agreement that would
16 apply to this or any other major merger where the
17 goals are spelled out, we can all agree to them,
18 they're transparent, they're enforceable.
19 And I thank you for your attention.
20 HEARING OFFICER SMITH: Thank you very
21 much.
22 MS. WORGAFTIK: My name is Susan Worgaftik.
23 I'm chair of the Massachusetts Micro-Enterprise
24 Coalition and director of This Neighborhood Means
25 Business!, a micro-entrepreneurship education and
0247
1 technical assistance program in Dorchester,
2 Massachusetts. I would like to thank the Federal
3 Reserve for this opportunity to present my views.
4 The announcement of the merger of Fleet
5 Bank and BankBoston foreshadows a change of great
6 concern to micro-enterprise training, technical
7 assistance and loan programs.
8 The micro-enterprise programs of the
9 Commonwealth serve entrepreneurs with businesses of
10 five employees or fewer and low and moderate
11 individuals who are in the process of creating their
12 own businesses. Most of these businesses are
13 located in the Commonwealth's inner cities and rural
14 areas. The development of new micro-enterprises has
15 been an important element in the recent economic
16 improvements in urban neighborhoods and rural
17 communities throughout the Commonwealth.
18 In the last decade, we've been able to work
19 very closely with both BankBoston and Fleet Bank to
20 create loan products designed specifically for the
21 smallest of Massachusetts entrepreneurs. In the
22 early days of micro-entrepreneurship, the
23 development of these programs in Massachusetts was
24 very difficult. The large banks did not want to
25 involve themselves in these types of small loans.
0248
1 Competition between both BankBoston and Fleet Bank
2 was very helpful to us in the development of the
3 kinds of loan products we need, and today we have
4 many loan products that are available to our
5 smallest entrepreneurs that were not available to us
6 ten years ago.
7 In addition, the foundation and corporate
8 support that micro-entrepreneurship programs have
9 received from BankBoston and Fleet Bank have been
10 essential to the development of the technical
11 assistance and entrepreneurship education programs
12 that are crucial to making micro-enterprises
13 succeed. Without those programs, we have found that
14 many of our entrepreneurs fail very early in their
15 business life.
16 So, clearly, BankBoston and Fleet Bank
17 believe that the synergy that's created by the
18 merger will be beneficial in the development of
19 their business. We believe that the same should be
20 true for the communities, the businesses, and the
21 individuals which the banks serve. If one plus one
22 equals more than two for the banks, it should also
23 equal that for the businesses and the individuals in
24 our communities.
25 It's my hope that this merger will mean an
0249
1 increase in the number of loans available to micro
2 and small community entrepreneurs in urban and rural
3 communities, and that there will be a significant
4 increase in the technical assistance and education
5 support grants essential for making those loans
6 successful. Anything less is a direct step backward
7 from the commitments that these two banks have made
8 to our communities for micro-entrepreneurs in the
9 past.
10 As a partner in the efforts of the
11 Massachusetts Association for Community Development
12 Corporations, Massachusetts Affordable Housing
13 Alliance, and the Organization for a New Equality, I
14 had hoped that we would be able to have a verifiable
15 agreement with the new Fleet-Boston by now.
16 I had hoped that such an agreement would
17 ensure that the number and availability of funds for
18 loans to micro-entrepreneurs would expand much the
19 same way that the expectations for the new
20 Fleet-Boston would forecast their future. I had
21 hoped that this agreement would recognize the
22 importance of entrepreneurship training and
23 technical assistance to the success of micro loans
24 and that there would be funds available for that
25 purpose. At this time, no such agreement exists.
0250
1 As we move into a new era of banking, it's
2 essential that all aspects of the economy benefit
3 from the progress and the projections that are put
4 forward. At this time, the projections that we
5 have -- that have been presented publicly -- don't
6 mention the needs and the concerns of the
7 micro-entrepreneurs of the Commonwealth.
8 I urge you to recommend that the new
9 Fleet-Boston resume discussions with MACDC, MAHA and
10 ONE to develop a balanced plan for the future which
11 will make this merger a success in everyone's eyes,
12 a merger which benefits all of us.
13 Thank you.
14 HEARING OFFICER SMITH: Thank you.
15 Mr. Young.
16 MR. YOUNG: I'm here representing a rural
17 perspective. Our CDC works in nine towns, 300
18 square miles, about 25,000 people. To personalize
19 it, if my septic system fails, and you drink water
20 in Boston, you get it. North Quabbin Region is the
21 place I'm representing.
22 We have got to be mindful that the CRA,
23 coupled with strong compliance on the part of
24 financial institutions and regulatory agencies,
25 makes stronger communities. Communities of the
0251
1 North Quabbin Region are concerned over the proposed
2 merger, and the concerns thus far raised by the
3 North Quabbin Community Reinvestment Coalition are,
4 first, diminished local autonomy.
5 This has had a profound negative impact on
6 institution involvement in our community, as, for
7 instance, the role of Fleet, formerly known as
8 Shawmut, formerly known to us as Franklin County
9 Trust, formerly known as Orange National Bank, has
10 been diminished to the point that the Orange -- that
11 the Fleet Bank in Orange is jokingly referred to as
12 a manned ATM. But it is not really a joking matter,
13 and regulators should look with a keen eye on the
14 possible outcomes of this merger on rural
15 communities.
16 The second concern is the increased
17 reliance of credit scoring. We understand the needs
18 of the bank to meet the community's credit needs
19 consistent with safe and sound lending practices.
20 Small businesses in our region face difficulties
21 obtaining credit, and they warrant special
22 consideration. The use of credit scoring continues
23 to increase the difficulty.
24 With every merger, more and more of our
25 small and micro-businesses are no longer
0252
1 creditworthy. This diminished creditworthiness
2 comes, in many instances, after decades of hard
3 work, decades of prior credit having been repaid as
4 agreed. Our small and rural and sometimes
5 unconventional businesses fall through the cracks in
6 national and regional credit scoring models.
7 Thirdly, financial institutions need to
8 participate in educational and social service
9 support. Fourthly, banks need to provide portfolio
10 lending in our region, especially for renovation of
11 owner-occupied one- to four-family properties. The
12 portfolio aspect is critical, that they be held and
13 not resold.
14 The merged bank needs to be responsive to
15 community leaders and members of our area. We
16 suggest an advisory Board be made up of members of
17 respective regions to ensure that all community
18 concerns are addressed by the management of the
19 combined bank.
20 A little more than a year ago, our CDC went
21 through this with Family Bank. We raised concerns
22 about local lending authority, loan funds, mortgage
23 outreach, portfolio lending, and in the end we
24 signed an agreement. The agreement provided for
25 various commitments by Family Bank to enhance its
0253
1 community development activities. In the end, I
2 think Family Bank appreciated our concerns. The
3 needs were addressed. Community development banking
4 is good business.
5 Please extend the comment period. Don't
6 approve this merger without a signed agreement,
7 because it's in our mutual interest.
8 HEARING OFFICER SMITH: Thank you very
9 much.
10 Questions from the panel?
11 HEARING OFFICER KWAST: I have a question.
12 Mr. Morehouse, I think touched on this, but
13 I wonder if some of the other panel members might
14 comment on the role of smaller and medium-sized
15 banks in serving the needs of the organizations and
16 needs of your customers.
17 MR. DRAISEN: We've had a lot of
18 discussions internally, Mr. Kwast, among our CDCs
19 about the divestiture issue and the different sized
20 banks. And I think the sense among our CDCs is that
21 there's a role for everyone.
22 Very frequently, we have individual CDCs
23 that have a very close relationship with a local
24 bank that really knows the customers in that
25 community, the entrepreneurs that the CDC is dealing
0254
1 with, and their presence is invaluable. So the loss
2 of those community banks is a severe problem. Or,
3 conversely, the possibility of those community banks
4 picking up a few additional branches would be a very
5 good thing.
6 From another perspective, however, if we
7 have a very large bank that comes into the area,
8 sometimes it has greater overall CDC -- overall CRA
9 capacity, it knows how to work with some of the
10 bigger programs, it has experience from other parts
11 of its portfolio with doing some of the more
12 complicated deals that sometimes involve three
13 government programs and six different funding
14 programs and things like that.
15 I think the summary is that we want to make
16 sure that it's not just one big bank, that gets to
17 deal here. We do want to see more competition. We
18 understand the value of that. We sense that that's
19 going to be the direction that the divestiture goes
20 in. But there's also a very important role for the
21 small or the medium-sized banks, and we work with
22 them very closely, and they should not be shut out.
23 MS. WORGAFTIK: In relationship to
24 micro-entrepreneurs, I would second that. And I
25 would also point out that in some ways, the size of
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1 the bank relates to programmatic issues, but the
2 availability of the bank is something that the
3 micro-entrepreneurs need.
4 We often find that we don't have banks
5 staffed well enough to be -- and some of the larger
6 banks -- in terms of their real recognition of the
7 micro-entrepreneurs to really give them the kind of
8 attention that they need. It is kind of -- so I
9 would be looking for the kind of staffing from any
10 sized bank that would really be able to say, "We are
11 serious about the work that is done with the
12 community and just not simply that we have an
13 outpost here."
14 So regardless of whether it is a larger
15 bank or a smaller bank, that question of taking the
16 time to really work through issues of
17 entrepreneurship is extremely important to our
18 members.
19 MR. YOUNG: The smaller banks are critical
20 to our success. For example, the most recent real
21 estate deal we did involved -- we were attempting to
22 purchase a building from Fleet which was a
23 foreclosure. While we were trying to borrow money
24 from Fleet's community development side, it couldn't
25 hold back the asset management or foreclosure side,
0256
1 and they sold the building to Bob Fader.
2 Ultimately, it was a local bank that financed the
3 deal, and we had to renegotiate it with somebody who
4 bought the sold-off paper.
5 So in my region, Fleet's branch is really a
6 nonplayer. Although BankBoston and Fleet have been
7 important supporters to my organization in terms of
8 banking services, they are only going for the
9 highest cut, which is really not our CDC strategy in
10 economic revitalization.
11 MS. ARANJO: In the African-American
12 community -- and as you can see, there are not many
13 of us here testifying -- I run a credit union. I
14 just had a gentleman who has a million dollars worth
15 of orders from J.C. Penney and the U.S. Army. These
16 are not people who won't pay. They needed a credit
17 line of $348,000 for their merchandise to be made.
18 Fleet Bank turned them down even after getting a
19 guaranty from the business association in Washington
20 who guarantees minority loans, and they were still
21 turned down.
22 This happens too often in the
23 African-American community. They will give you
24 loans of all types except those which allow us to
25 develop credible businesses which allow us to
0257
1 develop our community. And I would like to say that
2 it is important to the African-American community
3 that there are local, community-driven banks or
4 financial institutions which take the time to know
5 the community and understand that color is not
6 character.
7 MR. WESTGATE: It's the competition that we
8 all need, both for our own agencies and for the
9 people we serve. Just to illustrate it, we had an
10 unsecured line of credit with a local bank at prime
11 plus 2. Another bank came in, and now we have an
12 unsecured line of $400,000 of prime minus a half.
13 If you have competition, both the
14 homeowners and the businesses and the nonprofits can
15 profit from that. If you have no competition, then
16 we all have to live with some of the stories you've
17 heard today.
18 HEARING OFFICER BROWNE: I have a question
19 for Mr. Westgate.
20 In talking about the high value -- well,
21 high loan-to-value lending in Chelsea, was that
22 unique to Fleet, or did you see that in other
23 institutions as well?
24 MR. WESTGATE: I won't say it is absolutely
25 unique to Fleet, but in the NCRC data, it was the
0258
1 only banking institution that showed up that way.
2 HEARING OFFICER SMITH: Thank you very much
3 for coming this afternoon, and I'm sorry you all had
4 to wait so long, as other panels also are having to
5 do.
6 (Pause)
7 HEARING OFFICER SMITH: Thank you. With
8 this next group, we again have very brief
9 presentations; but what we are also doing is setting
10 a time limit, so that at a certain point, if people
11 haven't made it through, we will have to move them
12 to later in the day in order to not have our other
13 panels running quite so late. So --
14 MS. WEBSTER: What is our time limit?
15 HEARING OFFICER SMITH: One minute.